N-14

As filed with the Securities and Exchange Commission on February 8, 2007

Registration No.                                         

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

[ ] Pre-Effective Amendment No.                     

[ ] Post-Effective Amendment No.                     

(Check appropriate Box or Boxes)

Goldman Sachs Trust

(Exact Name of Registrant as Specified in Charter)

312-655-4400
(Area Code and Telephone Number)

71 South Wacker Drive, Suite 500
Chicago, Illinois 60606
(Address of Principal Executive Offices)

Peter V. Bonanno, Esq.
Goldman, Sachs & Co.
One New York Plaza, 37^th Floor
New York, New York 10004
(Name and address of Agent for Service)

Copies to:

Kenneth L. Greenberg, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18^th and Cherry Streets
Philadelphia, Pennsylvania 19103

Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective under the Securities Act of 1933.

Title of Securities Being Registered: Shares of Beneficial Interest, $.001 value.

It is proposed that this filing will become effective on March 10, 2007 pursuant to Rule 488.

An indefinite amount of the Registrant’s securities has been registered under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at this time.

GOLDMAN SACHS TRUST
FORM N-14
CROSS REFERENCE SHEET

Item No.		Heading
Part A
1.	Beginning of Registration Statement and Outside Front Cover Page of Prospectus	Cover Page of Registration Statement; Cross-Reference Sheet; Front Cover Pages of Proxy Statement/Prospectus for the Signal Funds
2.	Beginning and Outside Back Cover Page of Prospectus	Table of Contents
3.	Fee Table, Synopsis Information and Risk Factors	Summary; Board’s Consideration of the Reorganization; The Reorganization; Federal Income Tax Consequences of the Reorganization; Comparative Fees and Expenses; Voting Information; Principal Risk Factors; Risks of Investing in the Signal Funds and GST Funds
4.	Information About the Transaction	Information about Reorganization; Board Considerations; The Reorganization Agreement; Description of Securities to be Issued; Federal Income Tax Consequences; Capitalization
5.	Information About the Registrant	Summary; Comparative Fees and Expenses; Comparison of Signal Funds and GST Funds; Investment Objectives and Principal Investment Strategies; Other Investment Practices and Investment Securities of the Signal Funds and the GST Funds; Investment Restrictions; Comparison of Coventry Group’s and GST’s Charter Documents; Investment Advisers and Advisory Fee Information; Other Service Providers; Administration Arrangements; Shareholder Transactions and Services of Signal Funds and GST Funds; Dividends and Other Distributions; Additional Information About the Signal Funds and GST Funds; Financial Highlights; Materials Incorporated by Reference
6.	Information About the Company Being Acquired	Summary; Comparative Fees and Expenses; Comparison of Signal Funds and GST Funds; Investment Objectives and Principal Investment Strategies; Other Investment Practices and Investment Securities of the Signal Funds and the GST Funds; Investment Restrictions; Comparison of Coventry Group’s and GST’s Charter Documents; Investment Advisers and Advisory Fee Information; Other Service Providers; Administration Arrangements; Shareholder Transactions and Services of Signal Funds and GST Funds; Dividends and Other Distributions; Additional Information About the Signal Funds and GST Funds; Financial Highlights; Materials Incorporated by Reference

Item No.		Heading
7.	Voting Information	Voting Information
8.	Interest of Certain Persons and Experts	Not Applicable
9.	Additional Information Required for Reoffering by Persons Deemed to be Underwriters	Not Applicable
Part B
10.	Cover Page	Cover Page
11.	Table of Contents	Not Applicable
12.	Additional Information About the Registrant	Incorporation of Documents by Reference into the Statement of Additional Information
13.	Additional Information About the Company Being Acquired	Incorporation of Documents by Reference into the Statement of Additional Information
14.	Financial Statements	Pro Forma Financial Information
Part C

Items 15-17. Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of this Registration Statement.

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The Coventry Group

Signal Large Cap Growth Fund

Signal Income Fund

Signal Tax-Exempt Income Fund

3435 Stelzer Road

Columbus, Ohio 43219

          , 2007

Dear Shareholder:

On behalf of the Board of Trustees of The Coventry Group (“Coventry Group”), we are pleased to invite you to a special meeting of shareholders of the Coventry Group’s funds named above (each fund a “Signal Fund” and, together, the “Signal Funds”) to be held at 11:00 a.m. (Eastern time) on          , 2007 at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 (the “Special Meeting”). At the Special Meeting, you will be asked to approve an Agreement and Plan of Reorganization, dated as of          , 2007 (the “Reorganization Agreement”), by and between Coventry Group and the Goldman Sachs Trust (“GST”), which contemplates the reorganization of each of the Signal Funds into a corresponding fund and share class (as listed below) of GST (each a “GST Fund” and, together, the “GST Funds”).

Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

The Coventry Group Board of Trustees recommend that you vote to approve the proposed reorganization.

In considering these matters, you should note:

•  Similar Investment Objectives and Policies

Each of the Signal Funds is proposed to be reorganized into an existing GST Fund, each of which has investment objectives and policies that are similar to those of its corresponding Signal Fund.

•  Same Aggregate Value of Shares

The GST Fund shares you receive in the reorganization will have the same total dollar value as the total dollar value of the Signal Fund shares that you held immediately prior to the reorganization. The exchange of Signal Fund shares for GST Fund shares is intended to be tax-free under federal income tax laws (although there can be no assurances that the Internal Revenue Service will not adopt a contrary position), and no front-end or contingent deferred sales loads will be charged as a result of the exchange.

•  Reasons for the Reorganization

Signal Capital Management, Inc. (“Signal Capital”), the investment adviser to the Signal Funds, recently informed the Coventry Group Board of Trustees (“Coventry Group Trustees”) that it has re-considered its long term strategic commitment to the proprietary mutual fund business and, as a result, has determined that it no longer intends to serve as the investment adviser to the Signal Funds and that it no longer intends to participate directly in the mutual fund business. After review and evaluation of possible alternatives, Signal Capital recommended to the Coventry Group Trustees a fund restructuring with another fund group. Following a review of various candidates by

Signal Capital, and consideration of merger proposals from certain potential candidates, Signal Capital recommended that the Coventry Group Trustees approve the reorganization proposal of Goldman Sachs Asset Management, L.P. (“GSAM”). After reviewing and considering a number of factors relating to GST, the GST Funds, GSAM and Goldman, Sachs & Co., the Coventry Group Trustees have determined that the reorganization of the Signal Funds into corresponding GST Funds is in the best interest of the shareholders of each of the Signal Funds.

To see how the reorganization will affect your Signal Funds, please carefully review the enclosed materials where you will find information on the expenses, investment policies and services relating to the corresponding GST Funds.

* * * * *

The formal Notice of Special Meeting, a Combined Proxy Statement/Prospectus, a Proxy Ballot and certain GST Fund prospectuses are enclosed. If you own shares in more than one of the Signal Funds, more than one Proxy Ballot accompanies these materials. Please be sure to vote, sign, date and return each Proxy Ballot.

Whether or not you plan to attend the Special Meeting, you may vote by proxy in any of the following ways:

1.	Internet — Instructions for casting your vote via the Internet can be found in the enclosed proxy voting materials. The required control number is printed on your enclosed Proxy Ballot. If this feature is used, you are giving authorization for another person to execute your proxy and there is no need to mail the Proxy Ballot.
2.	Telephone — Instructions for casting your vote via telephone can be found in the enclosed proxy voting materials. The toll-free telephone number and required control number are printed on your enclosed Proxy Ballot. If this feature is used, you are giving authorization for another person to execute your proxy and there is no need to mail the Proxy Ballot.
3.	By mail — If you vote by mail, please indicate your voting instructions on the enclosed Proxy Ballot, date and sign the card, and return it in the envelope provided. The envelope is addressed for your convenience and needs no postage if mailed in the United States.

Please return your Proxy Ballot(s) or follow the instructions in the enclosed materials to vote on the Internet or by telephone so that your vote will be counted.

Your vote is important to us regardless of the number of shares that you own. Please vote by returning your Proxy Ballot(s) today in the enclosed postage-paid envelope. You also may vote your proxy by a toll-free phone call or by voting on the Internet, as indicated in the enclosed materials.

The proposed reorganization and the reasons for the Coventry Group Trustees’ recommendation are discussed in detail in the enclosed materials, which you should read carefully. If you have any questions about the reorganization, please do not hesitate to contact the Funds toll free at 1-888-426-9709.

We look forward to your attendance at the Special Meeting or receiving your Proxy Ballot(s) or your Internet or telephone instructions so that your shares may be voted at the Special Meeting.

Sincerely,

R. Jeffrey Young

President

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THE COVENTRY GROUP
GOLDMAN SACHS TRUST
          , 2007

Questions & Answers

For Shareholders of the Signal Funds of The Coventry Group:

The following questions and answers provide an overview of the proposals to reorganize The Signal Funds of The Coventry Group (“Coventry Group”) into corresponding portfolios offered by the Goldman Sachs Trust (“GST”). We also encourage you to read the full text of the combined proxy statement/prospectus (the “Proxy/Prospectus”) that follows.

Q:  What are shareholders being asked to vote upon?

A:   Shareholders are being asked in the attached Proxy/Prospectus to consider and approve a proposal to reorganize each of The Signal Funds offered by the Coventry Group (each, a “Signal Fund” and, together, the “Signal Funds”) into a corresponding portfolio offered by GST (each, a “GST Fund” and, together, the “GST Funds”). Signal Fund shareholders will vote on an Agreement and Plan of Reorganization dated as of          , 2007 (the “Reorganization Agreement”) on a portfolio by portfolio basis.

Q.  Why has the reorganization of the Signal Funds into corresponding GST Funds been recommended?

A:   Signal Capital Management, Inc. (“Signal Capital”), the investment adviser to the Signal Funds, recently informed the Coventry Group Board of Trustees (“Coventry Group Trustees”) that it has re-considered its long term strategic commitment to the proprietary mutual fund business and, as a result, has determined that it no longer intends to serve as the investment adviser to the Signal Funds and that it no longer intends to participate directly in the mutual fund business. After review and evaluation of possible alternatives, Signal Capital recommended to the Coventry Group Trustees a fund restructuring with another fund group. Following a review of various candidates by Signal Capital, and consideration of merger proposals from certain potential candidates, Signal Capital recommended that the Coventry Group Trustees approve the reorganization proposal of Goldman Sachs Asset Management, L.P. (“GSAM”). After reviewing and considering a number of factors relating to GST, the GST Funds, GSAM and Goldman, Sachs & Co., the Coventry Group Trustees have determined that the reorganization of the Signal Funds into corresponding GST Funds is in the best interest of the shareholders of each of the Signal Funds.

The Coventry Group Trustees reviewed and considered a number of factors relating to GST, the GST Funds, GSAM and Goldman, Sachs & Co. The Coventry Group Trustees also considered that neither Coventry Group nor GST will bear any direct fees or expenses in connection with the reorganization or any explicit brokerage commissions resulting from portfolio transactions executed on behalf of the Signal Funds in preparation for, or immediately following, the reorganization. Under the Reorganization Agreement, which contemplates the reorganization of each of the Signal Funds into a corresponding GST Fund, all of the fees, expenses and explicit brokerage commissions in connection with entering into and carrying out the transactions contemplated by the Reorganization Agreement whether or not the transactions contemplated are concluded will be paid by Signal Capital (or an affiliate) or GSAM (or an affiliate).

Q:  What is the anticipated timing of the reorganization?

A:   The special meeting of shareholders to consider the proposal is scheduled to occur on          , 2007. If all necessary approvals are obtained, the proposed reorganization will likely take place on          , 2007.

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Q:  Who will receive the Proxy/Prospectus material?

A:   The Proxy/Prospectus has been mailed to all persons and entities that held shares of record in a Signal Fund on          , 2007. Please note that in some cases record ownership of and/or voting authority over Signal Fund shares may reside with a fiduciary or other agent. In these cases, the fiduciary or other agent may receive the Proxy/Prospectus.

Q:  How are the Signal Funds proposed to be reorganized?

A:   The Reorganization Agreement for the Signal Funds, approved by the Coventry Group Trustees, contemplates the reorganization of the Signal Funds into three GST Funds having similar investment objectives and policies. Under the Reorganization Agreement, each Signal Fund will be reorganized into the GST Fund listed directly opposite such Signal Fund in the table below.

Signal Funds	GST Funds
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

Each GST Fund has investment objectives and policies that are similar to the corresponding Signal Fund being reorganized into it.

Q:  Which class of shares of the GST Funds will I receive in the reorganization?

A:   Holders of Signal Fund Class A Shares will receive GST Fund Class A Shares and holders of Signal Fund Class I Shares will receive GST Fund Institutional Shares.

If the reorganization is approved by shareholders, Signal Fund shareholders who do not wish to have their Signal Fund shares exchanged for shares of a corresponding GST Fund as part of the reorganization should redeem their shares prior to the consummation of the reorganization. If you redeem your shares, you will recognize a taxable gain or loss based on the difference between your tax basis in the shares and the amount you receive for them. In addition, if you redeem your shares prior to the reorganization and your shares are subject to a contingent deferred sales load, your redemption proceeds will be reduced by any applicable sales load.

Q:  What are the costs and federal tax implications to shareholders in connection with the proposed reorganization?

A:   Neither Coventry Group nor GST will bear any direct fees or expenses in connection with the reorganization or any explicit brokerage commissions resulting from portfolio transactions executed on behalf of the Signal Funds in preparation for, or immediately following, the reorganization. Under the Reorganization Agreement, GSAM (or an affiliate) and Signal Capital (or an affiliate) have agreed to pay all of the fees, expenses and explicit brokerage commissions in connection with entering into and carrying out the transactions contemplated by the Reorganization Agreement whether or not the transactions contemplated are concluded.

No sales charge will be imposed on the shares of the GST Funds issued to you in the reorganization, which means that the aggregate value of the GST Fund shares issued to you will be equal to the aggregate value of the Signal Funds shares that you own immediately prior to the reorganization. In addition, the exchange of Signal

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Fund shares for GST Fund shares is intended to be tax-free under federal income tax laws (however there can be no assurance that the Internal Revenue Service will not adopt a contrary position). However, immediately prior to the reorganization, each Signal Fund will declare and pay a final distribution of all of its investment company taxable income for taxable years before the effective time of the reorganization and all of its net capital gain, if any, recognized in taxable years ending on or before the effective time of the reorganization to shareholders. The sale of securities by a Signal Fund prior to the reorganization, whether in the ordinary course of business or in anticipation of the reorganization, could increase the amount of the final distribution made by a Signal Fund prior to the reorganization.

Q:  Can one of the proposed reorganizations take place without the others?

A:   Yes. The proposed reorganizations are not conditioned on each other. If shareholders of one Signal Fund approve the proposed reorganization of their Signal Fund, it will proceed whether or not the proposed reorganizations for the other Signal Funds proceed.

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The Coventry Group

Signal Large Cap Growth Fund

Signal Income Fund

Signal Tax-Exempt Income Fund

3435 Stelzer Road

Columbus, Ohio 43219

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On          , 2007

To Shareholders of The Coventry Group:

NOTICE IS GIVEN THAT a special meeting of the shareholders (the “Special Meeting”) of the investment portfolios named above (each, a “Signal Fund” and together, the “Signal Funds”) of The Coventry Group (“Coventry Group”), will be held at 11:00 a.m. (Eastern time), on          , 2007 at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 for the purpose of considering and voting upon:

ITEM 1. A proposal to approve an Agreement and Plan of Reorganization by and between Coventry Group and the Goldman Sachs Trust (“GST”), which provides for and contemplates: (1) the transfer of substantially all of the assets and liabilities of each Signal Fund to a corresponding investment portfolio of GST (each, a “GST Fund” and together, the “GST Funds”) in exchange for shares of the designated classes of the corresponding GST Fund; and (2) the distribution of the shares of designated classes of the corresponding GST Fund to the shareholders of each Signal Fund in liquidation of each of the Signal Funds.

Item 1 is described in the attached Combined Proxy Statement/Prospectus. Your Trustees unanimously recommend that you vote in favor of the proposal.

Shareholders of record as of the close of business on          , 2007 are entitled to notice of, and to vote at, the Special Meeting or any adjournment(s) thereof.

You are requested to vote, date, sign and return promptly in the enclosed envelope the accompanying proxy ballot(s) that is/are being solicited by the Coventry Group Board of Trustees. This is important to ensure a quorum at the Special Meeting. You also may return proxy ballot(s) by: 1) telephone voting or 2) voting on the Internet. Proxies may be revoked at any time before they are exercised by submitting to Coventry Group a written notice of revocation or a subsequently executed proxy or by attending the Special Meeting and voting in person.

By Order of the Board of Trustees,

Timothy Bresnahan

Secretary

We need your proxy vote immediately. You may think that your vote is not important, but it is. By law, the Special Meeting will have to be adjourned with respect to a particular Signal Fund without conducting any business if a majority of the shares of such Signal Fund entitled to vote in person or by proxy at the meeting are not represented at the meeting. In that event, Coventry Group would continue to solicit votes for a certain period of time in an attempt to achieve a quorum. Your vote could be critical in allowing Coventry Group to hold the Special Meeting as scheduled, so please return your proxy ballot(s) immediately or vote on the Internet or by telephone.

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COMBINED PROXY STATEMENT/PROSPECTUS
          , 2007

THE COVENTRY GROUP

3435 Stelzer Road

Columbus, Ohio 43219

1-888-426-9709

GOLDMAN SACHS TRUST

71 South Wacker Drive

Suite 500

Chicago, Illinois 60606

1-800-526-7384

This combined proxy statement/prospectus (“Proxy/Prospectus”) is being sent to shareholders of the Signal Large Cap Growth Fund, Signal Income Fund and Signal Tax-Exempt Income Fund (each, a “Signal Fund” and together, the “Signal Funds”), each a series of The Coventry Group, a Massachusetts business trust (“Coventry Group”). The Board of Trustees of the Coventry Group (“Coventry Group Trustees”) has called a Special Meeting of Shareholders (the “Special Meeting”) at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 on          , 2007 at 11:00 a.m. Eastern time.

At the Special Meeting, shareholders will be asked:

•     To approve an Agreement and Plan of Reorganization dated as of          , 2007 (the “Reorganization Agreement”), by and between Coventry Group and the Goldman Sachs Trust (“GST”), which provides for and contemplates: (1) the transfer of substantially all of the assets and liabilities of each Signal Fund to a corresponding investment portfolio of GST (each, a “GST Fund” and together, the “GST Funds”) in exchange for the shares of designated classes of the corresponding GST Fund; and (2) the distribution of the shares of designated classes of the corresponding GST Fund to shareholders of each Signal Fund in liquidation of each of the Signal Funds.

Reorganization Agreement.  The Reorganization Agreement, which is attached as Appendix A, provides for the transfer of substantially all of the assets and liabilities of each Signal Fund to a corresponding GST Fund in exchange for Class A Shares and Institutional Shares of the corresponding GST Fund, as applicable (as listed below).

Signal Funds	GST Funds
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

Coventry Group and GST are both registered, open-end management investment companies (mutual funds). As a result of the reorganization, shareholders of the Signal Funds will become shareholders of the GST Funds (the Signal Funds and GST Funds are sometimes referred to as “Funds”).

The transactions contemplated by the Reorganization Agreement are referred to collectively as the “Reorganization.” The Signal Funds and the corresponding GST Funds into which they are proposed to be reorganized are sometimes referred to in this Proxy/Prospectus as “Corresponding Signal Funds” and “Corresponding GST Funds.” Each GST Fund has investment objectives and policies similar to the Corresponding Signal Fund being reorganized into it.

This Proxy/Prospectus sets forth concisely the information that a Signal Fund shareholder should know before voting on the Reorganization and investing in the GST Funds, and should be retained for future reference. It is both Signal Funds’ proxy statement for the Special Meeting and a prospectus for the GST Funds.

Additional information is set forth in the Statement of Additional Information dated          , 2007 relating to this Proxy/Prospectus and in the prospectus dated August 1, 2006 for the Signal Funds which you have previously been given or sent and are incorporated herein by reference. Each of these documents is on file with the Securities and Exchange Commission (the “SEC”), and is available without charge by calling the Signal Funds at the telephone number stated above or by writing the Signal Funds at the following address: The Signal Funds, 3435 Stelzer Road, Columbus, Ohio 43219.

The information contained in the current prospectuses, as supplemented, for the: (1) Class A and Institutional Shares of the Goldman Sachs Structured Large Cap Growth Fund dated December 29, 2006; and (2) Class A and Institutional Shares of the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund, dated February 28, 2006 are also incorporated by reference into this Proxy/Prospectus. Each of these documents is on file with the SEC, and is available without charge by calling or writing GST at the telephone number or address stated above. In addition, a current prospectus for each of the GST Funds that a particular Signal Fund shareholder will own upon consummation of the Reorganization accompanies this Proxy/Prospectus.

The Annual Report for the Signal Funds for the fiscal year ended March 31, 2006 and the Semi-Annual Report for the Signal Funds for the fiscal period ended September 30, 2006 can be obtained without charge by calling the Signal Funds at the telephone number stated above or by writing the Signal Funds at the following address: The Signal Funds, 3435 Stelzer Road, Columbus, Ohio 43219. The Annual Report for the Goldman Sachs Structured Large Cap Growth Fund for the year ended August 31, 2006 and the Annual Report for the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund for the year ended October 31, 2006; can be obtained without charge by calling or writing GST at the telephone number or address stated above. Each of these documents together with other information about the Signal Funds and the GST Funds is also available on the SEC’s website at www.sec.gov.

This Proxy/Prospectus is expected to be first sent to shareholders on or about          , 2007.

The SEC has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Proxy/Prospectus. Any representation to the contrary is a criminal offense.

Shares of the Signal Funds and the GST Funds are not deposits or obligations of or guaranteed or endorsed by any bank, Signal Capital Management, Inc., Old National Trust Company, Goldman Sachs Asset Management, L.P., Goldman, Sachs & Co. or any of their affiliates. Such shares are not insured by the U.S. Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Mutual fund shares involve certain investment risks, including the possible loss of principal.

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PROXY STATEMENT/PROSPECTUS

Table of Contents

	Page
SUMMARY		1
Board’s Consideration of the Reorganization		1
The Reorganization		1
Federal Income Tax Consequences of the Reorganization		2
Comparative Fees and Expenses		3
Voting Information		10
PRINCIPAL RISK FACTORS		11
Risks of Investing in the Signal Funds and GST Funds		11
INFORMATION ABOUT THE REORGANIZATION		17
Board Considerations		17
The Reorganization Agreement		18
Description of the Securities to be Issued		20
Federal Income Tax Consequences		20
Capitalization		22
COMPARISON OF SIGNAL FUNDS AND GST FUNDS		24
Investment Objectives and Principal Investment Strategies		24
Other Investment Practices and Investment Securities of the Signal Funds and the GST Funds		28
Investment Restrictions		34
Comparison of Coventry Group’s and GST’s Charter Documents		36
Investment Advisers and Advisory Fee Information		38
Other Service Providers		40
Administration Arrangements		40
Shareholder Transactions and Services of Signal Funds and GST Funds		40
Dividends and Other Distributions		53
ADDITIONAL INFORMATION ABOUT THE SIGNAL FUNDS AND GST FUNDS		54
Financial Highlights		54
Materials Incorporated By Reference		66
VOTING INFORMATION		66
OTHER INFORMATION		68
SHAREHOLDER INQUIRIES		70
APPENDIX A — Agreement and Plan of Reorganization		A-1

SUMMARY

The following is a summary of certain information contained in this Proxy/Prospectus and the Reorganization Agreement. The Reorganization Agreement governs the terms of the Reorganization and is attached as Appendix A.

Board’s Consideration of the Reorganization

At meetings held on November 16, 2006 and January 16, 2007, The Coventry Group Trustees considered the Reorganization Agreement and the Reorganization of each Signal Fund into its Corresponding GST Fund. Based upon their evaluation of the information presented to them, and in light of their fiduciary duties under federal and state law, the Coventry Group Trustees, including all of the non-interested Trustees (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”))(non-interested Coventry Group Trustees are referred to as “Independent Coventry Group Trustees”) determined that participation in the Reorganization, as contemplated by the Reorganization Agreement, was in the best interests of the shareholders of each Signal Fund and that the interests of the existing shareholders of each Signal Fund will not be diluted as a result of the Reorganization. For additional information, see “Information About the Reorganization — Board Considerations.”

The Coventry Group Trustees, including all of the Independent Coventry Group Trustees, unanimously recommend that shareholders of each Signal Fund approve the Reorganization Agreement.

At a meeting held on          , 2006, the GST Board of Trustees similarly found that participation in the Reorganization is in the best interests of each GST Fund and that the interests of the shareholders of each GST Fund will not be diluted as a result of the Reorganization.

The Reorganization

The Reorganization Agreement provides for a separate Reorganization involving each Signal Fund and its Corresponding GST Fund listed opposite its name below.

Signal Funds	GST Funds
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

Each GST Fund has investment objectives and policies that are similar to the corresponding Signal Fund being reorganized into it.

As set forth in the Reorganization Agreement, each Reorganization between a Signal Fund and its Corresponding GST Fund would involve:

•     The acquisition of all of the assets of a Signal Fund by its Corresponding GST Fund and the assumption by that GST Fund of all of the liabilities (other than those liabilities specifically excluded under the Reorganization Agreement) of the Signal Fund, in exchange for the corresponding classes of shares noted in the above chart of the GST Fund having aggregate values equal to the net asset values of the corresponding classes of shares noted in the above chart of the Signal Fund as of the close of business on the business day immediately preceding the effective time of the Reorganization;

•     The distribution of the Corresponding GST Fund’s corresponding classes of shares to each holder of Class A Shares and Class I Shares (as applicable) of the Signal Funds as of the effective time of the Reorganization; and

•     The complete liquidation of each Signal Fund.

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As a result of the Reorganization, each Signal Fund shareholder will become a shareholder of its Corresponding GST Fund and will hold, immediately after the Reorganization, GST Fund shares in such Corresponding GST Fund having a total dollar value equal to the total dollar value of the shares such shareholder held in the Signal Fund immediately prior to the effectiveness of the Reorganization. The exchange of shares in the Reorganization is intended to be tax-free under federal income tax laws (although there can be no assurances that the Internal Revenue Service will not adopt a contrary position) and shareholders of the GST Funds and the Signal Funds will not pay any sales charge as a result of the exchange of the shares in the Reorganization.

If approved, the Reorganization will occur as of the opening of business on or about          , 2007, or another date selected by Coventry Group and GST. Approval of each Reorganization requires the approval of the holders of the lesser of (a) 67% or more of the shares of the relevant Signal Fund voted at the Special Meeting, if holders of more than 50% of the outstanding shares of the relevant Signal Fund are represented at the Special Meeting in person or by proxy or (b) more than 50% of the outstanding shares of the relevant Signal Fund. See “Information about the Reorganization” and “Voting Information” below.

Signal Capital Management, Inc. (“Signal Capital”), the investment adviser to the Signal Funds, recently informed the Coventry Group Board of Trustees (“Coventry Group Trustees”) that it has re-considered its long term strategic commitment to the proprietary mutual fund business and, as a result, has determined that it no longer intends to serve as the investment adviser to the Signal Funds and that it no longer intends to participate directly in the mutual fund business. After review and evaluation of possible alternatives, Signal Capital recommended to the Coventry Group Trustees a fund restructuring with another fund group. Following a review of various candidates by Signal Capital, and consideration of merger proposals from certain potential candidates, Signal Capital recommended that the Coventry Group Trustees approve the reorganization proposal of Goldman Sachs Asset Management, L.P. (“GSAM”). After reviewing and considering a number of factors relating to GST, the GST Funds, GSAM and Goldman, Sachs & Co., the Coventry Group Trustees have determined that the reorganization of the Signal Funds into corresponding GST Funds is in the best interest of the shareholders of each of the Signal Funds.

The Coventry Group Trustees reviewed and considered a number of factors relating to GST, the GST Funds, GSAM and Goldman, Sachs & Co. (“Goldman Sachs”). For the reasons and additional reasons set forth below under “Information About the Reorganization — Coventry Group Trustees’ Considerations” the Coventry Group Trustees unanimously recommend the approval of the proposed Reorganization by Signal Fund shareholders.

Although each Signal Fund has a similar investment objective and principal strategies to its Corresponding GST Fund, some of a Signal Fund’s holdings may not be permissible portfolio holdings for its Corresponding GST Fund. Therefore, some portion of a Signal Fund’s securities holdings may be sold prior to or immediately following the Reorganization. In addition, for certain Signal Funds, the investment adviser to the GST Funds, GSAM, anticipates selling a portion of such Signal Fund shortly after the Reorganization. To the extent that a Signal Fund’s securities holdings are sold prior to the Reorganization, the proceeds of such sales will be held in temporary investments or reinvested in assets that the Corresponding GST Fund may hold. The possible need for a Signal Fund to dispose of certain portfolio investments prior to the Reorganization could result in selling such investments at a disadvantageous time. The sale of securities either prior to the Reorganization or shortly thereafter could result in the Signal Fund or its Corresponding GST Fund realizing gains (which may be taxable) or losses that would not otherwise have been realized but for the Reorganization. Such a sale of assets and the reinvestment of the proceeds would involve brokerage and other transactional costs. In this event, GSAM will pay the reasonable explicit brokerage commissions resulting from portfolio transactions executed on behalf of Signal Funds in preparation for the Reorganization.

Federal Income Tax Consequences of the Reorganization

It is intended that the Reorganization will not result in the recognition, for federal income tax purposes, of gain or loss by the Signal Funds, the GST Funds or their respective shareholders, although there can be no assurance that the Internal Revenue Service will not adopt a contrary position. The sale of securities by the Signal Funds prior to the Reorganization, whether in the ordinary course of business or in anticipation of the Reorganization, could increase the amount of the final distribution made by a Signal Fund prior to the Reorganization. Immediately prior to the Reorganization, each Signal Fund will declare and pay a distribution of all of its investment company taxable

2

income for taxable years before the effective time of the Reorganization and all of its net capital gain, if any, recognized in taxable years ending on or before the effective time of the Reorganization to shareholders.

As a condition to the closing of the Reorganization, Coventry Group and GST will receive an opinion from GST’s counsel, Drinker Biddle & Reath LLP (based on certain facts, qualifications, assumptions and representations) to the effect that each Reorganization, for federal income tax purposes, will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). See “Information About the Reorganization — Federal Income Tax Consequences,” below.

Comparative Fees and Expenses

Signal Fund and GST Fund Expenses

Expense Ratio Tables. Expenses of mutual funds are often measured by their expense ratios (i.e., the ratio of their total expenses for a year divided by their average daily net asset value over the same year). The total expenses of each Signal Fund differ from the expenses of its Corresponding GST Fund.

The following tables: (1) compare the fees and expenses for the Signal Funds and their Corresponding GST Funds based on actual expenses for a recent twelve month period and (2) show the estimated fees and expenses for the Corresponding GST Funds on a pro forma basis after giving effect to the Reorganization. The purpose of these tables is to assist shareholders in understanding the various costs and expenses that investors in these portfolios will bear as shareholders. The tables enable you to compare and contrast the recent expense levels for the Signal Funds and the GST Funds and obtain a general idea of what the expense levels would be if the Reorganization occurs. The tables do not reflect any charges that may be imposed by institutions directly on their customer accounts in connection with investments in the portfolios. Pro forma expense levels shown should not be considered an actual representation of future expenses or performance. Such pro forma expense levels project anticipated expense levels, but actual expenses may be greater or less than those shown.

The Signal Large Cap Growth Fund’s annual operating expenses are based on actual expenses for the twelve months ended August 31, 2006 and the Signal Income Fund and Signal Tax-Exempt Income Fund’s expenses are based on actual expenses for the twelve months ended October 31, 2006. The Goldman Sachs Structured Large Cap Growth Fund’s annual operating expenses are based on actual expenses for the twelve months ended August 31, 2006. The Goldman Sachs Core Fixed Income and Municipal Income Funds’ annual operating expenses are based on actual expenses for the fiscal year ended October 31, 2006. The Combined Fund pro forma expense ratios are constructed by assuming that the reorganization occurred on September 1, 2005 with respect to the Goldman Sachs Structured Large Cap Growth Fund; November 1, 2005 with respect to the Goldman Sachs Core Fixed Income and Municipal Income Funds; and represent the hypothetical experience of the combined pro forma funds for the twelve months ended August 31, 2006 and October 31, 2006, respectively.

For financial statement purposes, the Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund will be the accounting survivors. As the accounting survivor, such Fund’s operating history will be used for financial reporting purposes.

Example Tables. Following the expense ratio tables are expense examples intended to help you compare and contrast the cost of investing in: (1) a Signal Fund as it currently exists, (2) its Corresponding GST Fund as it currently exists and (3) the same GST Fund if it acquires its Corresponding Signal Fund (i.e., the “pro forma” figure).

The examples depict the dollar amount of expenses on a hypothetical investment in each of the Signal Funds and the GST Funds for the periods shown. In the “pro forma” line, the dollar figures shown are computed based on the total operating expense figures from the corresponding expense ratio table (and not the net operating expense figure). In other words, the examples do not reflect any expense waivers or reimbursement.

3

SIGNAL LARGE CAP GROWTH FUND — CLASS A SHARES AND CLASS I SHARES

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND — CLASS A SHARES AND INSTITUTIONAL SHARES

Goldman Sachs

Combined Fund

Signal Large Cap Growth Fund

Structured Large Cap Growth Fund

Pro Forma

Class A

Class I

Class A

Institutional

Class A

Institutional

Shares

Shares

Shares

Shares

Shares

Shares

Shareholder Fees

(fees paid directly from your investment):

Maximum Sales Charge (Load) Imposed on Purchases

4.75%

1

None

5.5%

1

None

5.5%

1

None

Maximum Deferred Sales Charge (Load)

None

1

None

None

1

None

None

1

None

Maximum Sales Charge (Load) Imposed on Reinvested Dividends

None

None

None

None

None

None

Redemption Fees

None

None

None

None

None

None

Exchange Fees

None

None

None

None

None

None

							Goldman Sachs						Combined Fund
	Signal Large Cap Growth Fund						Structured Large Cap Growth Fund						Pro Forma
	Class A			Class I			Class A			Institutional			Class A			Institutional
	Shares			Shares			Shares			Shares			Shares			Shares
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):
Management Fees*		0.75%	2		0.75%	2		0.65%	4		0.65%	4		0.65%	4		0.65%	4
Distribution and Service (12b-1) Fees		0.25%			None			0.25%			None			0.25%			None
Other Expenses*		0.55%			0.55%			0.26%	5		0.11%	5		0.26%	5		0.11%	5
Total Fund Operating Expenses*		1.55%			1.30%			1.16%			0.76%			1.16%			0.76%

See page 7 for all other footnotes.

* The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Signal Fund, GST Fund and Combined Fund are as set forth below.

							Goldman Sachs						Combined Fund
	Signal Large Cap Growth Fund						Structured Large Cap Growth Fund						Pro Forma
	Class A			Class I			Class A			Institutional			Class A			Institutional
	Shares			Shares			Shares			Shares			Shares			Shares
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees		0.55%	2		0.55%	2		0.56%	4		0.56%	4		0.56%	4		0.56%	4
Distribution and Service (12b-1) Fees		0.25%			None			0.25%			None			0.25%			None
Other Expenses		0.55%			0.55%			0.19%	5		0.04%	5		0.19%	5		0.04%	5
Total Fund Operating Expenses (after current expense limitations)		1.35%	3		1.10%	3		1.00%			0.60%			1.00%			0.60%

4

SIGNAL INCOME FUND — CLASS A SHARES AND CLASS I SHARES

GOLDMAN SACHS CORE FIXED INCOME FUND — CLASS A SHARES AND INSTITUTIONAL SHARES

Goldman Sachs

Combined Fund

Signal Income Fund

Core Fixed Income Fund

Pro Forma

Class A

Class I

Class A

Institutional

Class A

Institutional

Shares

Shares

Shares

Shares

Shares

Shares

Shareholder Fees (fees paid directly from your investment):

Maximum Sales Charge (Load) Imposed on Purchases

3.25%

1

None

4.5%

1

None

4.5%

1

None

Maximum Deferred Sales Charge (Load)

None

1

None

None

1

None

None

1

None

Maximum Sales Charge (Load) Imposed on Reinvested Dividends

None

None

None

None

None

None

Redemption Fees

None

None

None

None

None

None

Exchange Fees

None

None

None

None

None

None

							Goldman Sachs						Combined Fund
	Signal Income Fund						Core Fixed Income Fund						Pro Forma
	Class A			Class I			Class A			Institutional			Class A			Institutional
	Shares			Shares			Shares			Shares			Shares			Shares
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):
Management Fees		0.50%	2		0.50%	2		0.38%	4		0.38%	4		0.38%	4		0.38%	4
Distribution and Service (12b-1) Fees		0.25%			None			0.25%			None			0.25%			None
Other Expenses*		0.41%			0.41%			0.21%	5		0.09%	5		0.21%	5		0.09%	5
Total Fund Operating Expenses*		1.16%	3		0.91%	3		0.84%			0.47%			0.84%			0.47%

See page 7 for all other footnotes.

* The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Signal Fund, the GST Fund and the Combined Fund are as set forth below.

							Goldman Sachs						Combined Fund
	Signal Income Fund						Core Fixed Income Fund						Pro Forma
	Class A			Class I			Class A			Institutional			Class A			Institutional
	Shares			Shares			Shares			Shares			Shares			Shares
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees		0.25%	2		0.25%	2		0.37%	4		0.37%	4		0.37%	4		0.37%	4
Distribution and Service (12b-1) Fees		0.25%			None			0.25%			None			0.25%			None
Other Expenses		0.41%			0.41%			0.21%	5		0.09%	5		0.21%	5		0.09%	5
Total Fund Operating Expenses (after current expense limitations)		0.91%	3		0.66%	3		0.83%			0.46%			0.83%			0.46%

5

SIGNAL TAX-EXEMPT INCOME FUND — CLASS A SHARES AND CLASS I SHARES

GOLDMAN SACHS MUNICIPAL INCOME FUND — CLASS A SHARES AND INSTITUTIONAL SHARES

Goldman Sachs

Combined Fund

Signal Tax-Exempt Income Fund

Municipal Income Fund

Pro Forma

Class A

Class I

Class A

Institutional

Class A

Institutional

Shares

Shares

Shares

Shares

Shares

Shares

Shareholder Fees (fees paid directly from your investment):

Maximum Sales Charge (Load) Imposed on Purchases

3.25%

1

None

4.5%

1

None

4.5%

1

None

Maximum Deferred Sales Charge (Load)

None

1

None

None

1

None

None

1

None

Maximum Sales Charge (Load) Imposed on Reinvested Dividends

None

None

None

None

None

None

Redemption Fees

None

None

2.00%

6

2.00%

6

2.00%

6

2.00%

6

Exchange Fees

None

None

None

None

None

None

							Goldman Sachs						Combined Fund
	Signal Tax-Exempt Income Fund						Municipal Income Fund						Pro Forma
	Class A			Class I			Class A			Institutional			Class A			Institutional
	Shares			Shares			Shares			Shares			Shares			Shares
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees*		0.50%	2		0.50%	2		0.55%	4		0.55%	4		0.55%	4		0.55%	4
Distribution and Service (12b-1) Fees		0.25%			None			0.25%			None			0.25%			None
Other Expenses*		0.78%			0.78%			0.36%	5		0.24%	5		0.36%	5		0.24%	5
Total Fund Operating Expenses*		1.53%	3		1.28%	3		1.16%			0.79%			1.16%			0.79%

See page 7 for all other footnotes.

* The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Signal Fund, the GST Fund and the Combined Fund are as set forth below.

							Goldman Sachs						Combined Fund
	Signal Tax-Exempt Income Fund						Municipal Income Fund						Pro Forma
	Class A			Class I			Class A			Institutional			Class A			Institutional
	Shares			Shares			Shares			Shares			Shares			Shares
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees		0.10%	2		0.10%	2		0.50%	4		0.50%	4		0.50%	4		0.50%	4
Distribution and Service (12b-1) Fees		0.25%			None			0.25%			None			0.25%			None
Other Expenses		0.78%			0.78%			0.25%	5		0.13%	5		0.25%	5		0.13%	5
Total Fund Operating Expenses (after current expense limitations)		1.13%	3		0.88%	3		1.00%			0.63%	6		1.00%			0.63%

6

Footnotes

1	The maximum sales charge is a percentage of the offering price. This sales charge varies depending on how much you invest. Under certain circumstances, the maximum sales charge may be reduced or waived entirely. Lower sales charges are available depending upon the amount invested. A contingent deferred sales charge (“CDSC”) of 1% is imposed on certain redemptions (within 18 months of purchase) of Class A Shares of the Signal Funds and GST Funds sold without an initial sales charge as part of an investment of $1 million or more.
2	Signal Capital has entered into a contractual agreement with the Signal Funds to limit Signal Capital’s investment management fee for the Signal Funds’ current fiscal year to 0.55%, 0.25% and 0.10% of the average daily net assets of the Signal Large Cap Growth, Income and Tax-Exempt Income Funds, respectively. Without this fee waiver by Signal Capital, the investment management fees for the Signal Funds would have been 0.75%, 0.50% and 0.50% of the average daily net assets of the Signal Large Cap Growth, Income and Tax-Exempt Income Funds, respectively.
3	Without Signal Capital’s contractual agreement to waive a portion of its investment management fees, the “Total Fund Operating Expenses” for the Class A Shares would have been 1.55%, 1.16% and 1.53% for the Signal Large Cap Growth, Income and Tax-Exempt Income Funds, respectively. Without Signal Capital’s contractual agreement to waive a portion of its investment management fees, the “Total Fund Operating Expenses” for the Class I Shares would have been 1.30%, 0.91%, and 1.28% for the Signal Large Cap Growth, Income, and Tax-Exempt Income Funds, respectively.
4	GSAM has entered into the following contractual fee reduction commitments for the GST Funds:

	Management Fee			Average Daily
GST Fund	Annual Rate			Net Assets
Structured Large Cap Growth Fund		0.65	%	First $	1 Billion
		0.59	%	Next $	1 Billion
		0.56	%	Over $	2 Billion
Core Fixed Income Fund		0.40	%	First $	1 Billion
		0.36	%	Next $	1 Billion
		0.34	%	Over $	2 Billion
Municipal Income Fund		0.55	%	First $	1 Billion
		0.50	%	Next $	1 Billion
		0.48	%	Over $	2 Billion

Prior to this fee reduction commitment, the management fees for the Goldman Sachs Structured Large Cap Growth Fund, Core Fixed Income Fund and Municipal Income Fund as an annual percentage rate of average daily net assets were 0.65%, 0.40% and 0.55%, respectively. Additionally, as of December 29, 2006, the Investment Adviser was voluntarily waiving a portion of its management fee equal to 0.14% based on the average daily net assets of the Goldman Sachs Structured Large Cap Growth Fund. The annual operating expenses of the Goldman Sachs Core Fixed Income Fund and Municipal Income Fund have been restated to reflect a contractual reduction in transfer agent fees from an annual rate of 0.19% to an annual rate of 0.16% of the average daily net assets the GST Fund’s Class A Shares.

GSAM has voluntarily agreed not to impose a portion of the management fee on the Municipal Income Fund equal to 0.05% of the Fund’s average daily net assets. As a result of fee waivers, the current management fee of the Municipal Income Fund is 0.50% of the GST Fund’s average daily net assets. This waiver may be terminated at any time at the option of GSAM.

⁵ “Other Expenses” of Class A Shares of a GST Fund include transfer agency fees and expenses equal on an annualized basis to 0.19% of the average daily net assets of the Goldman Sachs Structured Large Cap Growth Fund’s Class A Shares and 0.16% of the average daily net assets of the Goldman Sachs Core Fixed Income and Municipal Income Funds’ Class A Shares, plus all other ordinary expenses not detailed above. “Other Expenses” of Institutional Shares of a GST Fund include transfer agency fees and expenses equal on an annualized basis to 0.04% of the average daily net assets of the Institutional Shares for the Goldman Sachs Structured Large Cap Growth, Core Fixed Income and Municipal Income Funds. GSAM has voluntarily agreed to reduce or limit “Other Expenses” (excluding management fees, distribution and service fees, shareholder administration fees, transfer agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses) to the following annual percentage rates of each GST Fund’s average daily net assets:

GST Fund	Other Expenses
Structured Large Cap Growth		0.004	%
Core Fixed Income		0.104	%
Municipal Income		0.004	%

The expense reductions may be terminated at any time at the option of GSAM.

⁶ A 2% redemption fee will be imposed on the redemption of shares (including by exchange) of the Goldman Sachs Municipal Income Fund held for 30 calendar days or less.

7

Examples

The following Examples are intended to help you compare the cost of investing in: (1) each Signal Fund as it currently exists; (2) its Corresponding GST Fund as it currently exists; and (3) the same GST Fund if it acquires the Corresponding Signal Fund (i.e., the Combined Fund Pro Forma) with the cost of investing in other mutual funds. The Examples assume that you invest $10,000 in Class A, Class I or Institutional Shares of a Signal Fund, a GST Fund or a Combined Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year and that a Signal Fund’s, GST Fund’s or Combined Fund’s operating expenses remain the same. The Examples do not reflect any waivers and expense limitations. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years		5 Years		10 Years
Signal Large Cap Growth Fund
Class A Shares	$	625	$	941	$	1,280	$	2,233
Class I Shares	$	132	$	412	$	713	$	1,568
Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	$	662	$	898	$	1,153	$	1,881
Institutional Shares	$	78	$	243	$	422	$	942
Combined Fund Pro Forma
Class A Shares	$	662	$	898	$	1,153	$	1,881
Institutional Shares	$	78	$	243	$	422	$	942
Signal Income Fund
Class A Shares	$	439	$	682	$	943	$	1,688
Class I Shares	$	93	$	290	$	504	$	1,120
Goldman Sachs Core Fixed Income Fund
Class A Shares	$	532	$	706	$	895	$	1,440
Institutional Shares	$	48	$	151	$	263	$	591
Combined Fund Pro Forma
Class A Shares	$	532	$	706	$	895	$	1,440
Institutional Shares	$	48	$	151	$	263	$	591
Signal Tax-Exempt Income Fund
Class A Shares	$	476	$	793	$	1,132	$	2,089
Class I Shares	$	130	$	406	$	702	$	1,545
Goldman Sachs Municipal Income Fund
Class A Shares	$	563	$	802	$	1,060	$	1,796
Institutional Shares	$	81	$	252	$	439	$	978
Combined Fund Pro Forma
Class A Shares	$	563	$	802	$	1,060	$	1,796
Institutional Shares	$	81	$	252	$	439	$	978

The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor will bear directly or indirectly. The examples should not be considered a representation of future expenses which may be more or less than those shown. The assumed 5% annual return is hypothetical and should not be considered a representation of past or future annual return. Actual return may be greater or less than the assumed amount. The examples assume that all dividends and other distributions are reinvested.

8

The hypothetical examples assume that a CDSC will not apply to redemptions of Signal Fund, GST Fund and Combined Fund Class A Shares within the first 18 months.

Certain institutions that sell GST Fund and Signal Fund shares and/or their salespersons may receive other compensation in connection with the sale and distribution of Class A Shares for services to their customers’ accounts and/or the Signal Funds or GST Funds. For more information regarding such compensation, see “Shareholder Information” in the Signal Funds’ prospectuses, “Shareholder Guide” in the GST Funds’ prospectuses and “Payments to Intermediaries” in the GST Funds’ Statements of Additional Information.

Overview of the Signal Funds and GST Funds

Comparison of Investment Objectives

The following chart summarizes the investment objective of each of the Signal Funds and the Corresponding GST Fund.

Signal Fund	Corresponding GST Fund
Signal Large Cap Growth Fund:	Goldman Sachs Structured Large Cap Growth Fund:
Seeks capital appreciation.	Seeks long-term growth of capital. The GST Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap U.S. issues that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy. Dividend income is a secondary consideration representing all major sectors of the U.S. economy.
Signal Income Fund:	Goldman Sachs Core Fixed Income Fund:
Seeks current income consistent with the preservation of capital.	Seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index.
Signal Tax Exempt Income Fund:	Goldman Sachs Municipal Income Fund:
Seeks current income exempt from federal income tax.	Seeks a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital.

Service Providers

The GST Funds are managed on a day-to-day basis by GSAM and GSAM will continue to manage the GST Funds after the Reorganization. As of          , 2006, GSAM had assets under management of approximately $      billion.

Signal Capital, a wholly owned subsidiary of Old National Trust Company (“ONTC”), currently serves as investment adviser to each Signal Fund.

The Signal Funds and GST Funds have different administrators, distributors, transfer agents and other service providers. For a detailed description of the management of the GST Funds, including GSAM and other service providers to the GST Funds, see “Comparison of Signal Funds and GST Funds — Investment Advisers and Advisory Fee Information.” “Comparison of Signal Funds and GST Funds — Other Service Providers,” and the GST Funds’ prospectuses which accompany this Proxy/Prospectus.

9

Share Class Characteristics and Shareholder Transactions and Services

Sales Load, Distribution and Shareholder Servicing Arrangements for the Signal Funds.

Class A Shares.  There is a maximum sales charge of 4.75% for the Class A Shares of the Signal Large Cap Growth Fund and a 3.25% maximum sales charge for Class A Shares of the Signal Income Fund and Signal Tax-Exempt Income Fund. The sales charge is calculated as a percentage of the offering price for Class A Shares. Sales charges are reduced as the amount invested increases, provided that the amount invested reaches certain specified levels. There is no initial sales charge on purchase of $1 million or more. However, a CDSC of 1% will be charged to a shareholder if shares are redeemed within the first 18 months after purchase of a Signal Fund. For more information, see “Comparison of Signal Funds and GST Funds — Shareholder Transactions and Services of the Signal Funds and the GST Funds — Sales Charges, Reduction of Sales Charges and Sales Charge Exemptions” below.

Signal Funds has adopted a distribution and service plan pursuant to Rule 12b-1 under the 1940 Act with respect to Class A Shares of the Signal Funds. Under the Signal Funds Class A Plan, Signal Funds will pay to Signal Funds’ distributor a distribution and service fee for services provided to Class A shareholders equal, on an annual basis of 0.25% of Class A’s average daily net assets for each of the Signal Funds covered by the Plan.

Class I Shares.   Class I Shares of the Signal Funds are offered at net asset value with no front-end sales charge or CDSC. Class I Shares pay no distribution or service fees.

Sales Load, Distribution and Shareholder Servicing Arrangements for GST

Class A Shares.   There is a maximum sales charge of 5.50% for Goldman Sachs Structured Large Cap Growth Fund, and a maximum sales charge of 4.50% for Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund. The sales charge is calculated as a percentage of the offering price for Class A Shares. Sales charges are reduced as the amount invested increases, provided that the amount invested reaches certain specified levels. There is no sales charge on purchases of Class A Shares of a GST Fund of $1,000,000 or more; however, a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase. This CDSC may be waived in certain circumstances.

Class A Shares of the Goldman Sachs Municipal Income Fund charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less.

GST has adopted a distribution and service plan (the “GST Class A Plan”) under which Class A Shares of the GST Funds bear distribution and service fees paid to authorized dealers and Goldman Sachs. Under the GST Class A Plan, Goldman Sachs is entitled to a monthly fee from each GST Fund for distribution services equal, on an annual basis, to 0.25% of the average daily net assets of a GST Fund attributable to Class A Shares.

Institutional Shares.   Institutional Shares of the GST Funds are offered at net asset value with no front-end sales charge or CDSC. Institutional Shares of the Goldman Sachs Municipal Income Fund are subject to a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. GST Institutional Shares are not subject to a distribution plan or shareholder servicing plan.

The sales charges, sales charge exemptions, distribution and servicing arrangements, purchase, redemption, exchange, dividend and other policies and procedures of the Signal Funds and their Corresponding GST Funds are generally similar. There are, however, some differences. For more information, see “Comparison of Signal Funds and GST Funds — Shareholder Transactions and Services of the Signal Funds and the GST Funds” below.

Voting Information

The Coventry Group Trustees are furnishing this Proxy/Prospectus in connection with the solicitation of proxies. Only shareholders of record at the close of business on          , 2007, will be entitled to vote at the Special Meeting. Shares represented by a properly executed proxy will be voted in accordance with the instructions thereon. If no instruction is made, the named proxies will vote in favor of the proposal set forth in the Notice of Meeting. Proxies may be revoked at any time before they are exercised by submitting to Coventry Group a written notice of revocation or a subsequently executed proxy or by attending the Special Meeting and voting in person. For additional information, see “Voting Information” below.

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PRINCIPAL RISK FACTORS

Risks of Investing in the Signal Funds and GST Funds

An investment in a Signal Fund or its Corresponding GST Fund is subject to specific risks arising from the types of securities in which the Signal Fund or its Corresponding GST Fund invests and general risks arising from investing in any mutual fund. There is no assurance that a Signal Fund or a Corresponding GST Fund will meet its investment objective, and investors could lose money by investing in a Signal Fund or its Corresponding GST Fund. As with all mutual funds, an investment in a Signal Fund or a Corresponding GST Fund is not insured or guaranteed by Signal Capital, ONTC, GSAM, Goldman Sachs, or by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve Board or any other government agency.

The Goldman Sachs Structured Large Cap Growth Fund and Signal Large Cap Growth Fund (collectively, the “Equity Funds”) will be subject to the risks associated with equity investments. “Equity investments” may include common stocks, preferred stocks, interests in real estate investment trusts, convertible debt obligations, convertible preferred stocks, equity interests in trusts, partnerships, joint ventures, limited liability companies and similar enterprises, warrants, stock purchase rights and synthetic and derivative instruments that have economic characteristics similar to equity securities. In general, the values of equity investments fluctuate in response to the activities of individual companies and in response to general market and economic conditions. Accordingly, the values of the equity investments that the Equity Funds hold may rise or decline over short or extended periods. The stock markets tend to be cyclical, with periods when stock prices generally rise and periods when prices generally decline. This volatility means that the value of an investment in an Equity Fund may increase or decrease. Recently, certain stock markets have experienced substantial price volatility.

The Goldman Sachs Municipal Income Fund and Core Fixed Income Fund, as well as the Signal Tax-Exempt Income Fund and Income Fund will be subject to the risks associated with fixed-income securities. To the extent it invests in fixed-income securities, an Equity Fund will also be subject to the risks associated with fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase. Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that an issuer or guarantor could default on its obligations, and a Signal Fund or its Corresponding GST Fund will not recover its investment. Call risk and extension risk are normally present when the borrower has the option to prepay its obligations.

All of the principal risks applicable to the Signal Funds and GST Funds are described in the table that follows below. More information about certain types of portfolio securities and investment techniques, and their associated risks, is provided in Appendix A to the prospectuses of the GST Funds. You should consider the investment risks discussed in this section and the prospectuses of the GST Funds, which are important to your investment choice.

Principal Risk	Funds Denoting Risk as a Principal Risk
Net Asset Value Risk — The risk that the net asset value of a Fund and the value of your investment will fluctuate.	All GST Funds All Signal Funds
Interest Rate Risk — The risk that when interest rates increase, fixed income securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.	All GST Funds All Signal Funds

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Principal Risk	Funds Denoting Risk as a Principal Risk
Credit/Default Risk — The risk that an issuer or guarantor of a fixed-income security held by a Fund (which may have low credit ratings), or a bank or other financial institution that has entered into a repurchase agreement, or the counterparty in a derivative transaction, may default on its payment obligations including the obligation to pay interest and repay principal. For certain funds, this risk may include the risk of default on foreign letters of credit, guarantees or insurance that back municipal securities.	Goldman Sachs Core Fixed Income Fund Goldman Sachs Municipal Income Fund All Signal Funds
Call Risk — The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as a mortgage-backed security) earlier than expected. This may happen when there is a decline in interest rates. Under these circumstances, a Fund may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities.	Goldman Sachs Core Fixed Income Fund Goldman Sachs Municipal Income Fund
Extension Risk — The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as a mortgage-backed security) later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease, and a Fund will also suffer from the inability to invest in higher yielding securities.	Goldman Sachs Core Fixed Income Fund Goldman Sachs Municipal Income Fund
U.S. Government Securities Risk — The risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Although many U.S. Government Securities purchased by the Funds, such as those issued by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal Home Loan Banks, may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. The maximum potential liability of the issuers of some U.S. Government Securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.	Goldman Sachs Core Fixed Income Fund Goldman Sachs Municipal Income Fund
Stock Risk — The risk that stock prices have historically risen and fallen in periodic cycles. In recent years, U.S. and foreign stocks have experienced substantial price volatility.	Goldman Sachs Structured Large Cap Growth Fund Signal Large Cap Fund

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Principal Risk	Funds Denoting Risk as a Principal Risk
Derivatives Risk — The risk that loss may result from a Fund’s investments in options, futures, swaps, structured securities and other derivative instruments. These instruments may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses to a Fund.	All GST Funds
Management Risk — The risk that a strategy used by a Fund’s investment adviser may fail to produce the intended results.	All GST Funds All Signal Funds
Market Risk — The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Price changes may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more industry sectors, which will increase a Fund’s exposure to risk of loss from adverse developments affecting those sectors.	All GST Funds All Signal Funds
Liquidity Risk — The risk that a Fund will not be able to pay redemption proceeds within the time period stated in its prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in small and mid-capitalization stocks and real estate investment trusts will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate.	All GST Funds

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Principal Risk	Funds Denoting Risk as a Principal Risk
Tax Risk — A Fund may be adversely impacted by changes in tax rates and policies. Because interest income from municipal securities is normally not subject to regular federal income taxation, the attractiveness of municipal securities in relation to other investment alternatives is affected by changes in federal income tax rates or changes in the tax-exempt status of interest income from municipal securities. Any proposed or actual changes in such rates or exempt status, therefore, can significantly affect the demand for and supply, liquidity and marketability of municipal securities. This could in turn affect a Fund’s net asset value and ability to acquire and dispose of municipal securities at desirable yield and price levels. Additionally, this Fund would not be a suitable investment for IRAs, other tax-exempt or tax-deferred accounts or for other investors who are not sensitive to the federal, state or local income tax consequences of their investments.	Goldman Sachs Municipal Income Fund
Concentration Risk — The risk that if a Fund invests more than 25% of its total assets in issuers within the same state, industry or economic sector, an adverse economic, business or political development may affect the value of a Fund’s investments more than if its investments were not so concentrated.	Goldman Sachs Municipal Income Fund
Investment Style Risk — Different investment styles tend to shift in and out of favor depending upon market and economic conditions as well as investor sentiment. A Fund may outperform or underperform other funds that employ a different investment style. Examples of different investment styles include growth and value investing. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth of earnings potential. Growth companies are often expected by investors to increase their earnings at a certain rate. When these expectations are not met, investors can punish the stock inordinately even if earnings showed an absolute increase. Also, since growth companies usually invest a high portion of earnings in their business, growth stocks may lack the dividends of some value stocks that can cushion stock prices in a falling market. Growth oriented funds will typically underperform when value investing is in favor. Value stocks are those that are undervalued in comparison to their peers due to adverse business developments or other factors.	Goldman Sachs Structured Large Cap Growth Fund

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Principal Risk	Funds Denoting Risk as a Principal Risk
Foreign Risk — The risk that when a Fund invests in foreign securities, it will be subject to risk of loss not typically associated with domestic issuers. Loss may result because of less foreign government regulation, less public information and less economic, political and social stability. Loss may also result from the imposition of exchange controls, confiscations and other government restrictions. A Fund will also be subject to the risk of negative foreign currency rate fluctuations. Foreign risks will normally be greatest when a Fund invests in issuers located in emerging countries.	Goldman Sachs Structured Large Cap Growth Fund Goldman Sachs Core Fixed Income Fund All Signal Funds
Emerging Countries Risk — The securities markets of Asian, Latin and South American, Eastern European, African and other emerging countries are less liquid, are especially subject to greater price volatility, have smaller market capitalizations, have less government regulation and are not subject to as extensive and frequent accounting, financial and other reporting requirements as the securities markets of more developed countries.	Goldman Sachs Core Fixed Income Fund
Sovereign Risk — The risk that the issuer of the sovereign debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay the principal or interest when due. This risk includes, political, economic and repayment risks. Political risk is the risk associated with the general political and social environment of a country and includes, among other factors, government instability, poor socioeconomic conditions, corruption, lack of law and order, lack of democratic accountability, poor quality of the bureaucracy, internal and external conflict, and religious and ethnic tensions. High political risk can impede the economic welfare of a country. Economic risk is the risk associated with general economic conditions and includes, among other things, low quality and growth rate of gross domestic product (“GDP”), high inflation or deflation, high government deficits as a percentage of GDP, weak financial sector, overvalued exchange rate, and high current accounts deficits as a percentage of GDP. Repayment risk is the risk associated with the inability of a country to pay its external debt obligations in the immediate future and includes, among other items but are not limited to, high foreign debt as a percentage of GDP, high foreign debt service as a percentage of exports, and an unsustainable exchange rate structure.	Goldman Sachs Core Fixed Income Fund

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Principal Risk	Funds Denoting Risk as a Principal Risk
Non-Hedging Foreign Currency Trading Risk — A Fund may engage, to a greater extent than other Funds, in forward foreign currency transactions for speculative purposes. A Fund’s investment adviser may purchase or sell foreign currencies through the use of forward contracts based on the investment adviser’s judgment regarding the direction of the market for a particular foreign currency or currencies. In pursuing this strategy, an investment adviser seeks to profit from anticipated movements in currency rates by establishing “long” and/or “short” positions in forward contracts on various foreign currencies. Foreign exchange rates can be extremely volatile and a variance in the degree of volatility of the market or in the direction of the market from the investment adviser’s expectations may produce significant losses to a Fund.	Goldman Sachs Core Fixed Income Fund
Mid Cap and Small Cap Risk — The securities of small capitalization and mid-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. Securities of such issuers may lack sufficient market liquidity to enable a Fund to effect sales at an advantageous time or without a substantial drop in price. Both mid-cap and small-cap companies often have narrower markets and more limited managerial and financial resources than larger, more established companies. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of a Fund’s portfolio. Generally, the smaller the company, the greater these risks.	Goldman Sachs Structured Large Cap Growth Fund

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INFORMATION ABOUT THE REORGANIZATION

Significant features of the Reorganization are summarized below. This summary is qualified in its entirety by reference to the Reorganization Agreement which is attached as Appendix A.

Board Considerations

The Coventry Group Trustees have determined that the Reorganization is in the best interest of the shareholders of each Signal Fund, and that the interests of the existing shareholders of each Signal Fund will not be diluted as a result of the Reorganization. The Coventry Group Trustees have also considered and unanimously approved the terms and conditions of the Reorganization Agreement. The following sets forth in greater detail the steps taken by the Coventry Group Trustees in arriving at these conclusions.

Signal Capital, the investment adviser to the Signal Funds, recently informed the Coventry Group Trustees that it has re-considered its long term strategic commitment to the proprietary mutual fund business and, as a result, has determined that it no longer intends to serve as the investment adviser to the Signal Funds and that it no longer intends to participate directly in the mutual fund business. After review and evaluation of possible alternatives, Signal Capital recommended to the Coventry Group Trustees a fund restructuring with another fund group. Following a review of various candidates by Signal Capital, and consideration of merger proposals from certain potential candidates, Signal Capital recommended that the Coventry Group Trustees approve the reorganization proposal of GSAM. After reviewing and considering a number of factors relating to GST, the GST Funds, GSAM and Goldman, Sachs & Co., the Coventry Group Trustees have determined that the reorganization of the Signal Funds into corresponding GST Funds is in the best interest of the shareholders of each of the Signal Funds.

The Coventry Group Trustees requested that Coventry Group counsel conduct certain reviews of the GST Funds, GSAM and each Goldman Sachs entity that provides services to the GST Funds. With respect to the GST Funds, the review included, among other things, (1) organizational documents, (2) certain documents filed with the SEC, (3) certain service provider contracts, (4) certain materials concerning legal proceedings and regulatory matters, (5) certain materials concerning insurance and (6) certain materials concerning compliance matters. With respect to GSAM and its affiliates, the review included, among other things, (1) certain organizational materials, (2) certain materials concerning legal proceedings and regulatory matters, (3) various aspects of investment management compliance, (4) various aspects of risk management processes and procedures, (5) various aspects of brokerage and trading practices, (6) certain materials concerning insurance and (7) certain financial statements.

At a Coventry Group Trustees meeting held on January 16, 2007, representatives of GSAM presented materials on the structure, personnel and capabilities of GSAM. The portfolio managers of the Corresponding GST Funds also made presentations to the Coventry Group Trustees. In addition, the Chief Compliance Officer of the GST Funds provided an overview of the GST Funds’ compliance program and GSAM’s compliance department and risk management framework. In advance of the meeting, materials were provided to the Coventry Group Trustees by GSAM and counsel to Coventry Group. These materials included information on the investment objectives and the strategies of the GST Funds and comparative operating expense ratios and performance information.

During the meeting, the Coventry Group Trustees, with the advice and assistance of counsel, reviewed and considered, among other things:

i.	the reputation, financial strength and capabilities of Goldman Sachs and GSAM;
ii.	that GSAM and the GST Funds offer, in a single fund family, funds reasonably compared to the Signal Funds, with comparable shareholder services;
iii.	GSAM’s experience with and capabilities regarding mutual funds, including fund reorganizations;
iv.	the investment objectives and policies of the GST Funds and their relative compatibility with those of the Signal Funds;
v.	the historical investment performance records of the GST Funds and the Signal Funds, relative to each other, along with portfolio turnover;

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vi.	the investment advisory and total expenses payable and paid by the GST Funds, as compared with those of the Signal Funds;
vii.	the compliance organization of GSAM and the GST Funds;
viii.	the qualifications and experience of the investment personnel who would be managing the GST Funds;
ix.	Goldman Sachs’ distribution capabilities and the prospects for future growth of the GST Funds;

x.  the viability of the Signal Funds absent approval of the proposed Reorganization, and alternatives to the Reorganization including restructuring with different funds and liquidating the Signal Funds;

xi.	the terms of the proposed Reorganization, including the anticipated tax-free nature of the transaction for the Signal Funds and their shareholders, and that the transactions are not contingent on each other and may proceed separately; and
xii.	that the Signal Funds would not bear any of the expenses of the proposed Reorganization.

At a Coventry Group Trustees meeting held on January 16, 2007, the Coventry Group Trustees determined that, based upon their consideration and review of the foregoing factors, the Reorganization was in the best interest of the shareholders of each Signal Fund, and that the interests of the existing shareholders of each Signal Fund would not be diluted as a result of the Reorganization. The Coventry Group Trustees also considered and unanimously approved the terms and conditions of the Reorganization Agreement.

The Reorganization Agreement

The following summary of the Reorganization Agreement is qualified in its entirety by reference to the Reorganization Agreement attached to this Proxy/Prospectus as Appendix A.

The Reorganization Agreement provides that with respect to each Signal Fund: (1) all of the Signal Fund’s assets will be acquired, and all of the liabilities (other than those liabilities specifically excluded under the Reorganization Agreement) of the Signal Fund will be assumed, by its Corresponding GST Fund in exchange for Class A Shares and Institutional Shares (as provided in the chart below)(collectively, “GST Shares”), (2) such GST Shares of the GST Funds will be distributed to the shareholders of the corresponding share class of each Signal Fund, and (3) each Signal Fund will liquidate.

Subject to the satisfaction of the conditions described below, such acquisition is scheduled to occur at the opening of business on          , 2007 or on a later date as the parties may agree (the “Effective Time of the Reorganization”).

Generally, with respect to the Reorganization and except as noted immediately below each shareholder of a Signal Fund will receive the number of full and fractional (to the third decimal place) Class A Shares and Institutional Shares of its Corresponding GST Fund equal in value to the value of the Class A Shares or Class I Shares, respectively, held as of the close of regularly scheduled trading on the New York Stock Exchange (“NYSE”) at the Effective Time of the Reorganization. Immediately upon receipt of GST Fund shares, each Signal Fund will liquidate and distribute pro-rata to its shareholders of record as of the Effective Time of the Reorganization the shares of the Corresponding GST Fund received by such Signal Fund in the Reorganization. The transactions described above are summarized in the following table.

Signal Funds	GST Funds
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

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The liquidation and distribution of a Signal Fund’s shares will be accomplished by the transfer of the Corresponding GST Fund’s shares then credited to the account of the Signal Fund on the books of the Corresponding GST Fund to open accounts on the share records of the Corresponding GST Fund in the names of the shareholders of the Signal Fund. The aggregate net asset values of the Class A Shares and Institutional Shares of the Corresponding GST Fund to be credited to the shareholders of the Signal Fund will be equal to the aggregate net asset values of the Class A Shares and Class I Shares respectively, of the Signal Fund owned by such shareholders at the close of business on the business day immediately preceding the Effective Time of the Reorganization. All issued and outstanding shares of each Signal Fund will simultaneously be canceled on the books of such Signal Fund.

Under the Reorganization Agreement, Coventry Group and GST will not bear any fees, expenses or explicit brokerage commissions in connection with the transactions contemplated by the Reorganization Agreement. All of the fees, expenses and explicit brokerage commissions in connection with entering into and carrying out the transactions contemplated by the Reorganization Agreement will be paid by Signal Capital or GSAM (or an affiliate).

The Reorganization Agreement provides that GST will assume all obligations of each Signal Fund to indemnify the Independent Trustees against all liabilities and expenses with respect to any actions or omissions involving the Signal Funds.

The Reorganization Agreement contains a number of representations and warranties made by Coventry Group to GST related to, among other things, its legal status, compliance with laws and regulations and financial position (section 4.1) and similar representations and warranties made by GST to Coventry Group (section 4.2). The Reorganization Agreement contains a number of conditions precedent that must occur before either Coventry Group or GST are obligated to proceed with any of the Reorganizations (sections 6.1, 6.2 and 6.3). These include, among others, that: (1) the shareholders of each Signal Fund approve the Reorganization of their Signal Fund; (2) Coventry Group receive from GST’s legal counsel and GST receive from Coventry Group’s legal counsel, certain opinions supporting the representations and warranties made by each party regarding legal status and compliance with laws and regulations (including an opinion from GST counsel that the shares issued in the Reorganization will be validly issued, fully paid and non assessable); (3) both Coventry Group and GST receive from GST’s counsel the tax opinion discussed below under “Federal Income Tax Consequences;” and (4) the receipt of certain certificates from Coventry Group and GST officers concerning the continuing accuracy of representations and warranties in the Reorganization Agreement.

The Reorganization Agreement may be terminated and the Reorganization abandoned at any time prior to the Effective Time of the Reorganization by: (1) the mutual written consent of Coventry Group and GST; (2) Coventry Group (a) following any material breach by GST of any of its representations, warranties or covenants contained in the Reorganization Agreement, if GST does not cure such breach within 10 business days; (b) if any of the conditions precedent set forth in paragraphs 6.1 and 6.3 are not satisfied by December 31, 2007; or (c) upon the occurrence of an event which has a material adverse effect upon GST or a GST Fund; (3) GST upon any material breach by Coventry Group of any of its representations, warranties or covenants contained in the Reorganization Agreement, if Coventry Group does not cure such breach within 10 business days; (b) if any of the conditions precedent set forth in paragraphs 6.2 and 6.3 are not satisfied by December 31, 2007; or (c) upon the occurrence of an event which has a material adverse effect upon Coventry Group or a Signal Fund; (4) either Coventry Group or GST if the closing does not occur by December 31, 2007; or (5) by either GST or Coventry Group following a determination that the consummation of the Reorganization is not in the best interest of its shareholders by the terminating party’s Board.

Approval of each Reorganization requires the approval of the holders the lesser of (a) 67% or more of the shares of the relevant Signal Fund voted at the Special Meeting if more than 50% of the outstanding shares of the relevant Signal Fund are represented at the Special Meeting in person of by proxy or (b) more than 50% of the outstanding shares of the relevant Signal Fund. See the section of this Proxy/Prospectus entitled “Voting Information” for more information.

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The Reorganization Agreement provides that the failure of any Signal Fund to consummate the transactions contemplated in the Reorganization Agreement will not affect the consummation of the validity of the Reorganization with respect to any other Signal Funds.

The Reorganization Agreement also provides that in order to facilitate the transfer of the assets of the Signal Funds at the Effective Time of the Reorganization, GSAM may request that Signal Capital use its commercially reasonable best efforts, subject to its fiduciary duty as an investment adviser, to limit or cease portfolio trading on behalf of a Signal Fund for a period of up to three days prior to the Valuation Time of the Reorganization.

Although each Signal Fund has a similar investment objective and principal strategies to its Corresponding GST Fund, some of a Signal Fund’s holdings may not be permissible portfolio holdings of its Corresponding GST Fund. Therefore, some portion of a Signal Fund’s securities holdings may be sold prior to or immediately following the Reorganization. In addition, for certain Signal Funds, GSAM anticipates selling a portion of such Signal Fund shortly after the Reorganization. To the extent that a Signal Fund’s securities holdings are sold prior to the Reorganization, the proceeds of such sales will be held in temporary investments or reinvested in assets that the Corresponding GST Fund may hold. The possible need for a Signal Fund to dispose of certain portfolio investments prior to the Reorganization could result in selling such investments at a disadvantageous time. The sale of securities either prior to the Reorganization or shortly thereafter could result in the Signal Fund or its Corresponding GST Fund realizing gains (which may be taxable) or losses that would not otherwise have been realized but for the Reorganization. Such a sale of assets and the reinvestment of the proceeds would involve brokerage and other transactional costs. In this event, GSAM will pay the reasonable explicit brokerage commissions resulting from portfolio transactions executed on behalf of the Signal Funds in preparation for the Reorganization.

If the Reorganization is approved, Signal Fund shareholders who do not wish to have their Signal Fund shares exchanged for shares of a Corresponding GST Fund as part of the Reorganization should redeem their shares prior to the consummation of the Reorganization. If you redeem your shares, you may recognize a taxable gain or loss based on the difference between your tax basis in the shares and the amount you receive for them. In addition, if you redeem your shares prior to the Reorganization and your shares are subject to a contingent deferred sales load, your redemption proceeds will be reduced by any applicable sales load.

Description of the Securities to be Issued

Shareholders of each Signal Fund as of the Effective Time of the Reorganization will receive full and/or fractional Class A Shares and Institutional Shares of the respective Corresponding GST Fund in accordance with the procedures provided for in the Reorganization Agreement, as described above. The GST Fund shares to be issued in connection with each Reorganization will be fully paid and non-assessable when issued, and will have no pre-emptive or conversion rights. The rights of shareholders of Coventry Group and GST are comparable. For more information see “Comparison of Signal Funds and GST Funds — Comparison of Coventry Group’s and GST’s Charter Documents and — Shareholder Transactions and Services of the Signal Funds and GST Funds.”

Federal Income Tax Consequences

The exchange of each Signal Fund’s assets for the Corresponding GST Fund shares and the assumption of the liabilities of each Signal Fund pursuant to the Reorganization Agreement is intended to qualify for federal income tax purposes as a tax-free reorganization under Section 368(a) of the Code. As a condition to the closing of the Reorganization, Coventry Group and GST will receive the opinion of Drinker Biddle & Reath LLP, counsel to GST, to the effect that on the basis of the existing provisions of the Code, Treasury regulations thereunder, current administrative rulings and pronouncements and court decisions, and certain facts, qualifications, assumptions and representations, with respect to the Reorganization, for federal income tax purposes:

(1)  each Reorganization will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and each GST Fund and Signal Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code;

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(2)	each Signal Fund will recognize no gain or loss (a) upon the transfer of its assets to the Corresponding GST Fund in exchange for GST Fund shares and the assumption of the liabilities of the Signal Fund, and (b) upon the distribution of those shares to the shareholders of the Signal Fund;
(3)	each GST Fund will recognize no gain or loss upon the receipt of the assets of the Corresponding Signal Fund in exchange for shares of such GST Fund and the assumption of the liabilities of such Signal Fund;
(4)	the tax basis in the hands of each GST Fund of each asset of the Corresponding Signal Fund transferred to such GST Fund in the Reorganization will be the same as the basis of that asset in the hands of such Signal Fund immediately before the transfer;
(5)	the holding period of each asset of each Signal Fund in the hands of the Corresponding GST Fund will include the period during which that asset was held by such Signal Fund;
(6)	the shareholders of each Signal Fund will recognize no gain or loss upon their receipt of shares of the Corresponding GST Fund;
(7)	the aggregate tax basis of the GST Fund shares received by each shareholder of the Corresponding Signal Fund will equal the aggregate tax basis of the Signal Fund shares surrendered in exchange therefor;
(8)	the holding periods of the GST Fund shares received by each Signal Fund shareholder will include the holding periods of the Signal Fund shares surrendered in exchange therefor, provided that the Signal Fund shares are held by that shareholder as capital assets on the date of the exchange; and
(9)	each GST Fund will succeed to and take into account the tax attributes of the Corresponding Signal Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations thereunder.

Shares held for the purpose of investment are generally considered to be capital assets.

Neither Coventry Group nor GST has sought a tax ruling from the Internal Revenue Service (“IRS”). The opinion of counsel is not binding on the IRS nor does it preclude the IRS from adopting a contrary position.

Immediately before the Reorganization, each Signal Fund will pay a dividend or dividends that, together with all previous dividends, will have the effect of distributing to its shareholders all of its investment company taxable income for taxable income years ending at or before the Effective Time of the Reorganization (computed without regard to any deduction for dividends paid) and all of its net capital gain, if any, recognized in taxable years ending at or before the Effective Time of the Reorganization. Any such dividends will generally be included in the taxable income of a Signal Fund’s shareholders.

As a result of the Reorganization, each GST Fund will succeed to the tax attributes of the Corresponding Signal Fund, except that the amount of capital loss carryforwards of a Signal Fund that the Corresponding GST Fund may use to offset capital gains recognized after the Reorganization will be subject to an annual limitation under Sections 382 and 383 of the Code. In general, the limitation for each taxable year will equal the sum of (1) the product of the net asset value of the Signal Fund as of the Effective Time of the Reorganization multiplied by that month’s “long-term tax-exempt rate” (which is a market-based rate published by the IRS each month) plus (2) the amount of any unrealized built-in gains of the Signal Fund as of the Effective Time of the Reorganization that the GST Fund recognizes within the first five taxable years ending after the Effective Time of the Reorganization (as long as the amount of unrealized built-in gains is greater than the lesser of (i) 15% of the net asset value of the Signal Fund or (ii) $10,000,000 as of the Effective Time). (The annual limitation will be proportionately reduced for the post-Effective Time of the Reorganization portion of the GST Fund’s current taxable year after the Effective Time of the Reorganization and for any subsequent short taxable year.)

Certain GST Funds anticipate selling portions of the portfolio holdings received from Signal Funds after the Reorganization. The sale of these securities after the Reorganization will result in those GST Funds recognizing gains and/or losses that they would not otherwise have realized were it not for the Reorganization. If the net effect of these additional gains and/or losses is an increase in a GST Fund’s net short-term or long-term capital gain for the

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current calendar year and/or fiscal year, the amount of the GST Fund’s taxable distributions to shareholders may likely be increased.

Shareholders should consult their own tax advisers concerning the potential tax consequences of the Reorganization to them, including foreign, state and local tax consequences.

Capitalization

The following tables show the capitalization of each Signal Fund and its Corresponding GST Fund as of August 31, 2006 with respect to the Signal Large Cap Growth Fund and the Goldman Sachs Structured Large Cap Growth Fund, October 31, 2006 with respect to the Signal Income Fund and Goldman Sachs Core Fixed Income Fund and October 31, 2006 with respect to the Signal Tax-Exempt Income Fund and Goldman Sachs Municipal Income Fund, and the capitalization of such GST Fund on a pro-forma basis as of that date after giving effect to the Reorganization. The following are examples of the number of Class A Shares and Institutional Shares of a GST Fund that would be exchanged for the shares of its Corresponding Signal Fund if the Reorganization shown had been consummated on August 31, 2006 with respect to the Signal Large Cap Growth Fund and the Goldman Sachs Structured Large Cap Growth Fund, October 31, 2006 with respect to the Signal Income Fund and Goldman Sachs Core Fixed Income Fund and October 31, 2006 with respect to the Signal Tax-Exempt Income Fund and Goldman Sachs Municipal Income Fund, and do not reflect the number of such shares or the value of such shares that would actually be received if the Reorganization depicted occurs. Amounts in the tables are in thousands, except for net asset value per share.

Signal Large Cap Growth Fund and Goldman Sachs Structured Large Cap Growth Fund

				Combined Goldman
		Goldman Sachs		Sachs Structured
	Signal Large Cap	Structured Large	Pro Forma	Large Cap Growth Fund
	Growth Fund	Cap Growth Fund*	Adjustments	Pro Forma
Net Assets:	$683,219 (Class A Shares) $39,278,868 (Class I Shares)	$310,385,872 (Class A Shares) $488,448,022 (Institutional Shares)	$0 $0	$311,069,091 (Class A Shares) $527,726,890 (Institutional Shares)
Net Asset Value Per Share:	$11.61 (Class A Shares) $11.71 (Class I Shares)	$13.20 (Class A Shares) $13.58 (Institutional Shares)		$13.20 (Class A Shares) $13.58 (Institutional Shares)
Shares Outstanding:	58,853 (Class A Shares) 3,354,027 (Class I Shares)	23,521,286 (Class A Shares) 35,974,280 (Institutional Shares)	(7,078) (461,131)	23,573,061 (Class A Shares) 38,867,176 (Institutional Shares)

*  The Goldman Sachs Structured Large Cap Growth Fund will be the accounting survivor for financial statement purposes.

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Signal Income Fund and Goldman Sachs Core Fixed Income Fund

				Combined Goldman
		Goldman Sachs		Sachs Core Fixed
	Signal	Core Fixed	Pro Forma	Income Fund
	Income Fund	Income Fund*	Adjustments	Pro Forma
Net Assets:	$263,678 (Class A Shares) $88,316,575 (Class I Shares)	$714,876,529 (Class A Shares) $1,558,970,671 (Institutional Shares)	$0 $0	$715,140,207 (Class A Shares) $1,647,287,246 (Institutional Shares)
Net Asset Value Per Share:	$9.67 (Class A Shares) $9.67 (Class I Shares)	$9.82 (Class A Shares) $9.86 (Institutional Shares)		$9.82 (Class A Shares) $9.86 (Institutional Shares)
Shares Outstanding:	27,257 (Class A Shares) 9,128,752 (Class I Shares)	72,780,585 (Class A Shares) 158,124,682 (Institutional Shares)	(413) (170,899)	72,807,429 (Class A Shares) 167,082,535 (Institutional Shares)

*  The Goldman Sachs Core Fixed Income Fund will be the accounting survivor for financial statement purposes.

Signal Tax-Exempt Income Fund and Goldman Sachs Municipal Income Fund

				Combined Goldman
		Goldman Sachs		Sachs Municipal
	Signal Tax-Exempt	Municipal Income	Pro Forma	Income Fund
	Income Fund	Fund*	Adjustments	Pro Forma
Net Assets:	$137,111 (Class A Shares) $19,645,371 (Class I Shares)	$302,270,811 (Class A Shares) $152,070,274 (Institutional Shares)	$0 $0	$302,407,922 (Class A Shares) $171,715,645 (Institutional Shares)
Net Asset Value Per Share:	$9.83 (Class A Shares) $9.83 (Class I Shares)	$15.80 (Class A Shares) $15.80 (Institutional Shares)		$15.80 (Class A Shares) $15.80 (Institutional Shares)
Shares Outstanding:	13,944 (Class A Shares) 1,997,702 (Class I Shares)	19,125,274 (Class A Shares) 9,622,583 (Institutional Shares)	(5,269) (754,598)	19,133,949 (Class A Shares) 10,865,687 (Institutional Shares)

*  The Goldman Sachs Municipal Income Fund will be the accounting survivor for financial statement purposes.

23

COMPARISON OF SIGNAL FUNDS AND GST FUNDS

Investment Objectives and Principal Investment Strategies

This section briefly compares and contrasts the investment objectives and principal investment strategies of each Signal Fund with those of its Corresponding GST Fund. More complete information may be found in the respective prospectuses for the Signal Funds and the GST Funds.

Signal Large Cap Growth Fund and Goldman Sachs Structured Large Cap Growth Fund

Investment Objectives:

(a)  Signal Large Cap Growth Fund: Seeks capital appreciation.

(b)  Goldman Sachs Structured Large Cap Growth Fund: Seeks long-term growth of capital. The GST Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap U.S. issuers that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy. Dividend income is a secondary consideration.

Principal Investment Strategies: The Signal Large Cap Growth Fund invests in a diversified portfolio of equity securities of large capitalization companies. For these purposes, Signal Capital deems issuers with market capitalizations in excess of $5 billion to be large capitalization companies. Signal Capital seeks investments in issuers that demonstrate superior sales and earnings growth rates, improving profitability, or above-average growth relative to their current market valuations.

Consistent with the Signal Large Cap Growth Fund’s investment objective, the Signal Fund:

•  invests substantially all, but in no event less than 80%, of its net assets in U.S. domestic equity securities of large capitalization companies

•  invests in the following types of equity securities: common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, warrants and any rights to purchase common stocks

•  may engage in short sales against the box

•  may invest in fixed income securities consisting of corporate notes, bonds and debentures that are rated investment grade at the time of purchase

•  may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

•  may invest up to 20% of its total assets in the securities of foreign issuers and may acquire sponsored and unsponsored American Depositary Receipts (“ADRs”) and European Depositary Receipts (“EDRs”)

•  may engage in repurchase transactions pursuant to which the Signal Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

•  may engage in options transactions

•  may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

•  may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

•  may purchase securities on a when-issued or delayed basis in which a security’s price and yield are fixed on a specific date but payment and delivery are scheduled for a future date beyond the standard settlement period

•  may invest in other investment companies

In the event that Signal Capital determines that current market conditions are not suitable for the Signal Fund’s typical investments, Signal Capital may instead, for temporary defensive purposes during such unusual market

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conditions, invest all or any portion of the Signal Fund’s assets in money market instruments and repurchase agreements.

The Goldman Sachs Structured Large Cap Growth Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in a broadly diversified portfolio of equity investments in large-cap U.S. issuers, including foreign issuers that are traded in the United States. However, it is currently anticipated that, under normal circumstances, the GST Fund will invest at least 95% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on an unrestricted basis) similar to that of the Russell 1000^® Growth Index at the time of investment. If the market capitalization of a company held by the GST Fund moves outside this range, the GST Fund may, but is not required to, sell the securities. The GST Fund is not required to limit its investments to securities in the Russell 1000^® Growth Index. The capitalization range of the Russell 1000^® Growth Index is currently between $1.3 billion and $432 billion.

GSAM emphasizes a company’s growth prospects in analyzing equity investments to be purchased by the GST Fund. The GST Fund’s investments are selected using both a variety of quantitative techniques derived from fundamental research including but not limited to valuation, momentum, profitability and earnings quality, in seeking to maximize the GST Fund’s expected return, while maintaining risk, style, capitalization and industry characteristics similar to the Russell 1000^® Growth Index. The GST Fund seeks a portfolio consisting of companies with above average capitalization and earnings growth expectations and below average dividend yields. The GST Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

Comment: The investment objectives, policies and restrictions of the Signal Large Cap Growth Fund and Goldman Sachs Structured Large Cap Growth Fund are, in general, similar. The tables below under “Other Investment Practices and Investment Securities of the Signal and GST Funds” show certain similarities and differences regarding the investment practices and investment securities of each Fund. One difference that should be noted is that the Signal Large Cap Growth Fund defines large capitalization companies as companies with market capitalization in excess of $5 billion at the time of investment. The investment adviser for the Goldman Sachs Structured Large Cap Growth Fund targets equity investments that fall within the capitalization range of the Russell 1000^® Growth Index, which is currently between $1.3 billion and $432 billion]. Additionally, the Signal Fund may invest in the securities of foreign issuers, including ADRs and EDRs, whereas the GST Fund may only invest in securities of foreign issuers which are traded in the U.S. One other difference is that the investment adviser to the GST Fund uses a quantitative investment style unlike the investment adviser to the Signal Fund.

Signal Income Fund and Goldman Sachs Core Fixed Income Fund

Investment Objectives:

(a)  Signal Income Fund: Seeks current income consistent with the preservation of capital.

(b)  Goldman Sachs Core Fixed Income Fund: Seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index.

Principal Investment Strategies: The Signal Income Fund invests primarily in debt securities of all types, including investment grade bonds and U.S. Government bonds.

Consistent with the Signal Income Fund’s investment objective, the Signal Fund:

•  invests substantially all, but in no event less than 65%, of its total assets in debt securities

•  invests in fixed income securities consisting of bonds, fixed income preferred stocks, debentures, notes, zero-coupon securities, mortgage-related and other asset-backed securities, state municipal or industrial revenue bonds, obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government, debt securities convertible into, or exchangeable for, common stocks, foreign debt securities, guaranteed investment contracts, income participation loans, first mortgage loans and participation certificates in pools of mortgages issued or guaranteed by agencies or instrumentalities of the U.S. Government

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•  invests only in debt securities which are rated at the time of purchase within the four highest rating categories assigned by one or more nationally recognized statistical rating organizations (“NRSROs”) or, if unrated, which Signal Capital deems to be of comparable quality.

•  may engage in repurchase transactions pursuant to which the Signal Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

•  may engage in options transactions

•  may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

•  may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

•  may purchase securities on a when-issued or delayed-delivery basis in which a security’s price and yield are fixed on a specific date but payment and delivery are scheduled for a future date beyond the standard settlement period

•  may invest in other investment companies

In the event that Signal Capital determines that current market conditions are not suitable for the Signal Income Fund’s typical investments, Signal Capital may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Signal Fund’s assets in money market instruments and repurchase agreements.

The Goldman Sachs Core Fixed Income Fund invests, under normal circumstances, at least 80% of its Net Assets in fixed-income securities, including U.S. Government securities, corporate debt securities, privately issued mortgage-backed securities and asset-backed securities. The GST Fund may also invest in custodial receipts, municipal securities and convertible securities. The GST Fund may also engage in forward foreign currency transactions for both speculative and hedging purposes. The GST Fund’s investments in non-U.S. dollar denominated obligations will not exceed 25% of its total assets at the time of investment and 10% of the GST Fund’s total assets may be invested in obligations of issuers in countries with emerging markets or economies. However, to the extent that the investment adviser has entered into transactions that are intended to hedge the GST Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency. In pursuing its investment objective, the GST Fund uses the index as its performance benchmark, but the GST Fund will not attempt to replicate the index. The GST Fund may, therefore, invest in securities that are not included in the index. The GST Fund has a target duration. Individual securities purchased by the GST Fund may have durations that are either shorter or longer than the target duration. GSAM uses derivative instruments to manage the duration of the GST Fund’s investment portfolios in accordance with its target duration. These derivative instruments include financial futures contracts and swap transactions, as well as other types of derivatives. Financial futures contracts used by the GST Fund include interest rate futures contracts including, among others, Eurodollar futures contracts. Eurodollar contracts are U.S. dollar-denominated futures contracts that are based on the implied forward London Interbank Offered Rate (LIBOR) of a three-month deposit. Securities purchased by the GST Fund must have a minimum credit quality of BBB- by S&P or Baa3 by Moody’s or a comparable rating by another NRSRO at the time of purchase. Securities must be either rated by a NRSRO or if unrated, determined by GSAM to be of comparable quality.

Comment: The investment objectives, policies and restrictions of the Signal Income Fund and Goldman Sachs Core Fixed Income Fund are, in general, similar. The tables below under “Other Investment Practices and Investment Securities of the Signal and GST Funds” show certain similarities and differences regarding the investment practices and investment securities of each Fund. One difference that should be noted is that the GST Fund has a duration target equal to the Lehman Brothers Aggregate Bond Index, plus or minus one year, with a maximum duration of 6 years. Historically, over the last ten years, the duration of the Lehman Brothers Aggregate Bond Index has ranged between 3.8 and 5 years. The Signal Fund, on the other hand, has no specific target duration.

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Signal Tax-Exempt Income Fund and Goldman Sachs Municipal Income Fund

Investment Objectives:

(a)	Signal Tax-Exempt Income Fund: Seeks current income exempt from federal income tax.
(b)	Goldman Sachs Municipal Income Fund: Seeks a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital.

Principal Investment Strategies: The Signal Tax-Exempt Income Fund invests primarily in municipal obligations, the interest on which is exempt from federal income tax.

Consistent with the Signal Tax-Exempt Income Fund’s investment objective, the Signal Fund:

•  invests substantially all, but in no event less than 80%, of its net assets in tax-exempt securities

•  invests only in debt securities which are rated at the time of purchase within the four highest rating categories assigned by one or more NRSROs or, if unrated, which Signal Capital deems to be of comparable quality

•  may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

•  may invest in the securities of foreign issuers and may acquire sponsored and unsponsored ADRs

•  may engage in repurchase transactions pursuant to which the Signal Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

•  may engage in options transactions

•  may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

•  may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

•  may invest in other investment companies

In the event that Signal Capital determines that current market conditions are not suitable for the Signal Fund’s typical investments, Signal Capital may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Signal Fund’s assets in money market instruments and repurchase agreements.

The Goldman Sachs Municipal Income Fund invests, under normal market conditions, at least 80% of its Net Assets in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes). The GST Fund may invest up to 100% of its Net Assets in private activity bonds, the interest on which (including the GST Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the GST Fund’s portfolio will be invested in U.S. dollar-denominated securities. Securities purchased by the GST Fund must have a minimum credit rating of BBB by S&P or Baa by Moody’s or a comparable rating by another NRSRO at the time of purchase. Securities with either be rated by a NRSRO or if unrated, determined by GSAM to be of comparable quality.

Comment: The investment objectives, policies and restrictions of the Signal Tax-Exempt Income Fund and Goldman Sachs Municipal Income Fund are, in general, similar. The tables below under “Other Investment Practices and Investment Securities of the Signal and GST Funds” show certain similarities and differences regarding the investment practices and investment securities of each Fund. One difference that should be noted is that the GST Fund has a duration target equal to the Lehman Brothers Aggregate Municipal Bond Index, plus or minus one year, with a maximum duration of 12 years. Historically, over the last ten years, the duration of the Lehman Brothers Aggregate Municipal Bond Index has ranged between six and eight years. The Signal Fund, on the other hand, has no specific target duration.

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Other Investment Practices and Investment Securities of the Signal Funds and the GST Funds

Signal Large Cap Growth Fund and Goldman Sachs Structured Large Cap Growth Fund:

10 Percent of total assets (including securities lending collateral) (Italic type)
10 Percent of Net Assets (excluding borrowing for investment purposes)
(Roman type)				Goldman Sachs
• No specific % limitation on usage; limited only by the objective and strategies of the Fund	Signal Large Cap			Structured Large
— Not permitted	Growth Fund			Cap Growth Fund
Investment Practices
Borrowing		331/3			331/3
Cross Hedging of Currencies		—			•
Custodial Receipts and Trust Certificates		—			•
Equity Swaps		—			•	1
Foreign Currency Transactions		—			•	2
Futures Contracts and Options on Futures Contracts		•	3		•	4
Investment Company Securities (including iSharessm and Standard & Poor’s Depositary Receiptstm)		•			10
Options on Foreign Currencies5		—			•
Options on Securities and Securities Indices5		•			•	6
Repurchase Agreements		•			•
Securities Lending		•			331/3
Short Sales Against the Box		•			—
Unseasoned Companies		•			•
Warrants and Stock Purchase Rights		•			•
When-Issued Securities and Forward Commitments		•			•

1.	Limited to 15% of Net Assets (together with other illiquid securities) for all structured securities and swap transactions that are not deemed liquid.
2.	Limited by the amount the GST Fund invests in foreign securities.
3.	The Signal Fund may engage in futures transactions as well as options on futures contracts solely for hedging purposes.
4.	The GST Fund may enter into future transactions only with respect to a representative index.
5.	Each Fund may purchase and sell call and put options.
6.	The Signal Fund and GST Fund may sell covered call and put options and purchase call and put options.

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10 Percent of total assets (excluding securities lending collateral) (Italic type)				Goldman Sachs
10 Percent of Net Assets (including borrowing for investment purposes) (Roman type)	Signal			Structured
• No specific % limitation on usage; limited only by the objective and strategies of the Fund	Large Cap			Large Cap
— Not permitted	Growth Fund			Growth Fund
Investment Securities
American, European and Global Depositary Receipts		20	1		•	2
Bank Obligations		•			•	3
Convertible Securities		•			•	4
Corporate Debt Obligations		•	5		•	3
Equity Investments		80	+		80	+
Fixed Income Securities6		•			20	3
Foreign Securities		20			•	7
Real Estate Investment Trusts		•			•
Structured Securities		—			•	8
Temporary Investments		•			35
U.S. Government Securities		•			•	3

1.	The Signal Fund may not invest in Global Depository Receipts.
2.	The GST Fund may not invest in EDRs.
3.	Limited by the amount the GST Fund invests in fixed-income securities and limited to cash equivalents only. The GST Fund may invest in bank obligations issued by U.S. or Foreign banks.
4.	The GST Fund has no minimum rating criteria for convertible debt securities.
5.	The Signal Fund may only invest in obligations that are investment grade at the time of purchase.
6.	Except as noted for the GST Fund under “Convertible Securities,” fixed-income securities must be investment grade (i.e., BBB or higher by S&P, Baa or higher by Moody’s or have a comparable rating by another NRSRO).
7.	Equity securities of foreign issuers must be traded in the United States.
8.	Limited to 15% of Net Assets (together with other illiquid securities) for all structured securities and swap transactions that are not deemed liquid.

29

Signal Income Fund and Goldman Sachs Core Fixed Income Fund:

10 Percent of total assets (including securities lending collateral) (Italic type)
10 Percent of Net Assets (excluding borrowings for investment purposes) (Roman Type)				Goldman Sachs
• No specific % limitation on usage; limited only by the objective and strategies of the Fund	Signal			Core Fixed
— Not permitted	Income Fund			Income Fund
Investment Practices
Borrowings		331/3			331/3
Credit, Interest Rate and Total Return Swaps		—			•	1
Currency Options and Futures		—			•
Cross Hedging of Currencies		—			•
Currency Swaps		—			•	1
Financial Futures Contracts		•	2		•
Forward Foreign Currency Exchange Contracts		—			•
Interest Rate Floors, Caps and Collars		—			•
Investment Company Securities		•			•
Mortgage Dollar Rolls		—			•
Mortgage Swaps		—			•	1
Options (including options on futures)		•			•
Options on Foreign Currencies		—			•
Repurchase Agreements		•			•	3
Securities Lending		•			331/3
Standby Commitments and Tender Option Bonds		—			—
When-Issued Securities and Forward Commitments		•			•

1.	The GST Fund is limited to 15% of Net Assets (together with other illiquid securities) for all structured securities and swap transactions that are not deemed liquid.
2.	The Signal Fund may engage in futures transactions as well as options on futures contracts solely for hedging purposes.
3.	The GST Fund may enter into repurchase agreements collateralized by securities issued by foreign governments.

30

10 Percent of total assets (excluding securities lending collateral) (Italic type)
10 Percent of Net Assets (including borrowings for investment purposes) (Roman Type)			Goldman Sachs
• No specific % limitation on usage; limited only by the objective and strategies of the Fund	Signal		Core Fixed
— Not permitted	Income Fund		Income Fund
Investment Securities
Asset-Backed Securities		•		•
Bank Obligations		•		•
Convertible Securities		•		•
Corporate Debt Obligations		•		•
Trust Preferred Securities		—		•
Emerging Country Securities		—		10	1
Floating and Variable Rate Obligations		•		•
Foreign Securities		•		•	2
Illiquid Securities		•		15
Mortgage-Backed Securities		•		•
Preferred Stocks, Warrants and Rights		•		•
Taxable Municipal Securities		•		•
Tax-Free Municipal Securities		•		•
Temporary Investments		•		•
U.S. Government Securities		•		•
Foreign Government Securities		•		•
Structured Securities		—		•

1.	Of the GST Fund’s investments in foreign securities, 10% of the GST Fund’s total assets in the aggregate may be invested in emerging country securities.
2.	For the GST Fund, includes issuers domiciled in one country and issuing securities denominated in the currency of another. The GST Fund may invest up to 25% of its total assets in securities not denominated in U.S. dollars (unless the Fund’s position is hedged against currency risk).

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Signal Tax-Exempt Income Fund and Goldman Sachs Municipal Income Fund:

10 Percent of total assets (including securities lending collateral) (Italic type)
10 Percent of Net Assets (excluding borrowing for investment purposes)(Roman type)	Signal			Goldman Sachs
• No specific % limitation on usage; limited only by the objective and strategies of the Fund	Tax-Exempt			Municipal
— Not permitted	Income Fund			Income Fund
Investment Practices
Borrowings		331/3			331/3
Credit, Interest Rate and Total Return Swaps		—			•	1
Financial Futures Contracts		•	2		•
Interest Rate Floors, Caps and Collars		—			•
Investment Company Securities		•			•
Options (including Options on Futures)		•			•
Repurchase Agreements		•			•
Securities Lending		•			331/3
Standby Commitments and Tender Option Bonds		—			•
When-Issued Securities and Forward Commitments		—			•

1.	Limited to 15% of Net Assets (together with other illiquid securities) for all structured securities and swap transactions that are not deemed liquid.
2.	The Signal Fund may engage in futures transactions as well as options on futures contracts solely for hedging purposes.

32

10 Percent of total assets (excluding securities lending collateral) (Italic type)
10 Percent of Net Assets (including borrowing for investment purposes) (Roman type)	Signal			Goldman Sachs
• No specific % limitation on usage; limited only by the objective and strategies of the Fund	Tax-Exempt			Municipal
— Not permitted	Income Fund			Income Fund
Investment Securities
Asset-Backed Securities		—			•
Convertible Securities		—			•
Corporate Debt Obligations		•			•
Floating and Variable Rate Obligations		•			•
Foreign Securities		•			—
Structured Securities		—			•	1
Taxable Municipal Securities		•			20
Tax-Free Municipal Securities2		80	+		80+
Temporary Investments		•			•	3
Trust Preferred Securities		—			•
U.S. Government Securities		•			•

1.	Limited to 15% of Net Assets (together with other illiquid securities) for all structured securities and swap transactions that are not deemed liquid.
2.	The Signal Fund and GST Fund will invest at least 80% of their Net Assets in municipal securities, the interest on which is exempt from regular federal income tax.
3.	The GST Fund may invest no more than 20% of its Net Assets in taxable investments under normal market conditions. Under unusual conditions, taxable investments may exceed this percentage.

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Investment Restrictions

This section briefly compares and contrasts certain fundamental and non-fundamental investment restrictions of each Signal Fund with those of its corresponding GST Fund. More complete information may be found in the respective statements of additional information for the Signal Funds and the GST Funds.

Unless otherwise indicated, the restrictions discussed below are fundamental policies of a Signal Fund or GST Fund. This means that they cannot be changed without approval of shareholders. Investment restrictions that are non-fundamental may be changed for the Signal Funds and GST Funds by the Boards of Trustees of Coventry Group and GST, respectively.

Maintenance of Status as a “Diversified Company.” All Signal Funds and GST Funds are “diversified companies” as defined by the 1940 Act. A “diversified company” is one that, with respect to at least 75% of the value of its total assets, is invested in cash, cash items, government securities, investment company securities and other securities. Investments in other securities are limited as to any one issuer to: (1) an amount no greater than 5% of the value of the total assets of the Fund; and (2) not more than 10% of the outstanding voting securities of the issuer.

Issuance of Senior Securities. The Signal Funds and the GST Funds are prohibited from issuing senior securities except to the extent with respect to the GST Funds, such issuance would not violate the 1940 Act or other applicable law or with respect to the Signal Funds, permitted by the 1940 Act or any rule, order or interpretation thereunder.

Borrowings. The Signal Funds may not borrow money except as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.

Each GST Fund has a fundamental investment restriction of not borrowing money, except: (1) each GST Fund may borrow from banks or through reverse repurchase agreements in amounts up to 331/3% of its total assets (including the amount borrowed); (2) each GST Fund may, to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes; (3) each GST Fund may obtain short-term credits necessary for the clearance of purchases and sales of portfolio securities; (4) each GST Fund may purchase securities on margin to the extent permitted by applicable law; and (5) each GST Fund may engage in transactions in mortgage dollar rolls which are accounted for as financings. In addition, each GST Fund has a non-fundamental policy prohibiting a GST Fund from purchasing additional securities if its borrowings (excluding covered mortgage dollar rolls) exceed 5% of its Net Assets.

Securities Underwriting. Both the Signal Funds and the GST Funds have similar restrictions with respect to securities underwriting. The GST Funds may underwrite securities issued by others except to the extent that the sale of portfolio securities may be deemed to be an underwriting. The Signal Funds may underwrite the securities issued by other persons, except to the extent that the Signal Fund may be deemed to be an underwriter under certain securities laws in the disposition of “restricted securities.”

Concentration in Industries. Both the Signal Funds and the GST Funds have a similar restriction generally prohibiting them from investing 25% or more of their respective total assets in the securities of one or more issuers conducting their principal business activities in the same industry (excluding, in the case of the GST Fund, the U.S. Government or any of its agencies or instrumentalities).

For purposes of applying this restriction to the Signal Funds: (1) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements secured by such obligations; (2) wholly owned finance companies will be considered to be in the industries of their parent if their activities are primarily related to financing the activities of their parents; and (3) utilities will be divided according to their services. For example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry.

For purposes of applying this restriction to the GST Funds, the U.S. Government or any of its agencies or instrumentalities are excluded.

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For purposes of applying this restriction to the Goldman Sachs Municipal Income Fund or Goldman Sachs Core Fixed Income Fund, (1) state and municipal governments and their agencies, authorities and instrumentalities are not deemed to be industries; (2) telephone companies are considered to be a separate industry from water, gas or electric utilities; (3) personal credit finance companies and business credit finance companies are deemed to be separate industries; and (4) wholly-owned finance companies are considered to be in the same industry of their parents if their activities are primarily related to financing the activities of their parents. This restriction does not apply to investments in municipal securities which have been pre-refunded by the use of obligations of the U.S. Government or any of its agencies or instrumentalities.

The Goldman Sachs Municipal Income Fund may invest 25% or more of the value of its total assets in municipal securities which are related in such a way that an economic, business or political development or change affecting one municipal security would also affect the other municipal securities. These municipal securities include (a) municipal securities, the interest on which is paid solely from revenues of 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 securities whose issuers are in the same state; and (c) industrial development obligations.

Purchases of Real Estate. The Signal Funds may not purchase or sell real estate, although investments in marketable securities of companies engaged in such activities and securities secured by real estate or interests therein are not prohibited by this restriction. The GST Funds may not purchase, hold or deal in real estate (including, with respect to the Goldman Sachs Core Fixed Income Fund, real estate limited partnerships). The GST Funds may purchase or sell: (1) securities secured by real estate or interests in real estate, (2) securities of real estate investment trusts, (other than the Goldman Sachs Core Fixed Income Fund), (3) mortgage-related securities, and (4) may hold and sell real estate acquired by a Fund as a result of the ownership of securities.

Commodities. Neither the Signal Funds nor GST Funds may purchase or sell commodities or commodities contracts, except that: (1) the Signal Funds may purchase or sell commodities or commodities contracts to the extent disclosed in the current Prospectus of the Signal Fund, and (2) the GST Funds may invest in currency and financial instruments and contracts that are commodities or commodity contracts.

Investments in Other Investment Companies or Series Thereof. Notwithstanding any other fundamental investment restriction or policy, a GST Fund may invest some or all of its assets in a single open-end investment company or series thereof with substantially the same investment objective, restrictions and policies as the GST Fund. The Signal Funds have no similar restriction.

Loans.  Neither the Signal Funds nor the GST Funds may make loans except through the purchase of debt obligations in accordance with each Signal Fund or GST Fund’s investment objective and policies. In addition, the Signal Funds may make time deposits with financial institutions and enter into repurchase agreements. The GST Funds may make loans though repurchase agreements with banks, brokers, dealers and other financial institutions and loans of securities as permitted by applicable law.

Purchases of Securities on Margin. The Signal Funds may not purchase securities on margin, except for use of short-term credit necessary for clearance of purchases of portfolio securities and except as may be necessary to make margin payments in connection with derivative securities transactions. As a fundamental policy, the GST Funds may purchase securities on margin to the extent permitted by applicable law.

Investments in Illiquid Securities. As a non-fundamental limitation, the GST Funds may not acquire any illiquid (not readily marketable) investments if more than 15% of their Net Assets would be invested in illiquid investments. Signal Funds have a similar non-fundamental limitation.

Investments for Purposes of Exercising Control. As a non-fundamental policy, the GST Funds are restricted from investing in companies for the purpose of exercising control or management. The Signal Funds have no similar restriction.

Short Sales of Securities. As a non-fundamental limitation, the GST Funds may not make short sales of securities, except short sales against-the-box. The Signal Funds have no similar restriction.

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Oil, Gas or Mineral-Related Investments. As a fundamental policy, the Goldman Sachs Core Fixed Income Fund may not invest in oil, gas or mineral leases. The other GST Funds and the Signal Funds have no similar fundamental restrictions.

Comparison of Coventry Group’s and GST’s Charter Documents

The Coventry Group is organized as a Massachusetts business trust. GST is organized as a Delaware statutory trust. The operations of Coventry Group are governed by Coventry Group’s Declaration of Trust, By-Laws and applicable Massachusetts law. The operations of GST are governed by GST’s Agreement and Declaration of Trust, By-laws and applicable Delaware law. The operations of both Coventry Group and GST are also subject to the provisions of the 1940 Act, the rules and regulations of the SEC thereunder and applicable state securities laws. In general, the charter documents governing Coventry Group are similar to those documents governing GST. The attributes of a share of beneficial interest of Coventry Group and GST are also comparable. The following is only a summary of certain of the differences between Coventry Group and its Declaration of Trust (the “Coventry Group Charter”), on the one hand, and GST and its Agreement and Declaration of Trust (the “GST Charter”), on the other. It is not a complete list of differences.

     Trustees of Coventry Group and GST

Subject to the provisions of the GST Charter, the operations of GST are supervised by GST’s Trustees and, subject to the provisions of the Coventry Group Charter, the operations of Coventry Group are supervised by the Coventry Group Trustees. The responsibilities, powers and fiduciary duties of the GST Trustees are substantially the same as those of the Coventry Group Trustees. The GST Charter permits GST’s Board of Trustees to remove a GST Trustee with or without cause at any time by a written instrument signed by at least a majority of the then Trustees specifying the effective date of removal or by the vote of holders of shares of beneficial interest of two-thirds of the outstanding shares of GST at a meeting of the shareholders.

The Coventry Group Charter permits the Coventry Group Trustees to remove a Coventry Group Trustee with cause at any time by the action of two-thirds of the remaining Trustees or by vote of at least two-thirds of holders of shares of beneficial interest of the outstanding shares of Coventry Group at a meeting of shareholders.

Both the Coventry Group Charter and GST Charter permit the Coventry Group Trustees or the GST Trustees, as applicable, to amend the respective Charter documents without a shareholder vote. However, shareholders of the GST Trust have the right to vote on any amendment: (1) that would adversely affect the voting rights of shareholders; (2) that is required by law to be approved by shareholders; (3) that would amend the provisions of the GST Charter regarding amendments thereto; or (4) that the GST Trustees determine to submit to shareholders.

Shareholders of Coventry Group have the right to vote on any amendment: (1) that would materially adversely affect the rights of shareholders under the Coventry Group Charter; (2) that is required by the 1940 Act; or (3) that the Coventry Group Trustees determine to submit to shareholders. The Coventry Group Trustees may amend the Coventry Group Charter without a shareholder vote if they deem it necessary to conform the charter to requirements of applicable federal or state laws or the regulations or requirements of the Code or if they deem it necessary or desirable to change the name of the Coventry Group or make any other changes which do not materially adversely affect the rights of shareholders.

     Liability and Indemnification of Coventry Group and GST Trustees

To protect the GST Trustees against certain liabilities, the GST Charter provides that if the GST Trustees have exercised reasonable care and have acted under reasonable belief that their actions are in the best interests of GST, the GST Trustees shall not be responsible or liable for any action or omission or for neglect or wrongdoing of them or any officer, agent, employee, investment adviser or independent contractor of GST, however; nothing in the GST Charter protects a GST Trustee against any liability to GST or its shareholders 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.

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In addition, the GST Charter provides for indemnification of Trustees, officers, employees and agents of GST unless the recipient is adjudicated: (1) to be liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office; or (2) not to have acted in good faith in the reasonable belief that such person’s actions were in the best interest of GST.

The Coventry Group Charter similarly provides that the Coventry Group’s trustees shall be liable for their own bad faith, willful misfeasance, gross negligence or reckless disregard of the duties involved in the conduct of his office. The Coventry Group Charter has similar indemnification provisions.

     Shareholder Liability

Under Delaware law, shareholders generally are not personally liable for the obligations of a Delaware statutory trust. A shareholder is entitled to the same limitation of liability extended to stockholders of private, for-profit corporations. Similar statutory or other authority, however, limiting shareholder liability does not exist in certain states. As a result, to the extent that GST or a shareholder is subject to the jurisdiction of courts to those states, the courts may not apply Delaware law, thereby subjecting the shareholder to liability. To guard against this risk, the GST Charter: (1) contains an express disclaimer of shareholder liability for acts or obligations of each GST Fund; and (2) provides for indemnification out of such GST Fund’s property, as applicable, for any shareholder held personally liable for the obligations of the GST Fund. In addition, notice of disclaimer of shareholder liability will normally be given in each agreement, obligation, or instrument entered into or executed by a GST Fund and/or GST. Thus, the risk of a shareholder incurring financial loss beyond his or her investment because of shareholder liability is limited to circumstances in which: (1) a court refuses to apply Delaware law; (2) no contractual limitation of liability is in effect; and (3) the applicable Fund is unable to meet its obligations to indemnify a shareholder. In light of Delaware law, the nature of the GST Funds’ business and the nature of its assets, GST’s Board of Trustees believes that the risk of personal liability to a shareholder is extremely remote.

Unlike Delaware, in Massachusetts there is no statute relating to business trusts that entitles shareholders of a Massachusetts business trust to the same limitation of liability as is extended to shareholders of a Massachusetts corporation. Under Massachusetts law, shareholders of Coventry Group could, under certain circumstances, be held personally liable as partners for Coventry Group’s obligations. Even if, however, Coventry Group were held to be a partnership, the possibility of shareholders incurring financial loss for that reason appears remote because the Coventry Group Charter contains an express disclaimer of shareholder liability for obligations of Coventry Group and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of Coventry Group or the Coventry Group Trustees. The Coventry Group Charter also provides for indemnification out of Coventry Group’s property for any shareholder held personally liable for Coventry Group’s obligations. Thus, the Coventry Group Trustees believe the risk of shareholder liability is also remote for Coventry Group’s shareholders.

     Voting Rights of Shareholders of Coventry Group and GST

Neither Coventry Group nor GST is required to hold annual meetings of shareholders and Coventry Group and GST do not intend to hold such meetings. In the event that a meeting of shareholders is held, each share of GST will be entitled, as determined by the GST 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 shareholders including the election of GST Trustees (this method of voting being referred to as “dollar based voting”). However, to the extent required by the 1940 Act or otherwise determined by the GST Trustees, series and classes of GST will vote separately from each other. Shareholders of GST do not have cumulative voting rights in the election of Trustees. Meetings of shareholders of GST, or any series or class thereof, may be called by the GST Trustees, certain officers or upon the written request of holders of 10% or more of the shares entitled to vote at such meetings. The GST 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. The GST Charter provides that the shareholders have the power to, vote only with respect to: (1) the election of GST Trustees to the extent and as provided therein; (2) the removal of Trustees as provided therein; (3) any matter required to be approved by the shareholders under the 1940 Act; (4) the termination of GST under certain circumstances as

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provided therein; (5) certain amendments of the GST Charter; and (6) with respect to such additional matters relating to GST as may be required or authorized by law, the GST Charter or the GST By-laws or any registration of GST with the SEC or any state, or as the GST Trustees may consider desirable.

Similarly, a shareholder meeting may be called at any time by the Coventry Group’s President, and shall be called by the President and Secretary at the request in writing or by resolution of a majority of Trustees, or at the written request of the holder or holders of 10% or more of the total number of shares then issued and outstanding of Coventry Group then entitled to vote at such meeting. The Coventry Group Charter, subject to limitations or conditions imposed by the Coventry Group Charter, provides that its shareholders shall have the power to vote only: (1) for the election of Trustees to the extent and as provided therein; (2) the removal of Trustees to the extent and as provided therein; (3) with respect to any investment advisory or management contract involving the Coventry Group; (4) for the termination of the Coventry Group to the extent and as provided therein; (5) with respect to amendments of the Coventry Group Charter to the extent and as provided therein; (6) with respect to any merger, consolidation or sale of assets involving the Coventry Group; (7) with respect to incorporation of the Coventry Group or any services to the extent; (8) to the same extent as stockholders of Massachusetts business corporations as to whether a claim should be brought as a class action or derivatively on behalf of the Trust, a series or shareholders; (9) with respect to any plan adopted pursuant to Rule 12b-1 under the 1940 Act; and (10) such additional matters relating to the Coventry Group as may be required or authorized by law, the Coventry Group Charter, or the By-laws or any registration of the Coventry Group with the SEC or any State, or as the Coventry Group Trustees may consider desirable. Shareholders of record of such share are entitled to one vote for each full share and a fractional vote for each fractional share. Shareholders are not entitled to cumulative voting in the election of Trustees.

Except when a larger vote is required by law, the GST Charter requires one-third of the holders of shares entitled to vote to establish a quorum for the transaction of business at a meeting of shareholders. The Coventry Group Charter requires representation in person or by proxy of a majority of the holders of shares entitled to vote to establish a quorum for the transaction of business at a meeting of shareholders. In addition, both the Coventry Group Charter and GST Charter provide that, except when a larger vote is required by law, by the respective GST Charter or Coventry Group Charter, or by the respective By-laws of GST or Coventry Group, the holders of shares representing a majority of votes present and entitled to be cast at a shareholders’ meeting in person or by proxy on the matter shall decide that matter except that a plurality of votes cast shall elect a trustee.

Termination of Coventry Group/GST and its Series or Classes

The GST Charter permits the termination of GST or any series or class of GST: (1) by a majority of the affected shareholders at a meeting of shareholders of GST, series or class; or (2) by a majority of the GST Trustees without shareholder approval if the GST Trustees determine, in their sole discretion, that such action is in the best interest of GST, such series, such class or their shareholders.

Similarly, the Coventry Group Charter provides that the Coventry Group or any series may be terminated at any time by: (1) a vote of a majority of the shares of the Coventry Group or series outstanding and entitled to vote, at any meeting of shareholders; or (2) by an instrument in writing signed by the Coventry Group Trustees. Any class may be terminated at any time by an instrument executed by a majority of the Coventry Group Trustees.

Investment Advisers and Advisory Fee Information

The GST Funds are managed on a day-to-day basis by GSAM. GSAM will continue to manage the GST Funds after the Reorganization. As of December 31, 2006, GSAM had assets under management of approximately $      billion.

Signal Capital, a wholly owned subsidiary of ONTC, currently serves as investment adviser to each Signal Fund.

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The following table shows the contractual investment advisory fees including the fee ratios after any fee waivers for each Signal Fund and its corresponding GST Fund. The fees for the Signal Funds are based on actual expenses for the twelve months ended March 31, 2006. The fees for the GST Funds represent the pro forma annualized advisory fees before and after waivers based upon fee arrangements that will be in place upon consummation of the Reorganization.

	Advisory Fees		Advisory Fees
	Before/After		Before/After
Signal Fund	Waivers	Corresponding GST Fund	Waivers
Large Cap Growth Fund Advisory Fee	0.75%/0.55%	Structured Large Cap Growth Fund Advisory Fee	0.65%/0.51%1
Income Fund Advisory Fee	0.50%/0.25%	Core Fixed Income Fund Advisory Fee	0.38%/0.38%1
Tax-Exempt Income Fund Advisory Fee	0.50%/0.07%	Municipal Income Fund Advisory Fee	0.55%/0.50%1

¹ GSAM has entered into fee reduction commitments which impose breakpoints on the management fees and reduce the management fees for certain GST Funds to annual rates equal to the following percentages of the average daily net assets of the GST Funds:

				Over $1 billion
Fund	First $1 billion			up to $2 billion			Over $2 billion
Structured Large Cap Growth Fund		0.65	%		0.59	%		0.56	%
Core Fixed Income Fund		0.40	%		0.36	%		0.34	%
Municipal Income Fund		0.55	%		0.50	%		0.48	%

In addition, GSAM has voluntarily agreed not to impose a portion of the management fee for certain GST Funds. These fee waivers may be terminated at any time at the option of GSAM. As a result of fee waivers, the current management fees of these GST Funds as a percentage of average daily net assets are as follows:

GST Fund	Management Fee
Structured Large Cap Growth Fund		0.51	%
Municipal Income Fund		0.50	%

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Other Service Providers

The Signal Funds and GST have different service providers. Upon completion of the Reorganization, GST will continue to engage its existing service providers. In all cases, the types of services provided to the Coventry Group and GST under the service arrangements are substantially similar.

	Signal Funds	GST
Distributor	BISYS Fund Services, L.P.	Goldman Sachs
Administrator	BISYS Fund Services Ohio, Inc.	GSAM*
Transfer Agent and Dividend Disbursing Agent	BISYS Fund Services Ohio, Inc.	Goldman Sachs
Custodian	The Huntington National Bank	JP Morgan Chase Bank (Goldman Sachs Municipal Income Fund)
		State Street Bank & Trust Company (All other GST Funds)
Independent Registered Public Accounting Firm	Ernst & Young LLP	PricewaterhouseCoopers LLP

*  GSAM provides administrative services to GST Funds as part of its advisory services for GST Funds.

Administration Arrangements

BISYS Fund Services Ohio, Inc. serves as administrator to the Signal Funds. The administrator assists in each Signal Fund’s administration and operation including, but not limited to, maintaining office facilities; furnishing statistical and research data, clerical, certain bookkeeping services and stationery and office supplies; preparing the periodic reports on Form N-SAR; compiling data for and assisting in the preparation of all of the Signal Funds’ federal and state tax returns (other than those required to be made by the Signal Funds’ custodian and transfer agent); preparing compliance filings pursuant to state securities laws; assisting in the preparation of semi-annual and annual reports and registration statements for the Coventry Group; compiling data for and preparing reports pursuant to Rule 24f-2 under the 1940 Act; keeping and maintaining the financial accounts and records of each Signal Fund, including calculating daily expense accruals; and generally assisting in all aspects of the Signal Funds’ operations other than those performed by the Signal Funds’ investment adviser, custodian and transfer agent. BISYS Fund Services Ohio, Inc. is entitled to receive a fee for its administrative services, computed daily and payable monthly, at an annual rate of 0.14% of each Signal Fund’s average net assets.

GSAM provides various administrative, accounting and corporate secretarial services to the GST Funds. GSAM performs these administrative services for the GST Funds under its Management Agreements with the GST Funds.

Shareholder Transactions and Services of Signal Funds and GST Funds

This section compares the shareholder transactions and services of Signal Funds and their corresponding GST Funds. The following is qualified in its entirety by the more detailed information in the prospectuses for the Signal Funds and GST Funds, which are incorporated by reference into this Proxy/Prospectus. Unless otherwise indicated, terms used herein and not otherwise defined have the same meanings as are given to them in such prospectuses.

Sales Charges, Reduction of Sales Charges and Sales Charge Exemptions

Signal Funds Class I Shares and GST Funds Institutional Shares.  Signal Funds Class I Shares and GST Funds Institutional Shares are offered at net asset value with no front-end sales charges or CDSC. The minimum investment amount for purchasing Class I Shares of the Signal Funds generally is $1,000. For GST Funds Institutional Shares, the minimum investment is $1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates.

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Signal Funds Class A Shares.  There is a maximum sales charge of 4.75% for Class A Shares of the Signal Large Cap Growth Fund; and a 3.25% maximum sales charge for Class A Shares of the Signal Income and Tax-Exempt Income Funds. The sales charge is calculated as a percentage of the offering price for Class A Shares.

GST Funds Class A Shares.  There is a maximum sales charge of 5.5% for Class A Shares of the Goldman Sachs Structured Large Cap Growth Fund, and a maximum sales charge of 4.5% for Class A Shares of the Goldman Sachs Core Fixed Income Fund and Municipal Income Fund. The sales charge is calculated as a percentage of the offering price for Class A Shares.

Reduction of Sales Charges

Sales Charges for Signal Funds Class A Shares

Sales charges on Class A Shares of Signal Funds are reduced as the amount invested increases, provided that the amount invested reaches certain specified levels as follows:

Class A Sales Charges:

							Signal Income and
	Signal Large Cap Growth Fund						Tax-Exempt Income Funds
	Sales Charge as a			Sales Charge as a			Sales Charge as a			Sales Charge as a
	Percentage of			Percentage of			Percentage of			Percentage of
Amount of Transaction at Offering Price*	Offering Price			Net Asset Value			Offering Price			Net Asset Value
Up to $25,000		4.75	%		4.99	%		3.25	%		3.36	%
$25,000 but less than $100,000		4.50	%		4.71	%		3.00	%		3.09	%
$100,000 but less than $250,000		3.50	%		3.63	%		2.75	%		2.83	%
$250,000 but less than $500,0000		2.50	%		2.56	%		2.25	%		2.30	%
$500,000 but less than $1,000,000		1.00	%		1.01	%		2.00	%		2.04	%
$1,000,000 and above*		None			None			None			None

*  There is no initial sales charge on purchases of $1 million or more. However, a CDSC of up to 1.00% of the purchase price will be charged to the shareholder if shares are redeemed in the first 18 months after purchase of a Signal Fund.

Sales Charges for GST Funds Class A Shares

Sales charges on Class A Shares of GST Funds are reduced as the amount invested increases, provided that the amount invested reaches certain specified levels, as follows:

Goldman Sachs Structured Large Cap Growth Fund

	Sales Charge as a			Sales Charge as a
	Percentage of			Percentage of Net
Amount of Transaction at Offering Price	Offering Price			Amount Invested
Less than $50,000		5.50	%		5.82	%
$50,000 but less than $100,000		4.75	%		4.99	%
$100,000 but less than $250,000		3.75	%		3.90	%
$250,000 but less than $500,000		2.75	%		2.83	%
$500,000 but less than $1,000,000		2.00	%		2.04	%
$1,000,000 and over		0.00	%*		0.00	%*

*  No sales charge is payable at the time of purchase of Class A Shares of $1 million or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase.

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Goldman Sachs Core Fixed Income Fund

Goldman Sachs Municipal Income Fund

	Sales Charge as a			Sales Charge as a
	Percentage of			Percentage of Net
Amount of Transaction at Offering Price	Offering Price			Amount Invested
Less than $100,000		4.50	%		4.71	%
$100,000 but less than $250,000		3.00	%		3.09	%
$250,000 but less than $500,000		2.50	%		2.56	%
$500,000 but less than $1,000,000		2.00	%		2.04	%
$1,000,000 and over		0.00	%*		0.00	%*

*  No sales charge is payable at the time of purchase of Class A Shares of $1 million ($500,000 in the case of the Goldman Sachs Short Duration Government Fund) or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase.

The reduced sales charges on Signal Funds Class A Shares and GST Class A Shares described above are available through:

Rights of Accumulation

Signal Funds Class A Shares

An investor is entitled to a reduced sales charge on additional purchases of a class of shares of a Signal Fund if the value of the investor’s existing aggregate holdings at the time of the additional purchase, plus the amount of the additional purchase equals $25,000 or more. The investor’s discount is determined based on the schedule listed above under “Sales Charges for Signal Funds Class A Shares.”

GST Class A Shares

When buying Class A Shares in GST Funds, the current aggregate investment determines the initial sales load an investor will pay. An investor may qualify for reduced sales charges when the current market value of holdings across Class A, Class B and/or Class C Shares, plus new purchases, reaches $50,000 or more for the Structured Large Cap Growth Fund or an aggregate of $100,000 or more for each of the Goldman Sachs Core Fixed Income and Municipal Income Funds. Class A, Class B and/or Class C Shares of any of the GST Funds may be combined under the Right of Accumulation. For purposes of applying the Right of Accumulation, shares of the GST Funds and any other GST Fund of GST purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, under some circumstances, Class A, Class B and/or Class C Shares of the GST Funds and Class A, Class B and/or Class C Shares of any other GST Fund purchased by partners, directors, officers or employees of the same business organization, groups of individuals represented by and investing on the recommendation of the same accounting firm, certain affinity groups or other similar organizations may be combined for the purpose of determining whether a purchase will qualify for the Right of Accumulation and, if qualifying, the applicable sales charge level. To qualify for a reduced sales load, an investor or the investor’s Authorized Dealer must notify the GST Funds’ Transfer Agent at the time of investment that a quantity discount is applicable. Use of this option is subject to a check of appropriate records.

Letter of Intent

Signal Funds Class A Shares

An investor is entitled to a reduced sales charge if he/she executes a Letter of Intent to purchase $25,000 or more of Class A Shares at the public offering price within a period of 13 months. The discount will be determined based on the schedule listed above under “Sales Charges for Signal Funds Class A Shares.” Shares purchased under

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the non-binding Letter of Intent will be held in escrow until the total investment has been completed. In the event the Letter of Intent is not completed, sufficient escrowed shares will be redeemed to pay any front-end sales charges.

GST Class A Shares

An investor may obtain a reduced sales charge by means of a written Statement of Intention which expresses his/her non-binding commitment to invest (not counting reinvestments of dividends and distributions) in the aggregate $50,000 or more within a period of 13 months in Class A Shares of the Goldman Sachs Structured Large Cap Growth Fund or $100,000 or more for the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund. Any investments made during the period will receive the discounted sales load based on the full amount of the investment commitment. At the investor’s request, purchases made during the previous 90 days may be included; however, capital appreciation does not apply toward these combined purchases. If the investment commitment of the Statement of Intention is not met prior to the expiration of the 13-month period, the entire amount will be subject to the higher applicable sales charge unless the failure to meet the investment commitment is due to the death of the investor. By selecting the Statement of Intention, the investor authorizes the Transfer Agent to escrow and redeem Class A Shares in his/her account to pay this additional charge.

Sales Charge and CDSC Waivers — Signal Funds and GST Fund Shares — Class A Shares

No front-end sales charge will be assessed on Signal Fund Shares or GST Fund Shares sold to the following individuals or entities, or under the following conditions:

Signal Funds	GST Funds
Representatives of selling brokers and members of their immediate families.	Any employee or registered representative of any authorized dealer or their respective spouses, children and parents.
Trustees or officers of the Signal Funds.	Trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor.
BISYS or any of its affiliates.	Goldman Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any trustee or officer of GST and designated family members of any of these individuals.
Accounts for which Signal Capital or any of its affiliates act in a fiduciary, advisory, agency or similar capacity.	Accounts over which GSAM or its advisory affiliates have investment discretion.
Any person purchasing shares within approved asset allocation or “wrap fee” programs sponsored by financial services organization.	“Wrap” accounts for the benefit of clients of broker-dealers, financial institutions or financial planners, provided they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards.
Retirement accounts or plans (or monies from retirement accounts or plans) for which there is a written service agreement between the group or distributor and the plan sponsors, so long as such shares are purchased through the Signal Funds.	Shareholders who roll over distributions from any tax- qualified Employee Benefit Plan or tax-sheltered annuity to an IRA which invests in GST Funds if the tax-qualified Employee Benefit Plan or tax-sheltered annuity receives administrative services provided by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plan or annuity.

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Signal Funds	GST Funds
Directors or officers of BISYS or the investment adviser, or affiliates or bona fide full-time employees or any of the foregoing who have acted as such for not less than ninety days (including members of their immediate families and their retirement plans or accounts).
	Banks, trust companies or other types of depository institutions.
	Any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales commission with the purchase of shares of a GST Fund.
	Registered investment advisers investing for accounts for which they receive asset-based fees.
	State sponsored 529 college savings plans.
	Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations (“Employee Benefit Plans”) that buy shares of a GST Fund worth $500,000 or more; or have 100 or more eligible employees at the time of purchase; or certify that they expect to have annual plan purchases of shares of GST Funds of $200,000 or more; or are provided administrative services by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plans; or have at the time of purchase aggregate assets of at least $2,000,000.
	Qualified Employee Benefit Plans of Goldman Sachs.
	Shareholders receiving distributions from a qualified retirement plan invested in GST Funds and reinvesting such proceeds in a Goldman Sachs IRA in the same class.
	Purchases of $1 million or more of Class A Shares will be made at net asset value with no initial sales charge. However, if you redeem shares within 18 months after the end of the calendar month in which the purchase was made, a CDSC of 1% may be imposed. The CDSC may not be imposed if your authorized dealer enters into an agreement with Goldman Sachs to return all or an applicable prorated portion of its commission to Goldman Sachs.

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Signal Funds	GST Funds
	Non-qualified pension plans sponsored by employers who also sponsor qualified plans that qualify for and invest in Goldman Sachs Funds at net asset value without the payment of any sales charge;   Insurance company separate accounts that make the Funds available as underlying investments in certain group annuity contracts;

CDSC Waivers — GST Funds (Class A Shares)

With respect to the GST Funds, the CDSC may be waived or reduced if the redemption relates to:

GST Funds

Retirement distributions or loans to participants or beneficiaries from Employee Benefit Plans.

The death or disability (as defined in Section 72(m)(7) of the Code of a shareholder, participant or beneficiary in an Employee Benefit Plan.

Satisfying the minimum distribution requirements of the Code.

Hardship withdrawals by a participant or beneficiary in an Employee Benefit Plan.

Establishing “substantially equal periodic payments” as described under Section 72(t)(2) of the Code.

The separation from service by a participant or beneficiary in an Employee Benefit Plan.

Excess contributions distributed from an Employee Benefit Plan;

Distributions from a qualified Employee Benefit Plan invested in the GST Funds which are being rolled over to a Goldman IRA in the same share class.

Redemption proceeds which are to be reinvested in accounts or non-registered products over which GSAM or its advisory affiliates have investment discretion.

Repurchase of Signal Funds Class A Shares.  An investor who has sold Class A shares of a Signal Fund and decides to reinvest in a Signal Fund within a 120 day period will not be charged the applicable sales load on amounts up to the value of the shares sold. The investor must provide a written reinstatement request and payment within 120 days of the date his or her instructions to sell were processed.

Repurchase of GST Class A Shares.  An investor may redeem shares of a GST Fund and reinvest a portion or all of the redemption proceeds (plus any additional amounts needed to round off purchases to the nearest full share) at net asset value. To be eligible for this privilege, the investor must hold the shares he wants to redeem for at least 30 days and he must reinvest the share proceeds within 90 days after redemption. An investor may reinvest in Class A Shares of the same GST Fund or another GST Fund.

If an investor pays a CDSC upon redemption of Class A Shares and then reinvests in Class A Shares as described above, the account will be credited with the amount of the CDSC the investor paid. The reinvested shares will, however, continue to be subject to a CDSC. The holding period of the shares acquired through reinvestment will include the holding period of the redeemed shares for purposes of computing the CDSC payable under a subsequent redemption.

The reinvestment privilege may be exercised at any time in connection with transactions in which the proceeds are reinvested at net asset value in a tax-sheltered Employee Benefit Plan. In other cases, the reinvestment privilege may be exercised once per year upon receipt of a written request. There may be tax consequences as a result of a redemption. Professional tax advice should be sought regarding the tax consequences of a redemption and reinvestment.

45

Distribution and Shareholder Servicing Arrangements

Signal Fund Class A Shares.  Signal Funds has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to Class A Shares of the Signal Funds. 12b-1 fees compensate dealers and investment representatives for services and expenses relating to the sale and distribution of a Signal Fund’s shares and/or for providing shareholder services. 12b-1 fees are paid from Fund assets on an ongoing basis, and will increase the cost of investment. Class A Shares pay a 12b-1 fee of up to 0.25% of the average daily net assets of a Signal Fund. The distributor may use up to 0.25% of the 12b-1 fee for shareholder servicing and for distribution. Long-term shareholders may pay indirectly more than the equivalent of the maximum permitted front-end sales charge due to the recurring nature of 12b-1 distribution and service fees.

Signal Fund Class I Shares.  Class I Shares pay no distribution or service fees. However, Signal Capital, at its expense, may provide compensation to dealers in connection with sales of shares of a Signal Fund.

GST Class A Shares.  GST has adopted a distribution and service plan (the “GST Class A Plan”) under which Class A Shares of the GST Funds bear distribution and service fees paid to authorized dealers and Goldman Sachs. Under the GST Class A Plan, Goldman Sachs is entitled to a monthly fee from each GST Fund for distribution services equal, on an annual basis, to 0.25% of the average daily net assets of a GST Fund attributable to Class A Shares.

The distribution fees paid under the GST Class A Plan is subject to the requirements of Rule 12b-1 under the 1940 Act, and may be used (among other things) for: (1) compensation paid to and expenses incurred by authorized dealers, Goldman Sachs and their respective officers, employees and sales representatives; (2) commissions paid to authorized dealers; (3) allocable overhead; (4) telephone and travel expenses; (5) interest and other costs associated with the financing of such compensation and expenses; (6) printing of prospectuses for prospective shareholders; (7) preparation and distribution of sales literature or advertising of any type; and (8) all other expenses incurred in connection with activities primarily intended to result in the sale of Class A Shares.

GST Institutional Shares.  GST Institutional Shares are not subject to a distribution plan or shareholder servicing plan.

Redemption Fees.  Goldman Sachs Municipal Income Fund charges a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the GST Fund uses a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the GST Fund, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the GST Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The Goldman Sachs Municipal Income Fund does not assess a redemption fee with respect to certain transactions, specifically:

•  Redemptions of shares acquired by reinvestment of dividends or capital gains distributions;

•  Redemptions of shares by other Goldman Sachs Funds (e.g., Goldman Sachs Asset Allocation Portfolios);

•  Redemptions of shares that are acquired or redeemed in connection with participation in a systematic withdrawal program or automatic investment plan;

•  Redemptions of shares held through discretionary wrap programs or models programs that utilize regularly scheduled automatic rebalancing of assets and that have provided GSAM with a representation letter specifying certain operating policies and standards;

•  Redemptions of shares involving transactions other than participant initiated exchanges from retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Code. Redemptions involving transactions other than participant initiated exchanges would include, for example: loans; required

46

minimum distributions; rollovers; forfeiture; redemptions of shares to pay fees; plan level redemptions or exchanges; redemptions pursuant to systematic withdrawal programs; return of excess contribution amounts; hardship withdrawals; redemptions related to death, disability or qualified domestic relations order; and certain other transactions;

•  Redemptions of shares from accounts of financial institutions in connection with hedging services provided in support of nonqualified deferred compensation plans offering the GST Funds;

•  Redemption of shares where the GST Funds are made available as an underlying investment in certain group annuity contracts; or

•  Redemption of shares that are issued as part of an investment company reorganization to which a GST Fund is a party.

•  Redemption of shares representing “seed capital” investments by Goldman Sachs or its affiliates.

Class A or Institutional Shares of the Goldman Sachs Municipal Income Fund issued on the closing date of the Reorganization to Signal Funds shareholders in connection with the Reorganization will not be subject to a redemption fee. However, new purchases of Class A, or Institutional Shares of the Goldman Sachs Municipal Income Fund made by former Signal Fund shareholders on or after the closing date of the Reorganization will be subject to the redemption fee.

Purchases, Redemptions and Exchanges of Shares

Purchase Policies.

The following chart compares existing purchase policies of the Signal Funds and GST Funds:

	Signal Funds:			GST Funds:
	Class A Shares			Class A Shares
Minimum Initial Investment	Regular (non-retirement)	$	1,000	Regular Accounts	$	1,000
	Retirement	$	1,000	Employer Sponsored Benefit Plans	$	250
	Automatic Investment Plan Regular	$	25	Uniform Gift to Minors Act Accounts/Uniform Transfer to Minors Act Accounts	$	250
	Automatic Investment Plan Retirement	$	250	Individual Retirement Accounts and Coverdell ESAs	$	250
				Automatic Investment Plan Accounts	$	250

	Signal Funds:			GST Funds:
	Class I Shares			Institutional Shares
Minimum Initial Investment	Regular (non-retirement)	$	1,000	Banks, trust companies or other depository institutions investing for their own account or on behalf of their clients	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates

47

Signal Funds:			GST Funds:
Class I Shares			Institutional Shares
Retirement	$	1,000	Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans that are sponsored by one or more employers (including governmental or church employers) or employee organizations	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates
Automatic Investment Plan Regular	$	25	State, county, city or any instrumentality, department, authority or agency thereof	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates
Automatic Investment Plan Retirement	$	250	Corporations with at least $100 million in assets or in outstanding publicly traded securities	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates
			“Wrap” account sponsors (provided they have an agreement covering the arrangement with GSAM)	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates
			Registered investment advisers investing for accounts for which they receive asset-based fees	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates
			Qualified non-profit organizations, charitable trusts, foundations and endowments	$1,000,000 in Institutional Shares of a GST Fund alone or in combination with other assets under the management of GSAM and its affiliates
			Individual investors	$10,000,000
			Accounts over which GSAM or its advisory affiliates have investment discretion	$10,000,000

48

Signal Funds:	GST Funds:
Class I Shares	Institutional Shares
	Individual Retirement Accounts (IRAs) for which GSAM or its advisory affiliates act as fiduciary	No minimum

	Signal Funds:			GST Funds:
	Class A Shares			Class A Shares
Minimum Subsequent Investments	Regular (non-retirement)	$	25	Regular Accounts	$	50
	Retirement	$	25	Employer Sponsored Benefit Plans		None
	Automatic Investment Plan Regular	$	25	Uniform Gift to Minors Act Accounts/Uniform Transfer to Minors Act Accounts	$	50
	Automatic Investment Plan Retirement	$	25	Individual Retirement Accounts and Coverdell ESAs	$	50
				Automatic Investment Plan Accounts	$	50

	Signal Funds:			GST Funds:
	Class I Shares			Institutional Shares
Minimum Subsequent Investments	Regular (non-retirement)	$	25	None
	Retirement	$	25
	Automatic Investment Plan Regular	$	25
	Automatic Investment Plan Retirement	$	25

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Purchase Methods	Directly through Signal Funds by mail, overnight service or wire transfer, or through the Fund’s distributor or investment representatives	Directly through GST by mail; by wire or through ACH; through an authorized dealer

	Institutional Funds:	GST Funds:
	Class I Shares	Institutional Shares
Purchase Methods	Directly through Signal Funds by mail, overnight service or wire transfer, or through the Fund’s distributor or investment representatives	Order through GST by telephone, and either send payment by wire through The Northern Trust Company or by check to GST by mail; through an authorized financial institution

49

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Systematic/ Automatic Investment Plan	Yes (subject to $25 initial investment and $25 minimum subsequent investment)	Yes ($50 per month minimum)

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Systematic/ Automatic Investment Plan	Yes (subject to $25 initial investment and $25 minimum subsequent investment)	None

Redemption Procedures.

The following chart compares existing redemption procedures of the Signal Funds and GST Funds.

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Request made through an Authorized Broker-Dealer or Other Financial Institution or Adviser	Yes	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Request made through an Authorized Broker- Dealer or Other Financial Institution or Adviser	Yes	Yes

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Request Made by Mail	Yes	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Request Made by Mail	Yes	Yes

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Request made by Telephone	Yes (unless you have declined telephone sales privilege)	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Request made by Telephone	Yes (unless you have declined telephone sales privilege)	Yes

50

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Proceeds paid by Wire	Yes	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Proceeds paid by Wire	Yes	Yes

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Proceeds paid by Systematic Withdrawal Plan	Yes, but must have at least $5,000 in account and withdrawals must be $100 or more	Yes, but withdrawals must be $50 or more

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Proceeds paid by Systematic Withdrawal Plan	Yes, but must have at least $5,000 in account and withdrawals must be $100 or more	No

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Proceeds paid by Check	Yes	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Proceeds paid by Check	Yes	Yes

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Check Writing Privileges	No	No

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Check Writing Privileges	No	No

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Involuntary Redemptions	Yes — If account balance drops to $500 or less due to redemption activity	Yes — If account balance drops below the required Fund minimum because of redemptions (60 days’ written notice provided) If your institution or authorized dealer’s relationship with Goldman Sachs is terminated and your account does not transfer to an entity with a relationship with Goldman Sachs

51

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Involuntary Redemptions	Yes — If account balance drops to $500 or less due to redemption activity	Generally no — But if your institution or authorized dealer’s relationship with Goldman Sachs is terminated and your account does not transfer to an entity with a relationship with Goldman Sachs

Share Exchanges.

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Through an Authorized Broker- Dealer or Other Financial Institution or Adviser	Yes	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Through an Authorized Broker-Dealer or Other Financial Institution or Adviser	Yes	Yes

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
By Mail	Yes	Yes

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
By Mail	Yes	Yes

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
By Telephone	Yes (unless declined telephone privileges)	Yes, if the telephone exchange privilege on the account application was not declined

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
By Telephone	Yes (unless declined telephone privileges)	Yes, if the telephone exchange privilege on the account application was elected

52

	Signal Funds:	GST Funds:
	Class A Shares	Class A Shares
Minimum	Must meet initial investment requirements	If the exchange represents the initial investment, the amount must satisfy initial investment requirements

	Signal Funds:	GST Funds:
	Class I Shares	Institutional Shares
Minimum	Must meet initial investment requirements	If the exchange represents the initial investment, the amount must satisfy initial investment requirements

Pricing of Shares for the Signal Funds and GST Funds

The price per share (offering price) of the Signal Funds will be the net asset value per share next calculated after your order is accepted by the Signal Funds plus in the case of Class A Shares, any applicable sales charge.

The price per share (offering price) of the GST Funds will be the net asset value next calculated after GST Fund receives your order in proper form plus, in case of Class A Shares, the applicable front-end sales charges or any redemption fees.

For processing purchase and redemption orders, the net asset value per share of each of the Signal Funds and GST Funds is calculated each business day at 4:00 p.m. Eastern time.

The net asset value for the GST Fund shares is determined on any day that the NYSE is open. The net asset value for Signal Fund shares is determined on any day that the NYSE and the Federal Reserve Bank of Chicago are open.

Dividends and Other Distributions

Dividends from investment company taxable income for Signal Funds and GST Funds are declared and paid as follows:

	Signal Funds	GST Funds
Declared Daily and Paid Monthly	Signal Income Fund	Goldman Sachs Core Fixed Income Fund
	Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Declared Annually and Paid Annually	Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund

Both the Signal Funds and GST Funds make distributions of capital gains (if any) at least annually.

53

ADDITIONAL INFORMATION ABOUT THE SIGNAL FUNDS
AND GST FUNDS

Financial Highlights

Signal Funds — Financial Highlights

The following financial highlights tables are intended to help you understand each Signal Fund’s financial performance for the past five years. Some of the information reflects financial information for a single Signal Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Signal Funds (assuming reinvestment of all dividends and distributions). The information for the fiscal year ended March 31, 2006 has been audited by Ernst & Young LLP, Signal Funds’ independent registered public accounting firm. Their report along with each Signal Fund’s financial statements, are included in the annual report, which is available upon request without charge. The information for all periods period prior to April 1, 2005 was audited by the Signal Funds’ prior auditors.

Selected data for a share of beneficial interest outstanding throughout each period.

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55

FINANCIAL HIGHLIGHTS
Signal Funds
For a Share Outstanding Throughout Each Period

			Change in Net Assets Resulting
			from Operations:
						Net			Change
						Realized and			in Net			Less Dividends from:
	Net Asset		Net			Unrealized\			Asset Value						Net Realized
	Value,		Investment			Gains			Resulting			Net			Gains
	Beginning		Income			(Losses) on			from			Investment			(Losses) on			Total
	of Period		(Loss)			Investments			Operations			Income			Investments			Dividends
Class A
Large Cap Growth Fund
Period ended Sept. 30, 2006 (Unaudited)	$	12.08	$	(0.01	)	$	(0.24	)	$	(0.25	)	$	—		$	—		$	—
Year ended March 31, 2006		11.35		(0.07	)		1.49			1.42			—	(e)		(0.69	)		(0.69	)
Year ended March 31, 2005		11.29		(0.01	)		1.00			0.99			—			(0.93	)		(0.93	)
Year ended March 31, 2004		9.05		(0.01	)		2.58			2.57			—	(e)		(0.33	)		(0.33	)
Period ended March 31, 2003(d)		10.00		—	(e)		(0.95	)		(0.95	)		—	(e)		—			—
Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.57		0.19			0.09			0.28			(0.19	)		—			(0.19	)
Year ended March 31, 2006		9.77		0.37			(0.20	)		0.17			(0.37	)		—			(0.37	)
Year ended March 31, 2005		10.19		0.35			(0.42	)		(0.07	)		(0.35	)		—			(0.35	)
Year ended March 31, 2004		10.21		0.34			(0.02	)		0.32			(0.34	)		—	(e)		(0.34	)
Period ended March 31, 2003(d)		10.00		0.31			0.25			0.56			(0.31	)		(0.04	)		(0.35	)
Tax-Exempt Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.74		0.15			0.08			0.23			(0.15	)		—			(0.15	)
Year ended March 31, 2006		9.89		0.31			(0.13	)		0.18			(0.31	)		(0.02	)		(0.33	)
Year ended March 31, 2005		10.22		0.32			(0.25	)		0.07			(0.32	)		(0.08	)		(0.40	)
Year ended March 31, 2004		10.18		0.33			0.08			0.41			(0.33	)		(0.04	)		(0.37	)
Period ended March 31, 2003(d)		10.00		0.27			0.21			0.48			(0.27	)		(0.03	)		(0.30	)
Class I
Large Cap Growth Fund
Period ended Sept. 30, 2006 (unaudited)		12.18		0.01			(0.25	)		(0.24	)		(0.01	)		—			(0.01	)
Year ended March 31, 2006		11.42		0.01			1.45			1.46			(0.01	)		(0.69	)		(0.70	)
Year ended March 31, 2005		11.33		0.01			1.02			1.03			(0.01	)		(0.93	)		(0.94	)
Year ended March 31, 2004		9.06		0.01			2.60			2.61			(0.01	)		(0.33	)		(0.34	)
Period ended March 31, 2003(d)		10.00		0.02			(0.94	)		(0.92	)		(0.02	)		—			(0.02	)
Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.57		0.20			0.09			0.29			(0.20	)		—			(0.20	)
Year ended March 31, 2006		9.77		0.40			(0.20	)		0.20			(0.40	)		—			(0.40	)
Year ended March 31, 2005		10.19		0.38			(0.42	)		(0.04	)		(0.38	)		—			(0.38	)
Year ended March 31, 2004		10.21		0.36			(0.02	)		0.34			(0.36	)		—	(e)		(0.36	)
Period ended March 31, 2003(d)		10.00		0.29			0.25			0.54			(0.29	)		(0.04	)		(0.33	)
Tax-Exempt Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.74		0.16			0.08			0.24			(0.16	)		—			(0.16	)
Year ended March 31, 2006		9.89		0.33			(0.13	)		0.20			(0.33	)		(0.02	)		(0.35	)
Year ended March 31, 2005		10.22		0.35			(0.25	)		0.10			(0.35	)		(0.08	)		(0.43	)
Year ended March 31, 2004		10.18		0.36			0.08			0.44			(0.36	)		(0.04	)		(0.40	)
Period ended March 31, 2003(d)		10.00		0.26			0.21			0.47			(0.26	)		(0.03	)		(0.29	)

*	Excludes sales and redemption charges.
**	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 through March 31, 2003.
(e)	Amount is less than $0.005.

56

					Ratios/Supplementary Data:
													Ratio of
					Net					Ratio of Net			Expenses
Net Asset					Assets,		Ratio of			Investment			to
Value,					End of		Expenses			Income to			Average
End of		Total			Period		to Average			Average Net			Net			Portfolio
Period		Return*			(000’s)		Net Assets			Assets			Assets**			Turnover(c)
$	11.83		(2.07	%)(a)		676		1.37	%(b)		(0.17	%)(b)		1.57	%(b)		26.39	%
	12.08		12.65	%		756		1.34	%		(0.60	%)		1.54	%		36.43	%
	11.35		8.74	%		566		1.43	%		(0.15	%)		1.63	%		39.77	%
	11.29		28.60	%		466		1.44	%		(0.16	%)		1.64	%		39.64	%
	9.05		(9.40	%)(a)		224		1.45	%(b)		0.11	%(b)		1.67	%(b)		34.11	%
	9.66		2.99	%(a)		268		0.91	%(b)		4.06	%(b)		1.16	%(b)		6.84	%
	9.57		1.76	%		319		0.90	%		3.81	%		1.15	%		24.47	%
	9.77		(0.64	%)		321		0.95	%		3.56	%		1.20	%		14.91	%
	10.19		3.17	%		263		0.98	%		3.31	%		1.23	%		43.76	%
	10.21		5.65	%(a)		218		1.07	%(b)		3.54	%(b)		1.32	%(b)		7.47	%
	9.82		2.38	%(a)		137		1.15	%(b)		3.06	%(b)		1.55	%(b)		8.03	%
	9.74		1.82	%		144		1.08	%		3.11	%		1.51	%		11.64	%
	9.89		0.73	%		136		1.12	%		3.21	%		1.62	%		18.11	%
	10.22		4.14	%		137		1.09	%		3.25	%		1.58	%		9.11	%
	10.18		4.85	%(a)		57		1.09	%(b)		3.36	%(b)		1.52	%(b)		8.54	%
	11.93		(2.01	%)(a)		36,452		1.12	%(b)		0.09	%(b)		1.32	%(b)		26.39	%
	12.18		12.95	%		38,240		1.08	%		0.09	%		1.28	%		36.43	%
	11.42		9.08	%		38,377		1.18	%		0.10	%		1.38	%		39.77	%
	11.33		29.00	%		33,600		1.19	%		0.09	%		1.39	%		39.64	%
	9.06		(9.20	%)(a)		31,260		1.21	%(b)		0.32	%(b)		1.43	%(b)		34.11	%
	9.66		3.12	%(a)		86,948		0.66	%(b)		4.30	%(b)		0.91	%(b)		6.84	%
	9.57		2.01	%		97,809		0.65	%		4.06	%		0.90	%		24.47	%
	9.77		(0.39	%)		97,675		0.69	%		3.82	%		0.94	%		14.91	%
	10.19		3.43	%		61,481		0.73	%		3.56	%		0.98	%		43.76	%
	10.21		5.47	%(a)		59,724		0.82	%(b)		3.88	%(b)		1.07	%(b)		7.47	%
	9.82		2.50	%(a)		19,722		0.90	%(b)		3.31	%(b)		1.30	%(b)		8.03	%
	9.74		2.07	%		21,350		0.82	%		3.36	%		1.26	%		11.64	%
	9.89		0.98	%		21,728		0.87	%		3.46	%		1.37	%		18.11	%
	10.22		4.41	%		18,660		0.83	%		3.52	%		1.33	%		9.11	%
	10.18		4.75	%(a)		19,154		0.86	%(b)		3.58	%(b)		1.27	%(b)		8.54	%

57

GST Funds — Financial Highlights

The following financial highlights tables are intended to help you understand each GST Fund’s financial performance for the past five years. Certain information reflects financial results for a single GST Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in GST Fund (assuming reinvestment of all dividends and distributions). The information for the Goldman Sachs Structured Large Cap Growth Fund has been audited by PricewaterhouseCoopers LLP. The information for the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund has been audited by Ernst & Young LLP. PricewaterhouseCoopers LLP’s and Ernst & Young LLP’s reports along with such GST Fund’s financial statements, are included in each Fund’s annual report, which is available upon request without charge.

Selected data for a share of beneficial interest outstanding throughout each period

58

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59

FINANCIAL HIGHLIGHTS

Goldman Sachs Structured Large Cap Growth Fund

Selected Data for a Share Outstanding Throughout Each Year

	Net Asset		Income (Loss) from Investment Operations									Distributions to Shareholders
	Value,		Net			Net Realized			Total from			From Net			From Net
	Beginning		Investment			and Unrealized			Investment			Investment			Realized			Total
Year—Share Class	of Year		Income (Loss)(a)			Gain (Loss)			Operations			Income			Gains			Distributions
For the Years Ended August 31,
2006 - A	$	12.55	$	0.04		$	0.61		$	0.65		$	—	(f)	$	—		$	—	(f)
2006 - Institutional		12.89		0.09			0.64			0.73			(0.04	)		—			(0.04	)
2005 - A		11.13		0.04	(c)		1.38	(d)		1.42			—			—			—
2005 - Institutional		11.38		0.08	(c)		1.43	(d)		1.51			—			—			—
2004 - A		10.33		(0.01	)		0.81			0.80			—			—			—
2004 - Institutional		10.52		0.03			0.83			0.86			—			—			—
2003 - A		9.06		(0.01	)		1.28			1.27			—			—			—
2003 - Institutional		9.19		0.03			1.30			1.33			—			—			—
2002 - A		11.51		(0.03	)		(2.38	)		(2.41	)		—			(0.04	)		(0.04	)
2002 - Institutional		11.63		0.01			(2.41	)		(2.40	)		—			(0.04	)		(0.04	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)	Reflects income recognized from a special dividend which amounted to $0.03 per share and 0.30% of average net assets.
(d)	Reflects an increase of $0.01 due to payments by affiliates during the period to reimburse certain security claims.
(e)	Performance has not been restated to reflect the impact of security claims recorded during the period. If restated, the performance would have been 12.67% and 13.18% for Class A and Institutional Shares, respectively.
(f)	Amount is less than $0.005 per share.

60

													Ratios Assuming No
													Expense Reductions
										Ratio of			Ratio of			Ratio of
					Net Assets		Ratio of			Net Investment			Total			Net Investment
Net Asset					at End of		Net Expenses			Income (Loss)			Expenses			Income (Loss)			Portfolio
Value, End		Total			Year		to Average			to Average			to Average			to Average			Turnover
of Year		Return(b)			(in 000s)		Net Assets			Net Assets			Net Assets			Net Assets			Rate
$	13.20		5.21	%	$	310,386		1.00	%		0.28	%		1.16	%		0.12	%		111	%
	13.58		5.66			488,448		0.60			0.69			0.76			0.53			111
	12.55		12.76	(e)		166,792		1.11			0.37	(c)		1.24			0.24	(c)		146
	12.89		13.27	(e)		263,906		0.71			0.65	(c)		0.84			0.52	(c)		146
	11.13		7.74			120,872		1.15			(0.10	)		1.29			(0.24	)		149
	11.38		8.17			109,353		0.75			0.31			0.89			0.17			149
	10.33		14.02			127,317		1.18			(0.07	)		1.31			(0.20	)		119
	10.52		14.47			114,524		0.78			0.33			0.91			0.20			119
	9.06		(21.04	)		139,593		1.17			(0.32	)		1.27			(0.42	)		113
	9.19		(20.74	)		131,590		0.77			0.08			0.87			(0.02	)		113

61

FINANCIAL HIGHLIGHTS

Goldman Sachs Core Fixed Income Fund

Selected Data for a Share Outstanding Throughout Each Year

	Net Asset		Income (Loss) from Investment Operations							Distributions to Shareholders
	Value,		Net		Net Realized			Total From		From Net			From Net
	Beginning		Investment		and Unrealized			Investment		Investment			Realized			From			Total
Year—Share Class	of Year		Income(a)		Gain (Loss)			Operations		Income			Gains			Capital			Distributions
For the Years Ended October 31,
2006 - A	$	9.87	$	0.41	$	(0.01	)	$	0.40	$	(0.38	)	$	(0.06	)	$	(0.01	)	$	(0.45	)
2006 - Institutional		9.90		0.45		—			0.45		(0.42	)		(0.06	)		(0.01	)		(0.49	)
2005 - A		10.25		0.32		(0.20	)		0.12		(0.37	)		(0.13	)		—			(0.50	)
2005 - Institutional		10.28		0.36		(0.21	)		0.15		(0.40	)		(0.13	)		—			(0.53	)
2004 - A		10.31		0.30		0.32			0.62		(0.33	)		(0.35	)		—			(0.68	)
2004 - Institutional		10.35		0.34		0.31			0.65		(0.37	)		(0.35	)		—			(0.72	)
2003 - A		10.07		0.40		0.28			0.68		(0.40	)		(0.04	)		—			(0.44	)
2003 - Institutional		10.09		0.45		0.29			0.74		(0.44	)		(0.04	)		—			(0.48	)
2002 - A		10.25		0.50		(0.13	)		0.37		(0.52	)		(0.03	)		—			(0.55	)
2002 - Institutional		10.28		0.55		(0.15	)		0.40		(0.56	)		(0.03	)		—			(0.59	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	The portfolio turnover rate excluding the effect of mortgage dollar rolls is 516% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions.

62

													Ratios Assuming no
													Expense Reductions
										Ratio of			Ratio of			Ratio of
					Net Assets		Ratio of			Net Investment			Total			Net Investment
Net Asset					at End of		Net Expenses			Income to			Expenses			Income to			Portfolio
Value, End		Total			Year		to Average			Average Net			to Average			Average Net			Turnover
of Year		Return(b)			(in 000s)		Net Assets			Assets			Net Assets			Assets			Rate(c)
$	9.82		4.21	%	$	714,877		0.83	%		4.24	%		0.84	%		4.23	%		562	%
	9.86		4.69			1,558,971		0.46			4.65			0.47			4.64			562
	9.87		1.14			658,114		0.86			3.14			0.87			3.13			283
	9.90		1.53			1,098,280		0.47			3.54			0.48			3.53			283
	10.25		6.24			523,045		0.90			2.96			0.90			2.96			549
	10.28		6.55			860,021		0.50			3.36			0.50			3.36			549
	10.31		7.03			445,178		0.89			3.91			0.89			3.91			489
	10.35		7.54			695,181		0.49			4.39			0.49			4.39			489
	10.07		3.59			315,441		0.90			5.03			0.90			5.03			437
	10.09		3.99			733,996		0.50			5.51			0.50			5.51			437

63

FINANCIAL HIGHLIGHTS

Goldman Sachs Municipal Income Fund

Selected Data for a Share Outstanding Throughout Each Year

											Distributions to
			Income (Loss) from Investment Operations								Shareholders
	Net Asset		Net
	Value,		Investment			Net Realized			Total from		From Net
	Beginning		Income			and Unrealized			Investment		Investment
Year—Share Class	of Year		(Loss)(a)			Gain (Loss)			Operations		Income
For the Years Ended October 31,
2006 - A	$	15.59	$	0.63		$	0.22		$	0.85	$	(0.64	)
2006 - Institutional		15.59		0.69			0.22			0.91		(0.70	)
2005 - A		15.68		0.63			(0.08	)		0.55		(0.64	)
2005 - Institutional		15.67		0.70			(0.08	)		0.62		(0.70	)
2004 - A		15.41		0.65			0.27			0.92		(0.65	)
2004 - Institutional		15.40		0.72			0.26			0.98		(0.71	)
2003 - A		15.29		0.64			0.13			0.77		(0.65	)
2003 - Institutional		15.29		0.71			0.11			0.82		(0.71	)
2002 - A		15.32		0.65	(c)		(0.01	)(c)		0.64		(0.67	)
2002 - Institutional		15.32		0.71	(c)		(0.01	)(c)		0.70		(0.73	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.
(c)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA audit and Accounting Grade for Investment Companies and began amortizing all premium and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was an impact of less than $0.01 per share to net investment income and net realized and unrealized gains and losses, and an impact to the ratio of net investment income to average net assets with and without expense reductions by less than 0.01%. Per share amounts, ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

(d)   Ratios have been restated for the years ended October 31, 2005, 2004, 2003 and 2002.

(e)   Rates have been restated for the years ended October 31, 2005, 2004, 2003 and 2002 which were previously reported as 38%, 32%, 54% and 39%, respectively.

64

																Ratios assuming no expense reductions
							Ratio of			Ratio of						Ratio of			Ratio of
							net expenses			net expenses			Ratio of			total expenses			total expenses			Ratio of
					Net Assets		to average			to average			net investment			to average			to average			net investment
Net Asset					at End of		net assets			net assets			income			net assets			net assets			income			Portfolio
Value, End		Total			Year		excluding interest			including interest			to average			excluding interest			including interest			to average			turnover
of Year		Return(b)			(in 000s)		expense and fees			expense and fees(d)			net assets			expense and fees			expense and fees(d)			net assets			rate(e)
$	15.80		5.59	%	$	302,271		0.90	%		1.00	%		4.05	%		1.07	%		1.16	%		3.88	%		19	%
	15.80		5.98			152,070		0.53			0.63			4.42			0.70			0.79			4.26			19
	15.59		3.55			240,123		0.93			1.00			3.99			1.09			1.16			3.83			37
	15.59		4.02			128,311		0.54			0.61			4.37			0.70			0.77			4.21			37
	15.68		6.09			179,223		0.94			1.02			4.21			1.12			1.20			4.03			27
	15.67		6.52			60,506		0.54			0.62			4.61			0.72			0.80			4.43			27
	15.41		5.10			160,856		0.95			1.00			4.17			1.13			1.18			3.99			52
	15.40		5.45			57,696		0.55			0.60			4.58			0.73			0.78			4.40			52
	15.29		4.30			119,161		0.94			1.00			4.27	(c)		1.11			1.17			4.10	(c)		35
	15.29		4.71			76,733		0.54			0.60			4.69	(c)		0.71			0.77			4.52	(c)		35

65

Materials Incorporated By Reference

Information about the Signal Funds is included in the Prospectus for the Funds dated August 1, 2006, which are incorporated herein by reference.

Information about the GST Funds is included in the Prospectuses (as supplemented) dated: (1) December 29, 2006 for the Goldman Sachs Structured Large Cap Growth Fund; and (2) February 28, 2006 for the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund; copies of which accompany this Proxy/Prospectus and are incorporated herein by reference.

VOTING INFORMATION

General Information

The Coventry Group Trustees are furnishing this Proxy/Prospectus in connection with the solicitation of proxies for the Special Meeting. It is expected that the solicitation of proxies will be primarily by mail. Officers and service contractors of Coventry Group and GST may also solicit proxies by telephone or otherwise. Shareholders may vote: (1) by mail, by marking, signing, dating and returning the enclosed proxy ballot(s) in the enclosed postage-paid envelope, (2) by touch-tone voting, or (3) by on the Internet voting. Any shareholder giving a proxy may revoke it at any time before it is exercised by submitting to Coventry Group a written notice of revocation or a subsequently executed proxy or by attending the Special Meeting and voting in person.

Only shareholders of record at the close of business on           will be entitled to vote at the Special Meeting. On that date, the following Signal Fund Shares were outstanding and entitled to be voted:

	Shares Outstanding and
Coventry Group	Entitled to Vote
Signal Large Cap Growth Fund
Signal Income Fund
Signal Tax-Exempt Income Fund

Each whole and fractional share of a Signal Fund is entitled to a whole or fractional vote, as the case may be.

The votes of the shareholders of GST Funds are not being solicited since their approval or consent is not necessary for the Reorganization to take place.

If an accompanying proxy is executed and returned in time for the Special Meeting, the shares covered thereby will be voted in accordance with the proxy on all matters that may properly come before the Special Meeting.

Shareholder and Board Approvals

The Reorganization Agreement is being submitted for approval by Signal Funds’ shareholders at the Special Meeting pursuant to Coventry Group’s Charter and By-Laws, and was unanimously approved by the Coventry Group Trustees at a meeting held on January 16, 2007. Coventry Group shareholders will vote on the Reorganization Agreement on a portfolio by portfolio basis. A majority of shares of each Signal Fund entitled to vote constitutes a quorum at the Special Meeting. Approval of each Reorganization requires the approval of the holders of the lesser of (a) 67% or more of the shares of the relevant Signal Fund voted at the Special Meeting, if holders of more than 50% of the outstanding shares of the relevant Signal Fund are represented at the Special Meeting in person of by proxy or (b) more than 50% of the outstanding Shares of the relevant Signal Fund. A vote for the Reorganization Agreement includes a vote for the Reorganization of the Signal Funds; conversely, a vote against the Reorganization Agreement is a vote against the Reorganization of the Signal Funds. The Reorganization Agreement provides that in the event the Reorganization Agreement is approved with respect to less than all of the Signal Funds, the failure of a Signal Fund to consummate the transactions contemplated by the Reorganization Agreement shall not affect the consummation or validity of the Reorganization with respect to any other Signal Fund. Accordingly, it is possible that if a shareholder owns shares in two or more Signal Funds and one of the Signal Funds does not approve the Reorganization, then the shareholder of the particular Signal Fund which did not approve the

66

Reorganization would remain a shareholder of that Signal Fund. However, with respect to the Signal Funds that approve the Reorganization, the shareholder of those particular Signal Funds at the Effective Time of the Reorganization would become a shareholder of the Corresponding GST Funds.

Quorum and Adjournment

In the event that a quorum is not present at the Special Meeting, one or more adjournment(s) may be proposed to permit further solicitation of proxies. In determining whether to adjourn the Special Meeting with respect to a proposal, the following factors may be considered: the percentage of votes actually cast, the percentage of negative votes cast, the nature of any further solicitation and the information to be provided to owners with respect to the reasons for the solicitation. Generally, votes cast in favor of a proposal will be voted in favor of adjournment while votes cast against a proposal will be voted against adjournment.

Any adjourned session or sessions may be held after the date set for the original Special Meeting without notice except announcement at the Special Meeting. Any such adjournment(s) will require the affirmative vote of a plurality of those shares affected by the adjournment(s) that are represented at the Special Meeting in person or by proxy and entitled to vote. A shareholder vote may be taken with respect to one or more Signal Funds (but not the other Signal Funds) on some or all matters before any such adjournment(s) if a quorum is present and sufficient votes have been received for approval with respect to such Signal Funds.

A quorum is constituted with respect to a Signal Fund by the presence in person or by proxy of the holders of 50% of the shares of such Signal Fund entitled to vote at the Special Meeting. For purposes of determining the presence of a quorum for transacting business at the Special Meeting, abstentions will be treated as shares that are present at the Special Meeting but which have not been voted. Abstentions will have the effect of a “no” vote for purposes of obtaining the requisite approvals of the Reorganization Agreement. Broker “non-votes” (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owners or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will have the same effect as abstentions.

Principal Shareholders

As of          , 2007, the Officers and Trustees of the Coventry Group as a group owned or controlled less than 1% of each Signal Fund’s outstanding shares. As of          , 2007, the officers and Trustees of GST as a group owned or controlled less than 1% of each GST Fund’s outstanding shares. The following table sets forth the name, address and share ownership of each person known to Signal Fund to have ownership with respect to 5% or more of a class of a Signal Fund as of          , 2007. The type of ownership of each entry listed on the table is record ownership. The percentage of the Corresponding GST Fund that would be owned by the below named shareholders upon consummation of the Reorganization is expected to decline.

		Class;
		Amount of	Percentage of	Percentage of
Signal Fund	Name and Address	Shares Owned	Class Owned	Fund Owned
Large Cap
Growth Fund
Income Fund
Tax-Exempt
Income Fund

67

The following table sets forth the name, address and share ownership of each person known to GST to have ownership with respect to 5% or more of a class of a GST Fund as of          , 2007. The type of ownership of each entry listed on the table is record ownership. The percentage of GST Fund that would be owned by the below named shareholder upon consummation of the Reorganization is expected to decline.

		Class;
		Amount of	Percentage of	Percentage of
GST Fund	Name and Address	Shares Owned	Class Owned	Fund Owned
Structured
Large Cap
Growth Fund
Core Fixed Income Fund
Municipal
Income Fund

For purposes of the 1940 Act, any person who owns directly or through one or more controlled companies more than 25% of the voting securities of a company is presumed to “control” such company. Accordingly, to the extent that a shareholder identified in the foregoing table is identified as the beneficial holder of more than 25% of a class, or is identified as the holder of record of more than 25% of a class and has voting and/or investment power, it may be presumed to control such class.

Coventry Group and GST have been advised by Signal Capital that the shares of each Signal Fund over which Signal Capital and its affiliates have voting power may be voted by Signal Capital, in its capacity as fiduciary, and that it has engaged an independent third party to evaluate the Reorganization proposal and make a recommendation as to how to vote such shares. In certain cases, Signal Capital and its affiliates may have the power to vote, as record holder of Signal Fund shares, 50% or more of the outstanding shares of a Signal Fund.

OTHER INFORMATION

Shareholder Proposals

As a general matter, Coventry Group does not hold annual meetings of shareholders unless otherwise required by the 1940 Act. Shareholders wishing to submit proposals for inclusion in a proxy statement for a subsequent shareholder’s meeting should send their written proposals to the Secretary of Coventry Group, 3435 Stelzer Road, Columbus, Ohio 43219.

Other Business

Signal Capital and Coventry Group know of no business to be presented to the Special Meeting other than the matters set forth in this Proxy/Prospectus.

Available Information

Coventry Group and GST are each subject to the information requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith, each files reports and other information with the SEC. Reports, proxy statements, registration statements and other information filed by Coventry Group and GST may be inspected without charge and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, DC 20549, and at certain of the following regional offices of the SEC listed below: Northeast Regional Office, The 3 World Financial Center, New York, New York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801 California Street, Suite 1500, Denver, Colorado 80202; and Pacific Regional Office, 5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036. Copies of such materials may also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549 at prescribed rates. Information included in the

68

Proxy/Prospectus concerning Coventry Group was provided by Coventry Group and information included in the Proxy/Prospectus concerning GST was provided by GST.

Legal Proceedings

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against Goldman Sachs, GSAM, the Trustees and Officers of GST, and John Doe Defendants. In addition, certain other investment portfolios of GST were named as nominal defendants. On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed consolidated amended complaint against Goldman Sachs, GSAM, GSAMI, the Trustees and Officers or GST and Goldman Sachs Variable Insurance Trust (“GSVIT”) and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of GST and GSVIT (collectively, the “Goldman Funds”) were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended complaint on April 15, 2005.

The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company and the Investment Advisers Act of 1940, (ii) common law breach of fiduciary duty, and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Funds and omitted statements of fact in registration statements and reports filed pursuant to the 1940 Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Funds paid excessive and improper investment advisory fees to GSAM and GSAMI. The complaint also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that GST’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreements and return of fees paid; an accounting of all Goldman Funds-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals in similar litigation.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Funds.

Experts

The audited financial statements for the Signal Funds, appearing in the Coventry Group 2006 Annual Report, have been audited by Ernst and Young LLP, independent registered public accounting firm, as set forth in their report therein and incorporated by reference into the Statement of Additional Information relating to this Proxy/Prospectus. Such financial statements are incorporated therein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The financial statements for all periods prior to April 1, 2005 were audited by the Signal Funds’ prior auditors.

The audited financial statements and related reports of PricewaterhouseCoopers LLP (with respect to the Goldman Sachs Structured Large Cap Growth Fund) and Ernst & Young LLP (with respect to the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund), independent registered public accounting firms for GST Funds, contained in: (1) the 2006 Annual Reports of the Goldman Sachs Large Cap Growth Fund, and

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(2) the 2006 Annual Reports of the Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund are incorporated by reference into the Statement of Additional Information relating to this Proxy/Prospectus. The financial statements in each GST Fund’s Annual Report have been incorporated by reference in reliance upon such report given upon the authority of such firms as experts in accounting and auditing.

SHAREHOLDER INQUIRIES

Shareholder inquiries may be addressed to Coventry Group or to GST in writing at the address(es), or by phone at the phone number(s), on the cover page of this Proxy/Prospectus.

* * *

Shareholders who do not expect to be present at the Special Meeting are requested to mark, sign and date the enclosed proxy and return it in the enclosed envelope. No postage is required if mailed in the United States. Shareholders also may vote on the Internet or by telephone.

The Signal Funds will furnish, without charge, copies of their 2006 Annual Report to any shareholder upon request by writing the Funds at the following address: The Signal Funds, 3435 Stelzer Road, Columbus, Ohio 43219.

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APPENDIX A-

AGREEMENT AND PLAN OF REORGANIZATION

This AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) dated as of January   , 2007, by and between The Coventry Group, a Massachusetts business trust (“Coventry Group”), on behalf of its investment portfolios listed on Exhibit A attached hereto (each portfolio a “Signal Fund,” and collectively, the “Signal Funds”), and the Goldman Sachs Trust, a Delaware statutory trust (“GST” and, together with Coventry, the “Parties” and each a “Party”), on behalf of its investment portfolios listed on Exhibit A attached hereto (each portfolio a “GST Fund” and collectively, the “GST Funds”). Signal Capital Management, Inc., an Indiana corporation (“Signal Capital”), joins this Agreement solely for purposes of paragraphs 1.3, 1.5, 5.1, 9.2, 10.5, 10.14 and 10.15 and Article VII; and Goldman Sachs Asset Management, L.P., a New York limited partnership (“GSAM”), joins this Agreement solely for purposes of paragraphs 5.1, 9.2, 10.5, 10.14 and 10.15 and Article VII. Capitalized terms not otherwise defined herein shall have the meaning set forth in Article XI hereof.

RECITALS:

Coventry Group issues a separately designated series of shares of beneficial interest representing the interests in each Signal Fund. Likewise, GST issues a separately designated series of shares of beneficial interest representing the interests in each GST Fund.

The Parties wish to conclude a series of business combination transactions under the terms set forth in this Agreement in which: (1) all of the Fund Assets of each Signal Fund will be transferred to the GST Fund set forth opposite its name on Exhibit A attached hereto (a “corresponding” GST Fund) in exchange for Institutional shares and Class A shares of the corresponding GST Fund and the assumption by that GST Fund of all of that Signal Fund’s Liabilities, and (2) Institutional shares and Class A shares will be distributed to holders of Class I shares and Class A shares respectively, of such Signal Fund in complete liquidation of such Signal Fund, all upon the terms and conditions set forth in this Agreement (the “Reorganization”).

The Parties intend this Agreement to be, and adopt it as, a plan of reorganization within the meaning of the regulations under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Board of Trustees of Coventry Group (the “Coventry Group Board”), including a majority of trustees who are not “interested persons” (as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”)) (“Independent Trustees”) of Coventry Group, has determined with respect to each Signal Fund that: (1) participation in its Fund Transaction (as defined in paragraph 1.1) is in the best interests of such Signal Fund, and (2) the interests of existing shareholders of such Signal Fund will not be diluted as a result of its effecting its Fund Transaction.

The Board of Trustees of GST (the “GST Board”), including a majority of Independent Trustees of GST, has determined with respect to each GST Fund that: (1) participation in its Fund Transaction is in the best interests of such GST Fund, and (2) the interests of existing shareholders of such GST Fund will not be diluted as a result of its effecting its Fund Transaction.

NOW THEREFORE, in consideration of the mutual promises, representations, and warranties made herein, covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties, and Signal Capital, and GSAM to the extent indicated above, intending to be legally bound hereby, agree as follows:

ARTICLE I

THE REORGANIZATION AND FUND TRANSACTIONS

1.1 The Reorganization and Fund Transactions. In accordance with Title 12 of the Delaware Code (the “Delaware Law”) and Title XXII, Chapter 182 of the General Laws of Massachusetts (the “Massachusetts Law”) and the agreement and declaration of trust and by-laws, as they may be amended from time to time, of Coventry

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Group (“Coventry Group Governing Documents”), at the Effective Time (as defined below), upon the terms and subject to the conditions of this Agreement, and on the basis of the representations and warranties contained herein, Coventry Group shall assign, deliver and otherwise transfer all of the Fund Assets of each Signal Fund, subject to all of the Liabilities of such Signal Fund, to GST on behalf of the GST Fund set forth opposite such Signal Fund on Exhibit A attached hereto (each such Signal Fund and its corresponding GST Fund, a “Transaction Party” of the other), and GST shall assume all of the Liabilities of each Signal Fund on behalf of its GST Fund Transaction Party. In consideration of the foregoing, GST shall, on behalf of each GST Fund, at the Effective Time deliver to Coventry Group on behalf of each Signal Fund set forth opposite such GST Fund on Exhibit A, full and fractional (to the third decimal place) Institutional shares and Class A shares of such GST Fund. The number of shares of each such class of each such GST Fund shall be determined as set forth in paragraph 2.3 by dividing (a) the value of the Fund Assets attributable to the class of its Signal Fund Transaction Party set forth opposite its name on Exhibit A attached hereto, net of such Signal Fund’s Known Liabilities attributable to such class (computed as of the Valuation Time (as defined below) in the manner set forth in paragraph 2.1), by (b) the net asset value of one share of such class of such GST Fund (computed as of the Valuation Time in the manner set forth in paragraph 2.2). (Each such transaction between a Signal Fund and its GST Fund Transaction Party is hereinafter referred to as a “Fund Transaction”). At and after the Effective Time, all of the Fund Assets of each Signal Fund shall become and be included in the Fund Assets of its GST Fund Transaction Party and the Liabilities of each Signal Fund shall become and be the Liabilities of and shall attach to its GST Fund Transaction Party. At and after the Effective Time, the Liabilities of each Signal Fund may be enforced only against its GST Fund Transaction Party to the same extent as if such Liabilities had been incurred by such GST Fund Transaction Party subject to any defense and/or set off that Coventry Group or such Signal Fund was entitled to assert immediately prior to the Effective Time and further subject to any defense and/or setoff that GST or a GST Fund may from time to time be entitled to assert.

1.2 Signal Fund Assets. 

(a) At least fifteen Business Days prior to the Valuation Time, Coventry Group will provide GST with a schedule of the securities and other assets and Known Liabilities of each Signal Fund. Prior to the execution of this Agreement, GST has provided Coventry Group with a copy of the current investment objective, investment policies, principal investment strategies, and restrictions applicable to each GST Fund (including restrictions applicable to GSAM arising as a result of the investment activities of Goldman, Sachs & Co. and its Affiliates for proprietary accounts and other clients) and GST will provide Coventry Group with a written notice of any changes thereto until the Valuation Time. Coventry Group reserves the right to sell any of the securities or other assets shown on the list for any Signal Fund prior to the Valuation Time but will not, without the prior approval of GST, acquire any additional securities other than securities which the Signal Fund’s Transaction Party may purchase in accordance with its stated investment objective and policies.

(b) At least ten Business Days prior to the Valuation Time, GST will advise Coventry Group of any investments of a Signal Fund shown on the Signal Fund’s schedule provided pursuant to paragraph (a) which the Signal Fund Transaction Party would not be permitted to hold (i) under its investment objective, principal investment strategies or investment restrictions; (ii) under applicable Law; or (iii) because the transfer of such investments would result in material operational or administrative difficulties to GST in connection with facilitating the orderly transition of the Signal Fund’s Fund Assets. Under such circumstances, to the extent practicable, Coventry Group will, if requested by GST and, to the extent permissible and consistent with its own investment objectives and policies and the fiduciary duties of Signal Capital, dispose of such investments prior to the Valuation Time. In addition, if it is determined that the portfolios of two Transaction Parties, when aggregated, would contain investments exceeding certain percentage limitations to which a GST Fund is or will be subject with respect to such investments, Coventry Group will, if requested by GST and, to the extent permissible and consistent with its own investment objectives and policies and the fiduciary duties of Signal Capital, dispose of and/or reinvest a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Effective Time. Notwithstanding the foregoing, nothing herein will require a Signal Fund to dispose of any portfolio securities or other investments, if, in the reasonable judgment of the Signal Funds’ Board or Coventry Group’s investment adviser, such disposition would adversely affect the tax-free nature of the Reorganization for federal income tax purposes or would otherwise not be in the best interests of a Signal Fund.

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1.3 Assumption of Liabilities. Coventry Group will, to the extent permissible and consistent with its own investment objectives and policies, use its best efforts to discharge all of the Known Liabilities of each Signal Fund prior to or at the Effective Time. GST, on behalf of each GST Fund, will assume all of the Liabilities of the Signal Fund Transaction Party of such GST Fund. If prior to the Effective Time either Party identifies a Liability that the Parties mutually agree should not be assumed by GST, such Liability shall be excluded from the definition of Liabilities hereunder and shall be listed on a Schedule of Excluded Liabilities to be signed by the Parties at the Closing (the “Excluded Liabilities”). Certain Liabilities that would otherwise be listed as Excluded Liabilities may be assumed by GST on the condition that GST and the GST Funds be indemnified in writing to their reasonable satisfaction by Signal Capital against any and all losses, claims, damages or liability that GST and the GST Funds may become subject to as a result of assuming such Liability (it being understood that GST shall not be obligated to assume any Excluded Liability, nor shall Signal Capital be obligated to provide or agree to provide such indemnification). GST shall not assume any Liability for any obligation of Coventry Group to file reports with the SEC, Internal Revenue Service or other regulatory or tax authority covering any reporting period ending prior to or at the Effective Time with respect to the Coventry Group or any Signal Fund.

1.4 Distribution of GST Shares. Immediately upon receipt, Coventry Group, on behalf of each Signal Fund, will distribute the Institutional shares and Class A shares of such Signal Fund’s Transaction Party received by Coventry Group from GST pursuant to paragraph 1.1 (the “GST Shares”), pro rata to the record holders of the Class I shares and Class A shares, respectively, of such Signal Fund determined as of the Valuation Time in complete liquidation of such Signal Fund. Such distribution will be accomplished by an instruction, signed by an appropriate officer of Coventry Group, to transfer the GST Shares then credited to each Signal Fund’s account on the Books and Records of GST and to open accounts on the Books and Records of GST established and maintained by GST’s transfer agent in the names of record holders of each class of shares of such Signal Fund and representing the respective pro rata number of each class of such GST Shares due to such record holder. All issued and outstanding Signal Fund shares will be cancelled promptly by Coventry Group on Coventry Group Books and Records. Any such shares issued and outstanding prior to such cancellation shall thereafter represent only the right to receive the GST Shares issued to such Signal Fund in accordance with paragraph 1.1 above. In addition, each record holder of a Signal Fund shall have the right to receive any unpaid dividends or other distributions which were declared with respect to his/her or its shares of such Signal Fund at or before the Valuation Time.

1.5 Liquidation of Signal Funds. As soon as conveniently practicable after the distribution of GST Shares pursuant to paragraph 1.4 has been made, Coventry Group shall take, in accordance with Massachusetts Law, the 1940 Act and the Coventry Group Governing Documents, all such other steps as may be necessary or appropriate to effect a complete liquidation and dissolution of such Signal Funds.

1.6 Transfer Taxes. Any transfer taxes payable on issuance of GST Shares in a name other than that of the record holder of Signal Fund shares on Coventry Group’s Books and Records shall be paid by the Person to whom such GST Shares are issued and transferred, as a condition of that transfer.

ARTICLE II

VALUATION

2.1 Net Asset Value of the Signal Funds. The net asset value of a share of each class of each Signal Fund shall be the net asset value computed as of the Valuation Time, after the declaration and payment of any dividends and/or other distributions on the date thereof, using the valuation procedures described in the then-current prospectus and statement of additional information of its GST Fund Transaction Party as supplemented from time to time.

2.2 Net Asset Value of the GST Funds. The net asset value of a share of each class of each GST Fund shall be the net asset value computed as of the Valuation Time after the declaration and payment of any dividends and/or other distributions on the date thereof, using the valuation procedures set forth in the GST Fund’s then-current prospectus and statement of additional information.

2.3 Calculation of Number of GST Shares. (a) The number of GST Fund Institutional shares to be issued (including fractional shares (to the third decimal place), if any) in connection with a Fund Transaction shall be

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determined by dividing the value of the net assets of the Signal Fund participating therein attributable to Class I shares, determined in accordance with the valuation procedures referred to in paragraph 2.1 by the net asset value per Institutional share of its GST Fund Transaction Party determined in accordance with the valuation procedures referred to in paragraph 2.2.

(b) The number of GST Fund Class A shares to be issued (including fractional shares (to the third decimal place), if any) in connection with a Fund Transaction shall be determined by dividing the value of the net assets of the Signal Fund participating therein attributable to Class A shares, determined in accordance with the valuation procedures referred to in paragraph 2.1 by the net asset value per Class A share of its GST Fund Transaction Party determined in accordance with the valuation procedures referred to in paragraph 2.2.

2.4 Joint Direction of Calculation. All computations of net asset value and the value of securities transferred under this Article II shall be made by State Street Bank and Trust Company (“State Street”) and The Huntington National Bank (“Huntington”) under the joint direction of the following entities, in accordance with their regular practice and the requirements of the 1940 Act: (a) Signal Capital, the investment adviser to the Signal Funds; and (b) GSAM, the investment adviser to the GST Funds. Coventry Group and GST agree to use all commercially reasonable efforts to resolve prior to the Valuation Time any material pricing differences between the prices of portfolio securities determined in accordance with the pricing policies and procedures of a Signal Fund and those determined in accordance with the pricing policies and procedures of its GST Fund Transaction Party.

2.5 Valuation Time. The valuation time shall be the close of regular trading on the New York Stock Exchange (“NYSE”) on the Business Day preceding the Effective Time, or such earlier or later date and time as may be mutually agreed in writing by an authorized officer of each of the Parties (the “Valuation Time”).

ARTICLE III

EFFECTIVE TIME AND CLOSING

3.1 Effective Time and Closing. Subject to the terms and conditions set forth herein, each Fund Transaction shall occur immediately prior to the opening of business on          , 2007, or on such other date as may be mutually agreed in writing by an authorized officer of each Party (the “Effective Time”). To the extent any Fund Assets are, for any reason, not transferred at the Effective Time, Coventry Group shall cause such Fund Assets to be transferred in accordance with this Agreement at the earliest practical date thereafter. The closing of the Fund Transactions will take place at the offices of Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia, PA 19103, or at such other place as may be mutually agreed in writing by an authorized officer of each Party, at the Effective Time (the “Closing”).

3.2 Transfer and Delivery of Fund Assets. Coventry Group shall direct Huntington, as custodian for Coventry Group, to deliver to GST at the Closing a certificate of an authorized officer certifying that: (a) Huntington delivered the Fund Assets of each Signal Fund to the corresponding GST Fund at the Effective Time; and (b) all necessary taxes in connection with the delivery of such Fund Assets, including all applicable foreign, federal and state stock transfer stamps and any other stamp duty taxes, if any, have been paid or provision (as reasonably estimated) for payment has been made. At least three Business Days prior to the Effective Time, Huntington shall present for examination those Fund Assets represented by certificate or other written instrument to those Persons who have primary responsibility for the safekeeping of the assets of the GST Funds at State Street, as custodian of GST on behalf of the GST Funds with the principal place of business at 225 Franklin Street, Boston, Massachusetts 02110. At the Effective Time, Coventry Group shall endorse and deliver, or transfer by appropriate transfer or assignment documents, such certificates and other written instruments as of the Effective Time for the account of the appropriate GST Fund in proper form for transfer and in such condition as to constitute good delivery thereof in accordance with the customs of brokers. Huntington shall deliver other Fund Assets to those Persons who have primary responsibility for the safekeeping of the GST Funds at State Street as of the Effective Time by book entry, in accordance with the customary practices of Huntington and of each securities depository (as defined in Rule 17f-4 and Rule 17f-7 under the 1940 Act) in which such Fund Assets are held. Any cash to be transferred by a Signal Fund to a GST Fund shall be delivered by wire transfer of federal funds at the Effective Time pursuant to instructions provided by GST.

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3.3 GST Share Records. GST shall deliver to the Secretary of Coventry Group at the Closing a confirmation evidencing that: (a) the appropriate number of each class and series of GST Shares have been credited to the account of each Signal Fund on the Books and Records of the Signal Fund’s Transaction Party pursuant to paragraph 1.1 prior to the actions contemplated by paragraph 1.4, and (b) the appropriate number of each class and series of GST Shares have been credited to the accounts of record holders of Signal Fund shares on the Books and Records of GST pursuant to paragraph 1.4.

3.4 Postponement of Valuation Time and Effective Time. If immediately prior to the Valuation Time: (a) the NYSE or another primary trading market for portfolio securities of a GST Fund or Signal Fund is closed to trading, or trading thereupon is restricted, or (b) trading or the reporting of trading on such market is disrupted so that, in the judgment of an appropriate officer of Coventry Group or GST, accurate appraisal of the value of the net assets of a GST Fund or Signal Fund is impracticable, the Valuation Time and Effective Time for the Fund Transaction involving that GST Fund or Signal Fund shall be postponed until the first Business Day that is a Friday after the day when trading shall have been fully resumed and reporting shall have been restored or such later date as may be mutually agreed in writing by an authorized officer of each Party.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.1 Representations and Warranties of Coventry Group. Coventry Group, severally on behalf of each of the Signal Funds, hereby represents and warrants to GST, on behalf of the GST Funds, as follows, which representations and warranties shall be true and correct on the date hereof:

(a) Coventry Group has been duly organized and is validly existing under Massachusetts Laws as a voluntary association with transferable shares of beneficial interest commonly referred to as a “Massachusetts business trust” and has filed the necessary certificates and paid the necessary fees due thereon under Massachusetts Law and is duly qualified, licensed or admitted to do business and is in good standing as a foreign association under the Laws of each jurisdiction in which the nature of the business conducted by it makes such qualification, licensing or admission necessary, except in such jurisdictions where the failure to be so qualified, licensed or admitted and in good standing would not, individually or in the aggregate, have a Material Adverse Effect on its properties or assets or the properties or assets of any Signal Fund. Coventry Group has full power under the Coventry Group Governing Documents to conduct its business as it is now being conducted and to own the properties and assets it now owns for itself and on behalf of each Signal Fund. Coventry Group has all necessary authorizations, licenses and approvals from any applicable Governmental or Regulatory Body necessary to carry on its business as such business is now being carried on except authorizations, licenses and approvals that the failure to so obtain would not have a Material Adverse Effect on Coventry Group.

(b) The execution, delivery and performance of this Agreement by Coventry Group on behalf of each Signal Fund and the consummation of the transactions contemplated herein have been duly and validly authorized by the Coventry Group Board, and the Coventry Group Board has approved the Fund Transactions and has resolved to recommend each Fund Transaction to the shareholders of the applicable Signal Fund and to call a special meeting of shareholders of each Signal Fund for the purpose of approving this Agreement and the Fund Transaction contemplated thereby for that Fund. Other than the approval by the requisite vote of the shareholders of the outstanding shares of each Signal Fund in accordance with the provisions of the Coventry Group Governing Documents, applicable Massachusetts Law and the 1940 Act, no other action on the part of Coventry Group or its shareholders, or the shareholders of each Signal Fund, is necessary to authorize the execution, delivery and performance of this Agreement by Coventry Group on behalf of each Signal Fund or the consummation of each Fund Transaction contemplated herein. This Agreement has been duly and validly executed and delivered by Coventry Group on behalf of each Signal Fund, and assuming due authorization, execution and delivery hereof by GST, is a legal, valid and binding obligation of Coventry Group, as it relates to each Signal Fund, enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium and other Laws relating to or affecting creditors’ rights, to general equity principles and to any limitations on indemnity as may be required under federal and state securities Laws).

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(c) The authorized capital of Coventry Group consists of an unlimited number of shares of beneficial interest with a par value of one cent ($0.01) per share. Each class and series of shares has been duly established and represents a fractional undivided interest in one of the Signal Funds. The issued and outstanding Signal Fund shares of each class and series are duly authorized, validly issued, fully paid and non-assessable. There are no outstanding options, warrants or other rights of any kind to acquire from Coventry Group any shares of any series or equity interests of any Signal Fund or securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire, any such additional shares, nor is Coventry Group committed to issue any share appreciation or similar rights or options, warrants, rights or securities in connection with any series of shares. Coventry Group has no share certificates outstanding.

(d) Coventry Group has no subsidiaries.

(e) Except for consents, approvals, or waivers to be received prior to the Effective Time, including shareholder approval by each Signal Fund, and upon the effectiveness of the Registration Statement (as defined below), the execution, delivery and performance of this Agreement by Coventry Group for itself and on behalf of each Signal Fund does not, and the consummation of the transactions contemplated herein will not: (i) violate or conflict with the terms, conditions or provisions of the Coventry Group Governing Documents, or of any material contract, agreement, indenture, instrument, or other undertaking to which it is a party or by which it or a Signal Fund is bound, (ii) result in the acceleration of any obligation, or the imposition of any penalty, under any material agreement, indenture, instrument, contract, lease or other undertaking to which Coventry Group is a party or by which it or a Signal Fund is bound, (iii) result in a breach or violation by Coventry Group or any Signal Fund of any terms, conditions, or provisions of any Law or Order, or (iv) require any consent or approval of, filing with or notice to, any Governmental or Regulatory Body.

(f) (i) Prior to the execution of this Agreement, Coventry Group has delivered to GST true and complete copies of the audited statements of assets and liabilities of each of the Signal Funds as of March 31, 2006 or a later date if available prior to the date hereof, and the related audited schedules of investments, statements of income and changes in net assets and financial highlights for the periods then ended as well as the unaudited schedules of assets and liabilities of each of the Signal Funds dated as of September 30, 2006 and the related unaudited schedules of investments, statements of income and changes in net assets and financial highlights for the period then ended.

(ii) Except as set forth in the notes thereto, all such financial statements were prepared in accordance with U.S. generally accepted accounting principles, consistently applied throughout the periods then ended, and fairly present the financial condition and results of operations of each Signal Fund as of the respective dates thereof and for the respective periods covered thereby subject, in the case of the unaudited financial statements, to normal year-end audit adjustments.

(iii) To the best of Coventry Group’s Knowledge, except as reflected or reserved against in the statement of assets and liabilities included in each Signal Fund’s audited financial statements as of March 31, 2006 or unaudited financial statements as of September 30, 2006, as the case may be, or in the notes thereto, or as previously disclosed in writing to GST, there are no liabilities against, relating to or affecting a Signal Fund or any of its properties and assets, other than those incurred in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would have a Material Adverse Effect on Coventry Group or its properties or assets or on any Signal Fund or such Signal Fund’s properties or assets. In particular, since March 31, 2006 to the best of Coventry Group’s Knowledge and except as disclosed in writing to GST or in any of the Signal Funds’ prospectuses and statement of additional information as in effect on the date of this Agreement, there has not been any change in the financial condition, properties, assets, liabilities or business of any Signal Fund that would have a Material Adverse Effect on Coventry Group or its properties or assets or on any Signal Fund or such Signal Fund’s properties or assets other than changes occurring in the ordinary course of business.

(iv) As of the date hereof, except as previously disclosed to GST in writing or as disclosed in any of the Signal Funds’ prospectuses and statements of additional information as in effect on the date of this Agreement, and except as have been corrected as required by applicable Law, and to the best of Coventry Group’s Knowledge, there have been no material miscalculations of the net asset value of any Signal Fund or the net asset value per share of any class or series of shares during the twelve-month period preceding the date hereof which would have a

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Material Adverse Effect on such Signal Fund or its properties or assets, and all such calculations have been made in accordance with the applicable provisions of the 1940 Act.

(g) The minute books and other similar records of Coventry Group as made available to GST prior to the execution of this Agreement contain a true and complete record in all material respects of all action taken at all meetings and by all written consents in lieu of meetings of the shareholders of Coventry Group and of each Signal Fund, the Coventry Group Board and committees of the Coventry Group Board. The stock transfer ledgers and other similar records of Coventry Group and of each Signal Fund as made available to GST prior to the execution of this Agreement accurately reflect all record transfers prior to the execution of this Agreement in the shares of Coventry Group.

(h) Coventry Group and each Signal Fund have maintained, or caused to be maintained on its behalf, in all material respects, all Books and Records required of a registered investment company in compliance with the requirements of Section 31 of the 1940 Act and rules thereunder.

(i) Except as set forth in writing to GST, there is no Action or Proceeding pending against Coventry Group or, to the best of Coventry Group’s Knowledge, threatened against, relating to or affecting, Coventry Group or a Signal Fund.

(j) No agent, broker, finder or investment or commercial banker, or other Person or firm engaged by or acting on behalf of Coventry Group or a Signal Fund in connection with the negotiation, execution or performance of this Agreement or any other agreement contemplated hereby, or the consummation of the transactions contemplated hereby, is or will be entitled to any broker’s or finder’s or similar fees or other commissions as a result of the consummation of such transactions.

(k) Coventry Group is registered with the SEC as an open-end management investment company under the 1940 Act, and its registration with the SEC as such an investment company is in full force and effect, and each Signal Fund is a separate series of Coventry Group duly designated in accordance with the applicable provisions of the Coventry Group Governing Documents and the 1940 Act.

(l) As of the date hereof, all federal and other tax returns, dividend reporting forms, and other tax-related reports of each Signal Fund required by Law to have been filed by such date (including any extensions) have been filed and are correct in all material respects, and all federal and other taxes shown as due on such returns and reports have been paid or provision has been made on the respective Fund’s Books and Records for the payment thereof and, to the best of Coventry Group’s Knowledge, no such return is currently under audit or has been threatened with an audit and no assessment has been asserted with respect to such returns. To Coventry Group’s Knowledge, there are no levies, liens, or other encumbrances relating to taxes existing, threatened or pending with respect to the properties or assets of Coventry Group (or with respect to any properties or assets of any Signal Fund). As of the date hereof, Coventry Group has adequately provided for all tax liabilities on its Books and Records.

(m) For each taxable year of its operation (including the taxable year ending at the Effective Time each Signal Fund has met (or will meet) the requirements of Subchapter M of Chapter 1 of the Code for qualification as a regulated investment company and has elected to be such, and has been (or will be) eligible to and has computed (or will compute) its federal income tax under Section 852 of the Code. Each Signal Fund currently qualifies, and from the date of this Agreement until the Effective Time shall not take any action inconsistent with such qualification as a regulated investment company under the Code.

(n) All issued and outstanding shares of each Signal Fund have been offered and sold in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities Laws, are registered under the 1933 Act and under the Laws of all jurisdictions in which registration is or was required, except as may have been previously disclosed to GST in writing. Such registrations are, in all material respects, complete, current and have been continuously effective, and all fees required to be paid have been paid. Coventry Group, and each of the Signal Funds, is not subject to any “stop order” and is, and was, fully qualified to sell its shares in each jurisdiction in which such shares are being, or were, registered and sold.

(o) The current prospectuses and statement of additional information of Coventry Group, including amendments and supplements thereto, and each prospectus and statement of additional information of Coventry

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Group used at all times during the past three years prior to the date of this Agreement conform, or conformed at the time of its or their use, in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder, and do not, or did not, as of their dates of distribution to the public, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. Each Signal Fund currently complies in all material respects with all investment objectives, policies, guidelines and restrictions and any compliance procedures established by Coventry Group with respect to such Signal Fund.

(p) The combined proxy statement and prospectus and statement of additional information (collectively, the “Proxy Statement/Prospectus”) to be included in GST’s registration statement on Form N-14 (the “Registration Statement”) and filed in connection with this Agreement, and the documents incorporated therein by reference and any amendment or supplement thereto insofar as they relate to Coventry Group and the Signal Funds, each comply or will comply in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder on the effective date of such Registration Statement. Each of the Proxy Statement/Prospectus, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto, insofar as it relates to Coventry Group and the Signal Funds, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not materially misleading on the effective date of such Registration Statement; provided, however, that Coventry Group makes no representations or warranties as to the information contained in the Proxy Statement/Prospectus, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto in reliance upon and in conformity with information relating to GST or the GST Funds and furnished by GST to Coventry Group specifically for use in connection with the Proxy Statement/Prospectus, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto.

(q) Except as previously disclosed in writing to GST, at the Effective Time, Coventry Group and each Signal Fund will have good and marketable title to its Fund Assets and full right, power, and authority to sell, assign, transfer and, upon delivery and payment for the Fund Assets, deliver such Fund Assets, free and clear of all liens, mortgages, pledges, encumbrances, charges, claims and equities, and subject to no restrictions on the subsequent transfer thereof (other than any Fund Assets consisting of restricted securities).

(r) Coventry Group has adopted and implemented written policies and procedures in accordance with Rule 38a-1 under the 1940 Act.

(s) Except as disclosed in writing to GST, to the best of Coventry Group’s Knowledge, no events have occurred and no issues, conditions or facts have arisen which either individually or in the aggregate have had a Material Adverse Effect on the Coventry Group or a Signal Fund.

4.2 Representations and Warranties of GST. GST, severally on behalf of each of the GST Funds, hereby represents and warrants to Coventry Group, on behalf of the Signal Funds, as follows, which representations and warranties shall be true and correct on the date hereof:

(a) GST is a statutory trust duly organized, validly existing and in good standing under the Laws of the State of Delaware and is duly qualified, licensed or admitted to do business and is in good standing as a foreign association under the Laws of each jurisdiction in which the nature of the business conducted by it makes such qualification, licensing or admission necessary, except in such jurisdictions where the failure to be so qualified, licensed or admitted and in good standing would not, individually or in the aggregate, have a Material Adverse Effect on its properties or assets or the properties or assets of any GST Fund. GST has full power under its Agreement and Declaration of Trust dated January 28, 1997, as amended from time to time, and amended and restated by-laws (“GST Governing Documents”) to conduct its business as it is now being conducted and to own the properties and assets it now owns for itself and on behalf of each GST Fund. GST has all necessary authorizations, licenses and approvals from any applicable Governmental or Regulatory Body necessary to carry on its business as such business is now being carried on except authorizations, licenses and approvals that the failure to so obtain would not have a Material Adverse Effect on GST.

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(b) The execution, delivery and performance of this Agreement by GST on behalf of each GST Fund and the consummation of the transactions contemplated herein have been duly and validly authorized by the GST Board and the GST Board has approved the Fund Transactions. No other action on the part of GST or its shareholders, or the shareholders of each GST Fund, is necessary to authorize the execution, delivery and performance of this Agreement by GST on behalf of each GST Fund or the consummation of each Fund Transaction contemplated herein. This Agreement has been duly and validly executed and delivered by GST on behalf of each GST Fund, and assuming due authorization, execution and delivery hereof by Coventry Group, is a legal, valid and binding obligation of GST, as it relates to each GST Fund, enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium and other Laws relating to or affecting creditors’ rights, to general equity principles and to any limitations on indemnity as may be required under federal and state securities Laws).

(c) The authorized capital of GST consists of an unlimited number of shares of beneficial interest with a par value of one-tenth of one cent ($0.001) per share. Each class and series of shares has been duly established and represents a fractional undivided interest in one of the GST Funds. The issued and outstanding GST shares of each class and series are duly authorized, validly issued, fully paid and non-assessable. There are no outstanding options, warrants or other rights of any kind to acquire from GST any shares of any series or equity interests of any GST Fund or securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire, any such additional shares, nor is GST committed to issue any share appreciation or similar rights or options, warrants, rights or securities in connection with any series of shares. GST has no share certificates outstanding.

(d) GST has no subsidiaries.

(e) Except for consents, approvals, or waivers to be received prior to the Effective Time, including shareholder approval by each Signal Fund, and upon the effectiveness of the Registration Statement, the execution, delivery and performance of this Agreement by GST for itself and on behalf of each GST Fund does not, and the consummation of the transactions contemplated herein will not: (i) violate or conflict with the terms, conditions or provisions of the GST Governing Documents, or of any material contract, agreement, indenture, instrument, or other undertaking to which it is a party or by which it or a GST Fund is bound, (ii) result in the acceleration of any obligation, or the imposition of any penalty, under any material agreement, indenture, instrument, contract, lease or other undertaking to which GST is a party or by which it or a GST Fund is bound, (iii) result in a breach or violation by GST or any GST Fund of any terms, conditions, or provisions of any Law or Order, or (iv) require any consent or approval of, filing with or notice to, any Governmental or Regulatory Body.

(f) (i) Prior to the execution of this Agreement, GST has delivered to Coventry Group true and complete copies of the audited statements of assets and liabilities of the Goldman Sachs Structured Large Cap Growth Fund dated as of August 31, 2006; and Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund dated as of October 31, 2006, and the related audited schedules of investments, statements of income and changes in net assets and financial highlights for the periods then ended.

(ii) Except as set forth in the notes thereto, all such financial statements were prepared in accordance with U.S. generally accepted accounting principles, consistently applied throughout the periods then ended, and fairly present the financial condition and results of operations of each GST Fund as of the respective dates thereof and for the respective periods covered thereby subject.

(iii) To the best of GST’s Knowledge, except as reflected or reserved against in the statement of assets and liabilities included in each GST Fund’s audited financial statements as of August 31, 2006 and October 31, 2006, as the case may be, or in the notes thereto, or as previously disclosed in writing to Coventry Group, there are no liabilities against, relating to or affecting an GST Fund or any of its properties and assets, other than those incurred in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would have a Material Adverse Effect on GST or its properties or assets or on any GST Fund or such GST Fund’s properties or assets. In particular, since the last fiscal year end of each GST Fund, to the best of GST’s Knowledge and except as disclosed in writing to Coventry Group or in any of the GST Fund’s prospectuses or statements of additional information as in effect on the date of this Agreement, there has not been any change in the

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financial condition, properties, assets, liabilities or business of any GST Fund that would have a Material Adverse Effect on GST or its properties or assets or on any GST Fund or such GST Fund’s properties or assets other than changes occurring in the ordinary course of business.

(iv) As of the date hereof, except as previously disclosed to Coventry Group in writing or as disclosed in any of the GST Funds’ prospectuses and statements of additional information as in effect on the date of this Agreement, and except as have been corrected as required by applicable Law, and to the best of GST’s Knowledge, there have been no material miscalculations of the net asset value of any GST Fund or the net asset value per share of any class or series of shares during the twelve-month period preceding the date hereof which would have a Material Adverse Effect on such GST Fund or its properties or assets, and all such calculations have been made in accordance with the applicable provisions of the 1940 Act.

(g) The minute books and other similar records of GST as made available to Coventry Group prior to the execution of this Agreement contain a true and complete record in all material respects of all action taken at all meetings and by all written consents in lieu of meetings of the shareholders of GST and of each GST Fund, the GST Board and committees of the GST Board. The stock transfer ledgers and other similar records of GST and of each GST Fund as made available to Coventry Group prior to the execution of this Agreement accurately reflect all record transfers prior to the execution of this Agreement in the shares of GST.

(h) GST and each GST Fund have maintained, or caused to be maintained on its behalf, in all material respects, all Books and Records required of a registered investment company in compliance with the requirements of Section 31 of the 1940 Act and rules thereunder.

(i) Except as set forth in writing to Coventry Group, there is no Action or Proceeding pending against GST or a GST Fund or, to the best of GST’s Knowledge, threatened against, relating to or affecting, GST or a GST Fund.

(j) No agent, broker, finder or investment or commercial banker, or other Person or firm engaged by or acting on behalf of GST or a GST Fund in connection with the negotiation, execution or performance of this Agreement or any other agreement contemplated hereby, or the consummation of the transactions contemplated hereby, is or will be entitled to any broker’s or finder’s or similar fees or other commissions as a result of the consummation of such transactions.

(k) GST is registered with the SEC as an open-end management investment company under the 1940 Act, and its registration with the SEC as such an investment company is in full force and effect, and each GST Fund is a separate series of GST duly designated in accordance with the applicable provisions of the GST Governing Documents and the 1940 Act.

(l) As of the date hereof, all federal and other tax returns, dividend reporting forms, and other tax-related reports of each GST Fund required by Law to have been filed by such date (including any extensions) have been filed and are correct in all material respects, and all federal and other taxes shown as due on such returns and reports have been paid or provision has been made on the respective Fund’s Books and Records for the payment thereof and, to the best of GST’s Knowledge, no such return is currently under audit or has been threatened with an audit and no assessment has been asserted with respect to such returns. To GST’s Knowledge, there are no levies, liens, or other encumbrances relating to taxes existing, threatened or pending with respect to the properties or assets of GST (or with respect to any properties or assets of any GST Fund). As of the date hereof, GST has adequately provided for all tax liabilities on its Books and Records.

(m) For each taxable year of its operation, each GST Fund has met the requirements of Subchapter M of Chapter 1 of the Code for qualification as a regulated investment company and has elected to be such, and has been eligible to and has computed its federal income tax under Section 852 of the Code. Each GST Fund currently qualifies, and from the date of this Agreement until the Effective Time shall not take any action inconsistent with such qualification, as a regulated investment company under the Code.

(n) All issued and outstanding shares of each GST Fund have been offered and sold in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities Laws, are registered under the 1933 Act and under the Laws of all jurisdictions in which registration is or was required, except as may

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have been previously disclosed to Coventry Group in writing. Such registrations are, in all material respects, complete, current and have been continuously effective, and all fees required to be paid have been paid. GST, and each of the GST Funds, is not subject to any “stop order” and is, and was, fully qualified to sell its shares in each jurisdiction in which such shares are being, or were, registered and sold.

(o) The shares of each GST Fund to be issued and delivered to Coventry Group for the account of each Signal Fund (and to be distributed immediately thereafter to its shareholders) pursuant to the terms of this Agreement will have been duly authorized at the Effective Time and, when so issued and delivered, will be registered under the 1933 Act, duly and validly issued, fully paid and non-assessable and no shareholder of a GST Fund shall have any statutory or contractual preemptive right of subscription or purchase in respect thereof.

(p) The current prospectus and statement of additional information of each GST Fund, including amendments and supplements thereto, and each prospectus and statement of additional information of the GST Funds used at all times during the past three years prior to the date of this Agreement, conform, or conformed at the time of its use, in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder, and do not, or did not, as of their dates of distribution to the public, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. Each GST Fund currently complies in all material respects with all investment objectives, policies, guidelines and restrictions and any compliance procedures established by GST with respect to such GST Fund.

(q) The Proxy Statement/Prospectus to be included in the Registration Statement and filed in connection with this Agreement, and the documents incorporated therein by reference and any amendment or supplement thereto insofar as they relate to GST and the GST Funds, each comply or will comply in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder on the effective date of such Registration Statement. Each of the Proxy Statement/Prospectus, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto, insofar as it relates to GST and the GST Funds, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not materially misleading on the effective date of such Registration Statement; provided, however, that GST makes no representations or warranties as to the information contained in the Proxy Statement/Prospectus, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto in reliance upon and in conformity with information relating to Coventry Group or the Signal Funds and furnished by Coventry Group to GST specifically for use in connection with the Proxy Statement/Prospectus, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto.

(r) GST has adopted and implemented written policies and procedures in accordance with Rule 38a-1 under the 1940 Act.

(s) Except as disclosed in writing to Coventry Group, to the best of GST’s Knowledge, no events have occurred and no issues, conditions or facts have arisen which either individually or in the aggregate have had a Material Adverse Effect on GST or a GST Fund.

ARTICLE V

COVENANTS AND AGREEMENTS

5.1 Conduct of Business. After the date of this Agreement and at or prior to the Effective Time, Coventry Group and GST will conduct the businesses of the Signal Funds and the GST Funds, respectively, only in the ordinary course and in accordance with this Agreement and the current prospectuses and statements of additional information of Coventry Group or GST, as applicable. It is understood that such ordinary course of business shall include (a) the declaration and payment of customary dividends and other distributions; (b) shareholder purchases and redemptions; (c) the continued good faith performance by the investment adviser, administrator, distributor and other service providers of their respective responsibilities in accordance with their agreements with Coventry Group

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or GST, as applicable, and applicable Law. In order to facilitate the transfer of Fund Assets at the Effective Time, GSAM may request in writing that Signal Capital use its commercially reasonable best efforts, subject to its fiduciary duty, to limit or cease portfolio trading on behalf of a Signal Fund for a period of up to three days prior to the Valuation Time. Signal Capital agrees that it will accommodate such requests to the extent such trading restrictions are consistent with the investment objectives, policies and strategies of the Signal Fund and consistent with fulfilling its fiduciary obligations as an investment adviser. No Party shall take any action that would, or would reasonably be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect.

5.2 Shareholders’ Meeting. Coventry Group will call, convene and hold a meeting of shareholders of each Signal Fund as soon as practicable, in accordance with applicable Law and the Coventry Group Governing Documents, for the purpose of approving this Agreement and the transactions contemplated herein as set forth in the Proxy Statement/Prospectus, and for such other purposes as may be necessary or desirable. In the event that, for any Signal Fund, insufficient votes are received from shareholders, the meeting may be adjourned as permitted under the Coventry Group Governing Documents and applicable Law, and as set forth in the Proxy Statement/Prospectus in order to permit further solicitation of proxies.

5.3 Proxy Statement/Prospectus and Registration Statement. Coventry Group and GST each will cooperate with each other in the preparation of the Proxy Statement/Prospectus and Registration Statement and cause the Registration Statement to be filed with the SEC in a form satisfactory to GST and Coventry Group and their respective counsel as promptly as practicable. Upon effectiveness of the Registration Statement, Coventry Group will cause the Proxy Statement/Prospectus to be delivered to shareholders of the Signal Funds entitled to vote on this Agreement and the transactions contemplated herein in accordance with the Coventry Group Governing Documents. Each Party will provide the materials and information necessary to prepare the Registration Statement, for inclusion therein, in connection with the shareholder meeting of each Signal Fund to consider the approval of this Agreement and the transactions contemplated herein. If, at any time prior to the Effective Time, a Party becomes aware of any untrue statement of material fact or omission to state a material fact required to be stated therein or necessary to make the statements made not misleading in light of the circumstances under which they were made, the Party discovering the item shall notify the other Party and the Parties shall cooperate in promptly preparing, filing and clearing with the SEC and, if appropriate, distributing to shareholders appropriate disclosure with respect to the item. Prior to filing the Registration Statement or any amendment or supplement thereto, GST will afford Coventry Group and its Independent Trustees a reasonable opportunity to review and comment thereon, and will obtain Coventry Group’s consent to the filing thereof (such consent will not be unreasonably withheld).

5.4 Information. Coventry Group and GST will furnish to one another, and the other’s accountants, legal counsel and other representatives, throughout the period prior to the Effective Time, all such documents and other information concerning the Signal Funds and the GST Funds, respectively, and their business and properties as may reasonably be requested by the other Party. Such cooperation shall include providing copies of reasonably requested documents and other information. Each Party shall make its employees and officers available on a mutually convenient basis to provide an explanation of any documents or information provided hereunder to the extent, if any, that such Party’s employees are familiar with such documents or information.

5.5 Notice of Material Changes. Each Party will notify the other Party of any event causing a Material Adverse Effect to such Party as soon as practicable following such Party’s Knowledge of any event causing such a Material Adverse Effect.

5.6 Financial Statements. At the Closing, Coventry Group will deliver to GST an unaudited statement of assets and liabilities of each Signal Fund, together with a schedule of portfolio investments as of and for the interim period ending at the Valuation Time. These financial statements will present fairly the financial position and portfolio investments of each Signal Fund as of the Valuation Time in conformity with U.S. generally accepted accounting principles applied on a consistent basis, and there will be no material contingent liabilities of any Signal Fund not disclosed in said financial statements. These financial statements shall be certified by the treasurer of Coventry Group as, to the best of his or her Knowledge, complying with the requirements of the preceding sentence. Coventry Group also will deliver to GST at or before the Effective Time, the detailed tax-basis accounting records for each security or other investment to be transferred to GST hereunder, which shall be prepared in accordance with

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the requirements for specific identification tax-lot accounting and clearly reflect the basis used for determination of gain and loss realized on the partial sale of any security to be transferred to the GST Funds.

5.7 Other Necessary Action. Coventry Group and GST will each take all necessary action and use its reasonable best efforts to complete all filings, obtain all governmental and other consents and approvals and satisfy any other provision required for consummation of the transactions contemplated by this Agreement.

5.8 Dividends. Prior to the Valuation Time, each Signal Fund shall have declared and at or before the Valuation Time each shall have paid a dividend, which, together with all previous dividends, shall have the effect of distributing to its shareholders all of the respective Signal Fund’s investment company taxable income (within the meaning of Section 852(b)(2) of the Code, computed without regard to any deduction for dividends paid), if any, plus any excess of its interest income excludible from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for all taxable periods or years ending at or before the Effective Time, and all of the Signal Fund’s net capital gain (as defined in Section 1222(11) of the Code), if any, after reduction for any capital loss carryforwards, recognized in all taxable periods or years ending at or before the Effective Time.

5.9 Books and Records. Upon reasonable notice, each Party will make available to the other Party for review any Books and Records which are reasonably requested by such other Party in connection with this Reorganization.

5.10 Issued Shares. The GST Shares to be issued and delivered to Coventry Group for the account of each Signal Fund (and to be distributed immediately thereafter to its shareholders) pursuant to this Agreement, will have been duly authorized at the Effective Time. Said shares when issued and delivered will be registered under the 1933 Act, will be duly and validly issued, fully paid and non-assessable. No shareholder of a GST Fund shall have any statutory or contractual preemptive right of subscription or purchase in respect thereof. The shareholders of each Signal Fund shall not pay any front-end or deferred sales charge in connection with the Fund Transaction. GST Shares received pursuant to this Agreement shall be included in determining any sales load reductions (e.g., under a rights of accumulation arrangement) on purchases of shares of a GST Fund after the Fund Transaction.

ARTICLE VI

CONDITIONS PRECEDENT

6.1 Conditions Precedent to Obligations of Coventry Group. The obligation of Coventry Group to conclude the transactions provided for herein shall be subject, at its election, to the performance by GST of all of the obligations to be performed by it hereunder at or before the Effective Time, and, in addition thereto, to the following further conditions unless waived by Coventry Group in writing:

(a) All representations and warranties of GST, on behalf of itself and the GST Funds, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Effective Time with the same force and effect as if made at and as of the Effective Time; provided that GST shall be given a period of 30 Business Days from the date on which any such representation or warranty shall not be true and correct in all material respects to cure such condition.

(b) GST shall have furnished to Coventry Group the opinion of Drinker Biddle & Reath LLP dated as of the Effective Time, substantially to the effect that:

(i) GST is a statutory trust, validly existing and in good standing under Delaware Law, and has power under the GST Governing Documents to conduct its business and own its assets as described in its currently effective registration statement on Form N-1A;

(ii) GST is registered with the SEC under the 1940 Act as an open-end management investment company and its registration with the SEC is in full force and effect;

(iii) the GST shares to be issued and delivered by GST pursuant to this Agreement have been duly authorized for issuance and, when issued and delivered as provided herein, will be validly issued, fully paid and

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non-assessable under Delaware Law and that the holders of GST shares will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the general corporation Law of the State of Delaware (except that no opinion need to be expressed as to such holders who are also Trustees of GST); and no preemptive rights of shareholders exist with respect to any such shares or the issue or delivery thereof;

(iv) except as disclosed in writing to Coventry Group, such counsel knows of no material legal proceedings pending or threatened against GST;

(v) this Agreement has been duly authorized, executed and delivered under the applicable Laws of the State of Delaware by GST and, assuming due authorization, execution and delivery by Coventry Group, constitutes a valid and legally binding obligation of GST, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other Laws relating to or affecting creditors’ rights generally and to general equity principles;

(vi) the Registration Statement has become effective under the 1933 Act and, to the Knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or threatened by the SEC;

(vii) to the Knowledge of such counsel, as of the date of its mailing, the Proxy Statement/Prospectus, and as of the date of its filing, the Registration Statement (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder;

(viii) the execution and delivery of this Agreement did not and the consummation of the transactions herein contemplated will not conflict with or result in a material breach of the terms or provisions of, or constitute a material default under, the GST Governing Documents or any material agreement or instrument known to such counsel to which GST is a party or by which any properties belonging to GST may be bound;

(ix) the execution and delivery of this Agreement did not and the consummation of the transactions herein contemplated will not conflict with or result in a material violation by GST or a GST Fund of any terms, conditions, or provisions of any federal securities Law or Delaware Law; and

(x) to the Knowledge of such counsel, no consent, approval, authorization, or other action by or filing with any Governmental or Regulatory Body is required in connection with the consummation of the transactions herein contemplated, except such as have been obtained or made under the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder and Delaware Law and except such as may be required under state securities Laws.

In rendering such opinion, Drinker Biddle & Reath LLP may rely upon certificates of officers of GST and of public officials as to matters of fact.

Such opinion (i) shall state that while such counsel have not verified, and are not passing upon and do not assume responsibility for, the accuracy, completeness or fairness of any portion of the Registration Statement or any amendment thereof or supplement thereto, they have generally reviewed and discussed certain information furnished therein with respect to the GST Funds with certain officers of GST and that in the course of such review and discussion no facts came to the attention of such counsel which caused them to believe that, on the mailing date of the Proxy Statement/Prospectus and on the effective date of the Registration Statement and any amendment thereof or supplement thereto and only insofar as they relate to the information furnished with respect to GST and the GST Funds, the Proxy Statement/Prospectus, Registration Statement or any amendment thereof or supplement thereto contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) shall state that such counsel do not express any opinion or belief as to the financial statements, other financial data, statistical data or financial information relating to GST and the GST Funds contained or incorporated by reference in the Registration Statement; (iii) may rely on the opinion of other counsel to the extent set forth in such opinion, provided such other

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counsel is reasonably acceptable to Coventry Group; and (iv) shall state that such opinion is solely for the benefit of Coventry Group and its trustees and officers.

(c) GST shall have furnished to Coventry Group a certificate of GST, signed by the president and treasurer of GST, dated as of the Effective Time, to the effect that they have examined the Proxy Statement/Prospectus and the Registration Statement (and any supplement thereto) and this Agreement and that:

(i) the representations and warranties of GST in this Agreement are true and correct in all material respects on and as of the Effective Time and GST has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Effective Time;

(ii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending or, to GST’s Knowledge, threatened in writing; and

(iii) since the date of the most recent financial statements of the GST Funds included in the Proxy Statement/Prospectus (or any supplement thereto), there has been no Material Adverse Effect on the business or properties of any of the GST Funds (other than changes in the ordinary course of business, including, without limitation, dividends and other distributions in the ordinary course and changes in net asset value per share), except as set forth in or contemplated in the Proxy Statement/Prospectus (or any supplement thereto).

(d) At the Valuation Time and Effective Time, except as previously disclosed to Coventry Group in writing, and except as have been corrected as required by applicable Law, and to the best of GST’s Knowledge, there shall have been no material miscalculations of the net asset value of any GST Fund or the net asset value per share of any series of shares during the twelve-month period preceding the Valuation Time and Effective Time, and all such calculations shall have been made in accordance with the applicable provisions of the 1940 Act. At the Valuation Time and Effective Time, all liabilities chargeable to each share class of a GST Fund which are required to be reflected in the net asset value per share of a share class of a GST Fund in accordance with applicable Law will be reflected in the net asset value per share of such share class of a GST Fund.

(e) The Secretary of Coventry Group shall have received the confirmation from GST required under paragraph 3.3 of this Agreement.

(f) GST shall have duly executed and delivered to Coventry Group, on behalf of each GST Fund, such assumptions of Liabilities and other instruments as Coventry Group may reasonably deem necessary or desirable to evidence the transactions contemplated by this Agreement, including the assumption of all of the Liabilities of each Signal Fund by the respective Transaction Party of such Signal Fund, other than the Excluded Liabilities.

(g) Coventry Group shall have completed to its satisfaction its due diligence review of GST and each GST Fund.

6.2 Conditions Precedent to Obligations of GST. The obligation of GST to conclude the transactions provided for herein shall be subject, at its election, to the performance by Coventry Group of all of the obligations to be performed by it hereunder at or before the Effective Time, and, in addition thereto, to the following further conditions unless waived by GST in writing:

(a) All representations and warranties of Coventry Group, on behalf of itself and the Signal Funds, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Effective Time with the same force and effect as if made at and as of the Effective Time; provided that Coventry Group shall be given a period of 30 Business Days from the date on which any such representation or warranty shall not be true and correct in all material respects to cure such condition.

(b) Coventry Group shall have furnished to GST the opinion of Dechert LLP dated as of the Effective Time, substantially to the effect that:

(i) Coventry Group is a validly existing voluntary association under Massachusetts Law and has full power under the Coventry Group Governing Documents to conduct its business and own its assets as described in its currently effective registration statement on Form N-1A;

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(ii) Coventry Group is registered with the SEC under the 1940 Act as an open-end management investment company and its registration with the SEC is in full force and effect;

(iii) all issued and outstanding Signal Fund shares of each series as of the Effective Time are duly authorized, validly issued, fully paid and non-assessable under Massachusetts Law (except that shareholders of Coventry Group may under certain circumstances be held personally liable for its obligations); and no preemptive rights of shareholders exist with respect to any such shares or the issue or delivery thereof;

(iv) except as disclosed in writing to GST, such counsel knows of no material legal proceedings pending or threatened against Coventry Group;

(v) this Agreement has been duly authorized, executed and delivered under the applicable Laws of the State of Massachusetts by Coventry Group and, assuming due authorization, execution and delivery by GST, constitutes a valid and legally binding obligation of Coventry Group, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other Laws relating to or affecting creditors’ rights generally and to general equity principles;

(vi) to the Knowledge of such counsel, as of the date of its mailing, the Proxy Statement/Prospectus, and as of the date of its filing, the Registration Statement (other than the financial statements and other financial and statistical information contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder;

(vii) the execution and delivery of this Agreement did not and the consummation of the transactions herein contemplated will not conflict with or result in a material breach of the terms or provisions of, or constitute a material default under, the Coventry Group Governing Documents or any material agreement or instrument known to such counsel to which Coventry Group is a party or by which any properties belonging to Coventry Group may be bound;

(viii) the execution and delivery of this Agreement did not and the consummation of the transactions herein contemplated will not conflict with or result in a material violation by Coventry Group or a Signal Fund of any terms, conditions, or provisions of any federal securities Law or Massachusetts Law; and

(ix) to the Knowledge of such counsel, no consent, approval, authorization or other action by or filing with any Governmental or Regulatory Body is required in connection with the consummation of the transactions herein contemplated, except such as have been obtained or made under the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder and Massachusetts Law and except such as may be required under state securities Laws.

In rendering such opinion, Dechert LLP may rely upon certificates of officers of Coventry Group and of public officials as to matters of fact.

Such opinion (i) shall state that while such counsel have not verified, and are not passing upon and do not assume responsibility for, the accuracy, completeness or fairness of any portion of the Registration Statement or any amendment thereof or supplement thereto, they have generally reviewed and discussed certain information furnished therein with respect to the Signal Funds with certain officers of Coventry Group and that in the course of such review and discussion no facts came to the attention of such counsel which caused them to believe that, on the mailing date of the Proxy Statement/Prospectus and on the effective date of the Registration Statement and any amendment thereof or supplement thereto and only insofar as they relate to the information furnished with respect to Coventry Group and the Signal Funds, the Proxy Statement/Prospectus, Registration Statement or any amendment thereof or supplement thereto contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) shall state that such counsel do not express any opinion or belief as to the financial statements, other financial data, statistical data or financial information relating to Coventry Group and the Signal Funds contained or incorporated by reference in the Registration Statement; (iii) may rely on the opinion of other counsel to the extent set forth in such opinion, provided such other counsel is reasonably acceptable to GST; and (iv) shall state that such opinion is solely for the benefit of GST and its trustees and officers.

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(c) Coventry Group shall have furnished to GST the unaudited statements required by paragraph 5.6.

(d) Coventry Group shall have furnished to GST a certificate of Coventry Group, signed by the president and treasurer of Coventry Group, dated as of the Effective Time, to the effect that they have examined the Proxy Statement/Prospectus and the Registration Statement (and any supplement thereto) and this Agreement and that:

(i) the representations and warranties of Coventry Group in this Agreement are true and correct in all material respects on and as of the Effective Time and Coventry Group has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Effective Time; and

(ii) since the date of the most recent financial statements of the Signal Funds included in the Proxy Statement/Prospectus (or any supplement thereto), there has been no Material Adverse Effect on the business or properties of any of the Signal Funds (other than changes in the ordinary course of business, including, without limitation, dividends and other distributions in the ordinary course and changes in net asset value per share), except as set forth in or contemplated in the Proxy Statement/Prospectus (or any supplement thereto).

(e) Coventry Group shall have duly executed and delivered to GST, on behalf of each Signal Fund, such bills of sale, assignments, certificates and other instruments of transfer, including transfer instructions to Coventry Group’s custodian and instructions to GST’s transfer agent (“Transfer Documents”) as GST may reasonably deem necessary or desirable to evidence the transfer to the respective Transaction Party of such Signal Fund all of the right, title and interest of such Signal Fund in and to the respective Fund Assets of such Signal Fund. In each case, the Fund Assets of each Signal Fund shall be accompanied by all necessary state stock transfer stamps or cash for the appropriate purchase price therefor.

(f) GST shall have received: (i) a certificate of an authorized signatory of Huntington, as custodian for Coventry Group, stating that the Fund Assets of each Signal Fund have been delivered to GST; (ii) a certificate of an authorized signatory from State Street, as custodian for GST, stating that the Fund Assets of each Signal Fund has been received; and (iii) a certificate of an authorized signatory of Coventry Group confirming that Coventry Group has delivered its records containing the names and addresses of the record holders of each series of Signal Fund shares and the number and percentage (to three decimal places) of ownership of each series of Signal Fund shares owned by each such holder as of the close of business at the Valuation Time.

(g) At the Valuation Time and Effective Time, except as previously disclosed to GST in writing, and except as have been corrected as required by applicable Law, and to the best of Coventry Group’s Knowledge, there shall have been no material miscalculations of the net asset value of any Signal Fund or the net asset value per share of any series of shares during the twelve-month period preceding the Valuation Time and Effective Time, and all such calculations shall have been made in accordance with the applicable provisions of the 1940 Act. At the Valuation Time and Effective Time, all Liabilities chargeable to each share class of a Signal Fund which are required to be reflected in the net asset value per share of a share class of a Signal Fund in accordance with applicable Law will be reflected in the net asset value per share of such share class of a Signal Fund.

(h) GST shall have completed to its satisfaction its due diligence review of Coventry Group and each Signal Fund.

(i) Coventry Group’s agreements with each of its service contractors shall have terminated at the Effective Time with respect to each Signal Fund, and each Party has received assurance that no claims for damages (liquidated or otherwise) will arise as a result of such termination.

6.3 Other Conditions Precedent. Unless waived in writing by the Parties with the consent of their respective boards of trustees, the consummation of each Fund Transaction is subject to the fulfillment, prior to or at the Effective Time, of each of the following conditions:

(a) This Agreement and the transactions contemplated herein, with respect to a particular Fund Transaction, shall have been approved by the requisite vote of the holders of the outstanding shares of the Signal Fund that is a party to such Fund Transaction in accordance with the provisions of the Coventry Group Governing Documents, applicable Massachusetts Law and the 1940 Act. Notwithstanding anything herein to the contrary, neither Coventry Group nor GST may waive the conditions set forth in this paragraph 6.3(a) with respect to a Fund Transaction.

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(b) The Registration Statement shall have become effective under the 1933 Act, and no stop order suspending effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been pending or threatened in writing.

(c) Coventry Group and GST shall have received an opinion or opinions from Drinker Biddle & Reath LLP (based upon certain facts, qualifications, assumptions and representations) that with respect to the Reorganization, for federal income tax purposes:

(i) Each Fund Transaction will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and each GST Fund and Signal Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code;

(ii) each Signal Fund will recognize no gain or loss (A) upon the transfer of its Fund Assets to the corresponding GST Fund in exchange for GST Shares of such GST Fund and the assumption of all of the Liabilities of such Signal Fund, and (B) upon the distribution of those GST Shares to the shareholders of such Signal Fund;

(iii) each GST Fund will recognize no gain or loss upon the receipt of the Fund Assets of the corresponding Signal Fund in exchange for GST Shares of such GST Fund and the assumption of all of the Liabilities of such Signal Fund;

(iv) the tax basis in the hands of each GST Fund of each asset of the corresponding Signal Fund transferred to such GST Fund in the Reorganization will be the same as the basis of that asset in the hands of such Signal Fund immediately before the transfer;

(v) the holding period of each asset of each Signal Fund in the hands of the corresponding GST Fund will include the period during which that asset was held by such Signal Fund;

(vi) the shareholders of each Signal Fund will recognize no gain or loss upon their receipt of GST Shares of the corresponding GST Fund;

(vii) the aggregate tax basis of the GST Shares of the corresponding GST Fund received by each shareholder of a Signal Fund will equal the aggregate tax basis of the Signal Fund shares surrendered in exchange therefor;

(viii) the holding period of GST Shares received by each Signal Fund shareholder will include the holding period of the Signal Fund shares surrendered in exchange therefor, provided that the Signal Fund shares are held by that shareholder as capital assets on the date of the exchange; and

(ix) each GST Fund will succeed to and take into account the tax attributes of the corresponding Signal Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations thereunder.

The delivery of the foregoing opinion is conditioned upon receipt by Drinker Biddle & Reath LLP of representations that it shall request of the Parties.

(d) At the Effective Time, the SEC shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, and there shall be no proceedings pending that would seek to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. No Action or Proceeding against Coventry Group or GST or their respective officers or trustees shall be threatened in writing or pending before any court or other Governmental or Regulatory Body in which it will seek, or seeks to restrain or prohibit any of the transactions contemplated by this Agreement or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

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ARTICLE VII

EXPENSES

Coventry Group and GST and their respective shareholders will not bear any fees, expenses or explicit brokerage commissions in connection with the transactions contemplated by this Agreement. The responsibility for payment of all of the fees, expenses and explicit brokerage commissions in connection with entering into and carrying out the transactions contemplated by this Agreement, whether or not the transactions contemplated hereby are concluded, shall be allocated among Signal Capital, and GSAM (or any Affiliate thereof) as Signal Capital, and GSAM shall agree.

ARTICLE VIII

AMENDMENTS AND TERMINATION

8.1 Amendments. The Parties may amend this Agreement in such manner as may be agreed upon, whether before or after the meetings of shareholders of the Signal Funds at which action upon this Agreement and the transactions contemplated hereby is to be taken; provided, however, that after the requisite approval of the shareholders of a Signal Fund has been obtained, this Agreement shall not be amended or modified so as to change the provisions with respect to the transactions herein contemplated in any manner that would materially and adversely affect the rights of such shareholders without their further approval. Nothing in this paragraph 8.1 shall be construed to prohibit the Parties from amending this Agreement to change the Valuation Time or Effective Time.

8.2 Termination. Notwithstanding anything in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Effective Time:

(a) by the mutual written consent of the Parties;

(b) by Coventry Group (i) following a material breach by GST of any of its representations, warranties or covenants contained in this Agreement, provided that GST shall have been given a period of 10 Business Days from the date of the occurrence of such material breach to cure such breach and shall have failed to do so; (ii) if any of the conditions set forth in paragraphs 6.1 and 6.3 are not satisfied as specified in said paragraphs on or before December 31, 2007; or (iii) upon the occurrence of an event which has a Material Adverse Effect upon GST or a GST Fund;

(c) by GST (i) following a material breach by Coventry Group of any of its representations, warranties or covenants contained in this Agreement, provided that Coventry Group shall have been given a period of 10 Business Days from the date of the occurrence of such material breach to cure such breach and shall have failed to do so; (ii) if any of the conditions set forth in paragraphs 6.2 and 6.3 are not satisfied as specified in said paragraphs on or before December 31, 2007; or (iii) upon the occurrence of an event which has a Material Adverse Effect upon the Coventry Group or a Signal Fund;

(d) by either Party by written notice to the other Party following a determination by the terminating Party’s Board that the consummation of the Reorganization is not in the best interest of its shareholders; or

(e) by either Party if the Effective Time does not occur by December 31, 2007.

If a Party terminates this Agreement in accordance with this paragraph 8.2, in the absence of willful default there shall be no liability for damages on the part of any Party, or the trustees or officers of such Party. In the event of willful default, all remedies at Law or in equity of the Party adversely affected shall survive.

ARTICLE IX

PUBLICITY; CONFIDENTIALITY

9.1 Publicity. Any public announcements or similar publicity with respect to this Agreement or the transactions contemplated herein will be made at such time and in such manner as the Parties mutually shall agree in writing, provided that nothing herein shall prevent either Party from making such public announcements as may be

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required by Law, in which case the Party issuing such statement or communication shall advise the other Party prior to such issuance.

9.2 Confidentiality. (a) The Parties, GSAM, and Signal Capital (for purposes of this paragraph 9.2, the “Protected Persons”) will hold, and will cause their board members, officers, employees, representatives, agents and Affiliated Persons to hold, in strict confidence, and not disclose to any other Person, and not use in any way except in connection with the transactions herein contemplated, without the prior written consent of the other Protected Persons, all confidential information obtained from the other Protected Persons in connection with the transactions contemplated by this Agreement, except such information may be disclosed: (i) to Governmental or Regulatory Bodies, and, where necessary, to any other Person in connection with the obtaining of consents or waivers as contemplated by this Agreement; (ii) if required by court order or decree or applicable Law; (iii) if it is publicly available through no act or failure to act of such Party; (iv) if it was already known to such Party on a non-confidential basis on the date of receipt; (v) during the course of or in connection with any litigation, government investigation, arbitration, or other proceedings based upon or in connection with the subject matter of this Agreement, including, without limitation, the failure of the transactions contemplated hereby to be consummated; or (vi) if it is otherwise expressly provided for herein.

(b) In the event of a termination of this Agreement, the Parties, GSAM, and Signal Capital agree that they along with their board members, employees, representative agents and Affiliated Persons shall, and shall cause their Affiliates to, except with the prior written consent of the other Protected Persons, keep secret and retain in strict confidence, and not use for the benefit of itself or themselves, nor disclose to any other Persons, any and all confidential or proprietary information relating to the other Protected Persons and their related parties and Affiliates, whether obtained through their due diligence investigation, this Agreement or otherwise, except such information may be disclosed: (i) if required by court order or decree or applicable Law; (ii) if it is publicly available through no act or failure to act of such Party; (iii) if it was already known to such Party on a non-confidential basis on the date of receipt; (iv) during the course of or in connection with any litigation, government investigation, arbitration, or other proceedings based upon or in connection with the subject matter of this Agreement, including, without limitation, the failure of the transactions contemplated hereby to be consummated; or (v) if it is otherwise expressly provided for herein.

ARTICLE X

MISCELLANEOUS

10.1 Entire Agreement. This Agreement (including any schedules delivered pursuant hereto, which are a part hereof) constitutes the entire agreement of the Parties with respect to the matters covered by this Agreement. This Agreement supersedes any and all prior understandings, written or oral, between the Parties and may be amended, modified, waived, discharged or terminated only by an instrument in writing signed by an authorized executive officer of the Party against which enforcement of the amendment, modification, waiver, discharge or termination is sought.

10.2 Notices. All notices or other communications under this Agreement shall be in writing and sufficient if delivered personally, by overnight courier, by facsimile, telecopied (if confirmed) or sent via registered or certified mail, postage prepaid, return receipt requested, addressed as follows (notices or other communication sent via e-mail shall not constitute notice):

If to Coventry Group:

The Coventry Group
3435 Stelzer Rd.
Columbus, OH 43219
Attention:
Telephone No.:
Facsimile No.:
E-mail:

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With copies (which shall not constitute notice) to:

Dechert LLP (counsel to Coventry Group)
1775 I Street, N.W.
Washington, DC 20006
Attention: Patrick W.D. Turley, Esq.
Telephone No.: (202) 261-3364
Facsimile No.: (202) 261-3333
E-mail: Patrick.Turley@dechert.com

Signal Capital Management, Inc.
One Main Street
Evansville, Indiana 47708
Attention:
Telephone No.:
Facsimile No.:
E-mail:

If to GST or GSAM:

Goldman Sachs Trust
32 Old Slip
New York, NY 10005
Attention: Peter V. Bonanno, Esq.
Telephone No.: (212) 357-3184
Facsimile No.: (212) 902-4140
E-mail: Peter.Bonanno@gs.com

With a copy (which shall not constitute notice) to:

Drinker Biddle & Reath LLP (counsel to GST)
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103-6996
Attention: Kenneth L. Greenberg, Esq.
Telephone No.: (215) 988-1152
Facsimile No.: (215) 988-2757
E-mail: Kenneth.Greenberg@dbr.com

10.3 Waiver. The failure of either Party hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of either Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach. Except as provided in paragraph 6.3(a), a Party may waive any condition to its obligations hereunder (such waiver to be in writing and authorized by an authorized officer of the waiving Party).

10.4 Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by either Party without the written consent of the other Party. Nothing herein express or implied is intended to or shall confer any rights, remedies or benefits upon any Person other than the Parties hereto.

10.5 Survival. Except as provided in the next sentence, the respective representations, warranties and covenants contained in this Agreement and in any certificates or other instruments exchanged at the Effective Time as provided in Article VI hereto shall not survive the consummation of the transactions contemplated hereunder. The covenants in paragraphs 1.3, 1.5, 5.6, 9.2, 10.9, 10.14 and 10.15, this paragraph 10.5 and Article VII shall survive the consummation of the transactions contemplated hereunder.

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10.6 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

10.7 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

10.8 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to its principles of conflicts of Laws.

10.9 Further Assurances. Subject to the terms and conditions herein provided, each of the Parties hereto shall use its reasonable best efforts to take, or cause to be taken, such action to execute and deliver, or cause to be executed and delivered, such additional documents and instruments and to do, or cause to be done, all things necessary, proper or advisable under the provisions of this Agreement and under applicable Law to consummate and make effective the Fund Transactions contemplated by this Agreement, including, without limitation, delivering and/or causing to be delivered to the other Party hereto each of the items required under this Agreement as a condition to such Party’s obligations hereunder. In addition, Coventry Group shall deliver or cause to be delivered to GST at the Closing, the Books and Records of each Signal Fund (regardless of whose possession they are in).

10.10 Beneficiaries. Nothing contained in this Agreement shall be deemed to create rights in Persons not Parties (including, without limitation, any shareholder of GST or Coventry Group).

10.11 Failure of Any Fund(s) to Consummate the Transactions. 

The failure of any GST Fund or Signal Fund to consummate its Fund Transaction shall not affect the consummation or validity of the Fund Transaction with respect to any other GST Fund or Signal Fund, and the provisions of this Agreement shall be construed to effect this intent. In the event that any Signal Fund fails to obtain the required shareholder vote for approval of this Agreement with respect to the Fund Transaction in which it is participating at or prior to the Effective Time, the Parties shall continue the solicitation of the shareholders of the applicable Signal Fund. If approval of this Agreement is denied by the shareholders of a Signal Fund, such Signal Fund shall resolicit such shareholders and make such new or amended filings as are required or desirable to obtain such shareholder approval. Notwithstanding the foregoing, if the required shareholder vote for approval of this Agreement with respect to any Fund Transaction has not been obtained on or before the nine month anniversary of the Effective Time (and before the date specified in paragraph 8.2(e)), then either Party shall have the right to terminate the affected Fund Transaction.

10.12 Validity. Whenever possible, each provision and term of this Agreement shall be interpreted in a manner to be effective and valid, but if any provision or term of this Agreement is held to be prohibited by Law or invalid, then such provision or term shall be ineffective only in the jurisdiction or jurisdictions so holding and only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement.

10.13 Effect of Facsimile Signature. A facsimile signature of an authorized officer of a Party hereto on any Transfer Document shall have the same effect as if executed in the original by such officer.

10.14 GST Liability. The name “Goldman Sachs Trust” is the designation of the trustees for the time being under an Agreement and Declaration of Trust dated January 28, 1997, as amended from time to time, and all Persons dealing with GST or a GST Fund must look solely to the property of GST or such GST Fund for the enforcement of any claims as none of its trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of GST. No GST Fund shall be liable for any claims against any other GST Fund. Both Parties along with GSAM, and Signal Capital specifically acknowledge and agree that any liability of GST under this Agreement with respect to a particular GST Fund, or in connection with the transactions contemplated herein with respect to a particular GST Fund, shall be discharged only out of the assets of the particular GST Fund and that no other portfolio of GST shall be liable with respect thereto.

10.15 Coventry Group Liability. The name Coventry Group is the designation of the trustees for the time being under an Agreement and Declaration of Trust dated January 8, 1992 and all Persons dealing with Coventry Group or a Signal Fund must look solely to the property of Coventry Group or such Signal Fund for the enforcement

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of any claims as none of its trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of Coventry Group. No Signal Fund shall be liable for any claims against any other Signal Fund. Both Parties along with GSAM, and Signal Capital specifically acknowledge and agree that any liability of Coventry Group under this Agreement with respect to a particular Signal Fund, or in connection with the transactions contemplated herein with respect to a particular Signal Fund, shall be discharged only out of the assets of the particular Signal Fund and that no other portfolio of Coventry Group shall be liable with respect thereto.

ARTICLE XI

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

“Action or Proceeding” means any action, suit or proceeding by any Person, or any investigation or audit by any Governmental or Regulatory Body.

“Affiliate” means, with respect to any Person, any other Person controlling, controlled by or under common control with such first Person.

“Agreement” has the meaning specified in the preamble.

“Books and Records” means Coventry Group’s or GST’s accounts, books, records or other documents (including but not limited to minute books, stock transfer ledgers, financial statements, tax returns and related work papers and letters from accountants, and other similar records) required to be maintained by Coventry Group or GST with respect to the Signal Funds or GST Funds, as applicable, pursuant to Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder.

“Business Day” means a day other than Saturday, Sunday or a day on which banks located in New York City are authorized or obligated to close.

“Closing” has the meaning specified in paragraph 3.1.

“Code” has the meaning specified in the recitals.

“corresponding,” when used with respect to a GST Fund or a Signal Fund, has the meaning specified in the recitals.

“Coventry Group” has the meaning specified in the preamble.

“Coventry Group Board” has the meaning specified in the recitals.

“Coventry Group Governing Documents” has the meaning specified in paragraph 1.1.

“Delaware Law” has the meaning specified in paragraph 1.1.

“Effective Time” has the meaning specified in paragraph 3.1.

“Excluded Liabilities” has the meaning specified in paragraph 1.3.

“Fund Assets” means all properties and assets of every kind and description whatsoever, including, without limitation, all cash, cash equivalents, securities, claims (whether absolute or contingent, known or unknown, accrued or unaccrued and including, but not limited to, any claims that Coventry Group may have against Signal Capital to the extent the same may be assigned by Coventry Group without Signal Capital’s consent (such consent, however, will not be unreasonably withheld)) and receivables (including dividend and interest receivable), goodwill and other intangible property, Books and Records, and all interests, rights, privileges and powers, owned by Coventry Group on behalf of a Signal Fund, and any prepaid expenses shown on a Signal Fund’s books at the Valuation Time, excluding (a) the estimated costs of extinguishing any Excluded Liability; (b) cash in an amount necessary to pay dividends pursuant to paragraph 5.8, and (c) Coventry Group’s rights under this Agreement.

“Fund Transaction” has the meaning specified in paragraph 1.1.

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“Governmental or Regulatory Body” means any court, tribunal, or government or political subdivision, whether federal, state, county, local or foreign, or any agency, authority, official or instrumentality of any such government or political subdivision.

“GSAM” has the meaning specified in the preamble.

“GST” has the meaning specified in the preamble.

“GST Board” has the meaning specified in the recitals.

“GST Fund” and “GST Funds” each has the meaning specified in the preamble.

“GST Governing Documents” has the meaning specified in paragraph 4.2(a).

“GST Shares” has the meaning specified in paragraph 1.4.

“Huntington” has the meaning specified in paragraph 2.4.

“Independent Trustees” has the meaning specified in the recitals.

“Knowledge” means (i) with respect to Coventry Group and any applicable Signal Fund, the actual knowledge after reasonable inquiry of Coventry Group’s trustees or officers, and Signal Capital in its capacity as a service provider to Coventry Group and (ii) with respect to GST and any applicable GST Fund, the actual knowledge after reasonable inquiry of GST’s trustees or officers, or GSAM in its respective capacity as a service provider to GST.

“Known Liabilities” means, with respect to Coventry Group and any applicable Signal Fund, those Liabilities of which Coventry Group’s trustees or officers, Signal Capital, or any administrator, distributor, transfer agent, shareholder servicing agent, auditor, or custodian has Knowledge.

“Law” means any law, statute, rule, regulation or ordinance of any Governmental or Regulatory Body.

“Liabilities” means all existing and future liabilities and obligations of any nature, whether known or unknown, accrued or unaccrued, absolute or contingent, conditional or unmatured, or otherwise of a Signal Fund including, but not limited to, (i) those reflected on an unaudited statement of assets and liabilities of a Signal Fund prepared by Coventry Group as of the Valuation Time in accordance with U.S. generally accepted accounting principles consistently applied from the prior audited reporting period and reviewed and approved by the respective treasurers of GST and Coventry Group at the Effective Time and (ii) all obligations of the Coventry Group to indemnify and hold harmless the trustees of Coventry Group as of the date hereof with respect to any actions or omissions involving the Signal Funds but excluding all such obligations with respect to the officers of the Coventry Group. “Liabilities” does not include, and GST and the GST Funds shall not assume, any Excluded Liabilities.

“Massachusetts Law” has the meaning specified in paragraph 1.1.

“Material Adverse Effect” as to any Person means a material adverse effect on the business, results of operations or financial condition of such Person. For purposes of this definition, a decline in net asset value of a Signal Fund or GST Fund arising out of its investment operations or declines in market values of securities in its portfolio, the discharge of liabilities, or the redemption of shares representing interests in such fund, shall not constitute a “Material Adverse Effect.”

“NYSE” has the meaning specified in paragraph 2.5.

“1940 Act” has the meaning specified in the recitals.

“1933 Act” means the Securities Act of 1933, as amended.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

“Order” means any writ, judgment, decree, injunction or similar order of any Government or Regulatory Body, in each case whether preliminary or final.

“Party” and “Parties” each has the meaning specified in the preamble.

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“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental or Regulatory Body or other entity.

“Protected Persons” has the meaning specified in paragraph 9.2.

“Proxy Statement/Prospectus” has the meaning specified in paragraph 4.1(p).

“Registration Statement” has the meaning specified in paragraph 4.1(p).

“Reorganization” has the meaning specified in the recitals.

“SEC” means the U.S. Securities and Exchange Commission.

“Signal Capital” has the meaning specified in the preamble.

“Signal Fund” and “Signal Funds” each has the meaning specified in the preamble.

“State Street” has the meaning specified in paragraph 2.4.

“Transaction Party” has the meaning specified in paragraph 1.1.

“Transfer Documents” has the meaning specified in paragraph 6.2(e).

“Valuation Time” has the meaning specified in paragraph 2.5.

[SIGNATURE PAGE FOLLOWS]

A-25

IN WITNESS WHEREOF, the Parties, Signal Capital, and GSAM have caused this Agreement to be duly executed and delivered by their duly authorized officers, as of the day and year first above written.

THE COVENTRY GROUP

By: 

Name:	R. Jeffrey Young
Title:	President

GOLDMAN SACHS TRUST

By: 

Name: James Fitzpatrick

Title:  Vice President

Solely for purposes of Article VII and Paragraphs 1.3, 1.5, 5.1, 9.2, 10.5, 10.14 and 10.15
SIGNAL CAPITAL
MANAGEMENT, INC.

By: 

Name: 

Title: 

Solely for purposes of Article VII and Paragraphs 5.1, 9.2, 10.5, 10.14 and 10.15
GOLDMAN SACHS
ASSET MANAGEMENT, L.P.

By: 

Name: James Fitzpatrick

Title:  Managing Director

A-26

EXHIBIT A

The Signal Funds and Corresponding GST Funds Transaction Parties

Signal Funds	Goldman Sachs Trust
Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

A-27

PART B

GOLDMAN SACHS TRUST

Goldman Sachs Structured Large Cap Growth Fund
Goldman Sachs Core Fixed Income Fund
Goldman Sachs Municipal Income Fund

Statement of Additional Information

                                        , 2007

Acquisition of substantially all of the assets and liabilities of:	By and in exchange for shares of:
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Signal Tax Exempt Income Fund	Goldman Sachs Municipal Income Fund
(collectively, the “Signal Funds”)	(collectively, the “GST Funds”)
	(a series of Goldman Sachs Trust)
(a series of The Coventry Group)	71 South Wacker
3435 Stelzer Road	Suite 500
Columbus, OH 43219	Chicago, Illinois 60600

     This Statement of Additional Information (“SAI”), which is not a prospectus, supplements and should be read in conjunction with the Combined Proxy Statement/Prospectus dated                     , 2007 (the “Proxy Statement/Prospectus”) relating specifically to the Special Meeting of Shareholders of the Signal Funds of the Coventry Group which will be held on                                         , 2007. A copy of the Proxy Statement/Prospectus may be obtained upon request and without charge by calling Goldman, Sachs & Co. toll free at 800-526-7384. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Proxy Statement/Prospectus. The Reorganization is expected to occur in accordance with the terms of the Reorganization Agreement.

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General Information:

     This SAI and the Proxy Statement/Prospectus are related to the proposed acquisition of all of the assets of the Signal Funds by its corresponding GST Fund and the assumption by the GST Funds of substantially all of the liabilities of the Signal Funds. Such assets and liabilities of each Signal Fund are proposed to be exchanged for Class A Shares and Institutional Shares of the corresponding GST Fund having an aggregate value equal to the net asset value of the particular Signal Fund’s Class A and Institutional Shares as of the Valuation Date. At the effective time of the reorganization, each corresponding GST Fund will distribute shares to each holder of the Signal Fund’s shares in an amount equal in value to the shareholder’s Signal Fund shares as of the effective time of the reorganization and each Signal Fund will completely liquidate (collectively, the “Reorganization”).

Incorporation of Documents By Reference into the Statement of Additional Information

This Statement of Additional Information incorporates by reference the following documents:

(1)	Statement of Additional Information dated August 1, 2006 with respect to the Signal Funds (previously filed on EDGAR, Accession No. 0000950152-06-006338).
(2)	The audited financial statements and related report of the independent registered public accounting firm included in the Coventry Group’s Annual Report to Shareholders for the fiscal year ended March 31, 2006 with respect to the Signal Funds (previously filed on EDGAR, Accession No. 0000950152-06-005038). No other parts of the Annual Report are incorporated herein by reference.
(3)	The unaudited financial statements included in the Coventry Group’s Semi-Annual Report to Shareholders for the fiscal period ended September 30, 2006 with respect to the Signal Funds (previously filed on EDGAR, Accession No. 0000950152-06-010000). No other parts of the Semi-Annual Report are incorporated herein by reference.
(4)	Statement of Additional Information dated December 29, 2006, as amended January 8, 2007 with respect to Class A Shares, Class B Shares, Class C Shares, Service Shares and Institutional Shares of the Goldman Sachs Balanced Fund, Goldman Sachs Growth and Income Fund, Goldman Sachs Structured Large Cap Value Fund, Goldman Sachs Structured U.S. Equity Fund, Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Structured Small Cap Equity Fund, Goldman Sachs Structured International Equity Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs Strategic Growth Fund, Goldman Sachs Growth Opportunities Fund, Goldman Sachs Mid Cap Value Fund, Goldman Sachs Small Cap Value Fund, Goldman Sachs Large Cap Value Fund, Goldman Sachs Concentrated International Equity Fund, Goldman Sachs Japanese Equity Fund, Goldman Sachs International Small Cap Fund, Goldman Sachs Emerging Markets Equity Fund, Goldman Sachs Asia Equity Fund, Goldman Sachs BRIC Fund and Goldman Sachs Concentrated Growth Fund (previously filed on EDGAR, Accession No. 0000950123-07-000202).
(5)	Statement of Additional Information dated February 28, 2006, as amended July 12, 2006, with respect to Class A Shares, Class B Shares, Class C Shares, Service

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	Shares, Institutional Shares, Administration Shares and Separate Account Institutional Shares of the Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, Goldman Sachs Short Duration Government Fund, Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs Government Income Fund, Goldman Sachs Municipal Income Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund, Goldman Sachs Investment Grade Credit Fund, Goldman Sachs Global Income Fund, Goldman Sachs High Yield Municipal Fund, Goldman Sachs High Yield Fund and Goldman Sachs Emerging Markets Debt Fund (previously filed on EDGAR, Accession No. 0000950123-06-007805).
(6)	The audited financial statements and related report of the independent registered public accounting firm included in the Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended August 31, 2006 with respect to the Goldman Sachs Structured Large Cap Growth Fund (previously filed on EDGAR, Accession No. 0000950123-06-013820). No other parts of the Annual Report are incorporated herein by reference.
(7)	The audited financial statements and related report of the independent registered public accounting firm included in the Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended October 31, 2006 with respect to the Goldman Sachs Core Fixed Income Fund (previously filed on EDGAR, Accession No. 0000950123-07-000670). No other parts of the Annual Report are incorporated herein by reference.
(8)	The audited financial statements and related report of the independent registered public accounting firm included in the Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended October 31, 2006 with respect to the Goldman Sachs Municipal Income Fund (previously filed on EDGAR, Accession No. 0000950123-07-000671). No other parts of the Annual Report are incorporated herein by reference.

Pro Forma Financial Statements

     Under the Reorganization Agreement, each Signal Fund is proposed to be reorganized into the GST Fund listed directly opposite such Fund in the table below.

Signal Fund	GST Fund
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Signal Tax Exempt Income Fund	Goldman Sachs Municipal Income Fund

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     No pro forma information has been prepared for the reorganization of the Signal Large Cap Growth Fund, Signal Income Fund and Signal Tax Exempt Income Fund because as of January 19, 2007, the net asset value of such Signal Funds did not exceed 10% of the net asset value of the Goldman Sachs Large Cap Growth Fund, Goldman Sachs Core Fixed Income Fund, and Goldman Sachs Municipal Income Fund, respectively, and, therefore pro forma financial information is not required.

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GOLDMAN SACHS TRUST
FORM N-14
PART C – OTHER INFORMATION

Item 15.     Indemnification

     Article IV of the Agreement and Declaration of Trust of Goldman Sachs Trust, a Delaware statutory trust, provides for indemnification of the Trustees, officers and agents of the Trust, subject to certain limitations. The Agreement and Declaration of Trust is incorporated herein by reference to Exhibit (1)(a).

     The Management Agreement with each of the Funds (other than the ILA Portfolios) provides that the applicable Investment Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by a Fund, except a loss resulting from willful 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 incorporated herein by reference to Exhibits (6)(a) through (6)(g).

     Section 9 of the Distribution Agreement between the Registrant and Goldman, Sachs & Co. dated April 30, 1997, as amended October 30, 2003 and Section 7 of the Transfer Agency Agreements between the Registrant and Goldman, Sachs & Co. dated July 15, 1991, May 1, 1988, April 30, 1997 and April 6, 1990 each provide that the Registrant will indemnify Goldman, Sachs & Co. against certain liabilities. The Distribution Agreement is incorporated herein by reference as Exhibit (7)(a). The Transfer Agency Agreements are incorporated herein by reference as Exhibits (13)(c), (13)(d), (13)(e), and (13)(f), respectively.

     Mutual fund and trustees and officers liability policies purchased jointly by the Registrant, Trust for Credit Unions, Goldman Sachs Variable Insurance Trust and The Commerce Funds 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 16.     Exhibits

     The following exhibits relating to Goldman Sachs Trust are incorporated herein by reference to Post-Effective Amendment No. 26 to Goldman Sachs Trust’s Registration Statement on Form N-1A (Accession No. 000950130-95-002856); 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. 32 to such Registration Statement (Accession No. 0000950130-97-0001846); to Post-Effective Amendment No. 40 to such Registration Statement (Accession No. 0000950130-97-004495); to Post-Effective Amendment No. 41 to such Registration Statement (Accession No 0000950130-98-000676); to Post-Effective Amendment No. 43 to such Registration Statement (Accession No. 0000950130-98-000965); to Post-Effective Amendment No. 44 to such Registration Statement (Accession No. 0000950130-98-002160); to Post-Effective Amendment No. 46 to such Registration Statement (Accession No. 0000950130-98-003563); to Post-Effective Amendment No. 47 to such Registration Statement (Accession No. 0000950130-98-004845); to Post-Effective Amendment No. 48 to such Registration Statement (Accession No. 0000950109-98-005275); to Post-Effective Amendment No. 50 to such Registration Statement (Accession No. 0000950130-98-006081); to Post-Effective Amendment No. 51 to such Registration Statement (Accession No. 0000950130-99-000178); to Post-Effective Amendment No. 52 to such Registration Statement (Accession No. 0000950130-99-000742); to Post-Effective Amendment No. 53 to such Registration Statement (Accession No. 0000950130-99-001069); to Post-Effective Amendment No. 54 to such Registration Statement (Accession No. 0000950130-99-002212); to Post-Effective Amendment No. 55 to such Registration Statement (Accession No. 0000950109-99-002544); to Post-Effective Amendment No. 56 to such Registration Statement (Accession No. 0000950130-99-005294); to Post-Effective Amendment No. 57 to such Registration Statement (Accession No. 0000950109-99-003474); to Post-Effective Amendment No. 58 to such Registration Statement (Accession No. 0000950109-99-004208); to Post-Effective Amendment No. 59 to such Registration Statement (Accession No. 0000950130-99-006810); to Post-Effective Amendment No. 60 to such Registration Statement (Accession No. 0000950109-99-004538) (no exhibits filed as part of this Amendment); to Post-Effective Amendment No. 61 to such Registration Statement (Accession No. 0000950130-00-000099) (no exhibits filed as part of this Amendment); to Post-Effective Amendment No. 62 to such Registration Statement (Accession No. 0000950109-00-000585); to Post-Effective Amendment No. 63 to such Registration Statement (Accession No. 0000950109-00-001365); to Post-Effective Amendment No. 64 to such Registration Statement (Accession No. 0000950130-00-002072); to Post-Effective Amendment No. 65 to such Registration Statement (Accession No. 0000950130-00-002509); to Post-Effective Amendment No. 66 to such Registration Statement (Accession No. 0000950130-00-003033); to Post-Effective Amendment No. 67 to such Registration Statement (Accession No. 0000950130-00-003405); to Post-Effective Amendment No. 68 to such Registration Statement (Accession No. 0000950109-00-500123); to Post-Effective Amendment No. 69 to such Registration Statement (Accession No. 0000950109-00-500156); to Post-Effective Amendment No. 70 to such Registration Statement (Accession No. 0000950109-01-000419); to Post-Effective Amendment No. 71 to such Registration Statement (Accession No. 0000950109-01-500094); to Post-Effective Amendment No. 72 to such Registration Statement (Accession No. 0000950109-01-500540); to Post-Effective Amendment No. 73 to such Registration Statement (Accession No. 0000950123-01-509514); to Post-Effective Amendment No. 74 to such Registration Statement (Accession No. 0000950123-02-002026); to Post-Effective Amendment No. 75 to such Registration Statement (Accession No. 0000950123-02-003780); to Post-Effective Amendment No. 76 to such Registration Statement (Accession No. 0000950123-02-006143); to Post-Effective Amendment No. 77 to such Registration Statement (Accession

- 2 -

No. 0000950123-02-006151); to Post-Effective Amendment No. 78 to such Registration Statement (Accession No. 0000950123-02-007177); to Post-Effective Amendment No. 79 to such Registration Statement (Accession No. 0000950123-02-011711); to Post-Effective Amendment No. 80 to such Registration Statement (Accession No. 0000950123-02-011988); to Post-Effective Amendment No. 81 to such Registration Statement (Accession No. 0000950123-03-001754); to Post-Effective Amendment No. 82 to such Registration Statement (Accession No. 0000950123-03-004262); to Post-Effective Amendment No. 83 to such Registration Statement (Accession No. 0000950123-03-007054); to Post-Effective Amendment No. 84 to such Registration Statement (Accession No. 0000950123-03-009618); to Post-Effective Amendment No. 85 to such Registration Statement (Accession No. 0000950123-03-013727); to Post-Effective Amendment No. 86 to such Registration Statement (Accession No. 0000950123-04-002212); to Post-Effective Amendment No. 87 to such Registration Statement (Accession No. 0000950123-04-003073); to the Registrant’s Registration Statement on Form N-14 relating to the Registrant’s acquisition of the Golden Oak^® Family of Funds (“Acquisition”) (Accession No. 0000950123-04-008643); to Post-Effective Amendment No. 88 to the Registrant’s Registration Statement on Form N-1A (Accession No. 0000950123-04-004668) to Post-Effective Amendment No. 93 to the Registrant’s Registration Statement on Form N-1A (Accession No. 0000950123-04-015178); to Post-Effective Amendment No. 103 to the Registrant’s Registration Statement on Form N-1A (Accession No. 0000950123-05-007490); to Post-Effective Amendment No. 109 to the Registrant’s Registration Statement on Form N-1A (Accession No. 0000950123-05-011442); to Post-Effective Amendment No. 112 to the Registrant’s Registration Statement on Form N-1A (Accession No. 0000950123-05-014459); to Post-Effective Amendment No. 114 to the Registrant’s Registration Statement on Form N-1A (0000950123-05-015341); to Post-Effective Amendment No. 118 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-001985); to Post-Effective Amendment No. 119 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-002378); to Post-Effective Amendment No. 124 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-005419); to Post-Effective Amendment No. 127 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-007014); to Post-Effective Amendment No. 129 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-008041); to Post-Effective Amendment No. 135 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-012408); to Post-Effective Amendment No. 137 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-012620); to Post-Effective Amendment No. 143 to the Registrant’s Registration Statement on Form N-1A (0000950123-06-015465); and to Post-Effective Amendment No. 149 to the Registrant’s Registration Statement on Form N-1A (0000950123-07-000569).

(1)	(a)	Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950130-97-000573).
	(b)	Amendment No. 1 dated April 24, 1997 to Agreement and Declaration of Trust January 28, 1997. (Accession No. 0000950130-97-004495).
	(c)	Amendment No. 2 dated July 21, 1997 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-97-004495).

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(d)	Amendment No. 3 dated October 21, 1997 to the Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-98-000676).
(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).
(f)	Amendment No. 5 dated April 23, 1998 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-98-004845).
(g)	Amendment No. 6 dated July 22, 1998 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-98-004845).
(h)	Amendment No. 7 dated November 3, 1998 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-98-006081).
(i)	Amendment No. 8 dated January 22, 1999 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-99-000742).
(j)	Amendment No. 9 dated April 28, 1999 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950109-99-002544).
(k)	Amendment No. 10 dated July 27, 1999 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-99-005294).
(l)	Amendment No. 11 dated July 27, 1999 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-99-005294).
(m)	Amendment No. 12 dated October 26, 1999 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-99-004208).
(n)	Amendment No. 13 dated February 3, 2000 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950109-00-000585).

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(o)	Amendment No. 14 dated April 26, 2000 to Agreement and Declaration of Trust as amended, dated January 28, 1997. (Accession No. 0000950130-00-002509).
(p)	Amendment No. 15 dated August 1, 2000 to Agreement and Declaration of Trust, as amended, dated January 28, 1997. (Accession No. 0000950109-00-500123).
(q)	Amendment No. 16 dated January 30, 2001 to Agreement and Declaration of Trust, dated January 28, 1997. (Accession No. 0000950109-01-500540).
(r)	Amendment No. 17 dated April 25, 2001 to Agreement and Declaration of Trust, dated January 28, 1997. (Accession No. 0000950123-01-509514).
(s)	Amendment No. 18 dated July 1, 2002 to Agreement and Declaration of Trust, dated January 28, 1997. (Accession No. 0000950123-02-011711).
(t)	Amendment No. 19 dated August 1, 2002 to Agreement and Declaration of Trust, dated January 28, 1997. (Accession No. 0000950123-02-011711).
(u)	Amendment No. 20 dated August 1, 2002 to Agreement and Declaration of Trust, dated January 28, 1997. (Accession No. 0000950123-02-011711).
(v)	Amendment No. 21 dated January 29, 2003 to the Agreement and Declaration of Trust, dated January 28, 1997. (Accession No. 0000950123-03-001754).
(w)	Amendment No. 22 dated July 31, 2003 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-03-013727).
(x)	Amendment No. 23 dated October 30, 2003 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-03-013727).
(y)	Amendment No. 24 dated May 6, 2004 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-04-008643).
(z)	Amendment No. 25 dated April 21, 2004 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-04-015178).

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(aa)	Amendment No. 26 dated November 4, 2004 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-04-015178).
(bb)	Amendment No. 27 dated February 10, 2005 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-05-007490).
(cc)	Amendment No. 28 dated May 12, 2005 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-05-014459).
(dd)	Amendment No. 29 dated June 16, 2005 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-05-014459).
(ee)	Amendment No. 30 dated August 4, 2005 to the Agreement and Declaration of Trust dated January 28, 1977. (Accession No. 0000950123-05-014459)
(ff)	Amendment No. 32 dated December 31, 2005 to the Agreement and Declaration of Trust dated January 28, 1997 (Accession No. 0000950123-05-015341).
(gg)	Amendment No. 31 dated November 2, 2005 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-007014).
(hh)	Amendment No. 33 dated March 16, 2006 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-007014).
(ii)	Amendment No. 34 dated March 16, 2006 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-007014).
(jj)	Amendment No. 36 dated June 15, 2006 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-010686).
(kk)	Amendment No. 35 dated May 11, 2006 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-008041).

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	(ll)	Amendment No. 37 dated August 10, 2006 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-015465).
	(mm)	Amendment No. 38 dated November 9, 2006 to the Agreement and Declaration of Trust dated January 28, 1997. (Accession No. 0000950123-06-015465).
(2)	(a)	Amended and Restated By-laws of the Delaware business trust dated January 28, 1997. (Accession No. 0000950130-97-000573).
	(b)	Amended and Restated By-laws of the Delaware business trust dated January 28, 1997 as amended and restated July 27, 1999. (Accession No. 0000950130-99-005294).
	(c)	Amended and Restated By-laws of the Delaware business trust dated January 28, 1997 as amended and restated October 30, 2002. (Accession No. 0000950123-02-011711).
	(d)	Amendment to Amended and Restated By-laws of the Delaware business trust dated January 28, 1997 as amended and restated October 30, 2002. (Accession No. 0000950123-04-015178).
	(e)	Amendment No. 1 dated November 4, 2004 to Amended and Restated By-Laws of the Delaware business trust dated January 28, 1997 as amended and restated October 30, 2002. (Accession No. 0000950123-04-007490).

(3)	Not Applicable
(4)	Agreement and Plan of Reorganization dated January                                            , 2007 is incorporated herein by reference to Appendix A to the Combined Proxy Statement/Prospectus.
(5)	Article II, Section 10, Article IV, Section 3, Article V, Article VI, Article VII, Article IX, Section 8 and Section 9 of the Registrant’s Agreement and Declaration of Trust incorporated herein by reference as Exhibit (1)(a) and Article III of the Registrant’s Amended and Restated By-Laws incorporated by reference as Exhibit (2)(c).

(6)	(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).
	(b)	Management Agreement dated April 30, 1997 between Registrant, on behalf of Goldman Sachs Adjustable Rate Government Fund, and

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	Goldman Sachs Funds Management, L.P. (Accession No. 0000950130-98-000676).
(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).
(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).
(e)	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).
(f)	Management Agreement dated April 30, 1997 between Registrant, Goldman Sachs Asset Management, Goldman Sachs Fund Management L.P. and Goldman, Sachs Asset Management International. (Accession No. 0000950109-98-005275).
(g)	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).
(h)	Amended Annex A to Management Agreement dated January 1, 1998 on behalf of the Goldman Sachs Asset Allocation Portfolios and Goldman Sachs Asset Management (Conservative Strategy Portfolio) (Accession No. 0000950130-99-000742).
(i)	Amended Annex A dated April 28, 1999 to Management Agreement dated April 30, 1997. (Accession No. 0000950109-99-002544).
(j)	Amended Annex A dated July 27, 1999 to Management Agreement dated April 30, 1997. (Accession No. 0000950130-99-005294).
(k)	Amended Annex A dated October 26, 1999 to Management Agreement dated April 30, 1997. (Accession No. 0000950130-99-004208).
(l)	Amended Annex A dated February 3, 2000 to Management Agreement dated April 30, 1997. (Accession No. 0000950109-00-001365).
(m)	Amended Annex A dated April 26, 2000 to Management Agreement dated April 30, 1997 (Accession No. 0000950130-00-002509).
(n)	Amended Annex A dated January 30, 2001 to Management Agreement dated April 30, 1997. (Accession No. 0000950109-01-500094).

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(o)	Amended Annex A dated April 25, 2001 to Management Agreement, dated April 30, 1997. (Accession No. 0000950123-01-509514).
(p)	Amended Annex A dated August 1, 2002 to Management Agreement, dated April 30, 1997. (Accession No. 0000950123-02-011711).
(q)	Assumption Agreement dated April 26, 2003 between Goldman, Sachs & Co. and Goldman Sachs Asset Management, L.P. (With respect to the Goldman Sachs Short-Duration Tax-Free Fund). (Accession No. 0000950123-03-007054).
(r)	Assumption Agreement dated April 26, 2003 between Goldman, Sachs & Co. and Goldman Sachs Asset Management, L.P. (With respect to the Goldman Sachs Money Market Funds). (Accession No. 0000950123-03-007054).
(s)	Assumption Agreement dated April 26, 2003 between Goldman, Sachs & Co. and Goldman Sachs Asset Management, L.P. (With respect to the Goldman Sachs Fixed Income, Equity, Specialty and Money Market Funds). (Accession No. 0000950123-03-007054).
(t)	Assumption Agreement dated April 26, 2003 between Goldman, Sachs & Co. and Goldman Sachs Asset Management, L.P. (With respect to the Goldman Sachs Core Fixed Income Fund). (Accession No. 0000950123-03-007054).
(u)	Assumption Agreement dated April 26, 2003 between Goldman, Sachs & Co. and Goldman Sachs Asset Management, L.P. (With respect to the Goldman Sachs Asset Allocation Funds). (Accession No. 0000950123-03-007054).
(v)	Amended Annex A dated July 31, 2003 to the Management Agreement dated April 30, 1997. (Accession No. 0000950123-03-009618).
(w)	Amended Annex A dated October 30, 2003 to the Management Agreement dated April 30, 1997. (Accession No. 0000950123-03-013727).
(x)	Amended Annex A dated November 2, 2005 to the Management Agreement dated April 30, 1997. (Accession No. 0000950123-05-014459).
(y)	Amended Annex A dated November 12, 2005 to the Management Agreement dated April 30, 1997. (Accession No. 0000950123-05-014459).

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(z)	Amended Annex A dated November 9, 2006 to the Management Agreement dated April 30, 1997. (Accession No. 0000950123-06- 015465).
(aa)	Fee Reduction Commitment dated January 1, 2005 among Goldman Sachs Asset Management, L.P., Goldman Sachs Asset Management International and Goldman Sachs Trust relating to the Capital Growth, CORE Large Cap Growth, CORE U.S. Equity and International Growth Opportunities Funds. (Accession No. 0000950123-04-007490).
(bb)	Fee Reduction Commitment dated February 25, 2005 among Goldman Sachs Asset Management, L.P., Goldman Sachs Asset Management International and Goldman Sachs Trust relating to the Government Income and Global Income and Funds. (Accession No. 0000950123-04-007490).
(cc)	Fee Reduction Commitment dated April 29, 2005 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the CORE Tax-Managed Equity Fund. (Accession No. 0000950123-04-007490).
(dd)	Fee Reduction Commitment dated April 29, 2005 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Aggressive Growth Strategy, Balanced Strategy, Growth and Income Strategy and Growth Strategy Portfolios. (Accession No. 0000950123-04-007490).
(ee)	Fee Reduction Commitment dated February 28, 2006 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Short Duration Tax-Free Fund. (Accession No. 0000950123-06-015465).
(ff)	Fee Reduction Commitment dated February 28, 2006 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Core Fixed Income Fund. (Accession No. 0000950123-06-015465).
(gg)	Fee Reduction Commitment dated February 28, 2006 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Short Duration Government Fund. (Accession No. 0000950123-06-015465).
(hh)	Fee Reduction Commitment dated February 28, 2006 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Ultra-Short Duration Government Fund. (Accession No. 0000950123-06-015465).

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(ii)

Fee Reduction Commitment dated February 28, 2006 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Enhanced Income Fund, Global Income fund, Government Income Fund, Municipal Income Fund, Investment Grade Credit Fund, U.S. Mortgages Fund, High Yield Fund, High Yield Municipal Fund and Emerging Markets Debt Fund. (Accession No. 0000950123-06-015465).

(jj)

Fee Reduction Commitment dated April 28, 2006 between Goldman Sachs Asset Management, L.P. and Goldman Sachs Trust relating to the Balanced Fund, CORE Large Cap Value Fund, Growth and Income Fund, Real Estate Securities Fund, Asia Growth Fund, CORE International Equity Fund, CORE U.S. Equity Fund, CORE Large Cap Growth Fund, European Equity Fund, International Equity Fund, Large Cap Value Fund, Strategic Growth Fund, Research Select Fund, CORE Tax-Managed Equity Fund, Tollkeeper Fund, Concentrated Growth Fund, Japanese Equity Fund, CORE Small Cap Equity Fund, Emerging Markets Equity Fund, International Growth Opportunities Fund, Mid-Cap Value Fund, Small Cap Value Fund and Growth Opportunities Fund. (Accession No. 0000950123-06-015465).

(7)	(a)	Distribution Agreement dated April 30, 1997, as amended October 30, 2003. (Accession No. 0000950123-03-013727).
	(b)	Amended Exhibit A dated November 9, 2006 to the Distribution Agreement dated April 30, 1997, as amended October 30, 2003. (Accession No. 0000950123-06-015465).

(8) Not applicable.

(9)	(a)	Custodian Agreement dated July 15, 1991, between Registrant and State Street Bank and Trust Company. (Accession No. 0000950130-95-002856).
	(b)	Custodian Agreement dated December 27, 1978 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - - Institutional Liquid Assets, filed as Exhibit 8(a). (Accession No. 0000950130-98-000965).
	(c)	Letter Agreement dated December 27, 1978 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - Institutional Liquid Assets, pertaining to the fees payable by Registrant pursuant to the Custodian Agreement, filed as Exhibit 8(b). (Accession No. 0000950130-98-000965).
	(d)	Amendment dated May 28, 1981 to the Custodian Agreement referred to above as Exhibit 9(b). (Accession No. 0000950130-98-000965).

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(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).
(f)	Letter Agreement dated June 14, 1984 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - Institutional Liquid Assets, pertaining to a change in wire charges under the Custodian Agreement, filed as Exhibit 8(d). (Accession No. 0000950130-98-000965).
(g)	Letter Agreement dated March 29, 1983 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - Institutional Liquid Assets, 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(f). (Accession No. 0000950130-98-000965).
(h)	Letter Agreement dated March 21, 1985 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - Institutional Liquid Assets, pertaining to the creation of a joint repurchase agreement account, filed as Exhibit 8(g). (Accession No. 0000950130-98-000965).
(i)	Letter Agreement dated November 7, 1985, with attachments, between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs — Institutional Liquid Assets, authorizing State Street Bank and Trust Company to permit redemption of units by check, filed as Exhibit 8(h). (Accession No. 0000950130-98-000965).
(j)	Money Transfer Services Agreement dated November 14, 1985, including attachment, between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs — Institutional Liquid Assets, pertaining to transfers of funds on deposit with State Street Bank and Trust Company, filed as Exhibit 8(i). (Accession No. 0000950130-98-000965).
(k)	Letter Agreement dated November 27, 1985 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - Institutional Liquid Assets, amending the Custodian Agreement. (Accession No. 0000950130-98-000965).
(l)	Letter Agreement dated July 22, 1986 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs - Institutional Liquid Assets, pertaining to a change in wire charges. (Accession No. 0000950130-98-000965).

- 12 -

(m)	Letter Agreement dated June 20, 1987 between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs — Institutional Liquid Assets, amending the Custodian Agreement. (Accession No. 0000950130-98-000965).
(n)	Letter Agreement between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs — Institutional Liquid Assets, pertaining to the latter’s designation of Security Pacific National Bank as its subcustodian and certain other matters. (Accession No. 0000950130-98-000965).
(o)	Amendment dated July 19, 1988 to the Custodian Agreement between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs — Institutional Liquid Assets. (Accession No. 0000950130-98-000965).
(p)	Amendment dated December 19, 1988 to the Custodian Agreement between Registrant and State Street Bank and Trust Company, on behalf of Goldman Sachs — Institutional Liquid Assets. (Accession No. 0000950130-98-000965).
(q)	Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company on behalf of Goldman Sachs Capital Growth Fund. (Accession No. 0000950130-98-006081).
(r)	Sub-Custodian Agreement dated March 29, 1983 between State Street Bank and Trust Company and Bank of America, National Trust and Savings Association on behalf of Goldman Sachs Institutional Liquid Assets. (Accession No. 0000950130-98-006081).
(s)	Fee schedule dated January 8, 1999 relating to Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Conservative Strategy Portfolio). (Accession No. 0000950130-99-000742).
(t)	Fee schedule dated April 12, 1999 relating to Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Strategic Growth and Growth Opportunities Portfolios). (Accession No. 0000950109-99-002544).
(u)	Fee schedule dated July 19, 1999 relating to Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Internet Tollkeeper Fund). (Accession No. 0000950130-99-005294).

- 13 -

(v)	Fee schedule dated October 1, 1999 relating to the Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Large Cap Value Fund). (Accession No. 0000950130-99-006810).
(w)	Fee schedule dated January 12, 2000 relating to Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (CORE Tax-Managed Equity Fund). (Accession No. 0000950109-00-000585).
(x)	Fee schedule dated January 6, 2000 relating to Custodian Agreement dated July 15, 1991 between Registrant and State Street Bank and Trust Company (High Yield Municipal Fund). (Accession No. 0000950109-00-000585).
(y)	Fee schedule dated April 14, 2000 relating to Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Research Select Fund). (Accession No. 0000950130-00-002509).
(z)	Fee schedule dated April 14, 2000 relating to Custodian Agreement dated July 15, 1991 between Registrant and State Street Bank and Trust Company (Enhanced Income Fund). (Accession No. 0000950130-00-002509).
(aa)	Additional Portfolio Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company. (Accession No. 0000950109-00-000585).
(bb)	Letter Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company relating to Custodian Agreement dated December 27, 1978. (Accession No. 0000950109-00-000585).
(cc)	Letter Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company relating to Custodian Agreement dated April 6, 1990. (Accession No. 0000950109-00-000585).
(dd)	Letter Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company relating to Custodian Agreement dated July 15, 1991. (Accession No. 0000950109-00-000585).
(ee)	Letter Agreement dated January 29, 2001 relating to Custodian Agreement dated July 15, 1991 between Registrant and State Street Bank and Trust Company (Global Consumer Growth Fund, Global Financial Services Fund, Global Health Sciences Fund, Global Infrastructure and

- 14 -

			Resources Fund and Global Technology Fund). (Accession No. 0000950109-01-500540).
		(ff)	Amendment dated July 2, 2001 to the Custodian Agreement dated December 27, 1978 between Registrant and State Street Bank and Trust Company (Accession No. 0000950123-01-509514).
		(gg)	Amendment dated July 2, 2001 to the Custodian Contract dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Accession No. 0000950123-01-509514).
		(hh)	Amendment dated July 2, 2001 to the Custodian Contract dated July 15, 1991 between Registrant and State Street Bank and Trust Company (Accession No. 0000950123-01-509514).
		(ii)	Form of amendment to the Custodian Agreement dated December 27, 1978 between Registrant and State Street Bank and Trust Company (Accession No. 0000950123-01-509514).
		(jj)	Amendment to the Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company (Accession No. 0000950123-02-003780).
		(kk)	Amendment to the Custodian Agreement dated July 15, 1991 between Registrant and State Street Bank and Trust Company (Accession No. 0000950123-02-003780).
		(ll)	Letter Amendment dated May 15, 2002 to the Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company. (Accession No. 0000950123-02-011711).
		(mm)	Global Custody Agreement dated June 30, 2006 between Registrant and J.P. Morgan Chase Bank N.A. (Accession No. 0000950123-07-000569).
(10	)	(a)	Class A Distribution and Service Plan amended and restated as of May 5, 2004 (Accession No. 0000950123-04-015178).
		(b)	Class B Distribution and Service Plan amended and restated as of February 4, 2004 (Accession No. 0000950123-04-002212).
		(c)	Class C Distribution and Service Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
		(d)	Cash Management Shares Plan of Distribution pursuant to Rule 12b-1 amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).

- 15 -

(e) Revised plan dated October 30, 2003 entered into by Registrant pursuant to Rule 18f-3. (Accession No. 0000950123-03-013727).

(11	)	Opinion and consent of counsel that shares will be validly issued, fully paid and non-assessable is filed herewith.
(12	)	Form of opinion of counsel with respect to certain tax consequences is filed herewith. Final signed opinion will be filed by post-effective amendment pursuant to an undertaking.

(13	)	(a	)	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).
		(b	)	Letter Agreement dated June 20, 1987 regarding use of checking account between Registrant and The Northern Trust Company. (Accession No. 0000950130-98-000965).
		(c	)	Transfer Agency Agreement dated July 15, 1991 between Registrant and Goldman, Sachs & Co. (Accession No. 0000950130-95-002856).
		(d	)	Transfer Agency Agreement dated May 1, 1988 between Goldman Sachs Institutional Liquid Assets and Goldman, Sachs & Co. (Accession No. 0000950130-98-006081).
		(e	)	Transfer Agency Agreement dated April 30, 1997 between Registrant and Goldman, Sachs & Co. on behalf of the Financial Square Funds. (Accession No. 0000950130-98-006081).
		(f	)	Transfer Agency Agreement dated April 6, 1990 between GS-Capital Growth Fund, Inc. and Goldman Sachs & Co. (Accession No. 0000950130-98-006081).
		(g	)	Form of Retail Service Agreement on behalf of Goldman Sachs Trust relating to Class A Shares of Goldman Sachs Asset Allocation Portfolios, Goldman Sachs Fixed Income Funds, Goldman Sachs Domestic Equity Funds and Goldman Sachs International Equity Funds. (Accession No. 0000950130-98-006081).
		(h	)	Form of Supplemental Service Agreement on behalf of Goldman Sachs Trust relating to the Administrative Class, Service Class and Cash Management Class of Goldman Sachs — Institutional Liquid Assets Portfolios. (Accession No. 0000950130-98-006081).

- 16 -

(i	)	Form of Supplemental Service Agreement on behalf of Goldman Sachs Trust relating to the FST Shares, FST Preferred Shares, FST Administration Shares and FST Service Shares of Goldman Sachs Financial Square Funds. (Accession No. 0000950130-98-006081).
(j	)	Fee schedule relating to Transfer Agency Agreement between Registrant and Goldman, Sachs & Co. on behalf of all Funds other than ILA and FST money market funds. (Accession No. 0000950109-01-500540).
(k	)	Fee schedule relating to Transfer Agency Agreement between Registrant and Goldman, Sachs & Co. on behalf of the ILA portfolios. (Accession No. 0000950109-01-500540).
(l	)	Form of Service Agreement on behalf of Goldman Sachs Trust relating to the Select Class, the Preferred Class, the Administration Class, the Service Class and the Cash Management Class, as applicable, of Goldman Sachs Financial Square Funds, Goldman Sachs Institutional Liquid Assets Portfolios, Goldman Sachs Fixed Income Funds, Goldman Sachs Domestic Equity Funds, Goldman Sachs International Equity Funds and Goldman Sachs Asset Allocation Portfolios. (Accession No. 0000950109-01-500540).
(m	)	Form of fee schedule relating to Transfer Agency Agreement between Registrant and Goldman, Sachs & Co. on behalf of the Cash Portfolio (Accession No. 0000950123-01-509514).
(n	)	Form of Account Service Agreement on behalf of Goldman Sachs Trust relating to Institutional Shares of Goldman Sachs U.S. Mortgages Fund and Investment Grade Credit Fund. (Accession No. 0000950123-03-013727).
(o	)	Form of Account Service Agreement on behalf of Goldman Sachs Trust relating to Class A Shares of Goldman Sachs U.S. Mortgages Fund and Investment Grade Credit Fund. (Accession No. 0000950123-03-013727).
(p	)	Goldman Sachs Institutional Liquid Assets Administration Class Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
(q	)	Goldman Sachs Cash Management Shares Service Plan and Shareholder Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-06-001985).
(r	)	Goldman Sachs FST Select Class Select Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).

- 17 -

	(s	)	Goldman Sachs FST Administration Class Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(t	)	Goldman Sachs FST Preferred Class Preferred Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(u	)	Goldman Sachs Administration Class Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(v	)	Goldman Sachs Institutional Liquid Assets Service Class Service Plan and Shareholder Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(w	)	Goldman Sachs Service Class Service Plan and Shareholder Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(x	)	Goldman Sachs Cash Portfolio Administration Class Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(y	)	Goldman Sachs Cash Portfolio Preferred Class Preferred Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
	(z	)	Goldman Sachs FST Capital Administration Class Capital Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
(aa)			Goldman Sachs Account Service Plan for Institutional Shares amended and restated as of February 4, 2004 (U.S. Mortgages Fund and Investment Grade Credit Fund). (Accession No. 0000950123-04-002212).
(bb)			Goldman Sachs Account Service Plan for Class A Shares amended and restated as of February 4, 2004 (U.S. Mortgages Fund and Investment Grade Credit Fund). (Accession No. 0000950123-04-002212).
(cc)			Goldman Sachs FST Service Class Service Plan and Shareholder Administration Plan amended and restated as of February 4, 2004. (Accession No. 0000950123-04-002212).
(dd)			Mutual Funds Service Agreement dated June 30, 2006 between Registrant and J.P. Morgan Investor Services, Co. (Accession No. 0000950123-07-000569).

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(14	)		(a	)	Consent of PricewaterhouseCoopers LLP is filed herewith.
			(b	)	Consent of Ernst & Young LLP is filed herewith.
			(c	)	Consent of Ernst & Young LLP is filed herewith.
(15	)	Not Applicable
(16	)		(a	)	Certificate of Secretary is filed herewith.
			(b	)	Powers of Attorney are filed herewith.
(17	)		(a	)	Form of Voting Instruction Form is filed herewith.
			(b	)	Prospectus dated December 29, 2006 with respect to Class A Shares, Class B Shares and Class C Shares of the Goldman Sachs Structured Large Cap Value Fund, Goldman Sachs Structured U.S. Equity Fund, Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Structured Small Cap Equity Fund and Goldman Sachs Structured International Equity Fund.
			(c	)	Supplement dated January 9, 2007 to the Prospectus for the Class A Shares, Class B Shares and Class C Shares dated December 29, 2006 with respect to the Structured Equity Funds.
			(d	)	Prospectus dated December 29, 2006 with respect to Institutional Shares of the Goldman Sachs Structured Large Cap Value Fund, Goldman Sachs Structured U.S. Equity Fund, Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Structured Small Cap Equity Fund and Goldman Sachs Structured International Equity Fund.
			(e	)	Prospectus dated February 28, 2006 with respect to Class A Shares, Class B Shares and Class C Shares of the Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, Goldman Sachs Short-Duration Government Fund, Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund, Goldman Sachs Investment Grade Credit Fund, Goldman Sachs Global Income Fund, Goldman Sachs High Yield Fund, and Goldman Sachs Emerging Markets Debt Fund.
			(f	)	Prospectus dated February 28, 2006 with respect to Institutional Shares of the Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, Goldman Sachs Short-Duration Government Fund, Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund, Goldman Sachs Investment Grade Credit Fund, Goldman Sachs Global Income

- 19 -

		Fund, Goldman Sachs High Yield Fund, and Goldman Sachs Emerging Markets Debt Fund.
(g	)	Prospectus dated February 28, 2006 with respect to Class A Shares, Class B Shares and Class C Shares of the Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund, Goldman Sachs Municipal Income Fund and Goldman Sachs High Yield Municipal Fund.
(h	)	Supplement dated December 13, 2006 to the Prospectus for the Class A Shares, Class B Shares and Class C Shares dated February 28, 2006 with respect to the Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund and Goldman Sachs Municipal Income Fund.
(i	)	Supplement dated January 9, 2007 to the Prospectuses for the Class A Shares, Class B Shares and Class C Shares dated February 28, 2006 with respect to the Taxable Fixed Income Funds; and Class A Shares, Class B Shares and Class C Shares dated February 28, 2006 with respect to the Municipal Fixed Income Funds.
(j	)	Prospectus dated February 28, 2006 with respect to Institutional Shares of the Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund, Goldman Sachs Municipal Income Fund and Goldman Sachs High Yield Municipal Fund.
(k	)	Supplement dated December 13, 2006 to the Prospectus for the Institutional Shares dated February 28, 2006 with respect to the Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund and Goldman Sachs Municipal Income Fund.
(l	)	Supplement dated September 8, 2006 to the Prospectus for the Class A Shares, Class B Shares and Class C Shares dated February 28, 2006 with respect to the Goldman Sachs Municipal Income Fund, Goldman Sachs High Yield Municipal Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund (Class A Shares and Class C Shares only) and Goldman Sachs New York Intermediate AMT-Free Municipal Fund (Class A Shares and Class C Shares only); and the Prospectus for the Institutional Shares dated February 28, 2006 with respect to the Goldman Sachs Municipal Income Fund, Goldman Sachs High Yield Municipal Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund and Goldman Sachs New York Intermediate AMT-Free Municipal Fund.

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(m	)	Statement of Additional Information dated December 29, 2006, as amended January 8, 2007, with respect to Class A Shares, Class B Shares, Class C Shares, Service Shares and Institutional Shares of the Goldman Sachs Balanced Fund, Goldman Sachs Growth and Income Fund, Goldman Sachs Structured Large Cap Value Fund, Goldman Sachs Structured U.S. Equity Fund, Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Structured Small Cap Equity Fund, Goldman Sachs Structured International Equity Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs Strategic Growth Fund, Goldman Sachs Growth Opportunities Fund, Goldman Sachs Small/Mid-Cap Growth Fund, Goldman Sachs Mid Cap Value Fund, Goldman Sachs Small Cap Value Fund, Goldman Sachs Large Cap Value Fund, Goldman Sachs Concentrated International Equity Fund, Goldman Sachs Japanese Equity Fund, Goldman Sachs International Small Cap Fund, Goldman Sachs Emerging Markets Equity Fund, Goldman Sachs Asia Equity Fund and Goldman Sachs Concentrated Growth Fund.
(n	)	Statement of Additional Information dated February 28, 2006, as amended July 12, 2006, with respect to Class A Shares, Class B Shares, Class C Shares, Service Shares, Institutional Shares, Administration Shares, and Separate Account Institutional Shares of the Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, Goldman Sachs Short Duration Government Fund, Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs Government Income Fund, Goldman Sachs Municipal Income Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund, Goldman Sachs Investment Grade Credit Fund, Goldman Sachs Global Income Fund, Goldman Sachs High Yield Municipal Fund, Goldman Sachs High Yield Fund, and Goldman Sachs Emerging Markets Debt Fund.
(o	)	Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended August 31, 2006 with respect to the Goldman Sachs Structured U.S. Equity Fund, Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Structured Small Cap Equity Fund, Goldman Sachs Structured Large Cap Value Fund, and Goldman Sachs Structured International Equity Fund.
(p	)	Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended October 31, 2006 with respect to the Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund and Goldman Sachs Short Duration Government Fund.
(q	)	Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended October 31, 2006 with respect to the Goldman Sachs Short Duration

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				Tax-Free Fund, Goldman Sachs Municipal Income Fund and Goldman Sachs High Yield Municipal Fund.
		(r	)	Goldman Sachs Trust Annual Report to Shareholders for the fiscal year ended October 31, 2006 with respect to the Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund and Goldman Sachs Investment Grade Credit Fund.
		(s	)	Prospectus dated August 1, 2006 with respect to the Class A Shares of the Signal Large Cap Growth Fund, Signal Income Fund and Signal Tax-Exempt Fund of the Signal Funds.
		(t	)	Prospectus dated August 1, 2006 with respect to the Class I Shares of the Signal Large Cap Growth Fund, Signal Income Fund, Signal Tax-Exempt Fund and Signal Money Market Fund of the Signal Funds.
		(u	)	Statement of Additional Information dated August 1, 2006 with respect to the Signal Large Cap Growth Fund, Signal Income Fund, Signal Tax-Exempt Fund and Signal Money Market Fund of the Signal Funds.
		(v	)	Signal Funds Annual Report to Shareholders for the fiscal year ended March 31, 2006 with respect to the Signal Large Cap Growth Fund, Signal Income Fund, Signal Tax Exempt Fund and Signal Money Market Fund.
		(w	)	Signal Funds Semi-Annual Report to Shareholders for the period ended September 30, 2006 with respect to the Signal Large Cap Growth Fund, Signal Income Fund, Signal Tax Exempt Fund and Signal Money Market Fund.
Item 17.	Undertakings
		(1	)	The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as amended (the “1933 Act”), the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
		(2	)	The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.

- 22 -

(3 ) The undersigned Registrant agrees to file by Post-Effective Amendment the opinion of counsel regarding the tax consequences of the proposed reorganization required by Item 16(12) of Form N-14 within a reasonable time after receipt of such opinion.

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SIGNATURES

     As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of New York, and State of New York, on the 8th of February, 2007.

GOLDMAN SACHS TRUST
Registrant

By:	/s/ Peter V. Bonanno
	Peter V. Bonanno
	Secretary

     As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated:

Name	Title	Date
1 Kaysie P. Uniacke	President (Chief Executive	February 8, 2007
Kaysie P. Uniacke	Officer)
1 John M. Perlowski	Treasurer (Principal	February 8, 2007
John M. Perlowski	Accounting Officer and
	Principal Financial Officer)
1 Ashok N. Bakhru	Chairman and Trustee	February 8, 2007
Ashok N. Bakhru
1 John P. Coblentz, Jr.	Trustee	February 8, 2007
John P. Coblentz, Jr.
1 Patrick T. Harker	Trustee	February 8, 2007
Patrick T. Harker
1 Mary Patterson McPherson	Trustee	February 8, 2007
Mary Patterson McPherson
1 Alan A. Shuch	Trustee	February 8, 2007
Alan A. Shuch
1 Richard P. Strubel	Trustee	February 8, 2007
Richard P. Strubel

¹ By: /s/ Peter V. Bonanno
          Peter V. Bonanno,
          Attorney-In-Fact

¹ Pursuant to a power of attorney incorporated herein by reference.

EX-99.11

Exhibit 11

DRINKER BIDDLE & REATH LLP
One Logan Square
18^th and Cherry Streets
Philadelphia, PA 19103-6996
(215) 988-2700
Fax: (215) 988-2757
www.dbr.com

February 8, 2007

Goldman Sachs Trust
71 South Wacker Drive, Suite 500
Chicago, Illinois 60606

Dear Sir or Madam:

     We have acted as counsel for Goldman Sachs Trust (the “Trust”), a Delaware statutory trust, in connection with the proposed acquisition by the investment portfolios listed below that are offered by the Trust (the “Acquiring GST Funds”) of the assets and liabilities of the investment portfolios listed below that are offered by the Signal Funds of The Coventry Group in exchange for shares of the Acquiring GST Funds:

Signal Funds	GST Funds
Signal Large Cap Growth Fund	Goldman Sachs Structured Large Cap Growth Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Income Fund	Goldman Sachs Core Fixed Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares
Signal Tax-Exempt Income Fund	Goldman Sachs Municipal Income Fund
Class A Shares	Class A Shares
Class I Shares	Institutional Shares

The aforementioned proposed acquisition is referred to herein as the “Reorganization.”

     This opinion relates to shares of beneficial interest of the Trust (the “Shares”) (par value $0.001 per Share) to be issued in the Reorganization, and is furnished in connection with the Trust’s Registration Statement on Form N-14 under the Securities Act of 1933, as amended (the “Registration Statement”).

     In rendering the opinion hereinafter set forth, we have considered such legal and factual matters as we have deemed necessary and have assumed that: (i) all documents submitted to us as originals are authentic, the signatures thereon are genuine and the persons signing the same were of legal capacity; (ii) all documents submitted to us as certified or photostatic copies conform to the original documents and that such originals are authentic; and (iii) all certificates of public officials upon which we have relied have been duly and properly given and that any public records reviewed by us are complete and accurate.

     This opinion is based exclusively on the laws of the State of Delaware and the federal law of the United States of America.

     On the basis of and subject to the foregoing, we are of the opinion that upon the prior satisfaction of the conditions contained in the Agreement and Plan of Reorganization described in the Registration Statement (the “Reorganization Agreement”), the Shares, when issued pursuant to the Reorganization Agreement and in the manner referred to in the Registration Statement, will be validly issued, fully paid and non-assessable by the Trust, and that the holders of the Shares will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of the State of Delaware (except that we express no opinion as to such holders who are also Trustees of the Trust). Pursuant to Section 2 of Article VIII of the Trust’s Agreement and Declaration of Trust, the Trustees have the power to cause shareholders, or shareholders of a particular series or class, to pay certain custodian, transfer, servicing or similar agent charges by setting off the same against declared but unpaid dividends or by reducing share ownership (or by both means).

     This opinion is solely for the use of the Trust and may not be referred to or used for any other purpose or relied on by any other persons without our prior written approval. This opinion is limited to the matters set forth in this letter and no other opinions should be inferred beyond the matters expressly stated.

     We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. This does not constitute a consent under section 7 of the Securities Act of 1933, and in so consenting we have not certified any part of the Registration Statement and do not otherwise come within the categories of persons whose consent is required under section 7 or under the rules and regulations of the Securities and Exchange Commission issued thereunder.

- 2 -

Very truly yours,
 

/s/ Drinker Biddle & Reath LLP  

Drinker Biddle & Reath LLP 

- 3 -

EX-99.12

Exhibit 12

______________, 2007

Goldman Sachs Trust
71 South Wacker Drive, Suite 500
Chicago, Illinois 60606-6303

The Coventry Group
3435 Stelzer Road
Columbus, Ohio 43219

Ladies and Gentlemen:

          We have acted as counsel to the Goldman Sachs Trust, a Delaware statutory trust (“GST”), and to certain of the investment portfolios of GST identified on Exhibit A to the Agreement and Plan of Reorganization by and between GST and The Coventry Group, a Massachusetts business trust (“Coventry Group”), dated January ___, 2007 (the “Plan”) in connection with the transfer of all of the assets of each investment portfolio of Coventry Group identified on Exhibit A to the Plan (collectively, the “Signal Funds”), to the investment portfolio of GST shown on Exhibit A to the Plan alongside such Signal Fund (collectively, the “GST Funds”), in exchange solely for shares of such GST Fund and its assumption of such Signal Fund’s liabilities, followed by the distribution by such Signal Fund to its shareholders of such GST Fund shares (collectively, the “Reorganization”), pursuant to the Plan. You have asked for our opinion as to certain Federal income tax consequences of the Reorganization. (All capitalized terms used but not otherwise defined in this letter shall have the meanings ascribed to them in the Plan.)

          For purposes of this opinion, we have reviewed the Plan and such other documents and matters of law and fact as we have considered necessary or appropriate, and we have assumed, with your consent, the following:

     (i) The Reorganization will be completed in the manner set forth in the Plan and in the Registration Statement on Form N-14 of GST to which this opinion is filed as an exhibit (the “Registration Statement”), including the combined Proxy Statement/Prospectus of Coventry Group and the Signal Funds and GST and the GST Funds contained therein (the “Proxy-Prospectus”).

     (ii) The representations contained in the letters of representation from GST and Coventry Group to us, dated as of this date, are true and complete.

     (iii) Each GST Fund will qualify as a “regulated investment company” under section 851 of the Internal Revenue Code of 1986, as amended (the “Code”) for the current taxable year.

Goldman Sachs Trust
The Coventry Group
                     , 2007
Page 2

On the basis of the foregoing, it is our opinion that:

(1)	the Reorganization will constitute a “reorganization” within the meaning of section 368(a)(1)(C) or (D) of the Code with respect to each GST Fund and the corresponding Signal Fund, and each such Fund will be a “party to a reorganization” within the meaning of section 368(b) of the Code;
(2)	each Signal Fund will recognize no gain or loss (a) upon the transfer of its assets to the corresponding GST Fund in exchange for GST Fund shares and the assumption of the liabilities of such Signal Fund, or (b) upon the distribution of those shares to the shareholders of such Signal Fund;
(3)	each GST Fund will recognize no gain or loss upon the receipt of the assets of the corresponding Signal Fund in exchange for shares of such GST Fund and the assumption of the liabilities of such Signal Fund;
(4)	the tax basis in the hands of each GST Fund of each asset of the corresponding Signal Fund transferred to such GST Fund in the Reorganization will be the same as the basis of that asset in the hands of such Signal Fund immediately before the transfer;
(5)	the holding period in the hands of each GST Fund of each asset of the corresponding Signal Fund transferred to such GST Fund in the Reorganization will include the period during which that asset was held by the corresponding Signal Fund;
(6)	the shareholders of each Signal Fund will recognize no gain or loss upon their receipt of shares of the corresponding GST Fund;
(7)	the aggregate tax basis of the GST Fund shares received by each shareholder of the corresponding Signal Fund will equal the aggregate tax basis of the Signal Fund shares surrendered by that shareholder in the Reorganization;
(8)	the holding periods of the GST Fund shares received by each shareholder of the corresponding Signal Fund will include the holding periods of the Signal Fund shares surrendered by that shareholder in the Reorganization, provided that the Signal Fund shares are held by that shareholder as capital assets on the date of the Reorganization; and
(9)	each GST Fund will succeed to and take into account the tax attributes of the corresponding Signal Fund described in section 381(c) of the Code, subject to the

Goldman Sachs Trust
The Coventry Group
                     , 2007
Page 3

conditions and limitations specified in sections 381, 382, 383 and 384 of the Code and the Treasury Regulations thereunder.

          This opinion represents our best legal judgment, but it has no binding effect or official status of any kind, and no assurance can be given that contrary positions may not be taken by the Internal Revenue Service or a court concerning the issues. We express no opinion relating to any Federal income tax matter except on the basis of the facts described above, and any changes in such facts could require a reconsideration and modification of such opinion. We also express no opinion regarding tax consequences under foreign, state or local laws. In issuing our opinion, we have relied solely upon existing provisions of the Code, existing and proposed regulations thereunder, and current administrative positions and judicial decisions. Such laws, regulations, administrative positions and judicial decisions are subject to change at any time. Any such changes could affect the validity of the opinion set forth above. Also, future changes in Federal income tax laws and the interpretation thereof can have retroactive effect.

          We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading “INFORMATION ABOUT THE REORGANIZATION – Federal Income Tax Consequences” in the Proxy-Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.

Very truly yours,

EX-99.14.A

Exhibit 14(a)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Combined Proxy Statement/Prospectus and Statement of Additional Information constituting parts of this Registration Statement on Form N-14 (“Registration Statement”) of our report dated October 27, 2006, relating to the financial statements and financial highlights which appear in the August 31, 2006 Annual Report to Shareholders of the Goldman Sachs Trust: Goldman Sachs Structured Large Cap Growth Fund (formerly known as Goldman Sachs CORE Large Cap Growth Fund), which is also incorporated by reference into this Registration Statement. We also consent to the references to us under the headings “Other Service Providers,” “GST Funds — Financial Highlights” and “Experts” in such Registration Statement. We also consent to the references to us under the heading “Financial Highlights” in the Prospectus, and under the headings “Independent Registered Public Accounting Firm” and “Financial Statements” in the Statement of Additional Information included in Form N-1A dated December 29, 2006, which has been incorporated by reference into the Registration Statement.

/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 2007

EX-99.14.B

Exhibit 14(b)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the captions “GST Funds — Financial Highlights” and “Experts” in Form N-14 Registration Statement and related Proxy Statement/Prospectus and to the incorporation by reference of our report dated December 21, 2006 for Goldman Sachs Core Fixed Income Fund and our report dated January 16, 2007 for Goldman Sachs Municipal Income Fund (two of the funds comprising Goldman Sachs Trust) in Form N-14 Registration Statement (File Nos. 33-17619 and 811-5349) and related Statement of Additional Information of Goldman Sachs Core Fixed Income Fund and Goldman Sachs Municipal Income Fund filed with the Securities and Exchange Commission.

/s/ ERNST & YOUNG LLP

New York, New York
February 5, 2007

EX-99.14.C

Exhibit 14(c)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the references to our firm under the captions “Financial Highlights,” “Other Service Providers” and “Experts” in the Combined Proxy Statement/Prospectus, for Class A and Class I shares of the Signal Large Cap Growth Fund, Signal Income Fund, and Signal Tax-Exempt Income Fund (the Signal Funds), and to the incorporation by reference of our report dated May 15, 2006 on the financial statements and financial highlights of the Signal Funds for the year ended March 31, 2006 in the Combined Proxy Statement/Prospectus included in this Registration Statement on Form N-14 of Goldman Sachs Trust.

We also consent to the reference to our firm under the captions “Independent Registered Public Accounting Firm”, “Disclosure of Fund Portfolio Holdings” and “Financial Statements” in the Signal Funds’ Statement of Additional Information and to the incorporation by reference of our report, dated May 15, 2006, on the financial statements and financial highlights of the Signal Funds included in the Annual Report to the Shareholders for the year ended March 31, 2006 in Post-Effective Amendment No. 119 to Coventry Group’s Registration Statement (Form N-1A, No. 033-44964), as filed with the Securities and Exchange Commission on August 1, 2006, which is incorporated by reference into the Combined Proxy Statement/Prospectus included in this Registration Statement on Form N-14 of the Goldman Sachs Trust.

/s/ Ernst & Young LLP

Columbus, Ohio
February 6, 2007

EX-99.16.A

Exhibit 16(a)

CERTIFICATE OF SECRETARY

     The undersigned Secretary for Goldman Sachs Trust (the “Trust”) hereby certifies that the Board of Trustees of the Trust duly adopted the following resolution at a meeting of the Trust’s Board of Trustees on December 14, 2006:

          RESOLVED, that the Trustees and Officers of the Trust who may be required to execute the Trust’s Registration Statement on Form N-14 and any amendments thereto be, and each hereby is, authorized to execute a power of attorney appointing Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski jointly and severally, their attorneys-in-fact, each with power of substitution, for said Trustees and Officers in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of the Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the SEC, the Trustees and Officers hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Dated: February 8, 2007

/s/ Peter Bonanno  

Peter Bonanno, 

Secretary 

EX-99.16.B

Exhibit 16(b)

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, Ashok N. Bakhru, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, his attorneys-in-fact, each with power of substitution, for him in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ Ashok N. Bakhru  

Ashok N. Bakhru 

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, John P. Coblentz, Jr., hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, his attorneys-in-fact, each with power of substitution, for him in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ John P. Coblentz, Jr.  

John P. Coblentz, Jr. 

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, Patrick T. Harker, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, his attorneys-in-fact, each with power of substitution, for him in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ Patrick T. Harker  

Patrick T. Harker 

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, John M. Perlowski, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick and James A. McNamara, jointly and severally, his attorneys-in-fact, each with power of substitution, for him in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ John M. Perlowski  

John M. Perlowski  

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, Mary Patterson McPherson, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, her attorneys-in-fact, each with power of substitution, for her in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ Mary Patterson McPherson  

Mary Patterson McPherson 

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, Alan A. Shuch, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, his attorneys-in-fact, each with power of substitution, for him in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ Alan A. Shuch  

Alan A. Shuch 

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

Know All Men By These Presents, that the undersigned, Richard P. Strubel, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, his attorneys-in-fact, each with power of substitution, for him in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ Richard P. Strubel  

Richard P. Strubel 

GOLDMAN SACHS TRUST
(a Delaware Statutory Trust)

Power of Attorney

     Know All Men By These Presents, that the undersigned, Kaysie P. Uniacke, hereby constitutes and appoints Peter Bonanno, James A. Fitzpatrick, James A. McNamara and John M. Perlowski, jointly and severally, her attorneys-in-fact, each with power of substitution, for her in any and all capacities to sign the Registration Statement on Form N-14 under the Securities Act of 1933 and the Investment Company Act of 1940 of Goldman Sachs Trust and any and all amendments to such Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Dated: December 13, 2006

/s/ Kaysie P. Uniacke  

Kaysie P. Uniacke 

EX-99.17.A

Exhibit 17(a)

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

PLEASE VOTE THIS PROXY CARD TODAY
Your prompt response is requested
RETURN IN THE ENCLOSED POSTAGE PAID ENVELOPE

(Please detach at perforation before mailing)

PROXY CARD PROXY CARD

THE COVENTRY GROUP
SPECIAL MEETING OF SHAREHOLDERS –                     ___, 2007
SIGNAL LARGE CAP GROWTH FUND

The undersigned hereby appoints                      and                      (the “Proxies”), and each of them, attorneys and Proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of the Signal Large Cap Growth Fund of The Coventry Group to be held at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, at 11:00 a.m. (Eastern Time) on                      ___, 2007, and at any adjournment or adjournments thereof (the “Meeting”). The Proxies will cast votes according to the number of shares of the Signal Large Cap Growth Fund which the undersigned may be entitled to vote with respect to the proposal set forth on the reverse side, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED                      ___, 2007

VOTE VIA THE INTERNET: [INTERNET ADDRESS]

VIA THE TELEPHONE: [800-NUMBER]

CONTROL NUMBER:

Note: Please sign exactly as shareholder name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney or executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.

Signature

Signature of joint owner, if any

Date

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE TODAY

(Please detach at perforation before mailing)

This proxy is solicited by the Board of Trustees of The Coventry Group, which unanimously recommends that you vote in favor of the proposal.

Please sign, date and return the proxy card promptly using the enclosed envelope. Every properly signed proxy card will be voted in the manner specified hereon and, in the absence of specification, will be treated as granting authority to vote “FOR” the proposal. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting.

THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: o		FOR	AGAINST	ABSTAIN
1.	To approve the Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of substantially all of the assets and liabilities of the Signal Large Cap Growth Fund to the Goldman Sachs Structured Large Cap Growth Fund of Goldman Sachs Trust (the “GST Fund”) in exchange for shares of designated classes of the GST Fund; and (b) the distribution of the shares of designated classes of the GST Fund to shareholders of the Signal Large Cap Growth Fund in liquidation of the Signal Large Cap Growth Fund.	o	o	o

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

PLEASE VOTE THIS PROXY CARD TODAY
Your prompt response is requested
RETURN IN THE ENCLOSED POSTAGE PAID ENVELOPE

(Please detach at perforation before mailing)

PROXY CARD PROXY CARD

THE COVENTRY GROUP
SPECIAL MEETING OF SHAREHOLDERS –                     ___, 2007
SIGNAL INCOME FUND

The undersigned hereby appoints                      and                      (the “Proxies”), and each of them, attorneys and Proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of the Signal Income Fund of The Coventry Group to be held at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, at 11:00 a.m. (Eastern Time) on                      ___, 2007, and at any adjournment or adjournments thereof (the “Meeting”). The Proxies will cast votes according to the number of shares of the Signal Income Fund which the undersigned may be entitled to vote with respect to the proposal set forth on the reverse side, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED                      ___, 2007

VOTE VIA THE INTERNET: [INTERNET ADDRESS]

VIA THE TELEPHONE: [800-NUMBER]

CONTROL NUMBER:

Note: Please sign exactly as shareholder name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney or executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.

Signature

Signature of joint owner, if any

Date

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

PLEASE SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE TODAY

(Please detach at perforation before mailing)

This proxy is solicited by the Board of Trustees of The Coventry Group, which unanimously recommends that you vote in favor of the proposal.

Please sign, date and return the proxy card promptly using the enclosed envelope. Every properly signed proxy card will be voted in the manner specified hereon and, in the absence of specification, will be treated as granting authority to vote “FOR” the proposal. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting.

THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: o		FOR	AGAINST	ABSTAIN
1.	To approve the Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of substantially all of the assets and liabilities of the Signal Income Fund to the Goldman Sachs Core Fixed Income Fund of Goldman Sachs Trust (the “GST Fund”) in exchange for shares of designated classes of the GST Fund; and (b) the distribution of the shares of designated classes of the GST Fund to shareholders of the Signal Income Fund in liquidation of the Signal Income Fund.	o	o	o

EVERY SHAREHOLDER’S VOTE IS IMPORTANT

PLEASE VOTE THIS PROXY CARD TODAY
Your prompt response is requested
RETURN IN THE ENCLOSED POSTAGE PAID ENVELOPE

(Please detach at perforation before mailing)

PROXY CARD PROXY CARD

THE COVENTRY GROUP
SPECIAL MEETING OF SHAREHOLDERS –                     ___, 2007
SIGNAL TAX-EXEMPT INCOME FUND

The undersigned hereby appoints                      and                      (the “Proxies”), and each of them, attorneys and Proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Share holders of the Signal Tax-Exempt Income Fund of The Coventry Group to be held at the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, at 11:00 a.m. (Eastern Time) on                      ___, 2007, and at any adjournment or adjournments thereof (the “Meeting”) . The Proxies will cast votes according to the number of shares of the Signal Tax-Exempt Income Fund which the undersigned may be entitled to vote with respect to the proposal set forth on the reverse side, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETI NG OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED                      ___, 2007

VOTE VIA THE INTERNET: [INTERNET ADDRESS]

VIA THE TELEPHONE: [800-NUMBER]

CONTROL NUMBER:

Note: Please sign exactly as shareholder name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney or executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.

Signature

Signature of joint owner, if any

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Please sign, date and return the proxy card promptly using the enclosed envelope. Every properly signed proxy card will be voted in the manner specified hereon and, in the absence of specification, will be treated as granting authority to vote “FOR” the proposal. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting.

THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL.

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1.	To approve the Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of substantially all of the assets and liabilities of the Signal Tax-Exempt Income Fund to the Goldman Sachs Municipal Income Fund of Goldman Sachs Trust (the “GST Fund”) in exchange for shares of designated classes of the GST Fund; and (b) the distribution of the shares of designated classes of the GST Fund to shareholders of the Signal Tax-Exempt Income Fund in liquidation of the Signal Tax-Exempt Income Fund.	o	o	o

EX-99.17.B

Prospectus

Class A, B
and C Shares

December 29, 2006

 GOLDMAN SACHS STRUCTURED EQUITY FUNDS

n Goldman Sachs Structured Large Cap Value Fund

n  Goldman Sachs Structured U.S. Equity Fund

n  Goldman Sachs Structured Large Cap Growth Fund

n  Goldman Sachs Structured Small Cap Equity Fund

n  Goldman Sachs Structured International Equity Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN A FUND.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

General Investment
Management Approach

Goldman Sachs Asset Management, L.P. (“GSAM^®”) serves as investment adviser to the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, and Structured International Equity Funds. GSAM is referred to in this Prospectus as the “Investment Adviser.”

   QUANTITATIVE STYLE FUNDS   

GSAM’s Quantitative Investment Philosophy:

GSAM’s quantitative style of funds management emphasizes the three building blocks of active management: fundamentally-based stock selection, careful portfolio construction and efficient implementation.

   GOLDMAN SACHS STRUCTURED FUNDS   

Step 1: Stock Selection

The Investment Adviser attempts to forecast expected returns on approximately 10,000 stocks on a daily basis using proprietary CORE^SM (“Computer-Optimized, Research-Enhanced”) models developed by the Global Quantitative Equity (“GQE”) team. These quantitative models are based on six investment themes—Valuation, Momentum, Analyst Sentiment, Profitability, Earnings Quality and Management Impact. The Valuation theme attempts to capture potential mispricings of securities by comparing measures of the company’s intrinsic value to its market value. The Momentum theme attempts to forecast companies’ future returns based on their past stock price performance, measured over various periods. The Analyst Sentiment theme looks at how Wall Street analysts’ views about a company’s earnings and prospects are changing over time. The Profitability theme assesses a company’s profit margins and operating efficiency relative to its peers, and views those that are more profitable as more attractive. Finally, the Management Impact theme evaluates a company’s management strategy through the company’s investing and financing behavior.

Step 2: Portfolio Construction

The Investment Adviser uses a proprietary risk model to help manage the expected deviation of the portfolio’s returns from those of the benchmark. The model attempts to identify and measure the comparative risks between equity investments as accurately as possible by including all the above themes used in the return model, as well as several other factors associated with risk but not return. In this process, the Investment Adviser seeks to manage risk by overweighting stocks with

1

positive characteristics identified in the return models and underweighting stocks with negative characteristics relative to their benchmark weights, while maintaining other characteristics such as size and sector weights close to the benchmark. A computer optimizer evaluates many different security combinations (considering many possible weightings) in an effort to construct the most efficient risk/return portfolio given each Structured Fund’s benchmark.

Step 3: Efficient Implementation

The portfolio management team considers transaction costs at each step of the investment process. The team incorporates expected portfolio turnover when assigning weights to the variables in the multifactor model. The team also factors expected execution costs into portfolio construction and evaluates multiple trading options. The team then selects the trading strategy it believes will minimize the total transaction costs to the Fund.

Goldman Sachs Structured Funds are fully invested, broadly diversified and offer consistent overall portfolio characteristics. They may serve as good foundations on which to build a portfolio.

References in this Prospectus to a Fund’s benchmark are for informational purposes only, and unless otherwise noted are not an indication of how a particular Fund is managed.

   GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND   

The Goldman Sachs Structured International Equity Fund is a joint effort by the GQE and Quantitative Strategies (“QS”) teams that is designed to invest in international markets and seeks to add value from diversified sources of return—tactical country selection and individual stock positions.

In addition to Steps 1 through 3 above, the Structured International Equity Fund employs top-down global country selection. The QS team attempts to forecast returns to 21 stock markets and 9 currencies on a daily basis. Country/ currency return forecasts are determined using models developed by the QS team and are based on five investment themes: Valuation, Momentum, Risk Premium, Fund Flows and Macro. The Valuation theme favors equity and currency markets which appear cheap relative to accounting measures of value and purchasing power. The Momentum theme favors countries and currencies that have had strong recent of the benchmark. The Risk Premium theme evaluates whether a country is overcompensating investors for political and financial risk, while the Fund Flows

2

GENERAL INVESTMENT MANAGEMENT APPROACH

theme evaluates the strength of capital market inflows. Finally, the Macro theme assesses a market’s interest rate environment and growth prospects.

By combining two uncorrelated sources of expected excess returns (international stock selection and country selection), the Investment Adviser seeks to create a portfolio that looks similar to the Fund’s benchmark, but is believed by the Investment Adviser to be positioned to outperform through country selection and stock selection. Sector weights are very similar to those in the benchmark adjusted for country selection views, but the Investment Adviser takes intentional country over- and under-weights with many small, diversified stock positions to seek to achieve positive excess returns relative to the benchmark.

3

Fund Investment Objectives
and Strategies

Goldman Sachs
Structured Large Cap Value Fund

FUND FACTS
Objective:	Long-term growth of capital and dividend income
Benchmark:	Russell 1000® Value Index
Investment Focus:	Diversified portfolio of equity investments in large-cap U.S. issuers selling at low to modest valuations
Investment Style:	Quantitative, applied to large-cap value stocks
Symbols:	Class A: GCVAX; Class B: GCVBX; Class C: GCVCX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital and dividend income. The Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap U.S. issuers that are selling at low to modest valuations relative to general market measures, such as earnings, book value and other fundamental accounting measures, and that are expected to have favorable prospects for capital appreciation and/or dividend-paying ability.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in a diversified portfolio of equity investments in large-cap U.S. issuers, including foreign issuers that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 95% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on

*  To the extent required by Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

4

FUND INVESTMENT OBJECTIVES AND STRATEGIES

an unrestricted basis) similar to that of the range of the market capitalizations of companies constituting the Russell 1000^® Value Index at the time of investment. If the market capitalization of a company held by the Fund moves outside this range, the Fund may, but is not required to, sell the securities. The Fund is not required to limit its investments to securities in the Russell 1000^® Value Index. The capitalization range of the Russell 1000^® Value Index is currently between $1.6 billion and $432 billion.

As discussed in “General Investment Management Approach,” the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research, including but not limited to valuation, momentum, profitability and earnings quality in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the Russell 1000^® Value Index. The benchmark generally consists of companies with above average capitalizations, low earnings growth expectations and above average dividend yields. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

5

Goldman Sachs
Structured U.S. Equity Fund

FUND FACTS
Objective:	Long-term growth of capital and dividend income
Benchmark:	S&P 500® Index
Investment Focus:	Large-cap U.S. equity investments
Investment Style:	Quantitative, applied to large-cap growth and value (blend) stocks
Symbols:	Class A: GSSQX; Class B: GSSBX; Class C: GSUSX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital and dividend income. The Fund seeks this objective through a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a diversified portfolio of equity investments in U.S. issuers, including foreign companies that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 95% of its Net Assets in such equity investments.

As discussed in “General Investment Management Approach,” the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research, including but not limited to valuation, momentum, profitability and earnings quality in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the S&P 500^® Index. The S&P 500 is an index of large-cap stocks designed to reflect a broad representation of the U.S. economy. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark. The Fund is not required to limit its investments to securities in the S&P 500^® Index.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

6

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Structured Large Cap Growth Fund

FUND FACTS
Objective:	Long-term growth of capital; dividend income is a secondary consideration
Benchmark:	Russell 1000® Growth Index
Investment Focus:	Large-cap, growth-oriented U.S. equity investments
Investment Style:	Quantitative, applied to large-cap growth stocks
Symbols:	Class A: GLCGX; Class B: GCLCX; Class C: GLCCX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap U.S. issuers that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy. Dividend income is a secondary consideration.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a broadly diversified portfolio of equity investments in large-cap U.S. issuers, including foreign issuers that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 95% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on an unrestricted basis) similar to that of the Russell 1000^® Growth Index at the time of investment. If the market capitalization of a company held by the Fund moves outside this range, the Fund may, but is not required to, sell the securities. The Fund is not required to limit its investments to securities in the Russell 1000^® Growth Index. The capitalization range of the Russell 1000^® Growth Index is currently between $1.3 billion and $432 billion.

As described in the “General Investment Management Approach”, the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research, including but not limited to valuation, momentum, profitability and earnings quality in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the Russell 1000^® Growth Index. The benchmark generally consists of companies with above average capitalization and earnings growth expectations and below average dividend yields. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

7

Goldman Sachs
Structured Small Cap Equity Fund

FUND FACTS
Objective:	Long-term growth of capital
Benchmark:	Russell 2000® Index
Investment Focus:	Equity investments in small-cap U.S. companies
Investment Style:	Quantitative, applied to small-cap growth and value (blend) stocks
Symbols:	Class A: GCSAX; Class B: GCSBX; Class C: GCSCX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments in U.S. issuers.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a broadly diversified portfolio of equity investments in small-cap U.S. issuers, including foreign issuers that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 85% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on an unrestricted basis) similar to that of the range of the market capitalizations of companies constituting the Russell 2000^® Index at the time of investment. The Fund is not required to limit its investments to securities in the Russell 2000^® Index. In addition, if the market capitalization of a company held by the Fund moves outside this range, the Fund may, but is not required to, sell the securities. The capitalization range of the Russell 2000^® Index is currently between $90 million and $2.9 billion.

As discussed in “General Investment Management Approach,” the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research, including but not limited to valuation, momentum, profitability and earnings quality in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the Russell 2000^® Index. The Russell 2000 is an index designed to represent an investable universe of small cap companies. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

8

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Structured International Equity Fund

FUND FACTS
Objective:	Long-term growth of capital
Benchmark:	MSCI® Europe, Australasia, Far East (“EAFE®”) Index (unhedged)
Investment Focus:	Large-cap equity investments in companies that are organized outside the United States or whose securities are primarily traded outside the United States
Investment Style:	Quantitative
Symbols:	Class A: GCIAX; Class B: GCIBX; Class C: GCICX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap companies that are organized outside the United States or whose securities are principally traded outside the United States.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a broadly diversified portfolio of equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States.*

The Fund may allocate its assets among countries as determined by the Investment Adviser from time to time, provided the Fund’s assets are invested in at least three foreign countries. The Fund may invest in the securities of issuers in countries with emerging markets or economies (“emerging countries”).

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

9

Goldman Sachs
Structured International Equity Fund continued

The Fund seeks broad representation of large-cap issuers across major countries and sectors of the international economy. The Fund’s investments are selected using both a variety of quantitative techniques and fundamental research, including but not limited to valuation, momentum, profitability and earnings, in seeking to maximize the Fund’s expected return, while maintaining risk, style, capitalization and industry characteristics similar to the EAFE^® Index. In addition, the Fund seeks a portfolio composed of companies with attractive valuations and stronger momentum characteristics than the EAFE^® Index.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered to be cash equivalents.

10

Other Investment Practices
and Securities

The table below identifies some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The table also highlights the differences among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in this table show allowable usage only; for actual usage, consult the Funds’ annual/ semi-annual reports. For more information about these and other investment practices and securities, see Appendix A. Each Fund publishes on its website (http://www.goldmansachsfunds.com) complete portfolio holdings for the Fund as of the end of each calendar quarter subject to a fifteen calendar-day lag between the date of the information and the date on which the information is disclosed. In addition, the Funds publish on their website month-end top ten holdings subject to a ten calendar-day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC. In addition, a description of the Funds’ policies and procedures with respect to the disclosure of a Fund’s portfolio securities is available in the Funds’ Statement of Additional Information (“Additional Statement”).

10 Percent of total assets (including securities lending collateral) (italic type)
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
•    No specific percentage limitation on usage; limited	Structured	Structured	Structured	Structured	Structured
only by the objectives and strategies of the Fund	Large Cap	U.S.	Large Cap	Small Cap	International
—   Not permitted	Value	Equity	Growth	Equity	Equity
	Fund	Fund	Fund	Fund	Fund
Investment Practices
Borrowings	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Cross Hedging of Currencies	•	•	•	•	•
Currency Swaps*	—	—	—	—	15
Custodial Receipts and Trust Certificates	•	•	•	•	•
Equity Swaps*	•	•	•	•	•
Foreign Currency Transactions**	•	•	•	•	•
Futures Contracts and Options on Futures Contracts	•1	•2	•1	•1	•
Investment Company Securities (including iSharesSM and Standard & Poor’s Depositary Receipts™)	10	10	10	10	10
Options on Foreign Currencies3	•	•	•	•	•
Options on Securities and Securities Indices4	•	•	•	•	•
Repurchase Agreements	•	•	•	•	•
Securities Lending	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Unseasoned Companies	•	•	•	•	•
Warrants and Stock Purchase Rights	•	•	•	•	•
When-Issued Securities and Forward Commitments	•	•	•	•	•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities and all swap transactions that are not deemed liquid.
**	Limited by the amount the Fund invests in foreign securities.
1	The Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds may enter into futures transactions only with respect to a representative index.
2	The Structured U.S. Equity Fund may enter into futures transactions only with respect to the S&P 500® Index.
3	The Funds may purchase and sell call and put options.
4	The Funds may sell covered call and put options and purchase call and put options.

11

10 Percent of Total Assets (excluding securities lending collateral) (italic type)
10 Percent of Net Assets (including borrowings for investment purposes) (roman type)
•    No specific percentage limitation	Structured	Structured	Structured	Structured	Structured
on usage; limited only by the	Large Cap	U.S.	Large Cap	Small Cap	International
objectives and strategies of the Fund	Value	Equity	Growth	Equity	Equity
—  Not permitted	Fund	Fund	Fund	Fund	Fund
Investment Securities
American, European and Global Depositary Receipts5	•	•	•	•	•
Bank Obligations6	•	•	•	•	•
Convertible Securities7	•	•	•	•	•
Corporate Debt Obligations6	•	•	•	•	•
Equity Investments	80+	90+	80+	80+	80+
Emerging Country Securities	—	—	—	—	25
Fixed-Income Securities6,8	20	10	20	20	20
Foreign Government Securities6	—	—	—	—	•
Foreign Securities9	•	•	•	•	•
Real Estate Investment Trusts	•	•	•	•	•
Structured Securities*	•	•	•	•	•
Temporary Investments	35	35	35	35	35
U.S. Government Securities6	•	•	•	•	•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.
5	The Funds, other than the Structured International Equity Fund, may not invest in European Depositary Receipts.
6	Limited by the amount the Fund invests in fixed-income securities and limited to cash equivalents only. The Funds may invest in bank obligations issued by U.S. or foreign banks.
7	The Funds have no minimum rating criteria for convertible debt securities.
8	Except as noted under “Convertible Securities,” fixed-income securities must be investment grade (i.e., BBB or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), Baa or higher by Moody’s Investors Service, Inc. (“Moody’s”) or have a comparable rating by another nationally recognized statistical rating organization (“NRSRO”)).
9	Except for the Structured International Equity Fund, equity securities of foreign issuers must be traded in the United States.

12

Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insur-ance Corporation or any other governmental agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective.

	Structured	Structured	Structured	Structured	Structured
	Large Cap	U.S.	Large Cap	Small Cap	International
•   Applicable	Value	Equity	Growth	Equity	Equity
— Not applicable	Fund	Fund	Fund	Fund	Fund
Credit/ Default	—	—	—	—	•
Foreign	•	•	•	•	•
Stock	•	•	•	•	•
Derivatives	•	•	•	•	•
Interest Rate	•	•	•	•	•
Management	•	•	•	•	•
Market	•	•	•	•	•
Liquidity	•	•	•	•	•
Investment Style	•	•	•	•	•
Mid Cap and Small Cap	•	•	•	•	•
Emerging Countries	—	—	—	—	•
Geographic	—	—	—	—	•

13

All Funds:

n	Credit/ Default Risk—The risk that an issuer or guarantor of fixed-income securities held by a Fund may default on its obligation to pay interest and repay principal.
n	Foreign Risk—The risk that when a Fund invests in foreign securities, it will be subject to risk of loss not typically associated with domestic issuers. Loss may result because of less foreign government regulation, less public information and less economic, political and social stability. Loss may also result from the imposition of exchange controls, confiscations and other government restrictions. A Fund will also be subject to the risk of negative foreign currency rate fluctuations. Foreign risks will normally be greatest when a Fund invests in issuers located in emerging countries.
n	Stock Risk—The risk that stock prices have historically risen and fallen in periodic cycles. Recently, U.S. and foreign stock markets have experienced substantial price volatility.
n	Derivatives Risk—The risk that loss may result from a Fund’s investments in options, futures, swaps, structured securities and other derivative instruments. These instruments may be leveraged so that small changes may produce disproportionate losses to a Fund.
n	Interest Rate Risk—The risk that when interest rates increase, securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.
n	Management Risk—The risk that a strategy used by the Investment Adviser may fail to produce the intended results.
n	Market Risk—The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more industry sectors, which will increase the Fund’s exposure to risk of loss from adverse developments affecting those sectors.
n	Liquidity Risk—The risk that a Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in small and mid-capitalization stocks and REITs will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate. The Goldman Sachs Asset Allocation Portfolios (the “Asset Allocation Portfolios”) expect to invest a significant percentage of their assets in the Funds and other funds for which GSAM or an affiliate now or in the future acts as investment adviser or

14

PRINCIPAL RISKS OF THE FUNDS

	underwriter. Redemptions by an Asset Allocation Portfolio of its position in a Fund may further increase liquidity risk and may impact a Fund’s net asset value (“NAV”).
n	Investment Style Risk—Different investment styles tend to shift in and out of favor depending upon market and economic conditions as well as investor sentiment. A Fund may outperform or underperform other funds that employ a different investment style. Examples of different investment styles include growth and value investing. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth of earnings potential. Growth companies are often expected by investors to increase their earnings at a certain rate. When these expectations are not met, investors can punish the stocks inordinately even if earnings showed an absolute increase. Also, since growth companies usually invest a high portion of earnings in their business, growth stocks may lack the dividends of some value stocks that can cushion stock prices in a falling market. Growth oriented funds will typically underperform when value investing is in favor. Value stocks are those that are undervalued in comparison to their peers due to adverse business developments or other factors.
n	Mid Cap and Small Cap Risk—The securities of small capitalization and mid-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. Securities of such issuers may lack sufficient market liquidity to enable a Fund to effect sales at an advantageous time or without a substantial drop in price. Both mid-cap and small-cap companies often have narrower markets and more limited managerial and financial resources than larger, more established companies. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of a Fund’s portfolio. Generally, the smaller the company size, the greater these risks.

Specific Funds:

n

Emerging Countries Risk—The securities markets of Asian, Latin, Central and South American, Eastern European, Middle Eastern, African and other emerging countries are less liquid, are especially subject to greater price volatility, have smaller market capitalizations, have less government regulation and are not subject to as extensive and frequent accounting, financial and other reporting requirements as the securities markets of more developed countries. Further, investment in equity securities of issuers located in certain emerging countries involves risk of loss resulting from problems in share registration and custody and substantial economic and political disruptions. These risks are not normally associated with investment in more developed countries.

n

Geographic Risk—Concentration of the investments of Structured International Equity Fund in issuers located in a particular country or region will subject the

15

Fund, to a greater extent than if investments were less concentrated, to the risks of adverse securities markets, exchange rates and social, political, regulatory or economic events which may occur in that country or region.

Concentration of the investments of the structured International Equity Fund in issuers located in a particular country or region will subject the Fund, to a greater extent than if investments were less concentrated, to the risks of adverse securities markets, exchange rates and social, political, regulatory or economic events which may occur in that country or region.

More information about the Funds’ portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice.

16

Fund Performance

   HOW THE FUNDS HAVE PERFORMED   

The bar chart and table provide an indication of the risks of investing in a Fund by showing: (a) changes in the performance of a Fund’s Class A Shares from year to year; and (b) how the average annual total returns of a Fund’s Class A, B and C Shares compare to those of broad-based securities market indices. The bar chart (including “Best Quarter” and “Worst Quarter” information) and table assume reinvestment of dividends and distributions. A Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.

The average annual total return calculation reflects a maximum initial sales charge of 5.5% for Class A Shares, the assumed contingent deferred sales charge (“CDSC”) for Class B Shares (5% maximum declining to 0% after six years), and the assumed CDSC for Class C Shares (1% if redeemed within 12 months of purchase). The bar chart (including “Best Quarter” and “Worst Quarter” information) does not reflect the sales loads applicable to Class A Shares. If the sales loads were reflected, returns would be less. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund’s performance would have been reduced.

   INFORMATION ON AFTER-TAX RETURNS   

These definitions apply to the after-tax returns.

Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on a Fund’s Class A Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.

Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on a Fund’s Class A Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Class A Shares at the end of the performance period.

Average Annual Total Returns After Taxes on Distributions and Sale of Shares. These returns reflect taxes paid on distributions on a Fund’s Class A Shares and taxes applicable when the shares are redeemed (sold).

Note on Tax Rates. The after-tax performance figures are calculated using the historical highest individual federal marginal income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.

17

Structured Large Cap Value Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
The total return for Class A Shares for the 9-month period ended September 30, 2006 was 10.45%. Best Quarter* Q2 ’03  +14.76% Worst Quarter* Q3 ’02  -17.08%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 12/31/98)
Returns Before Taxes		2.25%		4.04%		4.74%
Returns After Taxes on Distributions**		1.84%		3.70%		4.31%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.99%		3.36%		3.90%
Russell 1000® Value Index***		7.05%		5.27%		5.81%
Class B (Inception 12/31/98)
Returns Before Taxes		2.34%		4.10%		4.79%
Russell 1000® Value Index***		7.05%		5.27%		5.81%
Class C (Inception 12/31/98)
Returns Before Taxes		6.44%		4.44%		4.80%
Russell 1000® Value Index***		7.05%		5.27%		5.81%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Russell 1000® Value Index (inception date 1/1/99) is an unmanaged market capitalization weighted index of the 1,000 largest U.S. companies with lower price-to-book ratios and lower forecasted growth values. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

18

FUND PERFORMANCE

Structured U.S. Equity Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
The total return for Class A Shares for the 9-month period ended September 30, 2006 was 6.93%. Best Quarter* Q4 ’98  +21.44% Worst Quarter* Q3 ’02  -15.61%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Class A (Inception 5/24/91)
Returns Before Taxes		0.71%		0.84%		8.38%		9.56%
Returns After Taxes on Distributions**		0.66%		0.79%		7.34%		8.16%
Returns After Taxes on Distributions and Sale of Fund Shares**		0.53%		0.71%		6.90%		7.71%
S&P 500® Index***		4.91%		0.54%		9.07%		10.75%
Class B (Inception 5/1/96)
Returns Before Taxes		0.77%		0.84%		N/A		7.70%
S&P 500® Index***		4.91%		0.54%		N/A		8.64%
Class C (Inception 8/15/97)
Returns Before Taxes		4.76%		1.23%		N/A		4.61%
S&P 500® Index***		4.91%		0.54%		N/A		5.24%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The S&P 500® Index is the Standard & Poor’s 500 Composite Stock Price Index of 500 stocks, an unmanaged index of common stock prices. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

19

Structured Large Cap Growth Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
The total return for Class A Shares for the 9-month period ended September 30, 2006 was 3.20%. Best Quarter* Q4 ’98           +25.47% Worst Quarter* Q1 ’01           -22.05%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 5/1/97)
Returns Before Taxes		-0.27%		-3.85%		3.75%
Returns After Taxes on Distributions**		-0.28%		-3.86%		3.35%
Returns After Taxes on Distributions and Sale of Fund Shares**		-0.17%		-3.23%		3.05%
Russell 1000® Growth Index***		5.26%		-3.58%		4.40%
Class B (Inception 5/1/97)
Returns Before Taxes		-0.24%		-3.86%		3.67%
Russell 1000® Growth Index***		5.26%		-3.58%		4.40%
Class C (Inception 8/15/97)
Returns Before Taxes		3.67%		-3.48%		1.77%
Russell 1000® Growth Index***		5.26%		-3.58%		2.55%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Russell 1000® Growth Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with higher price-to-book ratios and higher forecasted growth values. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

20

FUND PERFORMANCE

Structured Small Cap Equity Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
The total return for Class A Shares for the 9-month period ended September 30, 2006 was 3.56%. Best Quarter* Q2 ’03           +21.27% Worst Quarter* Q3 ’98           -24.34%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 8/15/97)
Returns Before Taxes		1.53%		8.03%		7.20%
Returns After Taxes on Distributions**		-0.41%		6.96%		6.18%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.81%		6.52%		5.81%
Russell 2000® Index***		4.55%		8.22%		7.36%
Class B (Inception 8/15/97)
Returns Before Taxes		1.32%		8.08%		7.12%
Russell 2000® Index***		4.55%		8.22%		7.36%
Class C (Inception 8/15/97)
Returns Before Taxes		5.64%		8.45%		7.16%
Russell 2000® Index***		4.55%		8.22%		7.36%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Russell 2000® Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

21

Structured International Equity Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
The total return for Class A Shares for the 9-month period ended September 30, 2006 was 15.82%. Best Quarter* Q4 ’98           +18.84% Worst Quarter* Q3 ’02           -19.63%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 8/15/97)
Returns Before Taxes		8.36%		4.38%		3.43%
Returns After Taxes on Distributions**		8.14%		4.30%		3.15%
Returns After Taxes on Distributions and Sale of Fund Shares**		5.78%		3.78%		2.87%
MSCI® EAFE® Index (unhedged)***		14.02%		4.94%		5.44%
Class B (Inception 8/15/97)
Returns Before Taxes		8.74%		4.60%		3.58%
MSCI® EAFE® Index (unhedged)***		14.02%		4.94%		5.44%
Class C (Inception 8/15/97)
Returns Before Taxes		12.79%		4.97%		3.60%
MSCI® EAFE® Index (unhedged)***		14.02%		4.94%		5.44%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The unmanaged MSCI® EAFE® Index (unhedged) is a market capitalization-weighted composite of securities in 21 developed markets. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

22

Fund Fees and Expenses (Class A, B and C Shares)

This table describes the fees and expenses that you would pay if you buy and hold Class A, Class B or Class C Shares of a Fund.

	Structured Large Cap Value Fund
	Class A		Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		5.5%1		None			None
Maximum Deferred Sales Charge (Load)2		None		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None		None			None
Redemption Fees		None		None			None
Exchange Fees		None		None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6*		0.60%		0.60%			0.60%
Distribution and Service (12b-1) Fees		0.25%		1.00%			1.00%
Other Expenses7*		0.24%		0.24%			0.24%
Total Fund Operating Expenses*		1.09%		1.84%			1.84%

See pages 28-29 for all other footnotes.

*  The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, the “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Structured Large Cap Value Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.51%		0.51%		0.51%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses7		0.19%		0.19%		0.19%
Total Fund Operating Expenses (after current expense limitations)		0.95%		1.70%		1.70%

23

Fund Fees and Expenses continued

	Structured U.S. Equity Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		5.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None			5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6*		0.65%			0.65%			0.65%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses7*		0.25%			0.25%			0.25%
Total Fund Operating Expenses*		1.15%			1.90%			1.90%

See pages 28-29 for all other footnotes.

*  The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, the “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Structured U.S. Equity Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.51%		0.51%		0.51%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses7		0.19%		0.19%		0.19%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.95%		1.70%		1.70%

24

FUND FEES AND EXPENSES

	Structured Large Cap Growth Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		5.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None			5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6*		0.65%			0.65%			0.65%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses7*		0.26%			0.26%			0.26%
Total Fund Operating Expenses*		1.16%			1.91%			1.91%

See pages 28-29 for all other footnotes.

*  The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, the “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Structured Large Cap Growth Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.51%		0.51%		0.51%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses7		0.19%		0.19%		0.19%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.95%		1.70%		1.70%

25

Fund Fees and Expenses continued

	Structured Small Cap Equity Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		5.5%	1		None			None
Maximum Deferred Sales Charge (Load) 2		None			5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6*		0.85%			0.85%			0.85%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses6*		0.26%			0.26%			0.26%
Total Fund Operating Expenses*		1.36%			2.11%			2.11%

See pages 28-29 for all other footnotes.

*  The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, the “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Structured Small Cap Equity Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.81%		0.81%		0.81%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses7		0.19%		0.19%		0.19%
Total Fund Operating Expenses (after current expense limitations)		1.25%		2.00%		2.00%

26

FUND FEES AND EXPENSES

	Structured International Equity Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		5.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None			5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees8		2.0%			2.0%			2.0%
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6*		0.82%			0.82%			0.82%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses7*		0.27%			0.27%			0.27%
Total Fund Operating Expenses*		1.34%			2.09%			2.09%

See pages 28-29 for all other footnotes.

*  The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, the “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Structured International Equity Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.81%		0.81%		0.81%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses7		0.19%		0.19%		0.19%
Total Fund Operating Expenses (after current expense limitations)		1.25%		2.00%		2.00%

27

Fund Fees and Expenses continued

1	The maximum sales charge is a percentage of the offering price. Under certain circumstances, as described in the Shareholder Guide, the maximum sales charge may be reduced or waived entirely. A CDSC of 1% may be imposed on certain redemptions (within 18 months of purchase) of Class A Shares sold without an initial sales charge as part of an investment of $1 million or more.
2	The maximum CDSC is a percentage of the lesser of the NAV at the time of the redemption or the NAV when the shares were originally purchased.
3	A CDSC is imposed upon Class B Shares redeemed within six years of purchase at a rate of 5% in the first year, declining to 1% in the sixth year, and eliminated thereafter.
4	A CDSC of 1% is imposed on Class C Shares redeemed within 12 months of purchase.
5	The Funds annual operating expenses are based on actual expenses for the fiscal year ended August 31, 2006.
6	The Investment Adviser is entitled to a management fee at an annual rate equal to the following percentages of the average daily net assets of the funds:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Structured Large Cap Value		0.60	%	First $1 Billion
		0.54	%	Next $1 Billion
		0.51	%	Over $2 Billion
Structured U.S. Equity		0.65	%	First $1 Billion
		0.59	%	Next $1 Billion
		0.56	%	Over $2 Billion
Structured Large Cap Growth		0.65	%	First $1 Billion
		0.59	%	Next $1 Billion
		0.56	%	Over $2 Billion
Structured Small Cap Equity		0.85	%	First $2 Billion
		0.77	%	Over $2 Billion
Structured International Equity		0.85	%	First $1 Billion
		0.77	%	Next $1 Billion
		0.73	%	Over $2 Billion

Additionally, as of the date of this Prospectus, the Investment Adviser is voluntarily waiving a portion of its management fee equal to 0.09%, 0.14%, 0.14%, 0.04% and 0.01% based on the average daily net assets of the Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Equity Fund and Structured International Equity Fund, respectively.

7

“Other Expenses” include transfer agency fees and expenses equal on an annualized basis to 0.19% of the average daily net assets of each Fund’s Class A, B and C Shares, plus all other ordinary expenses not detailed above. The Investment Adviser has voluntarily agreed to reduce or limit “Other Expenses” (excluding management fees, distribution and service fees, transfer agency fees and expenses, taxes, interest, brokerage fees and litigation,

28

FUND FEES AND EXPENSES

indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the following annual percentage rates of each Fund’s average daily net assets:

	Other
Fund	Expenses
Structured Large Cap Value		0.004%
Structured U.S. Equity		0.004%
Structured Large Cap Growth		0.004%
Structured Small Cap Equity		0.004%
Structured International Equity		0.004%

The expense reductions may be terminated at any time at the option of the Investment Adviser.

⁸ A 2% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less.

29

Example

The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Class A, B or C Shares of a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Fund		1 Year		3 Years		5 Years		10 Years
Structured Large Cap Value
Class A Shares		$	655	$	878	$	1,118	$	1,806
Class B Shares
	– Assuming complete redemption at end of period	$	687	$	879	$	1,195	$	1,962
	– Assuming no redemption	$	187	$	579	$	995	$	1,962
Class C Shares
	– Assuming complete redemption at end of period	$	287	$	579	$	995	$	2,159
	– Assuming no redemption	$	187	$	579	$	995	$	2,159
Structured U.S. Equity
Class A Shares		$	661	$	895	$	1,148	$	1,871
Class B Shares
	– Assuming complete redemption at end of period	$	693	$	897	$	1,216	$	2,027
	– Assuming no redemption	$	193	$	597	$	1,016	$	2,027
Class C Shares
	– Assuming complete redemption at end of period	$	293	$	597	$	1,016	$	2,222
	– Assuming no redemption	$	193	$	597	$	1,016	$	2,222
Structured Large Cap Growth
Class A Shares		$	662	$	898	$	1,153	$	1,881
Class B Shares
	– Assuming complete redemption at end of period	$	694	$	900	$	1,232	$	2,038
	– Assuming no redemption	$	194	$	600	$	1,032	$	2,038
Class C Shares
	– Assuming complete redemption at end of period	$	294	$	600	$	1,032	$	2,233
	– Assuming no redemption	$	194	$	600	$	1,032	$	2,233
Structured Small Cap Equity
Class A Shares		$	681	$	957	$	1,254	$	2,095
Class B Shares
	– Assuming complete redemption at end of period	$	714	$	961	$	1,334	$	2,250
	– Assuming no redemption	$	214	$	661	$	1,134	$	2,250
Class C Shares
	– Assuming complete redemption at end of period	$	314	$	661	$	1,134	$	2,441
	– Assuming no redemption	$	214	$	661	$	1,134	$	2,441

30

FUND FEES AND EXPENSES

Fund		1 Year		3 Years		5 Years		10 Years
Structured International Equity
Class A Shares		$	679	$	951	$	1,244	$	2,074
Class B Shares
	– Assuming complete redemption at end of period	$	712	$	955	$	1,324	$	2,229
	– Assuming no redemption	$	212	$	655	$	1,124	$	2,229
Class C Shares
	– Assuming complete redemption at end of period	$	312	$	655	$	1,124	$	2,421
	– Assuming no redemption	$	212	$	655	$	1,124	$	2,421

The hypothetical example assumes that a CDSC will not apply to redemptions of Class A Shares within the first 18 months. Class B Shares convert to Class A Shares eight years after purchase; therefore, Class A expenses are used in the hypothetical example after year eight.

Certain institutions that sell Fund shares and/or their salespersons may receive other compensation in connection with the sale and distribution of Class A, Class B and Class C Shares for services to their customers’ accounts and/or the Funds. For additional information regarding such compensation, see “What Should I Know When I Purchase Shares Through An Authorized Dealer?” in the Prospectus and “Payments to Intermediaries” in the Additional Statement.

31

Service Providers

   INVESTMENT ADVISER   

Investment Adviser	Fund
Goldman Sachs Asset Management, L.P. (“GSAM”) 32 Old Slip New York, New York 10005	Structured Large Cap Value Structured U.S. Equity Structured Large Cap Growth Structured Small Cap Equity Structured International Equity

GSAM has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”). As of September 30, 2006, GSAM had assets under management of $576.4 billion.

The Investment Adviser provides day-to-day advice regarding the Funds’ portfolio transactions. The Investment Adviser makes the investment decisions for the Funds and places purchase and sale orders for the Funds’ portfolio transactions in U.S. and foreign markets. As permitted by applicable law, these orders may be directed to any brokers, including Goldman Sachs and its affiliates. While the Investment Adviser is ultimately responsible for the management of the Funds, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. In addition, the Investment Adviser has access to the research and certain proprietary technical models developed by Goldman Sachs, and will apply quantitative and qualitative analysis in determining the appropriate allocations among categories of issuers and types of securities.

The Investment Adviser also performs the following additional services for the Funds:

n	Supervises all non-advisory operations of the Funds
n	Provides personnel to perform necessary executive, administrative and clerical services to the Funds
n	Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
n	Maintains the records of each Fund
n	Provides office space and all necessary office equipment and services

32

SERVICE PROVIDERS

   MANAGEMENT FEES   

As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund’s average daily net assets):

						Actual Rate
						For the Fiscal
	Management Fee			Average Daily		Year Ended
Fund	Annual Rate			Net Assets		August 31, 2006
Structured Large Cap Value		0.60	%		First $1  Billion		0.60	%
		0.54	%		Next $1  Billion
		0.51	%		Over $2  Billion
Structured U.S. Equity		0.65	%		First $1  Billion		0.65	%
		0.59	%		Next $1  Billion
		0.56	%		Over $2  Billion
Structured Large Cap Growth		0.65	%		First $1  Billion		0.65	%
		0.59	%		Next $1  Billion
		0.56	%		Over $2  Billion
Structured Small Cap Equity		0.85	%		First $2  Billion		0.85	%
		0.77	%		Over $2  Billion
Structured International Equity		0.85	%		First $1  Billion		0.82	%
		0.77	%		Next $1  Billion
		0.73	%		Over $2  Billion

The Investment Advisor may voluntarily waive a portion of its advisory fee from time to time, and may discontinue or modify any such voluntary limitations in the future at its discretion.

A discussion regarding the basis for the Board of Trustees’ approval of the Management Agreement for the Funds in 2006 is available in the respective Fund’s annual report dated August 31, 2006.

33

   FUND MANAGERS   

Quantitative Domestic Equity Portfolio Management Team

n	A stable and growing team supported by an extensive internal staff
n	More than $100 billion in equities currently under management, including over $52 billion in US equities

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Melissa Brown Managing Director	Senior Portfolio Manager— Structured U.S. Equity Structured Large Cap Growth Structured Small Cap Equity Structured Large Cap Value	Since 1998 1998 1998 1998	Ms. Brown joined the Investment Adviser as a portfolio manager in 1998. From 1984 to 1998, she was the director of Quantitative Equity Research and served on the Investment Policy Committee at Prudential Securities Equity Research.
Robert C. Jones Chief Investment Officer Managing Director	Senior Portfolio Manager— Structured U.S. Equity Structured Large Cap Growth Structured Small Cap Equity Structured Large Cap Value	Since 1991 1997 1997 1998	Mr. Jones joined the Investment Adviser as a portfolio manager in 1989.

Melissa Brown, CFA, is a Managing Director and Senior Portfolio Manager for US portfolios. She is also a member of the GQE Investment Policy Committee. Robert C. Jones, CFA, is a Managing Director and Chair of the GQE Investment Policy Committee, which oversees the portfolio management process. He currently serves as the Chief Investment Officer for the GQE team. The computer optimizer constructs the portfolio based on the team’s models and design and no one person on the team has a subjective override of the computer optimizer process, except in very limited cases.

For more information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Funds, see the Additional Statement.

Quantitative International Equity Portfolio Management Team

n	Portfolio team based in New York. Experienced, highly qualified and stable quantitative team reflects our commitment to a superior research effort
n	Team manages approximately $102.6 billion in global/international equities for retail, institutional and high net worth clients

34

SERVICE PROVIDERS

n Designed to invest in international markets, seeking to add value from diversified sources of return — top-down country selection and bottom-up stock selection

______________________________________________________________________________________________________________

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Len Ioffe Managing Director	Senior Portfolio Manager— Structured International Equity	Since 2001	Mr. Ioffe joined the Investment Adviser as an associate in 1995. He became a portfolio manager in 1996.
Robert C. Jones Managing Director	Senior Portfolio Manager— Structured International Equity	Since 1997	Mr. Jones joined the Investment Adviser as a portfolio manager in 1989.

Len Ioffe, CFA, is a Managing Director and Senior Portfolio Manager on the GQE team, where he is responsible for portfolio management of global and non-US portfolios. He is also a member of the GQE Investment Policy Committee. Robert C. Jones, CFA, is a Managing Director and Chair of the GQE Investment Policy Committee, which oversees portfolio management process. He currently serves as the Chief Investment Officer for the GQE team. The computer optimizer constructs the portfolio based on the team’s models and design and no one person on the team has a subjective override of the computer optimizer process, except in very specific limited cases.

For more information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Funds, see the Additional Statement.

   DISTRIBUTOR AND TRANSFER AGENT   

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the “Distributor”) of each Fund’s shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, Illinois 60606, also serves as each Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.

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 shares acquired for its own account.

35

   ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER 
   ACCOUNTS MANAGED BY GOLDMAN SACHS   

The involvement of the Investment Adviser, 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 a Fund or limit a Fund’s investment activities. Goldman Sachs is a full service investment banking, broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financier, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. For example, a Fund may take a long position in a security at the same time that Goldman Sachs or other accounts managed by the Investment Adviser take a short position in the same security (or vice versa). These and other transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others

36

SERVICE PROVIDERS

associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Fund or who engage in transactions with or for the Funds. For more information about conflicts of interest, see the Additional Statement.

Under a securities lending program approved by the Funds’ Board of Trustees, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for each Fund to the extent that the Funds engage in the securities lending program. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of the cash received as collateral for loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions.

   LEGAL PROCEEDINGS   

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. (“GSG”), GSAM, the Trustees and Officers of the Goldman Sachs Trust (the “Trust”), and John Doe Defendants. In addition, the Goldman Sachs Funds included in this Prospectus and certain other investment portfolios of the Trust were named as nominal defendants (collectively, the “Goldman Sachs Funds”). On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman, Sachs & Co., the Trust, Goldman Sachs Variable Insurance Trust (“GSVIT”), the Trustees and Officers of the Trust and GSVIT and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the “Goldman Sachs Funds”) were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005.

37

The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company Act of 1940 (the “Investment Company Act”) and the Investment Advisers Act of 1940, (ii) common law breaches of fiduciary duty and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Investment Company Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI. The complaint also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreement and return of fees paid; an accounting of all Goldman Sachs Funds-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals on similar litigation.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to its clients, including the Goldman Sachs Funds.

38

Dividends

Each Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:

n	Cash
n	Additional shares of the same class of the same Fund
n	Shares of the same or an equivalent class of another Goldman Sachs Fund. Special restrictions may apply for certain Goldman Sachs Institutional Liquid Assets Portfolios (“ILA Portfolios”). See the Additional Statement.

You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the applicable Fund.

The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains are declared and paid as follows:

	Investment	Capital Gains
Fund	Income Dividends	Distributions
Structured Large Cap Value	Quarterly	Annually
Structured U.S. Equity	Annually	Annually
Structured Large Cap Growth	Annually	Annually
Structured Small Cap Equity	Annually	Annually
Structured International Equity	Annually	Annually

From time to time a portion of a Fund’s dividends may constitute a return of capital for tax purposes, and/or may include amounts in excess of the Fund’s net investment income for the period calculated in accordance with good accounting practice.

When you purchase shares of a Fund, part of the NAV per share may be represented by undistributed income and/or realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income and/or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.

39

Shareholder Guide

The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds’ shares.

   HOW TO BUY SHARES   

How Can I Purchase Class A, Class B And Class C Shares Of The Funds?

You may purchase shares of the Funds through:

n	Authorized Dealers;
n	Goldman Sachs; or
n	Directly from the Trust.

In order to make an initial investment in a Fund, you must furnish to the Fund, Goldman Sachs or your Authorized Dealer the information in the Account Application. An order will be processed upon receipt of payment.

To Open an Account:

n	Complete the Account Application
n	Mail your payment and Account Application to:

    Your Authorized Dealer

    —  Purchases by check or Federal Reserve draft should be made payable to your Authorized Dealer

    —  Your Authorized Dealer is responsible for forwarding payment promptly (within three business days) to the Fund

    or

    Goldman Sachs Funds, P.O. Box 219711, Kansas City, MO 64121-9711

    —  Purchases by check or Federal Reserve draft should be made payable to Goldman Sachs Funds — (Name of Fund and Class of Shares)

    —  Boston Financial Data Services, Inc. (“BFDS”), the Funds’ sub-transfer agent, will not accept checks drawn on foreign banks, third-party checks, cashier’s checks or official checks, temporary checks, electronic checks, drawer checks, cash, money orders, travelers cheques or credit card checks. In limited situations involving the transfer of retirement assets, the Fund may accept cashier’s checks or official bank checks.

    —  Federal funds wire, Automated Clearing House Network (“ACH”) transfer or bank wires should be sent to State Street Bank and Trust Company (“State Street”) (each Fund’s custodian). Please call the Funds at 1-800-526-7384 to get detailed instructions on how to wire your money.

40

SHAREHOLDER GUIDE

What Is My Minimum Investment In The Funds?

	Initial		Additional*
Regular Accounts		$1,000		$50
Employee Sponsored Benefit Plans		$250	No Minimum
Uniform Gift/ Transfer to Minor (UTMA/UGMA)		$250		$50
Individual Retirement Accounts and Coverdell ESAs		$250		$50
Automatic Investment Plans		$250		$50

    *
No minimum additional investment requirements are imposed with respect to investors trading through intermediaries who aggregate shares in omnibus or similar accounts (e.g., retirement plan accounts, wrap program accounts or traditional brokerage house accounts).

What Alternative Sales Arrangements Are Available?

The Funds offer three classes of shares through this Prospectus.

Maximum Amount You Can Buy In The Aggregate Across Funds	Class A	No limit
	Class B	$100,000*
	Class C	$1,000,000*
Initial Sales Charge	Class A	Applies to purchases of less than $1 million—varies by size of investment with a maximum of 5.5%
	Class B	None
	Class C	None
CDSC	Class A	1.00% on certain investments of $1 million or more if you sell within 18 months
	Class B	6 year declining CDSC with a maximum of 5%
	Class C	1% if shares are redeemed within 12 months of purchase
Conversion Feature	Class A	None
	Class B	Class B Shares automatically convert to Class A Shares after 8 years
	Class C	None

    *
No additional Class B Shares or Class C Shares may be purchased by an investor either in an initial purchase or in subsequent purchases if the current market value of the shares owned and/or purchased equals or exceeds $100,000 in the case of Class B Shares or $1,000,000 in the case of Class C Shares.

What Else Should I Know About Share Purchases?

The Trust reserves the right to:

n Refuse to open an account if you fail 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).

41

n	Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of shares of a Fund is evident, or if purchases, sales or exchanges are, or a subsequent abrupt redemption might be, of a size that would disrupt the management of a Fund.
n	Close a Fund to new investors from time to time and reopen any such Fund whenever it is deemed appropriate by a Fund’s Investment Adviser.
n	Modify or waive the minimum investment requirements.
n	Modify the manner in which shares are offered.
n	Modify the sales charge rates applicable to future purchases of shares.

Generally, the Fund will not allow non-U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds.

The Funds may allow you to purchase shares with securities instead of cash if consistent with a Fund’s investment policies and operations and if approved by the Fund’s Investment Adviser.

Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for investors who open accounts with the Funds. Applications without the required information, which will be reviewed solely for customer identification purposes, may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Funds are unable to verify an investor’s identity. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an account and redeeming an investor’s shares pursuant to the customer identification program.

42

SHAREHOLDER GUIDE

How Are Shares Priced?

The price you pay when you buy shares is the Fund’s next determined NAV for a share class (as adjusted for any applicable sales charge). The price you receive when you sell or exchange shares is a Fund’s next determined NAV for a share class with the redemption proceeds reduced by any applicable charge (e.g., CDSC’s or redemption fees). Each class calculates its NAV as follows:

NAV = (Value of Assets of the Class)
- (Liabilities of the Class)
Number of Outstanding Shares of the Class

The Funds’ investments are valued based on market quotations or if market quotations are not readily available, or if the Investment Adviser believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined in good faith under procedures established by the Trustees.

In the event that a Fund that invests a significant portion of assets in foreign equity securities, “fair value” prices are provided by an independent fair value service in accordance with the fair value procedures approved by the Trustees. Fair value prices are used because many foreign markets operate at times that do not coincide with those of the major U.S. markets. Events that could affect the values of foreign portfolio holdings may occur between the close of the foreign market and the time of determining the NAV, and would not otherwise be reflected in the NAV. If the independent fair value service does not provide a fair value for a particular security or if the value does not meet the established criteria for the Funds, the most recent closing price for such a security on its principal exchange will generally be its fair value on such date.

In addition, the Investment Adviser, consistent with applicable regulatory guidance, may determine to make an adjustment to the previous closing prices of either domestic or foreign securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in foreign markets; market disruptions or market closings; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements on earnings; significant litigation; and regulatory news such as governmental approvals.

43

One effect of using an independent fair value service and fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).

n	NAV per share of each share class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New York time) or such other time as the New York Stock Exchange or NASDAQ market may officially close. Fund shares will generally not be priced on any day the New York Stock Exchange is closed.
n	When you buy shares, you pay the NAV (as adjusted for any applicable sales charge) next calculated after the Funds receive your order in proper form.
n	When you sell shares, you receive the NAV next calculated after the Funds receive your order in proper form. Redemption proceeds are reduced by any applicable CDSC or redemption fee.
n	The Trust reserves the right to reprocess purchase (including dividend reinvestments), redemption and exchange transactions that were processed at an NAV other than a Fund’s official closing NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV, as adjusted.
n	The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.

Consistent with industry practice, investment transactions not settling on the same day are recorded and factored into a Fund’s net asset value on the business day following trade date (T+1). The use of T+1 accounting generally does not, but may, result in a net asset value that differs materially from the net asset value that would result if all transactions were reflected on their trade dates.

Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if

44

SHAREHOLDER GUIDE

the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1-800-526-7384.

Foreign securities may trade in their local markets on days a Fund is closed. As a result, if a Fund holds foreign securities, its NAV may be impacted on days when investors may not purchase or redeem Fund shares.

   COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS A SHARES   

What Is The Offering Price Of Class A Shares?

The offering price of Class A Shares of each Fund is the next determined NAV per share plus an initial sales charge paid to Goldman Sachs at the time of purchase of shares. The sales charge varies depending upon the amount you purchase. In some cases, described below, the initial sales charge may be eliminated altogether, and the offering price will be the NAV per share. The current sales charges and commissions paid to Authorized Dealers for Class A Shares of the Funds are as follows:

				Sales Charge			Maximum Dealer
	Sales Charge as			as Percentage			Allowance as
Amount of Purchase	Percentage of			of Net Amount			Percentage of
(including sales charge, if any)	Offering Price			Invested			Offering Price*
Less than $50,000		5.50	%		5.82	%		5.00	%
$50,000 up to (but less than) $100,000		4.75			4.99			4.00
$100,000 up to (but less than) $250,000		3.75			3.90			3.00
$250,000 up to (but less than) $500,000		2.75			2.83			2.25
$500,000 up to (but less than) $1 million		2.00			2.04			1.75
$1 million or more		0.00	**		0.00	**		***

*	Dealer’s allowance may be changed periodically. During special promotions, the entire sales charge may be allowed to Authorized Dealers. Authorized Dealers to whom substantially the entire sales charge is allowed may be deemed to be “underwriters” under the Securities Act of 1933.
**	No sales charge is payable at the time of purchase of Class A Shares of $1 million or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase.
***	The Distributor may pay a one-time commission to Authorized Dealers who initiate or are responsible for purchases of $1 million or more of shares of the Funds equal to 1.00% of the amount under $3 million, 0.50% of the next $2 million, and 0.25% thereafter. In instances where an Authorized Dealer (including Goldman Sachs’ Private Wealth Management Unit) agrees to waive its receipt of the one-time commission described above, the CDSC on Class A Shares, generally, will be waived. The Distributor may also pay, with respect to all or a portion of the amount purchased, a commission in accordance with the foregoing schedule to Authorized Dealers who initiate or are responsible for purchases of $500,000 or more by certain Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations investing in the Funds which satisfy the criteria set forth below in “When Are Class A Shares Not Subject To A Sales Load?” or $1 million or more by certain “wrap” accounts. Purchases by such plans will be made at NAV with no initial sales charge, but if shares are redeemed within 18 months after the end of

45

the calendar month in which such purchase was made, a CDSC of 1% may be imposed upon the plan, the plan sponsor or the third-party administrator. In addition, Authorized Dealers will remit to the Distributor such payments received in connection with “wrap” accounts in the event that shares are redeemed within 18 months after the end of the calendar month in which the purchase was made.

You should note that the actual sales charge that appears in your mutual fund transaction confirmation may differ slightly from the rate disclosed above in the Prospectus due to rounding calculations.

As indicated in the above chart, and as discussed further below and in the section titled “How Can the Sales Charge on Class A Shares Be Reduced?”, you may, under certain circumstances, be entitled to pay reduced sales charges on your purchases of Class A Shares or have those charges waived entirely. To take advantage of these discounts, you or your Authorized Dealer or financial intermediary must notify the Funds’ Transfer Agent at the time of your purchase order that a discount may apply to your current purchases. You may also be required to provide appropriate documentation to receive those discounts, including:

(i)	Information or records regarding shares of the Funds or other Goldman Sachs Funds held in all accounts (e.g., retirement accounts) of the shareholder at the financial intermediary;
(ii)	Information or records regarding shares of the Funds or other Goldman Sachs Funds held in any account of the shareholder at another financial intermediary; and
(iii)	Information or records regarding shares of the Funds or other Goldman Sachs Funds held at any financial intermediary by related parties of the shareholder, such as members of the same family or household.

You should note in particular that, if the Funds’ Transfer Agent is properly notified, under the “Right of Accumulation” described below, the “Amount of Purchase” in the chart on the preceding page will be deemed to include all Class A, Class B and/or Class C Shares of the Goldman Sachs Funds that were acquired by purchase or exchange, and that were subject to a sales charge, that are held at the time of purchase by any of the following persons: (i) you, your spouse and your children; and (ii) any trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account. This includes, for example, any Class A, Class B and/or Class C Shares held at a broker-dealer or other financial intermediary other than the one handling your current purchase. In some circumstances, other Class A, Class B and/or Class C Shares may be aggregated with your current purchase under the Right of Accumulation as described in the Additional Statement. For purposes of determining the “Amount of Purchase,” all Class A, Class B and/or Class C Shares held at the time of purchase will be valued at their current market value.

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You should also note that if you provide the Transfer Agent a signed written Statement of Intention to invest (not counting reinvestments of dividends and distributions) in the aggregate within a 13-month period, $50,000 or more in Class A Shares of one or more Goldman Sachs Funds any investments you make during the 13 months will be treated as though the total quantity were invested in one lump sum and you will receive the discounted sales load based on your investment commitment. You must, however, inform the Transfer Agent that the Statement of Intention is in effect each time shares are purchased. Each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Statement of Intention.

In addition to the information provided in this Prospectus and the Additional Statement, information about sales charge discounts is available from your Authorized Dealer or financial intermediary and, free of charge, on the Funds’ website at http://www.goldmansachsfunds.com.

What Else Do I Need To Know About Class A Shares’ CDSC?

Purchases of $1 million or more of Class A Shares will be made at NAV with no initial sales charge. However, if you redeem shares within 18 months after the end of the calendar month in which the purchase was made, a CDSC of 1% may be imposed. The CDSC may not be imposed if your Authorized Dealer enters into an agreement with the Distributor to return all or an applicable prorated portion of its commission to the Distributor. The CDSC is waived on redemptions in certain circumstances. See “In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or Reduced?” below.

When Are Class A Shares Not Subject To A Sales Load?

Class A Shares of the Funds may be sold at NAV without payment of any sales charge to the following individuals and entities:

n	Goldman Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of these individuals;
n	Qualified employee benefit plans of Goldman Sachs;
n	Trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor;
n	Any employee or registered representative of any Authorized Dealer or their respective spouses, children and parents;
n	Banks, trust companies or other types of depository institutions;
n	Any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of a Fund;

47

n Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations (“Employee Benefit Plans”) that:

n	Buy shares of Goldman Sachs Funds worth $500,000 or more; or
n	Have 100 or more eligible employees at the time of purchase; or
n	Certify that they expect to have annual plan purchases of shares of Goldman Sachs Funds of $200,000 or more; or
n	Are provided administrative services by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plans; or
n	Have at the time of purchase aggregate assets of at least $2,000,000;

n	Non-qualified pension plans sponsored by employers who also sponsor qualified plans that qualify for and invest in Goldman Sachs Funds at NAV without the payment of any sales charge;
n	Insurance company separate accounts that make the Funds available as underlying investments in certain group annuity contracts;
n	“Wrap” accounts for the benefit of clients of broker-dealers, financial institutions or financial planners, provided they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards;
n	Registered investment advisers investing for accounts for which they receive asset-based fees;
n	Accounts over which GSAM or its advisory affiliates have investment discretion;
n	Shareholders receiving distributions from a qualified Employee Benefit Plan invested in the Goldman Sachs Funds and reinvesting such proceeds in a Goldman Sachs IRA;
n	Shareholders who roll over distributions from any tax-qualified Employee Benefit Plan or tax-sheltered annuity to an IRA which invests in the Goldman Sachs Funds if the tax-qualified Employee Benefit Plan or tax-sheltered annuity receives administrative services provided by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plan or annuity;
n	State sponsored 529 college savings plans; or
n	Investors who qualify under other exemptions that are stated from time to time in the Additional Statement.

You must certify eligibility for any of the above exemptions on your Account Application and notify the Fund if you no longer are eligible for the exemption. The Fund will grant you an exemption subject to confirmation of your

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entitlement. You may be charged a fee if you effect your transactions through a broker or agent.

How Can The Sales Charge On Class A Shares Be Reduced?

n

Right of Accumulation: When buying Class A Shares in Goldman Sachs Funds, your current aggregate investment determines the initial sales load you pay. You may qualify for reduced sales charges when the current market value of holdings across Class A, Class B and/or Class C shares, plus new purchases, reaches $50,000 or more. Class A, Class B and/or Class C Shares of any of the Goldman Sachs Funds may be combined under the Right of Accumulation. For purposes of applying the Right of Accumulation, shares of the Funds and any other Goldman Sachs Funds purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, under some circumstances, Class A, Class B and/or Class C Shares of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of the same business organization, groups of individuals represented by and investing on the recommendation of the same accounting firm, and certain other organizations may be combined for the purpose of determining whether a purchase will qualify for the Right of Accumulation and, if qualifying, the applicable sales charge level. To qualify for a reduced sales load, you or your Authorized Dealer must notify the Funds’ Transfer Agent at the time of investment that a quantity discount is applicable. Use of this option is subject to a check of appropriate records. The Additional Statement has more information about the Right of Accumulation.

n

Statement of Intention: You may obtain a reduced sales charge by means of a written Statement of Intention which expresses your non-binding commitment to invest (not counting reinvestments of dividends and distributions) in the aggregate $50,000 or more within a period of 13 months in Class A Shares of one or more of the Goldman Sachs Funds. Any investments you make during the period will receive the discounted sales load based on the full amount of your investment commitment. At your request, purchases made during the previous 90 days may be included; however, capital appreciation does not apply toward these combined purchases. If the investment commitment of the Statement of Intention is not met prior to the expiration of the 13-month period, the entire amount will be subject to the higher applicable sales charge unless the failure to meet the investment commitment is due to the death of the investor. By selecting the Statement of Intention, you authorize the Transfer Agent to escrow and redeem Class A Shares in your account to pay this additional charge. The Additional Statement has more information about the Statement of Intention, which you should read carefully.

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   COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS B SHARES   

What Is The Offering Price Of Class B Shares?

You may purchase Class B Shares of the Funds at the next determined NAV without an initial sales charge. However, Class B Shares redeemed within six years of purchase will be subject to a CDSC at the rates shown in the table below based on how long you held your shares.

The CDSC schedule is as follows:

	CDSC as a
	Percentage of
	Dollar Amount
Year Since Purchase	Subject to CDSC
First		5%
Second		4%
Third		3%
Fourth		3%
Fifth		2%
Sixth		1%
Seventh and thereafter		None

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 distribution-related services to the Funds in connection with the sale of Class B Shares, including the payment of compensation to Authorized Dealers. A commission equal to 4% of the amount invested is paid to Authorized Dealers.

What Should I Know About The Automatic Conversion Of Class B Shares?

Class B Shares of a Fund will automatically convert into Class A Shares of the same Fund at the end of the calendar quarter that is eight years after the purchase date.

If you acquire Class B Shares of a Fund by exchange from Class B Shares of another Goldman Sachs Fund, your Class B Shares will convert into Class A Shares of such Fund based on the date of the initial purchase and the CDSC schedule of that purchase.

If you acquire Class B Shares through reinvestment of distributions, your Class B Shares will convert into Class A Shares based on the date of the initial purchase of the shares on which the distribution was paid.

The conversion of Class B Shares to Class A Shares will not occur at any time the Funds are advised that such conversions may constitute taxable events for federal tax purposes, which the Funds believe is unlikely. If conversions do not occur as a

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SHAREHOLDER GUIDE

result of possible taxability, Class B Shares would continue to be subject to higher expenses than Class A Shares for an indeterminate period.

   A COMMON QUESTION ABOUT THE PURCHASE OF CLASS C SHARES   

What Is The Offering Price Of Class C Shares?

You may purchase Class C Shares of the Funds at the next determined NAV without paying an initial sales charge. However, if you redeem Class C Shares within 12 months of purchase, a CDSC of 1% will normally be deducted from the redemption proceeds. In connection with purchases by Employee Benefit Plans, where Class C Shares are redeemed within 12 months of purchase, a CDSC of 1% may be imposed upon the plan sponsor or third-party administrator.

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 distribution-related services to the Funds in connection with the sale of Class C Shares, including the payment of compensation to Authorized Dealers. An amount equal to 1% of the amount invested is normally paid by the Distributor to Authorized Dealers.

   COMMON QUESTIONS APPLICABLE TO THE PURCHASE OF CLASS A, 
   B AND C SHARES   

What Else Do I Need To Know About The CDSC On Class A, B Or C Shares?

n The CDSC is based on the lesser of the NAV of the shares at the time of redemption or the original offering price (which is the original NAV).

n	No CDSC is charged on shares acquired from reinvested dividends or capital gains distributions.
n	No CDSC is charged on the per share appreciation of your account over the initial purchase price.
n	When counting the number of months since a purchase of Class B or Class C Shares was made, all payments made during a month will be combined and considered to have been made on the first day of that month.

n To keep your CDSC as low as possible, each time you place a request to sell shares, the Funds will first sell any shares in your account that do not carry a CDSC and then the shares in your account that have been held the longest.

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In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or Reduced?

The CDSC on Class A, Class B and Class C Shares that are subject to a CDSC may be waived or reduced if the redemption relates to:

n	Retirement distributions or loans to participants or beneficiaries from Employee Benefit Plans;
n	The death or disability (as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the “Code”)) of a shareholder, participant or beneficiary in an Employee Benefit Plan;
n	Hardship withdrawals by a participant or beneficiary in an Employee Benefit Plan;
n	Satisfying the minimum distribution requirements of the Code;
n	Establishing “substantially equal periodic payments” as described under Section 72(t)(2) of the Code;
n	The separation from service by a participant or beneficiary in an Employee Benefit Plan;
n	Excess contributions distributed from an Employee Benefit Plan;
n	Distributions from a qualified Employee Benefit Plan invested in the Goldman Sachs Funds which are being rolled over to a Goldman Sachs IRA, in the same share class; or
n	Redemption proceeds which are to be reinvested in accounts or non-registered products over which GSAM or its advisory affiliates have investment discretion.

In addition, Class A, B and C Shares subject to a systematic withdrawal plan may be redeemed without a CDSC. The Funds reserve the right to limit such redemptions, on an annual basis, to 12% each of the value of your Class B and C Shares and 10% of the value of your Class A Shares.

How Do I Decide Whether To Buy Class A, B Or C Shares?

The decision as to which Class to purchase depends on the amount you invest, the intended length of the investment and your personal situation.

n

Class A Shares. If you are making an investment of $50,000 or more that qualifies for a reduced sales charge, you should consider purchasing Class A Shares.

n

Class B Shares. If you plan to hold your investment for at least six years and would prefer not to pay an initial sales charge, you might consider purchasing Class B Shares. By not paying a front-end sales charge, your entire investment in Class B Shares is available to work for you from the time you make your initial investment. However, the distribution and service fee paid by Class B Shares will cause your Class B Shares (until conversion to Class A Shares) to have a higher expense ratio, and thus lower performance and lower dividend payments (to the extent dividends are paid) than Class A Shares. A maximum

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SHAREHOLDER GUIDE

purchase limitation of $100,000 in the aggregate normally applies to Class B Shares across all Goldman Sachs Funds.

n

Class C Shares. If you are unsure of the length of your investment or plan to hold your investment for less than six years and would prefer not to pay an initial sales charge, you may prefer Class C Shares. By not paying a front-end sales charge, your entire investment in Class C Shares is available to work for you from the time you make your initial investment. However, the distribution and service fee paid by Class C Shares will cause your Class C Shares to have a higher expense ratio, and thus lower performance and lower dividend payments (to the extent dividends are paid) than Class A Shares (or Class B Shares after conversion to Class A Shares).

Although Class C Shares are subject to a CDSC for only 12 months, Class C Shares do not have the automatic eight year conversion feature applicable to Class B Shares and your investment may pay higher distribution fees indefinitely.

A maximum purchase limitation of $1,000,000 in the aggregate normally applies to purchases of Class C Shares across all Goldman Sachs Funds.

Note: Authorized Dealers may receive different compensation for selling Class A, Class B or Class C Shares.

In addition to Class A, Class B and Class C Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses (which affect performance), have different minimum investment requirements and are entitled to different services. Information regarding these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus.

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   HOW TO SELL SHARES   

How Can I Sell Class A, Class B And Class C Shares Of The Funds?

You may arrange to take money out of your account by selling (redeeming) some or all of your shares. Generally, each Fund will redeem its shares upon request on any business day at the NAV next determined after receipt of such request in proper form, subject to any applicable CDSC or redemption fee. You may request that redemption proceeds be sent to you by check or by wire (if the wire instructions are on record). Redemptions may be requested in writing or by telephone.

Instructions For Redemptions:
By Writing:	n Write a letter of instruction that includes:
	n Your name(s) and signature(s)
	n Your account number
	n The Fund name and Class of Shares
	n The dollar amount you want to sell
	n How and where to send the proceeds
	n Obtain a signature guarantee (see details below)
	n Mail your request to:     Goldman Sachs Funds     P.O. Box 219711     Kansas City, MO 64121-9711
	or for overnight delivery:
	Goldman Sachs Funds     330 West 9th Street     Poindexter Bldg., 1st Floor     Kansas City, MO 64105
By Telephone:	If you have not declined the telephone redemption privilege on your Account Application:
	n 1-800-526-7384     (8:00 a.m. to 4:00 p.m. New York time)
	n You may redeem up to $50,000 of your shares daily
	n Proceeds which are sent directly to a Goldman Sachs     brokerage account or to the bank account designated on your     Account Application are not subject to the $50,000 limit

Any redemption request that requires money to go to an account or address other than that designated in the current records of the Transfer Agent must be in writing and signed by an authorized person with a Medallion signature guarantee. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.

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SHAREHOLDER GUIDE

When Do I Need A Medallion Signature Guarantee To Redeem Shares?

A Medallion signature guarantee is required if:

n	You are requesting in writing to redeem shares in an amount over $50,000;
n	You would like the redemption proceeds sent to an address that is not your address of record; or
n	You would like to change the bank designated on your Account Application.

A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required.

What Do I Need To Know About Telephone Redemption Requests?

The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. The Trust may accept telephone redemption instructions from any person identifying himself or herself as the owner of an account or the owner’s registered representative where the owner has not declined in writing to use this service. Thus, you risk possible losses if a telephone redemption is not authorized by you.

In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs and BFDS each employ reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:

n	All telephone requests are recorded.
n	Proceeds of telephone redemption requests will be sent only to your address of record or authorized bank account designated in the Account Application (unless you provide written instructions and a signature guarantee, indicating another address or account).
n	For the 30-day period following a change of address, telephone redemptions will only be filled by a wire transfer to the bank account designated in the Account Applications (see immediately preceding bullet point). In order to receive the redemption by check during this time period, the redemption request must be in the form of a written, Medallion signature guaranteed letter.
n	The telephone redemption option does not apply to shares held in a “street name” account. “Street name” accounts are accounts maintained and serviced by your Authorized Dealer. If your account is held in “street name,” you should contact your registered representative of record, who may make telephone redemptions on your behalf.

55

n The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions.

How Are Redemption Proceeds Paid?

By Wire: You may arrange for your redemption proceeds to be wired as federal funds to the domestic bank account designated in your Account Application. The following general policies govern wiring redemption proceeds:

n	Redemption proceeds will normally be wired on the next business day in federal funds (for a total of one business day delay), but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
n	Although redemption proceeds will normally be wired as described above, under certain circumstances, redemption requests or payments may be postponed or suspended as permitted pursuant to Section 22(e) of the Investment Company Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by the Fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption.
n	If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.
n	If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day.
n	To change the bank designated on your Account Application, you must send written instructions (with your Medallion signature guaranteed) to the Transfer Agent.
n	Neither the Trust, Goldman Sachs nor any Authorized Dealer assumes any responsibility for the performance of your bank or any intermediaries in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such intermediaries.

By Check: You may elect to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of a properly executed redemption request. If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.

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SHAREHOLDER GUIDE

What Do I Need To Know About The Redemption Fee?

The Structured International Equity Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Fund uses a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The redemption fee does not apply to transactions involving the following:

n	Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.
n	Redemptions of shares that are acquired or redeemed in connection with the participation in a systematic withdrawal program or automatic investment plan.
n	Redemption of shares by other Goldman Sachs Funds (e.g., Goldman Sachs Asset Allocation Portfolios).
n	Redemptions of shares held through discretionary wrap programs or models programs that utilize a regularly scheduled automatic rebalancing of assets and that have provided GSAM with certain representation regarding operating policies and standards.
n	Redemptions of shares involving transactions other than participant initiated exchanges from retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended. Redemptions involving transactions other than participant initiated exchanges would include, for example: loans; required minimum distributions; rollovers; forfeiture; redemptions of shares to pay fees; plan level redemptions or exchanges; redemptions pursuant to systematic withdrawal programs; return of excess contribution amounts; hardship withdrawals; redemptions related to death, disability or qualified domestic relations order; and certain other transactions.
n	Redemptions of shares from accounts of financial institutions in connection with hedging services provided in support of nonqualified deferred compensation plans offering the Goldman Sachs Funds.
n	Redemption of shares where the Fund is made available as an underlying investment in certain group annuity contracts.
n	Redemption of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.

57

n Redemptions of shares representing “seed capital” investments by Goldman Sachs or its affiliates.

The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future.

In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as system limitations, operational limitations, contractual limitations and further guidance from the SEC or other regulators.

If your shares are held through a financial intermediary in an omnibus or other group account, the Trust relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. The application of redemption fees and exemptions may vary and certain intermediaries may not apply the exceptions listed above. If you invest through a financial intermediary, please contact your intermediary for more information regarding when redemption fees will be applied to the redemption of your shares.

What Else Do I Need To Know About Redemptions?

The following generally applies to redemption requests:

n

Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received.

n

Institutions (including banks, trust companies, brokers and investment advisers) are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, these institutions may set times by which they must receive redemption requests. These institutions may also require additional documentation from you.

The Trust reserves the right to:

n

Redeem your shares if your account balance falls below the required Fund minimum as a result of a redemption. The Funds will not redeem your shares on this basis if the value of your account falls below the minimum account balance solely as a result of market conditions. The Funds will give you 60 days’ prior written notice to allow you to purchase sufficient additional shares of the Fund in order to avoid such redemption.

n

Redeem your shares in the event your Authorized Dealer’s relationship with Goldman Sachs is terminated, and you do not transfer your account to another

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SHAREHOLDER GUIDE

	Authorized Dealer. The Trust will not be responsible for any loss in an investor’s account or tax liability resulting from the redemption.
n	Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interests of the Trust.
n	Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities.
n	Reinvest any amounts (e.g., dividends, distributions, or redemption proceeds) which you have elected to receive by check should your check be returned to a Fund as undeliverable or remain uncashed for six months. This provision may not apply to certain retirement or qualified accounts or to a closed account. Your participation in a systematic withdrawal program may be terminated if your checks remain uncashed. No interest will accrue on amounts represented by uncashed distribution or redemption checks.
n	Charge an additional fee in the event a redemption is made via wire transfer.

Can I Reinvest Redemption Proceeds In The Same Or Another Goldman Sachs Fund?

You may redeem shares of a Fund and reinvest a portion or all of the redemption proceeds (plus any additional amounts needed to round off purchases to the nearest full share) at NAV. To be eligible for this privilege, you must have held the shares you want to redeem for at least 30 days and you must reinvest the share proceeds within 90 days after you redeem. You may reinvest as follows:

n	Class A or B Shares—Class A Shares of the same Fund or another Goldman Sachs Fund
n	Class C Shares—Class C Shares of the same Fund or another Goldman Sachs Fund
n	You should obtain and read the applicable prospectuses before investing in any other Funds.
n	If you pay a CDSC upon redemption of Class A or Class C Shares and then reinvest in Class A or Class C Shares as described above, your account will be credited with the amount of the CDSC you paid. The reinvested shares will, however, continue to be subject to a CDSC. The holding period of the shares acquired through reinvestment will include the holding period of the redeemed shares for purposes of computing the CDSC payable upon a subsequent redemption. For Class B Shares, you may reinvest the redemption proceeds in Class A Shares at NAV but the amount of the CDSC paid upon redemption of the Class B Shares will not be credited to your account.
n	The reinvestment privilege may be exercised at any time in connection with transactions in which the proceeds are reinvested at NAV in a tax-sheltered

59

	Employee Benefit Plan. In other cases, the reinvestment privilege may be exercised once per year upon receipt of a written request.
n	You may be subject to tax as a result of a redemption. You should consult your tax adviser concerning the tax consequences of a redemption and reinvestment.

Can I Exchange My Investment From One Fund To Another?

You may exchange shares of a Fund at NAV without the imposition of an initial sales charge or CDSC at the time of exchange for shares of the same class of another Goldman Sachs Fund. Redemption of shares (including by exchange) that are held for 30 calendar days or less (60 calendar days or less with respect to the Goldman Sachs High Yield Fund and High Yield Municipal Fund) may, however, be subject to a redemption fee as described above under “What Do I Need To Know About The Redemption Fee?” The exchange privilege may be materially modified or withdrawn at any time upon 60 days’ written notice to you.

Instructions For Exchanging Shares:
By Writing:	n Write a letter of instruction that includes:
	n Your name(s) and signature(s)
	n Your account number
	n The Fund names and Class of Shares
	n The dollar amount you want to exchange
	n Mail the request to:     Goldman Sachs Funds     P.O. Box 219711     Kansas City, MO 64121-9711
	or for overnight delivery—
	Goldman Sachs Funds     330 West 9th St.     Poindexter Bldg., 1st Floor     Kansas City, MO 64105
By Telephone:	If you have not declined the telephone exchange privilege on your Account Application:
	n 1-800-526-7384     (8:00 a.m. to 4:00 p.m. New York time)

You should keep in mind the following factors when making or considering an exchange:

n	You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange.
n	Currently, there is no charge for exchanges, although the Funds may impose a charge in the future.
n	The exchanged shares may later be exchanged for shares of the same class of the original Fund at the next determined NAV without the imposition of an initial sales charge or CDSC (but subject to any applicable redemption fee) if

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SHAREHOLDER GUIDE

	the amount in the Fund resulting from such exchanges is less than the largest amount on which you have previously paid the applicable sales charge.
n	When you exchange shares subject to a CDSC, no CDSC will be charged at that time. The exchanged shares will be subject to the CDSC of the shares originally held. For purposes of determining the amount of the applicable CDSC, the length of time you have owned the shares will be measured from the date you acquired the original shares subject to a CDSC and will not be affected by a subsequent exchange.
n	Eligible investors may exchange certain classes of shares for another class of shares of the same Fund. For further information, call Goldman Sachs Funds at 1-800-526-7384 and see the Additional Statement.
n	All exchanges which represent an initial investment in a Fund must satisfy the minimum initial investment requirements of that Fund. Exchanges into a money market fund need not meet the traditional minimum investment requirements for that fund if the entire balance of the original Fund account is exchanged.
n	Exchanges are available only in states where exchanges may be legally made.
n	It may be difficult to make telephone exchanges in times of drastic economic or market conditions.
n	Goldman Sachs and BFDS may use reasonable procedures described under “What Do I Need to Know About Telephone Redemption Requests?” in an effort to prevent unauthorized or fraudulent telephone exchange requests.
n	Normally, a telephone exchange will be made only to an identically registered account.
n	Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted.
n	Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund.

For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. You should consult your tax adviser concerning the tax consequences of an exchange.

   SHAREHOLDER SERVICES   

Can I Arrange To Have Automatic Investments Made On A Regular Basis?

You may be able to make systematic investments through your bank via ACH transfer or via bank draft each month. The minimum dollar amount for this service is $250 for the initial investment and $50 per month. Forms for this option are

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available from Goldman Sachs and your Authorized Dealer, or you may check the appropriate box on the Account Application.

Can My Dividends And Distributions From A Fund Be Invested In Other Funds?

You may elect to cross-reinvest dividends and capital gain distributions paid by a Fund in shares of the same class of other Goldman Sachs Funds.

n	Shares will be purchased at NAV.
n	You may elect cross-reinvestment into an identically registered account or a similarly registered account provided that at least one name on the account is registered identically.

Can I Arrange To Have Automatic Exchanges Made On A Regular Basis?

You may elect to exchange automatically a specified dollar amount of shares of a Fund for shares of the same class of other Goldman Sachs Funds.

n	Shares will be purchased at NAV if a sales charge had been imposed on the initial purchase.
n	Shares subject to a CDSC acquired under this program may be subject to a CDSC at the time of redemption from the Fund into which the exchange is made depending upon the date and value of your original purchase.
n	Automatic exchanges are made monthly on the 15th day of each month or the first business day thereafter.
n	Minimum dollar amount: $50 per month.

What Else Should I Know About Cross-Reinvestments And Automatic Exchanges?

Cross-reinvestments and automatic exchanges are subject to the following conditions:

n	You must invest an amount in the Fund into which cross-reinvestments or automatic exchanges are being made that is equal to that Fund’s minimum initial investment.
n	You should obtain and read the prospectus of the Fund into which dividends are invested or automatic exchanges are made.

Can I Have Automatic Withdrawals Made On A Regular Basis?

You may redeem from your account systematically via check or ACH transfer in any amount of $50 or more.

n It is normally undesirable to maintain a systematic withdrawal plan at the same time that you are purchasing additional Class A, Class B or Class C Shares because of the sales charge imposed on your purchases of Class A Shares and/or the imposition of a CDSC on your redemptions of Class A, Class B or Class C Shares.

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SHAREHOLDER GUIDE

n	Checks are normally mailed the next business day after your selected systematic withdrawal date of either the 15th or 25th of the month.
n	Each systematic withdrawal is a redemption and therefore a taxable transaction.
n	The CDSC applicable to Class A, Class B or Class C Shares redeemed under the systematic withdrawal plan may be waived.

What Types of Reports Will I Be Sent Regarding My Investment?

You will be provided with a printed confirmation of each transaction in your account and a quarterly account statement. A year-to-date statement for your account will be provided upon request made to Goldman Sachs. If your account is held in a “street name” you may receive your statements and confirmations on a different schedule.

You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting Goldman Sachs Funds by phone at 1-800-526-7384 or by mail at Goldman Sachs Funds, P.O. Box 219711, Kansas City, MO 64121. The Funds will begin sending individual copies to you within 30 days after receipt of your revocation.

The Funds do not generally provide sub-accounting services.

What Should I Know When I Purchase Shares Through An Authorized Dealer?

Authorized Dealers and other financial intermediaries may provide varying arrangements for their clients to purchase and redeem Fund shares. In addition, Authorized Dealers and other financial intermediaries are responsible for providing to you any communication, from a Fund to its shareholders, including but not limited to, prospectus supplements, proxy materials and notices regarding the source of dividend payments pursuant to Section 19 under the Investment Company Act. They may charge additional fees not described in this Prospectus to their customers for such services.

If shares of a Fund are held in a “street name” account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to your account will be performed by the Authorized Dealer, and not by a Fund and its Transfer Agent. Since the Funds will have no record of your transactions, you should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about your account. The transfer of shares in a “street name” account to an account with another dealer or to an account directly

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with a Fund involves special procedures and will require you to obtain historical purchase information about the shares in the account from the Authorized Dealer. If your Authorized Dealer’s relationship with Goldman Sachs is terminated, and you do not transfer your account to another Authorized Dealer, the Trust reserves the right to redeem your shares. The Trust will not be responsible for any loss in an investor’s account resulting from a redemption.

Authorized Dealers and other financial intermediaries may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers, and if approved by the Trust, to designate other intermediaries to accept such orders. In these cases:

n	A Fund will be deemed to have received an order that is in proper form when the order is accepted by an Authorized Dealer or intermediary on a business day, and the order will be priced at the Fund’s NAV per share (adjusted for any applicable sales charge and redemption fee) next determined after such acceptance.
n	Authorized Dealers and intermediaries are responsible for transmitting accepted orders to the Funds within the time period agreed upon by them.

You should contact your Authorized Dealer or intermediary to learn whether it is authorized to accept orders for the Trust.

The Investment Adviser, Distributor and/or their affiliates may make payments to Authorized Dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Funds. The payments are in addition to the distribution and service fees and sales charges described in this Prospectus. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, 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. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also compensate Intermediaries for subaccounting, administrative and/or shareholder processing

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services that are in addition to the fees paid for these services by the Funds. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the “Payments to Intermediaries” section of the Additional Statement for more information about these payments.

The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your Authorized Dealer or Intermediary for more information about the payments it receives and any potential conflicts of interest.

   DISTRIBUTION SERVICES AND FEES   

What Are The Different Distribution And Service Fees Paid By Class A, B and C Shares?

The Trust has adopted distribution and service plans (each a “Plan”) under which Class A, Class B and Class C Shares bear distribution and service fees paid to Authorized Dealers and Goldman Sachs. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from these arrangements. Goldman Sachs generally pays the distribution and service fees on a quarterly basis.

Under the Plans, Goldman Sachs is entitled to a monthly fee from each Fund for distribution services equal, on an annual basis, to 0.25%, 0.75% and 0.75%, respectively, of a Fund’s average daily net assets attributed to Class A, Class B and Class C Shares. Because these fees are paid out of the Fund’s assets on an ongoing basis, over time, these fees will increase the cost of your investment and may cost you more than paying other types of such charges.

The distribution fees are subject to the requirements of Rule 12b-1 under the Investment Company Act, and may be used (among other things) for:

n	Compensation paid to and expenses incurred by Authorized Dealers, Goldman Sachs and their respective officers, employees and sales representatives;
n	Commissions paid to Authorized Dealers;
n	Allocable overhead;
n	Telephone and travel expenses;
n	Interest and other costs associated with the financing of such compensation and expenses;

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n	Printing of prospectuses for prospective shareholders;
n	Preparation and distribution of sales literature or advertising of any type; and
n	All other expenses incurred in connection with activities primarily intended to result in the sale of Class A, Class B and Class C Shares.

In connection with the sale of Class C Shares, Goldman Sachs normally begins paying the 0.75% distribution fee as an ongoing commission to Authorized Dealers after the shares have been held for one year.

   PERSONAL ACCOUNT MAINTENANCE SERVICES AND FEES   

Under the Plans, Goldman Sachs is also entitled to receive a separate fee equal on an annual basis to 0.25% of each Fund’s average daily net assets attributed to Class B or Class C Shares. This fee is for personal and account maintenance services, and may be used to make payments to Goldman Sachs, Authorized Dealers and their officers, sales representatives and employees for responding to inquiries of, and furnishing assistance to, shareholders regarding ownership of their shares or their accounts or similar services not otherwise provided on behalf of the Funds. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from this arrangement.

In connection with the sale of Class C Shares, Goldman Sachs normally begins paying the 0.25% ongoing service fee to Authorized Dealers after the shares have been held for one year.

   RESTRICTIONS ON EXCESSIVE TRADING PRACTICES   

Policies and Procedures on Excessive Trading Practices. In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view to longer-term investment purposes only that are consistent with the investment policies and practice of the respective Funds. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm fund performance and result in dilution in the value of Fund shares held by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of

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excessive trading or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to a Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Trust or its shareholders or would subordinate the interests of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.

To deter excessive shareholder trading, the Structured International Equity Fund, certain other International Equity Funds and certain Fixed Income Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase (60 calendar days of purchase with respect to Goldman Sachs High Yield Fund and High Yield Municipal Fund) subject to certain exceptions. See “Shareholder Guide—How to Sell Shares—What Do I Need To Know About The Redemption Fee?” for more information about the redemption fee, including transactions and certain omnibus accounts to which the redemption fee does not apply. As a further deterrent to excessive trading, many foreign equity securities held by the Structured International Equity Fund are priced by an independent pricing service using fair valuation. For more information on fair valuation, please see “Shareholder Guide—How to Buy Shares—How are Shares Priced?”

Pursuant to the policy adopted by the Board of Trustees of the Trust, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive. Goldman Sachs reviews on a regular, periodic basis available information relating to the trading activity in the Funds in order to assess the likelihood that a Fund may be the target of excessive trading. As part of its excessive trading surveillance process, Goldman Sachs, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. Consistent with the standards described above, if, in its judgment, Goldman Sachs detects excessive, short term trading, Goldman Sachs may reject or restrict a purchase or exchange request and may further seek to close an investor’s account with a Fund. Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.

Fund shares may be held through omnibus arrangements maintained by intermediaries such as broker-dealers, investment advisers, transfer agents, administrators and insurance companies. In addition, Fund shares may be held in omnibus

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401(k) plans, Employee Benefit Plans and other group accounts. Omnibus accounts include multiple investors and such accounts typically provide the Funds with a net purchase or redemption request on any given day where the purchases and redemptions of Fund shares by the investors shares are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are not known by the Funds. A number of these financial intermediaries may not have the capability or may not be willing to apply the Funds’ market timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, a Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts is limited. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Funds and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance.

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Taxation

As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds.

Unless your investment is through an IRA or other tax-advantaged account, you should consider the possible tax consequences of Fund distributions and the sale of your Fund shares.

   DISTRIBUTIONS   

Each Fund contemplates declaring as dividends each year all or substantially all of its taxable income. Distributions you receive from the Funds are generally subject to federal income tax, and may also be subject to state or local taxes. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash. For federal tax purposes, Fund distributions attributable to short-term capital gains and net investment income are generally taxable to you as ordinary income, while distributions attributable to long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.

Under current provisions of the Internal Revenue Code (the “Code”), the maximum long-term capital gain tax rate applicable to individuals, estates, and trusts is 15%. Also, Fund distributions to noncorporate shareholders attributable to dividends received by the Funds from U.S. and certain qualified foreign corporations will generally be taxed at the long-term capital gain rate, as long as certain other requirements are met. The amount of a Fund’s distributions that qualify for this favorable tax treatment may be reduced as a result of a Fund’s securities lending activities, by a high portfolio turnover rate or by investments in debt securities or “non-qualified” foreign corporations. For these lower rates to apply, the non-corporate shareholder must own the relevant Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund’s ex-dividend date.

A sunset provision provides that the 15% long-term capital gain rate and the taxation of dividends at the long-term capital gain rate will revert back to a prior version of these provisions in the Code for taxable years beginning after December 31, 2010.

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Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in October, November or December but paid in January are taxable as if they were paid in December. A percentage of the Funds’ dividends paid to corporate shareholders may be eligible for the corporate dividends-received deduction. This percentage may, however, be reduced as a result of a Fund’s securities lending activities, by a high portfolio turnover rate, or by investments in debt securities or foreign corporations. It is also not anticipated that any significant percentage of dividends paid by the Structured International Equity Fund will be eligible for the dividends-received deduction. Character and tax status of all distributions will be available to shareholders after the close of each calendar year.

Each Fund may be subject to foreign withholding or other foreign taxes on income or gain from certain foreign securities. In general, each Fund may deduct these taxes in computing its taxable income. Rather than deducting these foreign taxes, the Structured International Equity Fund may make an election to treat a proportionate amount of those taxes as constituting a distribution to each shareholder, which would allow you either (i) to credit that proportionate amount of taxes against U.S. Federal income tax liability as a foreign tax credit or (ii) to take that amount as an itemized deduction.

If you buy shares of a Fund before it makes a distribution, the distribution will be taxable to you even though it may actually be a return of a portion of your investment. This is known as “buying a dividend.”

   SALES AND EXCHANGES   

Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this gain or loss is long-term or short-term depending on whether your holding period exceeds twelve months, except that any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a sale, exchange or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of that Fund. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.

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TAXATION

   OTHER INFORMATION   

When you open your account, you should provide your Social Security Number or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so.

Non-U.S. investors may be subject to U.S. withholding and estate tax. However, withholding is generally not required on properly designated distributions of long-term capital gains and of short-term capital gains and qualified interest income paid to non-U.S. investors before August 31, 2008. Although this designation will be made for capital gain distributions, the Funds do not anticipate making any qualified interest income designations. Therefore, all distributions of interest income will be subject to withholding when paid to non-U.S. investors. More information about U.S. taxation of non-U.S. investors is included in the Additional Statement.

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Appendix A
Additional Information on Portfolio
Risks, Securities and Techniques

   A.  General Portfolio Risks   

The Funds will be subject to the risks associated with equity investments. “Equity investments” may include common stocks, preferred stocks, interests in real estate investment trusts, convertible debt obligations, convertible preferred stocks, equity interests in trusts, partnerships, joint ventures, limited liability companies and similar enterprises, warrants, stock purchase rights and synthetic and derivative instruments (such as swaps and futures contracts) that have economic characteristics similar to equity securities. In general, the values of equity investments fluctuate in response to the activities of individual companies and in response to general market and economic conditions. Accordingly, the values of the equity investments that a Fund holds may decline over short or extended periods. The stock markets tend to be cyclical, with periods when stock prices generally rise and periods when prices generally decline. This volatility means that the value of your investment in the Funds may increase or decrease. In recent years, certain stock markets have experienced substantial price volatility.

To the extent that a Fund invests in fixed-income securities, that Fund will also be subject to the risks associated with its fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase. Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that an issuer or guarantor could default on its obligations, and a Fund will not recover its investment. Call risk and extension risk are normally present when the borrower has the option to prepay its obligations.

The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater expenses which must be borne by a Fund and its shareholders, and is also likely to result in higher short-term capital gains taxable to shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of a Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See “Financial Highlights” in Appendix B for a statement of the Funds’ historical portfolio turnover rates.

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APPENDIX A

The following sections provide further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental investment restrictions that cannot be changed without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in a Fund’s investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs.

   B.  Other Portfolio Risks   

Risks of Investing in Small Capitalization and Mid-Capitalization Companies. Each Fund may, to the extent consistent with its investment policies, invest in small and mid-capitalization companies. Investments in small and mid-capitalization companies involve greater risk and portfolio price volatility than investments in larger capitalization stocks. Among the reasons for the greater price volatility of these investments are the less certain growth prospects of smaller firms and the lower degree of liquidity in the markets for such securities. Small and mid-capitalization companies may be thinly traded and may have to be sold at a discount from current market prices or in small lots over an extended period of time. In addition, these securities are subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities in particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic or market conditions, or adverse investor perceptions whether or not accurate. Because of the lack of sufficient market liquidity, a Fund may incur losses because it will be required to effect sales at a disadvantageous time and only then at a substantial drop in price. Small and mid-capitalization companies include “unseasoned” issuers that do not have an established financial history; often have limited product lines, markets or financial resources; may depend on or use a few key personnel for management; and may be susceptible to losses and risks of bankruptcy. Small and mid-capitalization companies may be operating at a loss or have significant variations in operating results; may be engaged in a rapidly changing business with products subject to a substantial risk of obsolescence; may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position; and may have substantial borrowings or may otherwise have a weak financial condition. In addition, these companies may face intense competition, including competition from companies with greater financial resources, more extensive development,

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manufacturing, marketing, and other capabilities, and a larger number of qualified managerial and technical personnel. Transaction costs for these investments are often higher than those of larger capitalization companies. Investments in small and mid-capitalization companies may be more difficult to price precisely than other types of securities because of their characteristics and lower trading volumes.

Risks of Foreign Investments. The Funds may make foreign investments. Foreign investments involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers. Foreign investments may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and changes in exchange control regulations (e.g., currency blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the U.S. dollar) in which a portfolio security is quoted or denominated relative to the U.S. dollar would reduce the value of the portfolio security. In addition, if the currency in which a Fund receives dividends, interest or other payments declines in value against the U.S. dollar before such income is distributed as dividends to shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.

Brokerage commissions, custodial services and other costs relating to investment in international securities markets generally are more expensive than in the United States. In addition, clearance and settlement procedures may be different in foreign countries and, in certain markets, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. issuers. There may be less publicly available information about a foreign issuer than about a U.S. issuer. In addition, there is generally less government regulation of foreign markets, companies and securities dealers than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States. Foreign securities markets may have substantially less volume than U.S. securities markets and securities of many foreign issuers are less liquid and more volatile than securities of comparable domestic issuers. Furthermore, with respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments (or, in some cases, capital gains distributions), limitations on the removal of funds or other assets from such countries, and risks of political or social instability or diplomatic developments which could adversely affect investments in those countries.

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APPENDIX A

Concentration of a Fund’s assets in one or a few countries and currencies will subject a Fund to greater risks than if a Fund’s assets were not geographically concentrated.

Investment in sovereign debt obligations by a Fund involves risks not present in debt obligations of corporate issuers. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and a Fund may have limited recourse to compel payment in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn a Fund’s NAV, to a greater extent than the volatility inherent in debt obligations of U.S. issuers.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.

Investments in foreign securities may take the form of sponsored and unsponsored American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), European Depositary Receipts (“EDRs”) or other similar instruments representing securities of foreign issuers. ADRs, GDRs and EDRs represent the right to receive securities of foreign issuers deposited in a bank or other depository. ADRs and certain GDRs are traded in the United States. GDRs may be traded in either the United States or in foreign markets. EDRs are traded primarily outside the United States. Prices of ADRs are quoted in U.S. dollars. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security.

Risks of Euro. On January 1, 1999, the European Economic and Monetary Union (EMU) introduced a new single currency called the euro. The euro has replaced the national currencies of the following member countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Beginning January 1, 2007, the euro will become the currency of Slovenia. In addition, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, and Slovakia became members of the EMU on May 1, 2004 and Romania and Bulgaria will become members of the EMU on January 1, 2007, but these countries will not adopt the euro as their new currency until they can show that their economies have converged with the economies of the euro zone.

The European Central Bank has control over each country’s monetary policies. Therefore, the member countries no longer control their own monetary policies by directing independent interest rates for their currencies. The national governments

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of the participating countries, however, have retained the authority to set tax and spending policies and public debt levels.

The change to the euro as a single currency is relatively new and untested. The elimination of currency risk among EMU countries has affected the economic environment and behavior of investors, particularly in European markets, but the long-term impact of those changes on currency values or on the business or financial condition of European countries and issuers cannot be fully assessed at this time. In addition, the introduction of the euro presents other unique uncertainties, including the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax and labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other countries that now are or may in the future become members of the European Union (“EU”) will have an impact on the euro. Also, it is possible that the euro could be abandoned in the future by countries that have already adopted its use. In May and June 2005, voters in France and the Netherlands rejected ratification of the EU Constitution causing some other countries to postpone moves toward ratification. These or other events, including political and economic developments, could cause market disruptions, and could adversely affect the value of securities held by the Funds. Because of the number of countries using this single currency, a significant portion of the assets held by the Funds may be denominated in the euro.

Risks of Emerging Countries. The Structured International Equity Fund may invest in securities of issuers located in emerging countries. The risks of foreign investment are heightened when the issuer is located in an emerging country. Emerging countries are generally located in the Asia and Pacific regions, Eastern Europe, Latin and South America and Africa. The Fund’s purchase and sale of portfolio securities in certain emerging countries may be constrained by limitations relating to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on the aggregate trading volume by or holdings of the Fund, the Investment Adviser, its affiliates and their respective clients and other service providers. The Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.

Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees which may limit investment in such countries or increase the administrative costs of such investments. For example, certain Asian countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an

76

APPENDIX A

issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the issuer available for purchase by nationals. In addition, certain countries may restrict or prohibit investment opportunities in issuers or industries deemed important to national interests. Such restrictions may affect the market price, liquidity and rights of securities that may be purchased by the Fund. The repatriation of both investment income and capital from certain emerging countries is subject to restrictions such as the need for governmental consents. In situations where a country restricts direct investment in securities (which may occur in certain Asian and other countries), the Fund may invest in such countries through other investment funds in such countries.

Many emerging countries have experienced currency devaluations and substantial (and, in some cases, extremely high) rates of inflation. Other emerging countries have experienced economic recessions. These circumstances have had a negative effect on the economies and securities markets of such emerging countries. Economies in emerging countries generally are dependent heavily upon commodity prices and international trade and, accordingly, have been and may continue to be affected adversely by the economies of their trading partners, trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

Many emerging countries are subject to a substantial degree of economic, political and social instability. Governments of some emerging countries are authoritarian in nature or have been installed or removed as a result of military coups, while governments in other emerging countries have periodically used force to suppress civil dissent. Disparities of wealth, the pace and success of democratization, and ethnic, religious and racial disaffection, among other factors, have also led to social unrest, violence and/or labor unrest in some emerging countries. Unanticipated political or social developments may result in sudden and significant investment losses. Investing in emerging countries involves greater risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. As an example, in the past some Eastern European governments have expropriated substantial amounts of private property, and many claims of the property owners have never been fully settled. There is no assurance that similar expropriations will not recur in Eastern European or other countries.

The Structured International Equity Fund’s investment in emerging countries may also be subject to withholding or other taxes, which may be significant and may reduce the return from an investment in such countries to the Fund.

Settlement procedures in emerging countries are frequently less developed and reliable than those in the United States and may involve the Fund’s delivery of

77

securities before receipt of payment for their sale. In addition, significant delays may occur in certain markets in registering the transfer of securities. Settlement or registration problems may make it more difficult for the Fund to value its portfolio securities and could cause the Fund to miss attractive investment opportunities, to have a portion of its assets uninvested or to incur losses due to the failure of a counterparty to pay for securities the Fund has delivered or the Fund’s inability to complete its contractual obligations because of theft or other reasons.

The creditworthiness of the local securities firms used by a Fund in emerging countries may not be as sound as the creditworthiness of firms used in more developed countries. As a result, the Fund may be subject to a greater risk of loss if a securities firm defaults in the performance of its responsibilities.

The small size and inexperience of the securities markets in certain emerging countries and the limited volume of trading in securities in those countries may make the Fund’s investments in such countries less liquid and more volatile than investments in countries with more developed securities markets (such as the United States, Japan and most Western European countries). The Fund’s investments in emerging countries are subject to the risk that the liquidity of a particular investment, or investments generally, in such countries will shrink or disappear suddenly and without warning as a result of adverse economic, market or political conditions or adverse investor perceptions, whether or not accurate. Because of the lack of sufficient market liquidity, the Fund may incur losses because it will be required to effect sales at a disadvantageous time and only then at a substantial drop in price. Investments in emerging countries may be more difficult to price precisely because of the characteristics discussed above and lower trading volumes.

The Fund’s use of foreign currency management techniques in emerging countries may be limited. The Investment Adviser anticipates that a significant portion of the Funds’ currency exposure in emerging countries may not be covered by these techniques.

Risks of Derivative Investments. A Fund’s transactions, if any, in options, futures, options on futures, swaps, structured securities and foreign currency transactions involve additional risk of loss. Loss can result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative instruments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices, interest rates or currency prices or credit events. Each Fund may also invest

78

APPENDIX A

in derivative investments for non-hedging purposes (that is, to seek to increase total return). Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss.

Risks of Illiquid Securities. Each Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include:

n	Both domestic and foreign securities that are not readily marketable
n	Certain stripped mortgage-backed securities
n	Repurchase agreements and time deposits with a notice or demand period of more than seven days
n	Certain over-the-counter options
n	Certain structured securities and swap transactions
n	Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called “4(2) commercial paper” or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“144A Securities”).

Investing in 144A Securities may decrease the liquidity of a Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.

Credit/Default Risks. Debt securities purchased by the Funds may include securities (including zero coupon bonds) issued by the U.S. government (and its agencies, instrumentalities and sponsored enterprises), foreign governments, domestic and foreign corporations, banks and other issuers. Some of these fixed-income securities are described in the next section below. Further information is provided in the Additional Statement.

Debt securities rated BBB or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), Baa or higher by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB or Baa are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is

79

determined by the Investment Adviser to be of comparable credit quality. A security satisfies a Fund’s minimum rating requirement regardless of its relative ranking (for example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of the security, is in the best interest of a Fund and its shareholders.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:

n	U.S. government securities
n	Commercial paper rated at least A-2 by Standard & Poor’s, P-2 by Moody’s or having a comparable rating by another NRSRO
n	Certificates of deposit
n	Bankers’ acceptances
n	Repurchase agreements
n	Non-convertible preferred stocks and non-convertible corporate bonds with a remaining maturity of less than one year

When a Fund’s assets are invested in such instruments, the Fund may not be achieving its investment objective.

   C.  Portfolio Securities and Techniques   

This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks.

The Funds may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund’s investment objectives and policies. Further information is provided in the Additional Statement, which is available upon request.

Convertible Securities. Each Fund may invest in convertible securities. Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which a Fund invests are subject to the same rating criteria as its other investments in fixed-income securities. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest

80

APPENDIX A

rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.

Foreign Currency Transactions. A Fund may, to the extent consistent with its investment policies, purchase or sell foreign currencies on a cash basis or through forward contracts. A forward contract involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract. A Fund may engage in foreign currency transactions for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. In addition, the Structured International Equity Fund may enter into such transactions to seek to increase total return, which is considered a speculative practice. The Structured International Equity Fund may also enter into foreign currency transactions to seek a closer correlation between the Fund’s overall currency exposures and the currency exposures of the Fund’s performance benchmark.

The Funds may also engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted. A Fund may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the Investment Adviser, it would be beneficial to convert such currency into U.S. dollars at a later date (e.g., the Investment Adviser may anticipate the foreign currency to appreciate against the U.S. dollar).

Currency exchange rates may fluctuate significantly over short periods of time, causing, along with other factors, a Fund’s NAV to fluctuate (when the Fund’s NAV fluctuates, the value of your shares may go up or down). Currency exchange rates also can be affected unpredictably by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.

The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on an exchange. Such contracts are subject to the risk that the counterparty to the contract will default on its obligations. Since these contracts are not guaranteed by an exchange or clearinghouse, a default on a contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency

81

hedge or could force the Fund to cover its purchase or sale commitments, if any, at the current market price.

Structured Securities. Each Fund may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References.

The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may present a greater degree of market risk than many types of securities and may be more volatile, less liquid and more difficult to price accurately than less complex securities.

REITs. Each Fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate related loans. The value of a REIT is affected by changes in the value of the properties owned by the REIT or securing mortgage loans held by the REIT. REITs are dependent upon the ability of the REITs’ managers, and are subject to heavy cash flow dependency, default by borrowers and the qualification of the REITs under applicable regulatory requirements for favorable income tax treatment. REITs are also subject to risks generally associated with investments in real estate including possible declines in the value of real estate, general and local economic conditions, environmental problems and changes in interest rates. To the extent that assets underlying a REIT are concentrated geographically, by property type or in certain other respects, these risks may be heightened. A Fund will indirectly bear its proportionate share of any expenses, including management fees, paid by a REIT in which it invests.

Options on Securities, Securities Indices and Foreign Currencies. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller) of the option the obligation to sell, the underlying instrument during the option period. Each Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest. A Fund may also, to the extent consistent with its investment policies, purchase and sell (write) put and call options on foreign currencies.

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APPENDIX A

The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the Investment Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase a Fund’s transaction costs. Options written or purchased by the Funds may be traded on U.S. exchanges or (in the case of the Structured International Equity Fund) foreign exchanges or over-the-counter. Foreign and over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.

Futures Contracts and Options on Futures Contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument or currency at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on a particular securities index. The Structured International Equity Fund may also purchase and sell futures contracts based on various securities, foreign currencies and other financial instruments and indices. The Funds may engage in futures transactions on U.S. exchanges and the Structured International Equity Fund may engage in transactions on foreign exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in securities prices or, to the extent a Fund invests in foreign securities, currency exchange rates. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act, and therefore is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

Futures contracts and related options present the following risks:

n While a Fund may benefit from the use of futures and options on futures, unanticipated changes in securities prices or currency exchange rates may result

83

	in poorer overall performance than if the Fund had not entered into any futures contracts or options transactions.
n	Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and a Fund may be exposed to additional risk of loss.
n	The loss incurred by a Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received.
n	Futures markets are highly volatile and the use of futures may increase the volatility of a Fund’s NAV.
n	As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to a Fund.
n	Futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
n	Foreign exchanges may not provide the same protection as U.S. exchanges.

As an investment company registered with the SEC, a Fund must “set aside” (often referred to as “asset segregation”) liquid assets, or engage in other SEC- or staff-approved measures to “cover” open positions with respect to its transactions in futures contracts. In the case of futures contracts that do not cash settle, for example, a Fund must set aside liquid assets equal to the full notional value of the futures contracts while the positions are open. With respect to futures contracts that do cash settle, however, a Fund is permitted to set aside liquid assets in an amount equal to the Fund’s daily marked-to-market net obligations (i.e., the Fund’s daily net liability) under the futures contracts, if any, rather than their full notional value. Each Fund reserves the right to modify its asset segregation policies in the future to comply with any changes in the positions from time to time articulated by the SEC or its staff regarding asset segregation. By setting aside assets equal to only its net obligations under cash-settled futures contracts, a Fund will have the ability to employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional amount of the futures contracts.

Equity Swaps. Each Fund may invest in equity swaps. Equity swaps allow the parties to a swap agreement to exchange the dividend income or other components of return on an equity investment (for example, a group of equity securities or an index) for a component of return on another non-equity or equity investment.

An equity swap may be used by a Fund to invest in a market without owning or taking physical custody of securities in circumstances in which direct investment may be restricted for legal reasons or is otherwise deemed impractical or disadvantageous. Equity swaps are derivatives and their value can be very volatile.

84

APPENDIX A

To the extent that the Investment Adviser does not accurately analyze and predict the potential relative fluctuation of the components swapped with another party, a Fund may suffer a loss, which may be substantial. The value of some components of an equity swap (such as the dividends on a common stock) may also be sensitive to changes in interest rates. Furthermore, a Fund may suffer a loss if the counterparty defaults. Because equity swaps are normally illiquid, a Fund may be unable to terminate its obligations when desired.

When-Issued Securities and Forward Commitments. 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 settlement time. When-issued securities are securities that have been authorized, but not yet issued. When-issued securities are purchased in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. A forward commitment involves the entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when-issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate.

Repurchase Agreements. Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. Each Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation.

If the other party or “seller” defaults, a Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, a Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.

Certain Funds, together with other registered investment companies having advisory agreements with the Investment 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.

85

Lending of Portfolio Securities. Each Fund may engage in securities lending. Securities lending involves the lending of securities owned by a Fund to financial institutions such as certain broker-dealers including, as permitted by the SEC, Goldman Sachs. The borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. government securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by a Fund in short-term investments, including unregistered investment pools managed by the Investment Adviser or its affiliates and from which the Investment Adviser or its affiliates may receive fees. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or appreciation, and a Fund will be responsible for any loss that might result from its investment of the borrowers’ collateral. If the Investment Adviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of a Fund (including the loan collateral). Loan collateral (including any investment of the collateral) is not subject to the percentage limitations described elsewhere in this Prospectus regarding investments in fixed-income securities and cash equivalents.

A Fund may lend its securities to increase its income. A Fund may, however, experience delay in the recovery of its securities or incur a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund or becomes insolvent.

Preferred Stock, Warrants and Rights. Each Fund may invest in preferred stock, warrants and rights. Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default or other non-compliance by the issuer of the preferred stock.

Warrants and other rights are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant or right. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.

Other Investment Companies. Each Fund may invest in securities of other investment companies (including exchange-traded funds such as SPDRs and iShares^SM, as defined below) subject to statutory limitations prescribed by the Investment Company Act. These limitations include in certain circumstances a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund’s total

86

APPENDIX A

assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.

Exchange-traded funds such as SPDRs and iShares^SM are shares of unaffiliated investment companies which are traded like traditional equity securities on a national securities exchange or the NASDAQ^® National Market System.

n

Standard & Poor’s Depositary Receipts™. The Funds may, consistent with their investment policies, purchase Standard & Poor’s Depositary Receipts™ (“SPDRs”). SPDRs are securities traded on an exchange that represent ownership in the SPDR Trust, a trust which has been established to accumulate and hold a portfolio of common stocks that is intended to track the price performance and dividend yield of the S&P 500®. SPDRs may be used for several reasons, including, but not limited to, facilitating the handling of cash flows or trading, or reducing transaction costs. The price movement of SPDRs may not perfectly parallel the price action of the S&P 500®.

n

iSharesSM. iShares are shares of an investment company that invests substantially all of its assets in securities included in specified indices, including the MSCI indices for various countries and regions. The market prices of iShares are expected to fluctuate in accordance with both changes in the NAVs of their underlying indices and supply and demand of iShares on an exchange. However, iShares have a limited operating history and information is lacking regarding the actual performance and trading liquidity of iShares for extended periods or over complete market cycles. In addition, there is no assurance that the requirements of the exchange necessary to maintain the listing of iShares will continue to be met or will remain unchanged. In the event substantial market or other disruptions affecting iShares occur in the future, the liquidity and value of a Fund’s shares could also be substantially and adversely affected. If such disruptions were to occur, a Fund could be required to reconsider the use of iShares as part of its investment strategy.

Unseasoned Companies. Each Fund may invest in companies which (together with their predecessors) have operated less than three years. The securities of such

87

companies may have limited liquidity, which can result in their being priced higher or lower than might otherwise be the case. In addition, investments in unseasoned companies are more speculative and entail greater risk than do investments in companies with an established operating record.

Corporate Debt Obligations. Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. Each Fund may invest in corporate debt obligations issued by U.S. and certain non-U.S. issuers which issue securities denominated in the U.S. dollar (including Yankee and Euro obligations). In addition to obligations of corporations, corporate debt obligations include securities issued by banks and other financial institutions and supranational entities (i.e., the World Bank, the International Monetary Fund, etc.).

Bank Obligations. Each Fund may invest in obligations issued or guaranteed by U.S. or foreign banks. Bank obligations, including without limitation, time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulations. Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry.

U.S. Government Securities. Each Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (i) the full faith and credit of the U.S. Treasury; (ii) the right of the issuer to borrow from the U.S. Treasury; (iii) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (iv) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components of stripped U.S. Government Securities are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities whose principal value is periodically adjusted according to the rate of inflation.

Custodial Receipts and Trust Certificates. Each Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities or other

88

APPENDIX A

types of securities in which a Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. Each Fund may also invest in separately issued interests in custodial receipts and trust certificates.

Borrowings. Each Fund can borrow money from banks and other financial institutions in amounts not exceeding one-third of its total assets for temporary or emergency purposes. A Fund may not make additional investments if borrowings exceed 5% of its total assets.

89

Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund’s financial performance for the past five years (or less if the Fund has not been in operation for five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information has been audited by PricewaterhouseCoopers LLP, whose report, along with a Fund’s financial statements, is included in the Funds’ annual report (available upon request).

STRUCTURED LARGE CAP VALUE FUND

		Structured Large Cap Value Fund—Class A Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	12.69		$	11.15		$	9.48		$	8.74		$	10.31
Income (loss) from investment operations
Net investment incomea			0.17			0.12			0.04			0.10			0.07
Net realized and unrealized gain (loss)			1.51			1.76			1.75			0.74			(1.57	)
	Total from investment operations		1.68			1.88			1.79			0.84			(1.50	)
Distributions to shareholders
From net investment income			(0.14	)		(0.09	)		(0.12	)		(0.10	)		(0.07	)
From net realized gains			(0.24	)		(0.25	)		—			—			—
	Total distributions		(0.38	)		(0.34	)		(0.12	)		(0.10	)		(0.07	)
Net asset value, end of year		$	13.99		$	12.69		$	11.15		$	9.48		$	8.74
Total returnb			13.43	%		17.13	%		18.93	%		9.70	%		(14.61	)%
Net assets, end of year (in 000s)		$	438,245		$	186,441		$	100,374		$	79,866		$	76,472
Ratio of net expenses to average net assets			0.99	%		1.10	%		1.10	%		1.11	%		1.11	%
Ratio of net investment income to average net assets			1.31	%		0.99	%		0.95	%		1.13	%		0.76	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.10	%		1.14	%		1.15	%		1.22	%		1.20	%
Ratio of net investment income to average net assets			1.20	%		0.95	%		0.90	%		1.02	%		0.67	%
Portfolio turnover rate			127	%		132	%		154	%		102	%		112	%

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90

APPENDIX B

		Structured Large Cap Value Fund—Class B Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	12.59		$	11.06		$	9.40		$	8.67		$	10.24
Income (loss) from investment operations
Net investment income (loss)a			0.07			0.03			(0.04	)		0.03			—	c
Net realized and unrealized gain (loss)			1.49			1.76			1.74			0.73			(1.56	)
	Total from investment operations		1.56			1.79			1.70			0.76			(1.56	)
Distributions to shareholders
From net investment income			(0.03	)		(0.01	)		(0.04	)		(0.03	)		(0.01	)
From net realized gains			(0.24	)		(0.25	)		—			—			—
	Total distributions		(0.27	)		(0.26	)		(0.04	)		(0.03	)		(0.01	)
Net asset value, end of year		$	13.88		$	12.59		$	11.06		$	9.40		$	8.67
Total returnb			12.56	%		16.32	%		18.09	%		8.83	%		(15.28	)%
Net assets, end of year (in 000s)		$	19,200		$	20,479		$	19,819		$	18,077		$	18,828
Ratio of net expenses to average net assets			1.75	%		1.85	%		1.85	%		1.86	%		1.86	%
Ratio of net investment income to average net assets			0.49	%		0.22	%		0.19	%		0.38	%		—	%d
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.84	%		1.89	%		1.90	%		1.97	%		1.95	%
Ratio of net investment income (loss) to average net assets			0.40	%		0.18	%		0.14	%		0.27	%		(0.09	)%
Portfolio turnover rate			127	%		132	%		154	%		102	%		112	%

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91

		Structured Large Cap Value Fund—Class C Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	12.60		$	11.07		$	9.42		$	8.68		$	10.25
Income (loss) from investment operations
Net investment income (loss)a			0.07			0.03			(0.04	)		0.03			—	c
Net realized and unrealized gain (loss)			1.50			1.76			1.73			0.74			(1.56	)
	Total from investment operations		1.57			1.79			1.69			0.77			(1.56	)
Distributions to shareholders
From net investment income			(0.03	)		(0.01	)		(0.04	)		(0.03	)		(0.01	)
From net realized gains			(0.24	)		(0.25	)		—			—			—
	Total distributions		(0.27	)		(0.26	)		(0.04	)		(0.03	)		(0.01	)
Net asset value, end of year		$	13.90		$	12.60		$	11.07		$	9.42		$	8.68
Total returnb			12.66	%		16.32	%		17.97	%		8.95	%		(15.26	)%
Net assets, end of year (in 000s)		$	22,768		$	20,666		$	17,027		$	13,798		$	12,533
Ratio of net expenses to average net assets			1.75	%		1.85	%		1.85	%		1.86	%		1.86	%
Ratio of net investment income to average net assets			0.51	%		0.22	%		0.19	%		0.37	%		0.01	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.84	%		1.89	%		1.90	%		1.97	%		1.95	%
Ratio of net investment income (loss) to average net assets			0.41	%		0.18	%		0.14	%		0.26	%		(0.08	)%
Portfolio turnover rate			127	%		132	%		154	%		102	%		112	%

See page 105 for all footnotes.

92

APPENDIX B

STRUCTURED U.S. EQUITY FUND

		Structured U.S. Equity Fund—Class A Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	29.13		$	25.81		$	22.57		$	20.18		$	24.30
Income (loss) from investment operations
Net investment incomea			0.24			0.26	e		0.11			0.09			0.04
Net realized and unrealized gain (loss)			2.53			3.28			3.20			2.31			(4.16	)
	Total from investment operations		2.77			3.54			3.31			2.40			(4.12	)
Distributions to shareholders
From net investment income			(0.11	)		(0.22	)		(0.07	)		(0.01	)		—
Net asset value, end of year		$	31.79		$	29.13		$	25.81		$	22.57		$	20.18
Total returnb			9.51	%		13.75	%		14.71	%		11.90	%		(16.95	)%
Net assets, end of year (in 000s)		$	611,999		$	477,204		$	398,346		$	351,673		$	340,934
Ratio of net expenses to average net assets			0.99	%		1.09	%		1.13	%		1.15	%		1.14	%
Ratio of net investment income to average net assets			0.79	%		0.93	% e		0.43	%		0.44	%		0.19	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.15	%		1.19	%		1.25	%		1.26	%		1.24	%
Ratio of net investment income to average net assets			0.64	%		0.83	% e		0.31	%		0.33	%		0.09	%
Portfolio turnover rate			129	%		142	%		112	%		74	%		74	%

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93

		Structured U.S. Equity Fund—Class B Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	27.52		$	24.39		$	21.42		$	19.28		$	23.39
Income (loss) from investment operations
Net investment income (loss)a			—	c		0.05	e		(0.08	)		(0.06	)		(0.13	)
Net realized and unrealized gain (loss)			2.40			3.09			3.05			2.20			(3.98	)
	Total from investment operations		2.40			3.14			2.97			2.14			(4.11	)
Distributions to shareholders
From net investment income			—			(0.01	)		—			—			—
Net asset value, end of year		$	29.92		$	27.52		$	24.39		$	21.42		$	19.28
Total returnb			8.72	%		12.87	%		13.87	%		11.10	%		(17.57	)%
Net assets, end of year (in 000s)		$	78,110		$	108,595		$	115,492		$	118,993		$	125,243
Ratio of net expenses to average net assets			1.75	%		1.84	%		1.88	%		1.90	%		1.89	%
Ratio of net investment income (loss) to average net assets			0.01	%		0.19	%e		(0.32	)%		(0.31	)%		(0.57	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.90	%		1.94	%		2.00	%		2.01	%		1.99	%
Ratio of net investment income (loss) to average net assets			(0.13	)%		0.09	%e		(0.44	)%		(0.42	)%		(0.67	)%
Portfolio turnover rate			129	%		142	%		112	%		74	%		74	%

See page 105 for all footnotes.

94

APPENDIX B

		Structured U.S. Equity Fund—Class C Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	27.39		$	24.30		$	21.34		$	19.20		$	23.29
Income (loss) from investment operations
Net investment income (loss)a			0.01			0.05	e		(0.08	)		(0.06	)		(0.12	)
Net realized and unrealized gain (loss)			2.38			3.07			3.04			2.20			(3.97	)
	Total from investment operations		2.39			3.12			2.96			2.14			(4.09	)
Distributions to shareholders
From net investment income			—			(0.03	)		—			—			—
Net asset value, end of year		$	29.78		$	27.39		$	24.30		$	21.34		$	19.20
Total returnb			8.73	%		12.86	%		13.87	%		11.15	%		(17.56	)%
Net assets, end of year (in 000s)		$	36,628		$	38,380		$	38,656		$	36,546		$	36,223
Ratio of net expenses to average net assets			1.75	%		1.84	%		1.88	%		1.90	%		1.89	%
Ratio of net investment income (loss) to average net assets			0.03	%		0.20	% e		(0.32	)%		(0.31	)%		(0.56	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.90	%		1.94	%		2.00	%		2.01	%		1.99	%
Ratio of net investment income (loss) to average net assets			(0.12	)%		0.10	%e		(0.44	)%		(0.42	)%		(0.66	)%
Portfolio turnover rate			129	%		142	%		112	%		74	%		74	%

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95

STRUCTURED LARGE CAP GROWTH FUND

		Structured Large Cap Growth Fund—Class A Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	12.55		$	11.13		$	10.33		$	9.06		$	11.51
Income (loss) from investment operations
Net investment income (loss)a			0.04			0.04	f		(0.01	)		(0.01	)		(0.03	)
Net realized and unrealized gain (loss)			0.61			1.38	g		0.81			1.28			(2.38	)
	Total from investment operations		0.65			1.42			0.80			1.27			(2.41	)
Distributions to shareholders
From net realized gains			—			—			—			—			(0.04	)
Net asset value, end of year		$	13.20		$	12.55		$	11.13		$	10.33		$	9.06
Total returnb			5.21	%		12.76	% h		7.74	%		14.02	%		(21.04	)%
Net assets, end of year (in 000s)		$	310,386		$	166,792		$	120,872		$	127,317		$	139,593
Ratio of net expenses to average net assets			1.00	%		1.11	%		1.15	%		1.18	%		1.17	%
Ratio of net investment income (loss) to average net assets			0.28	%		0.37	%f		(0.10	)%		(0.07	)%		(0.32	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.16	%		1.24	%		1.29	%		1.31	%		1.27	%
Ratio of net investment income (loss) to average net assets			0.12	%		0.24	%f		(0.24	)%		(0.20	)%		(0.42	)%
Portfolio turnover rate			111	%		146	%		149	%		119	%		113	%

See page 105 for all footnotes.

96

APPENDIX B

		Structured Large Cap Growth Fund—Class B Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	11.81		$	10.55		$	9.87		$	8.72		$	11.16
Income (loss) from investment operations
Net investment lossa			(0.06	)		(0.04	) f		(0.09	)		(0.07	)		(0.11	)
Net realized and unrealized gain (loss)			0.58			1.30	g		0.77			1.22			(2.29	)
	Total from investment operations		0.52			1.26			0.68			1.15			(2.40	)
Distributions to shareholders
From net realized gains			—			—			—			—			(0.04	)
Net asset value, end of year		$	12.33		$	11.81		$	10.55		$	9.87		$	8.72
Total returnb			4.40	%		11.94	% h		6.89	%		13.19	%		(21.61	)%
Net assets, end of year (in 000s)		$	41,947		$	65,545		$	78,810		$	91,084		$	99,959
Ratio of net expenses to average net assets			1.76	%		1.86	%		1.90	%		1.93	%		1.92	%
Ratio of net investment loss to average net assets			(0.52	)%		(0.32	)% f		(0.85	)%		(0.82	)%		(1.06	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.91	%		1.99	%		2.04	%		2.06	%		2.02	%
Ratio of net investment loss to average net assets			(0.67	)%		(0.45	)% f		(0.99	)%		(0.95	)%		(1.16	)%
Portfolio turnover rate			111	%		146	%		149	%		119	%		113	%

See page 105 for all footnotes.

97

		Structured Large Cap Growth Fund—Class C Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	11.81		$	10.55		$	9.87		$	8.72		$	11.17
Income (loss) from investment operations
Net investment lossa			(0.06	)		(0.04	) f		(0.09	)		(0.07	)		(0.11	)
Net realized and unrealized gain (loss)			0.59			1.30	g		0.77			1.22			(2.30	)
	Total from investment operations		0.53			1.26			0.68			1.15			(2.41	)
Distributions to shareholders
From net realized gains			—			—			—			—			(0.04	)
Net asset value, end of year		$	12.34		$	11.81		$	10.55		$	9.87		$	8.72
Total returnb			4.49	%		11.94	% h		6.89	%		13.19	%		(21.68	)%
Net assets, end of year (in 000s)		$	22,811		$	29,672		$	32,901		$	36,553		$	41,627
Ratio of net expenses to average net assets			1.76	%		1.86	%		1.90	%		1.93	%		1.92	%
Ratio of net investment loss to average net assets			(0.52	)%		(0.32	)% f		(0.85	)%		(0.82	)%		(1.07	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.91	%		1.99	%		2.04	%		2.06	%		2.02	%
Ratio of net investment loss to average net assets			(0.67	)%		(0.45	)% f		(0.99	)%		(0.95	)%		(1.17	)%
Portfolio turnover rate			111	%		146	%		149	%		119	%		113	%

See page 105 for all footnotes.

98

APPENDIX B

STRUCTURED SMALL CAP EQUITY FUND

		Structured Small Cap Equity Fund—Class A Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	14.55		$	12.24		$	11.61		$	9.36		$	10.59
Income (loss) from investment operations
Net investment income (loss)a			—	c		(0.02	)		(0.04	)		0.02			—	c
Net realized and unrealized gain (loss)			0.35			3.02			1.38			2.23			(0.83	)
	Total from investment operations		0.35			3.00			1.34			2.25			(0.83	)
Distributions to shareholders
From net investment income			—			—			(0.02	)		—			—
From net realized gains			(1.14	)		(0.69	)		(0.69	)		—			(0.40	)
	Total distributions		(1.14	)		(0.69	)		(0.71	)		—			(0.40	)
Net asset value, end of year		$	13.76		$	14.55		$	12.24		$	11.61		$	9.36
Total returnb			2.42	%		24.97	%		11.87	%		24.04	%		(8.20	)%
Net assets, end of year (in 000s)		$	185,508		$	154,877		$	114,684		$	89,340		$	57,014
Ratio of net expenses to average net assets			1.27	%		1.33	%		1.33	%		1.34	%		1.34	%
Ratio of net investment income (loss) to average net assets			—	%d		(0.15	)%		(0.30	)%		0.25	%		0.01	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.37	%		1.41	%		1.43	%		1.52	%		1.58	%
Ratio of net investment income (loss) to average net assets			(0.09	)%		(0.23	)%		(0.40	)%		0.07	%		(0.23	)%
Portfolio turnover rate			151	%		149	%		153	%		149	%		136	%

See page 105 for all footnotes.

99

		Structured Small Cap Equity Fund—Class B Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	13.60		$	11.56		$	11.06		$	8.99		$	10.26
Income (loss) from investment operations
Net investment lossa			(0.10	)		(0.11	)		(0.13	)		(0.05	)		(0.08	)
Net realized and unrealized gain (loss)			0.33			2.84			1.32			2.12			(0.79	)
	Total from investment operations		0.23			2.73			1.19			2.07			(0.87	)
Distributions to shareholders
From net realized gains			(1.14	)		(0.69	)		(0.69	)		—			(0.40	)
Net asset value, end of year		$	12.69		$	13.60		$	11.56		$	11.06		$	8.99
Total returnb			1.66	%		24.07	%		11.08	%		23.03	%		(8.88	)%
Net assets, end of year (in 000s)		$	16,197		$	19,555		$	19,642		$	19,408		$	16,854
Ratio of net expenses to average net assets			2.02	%		2.08	%		2.08	%		2.09	%		2.09	%
Ratio of net investment loss to average net assets			(0.75	)%		(0.89	)%		(1.04	)%		(0.51	)%		(0.74	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			2.11	%		2.16	%		2.18	%		2.27	%		2.33	%
Ratio of net investment loss to average net assets			(0.84	)%		(0.97	)%		(1.14	)%		(0.69	)%		(0.98	)%
Portfolio turnover rate			151	%		149	%		153	%		149	%		136	%

See page 105 for all footnotes.

100

APPENDIX B

		Structured Small Cap Equity Fund—Class C Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	13.64		$	11.60		$	11.10		$	9.01		$	10.29
Income (loss) from investment operations
Net investment lossa			(0.10	)		(0.11	)		(0.13	)		(0.05	)		(0.07	)
Net realized and unrealized gain (loss)			0.34			2.84			1.32			2.14			(0.81	)
	Total from investment operations		0.24			2.73			1.19			2.09			(0.88	)
Distributions to shareholders
From net realized gains			(1.14	)		(0.69	)		(0.69	)		—			(0.40	)
Net asset value, end of year		$	12.74		$	13.64		$	11.60		$	11.10		$	9.01
Total returnb			1.65	%		24.09	%		11.05	%		23.09	%		(8.95	)%
Net assets, end of year (in 000s)		$	25,899		$	24,901		$	20,915		$	16,463		$	11,504
Ratio of net expenses to average net assets			2.02	%		2.08	%		2.08	%		2.09	%		2.09	%
Ratio of net investment loss to average net assets			(0.75	)%		(0.90	)%		(1.05	)%		(0.51	)%		(0.74	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			2.11	%		2.16	%		2.18	%		2.27	%		2.33	%
Ratio of net investment loss to average net assets			(0.84	)%		(0.98	)%		(1.15	)%		(0.69	)%		(0.98	)%
Portfolio turnover rate			151	%		149	%		153	%		149	%		136	%

See page 105 for all footnotes.

101

STRUCTURED INTERNATIONAL EQUITY FUND

		Structured International Equity Fund—Class A Shares
		Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	11.70		$	9.49		$	7.66		$	7.35		$	8.38
Income (loss) from investment operations
Net investment incomea			0.21			0.18			0.10			0.08			0.03
Net realized and unrealized gain (loss)			2.57			2.10			1.80			0.28			(1.06	)
	Total from investment operations		2.78			2.28			1.90			0.36			(1.03	)
Distributions to shareholders
From net investment income			(0.11	)		(0.07	)		(0.07	)		(0.05	)		—
From net realized gains			(0.08	)		—			—			—			—
	Total distributions		(0.19	)		(0.07	)		(0.07	)		(0.05	)		—
Net asset value, end of year		$	14.29		$	11.70		$	9.49		$	7.66		$	7.35
Total returnb			24.02	%		24.12	%		24.85	%		5.00	%		(12.29	)%
Net assets, end of year (in 000s)		$	739,861		$	293,591		$	130,291		$	95,015		$	72,405
Ratio of net expenses to average net assets			1.26	%		1.39	%		1.59	%		1.67	%		1.67	%
Ratio of net investment income to average net assets			1.63	%		1.64	%		1.08	%		1.12	%		0.38	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.35	%		1.40	%		1.68	%		1.84	%		1.82	%
Ratio of net investment income to average net assets			1.54	%		1.63	%		0.99	%		0.95	%		0.23	%
Portfolio turnover rate			59	%		73	%		99	%		122	%		115	%

See page 105 for all footnotes.

102

APPENDIX B

		Structured International Equity Fund—Class B Shares
		Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	11.53		$	9.37		$	7.56		$	7.24		$	8.29
Income (loss) from investment operations
Net investment income (loss)a			0.08			0.08			0.04			0.04			(0.01	)
Net realized and unrealized gain (loss)			2.57			2.08			1.80			0.28			(1.04	)
	Total from investment operations		2.65			2.16			1.84			0.32			(1.05	)
Distributions to shareholders
From net investment income			(0.01	)		—			(0.03	)		—	c		—
From net realized gains			(0.08	)		—			—			—			—
	Total distributions		(0.09	)		—			(0.03	)		—	c		—
Net asset value, end of year		$	14.09		$	11.53		$	9.37		$	7.56		$	7.24
Total returnb			23.18	%		23.05	%		24.31	%		4.45	%		(12.67	)%
Net assets, end of year (in 000s)		$	10,306		$	8,075		$	6,408		$	5,574		$	6,434
Ratio of net expenses to average net assets			2.02	%		2.14	%		2.16	%		2.17	%		2.17	%
Ratio of net investment income (loss) to average net assets			0.64	%		0.75	%		0.45	%		0.56	%		(0.07	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			2.11	%		2.15	%		2.25	%		2.34	%		2.32	%
Ratio of net investment income (loss) to average net assets			0.55	%		0.74	%		0.36	%		0.39	%		(0.22	)%
Portfolio turnover rate			59	%		73	%		99	%		122	%		115	%

See page 105 for all footnotes.

103

		Structured International Equity Fund—Class C Shares
		Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	11.54		$	9.37		$	7.56		$	7.25		$	8.30
Income (loss) from investment operations
Net investment income (loss)a			0.09			0.08			0.04			0.04			(0.01	)
Net realized and unrealized gain (loss)			2.56			2.09			1.79			0.28			(1.04	)
	Total from investment operations		2.65			2.17			1.83			0.32			(1.05	)
Distributions to shareholders
From net investment income			(0.02	)		—			(0.02	)		(0.01	)		—
From net realized gains			(0.08	)		—			—			—			—
	Total distributions		(0.10	)		—			(0.02	)		(0.01	)		—
Net asset value, end of year		$	14.09		$	11.54		$	9.37		$	7.56		$	7.25
Total returnb			23.10	%		23.16	%		24.28	%		4.38			(12.65	)%
Net assets, end of year (in 000s)		$	7,110		$	4,824		$	3,747		$	3,646		$	3,963
Ratio of net expenses to average net assets			2.02	%		2.14	%		2.16	%		2.17	%		2.17	%
Ratio of net investment income (loss) to average net assets			0.67	%		0.75	%		0.43	%		0.64	%		(0.07	)%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			2.11	%		2.15	%		2.25	%		2.34	%		2.32	%
Ratio of net investment income (loss) to average net assets			0.58	%		0.74	%		0.34	%		0.47	%		(0.22	)
Portfolio turnover rate			59	%		73	%		99	%		122	%		115	%

See page 105 for all footnotes.

104

APPENDIX B

Footnotes:

a	Calculated based on the average shares outstanding methodology.
b	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
c	Amount is less than $0.005 per share.
d	Amount is less than 0.005% of average net assets.
e	Reflects income recognized from a special dividend which amounted to $0.10 per share and 0.03% of average net assets.
f	Reflects income recognized from a special dividend which amounted to $0.03 per share and 0.30% of average net assets.
g	Reflects an increase of $0.01 due to payments by affiliates during the period to reimburse certain security claims.
h	Performance has not been restated to reflect the impact of security claims recorded during the period. If restated, the performance would have been 12.67%, 11.85%, and 11.85% for Class A, Class B, and Class C Shares.

105

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Index

1 General Investment Management Approach
4 Fund Investment Objectives and Strategies
4	Goldman Sachs Structured Large Cap Value Fund
6	Goldman Sachs Structured U.S. Equity Fund
7	Goldman Sachs Structured Large Cap Growth Fund
8	Goldman Sachs Structured Small Cap Equity Fund
9	Goldman Sachs Structured International Equity Fund
11 Other Investment Practices and Securities
13 Principal Risks of the Funds
17 Fund Performance
23 Fund Fees and Expenses
32 Service Providers
39 Dividends
40 Shareholder Guide
40	How To Buy Shares
54	How To Sell Shares
69 Taxation
72 Appendix A      Additional Information on      Portfolio Risks, Securities      and Techniques
90 Appendix B      Financial Highlights

Structured Equity Funds
Prospectus (Class A, B and C Shares)

   FOR MORE INFORMATION   

Annual/Semi-annual Report

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year.

Statement of Additional Information

Additional information about the Funds and their policies is also available in the Funds’ Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus).

The Funds’ annual and semi-annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1-800-526-7384. You can also access and download the annual and semi-annual reports and the Additional Statement at the Funds’ website: http://www.goldmansachsfunds.com.

To obtain other information and for shareholder inquiries:

n By telephone:	1-800-526-7384
n By mail:	Goldman Sachs Funds, P.O. Box 06050 Chicago, IL 60606
n On the Internet:	SEC EDGAR database – http://www.sec.gov

You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC’s public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102 or by electronic request to: publicinfo@sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942-8090.

The Funds’ investment company registration number is 811-5349.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

538962

STRUCTPROABC

EX-99.17.C

Goldman Sachs Trust (the “Trust”)

Goldman Sachs Domestic Equity Funds

Class A, B and C Shares of

Goldman Sachs Balanced Fund

Goldman Sachs Capital Growth Fund

Goldman Sachs Growth and Income Fund

Goldman Sachs Large Cap Value Fund

Goldman Sachs Strategic Growth Fund

Goldman Sachs Concentrated Growth Fund

Goldman Sachs Mid Cap Value Fund

Goldman Sachs Growth Opportunities Fund

Goldman Sachs Small/Mid Cap Growth Fund

Goldman Sachs Small Cap Value Fund

Supplement dated January 9, 2007 to the

Prospectus dated December 29, 2006

Goldman Sachs International Equity Funds

Class A, B and C Shares of

Goldman Sachs Concentrated International Equity Fund

Goldman Sachs Japanese Equity Fund

Goldman Sachs International Small Cap Fund

Goldman Sachs Emerging Markets Equity Fund

Goldman Sachs Asia Equity Fund

Goldman Sachs BRIC Fund (Brazil, Russia, India, China)

Supplement dated January 9, 2007 to the

Prospectus dated December 29, 2006

Goldman Sachs Structured Equity Funds

Class A, B and C Shares of

Goldman Sachs Structured Large Cap Value Fund

Goldman Sachs Structured Large Cap Growth Fund

Goldman Sachs Structured U.S. Equity Fund

Goldman Sachs Structured Small Cap Equity Fund

Goldman Sachs Structured International Equity Fund

Supplement dated January 9, 2007 to the

Prospectus dated December 29, 2006

     Effective January 9, 2007, the following text is added below the chart under “What Is My Minimum Investment In The Funds” in the section of the Prospectus titled “Shareholder Guide:”

     The minimum investment requirement may be waived for certain mutual fund “wrap” programs at the discretion of the Trust’s officers. No minimum amount is required for subsequent investments.

WRAPSTCK2 1-07

538572

EX-99.17.D

Prospectus

Institutional
Shares

December 29, 2006

 GOLDMAN SACHS STRUCTURED EQUITY FUNDS

n Goldman Sachs Structured Large Cap Value Fund

n  Goldman Sachs Structured U.S. Equity Fund

n  Goldman Sachs Structured Large Cap Growth Fund

n  Goldman Sachs Structured Small Cap Equity Fund

n  Goldman Sachs Structured International Equity Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN A FUND.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

General Investment
Management Approach

Goldman Sachs Asset Management, L.P. (“GSAM^®”) serves as investment adviser to the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, and Structured International Equity Funds. GSAM is referred to in this Prospectus as the “Investment Adviser.”

   QUANTITATIVE STYLE FUNDS   

GSAM’s Quantitative Investment Philosophy:

GSAM’s quantitative style of funds management emphasizes the three building blocks of active management: fundamentally-based stock selection, careful portfolio construction and efficient implementation.

   GOLDMAN SACHS STRUCTURED FUNDS   

Step 1: Stock Selection

The Investment Adviser attempts to forecast expected returns on approximately 10,000 stocks on a daily basis using proprietary CORE^SM (“Computer-Optimized, Research-Enhanced”) models developed by the Global Quantitative Equity (“GQE”) team. These quantitative models are based on six investment themes—Valuation, Momentum, Analyst Sentiment, Profitability, Earnings Quality and Management Impact. The Valuation theme attempts to capture potential mispricings of securities by comparing measures of the company’s intrinsic value to its market value. The Momentum theme attempts to forecast companies’ future returns based on their past stock price performance, measured over various periods. The Analyst Sentiment theme looks at how Wall Street analysts’ views about a company’s earnings and prospects are changing over time. The Profitability theme assesses a company’s profit margins and operating efficiency relative to its peers, and views those that are more profitable as more attractive. Finally, the Management Impact theme evaluates a company’s management strategy through the company’s investing and financing behavior.

Step 2: Portfolio Construction

The Investment Adviser uses a proprietary risk model to help manage the expected deviation of the portfolio’s returns from those of the benchmark. The model attempts to identify and measure the comparative risks between equity investments as accurately as possible by including all the above themes used in the return model, as well as several other factors associated with risk but not return. In this process, the Investment Adviser seeks to manage risk by overweighting stocks with

1

positive characteristics identified in the return models and underweighting stocks with negative characteristics relative to their benchmark weights, while maintaining other characteristics such as size and sector weights close to the benchmark. A computer optimizer evaluates many different security combinations (considering many possible weightings) in an effort to construct the most efficient risk/return portfolio given each Structured Fund’s benchmark.

Step 3: Efficient Implementation

The portfolio management team considers transaction costs at each step of the investment process. The team incorporates expected portfolio turnover when assigning weights to the variables in the multifactor model. The team also factors expected execution costs into portfolio construction and evaluates multiple trading options. The team then selects the trading strategy it believes will minimize the total transaction costs to the Fund.

Goldman Sachs Structured Funds are fully invested, broadly diversified and offer consistent overall portfolio characteristics. They may serve as good foundations on which to build a portfolio.

References in this Prospectus to a Fund’s benchmark are for informational purposes only, and unless otherwise noted are not an indication of how a particular Fund is managed.

   GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND   

The Goldman Sachs Structured International Equity Fund is a joint effort by the GQE and Quantitative Strategies (“QS”) teams that is designed to invest in international markets and seeks to add value from diversified sources of return—tactical country selection and individual stock positions.

In addition to Steps 1 through 3 above, the Structured International Equity Fund employs top-down global country selection. The QS team attempts to forecast returns to 21 stock markets and 9 currencies on a daily basis. Country/ currency return forecasts are determined using models developed by the QS team and are based on five investment themes: Valuation, Momentum, Risk Premium, Fund Flows and Macro. The Valuation theme favors equity and currency markets which appear cheap relative to accounting measures of value and purchasing power. The Momentum theme favors countries and currencies that have had strong recent of the benchmark. The Risk Premium theme evaluates whether a country is overcompensating investors for political and financial risk, while the Fund Flows

2

GENERAL INVESTMENT MANAGEMENT APPROACH

theme evaluates the strength of capital market inflows. Finally, the Macro theme assesses a market’s interest rate environment and growth prospects.

By combining two uncorrelated sources of expected excess returns (international stock selection and country selection), the Investment Adviser seeks to create a portfolio that looks similar to the Fund’s benchmark, but is believed by the Investment Adviser to be positioned to outperform through country selection and stock selection. Sector weights are very similar to those in the benchmark adjusted for country selection views, but the Investment Adviser takes intentional country over- and under-weights with many small, diversified stock positions to seek to achieve positive excess returns relative to the benchmark.

3

Fund Investment Objectives
and Strategies

Goldman Sachs
Structured Large Cap Value Fund

FUND FACTS
Objective:	Long-term growth of capital and dividend income
Benchmark:	Russell 1000® Value Index
Investment Focus:	Diversified portfolio of equity investments in large-cap U.S. issuers selling at low to modest valuations
Investment Style:	Quantitative, applied to large-cap value stocks
Symbols:	GCVIX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital and dividend income. The Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap U.S. issuers that are selling at low to modest valuations relative to general market measures, such as earnings, book value and other fundamental accounting measures, and that are expected to have favorable prospects for capital appreciation and/or dividend-paying ability.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in a diversified portfolio of equity investments in large-cap U.S. issuers, including foreign issuers that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 95% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on

*  To the extent required by Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

4

FUND INVESTMENT OBJECTIVES AND STRATEGIES

an unrestricted basis) similar to that of the range of the market capitalizations of companies constituting the Russell 1000^® Value Index at the time of investment. If the market capitalization of a company held by the Fund moves outside this range, the Fund may, but is not required to, sell the securities. The Fund is not required to limit its investments to securities in the Russell 1000^® Value Index. The capitalization range of the Russell 1000^® Value Index is currently between $1.6 billion and $432 billion.

As discussed in “General Investment Management Approach,” the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research including but not limited to valuation, momentum, profitability and earnings quality, in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the Russell 1000^® Value Index. The benchmark generally consists of companies with above average capitalizations, low earnings growth expectations and above average dividend yields. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

5

Goldman Sachs
Structured U.S. Equity Fund

FUND FACTS
Objective:	Long-term growth of capital and dividend income
Benchmark:	S&P 500® Index
Investment Focus:	Large-cap U.S. equity investments
Investment Style:	Quantitative, applied to large-cap growth and value (blend) stocks
Symbols:	GSELX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital and dividend income. The Fund seeks this objective through a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a diversified portfolio of equity investments in U.S. issuers, including foreign companies that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 95% of its Net Assets in such equity investments.

As discussed in “General Investment Management Approach,” the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research including but not limited to valuation, momentum, profitability and earnings quality, in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the S&P 500^® Index. The S&P 500 is an index of large-cap stocks designed to reflect a broad representation of the U.S. economy. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark. The Fund is not required to limit its investments to securities in the S&P 500^® Index.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

6

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Structured Large Cap Growth Fund

FUND FACTS
Objective:	Long-term growth of capital; dividend income is a secondary consideration
Benchmark:	Russell 1000® Growth Index
Investment Focus:	Large-cap, growth-oriented U.S. equity investments
Investment Style:	Quantitative, applied to large-cap growth stocks
Symbols:	GCGIX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap U.S. issuers that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy. Dividend income is a secondary consideration.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a broadly diversified portfolio of equity investments in large-cap U.S. issuers, including foreign issuers that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 95% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on an unrestricted basis) similar to that of the Russell 1000^® Growth Index at the time of investment. If the market capitalization of a company held by the Fund moves outside this range, the Fund may, but is not required to, sell the securities. The Fund is not required to limit its investments to securities in the Russell 1000^® Growth Index. The capitalization range of the Russell 1000^® Growth Index is currently between $1.3 billion and $432 billion.

As described in the “General Investment Management Approach”, the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research including but not limited to valuation, momentum, profitability and earnings quality, in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the Russell 1000^® Growth Index. The benchmark generally consists of companies with above average capitalization and earnings growth expectations and below average dividend yields. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

7

Goldman Sachs
Structured Small Cap Equity Fund

FUND FACTS
Objective:	Long-term growth of capital
Benchmark:	Russell 2000® Index
Investment Focus:	Equity investments in small-cap U.S. companies
Investment Style:	Quantitative, applied to small-cap growth and value (blend) stocks
Symbols:	GCSIX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments in U.S. issuers.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a broadly diversified portfolio of equity investments in small-cap U.S. issuers, including foreign issuers that are traded in the United States.* However, it is currently anticipated that, under normal circumstances, the Fund will invest at least 85% of its Net Assets in such equity investments. These issuers will have public stock market capitalizations (based upon shares available for trading on an unrestricted basis) similar to that of the range of the market capitalizations of companies constituting the Russell 2000^® Index at the time of investment. The Fund is not required to limit its investments to securities in the Russell 2000^® Index. In addition, if the market capitalization of a company held by the Fund moves outside this range, the Fund may, but is not required to, sell the securities. The capitalization range of the Russell 2000^® Index is currently between $90 million and $2.9 billion.

As discussed in “General Investment Management Approach,” the Fund’s investments are selected using a variety of quantitative techniques, derived from fundamental research including but not limited to valuation, momentum, profitability and earnings quality, in seeking to maximize the Fund’s expected return. The Fund maintains risk, style, capitalization and industry characteristics similar to the Russell 2000^® Index. The Russell 2000 is an index designed to represent an investable universe of small cap companies. The Fund seeks to maximize expected return while maintaining these and other characteristics similar to the benchmark.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered cash equivalents.

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

8

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Structured International Equity Fund

FUND FACTS
Objective:	Long-term growth of capital
Benchmark:	MSCI® Europe, Australasia, Far East (“EAFE®”) Index (unhedged)
Investment Focus:	Large-cap equity investments in companies that are organized outside the United States or whose securities are primarily traded outside the United States
Investment Style:	Quantitative
Symbols:	GCIIX

   INVESTMENT OBJECTIVE   

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments in large-cap companies that are organized outside the United States or whose securities are principally traded outside the United States.

   PRINCIPAL INVESTMENT STRATEGIES   

Equity Investments. The Fund invests, under normal circumstances, at least 80% of its Net Assets in a broadly diversified portfolio of equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States.*

The Fund may allocate its assets among countries as determined by the Investment Adviser from time to time, provided the Fund’s assets are invested in at least three foreign countries. The Fund may invest in the securities of issuers in countries with emerging markets or economies (“emerging countries”).

*  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

9

Goldman Sachs
Structured International Equity Fund continued

The Fund seeks broad representation of large-cap issuers across major countries and sectors of the international economy. The Fund’s investments are selected using both a variety of quantitative techniques and fundamental research, including but not limited to valuation, momentum, profitability and earnings, in seeking to maximize the Fund’s expected return, while maintaining risk, style, capitalization and industry characteristics similar to the EAFE^® Index. In addition, the Fund seeks a portfolio composed of companies with attractive valuations and stronger momentum characteristics than the EAFE^® Index.

Other. The Fund’s investments in fixed-income securities are limited to securities that are considered to be cash equivalents.

10

Other Investment Practices
and Securities

The table below identifies some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The table also highlights the differences among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in this table show allowable usage only; for actual usage, consult the Funds’ annual/ semi-annual reports. For more information about these and other investment practices and securities, see Appendix A. Each Fund publishes on its website (http://www.goldmansachsfunds.com) complete portfolio holdings for the Fund as of the end of each calendar quarter subject to a fifteen calendar-day lag between the date of the information and the date on which the information is disclosed. In addition, the Funds publish on their website month-end top ten holdings subject to a ten calendar-day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC. In addition, a description of the Funds’ policies and procedures with respect to the disclosure of a Fund’s portfolio securities is available in the Funds’ Statement of Additional Information (“Additional Statement”).

10 Percent of total assets (including securities lending collateral) (italic type)
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
•   No specific percentage limitation on usage; limited only by the objectives	Structured	Structured	Structured	Structured	Structured
and strategies of the Fund	Large Cap	U.S.	Large Cap	Small Cap	International
—   Not permitted	Value	Equity	Growth	Equity	Equity
	Fund	Fund	Fund	Fund	Fund
Investment Practices
Borrowings	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Cross Hedging of Currencies	•	•	•	•	•
Currency Swaps*	—	—	—	—	15
Custodial Receipts and Trust Certificates	•	•	•	•	•
Equity Swaps*	•	•	•	•	•
Foreign Currency Transactions**	•	•	•	•	•
Futures Contracts and Options on Futures Contracts	•1	•2	•1	•1	•
Investment Company Securities (including iSharesSM and Standard & Poor’s Depositary Receipts™)	10	10	10	10	10
Options on Foreign Currencies3	•	•	•	•	•
Options on Securities and Securities Indices4	•	•	•	•	•
Repurchase Agreements	•	•	•	•	•
Securities Lending	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Unseasoned Companies	•	•	•	•	•
Warrants and Stock Purchase Rights	•	•	•	•	•
When-Issued Securities and Forward Commitments	•	•	•	•	•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities and all swap transactions that are not deemed liquid.
**	Limited by the amount the Fund invests in foreign securities.
1	The Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds may enter into futures transactions only with respect to a representative index.
2	The Structured U.S. Equity Fund may enter into futures transactions only with respect to the S&P 500® Index.
3	The Funds may purchase and sell call and put options.
4	The Funds may sell covered call and put options and purchase call and put options.

11

10 Percent of Total Assets (excluding securities lending collateral) (italic type)
10 Percent of Net Assets (including borrowings for investment purposes) (roman type)
•    No specific percentage limitation	Structured	Structured	Structured	Structured	Structured
on usage; limited only by the	Large Cap	U.S.	Large Cap	Small Cap	International
objectives and strategies of the Fund	Value	Equity	Growth	Equity	Equity
—  Not permitted	Fund	Fund	Fund	Fund	Fund
Investment Securities
American, European and Global Depositary Receipts5	•	•	•	•	•
Bank Obligations6	•	•	•	•	•
Convertible Securities7	•	•	•	•	•
Corporate Debt Obligations6	•	•	•	•	•
Equity Investments	80+	90+	80+	80+	80+
Emerging Country Securities	—	—	—	—	25
Fixed-Income Securities6,8	20	10	20	20	20
Foreign Government Securities6	—	—	—	—	•
Foreign Securities9	•	•	•	•	•
Real Estate Investment Trusts	•	•	•	•	•
Structured Securities*	•	•	•	•	•
Temporary Investments	35	35	35	35	35
U.S. Government Securities6	•	•	•	•	•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.
5	The Funds, other than the Structured International Equity Fund, may not invest in European Depositary Receipts.
6	Limited by the amount the Fund invests in fixed-income securities and limited to cash equivalents only. The Funds may invest in bank obligations issued by U.S. or foreign banks.
7	The Funds have no minimum rating criteria for convertible debt securities.
8	Except as noted under “Convertible Securities,” fixed-income securities must be investment grade (i.e., BBB or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), Baa or higher by Moody’s Investors Service, Inc. (“Moody’s”) or have a comparable rating by another nationally recognized statistical rating organization (“NRSRO”)).
9	Except for the Structured International Equity Fund, equity securities of foreign issuers must be traded in the United States.

12

Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insur-ance Corporation or any other governmental agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective.

	Structured	Structured	Structured	Structured	Structured
	Large Cap	U.S.	Large Cap	Small Cap	International
•   Applicable	Value	Equity	Growth	Equity	Equity
— Not applicable	Fund	Fund	Fund	Fund	Fund
Credit/ Default	—	—	—	—	•
Foreign	•	•	•	•	•
Stock	•	•	•	•	•
Derivatives	•	•	•	•	•
Interest Rate	•	•	•	•	•
Management	•	•	•	•	•
Market	•	•	•	•	•
Liquidity	•	•	•	•	•
Investment Style	•	•	•	•	•
Mid Cap and Small Cap	•	•	•	•	•
Emerging Countries	—	—	—	—	•
Geographic	—	—	—	—	•

13

All Funds:

n	Credit/ Default Risk—The risk that an issuer or guarantor of fixed-income securities held by a Fund may default on its obligation to pay interest and repay principal.
n	Foreign Risk—The risk that when a Fund invests in foreign securities, it will be subject to risk of loss not typically associated with domestic issuers. Loss may result because of less foreign government regulation, less public information and less economic, political and social stability. Loss may also result from the imposition of exchange controls, confiscations and other government restrictions. A Fund will also be subject to the risk of negative foreign currency rate fluctuations. Foreign risks will normally be greatest when a Fund invests in issuers located in emerging countries.
n	Stock Risk—The risk that stock prices have historically risen and fallen in periodic cycles. Recently, U.S. and foreign stock markets have experienced substantial price volatility.
n	Derivatives Risk—The risk that loss may result from a Fund’s investments in options, futures, swaps, structured securities and other derivative instruments. These instruments may be leveraged so that small changes may produce disproportionate losses to a Fund.
n	Interest Rate Risk—The risk that when interest rates increase, securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.
n	Management Risk—The risk that a strategy used by the Investment Adviser may fail to produce the intended results.
n	Market Risk—The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more industry sectors, which will increase the Fund’s exposure to risk of loss from adverse developments affecting those sectors.
n	Liquidity Risk—The risk that a Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in small and mid-capitalization stocks and REITs will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate. The Goldman Sachs Asset Allocation Portfolios (the “Asset Allocation Portfolios”) expect to invest a significant percentage of their assets in the Funds and other funds for which GSAM or an affiliate now or in the future acts as investment adviser or

14

PRINCIPAL RISKS OF THE FUNDS

	underwriter. Redemptions by an Asset Allocation Portfolio of its position in a Fund may further increase liquidity risk and may impact a Fund’s net asset value (“NAV”).
n	Investment Style Risk—Different investment styles tend to shift in and out of favor depending upon market and economic conditions as well as investor sentiment. A Fund may outperform or underperform other funds that employ a different investment style. Examples of different investment styles include growth and value investing. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth of earnings potential. Growth companies are often expected by investors to increase their earnings at a certain rate. When these expectations are not met, investors can punish the stocks inordinately even if earnings showed an absolute increase. Also, since growth companies usually invest a high portion of earnings in their business, growth stocks may lack the dividends of some value stocks that can cushion stock prices in a falling market. Growth oriented funds will typically underperform when value investing is in favor. Value stocks are those that are undervalued in comparison to their peers due to adverse business developments or other factors.
n	Mid Cap and Small Cap Risk—The securities of small capitalization and mid-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. Securities of such issuers may lack sufficient market liquidity to enable a Fund to effect sales at an advantageous time or without a substantial drop in price. Both mid-cap and small-cap companies often have narrower markets and more limited managerial and financial resources than larger, more established companies. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of a Fund’s portfolio. Generally, the smaller the company size, the greater these risks.

Specific Funds:

n

Emerging Countries Risk—The securities markets of Asian, Latin, Central and South American, Eastern European, Middle Eastern, African and other emerging countries are less liquid, are especially subject to greater price volatility, have smaller market capitalizations, have less government regulation and are not subject to as extensive and frequent accounting, financial and other reporting requirements as the securities markets of more developed countries. Further, investment in equity securities of issuers located in certain emerging countries involves risk of loss resulting from problems in share registration and custody and substantial economic and political disruptions. These risks are not normally associated with investment in more developed countries.

n

Geographic Risk—Concentration of the investments of Structured International Equity Fund in issuers located in a particular country or region will subject the

15

Fund, to a greater extent than if investments were less concentrated, to the risks of adverse securities markets, exchange rates and social, political, regulatory or economic events which may occur in that country or region.

Concentration of the investments of the structured International Equity Fund in issuers located in a particular country or region will subject the Fund, to a greater extent than if investments were less concentrated, to the risks of adverse securities markets, exchange rates and social, political, regulatory or economic events which may occur in that country or region.

More information about the Funds’ portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice.

16

Fund Performance

   HOW THE FUNDS HAVE PERFORMED   

The bar chart and table provide an indication of the risks of investing in a Fund by showing: (a) changes in the performance of a Fund’s Institutional Shares from year to year; and (b) how the average annual total returns of a Fund’s Institutional Shares compare to those of broad-based securities market indices. The bar chart (including “Best Quarter” and “Worst Quarter” information) and table assume reinvestment of dividends and distributions. A Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund’s performance would have been reduced.

   INFORMATION ON AFTER-TAX RETURNS   

These definitions apply to the after-tax returns.

Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on a Fund’s Institutional Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.

Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on a Fund’s Institutional Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Institutional Shares at the end of the performance period.

Average Annual Total Returns After Taxes on Distributions and Sale of Shares. These returns reflect taxes paid on distributions on a Fund’s Institutional Shares and taxes applicable when the shares are redeemed (sold).

Note on Tax Rates. The after-tax performance figures are calculated using the historical highest individual federal marginal income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.

17

Structured Large Cap Value Fund

TOTAL RETURN	CALENDAR YEAR
The total return for Institutional Shares for the 9-month period ended September 30, 2006 was 10.75%. Best Quarter* Q2 ’03           +14.75% Worst Quarter* Q3 ’02           -17.00%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 12/31/98)
Returns Before Taxes		8.71%		5.65%		5.99%
Returns After Taxes on Distributions**		8.22%		5.20%		5.43%
Returns After Taxes on Distributions and Sale of Fund Shares**		6.30%		4.71%		4.93%
Russell 1000® Value Index***		7.05%		5.27%		5.81%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Russell 1000® Value Index (inception date 1/1/99) is an unmanaged market capitalization weighted index of the 1,000 largest U.S. companies with lower price-to-book ratios and lower forecasted growth values. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

18

FUND PERFORMANCE

Structured U.S. Equity Fund

TOTAL RETURN	CALENDAR YEAR
The total return for Institutional Shares for the 9-month period ended September 30, 2006 was 7.29%. Best Quarter* Q4 ’98           +21.60% Worst Quarter* Q3 ’02           -15.50%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Institutional Shares (Inception 6/15/95)
Returns Before Taxes		6.98%		2.39%		9.50%		10.50%
Returns After Taxes on Distributions**		6.88%		2.28%		8.34%		9.26%
Returns After Taxes on Distributions and Sale of Fund Shares**		4.66%		2.01%		7.85%		8.70%
S&P 500® Index***		4.91%		0.54%		9.07%		10.14%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The S&P 500® Index is the Standard & Poor’s 500 Composite Stock Price Index of 500 stocks, an unmanaged index of common stock prices. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

19

Structured Large Cap Growth Fund

TOTAL RETURN	CALENDAR YEAR
The total return for Institutional Shares for the 9-month period ended September 30, 2006 was 3.56%. Best Quarter* Q4 ’98           +25.61% Worst Quarter* Q1 ’01           -21.95%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 5/1/97)
Returns Before Taxes		5.95%		-2.35%		4.82%
Returns After Taxes on Distributions**		5.91%		-2.37%		4.39%
Returns After Taxes on Distributions and Sale of Fund Shares**		3.93%		-1.98%		3.98%
Russell 1000® Growth Index***		5.26%		-3.58%		4.40%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Russell 1000® Growth Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with higher price-to-book ratios and higher forecasted growth values. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

20

FUND PERFORMANCE

Structured Small Cap Equity Fund

TOTAL RETURN	CALENDAR YEAR
The total return for Institutional Shares for the 9-month period ended September 30, 2006 was 3.88%. Best Quarter* Q2 ’03           +21.20% Worst Quarter* Q3 ’98           -24.25%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 8/15/97)
Returns Before Taxes		7.90%		9.69%		8.34%
Returns After Taxes on Distributions**		5.90%		8.57%		7.30%
Returns After Taxes on Distributions and Sale of Fund Shares**		5.97%		7.96%		6.82%
Russell 2000® Index***		4.55%		8.22%		7.36%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Russell 2000® Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

21

Structured International Equity Fund

TOTAL RETURN	CALENDAR YEAR
The total return for Institutional Shares for the 9-month period ended September 30, 2006 was 16.07%. Best Quarter* Q4 ’98           +19.05% Worst Quarter* Q3 ’02           -19.52%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 8/15/97)
Returns Before Taxes		15.13%		6.16%		4.77%
Returns After Taxes on Distributions**		14.84%		5.97%		4.36%
Returns After Taxes on Distributions and Sale of Fund Shares**		10.26%		5.28%		3.97%
MSCI® EAFE® (unhedged)***		14.02%		4.94%		5.44%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The unmanaged MSCI® EAFE® Index (unhedged) is a market capitalization-weighted composite of securities in 21 developed markets. The Index figures do not reflect any deduction for fees, expenses or taxes. An investor cannot invest directly in an index.

22

Fund Fees and Expenses (Institutional Shares)

This table describes the fees and expenses that you would pay if you buy and hold Institutional Shares of a Fund.

	Structured		Structured		Structured		Structured		Structured
	Large Cap		U.S.		Large Cap		Small Cap		International
	Value		Equity		Growth		Equity		Equity
	Fund		Fund		Fund		Fund		Fund
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		None		None		None		None		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None		None		None		None		None
Redemption Fees		None		None		None		None		2.0%	1
Exchange Fees		None		None		None		None		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees2*		0.60%		0.65%		0.65%		0.85%		0.82%
Distribution and Service (12b-1) Fees		None		None		None		None		None
Other Expenses3*		0.09%		0.10%		0.11%		0.11%		0.12%
Total Fund Operating Expenses2*		0.69%		0.75%		0.76%		0.96%		0.94%

See page 24 for all other footnotes.

*  The “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Funds are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, the “Management Fees”, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Structured		Structured		Structured		Structured		Structured
	Large Cap		U.S.		Large Cap		Small Cap		International
	Value		Equity		Growth		Equity		Equity
	Fund		Fund		Fund		Fund		Fund
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees2		0.51%		0.51%		0.51%		0.81%		0.81%
Distribution and Service (12b-1) Fees		None		None		None		None		None
Other Expenses3		0.04%		0.04%		0.04%		0.04%		0.04%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.55%		0.55%		0.55%		0.85%		0.85%

23

Fund Fees and Expenses continued

1	A 2% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less.
2	The Funds’ annual operating expenses are based on actual expenses for the fiscal year ended August 31, 2006.
3	The Investment Adviser is entitled to a management fee at an annual rate equal to the following percentages of the average daily net assets of the Funds:

	Management Fee		Average Daily
Fund	Annual Rate		Net Assets
Structured Large Cap Value		0.60%		First $1 Billion
		0.54%		Next $1 Billion
		0.51%		Over $2 Billion
Structured U.S. Equity		0.65%		First $1 Billion
		0.59%		Next $1 Billion
		0.56%		Over $2 Billion
Structured Large Cap Growth		0.65%		First $1 Billion
		0.59%		Next $1 Billion
		0.56%		Over $2 Billion
Structured Small Cap Equity		0.85%		First $2 Billion
		0.77%		Over $2 Billion
Structured International Equity		0.85%		First $1 Billion
		0.77%		Next $1 Billion
		0.73%		Over $2 Billion

Additionally, as of the date of this Prospectus, the Investment Adviser is voluntarily waiving a portion of its management fee equal to 0.09%, 0.14%, 0.14%, 0.04% and 0.01% based on the average daily net assets of the Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Equity Fund and Structured International Equity Fund, respectively.

⁴ “Other Expenses” include transfer agency fees and expenses equal on an annualized basis to 0.04% of the average daily net assets of each Fund’s Institutional Shares plus all other ordinary expenses not detailed above. The Investment Adviser voluntarily agreed to reduce or limit “Other Expenses” (excluding management fees, transfer agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the following annual percentage rates of each Fund’s average daily net assets:

	Other
Fund	Expenses
Structured Large Cap Value		0.004%
Structured U.S. Equity		0.004%
Structured Large Cap Growth		0.004%
Structured Small Cap Equity		0.004%
Structured International Equity		0.004%

These expense reductions may be terminated at any time at the option of the Investment Adviser.

24

Example

The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Institutional Shares of a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Fund	1 Year		3 Years		5 Years		10 Years
Structured Large Cap Value	$	70	$	221	$	384	$	859
Structured U.S. Equity	$	77	$	240	$	417	$	930
Structured Large Cap Growth	$	78	$	243	$	422	$	942
Structured Small Cap Equity	$	98	$	306	$	531	$	1,178
Structured International Equity	$	96	$	300	$	520	$	1,155

Institutions that invest in Institutional Shares on behalf of their customers may charge other fees directly to their customer accounts in connection with their investments. You should contact your institution for information regarding such charges. Such fees, if any, may affect the return such customers realize with respect to their investments.

Certain institutions that invest in Institutional Shares may receive other compensation in connection with the sale and distribution of Institutional Shares or for services to their customers’ accounts and/or the Funds. For additional information regarding such compensation, see “Shareholder Guide” in the Prospectus and “Payments to Intermediaries” in the Additional Statement.

25

Service Providers

   INVESTMENT ADVISER   

Investment Adviser	Fund
Goldman Sachs Asset Management, L.P. (“GSAM”) 32 Old Slip New York, New York 10005	Structured Large Cap Value Structured U.S. Equity Structured Large Cap Growth Structured Small Cap Equity Structured International Equity

GSAM has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”). As of September 30, 2006, GSAM had assets under management of $576.4 billion.

The Investment Adviser provides day-to-day advice regarding the Funds’ portfolio transactions. The Investment Adviser makes the investment decisions for the Funds and places purchase and sale orders for the Funds’ portfolio transactions in U.S. and foreign markets. As permitted by applicable law, these orders may be directed to any brokers, including Goldman Sachs and its affiliates. While the Investment Adviser is ultimately responsible for the management of the Funds, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. In addition, the Investment Adviser has access to the research and certain proprietary technical models developed by Goldman Sachs, and will apply quantitative and qualitative analysis in determining the appropriate allocations among categories of issuers and types of securities.

The Investment Adviser also performs the following additional services for the Funds:

n	Supervises all non-advisory operations of the Funds
n	Provides personnel to perform necessary executive, administrative and clerical services to the Funds
n	Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
n	Maintains the records of each Fund
n	Provides office space and all necessary office equipment and services

26

SERVICE PROVIDERS

   MANAGEMENT FEES   

As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund’s average daily net assets):

						Actual Rate
						For the Fiscal
	Management Fee			Average Daily		Year Ended
Fund	Annual Rate			Net Assets		August 31, 2006
Structured Large Cap Value		0.60	%		First $1  Billion		0.60	%
		0.54	%		Next $1  Billion
		0.51	%		Over $2  Billion
Structured U.S. Equity		0.65	%		First $1  Billion		0.65	%
		0.59	%		Next $1  Billion
		0.56	%		Over $2  Billion
Structured Large Cap Growth		0.65	%		First $1  Billion		0.65	%
		0.59	%		Next $1  Billion
		0.56	%		Over $2  Billion
Structured Small Cap Equity		0.85	%		First $2  Billion		0.85	%
		0.77	%		Over $2  Billion
Structured International Equity		0.85	%		First $1  Billion		0.82	%
		0.77	%		Next $1  Billion
		0.73	%		Over $2  Billion

The Investment Adviser may voluntarily waive a portion of its advisory fee from time to time, and may discontinue or modify any such voluntary limitations in the future at its discretion.

A discussion regarding the basis for the Board of Trustees’ approval of the Management Agreement for the Funds in 2006 is available in the respective Fund’s annual report dated August 31, 2006.

27

   FUND MANAGERS   

Quantitative Domestic Equity Portfolio Management Team

n	A stable and growing team supported by an extensive internal staff
n	More than $100 billion in equities currently under management, including over $52 billion in US equities

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Melissa Brown Managing Director	Senior Portfolio Manager— Structured U.S. Equity Structured Large Cap Growth Structured Small Cap Equity Structured Large Cap Value	Since 1998 1998 1998 1998	Ms. Brown joined the Investment Adviser as a portfolio manager in 1998. From 1984 to 1998, she was the director of Quantitative Equity Research and served on the Investment Policy Committee at Prudential Securities Equity Research.
Robert C. Jones Chief Investment Officer Managing Director	Senior Portfolio Manager— Structured U.S. Equity Structured Large Cap Growth Structured Small Cap Equity Structured Large Cap Value	Since 1991 1997 1997 1998	Mr. Jones joined the Investment Adviser as a portfolio manager in 1989.

Melissa Brown, CFA, is a Managing Director and Senior Portfolio Manager for US portfolios. She is also a member of the GQE Investment Policy Committee. Robert C. Jones, CFA, is a Managing Director and Chair of the GQE Investment Policy Committee, which oversees the portfolio management process. He currently serves as the Chief Investment Officer for the GQE team. The computer optimizer constructs the portfolio based on the team’s models and design and no one person on the team has a subjective override of the computer optimizer process, except in very limited cases.

For more information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Funds, see the Additional Statement.

Quantitative International Equity Portfolio Management Team

n	Portfolio team based in New York. Experienced, highly qualified and stable quantitative team reflects our commitment to a superior research effort
n	Team manages approximately $102.6 billion in global/international equities for retail, institutional and high net worth clients

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SERVICE PROVIDERS

n Designed to invest in international markets, seeking to add value from diversified sources of return — top-down country selection and bottom-up stock selection

______________________________________________________________________________________________________________

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Len Ioffe Managing Director	Senior Portfolio Manager— Structured International Equity	Since 2001	Mr. Ioffe joined the Investment Adviser as an associate in 1995. He became a portfolio manager in 1996.
Robert C. Jones Managing Director	Senior Portfolio Manager— Structured International Equity	Since 1997	Mr. Jones joined the Investment Adviser as a portfolio manager in 1989.

Len Ioffe, CFA, is a Managing Director and Senior Portfolio Manager on the GQE team, where he is responsible for portfolio management of global and non-US portfolios. He is also a member of the GQE Investment Policy Committee. Robert C. Jones, CFA, is a Managing Director and Chair of the GQE Investment Policy Committee, which oversees portfolio management process. He currently serves as the Chief Investment Officer for the GQE team. The computer optimizer constructs the portfolio based on the team’s models and design and no one person on the team has a subjective override of the computer optimizer process, except in very specific limited cases.

For more information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Funds, see the Additional Statement.

   DISTRIBUTOR AND TRANSFER AGENT   

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the “Distributor”) of each Fund’s shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, Illinois 60606, also serves as each Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.

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 shares acquired for its own account.

29

   ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER 
   ACCOUNTS MANAGED BY GOLDMAN SACHS   

The involvement of the Investment Adviser, 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 a Fund or limit a Fund’s investment activities. Goldman Sachs is a full service investment banking, broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financier, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. For example, a Fund may take a long position in a security at the same time that Goldman Sachs or other accounts managed by the Investment Adviser take a short position in the same security (or vice versa). These and other transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others

30

SERVICE PROVIDERS

associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Fund or who engage in transactions with or for the Funds. For more information about conflicts of interest, see the Additional Statement.

Under a securities lending program approved by the Funds’ Board of Trustees, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for each Fund to the extent that the Funds engage in the securities lending program. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of the cash received as collateral for loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions.

   LEGAL PROCEEDINGS   

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. (“GSG”), GSAM, the Trustees and Officers of the Goldman Sachs Trust (the “Trust”), and John Doe Defendants. In addition, the Goldman Sachs Funds included in this Prospectus and certain other investment portfolios of the Trust were named as nominal defendants (collectively, the “Goldman Sachs Funds”). On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman, Sachs & Co., the Trust, Goldman Sachs Variable Insurance Trust (“GSVIT”), the Trustees and Officers of the Trust and GSVIT and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the “Goldman Sachs Funds”) were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005.

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The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company Act of 1940 (the “Investment Company Act”) and the Investment Advisers Act of 1940, (ii) common law breaches of fiduciary duty and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Investment Company Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI. The complaint also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreement and return of fees paid; an accounting of all Goldman Sachs Funds-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals on similar litigation.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to its clients, including the Goldman Sachs Funds.

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Dividends

Each Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:

n	Cash
n	Additional shares of the same class of the same Fund
n	Shares of the same or an equivalent class of another Goldman Sachs Fund. Special restrictions may apply for certain Goldman Sachs Institutional Liquid Assets Portfolios (“ILA Portfolios”). See the Additional Statement.

You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the applicable Fund.

The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains are declared and paid as follows:

	Investment	Capital Gains
Fund	Income Dividends	Distributions
Structured Large Cap Value	Quarterly	Annually
Structured U.S. Equity	Annually	Annually
Structured Large Cap Growth	Annually	Annually
Structured Small Cap Equity	Annually	Annually
Structured International Equity	Annually	Annually

From time to time a portion of a Fund’s dividends may constitute a return of capital for tax purposes, and/or may include amounts in excess of the Fund’s net investment income for the period calculated in accordance with good accounting practice.

When you purchase shares of a Fund, part of the NAV per share may be represented by undistributed income and/or realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income and/or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.

33

Shareholder Guide

The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds’ Institutional Shares.

   HOW TO BUY SHARES   

How Can I Purchase Institutional Shares Of The Funds?

You may purchase Institutional Shares on any business day at their NAV next determined after receipt of an order. No sales load is charged. You should either:

n

Place an order with Goldman Sachs at 1-800-621-2550 and wire federal funds to The Northern Trust Company (“Northern”), as subcustodian for State Street Bank and Trust Company (“State Street”) (each Fund’s custodian) on the next business day; or

n

Send a check or Federal Reserve draft payable to Goldman Sachs Funds—(Name of Fund and Class of Shares), P.O. Box 06050, Chicago, IL 60606-6306. The Fund will not accept a check drawn on foreign banks, third-party checks, cashier’s checks or official checks, temporary checks, electronic checks, drawer checks, cash, money orders, travelers cheques or credit card checks. In limited situations, involving the transfer of retirement assets, a Fund may accept cashier’s checks or official bank checks.

In order to make an initial investment in a Fund, you must furnish to the Fund or Goldman Sachs the Account Application. Purchases of Institutional Shares must be settled within three business days of receipt of a complete purchase order.

How Do I Purchase Shares Through A Financial Institution?

Certain institutions (including banks, trust companies, brokers and investment advisers) that provide recordkeeping, reporting and processing services to their customers may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers, and may designate other intermediaries to accept such orders, if approved by the Trust. In these cases:

n	A Fund 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, and the order will be priced at the Fund’s NAV per share (less any applicable redemption fee) next determined after such acceptance.
n	Authorized institutions and intermediaries will be responsible for transmitting accepted orders and payments to the Trust within the time period agreed upon by them.

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SHAREHOLDER GUIDE

You should contact your institution or intermediary to learn whether it is authorized to accept orders for the Trust. These institutions may receive payments from the Funds or Goldman Sachs for the services provided by them with respect to the Funds’ Institutional Shares. These payments may be in addition to other payments borne by the Funds.

The Investment Adviser, Distributor and/or their affiliates may make payments to authorized dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Funds. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries, registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, 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. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also compensate Intermediaries for subaccounting, administrative, and/or shareholder processing services that are in addition to the fees paid for these services by the Funds. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the “Payments to Intermediaries” section of the Additional Statement for more information about these payments.

The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your authorized dealer or Intermediary for more information about the payments it receives and any potential conflicts of interest.

In addition to Institutional Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses

35

(which affect performance), have different minimum investment requirements and are entitled to different services than Institutional Shares. Information regarding these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus.

What Is My Minimum Investment In The Funds?

Type of Investor	Minimum Investment
n Banks, trust companies or other depository     institutions investing for their own account     or on behalf of clients	$1,000,000 in Institutional Shares of a Fund alone or in combination with other assets under the management of GSAM and its affiliates
n Section 401(k), profit sharing, money purchase     pension, tax-sheltered annuity, defined benefit     pension, or other employee benefit plans that are     sponsored by one or more employers (including     governmental or church employers) or     employee organizations
n State, county, city or any instrumentality,     department, authority or agency thereof
n Corporations with at least $100 million in assets or     in outstanding publicly traded securities
n “Wrap” account sponsors (provided they have an     agreement covering the arrangement with GSAM)
n Registered investment advisers investing for     accounts for which they receive asset-based     fees
n Qualified non-profit organizations, charitable     trusts, foundations and endowments
n Individual investors	$10,000,000
n Accounts over which GSAM or its advisory     affiliates have investment discretion
n Individual Retirement Accounts (IRAs)     for which GSAM or its advisory     affiliates act as fiduciary	No minimum

The minimum investment requirement may be waived for current and former officers, partners, directors or employees of Goldman Sachs or any of its affiliates; brokerage or advisory clients of Goldman Sachs Private Wealth Management and accounts for which Goldman Sachs Trust Company, N.A. or The Goldman Sachs Trust Company of Delaware acts in a fiduciary capacity (i.e., as agent or trustee);

36

SHAREHOLDER GUIDE

certain mutual fund “wrap” programs; and for other investors at the discretion of the Trust’s officers. No minimum amount is required for subsequent investments.

What Else Should I Know About Share Purchases?

The Trust reserves the right to:

n	Refuse to open an account if you fail 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).
n	Modify or waive the minimum investment amounts.
n	Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of Institutional Shares of a Fund is evident, or if purchases, sales or exchanges are, or a subsequent abrupt redemption might be, of a size that would disrupt the management of a Fund.
n	Close a Fund to new investors from time to time and reopen any such Fund whenever it is deemed appropriate by a Fund’s Investment Adviser.

Generally, the Fund will not allow non-U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds.

The Funds may allow you to purchase shares with securities instead of cash if consistent with a Fund’s investment policies and operations and if approved by the Fund’s Investment Adviser.

Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for each investor who opens an account with the Funds. Applications without the required information, which will be reviewed solely for customer identification purposes, may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Funds are unable to verify an investor’s identity. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an account and redeeming an investor’s shares pursuant to the customer identification program.

37

How Are Shares Priced?

The price you pay when you buy Institutional Shares is a Fund’s next determined NAV for a share class. The price you receive when you sell or exchange Institutional Shares is a Fund’s next determined NAV for a share class with the redemption proceeds reduced by any applicable charge (e.g., redemption fees). The Funds calculate NAV as follows:

NAV = (Value of Assets of the Class)
- (Liabilities of the Class)
Number of Outstanding Shares of the Class

The Funds’ investments are valued based on market quotations or if market quotations are not readily available, or if the Investment Adviser believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined in good faith under procedures established by the Trustees.

In the event that a Fund invests a significant portion of assets in foreign equity securities, “fair value” prices are provided by an independent fair value service in accordance with the fair value procedures approved by the Trustees. Fair value prices are used because many foreign markets operate at times that do not coincide with those of the major U.S. markets. Events that could affect the values of foreign portfolio holdings may occur between the close of the foreign market and the time of determining the NAV, and would not otherwise be reflected in the NAV. If the independent fair value service does not provide a fair value for a particular security or if the value does not meet the established criteria for the Funds, the most recent closing price for such a security on its principal exchange will generally be its fair value on such date.

In addition, the Investment Adviser, consistent with applicable regulatory guidance, may determine to make an adjustment to the previous closing prices of either domestic or foreign securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in foreign markets; market disruptions or market closings; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements on earnings; significant litigation; and regulatory news such as governmental approvals.

One effect of using an independent fair value service and fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares.

38

SHAREHOLDER GUIDE

However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).

n	NAV per share of each class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New York time) or such other time as the New York Stock Exchange or NASDAQ market may officially close. Fund shares will generally not be priced on any day the New York Stock Exchange is closed.
n	When you buy shares, you pay the NAV next calculated after the Funds receive your order in proper form.
n	When you sell shares, you receive the NAV next calculated after the Funds receive your order in proper form. Redemption proceeds are reduced by any applicable redemption fee.
n	The Trust reserves the right to reprocess purchase (including dividend reinvestments), redemption and exchange transactions that were processed at an NAV other than a Fund’s official closing NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV, as adjusted.
n	The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.

Consistent with industry practice, investment transactions not settling on the same day are recorded and factored into a Fund’s net asset value on the business day following trade date (T+1). The use of T+1 accounting generally does not, but may, result in a net asset value that differs materially from the net asset value that would result if all transactions were reflected on their trade dates.

Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1-800-621-2550.

Foreign securities may trade in their local markets on days a Fund is closed. As a result, if a Fund holds foreign securities, its NAV may be impacted on days when investors may not purchase or redeem Fund shares.

39

   HOW TO SELL SHARES   

How Can I Sell Institutional Shares Of The Funds?

You may arrange to take money out of your account by selling (redeeming) some or all of your shares. Generally, each Fund will redeem its Institutional Shares upon request on any business day at their NAV next determined after receipt of such request in proper form subject to any applicable redemption fee. You may request that redemption proceeds be sent to you by check or by wire (if the wire instructions are on record). Redemptions may be requested in writing or by telephone.

Instructions For Redemptions:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund name and Class of Shares
	n The dollar amount you want to sell
	n How and where to send the proceeds
	n A Medallion signature guarantee may be required (see details below)
	n Mail your request to:     Goldman Sachs Funds     P.O. Box 06050     Chicago, IL 60606-6306
By Telephone:	If you have elected the telephone redemption privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)

Any redemption request that requires money to go to an account or address other than that designated in the current records of the Transfer Agent must be in writing and signed by an authorized person (a Medallion signature guarantee may be required). The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.

Certain institutions and intermediaries are authorized to accept redemption requests on behalf of the Funds as described under “How Do I Purchase Shares Through A Financial Institution?”

When Do I Need A Medallion Signature Guarantee To Redeem Shares?

A Medallion signature guarantee may be required if:

n	You would like the redemption proceeds sent to an address that is not your address of record; or
n	You would like to change your current bank designations.

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SHAREHOLDER GUIDE

A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required.

What Do I Need To Know About Telephone Redemption Requests?

The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs employs reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:

n	All telephone requests are recorded.
n	Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.
n	For the 30-day period following a change of address, telephone redemptions will generally be filled by a wire transfer to the bank account designated in the Account Applications (see immediately preceding bullet point). For direct accounts, to receive the redemption by check during this time period, a redemption request must be in the form of a written letter (a Medallion signature guarantee may be required).
n	The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions.

How Are Redemption Proceeds Paid?

By Wire: You may arrange for your redemption proceeds to be wired as federal funds to the domestic bank account designated in your Account Application. The following general policies govern wiring redemption proceeds:

n	Redemption proceeds will normally be wired on the next business day in federal funds (for a total of one business day delay), but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
n	Although redemption proceeds will normally be wired as described above, under certain circumstances, redemption requests or payments may be postponed or suspended as permitted pursuant to Section 22(e) of the Investment Company

41

	Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by the Fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption.
n	If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.
n	If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day.
n	To change the bank designated on your Account Application, you must send written instructions (with your Medallion Signature guarantee) to the Transfer Agent.
n	Neither the Trust, Goldman Sachs nor any other institution assumes any responsibility for the performance of your bank or any intermediaries in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such intermediaries.

By Check: You may elect in writing to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of receipt of a properly executed redemption request. If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.

What Do I Need To Know About The Redemption Fee?

The Structured International Equity Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Fund uses a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The redemption fee does not apply to transactions involving the following:

n	Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.
n	Redemptions of shares that are acquired or redeemed in connection with the participation in a systematic withdrawal program or automatic investment plan.

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SHAREHOLDER GUIDE

n	Redemption of shares by other Goldman Sachs Funds (e.g., Goldman Sachs Asset Allocation Portfolios).
n	Redemptions of shares held through discretionary wrap programs or models programs that utilize a regularly scheduled automatic rebalancing of assets and that have provided GSAM with certain representation regarding certain operating policies and standards.
n	Redemptions of shares involving transactions other than participant initiated exchanges from retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended. Redemptions involving transactions other than participant initiated exchanges would include, for example: loans; required minimum distributions; rollovers; forfeiture; redemptions of shares to pay fees; plan level redemptions or exchanges; redemptions pursuant to systematic withdrawal programs; return of excess contribution amounts; hardship withdrawals; redemptions related to death, disability or qualified domestic relations order; and certain other transactions.
n	Redemptions of shares from accounts of financial institutions in connection with hedging services provided in support of nonqualified deferred compensation plans offering the Goldman Sachs Funds.
n	Redemption of shares where the Fund is made available as an underlying investment in certain group annuity contracts.
n	Redemptions of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.
n	Redemptions of shares representing “seed capital” investments by Goldman Sachs or its affiliates.

The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future.

In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as system limitations, operational limitations, contractual limitations and further guidance from the SEC or other regulators.

If your shares are held through a financial intermediary in an omnibus or other group account, the Trust relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. The application of redemption fees and exemptions may vary and certain intermediaries may not apply the

43

exceptions listed above. If you invest through a financial intermediary, please contact your intermediary for more information regarding when redemption fees will be applied to the redemption of your shares.

What Else Do I Need To Know About Redemptions?

The following generally applies to redemption requests:

n

Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received.

n

Institutions (including banks, trust companies, brokers and investment advisers) are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, these institutions may set times by which they must receive redemption requests. These institutions may also require additional documentation from you.

The Trust reserves the right to:

n	Redeem your shares in the event an Institution’s relationship with Goldman Sachs is terminated and you do not transfer your account to another Institution with a relationship with Goldman Sachs. The Trust will not be responsible for any loss in an investor’s account or tax liability resulting from a redemption.
n	Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interest of the Trust.
n	Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities.
n	Reinvest any amounts (e.g., dividends, distributions, or redemption proceeds) which you have elected to receive by check should your check be returned to a Fund as undeliverable or remain uncashed for six months. This provision may not apply to certain retirement or qualified accounts or to a closed account. No interest will accrue on amounts represented by uncashed distribution or redemption checks.

Can I Exchange My Investment From One Fund To Another?

You may exchange Institutional Shares of a Fund at NAV for certain shares of another Goldman Sachs Fund. Redemption of shares (including by exchange) that are held for 30 calendar days or less (60 calendar days or less with respect to the Goldman Sachs High Yield Fund and High Yield Municipal Fund) may, however, be subject to a redemption fee as described above under “What Do I Need To Know About The Redemption Fee?” The exchange privilege may be materially modified or withdrawn at any time upon 60 days’ written notice to you.

44

SHAREHOLDER GUIDE

Instructions For Exchanging Shares:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund names and Class of Shares
	n The dollar amount to be exchanged
	n Mail the request to:     Goldman Sachs Funds     P.O. Box 06050     Chicago, IL 60606-6306
By Telephone:	If you have elected the telephone exchange privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)

You should keep in mind the following factors when making or considering an exchange:

n	You should obtain and carefully read the prospectus of the Fund you are acquiring before making an exchange.
n	All exchanges which represent an initial investment in a Fund must satisfy the minimum initial investment requirement of that Fund or the entire balance of the original Fund account should be exchanged. This requirement may be waived at the discretion of the Trust.
n	Normally, a telephone exchange will be made only to an identically registered account.
n	Exchanges are available only in states where exchanges may be legally made.
n	It may be difficult to make telephone exchanges in times of drastic economic or market conditions.
n	Goldman Sachs may use reasonable procedures described under “What Do I Need To Know About Telephone Redemption Requests?” in an effort to prevent unauthorized or fraudulent telephone exchange requests.
n	Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted.
n	Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund.

For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. You should consult your tax adviser concerning the tax consequences of an exchange.

45

What Types of Reports Will I Be Sent Regarding Investments In Institutional Shares?

You will be provided with a printed confirmation of each transaction in your account and a monthly statement. If your account is held in a “street name” you may receive your statements and confirmations on a different schedule. You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting Goldman Sachs Funds by phone at 1-800-621-2550 or by mail at Goldman Sachs Funds, P.O. Box 06050, Chicago, IL 60606-6306. The Funds will begin sending individual copies to you within 30 days after receipt of your revocation.

In addition, institutions and other financial intermediaries will be responsible for providing any communications from the Funds to their respective shareholders, including but not limited to prospectuses, prospectus supplements, proxy materials and notices regarding the sources of dividend payments pursuant to Section 19 of the Investment Company Act.

   RESTRICTIONS ON EXCESSIVE TRADING PRACTICES   

Policies and Procedures on Excessive Trading Practices. In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view to longer-term investment purposes only that are consistent with the investment policies and practices of the respective Funds. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm fund performance and result in dilution in the value of Fund shares held by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive trading or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to a Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are

46

SHAREHOLDER GUIDE

permitted that would harm the Trust or its shareholders or would subordinate the interests of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.

To deter excessive shareholder trading, the Structured International Equity Fund, certain other International Equity Funds and certain Fixed Income Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase (60 calendar days of purchase with respect to Goldman Sachs High Yield Fund and High Yield Municipal Fund) subject to certain exceptions. See “Shareholder Guide—How to Sell Shares—What Do I Need To Know About The Redemption Fee?” for more information about the redemption fee, including transactions and certain omnibus accounts to which the redemption fee does not apply. As a further deterrent to excessive trading, many foreign equity securities held by the Structured International Equity Fund are priced by an independent pricing service using fair valuation. For more information on fair valuation, please see “Shareholder Guide—How to Buy Shares—How are Shares Priced?”

Pursuant to the policy adopted by the Board of Trustees of the Trust, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive. Goldman Sachs reviews on a regular, periodic basis available information relating to the trading activity in the Funds in order to assess the likelihood that a Fund may be the target of excessive trading. As part of its excessive trading surveillance process, Goldman Sachs, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. Consistent with the standards described above, if, in its judgment, Goldman Sachs detects excessive, short term trading, Goldman Sachs may reject or restrict a purchase or exchange request and may further seek to close an investor’s account with a Fund. Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.

Fund shares may be held through omnibus arrangements maintained by intermediaries such as broker-dealers, investment advisers, transfer agents, administrators and insurance companies. In addition, Fund shares may be held in omnibus 401(k) plans, employee benefit plans and other group accounts. Omnibus accounts include multiple investors and such accounts typically provide the Funds with a net purchase or redemption request on any given day where the purchase and redemption of Fund shares by the investors are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are not known by the Funds. A number of these financial intermediaries

47

may not have the capability or may not be willing to apply the Funds’ market timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, a Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts is limited. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Funds and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance.

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Taxation

As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds.

Unless your investment is through an IRA or other tax-advantaged account, you should consider the possible tax consequences of Fund distributions and the sale of your Fund shares.

   DISTRIBUTIONS   

Each Fund contemplates declaring as dividends each year all or substantially all of its taxable income. Distributions you receive from the Funds are generally subject to federal income tax, and may also be subject to state or local taxes. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash. For federal tax purposes, Fund distributions attributable to short-term capital gains and net investment income are generally taxable to you as ordinary income, while distributions attributable to long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.

Under current provisions of the Internal Revenue Code (the “Code”), the maximum long-term capital gain tax rate applicable to individuals, estates, and trusts is 15%. Also, Fund distributions to noncorporate shareholders attributable to dividends received by the Funds from U.S. and certain qualified foreign corporations will generally be taxed at the long-term capital gain rate, as long as certain other requirements are met. The amount of a Fund’s distributions that qualify for this favorable tax treatment may be reduced as a result of a Fund’s securities lending activities, by a high portfolio turnover rate or by investments in debt securities or “non-qualified” foreign corporations. For these lower rates to apply, the non-corporate shareholder must own the relevant Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund’s ex-dividend date.

A sunset provision provides that the 15% long-term capital gain rate and the taxation of dividends at the long-term capital gain rate will revert back to a prior version of these provisions in the Code for taxable years beginning after December 31, 2010.

49

Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in October, November or December but paid in January are taxable as if they were paid in December. A percentage of the Funds’ dividends paid to corporate shareholders may be eligible for the corporate dividends-received deduction. This percentage may, however, be reduced as a result of a Fund’s securities lending activities, by a high portfolio turnover rate, or by investments in debt securities or foreign corporations. It is also not anticipated that any significant percentage of dividends paid by the Structured International Equity Fund will be eligible for the dividends-received deduction. Character and tax status of all distributions will be available to shareholders after the close of each calendar year.

Each Fund may be subject to foreign withholding or other foreign taxes on income or gain from certain foreign securities. In general, each Fund may deduct these taxes in computing its taxable income. Rather than deducting these foreign taxes, the Structured International Equity Fund may make an election to treat a proportionate amount of those taxes as constituting a distribution to each shareholder, which would allow you either (i) to credit that proportionate amount of taxes against U.S. Federal income tax liability as a foreign tax credit or (ii) to take that amount as an itemized deduction.

If you buy shares of a Fund before it makes a distribution, the distribution will be taxable to you even though it may actually be a return of a portion of your investment. This is known as “buying a dividend.”

   SALES AND EXCHANGES   

Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this gain or loss is long-term or short-term depending on whether your holding period exceeds twelve months, except that any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a sale, exchange or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of that Fund. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.

50

TAXATION

   OTHER INFORMATION   

When you open your account, you should provide your Social Security Number or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so.

Non-U.S. investors may be subject to U.S. withholding and estate tax. However, withholding is generally not required on properly designated distributions of long-term capital gains and of short-term capital gains and qualified interest income paid to non-U.S. investors before August 31, 2008. Although this designation will be made for capital gain distributions, the Funds do not anticipate making any qualified interest income designations. Therefore, all distributions of interest income will be subject to withholding when paid to non-U.S. investors. More information about U.S. taxation of non-U.S. investors is included in the Additional Statement.

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Appendix A
Additional Information on Portfolio
Risks, Securities and Techniques

   A.  General Portfolio Risks   

The Funds will be subject to the risks associated with equity investments. “Equity investments” may include common stocks, preferred stocks, interests in real estate investment trusts, convertible debt obligations, convertible preferred stocks, equity interests in trusts, partnerships, joint ventures, limited liability companies and similar enterprises, warrants, stock purchase rights and synthetic and derivative instruments (such as swaps and futures contracts) that have economic characteristics similar to equity securities. In general, the values of equity investments fluctuate in response to the activities of individual companies and in response to general market and economic conditions. Accordingly, the values of the equity investments that a Fund holds may decline over short or extended periods. The stock markets tend to be cyclical, with periods when stock prices generally rise and periods when prices generally decline. This volatility means that the value of your investment in the Funds may increase or decrease. In recent years, certain stock markets have experienced substantial price volatility.

To the extent that a Fund invests in fixed-income securities, that Fund will also be subject to the risks associated with its fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase. Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that an issuer or guarantor could default on its obligations, and a Fund will not recover its investment. Call risk and extension risk are normally present when the borrower has the option to prepay its obligations.

The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater expenses which must be borne by a Fund and its shareholders, and is also likely to result in higher short-term capital gains taxable to shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of a Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See “Financial Highlights” in Appendix B for a statement of the Funds’ historical portfolio turnover rates.

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APPENDIX A

The following sections provide further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental investment restrictions that cannot be changed without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in a Fund’s investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs.

   B.  Other Portfolio Risks   

Risks of Investing in Small Capitalization and Mid-Capitalization Companies. Each Fund may, to the extent consistent with its investment policies, invest in small and mid-capitalization companies. Investments in small and mid-capitalization companies involve greater risk and portfolio price volatility than investments in larger capitalization stocks. Among the reasons for the greater price volatility of these investments are the less certain growth prospects of smaller firms and the lower degree of liquidity in the markets for such securities. Small and mid-capitalization companies may be thinly traded and may have to be sold at a discount from current market prices or in small lots over an extended period of time. In addition, these securities are subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities in particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic or market conditions, or adverse investor perceptions whether or not accurate. Because of the lack of sufficient market liquidity, a Fund may incur losses because it will be required to effect sales at a disadvantageous time and only then at a substantial drop in price. Small and mid-capitalization companies include “unseasoned” issuers that do not have an established financial history; often have limited product lines, markets or financial resources; may depend on or use a few key personnel for management; and may be susceptible to losses and risks of bankruptcy. Small and mid-capitalization companies may be operating at a loss or have significant variations in operating results; may be engaged in a rapidly changing business with products subject to a substantial risk of obsolescence; may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position; and may have substantial borrowings or may otherwise have a weak financial condition. In addition, these companies may face intense competition, including competition from companies with greater financial resources, more extensive development,

53

manufacturing, marketing, and other capabilities, and a larger number of qualified managerial and technical personnel. Transaction costs for these investments are often higher than those of larger capitalization companies. Investments in small and mid-capitalization companies may be more difficult to price precisely than other types of securities because of their characteristics and lower trading volumes.

Risks of Foreign Investments. The Funds may make foreign investments. Foreign investments involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers. Foreign investments may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and changes in exchange control regulations (e.g., currency blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the U.S. dollar) in which a portfolio security is quoted or denominated relative to the U.S. dollar would reduce the value of the portfolio security. In addition, if the currency in which a Fund receives dividends, interest or other payments declines in value against the U.S. dollar before such income is distributed as dividends to shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.

Brokerage commissions, custodial services and other costs relating to investment in international securities markets generally are more expensive than in the United States. In addition, clearance and settlement procedures may be different in foreign countries and, in certain markets, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. issuers. There may be less publicly available information about a foreign issuer than about a U.S. issuer. In addition, there is generally less government regulation of foreign markets, companies and securities dealers than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States. Foreign securities markets may have substantially less volume than U.S. securities markets and securities of many foreign issuers are less liquid and more volatile than securities of comparable domestic issuers. Furthermore, with respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments (or, in some cases, capital gains distributions), limitations on the removal of funds or other assets from such countries, and risks of political or social instability or diplomatic developments which could adversely affect investments in those countries.

54

APPENDIX A

Concentration of a Fund’s assets in one or a few countries and currencies will subject a Fund to greater risks than if a Fund’s assets were not geographically concentrated.

Investment in sovereign debt obligations by a Fund involves risks not present in debt obligations of corporate issuers. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and a Fund may have limited recourse to compel payment in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn a Fund’s NAV, to a greater extent than the volatility inherent in debt obligations of U.S. issuers.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.

Investments in foreign securities may take the form of sponsored and unsponsored American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), European Depositary Receipts (“EDRs”) or other similar instruments representing securities of foreign issuers. ADRs, GDRs and EDRs represent the right to receive securities of foreign issuers deposited in a bank or other depository. ADRs and certain GDRs are traded in the United States. GDRs may be traded in either the United States or in foreign markets. EDRs are traded primarily outside the United States. Prices of ADRs are quoted in U.S. dollars. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security.

Risks of Euro. On January 1, 1999, the European Economic and Monetary Union (EMU) introduced a new single currency called the euro. The euro has replaced the national currencies of the following member countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Beginning January 1, 2007, the euro will become the currency of Slovenia. In addition, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, and Slovakia became members of the EMU on May 1, 2004 and Romania and Bulgaria will become members of the EMU on January 1, 2007, but these countries will not adopt the euro as their new currency until they can show that their economies have converged with the economies of the euro zone.

The European Central Bank has control over each country’s monetary policies. Therefore, the member countries no longer control their own monetary policies by directing independent interest rates for their currencies. The national governments

55

of the participating countries, however, have retained the authority to set tax and spending policies and public debt levels.

The change to the euro as a single currency is relatively new and untested. The elimination of currency risk among EMU countries has affected the economic environment and behavior of investors, particularly in European markets, but the long-term impact of those changes on currency values or on the business or financial condition of European countries and issuers cannot be fully assessed at this time. In addition, the introduction of the euro presents other unique uncertainties, including the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax and labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other countries that now are or may in the future become members of the European Union (“EU”) will have an impact on the euro. Also, it is possible that the euro could be abandoned in the future by countries that have already adopted its use. In May and June 2005, voters in France and the Netherlands rejected ratification of the EU Constitution causing some other countries to postpone moves toward ratification. These or other events, including political and economic developments, could cause market disruptions, and could adversely affect the value of securities held by the Funds. Because of the number of countries using this single currency, a significant portion of the assets held by the Funds may be denominated in the euro.

Risks of Emerging Countries. The Structured International Equity Fund may invest in securities of issuers located in emerging countries. The risks of foreign investment are heightened when the issuer is located in an emerging country. Emerging countries are generally located in the Asia and Pacific regions, Eastern Europe, Latin and South America and Africa. The Fund’s purchase and sale of portfolio securities in certain emerging countries may be constrained by limitations relating to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on the aggregate trading volume by or holdings of the Fund, the Investment Adviser, its affiliates and their respective clients and other service providers. The Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.

Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees which may limit investment in such countries or increase the administrative costs of such investments. For example, certain Asian countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an

56

APPENDIX A

issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the issuer available for purchase by nationals. In addition, certain countries may restrict or prohibit investment opportunities in issuers or industries deemed important to national interests. Such restrictions may affect the market price, liquidity and rights of securities that may be purchased by the Fund. The repatriation of both investment income and capital from certain emerging countries is subject to restrictions such as the need for governmental consents. In situations where a country restricts direct investment in securities (which may occur in certain Asian and other countries), the Fund may invest in such countries through other investment funds in such countries.

Many emerging countries have experienced currency devaluations and substantial (and, in some cases, extremely high) rates of inflation. Other emerging countries have experienced economic recessions. These circumstances have had a negative effect on the economies and securities markets of such emerging countries. Economies in emerging countries generally are dependent heavily upon commodity prices and international trade and, accordingly, have been and may continue to be affected adversely by the economies of their trading partners, trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

Many emerging countries are subject to a substantial degree of economic, political and social instability. Governments of some emerging countries are authoritarian in nature or have been installed or removed as a result of military coups, while governments in other emerging countries have periodically used force to suppress civil dissent. Disparities of wealth, the pace and success of democratization, and ethnic, religious and racial disaffection, among other factors, have also led to social unrest, violence and/or labor unrest in some emerging countries. Unanticipated political or social developments may result in sudden and significant investment losses. Investing in emerging countries involves greater risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. As an example, in the past some Eastern European governments have expropriated substantial amounts of private property, and many claims of the property owners have never been fully settled. There is no assurance that similar expropriations will not recur in Eastern European or other countries.

The Structured International Equity Fund’s investment in emerging countries may also be subject to withholding or other taxes, which may be significant and may reduce the return from an investment in such countries to the Fund.

Settlement procedures in emerging countries are frequently less developed and reliable than those in the United States and may involve the Fund’s delivery of

57

securities before receipt of payment for their sale. In addition, significant delays may occur in certain markets in registering the transfer of securities. Settlement or registration problems may make it more difficult for the Fund to value its portfolio securities and could cause the Fund to miss attractive investment opportunities, to have a portion of its assets uninvested or to incur losses due to the failure of a counterparty to pay for securities the Fund has delivered or the Fund’s inability to complete its contractual obligations because of theft or other reasons.

The creditworthiness of the local securities firms used by a Fund in emerging countries may not be as sound as the creditworthiness of firms used in more developed countries. As a result, the Fund may be subject to a greater risk of loss if a securities firm defaults in the performance of its responsibilities.

The small size and inexperience of the securities markets in certain emerging countries and the limited volume of trading in securities in those countries may make the Fund’s investments in such countries less liquid and more volatile than investments in countries with more developed securities markets (such as the United States, Japan and most Western European countries). The Fund’s investments in emerging countries are subject to the risk that the liquidity of a particular investment, or investments generally, in such countries will shrink or disappear suddenly and without warning as a result of adverse economic, market or political conditions or adverse investor perceptions, whether or not accurate. Because of the lack of sufficient market liquidity, the Fund may incur losses because it will be required to effect sales at a disadvantageous time and only then at a substantial drop in price. Investments in emerging countries may be more difficult to price precisely because of the characteristics discussed above and lower trading volumes.

The Fund’s use of foreign currency management techniques in emerging countries may be limited. The Investment Adviser anticipates that a significant portion of the Funds’ currency exposure in emerging countries may not be covered by these techniques.

Risks of Derivative Investments. A Fund’s transactions, if any, in options, futures, options on futures, swaps, structured securities and foreign currency transactions involve additional risk of loss. Loss can result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative instruments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices, interest rates or currency prices or credit events. Each Fund may also invest

58

APPENDIX A

in derivative investments for non-hedging purposes (that is, to seek to increase total return). Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss.

Risks of Illiquid Securities. Each Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include:

n	Both domestic and foreign securities that are not readily marketable
n	Certain stripped mortgage-backed securities
n	Repurchase agreements and time deposits with a notice or demand period of more than seven days
n	Certain over-the-counter options
n	Certain structured securities and swap transactions
n	Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called “4(2) commercial paper” or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“144A Securities”).

Investing in 144A Securities may decrease the liquidity of a Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.

Credit/Default Risks. Debt securities purchased by the Funds may include securities (including zero coupon bonds) issued by the U.S. government (and its agencies, instrumentalities and sponsored enterprises), foreign governments, domestic and foreign corporations, banks and other issuers. Some of these fixed-income securities are described in the next section below. Further information is provided in the Additional Statement.

Debt securities rated BBB or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), Baa or higher by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB or Baa are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is

59

determined by the Investment Adviser to be of comparable credit quality. A security satisfies a Fund’s minimum rating requirement regardless of its relative ranking (for example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of the security, is in the best interest of a Fund and its shareholders.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:

n	U.S. government securities
n	Commercial paper rated at least A-2 by Standard & Poor’s, P-2 by Moody’s or having a comparable rating by another NRSRO
n	Certificates of deposit
n	Bankers’ acceptances
n	Repurchase agreements
n	Non-convertible preferred stocks and non-convertible corporate bonds with a remaining maturity of less than one year

When a Fund’s assets are invested in such instruments, the Fund may not be achieving its investment objective.

   C.  Portfolio Securities and Techniques   

This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks.

The Funds may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund’s investment objectives and policies. Further information is provided in the Additional Statement, which is available upon request.

Convertible Securities. Each Fund may invest in convertible securities. Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which a Fund invests are subject to the same rating criteria as its other investments in fixed-income securities. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest

60

APPENDIX A

rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.

Foreign Currency Transactions. A Fund may, to the extent consistent with its investment policies, purchase or sell foreign currencies on a cash basis or through forward contracts. A forward contract involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract. A Fund may engage in foreign currency transactions for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. In addition, the Structured International Equity Fund may enter into such transactions to seek to increase total return, which is considered a speculative practice. The Structured International Equity Fund may also enter into foreign currency transactions to seek a closer correlation between the Fund’s overall currency exposures and the currency exposures of the Fund’s performance benchmark.

The Funds may also engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted. A Fund may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the Investment Adviser, it would be beneficial to convert such currency into U.S. dollars at a later date (e.g., the Investment Adviser may anticipate the foreign currency to appreciate against the U.S. dollar).

Currency exchange rates may fluctuate significantly over short periods of time, causing, along with other factors, a Fund’s NAV to fluctuate (when the Fund’s NAV fluctuates, the value of your shares may go up or down). Currency exchange rates also can be affected unpredictably by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.

The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on an exchange. Such contracts are subject to the risk that the counterparty to the contract will default on its obligations. Since these contracts are not guaranteed by an exchange or clearinghouse, a default on a contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency

61

hedge or could force the Fund to cover its purchase or sale commitments, if any, at the current market price.

Structured Securities. Each Fund may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References.

The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may present a greater degree of market risk than many types of securities and may be more volatile, less liquid and more difficult to price accurately than less complex securities.

REITs. Each Fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate related loans. The value of a REIT is affected by changes in the value of the properties owned by the REIT or securing mortgage loans held by the REIT. REITs are dependent upon the ability of the REITs’ managers, and are subject to heavy cash flow dependency, default by borrowers and the qualification of the REITs under applicable regulatory requirements for favorable income tax treatment. REITs are also subject to risks generally associated with investments in real estate including possible declines in the value of real estate, general and local economic conditions, environmental problems and changes in interest rates. To the extent that assets underlying a REIT are concentrated geographically, by property type or in certain other respects, these risks may be heightened. A Fund will indirectly bear its proportionate share of any expenses, including management fees, paid by a REIT in which it invests.

Options on Securities, Securities Indices and Foreign Currencies. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller) of the option the obligation to sell, the underlying instrument during the option period. Each Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest. A Fund may also, to the extent consistent with its investment policies, purchase and sell (write) put and call options on foreign currencies.

62

APPENDIX A

The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the Investment Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase a Fund’s transaction costs. Options written or purchased by the Funds may be traded on U.S. exchanges or (in the case of the Structured International Equity Fund) foreign exchanges or over-the-counter. Foreign and over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.

Futures Contracts and Options on Futures Contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument or currency at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on a particular securities index. The Structured International Equity Fund may also purchase and sell futures contracts based on various securities, foreign currencies and other financial instruments and indices. The Funds may engage in futures transactions on U.S. exchanges and the Structured International Equity Fund may engage in transactions on foreign exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in securities prices or, to the extent a Fund invests in foreign securities, currency exchange rates. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act, and therefore is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

Futures contracts and related options present the following risks:

n While a Fund may benefit from the use of futures and options on futures, unanticipated changes in securities prices or currency exchange rates may result

63

	in poorer overall performance than if the Fund had not entered into any futures contracts or options transactions.
n	Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and a Fund may be exposed to additional risk of loss.
n	The loss incurred by a Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received.
n	Futures markets are highly volatile and the use of futures may increase the volatility of a Fund’s NAV.
n	As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to a Fund.
n	Futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
n	Foreign exchanges may not provide the same protection as U.S. exchanges.

As an investment company registered with the SEC, a Fund must “set aside” (often referred to as “asset segregation”) liquid assets, or engage in other SEC- or staff-approved measures to “cover” open positions with respect to its transactions in futures contracts. In the case of futures contracts that do not cash settle, for example, a Fund must set aside liquid assets equal to the full notional value of the futures contracts while the positions are open. With respect to futures contracts that do cash settle, however, a Fund is permitted to set aside liquid assets in an amount equal to the Fund’s daily marked-to-market net obligations (i.e., the Fund’s daily net liability) under the futures contracts, if any, rather than their full notional value. Each Fund reserves the right to modify its asset segregation policies in the future to comply with any changes in the positions from time to time articulated by the SEC or its staff regarding asset segregation. By setting aside assets equal to only its net obligations under cash-settled futures contracts, a Fund will have the ability to employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional amount of the futures contracts.

Equity Swaps. Each Fund may invest in equity swaps. Equity swaps allow the parties to a swap agreement to exchange the dividend income or other components of return on an equity investment (for example, a group of equity securities or an index) for a component of return on another non-equity or equity investment.

An equity swap may be used by a Fund to invest in a market without owning or taking physical custody of securities in circumstances in which direct investment may be restricted for legal reasons or is otherwise deemed impractical or disadvantageous. Equity swaps are derivatives and their value can be very volatile.

64

APPENDIX A

To the extent that the Investment Adviser does not accurately analyze and predict the potential relative fluctuation of the components swapped with another party, a Fund may suffer a loss, which may be substantial. The value of some components of an equity swap (such as the dividends on a common stock) may also be sensitive to changes in interest rates. Furthermore, a Fund may suffer a loss if the counterparty defaults. Because equity swaps are normally illiquid, a Fund may be unable to terminate its obligations when desired.

When-Issued Securities and Forward Commitments. 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 settlement time. When-issued securities are securities that have been authorized, but not yet issued. When-issued securities are purchased in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. A forward commitment involves the entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when-issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate.

Repurchase Agreements. Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. Each Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation.

If the other party or “seller” defaults, a Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, a Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.

Certain Funds, together with other registered investment companies having advisory agreements with the Investment 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.

65

Lending of Portfolio Securities. Each Fund may engage in securities lending. Securities lending involves the lending of securities owned by a Fund to financial institutions such as certain broker-dealers including, as permitted by the SEC, Goldman Sachs. The borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. government securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by a Fund in short-term investments, including unregistered investment pools managed by the Investment Adviser or its affiliates and from which the Investment Adviser or its affiliates may receive fees. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or appreciation, and a Fund will be responsible for any loss that might result from its investment of the borrowers’ collateral. If the Investment Adviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of a Fund (including the loan collateral). Loan collateral (including any investment of the collateral) is not subject to the percentage limitations described elsewhere in this Prospectus regarding investments in fixed-income securities and cash equivalents.

A Fund may lend its securities to increase its income. A Fund may, however, experience delay in the recovery of its securities or incur a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund or becomes insolvent.

Preferred Stock, Warrants and Rights. Each Fund may invest in preferred stock, warrants and rights. Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default or other non-compliance by the issuer of the preferred stock.

Warrants and other rights are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant or right. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.

Other Investment Companies. Each Fund may invest in securities of other investment companies (including exchange-traded funds such as SPDRs and iShares^SM, as defined below) subject to statutory limitations prescribed by the Investment Company Act. These limitations include in certain circumstances a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund’s total

66

APPENDIX A

assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.

Exchange-traded funds such as SPDRs and iShares^SM are shares of unaffiliated investment companies which are traded like traditional equity securities on a national securities exchange or the NASDAQ^® National Market System.

n

Standard & Poor’s Depositary Receipts™. The Funds may, consistent with their investment policies, purchase Standard & Poor’s Depositary Receipts™ (“SPDRs”). SPDRs are securities traded on an exchange that represent ownership in the SPDR Trust, a trust which has been established to accumulate and hold a portfolio of common stocks that is intended to track the price performance and dividend yield of the S&P 500®. SPDRs may be used for several reasons, including, but not limited to, facilitating the handling of cash flows or trading, or reducing transaction costs. The price movement of SPDRs may not perfectly parallel the price action of the S&P 500®.

n

iSharesSM. iShares are shares of an investment company that invests substantially all of its assets in securities included in specified indices, including the MSCI indices for various countries and regions. The market prices of iShares are expected to fluctuate in accordance with both changes in the NAVs of their underlying indices and supply and demand of iShares on an exchange. However, iShares have a limited operating history and information is lacking regarding the actual performance and trading liquidity of iShares for extended periods or over complete market cycles. In addition, there is no assurance that the requirements of the exchange necessary to maintain the listing of iShares will continue to be met or will remain unchanged. In the event substantial market or other disruptions affecting iShares occur in the future, the liquidity and value of a Fund’s shares could also be substantially and adversely affected. If such disruptions were to occur, a Fund could be required to reconsider the use of iShares as part of its investment strategy.

Unseasoned Companies. Each Fund may invest in companies which (together with their predecessors) have operated less than three years. The securities of such

67

companies may have limited liquidity, which can result in their being priced higher or lower than might otherwise be the case. In addition, investments in unseasoned companies are more speculative and entail greater risk than do investments in companies with an established operating record.

Corporate Debt Obligations. Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. Each Fund may invest in corporate debt obligations issued by U.S. and certain non-U.S. issuers which issue securities denominated in the U.S. dollar (including Yankee and Euro obligations). In addition to obligations of corporations, corporate debt obligations include securities issued by banks and other financial institutions and supranational entities (i.e., the World Bank, the International Monetary Fund, etc.).

Bank Obligations. Each Fund may invest in obligations issued or guaranteed by U.S. or foreign banks. Bank obligations, including without limitation, time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulations. Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry.

U.S. Government Securities. Each Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (i) the full faith and credit of the U.S. Treasury; (ii) the right of the issuer to borrow from the U.S. Treasury; (iii) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (iv) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components of stripped U.S. Government Securities are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities whose principal value is periodically adjusted according to the rate of inflation.

Custodial Receipts and Trust Certificates. Each Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities or other

68

APPENDIX A

types of securities in which a Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. Each Fund may also invest in separately issued interests in custodial receipts and trust certificates.

Borrowings. Each Fund can borrow money from banks and other financial institutions in amounts not exceeding one-third of its total assets for temporary or emergency purposes. A Fund may not make additional investments if borrowings exceed 5% of its total assets.

69

Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund’s financial performance for the past five years (or less if the Fund has not been in operation for five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information has been audited by PricewaterhouseCoopers LLP, whose report, along with a Fund’s financial statements, is included in the Funds’ annual report (available upon request).

STRUCTURED LARGE CAP VALUE FUND

		Structured Large Cap Value Fund— Institutional Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	12.69		$	11.14		$	9.47		$	8.74		$	10.31
Income (loss) from investment operations
Net investment incomea			0.23			0.17			0.09			0.13			0.11
Net realized and unrealized gain (loss)			1.50			1.77			1.74			0.73			(1.57	)
	Total from investment operations		1.73			1.94			1.83			0.86			(1.46	)
Distributions to shareholders
From net investment income			(0.18	)		(0.14	)		(0.16	)		(0.13	)		(0.11	)
From net realized gains			(0.24	)		(0.25	)		—			—			—
	Total distributions		(0.42	)		(0.39	)		(0.16	)		(0.13	)		(0.11	)
Net asset value, end of year		$	14.00		$	12.69		$	11.14		$	9.47		$	8.74
Total returnb			13.92	%		17.69	%		19.41	%		10.03	%		(14.25	)%
Net assets, end of year (in 000s)		$	715,191		$	384,875		$	194,541		$	145,059		$	108,613
Ratio of net expenses to average net assets			0.59	%		0.70	%		0.70	%		0.71	%		0.71	%
Ratio of net investment income to average net assets			1.69	%		1.39	%		1.36	%		1.52	%		1.15	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.69	%		0.74	%		0.75	%		0.82	%		0.80	%
Ratio of net investment income to average net assets			1.59	%		1.35	%		1.31	%		1.41	%		1.06	%
Portfolio turnover rate			127	%		132	%		154	%		102	%		112	%

See page 75 for all footnotes.

70

APPENDIX B

STRUCTURED U.S. EQUITY FUND

		Structured U.S. Equity Fund— Institutional Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	29.72		$	26.32		$	23.00		$	20.57		$	24.68
Income (loss) from investment operations
Net investment incomea			0.38			0.36	c		0.21			0.17			0.14
Net realized and unrealized gain (loss)			2.56			3.37			3.27			2.37			(4.25	)
	Total from investment operations		2.94			3.73			3.48			2.54			(4.11	)
Distributions to shareholders
From net investment income			(0.18	)		(0.33	)		(0.16	)		(0.11	)		—
Net asset value, end of year		$	32.48		$	29.72		$	26.32		$	23.00		$	20.57
Total returnb			9.97	%		14.16	%		15.18	%		12.40	%		(16.65	)%
Net assets, end of year (in 000s)		$	644,250		$	269,545		$	140,587		$	131,457		$	163,439
Ratio of net expenses to average net assets			0.59	%		0.69	%		0.73	%		0.75	%		0.74	%
Ratio of net investment income to average net assets			1.22	%		1.23	%c		0.83	%		0.84	%		0.59	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.75	%		0.79	%		0.85	%		0.86	%		0.84	%
Ratio of net investment income to average net assets			1.06	%		1.13	%c		0.71	%		0.73	%		0.49	%
Portfolio turnover rate			129	%		142	%		112	%		74	%		74	%

See page 75 for all footnotes.

71

STRUCTURED LARGE CAP GROWTH FUND

		Structured Large Cap Growth Fund—Institutional Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	12.89		$	11.38		$	10.52		$	9.19		$	11.63
Income (loss) from investment operations
Net investment incomea			0.09			0.08	d		0.03			0.03			0.01
Net realized and unrealized gain (loss)			0.64			1.43	e		0.83			1.30			(2.41	)
	Total from investment operations		0.73			1.51			0.86			1.33			(2.40	)
Distributions to shareholders
From net investment income			(0.04	)		—			—			—			—
From net realized gains			—			—			—			—			(0.04	)
Net asset value, end of year		$	13.58		$	12.89		$	11.38		$	10.52		$	9.19
Total returnb			5.66	%		13.27	% f		8.17	%		14.47	%		(20.74	)%
Net assets, end of year (in 000s)		$	488,448		$	263,906		$	109,353		$	114,524		$	131,590
Ratio of net expenses to average net assets			0.60	%		0.71	%		0.75	%		0.78	%		0.77	%
Ratio of net investment income to average net assets			0.69	%		0.65	%d		0.31	%		0.33	%		0.08	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.76	%		0.84	%		0.89	%		0.91	%		0.87	%
Ratio of net investment income (loss) to average net assets			0.53	%		0.52	%d		0.17	%		0.20	%		(0.02	)%
Portfolio turnover rate			111	%		146	%		149	%		119	%		113	%

See page 75 for all footnotes.

72

APPENDIX B

STRUCTURED SMALL CAP EQUITY FUND

		Structured Small Cap Equity Fund— Institutional Shares
		For the Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	14.95		$	12.52		$	11.84		$	9.51		$	10.76
Income (loss) from investment operations
Net investment incomea			0.06			0.04			0.01			0.06			0.04
Net realized and unrealized gain (loss)			0.36			3.08			1.41			2.27			(0.85	)
	Total from investment operations		0.42			3.12			1.42			2.33			(0.81	)
Distributions to shareholders
From net investment income			—			—			(0.05	)		—			(0.04	)
From net realized gains			(1.14	)		(0.69	)		(0.69	)		—			(0.40	)
	Total distributions		(1.14	)		(0.69	)		(0.74	)		—			(0.44	)
Net asset value, end of year		$	14.23		$	14.95		$	12.52		$	11.84		$	9.51
Total returnb			2.77	%		25.57	%		12.31	%		24.50	%		(7.93	)%
Net assets, end of year (in 000s)		$	504,101		$	328,912		$	145,003		$	111,957		$	57,683
Ratio of net expenses to average net assets			0.87	%		0.93	%		0.93	%		0.94	%		0.94	%
Ratio of net investment income to average net assets			0.40	%		0.25	%		0.10	%		0.65	%		0.39	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.97	%		1.01	%		1.03	%		1.12	%		1.18	%
Ratio of net investment income to average net assets			0.30	%		0.17	%		—	%g		0.47	%		0.15	%
Portfolio turnover rate			151	%		149	%		153	%		149	%		136	%

See page 75 for all footnotes.

73

STRUCTURED INTERNATIONAL EQUITY FUND

		Structured International Equity Fund— Institutional Shares
		Years Ended August 31,
		2006			2005			2004			2003			2002
Net asset value, beginning of year		$	11.93		$	9.68		$	7.80		$	7.49		$	8.50
Income (loss) from investment operations
Net investment incomea			0.27			0.22			0.15			0.12			0.08
Net realized and unrealized gain (loss)			2.61			2.14			1.84			0.29			(1.07	)
	Total from investment operations		2.88			2.36			1.99			0.41			(0.99	)
Distributions to shareholders
From net investment income			(0.14	)		(0.11	)		(0.11	)		(0.10	)		(0.02	)
From net realized gains			(0.08	)		—			—			—			—
	Total distributions		(0.22	)		(0.11	)		(0.11	)		(0.10	)		(0.02	)
Net asset value, end of year		$	14.59		$	11.93		$	9.68		$	7.80		$	7.49
Total returnb			24.52	%		24.51	%		25.71	%		5.64	%		(11.68	)%
Net assets, end of year (in 000s)		$	1,661,909		$	697,144		$	261,118		$	158,021		$	188,858
Ratio of net expenses to average net assets			0.86	%		0.99	%		1.01	%		1.02	%		1.02	%
Ratio of net investment income to average net assets			2.01	%		1.96	%		1.65	%		1.73	%		1.02	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.95	%		1.00	%		1.10	%		1.19	%		1.17	%
Ratio of net investment income to average net assets			1.92	%		1.95	%		1.56	%		1.56	%		0.87	%
Portfolio turnover rate			59	%		73	%		99	%		122	%		115	%

See page 75 for all footnotes.

74

APPENDIX B

Footnotes:

a	Calculated based on the average shares outstanding methodology.
b	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
c	Reflects income recognized from a special dividend which amounted to $0.10 per share and 0.03% of average net assets.
d	Reflects income recognized from a special dividend which amounted to $0.03 per share and 0.30% of average net assets.
e	Reflects an increase of $0.01 due to payments by affiliates during the period to reimburse certain security claims.
f	Performance has not been restated to reflect the impact of security claims recorded during the period. If restated, the performance would have been 13.18% for Institutional Shares.
g	Amount is less than 0.005% of average net assets.

75

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Index

1	General Investment Management Approach
4	Fund Investment Objectives and Strategies
	4	Goldman Sachs Structured Large Cap Value Fund
	6	Goldman Sachs Structured U.S. Equity Fund
	7	Goldman Sachs Structured Large Cap Growth Fund
	8	Goldman Sachs Structured Small Cap Equity Fund
	9	Goldman Sachs Structured International Equity Fund
11	Other Investment Practices and Securities
13	Principal Risks of the Funds
17	Fund Performance
23	Fund Fees and Expenses
26	Service Providers
33	Dividends
34	Shareholder Guide
	34	How To Buy Shares
	40	How To Sell Shares
49	Taxation
52	Appendix A Additional Information on Portfolio Risks, Securities and Techniques
70	Appendix B Financial Highlights

Structured Equity Funds
Prospectus (Institutional Shares)

   FOR MORE INFORMATION   

Annual/Semi-annual Report

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year.

Statement of Additional Information

Additional information about the Funds and their policies is also available in the Funds’ Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus).

The Funds’ annual and semi-annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1-800-621-2550. You can also access and download the annual and semi-annual reports and the Additional Statement at the Funds’ website: http://www.goldmansachsfunds.com.

To obtain other information and for shareholder inquiries:

n By telephone:	1-800-621-2550
n By mail:	Goldman Sachs Funds, P.O. Box 06050 Chicago, IL 60606
n On the Internet:	SEC EDGAR database – http://www.sec.gov

You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC’s public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102 or by electronic request to: publicinfo@sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942-8090.

The Funds’ investment company registration number is 811-5349.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

STRUCTPROINS

EX-99.17.E

Prospectus

Class A, B
and C Shares

February 28, 2006

 GOLDMAN SACHS TAXABLE FIXED INCOME FUNDS

n Goldman Sachs Enhanced Income Fund

n  Goldman Sachs Ultra-Short Duration Government Fund

n  Goldman Sachs Short Duration Government Fund

n  Goldman Sachs Government Income Fund

n  Goldman Sachs U.S. Mortgages Fund

n  Goldman Sachs Core Fixed Income Fund

n  Goldman Sachs Investment Grade Credit Fund

n  Goldman Sachs Global Income Fund

n  Goldman Sachs High Yield Fund

n  Goldman Sachs Emerging Markets Debt Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN A FUND.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

General Investment
Management Approach

Goldman Sachs Asset Management, L.P. (“GSAM^®”), serves as investment adviser to the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield and Emerging Markets Debt Funds. Goldman Sachs Asset Management International (“GSAMI”) serves as investment adviser to the Global Income Fund. GSAM and GSAMI are each referred to in this Prospectus as the “Investment Adviser.”

The Funds Described In This Prospectus, Including The Enhanced Income Fund, Are Not Money Market Funds. Investors In The Funds Should Understand That The Net Asset Value (“NAV”) Of The Funds Will Fluctuate Which May Result In A Loss Of A Portion Of The Principal Amount Invested.

Goldman Sachs’ Fixed Income Investing Philosophy:

Global fixed income markets are constantly evolving and are highly diverse— with myriad countries, currencies, sectors, issuers and securities. We believe inefficiencies in these complex markets cause bond prices to diverge from their fair value for periods of time. To capitalize on these inefficiencies and generate consistent risk-adjusted performance, we believe it is critical to:

n	Thoughtfully combine diversified sources of return by employing multiple investment strategies
n	Take a global perspective to uncover relative value opportunities
n	Employ focused specialist teams to identify short-term mispricings and incorporate long-term views
n	Emphasize a risk-aware approach

GSAM’s Fixed Income investment process seeks to maximize risk-adjusted total returns by utilizing a diverse set of investment strategies. The process revolves around four key elements:

1. Developing a long-term risk budget— Lead portfolio managers (“Portfolio Team”) are responsible for the overall results of a Fund. They set the strategic direction of a Fund by establishing a “risk budget.” Following careful analysis of risk and return objectives, they allocate the overall risk budget to each component strategy to optimize potential return.

1

2. Generating investment views and strategies— Within the parameters of the risk budget, our Top-down and Bottom-up Strategy Teams generate investment ideas within their areas of specialization. The “Top-down Strategy Teams” are responsible for Cross-Sector, Duration, Country, and Currency decisions and are deliberately small to ensure creativity and expedite decision-making and execution. Concurrently, “Bottom-up Strategy Teams,” comprised of sector specialists, formulate sub-sector allocation and security selection decisions.

3. Implementing portfolios— The Strategy Teams trade the securities within their area of expertise, while the Portfolio Team oversees the portfolio construction process. In this way, a Fund benefits from the “Best Ideas” generated by the Strategy Teams and trades remain consistent with risk and return objectives.

4. Monitoring strategies— The Portfolio Team is responsible for monitoring the Funds to ensure the most optimal mix of strategies. In addition, the Top-down and Bottom-up Strategy Teams review the strategies within their areas of specialization.

With every fixed-income portfolio, the Investment Adviser applies a team approach that emphasizes risk management and capitalizes on Goldman Sachs’ extensive research capabilities.

Each of the Funds described in this Prospectus has a target duration. A Fund’s duration approximates its price sensitivity to changes in interest rates. For example, suppose that interest rates in one day fall by one percent which, in turn, causes yields on every bond in the market to fall by the same amount. In this example, the price of a bond with a duration of three years may be expected to rise approximately three percent and the price of a bond with a five year duration may be expected to rise approximately five percent. The converse is also true. Suppose interest rates in one day rise by one percent which, in turn, causes yields on every bond in the market to rise by the same amount. In this second example, the price of a bond with a duration of three years may be expected to fall approximately three percent and the price of a bond with a five year duration may be expected to fall approximately five percent. The longer the duration of a bond, the more sensitive the bond’s price is to changes in interest rates. Maturity measures the time until final payment is due; it takes no account of the pattern of a security’s cash flows over time. In calculating maturity, a Fund may determine the maturity of a variable or floating rate obligation according to its interest rate reset date, or the date principal can be recovered on demand, rather than the date of ultimate maturity. Similarly, to the extent that a fixed income obligation has a call, refunding, or redemption provision, the date on which the instrument is expected to be called, refunded or redeemed may be considered to be its maturity date. There is no guarantee that the expected call, refund or redemption

2

GENERAL INVESTMENT MANAGEMENT APPROACH

will occur, and a Fund’s average maturity may lengthen beyond the Investment Adviser’s expectations should the expected call, refund or redemption not occur. In computing portfolio duration, a Fund will estimate the duration of obligations that are subject to prepayment or redemption by the issuer, taking into account the influence of interest rates on prepayments and coupon flows. This method of computing duration is known as “option-adjusted” duration. The Investment Adviser may use futures contracts, options on futures contracts and swaps to manage the Funds’ target duration in accordance with their benchmark or benchmarks. A Fund will not be limited as to its maximum weighted average portfolio maturity or the maximum stated maturity with respect to individual securities unless otherwise noted.

The Investment Adviser uses derivative instruments, among other things, to manage the durations of Funds’ investment portfolios in accordance with their respective target durations. These derivative instruments include financial futures contracts and swap transactions, as well as other types of derivatives, and can be used to shorten and lengthen the duration of a Fund. The Funds’ investments in derivative instruments, including financial futures contracts and swaps, can be significant. These transactions can result in sizeable realized and unrealized capital gains and losses relative to the gains and losses from the Funds’ investments in bonds and other securities. Short-term and long-term realized capital gains distributions paid by the Funds are taxable to their shareholders.

Interest rates, fixed income securities prices, the prices of futures and other derivatives, and currency exchange rates can be volatile, and a variance in the degree of volatility or in the direction of the market from the Investment Adviser’s expectations may produce significant losses in a Fund’s investments in derivatives. In addition, a perfect correlation between a derivatives position and a fixed income security position is generally impossible to achieve. As a result, the Investment Adviser’s use of derivatives may not be effective in fulfilling the Investment Adviser’s investment strategies and may contribute to losses that would not have been incurred otherwise.

Financial futures contracts used by each of the Funds include interest rate futures contracts including, among others, Eurodollar futures contracts. Eurodollar futures contracts are U.S. dollar-denominated futures contracts that are based on the implied forward London Interbank Offered Rate (LIBOR) of a three-month deposit. Further information is included in this Prospectus regarding futures contracts, swaps and other derivative instruments used by the Funds, including information on the risks presented by these instruments and other purposes for which they may be used by the Funds.

Each Fund also has credit rating requirements for the securities it buys. A Fund will deem a security to have met its minimum credit rating requirement if the security has the required rating at the time of purchase from at least one nationally recognized statistical rating organization (“NRSRO”) even though it has been rated below the

3

minimum rating by one or more other NRSROs. Unrated securities may be purchased by the Funds if they are determined by the Investment Adviser to be of comparable quality. A security satisfies a Fund’s minimum rating requirement regardless of its relative ranking (for example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below such rating, the Fund will not be required to dispose of such security. This is so even if the downgrade causes the average credit quality of the Fund to be lower than that stated in the Prospectus. Furthermore, during this period, the Investment Adviser will only buy securities at or above the Fund’s average rating requirement. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of such security, is in the best interests of a Fund and its shareholders.

As discussed below, the Funds may invest in credit default swaps, which are derivative investments. When a Fund sells a credit default swap (commonly known as selling protection), the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) if the security defaults. A Fund will be the seller of a credit default swap only when the credit of the security is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into.

References in the Prospectus to a Fund’s benchmark are for informational purposes only, and unless otherwise noted are not necessarily an indication of how the Fund is managed.

4

Fund Investment Objectives
and Strategies

Goldman Sachs
Enhanced Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Six-Month U.S. Treasury Bill Index to One-Year U.S. Treasury Note Index
Expected Approximate Interest Rate Sensitivity:	9-month U.S. Treasury bill
Credit Quality:	Minimum = A by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality Weighted Average = AA
Benchmarks:	Six-Month U.S. Treasury Bill Index One-Year U.S. Treasury Note Index
Symbol:	Class A: GEIAX

   INVESTMENT OBJECTIVE   

The Fund seeks to generate return in excess of traditional money market products while maintaining an emphasis on preservation of capital and liquidity.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, primarily in a portfolio of fixed-income securities, including non-mortgage securities issued or guaranteed by the U.S. government, its agencies, instrumentalities or sponsored enterprises (“U.S. Government Securities”), corporate notes and commercial paper and fixed and floating rate asset-backed securities. Except for asset-backed securities and Treasury Securities deliverable into futures transactions, the Fund will not invest in securities with remaining maturities of more than 5 years as determined in accordance with the Statement of Additional Information (the “Additional Statement”). With respect to asset-backed securities, the Fund will not invest in asset-backed securities with a weighted average life of more than 5 years. The Fund may invest across a broad range of high-grade fixed-income sectors with an emphasis on the preservation of capital and liquidity. In pursuing the Fund’s investment objective, the Investment Adviser will seek to enhance the Fund’s return by identifying those high grade fixed income securities that are within the maturity limitations discussed above and that the Investment Adviser believes offer advantageous yields relative to other similar securities.

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Six- Month U.S. Treasury Bill Index/One Year U.S. Treasury Note Index has been approximately 0.75 years.

5

Goldman Sachs
Ultra-Short Duration Government Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Six-Month U.S. Treasury Bill Index to One-Year U.S. Treasury Note Index Maximum = 2 years
Expected Approximate Interest Rate Sensitivity:	9-month U.S. Treasury bill
Credit Quality:	U.S. Government Securities and repurchase agreements collateralized by such securities; non-U.S. Government Securities rated AAA or Aaa by a NRSRO at the time of purchase, or if unrated, determined by the Investment Adviser to be of comparable quality
Benchmarks:	Six-Month U.S. Treasury Bill Index One-Year U.S. Treasury Note Index
Symbol:	Class A: GSAMX

   INVESTMENT OBJECTIVE   

The Fund seeks to provide a high level of current income, consistent with low volatility of principal.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in U.S. Government Securities, including securities representing an interest in or collateralized by adjustable rate and fixed rate mortgage loans or other mortgage-related securities (“Mortgage-Backed Securities”), and in repurchase agreements collateralized by U.S. Government Securities**. The remainder of the Fund’s Net Assets (up to 20%) may be invested in other non-government securities. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

    *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Six- Month U.S. Treasury Bill Index/One Year U.S. Treasury Note Index has been approximately 0.75 years.

     **  To the extent required by Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

6

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Short Duration Government Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Two-Year U.S. Treasury Note Index plus or minus 0.5 years Maximum = 3 years
Expected Approximate Interest Rate Sensitivity:	2-year U.S. Treasury note
Credit Quality:	U.S. Government Securities and repurchase agreements collateralized by such securities
Benchmark:	Two-Year U.S. Treasury Note Index
Symbols:	Class A: GSSDX, Class B: GSDGX, Class C: GSDCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income and secondarily, in seeking current income, may also consider the potential for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in U.S. Government Securities and in repurchase agreements collateralized by such securities**. Substantially all of the Fund’s Net Assets will be invested in U.S. Government Securities and instruments based on U.S. Government Securities. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

    *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Two- Year U.S. Treasury Note Index has been approximately 1.75 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

7

Goldman Sachs
Government Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Mutual Fund Government/Mortgage Index plus or minus 1 year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	5-year U.S. Treasury note
Credit Quality:	U.S. Government Securities; non-U.S. Government Securities rated AAA or Aaa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Government/Mortgage Index
Symbols:	Class A: GSGOX, Class B: GSOBX, Class C: GSOCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income, consistent with safety of principal.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in U.S. Government Securities and in repurchase agreements collateralized by such securities**. The remainder of the Fund’s Net Assets (up to 20%) may be invested in non-government securities such as privately issued Mortgage-Backed Securities, asset-backed securities and corporate securities. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

    *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Mutual Fund Government/ Mortgage Index has ranged between 3 and 4.8 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

8

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
U.S. Mortgages Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Securitized Index plus or minus 0.5 years
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase. Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Securitized Index
Symbols:	Class A: GSUAX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of total return consisting of income and capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in securities representing direct or indirect interests in or that are collateralized by Mortgage-Backed Securities**. The Fund may also invest in mortgage dollar rolls, U.S. Government Securities and asset-backed securities. For more information about mortgage dollar rolls and these other investments, see “Appendix A — Additional Information on Portfolio Risks, Securities and Techniques.”

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Securitized Index has ranged between 1 and 4.3 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

9

Goldman Sachs
Core Fixed Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Aggregate Bond Index plus or minus one year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	5-year U.S. Treasury note
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase. Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Aggregate Bond Index
Symbols:	Class A: GCFIX, Class B: GCFBX, Class C: GCFCX

   INVESTMENT OBJECTIVE   

The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index (the “Index”).

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities, including U.S. Government Securities, corporate debt securities, privately issued Mortgage-Backed Securities and asset-backed securities**. The Fund may also invest in custodial receipts, Municipal Securities and convertible securities. The Fund may also engage in forward foreign currency transactions for both speculative and hedging purposes. The Fund’s investments in non-U.S. dollar denominated obligations will not exceed 25% of its total assets at

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Aggregate Bond Index has ranged between 3.8 and 5 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

10

FUND INVESTMENT OBJECTIVES AND STRATEGIES

the time of investment and 10% of the Fund’s total assets may be invested in obligations of issuers in countries with emerging markets or economies (“emerging countries”). However, to the extent that the Investment Adviser has entered into transactions that are intended to hedge the Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency. In pursuing its investment objective, the Fund uses the Index as its performance benchmark, but the Fund will not attempt to replicate the Index. The Fund may, therefore, invest in securities that are not included in the Index.

11

Goldman Sachs
Investment Grade Credit Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers U.S. Credit Index plus or minus one year
Expected Approximate Interest Rate Sensitivity:	7-year U.S. Treasury note
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase. Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers U.S. Credit Index
Symbol:	Class A: GSGAX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers U.S. Credit Index (the “Index”).

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in investment grade fixed-income securities**. Investment grade securities are securities that are rated at the time of purchase at least BBB- by Standard & Poor’s Rating Group (“Standard & Poor’s”) or at least Baa3 by Moody’s Investors Service, Inc. (“Moody’s”), have a comparable rating by another NRSRO or, if unrated, are determined by the Investment Adviser to be of comparable quality. The Fund may invest in corporate securities, U.S. Government Securities, Mortgage-Backed Securities, asset-backed securities, and fixed-income securities issued by or on behalf of states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”). Although the Fund may invest

      *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers U.S. Credit Index has ranged between 5.4 and 6.1 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

12

FUND INVESTMENT OBJECTIVES AND STRATEGIES

without limit in foreign securities, the Fund’s investments in non-U.S. dollar denominated obligations will not exceed 25% of its total assets at the time of investment, and 10% of the Fund’s total assets may be invested in obligations of emerging countries. However, to the extent that the Investment Adviser has entered into transactions that are intended to hedge the Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency. In pursuing its investment objective, the Fund uses the Index as its performance benchmark, but the Fund will not attempt to replicate the Index. The Fund may, therefore, invest in securities that are not included in the Index.

13

Goldman Sachs
Global Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = J.P. Morgan Global Government Bond Index (hedged) plus or minus 2.5 years Maximum = 7.5 years
Expected Approximate Interest Rate Sensitivity:	6-year government bond
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase; at least 50% of total assets = AAA or Aaa Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	J.P. Morgan Global Government Bond Index (hedged)
Symbols:	Class A: GSDTX, Class B: GSDBX, Class C: GSTCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high total return, emphasizing current income, and, to a lesser extent, providing opportunities for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in a portfolio of fixed-income securities of U.S. and foreign issuers**. The Fund also enters into transactions in foreign currencies. Under normal market conditions, the Fund will:

n	Have at least 30% of its Net Assets, after considering the effect of currency positions, denominated in U.S. dollars
n	Invest in securities of issuers in at least three countries

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the J.P. Morgan Global Government Bond Index (hedged) has ranged between 5.3 and 7.1 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

14

FUND INVESTMENT OBJECTIVES AND STRATEGIES

n Seek to meet its investment objective by pursuing investment opportunities in foreign and domestic fixed-income securities markets and by engaging in currency transactions to seek to enhance returns and to seek to hedge its portfolio against currency exchange rate fluctuations

The Fund may invest more than 25% of its total assets in the securities of corporate and governmental issuers located in each of Canada, Germany, Japan and the United Kingdom as well as in the securities of U.S. issuers. Not more than 25% of the Fund’s total assets will be invested in securities of issuers in any other single foreign country. The Fund may also invest up to 10% of its total assets in issuers in emerging countries.

The fixed-income securities in which the Fund may invest include:

n	U.S. Government Securities and custodial receipts therefor
n	Securities issued or guaranteed by a foreign government or any of its political subdivisions, authorities, agencies, instrumentalities or by supranational entities
n	Corporate debt securities
n	Certificates of deposit and bankers’ acceptances issued or guaranteed by, or time deposits maintained at, U.S. or foreign banks (and their branches wherever located) having total assets of more than $1 billion
n	Commercial paper
n	Mortgage-Backed Securities and asset-backed securities

The Global Income Fund is “non-diversified” under the Investment Company Act of 1940 (the “Investment Company Act”), and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Global Income Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

15

Goldman Sachs
High Yield Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped plus or minus 2.5 years Maximum = 7.5 years
Expected Approximate Interest Rate Sensitivity:	6-year U.S. Treasury note
Credit Quality:	At least 80% of net assets = BB or Ba or lower at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped
Symbols:	Class A: GSHAX, Class B: GSHBX, Class C: GSHCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income and may also consider the potential for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in high-yield, fixed-income securities that, at the time of purchase, are non-investment grade securities**. Non-investment grade securities are securities rated BB, Ba or below by a NRSRO, or, if unrated, determined by the Investment

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped has ranged between 4.1 and 4.8 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

16

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Adviser to be of comparable quality. The Fund may invest in all types of fixed-income securities, including:

n	Senior and subordinated corporate debt obligations (such as bonds, debentures, notes and commercial paper)
n	Convertible and non-convertible corporate debt obligations
n	Loan participations
n	Custodial receipts
n	Municipal Securities
n	Preferred stock

The Fund may invest up to 25% of its total assets in obligations of domestic and foreign issuers which are denominated in currencies other than the U.S. dollar and in securities of issuers located in emerging countries denominated in any currency. However, to the extent that the Investment Adviser has entered into transactions that are intended to hedge the Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency.

Under normal market conditions, the Fund may invest up to 20% of its Net Assets in investment grade fixed-income securities, including U.S. Government Securities. The Fund may also invest in common stocks, warrants, rights and other equity securities, but will generally hold such equity investments only when debt or preferred stock of the issuer of such equity securities is held by the Fund or when the equity securities are received by the Fund in connection with a corporate restructuring of an issuer.

Non-investment grade fixed-income securities (commonly known as “junk bonds”) tend to offer higher yields than higher rated securities with similar maturities. Non-investment grade fixed-income securities are, however, considered speculative and generally involve greater price volatility and greater risk of loss of principal and interest than higher rated securities. The Fund may purchase the securities of issuers that are in default.

17

Goldman Sachs
Emerging Markets Debt Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = JP Morgan EMBI Global Diversified Index plus or minus 2 years Maximum = 7 years
Expected Approximate Interest Rate Sensitivity:	10-year government bond
Credit Quality:	Minimum = D (Standard & Poor’s) or C (Moody’s)
Benchmark:	JP Morgan EMBI Global Diversified Index
Symbol:	Class A: GSDAX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of total return consisting of income and capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities of issuers located in emerging countries**. The Investment Adviser may consider, but is not bound by, classifications by the World Bank, the International Finance Corporation or the United Nations and its agencies in determining whether a country is emerging or developed. Currently, Emerging Countries include, among others, most African, Asian, Eastern European, Middle Eastern, South and Central American nations. The Investment Adviser currently intends that the Fund’s investment focus will be in the following emerging countries: Argentina, Brazil, Bulgaria, Colombia, Dominican Republic, Ecuador, Egypt, Malaysia, Mexico, Nigeria, Panama, Peru, The Philippines, Poland, Russia, South Africa, South Korea, Turkey, Ukraine, Uruguay, Venezuela as well as other

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the J.P. Morgan EMBI Global Diversified Index has ranged between 4.1 and 4.6 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

18

FUND INVESTMENT OBJECTIVES AND STRATEGIES

emerging countries to the extent that foreign investors are permitted by applicable law to make such investments.

The Fund may invest in all types of emerging country fixed-income securities, including the following:

n	Brady bonds and other debt issued by governments, their agencies and instrumentalities, or by their central banks,
n	interests issued by entities organized and operated for the purpose of restructuring the investment characteristics of instruments issued by emerging country issuers,
n	fixed and floating rate, senior and subordinated corporate debt obligations (such as bonds, debentures, notes and commercial paper),
n	loan participations, and
n	repurchase agreements with respect to the foregoing.

The majority of the countries in which the Fund invests will have sovereign ratings that are below investment grade or are unrated. Moreover, to the extent the Fund invests in corporate or other privately issued debt obligations, many of the issuers of such obligations will be smaller companies with stock market capitalizations of $1 billion or less at the time of investment. Although a majority of the Fund’s assets may be denominated in U.S. Dollars, the Fund may invest in securities denominated in any currency and may be subject to the risk of adverse currency fluctuations.

The Emerging Markets Debt Fund is “non-diversified” under the Investment Company Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Emerging Markets Debt Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

Non-investment grade fixed-income securities (commonly known as “junk bonds”) tend to offer higher yields than higher-rated securities with similar maturities. Non-investment grade securities are, however, considered speculative and generally involve greater price volatility and greater risk of loss of principal and interest than more highly rated securities. The Fund may purchase the securities of issuers that are in default.

19

Other Investment Practices
and Securities

The tables on the following pages identify some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The tables also highlight the differences among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in the table show allowable usage only; for actual usage, consult the Funds’ annual and semi-annual reports. For more information about these and other investment practices and securities, see Appendix A. Each Fund publishes on its website (http://www.gs.com/funds) complete portfolio holdings for the Fund as of the end of each fiscal quarter subject to a thirty calendar-day lag between the date of the information and the date on which the information is disclosed. In addition, the Funds publish on their website selected holdings information monthly subject to a ten calendar-day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC. In addition, a description of the Fund’s policies and procedures with respect to the disclosure of a Fund’s portfolio securities is available in the Fund’s Statement of Additional Information (“Additional Statement”).

10 Percent of total assets (including securities lending collateral) (italic type)
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
•    No specific percentage limitation		Ultra-Short	Short
on usage; limited only by the	Enhanced	Duration	Duration	Government
objectives and strategies of the Fund	Income	Government	Government	Income
—  Not permitted	Fund	Fund	Fund	Fund
Investment Practices
Borrowings	33 1/3	33 1/3	33 1/3	33 1/3
Credit, Interest Rate and Total Return Swaps*	•	•	•	•
Currency Options and Futures	—	—	—	—
Cross Hedging of Currencies	—	—	—	—
Currency Swaps*	—	—	—	—
Financial Futures Contracts	•	•	•	•
Forward Foreign Currency Exchange Contracts	—	—	—	—
Interest Rate Floors, Caps and Collars	•	•	•	•
Mortgage Dollar Rolls	—	•	•	•
Mortgage Swaps*	—	•	•	•
Options (including Options on Futures)	•	•	•	•
Options on Foreign Currencies	—	—	—	—
Repurchase Agreements	•**	•	•	•
Securities Lending	33 1/3	33 1/3	33 1/3	33 1/3
When-Issued Securities and Forward Commitments	•	•	•	•

*

Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.

**

The Enhanced Income, Core Fixed Income, Global Income and High Yield Funds may enter into repurchase agreements collateralized by securities issued by foreign governments. The U.S. Mortgages and Investment Grade Credit Funds may enter into repurchase agreements collateralized by U.S. Government Securities and securities rated at least AAA by Standard & Poor’s or Aaa by Moody’s or have a comparable rating by another NRSRO. The Emerging Markets Debt Fund may enter into repurchase agreements collateralized by securities issued by foreign governments and their central banks.

20

OTHER INVESTMENT PRACTICES AND SECURITIES

		Investment			Emerging
U.S.	Core Fixed	Grade	Global		Markets
Mortgages	Income	Credit	Income	High Yield	Debt
Fund	Fund	Fund	Fund	Fund	Fund
33 1/3	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
•	•	•	•	•	•
—	•	•	•	•	•
—	•	•	•	•	•
—	•	•	•	•	•
•	•	•	•	•	•
—	•	•	•	•	•
•	•	•	•	•	•
•	•	•	•	—	—
•	•	•	•	•	—
•	•	•	•	•	•
—	•	•	•	•	•
•**	•**	•**	•**	•**	•**
33 1/3	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
•	•	•	•	•	•

21

10 Percent of total assets (italic type)

10 Percent of Net Assets (including borrowings for investment purposes) (roman type)

•    No specific percentage limitation

Ultra-Short

Short

on usage; limited only by the

Enhanced

Duration

Duration

Government

U.S.

objectives and strategies of the Fund

Income

Government

Government

Income

Mortgages

—  Not permitted

Fund

Fund

Fund

Fund

Fund

Investment Securities

Asset-Backed Securities

•

•

•

1

•

•

Bank Obligations

•

•

—

•

•

Convertible Securities

•

—

—

—

—

Corporate Debt Obligations and Trust Preferred Securities

•

•

—

•

•

Emerging Country Securities

—

—

—

—

—

Floating and Variable Rate Obligations

•

•

•

•

•

Foreign Securities2

•

—

—

—

—

Loan Participations

—

—

—

—

—

Mortgage-Backed Securities

Adjustable Rate Mortgage Loans

—

•

•

•

•

Collateralized Mortgage Obligations

—

•

•

•

•

Fixed Rate Mortgage Loans

—

•

•

•

•

Government Issued Mortgage-Backed Securities

—

•

•

•

•

Multiple Class Mortgage-Backed Securities

—

•

•

•

•

Privately Issued Mortgage-Backed Securities

—

•

—

•

•

Stripped Mortgage-Backed Securities

—

•

•

•

•

Lower Grade Fixed Income Securities

—

—

—

—

—

Preferred Stock, Warrants and Rights

•

—

—

—

—

Structured Securities*

•

•

•

•

•

Taxable Municipal Securities

—

•

—

•

•

Tax-Free Municipal Securities

—

•

—

•

•

Temporary Investments

•

•

•

•

•

U.S. Government Securities

•

•

80+

80+

•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.
1	The Short Duration Government Fund may only invest in asset-backed securities that are issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises.
2	Includes issuers domiciled in one country and issuing securities denominated in the currency of another. Non-dollar securities are not permitted for the Enhanced Income Fund. The Investment Grade Credit Fund may invest up to 25% of its total assets in securities not denominated in U.S. dollars (positions hedged against currency risk are not counted when calculating compliance with this 25% limitation).
3	Of the Funds’ investments in foreign securities, 10% of each Fund’s total assets in the aggregate may be invested in emerging country securities.

22

OTHER INVESTMENT PRACTICES AND SECURITIES

Core Fixed

Investment

Global

Emerging

Income

Grade Credit

Income

High Yield

Markets Debt

Fund

Fund

Fund

Fund

Fund

•

•

•

•

•

•

•

•

•

•

•

•

—

•

•

•

•

•

•

•

10

3

10

3

10

3

25

4

•

•

•

•

•

•

•

4

•

4

•

•

4

•

—

•

—

•

•

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

—

—

—

80+

5

•

•

•

—

•

•

•

•

•

•

•

•

•

—

•

—

•

•

—

•

—

•

•

•

•

6

•

6

•

•

•

•

•

4	The Core Fixed Income Fund and Investment Grade Credit Fund may each invest up to 25% of their respective total assets in securities not denominated in U.S. dollars. The High Yield Fund may invest up to 25% of its total assets in securities not denominated in U.S. dollars and in emerging country securities denominated in any currency. If a Fund’s position is hedged against currency risk, such position is not counted when calculating compliance with this 25% limitation.
5	The High Yield Fund will invest at least 80% of its Net Assets in lower grade securities under normal circumstances.
6	The High Yield Fund and Emerging Markets Debt Fund may for this purpose invest in investment grade and high grade securities without limit.

23

Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective.

			Ultra-Short	Short
		Enhanced	Duration	Duration	Government	U.S.
•   Applicable		Income	Government	Government	Income	Mortgages
— Not applicable		Fund	Fund	Fund	Fund	Fund
NAV		•	•	•	•	•
Interest Rate		•	•	•	•	•
Credit/Default		•	•	•	•	•
Call		•	•	•	•	•
Extension		•	•	•	•	•
Derivatives		•	•	•	•	•
U.S. Government Securities		•	•	•	•	•
Market		•	•	•	•	•
Management		•	•	•	•	•
Liquidity		•	•	•	•	•
Non-Diversification		—	—	—	—	—
Sovereign
	Political	•	—	—	—	—
	Economic	•	—	—	—	—
	Repayment	•	—	—	—	—
Foreign		•	—	—	—	—
Emerging Countries		—	—	—	—	—
Junk Bond		—	—	—	—	—
Concentration		—	—	—	—	—
Foreign Currency Trading		—	—	—	—	—

24

PRINCIPAL RISKS OF THE FUNDS

Core Fixed		Investment		Global				Emerging
Income		Grade Credit		Income		High Yield		Markets Debt
Fund		Fund		Fund		Fund		Fund
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	—		—		•		—		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	—		—		—		•		•
	—		—		•		—		•
	•		•		•		•		•

25

All Funds:

n	NAV Risk—The risk that the net asset value (“NAV”) of the Fund and the value of your investment will fluctuate.
n	Interest Rate Risk—The risk that when interest rates increase, fixed-income securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.
n	Credit/Default Risk—The risk that an issuer or guarantor of fixed-income securities held by a Fund (which may have low credit ratings), or the counterparty in a derivative instrument, may default on its obligation to pay interest and repay principal.
n	Call Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as a Mortgage-Backed Security) earlier than expected. This may happen when there is a decline in interest rates. Under these circumstances, a Fund may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities.
n	Extension Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as a Mortgage-Backed Security) later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease, and a Fund will also suffer from the inability to invest in higher yielding securities.
n	Derivatives Risk—The risk that loss may result from a Fund’s investments in options, futures, swaps, options on swaps, structured securities and other derivative investments. These instruments may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses to a Fund. See “General Investment Management Approach” above.
n	U.S. Government Securities Risk—The risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Although many types of U.S. Government Securities may be purchased by the Funds, such as those issued by the Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. The maximum potential liability of the issuers of some U.S. Government Securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
n	Market Risk—The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes

26

PRINCIPAL RISKS OF THE FUNDS

	may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more industry sectors, which will increase the Fund’s exposure to risk of loss from adverse developments affecting those sectors.
n	Management Risk—The risk that a strategy used by the Investment Adviser may fail to produce the intended results.
n	Liquidity Risk—The risk that a Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in non-investment grade fixed-income securities or emerging country issuers will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within these investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate. The Goldman Sachs Asset Allocation Portfolios (the “Asset Allocation Portfolios”) expect to invest a significant percentage of their assets in the Funds and other funds for which GSAM or an affiliate now or in the future acts as investment adviser or underwriter. Redemptions by an Asset Allocation Portfolio of its position in a Fund may further increase liquidity risk and may impact a Fund’s NAV.

Specific Funds:

n

Non-Diversification Risk—The Global Income and Emerging Markets Debt Funds are non-diversified, meaning that each Fund is permitted to invest more of its assets in fewer issuers than “diversified” mutual funds. Thus, each Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

n

Sovereign Risk—The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds will be subject to the risk that the issuer of the sovereign debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay the principal or interest when due.

n

Political Risk—The risks associated with the general political and social environment of a country. These factors may include among other things government instability, poor socioeconomic conditions, corruption, lack of law and order, lack of democratic accountability, poor quality of the bureaucracy, internal and external conflict, and religious and ethnic tensions. High political risk can impede the economic welfare of a country.

n

Economic Risk—The risks associated with the general economic environment of a country. These can encompass, among other things, low quality and growth rate of Gross Domestic Product (“GDP”), high inflation or deflation, high

27

government deficits as a percentage of GDP, weak financial sector, overvalued exchange rate, and high current account deficits as a percentage of GDP.

n

Repayment Risk—The risk associated with the inability of a country to pay its external debt obligations in the immediate future. Repayment risk factors may include but are not limited to high foreign debt as a percentage of GDP, high foreign debt service as a percentage of exports, low foreign exchange reserves as a percentage of short-term debt or exports, and an unsustainable exchange rate structure.

n	Foreign Risk—The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds will be subject to risks of loss with respect to their foreign investments that are not typically associated with domestic issuers. Loss may result because of less foreign government regulation, less public information and less economic, political and social stability. Loss may also result from the imposition of exchange controls, confiscations and other government restrictions. The Funds will also be subject to the risk of negative foreign currency rate fluctuations. Foreign risks will normally be greatest when a Fund invests in issuers located in emerging countries.
n	Emerging Countries Risk—The Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may invest in emerging countries. The securities markets of Asian, Latin, Central and South American, Eastern European, Middle Eastern, African and other emerging countries are less liquid, are especially subject to greater price volatility, have smaller market capitalizations, have less government regulation and are not subject to as extensive and frequent accounting, financial and other reporting requirements as the securities markets of more developed countries. These risks are not normally associated with investments in more developed countries.
n	“Junk Bond” Risk—The High Yield and Emerging Markets Debt Funds will invest in non-investment grade fixed-income securities (commonly known as “junk bonds”) that are considered predominantly speculative by traditional investment standards. Non-investment grade fixed-income securities and unrated securities of comparable credit quality are subject to the increased risk of an issuer’s inability to meet principal and interest payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity.
n	Concentration Risk—The risk that if either the Global Income Fund or Emerging Markets Debt Fund invests more than 25% of its total assets in issuers within the same country, state, region, currency, industry or economic sector, an adverse economic, business or political development may affect the value of the Fund’s investments more than if its investments were not so concentrated. In addition, the Global Income Fund may invest more than 25% of its total assets in the securities

28

PRINCIPAL RISKS OF THE FUNDS

of corporate and governmental issuers located in each of Canada, Germany, Japan and the United Kingdom, as well as in the securities of U.S. issuers. Concentration of the Global Income Fund’s investments in such issuers will subject the Fund, to a greater extent than if investments were less concentrated, to losses arising from adverse developments affecting those issuers or countries.

n

Non-Hedging Foreign Currency Trading Risk—The Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may engage, to a greater extent than the other Funds, in forward foreign currency transactions for speculative purposes. The Funds’ Investment Adviser may purchase or sell foreign currencies through the use of forward contracts based on the Investment Adviser’s judgment regarding the direction of the market for a particular foreign currency or currencies. In pursuing this strategy, the Investment Adviser seeks to profit from anticipated movements in currency rates by establishing “long” and/or “short” positions in forward contracts on various foreign currencies. Foreign exchange rates can be extremely volatile and a variance in the degree of volatility of the market or in the direction of the market from the Investment Adviser’s expectations may produce significant losses to the Funds.

More information about the Funds’ portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice.

29

Fund Performance

   HOW THE FUNDS HAVE PERFORMED   

The bar chart and table provide an indication of the risks of investing in a Fund by showing: (a) changes in the performance of a Fund’s Class A Shares from year to year for up to the last ten years (with respect to the bar charts); and (b) how the average annual total returns of a Fund’s Class A, B and C Shares* compare to those of broad-based securities market indices. The bar chart (including “Best Quarter” and “Worst Quarter” information) and table assume reinvestment of dividends and distributions. A Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.

The average annual total return calculation reflects a maximum initial sales charge of 1.5% for Class A Shares of Enhanced Income and Ultra-Short Duration Government Funds; 2.0% for Class A Shares of Short Duration Government Fund; and 4.5% for Class A Shares of Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds; the assumed contingent deferred sales charge (“CDSC”) for Class B Shares (2% maximum declining to 0% after three years for the Short Duration Government Fund and 5% maximum declining to 0% after six years for the Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds); and the assumed CDSC for Class C Shares (1% if redeemed within 12 months of purchase). The bar charts (including “Best Quarter” and “Worst Quarter” information) do not reflect the sales loads applicable to Class A Shares. If the sales loads were reflected, returns would be less. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund’s performance would have been reduced.

     *  The Enhanced Income Fund, Ultra-Short Duration Government Fund, U.S. Mortgages Fund, Investment Grade Credit Fund and Emerging Markets Debt Fund do not currently, but may in the future, offer Class B and Class C Shares. Currently Class B Shares of the Short Duration Government Fund may no longer be purchased, except in connection with the reinvestment of dividends and capital gains.

30

FUND PERFORMANCE

   INFORMATION ON AFTER-TAX RETURNS   

These definitions apply to the after-tax returns.

Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on a Fund’s Class A Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.

Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on a Fund’s Class A Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Class A Shares at the end of the performance period.

Average Annual Total Returns After Taxes on Distributions and Sale of Shares. These returns reflect taxes paid on distributions on a Fund’s Class A Shares and taxes applicable when the shares are redeemed (sold).

Note on Tax Rates. The after-tax performance figures are calculated using the historical highest individual federal marginal income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.

31

Enhanced Income Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q1 ’01           +2.24% Worst Quarter* Q2 ’04           -0.23%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 8/2/00)
Returns Before Taxes		0.81%		2.40%		2.84%
Returns After Taxes on Distributions**		-0.22%		1.11%		1.44%
Returns After Taxes on Distributions and Sale of Fund Shares**		0.52%		1.27%		1.57%
Six-Month U.S. Treasury Bill Index***		3.10%		2.59%		2.92%
One-Year U.S. Treasury Note Index***		2.36%		2.87%		3.21%
Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index****		1.93%		3.58%		4.03%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index, as reported by Merrill Lynch, do not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

32

FUND PERFORMANCE

Ultra-Short Duration Government Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q4 ’00           +2.30% Worst Quarter* Q2 ’03           +0.03%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Class A (Inception 5/15/95)
Returns Before Taxes		0.84%		2.55%		3.96%		4.11%
Returns After Taxes on Distributions**		-0.17%		1.20%		2.17%		2.27%
Returns After Taxes on Distributions and Sale of Fund Shares**		0.54%		1.36%		2.27%		2.37%
Six-Month U.S. Treasury Bill Index***		3.10%		2.59%		4.04%		4.17%
One-Year U.S. Treasury Note Index***		2.36%		2.87%		4.24%		4.39%
Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index****		1.93%		3.58%		4.71%		4.86%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index, as reported by Merrill Lynch, do not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index, an unmanaged index, does not reflect deduction for any fees, expenses or taxes.

33

Short Duration Government Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q3 ’01           +3.66% Worst Quarter* Q2 ’04   -1.09%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 5/1/97)
Returns Before Taxes		-0.95%		3.36%		4.35%
Returns After Taxes on Distributions**		-1.88%		1.97%		2.52%
Returns After Taxes on Distributions and Sale of Fund Shares**		-0.62%		2.03%		2.57%
Two-Year U.S. Treasury Note Index***		1.45%		3.80%		4.61%
Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index****		1.73%		3.83%		4.88%
Class B (Inception 5/1/97)
Returns Before Taxes		-1.53%		3.16%		3.98%
Two-Year U.S. Treasury Note Index***		1.45%		3.80%		4.61%
Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index****		1.73%		3.83%		4.88%
Class C (Inception 8/15/97)
Returns Before Taxes		-0.68%		2.99%		3.64%
Two-Year U.S. Treasury Note Index***		1.45%		3.80%		4.47%
Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index****		1.73%		3.83%		4.75%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Two-Year U.S. Treasury Note Index, as reported by Merrill Lynch, does not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

34

FUND PERFORMANCE

Government Income Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q4 ’00   +4.65% Worst Quarter* Q2 ’04           -1.83%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years			Since Inception
Class A (Inception 2/10/93)
Returns Before Taxes		-2.57%		4.14%		5.18	%		5.72%
Returns After Taxes on Distributions**		-3.53%		2.55%		3.02	%		3.44%
Returns After Taxes on Distributions and Sale of Fund Shares**		-1.67%		2.60%		3.07	%		3.45%
Lehman Brothers Mutual Fund Government/Mortgage Index***		2.63%		5.40%		6.01	%		6.27%
Class B (Inception 5/1/96)
Returns Before Taxes		-3.77%		3.89%		N/A			5.30%
Lehman Brothers Mutual Fund Government/Mortgage Index***		2.63%		5.40%		N/A			6.46%
Class C (Inception 8/15/97)
Returns Before Taxes		0.35%		4.30%		N/A			4.92%
Lehman Brothers Mutual Fund Government/Mortgage Index***		2.63%		5.40%		N/A			6.16%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Mutual Fund Government/Mortgage Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

35

U.S. Mortgages Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q3 ’04           +2.90% Worst Quarter* Q2 ’04           -0.99%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		Since Inception
Class A (Inception 11/3/03)
Returns Before Taxes		-2.44%		1.43%
Returns After Taxes on Distributions**		-3.60%		0.03%
Returns After Taxes on Distributions and Sale of Fund Shares**		-1.59%		0.43%
Lehman Brothers Securitized Index***		2.53%		3.88%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Securitized Index is an unmanaged composite of asset-backed securities, collateralized mortgage-backed securities (ERISA-eligible) and fixed rate mortgage-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes.

36

FUND PERFORMANCE

Core Fixed Income Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q3 ’01           +4.46% Worst Quarter* Q2 ’04           -2.23%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 5/1/97)
Returns Before Taxes		-2.20%		4.83%		5.69%
Returns After Taxes on Distributions**		-3.66%		2.87%		3.44%
Returns After Taxes on Distributions and Sale of Fund Shares**		-1.39%		2.98%		3.48%
Lehman Brothers Aggregate Bond Index***		2.43%		5.87%		6.58%
Class B (Inception 5/1/97)
Returns Before Taxes		-3.49%		4.62%		5.48%
Lehman Brothers Aggregate Bond Index***		2.43%		5.87%		6.58%
Class C (Inception 8/15/97)
Returns Before Taxes		0.67%		5.04%		5.22%
Lehman Brothers Aggregate Bond Index***		2.43%		5.87%		6.33%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Aggregate Bond Index represents an unmanaged diversified portfolio of fixed-income securities, including U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed and asset-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes.

37

Investment Grade Credit Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q3 ’04           +4.08% Worst Quarter* Q2 ’04           -3.31%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		Since Inception
Class A (Inception 11/3/03)
Returns Before Taxes		-2.70%		2.00%
Returns After Taxes on Distributions**		-4.06%		0.58%
Returns After Taxes on Distributions and Sale of Fund Shares**		-1.76%		0.89%
Lehman Brothers U.S. Credit Index***		1.96%		4.06%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers U.S. Credit Index is an unmanaged index that is unbundled into pure corporates (industrial, utility, and finance, including both U.S. and Non-U.S. corporations) and non-corporates (sovereign, supranational, foreign agencies, and foreign local governments). The Index figures do not reflect any deduction for fees, expenses or taxes.

38

FUND PERFORMANCE

Global Income Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q3 ’98           +5.54% Worst Quarter* Q2 ’04   -1.96%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years			Since Inception
Class A (Inception 8/2/91)
Returns Before Taxes		-0.61%		3.52%		5.34	%		6.09%
Returns After Taxes on Distributions**		-3.38%		1.19%		2.79	%		3.36%
Returns After Taxes on Distributions and Sale of Fund Shares**		-0.42%		1.62%		2.99	%		3.51%
J.P. Morgan Global Government Bond Index (hedged)***		4.97%		5.28%		6.84	%		7.48%
Class B (Inception 5/1/96)
Returns Before Taxes		-1.83%		3.44%		N/A			5.34%
J.P. Morgan Global Government Bond Index (hedged)***		4.97%		5.28%		N/A			7.04%
Class C (Inception 8/15/97)
Returns Before Taxes		2.31%		3.87%		N/A			4.73%
J.P. Morgan Global Government Bond Index (hedged)***		4.97%		5.28%		N/A			6.45%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The J.P. Morgan Global Government Bond Index (hedged), an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

39

High Yield Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q2 ’03           +10.92% Worst Quarter* Q3 ’98            -6.68%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 8/1/97)
Returns Before Taxes		-1.10%		8.49%		5.82%
Returns After Taxes on Distributions**		3.82%		4.98%		2.28%
Returns After Taxes on Distributions and Sale of Fund Shares**		-0.75%		5.08%		2.68%
Lehman Brothers U.S. Corporate High Yield Bond Index – 2% Issuer Capped***		2.76%		9.12%		5.56%
Lehman Brothers U.S. Corporate High Yield Bond Index***		2.74%		8.85%		5.39%
Class B (Inception 8/1/97)
Returns Before Taxes		-2.33%		8.24%		5.62%
Lehman Brothers U.S. Corporate High Yield Bond Index – 2% Issuer Capped***		2.76%		9.12%		5.56%****
Lehman Brothers U.S. Corporate High Yield Bond Index***		2.74%		8.85%		5.39%****
Class C (Inception 8/15/97)
Returns Before Taxes		1.79%		8.68%		5.66%
Lehman Brothers U.S. Corporate High Yield Bond Index – 2% Issuer Capped***		2.76%		9.12%		5.65%****
Lehman Brothers U.S. Corporate High Yield Bond Index***		2.74%		8.85%		5.48%****

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax

40

FUND PERFORMANCE

	returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	Effective June 1, 2005, the Lehman Brothers U.S. Corporate High Yield Bond Index, -2% Issuer Capped replaced the Lehman Brothers U.S. Corporate High Yield Bond Index as the Fund’s benchmark. The Lehman Brothers U.S. Corporate High Yield Bond Index, -2% Issuer Capped covers the universe of U.S. dollar denominated, non-convertible, fixed rate, non-investment grade debt. Index holdings must have at least one year to final maturity, at least $150 million par amount outstanding, and be publicly issued with a rating of Ba1 or lower. The Lehman Brothers U.S. Corporate High Yield Bond Index is an unmanaged, total return performance benchmark for fixed income securities having a maximum quality rating of Ba1 (as determined by Moody’s Investors Service). In the Investment Adviser’s opinion, the Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped is a more appropriate benchmark against which to measure the performance of the Fund. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
****	Inception date of the Lehman Brothers U.S. Corporate High Yield Bond Index’s and Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped’s return is 9/1/97 because daily value was unavailable at 8/15/97.

41

Emerging Markets Debt Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q3 ’04           +10.72% Worst Quarter* Q2 ’04           -5.80%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		Since Inception
Class A (Inception 8/29/03)
Returns Before Taxes		10.18%		14.50%
Returns After Taxes on Distributions**		6.67%		10.87%
Returns After Taxes on Distributions and Sale of Fund Shares**		6.60%		10.25%
JP Morgan EMBI Global Diversified Index***		10.25%		12.70%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The JP Morgan EMBI Global Diversified Index is an unmanaged index of debt instruments of 31 emerging countries. The Index figures do not reflect any deduction for fees, expenses or taxes.

42

Fund Fees and Expenses (Class A, B and C Shares)

This table describes the fees and expenses that you would pay if you buy and hold Class A, Class B or Class C Shares of a Fund.

	Enhanced			Ultra-Short Duration
	Income Fund			Government Fund
	Class A			Class A
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		1.5%	1		1.5%	1
Maximum Deferred Sales Charge (Load)		None			None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None
Redemption Fees5		None			None
Exchange Fees		None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.25%			0.40%
Distribution and Service (12b-1) Fees		0.25%			0.25%
Other Expenses9*		0.27%			0.22%
Total Fund Operating Expenses*		0.77%			0.87%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Enhanced		Ultra-Short Duration
	Income Fund		Government Fund
	Class A		Class A
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.20%		0.40%
Distribution and Service (12b-1) Fees		0.25%		0.25%
Other Expenses9		0.17%		0.21%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.62%		0.86%

43

Fund Fees and Expenses continued

	Short Duration Government Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		2.0%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		2.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees5		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.50%			0.50%			0.50%
Distribution and Service (12b-1) Fees8		0.25%			1.00%			1.00%
Other Expenses9*		0.22%			0.22%			0.22%
Total Fund Operating Expenses*		0.97%			1.72%			1.72%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Short Duration Government Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.50%		0.50%		0.50%
Distribution and Service (12b-1) Fees8		0.25%		0.85%		1.00%
Other Expenses9		0.16%		0.16%		0.16%
Total Fund Operating Expenses (after current expense limitations)		0.91%		1.51%		1.66%

44

FUND FEES AND EXPENSES

	Government Income Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees5		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.54%			0.54%			0.54%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses9*		0.23%			0.23%			0.23%
Total Fund Operating Expenses*		1.02%			1.77%			1.77%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Government Income Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.54%		0.54%		0.54%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses9		0.16%		0.16%		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.95%		1.70%		1.70%

45

Fund Fees and Expenses continued

	U.S. Mortgages
	Fund
	Class A
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1
Maximum Deferred Sales Charge (Load)		None	1
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None
Redemption Fees5		None
Exchange Fees		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.40%
Account Service Fees		0.05%
Distribution and Service (12b-1) Fees		0.25%
Other Expenses9*		0.25%
Total Fund Operating Expenses*		0.95%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	U.S. Mortgages
	Fund
	Class A
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.33%
Account Service Fees		0.05%
Distribution and Service (12b-1) Fees		0.25%
Other Expenses9		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.79%

46

FUND FEES AND EXPENSES

	Core Fixed Income Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees5		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.38%			0.38%			0.38%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses9		0.20%			0.20%			0.20%
Total Fund Operating Expenses		0.83%			1.58%			1.58%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs “Other Expenses” and “Total Fund Operating Expenses” may increase without Shareholder approval.

	Core Fixed Income Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.38%		0.38%		0.38%
Account Service Fees
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses		0.20%		0.20%		0.20%
Total Fund Operating Expenses (after current expense limitations)		0.83%		1.58%		1.58%

47

Fund Fees and Expenses continued

	Investment Grade
	Credit Fund
	Class A
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1
Maximum Deferred Sales Charge (Load)		None	1
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None
Redemption Fees5		None
Exchange Fees		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.40%
Account Services Fees		0.05%
Distribution and Service (12b-1) Fees		0.25%
Other Expenses9*		0.34%
Total Fund Operating Expenses*		1.04%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Investment Grade
	Credit Fund
	Class A
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.33%
Account Service Fees		0.05%
Distribution and Service (12b-1) Fees		0.25%
Other Expenses9		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.79%

48

FUND FEES AND EXPENSES

	Global Income Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees5		2.0%			2.0%			2.0%
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.65%			0.65%			0.65%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses9*		0.32%			0.32%			0.32%
Total Fund Operating Expenses*		1.22%			1.97%			1.97%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Global Income Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.65%		0.65%		0.65%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses9		0.16%		0.16%		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		1.06%		1.81%		1.81%

49

Fund Fees and Expenses continued

	High Yield Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees5		2.0%			2.0%			2.0%
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.70%			0.70%			0.70%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses9*		0.21%			0.21%			0.21%
Total Fund Operating Expenses*		1.16%			1.91%			1.91%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	High Yield Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.70%		0.70%		0.70%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses9		0.18%		0.18%		0.18%
Total Fund Operating Expenses (after current expense limitations)		1.13%		1.88%		1.88%

50

FUND FEES AND EXPENSES

	Emerging
	Markets
	Debt Fund
	Class A
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1
Maximum Deferred Sales Charge (Load)		None	1
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None
Redemption Fees5		2.0%
Exchange Fees		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.80%
Distribution and Service (12b-1) Fees		0.25%
Other Expenses9*		0.81%
Total Fund Operating Expenses*		1.86%

See pages 52-53 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” of the Fund (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Emerging
	Markets
	Debt Fund
	Class A
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):6
Management Fees7		0.80%
Distribution and Service (12b-1) Fees		0.25%
Other Expenses9		0.20%
Total Fund Operating Expenses (after current expense limitations)		1.25%

51

Fund Fees and Expenses continued

1	The maximum sales charge is a percentage of the offering price. Under certain circumstances, which are described in the Shareholder Guide, the maximum sales charge may be reduced or waived entirely. Except with respect to direct purchases of the Enhanced Income Fund and the Ultra-Short Duration Government Fund, a CDSC of 1% may be imposed on certain redemptions (within 18 months of purchase) of Class A Shares sold without an initial sales charge as part of an investment of $1 million or more ($500,000 in the case of the Short Duration Government Fund).
2	The maximum CDSC is a percentage of the lesser of the NAV at the time of redemption or the NAV when the shares were originally purchased.
3	With the exception of the Short Duration Government Fund, a CDSC is imposed upon Class B Shares redeemed within six years of purchase at a rate of 5% in the first year, declining to 1% in the sixth year, and eliminated thereafter. With respect to the Short Duration Government Fund, a CDSC is imposed on shares redeemed within three years of purchase at a rate of 2.0% in the first year, declining to 1% in the third year, and eliminated thereafter.
4	A CDSC of 1% is imposed on Class C Shares redeemed within 12 months of purchase.
5	A 2.0% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less.
6	The Funds’ annual operating expenses have been restated to reflect a contractual reduction in transfer agent fees from an annual rate of 0.19% to an annual rate of 0.16% of the average daily net assets of a Fund’s Class A, Class B and Class C Shares. In addition, as a result of the fee reduction commitment discussed in footnote 7, the Government Income Core Fixed Income and Global Income Funds’ “Management Fees” and “Total Fund Operating Expenses” have been restated to reflect the expenses that are expected for the current fiscal year.
7	The Investment Adviser has entered into the following fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus:

	Management Fee		Average Daily
	Annual Rate		Net Assets
Enhanced Income		0.25%	First $1 Billion
		0.23%	Next $1 Billion
		0.22%	Over $2 Billion
Ultra-Short Duration Government		0.40%	First $1 Billion
		0.36%	Next $1 Billion
		0.34%	Over $2 Billion
Short Duration Government		0.50%	First $1 Billion
		0.45%	Next $1 Billion
		0.43%	Over $2 Billion
Government Income		0.54%	First $1 Billion
		0.49%	Next $1 Billion
		0.47%	Over $2 Billion
U.S. Mortgages		0.40%	First $1 Billion
		0.36%	Next $1 Billion
		0.34%	Over $2 Billion
Core Fixed Income		0.40%	First $1 Billion
		0.36%	Next $1 Billion
		0.34%	Over $2 Billion
Investment Grade Credit		0.40%	First $1 Billion
		0.36%	Next $1 Billion
		0.34%	Over $2 Billion

52

FUND FEES AND EXPENSES

	Management Fee		Average Daily
	Annual Rate		Net Assets
Global Income		0.65%	First $1 Billion
		0.59%	Next $1 Billion
		0.56%	Over $2 Billion
High Yield		0.70%	First $2 Billion
		0.63%	Over $2 Billion
Emerging Markets Debt		0.80%	First $2 Billion
		0.72%	Over $2 Billion

	Prior to this fee reduction commitment, the management fees for the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds as an annual percentage rate of average daily net assets were 0.25%, 0.40%, 0.50%, 0.54%, 0.40%, 0.40%, 0.40%, 0.65%, 0.70% and 0.80%, respectively.
	The Investment Adviser has voluntarily agreed not to impose a portion of the management fee on the Enhanced Income, U.S. Mortgages and Investment Grade Credit Funds equal to 0.05%, 0.07% and 0.07%, respectively, of such Funds’ average daily net assets. As a result of fee waivers, the current management fees of the Enhanced Income, U.S. Mortgages and Investment Grade Credit Funds are 0.20%, 0.33% and 0.33%, respectively, of such Funds’ average daily net assets. The waivers may be terminated at any time at the option of the Investment Adviser.
8	Goldman Sachs has voluntarily agreed not to impose a portion of the distribution and service fees attributable to Class B Shares of the Short Duration Government Fund equal to 0.15%. The waiver may be modified or terminated at any time at the option of the distributor. If this occurs, the distribution and service fees attributable to Class B Shares of the Short Duration Government Fund will increase to 1.00% of the Fund’s average daily net assets.
9	“Other Expenses” include transfer agency fees and expenses equal on an annualized basis to 0.16% of the average daily net assets of each Fund’s Class A, B and C Shares, plus all other ordinary expenses not detailed above. The Investment Adviser has voluntarily agreed to reduce or limit “Other Expenses” (excluding management fees, distribution and service fees, transfer agency fees and expenses, taxes, interest and brokerage fees and litigation, indemnification, shareholder meetings and other extraordinary expenses exclusive of any expense offset arrangements) to the following percentages of each Fund’s average daily net assets:

	Other
Fund	Expenses
Enhanced Income		0.014%
Ultra-Short Duration Government		0.054%
Short Duration Government		0.004%
Government Income		0.004%
U.S. Mortgages		0.004%
Core Fixed Income		0.104%
Investment Grade Credit		0.004%
Global Income		0.004%
High Yield		0.024%
Emerging Markets Debt		0.044%

53

Fund Fees and Expenses continued

Example

The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Class A, B or C Shares of a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Fund		1 Year		3 Years		5 Years		10 Years
Enhanced Income
Class A Shares			$227		$392		$571		$1,090
Ultra-Short Duration Government
Class A Shares			$237		$423		$625		$1,206
Short Duration Government
Class A Shares			$297		$503		$726		$1,366
Class B Shares
	– Assuming complete redemption at end of period		$375		$642		$933		$1,831
	– Assuming no redemption		$175		$542		$933		$1,831
Class C Shares
	– Assuming complete redemption at end of period		$275		$542		$933		$2,030
	– Assuming no redemption		$175		$542		$933		$2,030
Government Income
Class A Shares			$549		$760		$988		$1,642
Class B Shares
	– Assuming complete redemption at end of period		$680		$857		$1,159		$1,886
	– Assuming no redemption		$180		$557		$959		$1,886
Class C Shares
	– Assuming complete redemption at end of period		$280		$557		$959		$2,084
	– Assuming no redemption		$180		$557		$959		$2,084
U.S. Mortgages
Class A Shares			$543		$739		$952		$1,564
Core Fixed Income
Class A Shares			$531		$703		$890		$1,429
Class B Shares
	– Assuming complete redemption at end of period		$661		$799		$1,076		$1,677
	– Assuming no redemption		$261		$499		$860		$1,677
Class C Shares
	– Assuming complete redemption at end of period		$261		$499		$860		$1,878
	– Assuming no redemption		$161		$499		$860		$1,878

54

FUND FEES AND EXPENSES

Fund		1 Year		3 Years		5 Years		10 Years
Investment Grade Credit
Class A Shares			$559		$766		$998		$1,664
Global Income
Class A Shares			$559		$820		$1,090		$1,861
Class B Shares
	– Assuming complete redemption at end of period		$700		$918		$1,262		$2,102
	– Assuming no redemption		$200		$618		$1,062		$2,102
Class C Shares
	– Assuming complete redemption at end of period		$300		$618		$1,062		$2,296
	– Assuming no redemption		$200		$618		$1,060		$2,296
High Yield
Class A Shares			$563		$802		$1,060		$1,796
Class B Shares
	– Assuming complete redemption at end of period		$694		$900		$1,232		$2,038
	– Assuming no redemption		$194		$600		$1,032		$2,038
Class C Shares
	– Assuming complete redemption at end of period		$294		$600		$1,032		$2,233
	– Assuming no redemption		$194		$600		$1,032		$2,233
Emerging Markets Debt
Class A Shares			$630		$1,008		$1,911		$2,532

The hypothetical example assumes that a CDSC will not apply to redemptions of Class A Shares within the first 18 months. Class B Shares convert to Class A Shares eight years after purchase; therefore, Class A expenses are used in the hypothetical example after year eight.

Certain institutions that sell Fund shares and/or their salespersons may receive other compensation in connection with the sale and distribution of Class A, Class B and Class C Shares for services to their customers’ accounts and/or the Funds. For additional information regarding such compensation, see “What Should I Know When I Purchase Shares Through an Authorized Dealer?” in the Prospectus and “Payments to Intermediaries” in the Additional Statement.

55

Service Providers

   INVESTMENT ADVISERS   

Investment Adviser	Fund
Goldman Sachs Asset Management, L.P. 32 Old Slip New York, New York 10005	Enhanced Income Ultra-Short Duration Government Short Duration Government Government Income U.S. Mortgages Core Fixed Income Investment Grade Credit High Yield Emerging Markets Debt
Goldman Sachs Asset Management International Christchurch Court 10-15 Newgate Street London, England EC1A 7HD	Global Income

GSAM has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”). GSAMI, a member of the Investment Management Regulatory Organization Limited since 1990 and a registered investment adviser since 1991, is an affiliate of Goldman Sachs. As of December 31, 2005, GSAM and GSAMI had assets under management of $496.1 billion.

The Investment Adviser provides day-to-day advice regarding the Funds’ portfolio transactions. The Investment Adviser makes the investment decisions for the Funds and places purchase and sale orders for the Funds’ portfolio transactions in U.S. and foreign markets. As permitted by applicable law, these orders may be directed to any brokers, including Goldman Sachs and its affiliates. While the Investment Adviser is ultimately responsible for the management of the Funds, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. In addition, the Investment Adviser has access to the research and certain proprietary technical models developed by Goldman Sachs, and will apply quantitative and qualitative analysis in determining the appropriate allocations among categories of issuers and types of securities.

56

SERVICE PROVIDERS

The Investment Adviser also performs the following additional services for the Funds:

n	Supervises all non-advisory operations of the Funds
n	Provides personnel to perform necessary executive, administrative and clerical services to the Funds
n	Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
n	Maintains the records of each Fund
n	Provides office space and all necessary office equipment and services

   MANAGEMENT FEES   

As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund’s average daily net assets):

					Actual Rate
					For the Fiscal
	Management Fee		Average Daily		Year Ended
	Annual Rate*		Net Assets		October 31, 2005
GSAM:
Enhanced Income		0.25%		First $1 Billion		0.20%
		0.23%		Next $1 Billion
		0.22%		Over $2 Billion
Ultra-Short Duration		0.40%		First $1 Billion		0.40%
Government		0.36%		Next $1 Billion
		0.34%		Over $2 Billion
Short Duration		0.50%		First $1 Billion		0.50%
Government		0.45%		Next $1 Billion
		0.43%		Over $2 Billion
Government Income		0.54%		First $1 Billion		0.54%
		0.49%		Next $1 Billion
		0.47%		Over $2 Billion
U.S. Mortgages		0.40%		First $1 Billion		0.33%
		0.36%		Next $1 Billion
		0.34%		Over $2 Billion
Core Fixed Income		0.40%		First $1 Billion		0.39%
		0.36%		Next $1 Billion
		0.34%		Over $2 Billion
Investment Grade		0.40%		First $1 Billion		0.33%
Credit		0.36%		Next $1 Billion
		0.34%		Over $2 Billion

57

					Actual Rate
					For the Fiscal
	Management Fee		Average Daily		Year Ended
	Annual Rate*		Net Assets		October 31, 2005
Global Income		0.65%		First $1 Billion		0.65%
		0.59%		Next $1 Billion
		0.56%		Over $2 Billion
High Yield		0.70%		First $2 Billion		0.70%
		0.63%		Over $2 Billion
Emerging Markets		0.80%		First $2 Billion		0.80%
Debt		0.72%		Over $2 Billion

*  The Investment Adviser has entered into the foregoing fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus. Prior to this fee reduction commitment, the management fees for the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield, Emerging Markets Debt and Global Income Funds as an annual percentage rate of average daily net assets were 0.25%, 0.40%, 0.50%, 0.54%, 0.40%, 0.40%, 0.40%, 0.70%, 0.80% and 0.65%, respectively.

The difference, if any, between the stated fees and the actual fees paid by the Funds reflects that the Investment Adviser did not charge the full amount of the fees to which it would have been entitled. The Investment Adviser may discontinue or modify any such voluntary limitations in the future at its discretion.

A discussion regarding the basis for the Board of Trustees’ approval of the Management Agreements for the Funds in 2005 is available in the Funds’ annual report dated October 31, 2005.

58

SERVICE PROVIDERS

   FUND MANAGERS   

Fixed Income Portfolio Management Team

n	The investment process revolves around four groups: the Investment Strategy Group, the Top-down Strategy Teams, the Bottom-up Sector Teams and the Portfolio Teams.
n	These teams strive to maximize risk-adjusted returns by de-emphasizing interest rate anticipation and focusing on security selection and sector allocation
n	The team manages approximately $144.9 billion in municipal and taxable fixed-income assets for retail, institutional and high net worth clients

______________________________________________________________________________________________________________

U.S. Fixed Income-Investment Management Team

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Jonathan Beinner Managing Director and Co-Head U.S. and Global Fixed Income Teams	Senior Portfolio Manager— Fixed Income Group	Since 2000	Mr. Beinner joined the Investment Adviser in 1990 and became a portfolio manager in 1992. He became Co-Head of the U.S. and Global Fixed Income Teams in 2002.
Tom Kenny Managing Director and Co-Head U.S. and Global Fixed Income Teams	Senior Portfolio Manager— Fixed Income Group	Since 2000	Mr. Kenny joined the Investment Adviser in 1999 as a senior portfolio manager. Previously, he spent 13 years at Franklin Templeton where he was a portfolio manager of high yield municipal and municipal funds, Director of Municipal Research and Director of the Municipal Bond Department. He became Co-Head of the U.S. and Global Fixed Income Teams in 2002.
James B. Clark Managing Director, Co-Head U.S. Fixed Income Team	Senior Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income U.S. Mortgages Investment Grade Credit Emerging Markets Debt	Since 2000 1994 1994 1994 2000 2003 2003 2003	Mr. Clark joined the Investment Adviser in 1994 as a portfolio manager after working as an investment manager in the mortgage-backed securities group at Travelers Insurance Company.
Christopher Sullivan Managing Director, Co-Head U.S. Fixed Income Team	Senior Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income	Since 2001 2001 2001 2001 2001	Mr. Sullivan joined the Investment Adviser in 2001 as a portfolio manager and as Co-Head of the U.S. Fixed Income Team. Since 1997, he was a senior member of the account management group of Pacific Investment Management Company (PIMCO). Prior to joining PIMCO, he was an equity portfolio manager for Hawaiian Trust Company for three years.

59

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Andrew Jessop Managing Director and Co-Head of High Yield Team	Senior Portfolio Manager— High Yield	Since 1997	Mr. Jessop joined the Investment Adviser in 1997 as a portfolio manager. He is responsible for managing high yield assets. Previously, he worked six years managing high yield portfolios at Saudi International Bank in London.
James McCarthy Managing Director	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income	Since 2000 1995 1995 1995 1995	Mr. McCarthy joined the Investment Adviser in 1995 after working for Nomura Securities as a mortgage backed securities trader.
Thomas D. Teles Managing Director	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Core Fixed Income U.S. Mortgages	Since 2000 2000 2000 2000 2003	Mr. Teles joined the Investment Adviser in 2000. Prior to his current position, he worked for three years as a mortgage trader and in the research department for Goldman, Sachs & Co.
James Cielinski Managing Director	Senior Portfolio Manager— Global Income Investment Grade Credit Enhanced Income Core Fixed Income	Since 2000 2003 2003 2003	Mr. Cielinski joined the Investment Adviser in 1998 as a portfolio manager. Prior to his current position, he spent five years at Utah Retirement Systems, where he managed the fixed income group.
Mark Van Wyk Vice President	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income	Since 2000 1994 1994 1994 1994	Mr. Van Wyk joined the Investment Adviser in 1994 and specializes in U.S. government and financial derivatives. He worked with an options trading firm prior to joining the Investment Adviser.
Peter D. Dion Vice President	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income U.S. Mortgages Core Fixed Income	Since 2000 1995 1995 1995 2003 1995	Mr. Dion joined the Investment Adviser in 1992. From 1994 to 1995 he was an associate portfolio manager. He became a portfolio manager in 1995.

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SERVICE PROVIDERS

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Ben Johnson Vice President	Portfolio Manager— Investment Grade Credit	Since 2003	Mr. Johnson joined the Investment Adviser in 1998 and specializes in credit research. Prior to joining the Investment Adviser, he worked for Prudential Insurance Company of America where he invested in private placement debt securities.
Samuel Finkelstein Vice President	Portfolio Manager— Emerging Markets Debt	Since 2003	Mr. Finkelstein joined the investment manager in 1997. Prior to joining the emerging market team in 2000, he worked in the fixed income risk and strategy group where he constructed portfolios and monitored risk exposure. Prior to that, he worked for one year as a foreign currency trader at the Union Bank of Switzerland.
Ricardo Penfold Vice President	Portfolio Manager— Emerging Markets Debt	Since 2003	Mr. Penfold joined the Investment Adviser in 2000. Prior to that he was Head of Research and Economics in Venezuela for Santander Investments and Banco Santander Central Hispano for four years.
Owi Ruivivar, Ph.D Vice President	Portfolio Manager— Emerging Markets Debt	Since 2003	Ms. Ruivivar joined the Investment Adviser in 2002. Prior to joining GSAM she worked for five years at BNP Paribas where for her last two years there she headed global emerging market debt strategy. Before joining the finance industry in 1997 she worked in economics research at the International Monetary Fund, and at various other international development institutions.
Stephen Warren Vice President	Portfolio Manager— U.S. Mortgages	Since 2003	Mr Warren joined the Investment Adviser in 2003 as a member of the mortgage-backed securities team. Mr. Warren was previously a portfolio manager responsible for asset-backed securities and U.S. government bonds for the Investment Adviser from 1993 to 1997. From 1997 to 2003, he worked as a Principal and Chief Investment Officer at Integrity Capital Management, a quantitative hedge fund, and then as a managing director at Urbanfetch, an Internet company.

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		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Diana Gordon, Ph.D Vice President	Portfolio Manager— High Yield	Since 2001	Ms. Gordon joined the Investment Adviser in 1999 covering the high yield technology and communications sectors in addition to trading. Before joining the Investment Adviser, she was a high yield portfolio manager at Saudi International Bank.
Rob Cignarella Vice President	Portfolio Manager— High Yield	Since 2003	Mr. Cignarella joined the Investment Adviser in 1998 as a high yield credit research analyst. Prior to his current position he worked in investment banking at Salomon Brothers.

Global Fixed Income—Investment Management Team

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Andrew Wilson Managing Director and Co-Head Global Fixed Income Team	Senior Portfolio Manager— Global Income	Since 1995	Mr. Wilson joined the Investment Adviser in 1995 as a portfolio manager. Prior to his current position, he spent three years as an Assistant Director at Rothschild Asset Management, where he was responsible for managing global and international bond portfolios with specific focus on the U.S., Canadian, Australian and Japanese economies.
Philip Moffitt Partner Managing Director and Co-Head Global Fixed Income Team	Senior Portfolio Manager— Global Income	Since 2000	Mr. Moffitt joined the Investment Adviser in 1999 as a portfolio manager. Prior to joining the Investment Adviser he worked for three years as a proprietary trader for Tokai Asia Ltd in Hong Kong. Before that Mr. Moffitt spent ten years with Bankers Trust Asset Management in Australia, where he was a Managing Director responsible for all active global fixed income funds as well as a member of the Asset Allocation Committee.
Jennifer Youde Executive Director	Senior Portfolio Manager— Global Income	Since 2000	Ms. Youde joined the Investment Adviser in 1996. Prior to joining the Investment Adviser, she worked for thirteen years at CINMan where for her last five years there she managed the global bond and index-linked portfolios.

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SERVICE PROVIDERS

Jonathan Beinner serves as the Chief Investment Officer for the Global and U.S. Fixed Income Portfolio Management Team. Alongside Tom Kenny, he Co-Heads the Global and U.S. Fixed Income Team and is responsible for high-level decisions pertaining to portfolios across multiple strategies. The Fixed Income Portfolio Management Team is organized into a series of specialist teams which focus on generating and implementing investment ideas within their area of expertise. Both top-down and bottom-up decisions are made by these small strategy teams, rather than by one portfolio manager or committee. Ultimate accountability for the portfolio resides with the lead portfolio managers, who set the long-term risk budget and oversee the portfolio construction process.

For more information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Funds, see the Additional Statement.

   DISTRIBUTOR AND TRANSFER AGENT   

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the “Distributor”) of each Fund’s shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, Illinois 60606, also serves as each Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.

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 shares acquired for its own account.

   ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER 
   ACCOUNTS MANAGED BY GOLDMAN SACHS   

The involvement of the Investment Adviser, 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 a Fund or limit a Fund’s investment activities. Goldman Sachs is a full service investment banking, broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financer, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from

63

entities for which Goldman Sachs performs or seeks to perform investment banking or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs, and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. Furthermore, transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Funds or who engage in transactions with or for the Funds. For more information about conflicts of interest, see the Additional Statement.

Under a securities lending program approved by the Funds’ Board of Trustees, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for each Fund to the extent that the Funds engage in the securities lending program. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of the cash received as collateral for the loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions.

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SERVICE PROVIDERS

   LEGAL PROCEEDINGS   

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. (“GSG”), GSAM, the Trustees and Officers of the Goldman Sachs Trust (the “Trust”), and John Doe Defendants. In addition, certain of the Goldman Sachs Funds included in this Prospectus and certain other investment portfolios of the Trust were named as nominal defendants. On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, GSAMI, Goldman Sachs, the Trust, Goldman Sachs Variable Insurance Trust (“GSVIT”), the Trustees and Officers of the Trust and GSVIT and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the “Goldman Sachs Funds”) were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005.

The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company Act and the Investment Advisers Act of 1940, (ii) common law breaches of fiduciary duty, and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Investment Company Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI. The complaint also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreement and return of fees paid; an accounting of all Goldman Sachs Funds-related fees, commissions and soft dollar payments; restitution of all

65

unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

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Dividends

Each Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:

n	Cash
n	Additional shares of the same class of the same Fund
n	Shares of the same or an equivalent class of another Goldman Sachs Fund. Special restrictions may apply. See the Additional Statement.

You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the applicable Fund. If cash dividends are elected with respect to the Fund’s monthly net investment income dividends, then cash dividends must also be elected with respect to the non-long-term capital gains component, if any, of the Fund’s annual dividend.

The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains are declared and paid as follows:

	Investment Income		Capital Gains
	Dividends		Distributions
Fund	Declared	Paid	Declared and Paid
Enhanced Income	Daily	Monthly	Annually
Ultra-Short Duration Government	Daily	Monthly	Annually
Short Duration Government	Daily	Monthly	Annually
Government Income	Daily	Monthly	Annually
U.S. Mortgages	Daily	Monthly	Annually
Core Fixed Income	Daily	Monthly	Annually
Investment Grade Credit	Daily	Monthly	Annually
Global Income	Monthly	Monthly	Annually
High Yield	Daily	Monthly	Annually
Emerging Markets Debt	Daily	Monthly	Annually

From time to time a portion of a Fund’s dividends may constitute a return of capital.

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When you purchase shares of a Fund, part of the NAV per share may be represented by undistributed income or undistributed realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.

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Shareholder Guide

The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds’ shares.

   HOW TO BUY SHARES   

How Can I Purchase Class A, Class B And Class C Shares Of The Funds?

You may purchase shares of the Funds through:

n	Authorized Dealers;
n	Goldman Sachs; or
n	Directly from the Trust.

In order to make an initial investment in a Fund, you must furnish to the Fund, Goldman Sachs or your Authorized Dealer the information in the Account Application. An order will be processed upon receipt of payment.

To Open an Account:

n	Complete the Account Application
n	Mail your payment and Account Application to:

    Your Authorized Dealer

    —  Purchases by check or Federal Reserve draft should be made payable to your Authorized Dealer

    —  Your Authorized Dealer is responsible for forwarding payment promptly (within three business days) to the Fund

    or

    Goldman Sachs Funds
P.O. Box 219711, Kansas City, MO 64121-9711

    —  Purchases by check or Federal Reserve draft should be made payable to Goldman Sachs Funds—(Name of Fund and Class of Shares)

    —  Boston Financial Data Services, Inc. (“BFDS”), the Fund’s sub-transfer agent, will not accept checks drawn on foreign banks, third-party checks, cashier’s checks or official checks, temporary checks, electronic checks, drawer checks, cash, money orders, travelers cheques or credit card checks. In limited situations involving the transfer of retirement assets, the Fund may accept cashier’s checks or official bank checks.

    —  Federal funds wire, Automated Clearing House Network (“ACH”) transfer or bank wires should be sent to State Street Bank and Trust Company (“State Street”) (each Fund’s custodian). Please call the Funds at 1-800-526-7384 to get detailed instructions on how to wire your money.

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What Is My Minimum Investment In The Funds?

	Initial		Additional
Regular Accounts		$1,000		$50
Employee Benefit Plans (e.g., IRAs, employer sponsored plans)		$250		No Minimum
Uniform Gift/Transfer to Minors (UGMA/UTM) Accounts		$250		$50
Coverdell ESAs		$250		$50
Automatic Investment Plans		$250		$50

What Alternative Sales Arrangements Are Available?

The Funds offer three classes of shares through this Prospectus.*

Maximum Amount You Can Buy in the Aggregate Across Funds	Class A	No limit
	Class B	$100,000**
	Class C	$1,000,000 ($500,000 in the case of Short Duration Government Fund)**
Initial Sales Charge	Class A	Applies to purchases of less than $1 million ($500,000 in the case of Short Duration Government Fund)—varies by size of investment with a maximum of 4.5%
	Class B	None
	Class C	None
CDSC	Class A	1.00% on certain investments of $1 million or more if you sell within 18 months (except for certain redemptions of Ultra-Short Duration Government Fund and Enhanced Income Fund Class A Shares that were purchased directly, as opposed to exchanges)
	Class B	6 year declining CDSC with a maximum of 5% (2% in the case of Short Duration Government Fund, which has a 3 year declining CDSC)
	Class C	1% if shares are redeemed within 12 months of purchase
Conversion Feature	Class A	None
	Class B	Class B Shares automatically convert to Class A Shares after 8 years
	Class C	None

     *  The Enhanced Income Fund, Ultra-Short Duration Government Fund, U.S. Mortgages Fund, Investment Grade Credit Fund and Emerging Markets Debt Fund do not currently, but may in the future, offer Class B and Class C Shares. Currently, Class B Shares of the Short Duration Government Fund may no longer be purchased. Current Class B shareholders of the Short Duration Government Fund may only continue to reinvest dividends and capital gains into their accounts. Exchanges into Class B Shares of the Short Duration Government Fund from other Goldman Sachs Funds are not permitted. Sales of Class B Shares of the Short Duration Government Fund may resume at a future date.

     **  No additional Class B Shares or Class C Shares may be purchased by an investor either in an initial purchase or in subsequent purchases if the current market value of the shares owned

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SHAREHOLDER GUIDE

and/ or purchased is equal to or exceeds $100,000 in the case of Class B Shares or $1,000,000 in the case of Class C Shares ($500,000 in the case of the Short Duration Government Fund).

What Else Should I Know About Share Purchases?

The Trust reserves the right to:

n	Refuse to open an account if you fail 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).
n	Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of shares of a Fund is evident, or if purchases, sales or exchanges are, or a subsequent abrupt redemption might be, of a size that would disrupt the management of a Fund.
n	Close a Fund to new investors from time to time and reopen any such Fund whenever it is deemed appropriate by a Fund’s Investment Adviser.
n	Modify or waive the minimum investment amounts.
n	Modify the manner in which shares are offered.
n	Modify the sales charge rates applicable to future purchases of shares.

Generally, the Funds will not allow non-U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds.

The Funds may allow you to purchase shares with securities instead of cash if consistent with a Fund’s investment policies and operations and if approved by the Fund’s Investment Adviser.

Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for investors who open accounts with the Funds. Applications without the required information may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to: (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Funds are unable to verify an investor’s identity. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an account and redeeming an investor’s shares pursuant to the customer identification program.

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How Are Shares Priced?

The price you pay or receive when you buy, sell or exchange shares is the Fund’s next determined NAV for a share class (as adjusted for any applicable sales charge or redemption fee). Each class calculates its NAV as follows:

NAV = (Value of Assets of the Class)
- (Liabilities of the Class)
Number of Outstanding Shares of the Class

The Funds’ investments are valued based on market quotations, which may be furnished by a pricing service or provided by securities dealers. If accurate quotations are not readily available, or if the Investment Adviser believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined based on yield equivalents, a pricing matrix or other sources, under valuation procedures established by the Trustees. Debt obligations with a remaining maturity of 60 days or less are valued at amortized cost.

In addition, the Investment Adviser, consistent with applicable regulatory guidance, may determine to make an adjustment to the previous closing prices of securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in foreign markets; market disruptions or market closings; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements on earnings; significant litigation; and regulatory news such as governmental approvals.

One effect of using independent fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).

n NAV per share of each share class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York

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SHAREHOLDER GUIDE

	Stock Exchange (normally 4:00 p.m. New York time) or such earlier or later time as the New York Stock Exchange or NASDAQ market may officially close. This occurs after the determination, if any, of the income to be declared as a dividend (except in the case of the Global Income Fund). Fund shares will generally not be priced on any day the New York Stock Exchange is closed.
n	When you buy shares, you pay the NAV next calculated after the Funds receive your order in proper form, plus any applicable sales charge.
n	When you sell shares, you receive the NAV next calculated after the Funds receive your order in proper form, less any applicable CDSC or redemption fee.
n	On any business day 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. If a Fund does so, it will cease granting same business day credit for purchase and redemption orders received after the Fund’s closing time and credit will be given to the next business day.
n	The Trust reserves the right to reprocess purchase (including dividend reinvestments), redemption and exchange transactions that were processed at an NAV other than a Fund’s official closing NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV, as adjusted.
n	The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.

Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1-800-526-7384.

Foreign securities may trade in their local markets on days a Fund is closed. As a result, the NAV of a Fund that holds foreign securities may be impacted on days when investors may not purchase or redeem Fund shares.

   COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS A SHARES   

What Is The Offering Price Of Class A Shares?

The offering price of Class A Shares of each Fund is the next determined NAV per share plus an initial sales charge paid to Goldman Sachs at the time of purchase of shares. The sales charge varies depending upon the amount you

73

purchase. In some cases, described below, the initial sales charge may be eliminated altogether, and the offering price will be the NAV per share. The current sales charges and commissions paid to Authorized Dealers for Class A Shares of the Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds are as follows:

				Sales Charge			Maximum Dealer
	Sales Charge as			as Percentage			Allowance as
Amount of Purchase	Percentage of			of Net Amount			Percentage of
(including sales charge, if any)	Offering Price			Invested			Offering Price*
Less than $100,000		4.50	%		4.71	%		4.00	%
$100,000 up to (but less than) $250,000		3.00			3.09			2.50
$250,000 up to (but less than) $500,000		2.50			2.56			2.00
$500,000 up to (but less than) $1 million		2.00			2.04			1.75
$1 million or more		0.00	**		0.00	**		***

The current sales charges and commissions paid to Authorized Dealers for Class A Shares of the Short Duration Government Fund are as follows:

				Sales Charge			Maximum Dealer
	Sales Charge as			as Percentage			Allowance as
Amount of Purchase	Percentage of			of Net Amount			Percentage of
(including sales charge, if any)	Offering Price			Invested			Offering Price*
Less than $250,000		2.00	%		2.04	%		1.75	%
$250,000 up to (but less than) $500,000		1.50			1.52			1.25
$500,000 or more		0.00	**		0.00	**		***

The current sales charges and commissions paid to Authorized Dealers of Class A Shares of the Enhanced Income Fund and the Ultra-Short Duration Government Fund are as follows:

				Sales Charge			Maximum Dealer
	Sales Charge as			as Percentage			Allowance as
Amount of Purchase	Percentage of			of Net Amount			Percentage of
(including sales charge, if any)	Offering Price			Invested			Offering Price*
Less than $500,000		1.50	%		1.52	%		1.25	%
$500,000 up to (but less than) $1 million		1.00			1.01			0.75
$1 million or more		0.00			0.00			0.00

*	Dealer’s allowance may be changed periodically. During special promotions, the entire sales charge may be allowed to Authorized Dealers. Authorized Dealers to whom substantially the entire sales charge is allowed may be deemed to be “underwriters” under the Securities Act of 1933.
**	No sales charge is payable at the time of purchase of Class A Shares of $1 million ($500,000 in the case of the Short Duration Government Fund) or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase.

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SHAREHOLDER GUIDE

***
The Distributor may pay a one-time commission to Authorized Dealers who initiate or are responsible for purchases of $1 million or more of shares of the Funds ($500,000 in the case of the Short Duration Government Fund) equal to 1.00% of the amount under $3 million, 0.50% of the next $2 million, and 0.25% thereafter. In instances where an Authorized Dealer (including Goldman Sachs’ Private Wealth Management Unit) agrees to waive its receipt of the one-time commission described above, the CDSC on Class A shares, generally, will be waived. The Distributor may also pay, with respect to all or a portion of the amount purchased, a commission in accordance with the foregoing schedule to Authorized Dealers who initiate or are responsible for purchases of $500,000 or more by certain Section 401(k), profit sharing, money purchase pension, tax sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations investing in the Funds which satisfy the criteria set forth below in “When Are Class A Shares Not Subject To A Sales Load?” or $1 million ($500,000 in the case of the Short Duration Government Fund) or more by certain “wrap” accounts. Purchases by such plans will be made at NAV with no initial sales charge, but if shares are redeemed within 18 months after the end of the calendar month in which such purchase was made, a CDSC of 1% may be imposed upon the plan, the plan sponsor or the third party administrator. In addition, Authorized Dealers will remit to the Distributor such payments received in connection with “wrap” accounts in the event that shares are redeemed within 18 months after the end of the calendar month in which the purchase was made.

You should note that the actual sales charge that appears in your mutual fund transaction confirmation may differ slightly from the rate disclosed above in this Prospectus due to rounding calculations.

As indicated in the chart on the preceding page, and as discussed further below and in the section titled “How Can the Sales Charge on Class A Shares Be Reduced?,” you may, under certain circumstances, be entitled to pay reduced sales charges on your purchases of Class A Shares or have those charges waived entirely. To take advantage of these discounts, you or your Authorized Dealer or financial intermediary must notify the Funds’ Transfer Agent at the time of your purchase order that a discount may apply to your current purchases. You may also be required to provide appropriate documentation to receive these discounts, including:

(i)  Information or records regarding shares of the Funds or other Goldman Sachs Funds held in all accounts (e.g., retirement accounts) of the shareholder at the financial intermediary;

(ii)  Information or records regarding shares of the Funds or other Goldman Sachs Funds held in any account of the shareholder at another financial intermediary; and

(iii)  Information or records regarding shares of the Funds or other Goldman Sachs Funds held at any financial intermediary by related parties of the shareholder, such as members of the same family or household.

You should note in particular that, if the Funds’ Transfer Agent is properly notified, under the “Right of Accumulation” described below, the “Amount of Purchase” in the chart on the preceding page will be deemed to include all Class A, Class B and/ or Class C Shares of the Goldman Sachs Funds that were acquired by purchase

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or exchange, and are held at the time of purchase by any of the following persons: (i) you, your spouse and your children; and (ii) any trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account. This includes, for example, any Class A, Class B and/or Class C Shares held at a broker-dealer or other financial intermediary other than the one handling your current purchase. In some circumstances, other Class A, Class B and/or Class C Shares may be aggregated with your current purchase under the Right of Accumulation as described in the Additional Statement. For purposes of determining the “Amount of Purchase,” all Class A, Class B and/or Class C Shares held at the time of purchase will be valued at their current market value.

You should also note that if you provide the Transfer Agent a signed written Statement of Intention to invest (not counting reinvestments of dividends and distributions) in the aggregate, within a 13-month period, $100,000 or more in Class A Shares in the case of the Government Income, U.S. Mortgages, Investment Grade Credit, Core Fixed Income, Global Income, High Yield and Emerging Markets Debt Funds; $250,000 or more in the case of the Short Duration Government Fund; and $500,000 or more in the case of the Enhanced Income Fund and the Ultra-Short Duration Government Fund, any investments you make during the 13 months will be treated as though the total quantity were invested in one lump sum and you will receive the discounted sales load based on your investment commitment. You must, however, inform the Transfer Agent that the Statement of Intention is in effect each time shares are purchased. Each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Statement of Intention.

In addition to the information provided in this Prospectus and the Additional Statement, information about sales charge discounts is available from your Authorized Dealer or financial intermediary and, free of charge, on the Funds’ website at http://www.gs.com/funds.

What Else Do I Need To Know About Class A Shares’ CDSC?

Purchases of $1 million ($500,000 in the case of the Short Duration Government Fund) or more of Class A Shares will be made at NAV with no initial sales charge. However, if you redeem shares within 18 months after the end of the calendar month in which the purchase was made, a CDSC of 1% may be imposed. The CDSC may not be imposed if your Authorized Dealer enters into an agreement with the Distributor to return all or an applicable prorated portion of its commission to the Distributor. The CDSC is waived on redemptions in certain circumstances. See “In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or Reduced?” below.

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SHAREHOLDER GUIDE

When Are Class A Shares Not Subject To A Sales Load?

Class A Shares of the Funds may be sold at NAV without payment of any sales charge to the following individuals and entities:

n	Goldman Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of these individuals;
n	Qualified employee benefit plans of Goldman Sachs;
n	Trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor;
n	Any employee or registered representative of any Authorized Dealer or their respective spouses, children and parents;
n	Banks, trust companies or other types of depository institutions;
n	Any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of a Fund;
n	Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations (“Employee Benefit Plans”) that:

n	Buy shares of Goldman Sachs Funds worth $500,000 or more; or
n	Have 100 or more eligible employees at the time of purchase; or
n	Certify that they expect to have annual plan purchases of shares of Goldman Sachs Funds of $200,000 or more; or
n	Are provided administrative services by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plans; or
n	Have at the time of purchase aggregate assets of at least $2,000,000.

n	“Wrap” accounts for the benefit of clients of broker-dealers, financial institutions or financial planners, provided they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards;
n	Registered investment advisers investing for accounts for which they receive asset-based fees;
n	Accounts over which GSAM or its advisory affiliates have investment discretion;
n	Shareholders receiving distributions from a qualified Employee Benefit Plan invested in the Goldman Sachs Funds and reinvesting such proceeds in a Goldman Sachs IRA;
n	Shareholders who roll over distributions from any tax-qualified Employee Benefit Plan or tax-sheltered annuity to an IRA which invests in the Goldman Sachs

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	Funds if the tax-qualified Employee Benefit Plan or tax-sheltered annuity receives administrative services provided by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plan or annuity; or
n	Investors who qualify under other exemptions that are stated from time to time in the Additional Statement.

In addition, during a 90-day period beginning in August 2005 and ending in November 2005, eligible clients of broker dealer Edward D. Jones & Co., LP were permitted to purchase Class A shares at NAV under the terms of the Edward Jones Free Switch Program.

You must certify eligibility for any of the above exemptions on your Account Application and notify the Fund if you no longer are eligible for the exemption. The Fund will grant you an exemption subject to confirmation of your entitlement. You may be charged a fee if you effect your transactions through a broker or agent.

How Can The Sales Charge On Class A Shares Be Reduced?

n Right of Accumulation: When buying Class A Shares in Goldman Sachs Funds, your current aggregate investment determines the initial sales load you pay. You may qualify for reduced sales charges when the current market value of holdings across Class A, Class B and/or Class C Shares, plus new purchases, reaches $100,000 or more in the case of the Government Income, U.S. Mortgages, Investment Grade Credit, Core Fixed Income, Global Income, High Yield and Emerging Markets Debt Funds; $250,000 or more in the case of the Short Duration Government Fund; and $500,000 or more in the case of the Enhanced Income Fund and the Ultra-Short Duration Government Fund. Class A, Class B and/or Class C Shares of any of the Goldman Sachs Funds may be combined under the Right of Accumulation. For purposes of applying the Right of Accumulation, shares of the Funds and any other Goldman Sachs Funds purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, under some circumstances, Class A, Class B and/or Class C Shares of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of the same business organization, groups of individuals represented by and investing on the recommendation of the same accounting firm, certain affinity groups or other similar organizations may be combined for the purpose of determining whether a purchase will qualify for the Right of Accumulation and, if qualifying, the

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applicable sales charge level. To qualify for a reduced sales load, you or your Authorized Dealer must notify the Fund’s Transfer Agent at the time of investment that a quantity discount is applicable. Use of this option is subject to a check of appropriate records. The Additional Statement has more information about the Right of Accumulation.

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Statement of Intention: You may obtain a reduced sales charge by means of a written Statement of Intention which expresses your non-binding commitment to invest (not counting reinvestments of dividends and distributions) in the aggregate $100,000 or more within a period of 13 months in the case of the Government Income, U.S. Mortgages, Investment Grade Credit, Core Fixed Income, Global Income, High Yield and Emerging Markets Debt Funds; $250,000 or more in the case of the Short Duration Government Fund; and $500,000 or more in the case of the Enhanced Income Fund and the Ultra-Short Duration Government Fund. Any investments you make during the period will receive the discounted sales load based on the full amount of your investment commitment. At your request, purchases made during the previous 90 days may be included; however, capital appreciation does not apply toward these combined purchases. If the investment commitment of the Statement of Intention is not met prior to the expiration of the 13-month period, the entire amount will be subject to the higher applicable sales charge. By selecting the Statement of Intention, you authorize the Transfer Agent to escrow and redeem Class A Shares in your account to pay this additional charge. The Additional Statement has more information about the Statement of Intention, which you should read carefully.

   COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS B SHARES   

What Is The Offering Price Of Class B Shares?

You may purchase Class B Shares of the Funds (other than the Enhanced Income Fund, Ultra-Short Duration Government Fund, U.S. Mortgages Fund, Investment Grade Credit Fund, and Emerging Markets Debt Fund) at the next determined NAV without an initial sales charge. However, Class B Shares redeemed within six years (three years in the case of the Short Duration Government Fund) of purchase will be subject to a CDSC at the rates shown in the table below based on how long you held your shares.

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The CDSC schedule is as follows:

	CDSC as a Percentage of Dollar Amount Subject to CDSC
	Government Income, Core Fixed Income,		Short Duration
Year Since Purchase	Global Income, and High Yield Funds		Government Fund
First		5%		2%
Second		4%		1.5%
Third		3%		1%
Fourth		3%		None
Fifth		2%		None
Sixth		1%		None
Seventh and thereafter		None		None

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 distribution-related services to the Funds in connection with the sale of Class B Shares, including the payment of compensation to Authorized Dealers. A commission equal to 2% in the case of the Short Duration Government Fund and 4% in the case of all other Funds of the amount invested is paid to Authorized Dealers.

Former Expedition Fund shareholders who received Class B Shares of the Core Fixed Income Fund in connection with the reorganization of their Expedition Fund will be charged CDSCs on those Class B Shares based on the former Expedition Fund CDSC schedule and will be credited for the period of time from the original date of purchase of the Expedition Fund Class B Shares in determining the amount of their CDSC. Goldman Sachs Class B Shares purchased by former Expedition Fund shareholders after the effective time of the reorganization will be charged a CDSC according to the above CDSC schedule. For more information, see the Additional Statement.

As of the date of this Prospectus, Class B Shares of the Short Duration Government Fund may no longer be purchased. Current Class B shareholders of the Short Duration Government Fund may only continue to reinvest dividends and capital gains into their accounts. Exchanges into Class B Shares of the Short Duration Government Fund from other Goldman Sachs Funds are not permitted. Sales of Class B Shares of the Short Duration Government Fund may resume at a future date.

What Should I Know About The Automatic Conversion Of Class B Shares?

Class B Shares of a Fund will automatically convert into Class A Shares of the same Fund at the end of the calendar quarter that is eight years (three years in the case of the Short Duration Government Fund) after the purchase date.

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If you acquire Class B Shares of a Fund by exchange from Class B Shares of another Goldman Sachs Fund, your Class B Shares will convert into Class A Shares of such Fund based on the date of the initial purchase and the CDSC schedule of that purchase.

If you acquire Class B Shares through reinvestment of distributions, your Class B Shares will convert into Class A Shares based on the date of the initial purchase of the shares on which the distribution was paid.

The conversion of Class B Shares to Class A Shares will not occur at any time the Funds are advised that such conversions may constitute taxable events for federal tax purposes, which the Funds believe is unlikely. If conversions do not occur as a result of possible taxability, Class B Shares would continue to be subject to higher expenses than Class A Shares for an indeterminate period.

   A COMMON QUESTION ABOUT THE PURCHASE OF CLASS C SHARES   

What Is The Offering Price Of Class C Shares?

You may purchase Class C Shares of the Funds (other than the Enhanced Income Fund, Ultra-Short Duration Government Fund, U.S. Mortgages Fund, Investment Grade Credit Fund and Emerging Markets Debt Fund) at the next determined NAV without paying an initial sales charge. However, if you redeem Class C Shares within 12 months of purchase, a CDSC of 1% will normally be deducted from the redemption proceeds. In connection with purchases by Employee Benefit Plans, where Class C Shares are redeemed within 12 months of purchase, a CDSC of 1% may be imposed upon the plan sponsor or third-party administrator.

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 distribution-related services to the Funds in connection with the sale of Class C Shares, including the payment of compensation to Authorized Dealers. An amount equal to 1% of the amount invested is normally paid by the Distributor to Authorized Dealers.

   COMMON QUESTIONS APPLICABLE TO THE PURCHASE OF CLASS A, 
   B AND C SHARES   

When Will Shares Be Issued And Dividends Begin To Be Paid?

Global Income Fund: If a purchase order is received in proper form before the Fund’s NAV is determined, shares will be issued the same day and will be entitled to any dividends declared which have record dates on or after such purchase date.

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For all other Funds:

n Shares Purchased by Federal Funds Wire or ACH Transfer:

n	If a purchase order in proper form specifies a settlement date and is received before the Fund’s NAV is determined, shares will be issued and dividends will generally begin to accrue on the purchased shares on the business day after the purchase order is received.
n	If a purchase order is placed through an Authorized Dealer that settles through the National Securities Clearing Corporation (the “NSCC”), the purchase order will begin accruing on the NSCC settlement date.
n	If a purchase order in proper form does not specify a settlement date, shares will be issued and dividends will begin to accrue on the business day after payment is received.

n Shares Purchased by Check or Federal Reserve Draft:

n	If a purchase order in proper form specifies a settlement date and is received before the Fund’s NAV is determined, shares will be issued and dividends will begin to accrue on the business day after payment is received.
n	If a purchase order in proper form does not specify a settlement date, shares will be issued and dividends will begin to accrue on the business day after payment is received.

What Else Do I Need To Know About The CDSC On Class A, B Or C Shares?

n The CDSC is based on the lesser of the NAV of the shares at the time of redemption or the original offering price (which is the original NAV).

n	No CDSC is charged on shares acquired from reinvested dividends or capital gains distributions.
n	No CDSC is charged on the per share appreciation of your account over the initial purchase price.
n	When counting the number of months since a purchase of Class B or Class C Shares was made, all payments made during a month will be combined and considered to have been made on the first day of that month.

n To keep your CDSC as low as possible, each time you place a request to sell shares, the Funds will first sell any shares in your account that do not carry a CDSC and then the shares in your account that have been held the longest.

In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or Reduced?

The CDSC on Class A, Class B and Class C Shares that are subject to a CDSC may be waived or reduced if the redemption relates to:

n	Retirement distributions or loans to participants or beneficiaries from Employee Benefit Plans;
n	The death or disability (as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the “Code”)) of a participant or beneficiary in an Employee Benefit Plan;

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n	Hardship withdrawals by a participant or beneficiary in an Employee Benefit Plan;
n	Satisfying the minimum distribution requirements of the Code;
n	Establishing “substantially equal periodic payments” as described under Section 72(t)(2) of the Code;
n	The separation from service by a participant or beneficiary in an Employee Benefit Plan;
n	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 the event;
n	Excess contributions distributed from an Employee Benefit Plan;
n	Distributions from a qualified Employee Benefit Plan invested in the Goldman Sachs Funds which are being rolled over to a Goldman Sachs IRA in the same share class; or
n	Redemption proceeds which are to be reinvested in accounts or non-registered products over which GSAM or its advisory affiliates have investment discretion.

In addition, Class A, B and C Shares subject to a systematic withdrawal plan may be redeemed without a CDSC. The Funds reserve the right to limit such redemptions, on an annual basis, to 12% each of the value of your Class B and C Shares and 10% of the value of your Class A Shares.

How Do I Decide Whether To Buy Class A, B Or C Shares?

The decision as to which Class to purchase depends on the amount you invest, the intended length of the investment and your personal situation.

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Class A Shares. If you are making an investment of $100,000 or more that qualifies for a reduced sales charge, you should consider purchasing Class A Shares.

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Class B Shares. If you plan to hold your investment for at least six years (three years in the case of the Short Duration Government Fund) and would prefer not to pay an initial sales charge, you might consider purchasing Class B Shares. By not paying a front-end sales charge, your entire investment in Class B Shares is available to work for you from the time you make your initial investment. However, the distribution and service fee paid by Class B Shares will cause your Class B Shares (until conversion to Class A Shares) to have a higher expense ratio, and thus lower performance and lower dividend payments (to the extent dividends are paid) than Class A Shares. A maximum purchase limitation of $100,000 in the aggregate normally applies to Class B Shares. Once the current value of the Class B Shares in the aggregate across all Goldman Sachs Funds is equal to $100,000, you will not be allowed to purchase any additional Class B Shares. Individual purchases exceeding $100,000 will be rejected and additional purchases which could cause your holdings in Class B Shares to exceed $100,000 will be rejected.

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n Class C Shares. If you are unsure of the length of your investment or plan to hold your investment for less than six years and would prefer not to pay an initial sales charge, you may prefer Class C Shares. By not paying a front-end sales charge, your entire investment in Class C Shares is available to work for you from the time you make your initial investment. However, the distribution and service fee paid by Class C Shares will cause your Class C Shares to have a higher expense ratio, and thus lower performance and lower dividend payments (to the extent dividends are paid) than Class A Shares (or Class B Shares after conversion to Class A Shares).

Although Class C Shares are subject to a CDSC for only 12 months, Class C Shares do not have the automatic eight year conversion feature applicable to Class B Shares and your investment may pay higher distribution fees indefinitely.

A maximum purchase limitation of $1,000,000 ($500,000 in the case of the Short Duration Government Fund) in the aggregate normally applies to purchases of Class C Shares. Once the current value of the Class C Shares in the aggregate across all Goldman Sachs Funds is equal to $1,000,000, you will not be allowed to purchase any additional Class C Shares. Individual purchases exceeding $1,000,000 will be rejected and additional purchases which could cause your holdings in Class C Shares to exceed $1,000,000 will be rejected.

Note: Authorized Dealers may receive different compensation for selling Class A, Class B or Class C Shares.

In addition to Class A, Class B and Class C Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses (which affect performance), have different minimum investment requirements and are entitled to different services. Information regarding these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus.

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SHAREHOLDER GUIDE

   HOW TO SELL SHARES   

How Can I Sell Class A, Class B And Class C Shares Of The Funds?

You may arrange to take money out of your account by selling (redeeming) some or all of your shares. Generally, each Fund will redeem its shares upon request on any business day at the NAV next determined after receipt of such request in proper form, subject to any applicable CDSC or redemption fee. You may request that redemption proceeds be sent to you by check or by wire (if the wire instructions are on record). Redemptions may be requested in writing or by telephone.

Instructions For Redemptions:
By Writing:	n Write a letter of instruction that includes:
	n Your name(s) and signature(s)
	n Your account number
	n The Fund name and Class of Shares
	n The dollar amount you want to sell
	n How and where to send the proceeds
	n Obtain a Medallion signature guarantee (see details below)
	n Mail your request to:     Goldman Sachs Funds     P.O. Box 219711     Kansas City, MO 64121-9711
	or for overnight delivery:
	Goldman Sachs Funds     330 West 9th Street     Poindexter Bldg., 1st Floor     Kansas City, MO 64105
By Telephone:	If you have not declined the telephone redemption privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)
	n You may redeem up to $50,000 of your shares daily
	n Proceeds which are sent directly to a Goldman Sachs     brokerage account or to the bank account designated on your     Account Application are not subject to the $50,000 limit

Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application with a Medallion signature guarantee. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.

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When Do I Need A Medallion Signature Guarantee To Redeem Shares?

A Medallion signature guarantee is required if:

n	You are requesting in writing to redeem shares in an amount over $50,000;
n	You would like the redemption proceeds sent to an address that is not your address of record; or
n	You would like to change the bank designated on your Account Application.

A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required for executors, trustees or corporations or when deemed appropriate by the Transfer Agent.

What Do I Need To Know About Telephone Redemption Requests?

The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. The Trust may accept telephone redemption instructions from any person identifying himself or herself as the owner of an account or the owner’s registered representative where the owner has not declined in writing to use this service. Thus, you risk possible losses if a telephone redemption is not authorized by you.

In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs and BFDS each employ reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:

n	All telephone requests are recorded.
n	Proceeds of telephone redemption requests will be sent only to your address of record or authorized bank account designated in the Account Application (unless you provide written instructions and a Medallion signature guarantee, indicating another address or account).
n	For the 30-day period following a change of address, telephone redemptions will only be filled by a wire transfer to the bank account designated in the Account Applications (see immediately preceding bullet point). In order to receive the redemption by check during this time period, the redemption request must be a written, Medallion signature guaranteed letter.

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n	The telephone redemption option does not apply to shares held in a “street name” account. “Street name” accounts are accounts maintained and serviced by your Authorized Dealer. If your account is held in “street name,” you should contact your registered representative of record, who may make telephone redemptions on your behalf.
n	The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions.

How Are Redemption Proceeds Paid?

By Wire: You may arrange for your redemption proceeds to be wired as federal funds to the domestic bank account designated in your Account Application. The following general policies govern wiring redemption proceeds:

n	Redemption proceeds will normally be wired on the next business day in federal funds, but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
n	Although redemption proceeds will normally be wired as described above, under certain circumstances, redemption requests or payments may be postponed or suspended as permitted pursuant to Section 22(e) of the Investment Company Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by the Fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption.
n	If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days. If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day.
n	To change the bank designated on your Account Application you must send written instructions (with your Medallion signature guaranteed) to the Transfer Agent.
n	Neither the Trust, Goldman Sachs nor any Authorized Dealer assumes any responsibility for the performance of your bank or any intermediaries in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such intermediaries.

By Check: You may elect to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of a properly executed redemption request. If you

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are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.

What Do I Need To Know About The Redemption Fee?

The Global Income, High Yield and Emerging Markets Debt Funds will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Funds use a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of a Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The redemption fee does not apply to transactions involving the following:

n	Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.
n	Redemptions of shares that are acquired or redeemed in connection with the participation in a systematic withdrawal program or automatic investment plan.
n	Redemptions of shares in connection with a regularly scheduled automatic rebalancing of assets by certain mutual fund asset allocation programs.
n	Redemptions of shares maintained in omnibus accounts by the Funds’ transfer agent on behalf of trust companies and bank trust departments investing assets held in a fiduciary, agency, advisory, custodial or similar capacity and over which the trust companies and bank trust departments or other plan fiduciaries or participants (in the case of certain retirement plans) have full or shared investment discretion.
n	Total or partial redemptions of shares held: (i) through retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended, that are maintained by the Funds’ transfer agent on an omnibus basis, and (ii) by financial institutions providing hedging services in support of non-qualified deferred compensation plans offering the Goldman Sachs Funds where Fund shares are purchased and redeemed not more often than monthly on a date or dates determined by the financial institution or plan sponsor (or administrator).
n	Redemption of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.

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The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future to reflect, among other factors, regulatory requirements mandated by the SEC.

In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as operational limitations, contractual limitations and further guidance from the SEC or other regulators.

What Else Do I Need To Know About Redemptions?

The following generally applies to redemption requests:

n	Shares of each Fund (other than the Global Income Fund) earn dividends declared on the day the shares are redeemed.
n	Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received.
n	Institutions (including banks, trust companies, brokers and investment advisers) are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, these institutions may set times by which they must receive redemption requests. These institutions may also require additional documentation from you.

The Trust reserves the right to:

n	Redeem your shares if your account balance falls below the required Fund minimum as a result of a redemption. The Funds will not redeem your shares on this basis if the value of your account falls below the minimum account balance solely as a result of market conditions. The Funds will give you 60 days’ prior written notice to allow you to purchase sufficient additional shares of the Fund in order to avoid such redemption.
n	Redeem your shares in the event your Authorized Dealer’s relationship with Goldman Sachs is terminated, and you do not transfer your account to another Authorized Dealer. The Trust will not be responsible for any loss in an investor’s account resulting from the redemption.
n	Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interests of the Trust.
n	Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities.
n	Reinvest any dividends or other distributions which you have elected to receive in cash should your check for such dividends or other distributions be returned

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to a Fund as undeliverable or remain uncashed for six months. This provision may not apply to certain retirement or qualified accounts. In addition, that distribution and all future distributions payable to you will be reinvested at the NAV on the day of reinvestment in additional shares of the same class of the Fund that pays the distributions. No interest will accrue on amounts represented by uncashed distribution or redemption checks.

Can I Reinvest Redemption Proceeds In The Same Or Another Goldman Sachs Fund?

You may redeem shares of a Fund and reinvest a portion or all of the redemption proceeds (plus any additional amounts needed to round off purchases to the nearest full share) at NAV. To be eligible for this privilege, you must have held the shares you want to redeem for at least 30 days and you must reinvest the share proceeds within 90 days after you redeem. You may reinvest as follows:

n	Class A or B Shares—Class A Shares of the same Fund or another Goldman Sachs Fund
n	Class C Shares—Class C Shares of the same Fund or another Goldman Sachs Fund

n	You should obtain and read the applicable prospectuses before investing in any other Funds.
n	If you pay a CDSC upon redemption of Class A or Class C Shares and then reinvest in Class A or Class C Shares as described above, your account will be credited with the amount of the CDSC you paid. The reinvested shares will, however, continue to be subject to a CDSC. The holding period of the shares acquired through reinvestment will include the holding period of the redeemed shares for purposes of computing the CDSC payable upon a subsequent redemption. For Class B Shares, you may reinvest the redemption proceeds in Class A Shares at NAV but the amount of the CDSC paid upon redemption of the Class B Shares will not be credited to your account.
n	The reinvestment privilege may be exercised at any time in connection with transactions in which the proceeds are reinvested at NAV in a tax-sheltered Employee Benefit Plan. In other cases, the reinvestment privilege may be exercised once per year upon receipt of a written request.
n	You may be subject to tax as a result of a redemption. You should consult your tax adviser concerning the tax consequences of a redemption and reinvestment.

Can I Exchange My Investment From One Fund To Another?

You may exchange shares of a Fund at NAV without the imposition of an initial sales charge or CDSC at the time of exchange for shares of the same class or an equivalent class of another Goldman Sachs Fund. Redemption of shares (including by exchange) of the Global Income, High Yield and Emerging Markets Debt Funds that are held for 30 calendar days or less may, however, be subject to a redemption

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fee as described above under “What Do I Need To Know About The Redemption Fee?” The exchange privilege may be materially modified or withdrawn at any time upon 60 days’ written notice to you.

Instructions For Exchanging Shares:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund names and Class of Shares
	n The dollar amount you want to exchange
	n Mail the request to:     Goldman Sachs Funds     P.O. Box 219711     Kansas City, MO 64121-9711
	or for overnight delivery—
	Goldman Sachs Funds     330 West 9th St.     Poindexter Bldg., 1st Floor     Kansas City, MO 64105
By Telephone:	If you have not declined the telephone exchange privilege on your Account Application:
	n 1-800-526-7384     (8:00 a.m. to 4:00 p.m. New York time)

You should keep in mind the following factors when making or considering an exchange:

n	You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange.
n	Currently, there is no charge for exchanges, although a Fund may impose a charge in the future.
n	The exchanged shares may later be exchanged for shares of the same class (or an equivalent class) of the original Fund at the next determined NAV without the imposition of an initial sales charge or CDSC (but subject to any applicable redemption fee) if the amount in the Fund resulting from such exchanges is less than the largest amount on which you have previously paid the applicable sales charge.
n	When you exchange shares subject to a CDSC, no CDSC will be charged at that time. The exchanged shares will be subject to the CDSC of the shares originally held. For purposes of determining the amount of the applicable CDSC, the length of time you have owned the shares will be measured from the date you acquired the original shares subject to a CDSC and will not be affected by a subsequent exchange.

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n	Eligible investors may exchange certain classes of shares for another class of shares of the same Fund. For further information, call Goldman Sachs Funds at 1-800-526-7384 and see the Additional Statement.
n	All exchanges which represent an initial investment in a Fund must satisfy the minimum initial investment requirements of that Fund. Exchanges into a money market fund need not meet the traditional minimum investment requirements for that fund if the entire balance of the original Fund account is exchanged.
n	Exchanges are available only in states where exchanges may be legally made.
n	It may be difficult to make telephone exchanges in times of drastic economic or market conditions.
n	Goldman Sachs and BFDS may use reasonable procedures described under “What Do I Need To Know About Telephone Redemption Requests?” in an effort to prevent unauthorized or fraudulent telephone exchange requests.
n	Telephone exchanges normally will be made only to an identically registered account.
n	Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted.
n	Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund.

For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. You should consult your tax adviser concerning the tax consequences of an exchange.

   SHAREHOLDER SERVICES   

Can I Arrange To Have Automatic Investments Made On A Regular Basis?

You may be able to make systematic cash investments through your bank via ACH transfer or your checking account via bank draft each month. The minimum dollar amount for this service is $50 per month. Forms for this option are available from Goldman Sachs, and your Authorized Dealer, or you may check the appropriate box on the Account Application.

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Can My Dividends And Distributions From A Fund Be Invested In Other Funds?

You may elect to cross-reinvest dividends and capital gains distributions paid by a Fund in shares of the same class or an equivalent class of other Goldman Sachs Funds.

n	Shares will be purchased at NAV.
n	No initial sales charge or CDSC will be imposed.
n	You may elect cross-reinvestment into an identically registered account or a similarly registered account provided that at least one name on the account is registered identically.

Can I Arrange To Have Automatic Exchanges Made On A Regular Basis?

You may elect to exchange automatically a specified dollar amount of shares of a Fund for shares of the same class or an equivalent class of other Goldman Sachs Funds.

n	Shares will be purchased at NAV.
n	No initial sales charge is imposed.
n	Shares subject to a CDSC acquired under this program may be subject to a CDSC at the time of redemption from the Fund into which the exchange is made depending upon the date and value of your original purchase.
n	Automatic exchanges are made monthly on the 15th day of each month or the first business day thereafter.
n	Minimum dollar amount: $50 per month.

What Else Should I Know About Cross-Reinvestments And Automatic Exchanges?

Cross-reinvestments and automatic exchanges are subject to the following conditions:

n	You must invest an amount in the Fund into which cross-reinvestments or automatic exchanges are being made that is equal to that Fund’s minimum initial investment.
n	You should obtain and read the prospectus of the Fund into which dividends are invested or automatic exchanges are made.

Can I Have Automatic Withdrawals Made On A Regular Basis?

You may draw on your account systematically via check or ACH transfer in any amount of $50 or more.

n It is normally undesirable to maintain a systematic withdrawal plan at the same time that you are purchasing additional Class A, Class B or Class C Shares because of the sales charge imposed on your purchases of Class A Shares or the imposition of a CDSC on your redemptions of Class A, Class B or Class C Shares.

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n	Checks are mailed the next business day after your selected systematic withdrawal date.
n	Each systematic withdrawal is a redemption and therefore may be a taxable transaction.
n	The CDSC applicable to Class A, Class B or Class C Shares redeemed under the systematic withdrawal plan may be waived.

What Types of Reports Will Be Sent Regarding My Investment?

You will be provided with a printed confirmation of each transaction in your account and a quarterly account statement. A year-to-date statement for your account will be provided upon request made to Goldman Sachs. If your account is held in “street name” you may receive your statements and confirmations on a different schedule.

You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting Goldman Sachs Funds by phone at 1-800-526-7384 or by mail at Goldman Sachs Funds, 71 S. Wacker Dr., Suite 500, Chicago, IL 60606. The Funds will begin sending individual copies to you within 30 days after receipt of your revocation.

The Funds do not generally provide sub-accounting services.

What Should I Know When I Purchase Shares Through An Authorized Dealer?

Authorized Dealers and other financial intermediaries may provide varying arrangements for their clients to purchase and redeem Fund shares. In addition, Authorized Dealers and other financial intermediaries are responsible for providing to you any communications from a Fund to its shareholders, including but not limited to, prospectuses, prospectus supplements, proxy materials and notices regarding the source of dividend payments pursuant to Section 19 of the Investment Company Act. They may charge additional fees not described in this Prospectus to their customers for such services.

If shares of a Fund are held in a “street name” account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to your account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Funds will have no record of your transactions, you should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about your account. The transfer of shares in a “street

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name” account to an account with another dealer or to an account directly with the Fund involves special procedures and will require you to obtain historical purchase information about the shares in the account from the Authorized Dealer. If your Authorized Dealer’s relationship with Goldman Sachs is terminated and you do not transfer your account to another Authorized Dealer, the Trust reserves the right to redeem your shares. The Trust will not be responsible for any loss in an investor’s account resulting from a redemption.

Authorized Dealers and other financial intermediaries may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers, and if approved by the Trust, to designate other intermediaries to accept such orders. In these cases:

n	A Fund will be deemed to have received an order that is in proper form when the order is accepted by an Authorized Dealer or intermediary on a business day, and the order will be priced at the Fund’s NAV per share (adjusted for any applicable sales charge and redemption fee) next determined after such acceptance.
n	Authorized Dealers and intermediaries are responsible for transmitting accepted orders to the Funds within the time period agreed upon by them.

You should contact your Authorized Dealer or intermediary to learn whether it is authorized to accept orders for the Trust.

The Investment Adviser, Distributor and/or their affiliates may make payments to Authorized Dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Funds. The payments are in addition to the distribution and service fees and sales charges described in this Prospectus. Such payments are intended to compensate Intermediaries, for among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, 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. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also compensate

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Intermediaries for subaccounting, administrative and/or shareholder processing services that are in addition to the fees paid for these services by the Funds. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the “Payments to Intermediaries” section of the Additional Statement for more information about these payments.

The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your Authorized Dealer or Intermediary for more information about the payments it receives and any potential conflicts of interest.

   DISTRIBUTION SERVICES AND FEES   

What Are The Different Distribution And Service Fees Paid By Class A, B and C Shares?

The Trust has adopted distribution and service plans (each a “Plan”) under which Class A, Class B and Class C Shares bear distribution and service fees paid to Authorized Dealers and Goldman Sachs. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from these arrangements. Goldman Sachs generally pays the distribution and service fees on a quarterly basis.

Under the Plans, Goldman Sachs is entitled to a monthly fee from each Fund for distribution services equal, on an annual basis, to 0.25%, 0.75% and 0.75%, respectively, of a Fund’s average daily net assets attributed to Class A, Class B and Class C Shares.* Because these fees are paid out of the Fund’s assets on an ongoing basis, over time, these fees will increase the cost of your investment and may cost you more than paying other types of such charges.

The distribution fees are subject to the requirements of Rule 12b-1 under the Investment Company Act, and may be used (among other things) for:

n	Compensation paid to and expenses incurred by Authorized Dealers, Goldman Sachs and their respective officers, employees and sales representatives;
n	Commissions paid to Authorized Dealers;

     *  Currently, Goldman Sachs voluntarily limits such fees to 0.60% of the average daily net assets attributed to Class B Shares of the Short Duration Government Fund. Goldman Sachs may modify or discontinue such waivers in the future at its discretion.

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n	Allocable overhead;
n	Telephone and travel expenses;
n	Interest and other costs associated with the financing of such compensation and expenses;
n	Printing of prospectuses for prospective shareholders;
n	Preparation and distribution of sales literature or advertising of any type; and
n	All other expenses incurred in connection with activities primarily intended to result in the sale of Class A, Class B and Class C Shares.

In connection with the sale of Class C Shares, Goldman Sachs normally begins paying the 0.75% distribution fee as an ongoing commission to Authorized Dealers after the shares have been held for one year.

   PERSONAL AND ACCOUNT MAINTENANCE SERVICES AND FEES   

Under the Plans, Goldman Sachs is also entitled to receive a separate fee equal on an annual basis to 0.25% of each Fund’s average daily net assets attributed to Class B or Class C Shares. This fee is for personal and account maintenance services, and may be used to make payments to Goldman Sachs, Authorized Dealers and their officers, sales representatives and employees for responding to inquiries of, and furnishing assistance to, shareholders regarding ownership of their shares or their accounts or similar services not otherwise provided on behalf of the Funds. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from this arrangement.

Goldman Sachs is also entitled to receive an account service fee equal on an annual basis to 0.05% of the U.S. Mortgages and Investment Grade Credit Funds’ respectively, average daily net assets attributed to Class A Shares. This fee is for account services, and may be used to make payments to Authorized Dealers for account maintenance, processing orders to purchase, redeem and exchange Class A Shares and other services.

In connection with the sale of Class C Shares, Goldman Sachs normally begins paying the 0.25% ongoing service fee to Authorized Dealers after the shares have been held for one year.

   RESTRICTIONS ON EXCESSIVE TRADING PRACTICES   

Policies and Procedures on Excessive Trading Practices. In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view

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to longer-term investment purposes only that are consistent with the investment policies and practices of the respective Funds. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm fund performance and result in dilution in the value of Fund shares held by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive trading or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to a Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Trust or its shareholders or would subordinate the interests of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.

To deter excessive shareholder trading, the High Yield, Global Income and Emerging Markets Debt Funds described in this Prospectus, certain other Fixed Income Funds and the International Equity Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase subject to certain exceptions. See “Shareholder Guide—What Do I Need To Know About The Redemption Fee?” for more information about the redemption fee, including transactions and certain omnibus accounts to which the redemption fee does not apply.

Pursuant to the policy adopted by the Board of Trustees, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive. Goldman Sachs reviews on a regular, periodic basis available information relating to the trading activity in the Funds in order to assess the likelihood that a Fund may be the target of excessive trading. As part of its excessive trading surveillance process, Goldman Sachs, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. Consistent with the standards described above, if, in its judgment, Goldman Sachs detects excessive, short term trading, Goldman Sachs is authorized to reject or restrict a purchase or exchange request and may further seek to close an investor’s account with a Fund. Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading

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or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.

Fund shares may be held through omnibus arrangements maintained by intermediaries such as broker-dealers, investment advisers, transfer agents, administrators and insurance companies. In addition, Fund shares may be held in omnibus 401(k) plans, Employee Benefit Plans and other group accounts. Omnibus accounts include multiple investors and such accounts typically provide the Funds with a net purchase or redemption request on any given day where the purchases and redemptions of Fund shares by the investors are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are not known by the Funds. A number of these financial intermediaries may not have the capability or may not be willing to apply the Funds’ market timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, a Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts is limited. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Funds and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance.

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Taxation

As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds.

Unless your investment is an IRA or other tax-advantaged account, you should consider the possible tax consequences of Fund distributions and the sale of your Fund shares.

   DISTRIBUTIONS   

Each Fund contemplates declaring as dividends each year all or substantially all of its taxable income. Distributions you receive from the Funds are generally subject to federal income tax, and may also be subject to state or local taxes. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash. For federal tax purposes, Fund distributions attributable to short-term capital gains and net investment income are generally taxable to you as ordinary income, while distributions attributable to long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.

Under current provisions of the Internal Revenue Code, the maximum long-term capital gain tax rate applicable to individuals, estates, and trusts is 15%. A sunset provision provides that the 15% long-term capital gain rate will revert back to its prior level for taxable years beginning after December 31, 2008. (The 15% maximum tax rate also applies to certain qualifying dividend income, but Fund distributions will not qualify for that favorable treatment and will also not qualify for the corporate dividends received deduction because the Funds will be earning interest income rather than dividend income.)

Each Fund’s transactions in derivatives (such as futures contracts and swaps) will be subject to special tax rules, the effect of which may be to accelerate income to a Fund, defer losses to a Fund, cause adjustments in the holding periods of a Fund’s securities and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to you. A Fund’s use of derivatives may result in the Fund realizing more short-term capital gains and ordinary income subject to tax at ordinary income tax rates than it would if it did not use derivatives.

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TAXATION

Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in October, November or December but paid in January are taxable as if they were paid in December.

The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may be subject to foreign withholding or other foreign taxes on income or gain from certain foreign securities. In general, the Funds may deduct these taxes in computing their taxable income. Shareholders of the Global Income and Emerging Markets Debt Funds may be entitled to claim a credit or a deduction with respect to foreign taxes if a Fund elects to pass through these taxes to you.

You will be mailed annual tax information with respect to your investment in each Fund in January of the following year.

   SALES AND EXCHANGES   

Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this gain or loss is long-term or short-term depending on whether your holding period exceeds twelve months, except that any loss realized on shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a sale, exchange or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that same Fund within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition (such as pursuant to a dividend reinvestment in shares of the Fund.) If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.

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   OTHER INFORMATION   

When you open your account, you should provide your Social Security Number or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so.

Non-U.S. investors may be subject to U.S. withholding and estate tax. However, withholding is generally not required on properly designated distributions of short-term capital gains and qualified interest income paid to non-U.S. investors after November 1, 2005 and before October 31, 2008. Although this designation will be made for short-term capital gain distributions, the Funds do not anticipate making any qualified interest income designation. Therefore, all distributions of interest income will be subject to withholding when paid to non-U.S. investors.

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Appendix A
Additional Information on Portfolio
Risks, Securities and Techniques

   A.  General Portfolio Risks   

The Funds will be subject to the risks associated with fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase (although many mortgage-related securities will have less potential than other debt securities for capital appreciation during periods of declining rates). Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that the issuer or guarantor could default on its obligations, and a Fund will not recover its investment. Call risk and extension risk are normally present in adjustable rate mortgage loans (“ARMs”), Mortgage-Backed Securities and asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can either shorten (call risk) or lengthen (extension risk). In general, if interest rates on new mortgage loans fall sufficiently below the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to increase. Conversely, if mortgage loan interest rates rise above the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to decrease. In either case, a change in the prepayment rate can result in losses to investors. The same would be true of asset-backed securities, such as securities backed by car loans.

The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater expenses which must be borne by a Fund and its shareholders and is also likely to result in higher short-term capital gains taxable to shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of a Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See “Financial Highlights” in Appendix B for a statement of the Funds’ historical portfolio turnover rates.

The following sections provide further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental investment restrictions that cannot be changed

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without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in a Fund’s investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs.

   B.  Other Portfolio Risks   

Credit/Default Risks. Debt securities purchased by the Funds may include securities (including zero coupon bonds) issued by the U.S. government (and its agencies, instrumentalities and sponsored enterprises), foreign governments, domestic and foreign corporations, banks and other issuers. Some of these fixed-income securities are described in the next section below. Further information is provided in the Additional Statement.

Debt securities rated BBB- or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB- or Baa3 are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is determined by the Investment Adviser to be of comparable credit quality. If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the Investment Adviser will consider which action, including the sale of the security, is in the best interest of a Fund and its shareholders.

Certain Funds may invest in fixed-income securities rated BB or Ba or below (or comparable unrated securities) which are commonly referred to as “junk bonds.” Junk bonds are considered predominantly speculative and may be questionable as to principal and interest payments.

In some cases, junk bonds may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will present greater speculative risks than those associated with investment in investment grade bonds. Also, to the extent that the rating assigned

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APPENDIX A

to a security in a Fund’s portfolio is downgraded by a rating organization, the market price and liquidity of such security may be adversely affected.

Risks of Derivative Investments. A Fund’s transactions in options, futures, options on futures, swaps, interest rate caps, floors and collars, structured securities, inverse floating-rate securities, stripped mortgage-backed securities and foreign currency transactions involve additional risk of loss. A Fund may enter into a derivative investment for hedging purposes, for example, in an effort to preserve a return or spread, protect against currency fluctuations, protect against adverse price movements, manage portfolio duration or manage a Fund’s credit exposures. Even so, loss can result from a lack of correlation between changes in the value of derivative investments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative investments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices, interest rates, currency prices or credit events.

In addition, each Fund may invest in derivative investments for non-hedging purposes (that is, to seek to increase total return) in connection with the management of the Fund, including the management of the Fund’s interest rate, currency, duration and credit exposures. Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss.

Derivative Mortgage-Backed Securities (such as principal-only (“POs”), interest-only (“IOs”) or inverse floating rate securities) are particularly exposed to call and extension risks. Small changes in mortgage prepayments can significantly impact the cash flow and the market value of these securities. In general, the risk of faster than anticipated prepayments adversely affects IOs, super floaters and premium priced Mortgage-Backed Securities. The risk of slower than anticipated prepayments generally adversely affects POs, floating-rate securities subject to interest rate caps, support tranches and discount priced Mortgage-Backed Securities. In addition, particular derivative securities may be leveraged such that their exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is magnified.

Some floating-rate derivative debt securities can present more complex types of derivative and interest rate risks. For example, range floaters are subject to the risk that the coupon will be reduced below market rates if a designated interest rate floats outside of a specified interest rate band or collar. Dual index or yield curve floaters are subject to lower prices in the event of an unfavorable change in the spread between two designated interest rates.

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Risks of Foreign Investments. In general, certain Funds may make foreign investments. Foreign investments involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers. Foreign investments may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and changes in exchange control regulations (e.g., currency blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the U.S. dollar) in which a portfolio security is quoted or denominated relative to the U.S. dollar would reduce the value of the portfolio security. In addition, if the currency in which a Fund receives dividends, interest or other payments declines in value against the U.S. dollar before such income is distributed as dividends to shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.

Brokerage commissions, custodial services and other costs relating to investment in international securities markets generally are more expensive than in the United States. In addition, clearance and settlement procedures may be different in foreign countries and, in certain markets, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. issuers. There may be less publicly available information about a foreign issuer than a U.S. issuer. In addition, there is generally less government regulation of foreign markets, companies and securities dealers than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States. Foreign securities markets may have substantially less volume than U.S. securities markets and securities of many foreign issuers are less liquid and more volatile than securities of comparable domestic issuers. Furthermore, with respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments (or, in some cases, capital gains distributions), limitations on the removal of funds or other assets from such countries, and risks of political or social instability or diplomatic developments which could adversely affect investments in those countries.

Concentration of a Fund’s assets in one or a few countries and currencies will subject a Fund to greater risks than if a Fund’s assets were not geographically concentrated.

Risks of Sovereign Debt. Investment in sovereign debt obligations by a Fund involves risks not present in debt obligations of corporate issuers. The issuer of the

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debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and a Fund may have limited recourse to compel payment in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn a Fund’s NAV, to a greater extent than the volatility inherent in debt obligations of U.S. issuers.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.

Risks of Euro. On January 1, 1999, the European Economic and Monetary Union (EMU) introduced a new single currency called the euro. The euro has replaced the national currencies of the following member countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. In addition, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia became members of the EMU on May 1, 2004, but these countries will not adopt the euro as their new currency until they can show their economies have converged with the economies of the euro zone.

The European Central Bank has control over each country’s monetary policies. Therefore, the member countries no longer control their own monetary policies by directing independent interest rates for their currencies. The national governments of the participating countries, however, have retained the authority to set tax and spending policies and public debt levels.

The change to the euro as a single currency is relatively new and untested. The elimination of currency risk among EMU countries has affected the economic environment and behavior of investors, particularly in European markets, but the long-term impact of those changes on currency values or on the business or financial condition of European countries and issuers cannot be fully assessed at this time. In addition, the introduction of the euro presents other unique uncertainties, including the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax and labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other countries that now are or may in the future become members of the European Union (“EU”) will have an impact on the euro. Also, it is possible that the euro could be abandoned in the future by countries that have already adopted its use. In May and June 2005, voters in France and the Netherlands rejected

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ratification of the EU Constitution causing some other countries to postpone moves toward ratification. These or other events, including political and economic developments, could cause market disruptions, and could adversely affect the value of securities held by the Funds. Because of the number of countries using this single currency, a significant portion of the assets held by the Funds may be denominated in the euro.

Risks of Emerging Countries. Certain Funds may invest in securities of issuers located in emerging countries. The risks of foreign investment are heightened when the issuer is located in an emerging country. Emerging countries are generally located in the Asia and Pacific regions, the Middle East, Eastern Europe, Latin, Central and South America and Africa. A Fund’s purchase and sale of portfolio securities in certain emerging countries may be constrained by limitations relating to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on the aggregate trading volume by or holdings of a Fund, the Investment Adviser, its affiliates and their respective clients and other service providers. A Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.

Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees which may limit investment in such countries or increase the administrative costs of such investments. For example, certain Asian countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the issuer available for purchase by nationals. In addition, certain countries may restrict or prohibit investment opportunities in issuers or industries deemed important to national interests. Such restrictions may affect the market price, liquidity and rights of securities that may be purchased by a Fund. The repatriation of both investment income and capital from certain emerging countries is subject to restrictions such as the need for governmental consents. In situations where a country restricts direct investment in securities (which may occur in certain Asian and other countries), a Fund may invest in such countries through other investment funds in such countries.

Many emerging countries have recently experienced currency devaluations and substantial (and, in some cases, extremely high) rates of inflation. Other emerging countries have experienced economic recessions. These circumstances have had a negative effect on the economies and securities markets of those emerging countries. Economies in emerging countries generally are dependent heavily upon

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commodity prices and international trade and, accordingly, have been and may continue to be affected adversely by the economies of their trading partners, trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

Many emerging countries are subject to a substantial degree of economic, political and social instability. Governments of some emerging countries are authoritarian in nature or have been installed or removed as a result of military coups, while governments in other emerging countries have periodically used force to suppress civil dissent. Disparities of wealth, the pace and success of democratization, and ethnic, religious and racial disaffection, among other factors, have also led to social unrest, violence and/or labor unrest in some emerging countries. Unanticipated political or social developments may result in sudden and significant investment losses. Investing in emerging countries involves greater risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. As an example, in the past some Eastern European governments have expropriated substantial amounts of private property, and many claims of the property owners have never been fully settled. There is no assurance that similar expropriations will not recur in Eastern European or other countries.

A Fund’s investment in emerging countries may also be subject to withholding or other taxes, which may be significant and may reduce the return from an investment in such countries to the Fund.

Settlement procedures in emerging countries are frequently less developed and reliable than those in the United States and may involve a Fund’s delivery of securities before receipt of payment for their sale. In addition, significant delays may occur in certain markets in registering the transfer of securities. Settlement or registration problems may make it more difficult for a Fund to value its portfolio securities and could cause the Fund to miss attractive investment opportunities, to have a portion of its assets uninvested or to incur losses due to the failure of a counterparty to pay for securities the Fund has delivered or the Fund’s inability to complete its contractual obligations because of theft or other reasons.

The creditworthiness of the local securities firms used by a Fund in emerging countries may not be as sound as the creditworthiness of firms used in more developed countries. As a result, the Fund may be subject to a greater risk of loss if a securities firm defaults in the performance of its responsibilities.

The small size and inexperience of the securities markets in certain emerging countries and the limited volume of trading in securities in those countries may

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make a Fund’s investments in such countries less liquid and more volatile than investments in countries with more developed securities markets (such as the United States, Japan and most Western European countries). A Fund’s investments in emerging countries are subject to the risk that the liquidity of a particular investment, or investments generally, in such countries will shrink or disappear suddenly and without warning as a result of adverse economic, market or political conditions or adverse investor perceptions, whether or not accurate. Because of the lack of sufficient market liquidity, a Fund may incur losses because it will be required to effect sales at a disadvantageous time and then only at a substantial drop in price. Investments in emerging countries may be more difficult to price precisely because of the characteristics discussed above and lower trading volumes.

A Fund’s use of foreign currency management techniques in emerging countries may be limited. Due to the limited market for these instruments in emerging countries, all or a significant portion of the Funds’ currency exposure in emerging countries may not be covered by such instruments.

Risks of Investments in Central and South America. A significant portion of the Emerging Markets Debt Fund’s portfolio may be invested in issuers located in Central and South American countries. The economies of Central and South American countries have experienced considerable difficulties in the past decade, including high inflation rates, high interest rates and currency devaluations. As a result, Central and South American securities markets have experienced great volatility. In addition, a number of Central and South American countries are among the largest emerging country debtors. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies. The political history of certain Central and South American countries has been characterized by political uncertainty, intervention by the military in civilian and economic spheres and political corruption. Such developments, if they were to recur, could reverse favorable trends toward market and economic reform, privatization and removal of trade barriers. Certain Central and South American countries have entered into regional trade agreements that would, among other things, reduce barriers between countries, increase competition among companies and reduce government subsidies in certain industries. No assurance can be given that these changes will result in the economic stability intended. There is a possibility that these trade arrangements will not be implemented, will be implemented but not completed or will be completed but then partially or completely unwound. Any of the foregoing risk factors could have an adverse impact on the Fund’s investments in Central and South America.

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Risks of Illiquid Securities. Each Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include:

n	Both domestic and foreign securities that are not readily marketable
n	Certain municipal leases and participation interests
n	Certain stripped Mortgage-Backed Securities
n	Repurchase agreements and time deposits with a notice or demand period of more than seven days
n	Certain over-the-counter options
n	Certain structured securities and all swap transactions
n	Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called “4(2) commercial paper” or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“144A Securities”).

Investing in 144A Securities may decrease the liquidity of a Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:

n	U.S. Government Securities
n	Repurchase agreements collateralized by U.S. Government Securities

When a Fund’s assets are invested in such instruments, the Fund may not be achieving its investive objective.

   C.  Portfolio Securities and Techniques   

This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks.

The Funds may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund’s investment objective and policies. Further information is provided in the Additional Statement, which is available upon request.

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U.S. Government Securities. Each Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (a) the full faith and credit of the U.S. Treasury; (b) the right of the issuer to borrow from the U.S. Treasury; (c) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (d) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components of stripped U.S. Government Securities are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation.

Custodial Receipts and Trust Certificates. Each Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities, Municipal Securities or other types of securities in which a Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. Each Fund may also invest in separately issued interests in custodial receipts and trust certificates.

Mortgage-Backed Securities. Certain Funds may invest in Mortgage-Backed Securities. Mortgage-Backed Securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by real property. Mortgage-Backed Securities can be backed by either fixed rate mortgage loans or adjustable rate mortgage loans, and may be issued by either a governmental or non-governmental entity.

Certain Funds may invest in privately-issued mortgage pass-through securities that represent interests in pools of mortgage loans that are issued by trusts formed by originators of and institutional investors in mortgage loans (or represent interests in custodial arrangements administered by such institutions). These originators and

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institutions include commercial banks, savings and loans associations, credit unions, savings banks, mortgage bankers, insurance companies, investment banks or special purpose subsidiaries of the foregoing. The pools underlying privately-issued mortgage pass-through securities consist of mortgage loans secured by mortgages or deeds of trust creating a first lien on commercial, residential, residential multi-family and mixed residential/ commercial properties. These Mortgage-Backed Securities typically do not have the same credit standing as U.S. government guaranteed Mortgage-Backed Securities.

Privately-issued mortgage pass-through securities generally offer a higher yield than similar securities issued by a government entity because of the absence of any direct or indirect government or agency payment guarantees. However, timely payment of interest and principal on mortgage loans in these pools may be supported by various forms of insurance or guarantees, including individual loan, pool and hazard insurance, subordination and letters of credit. The insurance and guarantees are issued by government entities, private insurers, banks and mortgage poolers. Mortgage-Backed Securities without insurance or guarantees may also be purchased by the Fund if they have the required rating from an NRSRO. Some Mortgage-Backed Securities issued by private organizations may not be readily marketable.

Mortgage-Backed Securities may include multiple class securities, including collateralized mortgage obligations (“CMOs”) and Real Estate Mortgage Investment Conduit (“REMIC”) pass-through or participation certificates. A REMIC is a CMO that qualifies for special tax treatment under the Code and invests in certain mortgages principally secured by interests in real property and other permitted investments. CMOs provide an investor with a specified interest in the cash flow from a pool of underlying mortgages or of other Mortgage-Backed Securities. CMOs are issued in multiple classes each with a specified fixed or floating interest rate and a final scheduled distribution date. In many cases, payments of principal are applied to the CMO classes in the order of their respective stated maturities, so that no principal payments will be made on a CMO class until all other classes having an earlier stated maturity date are paid in full.

Sometimes, however, CMO classes are “parallel pay,” i.e., payments of principal are made to two or more classes concurrently. In some cases, CMOs may have the characteristics of a stripped mortgage-backed security whose price can be highly volatile. CMOs may exhibit more or less price volatility and interest rate risk than other types of Mortgage-Backed Securities, and under certain interest rate and payment scenarios, the Fund may fail to recoup fully its investment in certain of these securities regardless of their credit quality.

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To the extent a Fund concentrates its investments in pools of Mortgage-Backed Securities sponsored by the same sponsor or serviced by the same servicer, it may be subject to additional risks. Servicers of mortgage-related pools collect payments on the underlying mortgage assets for pass-through to the pool on a periodic basis. Upon insolvency of the servicer, the pool may be at risk with respect to collections received by the servicer but not yet delivered to the pool.

Mortgaged-Backed Securities also include stripped Mortgage-Backed Securities (“SMBS”), which are derivative multiple class Mortgage-Backed Securities. SMBS are usually structured with two different classes: one that receives substantially all of the interest payments and the other that receives substantially all of the principal payments from a pool of mortgage loans. The market value of SMBS consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. The yields on SMBS that receive all or most of the interest from mortgage loans are generally higher than prevailing market yields on other Mortgage-Backed Securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped.

Asset-Backed Securities. Each Fund may invest in asset-backed securities. Asset-backed securities are securities whose principal and interest payments are collateralized by pools of assets such as auto loans, credit card receivables, leases, installment contracts and personal property. Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, a Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. Asset-backed securities present credit risks that are not presented by Mortgage-Backed Securities. This is because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. If the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that a Fund’s recoveries on repossessed collateral may not be available to support payments on the securities. In the event of a default, a Fund may suffer a loss if it cannot sell collateral quickly and receive the amount it is owed.

Municipal Securities. Certain Funds may invest in securities and instruments issued by state and local government issuers. Municipal Securities in which a Fund may invest consist of bonds, notes, commercial paper and other instruments

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(including participation interests in such securities) issued by or on behalf of the states, territories and possessions of the United States (including the District of Columbia) and their political subdivisions, agencies or instrumentalities.

Municipal Securities include both “general” and “revenue” bonds and may be issued to obtain funds for various purposes. General obligations are secured by the issuer’s pledge of its full faith, credit and taxing power. Revenue obligations are payable only from the revenues derived from a particular facility or class of facilities.

Municipal Securities are often issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Municipal Securities include private activity bonds, pre-refunded municipal securities and auction rate securities.

The obligations of the issuer to pay the principal of and interest on a Municipal Security are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest or imposing other constraints upon the enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power or ability of the issuer to pay when due the principal of or interest on a Municipal Security may be materially affected.

In addition, Municipal Securities include municipal leases, certificates of participation and “moral obligation” bonds. A municipal lease is an obligation issued by a state or local government to acquire equipment or facilities. Certificates of participation represent interests in municipal leases or other instruments, such as installment purchase agreements. Moral obligation bonds are supported by a moral commitment but not a legal obligation of a state or local government. Municipal leases, certificates of participation and moral obligation bonds frequently involve special risks not normally associated with general obligation or revenue bonds. In particular, these instruments permit governmental issuers to acquire property and equipment without meeting constitutional and statutory requirements for the issuance of debt. If, however, the governmental issuer does not periodically appropriate money to enable it to meet its payment obligations under these instruments, it cannot be legally compelled to do so. If a default occurs, it is likely that a Fund would be unable to obtain another acceptable source of payment. Some municipal leases, certificates of participation and moral obligation bonds may be illiquid.

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Municipal Securities may also be in the form of a tender option bond, which is a Municipal Security (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 with the agreement of a third party, such as a bank, broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities to the institution. After payment of a fee to the financial institution that provides this option, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. An institution may 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 Fund’s duration. Certain tender option bonds may be illiquid.

Municipal Securities may be backed by letters of credit or other forms of credit enhancement issued by domestic or foreign banks 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 Securities. Letters of credit and other obligations of foreign banks and financial institutions 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 are generally not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks.

Certain Funds may invest 25% or more of the value of their respective total assets in Municipal Securities which are related in such a way that an economic, business or political development or change affecting one Municipal Security would also affect the other Municipal Security. For example, a Fund may invest all of its assets in (a) Municipal Securities 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 Securities whose issuers are in the same state; or (c) industrial development obligations. Concentration of a Fund’s investments in these Municipal Securities will subject the Fund, to a greater extent than if such investment was not so concentrated, to the risks of adverse economic, business or political developments affecting the particular state, industry or other area of concentration.

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Brady Bonds and Similar Instruments. Certain Funds may invest in debt obligations commonly referred to as “Brady Bonds.” Brady Bonds are created through the exchange of existing commercial bank loans to foreign borrowers for new obligations in connection with debt restructurings under a plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the “Brady Plan”).

Brady Bonds involve various risk factors including the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds in which a Fund may invest will not be subject to restructuring arrangements or to requests for new credit, which may cause the Fund to suffer a loss of interest or principal on its holdings.

In addition, certain Funds may invest in other interests issued by entities organized and operated for the purpose of restructuring the investment characteristics of instruments issued by emerging country issuers. These types of restructuring involve the deposit with or purchase by an entity of specific instruments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying instruments. Certain issuers of such structured securities may be deemed to be “investment companies” as defined in the Investment Company Act. As a result, a Fund’s investment in such securities may be limited by certain investment restrictions contained in the Investment Company Act.

Corporate Debt Obligations; Trust Preferred Securities; Convertible Securities. Certain Funds may invest in corporate debt obligations, trust preferred securities and convertible securities. Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. A trust preferred security is a long dated bond (for example, 30 years) with preferred features. The preferred features are that payment of interest can be deferred for a specified period without initiating a default event. The securities are generally senior in claim to standard preferred stock but junior to other bondholders. Certain Funds may also invest in other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities.

Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which a Fund invests are subject to the same rating criteria as its other investments in fixed-income securities. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline

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as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.

Bank Obligations. Certain Funds may invest in obligations issued or guaranteed by U.S. or foreign banks. Bank obligations, including without limitation, time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulations. Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry.

Foreign Currency Transactions. Certain Funds may, to the extent consistent with their investment policies, purchase or sell foreign currencies on a cash basis or through forward contracts. A forward contract involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract.

Certain Funds may engage in foreign currency transactions for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. In addition, certain Funds may enter into foreign currency transactions to seek a closer correlation between the Fund’s overall currency exposures and the currency exposures of the Fund’s performance benchmark. Certain Funds may also enter into such transactions to seek to increase total return, which is considered a speculative practice.

Some Funds may also engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted. A Fund may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the Investment Adviser, it would be beneficial to convert such currency into U.S. dollars at a later date (e.g., the Investment Adviser may anticipate the foreign currency to appreciate against the U.S. dollar).

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Currency exchange rates may fluctuate significantly over short periods of time, causing, along with other factors, a Fund’s NAV to fluctuate (when the Fund’s NAV fluctuates, the value of your shares may go up or down). Currency exchange rates also can be affected unpredictably by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.

The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on an exchange. Such contracts are subject to the risk that the counterparty to the contract will default on its obligations. Since these contracts are not guaranteed by an exchange or clearinghouse, a default on a contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or could force the Fund to cover its purchase or sale commitments, if any, at the current market price.

Structured Securities and Inverse Floaters. Certain Funds may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may present a greater degree of market risk than many types of securities, and may be more volatile, less liquid and more difficult to price accurately than less complex securities.

Structured securities include, but are not limited to, inverse floating rate debt securities (“inverse floaters”). The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value.

Floating and Variable Rate Obligations. Each Fund may purchase floating and variable rate obligations. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels.

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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. 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 interests in a pool of debt obligations held by a bank or other financial institutions.

Zero Coupon, Deferred Interest, Pay-In-Kind and Capital Appreciation Bonds. Each Fund may invest in zero coupon bonds, deferred interest, pay-in-kind and capital appreciation bonds. These bonds are issued at a discount from their face value because interest payments are typically postponed until maturity. Pay-in-kind securities are securities that have interest payable by the delivery of additional securities. The market prices of these securities generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit quality.

Mortgage Dollar Rolls. Certain Funds may enter into mortgage dollar rolls. A mortgage dollar roll involves the sale by a Fund of securities for delivery in the current month. The Fund simultaneously contracts with the same counterparty to repurchase substantially similar (same type, coupon and maturity) but not identical securities on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund benefits to the extent of any difference between (a) the price received for the securities sold and (b) the lower forward price for the future purchase and/or fee income plus the interest earned on the cash proceeds of the securities sold. Unless the benefits of a mortgage dollar roll exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the roll, the use of this technique will diminish the Fund’s performance.

Successful use of mortgage dollar rolls depends upon the Investment Adviser’s ability to predict correctly interest rates and mortgage prepayments. If the Investment Adviser is incorrect in its prediction, a Fund may experience a loss. The Funds do not currently intend to enter into mortgage dollar rolls for financing and do not treat them as borrowings.

Options on Securities, Securities Indices and Foreign Currencies. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller)

120

APPENDIX A

of the option the obligation to sell, the underlying instrument during the option period. Each Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest. Certain Funds may also, to the extent consistent with its investment policies, purchase and sell (write) put and call options on foreign currencies.

The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the Investment Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase a Fund’s transaction costs. Options written or purchased by the Funds may be traded on either U.S. or foreign exchanges or over-the-counter. Foreign and over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.

Yield Curve Options. Each Fund may enter into options on the yield “spread” or differential between two securities. Such transactions are referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, such options present a risk of loss even if the yield of one of the underlying securities remains constant, or if the spread moves in a direction or to an extent which was not anticipated.

Futures Contracts and Options on Futures Contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument or currency at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on particular securities, foreign currencies, securities indices and other financial

121

instruments and indices. The Funds may engage in futures transactions on U.S. and (in the case of certain Funds) foreign exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in interest rates, securities prices or, to the extent a Fund invests in foreign securities, currency exchange rates, or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

Futures contracts and related options present the following risks:

n	While a Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance than if the Fund had not entered into any futures contracts or options transactions.
n	Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and a Fund may be exposed to additional risk of loss.
n	The loss incurred by a Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received.
n	Futures markets are highly volatile and the use of futures may increase the volatility of a Fund’s NAV.
n	As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to a Fund.
n	Futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
n	Foreign exchanges may not provide the same protection as U.S. exchanges.

When-Issued Securities and Forward Commitments. 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 settlement time. When-issued securities are securities that have been authorized, but not yet issued. When-issued securities are purchased in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. A forward

122

APPENDIX A

commitment involves entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when-issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate.

Lending of Portfolio Securities. Each Fund may engage in securities lending. Securities lending involves the lending of securities owned by a Fund to financial institutions such as certain broker-dealers, including, as permitted by the SEC, Goldman Sachs. The borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. Government Securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by a Fund in short-term investments, including unregistered investment pools managed by the Investment Adviser or its affiliates and from which the Investment Adviser or its affiliates may receive fees. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or appreciation, and a Fund will be responsible for any loss that might result from its investment of the borrowers’ collateral. If the Investment Adviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of a Fund (including the loan collateral). Loan collateral (including any investment of that collateral) is not subject to the percentage limitations described elsewhere in this Prospectus regarding investments in particular types of fixed-income and other securities.

A Fund may lend its securities to increase its income. A Fund may, however, experience delay in the recovery of its securities or incur a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund or becomes insolvent.

Repurchase Agreements. Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. Each Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation. Some Funds may also enter into repurchase agreements involving certain foreign government securities.

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If the other party or “seller” defaults, a Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, a Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.

Certain Funds, together with other registered investment companies having advisory agreements with the Investment 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.

Borrowings and Reverse Repurchase Agreements. Each Fund can borrow money from banks and other financial institutions, and certain Funds may enter into reverse repurchase agreements in amounts not exceeding one-third of a Fund’s total assets. A Fund may not make additional investments if borrowings exceed 5% of its total assets. Reverse repurchase agreements involve the sale of securities held by a Fund (excluding the Enhanced Income Fund) subject to the Fund’s agreement to repurchase them at a mutually agreed upon date and price (including interest). These transactions may be entered into as a temporary measure for emergency purposes or to meet redemption requests. Reverse repurchase agreements may also be entered into when the Investment Adviser expects that the interest income to be earned from the investment of the transaction proceeds will be greater than the related interest expense. Borrowings and reverse repurchase agreements involve leveraging. If the securities held by a Fund decline in value while these transactions are outstanding, the NAV of the Fund’s outstanding shares will decline in value by proportionately more than the decline in value of the securities. In addition, reverse repurchase agreements involve the risk that the investment return earned by a Fund (from the investment of the proceeds) will be less than the interest expense of the transaction, that the market value of the securities sold by a Fund will decline below the price the Fund is obligated to pay to repurchase the securities, and that the securities may not be returned to the Fund.

Interest Rate Swaps, Mortgage Swaps, Credit Swaps, Currency Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses on an underlying security. Credit

124

APPENDIX A

swaps give one party to a transaction (the buyer of the credit swap) the right to dispose of or acquire an asset (or group of assets), or the right to receive a payment from the other party, upon the occurrence of specified credit events. Currency swaps involve the exchange of the parties’ respective rights to make or receive payments in specified currencies. Total return swaps give a Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset in a total return swap declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty. The Funds may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.

Each Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As an example, when a Fund is the buyer of a credit default swap (commonly known as buying protection), it may make periodic payments to the seller of the credit default swap to obtain protection against a credit default on a specified underlying asset (or group of assets). If a default occurs, the seller of a credit default swap may be required to pay the Fund the “notional value” of the credit default swap on a specified security (or group of securities). On the other hand, when a Fund is a seller of a credit default swap (commonly known as selling protection), in addition to the credit exposure the Fund has on the other assets held in its portfolio, the Fund is also subject to the credit exposure on the notional amount of the swap since, in the event of a credit default, the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) to the buyer of the credit default swap. A Fund will be the seller of a credit default swap only when the credit of the underlying asset is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into.

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The use of interest rate, mortgage, credit, currency and total return swaps, options on swaps, and interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Investment Adviser is incorrect in its forecasts of market values, interest rates and currency exchange rates, or in its evaluation of the creditworthiness of swap counterparties and the issuers of the underlying assets, the investment performance of a Fund would be less favorable than it would have been if these investment techniques were not used.

Other Investment Companies. Each Fund may invest in securities of other investment companies subject to statutory limitations prescribed by the Investment Company Act. These limitations include a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund’s total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.

Non-Investment Grade Fixed-Income Securities. Non-investment grade fixed-income securities and unrated securities of comparable credit quality (commonly known as “junk bonds”) are considered predominantly speculative by traditional investment standards. In some cases, these obligations may be highly speculative and have poor prospects for reaching investment grade standing. Non-investment grade fixed-income securities are subject to the increased risk of an issuer’s inability to meet principal and interest obligations. These securities, also referred to as high yield securities, may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity.

Non-investment grade fixed-income securities are often issued in connection with a corporate reorganization or restructuring or as part of a merger, acquisition, takeover or similar event. They are also issued by less established companies seeking to expand. Such issuers are often highly leveraged and generally less able than more established or less leveraged entities to make scheduled payments of

126

APPENDIX A

principal and interest in the event of adverse developments or business conditions. Non-investment grade securities are also issued by governmental bodies that may have difficulty in making all scheduled interest and principal payments.

The market value of non-investment grade fixed-income securities tends to reflect individual corporate or municipal developments to a greater extent than that of higher rated securities which react primarily to fluctuations in the general level of interest rates. As a result, a Fund’s ability to achieve its investment objectives may depend to a greater extent on the Investment Adviser’s judgment concerning the creditworthiness of issuers than funds which invest in higher-rated securities. Issuers of non-investment grade fixed-income securities may not be able to make use of more traditional methods of financing and their ability to service debt obligations may be affected more adversely than issuers of higher-rated securities by economic downturns, specific corporate or financial developments or the issuer’s inability to meet specific projected business forecasts. Negative publicity about the junk bond market and investor perceptions regarding lower rated securities, whether or not based on fundamental analysis, may depress the prices for such securities.

A holder’s risk of loss from default is significantly greater for non-investment grade fixed-income securities than is the case for holders of other debt securities because such non-investment grade securities are generally unsecured and are often subordinated to the rights of other creditors of the issuers of such securities. Investment by a Fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a Fund of its initial investment and any anticipated income or appreciation is uncertain.

The secondary market for non-investment grade fixed-income securities is concentrated in relatively few market makers and is dominated by institutional investors, including mutual funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as, and is more volatile than, the secondary market for higher-rated securities. In addition, market trading volume for high yield fixed-income securities is generally lower and the secondary market for such securities could shrink or disappear suddenly and without warning as a result of adverse market or economic conditions, independent of any specific adverse changes in the condition of a particular issuer. The lack of sufficient market liquidity may cause a Fund to incur losses because it will be required to effect sales at a disadvantageous time and then only at a substantial drop in price. These factors may have an adverse effect on the market price and a Fund’s ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for a Fund to obtain precise valuations of the high yield securities in its portfolio.

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Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of non-investment grade securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the conditions of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality.

Loan Participations. Certain Funds may invest in loan participations. A loan participation is an interest in a loan to a U.S. or foreign company or other borrower which is administered and sold by a financial intermediary. A Fund may only invest in loans to issuers in whose obligations it may otherwise invest. Loan participation interests may take the form of a direct or co-lending relationship with the corporate borrower, an assignment of an interest in the loan by a co-lender or another participant, or a participation in the seller’s share of the loan. When a Fund acts as co-lender in connection with a participation interest or when it acquires certain participation interests, the Fund will have direct recourse against the borrower if the borrower fails to pay scheduled principal and interest. In cases where the Fund lacks direct recourse, it will look to an agent for the lenders (the “agent lender”) to enforce appropriate credit remedies against the borrower. In these cases, the Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation (such as commercial paper) of such borrower. Moreover, under the terms of the loan participation, the Fund may be regarded as a creditor of the agent lender (rather than of the underlying corporate borrower), so that the Fund may also be subject to the risk that the agent lender may become insolvent.

Preferred Stock, Warrants and Rights. Certain Funds may invest in preferred stock, warrants and rights. Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default or other non-compliance by the issuer of the preferred stock.

Warrants and other rights are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant or right. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.

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Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund’s financial performance for the past five years (or less if the Fund has been in operation for less than five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information has been audited by Ernst & Young LLP, whose report, along with the Funds’ financial statements, is included in the Funds’ annual report (available upon request).

ENHANCED INCOME FUND

	Enhanced Income Fund—Class A Shares
	Years Ended October 31,
	2005			2004			2003			2002			2001
Net asset value, beginning of year	$	9.78		$	9.99		$	10.13		$	10.26		$	10.00
Income (loss) from investment operations
Net investment incomea		0.28			0.25			0.33			0.38			0.45
Net realized and unrealized gain (loss)		(0.10	)		(0.19	)		(0.15	)		(0.13	)		0.34
Total from investment operations		0.18			0.06			0.18			0.25			0.79
Distributions to shareholders
From net investment income		(0.28	)		(0.27	)		(0.32	)		(0.38	)		(0.53	)
Net asset value, end of year	$	9.68		$	9.78		$	9.99		$	10.13		$	10.26
Total returnb		1.88	%		0.63	%		1.77	%		2.48	%		8.10	%
Net assets at end of period (in 000s)	$	65,645		$	150,537		$	378,378		$	810,768		$	151,497
Ratio of net expenses to average net assets		0.64	%		0.65	%		0.65	%		0.65	%		0.65	%
Ratio of net investment income to average net assets		2.94	%		2.61	%		3.28	%		3.70	%		4.60	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets		0.79	%		0.73	%		0.71	%		0.72	%		0.80	%
Ratio of net investment income to average net assets		2.80	%		2.53	%		3.22	%		3.63	%		4.45	%
Portfolio turnover rate		49	%		51	%		41	%		65	%		127	%

See page 149 for all footnotes.

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ULTRA-SHORT DURATION GOVERNMENT FUND

		Ultra-Short Duration Government Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.33		$	9.47		$	9.66		$	9.79		$	9.56
Income (loss) from investment operations
Net investment incomea			0.20			0.19			0.24			0.31	e		0.53
Net realized and unrealized gain (loss)			(0.01	)		(0.04	)		(0.11	)		(0.06	)e		0.23
	Total from investment operations		0.19			0.15			0.13			0.25			0.76
Distributions to shareholders
From net investment income			(0.25	)		(0.29	)		(0.32	)		(0.38	)		(0.53	)
Net asset value, end of year		$	9.27		$	9.33		$	9.47		$	9.66		$	9.79
Total returnb			1.98	%		1.61	%		1.40	%		2.57	%		8.21	%
Net assets at end of year (in 000s)		$	190,210		$	373,650		$	768,910		$	1,000,977		$	59,209
Ratio of net expenses to average net assets			0.89	%		0.88	%		0.86	%		0.88	%		0.89	%
Ratio of net investment income to average net assets			2.20	%		2.12	%		2.55	%		3.21	%e		5.48	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.89	%		0.88	%		0.86	%		0.88	%		0.97	%
Ratio of net investment income to average net assets			2.20	%		2.12	%		2.55	%		3.21	%e		5.40	%
Portfolio turnover rated			71	%		103	%		102	%		144	%		87	%

See page 149 for all footnotes.

130

APPENDIX B

SHORT DURATION GOVERNMENT FUND

		Short Duration Government Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.86		$	9.99		$	10.12		$	10.04		$	9.49
Income (loss) from investment operations
Net investment incomea			0.24			0.24			0.35			0.37	e		0.51
Net realized and unrealized gain (loss)			(0.19	)		(0.06	)		(0.14	)		0.14	e		0.60
	Total from investment operations		0.05			0.18			0.21			0.51			1.11
Distributions to shareholders
From net investment income			(0.26	)		(0.30	)		(0.34	)		(0.43	)		(0.56	)
From paid-in capital			—			(0.01	)		—			—			—
	Total distributions		(0.26	)		(0.31	)		(0.34	)		(0.43	)		(0.56	)
Net asset value, end of year		$	9.65		$	9.86		$	9.99		$	10.12		$	10.04
Total returnb			0.50	%		1.81	%		2.11	%		5.26	%		12.00	%
Net assets at end of year (in 000s)		$	327,365		$	321,863		$	317,379		$	246,763		$	88,394
Ratio of net expenses to average net assets			0.93	%		0.94	%		0.95	%		0.94	%		0.94	%
Ratio of net investment income to average net assets			2.50	%		2.41	%		3.46	%		3.69	%e		5.26	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.99	%		1.00	%		1.01	%		1.04	%		1.11	%
Ratio of net investment income to average net assets			2.44	%		2.35	%		3.40	%		3.59	%e		5.09	%
Portfolio turnover rated			98	%		249	%		184	%		194	%		243	%

See page 149 for all footnotes.

131

		Short Duration Government Fund—Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.83		$	9.95		$	10.09		$	10.01		$	9.46
Income (loss) from investment operations
Net investment incomea			0.19			0.19			0.29			0.31	e		0.47
Net realized and unrealized gain (loss)			(0.20	)		(0.06	)		(0.15	)		0.14	e		0.58
	Total from investment operations		(0.01	)		0.13			0.14			0.45			1.05
Distributions to shareholders
From net investment income			(0.20	)		(0.24	)		(0.28	)		(0.37	)		(0.50	)
From paid-in capital			—			(0.01	)		—			—			—
	Total distributions		(0.20	)		(0.25	)		(0.28	)		(0.37	)		(0.50	)
Net asset value, end of year		$	9.62		$	9.83		$	9.95		$	10.09		$	10.01
Total returnb			(0.10	)		1.31	%		1.41	%		4.65	%		11.38	%
Net assets at end of year (in 000s)		$	23,602		$	38,526		$	50,580		$	49,874		$	16,809
Ratio of net expenses to average net assets			1.54	%		1.54	%		1.55	%		1.54	%		1.54	%
Ratio of net investment income to average net assets			1.95	%		1.85	%		2.87	%		3.09	% e		4.80	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.74	%		1.75	%		1.76	%		1.79	%		1.86	%
Ratio of net investment income to average net assets			1.75	%		1.64	%		2.66	%		2.84	% e		4.48	%
Portfolio turnover rated			98	%		249	%		184	%		194	%		243	%

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132

APPENDIX B

		Short Duration Government Fund—Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.81		$	9.93		$	10.07		$	9.99		$	9.45
Income (loss) from investment operations
Net investment incomea			0.17			0.17			0.27			0.28	e		0.44
Net realized and unrealized gain (loss)			(0.20	)		(0.06	)		(0.14	)		0.16	e		0.58
	Total from investment operations		(0.03	)		0.11			0.13			0.44			1.02
Distributions to shareholders
From net investment income			(0.19	)		(0.22	)		(0.27	)		(0.36	)		(0.48	)
From paid-in capital			—			(0.01	)		—			—			—
	Total distributions		(0.19	)		(0.23	)		(0.27	)		(0.36	)		(0.48	)
Net asset value, end of year		$	9.59		$	9.81		$	9.93		$	10.07		$	9.99
Total returnb			(0.35	)		1.16	%		1.26	%		4.50	%		11.12	%
Net assets at end of year (in 000s)		$	57,078		$	90,317		$	130,087		$	95,458		$	18,871
Ratio of net expenses to average net assets			1.69	%		1.69	%		1.70	%		1.69	%		1.69	%
Ratio of net investment income to average net assets			1.80	%		1.71	%		2.71	%		2.84	% e		4.59	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.74	%		1.75	%		1.76	%		1.79	%		1.86	%
Ratio of net investment income to average net assets			1.75	%		1.65	%		2.65	%		2.74	% e		4.42	%
Portfolio turnover rated			98	%		249	%		184	%		194	%		243	%

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133

GOVERNMENT INCOME FUND

		Government Income Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	15.00		$	14.88		$	14.95		$	14.96		$	13.84
Income (loss) from investment operations
Net investment incomea			0.43			0.39			0.41			0.63	e		0.78
Net realized and unrealized gain (loss)			(0.30	)		0.33			0.05			0.19	e		1.13
	Total from investment operations		0.13			0.72			0.46			0.82			1.91
Distributions to shareholders
From net investment income			(0.39	)		(0.47	)		(0.51	)		(0.67	)		(0.79	)
From net realized gains			(0.17	)		(0.13	)		(0.02	)		(0.16	)		—
	Total distributions		(0.56	)		(0.60	)		(0.53	)		(0.83	)		(0.79	)
Net asset value, end of year		$	14.57		$	15.00		$	14.88		$	14.95		$	14.96
Total returnb			0.80	%		4.99	%		3.11	%		5.77	%		14.20	%
Net assets at end of year (in 000s)		$	729,958		$	494,883		$	358,058		$	248,719		$	142,904
Ratio of net expenses to average net assets			0.97	%		0.98	%		0.99	%		0.98	%		0.98	%
Ratio of net investment income to average net assets			2.83	%		2.60	%		2.78	%		4.26	%e		5.46	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.07	%		1.17	%		1.18	%		1.24	%		1.31	%
Ratio of net investment income to average net assets			2.73	%		2.41	%		2.59	%		4.00	%e		5.13	%
Portfolio turnover rated			256	%		609	%		520	%		226	%		473	%

See page 149 for all footnotes.

134

APPENDIX B

		Government Income Fund—Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	15.00		$	14.88		$	14.95		$	14.96		$	13.85
Income (loss) from investment operations
Net investment incomea			0.30			0.28			0.31			0.52	e		0.68
Net realized and unrealized gain (loss)			(0.28	)		0.32			0.04			0.19	e		1.11
	Total from investment operations		0.02			0.60			0.35			0.71			1.79
Distributions to shareholders
From net investment income			(0.28	)		(0.35	)		(0.40	)		(0.56	)		(0.68	)
From net realized gains			(0.17	)		(0.13	)		(0.02	)		(0.16	)		—
	Total distributions		(0.45	)		(0.48	)		(0.42	)		(0.72	)		(0.68	)
Net asset value, end of year		$	14.57		$	15.00		$	14.88		$	14.95		$	14.96
Total returnb			0.04	%		4.21	%		2.34	%		4.99	%		13.27	%
Net assets at end of year (in 000s)		$	24,882		$	32,782		$	44,120		$	51,124		$	34,036
Ratio of net expenses to average net assets			1.72	%		1.73	%		1.74	%		1.73	%		1.73	%
Ratio of net investment income to average net assets			2.08	%		1.93	%		2.06	%		3.54	% e		4.71	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.83	%		1.92	%		1.93	%		1.99	%		2.06	%
Ratio of net investment income to average net assets			1.97	%		1.74	%		1.87	%		3.28	% e		4.38	%
Portfolio turnover rated			256	%		609	%		520	%		226	%		473	%

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135

		Government Income Fund—Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	14.99		$	14.87		$	14.94		$	14.95		$	13.84
Income (loss) from investment operations
Net investment incomea			0.31			0.28			0.31			0.51	e		0.68
Net realized and unrealized gain (loss)			(0.29	)		0.32			0.04			0.20	e		1.11
	Total from investment operations		0.02			0.60			0.35			0.71			1.79
Distributions to shareholders
From net investment income			(0.28	)		(0.35	)		(0.40	)		(0.56	)		(0.68	)
From net realized gains			(0.17	)		(0.13	)		(0.02	)		(0.16	)		—
	Total distributions		(0.45	)		(0.48	)		(0.42	)		(0.72	)		(0.68	)
Net asset value, end of year		$	14.56		$	14.99		$	14.87		$	14.94		$	14.95
Total returnb			0.11	%		4.14	%		2.34	%		4.99	%		13.28	%
Net assets at end of year (in 000s)		$	18,692		$	20,778		$	23,720		$	24,095		$	13,814
Ratio of net expenses to average net assets			1.72	%		1.73	%		1.74	%		1.73	%		1.73	%
Ratio of net investment income to average net assets			2.08	%		1.91	%		2.05	%		3.49	% e		4.71	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.83	%		1.92	%		1.93	%		1.99	%		2.06	%
Ratio of net investment income to average net assets			1.97	%		1.72	%		1.86	%		3.23	% e		4.38	%
Portfolio turnover rated			256	%		609	%		520	%		226	%		473	%

See page 149 for all footnotes.

136

APPENDIX B

U.S. MORTGAGES FUND

		U.S. Mortgages Fund—Class A Shares
		For the Period Ended October 31,
					2004
		2005			(commenced November 3, 2003)
Net asset value, beginning of period		$	10.22		$	10.00
Income (loss) from investment operations
Net investment incomea			0.28			0.22
Net realized and unrealized gain (loss)			(0.17	)		0.33
	Total from investment operations		0.11			0.55
Distributions to shareholders
From net investment income			(0.33	)		(0.33	)
From net realized gains			(0.18	)		—
	Total distributions		(0.51	)		(0.33	)
Net asset value, end of period		$	9.82		$	10.22
Total returnb			1.00	%		5.60	%
Net assets at end of period (in 000s)		$	7,916		$	628
Ratio of net expenses to average net assets			0.81	%		0.82	%b
Ratio of net investment income to average net assets			2.88	%		1.95	%b
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.98	%		1.08	%b
Ratio of net investment income to average net assets			2.71	%		1.69	%b
Portfolio turnover rated			2006	%		1953	%

See page 149 for all footnotes.

137

CORE FIXED INCOME FUND

		Core Fixed Income Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.25		$	10.31		$	10.07		$	10.25		$	9.52
Income (loss) from investment operations
Net investment incomea			0.32			0.30			0.40			0.50			0.56
Net realized and unrealized gain (loss)			(0.20	)		0.32			0.28			(0.13	)		0.75
	Total from investment operations		0.12			0.62			0.68			0.37			1.31
Distributions to shareholders
From net investment income			(0.37	)		(0.33	)		(0.40	)		(0.52	)		(0.58	)
From net realized gains			(0.13	)		(0.35	)		(0.04	)		(0.03	)		—
	Total distributions		(0.50	)		(0.68	)		(0.44	)		(0.55	)		(0.58	)
Net asset value, end of year		$	9.87		$	10.25		$	10.31		$	10.07		$	10.25
Total returnb			1.14	%		6.24	%		7.03	%		3.59	%		14.17	%
Net assets at end of year (in 000s)		$	658,114		$	523,045		$	445,178		$	315,441		$	178,885
Ratio of net expenses to average net assets			0.86	%		0.90	%		0.89	%		0.90	%		0.94	%
Ratio of net investment income to average net assets			3.14	%		2.96	%		3.91	%		5.03	%		5.61	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.87	%		0.90	%		0.89	%		0.90	%		0.94	%
Ratio of net investment income to average net assets			3.13	%		2.96	%		3.91	%		5.03	%		5.61	%
Portfolio turnover rated			283	%		549	%		489	%		437	%		315	%

See page 149 for all footnotes.

138

APPENDIX B

		Core Fixed Income Fund—Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.29		$	10.35		$	10.10		$	10.29		$	9.54
Income (loss) from investment operations
Net investment incomea			0.24			0.23			0.33			0.43			0.49
Net realized and unrealized gain (loss)			(0.20	)		0.31			0.28			(0.15	)		0.77
	Total from investment operations		0.04			0.54			0.61			0.28			1.26
Distributions to shareholders
From net investment income			(0.29	)		(0.25	)		(0.32	)		(0.44	)		(0.51	)
From net realized gains			(0.13	)		(0.35	)		(0.04	)		(0.03	)		—
	Total distributions		(0.42	)		(0.60	)		(0.36	)		(0.47	)		(0.51	)
Net asset value, end of year		$	9.91		$	10.29		$	10.35		$	10.10		$	10.29
Total returnb			0.38	%		5.43	%		6.31	%		2.70	%		13.51	%
Net assets at end of year (in 000s)		$	29,096		$	32,040		$	37,120		$	36,131		$	26,848
Ratio of net expenses to average net assets			1.61	%		1.65	%		1.64	%		1.65	%		1.69	%
Ratio of net investment income to average net assets			2.40	%		2.21	%		3.21	%		4.33	%		4.93	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.62	%		1.65	%		1.64	%		1.65	%		1.69	%
Ratio of net investment income to average net assets			2.39	%		2.21	%		3.21	%		4.33	%		4.93	%
Portfolio turnover rated			283	%		549	%		489	%		437	%		315	%

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139

		Core Fixed Income Fund—Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.29		$	10.35		$	10.10		$	10.29		$	9.55
Income (loss) from investment operations
Net investment incomea			0.24			0.23			0.33			0.43			0.49
Net realized and unrealized gain (loss)			(0.20	)		0.31			0.28			(0.15	)		0.76
	Total from investment operations		0.04			0.54			0.61			0.28			1.25
Distributions to shareholders
From net investment income			(0.29	)		(0.25	)		(0.32	)		(0.44	)		(0.51	)
From net realized gains			(0.13	)		(0.35	)		(0.04	)		(0.03	)		—
	Total distributions		(0.42	)		(0.60	)		(0.36	)		(0.47	)		(0.51	)
Net asset value, end of year		$	9.91		$	10.29		$	10.35		$	10.10		$	10.29
Total returnb			0.38	%		5.42	%		6.21	%		2.80	%		13.38	%
Net assets at end of year (in 000s)		$	23,432		$	24,323		$	25,409		$	20,176		$	11,998
Ratio of net expenses to average net assets			1.61	%		1.65	%		1.64	%		1.65	%		1.69	%
Ratio of net investment income to average net assets			2.40	%		2.21	%		3.16	%		4.32	%		4.89	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.62	%		1.65	%		1.64	%		1.65	%		1.69	%
Ratio of net investment income to average net assets			2.39	%		2.21	%		3.16	%		4.32	%		4.89	%
Portfolio turnover rated			283	%		549	%		489	%		437	%		315	%

See page 149 for all footnotes.

140

APPENDIX B

INVESTMENT GRADE CREDIT FUND

		Investment Grade Credit Fund—Class A Shares
		For the Period Ended October 31,
					2004
		2005			(commenced November 3, 2003)
Net asset value, beginning of period		$	10.31		$	10.00
Income (loss) from investment operations
Net investment incomea			0.40			0.38
Net realized and unrealized gain (loss)			(0.35	)		0.31
	Total from investment operations		0.05			0.69
Distributions to shareholders
From net investment income			(0.39	)		(0.38	)
From net realized gains			(0.04	)		—
	Total distributions		(0.43	)		(0.38	)
Net asset value, end of period		$	9.93		$	10.31
Total returnb			0.50	%		7.00	%
Net assets at end of period (in 000s)		$	3,622		$	2,179
Ratio of net expenses to average net assets			0.81	%		0.82	%b
Ratio of net investment income to average net assets			3.88	%		3.66	%b
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.07	%		1.85	%b
Ratio of net investment income to average net assets			3.62	%		2.63	%b
Portfolio turnover rate			88	%		78	%

See page 149 for all footnotes.

141

GLOBAL INCOME FUND

		Global Income Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	13.65		$	14.39		$	14.34		$	14.72		$	14.68
Income (loss) from investment operations
Net investment incomea			0.32			0.36			0.46			0.50	e		0.55
Net realized and unrealized gain (loss)			0.28			0.19			0.32			(0.35	) e		0.85
	Total from investment operations		0.60			0.55			0.78			0.15			1.40
Distributions to shareholders
From net investment income			(1.00	)		(1.29	)		(0.73	)		(0.53	)		(1.36	)
Net asset value, end of year		$	13.25		$	13.65		$	14.39		$	14.34		$	14.72
Total returnb			4.56	%		4.01	%		5.45	%		1.08	%		10.08	%
Net assets at end of year (in 000s)		$	173,712		$	168,340		$	224,553		$	255,821		$	286,718
Ratio of net expenses to average net assets			1.08	%		1.25	%		1.35	%		1.34	%		1.34	%
Ratio of net investment income to average net assets			2.36	%		2.60	%		3.15	%		3.36	%e		3.80	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.32	%		1.67	%		1.74	%		1.72	%		1.70	%
Ratio of net investment income to average net assets			2.12	%		2.18	%		2.76	%		2.98	%e		3.44	%
Portfolio turnover rate			137	%		109	%		106	%		146	%		222	%

See page 149 for all footnotes.

142

APPENDIX B

		Global Income Fund—Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	13.61		$	14.34		$	14.30		$	14.68		$	14.65
Income (loss) from investment operations
Net investment incomea			0.22			0.28			0.39			0.41	e		0.48
Net realized and unrealized gain (loss)			0.27			0.19			0.30			(0.33	) e		0.84
	Total from investment operations		0.49			0.47			0.69			0.08			1.32
Distributions to shareholders
From net investment income			(0.90	)		(1.20	)		(0.65	)		(0.46	)		(1.29	)
Net asset value, end of year		$	13.20		$	13.61		$	14.34		$	14.30		$	14.68
Total returnb			3.72	%		3.47	%		4.87	%		0.59	%		9.50	%
Net assets at end of year (in 000s)		$	24,819		$	31,252		$	37,118		$	37,986		$	31,969
Ratio of net expenses to average net assets			1.83	%		1.84	%		1.85	%		1.84	%		1.84	%
Ratio of net investment income to average net assets			1.61	%		2.00	%		2.64	%		2.88	% e		3.28	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			2.07	%		2.26	%		2.24	%		2.22	%		2.20	%
Ratio of net investment income to average net assets			1.37	%		1.58	%		2.25	%		2.50	% e		2.92	%
Portfolio turnover rate			137	%		109	%		106	%		146	%		222	%

See page 149 for all footnotes.

143

		Global Income Fund—Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	13.58		$	14.32		$	14.27		$	14.65		$	14.63
Income (loss) from investment operations
Net investment incomea			0.22			0.28			0.38			0.41	e		0.47
Net realized and unrealized gain (loss)			0.28			0.18			0.32			(0.33	) e		0.84
	Total from investment operations		0.50			0.46			0.70			0.08			1.31
Distributions to shareholders
From net investment income			(0.90	)		(1.20	)		(0.65	)		(0.46	)		(1.29	)
Net asset value, end of year		$	13.18		$	13.58		$	14.32		$	14.27		$	14.65
Total returnb			3.80	%		3.40	%		4.96	%		0.59	%		9.44	%
Net assets at end of year (in 000s)		$	8,370		$	8,463		$	11,238		$	11,533		$	8,679
Ratio of net expenses to average net assets			1.83	%		1.84	%		1.85	%		1.84	%		1.84	%
Ratio of net investment income to average net assets			1.61	%		2.01	%		2.64	%		2.88	% e		3.28	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			2.07	%		2.26	%		2.24	%		2.22	%		2.20	%
Ratio of net investment income to average net assets			1.37	%		1.59	%		2.25	%		2.50	% e		2.92	%
Portfolio turnover rate			137	%		109	%		106	%		146	%		222	%

See page 149 for all footnotes.

144

APPENDIX B

HIGH YIELD FUND

		High Yield Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	8.08		$	7.79		$	6.38		$	7.24		$	8.18
Income (loss) from investment operations
Net investment incomea			0.62			0.65			0.65			0.68	e		0.83
Net realized and unrealized gain (loss)			(0.22	)		0.32			1.40			(0.86	) e		(0.93	)
	Total from investment operations		0.40			0.97			2.05			(0.18	)		(0.10	)
Distributions to shareholders
From net investment income			(0.67	)		(0.68	)		(0.64	)		(0.68	)		(0.84	)
Net asset value, end of year		$	7.81		$	8.08		$	7.79		$	6.38		$	7.24
Total returnb			5.10	%		12.94	%		33.34	%		(2.98	)%		(1.54	)%
Net assets at end of year (in 000s)		$	1,006,734		$	1,109,364		$	1,821,032		$	770,011		$	493,739
Ratio of net expenses to average net assets			1.15	%		1.16	%		1.17	%		1.16	%		1.16	%
Ratio of net investment income to average net assets			7.74	%		8.31	%		8.97	%		9.54	% e		10.55	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.17	%		1.18	%		1.19	%		1.19	%		1.22	%
Ratio of net investment income to average net assets			7.72	%		8.29	%		8.95	%		9.51	% e		10.49	%
Portfolio turnover rate			52	%		47	%		54	%		36	%		57	%

See page 149 for all footnotes.

145

		High Yield Fund—Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	8.09		$	7.80		$	6.39		$	7.24		$	8.18
Income (loss) from investment operations
Net investment incomea			0.56			0.60			0.60			0.63	e		0.77
Net realized and unrealized gain (loss)			(0.22	)		0.31			1.39			(0.85	) e		(0.93	)
	Total from investment operations		0.34			0.91			1.99			(0.22	)		(0.16	)
Distributions to shareholders
From net investment income			(0.61	)		(0.62	)		(0.58	)		(0.63	)		(0.78	)
Net asset value, end of year			7.82		$	8.09		$	7.80		$	6.39		$	7.24
Total returnb			4.31			12.09	%		32.31	%		(3.56	)%		(2.28	)%
Net assets at end of year (in 000s)		$	104,637		$	105,106		$	97,894		$	54,065		$	45,514
Ratio of net expenses to average net assets			1.90	%		1.91	%		1.92	%		1.91	%		1.91	%
Ratio of net investment income to average net assets			6.98	%		7.54	%		8.25	%		8.83	% e		9.83	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.92	%		1.93	%		1.94	%		1.94	%		1.97	%
Ratio of net investment income to average net assets			6.96	%		7.52	%		8.23	%		8.80	% e		9.77	%
Portfolio turnover rate			52	%		47	%		54	%		36	%		57	%

See page 149 for all footnotes.

146

APPENDIX B

		High Yield Fund—Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	8.08		$	7.79		$	6.38		$	7.24		$	8.17
Income (loss) from investment operations
Net investment incomea			0.56			0.60			0.59			0.62	e		0.77
Net realized and unrealized gain (loss)			(0.22	)		0.31			1.40			(0.85	) e		(0.92	)
	Total from investment operations		0.34			0.91			1.99			(0.23	)		(0.15	)
Distributions to shareholders
From net investment income			(0.61	)		(0.62	)		(0.58	)		(0.63	)		(0.78	)
Net asset value, end of year		$	7.81		$	8.08		$	7.79		$	6.38		$	7.24
Total returnb			4.32	%		12.10	%		32.36	%		(3.57	)%		(2.28	)%
Net assets at end of year (in 000s)		$	72,590		$	56,174		$	46,812		$	20,107		$	12,494
Ratio of net expenses to average net assets			1.90	%		1.91	%		1.92	%		1.91	%		1.91	%
Ratio of net investment income to average net assets			6.95	%		7.53	%		8.21	%		8.81	% e		9.82	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.92	%		1.93	%		1.94	%		1.94	%		1.97	%
Ratio of net investment income to average net assets			6.93	%		7.51			8.19	%		8.78	% e		9.76	%
Portfolio turnover rate			52	%		47	%		54	%		36	%		57	%

See page 149 for all footnotes.

147

EMERGING MARKETS DEBT FUND

		Emerging Markets Debt Fund—Class A Shares
								For the
								Period Ended
								October 31, 2003
		2005			2004			(Commenced August 29, 2003)
Net asset value, beginning of period		$	11.18		$	10.22		$	10.00
Income (loss) from investment operations
Net investment incomea			0.74			0.59			0.08
Net realized and unrealized gain			1.00			0.97			0.26
	Total from investment operations		1.74			1.56			0.34
Distributions to shareholders
From net investment income			(0.64	)		(0.57	)		(0.12	)
From net realized gains			(0.53	)		(0.03	)		—
	Total distributions		(1.17	)		(0.60	)		(0.12	)
Net asset value, end of period		$	11.75		$	11.18		$	10.22
Total returnb			16.48	%		15.78	%		3.36	%
Net assets, end of period (in 000s)		$	34,327		$	5,411		$	1,088
Ratio of net expenses to average net assets			1.26	%		1.28	%		1.28	%c
Ratio of net investment income to average net assets			6.13	%		5.43	%		5.35	%c
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.82	%		3.09	%		5.53	%c
Ratio of net investment income to average net assets			5.57	%		3.62	%		1.10	%c
Portfolio turnover rate			207	%		273	%		49	%

See page 149 for all footnotes.

148

Footnotes:

a	Calculated based on the average shares outstanding methodology.
b	Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account, if applicable. Total returns for periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
c	Annualized.
d	Includes the effect of mortgage dollar roll transactions.
e	As required, effective November 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effects of these changes for the year ended October 31, 2002 were as follows:

					Decrease the Ratio of Net
					Investment Incomes to
	Decrease Net		Increase Net Realized		Average Net Assets With
	Investment		and Unrealized Gains		and Without Expense
Fund	Income Per Share		and Losses Per Share		Reductions
Ultra-Short Duration Government	$	0.05	$	0.05		0.48	%
Short Duration Government	$	0.06	$	0.06		0.63	%
Government Income	$	0.06	$	0.06		0.44	%
Global Income	$	0.06	$	0.06		0.43	%

Per share ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

149

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Index

1 General Investment Management Approach
5 Fund Investment Objectives and Strategies
5	Goldman Sachs Enhanced Income Fund
6	Goldman Sachs Ultra-Short Duration Government Fund
7	Goldman Sachs Short Duration Government Fund
8	Goldman Sachs Government Income Fund
9	Goldman Sachs U.S. Mortgages Fund
10	Goldman Sachs Core Fixed Income Fund
12	Goldman Sachs Investment Grade Credit Fund
14	Goldman Sachs Global Income Fund
16	Goldman Sachs High Yield Fund
18	Goldman Sachs Emerging Markets Debt Fund
20 Other Investment Practices and Securities
24 Principal Risks of the Funds
30 Fund Performance
43 Fund Fees and Expenses
56 Service Providers
67 Dividends
69 Shareholder Guide
69	How to Buy Shares
85	How to Sell Shares
100 Taxation
103 Appendix A        Additional Information on        Portfolio Risks, Securities        and Techniques
129 Appendix B        Financial Highlights

Fixed Income Funds
Prospectus (Class A, B and C Shares)

   FOR MORE INFORMATION   

Annual/Semi-annual Report

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year.

Statement of Additional Information

Additional information about the Funds and their policies is also available in the Funds’ Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus).

The Funds’ annual and semi-annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1-800-526-7384. You can also access and download the annual and semi-annual reports and the Additional Statement at the Funds’ website: http//www.gs.com/funds.

To obtain other information and for shareholder inquiries:

n By telephone:	1-800-621-2550
n By mail:	Goldman, Sachs & Co., 71 S. Wacker Drive, Suite 500 Chicago, Illinois 60606
n By e-mail:	gs-funds@gs.com
n On the Internet:	SEC EDGAR database – http://www.sec.gov
	Goldman Sachs – http://www.gs.com/funds

You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC’s public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102 or by electronic request to: publicinfo@sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942-8090.

The Funds’ investment company registration number is 811-5349.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

536411
FIPROTAXABC

EX-99.17.F

Prospectus

Institutional
Shares

February 28, 2006

 GOLDMAN SACHS TAXABLE FIXED INCOME FUNDS

n Goldman Sachs Enhanced Income Fund

n  Goldman Sachs Ultra-Short Duration Government Fund

n  Goldman Sachs Short Duration Government Fund

n  Goldman Sachs Government Income Fund

n  Goldman Sachs U.S. Mortgages Fund

n  Goldman Sachs Core Fixed Income Fund

n  Goldman Sachs Investment Grade Credit Fund

n  Goldman Sachs Global Income Fund

n  Goldman Sachs High Yield Fund

n  Goldman Sachs Emerging Markets Debt Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN A FUND.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

General Investment
Management Approach

Goldman Sachs Asset Management, L.P. (“GSAM^®”), serves as investment adviser to the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield and Emerging Markets Debt Funds. Goldman Sachs Asset Management International (“GSAMI”) serves as investment adviser to the Global Income Fund. GSAM and GSAMI are each referred to in this Prospectus as the “Investment Adviser.”

The Funds Described In This Prospectus, Including The Enhanced Income Fund, Are Not Money Market Funds. Investors In The Funds Should Understand That The Net Asset Value (“NAV”) Of The Funds Will Fluctuate Which May Result In A Loss Of A Portion Of The Principal Amount Invested.

Goldman Sachs’ Fixed Income Investing Philosophy:

Global fixed income markets are constantly evolving and are highly diverse— with myriad countries, currencies, sectors, issuers and securities. We believe inefficiencies in these complex markets cause bond prices to diverge from their fair value for periods of time. To capitalize on these inefficiencies and generate consistent risk-adjusted performance, we believe it is critical to:

n	Thoughtfully combine diversified sources of return by employing multiple investment strategies
n	Take a global perspective to uncover relative value opportunities
n	Employ focused specialist teams to identify short-term mispricings and incorporate long-term views
n	Emphasize a risk-aware approach

GSAM’s Fixed Income investment process seeks to maximize risk-adjusted total returns by utilizing a diverse set of investment strategies. The process revolves around four key elements:

1. Developing a long-term risk budget— Lead portfolio managers (“Portfolio Team”) are responsible for the overall results of a Fund. They set the strategic direction of a Fund by establishing a “risk budget.” Following careful analysis of risk and return objectives, they allocate the overall risk budget to each component strategy to optimize potential return.

1

2. Generating investment views and strategies— Within the parameters of the risk budget, our Top-down and Bottom-up Strategy Teams generate investment ideas within their areas of specialization. The “Top-down Strategy Teams” are responsible for Cross-Sector, Duration, Country, and Currency decisions and are deliberately small to ensure creativity and expedite decision-making and execution. Concurrently, “Bottom-up Strategy Teams,” comprised of sector specialists, formulate sub-sector allocation and security selection decisions.

3. Implementing portfolios— The Strategy Teams trade the securities within their area of expertise, while the Portfolio Team oversees the portfolio construction process. In this way, a Fund benefits from the “Best Ideas” generated by the Strategy Teams and trades remain consistent with risk and return objectives.

4. Monitoring strategies— The Portfolio Team is responsible for monitoring the Funds to ensure the most optimal mix of strategies. In addition, the Top-down and Bottom-up Strategy Teams review the strategies within their areas of specialization.

With every fixed-income portfolio, the Investment Adviser applies a team approach that emphasizes risk management and capitalizes on Goldman Sachs’ extensive research capabilities.

Each of the Funds described in this Prospectus has a target duration. A Fund’s duration approximates its price sensitivity to changes in interest rates. For example, suppose that interest rates in one day fall by one percent which, in turn, causes yields on every bond in the market to fall by the same amount. In this example, the price of a bond with a duration of three years may be expected to rise approximately three percent and the price of a bond with a five year duration may be expected to rise approximately five percent. The converse is also true. Suppose interest rates in one day rise by one percent which, in turn, causes yields on every bond in the market to rise by the same amount. In this second example, the price of a bond with a duration of three years may be expected to fall approximately three percent and the price of a bond with a five year duration may be expected to fall approximately five percent. The longer the duration of a bond, the more sensitive the bond’s price is to changes in interest rates. Maturity measures the time until final payment is due; it takes no account of the pattern of a security’s cash flows over time. In calculating maturity, a Fund may determine the maturity of a variable or floating rate obligation according to its interest rate reset date, or the date principal can be recovered on demand, rather than the date of ultimate maturity. Similarly, to the extent that a fixed income obligation has a call, refunding, or redemption provision, the date on which the instrument is expected to be called, refunded, or redeemed may be considered to be its maturity date. There is no guarantee

2

GENERAL INVESTMENT MANAGEMENT APPROACH

that the expected call, refund or redemption will occur, and a Fund’s average maturity may lengthen beyond the Investment Adviser’s expectations should the expected call, refund or redemption not occur. In computing portfolio duration, a Fund will estimate the duration of obligations that are subject to prepayment or redemption by the issuer, taking into account the influence of interest rates on prepayments and coupon flows. This method of computing duration is known as “option-adjusted” duration. The Investment Adviser may use futures contracts, options on futures contracts and swaps to manage the Funds’ target duration in accordance with their benchmark or benchmarks. A Fund will not be limited as to its maximum weighted average portfolio maturity or the maximum stated maturity with respect to individual securities unless otherwise noted.

The Investment Adviser uses derivative instruments, among other things, to manage the durations of Funds’ investment portfolios in accordance with their respective target durations. These derivative instruments include financial futures contracts and swap transactions, as well as other types of derivatives, and can be used to shorten and lengthen the duration of a Fund. The Funds’ investments in derivative instruments, including financial futures contracts and swaps, can be significant. These transactions can result in sizeable realized and unrealized capital gains and losses relative to the gains and losses from the Funds’ investments in bonds and other securities. Short-term and long-term realized capital gains distributions paid by the Funds are taxable to their shareholders.

Interest rates, fixed income securities prices, the prices of futures and other derivatives, and currency exchange rates can be volatile, and a variance in the degree of volatility or in the direction of the market from the Investment Adviser’s expectations may produce significant losses in a Fund’s investments in derivatives. In addition, a perfect correlation between a derivatives position and a fixed income security position is generally impossible to achieve. As a result, the Investment Adviser’s use of derivatives may not be effective in fulfilling the Investment Adviser’s investment strategies and may contribute to losses that would not have been incurred otherwise.

Financial futures contracts used by each of the Funds include interest rate futures contracts including, among others, Eurodollar futures contracts. Eurodollar futures contracts are U.S. dollar-denominated futures contracts that are based on the implied forward London Interbank Offered Rate (LIBOR) of a three-month deposit. Further information is included in this Prospectus regarding futures contracts, swaps and other derivative instruments used by the Funds, including information on the risks presented by these instruments and other purposes for which they may be used by the Funds.

3

Each Fund also has credit rating requirements for the securities it buys. A Fund will deem a security to have met its minimum credit rating requirement if the security has the required rating at the time of purchase from at least one nationally recognized statistical rating organization (“NRSRO”) even though it has been rated below the minimum rating by one or more other NRSROs. Unrated securities may be purchased by the Funds if they are determined by the Investment Adviser to be of comparable quality. A security satisfies a Fund’s minimum rating requirement regardless of its relative ranking (for example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below such rating, the Fund will not be required to dispose of such security. This is so even if the downgrade causes the average credit quality of the Fund to be lower than that stated in the Prospectus. Furthermore, during this period, the Investment Adviser will only buy securities at or above the Fund’s average rating requirement. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of such security, is in the best interests of a Fund and its shareholders.

As discussed below, the Funds may invest in credit default swaps, which are derivative investments. When a Fund sells a credit default swap (commonly known as selling protection), the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) if the security defaults. A Fund will be the seller of a credit default swap only when the credit of the security is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into.

References in the Prospectus to a Fund’s benchmark are for informational purposes only, and unless otherwise noted are not necessarily an indication of how the Fund is managed.

4

Fund Investment Objectives
and Strategies

Goldman Sachs
Enhanced Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Six-Month U.S. Treasury Bill Index to One-Year U.S. Treasury Note Index
Expected Approximate Interest Rate Sensitivity:	9-month U.S. Treasury bill
Credit Quality:	Minimum = A by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality Weighted Average = AA
Benchmarks:	Six-Month U.S. Treasury Bill Index One-Year U.S. Treasury Note Index
Symbol:	GEIIX

   INVESTMENT OBJECTIVE   

The Fund seeks to generate return in excess of traditional money market products while maintaining an emphasis on preservation of capital and liquidity.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, primarily in a portfolio of fixed-income securities, including non-mortgage securities issued or guaranteed by the U.S. government, its agencies, instrumentalities or sponsored enterprises (“U.S. Government Securities”), corporate notes and commercial paper and fixed and floating rate asset-backed securities. Except for asset-backed securities and Treasury Securities deliverable into futures transactions, the Fund will not invest in securities with remaining maturities of more than 5 years as determined in accordance with the Statement of Additional Information (the “Additional Statement”). With respect to asset-backed securities, the Fund will not invest in asset-backed securities with a weighted average life of more than 5 years. The Fund may invest across a broad range of high-grade fixed-income sectors with an emphasis on the preservation of capital and liquidity. In pursuing the Fund’s investment objective, the Investment Adviser will seek to enhance the Fund’s return by identifying those high grade fixed income securities that are within the maturity limitations discussed above and that the Investment Adviser believes offer advantageous yields relative to other similar securities.

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Six- Month U.S. Treasury Bill Index/One Year U.S. Treasury Note Index has been approximately 0.75 years.

5

Goldman Sachs
Ultra-Short Duration Government Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Six-Month U.S. Treasury Bill Index to One-Year U.S. Treasury Note Index Maximum = 2 years
Expected Approximate Interest Rate Sensitivity:	9-month U.S. Treasury bill
Credit Quality:	U.S. Government Securities and repurchase agreements collateralized by such securities; non-U.S. Government Securities rated AAA or Aaa by a NRSRO at the time of purchase, or if unrated, determined by the Investment Adviser to be of comparable quality
Benchmarks:	Six-Month U.S. Treasury Bill Index One-Year U.S. Treasury Note Index
Symbol:	GSARX

   INVESTMENT OBJECTIVE   

The Fund seeks to provide a high level of current income, consistent with low volatility of principal.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in U.S. Government Securities, including securities representing an interest in or collateralized by adjustable rate and fixed rate mortgage loans or other mortgage-related securities (“Mortgage-Backed Securities”), and in repurchase agreements collateralized by U.S. Government Securities**. The remainder of the Fund’s Net Assets (up to 20%) may be invested in other non-government securities. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

    *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Six- Month U.S. Treasury Bill Index/One Year U.S. Treasury Note Index has been approximately 0.75 years.

     **  To the extent required by Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

6

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Short Duration Government Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Two-Year U.S. Treasury Note Index plus or minus 0.5 years Maximum = 3 years
Expected Approximate Interest Rate Sensitivity:	2-year U.S. Treasury note
Credit Quality:	U.S. Government Securities and repurchase agreements collateralized by such securities
Benchmark:	Two-Year U.S. Treasury Note Index
Symbol:	GSTGX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income and secondarily, in seeking current income, may also consider the potential for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in U.S. Government Securities and in repurchase agreements collateralized by such securities**. Substantially all of the Fund’s Net Assets will be invested in U.S. Government Securities and instruments based on U.S. Government Securities. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

    *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Two- Year U.S. Treasury Note Index has been approximately 1.75 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

7

Goldman Sachs
Government Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Mutual Fund Government/Mortgage Index plus or minus 1 year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	5-year U.S. Treasury note
Credit Quality:	U.S. Government Securities; non-U.S. Government Securities rated AAA or Aaa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Government/Mortgage Index
Symbol:	GSOIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income, consistent with safety of principal.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in U.S. Government Securities and in repurchase agreements collateralized by such securities**. The remainder of the Fund’s Net Assets (up to 20%) may be invested in non-government securities such as privately issued Mortgage-Backed Securities, asset-backed securities and corporate securities. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

    *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Mutual Fund Government/ Mortgage Index has ranged between 3 and 4.8 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

8

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
U.S. Mortgages Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Securitized Index plus or minus 0.5 years
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase. Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Securitized Index
Symbol:	GSUIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of total return consisting of income and capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in securities representing direct or indirect interests in or that are collateralized by Mortgage-Backed Securities**. The Fund may also invest in mortgage dollar rolls, U.S. Government Securities and asset-backed securities. For more information about mortgage dollar rolls and these other investments, see “Appendix A — Additional Information on Portfolio Risks, Securities and Techniques.”

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Securitized Index has ranged between 1 and 4.3 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

9

Goldman Sachs
Core Fixed Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Aggregate Bond Index plus or minus one year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	5-year U.S. Treasury note
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase. Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Aggregate Bond Index
Symbol:	GSFIX

   INVESTMENT OBJECTIVE   

The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index (the “Index”).

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities, including U.S. Government Securities, corporate debt securities, privately issued Mortgage-Backed Securities and asset-backed securities**. The Fund may also invest in custodial receipts, Municipal Securities and convertible securities. The Fund may also engage in forward foreign currency transactions for both speculative and hedging purposes. The Fund’s investments in non-U.S. dollar denominated obligations will not exceed 25% of its total assets at the time of investment and 10% of the Fund’s total assets may be invested in

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Aggregate Bond Index has ranged between 3.8 and 5 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

10

FUND INVESTMENT OBJECTIVES AND STRATEGIES

obligations of issuers in countries with emerging markets or economies (“emerging countries”). However, to the extent that the Investment Adviser has entered into transactions that are intended to hedge the Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency. In pursuing its investment objective, the Fund uses the Index as its performance benchmark, but the Fund will not attempt to replicate the Index. The Fund may, therefore, invest in securities that are not included in the Index.

11

Goldman Sachs
Investment Grade Credit Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers U.S. Credit Index plus or minus one year
Expected Approximate Interest Rate Sensitivity:	7-year U.S. Treasury note
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase. Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers U.S. Credit Index
Symbol:	GSGDX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers U.S. Credit Index (the “Index”).

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in investment grade fixed-income securities**. Investment grade securities are securities that are rated at the time of purchase at least BBB- by Standard & Poor’s Rating Group (“Standard & Poor’s”) or at least Baa3 by Moody’s Investors Service, Inc. (“Moody’s”), have a comparable rating by another NRSRO or, if unrated, are determined by the Investment Adviser to be of comparable quality. The Fund may invest in corporate securities, U.S. Government Securities, Mortgage-Backed Securities, asset-backed securities, and fixed-income securities issued by or on behalf of states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”). Although the Fund may invest

      *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers U.S. Credit Index has ranged between 5.4 and 6.1 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

12

FUND INVESTMENT OBJECTIVES AND STRATEGIES

without limit in foreign securities, the Fund’s investments in non-U.S. dollar denominated obligations will not exceed 25% of its total assets at the time of investment, and 10% of the Fund’s total assets may be invested in obligations of emerging countries. However, to the extent that the Investment Adviser has entered into transactions that are intended to hedge the Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency. In pursuing its investment objective, the Fund uses the Index as its performance benchmark, but the Fund will not attempt to replicate the Index. The Fund may, therefore, invest in securities that are not included in the Index.

13

Goldman Sachs
Global Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = J.P. Morgan Global Government Bond Index (hedged) plus or minus 2.5 years Maximum = 7.5 years
Expected Approximate Interest Rate Sensitivity:	6-year government bond
Credit Quality:	Minimum = BBB- or Baa3 at time of purchase; at least 50% of total assets = AAA or Aaa Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	J.P. Morgan Global Government Bond Index (hedged)
Symbol:	GSDUX

   INVESTMENT OBJECTIVE   

The Fund seeks a high total return, emphasizing current income, and, to a lesser extent, providing opportunities for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in a portfolio of fixed-income securities of U.S. and foreign issuers**. The Fund also enters into transactions in foreign currencies. Under normal market conditions, the Fund will:

n	Have at least 30% of its Net Assets, after considering the effect of currency positions, denominated in U.S. dollars
n	Invest in securities of issuers in at least three countries
n	Seek to meet its investment objective by pursuing investment opportunities in foreign and domestic fixed-income securities markets and by engaging in

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the J.P. Morgan Global Government Bond Index (hedged) has ranged between 5.3 and 7.1 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

14

FUND INVESTMENT OBJECTIVES AND STRATEGIES

currency transactions to seek to enhance returns and to seek to hedge its portfolio against currency exchange rate fluctuations

The Fund may invest more than 25% of its total assets in the securities of corporate and governmental issuers located in each of Canada, Germany, Japan and the United Kingdom as well as in the securities of U.S. issuers. Not more than 25% of the Fund’s total assets will be invested in securities of issuers in any other single foreign country. The Fund may also invest up to 10% of its total assets in issuers in emerging countries.

The fixed-income securities in which the Fund may invest include:

n	U.S. Government Securities and custodial receipts therefor
n	Securities issued or guaranteed by a foreign government or any of its political subdivisions, authorities, agencies, instrumentalities or by supranational entities
n	Corporate debt securities
n	Certificates of deposit and bankers’ acceptances issued or guaranteed by, or time deposits maintained at, U.S. or foreign banks (and their branches wherever located) having total assets of more than $1 billion
n	Commercial paper
n	Mortgage-Backed Securities and asset-backed securities

The Global Income Fund is “non-diversified” under the Investment Company Act of 1940 (the “Investment Company Act”), and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Global Income Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

15

Goldman Sachs
High Yield Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped plus or minus 2.5 years Maximum = 7.5 years
Expected Approximate Interest Rate Sensitivity:	6-year U.S. Treasury note
Credit Quality:	At least 80% of net assets = BB or Ba or lower at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped
Symbol:	GSHIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income and may also consider the potential for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in high-yield, fixed-income securities that, at the time of purchase, are non-investment grade securities**. Non-investment grade securities are securities rated BB, Ba or below by a NRSRO, or, if unrated, determined by the Investment

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped has ranged between 4.1 and 4.8 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

16

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Adviser to be of comparable quality. The Fund may invest in all types of fixed-income securities, including:

n	Senior and subordinated corporate debt obligations (such as bonds, debentures, notes and commercial paper)
n	Convertible and non-convertible corporate debt obligations
n	Loan participations
n	Custodial receipts
n	Municipal Securities
n	Preferred stock

The Fund may invest up to 25% of its total assets in obligations of domestic and foreign issuers which are denominated in currencies other than the U.S. dollar and in securities of issuers located in emerging countries denominated in any currency. However, to the extent that the Investment Adviser has entered into transactions that are intended to hedge the Fund’s position in a non-U.S. dollar denominated obligation against currency risk, such obligation will not be counted when calculating compliance with the 25% limitation on obligations in non-U.S. currency.

Under normal market conditions, the Fund may invest up to 20% of its Net Assets in investment grade fixed-income securities, including U.S. Government Securities. The Fund may also invest in common stocks, warrants, rights and other equity securities, but will generally hold such equity investments only when debt or preferred stock of the issuer of such equity securities is held by the Fund or when the equity securities are received by the Fund in connection with a corporate restructuring of an issuer.

Non-investment grade fixed-income securities (commonly known as “junk bonds”) tend to offer higher yields than higher rated securities with similar maturities. Non-investment grade fixed-income securities are, however, considered speculative and generally involve greater price volatility and greater risk of loss of principal and interest than higher rated securities. The Fund may purchase the securities of issuers that are in default.

17

Goldman Sachs
Emerging Markets Debt Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = JP Morgan EMBI Global Diversified Index plus or minus 2 years Maximum = 7 years
Expected Approximate Interest Rate Sensitivity:	10-year government bond
Credit Quality:	Minimum = D (Standard & Poor’s) or C (Moody’s)
Benchmark:	JP Morgan EMBI Global Diversified Index
Symbol:	GSDIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of total return consisting of income and capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities of issuers located in emerging countries**. The Investment Adviser may consider, but is not bound by, classifications by the World Bank, the International Finance Corporation or the United Nations and its agencies in determining whether a country is emerging or developed. Currently, Emerging Countries include, among others, most African, Asian, Eastern European, Middle Eastern, South and Central American nations. The Investment Adviser currently intends that the Fund’s investment focus will be in the following emerging countries: Argentina, Brazil, Bulgaria, Colombia, Dominican Republic, Ecuador, Egypt, Malaysia, Mexico, Nigeria, Panama, Peru, The Philippines, Poland, Russia, South Africa, South Korea, Turkey, Ukraine, Uruguay, Venezuela as well as other

     *   The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the J.P. Morgan EMBI Global Diversified Index has ranged between 4.1 and 4.6 years.

     **  To the extent required by SEC regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its Net Assets in the particular type of investment suggested by its name.

18

FUND INVESTMENT OBJECTIVES AND STRATEGIES

emerging countries to the extent that foreign investors are permitted by applicable law to make such investments.

The Fund may invest in all types of emerging country fixed-income securities, including the following:

n	Brady bonds and other debt issued by governments, their agencies and instrumentalities, or by their central banks,
n	interests issued by entities organized and operated for the purpose of restructuring the investment characteristics of instruments issued by emerging country issuers,
n	fixed and floating rate, senior and subordinated corporate debt obligations (such as bonds, debentures, notes and commercial paper),
n	loan participations, and
n	repurchase agreements with respect to the foregoing.

The majority of the countries in which the Fund invests will have sovereign ratings that are below investment grade or are unrated. Moreover, to the extent the Fund invests in corporate or other privately issued debt obligations, many of the issuers of such obligations will be smaller companies with stock market capitalizations of $1 billion or less at the time of investment. Although a majority of the Fund’s assets may be denominated in U.S. Dollars, the Fund may invest in securities denominated in any currency and may be subject to the risk of adverse currency fluctuations.

The Emerging Markets Debt Fund is “non-diversified” under the Investment Company Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Emerging Markets Debt Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

Non-investment grade fixed-income securities (commonly known as “junk bonds”) tend to offer higher yields than higher-rated securities with similar maturities. Non-investment grade securities are, however, considered speculative and generally involve greater price volatility and greater risk of loss of principal and interest than more highly rated securities. The Fund may purchase the securities of issuers that are in default.

19

Other Investment Practices
and Securities

The tables on the following pages identify some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The tables also highlight the differences among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in the table show allowable usage only; for actual usage, consult the Funds’ annual and semi-annual reports. For more information about these and other investment practices and securities, see Appendix A. Each Fund publishes on its website (http://www.gs.com/funds) complete portfolio holdings for the Fund as of the end of each fiscal quarter subject to a thirty calendar-day lag between the date of the information and the date on which the information is disclosed. In addition, the Funds publish on their website selected holdings information monthly subject to a ten calendar-day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC. In addition, a description of the Fund’s policies and procedures with respect to the disclosure of a Fund’s portfolio securities is available in the Fund’s Statement of Additional Information (“Additional Statement.”)

10 Percent of total assets (including securities lending collateral) (italic type)
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
•    No specific percentage limitation		Ultra-Short	Short
on usage; limited only by the	Enhanced	Duration	Duration	Government
objectives and strategies of the Fund	Income	Government	Government	Income
—  Not permitted	Fund	Fund	Fund	Fund
Investment Practices
Borrowings	33 1/3	33 1/3	33 1/3	33 1/3
Credit, Interest Rate and Total Return Swaps*	•	•	•	•
Currency Options and Futures	—	—	—	—
Cross Hedging of Currencies	—	—	—	—
Currency Swaps*	—	—	—	—
Financial Futures Contracts	•	•	•	•
Forward Foreign Currency Exchange Contracts	—	—	—	—
Interest Rate Floors, Caps and Collars	•	•	•	•
Mortgage Dollar Rolls	—	•	•	•
Mortgage Swaps*	—	•	•	•
Options (including Options on Futures)	•	•	•	•
Options on Foreign Currencies	—	—	—	—
Repurchase Agreements	•**	•	•	•
Securities Lending	33 1/3	33 1/3	33 1/3	33 1/3
When-Issued Securities and Forward Commitments	•	•	•	•

*

Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.

**

The Enhanced Income, Core Fixed Income, Global Income and High Yield Funds may enter into repurchase agreements collateralized by securities issued by foreign governments. The U.S. Mortgages and Investment Grade Credit Funds may enter into repurchase agreements collateralized by U.S. Government Securities and securities rated at least AAA by Standard & Poor’s or Aaa by Moody’s or have a comparable rating by another NRSRO. The Emerging Markets Debt Fund may enter into repurchase agreements collateralized by securities issued by foreign governments and their central banks.

20

OTHER INVESTMENT PRACTICES AND SECURITIES

		Investment			Emerging
U.S.	Core Fixed	Grade	Global		Markets
Mortgages	Income	Credit	Income	High Yield	Debt
Fund	Fund	Fund	Fund	Fund	Fund
33 1/3	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
•	•	•	•	•	•
—	•	•	•	•	•
—	•	•	•	•	•
—	•	•	•	•	•
•	•	•	•	•	•
—	•	•	•	•	•
•	•	•	•	•	•
•	•	•	•	—	—
•	•	•	•	•	—
•	•	•	•	•	•
—	•	•	•	•	•
•**	•**	•**	•**	•**	•**
33 1/3	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
•	•	•	•	•	•

21

10 Percent of total assets (italic type)

10 Percent of Net Assets (including borrowings for investment purposes) (roman type)

•    No specific percentage limitation

Ultra-Short

Short

on usage; limited only by the

Enhanced

Duration

Duration

Government

U.S.

objectives and strategies of the Fund

Income

Government

Government

Income

Mortgages

—  Not permitted

Fund

Fund

Fund

Fund

Fund

Investment Securities

Asset-Backed Securities

•

•

•

1

•

•

Bank Obligations

•

•

—

•

•

Convertible Securities

•

—

—

—

—

Corporate Debt Obligations and Trust Preferred Securities

•

•

—

•

•

Emerging Country Securities

—

—

—

—

—

Floating and Variable Rate Obligations

•

•

•

•

•

Foreign Securities2

•

—

—

—

—

Loan Participations

—

—

—

—

—

Mortgage-Backed Securities

Adjustable Rate Mortgage Loans

—

•

•

•

•

Collateralized Mortgage Obligations

—

•

•

•

•

Fixed Rate Mortgage Loans

—

•

•

•

•

Government Issued Mortgage-Backed Securities

—

•

•

•

•

Multiple Class Mortgage-Backed Securities

—

•

•

•

•

Privately Issued Mortgage-Backed Securities

—

•

—

•

•

Stripped Mortgage-Backed Securities

—

•

•

•

•

Lower Grade Fixed Income Securities

—

—

—

—

—

Preferred Stock, Warrants and Rights

•

—

—

—

—

Structured Securities*

•

•

•

•

•

Taxable Municipal Securities

—

•

—

•

•

Tax-Free Municipal Securities

—

•

—

•

•

Temporary Investments

•

•

•

•

•

U.S. Government Securities

•

•

80+

80+

•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.
1	The Short Duration Government Fund may only invest in asset-backed securities that are issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises.
2	Includes issuers domiciled in one country and issuing securities denominated in the currency of another. Non-dollar securities are not permitted for the Enhanced Income Fund. The Investment Grade Credit Fund may invest up to 25% of its total assets in securities not denominated in U.S. dollars (positions hedged against currency risk are not counted when calculating compliance with this 25% limitation).
3	Of the Funds’ investments in foreign securities, 10% of each Fund’s total assets in the aggregate may be invested in emerging country securities.

22

OTHER INVESTMENT PRACTICES AND SECURITIES

Core Fixed

Investment

Global

Emerging

Income

Grade Credit

Income

High Yield

Markets Debt

Fund

Fund

Fund

Fund

Fund

•

•

•

•

•

•

•

•

•

•

•

•

—

•

•

•

•

•

•

•

10

3

10

3

10

3

25

4

•

•

•

•

•

•

•

4

•

4

•

•

4

•

—

•

—

•

•

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

•

•

•

•

—

—

—

—

80+

5

•

•

•

—

•

•

•

•

•

•

•

•

•

—

•

—

•

•

—

•

—

•

•

•

•

6

•

6

•

•

•

•

•

4	The Core Fixed Income Fund and Investment Grade Credit Fund may each invest up to 25% of their respective total assets in securities not denominated in U.S. dollars. The High Yield Fund may invest up to 25% of its total assets in securities not denominated in U.S. dollars and in emerging country securities denominated in any currency. If a Fund’s position is hedged against currency risk, such position is not counted when calculating compliance with this 25% limitation.
5	The High Yield Fund will invest at least 80% of its Net Assets in lower grade securities under normal circumstances.
6	The High Yield Fund and Emerging Markets Debt Fund may for this purpose invest in investment grade and high grade securities without limit.

23

Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective.

			Ultra-Short	Short
		Enhanced	Duration	Duration	Government	U.S.
•   Applicable		Income	Government	Government	Income	Mortgages
— Not applicable		Fund	Fund	Fund	Fund	Fund
NAV		•	•	•	•	•
Interest Rate		•	•	•	•	•
Credit/Default		•	•	•	•	•
Call		•	•	•	•	•
Extension		•	•	•	•	•
Derivatives		•	•	•	•	•
U.S. Government Securities		•	•	•	•	•
Market		•	•	•	•	•
Management		•	•	•	•	•
Liquidity		•	•	•	•	•
Non-Diversification		—	—	—	—	—
Sovereign
	Political	•	—	—	—	—
	Economic	•	—	—	—	—
	Repayment	•	—	—	—	—
Foreign		•	—	—	—	—
Emerging Countries		—	—	—	—	—
Junk Bond		—	—	—	—	—
Concentration		—	—	—	—	—
Foreign Currency Trading		—	—	—	—	—

24

PRINCIPAL RISKS OF THE FUNDS

Core Fixed		Investment		Global				Emerging
Income		Grade Credit		Income		High Yield		Markets Debt
Fund		Fund		Fund		Fund		Fund
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	—		—		•		—		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	•		•		•		•		•
	—		—		—		•		•
	—		—		•		—		•
	•		•		•		•		•

25

All Funds:

n	NAV Risk—The risk that the net asset value (“NAV”) of the Fund and the value of your investment will fluctuate.
n	Interest Rate Risk—The risk that when interest rates increase, fixed-income securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.
n	Credit/Default Risk—The risk that an issuer or guarantor of fixed-income securities held by a Fund (which may have low credit ratings), or the counterparty in a derivative instrument, may default on its obligation to pay interest and repay principal.
n	Call Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as a Mortgage-Backed Security) earlier than expected. This may happen when there is a decline in interest rates. Under these circumstances, a Fund may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities.
n	Extension Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as a Mortgage-Backed Security) later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease, and a Fund will also suffer from the inability to invest in higher yielding securities.
n	Derivatives Risk—The risk that loss may result from a Fund’s investments in options, futures, swaps, options on swaps, structured securities and other derivative investments. These instruments may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses to a Fund. See “General Investment Management Approach” above.
n	U.S. Government Securities Risk—The risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Although many types of U.S. Government Securities may be purchased by the Funds, such as those issued by the Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. The maximum potential liability of the issuers of some U.S. Government Securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
n	Market Risk—The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes may be temporary or last for extended periods. A Fund’s investments may be

26

PRINCIPAL RISKS OF THE FUNDS

	overweighted from time to time in one or more industry sectors, which will increase the Fund’s exposure to risk of loss from adverse developments affecting those sectors.
n	Management Risk—The risk that a strategy used by the Investment Adviser may fail to produce the intended results.
n	Liquidity Risk—The risk that a Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in non-investment grade fixed-income securities or emerging country issuers will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within these investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate. The Goldman Sachs Asset Allocation Portfolios (the “Asset Allocation Portfolios”) expect to invest a significant percentage of their assets in the Funds and other funds for which GSAM or an affiliate now or in the future acts as investment adviser or underwriter. Redemptions by an Asset Allocation Portfolio of its position in a Fund may further increase liquidity risk and may impact a Fund’s NAV.

Specific Funds:

n

Non-Diversification Risk—The Global Income and Emerging Markets Debt Funds are non-diversified, meaning that each Fund is permitted to invest more of its assets in fewer issuers than “diversified” mutual funds. Thus, each Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

n

Sovereign Risk—The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds will be subject to the risk that the issuer of the sovereign debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay the principal or interest when due.

n

Political Risk—The risks associated with the general political and social environment of a country. These factors may include among other things government instability, poor socioeconomic conditions, corruption, lack of law and order, lack of democratic accountability, poor quality of the bureaucracy, internal and external conflict, and religious and ethnic tensions. High political risk can impede the economic welfare of a country.

n

Economic Risk—The risks associated with the general economic environment of a country. These can encompass, among other things, low quality and growth rate of Gross Domestic Product (“GDP”), high inflation or deflation, high

27

government deficits as a percentage of GDP, weak financial sector, overvalued exchange rate, and high current account deficits as a percentage of GDP.

n

Repayment Risk—The risk associated with the inability of a country to pay its external debt obligations in the immediate future. Repayment risk factors may include but are not limited to high foreign debt as a percentage of GDP, high foreign debt service as a percentage of exports, low foreign exchange reserves as a percentage of short-term debt or exports, and an unsustainable exchange rate structure.

n	Foreign Risk—The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds will be subject to risks of loss with respect to their foreign investments that are not typically associated with domestic issuers. Loss may result because of less foreign government regulation, less public information and less economic, political and social stability. Loss may also result from the imposition of exchange controls, confiscations and other government restrictions. The Funds will also be subject to the risk of negative foreign currency rate fluctuations. Foreign risks will normally be greatest when a Fund invests in issuers located in emerging countries.
n	Emerging Countries Risk—The Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may invest in emerging countries. The securities markets of Asian, Latin, Central and South American, Eastern European, Middle Eastern, African and other emerging countries are less liquid, are especially subject to greater price volatility, have smaller market capitalizations, have less government regulation and are not subject to as extensive and frequent accounting, financial and other reporting requirements as the securities markets of more developed countries. These risks are not normally associated with investments in more developed countries.
n	“Junk Bond” Risk—The High Yield and Emerging Markets Debt Funds will invest in non-investment grade fixed-income securities (commonly known as “junk bonds”) that are considered predominantly speculative by traditional investment standards. Non-investment grade fixed-income securities and unrated securities of comparable credit quality are subject to the increased risk of an issuer’s inability to meet principal and interest payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity.
n	Concentration Risk—The risk that if either the Global Income Fund or Emerging Markets Debt Fund invests more than 25% of its total assets in issuers within the same country, state, region, currency, industry or economic sector, an adverse economic, business or political development may affect the value of the Fund’s investments more than if its investments were not so concentrated. In addition, the Global Income Fund may invest more than 25% of its total assets in the securities

28

PRINCIPAL RISKS OF THE FUNDS

of corporate and governmental issuers located in each of Canada, Germany, Japan and the United Kingdom, as well as in the securities of U.S. issuers. Concentration of the Global Income Fund’s investments in such issuers will subject the Fund, to a greater extent than if investments were less concentrated, to losses arising from adverse developments affecting those issuers or countries.

n

Non-Hedging Foreign Currency Trading Risk—The Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may engage, to a greater extent than the other Funds, in forward foreign currency transactions for speculative purposes. The Funds’ Investment Adviser may purchase or sell foreign currencies through the use of forward contracts based on the Investment Adviser’s judgment regarding the direction of the market for a particular foreign currency or currencies. In pursuing this strategy, the Investment Adviser seeks to profit from anticipated movements in currency rates by establishing “long” and/or “short” positions in forward contracts on various foreign currencies. Foreign exchange rates can be extremely volatile and a variance in the degree of volatility of the market or in the direction of the market from the Investment Adviser’s expectations may produce significant losses to the Funds.

More information about the Funds’ portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice.

29

Fund Performance

   HOW THE FUNDS HAVE PERFORMED   

The bar chart and table provide an indication of the risks of investing in a Fund by showing: (a) changes in the performance of a Fund’s Institutional Shares from year to year for up to the last ten years (with respect to the bar charts); and (b) how the average annual total returns of a Fund’s Institutional Shares compare to those of broad-based securities market indices. The bar chart (including “Best Quarter” and “Worst Quarter” information) and table assume reinvestment of dividends and distributions. A Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund’s performance would have been reduced.

   INFORMATION ON AFTER-TAX RETURNS   

These definitions apply to the after-tax returns.

Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on a Fund’s Institutional Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.

Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on a Fund’s Institutional Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Institutional Shares at the end of the performance period.

Average Annual Total Returns After Taxes on Distributions and Sale of Shares. These returns reflect taxes paid on distributions on a Fund’s Institutional Shares and taxes applicable when the shares are redeemed (sold).

Note on Tax Rates. The after-tax performance figures are calculated using the historical highest individual federal marginal income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.

30

FUND PERFORMANCE

Enhanced Income Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q1 ’01           +2.23% Worst Quarter* Q2 ’04           -0.13%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 8/2/00)
Returns Before Taxes		2.76%		3.07%		3.51%
Returns After Taxes on Distributions**		1.57%		1.62%		1.96%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.78%		1.75%		2.05%
Six-Month U.S. Treasury Bill Index***		3.10%		2.59%		2.92%
One-Year U.S. Treasury Note Index***		2.36%		2.87%		3.21%
Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index****		1.93%		3.58%		4.03%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index, as reported by Merrill Lynch, do not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

31

Ultra-Short Duration Government Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q4 ’00           +2.29% Worst Quarter* Q2 ’04           +0.06%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Institutional Shares (Inception 7/17/91)
Returns Before Taxes		2.75%		3.30%		4.52%		4.69%
Returns After Taxes on Distributions**		1.59%		1.78%		2.58%		2.72%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.78%		1.90%		2.66%		2.79%
Six-Month U.S. Treasury Bill Index***		3.10%		2.59%		4.04%		4.27%
One-Year U.S. Treasury Note Index***		2.36%		2.87%		4.24%		4.58%
Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index****		1.93%		3.58%		4.71%		5.17%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index, as reported by Merrill Lynch, do not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

32

FUND PERFORMANCE

Short Duration Government Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q3 ’01           +3.77% Worst Quarter* Q2 ’04           -1.10%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Institutional Shares (Inception 8/15/88)
Returns Before Taxes		1.57%		4.19%		5.10%		6.06%
Returns After Taxes on Distributions**		0.47%		2.63%		3.02%		3.24%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.02%		2.64%		3.05%		3.37%
Two-Year U.S. Treasury Note Index***		1.45%		3.80%		4.60%		5.85%
Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index****		1.73%		3.83%		4.88%		6.10%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Two-Year U.S. Treasury Note Index, as reported by Merrill Lynch, does not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

33

Government Income Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q4 ’00           +4.83% Worst Quarter* Q2 ’04           -1.80%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 8/15/97)
Returns Before Taxes		2.59%		5.52%		6.11%
Returns After Taxes on Distributions**		1.43%		3.77%		3.89%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.68%		3.69%		3.86%
Lehman Brothers Mutual Fund Government/ Mortgage Index***		2.63%		5.40%		6.16%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Mutual Fund Government/ Mortgage Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

34

FUND PERFORMANCE

U.S. Mortgages Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q3 ’04           +2.80% Worst Quarter* Q2 ’04           -0.89%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		Since Inception
Institutional Shares (Inception 11/3/03)
Returns Before Taxes		2.63%		4.08%
Returns After Taxes on Distributions**		1.28%		2.50%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.70%		2.59%
Lehman Brothers Securitized Index***		2.53%		3.88%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Securitized Index is an unmanaged composite of asset-backed securities, collateralized mortgage-backed securities (ERISA-eligible) and fixed rate mortgage-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes.

35

Core Fixed Income Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q3 ’01          +4.55% Worst Quarter* Q2 ’04           -2.13%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Institutional Shares (Inception 1/5/94)
Returns Before Taxes		2.85%		6.25%		6.28%		6.48%
Returns After Taxes on Distributions**		1.18%		4.12%		3.83%		3.97%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.89%		4.10%		3.85%		3.98%
Lehman Brothers Aggregate Bond Index***		2.43%		5.87%		6.16%		6.35%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Aggregate Bond Index represents an unmanaged diversified portfolio of fixed-income securities, including U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed and asset-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes.

36

FUND PERFORMANCE

Investment Grade Credit Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q3 ’04           +4.18% Worst Quarter* Q2 ’04           -3.20%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		Since Inception
Institutional Shares (Inception 11/3/03)
Returns Before Taxes		2.37%		4.72%
Returns After Taxes on Distributions**		0.80%		3.11%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.53%		3.10%
Lehman Brothers U.S. Credit Index***		1.96%		4.06%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers U.S. Credit Index is an unmanaged index that is unbundled into pure corporates (industrial, utility, and finance, including both U.S. and Non-U.S. corporations) and non-corporates (sovereign, supranatural, foreign agencies, and foreign local governments). The Index figures do not reflect any deduction for fees, expenses or taxes.

37

Global Income Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q3 ’98           +5.70% Worst Quarter* Q2 ’04           -1.90%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Institutional Shares (Inception 8/1/95)
Returns Before Taxes		4.51%		5.06%		6.44%		6.96%
Returns After Taxes on Distributions**		1.46%		2.47%		3.63%		3.97%
Returns After Taxes on Distributions and Sale of Fund Shares**		2.91%		2.78%		3.79%		4.11%
J.P. Morgan Global Government Bond Index (hedged)***		4.97%		5.28%		6.84%		7.21%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The J.P. Morgan Global Government Bond Index (hedged), an unmanaged index, does not reflect any deduction for fees, expenses or taxes.

38

FUND PERFORMANCE

High Yield Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q2 ’03           +10.85% Worst Quarter* Q3 ’98              -6.52%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 8/1/97)
Returns Before Taxes		3.98%		9.91%		6.81%
Returns After Taxes on Distributions**		1.00%		6.21%		3.10%
Returns After Taxes on Distributions and Sale of Fund Shares**		2.55%		6.19%		3.42%
Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped***		2.76%		9.12%		5.56%
Lehman Brothers U.S. Corporate High Yield Bond Index***		2.74%		8.85%		5.39%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	Effective June 1, 2005, the Lehman Brothers U.S. Corporate High Yield Bond Index, -2% Issuer Capped replaced the Lehman Brothers U.S. Corporate High Yield Bond Index as the Fund’s benchmark. The Lehman Brothers U.S. Corporate High Yield Bond Index, -2% Issuer Capped covers the universe of U.S. dollar denominated, non-convertible, fixed rate, non-investment grade debt. Index holdings must have at least one year to final maturity, at least $150 million par amount outstanding, and be publicly issued with a rating of Ba1 or lower. The Lehman Brothers U.S. Corporate High Yield Bond Index is an unmanaged, total return performance benchmark for fixed income securities having a maximum quality rating of Ba1 (as determined by Moody’s Investors Service). In the Investment Adviser’s opinion, the Lehman Brothers U.S. Corporate High Yield Bond Index -2% Issuer Capped is a more appropriate benchmark against which to measure the performance of the Fund. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.

39

Emerging Markets Debt Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q3 ’04           +10.82% Worst Quarter* Q2 ’04           -5.70%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		Since Inception
Institutional Shares (Inception 8/29/03)
Returns Before Taxes		15.81%		17.25%
Returns After Taxes on Distributions**		11.97%		13.38%
Returns After Taxes on Distributions and Sale of Fund Shares**		10.25%		12.49%
JP Morgan EMBI Global Diversified Index***		10.25%		12.70%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The JP Morgan EMBI Global Diversified Index is an unmanaged index of debt instruments of 31 emerging countries. The Index figures do not reflect any deduction for fees, expenses or taxes.

40

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Fund Fees and Expenses (Institutional Shares)

This table describes the fees and expenses that you would pay if you buy and hold Institutional Shares of a Fund.

			Ultra-Short		Short
	Enhanced		Duration		Duration
	Income		Government		Government
	Fund		Fund		Fund
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		None		None		None
Maximum Deferred Sales Charge (Load)		None		None		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None		None		None
Redemption Fees1		None		None		None
Exchange Fees		None		None		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):2
Management Fees3		0.25%		0.40%		0.50%
Account Service Fees		None		None		None
Distribution and Service (12b-1) Fees		None		None		None
Other Expenses4*		0.15%		0.10%		0.10%
Total Fund Operating Expenses*		0.40%		0.50%		0.60%

See pages 44-45 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Funds are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser or Transfer Agent, as applicable. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

			Ultra-Short		Short
	Enhanced		Duration		Duration
	Income		Government		Government
	Fund		Fund		Fund
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):2
Management Fees3		0.20%		0.40%		0.50%
Account Service Fees		None		None		None
Distribution and Service (12b-1) Fees		None		None		None
Other Expenses4		0.05%		0.09%		0.04%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.25%		0.49%		0.54%

42

FUND FEES AND EXPENSES

Government

Core Fixed

Investment

Global

Emerging

Income

U.S. Mortgages

Income

Grade

Income

High Yield

Markets

Fund

Fund

Fund

Credit Fund

Fund

Fund

Debt Fund

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

2.0%

2.0%

2.0%

None

None

None

None

None

None

None

0.54%

0.40%

0.38%

0.40%

0.65%

0.70%

0.80%

None

0.05%

None

0.05%

None

None

None

None

None

None

None

None

None

None

0.11%

0.13%

0.08%

0.22%

0.20%

0.09%

0.69%

0.65%

0.58%

0.46%

0.67%

0.85%

0.79%

1.49%

Government				Core Fixed				Global				Emerging
Income		U.S. Mortgages		Income		Investment Grade		Income		High Yield		Markets
Fund		Fund		Fund		Credit Fund		Fund		Fund		Debt Fund
	0.54%		0.33%		0.38%		0.33%		0.65%		0.70%		0.80%
	None		0.05%		None		0.05%		None		None		None
	None		None		None		None		None		None		None
	0.04%		0.02%		0.08%		0.02%		0.04%		0.06%		0.08%
	0.58%		0.40%		0.46%		0.40%		0.69%		0.76%		0.88%

43

Fund Fees and Expenses continued

1	A 2% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less.
2	The Enhanced Income, Ultra-Short Duration Government, Short Duration Government, U.S. Mortgages, Investment Grade Credit and High Yield Funds’ annual operating expenses are based on actual expenses for the fiscal year ended October 31, 2005. As a result of the fee reduction commitment in footnote 3, the Government Income, Core Fixed Income and Global Income Funds’ “Management Fees” and “Total Fund Operating Expenses” have been restated to reflect the expenses that are expedited for the current fiscal year.
3	The Investment Adviser has entered into the following fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus:

	Management Fee		Average Daily
	Annual Rate		Net Assets
Enhanced Income		0.25%	First $	1  Billion
		0.23%	Next $	1  Billion
		0.22%	Over $	2  Billion
Ultra-Short Duration Government		0.40%	First $	1  Billion
		0.36%	Next $	1  Billion
		0.34%	Over $	2  Billion
Short Duration Government		0.50%	First $	1  Billion
		0.45%	Next $	1  Billion
		0.43%	Over $	2  Billion
Government Income		0.54%	First $	1  Billion
		0.49%	Next $	1  Billion
		0.47%	Over $	2  Billion
U.S. Mortgages		0.40%	First $	1  Billion
		0.36%	Next $	1  Billion
		0.34%	Over $	2  Billion
Core Fixed Income		0.40%	First $	1  Billion
		0.36%	Next $	1  Billion
		0.34%	Over $	2  Billion
Investment Grade Credit		0.40%	First $	1  Billion
		0.36%	Next $	1  Billion
		0.34%	Over $	2  Billion
Global Income		0.65%	First $	1  Billion
		0.59%	Next $	1  Billion
		0.56%	Over $	2  Billion
High Yield		0.70%	First $	2  Billion
		0.63%	Over $	2  Billion
Emerging Markets Debt		0.80%	First $	2  Billion
		0.72%	Over $	2  Billion

Prior to this fee reduction commitment, the contractual management fees for the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income High Yield and Emerging Markets Debt

44

FUND FEES AND EXPENSES

	Funds as an annual percentage rate of average daily net assets were 0.25%, 0.40%, 0.50%, 0.65%, 0.40%, 0.40%, 0.40%, 0.65%, 0.70% and 0.80%, respectively.
	The Investment Adviser has voluntarily agreed not to impose a portion of the management fee on the Enhanced Income, U.S. Mortgages and Investment Grade Credit Funds equal to 0.05%, 0.07%, and 0.07%, respectively, of such Funds’ average daily net assets. As a result of fee waivers, the current management fees of the Enhanced Income, U.S. Mortgages, and Investment Grade Credit Funds are 0.20%, 0.33%, and 0.33%, respectively, of such Funds’ average daily net assets. The waivers may be terminated at any time at the option of the Investment Adviser.
4	“Other Expenses” include transfer agency fees and expenses equal on an annualized basis to 0.04% of the average daily net assets of each Fund’s Institutional Shares, plus all other ordinary expenses not detailed above. The Transfer Agent has voluntarily agreed to reduce or limit a portion of the transfer agency fee on the Institutional Shares of the U.S. Mortgages and Investment Grade Credit Funds equal to 0.02% of the Funds’ Institutional Shares average daily net assets. The Investment Adviser has voluntarily agreed to reduce or limit “Other Expenses” of each Fund (excluding management fees, transfer agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification, shareholder meetings and other extraordinary expenses exclusive of any expense offset arrangements) to the following percentages of each Fund’s average daily net assets:

	Other
Fund	Expenses
Enhanced Income		0.014%
Ultra-Short Duration Government		0.054%
Short Duration Government		0.004%
Government Income		0.004%
U.S. Mortgages		0.004%
Core Fixed Income		0.104%
Investment Grade Credit		0.004%
Global Income		0.004%
High Yield		0.024%
Emerging Markets Debt		0.044%

The fee waiver and expense reductions may be terminated at any time at the option of the Investment Adviser or Transfer Agent, as applicable.

45

Fund Fees and Expenses continued

Example

The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Institutional Shares of a Fund for the time periods indicated and then redeem all of your Institutional Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Fund	1 Year		3 Years		5 Years		10 Years
Enhanced Income	$	41	$	128	$	224	$	505
Ultra-Short Duration Government	$	51	$	160	$	280	$	628
Short Duration Government	$	61	$	192	$	335	$	750
Government Income	$	66	$	208	$	362	$	810
U.S. Mortgages	$	59	$	186	$	324	$	726
Core Fixed Income	$	47	$	148	$	258	$	579
Investment Grade Credit	$	68	$	214	$	373	$	835
Global Income	$	87	$	271	$	471	$	1,049
High Yield	$	81	$	252	$	439	$	978
Emerging Markets Debt	$	152	$	471	$	813	$	1,779

Institutions that invest in Institutional Shares on behalf of their customers may charge other fees directly to their customer accounts in connection with their investments. You should contact your institution for information regarding such charges. Such fees, if any, may affect the return such customers realize with respect to their investments.

Certain institutions that invest in Institutional Shares may receive other compensation in connection with the sale and distribution of Institutional Shares or for services to their customers’ accounts and/or the Funds. For additional information regarding such compensation, see “Shareholder Guide” in the Prospectus and “Payments to Intermediaries” in the Additional Statement.

46

Service Providers

   INVESTMENT ADVISERS   

Investment Adviser	Fund
Goldman Sachs Asset Management, L.P. 32 Old Slip New York, New York 10005	Enhanced Income Ultra-Short Duration Government Short Duration Government Government Income U.S. Mortgages Core Fixed Income Investment Grade Credit High Yield Emerging Markets Debt
Goldman Sachs Asset Management International Christchurch Court 10-15 Newgate Street London, England EC1A 7HD	Global Income

GSAM has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”). GSAMI, a member of the Investment Management Regulatory Organization Limited since 1990 and a registered investment adviser since 1991, is an affiliate of Goldman Sachs. As of December 31, 2005, GSAM had assets under management of $496.1 billion.

The Investment Adviser provides day-to-day advice regarding the Funds’ portfolio transactions. The Investment Adviser makes the investment decisions for the Funds and places purchase and sale orders for the Funds’ portfolio transactions in U.S. and foreign markets. As permitted by applicable law, these orders may be directed to any brokers, including Goldman Sachs and its affiliates. While the Investment Adviser is ultimately responsible for the management of the Funds, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. In addition, the Investment Adviser has access to the research and certain proprietary technical models developed by Goldman Sachs, and will apply quantitative and qualitative analysis in determining the appropriate allocations among categories of issuers and types of securities.

47

The Investment Adviser also performs the following additional services for the Funds:

n	Supervises all non-advisory operations of the Funds
n	Provides personnel to perform necessary executive, administrative and clerical services to the Funds
n	Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
n	Maintains the records of each Fund
n	Provides office space and all necessary office equipment and services

   MANAGEMENT FEES   

As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund’s average daily net assets):

					Actual Rate
					For the Fiscal
	Management Fee		Average Daily		Year Ended
	Annual Rate*		Net Assets		October 31, 2005
GSAM:
Enhanced Income		0.25%		First $1 Billion		0.20%
		0.23%		Next $1 Billion
		0.22%		Over $2 Billion
Ultra-Short Duration		0.40%		First $1 Billion		0.40%
Government		0.36%		Next $1 Billion
		0.34%		Over $2 Billion
Short Duration		0.50%		First $1 Billion		0.50%
Government		0.45%		Next $1 Billion
		0.43%		Over $2 Billion
Government Income		0.54%		First $1 Billion		0.54%
		0.49%		Next $1 Billion
		0.47%		Over $2 Billion
U.S. Mortgages		0.40%		First $1 Billion		0.33%
		0.36%		Next $1 Billion
		0.34%		Over $2 Billion
Core Fixed Income		0.40%		First $1 Billion		0.39%
		0.36%		Next $1 Billion
		0.34%		Over $2 Billion
Investment Grade		0.40%		First $1 Billion		0.33%
Credit		0.36%		Next $1 Billion
		0.34%		Over $2 Billion

48

SERVICE PROVIDERS

					Actual Rate
					For the Fiscal
	Management Fee		Average Daily		Year Ended
	Annual Rate*		Net Assets		October 31, 2005
Global Income		0.65%		First $1 Billion		0.65%
		0.59%		Next $1 Billion
		0.56%		Over $2 Billion
High Yield		0.70%		First $2 Billion		0.70%
		0.63%		Over $2 Billion
Emerging Markets		0.80%		First $2 Billion		0.80%
Debt		0.72%		Over $2 Billion

*  The Investment Adviser has entered into the foregoing fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus. Prior to this fee reduction commitment, the management fees for the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield, Emerging Markets Debt and Global Income Funds as an annual percentage rate of average daily net assets were 0.25%, 0.40%, 0.50%, 0.54%, 0.40%, 0.40%, 0.40%, 0.70%, 0.80% and 0.65%, respectively.

The difference, if any, between the stated fees and the actual fees paid by the Funds reflects that the Investment Adviser did not charge the full amount of the fees to which it would have been entitled. The Investment Adviser may discontinue or modify any such voluntary limitations in the future at its discretion.

A discussion regarding the basis for the Board of Trustees’ approval of the Management Agreements for the Funds in 2005 is available in the Funds’ annual report dated October 31, 2005.

49

   FUND MANAGERS   

Fixed Income Portfolio Management Team

n	The investment process revolves around four groups: the Investment Strategy Group, the Top-down Strategy Teams, the Bottom-up Sector Teams and the Portfolio Teams.
n	These teams strive to maximize risk-adjusted returns by de-emphasizing interest rate anticipation and focusing on security selection and sector allocation
n	The team manages approximately $144.9 billion in municipal and taxable fixed-income assets for retail, institutional and high net worth clients

______________________________________________________________________________________________________________

U.S. Fixed Income-Investment Management Team

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Jonathan Beinner Managing Director and Co-Head U.S. and Global Fixed Income Teams	Senior Portfolio Manager—Fixed Income Group	Since 2000	Mr. Beinner joined the Investment Adviser in 1990 and became a portfolio manager in 1992. He became Co-Head of the U.S. and Global Fixed Income Teams in 2002.
Tom Kenny Managing Director and Co-Head U.S. and Global Fixed Income Teams	Senior Portfolio Manager—Fixed Income Group	Since 2000	Mr. Kenny joined the Investment Adviser in 1999 as a senior portfolio manager. Previously, he spent 13 years at Franklin Templeton where he was a portfolio manager of high yield municipal and municipal funds, Director of Municipal Research and Director of the Municipal Bond Department. He became Co-Head of the U.S. and Global Fixed Income Teams in 2002.
James B. Clark Managing Director, Co-Head U.S. Fixed Income Team	Senior Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income U.S. Mortgages Investment Grade Credit Emerging Markets Debt	Since 2000 1994 1994 1994 2000 2003 2003 2003	Mr. Clark joined the Investment Adviser in 1994 as a portfolio manager after working as an investment manager in the mortgage-backed securities group at Travelers Insurance Company.
Christopher Sullivan Managing Director, Co-Head U.S. Fixed Income Team	Senior Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income	Since 2001 2001 2001 2001 2001	Mr. Sullivan joined the Investment Adviser in 2001 as a portfolio manager and as Co-Head of the U.S. Fixed Income Team. Since 1997, he was a senior member of the account management group of Pacific Investment Management Company (PIMCO). Prior to joining PIMCO, he was an equity portfolio manager for Hawaiian Trust Company for three years.

50

SERVICE PROVIDERS

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Andrew Jessop Managing Director and Co-Head of High Yield Team	Senior Portfolio Manager— High Yield	Since 1997	Mr. Jessop joined the Investment Adviser in 1997 as a portfolio manager. He is responsible for managing high yield assets. Previously, he worked six years managing high yield portfolios at Saudi International Bank in London.
James McCarthy Managing Director	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income	Since 2000 1995 1995 1995 1995	Mr. McCarthy joined the Investment Adviser in 1995 after working for Nomura Securities as a mortgage backed securities trader.
Thomas D. Teles Managing Director	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Core Fixed Income U.S. Mortgages	Since 2000 2000 2000 2000 2003	Mr. Teles joined the Investment Adviser in 2000. Prior to his current position, he worked for three years as a mortgage trader and in the research department for Goldman, Sachs & Co.
James Cielinski Managing Director	Senior Portfolio Manager— Global Income Investment Grade Credit Enhanced Income Core Fixed Income	Since 2000 2003 2003 2003	Mr. Cielinski joined the Investment Adviser in 1998 as a portfolio manager. Prior to his current position, he spent five years at Utah Retirement Systems, where he managed the fixed income group.
Mark Van Wyk Vice President	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income Core Fixed Income	Since 2000 1994 1994 1994 1994	Mr. Van Wyk joined the Investment Adviser in 1994 and specializes in U.S. government and financial derivatives. He worked with an options trading firm prior to joining the Investment Adviser.
Peter D. Dion Vice President	Portfolio Manager— Enhanced Income Ultra-Short Duration   Government Short Duration Government Government Income U.S. Mortgages Core Fixed Income	Since 2000 1995 1995 1995 2003 1995	Mr. Dion joined the Investment Adviser in 1992. From 1994 to 1995 he was an associate portfolio manager. He became a portfolio manager in 1995.

51

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Ben Johnson Vice President	Portfolio Manager— Investment Grade Credit	Since 2003	Mr. Johnson joined the Investment Adviser in 1998 and specializes in credit research. Prior to joining the Investment Adviser, he worked for Prudential Insurance Company of America where he invested in private placement debt securities.
Samuel Finkelstein Vice President	Portfolio Manager— Emerging Markets Debt	Since 2003	Mr. Finkelstein joined the investment manager in 1997. Prior to joining the emerging market team in 2000, he worked in the fixed income risk and strategy group where he constructed portfolios and monitored risk exposure. Prior to that, he worked for one year as a foreign currency trader at the Union Bank of Switzerland.
Ricardo Penfold Vice President	Portfolio Manager— Emerging Markets Debt	Since 2003	Mr. Penfold joined the Investment Adviser in 2000. Prior to that he was Head of Research and Economics in Venezuela for Santander Investments and Banco Santander Central Hispano for four years.
Owi Ruivivar, Ph.D Vice President	Portfolio Manager— Emerging Markets Debt	Since 2003	Ms. Ruivivar joined the Investment Adviser in 2002. Prior to joining GSAM she worked for five years at BNP Paribas where for her last two years there she headed global emerging market debt strategy. Before joining the finance industry in 1997 she worked in economics research at the International Monetary Fund, and at various other international development institutions.
Stephen Warren Vice President	Portfolio Manager— U.S. Mortgages	Since 2003	Mr Warren joined the Investment Adviser in 2003 as a member of the mortgage-backed securities team. Mr. Warren was previously a portfolio manager responsible for asset-backed securities and U.S. government bonds for the Investment Adviser from 1993 to 1997. From 1997 to 2003, he worked as a Principal and Chief Investment Officer at Integrity Capital Management, a quantitative hedge fund, and then as a managing director at Urbanfetch, an Internet company.

52

SERVICE PROVIDERS

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Diana Gordon, Ph.D Vice President	Portfolio Manager— High Yield	Since 2001	Ms. Gordon joined the Investment Adviser in 1999 covering the high yield technology and communications sectors in addition to trading. Before joining the Investment Adviser, she was a high yield portfolio manager at Saudi International Bank.
Rob Cignarella Vice President	Portfolio Manager— High Yield	Since 2003	Mr. Cignarella joined the Investment Adviser in 1998 as a high yield credit research analyst. Prior to his current position he worked in investment banking at Salomon Brothers.

Global Fixed Income—Investment Management Team

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Andrew Wilson Managing Director and Co-Head Global Fixed Income Team	Senior Portfolio Manager— Global Income	Since 1995	Mr. Wilson joined the Investment Adviser in 1995 as a portfolio manager. Prior to his current position, he spent three years as an Assistant Director at Rothschild Asset Management, where he was responsible for managing global and international bond portfolios with specific focus on the U.S., Canadian, Australian and Japanese economies.
Philip Moffitt Partner Managing Director and Co-Head Global Fixed Income Team	Senior Portfolio Manager— Global Income	Since 2000	Mr. Moffitt joined the Investment Adviser in 1999 as a portfolio manager. Prior to joining the Investment Adviser he worked for three years as a proprietary trader for Tokai Asia Ltd in Hong Kong. Before that Mr. Moffitt spent ten years with Bankers Trust Asset Management in Australia, where he was a Managing Director responsible for all active global fixed income funds as well as a member of the Asset Allocation Committee.
Jennifer Youde Executive Director	Senior Portfolio Manager— Global Income	Since 2000	Ms. Youde joined the Investment Adviser in 1996. Prior to joining the Investment Adviser, she worked for thirteen years at CINMan where for her last five years there she managed the global bond and index-linked portfolios.

53

Jonathan Beinner serves as the Chief Investment Officer for the Global and U.S. Fixed Income Portfolio Management Team. Alongside Tom Kenny, he Co-Heads the Global and U.S. Fixed Income Team and is responsible for high-level decisions pertaining to portfolios across multiple strategies. The Fixed Income Portfolio Management Team is organized into a series of specialist teams which focus on generating and implementing investment ideas within their area of expertise. Both top-down and bottom-up decisions are made by these small strategy teams, rather than by one portfolio manager or committee. Ultimate accountability for the portfolio resides with the lead portfolio managers, who set the long-term risk budget and oversee the portfolio construction process.

For more information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Funds, see the Additional Statement.

   DISTRIBUTOR AND TRANSFER AGENT   

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the “Distributor”) of each Fund’s shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, Illinois 60606, also serves as each Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.

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 shares acquired for its own account.

   ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER 
   ACCOUNTS MANAGED BY GOLDMAN SACHS   

The involvement of the Investment Adviser, 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 a Fund or limit a Fund’s investment activities. Goldman Sachs is a full service investment banking, broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financer, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from

54

SERVICE PROVIDERS

entities for which Goldman Sachs performs or seeks to perform investment banking or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs, and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. Furthermore, transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Funds or who engage in transactions with or for the Funds. For more information about conflicts of interest, see the Additional Statement.

Under a securities lending program approved by the Funds’ Board of Trustees, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for each Fund to the extent that the Funds engage in the securities lending program. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of the cash received as collateral for the loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions.

55

   LEGAL PROCEEDINGS   

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. (“GSG”), GSAM, the Trustees and Officers of the Goldman Sachs Trust (the “Trust”), and John Doe Defendants. In addition, certain of the Goldman Sachs Funds included in this Prospectus and certain other investment portfolios of the Trust were named as nominal defendants. On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, GSAMI, Goldman Sachs, the Trust, Goldman Sachs Variable Insurance Trust (“GSVIT”), the Trustees and Officers of the Trust and GSVIT and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the “Goldman Sachs Funds”) were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005.

The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company Act and the Investment Advisers Act of 1940, (ii) common law breaches of fiduciary duty, and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Investment Company Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI. The complaint also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreement and return of fees paid; an accounting of all Goldman Sachs Funds-related fees, commissions and soft dollar payments; restitution of all

56

SERVICE PROVIDERS

unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

57

Dividends

Each Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:

n	Cash
n	Additional shares of the same class of the same Fund
n	Shares of the same or an equivalent class of another Goldman Sachs Fund. Special restrictions may apply. See the Additional Statement.

You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the applicable Fund. If cash dividends are elected with respect to the Fund’s monthly net investment income dividends, then cash dividends must also be elected with respect to the non-long-term capital gains component, if any, of the Fund’s annual dividend.

The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains are declared and paid as follows:

	Investment Income		Capital Gains
	Dividends		Distributions
Fund	Declared	Paid	Declared and Paid
Enhanced Income	Daily	Monthly	Annually
Ultra-Short Duration Government	Daily	Monthly	Annually
Short Duration Government	Daily	Monthly	Annually
Government Income	Daily	Monthly	Annually
U.S. Mortgages	Daily	Monthly	Annually
Core Fixed Income	Daily	Monthly	Annually
Investment Grade Credit	Daily	Monthly	Annually
Global Income	Monthly	Monthly	Annually
High Yield	Daily	Monthly	Annually
Emerging Markets Debt	Daily	Monthly	Annually

From time to time a portion of a Fund’s dividends may constitute a return of capital.

58

DIVIDENDS

When you purchase shares of a Fund, part of the NAV per share may be represented by undistributed income or undistributed realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.

59

Shareholder Guide

The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds’ Institutional Shares.

   HOW TO BUY SHARES    

How Can I Purchase Institutional Shares Of The Funds?

You may purchase Institutional Shares on any business day at their NAV next determined after receipt of an order. No sales load is charged. You should either:

n

Place an order with Goldman Sachs at 1-800-621-2550 and wire federal funds to The Northern Trust Company (“Northern”), as subcustodian for State Street Bank and Trust Company (“State Street”) (the Fund’s custodian), on the next business day; or

n

Send a check or Federal Reserve draft payable to Goldman Sachs Funds—(Name of Fund and Class of Shares), 71 S. Wacker Drive, Suite 500, Chicago, IL 60606. The Fund will not accept a check drawn on foreign banks, third-party checks, cashier’s checks or official checks, temporary checks, electronic checks, drawer checks, cash, money orders, travelers cheques or credit card checks. In limited situations involving the transfer of retirement assets, the Fund may accept cashier’s checks or official bank checks.

In order to make an initial investment in a Fund, you must furnish to the Fund or Goldman Sachs the Account Application. Purchases of Institutional Shares must be settled within three business days of receipt of a complete purchase order.

How Do I Purchase Shares Through A Financial Institution?

Certain institutions (including banks, trust companies, brokers and investment advisers) that provide recordkeeping, reporting and processing services to their customers may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers and may designate other intermediaries to accept such orders, if approved by the Trust. In these cases:

n	A Fund 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, and the order will be priced at the Fund’s NAV per share next determined after such acceptance (less any applicable redemption fee).
n	Authorized institutions or intermediaries will be responsible for transmitting accepted orders and payments to the Trust within the time period agreed upon by them.

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You should contact your institution or intermediary to learn whether it is authorized to accept orders for the Trust. These institutions may receive payments from the Funds or Goldman Sachs for the services provided by them with respect to the Funds’ Institutional Shares. These payments may be in addition to other payments borne by the Funds.

With respect to the U.S. Mortgages and Investment Grade Credit Funds, Goldman Sachs is also entitled to receive an account service fee equal on an annual basis to 0.05% of each Fund’s average daily net assets attributed to Institutional Shares. This fee is for account services and may be used to make payments to service organizations for account maintenance, processing orders to purchase, redeem and exchange Institutional Shares and other services.

The Investment Adviser, Distributor and/or their affiliates may make payments to authorized dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Funds. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, 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. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also compensate Intermediaries for subaccounting, administrative and/or shareholder processing services that are in addition to the fees paid for these services by the Funds. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the “Payments to Intermediaries” section of the Additional Statement for more information about these payments.

The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or

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salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your authorized dealer or Intermediary for more information about the payments it receives and any potential conflicts of interest.

In addition to Institutional Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses (which affect performance), have different minimum investment requirements and are entitled to different services than Institutional Shares. Information regarding these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus.

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What Is My Minimum Investment In The Funds?

Type of Investor	Minimum Investment
n Banks, trust companies or other     depository institutions investing     for their own account or on behalf     of their clients n  Section 401(k), profit sharing,     money purchase pension, tax-     sheltered annuity, defined benefit     pension or other employee benefit     plans that are sponsored by one     or more employers (including     governmental or church     employers) or employee     organizations n  State, county, city or any     instrumentality, department,     authority or agency thereof n  Corporations with at least $100     million in assets or in outstanding     publicly traded securities n  “Wrap” account sponsors     (provided they have an agreement     covering the arrangement with     GSAM) n  Registered investment advisers     investing for accounts for which     they receive asset-based fees n  Qualified non-profit organizations,     charitable trusts, foundations and endowments	$1,000,000 in Institutional Shares of a Fund alone or in combination with other assets under the management of GSAM and its affiliates
n Individual investors n  Accounts over which GSAM or its     advisory affiliates have investment     discretion	$10,000,000
n Individual Retirement Accounts (IRAs)     for which GSAM or its advisory     affiliates act as fiduciary	No minimum

The minimum investment requirement may be waived for current and former officers, partners, directors or employees of Goldman Sachs or any of its affiliates; brokerage or advisory clients of Goldman Sachs Private Wealth Management; certain mutual fund “wrap” programs; and for other investors at the discretion of the Trust’s officers. No minimum amount is required for subsequent investments.

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What Else Should I Know About Share Purchases?

The Trust reserves the right to:

n	Refuse to open an account if you fail 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).
n	Modify or waive the minimum investment amounts.
n	Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of Institutional Shares of a Fund is evident, or if purchases, sales or exchanges are, or a subsequent abrupt redemption might be, of a size that would disrupt the management of a Fund.
n	Close a Fund to new investors from time to time and reopen any such Fund whenever it is deemed appropriate by a Fund’s Investment Adviser.

Generally, the Funds will not allow non-U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds.

The Funds may allow you to purchase shares with securities instead of cash if consistent with a Fund’s investment policies and operations and if approved by the Fund’s Investment Adviser.

Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for each investor who opens an account with the Funds. Applications without the required information may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to: (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Funds are unable to verify an investor’s identity. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an account and redeeming an investor’s shares pursuant to the customer identification program.

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How Are Shares Priced?

The price you pay or receive when you buy, sell or exchange Institutional Shares is the Fund’s next determined NAV for a share class (as adjusted for any applicable redemption fee). The Funds calculate NAV as follows:

NAV = (Value of Assets of the Class)
- (Liabilities of the Class)
Number of Outstanding Shares of the Class

The Funds’ investments are valued based on market quotations, which may be furnished by a pricing service or provided by securities dealers. If accurate quotations are not readily available, or if the Investment Adviser believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined based on yield equivalents, a pricing matrix or other sources, under valuation procedures established by the Trustees. Debt obligations with a remaining maturity of 60 days or less are valued at amortized cost.

In addition, the Investment Adviser, consistent with applicable regulatory guidance, may determine to make an adjustment to the previous closing prices of securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in foreign markets; market disruptions or market closings; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements on earnings; significant litigation; and regulatory news such as governmental approvals.

One effect of using independent fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).

n NAV per share of each class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York Stock

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	Exchange (normally 4:00 p.m. New York time) or such earlier or later time as the New York Stock Exchange or NASDAQ market may officially close. This occurs after the determination, if any, of the income to be declared as a dividend (except in the case of the Global Income Fund). Fund shares will generally not be priced on any day the New York Stock Exchange is closed.
n	When you buy shares, you pay the NAV next calculated after the Funds receive your order in proper form.
n	When you sell shares, you receive the NAV next calculated after the Funds receive your order in proper form less any applicable redemption fee.
n	On any business day 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. If a Fund does so, it will cease granting same business day credit for purchase and redemption orders received after the Fund’s closing time and credit will be given to the next business day.
n	The Trust reserves the right to reprocess purchase (including dividend re-investments), redemption and exchange transactions that were processed at an NAV other than a Fund’s official closing NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV as adjusted.
n	The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.

Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1-800-621-2550.

Foreign securities may trade in their local markets on days a Fund is closed. As a result, the NAV of a Fund that holds foreign securities may be impacted on days when investors may not purchase or redeem Fund shares.

When Will Shares Be Issued And Dividends Begin To Be Paid?

Global Income Fund: If a purchase order is received in proper form before the Fund’s NAV is determined, shares will be issued the same day and will be entitled to any dividends declared which have a record date on or after such purchase date.

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For all other Funds:

n Shares Purchased by Federal Funds Wire:

n	If a purchase order in proper form specifies a settlement date and is received before the Fund’s NAV is determined that day, shares will be issued and dividends will begin to accrue on the purchased shares on the later of (i) the business day after the purchase order is received, or (ii) the day that the federal funds wire is received by Northern.
n	If a purchase order in proper form does not specify a settlement date, shares will be issued and dividends will begin to accrue on the business day after payment is received. Failure to provide payment on settlement date may result in a delay in accrual.
n	If a purchase order is placed through an Authorized Dealer that settles through the National Securities Clearing Corporation (the “NSCC”), the purchase order will begin accruing on the NSCC settlement date.

n Shares Purchased by Check or Federal Reserve Draft

  n If a purchase order in proper form is received before the Fund’s NAV is determined that day, shares will be issued and dividends will begin to accrue two days after receipt of check or payment.

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   HOW TO SELL SHARES    

How Can I Sell Institutional Shares Of The Funds?

You may arrange to take money out of your account by selling (redeeming) some or all of your shares. Generally, each Fund will redeem its Institutional Shares upon request on any business day at their NAV next determined after receipt of such request in proper form subject to any applicable redemption fee. You may request that redemption proceeds be sent to you by check or by wire (if the wire instructions are on record). Redemptions may be requested in writing or by telephone.

Instructions For Redemptions:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund name and Class of Shares
	n The dollar amount you want to sell
	n How and where to send the proceeds
	n Obtain a Medallion signature guarantee (see details below)
	n Mail the request to:     Goldman Sachs Funds     71 S. Wacker Drive, Suite 500     Chicago, IL 60606
By Telephone:	If you have elected the telephone redemption privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)

Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.

Certain institutions and intermediaries are authorized to accept redemption requests on behalf of the Fund as described under “How Do I Purchase Shares Through A Financial Institution?”

When Do I Need A Medallion Signature Guarantee To Redeem Shares?

A Medallion signature guarantee may be required if:

n	You would like the redemption proceeds sent to an address that is not your address of record; or
n	You would like to change your current bank designations.

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A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required for executors, trustees or corporations or when deemed appropriate by the Transfer Agent.

What Do I Need To Know About Telephone Redemption Requests?

The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs employs reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:

n	All telephone requests are recorded.
n	Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application with a Medallion signature guarantee. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.
n	For the 30-day period following a change of address, telephone redemptions will only be filled by a wire transfer to the bank account designated in the Account Applications (see immediately preceding bullet point). In order to receive the redemption by check during this time period, the redemption request must be a written, Medallion signature guaranteed letter.
n	The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions.

How Are Redemption Proceeds Paid?

By Wire: You may arrange for your redemption proceeds to be wired as federal funds to the domestic bank account designated in your Account Application. The following general policies govern wiring redemption proceeds:

n	Redemption proceeds will normally be wired on the next business day in federal funds (for a total of one business day delay), but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
n	Although redemption proceeds will normally be wired as described above, under certain circumstances, redemption requests or payments may be postponed or

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	suspended as permitted pursuant to Section 22(e) of the Investment Company Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by the Fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption.
n	If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days. If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day.
n	To change the bank designated on your Account Application, you must send written instructions signed by an authorized person designated on the Account Application with a Medallion signature guarantee to the Transfer Agent.
n	Neither the Trust, Goldman Sachs nor any other institution assumes any responsibility for the performance of your bank or any intermediaries in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such intermediaries.

By Check: You may elect in writing to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of a properly executed redemption request. If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.

What Do I Need To Know About The Redemption Fee?

The Global Income, High Yield and Emerging Markets Debt Funds will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Funds use a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of a Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The redemption fee does not apply to transactions involving the following:

n Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.

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n	Redemptions of shares that are acquired or redeemed in connection with the participation in a systematic withdrawal program or automatic investment plan.
n	Redemptions of shares in connection with a regularly scheduled automatic rebalancing of assets by certain mutual fund asset allocation programs.
n	Redemptions of shares maintained in omnibus accounts by the Funds’ transfer agent on behalf of trust companies and bank trust departments investing assets held in a fiduciary, agency, advisory, custodial or similar capacity and over which the trust companies and bank trust departments or other plan fiduciaries or participants (in the case of certain retirement plans) have full or shared investment discretion.
n	Total or partial redemptions of shares held: (i) through retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended, that are maintained by the Funds’ transfer agent on an omnibus basis, and (ii) by financial institutions providing hedging services in support of non-qualified deferred compensation plans offering the Goldman Sachs Funds where Fund shares are purchased and redeemed not more often than monthly on a date or dates determined by the financial institution or plan sponsor (or administrator).
n	Redemption of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.

The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future to reflect, among other factors, regulatory requirements mandated by the SEC.

In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as operational limitations, contractual limitations and further guidance from the SEC or other regulators.

What Else Do I Need To Know About Redemptions?

The following generally applies to redemption requests:

n	Institutional shares of each Fund (other than the Global Income Fund) earn dividends declared on the day the shares are redeemed.
n	Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received.

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n Institutions (including banks, trust companies, brokers and investment advisers) are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, these institutions may set times by which they must receive redemption requests. These institutions may also require additional documentation from you.

The Trust reserves the right to:

n	Redeem your shares in the event an Institution’s relationship with Goldman Sachs is terminated, and you do not transfer your Account to another Institution with a relationship with Goldman Sachs. The Trust will not be responsible for any loss in an investor’s account resulting from that redemption.
n	Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interest of the Trust.
n	Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities.
n	Reinvest any dividends or other distributions which you have elected to receive in cash should your check for such dividends or other distributions be returned to a Fund as undeliverable or remain uncashed for six months. In addition, that distribution and all future distributions payable to you will be reinvested at the NAV on the day of reinvestment in additional Institutional Shares of the Fund that pays the distributions. No interest will accrue on amounts represented by uncashed distribution or redemption checks.

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Can I Exchange My Investment From One Fund To Another?

You may exchange Institutional Shares of a Fund at NAV for Institutional Shares of another Goldman Sachs Fund. Redemption of shares (including by exchange) of the Global Income, High Yield and Emerging Markets Debt Funds that are held for 30 calendar days or less may, however, be subject to a redemption fee as described above under “What Do I Need To Know About The Redemption Fee?” The exchange privilege may be materially modified or withdrawn at any time upon 60 days’ written notice to you.

Instructions For Exchanging Shares:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund names and Class of Shares
	n The dollar amount to be exchanged
	n Mail the request to:     Goldman Sachs Funds     71 S. Wacker Drive, Suite 500     Chicago, IL 60606
By Telephone:	If you have elected the telephone exchange privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)

You should keep in mind the following factors when making or considering an exchange:

n	You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange.
n	All exchanges which represent an initial investment in a Fund must satisfy the minimum initial investment requirements of that Fund or the entire balance of the original Fund account should be exchanged. This requirement may be waived at the discretion of the Trust.
n	Telephone exchanges normally will be made only to an identically registered account.
n	Exchanges are available only in states where exchanges may be legally made.
n	It may be difficult to make telephone exchanges in times of drastic economic or market conditions.
n	Goldman Sachs may use reasonable procedures described under “What Do I Need To Know About Telephone Redemption Requests?” in an effort to prevent unauthorized or fraudulent telephone exchange requests.
n	Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted.

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n Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund.

For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. You should consult your tax adviser concerning the tax consequences of an exchange.

What Types Of Reports Will I Be Sent Regarding Investments in Institutional Shares?

You will be provided with a printed confirmation of each transaction in your account and a monthly statement. A year-to-date statement for your account will be provided upon request made to Goldman Sachs. If your account is held in a “street name” you may receive your statements and confirmations on a different schedule.

You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting Goldman Sachs Funds by phone at 1-800-621-2550 or by mail at Goldman Sachs Funds, 71 S. Wacker Dr., Suite 500, Chicago, IL 60606. The Funds will begin sending individual copies to you within 30 days after receipt of your revocation.

In addition, Institutions and financial intermediaries will be responsible for providing any communications from a Fund to its shareholders, including but not limited to prospectuses, prospectus supplements, proxy materials and notices regarding the sources of dividend payments pursuant to Section 19 of the Investment Company Act.

   RESTRICTIONS ON EXCESSIVE TRADING PRACTICES   

Policies and Procedures on Excessive Trading Practices. In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view to longer-term investment purposes only that are consistent with the investment policies and practices of the respective Funds. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm fund performance and result in dilution in the value of Fund shares held by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any

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SHAREHOLDER GUIDE

investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive trading or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to a Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Trust or its shareholders or would subordinate the interests of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.

To deter excessive shareholder trading, the High Yield, Global Income and Emerging Markets Debt Funds described in this Prospectus, certain other Fixed Income Funds and the International Equity Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase subject to certain exceptions. See “Shareholder Guide—What Do I Need To Know About The Redemption Fee?” for more information about the redemption fee, including transactions and certain omnibus accounts to which the redemption fee does not apply.

Pursuant to the policy adopted by the Board of Trustees, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive. Goldman Sachs reviews on a regular, periodic basis available information relating to the trading activity in the Funds in order to assess the likelihood that a Fund may be the target of excessive trading. As part of its excessive trading surveillance process, Goldman Sachs, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. Consistent with the standards described above, if, in its judgment, Goldman Sachs detects excessive, short term trading, Goldman Sachs is authorized to reject or restrict a purchase or exchange request and may further seek to close an investor’s account with a Fund. Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.

Fund shares may be held through omnibus arrangements maintained by intermediaries such as broker-dealers, investment advisers, transfer agents, administrators and insurance companies. In addition Fund shares may be held in omnibus 401(k) plans, employee benefit plans and other group accounts. Omnibus accounts

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include multiple investors and such accounts typically provide the Funds with a net purchase or redemption request on any given day where the purchases and redemptions of Fund shares by the investors are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are not known by the Funds. A number of these financial intermediaries may not have the capability or may not be willing to apply the Funds’ market timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, a Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts is limited. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Funds and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance.

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Taxation

As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds.

Unless your investment is an IRA or other tax-advantaged account, you should consider the possible tax consequences of Fund distributions and the sale of your Fund shares.

   DISTRIBUTIONS   

Each Fund contemplates declaring as dividends each year all or substantially all of its taxable income. Distributions you receive from the Funds are generally subject to federal income tax, and may also be subject to state or local taxes. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash. For federal tax purposes, Fund distributions attributable to short-term capital gains and net investment income are generally taxable to you as ordinary income, while distributions attributable to long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.

Under current provisions of the Internal Revenue Code, the maximum long-term capital gain tax rate applicable to individuals, estates, and trusts is 15%. A sunset provision provides that the 15% long-term capital gain rate will revert back to its prior level for taxable years beginning after December 31, 2008. (The 15% maximum tax rate also applies to certain qualifying dividend income, but Fund distributions will not qualify for that favorable treatment and will also not qualify for the corporate dividends received deduction because the Funds will be earning interest income rather than dividend income.)

Each Fund’s transactions in derivatives (such as futures contracts and swaps) will be subject to special tax rules, the effect of which may be to accelerate income to a Fund, defer losses to a Fund, cause adjustments in the holding periods of a Fund’s securities and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to you. A Fund’s use of derivatives may result in the Fund realizing more short-term capital gains and ordinary income subject to tax at ordinary income tax rates than it would if it did not use derivatives.

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Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in October, November or December but paid in January are taxable as if they were paid in December.

The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may be subject to foreign withholding or other foreign taxes on income or gain from certain foreign securities. In general, the Funds may deduct these taxes in computing their taxable income. Shareholders of the Global Income and Emerging Markets Debt Funds may be entitled to claim a credit or a deduction with respect to foreign taxes if a Fund elects to pass through these taxes to you.

You will be mailed annual tax information with respect to your investment in each Fund in January of the following year.

   SALES AND EXCHANGES   

Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this gain or loss is long-term or short-term depending on whether your holding period exceeds twelve months, except that any loss realized on shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a sale, exchange or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that same Fund within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition (such as pursuant to a dividend reinvestment in shares of the Fund.) If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.

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TAXATION

   OTHER INFORMATION   

When you open your account, you should provide your Social Security Number or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so.

Non-U.S. investors may be subject to U.S. withholding and estate tax. However, withholding is generally not required on properly designated distributions of short-term capital gains and qualified interest income paid to non-U.S. investors after November 1, 2005 and before October 31, 2008. Although this designation will be made for short-term capital gain distributions, the Funds do not anticipate making any qualified interest income designation. Therefore, all distributions of interest income will be subject to withholding when paid to non-U.S. investors.

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Appendix A
Additional Information on Portfolio
Risks, Securities and Techniques

   A.  General Portfolio Risks   

The Funds will be subject to the risks associated with fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase (although many mortgage-related securities will have less potential than other debt securities for capital appreciation during periods of declining rates). Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that the issuer or guarantor could default on its obligations, and a Fund will not recover its investment. Call risk and extension risk are normally present in adjustable rate mortgage loans (“ARMs”), Mortgage-Backed Securities and asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can either shorten (call risk) or lengthen (extension risk). In general, if interest rates on new mortgage loans fall sufficiently below the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to increase. Conversely, if mortgage loan interest rates rise above the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to decrease. In either case, a change in the prepayment rate can result in losses to investors. The same would be true of asset-backed securities, such as securities backed by car loans.

The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater expenses which must be borne by a Fund and its shareholders and is also likely to result in higher short-term capital gains taxable to shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of a Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See “Financial Highlights” in Appendix B for a statement of the Funds’ historical portfolio turnover rates.

The following sections provide further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental investment restrictions that cannot be changed

80

APPENDIX A

without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in a Fund’s investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs.

   B.  Other Portfolio Risks   

Credit/Default Risks. Debt securities purchased by the Funds may include securities (including zero coupon bonds) issued by the U.S. government (and its agencies, instrumentalities and sponsored enterprises), foreign governments, domestic and foreign corporations, banks and other issuers. Some of these fixed-income securities are described in the next section below. Further information is provided in the Additional Statement.

Debt securities rated BBB- or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB- or Baa3 are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is determined by the Investment Adviser to be of comparable credit quality. If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the Investment Adviser will consider which action, including the sale of the security, is in the best interest of a Fund and its shareholders.

Certain Funds may invest in fixed-income securities rated BB or Ba or below (or comparable unrated securities) which are commonly referred to as “junk bonds.” Junk bonds are considered predominantly speculative and may be questionable as to principal and interest payments.

In some cases, junk bonds may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will present greater speculative risks than those associated with investment in investment grade bonds. Also, to the extent that the rating assigned

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to a security in a Fund’s portfolio is downgraded by a rating organization, the market price and liquidity of such security may be adversely affected.

Risks of Derivative Investments. A Fund’s transactions in options, futures, options on futures, swaps, interest rate caps, floors and collars, structured securities, inverse floating-rate securities, stripped mortgage-backed securities and foreign currency transactions involve additional risk of loss. A Fund may enter into a derivative investment for hedging purposes, for example, in an effort to preserve a return or spread, protect against currency fluctuations, protect against adverse price movements, manage portfolio duration or manage a Fund’s credit exposures. Even so, loss can result from a lack of correlation between changes in the value of derivative investments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative investments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices, interest rates, currency prices or credit events.

In addition, each Fund may invest in derivative investments for non-hedging purposes (that is, to seek to increase total return) in connection with the management of the Fund, including the management of the Fund’s interest rate, currency, duration and credit exposures. Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss.

Derivative Mortgage-Backed Securities (such as principal-only (“POs”), interest-only (“IOs”) or inverse floating rate securities) are particularly exposed to call and extension risks. Small changes in mortgage prepayments can significantly impact the cash flow and the market value of these securities. In general, the risk of faster than anticipated prepayments adversely affects IOs, super floaters and premium priced Mortgage-Backed Securities. The risk of slower than anticipated prepayments generally adversely affects POs, floating-rate securities subject to interest rate caps, support tranches and discount priced Mortgage-Backed Securities. In addition, particular derivative securities may be leveraged such that their exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is magnified.

Some floating-rate derivative debt securities can present more complex types of derivative and interest rate risks. For example, range floaters are subject to the risk that the coupon will be reduced below market rates if a designated interest rate floats outside of a specified interest rate band or collar. Dual index or yield curve floaters are subject to lower prices in the event of an unfavorable change in the spread between two designated interest rates.

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APPENDIX A

Risks of Foreign Investments. In general, certain Funds may make foreign investments. Foreign investments involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers. Foreign investments may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and changes in exchange control regulations (e.g., currency blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the U.S. dollar) in which a portfolio security is quoted or denominated relative to the U.S. dollar would reduce the value of the portfolio security. In addition, if the currency in which a Fund receives dividends, interest or other payments declines in value against the U.S. dollar before such income is distributed as dividends to shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.

Brokerage commissions, custodial services and other costs relating to investment in international securities markets generally are more expensive than in the United States. In addition, clearance and settlement procedures may be different in foreign countries and, in certain markets, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. issuers. There may be less publicly available information about a foreign issuer than a U.S. issuer. In addition, there is generally less government regulation of foreign markets, companies and securities dealers than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States. Foreign securities markets may have substantially less volume than U.S. securities markets and securities of many foreign issuers are less liquid and more volatile than securities of comparable domestic issuers. Furthermore, with respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments (or, in some cases, capital gains distributions), limitations on the removal of funds or other assets from such countries, and risks of political or social instability or diplomatic developments which could adversely affect investments in those countries.

Concentration of a Fund’s assets in one or a few countries and currencies will subject a Fund to greater risks than if a Fund’s assets were not geographically concentrated.

Risks of Sovereign Debt. Investment in sovereign debt obligations by a Fund involves risks not present in debt obligations of corporate issuers. The issuer of the

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debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and a Fund may have limited recourse to compel payment in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn a Fund’s NAV, to a greater extent than the volatility inherent in debt obligations of U.S. issuers.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.

Risks of Euro. On January 1, 1999, the European Economic and Monetary Union (EMU) introduced a new single currency called the euro. The euro has replaced the national currencies of the following member countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. In addition, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia became members of the EMU on May 1, 2004, but these countries will not adopt the euro as their new currency until they can show their economies have converged with the economies of the euro zone.

The European Central Bank has control over each country’s monetary policies. Therefore, the member countries no longer control their own monetary policies by directing independent interest rates for their currencies. The national governments of the participating countries, however, have retained the authority to set tax and spending policies and public debt levels.

The change to the euro as a single currency is relatively new and untested. The elimination of currency risk among EMU countries has affected the economic environment and behavior of investors, particularly in European markets, but the long-term impact of those changes on currency values or on the business or financial condition of European countries and issuers cannot be fully assessed at this time. In addition, the introduction of the euro presents other unique uncertainties, including the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax and labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other countries that now are or may in the future become members of the European Union (“EU”) will have an impact on the euro. Also, it is possible that the euro could be abandoned in the future by countries that have already adopted its use. In May and June 2005, voters in France and the Netherlands rejected

84

APPENDIX A

ratification of the EU Constitution causing some other countries to postpone moves toward ratification. These or other events, including political and economic developments, could cause market disruptions, and could adversely affect the value of securities held by the Funds. Because of the number of countries using this single currency, a significant portion of the assets held by the Funds may be denominated in the euro.

Risks of Emerging Countries. Certain Funds may invest in securities of issuers located in emerging countries. The risks of foreign investment are heightened when the issuer is located in an emerging country. Emerging countries are generally located in the Asia and Pacific regions, the Middle East, Eastern Europe, Latin, Central and South America and Africa. A Fund’s purchase and sale of portfolio securities in certain emerging countries may be constrained by limitations relating to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on the aggregate trading volume by or holdings of a Fund, the Investment Adviser, its affiliates and their respective clients and other service providers. A Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.

Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees which may limit investment in such countries or increase the administrative costs of such investments. For example, certain Asian countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the issuer available for purchase by nationals. In addition, certain countries may restrict or prohibit investment opportunities in issuers or industries deemed important to national interests. Such restrictions may affect the market price, liquidity and rights of securities that may be purchased by a Fund. The repatriation of both investment income and capital from certain emerging countries is subject to restrictions such as the need for governmental consents. In situations where a country restricts direct investment in securities (which may occur in certain Asian and other countries), a Fund may invest in such countries through other investment funds in such countries.

Many emerging countries have recently experienced currency devaluations and substantial (and, in some cases, extremely high) rates of inflation. Other emerging countries have experienced economic recessions. These circumstances have had a negative effect on the economies and securities markets of those emerging countries. Economies in emerging countries generally are dependent heavily upon

85

commodity prices and international trade and, accordingly, have been and may continue to be affected adversely by the economies of their trading partners, trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.

Many emerging countries are subject to a substantial degree of economic, political and social instability. Governments of some emerging countries are authoritarian in nature or have been installed or removed as a result of military coups, while governments in other emerging countries have periodically used force to suppress civil dissent. Disparities of wealth, the pace and success of democratization, and ethnic, religious and racial disaffection, among other factors, have also led to social unrest, violence and/or labor unrest in some emerging countries. Unanticipated political or social developments may result in sudden and significant investment losses. Investing in emerging countries involves greater risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. As an example, in the past some Eastern European governments have expropriated substantial amounts of private property, and many claims of the property owners have never been fully settled. There is no assurance that similar expropriations will not recur in Eastern European or other countries.

A Fund’s investment in emerging countries may also be subject to withholding or other taxes, which may be significant and may reduce the return from an investment in such countries to the Fund.

Settlement procedures in emerging countries are frequently less developed and reliable than those in the United States and may involve a Fund’s delivery of securities before receipt of payment for their sale. In addition, significant delays may occur in certain markets in registering the transfer of securities. Settlement or registration problems may make it more difficult for a Fund to value its portfolio securities and could cause the Fund to miss attractive investment opportunities, to have a portion of its assets uninvested or to incur losses due to the failure of a counterparty to pay for securities the Fund has delivered or the Fund’s inability to complete its contractual obligations because of theft or other reasons.

The creditworthiness of the local securities firms used by a Fund in emerging countries may not be as sound as the creditworthiness of firms used in more developed countries. As a result, the Fund may be subject to a greater risk of loss if a securities firm defaults in the performance of its responsibilities.

The small size and inexperience of the securities markets in certain emerging countries and the limited volume of trading in securities in those countries may

86

APPENDIX A

make a Fund’s investments in such countries less liquid and more volatile than investments in countries with more developed securities markets (such as the United States, Japan and most Western European countries). A Fund’s investments in emerging countries are subject to the risk that the liquidity of a particular investment, or investments generally, in such countries will shrink or disappear suddenly and without warning as a result of adverse economic, market or political conditions or adverse investor perceptions, whether or not accurate. Because of the lack of sufficient market liquidity, a Fund may incur losses because it will be required to effect sales at a disadvantageous time and then only at a substantial drop in price. Investments in emerging countries may be more difficult to price precisely because of the characteristics discussed above and lower trading volumes.

A Fund’s use of foreign currency management techniques in emerging countries may be limited. Due to the limited market for these instruments in emerging countries, all or a significant portion of the Funds’ currency exposure in emerging countries may not be covered by such instruments.

Risks of Investments in Central and South America. A significant portion of the Emerging Markets Debt Fund’s portfolio may be invested in issuers located in Central and South American countries. The economies of Central and South American countries have experienced considerable difficulties in the past decade, including high inflation rates, high interest rates and currency devaluations. As a result, Central and South American securities markets have experienced great volatility. In addition, a number of Central and South American countries are among the largest emerging country debtors. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies. The political history of certain Central and South American countries has been characterized by political uncertainty, intervention by the military in civilian and economic spheres and political corruption. Such developments, if they were to recur, could reverse favorable trends toward market and economic reform, privatization and removal of trade barriers. Certain Central and South American countries have entered into regional trade agreements that would, among other things, reduce barriers between countries, increase competition among companies and reduce government subsidies in certain industries. No assurance can be given that these changes will result in the economic stability intended. There is a possibility that these trade arrangements will not be implemented, will be implemented but not completed or will be completed but then partially or completely unwound. Any of the foregoing risk factors could have an adverse impact on the Fund’s investments in Central and South America.

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Risks of Illiquid Securities. Each Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include:

n	Both domestic and foreign securities that are not readily marketable
n	Certain municipal leases and participation interests
n	Certain stripped Mortgage-Backed Securities
n	Repurchase agreements and time deposits with a notice or demand period of more than seven days
n	Certain over-the-counter options
n	Certain structured securities and all swap transactions
n	Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called “4(2) commercial paper” or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“144A Securities”).

Investing in 144A Securities may decrease the liquidity of a Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:

n	U.S. Government Securities
n	Repurchase agreements collateralized by U.S. Government Securities

When a Fund’s assets are invested in such instruments, the Fund may not be achieving its investive objective.

   C.  Portfolio Securities and Techniques   

This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks.

The Funds may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund’s investment objective and policies. Further information is provided in the Additional Statement, which is available upon request.

88

APPENDIX A

U.S. Government Securities. Each Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (a) the full faith and credit of the U.S. Treasury; (b) the right of the issuer to borrow from the U.S. Treasury; (c) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (d) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components of stripped U.S. Government Securities are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation.

Custodial Receipts and Trust Certificates. Each Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities, Municipal Securities or other types of securities in which a Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. Each Fund may also invest in separately issued interests in custodial receipts and trust certificates.

Mortgage-Backed Securities. Certain Funds may invest in Mortgage-Backed Securities. Mortgage-Backed Securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by real property. Mortgage-Backed Securities can be backed by either fixed rate mortgage loans or adjustable rate mortgage loans, and may be issued by either a governmental or non-governmental entity.

Certain Funds may invest in privately-issued mortgage pass-through securities that represent interests in pools of mortgage loans that are issued by trusts formed by originators of and institutional investors in mortgage loans (or represent interests in custodial arrangements administered by such institutions). These originators and

89

institutions include commercial banks, savings and loans associations, credit unions, savings banks, mortgage bankers, insurance companies, investment banks or special purpose subsidiaries of the foregoing. The pools underlying privately-issued mortgage pass-through securities consist of mortgage loans secured by mortgages or deeds of trust creating a first lien on commercial, residential, residential multi-family and mixed residential/ commercial properties. These Mortgage-Backed Securities typically do not have the same credit standing as U.S. government guaranteed Mortgage-Backed Securities.

Privately-issued mortgage pass-through securities generally offer a higher yield than similar securities issued by a government entity because of the absence of any direct or indirect government or agency payment guarantees. However, timely payment of interest and principal on mortgage loans in these pools may be supported by various forms of insurance or guarantees, including individual loan, pool and hazard insurance, subordination and letters of credit. The insurance and guarantees are issued by government entities, private insurers, banks and mortgage poolers. Mortgage-Backed Securities without insurance or guarantees may also be purchased by the Fund if they have the required rating from an NRSRO. Some Mortgage-Backed Securities issued by private organizations may not be readily marketable.

Mortgage-Backed Securities may include multiple class securities, including collateralized mortgage obligations (“CMOs”) and Real Estate Mortgage Investment Conduit (“REMIC”) pass-through or participation certificates. A REMIC is a CMO that qualifies for special tax treatment under the Code and invests in certain mortgages principally secured by interests in real property and other permitted investments. CMOs provide an investor with a specified interest in the cash flow from a pool of underlying mortgages or of other Mortgage-Backed Securities. CMOs are issued in multiple classes each with a specified fixed or floating interest rate and a final scheduled distribution date. In many cases, payments of principal are applied to the CMO classes in the order of their respective stated maturities, so that no principal payments will be made on a CMO class until all other classes having an earlier stated maturity date are paid in full.

Sometimes, however, CMO classes are “parallel pay,” i.e., payments of principal are made to two or more classes concurrently. In some cases, CMOs may have the characteristics of a stripped mortgage-backed security whose price can be highly volatile. CMOs may exhibit more or less price volatility and interest rate risk than other types of Mortgage-Backed Securities, and under certain interest rate and payment scenarios, the Fund may fail to recoup fully its investment in certain of these securities regardless of their credit quality.

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APPENDIX A

To the extent a Fund concentrates its investments in pools of Mortgage-Backed Securities sponsored by the same sponsor or serviced by the same servicer, it may be subject to additional risks. Servicers of mortgage-related pools collect payments on the underlying mortgage assets for pass-through to the pool on a periodic basis. Upon insolvency of the servicer, the pool may be at risk with respect to collections received by the servicer but not yet delivered to the pool.

Mortgaged-Backed Securities also include stripped Mortgage-Backed Securities (“SMBS”), which are derivative multiple class Mortgage-Backed Securities. SMBS are usually structured with two different classes: one that receives substantially all of the interest payments and the other that receives substantially all of the principal payments from a pool of mortgage loans. The market value of SMBS consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. The yields on SMBS that receive all or most of the interest from mortgage loans are generally higher than prevailing market yields on other Mortgage-Backed Securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped.

Asset-Backed Securities. Each Fund may invest in asset-backed securities. Asset-backed securities are securities whose principal and interest payments are collateralized by pools of assets such as auto loans, credit card receivables, leases, installment contracts and personal property. Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, a Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. Asset-backed securities present credit risks that are not presented by Mortgage-Backed Securities. This is because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. If the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that a Fund’s recoveries on repossessed collateral may not be available to support payments on the securities. In the event of a default, a Fund may suffer a loss if it cannot sell collateral quickly and receive the amount it is owed.

Municipal Securities. Certain Funds may invest in securities and instruments issued by state and local government issuers. Municipal Securities in which a Fund may invest consist of bonds, notes, commercial paper and other instruments

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(including participation interests in such securities) issued by or on behalf of the states, territories and possessions of the United States (including the District of Columbia) and their political subdivisions, agencies or instrumentalities.

Municipal Securities include both “general” and “revenue” bonds and may be issued to obtain funds for various purposes. General obligations are secured by the issuer’s pledge of its full faith, credit and taxing power. Revenue obligations are payable only from the revenues derived from a particular facility or class of facilities.

Municipal Securities are often issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Municipal Securities include private activity bonds, pre-refunded municipal securities and auction rate securities.

The obligations of the issuer to pay the principal of and interest on a Municipal Security are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest or imposing other constraints upon the enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power or ability of the issuer to pay when due the principal of or interest on a Municipal Security may be materially affected.

In addition, Municipal Securities include municipal leases, certificates of participation and “moral obligation” bonds. A municipal lease is an obligation issued by a state or local government to acquire equipment or facilities. Certificates of participation represent interests in municipal leases or other instruments, such as installment purchase agreements. Moral obligation bonds are supported by a moral commitment but not a legal obligation of a state or local government. Municipal leases, certificates of participation and moral obligation bonds frequently involve special risks not normally associated with general obligation or revenue bonds. In particular, these instruments permit governmental issuers to acquire property and equipment without meeting constitutional and statutory requirements for the issuance of debt. If, however, the governmental issuer does not periodically appropriate money to enable it to meet its payment obligations under these instruments, it cannot be legally compelled to do so. If a default occurs, it is likely that a Fund would be unable to obtain another acceptable source of payment. Some municipal leases, certificates of participation and moral obligation bonds may be illiquid.

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APPENDIX A

Municipal Securities may also be in the form of a tender option bond, which is a Municipal Security (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 with the agreement of a third party, such as a bank, broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities to the institution. After payment of a fee to the financial institution that provides this option, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. An institution may 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 Fund’s duration. Certain tender option bonds may be illiquid.

Municipal Securities may be backed by letters of credit or other forms of credit enhancement issued by domestic or foreign banks 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 Securities. Letters of credit and other obligations of foreign banks and financial institutions 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 are generally not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks.

Certain Funds may invest 25% or more of the value of their respective total assets in Municipal Securities which are related in such a way that an economic, business or political development or change affecting one Municipal Security would also affect the other Municipal Security. For example, a Fund may invest all of its assets in (a) Municipal Securities 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 Securities whose issuers are in the same state; or (c) industrial development obligations. Concentration of a Fund’s investments in these Municipal Securities will subject the Fund, to a greater extent than if such investment was not so concentrated, to the risks of adverse economic, business or political developments affecting the particular state, industry or other area of concentration.

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Brady Bonds and Similar Instruments. Certain Funds may invest in debt obligations commonly referred to as “Brady Bonds.” Brady Bonds are created through the exchange of existing commercial bank loans to foreign borrowers for new obligations in connection with debt restructurings under a plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the “Brady Plan”).

Brady Bonds involve various risk factors including the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds in which a Fund may invest will not be subject to restructuring arrangements or to requests for new credit, which may cause the Fund to suffer a loss of interest or principal on its holdings.

In addition, certain Funds may invest in other interests issued by entities organized and operated for the purpose of restructuring the investment characteristics of instruments issued by emerging country issuers. These types of restructuring involve the deposit with or purchase by an entity of specific instruments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying instruments. Certain issuers of such structured securities may be deemed to be “investment companies” as defined in the Investment Company Act. As a result, a Fund’s investment in such securities may be limited by certain investment restrictions contained in the Investment Company Act.

Corporate Debt Obligations; Trust Preferred Securities; Convertible Securities. Certain Funds may invest in corporate debt obligations, trust preferred securities and convertible securities. Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. A trust preferred security is a long dated bond (for example, 30 years) with preferred features. The preferred features are that payment of interest can be deferred for a specified period without initiating a default event. The securities are generally senior in claim to standard preferred stock but junior to other bondholders. Certain Funds may also invest in other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities.

Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which a Fund invests are subject to the same rating criteria as its other investments in fixed-income securities. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline

94

APPENDIX A

as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.

Bank Obligations. Certain Funds may invest in obligations issued or guaranteed by U.S. or foreign banks. Bank obligations, including without limitation, time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulations. Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry.

Foreign Currency Transactions. Certain Funds may, to the extent consistent with their investment policies, purchase or sell foreign currencies on a cash basis or through forward contracts. A forward contract involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract.

Certain Funds may engage in foreign currency transactions for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. In addition, certain Funds may enter into foreign currency transactions to seek a closer correlation between the Fund’s overall currency exposures and the currency exposures of the Fund’s performance benchmark. Certain Funds may also enter into such transactions to seek to increase total return, which is considered a speculative practice.

Some Funds may also engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted. A Fund may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the Investment Adviser, it would be beneficial to convert such currency into U.S. dollars at a later date (e.g., the Investment Adviser may anticipate the foreign currency to appreciate against the U.S. dollar).

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Currency exchange rates may fluctuate significantly over short periods of time, causing, along with other factors, a Fund’s NAV to fluctuate (when the Fund’s NAV fluctuates, the value of your shares may go up or down). Currency exchange rates also can be affected unpredictably by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.

The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on an exchange. Such contracts are subject to the risk that the counterparty to the contract will default on its obligations. Since these contracts are not guaranteed by an exchange or clearinghouse, a default on a contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or could force the Fund to cover its purchase or sale commitments, if any, at the current market price.

Structured Securities and Inverse Floaters. Certain Funds may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may present a greater degree of market risk than many types of securities, and may be more volatile, less liquid and more difficult to price accurately than less complex securities.

Structured securities include, but are not limited to, inverse floating rate debt securities (“inverse floaters”). The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value.

Floating and Variable Rate Obligations. Each Fund may purchase floating and variable rate obligations. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels.

96

APPENDIX A

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. 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 interests in a pool of debt obligations held by a bank or other financial institutions.

Zero Coupon, Deferred Interest, Pay-In-Kind and Capital Appreciation Bonds. Each Fund may invest in zero coupon bonds, deferred interest, pay-in-kind and capital appreciation bonds. These bonds are issued at a discount from their face value because interest payments are typically postponed until maturity. Pay-in-kind securities are securities that have interest payable by the delivery of additional securities. The market prices of these securities generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit quality.

Mortgage Dollar Rolls. Certain Funds may enter into mortgage dollar rolls. A mortgage dollar roll involves the sale by a Fund of securities for delivery in the current month. The Fund simultaneously contracts with the same counterparty to repurchase substantially similar (same type, coupon and maturity) but not identical securities on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund benefits to the extent of any difference between (a) the price received for the securities sold and (b) the lower forward price for the future purchase and/or fee income plus the interest earned on the cash proceeds of the securities sold. Unless the benefits of a mortgage dollar roll exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the roll, the use of this technique will diminish the Fund’s performance.

Successful use of mortgage dollar rolls depends upon the Investment Adviser’s ability to predict correctly interest rates and mortgage prepayments. If the Investment Adviser is incorrect in its prediction, a Fund may experience a loss. The Funds do not currently intend to enter into mortgage dollar rolls for financing and do not treat them as borrowings.

Options on Securities, Securities Indices and Foreign Currencies. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller)

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of the option the obligation to sell, the underlying instrument during the option period. Each Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest. Certain Funds may also, to the extent consistent with its investment policies, purchase and sell (write) put and call options on foreign currencies.

The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the Investment Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase a Fund’s transaction costs. Options written or purchased by the Funds may be traded on either U.S. or foreign exchanges or over-the-counter. Foreign and over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.

Yield Curve Options. Each Fund may enter into options on the yield “spread” or differential between two securities. Such transactions are referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, such options present a risk of loss even if the yield of one of the underlying securities remains constant, or if the spread moves in a direction or to an extent which was not anticipated.

Futures Contracts and Options on Futures Contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument or currency at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on particular securities, foreign currencies, securities indices and other financial

98

APPENDIX A

instruments and indices. The Funds may engage in futures transactions on U.S. and (in the case of certain Funds) foreign exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in interest rates, securities prices or, to the extent a Fund invests in foreign securities, currency exchange rates, or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

Futures contracts and related options present the following risks:

n	While a Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance than if the Fund had not entered into any futures contracts or options transactions.
n	Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and a Fund may be exposed to additional risk of loss.
n	The loss incurred by a Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received.
n	Futures markets are highly volatile and the use of futures may increase the volatility of a Fund’s NAV.
n	As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to a Fund.
n	Futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
n	Foreign exchanges may not provide the same protection as U.S. exchanges.

When-Issued Securities and Forward Commitments. 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 settlement time. When-issued securities are securities that have been authorized, but not yet issued. When-issued securities are purchased in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. A forward

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commitment involves entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when-issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate.

Lending of Portfolio Securities. Each Fund may engage in securities lending. Securities lending involves the lending of securities owned by a Fund to financial institutions such as certain broker-dealers, including, as permitted by the SEC, Goldman Sachs. The borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. Government Securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by a Fund in short-term investments, including unregistered investment pools managed by the Investment Adviser or its affiliates and from which the Investment Adviser or its affiliates may receive fees. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or appreciation, and a Fund will be responsible for any loss that might result from its investment of the borrowers’ collateral. If the Investment Adviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of a Fund (including the loan collateral). Loan collateral (including any investment of that collateral) is not subject to the percentage limitations described elsewhere in this Prospectus regarding investments in particular types of fixed-income and other securities.

A Fund may lend its securities to increase its income. A Fund may, however, experience delay in the recovery of its securities or incur a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund or becomes insolvent.

Repurchase Agreements. Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. Each Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation. Some Funds may also enter into repurchase agreements involving certain foreign government securities.

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APPENDIX A

If the other party or “seller” defaults, a Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, a Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.

Certain Funds, together with other registered investment companies having advisory agreements with the Investment 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.

Borrowings and Reverse Repurchase Agreements. Each Fund can borrow money from banks and other financial institutions, and certain Funds may enter into reverse repurchase agreements in amounts not exceeding one-third of a Fund’s total assets. A Fund may not make additional investments if borrowings exceed 5% of its total assets. Reverse repurchase agreements involve the sale of securities held by a Fund (excluding the Enhanced Income Fund) subject to the Fund’s agreement to repurchase them at a mutually agreed upon date and price (including interest). These transactions may be entered into as a temporary measure for emergency purposes or to meet redemption requests. Reverse repurchase agreements may also be entered into when the Investment Adviser expects that the interest income to be earned from the investment of the transaction proceeds will be greater than the related interest expense. Borrowings and reverse repurchase agreements involve leveraging. If the securities held by a Fund decline in value while these transactions are outstanding, the NAV of the Fund’s outstanding shares will decline in value by proportionately more than the decline in value of the securities. In addition, reverse repurchase agreements involve the risk that the investment return earned by a Fund (from the investment of the proceeds) will be less than the interest expense of the transaction, that the market value of the securities sold by a Fund will decline below the price the Fund is obligated to pay to repurchase the securities, and that the securities may not be returned to the Fund.

Interest Rate Swaps, Mortgage Swaps, Credit Swaps, Currency Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses on an underlying security. Credit

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swaps give one party to a transaction (the buyer of the credit swap) the right to dispose of or acquire an asset (or group of assets), or the right to receive a payment from the other party, upon the occurrence of specified credit events. Currency swaps involve the exchange of the parties’ respective rights to make or receive payments in specified currencies. Total return swaps give a Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset in a total return swap declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty. The Funds may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.

Each Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As an example, when a Fund is the buyer of a credit default swap (commonly known as buying protection), it may make periodic payments to the seller of the credit swap to obtain protection against a credit default on a specified underlying asset (or group of assets). If a default occurs, the seller of the credit default swap may be required to pay the Fund the “notional value” of the credit default swap on a specified security (or group of securities). On the other hand, when a Fund is a seller of a credit default swap, in addition to the credit exposure the Fund has on the other assets held in its portfolio, the Fund is also subject to the credit exposure on the notional amount of the swap since, in the event of a credit default, the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) to the buyer of the credit default swap. A Fund will be the seller of a credit default swap only when the credit of the underlying asset is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into.

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APPENDIX A

The use of interest rate, mortgage, credit, currency and total return swaps, options on swaps, and interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Investment Adviser is incorrect in its forecasts of market values, interest rates and currency exchange rates, or in its evaluation of the creditworthiness of swap counterparties and the issuers of the underlying assets, the investment performance of a Fund would be less favorable than it would have been if these investment techniques were not used.

Other Investment Companies. Each Fund may invest in securities of other investment companies subject to statutory limitations prescribed by the Investment Company Act. These limitations include a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund’s total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.

Non-Investment Grade Fixed-Income Securities. Non-investment grade fixed-income securities and unrated securities of comparable credit quality (commonly known as “junk bonds”) are considered predominantly speculative by traditional investment standards. In some cases, these obligations may be highly speculative and have poor prospects for reaching investment grade standing. Non-investment grade fixed-income securities are subject to the increased risk of an issuer’s inability to meet principal and interest obligations. These securities, also referred to as high yield securities, may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity.

Non-investment grade fixed-income securities are often issued in connection with a corporate reorganization or restructuring or as part of a merger, acquisition, takeover or similar event. They are also issued by less established companies seeking to expand. Such issuers are often highly leveraged and generally less able than more established or less leveraged entities to make scheduled payments of

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principal and interest in the event of adverse developments or business conditions. Non-investment grade securities are also issued by governmental bodies that may have difficulty in making all scheduled interest and principal payments.

The market value of non-investment grade fixed-income securities tends to reflect individual corporate or municipal developments to a greater extent than that of higher rated securities which react primarily to fluctuations in the general level of interest rates. As a result, a Fund’s ability to achieve its investment objectives may depend to a greater extent on the Investment Adviser’s judgment concerning the creditworthiness of issuers than funds which invest in higher-rated securities. Issuers of non-investment grade fixed-income securities may not be able to make use of more traditional methods of financing and their ability to service debt obligations may be affected more adversely than issuers of higher-rated securities by economic downturns, specific corporate or financial developments or the issuer’s inability to meet specific projected business forecasts. Negative publicity about the junk bond market and investor perceptions regarding lower rated securities, whether or not based on fundamental analysis, may depress the prices for such securities.

A holder’s risk of loss from default is significantly greater for non-investment grade fixed-income securities than is the case for holders of other debt securities because such non-investment grade securities are generally unsecured and are often subordinated to the rights of other creditors of the issuers of such securities. Investment by a Fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a Fund of its initial investment and any anticipated income or appreciation is uncertain.

The secondary market for non-investment grade fixed-income securities is concentrated in relatively few market makers and is dominated by institutional investors, including mutual funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as, and is more volatile than, the secondary market for higher-rated securities. In addition, market trading volume for high yield fixed-income securities is generally lower and the secondary market for such securities could shrink or disappear suddenly and without warning as a result of adverse market or economic conditions, independent of any specific adverse changes in the condition of a particular issuer. The lack of sufficient market liquidity may cause a Fund to incur losses because it will be required to effect sales at a disadvantageous time and then only at a substantial drop in price. These factors may have an adverse effect on the market price and a Fund’s ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for a Fund to obtain precise valuations of the high yield securities in its portfolio.

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APPENDIX A

Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of non-investment grade securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the conditions of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality.

Loan Participations. Certain Funds may invest in loan participations. A loan participation is an interest in a loan to a U.S. or foreign company or other borrower which is administered and sold by a financial intermediary. A Fund may only invest in loans to issuers in whose obligations it may otherwise invest. Loan participation interests may take the form of a direct or co-lending relationship with the corporate borrower, an assignment of an interest in the loan by a co-lender or another participant, or a participation in the seller’s share of the loan. When a Fund acts as co-lender in connection with a participation interest or when it acquires certain participation interests, the Fund will have direct recourse against the borrower if the borrower fails to pay scheduled principal and interest. In cases where the Fund lacks direct recourse, it will look to an agent for the lenders (the “agent lender”) to enforce appropriate credit remedies against the borrower. In these cases, the Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation (such as commercial paper) of such borrower. Moreover, under the terms of the loan participation, the Fund may be regarded as a creditor of the agent lender (rather than of the underlying corporate borrower), so that the Fund may also be subject to the risk that the agent lender may become insolvent.

Preferred Stock, Warrants and Rights. Certain Funds may invest in preferred stock, warrants and rights. Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default or other non-compliance by the issuer of the preferred stock.

Warrants and other rights are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant or right. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.

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Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund’s financial performance for the past five years (or less if the Fund has been in operation for less than five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information has been audited by Ernst & Young LLP, whose report, along with the Funds’ financial statements, is included in the Funds’ annual report (available upon request).

ENHANCED INCOME FUND

		Enhanced Income Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.77		$	9.98		$	10.12		$	10.26		$	10.00
Income (loss) from investment operations
Net investment incomea			0.32			0.30			0.37			0.42			0.55
Net realized and unrealized gain (loss)			(0.10	)		(0.20	)		(0.15	)		(0.14	)		0.28
	Total from investment operations		0.22			0.10			0.22			0.28			0.83
Distributions to shareholders
From net investment income			(0.32	)		(0.31	)		(0.36	)		(0.42	)		(0.57	)
Net asset value, end of year		$	9.67		$	9.77		$	9.98		$	10.12		$	10.26
Total returnb			2.28			1.04	%		2.18	%		2.79	%		8.53	%
Net assets at end of year (in 000s)		$	301,362		$	492,276		$	1,106,956		$	2,071,378		$	807,871
Ratio of net expenses to average net assets			0.25	%		0.25	%		0.25	%		0.25	%		0.25	%
Ratio of net investment income to average net assets			3.34	%		3.02	%		3.65	%		4.17	%		5.40	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.40	%		0.33	%		0.31	%		0.32	%		0.40	%
Ratio of net investment income to average net assets			3.19	%		2.94	%		3.59	%		4.10	%		5.25	%
Portfolio turnover rate			49	%		51	%		41	%		65	%		127	%

See page 116 for all footnotes.

106

APPENDIX B

ULTRA-SHORT DURATION GOVERNMENT FUND

		Ultra-Short Duration Government Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.34		$	9.48		$	9.68		$	9.81		$	9.58
Income (loss) from investment operations
Net investment incomea		$	0.23		$	0.23			0.28			0.35	e		0.56
Net realized and unrealized gain (loss)			—	f		(0.04	)		(0.12	)		(0.06	)e		0.24
	Total from investment operations		0.23			0.19			0.16			0.29			0.80
Distributions to shareholders
From net investment income			(0.29	)		(0.33	)		(0.36	)		(0.42	)		(0.57	)
Net asset value, end of year		$	9.28		$	9.34		$	9.48		$	9.68		$	9.81
Total returnb			2.49	%		2.02	%		1.69	%		2.98	%		8.62	%
Net assets at end of year (in 000s)		$	584,628		$	1,158,844		$	1,967,845		$	2,646,847		$	278,316
Ratio of net expenses to average net assets			0.49	%		0.48	%		0.46	%		0.48	%		0.49	%
Ratio of net investment income to average net assets			2.59	%		2.49	%		2.95	%		3.65	%e		5.79	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.50	%		0.48	%		0.46	%		0.48	%		0.57	%
Ratio of net investment income to average net assets			2.58	%		2.49	%		2.95	%		3.65	%e		5.71	%
Portfolio turnover rated			71	%		103	%		102	%		144	%		87	%

See page 116 for all footnotes.

107

SHORT DURATION GOVERNMENT FUND

		Short Duration Government Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	9.84		$	9.96		$	10.10		$	10.02		$	9.47
Income (loss) from investment operations
Net investment incomea			0.29			0.28			0.39			0.42	e		0.57
Net realized and unrealized gain (loss)			(0.20	)		(0.05	)		(0.15	)		0.13	e		0.58
	Total from investment operations		0.09			0.23			0.24			0.55			1.15
Distributions to shareholders
From net investment income			(0.30	)		(0.33	)		(0.38	)		(0.47	)		(0.60	)
From paid-in capital			—			(0.02	)		—			—			—
	Total distributions		(0.30	)		(0.35	)		(0.38	)		(0.47	)		(0.60	)
Net asset value, end of year		$	9.63		$	9.84		$	9.96		$	10.10		$	10.02
Total returnb			0.89	%		2.33			2.43	%		5.69	%		12.47	%
Net assets at end of year (in 000s)		$	517,492		$	382,008		$	415,210		$	280,452		$	206,129
Ratio of net expenses to average net assets			0.54	%		0.54			0.55	%		0.54	%		0.54	%
Ratio of net investment income to average net assets			2.87	%		2.79	%		3.86	%		4.20	%e		5.89	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.60	%		0.60	%		0.61	%		0.64	%		0.71	%
Ratio of net investment income to average net assets			2.81	%		2.73	%		3.80	%		4.10	%e		5.72	%
Portfolio turnover rated			98	%		249	%		184	%		194	%		243	%

See page 116 for all footnotes.

108

APPENDIX B

GOVERNMENT INCOME FUND

		Government Income Fund—Institutional Shares
		For The Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	14.98		$	14.85		$	14.93		$	14.94		$	13.82
Income from investment operations
Net investment incomea			0.46			0.46			0.47			0.69	e		0.83
Net realized and unrealized gain (loss)			(0.27	)		0.33			0.04			0.19	e		1.14
	Total from investment operations		0.19			0.79			0.51			0.88			1.97
Distributions to shareholders
From net investment income			(0.45	)		(0.53	)		(0.57	)		(0.73	)		(0.85	)
From net realized gains			(0.17	)		(0.13	)		(0.02	)		(0.16	)		—
	Total distributions		(0.62	)		(0.66	)		(0.59	)		(0.89	)		(0.85	)
Net asset value, end of year		$	14.55		$	14.98		$	14.85		$	14.93		$	14.94
Total returnb			1.26	%		5.35	%		3.60	%		6.13	%		14.67	%
Net assets at end of year (in 000s)		$	60,747		$	69,770		$	151,111		$	82,523		$	34,997
Ratio of net expenses to average net assets			0.58	%		0.58	%		0.59	%		0.58	%		0.58	%
Ratio of net investment income to average net assets			3.20	%		3.12	%		3.16	%		4.74	% e		5.80	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.69	%		0.77	%		0.78	%		0.84	%		0.91	%
Ratio of net investment income to average net assets			3.08	%		2.93	%		2.97	%		4.48	% e		5.47	%
Portfolio turnover rated			256	%		609	%		520	%		226	%		473	%

See page 116 for all footnotes.

109

U.S. MORTGAGES FUND

		U.S. Mortgages Fund— Institutional Shares
		For The Period Ended October 31,
		2005			2004 (Commenced November 3, 2003)
Net asset value, beginning of period		$	10.22		$	10.00
Income from investment operations
Net investment incomea			0.33			0.29
Net realized and unrealized gain (loss)			(0.18	)		0.31
	Total from investment operations		0.15			0.60
Distributions to shareholders
From net investment income			(0.37	)		(0.38	)
From net realized gains			(0.18	)		—
	Total distributions		(0.55	)		(0.38	)
Net asset value, end of period		$	9.82		$	10.22
Total returnb			1.49	%		6.07	%
Net assets at end of period (in 000s)		$	74,616		$	120,628
Ratio of net expenses to average net assets			0.40	%		0.40	%b
Ratio of net investment income to average net assets			3.43	%		2.86	%b
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.58	%		0.68	%b
Ratio of net investment income to average net assets			3.24	%		2.58	%b
Portfolio turnover rated			2006	%		1953	%

See page 116 for all footnotes.

110

APPENDIX B

CORE FIXED INCOME FUND

		Core Fixed Income Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.28		$	10.35		$	10.09		$	10.28		$	9.54
Income (loss) from investment operations
Net investment incomea			0.36			0.34			0.45			0.55			0.60
Net realized and unrealized gain (loss)			(0.21	)		0.31			0.29			(0.15	)		0.76
	Total from investment operations		0.15			0.65			0.74			0.40			1.36
Distributions to shareholders
From net investment income			(0.40	)		(0.37	)		(0.44	)		(0.56	)		(0.62	)
From net realized gains			(0.13	)		(0.35	)		(0.04	)		(0.03	)		—
	Total distributions		(0.53	)		(0.72	)		(0.48	)		(0.59	)		(0.62	)
Net asset value, end of year		$	9.90		$	10.28		$	10.35		$	10.09		$	10.28
Total returnb			1.53	%		6.55	%		7.54	%		3.99	%		14.69	%
Net assets at end of year (in 000s)		$	1,098,280		$	860,021		$	695,181		$	733,996		$	440,836
Ratio of net expenses to average net assets			0.47	%		0.50	%		0.49	%		0.50	%		0.54	%
Ratio of net investment income to average net assets			3.54	%		3.36	%		4.39	%		5.51	%		6.05	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.48	%		0.50	%		0.49	%		0.50	%		0.54	%
Ratio of net investment income to average net assets			3.53	%		3.36	%		4.39	%		5.51	%		6.05	%
Portfolio turnover rated			283	%		549	%		489	%		437	%		315	%

See page 116 for all footnotes.

111

INVESTMENT GRADE CREDIT FUND

		Investment Grade Credit Fund— Institutional Shares
		Period Ended October 31,
		2005			2004 (Commenced November 3, 2003)
Net asset value, beginning of period		$	10.32		$	10.00
Income (loss) from investment operations
Net investment incomea			0.52			0.44
Net realized and unrealized gain (loss)			(0.42	)		0.30
	Total from investment operations		0.10			0.74
Distributions to shareholders
From net investment income			(0.43	)		(0.42	)
From net realized gains			(0.04	)		—
	Total distributions		(0.47	)		(0.42	)
Net asset value, end of period		$	9.95		$	10.32
Total returnb			0.89	%		7.57	%
Net assets at end of period (in 000s)		$	3,638		$	76
Ratio of net expenses to average net assets			0.40	%		0.40	%b
Ratio of net investment income to average net assets			4.40	%		4.28	%b
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.66	%		1.45	%b
Ratio of net investment income to average net assets			4.14	%		3.23	%b
Portfolio turnover rate			88	%		78	%

See page 116 for all footnotes.

112

APPENDIX B

GLOBAL INCOME FUND

		Global Income Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	13.64		$	14.37		$	14.33		$	14.70		$	14.67
Income (loss) from investment operations
Net investment incomea			0.37			0.43			0.56			0.58	e		0.65
Net realized and unrealized gain (loss)			0.28			0.20			0.30			(0.33	) e		0.84
	Total from investment operations		0.65			0.63			0.86			0.25			1.49
Distributions to shareholders
From net investment income			(1.06	)		(1.36	)		(0.82	)		(0.62	)		(1.46	)
Net asset value, end of year		$	13.23		$	13.64		$	14.37		$	14.33		$	14.70
Total returnb			4.90	%		4.66	%		6.07	%		1.82	%		10.73	%
Net assets at end of year (in 000s)		$	214,410		$	117,471		$	90,368		$	143,127		$	181,869
Ratio of net expenses to average net assets			0.69	%		0.69	%		0.70	%		0.69	%		0.69	%
Ratio of net investment income to average net assets			2.70	%		3.12	%		3.82	%		4.00	% e		4.47	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.91	%		1.11	%		1.09	%		1.07	%		1.05	%
Ratio of net investment income to average net assets			2.48	%		2.70	%		3.43	%		3.62	% e		4.11	%
Portfolio turnover rate			137	%		109	%		106	%		146	%		222	%

See page 116 for all footnotes.

113

HIGH YIELD FUND

		High Yield Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	8.09		$	7.81		$	6.39		$	7.25		$	8.19
Income (loss) from investment operations
Net investment incomea			0.65			0.69			0.68			0.70	e		0.86
Net realized and unrealized gain (loss)			(0.21	)		0.30			1.41			(0.85	) e		(0.93	)
	Total from investment operations		0.44			0.99			2.09			(0.15	)		(0.07	)
Distributions to shareholders
From net investment income			(0.71	)		(0.71	)		(0.67	)		(0.71	)		(0.87	)
Net asset value, end of year			7.82		$	8.09		$	7.81		$	6.39		$	7.25
Total returnb			5.50			13.23	%		33.98	%		(2.59	)%		(1.14	)%
Net assets, end of year (in 000s)		$	825,508		$	832,175		$	1,119,417		$	726,140		$	460,253
Ratio of net expenses to average net assets			0.76	%		0.76	%		0.77	%		0.76	%		0.76	%
Ratio of net investment income to average net assets			8.11	%		8.73	%		9.42	%		9.95	%e		10.96	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.79	%		0.78	%		0.79	%		0.79	%		0.82	%
Ratio of net investment income to average net assets			8.08	%		8.71	%		9.40	%		9.92	%		10.90	%
Portfolio turnover rate			52	%		47	%		54	%		36	%		57	%

See page 116 for all footnotes.

114

APPENDIX B

EMERGING MARKETS DEBT FUND

		Emerging Markets Debt Fund—
		Institutional Shares
								For the
								Period Ended
		Year Ended						October 31,
		October 31,						2003
								(commenced
		2005			2004			August 29, 2003)
Net asset value, beginning of period		$	11.19		$	10.23		$	10.00
Income from investment operations
Net investment incomea			0.77			0.62			0.11
Net realized and unrealized gain			1.02			0.98			0.24
	Total from investment operations		1.79			1.60			0.35
Distributions to shareholders
From net investment income			(0.69	)		(0.61	)		(0.12	)
From net realized gains			(0.53	)		(0.03	)		—
	Total distributions		(1.22	)		(0.64	)		(0.12	)
Net asset value, end of period		$	11.76		$	11.19		$	10.23
Total returnb			17.01	%		16.22	%		3.52	%
Net assets, end of period (in 000s)		$	40,962		$	20,387		$	11,688
Ratio of net expenses to average net assets			0.88	%		0.88	%		0.88	%c
Ratio of net investment income to average net assets			6.58	%		5.90	%		5.96	%c
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.52	%		2.57	%		4.88	%c
Ratio of net investment income to average net assets			5.94	%		4.21	%		1.96	%c
Portfolio turnover rate			207	%		273	%		49	%

See page 116 for all footnotes.

115

Footnotes:

a	Calculated based on the average shares outstanding methodology.
b	Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account, if applicable. Total returns for periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
c	Annualized.
d	Includes the effect of mortgage dollar roll transactions.
e	As required, effective November 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effects of these changes for the year ended October 31, 2002 were as follows:
f	Amount is less than $0.005 per share.

					Decrease the Ratio of Net
					Investment Income to
	Decrease Net		Increase Net Realized		Average Net Assets With
	Investment		and Unrealized Gains		and Without Expense
Fund	Income Per Share		and Losses Per Share		Reductions
Ultra-Short Duration Government	$	0.05	$	0.05		0.48	%
Short Duration Government	$	0.06	$	0.06		0.63	%
Government Income	$	0.06	$	0.06		0.44	%
Global Income	$	0.06	$	0.06		0.43	%

Per share ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

116

Index

1 General Investment Management Approach
5 Fund Investment Objectives and Strategies
5	Goldman Sachs Enhanced Income Fund
6	Goldman Sachs Ultra-Short Duration Government Fund
7	Goldman Sachs Short Duration Government Fund
8	Goldman Sachs Government Income Fund
9	Goldman Sachs U.S. Mortgages Fund
10	Goldman Sachs Core Fixed Income Fund
12	Goldman Sachs Investment Grade Credit Fund
14	Goldman Sachs Global Income Fund
16	Goldman Sachs High Yield Fund
18	Goldman Sachs Emerging Markets Debt Fund
20 Other Investment Practices and Securities
24 Principal Risks of the Funds
30 Fund Performance
42 Fund Fees and Expenses
47 Service Providers
58 Dividends
60 Shareholder Guide
60	How to Buy Shares
68	How to Sell Shares
77 Taxation
80 Appendix A      Additional Information on Portfolio Risks, Securities and Techniques
106 Appendix B      Financial Highlights

Fixed Income Funds
Prospectus (Institutional Shares)

   FOR MORE INFORMATION   

Annual/Semi-annual Report

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year.

Statement of Additional Information

Additional information about the Funds and their policies is also available in the Funds’ Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus).

The Funds’ annual and semi-annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1-800-621-2550. You can also access and download the annual and semi-annual reports and the Additional Statement at the Funds’ website: http://www.gs.com/funds.

To obtain other information and for shareholder inquiries:

n By telephone:	1-800-621-2550
n By mail:	Goldman, Sachs & Co., 71 S. Wacker Drive, Suite 500 Chicago, Illinois 60606
n By e-mail:	gs-funds@gs.com
n On the Internet:	SEC EDGAR database – http://www.sec.gov Goldman Sachs – http://www.gs.com/funds

You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC’s public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102 or by electronic request to: publicinfo@sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942-8090.

The Funds’ investment company registration number is 811-5349.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

FIPROTAXINST

EX-99.17.G

Prospectus

Class A, B
and C Shares

February 28, 2006

 GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

n  Goldman Sachs Short Duration Tax-Free Fund

n  Goldman Sachs California Intermediate AMT-Free
     Municipal Fund
n  Goldman Sachs New York Intermediate AMT-Free
     Municipal Fund

n  Goldman Sachs Municipal Income Fund

n  Goldman Sachs High Yield Municipal Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN A FUND.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

General Investment
Management Approach

Goldman Sachs Asset Management, L.P. (“GSAM”), serves as investment adviser to the Short Duration Tax-Free, California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds. GSAM is referred to in this Prospectus as the “Investment Adviser.”

The Funds Described In This Prospectus Are Not Money Market Funds. Investors In The Funds Should Understand That The Net Asset Value (“NAV”) Of The Funds Will Fluctuate Which May Result In A Loss Of A Portion Of The Principal Amount Invested.

Goldman Sachs’ Municipal Fixed Income Investing Philosophy:

Fixed income markets are constantly evolving and are highly diverse. We believe inefficiencies in these complex markets causes bond prices to diverge from their fair value for periods of time. To capitalize on these inefficiencies and generate consistent risk-adjusted performance, we believe it is critical to:

n	Thoughtfully combine diversified sources of return by employing multiple investment strategies
n	Take a global perspective to uncover relative value opportunities
n	Employ focused specialist teams to identify short-term mispricings and incorporate long-term views
n	Emphasize a risk-aware approach

GSAM’s Fixed Income investment process seeks to maximize risk-adjusted total returns by utilizing a diverse set of investment strategies. The process revolves around four key elements:

1. Developing a long-term risk budget—Lead portfolio managers (“Portfolio Team”) are responsible for the overall results of a Fund. They set the strategic direction of a Fund by establishing a “risk budget.” Following careful analysis of risk and return objectives, they allocate the overall risk budget to each component strategy to optimize potential return.

2. Generating investment views and strategies—Within the parameters of the risk budget, our Top-down and Bottom-up Strategy Teams generate investment ideas within their areas of specialization. The “Top-down Strategy Teams” are responsible for Cross-Sector and Duration decisions and are deliberately small to ensure creativity and expedite decision-making and execution. Concurrently, “Bottom-up Strategy Teams,” comprised of sector specialists, formulate sub-sector allocation and security selection decisions.

1

3. Implementing portfolios—The Strategy Teams trade the securities within their area of expertise, while the Portfolio Team oversees the portfolio construction process. In this way, the Fund benefits from the “Best Ideas” generated by the Strategy Teams and trades remain consistent with risk and return objectives. In the unique case of municipal fixed income, the Strategy Team and the Portfolio Team are one in the same.

4. Monitoring strategies—The Portfolio Team is responsible for monitoring the Funds to ensure the most optimal mix of strategies. In addition, the Top-down and Bottom-up Strategy Teams review the strategies within their areas of specialization.

The Investment Adviser de-emphasizes interest rate predictions as a means of generating incremental return. Instead, the Investment Adviser seeks to add value through the selection of particular securities and investment sector allocation as described above.

2

GENERAL INVESTMENT MANAGEMENT APPROACH

With every fixed-income portfolio, the Investment Adviser applies a team approach that emphasizes risk management and capitalizes on Goldman Sachs’ extensive research capabilities.

Each of the Funds described in this Prospectus has a target duration. A Fund’s duration approximates its price sensitivity to changes in interest rates. For example, suppose that interest rates in one day fall by one percent which, in turn, causes yields on every bond in the market to fall by the same amount. In this example, the price of a bond with a duration of three years may be expected to rise approximately three percent and the price of a bond with a five year duration may be expected to rise approximately five percent. The converse is also true. Suppose interest rates in one day rise by one percent which, in turn, causes yields on every bond in the market to rise by the same amount. In this second example, the price of a bond with a duration of three years may be expected to fall approximately three percent and the price of a bond with a five year duration may be expected to fall approximately five percent. The longer the duration of a bond, the more sensitive the bond’s price is to changes in interest rates. Maturity measures the time until final payment is due; it takes no account of the pattern of a security’s cash flows over time. In calculating maturity, a Fund may determine the maturity of a variable or floating rate obligation according to its interest rate reset date, or the date principal can be recovered on demand, rather than the date of ultimate maturity. Similarly, to the extent that a fixed income obligation has a call, refunding, or redemption provision, the date on which the instrument is expected to be called, refunded, or redeemed may be considered to be its maturity date. There is no guarantee that the expected call, refund or redemption will occur, and a Fund’s average maturity may lengthen beyond the Investment Adviser’s expectations should the expected call, refund or redemption not occur. In computing portfolio duration, a Fund will estimate the duration of obligations that are subject to prepayment or redemption by the issuer, taking into account the influence of interest rates on prepayments and coupon flows. This method of computing duration is known as “option-adjusted” duration. The Investment Adviser may use futures contracts, options on futures contracts and swaps to manage the Funds’ target duration in accordance with their benchmark or benchmarks. A Fund will not be limited as to its maximum weighted average portfolio maturity or the maximum stated maturity with respect to individual securities unless otherwise noted.

Each Fund also has credit rating requirements for the securities it buys. A Fund will deem a security to have met its minimum credit rating requirement if the security has the required rating at the time of purchase from at least one nationally recognized statistical rating organization (“NRSRO”) even though it has been rated

3

below the minimum rating by one or more other NRSROs. Unrated securities may be purchased by the Funds if they are determined by the Investment Adviser to be of comparable quality. A security satisfies a Fund’s minimum rating requirement regardless of its relative ranking (for example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below such rating, the Fund will not be required to dispose of such security. This is so even if the downgrade causes the average credit quality of the Fund to be lower than that stated in the Prospectus. Furthermore, during this period, the Investment Adviser will only buy securities at or above the Fund’s average rating requirement. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of such security, is in the best interests of a Fund and its shareholders.

As discussed below, the Funds may invest in credit default swaps, which are derivative investments. When a Fund sells a credit default swap (commonly known as selling protection), the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) if the security defaults. A Fund will be the seller of a credit default swap only when the credit of the security is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into.

References in this Prospectus to a Fund’s benchmark or benchmarks are for informational purposes only, and unless otherwise noted are not necessarily an indication of how the Fund is managed.

4

Fund Investment Objectives
and Strategies

Goldman Sachs
Short Duration Tax-Free Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers 1–3 Year Municipal Bond Index plus or minus 0.5 years Maximum = 3.5 years
Expected Approximate Interest Rate Sensitivity:	2.5-year municipal bond
Credit Quality:	Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers 1–3 Year Municipal Bond Index
Symbols:	Class A: GSDTX, Class B: GSDBX, Class C: GSTCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income, consistent with relatively low volatility of principal, that is exempt from regular federal income tax.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal market conditions, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities issued by or on behalf of states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”), the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes), and is not a tax preference item under the federal alternative minimum tax. Under normal market

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers 1-3 Year Municipal Bond Index has ranged between two and two and a half years.

5

Goldman Sachs
Short Duration Tax-Free Fund continued

conditions, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net Assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in Appendix A — Portfolio Securities and Techniques.”

6

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
California Intermediate AMT-Free
Municipal Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers CA 1–10 Year Municipal Bond Index plus or minus one year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	6-year municipal bond
Credit Quality:	Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
	Weighted Average = AA/A+
Benchmark:	Lehman Brothers CA 1–10 Year Municipal Bond Index
Symbols:	Class A: GCAAX, Class C: GCACX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax, is exempt from California State personal income tax, and is consistent with preservation of capital. As a secondary objective, the Fund seeks to maximize after-tax total return consistent with the Fund’s intermediate duration and AA/A+ average credit quality.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities issued by or on behalf of the State of California and its political subdivisions, agencies, instrumentalities and public authorities and other states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”), the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the past 10 years, the duration of the Lehman Brothers CA 1-10 Year Municipal Bond Index has ranged between approximately four and five years.

7

Goldman Sachs
California Intermediate AMT-Free
Municipal Fund continued

income tax purposes), is not a tax preference item under the federal alternative minimum tax and is exempt from California State personal income tax. Under normal circumstances, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net Assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. The Fund may also invest up to 20% of its Net Assets in Municipal Securities that are subject to California State personal income tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. Under normal circumstances, the Fund maintains a dollar-weighted average portfolio maturity of three to ten years. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

The Fund is “non-diversified” under the Investment Company Act of 1940, as amended (the “Act”), and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

8

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
New York Intermediate AMT-Free
Municipal Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers NY 1-10 Year Municipal Bond Index plus or minus one year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	6-year municipal bond
Credit Quality:	Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality Weighted Average = AA/A+
Benchmark:	Lehman Brothers NY 1-10 Year Municipal Bond Index
Symbols:	Class A: GNYAX, Class C: GNYCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax, is exempt from New York State and City personal income taxes, and is consistent with preservation of capital. As a secondary objective, the Fund seeks to maximize after-tax total return consistent with the Fund’s intermediate duration and AA/A+ average credit quality.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its Net Assets in fixed income securities issued by or on behalf of the State of New York and its political subdivisions, agencies, instrumentalities and public authorities and other Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes), is not a tax preference item under the federal alternative minimum tax and is exempt from

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the past 10 years, the duration of the Lehman Brothers NY 1-10 Year Municipal Bond Index has ranged between approximately four and five years.

9

Goldman Sachs
New York Intermediate AMT-Free Municipal Fund continued

New York State and City personal income taxes. Under normal circumstances, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net Assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. The Fund may also invest up to 20% of its Net Assets in Municipal Securities that are subject to New York State and/or New York City personal income taxes. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. Under normal circumstances the Fund maintains a dollar-weighted average portfolio maturity of three to ten years. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

The Fund is “non-diversified” under the Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

10

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Municipal Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Aggregate Municipal Bond Index plus or minus one year Maximum = 12 years
Expected Approximate Interest Rate Sensitivity:	15-year municipal bond
Credit Quality:	Minimum = BBB or Baa at the time of purchase; Weighted Average = A Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Aggregate Municipal Bond Index
Symbols:	Class A: GSMIX, Class B: GSMBX, Class C: GSMUX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal market conditions, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes). The Fund may invest up to 100% of its Net Assets in private activity bonds, the interest on which (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Aggregate Municipal Bond Index has ranged between six and eight years.

11

Goldman Sachs
High Yield Municipal Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Municipal Bond Index plus or minus 2 years Maximum = 12 years
Expected Approximate Interest Rate Sensitivity:	15–20-year municipal bond
Credit Quality:	At least 65% of total assets = BBB or Baa or lower at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmarks:	Lehman Brothers Aggregate Municipal Bond Index and Lehman Brothers High Yield Municipal Bond Index
Symbols:	Class A: GHYAX, Class B: GHYBX, Class C: GHYCX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax and may also consider the potential for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 65% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase (“Total Assets”) in high-yield Municipal Securities that, at the time of purchase, are medium quality or non-investment grade. Medium quality securities are rated BBB or Baa by a NRSRO, and non-investment grade securities are securities rated BB, Ba or below by a NRSRO. Unrated securities will be determined by the Investment Adviser to be of comparable quality. Under normal circumstances, the Fund may also invest up to 35% of its Total Assets in higher grade fixed-income securities.

In pursuing its principal investment strategy, the Investment Adviser will assess the relative value in the Municipal Securities market from both a credit and yield curve

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the durations of the Lehman Brothers Aggregate Municipal Bond and Lehman Brothers High Yield Municipal Bond Indexes have ranged between six and eight years and six and nine years, respectively.

12

FUND INVESTMENT OBJECTIVES AND STRATEGIES

perspective. Tax-exempt securities offering the high current income sought by the Fund may be predominantly in the lower rating categories of NRSROs (BB/Ba or lower).

Under normal market conditions, the Fund invests at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes).

The Fund may invest up to 100% of its Net Assets in private activity bonds, the interest on which (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

Recognizing that the high-yield municipal market may consist of a limited number of attractive investment opportunities at any one time, the Investment Adviser may temporarily close the Fund to new investors in circumstances when it believes that a sufficient quantity of appropriate high-yield Municipal Securities is not available in the market place. The closure of the Fund under these circumstances generally will not preclude existing shareholders of the High Yield Municipal Fund from purchasing or redeeming Fund shares, although the Investment Adviser reserves the right to close the Fund to additional purchases by existing Fund shareholders in its discretion. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

The High Yield Municipal Fund is “non-diversified” under the Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the High Yield Municipal Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

Non-investment grade fixed-income securities (commonly known as “junk bonds”) tend to offer higher yields than higher rated securities with similar maturities. Non-investment grade fixed-income securities are, however, considered speculative and generally involve greater price volatility and greater risk of loss of principal and interest than higher rated securities. The Fund may purchase the securities of issuers that are in default.

13

Other Investment Practices
and Securities

The tables on the following page identify some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The tables also highlight the differences and similarities among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in the tables show allowable usage only; for actual usage, consult the Funds’ annual and semi-annual reports (when available, in the case of the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds). For more information about these and other investment practices and securities, see Appendix A. Each Fund publishes on its website (http://www.gs.com/funds) complete portfolio holdings for the Fund as of the end of each fiscal quarter subject to a thirty calendar-day lag between the date of the information and the date on which the information is disclosed. In addition, the Funds publish on their website selected holdings information monthly subject to a ten calendar-day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission (“SEC”). In addition, a description of the Fund’s policies and procedures with respect to the disclosure of a Fund’s portfolio securities is available in the Funds’ Statement of Additional Information (“Additional Statement”).

14

OTHER INVESTMENT PRACTICES AND SECURITIES

10 Percent of total assets (including securities lending collateral) (italic type)
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
•    No specific percentage limitation	Short	California	New York
on usage; limited only by the	Duration	Intermediate	Intermediate	Municipal	High Yield
objectives and strategies of the Fund	Tax-Free	AMT-Free	AMT-Free	Income	Municipal
—  Not permitted	Fund	Municipal	Municipal	Fund	Fund
		Fund	Fund
Investment Practices
Borrowings	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Credit, Interest Rate and Total Return Swaps*	•	•	•	•	•
Financial Futures Contracts	•	•	•	•	•
Interest Rate Floors, Caps and Collars	•	•	•	•	•
Options (including Options on Futures)	•	•	•	•	•
Repurchase Agreements	•	•	•	•	•
Securities Lending	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Standby Commitments and Tender Option Bonds	•	•	•	•	•
When-Issued Securities and Forward Commitments	•	•	•	•	•

  *
Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.

10 Percent of total assets (italic type)
10 Percent of Net Assets (including borrowings for investment purposes) (roman type)
•    No specific percentage limitation	Short	California	New York
on usage; limited only by the	Duration	Intermediate	Intermediate	Municipal	High Yield
objectives and strategies of the Fund	Tax-Free	AMT-Free	AMT-Free	Income	Municipal
—  Not permitted	Fund	Municipal	Municipal	Fund	Fund
		Fund	Fund
Investment Securities
Asset-Backed Securities	•	•	•	•	•
Convertible Securities	•	•	•	•	•
Corporate Debt Obligations and Trust Preferred Securities	•	•	•	•	•
Floating and Variable Rate Obligations	•	•	•	•	•
Lower Grade Fixed Income Securities	—	—	—	—	65+1
Structured Securities*	•	•	•	•	•
Taxable Municipal Securities	20	20	20	20	20
Tax-Free Municipal Securities	80+2	80+3	80+4	80+5	80+5
Temporary Investments	•6	•6	•6	•6	•6,7
U.S. Government Securities	•	•	•	•	•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.
1	The High Yield Municipal Fund will invest at least 65% of its Total Assets in lower grade securities under normal circumstances.
2	The Short Duration Tax-Free Fund will invest 80% of its Net Assets in obligations the interest on which is exempt from regular federal income tax and is not a tax preference item under the federal alternative minimum tax.
3	The California Intermediate AMT-Free Municipal Fund will invest 80% of its Net Assets in Municipal Securities the interest on which is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax and is exempt from California State personal income tax.
4	The New York Intermediate AMT-Free Municipal Fund will invest at least 80% of its Net Assets in Municipal Securities, the interest on which is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax and is exempt from New York State and City personal income tax.
5	The Municipal Income and High Yield Municipal Funds will invest at least 80% of their Net Assets in municipal securities, the interest on which is exempt from regular federal income tax.
6	The Short Duration Tax-Free, California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds may invest no more than 20% of their Net Assets in taxable investments under normal market conditions. Under unusual conditions, taxable investments may exceed this percentage.
7	The High Yield Municipal Fund may for this purpose invest in investment and high grade securities without limit.

15

Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective.

	Short	California	New York
	Duration	Intermediate	Intermediate	Municipal	High Yield
•   Applicable	Tax-Free	AMT-Free Municipal	AMT-Free Municipal	Income	Municipal
— Not applicable	Fund	Fund	Fund	Fund	Fund
NAV	•	•	•
Interest Rate	•	•	•	•	•
Credit/Default	•	•	•	•	•
Call	•	•	•	•	•
Extension	•	•	•	•	•
Derivatives	•	•	•	•	•
U.S. Government Securities	•	•	•	•	•
Market	•	•	•	•	•
Management	•	•	•	•	•
Liquidity	•	•	•	•	•
Non-Diversification	—	•	•	—	•
“Junk Bond”	—	—	—	—	•
Tax	•	•	•	•	•
Concentration	•	•	•	•	•
California/New York	—	•	•	—	—

16

PRINCIPAL RISKS OF THE FUNDS

All Funds:

n	NAV Risk—The risk that the net asset value (“NAV”) of the Fund and the value of your investment will fluctuate.
n	Interest Rate Risk—The risk that when interest rates increase, fixed-income securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.
n	Credit/Default Risk—The risk that an issuer or guarantor of fixed-income securities held by a Fund (which may have low credit ratings), or the counterparty in a derivative investment, may default on its obligation to pay interest and repay principal. This risk includes the risk of default on foreign letters of credit or guarantees that back Municipal Securities.
n	Call Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as an asset-backed security) earlier than expected. This may happen when there is a decline in interest rates. Under these circumstances, a Fund may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities.
n	Extension Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as an asset-backed security) later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease, and a Fund will also suffer from the inability to invest in higher yielding securities.
n	Derivatives Risk—The risk that loss may result from a Fund’s investments in options, futures, swaps, options on swaps, structured securities and other derivative investments. These instruments may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses to a Fund.
n	U.S. Government Securities Risk—The risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Although many types of U.S. Government Securities that may be purchased by the Funds, such as those issued by the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. The maximum potential liability of the issuers of some U.S. Government Securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
n	Market Risk—The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes

17

	may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more sectors, which will increase a Fund’s exposure to risk of loss from adverse developments affecting those sectors.
n	Management Risk—The risk that a strategy used by the Investment Adviser may fail to produce the intended results.
n	Liquidity Risk—The risk that a Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in non-investment grade fixed-income securities will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within these investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate.
n	Tax Risk—The Funds may be adversely impacted by changes in tax rates and policies. Because interest income from Municipal Securities is normally not subject to regular federal income taxation and, for the California Intermediate AMT- Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund, certain state taxes, the attractiveness of Municipal Securities in relation to other investment alternatives is affected by changes in federal and state income tax rates or changes in the tax-exempt status of interest income from Municipal Securities. Any proposed or actual changes in such rates or exempt status, therefore, can significantly affect the demand for and supply, liquidity and marketability of Municipal Securities. This could in turn affect a Fund’s net asset value and ability to acquire and dispose of Municipal Securities at desirable yield and price levels. Additionally, these Funds would not be a suitable investment for IRAs, other tax-exempt or tax-deferred accounts or for other investors who are not sensitive to the federal, state or local income tax consequences of their investments.
n	Concentration Risk—The risk that if a Fund invests more than 25% of its total assets in issuers within the same country, state, industry or economic sector, an adverse economic, business or political development may affect the value of the Fund’s investments more than if its investments were not so concentrated. At the October 31, 2005 fiscal year end of the High Yield Municipal Fund, the Fund had invested more than 25% of its assets in the Municipal Securities of issuers located in Florida.

Specific Funds:

n Non-Diversification Risk—The High Yield Municipal Fund, California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund are non-diversified, meaning that each Fund is permitted to invest more of its assets in fewer issuers than “diversified” mutual funds. Thus, each Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

18

PRINCIPAL RISKS OF THE FUNDS

n

“Junk Bond” Risk—The High Yield Municipal Fund will invest in non-investment grade fixed-income securities (commonly known as “junk bonds”) that are considered predominantly speculative by traditional investment standards. Non- investment grade fixed-income securities and unrated securities of comparable credit quality are subject to the increased risk of an issuer’s inability to meet principal and interest payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity.

n

California/New York Risk—The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds intend to invest primarily in California municipal obligations and New York municipal obligations, respectively. The investments of the Funds are, therefore, affected by political and economic developments within these States, and by the financial condition of these States, their public authorities and political sub-divisions. If California, New York, or any of their local governmental entities are unable to meet their financial obligations, the corresponding Fund’s income, NAV, and ability to preserve or realize appreciation of capital or liquidity could be adversely affected. See Appendix A in this Prospectus for more information concerning the risks of investing in California and New York.

More information about the Funds’ portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice.

19

Fund Performance

   HOW THE FUNDS HAVE PERFORMED   

The bar chart and table provide an indication of the risks of investing in a Fund by showing: (a) with respect to the bar charts, changes in the performance of a Fund’s Class A Shares from year to year for up to the last ten calendar years and (b) with respect to the table, how the average annual total returns of a Fund’s Class A, B and C Shares* compare to those of broad-based securities market indices. The bar chart (including “Best Quarter” and “Worst Quarter” information) and table assume reinvestment of dividends and distributions. A Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. No performance for the California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund is provided because the Funds have less than one calendar year’s performance.

The average annual total return calculation reflects a maximum initial sales charge of 2.0% for Class A Shares of Short Duration Tax-Free Fund and 4.5% for Class A Shares of Municipal Income and High Yield Municipal Funds; the assumed contingent deferred sales charge (“CDSC”) for Class B Shares (2% maximum declining to 0% after three years for the Short Duration Tax-Free Fund and 5% maximum declining to 0% after six years for the Municipal Income and High Yield Municipal Funds); and the assumed CDSC for Class C Shares (1% if redeemed within 12 months of purchase). The bar charts (including “Best Quarter” and “Worst Quarter” information) do not reflect the sales loads applicable to Class A Shares. If the sales loads were reflected, returns would be less. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund’s performance would have been reduced.

   INFORMATION ON AFTER-TAX RETURNS   

These definitions apply to the after-tax returns.

Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on a Fund’s Class A Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.

     *  Currently, Class B shares of the Short Duration Tax-Free Fund may no longer be purchased except in connection with the reinvestment of dividends and capital gains.

20

FUND PERFORMANCE

Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on a Fund’s Class A Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Class A Shares at the end of the performance period.

Average Annual Total Returns After Taxes on Distributions and Sale of Shares. These returns reflect taxes paid on distributions on a Fund’s Class A Shares and taxes applicable when the shares are redeemed (sold).

Note on Tax Rates. The after-tax performance figures are calculated using the historical highest individual federal marginal income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.

21

Short Duration Tax-Free Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q2 ’02           +2.58% Worst Quarter* Q2 ’04           -1.02%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 5/1/97)
Returns Before Taxes		-1.03%		2.44%		3.10%
Returns After Taxes on Distributions**		-1.03%		2.44%		3.10%
Returns After Taxes on Distributions and Sale of Fund Shares**		0.20%		2.45%		3.09%
Lehman Brothers 1-3 Year Municipal Bond Index***		1.08%		3.09%		3.72%
Class B (Inception 5/1/97)
Returns Before Taxes		-1.63%		2.22%		2.71%
Lehman Brothers 1-3 Year Municipal Bond Index***		1.08%		3.09%		3.72%
Class C (Inception 8/15/97)
Returns Before Taxes		-0.78%		2.08%		2.42%
Lehman Brothers 1-3 Year Municipal Bond Index***		1.08%		3.09%		3.64%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers 1-3 Year Municipal Bond Index, an unmanaged index, represents investment grade municipal bonds with maturities greater than one year and less than 4 years, and does not reflect any deduction for fees, expenses or taxes.

22

FUND PERFORMANCE

Municipal Income Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q4 ’00   +4.29% Worst Quarter* Q2 ’99   -2.89%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Class A (Inception 7/20/93)
Returns Before Taxes		-0.52%		4.51%		4.86%		5.05%
Returns After Taxes on Distributions**		-1.91%		4.51%		4.83%		4.94%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.04%		4.48%		4.78%		4.88%
Lehman Brothers Aggregate Municipal Bond Index***		3.51%		5.59%		5.71%		5.88%
Class B (Inception 5/1/96)
Returns Before Taxes		-1.76%		4.30%		N/A		4.93%
Lehman Brothers Aggregate Municipal Bond Index***		3.51%		5.59%		N/A		6.08%
Class C (Inception 8/15/97)
Returns Before Taxes		2.30%		4.68%		N/A		4.38%
Lehman Brothers Aggregate Municipal Bond Index***		3.51%		5.59%		N/A		5.68%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index figures do not include any deduction for fees, expenses or taxes.

23

High Yield Municipal Fund

TOTAL RETURN	CALENDAR YEAR (CLASS A)
Best Quarter* Q2 ’03              +3.76% Worst Quarter* Q2 ’04   -1.74%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Class A (Inception 4/3/00)
Returns Before Taxes		2.37%		6.49%		6.76%
Returns After Taxes on Distributions**		0.67%		6.11%		6.43%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.51%		5.95%		6.24%
Lehman Brothers High Yield Municipal Index***		8.58%		7.67%		7.48%
Lehman Brothers Aggregate Municipal Bond Index****		3.51%		5.59%		6.34%
Class B (Inception 4/3/00)
Returns Before Taxes		1.21%		6.28%		6.65%
Lehman Brothers High Yield Municipal Index***		8.58%		7.67%		7.48%
Lehman Brothers Aggregate Municipal Bond Index****		3.51%		5.59%		6.34%
Class C (Inception 4/3/00)
Returns Before Taxes		5.37%		6.67%		6.82%
Lehman Brothers High Yield Municipal Index***		8.58%		7.67%		7.48%
Lehman Brothers Aggregate Municipal Bond Index****		3.51%		5.59%		6.34%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	The after-tax returns are for Class A Shares only. The after-tax returns for Class B and Class C Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers High Yield Municipal Index is an unmanaged index made up of bonds that are non-investment grade, unrated, or rated below Ba1 by Moody’s Investors Services with a remaining maturity of at least one year. The Index does not include any deduction for fees, expenses or taxes.
****	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index does not reflect any deduction for fees, expenses or taxes.

24

Fund Fees and Expenses (Class A, B and C Shares)

This table describes the fees and expenses that you would pay if you buy and hold Class A, Class B, or Class C Shares of a Portfolio.

	Short Duration Tax-Free Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		2.0%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		2.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.40%			0.40%			0.40%
Distribution and Service (12b-1) Fees7		0.25%			1.00%			1.00%
Other Expenses8		0.24%			0.24%			0.24%
Total Fund Operating Expenses*		0.89%			1.64%			1.64%

See pages 30 and 31 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Short Duration Tax-Free Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)5:
Management Fees6		0.35%		0.35%		0.35%
Distribution and Service (12b-1) Fees7		0.25%		0.85%		1.00%
Other Expenses8		0.16%		0.16%		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.76%		1.36%		1.51%

25

Fund Fees and Expenses continued

	California
	Intermediate AMT-
	Free Municipal Fund
	Class A			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None
Maximum Deferred Sales Charge (Load)2		None	1		1.0%	3
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None
Redemption Fees9		2.00%			2.00%
Exchange Fees		None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.45%			0.45%
Distribution and Service (12b-1) Fees		0.25%			1.00%
Other Expenses8*		0.62%			0.62%
Total Fund Operating Expenses*		1.32%			2.07%

See pages 30 and 31 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	California
	Intermediate AMT-
	Free Municipal Fund
	Class A		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)5:
Management Fees6		0.45%		0.45%
Distribution and Service (12b-1) Fees		0.25%		1.00%
Other Expenses8		0.20%		0.20%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.90%		1.65%

26

FUND FEES AND EXPENSES

	New York
	Intermediate AMT-
	Free Municipal Fund
	Class A			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None
Maximum Deferred Sales Charge (Load)2		None	1		1.0%	3
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None
Redemption Fees9		2.00%			2.00%
Exchange Fees		None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.45%			0.45%
Distribution and Service (12b-1) Fees		0.25%			1.00%
Other Expenses8*		1.97%			1.97%
Total Fund Operating Expenses*		2.67%			3.42%

See pages 30 and 31 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	New York
	Intermediate AMT-
	Free Municipal Fund
	Class A		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)5:
Management Fees6		0.45%		0.45%
Distribution and Service (12b-1) Fees		0.25%		1.00%
Other Expenses8		0.20%		0.20%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.90%		1.65%

27

Fund Fees and Expenses continued

	Municipal Income Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees9		2.00%			2.00%			2.00%
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.55%			0.55%			0.55%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses8		0.27%			0.27%			0.27%
Total Fund Operating Expenses*		1.07%			1.82%			1.82%

See pages 30 and 31 for all other footnotes.

*  The “Management Fees,” “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	Municipal Income Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)5:
Management Fees6		0.50%		0.50%		0.50%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses8		0.16%		0.16%		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.91%		1.66%		1.66%

28

FUND FEES AND EXPENSES

	High Yield Municipal Fund
	Class A			Class B			Class C
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		4.5%	1		None			None
Maximum Deferred Sales Charge (Load)2		None	1		5.0%	3		1.0%	4
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None			None			None
Redemption Fees		None			None			None
Exchange Fees		None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):5
Management Fees6		0.52%			0.52%			0.52%
Distribution and Service (12b-1) Fees		0.25%			1.00%			1.00%
Other Expenses8		0.18%			0.18%			0.18%
Total Fund Operating Expenses*		0.95%			1.70%			1.70%

See pages 30 and 31 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) of the Fund are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

	High Yield Municipal Fund
	Class A		Class B		Class C
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)5:
Management Fees6		0.52%		0.52%		0.52%
Distribution and Service (12b-1) Fees		0.25%		1.00%		1.00%
Other Expenses8		0.16%		0.16%		0.16%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.93%		1.68%		1.68%

29

Fund Fees and Expenses continued

1	The maximum sales charge is a percentage of the offering price. Under certain circumstances, which are described in the Shareholder Guide, the maximum sales charge may be reduced or waived entirely. A CDSC of 1% may be imposed on certain redemptions (within 18 months of purchase) of Class A Shares sold without an initial sales charge as part of an investment of $1 million or more ($500,000 in the case of the Short Duration Tax-Free Fund).
2	The maximum CDSC is a percentage of the lesser of the NAV at the time of redemption or the NAV when the shares were originally purchased.
3	With the exception of the Short Duration Tax-Free Fund, a CDSC is imposed upon Class B Shares redeemed within six years of purchase at a rate of 5% in the first year, declining to 1% in the sixth year, and eliminated thereafter. With respect to the Short Duration Tax-Free Fund, a CDSC is imposed on shares redeemed within three years of purchase at a rate of 2.0% in the first year, declining to 1% in the third year, and eliminated thereafter.
4	A CDSC of 1% is imposed on Class C Shares redeemed within 12 months of purchase.
5	The California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund commenced operations on November 1, 2005 and their annual operating expenses have been estimated for the current fiscal year. The Short Duration Tax-Free, Municipal Income and High Yield Funds’ annual operating expenses have been restated to reflect a contractual reduction in the transfer agent fee from an annual rate of 0.19% to an annual rate of 0.16% of the average daily net assets of the Funds’ Class A, Class B and Class C shares. In addition, as a result of the fee reduction commitment disclosed in footnote 6 the High Yield Fund’s “Management Fees” and “Total Fund Operating Expenses” have been restated to reflect the expenses that are expected for the current fiscal year.
6	The Investment Adviser has entered into the following fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus. The rates listed below for the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds have been contractual since their commencement of operations.

		Management Fee
Fund		Annual Rate			Average Daily Net Assets
Short Duration Tax-Free			0.40	%		on the first $1 billion
			0.36	%		on the next $1 billion
			0.34	%		over $2 billion
California Intermediate			0.45	%		on the first $1 billion
	AMT-Free Municipal		0.41	%		on the next $1 billion
			0.39	%		over $2 billion
New York Intermediate			0.45	%		on the first $1 billion
	AMT-Free Municipal		0.41	%		on the next $1 billion
			0.39	%		over $2 billion
Municipal Income			0.55	%		on the first $1 billion
			0.50	%		on the next $1 billion
			0.48	%		over $2 billion
High Yield Municipal			0.55	%		on the first $2 billion
			0.50	%		over $2 billion

30

FUND FEES AND EXPENSES

	Prior to this fee reduction commitment, the management fees from the Short Duration Tax-Free, Municipal Income and High Yield Municipal Funds as an annual percentage rate of average daily net assets were 0.40%, 0.55% and 0.55%, respectively. In addition, the Investment Adviser has voluntarily agreed not to impose a portion of the management fee on the Short Duration Tax-Free and Municipal Income Funds equal to 0.05% and 0.05%, respectively, of such Funds’ average daily net assets. As a result of fee waivers, the current management fees of the Short Duration Tax-Free and Municipal Income Funds are 0.35% and 0.50%, respectively, of such Funds’ average daily net assets. The waivers may be terminated at any time at the option of the Investment Adviser.
7	Goldman Sachs has voluntarily agreed not to impose a portion of the distribution and service fees attributable to Class B Shares of the Short Duration Tax-Free Fund equal to 0.15%. The waiver may be terminated at any time at the option of the distributor. If this occurs, the distribution and service fees attributable to Class B Shares of this Fund will increase to 1.00% of the Fund’s average daily net assets.
8	“Other Expenses” include transfer agency fees and expenses equal on an annualized basis to 0.16% of the average daily net assets of each Fund’s Class A, B and C Shares, plus all other ordinary expenses not detailed above. The Investment Adviser has voluntarily agreed to reduce or limit “Other Expenses” (excluding management fees, distribution and service fees, transfer agency fees and expenses, taxes, interest and brokerage fees and litigation, indemnification, shareholder meetings and other extraordinary expenses exclusive of any expense offset arrangements) to the following percentages of each Fund’s average daily net assets:

	Other
Fund	Expenses
Short Duration Tax-Free		0.004%
California Intermediate AMT-Free Municipal		0.044%
New York Intermediate AMT-Free Municipal		0.044%
Municipal Income		0.004%
High Yield Municipal		0.004%

⁹ A 2.0% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less.

31

Fund Fees and Expenses continued

Example

The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Class A, B or C of a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Fund		1 Year		3 Years		5 Years		10 Years
Short Duration Tax-Free
Class A Shares		$	289	$	478	$	683	$	1,274
Class B Shares
	– Assuming complete redemption at end of period	$	367	$	617	$	892	$	1,743
	– Assuming no redemption	$	167	$	517	$	892	$	1,743
Class C Shares
	– Assuming complete redemption at end of period	$	267	$	517	$	892	$	1,944
	– Assuming no redemption	$	167	$	517	$	892	$	1,944
California Intermediate AMT-Free Municipal
Class A Shares		$	332	$	610	$	N/A	$	N/A
Class C Shares
	– Assuming complete redemption at end of period	$	310	$	649	$	N/A	$	N/A
	– Assuming no redemption	$	210	$	649	$	N/A	$	N/A
New York Intermediate AMT-Free Municipal
Class A Shares		$	708	$	1,242	$	N/A	$	N/A
Class C Shares
	– Assuming complete redemption at end of period	$	445	$	1,051	$	N/A	$	N/A
	– Assuming no redemption	$	345	$	1,051	$	N/A	$	N/A
Municipal Income
Class A Shares		$	554	$	775	$	1,014	$	1,697
Class B Shares
	– Assuming complete redemption at end of period	$	685	$	873	$	1,185	$	1,940
	– Assuming no redemption	$	185	$	573	$	985	$	1,940
Class C Shares
	– Assuming complete redemption at end of period	$	285	$	573	$	985	$	2,137
	– Assuming no redemption	$	185	$	573	$	985	$	2,137

32

FUND FEES AND EXPENSES

Fund		1 Year		3 Years		5 Years		10 Years
High Yield Municipal
Class A Shares		$	543	$	739	$	952	$	1,564
Class B Shares
	– Assuming complete redemption at end of period	$	673	$	836	$	1,123	$	1,810
	– Assuming no redemption	$	173	$	536	$	923	$	1,810
Class C Shares
	– Assuming complete redemption at end of period	$	273	$	536	$	923	$	2,009
	– Assuming no redemption	$	173	$	536	$	923	$	2,009

The hypothetical example assumes that a CDSC will not apply to redemptions of Class A Shares within the first 18 months. Class B Shares convert to Class A Shares eight years after purchase; therefore, Class A expenses are used in the hypothetical example after year eight.

Certain institutions that sell Fund shares and/or their salespersons may receive other compensation in connection with the sale and distribution of Class A, Class B and Class C Shares for services to their customers’ accounts and/or the Funds. For additional information regarding such compensation, see “What Should I Know When I Purchase Shares Through an Authorized Dealer?” in the Prospectus and “Payments to Intermediaries” in the Additional Statement.

33

Service Providers

   INVESTMENT ADVISERS   

Investment Adviser	Fund
Goldman Sachs Asset Management, L.P. (“GSAM”) 32 Old Slip New York, New York 10005	Short Duration Tax-Free California Intermediate AMT-Free Municipal New York Intermediate AMT-Free Municipal Municipal Income High Yield Municipal

GSAM has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman Sachs & Co. (“Goldman Sachs”). As of December 31, 2005, GSAM had assets under management of $496.1 billion.

The Investment Adviser provides day-to-day advice regarding the Funds’ portfolio transactions. The Investment Adviser makes the investment decisions for the Funds and places purchase and sale orders for the Funds’ portfolio transactions in U.S. markets. As permitted by applicable law, these orders may be directed to any brokers, including Goldman Sachs and its affiliates. While the Investment Adviser is ultimately responsible for the management of the Funds, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. In addition, the Investment Adviser has access to the research and certain proprietary technical models developed by Goldman Sachs, and will apply quantitative and qualitative analysis in determining the appropriate allocations among categories of issuers and types of securities.

The Investment Adviser also performs the following additional services for the Funds:

n	Supervises all non-advisory operations of the Funds
n	Provides personnel to perform necessary executive, administrative and clerical services to the Funds
n	Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
n	Maintains the records of each Fund
n	Provides office space and all necessary office equipment and services

34

SERVICE PROVIDERS

   MANAGEMENT FEES   

As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund’s average daily net assets):

		Actual Rate
		For the Fiscal
		Year Ended
	Contractual Rate*	October 31, 2005
GSAM:
Short Duration Tax-Free	0.40% on the first $1 billion 0.36% on the next $1 billion 0.34% over $2 billion		0.35%
California Intermediate AMT-Free Municipal	0.45% on the first $1 billion 0.41% on the next $1 billion 0.39% over $2 billion		N/A**
New York Intermediate AMT-Free Municipal	0.45% on the first $1 billion 0.41% on the next $1 billion 0.39% over $2 billion		N/A**
Municipal Income	0.55% on the first $1 billion 0.50% on the next $1 billion 0.48% over $2 billion		0.50%
High Yield Municipal	0.55% on the first $2 billion 0.50% over $2 billion		0.52%

*

The investment Adviser has entered into the foregoing new fee reduction commitments for the Funds which were implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus. The rates listed above for the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds have been contractual since their commencement of operations in November 2005. Prior to the fee reduction commitment, the management fees for the Short Duration Tax-Free, Municipal Income and High Yield Municipal Funds as an annual percentage of average daily net assets were 0.40%, 0.55% and 0.55%, respectively.

**

The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds did not conduct investment operations during this fiscal period.

The difference, if any, between the stated fees and the actual fees paid by the Funds reflects that the Investment Adviser did not charge the full amount of the fees to which it would have been entitled. The Investment Adviser may discontinue or modify any such voluntary limitations in the future at its discretion.

A discussion regarding the basis for the Board of Trustees’ approval of the Management Agreements for the Short Duration Tax Free, Municipal Income and High Yield Municipal Funds in 2005 is available in the Funds’ annual report dated

35

October 31, 2005. The semi-annual report for the fiscal period ended April 30, 2006 for the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds will become available in June 2006 and will contain a discussion regarding the basis for the Board of Trustees’ approval of the Management Agreement relating to those Funds.

   FUND MANAGERS   

Fixed Income Portfolio Management Team

n	The investment process revolves around three groups: the Fixed Income Strategy Group, the Top-down Strategy Teams, and the Municipal Bond Teams.
n	These teams strives to maximize risk-adjusted returns by de-emphasizing interest rate anticipation and focusing on security selection and sector allocation
n	The team manages approximately $144.9 billion in municipal and taxable fixed-income assets for retail, institutional and high net worth clients

______________________________________________________________________________________________________________

U.S. Fixed Income-Municipal Investment Management Team

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Ben Barber Managing Director Head of U.S. Municipal Team	Senior Portfolio Manager— Short Duration Tax-Free California Intermediate AMT-Free Municipal New York Intermediate AMT-Free Municipal Municipal Income High Yield Municipal	Since 1999 2005 2005 1999 2000	Mr. Barber joined the Investment Adviser in 1999 as a portfolio manager. Prior to his current position, he managed high yield municipal and municipal bond funds at Franklin Templeton for eight years.
Tom Kenny Managing Director and Co-Head U.S. and Global Fixed Income Teams	Senior Portfolio Manager— California Intermediate AMT-Free Municipal Fund New York Intermediate AMT-Free Municipal Fund High Yield Municipal	Since 2005 2005 2000	Mr. Kenny joined the Investment Adviser in 1999 as a senior portfolio manager. Previously, he spent 13 years at Franklin Templeton where he was a portfolio manager of high yield municipal and municipal funds, Director of Municipal Research and Director of the Municipal Bond Department.
Scott Diamond Vice President	Portfolio Manager— Short Duration Tax-Free California Intermediate AMT-Free Municipal New York Intermediate AMT-Free Municipal Municipal Income High Yield Municipal	Since 2002 2005 2005 2002 2002	Mr. Diamond joined the Investment Adviser in 2002 as a portfolio manager. Before joining the Investment Adviser, Mr. Diamond worked for Prudential Financial for nine years where he served as the portfolio manager for national and state specific mutual funds, as well as managing the municipal portfolio of several institutional accounts.

36

SERVICE PROVIDERS

Ben Barber is a Senior Portfolio Manager and serves as the Head of the U.S. Municipal Investment Management Team. As the leader of the Municipal Investment Management Team, Mr. Barber is ultimately responsible for the composition of a Fund’s structure at both the security and sector level. Along with the other portfolio managers on the team, Mr. Barber has specific responsibilities including duration, term structure, trading, and credit research. Each portfolio manager is responsible for liaising with the Municipal Credit Research Department, and promoting his or her fixed income investment ideas to the other members of the team so that a consensus view might be achieved and implemented.

The Additional Statement provides information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and portfolio manager ownership of securities in the Funds.

   DISTRIBUTOR AND TRANSFER AGENT   

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the “Distributor”) of each Fund’s shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, IL 60606, also serves as each Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.

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 shares acquired for its own account.

   ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER 
   ACCOUNTS MANAGED BY GOLDMAN SACHS   

The involvement of the Investment Adviser, 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 a Fund or limit a Fund’s investment activities. Goldman Sachs is a full service investment banking broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financer, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking

37

or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. Furthermore, transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Funds or who engage in transactions with or for the Funds. For more information about conflicts of interest see the Additional Statement.

Under a securities lending program approved by the Funds’ Board of Trustees, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for each Fund to the extent that the Funds engage in the securities lending program. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of the cash received as collateral for the loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions.

38

SERVICE PROVIDERS

   LEGAL PROCEEDINGS   

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. (“GSG”), GSAM, the Trustees and Officers of the Goldman Sachs Trust (the “Trust”), and John Doe Defendants. In addition, certain of the Goldman Sachs Funds included in this Prospectus and certain other investment portfolios of the Trust were named as nominal defendants. On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman, Sachs, Goldman Sachs Variable Insurance Trust (“GSVIT”) the Trust, the Trustees and Officers of the Trust and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the “Goldman Sachs Funds”) were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005.

The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company Act of 1940 (the “Investment Company Act”), and the Investment Advisers Act of 1940, (ii) common law breach of fiduciary duty, and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Investment Company Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreement and return of fees paid; an accounting of all Goldman Sachs Funds-related fees, commissions and soft

39

dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006 the plaintiffs appealed this decision.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

40

Dividends

Each Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:

n	Cash
n	Additional shares of the same class of the same Fund
n	Shares of the same or an equivalent class of another Goldman Sachs Fund. Special restrictions may apply. See the Additional Statement.

You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the applicable Fund. If cash dividends are elected with respect to the Fund’s monthly net investment income dividends, then cash dividends must also be elected with respect to the non-long-term capital gains component, if any, of the Fund’s annual dividend.

The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains are declared and paid as follows:

	Investment Income		Capital Gains
	Dividends		Distributions
Fund	Declared	Paid	Declared and Paid
Short Duration Tax-Free	Daily	Monthly	Annually
California Intermediate AMT-Free Municipal	Daily	Monthly	Annually
New York Intermediate AMT-Free Municipal	Daily	Monthly	Annually
Municipal Income	Daily	Monthly	Annually
High Yield Municipal	Daily	Monthly	Annually

From time to time a portion of a Fund’s dividends may constitute a return of capital.

When you purchase shares of a Fund, part of the NAV per share may be represented by undistributed income or undistributed realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.

41

Shareholder Guide

The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds’ shares.

   HOW TO BUY SHARES   

How Can I Purchase Class A, Class B And Class C Shares Of The Funds?

You may purchase shares of the Funds through:

n	Goldman Sachs;
n	Authorized Dealers; or
n	Directly from the Trust.

In order to make an initial investment in a Fund, you must furnish to the Fund, Goldman Sachs or your Authorized Dealer the information in the Account Application. An order will be processed upon receipt of payment.

To Open an Account:

n	Complete the Account Application
n	Mail your payment and Account Application to:

    Your Authorized Dealer

    —  Purchases by check or Federal Reserve draft should be made payable to your Authorized Dealer

    —  Your Authorized Dealer is responsible for forwarding payment promptly (within three business days) to the Fund

    or

    Goldman Sachs Funds
P.O. Box 219711, Kansas City, MO 64121-9711

    —  Purchases by check or Federal Reserve draft should be made payable to Goldman Sachs Funds—(Name of Fund and Class of Shares)

    —  Boston Financial Data Services, Inc. (“BFDS”), the Fund’s sub-transfer agent, will not accept checks drawn on foreign banks, third-party checks, cashier’s checks or official checks, temporary checks, electronic checks, drawer checks, cash, money orders, travelers cheques or credit card checks. In limited situations involving the transfer of retirement assets, the Fund may accept cashier’s checks or official bank checks.

    —  Federal funds wire, Automated Clearing House Network (“ACH”) transfer or bank wires should be sent to State Street Bank and Trust Company (“State Street”) (each Fund’s custodian). Please call the Funds at 1-800-526-7384 to get detailed instructions on how to wire your money.

42

SHAREHOLDER GUIDE

What Is My Minimum Investment In The Funds?

	Initial		Additional
Regular Accounts		$1,000		$50
Employee Benefit Plans (e.g., IRAs, employee sponsored plans)*		$250		No minimum
Uniform Gift/Transfer to Minors (UGMA/UTMA) Accounts		$250		$50
Coverdell ESAs*		$250		$50
Automatic Investment Plans		$250		$50**

 *  The Funds may not be appropriate for IRAs, other tax deferred or tax exempt accounts or for other investors who are not sensitive to federal, state or local income tax consequences of these investments. Please consult with your financial or tax adviser for more information.

**  No minimum in the case of the California Intermediate AMT-Free Municipal Fund and the New York Intermediate AMT-Free Municipal Fund.

What Alternative Sales Arrangements Are Available?

The Funds offer three classes of shares through this Prospectus.*

Maximum Amount You Can Buy in the Aggregate Across Funds	Class A	No limit
	Class B	$100,000**
	Class C	$1,000,000 ($500,000 in the case of Short Duration Tax-Free Fund)**
Initial Sales Charge	Class A	Applies to purchases of less than $1 million ($500,000 in the case of Short Duration Tax-Free Fund)—varies by size of investment with a maximum of 4.5% (2.0% maximum in the case of the Short Duration Tax-Free Fund)
	Class B	None
	Class C	None
CDSC	Class A	1.00% on certain investments of $1 million or more if you sell within 18 months
	Class B	6 year declining CDSC with a maximum of 5% (2% in the case of Short Duration Tax-Free Fund, which has a 3 year declining CDSC)
	Class C	1% if shares are redeemed within 12 months of purchase
Conversion Feature	Class A	None
	Class B	Class B Shares automatically convert to Class A Shares after 8 years
	Class C	None

 *  Currently, Class B Shares of the Short Duration Tax-Free Fund may no longer be purchased. Current Class B Shareholders of the Short Duration Tax Free Fund may only continue to reinvest dividends and capital gains into their accounts. Exchanges into Class B Shares of the Short Duration Tax-Free Fund from other Goldman Sachs Funds are not permitted. Sales of Class B Shares of the Short Duration Tax-Free Fund may resume at a future date. California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund do not currently offer Class B Shares.

43

**  No additional Class B Shares or Class C Shares may be purchased by an investor either in an initial purchase or in subsequent purchases if the current market value of the shares owned and/or purchased is equal to or exceeds $100,000 in the case of Class B Shares or $1,000,000 ($500,000 in the case of the Short Duration Tax-Free Fund) in the case of Class C Shares.

What Else Should I Know About Share Purchases?

The Trust reserves the right to:

n	Refuse to open an account if you fail 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).
n	Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of shares of a Fund is evident, or if purchases, sales or exchanges are, or a subsequent abrupt redemption might be, of a size that would disrupt the management of a Fund.
n	Close a Fund to new investors from time to time and reopen any such Fund whenever it is deemed appropriate by a Fund’s Investment Adviser.
n	Modify or waive the minimum investment amounts.
n	Modify the manner in which shares are offered.
n	Modify the sales charge rates applicable to future purchases of shares.

Generally, the Funds will not allow non-U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds.

The Funds may allow you to purchase shares with securities instead of cash if consistent with a Fund’s investment policies and operations and if approved by the Fund’s Investment Adviser.

Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for investors who open accounts with the Funds. Applications without the required information may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to: (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Funds are unable to verify an investor’s identity. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an

44

SHAREHOLDER GUIDE

account and redeeming an investor’s shares pursuant to the customer identification program.

How Are Shares Priced?

The price you pay or receive when you buy, sell or exchange shares is the Fund’s next determined NAV for a share class (as adjusted for any applicable sales charge or redemption fee). Each class calculates its NAV as follows:

NAV = (Value of Assets of the Class)
- (Liabilities of the Class)
Number of Outstanding Shares of the Class

The Funds’ investments are valued based on market quotations, which may be furnished by a pricing service or provided by securities dealers. If accurate quotations are not readily available, or if the Investment Adviser believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined based on yield equivalents, a pricing matrix or other sources, under valuation procedures established by the Trustees. Debt obligations with a remaining maturity of 60 days or less are valued at amortized cost.

In addition, the Investment Adviser, consistent with applicable regulatory guidance, may determine to make an adjustment to the previous closing prices of securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in foreign markets; market disruptions or market closings; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements on earnings; significant litigation; and regulatory news such as governmental approvals.

One effect of using independent fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).

45

n	NAV per share of each share class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New York time) or such earlier or later time as the New York Stock Exchange or NASDAQ market may officially close. This occurs after the determination, if any, of the income to be declared as a dividend. Fund shares will generally not be priced on any day the New York Stock Exchange is closed.
n	When you buy shares, you pay the NAV next calculated after the Funds receive your order in proper form, plus any applicable sales charge.
n	When you sell shares, you receive the NAV next calculated after the Funds receive your order in proper form, less any applicable CDSC or redemption fee.
n	On any business day 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. If a Fund does so, it will cease granting same business day credit for purchase and redemption orders received after the Fund’s closing time and credit will be given to the next business day.
n	The Trust reserves the right to reprocess purchase (including dividend reinvestments), redemption and exchange transactions that were processed at an NAV other than a Fund’s official closing NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV as adjusted.
n	The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.

Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1-800-526-7384.

   COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS A SHARES   

What Is The Offering Price Of Class A Shares?

The offering price of Class A Shares of each Fund is the next determined NAV per share plus an initial sales charge paid to Goldman Sachs at the time of purchase of shares. The sales charge varies depending upon the amount you purchase. In some cases, described below, the initial sales charge may be

46

SHAREHOLDER GUIDE

eliminated altogether, and the offering price will be the NAV per share. The current sales charges and commissions paid to Authorized Dealers for Class A Shares of the California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds are as follows:

				Sales Charge			Maximum Dealer
	Sales Charge as			as Percentage			Allowance as
Amount of Purchase	Percentage of			of Net Amount			Percentage of
(including sales charge, if any)	Offering Price			Invested			Offering Price*
Less than $100,000		4.50	%		4.71	%		4.00	%
$100,000 up to (but less than) $250,000		3.00			3.09			2.50
$250,000 up to (but less than) $500,000		2.50			2.56			2.00
$500,000 up to (but less than) $1 million		2.00			2.04			1.75
$1 million or more		0.00	**		0.00	**		***

The current sales charges and commissions paid to Authorized Dealers for Class A Shares of the Short Duration Tax-Free Fund are as follows:

				Sales Charge			Maximum Dealer
	Sales Charge as			as Percentage			Allowance as
Amount of Purchase	Percentage of			of Net Amount			Percentage of
(including sales charge, if any)	Offering Price			Invested			Offering Price*
Less than $250,000		2.00	%		2.04	%		1.75	%
$250,000 up to (but less than) $500,000		1.50			1.52			1.25
$500,000 or more		0.00	**		0.00	**		***

*	Dealer’s allowance may be changed periodically. During special promotions, the entire sales charge may be allowed to Authorized Dealers. Authorized Dealers to whom substantially the entire sales charge is allowed may be deemed to be “underwriters” under the Securities Act of 1933.
**	No sales charge is payable at the time of purchase of Class A Shares of $1 million ($500,000 in the case of the Short Duration Tax-Free Fund) or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase.
***	The Distributor may pay a one-time commission to Authorized Dealers who initiate or are responsible for purchases of $1 million or more of shares of the Funds ($500,000 in the case of the Short Duration Tax-Free Fund) equal to 1.00% of the amount under $3 million, 0.50% of the next $2 million, and 0.25% thereafter. In instances where an Authorized Dealer (including Goldman Sachs’ Private Wealth Management Unit) agrees to waive its receipt of the one-time commission described above, the CDSC on Class A shares, generally, will be waived. The Distributor may also pay, with respect to all or a portion of the amount purchased, a commission in accordance with the foregoing schedule to Authorized Dealers who initiate or are responsible for purchases of $500,000 or more by certain Section 401(k), profit sharing, money purchase pension, tax sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations investing in the Funds which satisfy the criteria set forth below in “When Are Class A Shares Not Subject To A Sales Load?” or $1 million ($500,000 in the case of the Short Duration Tax-Free Fund) or more by certain “wrap” accounts. Purchases by such plans will be made at NAV with no initial sales charge, but if shares are redeemed within 18 months after the end of the calendar month in which such purchase was made, a CDSC of 1% may be imposed upon the plan, the plan sponsor or the third party administrator. In addition, Authorized Dealers will remit to the Distributor such payments received in connection with

47

“wrap” accounts in the event that shares are redeemed within 18 months after the end of the calendar month in which the purchase was made.

You should note that the actual sales charge that appears in your mutual fund transaction confirmation may differ slightly from the rate disclosed above in this Prospectus due to rounding calculations.

As indicated in the chart on the preceding page, and as discussed further below and in the section titled “How Can the Sales Charge on Class A Shares Be Reduced?”, you may, under certain circumstances, be entitled to pay reduced sales charges on your purchases of Class A Shares or have those charges waived entirely. To take advantage of these discounts, you or your Authorized Dealer or financial intermediary must notify the Funds’ Transfer Agent at the time of your purchase order that a discount may apply to your current purchases. You may also be required to provide appropriate documentation to receive these discounts, including:

(i)	Information or records regarding shares of the Funds or other Goldman Sachs Funds held in all accounts (e.g., retirement accounts) of the shareholder at the financial intermediary;
(ii)	Information or records regarding shares of the Funds or other Goldman Sachs Funds held in any account of the shareholder at another financial intermediary; and

(iii)  Information or records regarding shares of the Funds or other Goldman Sachs Funds held at any financial intermediary by related parties of the shareholder, such as members of the same family or household.

You should note in particular that, if the Funds’ Transfer Agent is properly notified, under the “Right of Accumulation” described below, the “Amount of Purchase” in the chart on the preceding page will be deemed to include all Class A, Class B and/or Class C Shares of the Goldman Sachs Funds that were acquired by purchase or exchange and are held at the time of purchase by any of the following persons: (i) you, your spouse and your children; and (ii) any trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account. This includes, for example, any Class A, Class B and/or Class C Shares held at a broker-dealer or other financial intermediary other than the one handling your current purchase. In some circumstances, other Class A, Class B and/or Class C Shares may be aggregated with your current purchase under the Right of Accumulation as described in the Additional Statement. For purposes of determining the “Amount of Purchase,” all Class A, Class B and/or Class C Shares held at the time of purchase will be valued at their current market value.

You should also note that if you provide the Transfer Agent a signed written Statement of Intention to invest (not counting reinvestments of dividends and distributions) in the aggregate, within a 13-month period, $100,000 or more in

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SHAREHOLDER GUIDE

Class A Shares of one or more Goldman Sachs Funds, any investments you make during the 13 months will be treated as though the total quantity were invested in one lump sum and you will receive the discounted sales load based on your investment commitment. You must, however, inform the Transfer Agent that the Statement of Intention is in effect each time shares are purchased. Each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Statement of Intention.

In addition to the information provided in this Prospectus and the Additional Statement, information about sales charge discounts is available from your Authorized Dealer or financial intermediary and, free of charge, on the Funds’ website at http://www.gs.com/funds.

What Else Do I Need To Know About Class A Shares’ CDSC?

Purchases of $1 million ($500,000 in the case of the Short Duration Tax-Free Fund) or more of Class A Shares will be made at NAV with no initial sales charge. However, if you redeem shares within 18 months after the end of the calendar month in which the purchase was made, a CDSC of 1% may be imposed. The CDSC may not be imposed if your Authorized Dealer enters into an agreement with the Distributor to return all or an applicable prorated portion of its commission to the Distributor. The CDSC is waived on redemptions in certain circumstances. See “In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or Reduced?” below.

When Are Class A Shares Not Subject To A Sales Load?

Class A Shares of the Funds may be sold at NAV without payment of any sales charge to the following individuals and entities:

n	Goldman Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of these individuals;
n	Qualified employee benefit plans of Goldman Sachs;
n	Trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor;
n	Any employee or registered representative of any Authorized Dealer or their respective spouses, children and parents;
n	Banks, trust companies or other types of depository institutions;
n	Any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of a Fund;
n	Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health

49

savings account) that are sponsored by one or more employers (including governmental or church employers) or employee organizations (“Employee Benefit Plans”) that:

n	Buy shares of Goldman Sachs Funds worth $500,000 or more; or
n	Have 100 or more eligible employees at the time of purchase; or
n	Certify that they expect to have annual plan purchases of shares of Goldman Sachs Funds of $200,000 or more; or
n	Are provided administrative services by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plans; or
n	Have at the time of purchase aggregate assets of at least $2,000,000.

n	“Wrap” accounts for the benefit of clients of broker-dealers, financial institutions or financial planners, provided they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards;
n	Registered investment advisers investing for accounts for which they receive asset-based fees;
n	Accounts over which GSAM or its advisory affiliates have investment discretion;
n	Shareholders receiving distributions from a qualified Employee Benefit Plan invested in the Goldman Sachs Funds and reinvesting such proceeds in a Goldman Sachs IRA;
n	Shareholders who roll over distributions from any tax-qualified Employee Benefit Plan or tax-sheltered annuity to an IRA which invests in the Goldman Sachs Funds if the tax-qualified Employee Benefit Plan or tax-sheltered annuity receives administrative services provided by certain third-party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plan or annuity; or
n	Investors who qualify under other exemptions that are stated from time to time in the Additional Statement.

In addition, during the 90-day period beginning in August 2005 and ending in November 2005, eligible clients of broker-dealer Edward D. Jones & Co., LP were permitted to purchase Class A shares at NAV under the terms of the Edward Jones Free Switch Program.

You must certify eligibility for any of the above exemptions on your Account Application and notify the Fund if you no longer are eligible for the exemption. The Fund will grant you an exemption subject to confirmation of your entitlement. You may be charged a fee if you effect your transactions through a broker or agent.

How Can The Sales Charge On Class A Shares Be Reduced?

n Right of Accumulation: When buying Class A Shares in Goldman Sachs Funds, your current aggregate investment determines the initial sales load you pay. You

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SHAREHOLDER GUIDE

may qualify for reduced sales charges when the current market value of holdings across Class A, Class B and/or Class C Shares, plus new purchases, reaches $100,000 or more in the case of the California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds and $250,000 or more in the case of the Short Duration Tax-Free Fund. Class A, Class B and/or Class C Shares of any of the Goldman Sachs Funds may be combined under the Right of Accumulation. For purposes of applying the Right of Accumulation, shares of the Funds and any other Goldman Sachs Funds purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, under some circumstances, Class A, Class B and/or Class C Shares of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of the same business organization, groups of individuals represented by and investing on the recommendation of the same accounting firm, certain affinity groups or other similar organizations may be combined for the purpose of determining whether a purchase will qualify for the Right of Accumulation and, if qualifying, the applicable sales charge level. To qualify for a reduced sales load, you or your Authorized Dealer must notify the Fund’s Transfer Agent at the time of investment that a quantity discount is applicable. Use of this option is subject to a check of appropriate records. The Additional Statement has more information about the Right of Accumulation.

n

Statement of Intention: You may obtain a reduced sales charge by means of a written Statement of Intention which expresses your non-binding commitment to invest (not counting reinvestments of dividends and distributions) in the aggregate $100,000 or more within a period of 13 months in the case of the California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds and $250,000 or more in the case of the Short Duration Tax-Free Fund. Any investments you make during the period will receive the discounted sales load based on the full amount of your investment commitment. At your request, purchases made during the previous 90 days may be included; however, capital appreciation does not apply toward these combined purchases. If the investment commitment of the Statement of Intention is not met prior to the expiration of the 13-month period, the entire amount will be subject to the higher applicable sales charge. By selecting the Statement of Intention, you authorize the Transfer Agent to escrow and redeem Class A Shares in your account to pay this additional charge. The Additional Statement has more information about the Statement of Intention, which you should read carefully.

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   COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS B SHARES*   

What Is The Offering Price Of Class B Shares?

You may purchase Class B Shares of the Funds (other than the California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund) at the next determined NAV without an initial sales charge. However, Class B Shares redeemed within six years (three years in the case of the Short Duration Tax-Free Fund) of purchase will be subject to a CDSC at the rates shown in the table below based on how long you held your shares.

The CDSC schedule is as follows:

	CDSC as a Percentage of Dollar
	Amount Subject to CDSC
	Municipal Income and		Short Duration
Year Since Purchase	High Yield Municipal Funds		Tax-Free Fund
First		5%		2%
Second		4%		1.5%
Third		3%		1%
Fourth		3%		None
Fifth		2%		None
Sixth		1%		None
Seventh and thereafter		None		None

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 distribution-related services to the Funds in connection with the sale of Class B Shares, including the payment of compensation to Authorized Dealers. A commission equal to 2% in the case of the Short Duration Tax-Free Fund and 4% in the case of all other Funds of the amount invested is paid to Authorized Dealers.

Former Expedition Fund shareholders who received Class B Shares of the Municipal Income Fund in connection with the reorganization of their Expedition Fund will be charged CDSCs on those Class B Shares based on the former Expedition Fund CDSC schedule and will be credited for the period of time from the original date of purchase of the Expedition Fund Class B Shares in determining the amount of their CDSC. Goldman Sachs Class B Shares purchased by former Expedition Fund shareholders after the effective time of the reorganization will be charged a CDSC according to the above CDSC schedule. For more information, see the Additional Statement.

*  California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund do not currently offer B Shares.

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SHAREHOLDER GUIDE

As of the date of this Prospectus, Class B Shares of the Short Duration Tax-Free Fund may no longer be purchased. Current Class B Shareholders of the Short Duration Tax-Free Fund may only continue to reinvest dividends and capital gains into their accounts. Exchanges into Class B Shares of the Short Duration Tax-Free Fund from other Goldman Sachs Funds are not permitted. Sales of Class B Shares of the Short Duration Tax-Free Fund may resume at a future date.

What Should I Know About The Automatic Conversion Of Class B Shares?

Class B Shares of a Fund will automatically convert into Class A Shares of the same Fund at the end of the calendar quarter that is eight years (three years in the case of the Short Duration Tax-Free Fund) after the purchase date.

If you acquire Class B Shares of a Fund by exchange from Class B Shares of another Goldman Sachs Fund, your Class B Shares will convert into Class A Shares of such Fund based on the date of the initial purchase and the CDSC schedule of that purchase.

If you acquire Class B Shares through reinvestment of distributions, your Class B Shares will convert into Class A Shares based on the date of the initial purchase of the shares on which the distribution was paid.

The conversion of Class B Shares to Class A Shares will not occur at any time the Funds are advised that such conversions may constitute taxable events for federal tax purposes, which the Funds believe is unlikely. If conversions do not occur as a result of possible taxability, Class B Shares would continue to be subject to higher expenses than Class A Shares for an indeterminate period.

   A COMMON QUESTION ABOUT THE PURCHASE OF CLASS C SHARES   

What Is The Offering Price Of Class C Shares?

You may purchase Class C Shares of the Funds at the next determined NAV without paying an initial sales charge. However, if you redeem Class C Shares within 12 months of purchase, a CDSC of 1% will normally be deducted from the redemption proceeds. In connection with purchases by Employee Benefit Plans, where Class C Shares are redeemed within 12 months of purchase, a CDSC of 1% may be imposed upon the plan sponsor or third-party administrator.

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 distribution-related services to the Funds in connection with the sale of Class C Shares, including the payment of compensation to Authorized Dealers. An amount equal to 1% of the amount invested is normally paid by the Distributor to Authorized Dealers.

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   COMMON QUESTIONS APPLICABLE TO THE PURCHASE OF CLASS A, 
   B AND C SHARES   

When Will Shares Be Issued And Dividends Begin To Be Paid?

n Shares Purchased by Federal Funds Wire or ACH Transfer:

n	If a purchase order in proper form specifies a settlement date and is received before the Fund’s NAV is determined, shares will be issued and dividends will generally begin to accrue on the purchased shares on the business day after the purchase order is received.
n	If a purchase order is placed through an Authorized Dealer that settles through the National Securities Clearing Corporation (“NSCC”), the purchase order will begin accruing on the NSCC settlement date.
n	If a purchase order in proper form does not specify a settlement date, shares will be issued and dividends will begin to accrue on the business day after payment is received.

n Shares Purchased by Check or Federal Reserve Draft:

n	If a purchase order in proper form specifies a settlement date and is received before the Fund’s NAV is determined, shares will be issued and dividends will begin to accrue on the business day after payment is received.
n	If a purchase order in proper form does not specify a settlement date, shares will be issued and dividends will begin to accrue on the business day after payment is received.

What Else Do I Need To Know About The CDSC On Class A, B Or C Shares?

n The CDSC is based on the lesser of the NAV of the shares at the time of redemption or the original offering price (which is the original NAV).

n	No CDSC is charged on shares acquired from reinvested dividends or capital gains distributions.
n	No CDSC is charged on the per share appreciation of your account over the initial purchase price.
n	When counting the number of months since a purchase of Class B or Class C Shares was made, all payments made during a month will be combined and considered to have been made on the first day of that month.

n To keep your CDSC as low as possible, each time you place a request to sell shares, the Funds will first sell any shares in your account that do not carry a CDSC and then the shares in your account that have been held the longest.

In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or Reduced?

The CDSC on Class A, Class B and Class C Shares that are subject to a CDSC may be waived or reduced if the redemption relates to:

n Retirement distributions or loans to participants or beneficiaries from Employee Benefit Plans;

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SHAREHOLDER GUIDE

n	The death or disability (as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the “Code”)) of a participant or beneficiary in an Employee Benefit Plan;
n	Hardship withdrawals by a participant or beneficiary in an Employee Benefit Plan;
n	Satisfying the minimum distribution requirements of the Code;
n	Establishing “substantially equal periodic payments” as described under Section 72(t)(2) of the Code;
n	The separation from service by a participant or beneficiary in an Employee Benefit Plan;
n	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 the event;
n	Excess contributions distributed from an Employee Benefit Plan;
n	Distributions from a qualified Employee Benefit Plan invested in the Goldman Sachs Funds which are being rolled over to a Goldman Sachs IRA in the same share class; or
n	Redemption proceeds which are to be reinvested in accounts or non-registered products over which GSAM or its advisory affiliates have investment discretion.

In addition, Class A, B and C Shares subject to a systematic withdrawal plan may be redeemed without a CDSC. The Funds reserve the right to limit such redemptions, on an annual basis, to 12% each of the value of your Class B and C Shares and 10% of the value of your Class A Shares.

How Do I Decide Whether To Buy Class A, B Or C Shares?

The decision as to which Class to purchase depends on the amount you invest, the intended length of the investment and your personal situation.

n

Class A Shares. If you are making an investment of $100,000 or more that qualifies for a reduced sales charge, you should consider purchasing Class A Shares.

n

Class B Shares. If you plan to hold your investment for at least six years (three years in the case of the Short Duration Tax-Free Fund) and would prefer not to pay an initial sales charge, you might consider purchasing Class B Shares. By not paying a front-end sales charge, your entire investment in Class B Shares is available to work for you from the time you make your initial investment. However, the distribution and service fee paid by Class B Shares will cause your Class B Shares (until conversion to Class A Shares) to have a higher expense ratio, and thus lower performance and lower dividend payments (to the extent dividends are paid) than Class A Shares. A maximum purchase limitation of $100,000 in the aggregate normally applies to Class B Shares. Once the current value of the Class B Shares in the aggregate across all Goldman Sachs Funds is equal to $100,000, you will not be allowed to purchase any additional

55

Class B Shares. Individual purchases exceeding $100,000 will be rejected and additional purchases which could cause your holdings in Class B Shares to exceed $100,000 will be rejected.

n

Class C Shares. If you are unsure of the length of your investment or plan to hold your investment for less than six years and would prefer not to pay an initial sales charge, you may prefer Class C Shares. By not paying a front-end sales charge, your entire investment in Class C Shares is available to work for you from the time you make your initial investment. However, the distribution and service fee paid by Class C Shares will cause your Class C Shares to have a higher expense ratio, and thus lower performance and lower dividend payments (to the extent dividends are paid) than Class A Shares (or Class B Shares after conversion to Class A Shares).

Although Class C Shares are subject to a CDSC for only 12 months, Class C Shares do not have the automatic eight-year conversion feature applicable to Class B Shares and your investment may pay higher distribution fees indefinitely.

A maximum purchase limitation of $1,000,000 ($500,000 in the case of the Short Duration Tax-Free Fund) in the aggregate normally applies to purchases of Class C Shares. Once the current value of the Class C Shares in the aggregate across all Goldman Sachs Funds is equal to $1,000,000, you will not be allowed to purchase any additional Class C Shares. Individual purchases exceeding $1,000,000 will be rejected and additional purchases which could cause your holdings in Class C Shares to exceed $1,000,000 will be rejected.

Note: Authorized Dealers may receive different compensation for selling Class A, Class B or Class C Shares.

In addition to Class A, Class B and Class C Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses (which affect performance), have different minimum investment requirements and are entitled to different services. Information regarding these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus.

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SHAREHOLDER GUIDE

   HOW TO SELL SHARES   

How Can I Sell Class A, Class B And Class C Shares Of The Funds?

You may arrange to take money out of your account by selling (redeeming) some or all of your shares. Generally, each Fund will redeem its shares upon request on any business day at the NAV next determined after receipt of such request in proper form, subject to any applicable CDSC or redemption fee. You may request that redemption proceeds be sent to you by check or by wire (if the wire instructions are on record). Redemptions may be requested in writing or by telephone.

Instructions For Redemptions:
By Writing:	n Write a letter of instruction that includes:
	n Your name(s) and signature(s)
	n Your account number
	n The Fund name and Class of Shares
	n The dollar amount you want to sell
	n How and where to send the proceeds
	n Obtain a Medallion signature guarantee (see details below)
	n Mail your request to:     Goldman Sachs Funds     P.O. Box 219711     Kansas City, MO 64121-9711
	or for overnight delivery:
	Goldman Sachs Funds     330 West 9th Street     Poindexter Bldg., 1st Floor     Kansas City, MO 64105
By Telephone:	If you have not declined the telephone redemption privilege on your Account Application:
	n 1-800-621-2500     (8:00 a.m. to 4:00 p.m. New York time)
	n You may redeem up to $50,000 of your shares daily
	n Proceeds which are sent directly to a Goldman Sachs     brokerage account or to the bank account designated on your Account Application are not subject to the $50,000 limit

Any redemption request that requires money to go to an account or address other than that designated on the account application must be in writing and signed by an authorized person designated on the Account Application with a Medallion signature guarantee. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.

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When Do I Need A Medallion Signature Guarantee To Redeem Shares?

A Medallion signature guarantee is required if:

n	You are requesting in writing to redeem shares in an amount over $50,000;
n	You would like the redemption proceeds sent to an address that is not your address of record; or
n	You would like to change the bank designated on your Account Application.

A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required for executors, trustees or corporations or when deemed appropriate by the Transfer Agent.

What Do I Need To Know About Telephone Redemption Requests?

The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. The Trust may accept telephone redemption instructions from any person identifying himself or herself as the owner of an account or the owner’s registered representative where the owner has not declined in writing to use this service. Thus, you risk possible losses if a telephone redemption is not authorized by you.

In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs and BFDS each employ reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:

n	All telephone requests are recorded.
n	Proceeds of telephone redemption requests will be sent only to your address of record or authorized bank account designated in the Account Application (unless you provide written instructions and a Medallion signature guarantee, indicating another address or account).
n	For the 30-day period following a change of address, telephone redemptions will only be filled by a wire transfer to the bank account designated in the Account Application (see immediately preceding bullet point). In order to receive the redemptions by check during this time period, the redemption request must be a written, Medallion signature guaranteed letter.

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SHAREHOLDER GUIDE

n	The telephone redemption option does not apply to shares held in a “street name” account. “Street name” accounts are accounts maintained and serviced by your Authorized Dealer. If your account is held in “street name,” you should contact your registered representative of record, who may make telephone redemptions on your behalf.
n	The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions.

How Are Redemption Proceeds Paid?

By Wire: You may arrange for your redemption proceeds to be wired as federal funds to the domestic bank account designated in your Account Application. The following general policies govern wiring redemption proceeds:

n	Redemption proceeds will normally be wired on the next business day in federal funds, but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
n	Although redemption proceeds will normally be wired as described above, under certain circumstances, redemption requests or payments may be postponed or suspended as permitted pursuant to section 22(c) of the Investment Company Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by the Fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption.
n	If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days. If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day.
n	To change the bank designated on your Account Application you must send written instructions (with your signature medallion guaranteed) to the Transfer Agent.
n	Neither the Trust, Goldman Sachs nor any Authorized Dealer assumes any responsibility for the performance of your bank or any intermediaries in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such intermediaries.

By Check: You may elect to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of a properly executed redemption request. If you

59

are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.

What Do I Need To Know About The Redemption Fee?

The following generally applies to redemption requests:

The Municipal Income, California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Funds use a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of a Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The redemption fee does not apply to transactions involving the following:

n	Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.
n	Redemptions of shares that are acquired or redeemed in connection with the participation in a systematic withdrawal program or automatic investment plan.
n	Redemptions of shares in connection with a regularly scheduled automatic rebalancing of assets by certain mutual fund asset allocation programs.
n	Redemptions of shares maintained in omnibus accounts by the Fund’s transfer agent on behalf of trust companies and bank trust departments investing assets held in a fiduciary, agency, advisory, custodial or similar capacity and over which the trust companies and bank trust departments or other plan fiduciaries or participants (in the case of certain retirement plans) have full or shared investment discretion.
n	Total or partial redemptions of shares held: (i) through retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended, that are maintained by the Funds’ transfer agent on an omnibus basis; and (ii) by financial institutions providing hedging services in support of non-qualified deferred compensation plans offering the Goldman Sachs Funds where Fund shares are purchased and redeemed not more often than monthly on a date or dates determined by the financial institution or plan sponsor (or administrator).

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SHAREHOLDER GUIDE

n Redemption of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.

The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future to reflect, among other factors, regulatory requirements mandated by the SEC.

In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as operational limitations, contractual limitations and further guidance from the SEC or other regulators.

What Else Do I Need To Know About Redemptions?

The following generally applies to redemption requests:

n	Shares of each Fund earn dividends declared on the day the shares are redeemed.
n	Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received.
n	Institutions (including banks, trust companies, brokers and investment advisers) are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, these institutions may set times by which they must receive redemption requests. These institutions may also require additional documentation from you.

The Trust reserves the right to:

n	Redeem your shares if your account balance falls below the required Fund minimum as a result of a redemption. The Funds will not redeem your shares on this basis if the value of your account falls below the minimum account balance solely as a result of market conditions. The Funds will give you 60 days’ prior written notice to allow you to purchase sufficient additional shares of the Fund in order to avoid such redemption.
n	Redeem your shares in the event your Authorized Dealer’s relationship with Goldman Sachs is terminated, and you do not transfer your account to another Authorized Dealer, the Trust will not be responsible for any loss in an investor’s account resulting from the redemption.
n	Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interests of the Trust.
n	Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities.

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n Reinvest any dividends or other distributions which you have elected to receive in cash should your check for such dividends or other distributions be returned to a Fund as undeliverable or remain uncashed for six months. This provision may not apply to certain retirement or qualified accounts. In addition, that distribution and all future distributions payable to you will be reinvested at the NAV on the day of reinvestment in additional shares of the same class of the Fund that pays the distributions. No interest will accrue on amounts represented by uncashed distribution or redemption checks.

Can I Reinvest Redemption Proceeds In The Same Or Another Goldman Sachs Fund?

You may redeem shares of a Fund and reinvest a portion or all of the redemption proceeds (plus any additional amounts needed to round off purchases to the nearest full share) at NAV. To be eligible for this privilege, you must have held the shares you want to redeem for at least 30 days and you must reinvest the share proceeds within 90 days after you redeem. You may reinvest as follows:

n	Class A or B Shares—Class A Shares of the same Fund or another Goldman Sachs Fund
n	Class C Shares—Class C Shares of the same Fund or another Goldman Sachs Fund

n	You should obtain and read the applicable prospectuses before investing in any other Funds.
n	If you pay a CDSC upon redemption of Class A or Class C Shares and then reinvest in Class A or Class C Shares as described above, your account will be credited with the amount of the CDSC you paid. The reinvested shares will, however, continue to be subject to a CDSC. The holding period of the shares acquired through reinvestment will include the holding period of the redeemed shares for purposes of computing the CDSC payable upon a subsequent redemption. For Class B Shares, you may reinvest the redemption proceeds in Class A Shares at NAV but the amount of the CDSC paid upon redemption of the Class B Shares will not be credited to your account.
n	The reinvestment privilege may be exercised at any time in connection with transactions in which the proceeds are reinvested at NAV in a tax-sheltered Employee Benefit Plan. In other cases, the reinvestment privilege may be exercised once per year upon receipt of a written request.
n	You may be subject to tax as a result of a redemption. You should consult your tax adviser concerning the tax consequences of a redemption and reinvestment.

Can I Exchange My Investment From One Fund To Another?

You may exchange shares of a Fund at NAV without the imposition of an initial sales charge or CDSC at the time of exchange for shares of the same class or an equivalent class of another Goldman Sachs Fund. Redemption of shares (including

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SHAREHOLDER GUIDE

by exchange) that are held for 30 calendar days or less may, however, be subject to a redemption fee as described above under “What Do I Need To Know About The Redemption Fee?” The exchange privilege may be materially modified or withdrawn at any time upon 60 days’ written notice to you.

Instructions For Exchanging Shares:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund names and Class of Shares
	n The dollar amount you want to exchange
	n Mail the request to:     Goldman Sachs Funds     P.O. Box 219711     Kansas City, MO 64121-9711
	or for overnight delivery—
	Goldman Sachs Funds     330 West 9th St.     Poindexter Bldg., 1st Floor     Kansas City, MO 64105
By Telephone:	If you have not declined the telephone exchange privilege on your Account Application:
	n 1-800-621-2500     (8:00 a.m. to 4:00 p.m. New York time)

You should keep in mind the following factors when making or considering an exchange:

n	You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange.
n	Currently, there is no charge for exchanges, although a Fund may impose a charge in the future.
n	The exchanged shares may later be exchanged for shares of the same class (or an equivalent class) of the original Fund at the next determined NAV without the imposition of an initial sales charge or CDSC (but subject to any applicable redemption fee) if the amount in the Fund resulting from such exchanges is less than the largest amount on which you have previously paid the applicable sales charge.
n	When you exchange shares subject to a CDSC, no CDSC will be charged at that time. The exchanged shares will be subject to the CDSC of the shares originally held. For purposes of determining the amount of the applicable CDSC, the length of time you have owned the shares will be measured from the date you acquired the original shares subject to a CDSC and will not be affected by a subsequent exchange.

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n	Eligible investors may exchange certain classes of shares for another class of shares of the same Fund. For further information, call Goldman Sachs Funds at 1-800-526-7384 and see the Additional Statement.
n	All exchanges which represent an initial investment in a Fund must satisfy the minimum initial investment requirements of that Fund. Exchanges into a money market fund need not meet the traditional minimum investment requirements for that fund if the entire balance of the original Fund account is exchanged.
n	Exchanges are available only in states where exchanges may be legally made.
n	It may be difficult to make telephone exchanges in times of drastic economic or market conditions.
n	Goldman Sachs and BFDS may use reasonable procedures described under “What Do I Need To Know About Telephone Redemption Requests?” in an effort to prevent unauthorized or fraudulent telephone exchange requests.
n	Telephone exchanges normally will be made only to an identically registered account.
n	Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted.
n	Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund.

For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. You should consult your tax adviser concerning the tax consequences of an exchange.

   SHAREHOLDER SERVICES   

Can I Arrange To Have Automatic Investments Made On A Regular Basis?

You may be able to make systematic cash investments through your bank via ACH transfer or your checking account via bank draft each month. The minimum dollar amount for this service is $50 per month. Forms for this option are available from Goldman Sachs, and your Authorized Dealer, or you may check the appropriate box on the Account Application.

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SHAREHOLDER GUIDE

Can My Dividends And Distributions From A Fund Be Invested In Other Funds?

You may elect to cross-reinvest dividends and capital gains distributions paid by a Fund in shares of the same class or an equivalent class of other Goldman Sachs Funds.

n	Shares will be purchased at NAV.
n	No initial sales charge or CDSC will be imposed.
n	You may elect cross-reinvestment into an identically registered account or a similarly registered account provided that at least one name on the account is registered identically.

Can I Arrange To Have Automatic Exchanges Made On A Regular Basis?

You may elect to exchange automatically a specified dollar amount of shares of a Fund for shares of the same class or an equivalent class of other Goldman Sachs Funds.

n	Shares will be purchased at NAV.
n	No initial sales charge is imposed.
n	Shares subject to a CDSC acquired under this program may be subject to a CDSC at the time of redemption from the Fund into which the exchange is made depending upon the date and value of your original purchase.
n	Automatic exchanges are made monthly on the 15th day of each month or the first business day thereafter.
n	Minimum dollar amount: $50 per month.

What Else Should I Know About Cross-Reinvestments And Automatic Exchanges?

Cross-reinvestments and automatic exchanges are subject to the following conditions:

n	You must invest an amount in the Fund into which cross-reinvestments or automatic exchanges are being made that is equal to that Fund’s minimum initial investment.
n	You should obtain and read the prospectus of the Fund into which dividends are invested or automatic exchanges are made.

Can I Have Automatic Withdrawals Made On A Regular Basis?

You may draw on your account systematically via check or ACH transfer in any amount of $50 or more.

n It is normally undesirable to maintain a systematic withdrawal plan at the same time that you are purchasing additional Class A, Class B or Class C Shares because of the sales charge imposed on your purchases of Class A Shares and/or the imposition of a CDSC on your redemptions of Class A, Class B or Class C Shares.

65

n	Checks are mailed the next business day after your selected systematic withdrawal date.
n	Each systematic withdrawal is a redemption and therefore may be a taxable transaction.
n	The CDSC applicable to Class A, Class B or Class C Shares redeemed under the systematic withdrawal plan may be waived.

What Types of Reports Will Be Sent Regarding My Investment?

You will be provided with a printed confirmation of each transaction in your account and a quarterly account statement. A year-to-date statement for your account will be provided upon request made to Goldman Sachs. If your account is held in “street name” you may receive your statements and confirmations on a different schedule.

You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting Goldman Sachs Funds by phone at 1-800-526-7384 or by mail at Goldman Sachs Funds, 71 S. Wacker Dr., Suite 500 Chicago, IL 60606. The Funds will begin sending individual copies to you within 30 days after receipt of your revocation.

The Funds do not generally provide sub-accounting services.

What Should I Know When I Purchase Shares Through An Authorized Dealer?

Authorized Dealers and other financial intermediaries may provide varying arrangements for their clients to purchase and redeem Fund shares. In addition, Authorized Dealers and other financial intermediaries are responsible for providing to you any communications from a Fund to its shareholders, including but not limited to, prospectuses, prospectus supplements, proxy materials and notices regarding the source of dividend payments pursuant to Section 19 of the Investment Company Act. They may charge additional fees not described in this Prospectus to their customers for such services.

If shares of a Fund are held in a “street name” account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to your account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Funds will have no record of your transactions, you should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about your account. The transfer of shares in a “street

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SHAREHOLDER GUIDE

name” account to an account with another dealer or to an account directly with the Fund involves special procedures and will require you to obtain historical purchase information about the shares in the account from the Authorized Dealer. If your Authorized Dealer’s relationship with Goldman Sachs is terminated and you do not transfer your account to another Authorized Dealer, the Trust reserves the right to redeem your shares. The Trust will not be responsible for any loss in an investor’s account resulting from a redemption.

Authorized Dealers and other financial intermediaries may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers, and if approved by the Trust, to designate other intermediaries to accept such orders. In these cases:

n	A Fund will be deemed to have received an order that is in proper form when the order is accepted by an Authorized Dealer or intermediary on a business day, and the order will be priced at the Fund’s NAV per share (adjusted for any applicable sales charge or redemption fee) next determined after such acceptance.
n	Authorized Dealers and intermediaries are responsible for transmitting accepted orders to the Funds within the time period agreed upon by them.

You should contact your Authorized Dealer or intermediary to learn whether it is authorized to accept orders for the Trust.

The Investment Adviser, Distributor and/or their affiliates may make payments to Authorized Dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Funds. The payments are in addition to the distribution and service fees and sales charges described in this Prospectus. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, 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. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also compensate Intermediaries for subaccounting, administrative, and/or shareholder processing services that are in addition to the fees paid for these services by the Funds.

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The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the “Payments to Intermediaries” section of the Additional Statement for more information about these payments.

The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your Authorized Dealer or Intermediary for more information about the payments it receives and any potential conflicts of interest.

   DISTRIBUTION SERVICES AND FEES   

What Are The Different Distribution And Service Fees Paid By Class A, B and C Shares?

The Trust has adopted distribution and service plans (each a “Plan”) under which Class A, Class B and Class C Shares bear distribution and service fees paid to Authorized Dealers and Goldman Sachs. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from these arrangements. Goldman Sachs generally pays the distribution and service fees on a quarterly basis.

Under the Plans, Goldman Sachs is entitled to a monthly fee from each Fund for distribution services equal, on an annual basis, to 0.25%, 0.75% and 0.75%, respectively, of a Fund’s average daily net assets attributed to Class A, Class B and Class C Shares.* Because these fees are paid out of the Fund’s assets on an ongoing basis, over time, these fees will increase the cost of your investment and may cost you more than paying other types of such charges.

The distribution fees are subject to the requirements of Rule 12b-1 under the Investment Company Act, and may be used (among other things) for:

n	Compensation paid to and expenses incurred by Authorized Dealers, Goldman Sachs and their respective officers, employees and sales representatives;
n	Commissions paid to Authorized Dealers;
n	Allocable overhead;

     *  Currently, Goldman Sachs voluntarily limits such fees to 0.60% of the average daily net assets attributed to Class B Shares of the Short Duration Tax-Free Fund. Goldman Sachs may modify or discontinue such waivers in the future at its discretion.

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SHAREHOLDER GUIDE

n	Telephone and travel expenses;
n	Interest and other costs associated with the financing of such compensation and expenses;
n	Printing of prospectuses for prospective shareholders;
n	Preparation and distribution of sales literature or advertising of any type; and
n	All other expenses incurred in connection with activities primarily intended to result in the sale of Class A, Class B and Class C Shares.

In connection with the sale of Class C Shares, Goldman Sachs normally begins paying the 0.75% distribution fee as an ongoing commission to Authorized Dealers after the shares have been held for one year.

   PERSONAL AND ACCOUNT MAINTENANCE SERVICES AND FEES   

Under the Plans, Goldman Sachs is also entitled to receive a separate fee equal on an annual basis to 0.25% of each Fund’s average daily net assets attributed to Class B or Class C Shares. This fee is for personal and account maintenance services, and may be used to make payments to Goldman Sachs, Authorized Dealers and their officers, sales representatives and employees for responding to inquiries of, and furnishing assistance to, shareholders regarding ownership of their shares or their accounts or similar services not otherwise provided on behalf of the Funds. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from this arrangement.

In connection with the sale of Class C Shares, Goldman Sachs normally begins paying the 0.25% ongoing service fee to Authorized Dealers after the shares have been held for one year.

   RESTRICTIONS ON EXCESSIVE TRADING PRACTICES   

Policies and Procedures on Excessive Trading Practices. In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view to longer term investment purposes only that are consistent with the investment policies and practices of the respective Funds. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm fund performance and result in dilution in the value of Fund shares held by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive trading

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or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to a Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Trust or its shareholders or would subordinate the interests of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.

To deter excessive shareholder trading, the California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal and Municipal Income Funds described in this Prospectus, certain other Fixed Income Funds and the International Equity Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase subject to certain exceptions. See “Shareholder Guide—What Do I Need To Know About The Redemption Fee?” for more information about the redemption fee, including transactions and certain omnibus accounts to which the redemption fee does not apply.

Pursuant to the policy adopted by the Board of Trustees, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive. Goldman Sachs reviews on a regular, periodic basis available information relating to the trading activity in the Funds in order to assess the likelihood that a Fund may be the target of excessive trading. As part of its excessive trading surveillance process, Goldman Sachs, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. Consistent with the standards described above, if, in its judgment, Goldman Sachs detects excessive, short term trading, Goldman Sachs is authorized reject or restrict a purchase or exchange request and may further seek to close an investor’s account with a Fund. Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.

Fund shares may be held through omnibus arrangements maintained by intermediaries such as broker-dealers, investment advisers, transfer agents, administrators and insurance companies. In addition, Fund shares may be held in omnibus 401(k) plans, Employee Benefit Plans and other group accounts. Omnibus accounts include multiple investors and such accounts typically provide the Funds with a net purchase or redemption request on any given day where the purchases and redemptions of Fund shares by the investors are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are not known by the Funds. A number of these financial intermediaries may not have the capability or may not be willing to apply the Funds’ market

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SHAREHOLDER GUIDE

timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, a Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts is limited. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Funds and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance.

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Taxation

As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds.

   DISTRIBUTIONS   

Each Fund contemplates declaring as dividends each year all or substantially all of its income. The Funds expect to distribute “exempt-interest dividends” attributable to tax-exempt interest earned by those Funds. Exempt-interest dividends are generally not subject to federal income tax, but may be subject to state or local taxes. However, investments in tax-exempt bonds can also result in the recognition of income or gain by a Fund, and thereby cause a portion of the Fund’s distributions to shareholders to be taxable. Thus, if the value of a bond appreciates while the Fund owns it (aside from the appreciation attributable to original issue discount on that bond), and the Fund then sells the bond at a gain, that gain will generally not be exempt from tax—whether or not the interest income on the bond is exempt. Gain recognized by a Fund on sales of appreciated bonds will generally be short-term or long-term capital gain depending on whether the Fund has held the bonds for more than one year, but “market discount” bonds can cause the Fund to recognize ordinary income. “Market discount” is a discount at which a bond is purchased that is attributable to a decline in the value of the bond after its original issuance. The market discount is then taken into account ratably over the bond’s remaining term to maturity, and the portion that accrues during the Fund’s holding period for the bond is generally treated as taxable ordinary income to the extent of any realized gain on the bond upon disposition or maturity. Distributions attributable to ordinary income and short-term capital gain recognized by the Funds are generally taxable as ordinary income, while distributions attributable to long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.

You should note that exempt-interest dividends paid by the Funds may be a preference item when determining your federal alternative minimum tax liability. The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds intend, however, to invest predominantly in Municipal Securities that will not generate income that is a preference item for alternative minimum tax for non corporate shareholders. In addition, exempt-interest dividends of all of the Funds are taken into account in determining the taxable portion of

72

TAXATION

social security or railroad retirement benefits. Any interest on indebtedness incurred by you to purchase or carry shares in the Funds will not be deductible for federal income tax purposes.

If you buy shares of a Fund before it makes a taxable distribution, the distribution will be taxable to you even though it may actually be a return of a portion of your investment. This is know as “buying into a dividend.”

   SALES AND EXCHANGES   

Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this gain or loss is long-term or short-term depending on whether your holding period exceeds twelve months, except that any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. In addition, any loss realized on shares held for six months or less will be disallowed to the extent of any exempt-interest dividends that were received on the shares.

Any loss realized on a sale, exchange or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of that Fund. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.

   CALIFORNIA AND NEW YORK TAXES   

Except as stated below, you may be subject to state and local taxes on distributions paid by the Funds and on the redemption or exchange of Fund shares.

The California Intermediate AMT-Free Municipal Fund expects to pay dividends that generally are exempt from California State personal income tax. The New York Intermediate AMT-Free Municipal Fund expects to pay dividends that generally are exempt from New York State and City personal income taxes. These exemptions will apply, however, only to the dividends that are derived from interest paid on California or New York municipal obligations, respectively, or on certain federal obligations. For these purposes California and New York municipal obligations are obligations issued by or on behalf of the State of California or the State of New York, respectively, and their respective political subdivisions, agencies, instrumen-

73

talities, and public authorities and certain issuers located outside these states such as Puerto Rico, the U.S. Virgin Islands and Guam, the interest from which is exempt from California State personal income tax or New York State and New York City personal income taxes.

The California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund may also invest in taxable instruments or in Municipal Securities that are not California or New York municipal obligations. The Funds’ distributions of interest from municipal obligations other than California and New York municipal obligations, as applicable, may be subject to California and New York State and New York City personal income taxes. In addition, dividends paid by the Funds may be subject to California and New York corporate franchise and corporate income taxes.

   OTHER INFORMATION   

When you open your account, you should provide your Social Security Number or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so.

Investors that are generally exempt from U.S. tax on interest income, such as IRAs, other tax advantaged accounts, tax-exempt entities and non-U.S. investors, will not gain additional benefit from the tax-exempt status of the Fund’s distributions of interest attributable to exempt bonds. Because the Funds’ pre-tax returns will tend to be lower than those of funds that own taxable bonds of comparable quality, shares of the Funds will normally not be suitable investments for those kinds of investors. Moreover, investment in the Funds by IRAs and other tax advantaged retirement accounts is especially unsuitable because subsequent distributions made from such accounts to their holders generally will be subject to tax.

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Appendix A
Additional Information on Portfolio
Risks, Securities and Techniques

   A.  General Portfolio Risks   

The Funds will be subject to the risks associated with fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase (although some asset-backed securities will have less potential than other debt securities for capital appreciation during periods of declining rates). Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that the issuer or guarantor could default on its obligations, and a Fund will not recover its investment. Call risk and extension risk are normally present in asset-backed securities. For example, debtors have the option to prepay their loans. Therefore, the duration of an asset-backed security can either shorten (call risk) or lengthen (extension risk). In general, if interest rates on new loans fall sufficiently below the interest rates on existing outstanding loans, the rate of prepayment would be expected to increase. Conversely, if loan interest rates rise above the interest rates on existing outstanding loans, the rate of prepayment would be expected to decrease. In either case, a change in the prepayment rate can result in losses to investors.

The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater expenses which must be borne by a Fund and its shareholders and is also likely to result in higher short-term capital gains taxable to shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of a Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See “Financial Highlights” in Appendix B for a statement of the Funds’ (other than the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds) historical portfolio turnover rates.

The following sections provide further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental investment restrictions that cannot be changed

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without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in a Fund’s investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs.

   B.  Other Portfolio Risks   

Fundamental Policies. As a matter of fundamental policy, under normal circumstances, at least 80% of the Net Assets of the Short Duration Tax-Free, California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds (measured at the time of purchase) will be invested in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes), and, in the case of the Short Duration Tax Free, California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds, is not a tax preference item under the federal alternative minimum tax. In addition, as a matter of fundamental policy, at least 80% of the California Intermediate AMT-Free Municipal Fund’s and New York Intermediate AMT-Free Municipal Fund’s Net Assets (measured at the time of purchase) will be invested, under normal circumstances, in instruments that pay income which is exempt from California State personal income tax and New York State and City personal income taxes, respectively.

Risks of Investing in California and New York: The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds concentrate their investments in California and New York municipal obligations, respectively. Consequently, they are more susceptible to factors adversely affecting issuers of California and New York municipal obligations, and may be riskier than comparable municipal bond funds and money market funds that do not emphasize these issuers to this degree.

The California Intermediate AMT-Free Municipal Fund’s investments will be affected by political and economic developments within the State of California (“California”), and by the financial condition of California’s public authorities and political subdivisions. As of the end of 2005, California’s economy was recovering from a recession, with moderate growth predicted to mirror the national economy. The early 2000’s recession and stock market drop created State budget gaps as high as $38 billion, and a large budget deficit. Part of this deficit has been funded with the issuance of $11 billion of a total of $15 billion of sales-tax backed general obligation bonds approved by the voters in March 2004. However, the State

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APPENDIX A

still faces a multi-billion dollar structural budget gap which must be addressed in future years. California voters in the past have approved amendments to the California Constitution and other measures that limit the taxing and spending authority of California government entities, and future initiatives could result in adverse consequences affecting California municipal obligations. In part as a result of such initiatives, both the state and local governments in California face fiscal difficulties in varying degrees.

These factors, among others (including the outcome of related pending litigation), could reduce the credit standing of certain issuers of California municipal obligations. A more detailed discussion of the risks of investing in California is included in the Additional Statement.

The New York Intermediate AMT-Free Municipal Fund’s investments will 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”). Certain substantial issuers of New York municipal obligations (including issuers whose obligations may be acquired by the Fund) have, at times, experienced serious financial difficulties. The default or credit rating downgrade of one of these issuers could affect the market values and marketability of all New York municipal obligations and hurt the Fund’s investment performance. However, strong demand for New York municipal obligations has also at times had the effect of permitting New York municipal obligations 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 issuers of New York municipal obligations could result in defaults or declines in the market values of those issuers’ existing obligations and, possibly, in the obligations of other issuers of New York municipal obligations. Although as of the date of this Prospectus, no issuers were in default with respect to the payment of their New York municipal obligations, the occurrence of any such default could materially affect adversely the market values and marketability of all New York municipal obligations and, consequently, the value of the Fund’s holdings. A more detailed discussion of the risks of investing in New York is included in the Additional Statement.

If California, New York, or any of their local governmental entities are unable to meet their financial obligations, the corresponding Fund’s income, NAV, ability to preserve or realize appreciation of capital or liquidity could be adversely affected. Also, neither of these Funds is a diversified fund under the Act (except to the extent that diversification is required for federal income tax purposes). Because they may invest a larger percentage of their assets in the securities of fewer issuers

77

than do diversified funds, these Funds 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.

In addition to the risk of nonpayment of California or New York municipal obligations, if any of these obligations decline in quality and are downgraded by an NRSRO, they may become ineligible for purchase by the Funds. Since there are large numbers of buyers of these instruments, the supply of California or New York municipal obligations that are eligible for purchase by the Funds could become inadequate at certain times.

Credit/Default Risks. Debt securities purchased by the Funds may include securities (including zero coupon bonds) issued by the U.S. government (and its agencies, instrumentalities and sponsored enterprises), state and municipal governmental entities, corporations, banks and other issuers. Some of these fixed-income securities are described in the next section below. Further information is provided in the Additional Statement.

Debt securities rated BBB- or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB- or Baa3 are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is determined by the Investment Adviser to be of comparable credit quality. If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of the security, is in the best interests of a Fund and its shareholders.

The High Yield Municipal Fund may invest in fixed-income securities rated BB or Ba or below (or comparable unrated securities) which are commonly referred to as “junk bonds.” Junk bonds are considered predominantly speculative and may be questionable as to principal and interest payments.

In some cases, junk bonds may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will present greater speculative risks than those associated with

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investment in investment grade bonds. Also, to the extent that the rating assigned to a security in a Fund’s portfolio is downgraded by a rating organization, the market price and liquidity of such security may be adversely affected.

Risks of Derivative Investments. A Fund’s transactions in options, futures, options on futures, swaps, interest rate caps, floors and collars, structured securities and inverse floating-rate securities involve additional risk of loss. A Fund may enter into a derivative investment for hedging purposes, for example, in an effort to preserve a return or spread, protect against adverse price movements, manage portfolio duration or manage a Fund’s credit exposure. Even so, loss can result from a lack of correlation between changes in the value of derivative investments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative investments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices, interest rates or credit events.

In addition, each Fund may invest in derivative investments for non-hedging purposes (that is, to seek to increase total return) in connection with the management of the Fund, including the management of the Fund’s interest rate, duration and credit exposures. Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss. Particular derivative securities may be leveraged such that their exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is magnified.

Some floating-rate derivative debt securities can present more complex types of derivative and interest rate risks. For example, range floaters are subject to the risk that the coupon will be reduced below market rates if a designated interest rate floats outside of a specified interest rate band or collar. Dual index or yield curve floaters are subject to lower prices in the event of an unfavorable change in the spread between two designated interest rates.

Risks of Illiquid Securities. Each Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include:

n	Domestic securities that are not readily marketable
n	Certain municipal leases and participation interests
n	Repurchase agreements and time deposits with a notice or demand period of more than seven days
n	Certain over-the-counter options
n	Certain structured securities and all swap transactions

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n Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called “4(2) commercial paper” or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“144A Securities”).

Investing in 144A Securities may decrease the liquidity of a Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:

n	U.S. Government Securities
n	Repurchase agreements collateralized by U.S. Government Securities

The Funds may invest more than 20% of their respective Net Assets in taxable investments and, with respect to the High Yield Municipal Fund, in high grade securities under unusual conditions. When a Fund’s assets are invested in such instruments, the Fund may not be achieving its investive objective.

   C.  Portfolio Securities and Techniques   

This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks.

The Funds may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund’s investment objective and policies. Further information is provided in the Additional Statement, which is available upon request.

Municipal Securities. The Funds may invest in securities and instruments issued by state and local government issuers. Municipal Securities in which a Fund may invest consist of bonds, notes, commercial paper and other instruments (including participation interests in such securities) issued by or on behalf of the states, territories and possessions of the United States (including the District of Columbia) and their political subdivisions, agencies or instrumentalities. The interest on tax-free Municipal Securities will normally be exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes but not necessarily exempt from federal alternative minimum tax or from state or local

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taxes). Because of their tax-exempt status, the yields and market values of Municipal Securities may be more adversely impacted by changes in tax rates and policies than taxable fixed-income securities.

Municipal Securities include both “general” obligation and “revenue” bonds and may be issued to obtain funds for various purposes. General obligations are secured by the issuer’s pledge of its full faith, credit and taxing power. Revenue obligations are payable only from the revenues derived from a particular facility or class of facilities.

Municipal Securities are often issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Municipal Securities include private activity bonds, pre-refunded municipal securities and auction rate securities.

The obligations of the issuer to pay the principal of and interest on a Municipal Security are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest or imposing other constraints upon the enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power or ability of the issuer to pay when due the principal of or interest on a Municipal Security may be materially affected.

In addition, Municipal Securities include municipal leases, certificates of participation and “moral obligation” bonds. A municipal lease is an obligation issued by a state or local government to acquire equipment or facilities. Certificates of participation represent interests in municipal leases or other instruments, such as installment purchase agreements. Moral obligation bonds are supported by a moral commitment but not a legal obligation of a state or local government. Municipal leases, certificates of participation and moral obligation bonds frequently involve special risks not normally associated with general obligation or revenue bonds. In particular, these instruments permit governmental issuers to acquire property and equipment without meeting constitutional and statutory requirements for the issuance of debt. If, however, the governmental issuer does not periodically appropriate money to enable it to meet its payment obligations under these instruments, it cannot be legally compelled to do so. If a default occurs, it is likely that a Fund would be unable to obtain another acceptable source of payment. Some municipal leases, certificates of participation and moral obligation bonds may be illiquid.

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Municipal Securities may also be in the form of a tender option bond, which is a Municipal Security (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 with the agreement of a third party, such as a bank, broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities to the institution. After payment of a fee to the financial institution that provides this option, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. An institution may 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 Fund’s duration. There is risk that a Fund 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. Certain tender option bonds may be illiquid.

Municipal Securities may be backed by letters of credit or other forms of credit enhancement issued by domestic or foreign banks 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 Securities. Letters of credit and other obligations of foreign banks and financial institutions 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 are generally not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks.

The Funds may invest 25% or more of the value of their respective total assets in Municipal Securities which are related in such a way that an economic, business or political development or change affecting one Municipal Security would also affect the other Municipal Security. For example, a Fund may invest all of its assets in (a) Municipal Securities 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 Securities whose issuers are in the same state; or (c) industrial development obligations. Concentration of a Fund’s investments in these Municipal Securities will subject the Fund, to a greater extent than if such investment was not so concentrated, to the risks of adverse economic, business or political developments affecting the particular state, industry or other area of concentration. On October 31, 2005, the High Yield Municipal Fund had invested

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more than 25% of its assets in Municipal Securities of issuers located in Florida. Florida’s economy is influenced by numerous factors including transfer payments from the Federal government (social security benefits, pension benefits, etc.), population growth, interest rates, hurricane activity and business cycles affecting various major industries, including tourism, agriculture, construction and manufacturing. In addition, Florida is highly dependent upon sales and use taxes, which account for the majority of its General Fund revenues. The Florida Constitution does not permit a state or local personal income tax. The Florida Constitution may limit the State’s ability to raise revenues and may have an adverse effect on the State’s finances and political subdivisions. From time to time Florida and its political subdivisions have encountered financial difficulties. If these difficulties recur in the future, the value of the High Yield Municipal Fund could be adversely affected.

In purchasing Municipal Securities, each Fund intends to rely on opinions of bond counsel or counsel to the issuers for each issue as to the excludability of interest on such obligations from gross income for federal income tax purposes. A Fund will not undertake independent investigations concerning the tax-exempt status of such obligations, nor does it guarantee or represent that bond counsels’ opinions are correct. Bond counsels’ opinions will generally be based in part upon covenants by the issuers and related parties regarding continuing compliance with federal tax requirements. Tax laws contain numerous and complex requirements that must be satisfied on a continuing basis in order for bonds to be and remain tax-exempt. If the issuer of a bond or a user of a bond-financed facility fails to comply with such requirements at any time, interest on the bond could become taxable, retroactive to the date the obligation was issued. In that event, a portion of a Fund’s distributions attributable to interest the Fund received on such bond for the current year and for prior years could be characterized or recharacterized as taxable income.

U.S. Government Securities. Each Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (a) the full faith and credit of the U.S. Treasury; (b) the right of the issuer to borrow from the U.S. Treasury; (c) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (d) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components of stripped U.S. Government Securities are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation.

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Custodial Receipts and Trust Certificates. Each Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities, Municipal Securities or other types of securities in which a Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. Each Fund may also invest in separately issued interests in custodial receipts and trust certificates.

Asset-Backed Securities. Each Fund may invest in asset-backed securities. Asset-backed securities are securities whose principal and interest payments are collateralized by pools of assets such as auto loans, credit card receivables, leases, installment contracts and personal property. Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, a Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. If the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that a Fund’s recoveries on repossessed collateral may not be available to support payments on the securities. In the event of a default, a Fund may suffer a loss if it cannot sell collateral quickly and receive the amount it is owed.

Corporate Debt Obligations; Trust Preferred Securities; Convertible Securities. The Funds may invest in corporate debt obligations, trust preferred securities and convertible securities. Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. A trust preferred security is a long dated bond (for example, 30 years) with preferred features. The preferred features are that payment of interest can be deferred for a specified period without initiating a default event. The securities are

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generally senior in claim to standard preferred stock but junior to other bondholders. The Funds may also invest in other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities.

Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which a Fund invests are subject to the same rating criteria as its other investments in fixed-income securities. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.

Structured Securities and Inverse Floaters. The Funds may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may present a greater degree of market risk than many types of securities, and may be more volatile, less liquid and more difficult to price accurately than less complex securities.

Structured securities include, but are not limited to, inverse floating rate debt securities (“inverse floaters”). The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value.

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Floating and Variable Rate Obligations. Each Fund may purchase floating and variable rate obligations. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels. 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. 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 interests in a pool of debt obligations held by a bank or other financial institutions.

Zero Coupon, Deferred Interest, Pay-In-Kind and Capital Appreciation Bonds. Each Fund may invest in zero coupon bonds, deferred interest, pay-in-kind and capital appreciation bonds. These bonds are issued at a discount from their face value because interest payments are typically postponed until maturity. Pay-in-kind securities are securities that have interest payable by the delivery of additional securities. The market prices of these securities generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit quality.

Options on Securities and Securities Indices. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller) of the option the obligation to sell, the underlying instrument during the option period. Each Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest.

The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities markets. If the Investment Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase a Fund’s transaction costs. Options written or purchased by the Funds may be

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traded on either U.S. exchanges or over-the-counter. Over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.

Yield Curve Options. Each Fund may enter into options on the yield “spread” or differential between two securities. Such transactions are referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, such options present a risk of loss even if the yield of one of the underlying securities remains constant, or if the spread moves in a direction or to an extent which was not anticipated.

Futures Contracts and Options on Futures Contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on particular securities, securities indices and other financial instruments and indices. The Funds may engage in futures transactions on U.S. exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in interest rates, securities prices or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Pool Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

Futures contracts and related options present the following risks:

n While a Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance than if the Fund had not entered into any futures contracts or options transactions.

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n	Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and a Fund may be exposed to additional risk of loss.
n	The loss incurred by a Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received.
n	Futures markets are highly volatile and the use of futures may increase the volatility of a Fund’s NAV.
n	As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to a Fund.
n	Futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.

When-Issued Securities and Forward Commitments. 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 settlement time. When-issued securities are securities that have been authorized, but not yet issued. When-issued securities are purchased in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. A forward commitment involves entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when-issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate.

Lending of Portfolio Securities. Each Fund may engage in securities lending. Securities lending involves the lending of securities owned by a Fund to financial institutions such as certain broker-dealers, including, as permitted by the SEC, Goldman Sachs. The borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. Government Securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by a Fund in short-term investments, including unregistered investment pools managed by the Investment Adviser or its affiliates and from which the Investment Adviser or its affiliates may receive fees. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or

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appreciation, and a Fund will be responsible for any loss that might result from its investment of the borrowers’ collateral. If the Investment Adviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of a Fund (including the loan collateral). Loan collateral (including any investment of that collateral) is not subject to the percentage limitations described elsewhere in this Prospectus regarding investments in particular types of fixed-income and other securities.

A Fund may lend its securities to increase its income. A Fund may, however, experience delay in the recovery of its securities or incur a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund or becomes insolvent.

Repurchase Agreements. Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. Each Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation.

If the other party or “seller” defaults, a Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, a Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.

Certain Funds, together with other registered investment companies having advisory agreements with the Investment 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.

Borrowings and Reverse Repurchase Agreements. Each Fund can borrow money from banks and other financial institutions, and certain Funds may enter into reverse repurchase agreements in amounts not exceeding one-third of a Fund’s total assets. A Fund may not make additional investments if borrowings exceed 5% of its total assets. Reverse repurchase agreements involve the sale of securities held by a Fund subject to the Fund’s agreement to repurchase them at a mutually agreed upon date and price (including interest). These transactions may be entered into as a temporary measure for emergency purposes or to meet redemption requests. Reverse repurchase agreements may also be entered into when the Investment Adviser expects that the interest income to be earned from the investment of the transaction proceeds will be greater than the related interest expense. Borrowings and reverse repurchase agreements involve leveraging. If the securities held by a

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Fund decline in value while these transactions are outstanding, the NAV of the Fund’s outstanding shares will decline in value by proportionately more than the decline in value of the securities. In addition, reverse repurchase agreements involve the risk that the investment return earned by a Fund (from the investment of the proceeds) will be less than the interest expense of the transaction, that the market value of the securities sold by a Fund will decline below the price the Fund is obligated to pay to repurchase the securities, and that the securities may not be returned to the Fund.

Interest Rate Swaps, Credit Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses on an underlying security. Credit swaps give one party to a transaction (the buyer of the credit swap) the right to dispose of or acquire an asset (or group of assets), or the right to receive a payment from the other party, upon the occurrence of specified credit events. Total return swaps give a Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset in a total return swap declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty. The Funds may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.

Each Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As an example, when a Fund is the buyer of a credit default swap (commonly known as buying protection), it may make periodic payments to the seller of the credit default swap to obtain protection against a credit default on

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a specified underlying asset (or group of assets). If a default occurs, the seller of the credit default swap may be required to pay the Fund the “notional value” of the credit default swap on specified security (a group of securities). On the other hand, when a Fund is a seller of a credit default swap (commonly known as selling protection), in addition to the credit exposure the Fund has on the other assets held in its portfolio, the Fund is also subject to the credit exposure on the notional amount of the swap since, in the event of a credit default, the Fund may be required to pay the “notional value” of the credit default swap on specified security (a group of securities) to the buyer of the credit swap. A Fund will be the seller of a credit default swap only when the credit of the underlying asset is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into. The use of interest rate, credit and total return swaps, options on swaps, and interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Investment Adviser is incorrect in its forecasts of market values and interest rates or in its evaluation of the creditworthiness of swap counterparties and the issuers of the underlying assets, the investment performance of a Fund would be less favorable than it would have been if these investment techniques were not used.

Other Investment Companies. Each Fund may invest in securities of other investment companies subject to statutory limitations prescribed by the Investment Company Act. These limitations include a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund’s total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.

Non-Investment Grade Fixed-Income Securities. Non-investment grade fixed-income securities and unrated securities of comparable credit quality (commonly known as “junk bonds”) are considered predominantly speculative by traditional investment standards. In some cases, these obligations may be highly speculative and have poor prospects for reaching investment grade standing. Non-investment grade fixed-income securities are subject to the increased risk of an issuer’s

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inability to meet principal and interest obligations. These securities, also referred to as high yield securities, may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity. Non-investment grade securities are issued by state, city, or local municipalities that may have difficulty in making all scheduled interest and principal payments.

The market value of non-investment grade fixed-income securities tends to reflect individual corporate or municipal developments to a greater extent than that of higher rated securities which react primarily to fluctuations in the general level of interest rates. As a result, a Fund’s ability to achieve its investment objectives may depend to a greater extent on the Investment Adviser’s judgment concerning the creditworthiness of issuers than funds which invest in higher-rated securities. Issuers of non-investment grade fixed-income securities may not be able to make use of more traditional methods of financing and their ability to service debt obligations may be affected more adversely than issuers of higher-rated securities by economic downturns, specific corporate or financial developments or the issuer’s inability to meet specific projected business forecasts. Negative publicity about the junk bond market and investor perceptions regarding lower rated securities, whether or not based on fundamental analysis, may depress the prices for such securities.

A holder’s risk of loss from default is significantly greater for non-investment grade fixed-income securities than is the case for holders of other debt securities because such non-investment grade securities are generally unsecured and are often subordinated to the rights of other creditors of the issuers of such securities. Investment by a Fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a Fund of its initial investment and any anticipated income or appreciation is uncertain.

The secondary market for non-investment grade fixed-income securities is concentrated in relatively few market makers and is dominated by institutional investors, including mutual funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as, and is more volatile than, the secondary market for higher-rated securities. In addition, market trading volume for high yield fixed-income securities is generally lower and the secondary market for such securities could shrink or disappear suddenly and without warning as a result of adverse market or economic conditions, independent of any specific adverse changes in the condition of a particular issuer. Because of the lack of sufficient market liquidity, a Fund may incur losses because it will be required to effect sales at a disadvantageous time

92

APPENDIX A

and then only at a substantial drop in price. These factors may have an adverse effect on the market price and a Fund’s ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for a Fund to obtain precise valuations of the high yield securities in its portfolio.

Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of non-investment grade securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the conditions of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality.

93

Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund’s financial performance for the past five years (or less if the Fund has been in operation for less than five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information has been audited by Ernst & Young LLP, whose report, along with the Funds’ financial statements, is included in the Funds’ annual report (available upon request without charge).

There are no financial highlights for the California Intermediate AMT-Free Municipal Fund and the New York Intermediate AMT-Free Municipal Fund because the Funds commenced operations on November 1, 2005.

SHORT DURATION TAX-FREE FUND

		Short Duration Tax Free Fund—Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.39		$	10.45		$	10.36		$	10.26		$	9.94
Income (loss) from investment operations
Net investment incomea			0.24			0.19			0.17			0.26	c		0.38
Net realized and unrealized gain (loss)			(0.18	)		(0.06	)		0.10			0.12	c		0.33
	Total from investment operations		0.06			0.13			0.27			0.38			0.71
Distributions to shareholders
From net investment income			(0.25	)		(0.19	)		(0.18	)		(0.28	)		(0.39	)
Net asset value, end of year		$	10.20		$	10.39		$	10.45		$	10.36		$	10.26
Total returnb			0.56	%		1.25	%		2.62	%		3.72	%		7.27	%
Net assets at end of period (in 000s)		$	147,425		$	188,487		$	204,838		$	118,906		$	38,891
Ratio of net expenses to average net assets			0.78	%		0.79	%		0.80	%		0.79	%		0.79	%
Ratio of net investment income to average net assets			2.37	%		1.80	%		1.66	%		2.57	%c		3.73	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.91	%		0.90	%		0.92	%		1.02	%		1.25	%
Ratio of net investment income to average net assets			2.24	%		1.69	%		1.54	%		2.34	%c		3.27	%
Portfolio turnover rate			46	%		37	%		43	%		31	%		69	%

See page 103 for all footnotes.

94

APPENDIX B

		Short Duration Tax Free Fund—Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.38		$	10.44		$	10.35		$	10.25		$	9.94
Income (loss) from investment operations
Net investment incomea			0.18			0.12			0.11			0.21	c		0.32
Net realized and unrealized gain (loss)			(0.18	)		(0.05	)		0.10			0.10	c		0.32
	Total from investment operations		(0.00	)		0.07			0.21			0.31			0.64
Distributions to shareholders
From net investment income			(0.19	)		(0.13	)		(0.12	)		(0.21	)		(0.33	)
Net asset value, end of year		$	10.19		$	10.38		$	10.44		$	10.35		$	10.25
Total returnb			(0.04	)%		0.64	%		2.01	%		3.10	%		6.53	%
Net assets at end of period (in 000s)		$	2,612		$	4,619		$	6,536		$	5,111		$	2,382
Ratio of net expenses to average net assets			1.38	%		1.39	%		1.40	%		1.39	%		1.39	%
Ratio of net investment income to average net assets			1.77	%		1.20	%		1.09	%		2.01	% c		3.22	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.66	%		1.65	%		1.67	%		1.77	%		2.00	%
Ratio of net investment income to average net assets			1.49	%		0.94	%		0.82	%		1.63	% c		2.61	%
Portfolio turnover rate			46	%		37	%		43	%		31	%		69	%

See page 103 for all footnotes.

95

		Short Duration Tax Free Fund— Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.39		$	10.45		$	10.36		$	10.26		$	9.94
Income (loss) from investment operations
Net investment incomea			0.16			0.11			0.10			0.18	c		0.29
Net realized and unrealized gain (loss)			(0.18	)		(0.06	)		0.09			0.12	c		0.34
	Total from investment operations		(0.02	)		0.05			0.19			0.30			0.63
Distributions to shareholders
From net investment income			(0.17	)		(0.11	)		(0.10	)		(0.20	)		(0.31	)
Net asset value, end of year		$	10.20		$	10.39		$	10.45		$	10.36		$	10.26
Total returnb			(0.19	)%		0.49	%		1.86	%		2.94	%		6.48	%
Net assets at end of period (in 000s)		$	9,440		$	18,283		$	30,057		$	27,937		$	3,842
Ratio of net expenses to average net assets			1.53	%		1.54	%		1.55	%		1.54	%		1.54	%
Ratio of net investment income to average net assets			1.61	%		1.04	%		0.94	%		1.80	% c		2.94	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.66	%		1.65	%		1.67	%		1.77	%		2.00	%
Ratio of net investment income to average net assets			1.48	%		0.93	%		0.82	%		1.57	% c		2.48	%
Portfolio turnover rate			46	%		37	%		43	%		31	%		69	%

See page 103 for all footnotes.

96

APPENDIX B

MUNICIPAL INCOME FUND

		Municipal Income Fund— Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	15.68		$	15.41		$	15.29		$	15.32		$	14.48
Income (loss) from investment operations
Net investment incomea			0.63			0.65			0.64			0.65	c		0.67
Net realized and unrealized gain (loss)			(0.08	)		0.27			0.13			(0.01	) c		0.82
	Total from investment operations		0.55			0.92			0.77			0.64			1.49
Distributions to shareholders
From net investment income			(0.64	)		(0.65	)		(0.65	)		(0.67	)		(0.65	)
Net asset value, end of year		$	15.59		$	15.68		$	15.41		$	15.29		$	15.32
Total returnb			3.55	%		6.09	%		5.10	%		4.30	%		10.48	%
Net assets at end of period (in 000s)		$	240,123		$	179,223		$	160,856		$	119,161		$	80,735
Ratio of net expenses to average net assets			0.93	%		0.94	%		0.95	%		0.94	%		0.94	%
Ratio of net investment income to average net assets			3.99	%		4.21	%		4.17	%		4.27	%c		4.47	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.09	%		1.12	%		1.13	%		1.11	%		1.18	%
Ratio of net investment income to average net assets			3.83	%		4.03	%		3.99	%		4.10	%c		4.23	%
Portfolio turnover rate			38	%		32	%		54	%		39	%		22	%

See page 103 for all footnotes.

97

		Municipal Income Fund— Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	15.68		$	15.41		$	15.29		$	15.32		$	14.49
Income (loss) from investment operations
Net investment incomea			0.51			0.54			0.53			0.54	c		0.56
Net realized and unrealized gain (loss)			(0.08	)		0.26			0.12			(0.01	) c		0.81
	Total from investment operations		0.43			0.80			0.65			0.53			1.37
Distributions to shareholders
From net investment income			(0.52	)		(0.53	)		(0.53	)		(0.56	)		(0.54	)
Net asset value, end of year		$	15.59		$	15.68		$	15.41		$	15.29		$	15.32
Total returnb			2.78	%		5.30	%		4.32	%		3.52	%		9.57	%
Net assets at end of period (in 000s)		$	13,783		$	14,117		$	15,143		$	16,903		$	11,902
Ratio of net expenses to average net assets			1.68	%		1.69	%		1.70	%		1.69	%		1.69	%
Ratio of net investment income to average net assets			3.25	%		3.46	%		3.44	%		3.53	% c		3.72	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.84	%		1.87	%		1.88	%		1.86	%		1.93	%
Ratio of net investment income to average net assets			3.09	%		3.28	%		3.26	%		3.36	% c		3.48	%
Portfolio turnover rate			38	%		32	%		54	%		39	%		22	%

See page 103 for all footnotes.

98

APPENDIX B

		Municipal Income Fund— Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	15.68		$	15.41		$	15.30		$	15.33		$	14.50
Income (loss) from investment operations
Net investment incomea			0.52			0.54			0.53			0.54	c		0.56
Net realized and unrealized gain (loss)			(0.08	)		0.26			0.11			(0.01	) c		0.81
	Total from investment operations		0.44			0.80			0.64			0.53			1.37
Distributions to shareholders
From net investment income			(0.52	)		(0.53	)		(0.53	)		(0.56	)		(0.54	)
Net asset value, end of year		$	15.60		$	15.68		$	15.41		$	15.30		$	15.33
Total returnb			2.85	%		5.30	%		4.25	%		3.52	%		9.64	%
Net assets at end of period (in 000s)		$	7,873		$	5,838		$	4,615		$	6,155		$	5,300
Ratio of net expenses to average net assets			1.68	%		1.69	%		1.70	%		1.69	%		1.69	%
Ratio of net investment income to average net assets			3.24	%		3.46	%		3.45	%		3.54	% c		3.72	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.84	%		1.87	%		1.88	%		1.86	%		1.93	%
Ratio of net investment income to average net assets			3.08	%		3.28	%		3.27	%		3.37	% c		3.48	%
Portfolio turnover rate			38	%		32	%		54	%		39	%		22	%

See page 103 for all footnotes.

99

HIGH YIELD MUNICIPAL FUND

		High Yield Municipal Fund— Class A Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.90		$	10.66		$	10.34		$	10.57		$	10.18
Income (loss) from investment operations
Net investment incomea			0.54			0.54			0.54			0.57	c		0.59
Net realized and unrealized gain (loss)			0.21			0.23			0.33			(0.19	) c		0.41
	Total from investment operations		0.75			0.77			0.87			0.38			1.00
Distributions to shareholders
From net investment income			(0.54	)		(0.53	)		(0.55	)		(0.58	)		(0.61	)
From net realized gains			—			—			—			(0.03	)		—
	Total distributions		(0.54	)		(0.53	)		(0.55	)		(0.61	)		(0.61	)
Net asset value, end of year		$	11.11		$	10.90		$	10.66		$	10.34		$	10.57
Total returnb			6.99	%		7.40	%		8.59	%		3.66	%		10.05	%
Net assets at end of period (in 000s)		$	2,264,580		$	1,513,843		$	895,711		$	585,882		$	303,622
Ratio of net expenses to average net assets			0.97	%		0.99	%		1.00	%		0.99	%		0.99	%
Ratio of net investment income to average net assets			4.78	%		5.03	%		5.21	%		5.41	%c		5.68	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.99	%		1.01	%		1.03	%		1.04	%		1.08	%
Ratio of net investment income to average net assets			4.76	%		5.01	%		5.18	%		5.36	%c		5.59	%
Portfolio turnover rate			28	%		41	%		54	%		52	%		61	%

See page 103 for all footnotes.

100

APPENDIX B

		High Yield Municipal Fund— Class B Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, at beginning of year		$	10.90		$	10.66		$	10.34		$	10.57		$	10.18
Income (loss) from investment operations
Net investment incomea			0.45			0.46			0.47			0.49	c		0.51
Net realized and unrealized gain (loss)			0.22			0.23			0.32			(0.19	) c		0.41
	Total from investment operations		0.67			0.69			0.79			0.30			0.92
Distributions to shareholders
From net investment income			(0.46	)		(0.45	)		(0.47	)		(0.50	)		(0.53	)
From net realized gains			—			—			—			(0.03	)		—
	Total distributions		(0.46	)		(0.45	)		(0.47	)		(0.53	)		(0.53	)
Net asset value, end of year		$	11.11		$	10.90		$	10.66			10.34			10.57
Total returnb			6.20	%		6.60	%		7.78	%		2.88	%		9.23	%
Net assets at end of period (in 000s)		$	49,299		$	48,286		$	45,620		$	40,428		$	32,403
Ratio of net expenses to average net assets			1.72	%		1.74	%		1.75	%		1.74	%		1.74	%
Ratio of net investment income to average net assets			4.05	%		4.29	%		4.50	%		4.70	% c		4.91	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.75	%		1.76	%		1.78	%		1.79	%		1.83	%
Ratio of net investment income to average net assets			4.02	%		4.27	%		4.47	%		4.65	% c		4.82	%
Portfolio turnover rate			28	%		41	%		54	%		52	%		61	%

See page 103 for all footnotes.

101

		High Yield Municipal Fund— Class C Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.90		$	10.66		$	10.34		$	10.57		$	10.18
Income (loss) from investment operations
Net investment incomea			0.45			0.46			0.47			0.49	c		0.52
Net realized and unrealized gain (loss)			0.22			0.23			0.32			(0.19	) c		0.40
	Total from investment operations		0.67			0.69			0.79			0.30			0.92
Distributions to shareholders
From net investment income			(0.46	)		(0.45	)		(0.47	)		(0.50	)		(0.53	)
From net realized gains			—			—			—			(0.03	)		—
	Total distributions		(0.46	)		(0.45	)		(0.47	)		(0.53	)		(0.53	)
Net asset value, end of year		$	11.11		$	10.90		$	10.66		$	10.34		$	10.57
Total returnb			6.20	%		6.60	%		7.78	%		2.88	%		9.23	%
Net assets at end of period (in 000s)		$	87,466		$	61,299		$	40,624		$	30,696		$	20,359
Ratio of net expenses to average net assets			1.72	%		1.74	%		1.75	%		1.74	%		1.74	%
Ratio of net investment income to average net assets			4.03	%		4.28	%		4.48	%		4.68	% c		4.94	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			1.74	%		1.76	%		1.78	%		1.79	%		1.83	%
Ratio of net investment income to average net assets			4.01	%		4.26	%		4.45	%		4.63	% c		4.85	%
Portfolio turnover rate			28	%		41	%		54	%		52	%		61	%

See page 103 for all footnotes.

102

Footnotes:

a	Calculated based on the average shares outstanding methodology.
b	Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.
c	As required, effective November 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premium and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was an impact of less than $0.01 per share to net investment income and net realized and unrealized gains and losses, and an impact to the ratio of net investment income to average net assets with and without expense reductions by less than 0.01% for the Short Duration Tax-Free and Municipal Income Funds and a decrease of 0.04% for the High Yield Municipal Fund. Per share amounts, ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

103

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Index

1 General Investment Management Approach
5 Fund Investment Objectives and Strategies
5	Goldman Sachs Short Duration Tax-Free Fund
7	Goldman Sachs California Intermediate AMT-Free Municipal Fund
9	Goldman Sachs New York Intermediate AMT-Free Municipal Fund
11	Goldman Sachs Municipal Income Fund
12	Goldman Sachs High Yield Municipal Fund
14 Other Investment Practices and Securities
16 Principal Risks of the Funds
20 Fund Performance
25 Fund Fees and Expenses
34 Service Providers
41 Dividends
42 Shareholder Guide
42	How to Buy Shares
57	How to Sell Shares
72 Taxation
75 Appendix A      Additional Information on      Portfolio Risks, Securities      and Techniques
94 Appendix B      Financial Highlights

Fixed Income Funds
Prospectus (Class A, B and C Shares)

   FOR MORE INFORMATION   

Annual/Semi-annual Report

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year. The California Intermediate AMT-Free Municipal Fund and the New York Intermediate AMT-Free Municipal Funds commenced operation on November 1, 2005. The semi-annual report for the fiscal period ending April 30, 2006 will become available to shareholders in June 2006. The annual report for the fiscal year ending October 31, 2006 will become available to shareholders in December 2006.

Statement of Additional Information

Additional information about the Funds and their policies is also available in the Funds’ Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus).

The Funds’ annual and semi-annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1-800-526-7384. You can also access and download the annual and semi-annual reports and the Additional Statement at the Funds’ website: http://www.gs.com/funds.

To obtain other information and for shareholder inquiries:

n By telephone:	1-800-526-7384
n By mail:	Goldman Sachs Funds 71 S. Wacker Dr., Suite 500 Chicago, IL 60606
n By e-mail:	gs-funds@gs.com
n On the Internet:	SEC EDGAR database – http://www.sec.gov Goldman Sachs – http://www.gs.com/funds

You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC’s public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102 or by electronic request to: publicinfo@sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942-8090.

The Funds’ investment company registration number is 811-5349.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

536410
FIPROMUNIABC

EX-99.17.H

GOLDMAN SACHS TRUST (the “Trust”)

GOLDMAN SACHS MUNICIPAL

FIXED INCOME FUNDS

Class A, Class B and C Shares of

Goldman Sachs California Intermediate AMT-Free Municipal Fund

Goldman Sachs New York Intermediate AMT-Free Municipal Fund

Goldman Sachs Municipal Income Fund

Supplement dated December 13, 2006 to the

Prospectus dated February 28, 2006

Effective December 13, 2006, the California Intermediate AMT-Free Municipal Fund’s and New York Intermediate AMT-Free Municipal Fund’s weighted average credit quality will be a minimum of AA/ A+. As a result, the following replaces the tabular information regarding each Fund’s weighted average credit quality in the section of the Prospectus titled “Fund Investment Objectives and Strategies — Fund Facts:”

Credit Quality:  Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Weighted Average: AA/ A+ or better

Effective December 13, 2006, the Municipal Income Fund’s weighted average credit quality will be a minimum of A. As a result, the following replaces the tabular information regarding the Fund’s weighted average credit quality in the section of the Prospectus titled “Fund Investment Objectives and Strategies — Fund Facts:”

Credit Quality:  Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Weighted Average: A or better

538821

MUNFISTKABC 12-06

EX-99.17.I

Goldman Sachs Trust (the “Trust”)

Goldman Sachs Structured U.S. Equity Flex Fund

Class A and C Shares of

Supplement dated January 9, 2007 to the

Prospectus dated June 14, 2006

Goldman Sachs Structured International Equity Flex Fund

Class A and C Shares of

Supplement dated January 9, 2007 to the

Prospectus dated June 14, 2006

Goldman Sachs Municipal Fixed Income Funds

Class A and C Shares of

Goldman Sachs Tennessee Municipal Fund

Supplement dated January 9, 2007 to the

Prospectus dated October 30, 2006

Goldman Sachs Municipal Fixed Income Funds

Class A, B and C Shares of

Goldman Sachs Short Duration Tax-Free Fund

Goldman Sachs California Intermediate AMT-Free Municipal Fund

Goldman Sachs New York Intermediate AMT-Free Municipal Fund

Goldman Sachs Municipal Income Fund

Goldman Sachs High Yield Municipal Fund

Supplement dated January 9, 2007 to the

Prospectus dated February 28, 2006

Goldman Sachs Taxable Fixed Income Funds

Class A, B and C Shares of

Goldman Sachs Enhanced Income Fund

Goldman Sachs Ultra-Short Duration Government Fund

Goldman Sachs Short Duration Government Fund

Goldman Sachs Government Income Fund

Goldman Sachs U.S. Mortgages Fund

Goldman Sachs Core Fixed Income Fund

Goldman Sachs Investment Grade Credit Fund

Goldman Sachs Global Income Fund

Goldman Sachs High Yield Fund

Goldman Sachs Emerging Markets Debt Fund

Supplement dated January 9, 2007 to the

Prospectus dated February 28, 2006

Goldman Sachs Taxable Fixed Income Funds

Class A and C Shares of

Goldman Sachs Core Plus Fixed Income Fund

Supplement dated January 9, 2007 to the

Prospectus dated October 16, 2006,

as amended November 29, 2006

     Effective January 9, 2007, the following text is added below the chart under “What Is My Minimum Investment In The Funds” in the section of the Prospectus titled “Shareholder Guide:”

     The minimum investment requirement may be waived for certain mutual fund “wrap” programs at the discretion of the Trust’s officers. No minimum amount is required for subsequent investments.

WRAPSTCK1 1-07

538580

EX-99.17.J

Prospectus

Institutional
Shares

February 28, 2006

 GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

n Goldman Sachs Short Duration Tax-Free Fund

n  Goldman Sachs California Intermediate AMT-Free Municipal Fund

n  Goldman Sachs New York Intermediate AMT-Free Municipal Fund

n  Goldman Sachs Municipal Income Fund

n  Goldman Sachs High Yield Municipal Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN A FUND.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

General Investment
Management Approach

Goldman Sachs Asset Management, L.P. (“GSAM”), serves as investment adviser to the Short Duration Tax-Free, California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds. GSAM is referred to in this Prospectus as the “Investment Adviser.”

The Funds Described In This Prospectus Are Not Money Market Funds. Investors In The Funds Should Understand That The Net Asset Value (“NAV”) Of The Funds Will Fluctuate Which May Result In A Loss Of A Portion Of The Principal Amount Invested.

Goldman Sachs’ Municipal Fixed Income Investing Philosophy:

Fixed income markets are constantly evolving and are highly diverse. We believe inefficiencies in these complex markets causes bond prices to diverge from their fair value for periods of time. To capitalize on these inefficiencies and generate consistent risk-adjusted performance, we believe it is critical to:

n	Thoughtfully combine diversified sources of return by employing multiple investment strategies
n	Take a global perspective to uncover relative value opportunities
n	Employ focused specialist teams to identify short-term mispricings and incorporate long-term views
n	Emphasize a risk-aware approach

GSAM’s Fixed Income investment process seeks to maximize risk-adjusted total returns by utilizing a diverse set of investment strategies. The process revolves around four key elements:

1. Developing a long-term risk budget—Lead portfolio managers (“Portfolio Team”) are responsible for the overall results of a Fund. They set the strategic direction of a Fund by establishing a “risk budget.” Following careful analysis of risk and return objectives, they allocate the overall risk budget to each component strategy to optimize potential return.

2. Generating investment views and strategies—Within the parameters of the risk budget, our Top-down and Bottom-up Strategy Teams generate investment ideas within their areas of specialization. The “Top-down Strategy Teams” are responsible for Cross-Sector and Duration decisions and are deliberately small to ensure creativity and expedite decision-making and execution. Concurrently, “Bottom-up Strategy Teams,” comprised of sector specialists, formulate sub-sector allocation and security selection decisions.

1

3. Implementing portfolios—The Strategy Teams trade the securities within their area of expertise, while the Portfolio Team oversees the portfolio construction process. In this way, the Fund benefits from the “Best Ideas” generated by the Strategy Teams and trades remain consistent with risk and return objectives. In the unique case of municipal fixed income, the Strategy Team and the Portfolio Team are one in the same.

4. Monitoring strategies—The Portfolio Team is responsible for monitoring the Funds to ensure the most optimal mix of strategies. In addition, the Top-down and Bottom-up Strategy Teams review the strategies within their areas of specialization.

The Investment Adviser de-emphasizes interest rate predictions as a means of generating incremental return. Instead, the Investment Adviser seeks to add value through the selection of particular securities and investment sector allocation as described above.

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GENERAL INVESTMENT MANAGEMENT APPROACH

With every fixed-income portfolio, the Investment Adviser applies a team approach that emphasizes risk management and capitalizes on Goldman Sachs’ extensive research capabilities.

Each of the Funds described in this Prospectus has a target duration. A Fund’s duration approximates its price sensitivity to changes in interest rates. For example, suppose that interest rates in one day fall by one percent which, in turn, causes yields on every bond in the market to fall by the same amount. In this example, the price of a bond with a duration of three years may be expected to rise approximately three percent and the price of a bond with a five year duration may be expected to rise approximately five percent. The converse is also true. Suppose interest rates in one day rise by one percent which, in turn, causes yields on every bond in the market to rise by the same amount. In this second example, the price of a bond with a duration of three years may be expected to fall approximately three percent and the price of a bond with a five year duration may be expected to fall approximately five percent. The longer the duration of a bond, the more sensitive the bond’s price is to changes in interest rates. Maturity measures the time until final payment is due; it takes no account of the pattern of a security’s cash flows over time. In calculating maturity, a Fund may determine the maturity of a variable or floating rate obligation according to its interest rate reset date, or the date principal can be recovered on demand, rather than the date of ultimate maturity. Similarly, to the extent that a fixed income obligation has a call, refunding, or redemption provision, the date on which the instrument is expected to be called, refunded, or redeemed may be considered to be its maturity date. There is no guarantee that the expected call, refund or redemption will occur, and a Fund’s average maturity may lengthen beyond the Investment Adviser’s expectations should the expected call, refund or redemption not occur. In computing portfolio duration, a Fund will estimate the duration of obligations that are subject to prepayment or redemption by the issuer, taking into account the influence of interest rates on prepayments and coupon flows. This method of computing duration is known as “option-adjusted” duration. The Investment Adviser may use futures contracts, options on futures contracts and swaps to manage the Funds’ target duration in accordance with their benchmark or benchmarks. A Fund will not be limited as to its maximum weighted average portfolio maturity or the maximum stated maturity with respect to individual securities unless otherwise noted.

Each Fund also has credit rating requirements for the securities it buys. A Fund will deem a security to have met its minimum credit rating requirement if the security has the required rating at the time of purchase from at least one nationally recognized statistical rating organization (“NRSRO”) even though it has been rated

3

below the minimum rating by one or more other NRSROs. Unrated securities may be purchased by the Funds if they are determined by the Investment Adviser to be of comparable quality. A security satisfies a Fund’s minimum rating requirement regardless of its relative ranking (for example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below such rating, the Fund will not be required to dispose of such security. This is so even if the downgrade causes the average credit quality of the Fund to be lower than that stated in the Prospectus. Furthermore, during this period, the Investment Adviser will only buy securities at or above the Fund’s average rating requirement. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of such security, is in the best interests of a Fund and its shareholders.

As discussed below, the Funds may invest in credit default swaps, which are derivative investments. When a Fund sells a credit default swap (commonly known as selling protection), the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) if the security defaults. A Fund will be the seller of a credit default swap only when the credit of the security is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into.

References in this Prospectus to a Fund’s benchmark or benchmarks are for informational purposes only, and unless otherwise noted are not necessarily an indication of how the Fund is managed.

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Fund Investment Objectives
and Strategies

Goldman Sachs
Short Duration Tax-Free Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers 1–3 Year Municipal Bond Index plus or minus 0.5 years Maximum = 3.5 years
Expected Approximate Interest Rate Sensitivity:	2.5-year municipal bond
Credit Quality:	Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers 1–3 Year Municipal Bond Index
Symbol:	GSDUX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income, consistent with relatively low volatility of principal, that is exempt from regular federal income tax.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal market conditions, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities issued by or on behalf of states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”), the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes), and is not a tax preference item under the federal alternative minimum tax. Under normal market

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers 1-3 Year Municipal Bond Index has ranged between two and two and a half years.

5

Goldman Sachs
Short Duration Tax-Free Fund continued

conditions, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net Assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in Appendix A — Portfolio Securities and Techniques.”

6

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
California Intermediate AMT-Free
Municipal Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers CA 1–10 Year Municipal Bond Index plus or minus one year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	6-year municipal bond
Credit Quality:	Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
	Weighted Average = AA/A+
Benchmark:	Lehman Brothers CA 1–10 Year Municipal Bond Index
Symbol:	GCAIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax, is exempt from California State personal income tax, and is consistent with preservation of capital. As a secondary objective, the Fund seeks to maximize after-tax total return consistent with the Fund’s intermediate duration and AA/A+ average credit quality.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in fixed-income securities issued by or on behalf of the State of California and its political subdivisions, agencies, instrumentalities and public authorities and other states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”), the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the past 10 years, the duration of the Lehman Brothers CA 1-10 Year Municipal Bond Index has ranged between approximately four and five years.

7

Goldman Sachs
California Intermediate AMT-Free
Municipal Fund continued

income tax purposes), is not a tax preference item under the federal alternative minimum tax and is exempt from California State personal income tax. Under normal circumstances, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net Assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. The Fund may also invest up to 20% of its Net Assets in Municipal Securities that are subject to California State personal income tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. Under normal circumstances, the Fund maintains a dollar-weighted average portfolio maturity of three to ten years. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

The Fund is “non-diversified” under the Investment Company Act of 1940, as amended (the “Act”), and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

8

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
New York Intermediate AMT-Free
Municipal Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers NY 1-10 Year Municipal Bond Index plus or minus one year Maximum = 6 years
Expected Approximate Interest Rate Sensitivity:	6-year municipal bond
Credit Quality:	Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality Weighted Average = AA/A+
Benchmark:	Lehman Brothers NY 1-10 Year Municipal Bond Index
Symbol:	GNYIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax, is exempt from New York State and City personal income taxes, and is consistent with preservation of capital. As a secondary objective, the Fund seeks to maximize after-tax total return consistent with the Fund’s intermediate duration and AA/A+ average credit quality.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 80% of its Net Assets in fixed income securities issued by or on behalf of the State of New York and its political subdivisions, agencies, instrumentalities and public authorities and other Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes), is not a tax preference item under the federal alternative minimum tax and is exempt from

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the past 10 years, the duration of the Lehman Brothers NY 1-10 Year Municipal Bond Index has ranged between approximately four and five years.

9

Goldman Sachs
New York Intermediate AMT-Free Municipal Fund continued

New York State and City personal income taxes. Under normal circumstances, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net Assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. The Fund may also invest up to 20% of its Net Assets in Municipal Securities that are subject to New York State and/or New York City personal income taxes. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. Under normal circumstances the Fund maintains a dollar-weighted average portfolio maturity of three to ten years. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

The Fund is “non-diversified” under the Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

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FUND INVESTMENT OBJECTIVES AND STRATEGIES

Goldman Sachs
Municipal Income Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Aggregate Municipal Bond Index plus or minus one year Maximum = 12 years
Expected Approximate Interest Rate Sensitivity:	15-year municipal bond
Credit Quality:	Minimum = BBB or Baa at the time of purchase; Weighted Average = A Securities will either be rated by a NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmark:	Lehman Brothers Aggregate Municipal Bond Index
Symbol:	GSMTX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal market conditions, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes). The Fund may invest up to 100% of its Net Assets in private activity bonds, the interest on which (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the duration of the Lehman Brothers Aggregate Municipal Bond Index has ranged between six and eight years.

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Goldman Sachs
High Yield Municipal Fund

FUND FACTS
Duration* (under normal interest rate conditions):	Target = Lehman Brothers Municipal Bond Index plus or minus 2 years Maximum = 12 years
Expected Approximate Interest Rate Sensitivity:	15–20-year municipal bond
Credit Quality:	At least 65% of total assets = BBB or Baa or lower at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Benchmarks:	Lehman Brothers Aggregate Municipal Bond Index and Lehman Brothers High Yield Municipal Bond Index
Symbol:	GHYIX

   INVESTMENT OBJECTIVE   

The Fund seeks a high level of current income that is exempt from regular federal income tax and may also consider the potential for capital appreciation.

   PRINCIPAL INVESTMENT STRATEGIES   

The Fund invests, under normal circumstances, at least 65% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase (“Total Assets”) in high-yield Municipal Securities that, at the time of purchase, are medium quality or non-investment grade. Medium quality securities are rated BBB or Baa by a NRSRO, and non-investment grade securities are securities rated BB, Ba or below by a NRSRO. Unrated securities will be determined by the Investment Adviser to be of comparable quality. Under normal circumstances, the Fund may also invest up to 35% of its Total Assets in higher grade fixed-income securities.

In pursuing its principal investment strategy, the Investment Adviser will assess the relative value in the Municipal Securities market from both a credit and yield curve

     *  The Fund’s duration approximates its price sensitivity to changes in interest rates. Historically, over the last ten years, the durations of the Lehman Brothers Aggregate Municipal Bond and Lehman Brothers High Yield Municipal Bond Indexes have ranged between six and eight years and six and nine years, respectively.

12

FUND INVESTMENT OBJECTIVES AND STRATEGIES

perspective. Tax-exempt securities offering the high current income sought by the Fund may be predominantly in the lower rating categories of NRSROs (BB/Ba or lower).

Under normal market conditions, the Fund invests at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes).

The Fund may invest up to 100% of its Net Assets in private activity bonds, the interest on which (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

Recognizing that the high-yield municipal market may consist of a limited number of attractive investment opportunities at any one time, the Investment Adviser may temporarily close the Fund to new investors in circumstances when it believes that a sufficient quantity of appropriate high-yield Municipal Securities is not available in the market place. The closure of the Fund under these circumstances generally will not preclude existing shareholders of the High Yield Municipal Fund from purchasing or redeeming Fund shares, although the Investment Adviser reserves the right to close the Fund to additional purchases by existing Fund shareholders in its discretion. For more information about the Fund’s investments in Municipal Securities, see “Municipal Securities” in “Appendix A — Portfolio Securities and Techniques.”

The High Yield Municipal Fund is “non-diversified” under the Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds. Therefore, the High Yield Municipal Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

Non-investment grade fixed-income securities (commonly known as “junk bonds”) tend to offer higher yields than higher rated securities with similar maturities. Non-investment grade fixed-income securities are, however, considered speculative and generally involve greater price volatility and greater risk of loss of principal and interest than higher rated securities. The Fund may purchase the securities of issuers that are in default.

13

Other Investment Practices
and Securities

The tables on the following page identify some of the investment techniques that may (but are not required to) be used by the Funds in seeking to achieve their investment objectives. The tables also highlight the differences and similarities among the Funds in their use of these techniques and other investment practices and investment securities. Numbers in the tables show allowable usage only; for actual usage, consult the Funds’ annual and semi-annual reports (when available, in the case of the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds). For more information about these and other investment practices and securities, see Appendix A. Each Fund publishes on its website (http://www.gs.com/funds) complete portfolio holdings for the Fund as of the end of each fiscal quarter subject to a thirty calendar-day lag between the date of the information and the date on which the information is disclosed. In addition, the Funds publish on their website selected holdings information monthly subject to a ten calendar-day lag between the date of the information and the date on which the information is disclosed. This information will be available on the website until the date on which a Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission (“SEC”). In addition, a description of the Fund’s policies and procedures with respect to the disclosure of a Fund’s portfolio securities is available in the Funds’ Statement of Additional Information (“Additional Statement”).

14

OTHER INVESTMENT PRACTICES AND SECURITIES

10 Percent of total assets (including securities lending collateral) (italic type)
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
•    No specific percentage limitation	Short	California	New York
on usage; limited only by the	Duration	Intermediate	Intermediate	Municipal	High Yield
objectives and strategies of the Fund	Tax-Free	AMT-Free	AMT-Free	Income	Municipal
—  Not permitted	Fund	Municipal	Municipal	Fund	Fund
		Fund	Fund
Investment Practices
Borrowings	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Credit, Interest Rate and Total Return Swaps*	•	•	•	•	•
Financial Futures Contracts	•	•	•	•	•
Interest Rate Floors, Caps and Collars	•	•	•	•	•
Options (including Options on Futures)	•	•	•	•	•
Repurchase Agreements	•	•	•	•	•
Securities Lending	33 1/3	33 1/3	33 1/3	33 1/3	33 1/3
Standby Commitments and Tender Option Bonds	•	•	•	•	•
When-Issued Securities and Forward Commitments	•	•	•	•	•

  *
Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.

10 Percent of total assets (italic type)
10 Percent of Net Assets (including borrowings for investment purposes) (roman type)
•    No specific percentage limitation	Short	California	New York
on usage; limited only by the	Duration	Intermediate	Intermediate	Municipal	High Yield
objectives and strategies of the Fund	Tax-Free	AMT-Free	AMT-Free	Income	Municipal
—  Not permitted	Fund	Municipal	Municipal	Fund	Fund
		Fund	Fund
Investment Securities
Asset-Backed Securities	•	•	•	•	•
Convertible Securities	•	•	•	•	•
Corporate Debt Obligations and Trust Preferred Securities	•	•	•	•	•
Floating and Variable Rate Obligations	•	•	•	•	•
Lower Grade Fixed Income Securities	—	—	—	—	65+1
Structured Securities*	•	•	•	•	•
Taxable Municipal Securities	20	20	20	20	20
Tax-Free Municipal Securities	80+2	80+3	80+4	80+5	80+5
Temporary Investments	•6	•6	•6	•6	•6,7
U.S. Government Securities	•	•	•	•	•

*	Limited to 15% of net assets (together with other illiquid securities) for all structured securities which are not deemed to be liquid and all swap transactions.
1	The High Yield Municipal Fund will invest at least 65% of its Total Assets in lower grade securities under normal circumstances.
2	The Short Duration Tax-Free Fund will invest 80% of its Net Assets in obligations the interest on which is exempt from regular federal income tax and is not a tax preference item under the federal alternative minimum tax.
3	The California Intermediate AMT-Free Municipal Fund will invest 80% of its Net Assets in Municipal Securities the interest on which is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax and is exempt from California State personal income tax.
4	The New York Intermediate AMT-Free Municipal Fund will invest at least 80% of its Net Assets in Municipal Securities, the interest on which is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax and is exempt from New York State and City personal income tax.
5	The Municipal Income and High Yield Municipal Funds will invest at least 80% of their Net Assets in municipal securities, the interest on which is exempt from regular federal income tax.
6	The Short Duration Tax-Free, California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds may invest no more than 20% of their Net Assets in taxable investments under normal market conditions. Under unusual conditions, taxable investments may exceed this percentage.
7	The High Yield Municipal Fund may for this purpose invest in investment and high grade securities without limit.

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Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The following summarizes important risks that apply to the Funds and may result in a loss of your investment. None of the Funds should be relied upon as a complete investment program. There can be no assurance that a Fund will achieve its investment objective.

	Short	California	New York
	Duration	Intermediate	Intermediate	Municipal	High Yield
•   Applicable	Tax-Free	AMT-Free Municipal	AMT-Free Municipal	Income	Municipal
— Not applicable	Fund	Fund	Fund	Fund	Fund
NAV	•	•	•
Interest Rate	•	•	•	•	•
Credit/Default	•	•	•	•	•
Call	•	•	•	•	•
Extension	•	•	•	•	•
Derivatives	•	•	•	•	•
U.S. Government Securities	•	•	•	•	•
Market	•	•	•	•	•
Management	•	•	•	•	•
Liquidity	•	•	•	•	•
Non-Diversification	—	•	•	—	•
“Junk Bond”	—	—	—	—	•
Tax	•	•	•	•	•
Concentration	•	•	•	•	•
California/New York	—	•	•	—	—

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PRINCIPAL RISKS OF THE FUNDS

All Funds:

n	NAV Risk—The risk that the net asset value (“NAV”) of the Fund and the value of your investment will fluctuate.
n	Interest Rate Risk—The risk that when interest rates increase, fixed-income securities held by a Fund will decline in value. Long-term fixed-income securities will normally have more price volatility because of this risk than short-term fixed-income securities.
n	Credit/Default Risk—The risk that an issuer or guarantor of fixed-income securities held by a Fund (which may have low credit ratings), or the counterparty in a derivative investment, may default on its obligation to pay interest and repay principal. This risk includes the risk of default on foreign letters of credit or guarantees that back Municipal Securities.
n	Call Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as an asset-backed security) earlier than expected. This may happen when there is a decline in interest rates. Under these circumstances, a Fund may be unable to recoup all of its initial investment and will also suffer from having to reinvest in lower yielding securities.
n	Extension Risk—The risk that an issuer will exercise its right to pay principal on an obligation held by a Fund (such as an asset-backed security) later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease, and a Fund will also suffer from the inability to invest in higher yielding securities.
n	Derivatives Risk—The risk that loss may result from a Fund’s investments in options, futures, swaps, options on swaps, structured securities and other derivative investments. These instruments may be illiquid, difficult to price and leveraged so that small changes may produce disproportionate losses to a Fund.
n	U.S. Government Securities Risk—The risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Although many types of U.S. Government Securities that may be purchased by the Funds, such as those issued by the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States Treasury and, therefore, are not backed by the full faith and credit of the United States. The maximum potential liability of the issuers of some U.S. Government Securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
n	Market Risk—The risk that the value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes

17

	may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more sectors, which will increase a Fund’s exposure to risk of loss from adverse developments affecting those sectors.
n	Management Risk—The risk that a strategy used by the Investment Adviser may fail to produce the intended results.
n	Liquidity Risk—The risk that a Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Funds that invest in non-investment grade fixed-income securities will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within these investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions whether or not accurate.
n	Tax Risk—The Funds may be adversely impacted by changes in tax rates and policies. Because interest income from Municipal Securities is normally not subject to regular federal income taxation and, for the California Intermediate AMT- Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund, certain state taxes, the attractiveness of Municipal Securities in relation to other investment alternatives is affected by changes in federal and state income tax rates or changes in the tax-exempt status of interest income from Municipal Securities. Any proposed or actual changes in such rates or exempt status, therefore, can significantly affect the demand for and supply, liquidity and marketability of Municipal Securities. This could in turn affect a Fund’s net asset value and ability to acquire and dispose of Municipal Securities at desirable yield and price levels. Additionally, these Funds would not be a suitable investment for IRAs, other tax-exempt or tax-deferred accounts or for other investors who are not sensitive to the federal, state or local income tax consequences of their investments.
n	Concentration Risk—The risk that if a Fund invests more than 25% of its total assets in issuers within the same country, state, industry or economic sector, an adverse economic, business or political development may affect the value of the Fund’s investments more than if its investments were not so concentrated. At the October 31, 2005 fiscal year end of the High Yield Municipal Fund, the Fund had invested more than 25% of its assets in the Municipal Securities of issuers located in Florida.

Specific Funds:

n Non-Diversification Risk—The High Yield Municipal Fund, California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund are non-diversified, meaning that each Fund is permitted to invest more of its assets in fewer issuers than “diversified” mutual funds. Thus, each Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.

18

PRINCIPAL RISKS OF THE FUNDS

n

“Junk Bond” Risk—The High Yield Municipal Fund will invest in non-investment grade fixed-income securities (commonly known as “junk bonds”) that are considered predominantly speculative by traditional investment standards. Non- investment grade fixed-income securities and unrated securities of comparable credit quality are subject to the increased risk of an issuer’s inability to meet principal and interest payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity.

n

California/New York Risk—The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds intend to invest primarily in California municipal obligations and New York municipal obligations, respectively. The investments of the Funds are, therefore, affected by political and economic developments within these States, and by the financial condition of these States, their public authorities and political sub-divisions. If California, New York, or any of their local governmental entities are unable to meet their financial obligations, the corresponding Fund’s income, NAV, and ability to preserve or realize appreciation of capital or liquidity could be adversely affected. See Appendix A in this Prospectus for more information concerning the risks of investing in California and New York.

More information about the Funds’ portfolio securities and investment techniques, and their associated risks, is provided in Appendix A. You should consider the investment risks discussed in this section and in Appendix A. Both are important to your investment choice.

19

Fund Performance

   HOW THE FUNDS HAVE PERFORMED   

The bar chart and table provide an indication of the risks of investing in a Fund by showing: (a) with respect to the bar charts, changes in the performance of a Fund’s Institutional Shares from year to year for up to the last ten calendar years and (b) with respect to the table, how the average annual total returns of a Fund’s Institutional Shares compare to those of broad-based securities market indices. The bar chart (including “Best Quarter” and “Worst Quarter” information) and table assume reinvestment of dividends and distributions. A Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Performance reflects expense limitations in effect. If expense limitations were not in place, a Fund’s performance would have been reduced. No performance for the California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund is provided because the Funds have less than one calendar year’s performance.

   INFORMATION ON AFTER-TAX RETURNS   

These definitions apply to the after-tax returns.

Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on a Fund’s Institutional Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.

Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on a Fund’s Institutional Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Institutional Shares at the end of the performance period.

Average Annual Total Returns After Taxes on Distributions and Sale of Shares. These returns reflect taxes paid on distributions on a Fund’s Institutional Shares and taxes applicable when the shares are redeemed (sold).

Note on Tax Rates. The after-tax performance figures are calculated using the historically highest individual federal marginal income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.

20

FUND PERFORMANCE

Short Duration Tax-Free Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q2 ’02           +2.58% Worst Quarter* Q2 ’04           –0.93%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		10 Years		Since Inception
Institutional Shares (Inception 10/1/92)
Returns Before Taxes		1.27%		3.24%		3.77%		3.87%
Returns After Taxes on Distributions**		1.27%		3.24%		3.77%		3.71%
Returns After Taxes on Distributions and Sale of Fund Shares**		1.85%		3.20%		3.74%		3.69%
Lehman Brothers 1-3 Year Municipal Bond Index***		1.08%		3.09%		3.78%		3.90%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers 1-3 Year Municipal Bond Index, an unmanaged index, represents investment grade municipal bonds with maturities greater than one year and less than 4 years, and does not reflect any deduction for fees, expenses or taxes.

21

Municipal Income Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q4 ’00           +4.39% Worst Quarter* Q2 ’99           –2.80%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 8/15/97)
Returns Before Taxes		4.58%		5.90%		5.57%
Returns After Taxes on Distributions**		4.58%		5.90%		5.53%
Returns After Taxes on Distributions and Sale of Fund Shares**		4.56%		5.75%		5.45%
Lehman Brothers Aggregate Municipal Bond Index***		3.51%		5.59%		5.68%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index figures do not reflect any deduction for fees, expenses or taxes.

22

FUND PERFORMANCE

High Yield Municipal Fund

TOTAL RETURN	CALENDAR YEAR
Best Quarter* Q2 ’03              +3.86% Worst Quarter* Q2 04            –1.73%

   AVERAGE ANNUAL TOTAL RETURN   

For the period ended December 31, 2005	1 Year		5 Years		Since Inception
Institutional Shares (Inception 4/3/00)
Returns Before Taxes		7.72%		7.92%		8.06%
Returns After Taxes on Distributions**		5.78%		7.89%		8.04%
Returns After Taxes on Distributions and Sale of Fund Shares**		6.91%		7.62%		7.76%
Lehman Brothers High Yield Municipal Index***		8.58%		7.67%		7.48%
Lehman Brothers Aggregate Municipal Bond Index****		3.51%		5.59%		6.34%

*	Please note that “Best Quarter” and “Worst Quarter” figures are applicable only to the time period covered by the bar chart.
**	After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
***	The Lehman Brothers High Yield Municipal Index is an unmanaged index made up of bonds that are non-investment grade, unrated, or rated below Ba1 by Moody’s Investors Services with a remaining maturity of at least one year. The Index does not reflect any deduction for fees, expenses or taxes.
****	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index does not reflect any deduction for fees, expenses, or taxes.

23

Fund Fees and Expenses (Institutional Shares)

This table describes the fees and expenses that you would pay if you buy and hold Institutional Shares of a Fund.

			California		New York
	Short		Intermediate		Intermediate
	Duration		AMT-Free		AMT-Free		Municipal		High Yield
	Tax-Free		Municipal		Municipal		Income		Municipal
	Fund		Fund		Fund		Fund		Fund
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases		None		None		None		None		None
Maximum Deferred Sales Charge (Load)		None		None		None		None		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends		None		None		None		None		None
Redemption Fees		None		2.00%1		2.00%1		2.00%1		None
Exchange Fees		None		None		None		None		None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):2
Management Fees3		0.40%		0.45%		0.45%		0.55%		0.52%
Distribution and Service (12b-1) Fees		None		None		None		None		None
Other Expenses4*		0.12%		0.50%		1.85%		0.15%		0.06%
Total Fund Operating Expenses*		0.52%		0.95%		2.30%		0.70%		0.58%

See pages 25 and 26 for all other footnotes.

*  The “Other Expenses” and “Total Fund Operating Expenses” (after any waivers and expense limitations) are as set forth below. The waivers and expense limitations may be modified or terminated at any time at the option of the Investment Adviser. If this occurs, “Other Expenses” and “Total Fund Operating Expenses” may increase without shareholder approval.

			California		New York
	Short		Intermediate		Intermediate
	Duration		AMT-Free		AMT-Free		Municipal		High Yield
	Tax-Free		Municipal		Municipal		Income		Municipal
	Fund		Fund		Fund		Fund		Fund
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):2
Management Fees3		0.35%		0.45%		0.45%		0.50%		0.52%
Distribution and Service (12b-1) Fees		None		None		None		None		None
Other Expenses4		0.04%		0.08%		0.08%		0.04%		0.04%
Total Fund Operating Expenses (after current waivers and expense limitations)		0.39%		0.53%		0.53%		0.54%		0.56%

24

FUND FEES AND EXPENSES

1	A 2.0% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less.
2	The California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund commenced operations on November 1, 2005 and annual operating expenses have been estimated for the current year. The Short Duration Tax-Free and Municipal Income Funds’ annual operating expenses are based on actual expenses for the fiscal year ended October 31, 2005. As a result of the fee reduction commitment discussed in footnote 3, the High Yield Municipal Fund’s “Management Fees” and “Total Fund Operating Expenses” have been restated to reflect the expenses that are expected for the current fiscal year.
3	The Investment Adviser has entered into the following fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus. The rates listed below for the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds have been contractual since their commencement of operations.

	Management Fee		Average Daily
Fund	Annual Rate		Net Assets
Short Duration Tax-Free		0.40%	on the first $1 billion
		0.36%	on the next $1 billion
		0.34%	over $2 billion
California Intermediate AMT-Free Municipal		0.45%	on the first $1 billion
		0.41%	on the next $1 billion
		0.39%	over $2 billion
New York Intermediate AMT-Free Municipal		0.45%	on the first $1 billion
		0.41%	on the next $1 billion
		0.39%	over $2 billion
Municipal Income		0.55%	on the first $1 billion
		0.50%	on the next $1 billion
		0.48%	over $2 billion
High Yield Municipal		0.55%	on the first $2 billion
		0.50%	over $2 billion

Prior to this fee reduction commitment, the management fees for the Short Duration Tax-Free Municipal Income and High Yield Municipal Funds as an annual percentage rate of average daily net assets were 0.40%, 0.55% and 0.55%, respectively. In addition, The Investment Adviser has voluntarily agreed not to impose a portion of the management fee on the Short Duration Tax-Free and Municipal Income Funds equal to 0.05%, and 0.05%, respectively, of such Fund’s average daily net assets. As a result of fee waivers, the current management fees of the Short Duration Tax-Free and Municipal Income Funds are 0.35%, and 0.50%, respectively, of such Funds’ average daily net assets. The waivers may be terminated at any time at the option of the Investment Adviser.

25

Fund Fees and Expenses continued

⁴ “Other Expenses” include transfer agency fees and expenses equal on an annualized basis to 0.04% of the average daily net assets of each Fund’s Institutional Shares, plus all other ordinary expenses not detailed above. The Investment Adviser has voluntarily agreed to reduce or limit “Other Expenses” of each Fund (excluding management fees, transfer agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification, shareholder meetings and other extraordinary expenses exclusive of any expense offset arrangements) to the following percentages of each Fund’s average daily net assets:

	Other
Fund	Expenses
Short Duration Tax-Free		0.004%
California Intermediate AMT-Free Municipal		0.044%
New York Intermediate AMT-Free Municipal		0.044%
Municipal Income		0.004%
High Yield Municipal		0.004%

26

FUND FEES AND EXPENSES

The following Example is intended to help you compare the cost of investing in a Fund (without the waivers and expense limitations) with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in Institutional Shares of a Fund for the time periods indicated and then redeem all of your Institutional Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that a Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Fund	1 Year		3 Years		5 Years		10 Years
Short Duration Tax-Free	$	53	$	167	$	291	$	653
California Intermediate AMT-Free Municipal	$	97	$	303		N/A		N/A
New York Intermediate AMT-Free Municipal	$	233	$	718		N/A		N/A
Municipal Income	$	72	$	224	$	390	$	871
High Yield Municipal	$	59	$	186	$	324	$	726

Institutions that invest in Institutional Shares on behalf of their customers may charge other fees directly to their customer accounts in connection with their investments. You should contact your institution for information regarding such charges. Such fees, if any, may affect the return such customers realize with respect to their investments.

Certain institutions that invest in Institutional Shares may receive other compensation in connection with the sale and distribution of Institutional Shares or for services to their customers’ accounts and/or the Funds. For additional information regarding such compensation, see “Shareholder Guide” in the Prospectus and “Payments to Intermediaries” in the Additional Statement.

27

Service Providers

   INVESTMENT ADVISERS   

Investment Adviser	Fund
Goldman Sachs Asset Management, L.P. (“GSAM”) 32 Old Slip New York, New York 10005	Short Duration Tax-Free California Intermediate AMT-Free Municipal New York Intermediate AMT-Free Municipal Municipal Income High Yield Municipal

GSAM has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman Sachs & Co. (“Goldman Sachs”). As of December 31, 2005, GSAM had assets under management of $496.1 billion.

The Investment Adviser provides day-to-day advice regarding the Funds’ portfolio transactions. The Investment Adviser makes the investment decisions for the Funds and places purchase and sale orders for the Funds’ portfolio transactions in U.S. markets. As permitted by applicable law, these orders may be directed to any brokers, including Goldman Sachs and its affiliates. While the Investment Adviser is ultimately responsible for the management of the Funds, it is able to draw upon the research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. In addition, the Investment Adviser has access to the research and certain proprietary technical models developed by Goldman Sachs, and will apply quantitative and qualitative analysis in determining the appropriate allocations among categories of issuers and types of securities.

The Investment Adviser also performs the following additional services for the Funds:

n	Supervises all non-advisory operations of the Funds
n	Provides personnel to perform necessary executive, administrative and clerical services to the Funds
n	Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
n	Maintains the records of each Fund
n	Provides office space and all necessary office equipment and services

28

SERVICE PROVIDERS

   MANAGEMENT FEES   

As compensation for its services and its assumption of certain expenses, the Investment Adviser is entitled to the following fees, computed daily and payable monthly, at the annual rates listed below (as a percentage of each respective Fund’s average daily net assets):

		Actual Rate
		For the Fiscal
		Year Ended
	Contractual Rate*	October 31, 2005
GSAM:
Short Duration Tax-Free	0.40% on the first $1 billion 0.36% on the next $1 billion 0.34% over $2 billion		0.35%
California Intermediate AMT-Free Municipal	0.45% on the first $1 billion 0.41% on the next $1 billion 0.39% over $2 billion		N/A**
New York Intermediate AMT-Free Municipal	0.45% on the first $1 billion 0.41% on the next $1 billion 0.39% over $2 billion		N/A**
Municipal Income	0.55% on the first $1 billion 0.50% on the next $1 billion 0.48% over $2 billion		0.50%
High Yield Municipal	0.55% on the first $2 billion 0.50% over $2 billion		0.52%

*

The investment Adviser has entered into the foregoing new fee reduction commitments for the Funds which were implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of the date of this Prospectus. The rates listed above for the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds have been contractual since their commencement of operations in November 2005. Prior to the fee reduction commitment, the management fees for the Short Duration Tax-Free, Municipal Income and High Yield Municipal Funds as an annual percentage of average daily net assets were 0.40%, 0.55% and 0.55%, respectively.

**

The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds did not conduct investment operations during this fiscal period.

The difference, if any, between the stated fees and the actual fees paid by the Funds reflects that the Investment Adviser did not charge the full amount of the fees to which it would have been entitled. The Investment Adviser may discontinue or modify any such voluntary limitations in the future at its discretion.

A discussion regarding the basis for the Board of Trustees’ approval of the Management Agreements for the Short Duration Tax Free, Municipal Income and High Yield Municipal Funds in 2005 is available in the Funds’ annual report dated

29

October 31, 2005. The semi-annual report for the fiscal period ended April 30, 2006 for the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds will become available in June 2006 and will contain a discussion regarding the basis for the Board of Trustees’ approval of the Management Agreement relating to those Funds.

   FUND MANAGERS   

Fixed Income Portfolio Management Team

n	The investment process revolves around three groups: the Fixed Income Strategy Group, the Top-down Strategy Teams, and the Municipal Bond Teams.
n	These teams strives to maximize risk-adjusted returns by de-emphasizing interest rate anticipation and focusing on security selection and sector allocation
n	The team manages approximately $144.9 billion in municipal and taxable fixed-income assets for retail, institutional and high net worth clients

______________________________________________________________________________________________________________

U.S. Fixed Income-Municipal Investment Management Team

		Years
		Primarily
Name and Title	Fund Responsibility	Responsible	Five Year Employment History
Ben Barber Managing Director Head of U.S. Municipal Team	Senior Portfolio Manager— Short Duration Tax-Free California Intermediate AMT-Free Municipal New York Intermediate AMT-Free Municipal Municipal Income High Yield Municipal	Since 1999 2005 2005 1999 2000	Mr. Barber joined the Investment Adviser in 1999 as a portfolio manager. Prior to his current position, he managed high yield municipal and municipal bond funds at Franklin Templeton for eight years.
Tom Kenny Managing Director and Co-Head U.S. and Global Fixed Income Teams	Senior Portfolio Manager— California Intermediate AMT-Free Municipal Fund New York Intermediate AMT-Free Municipal Fund High Yield Municipal	Since 2005 2005 2000	Mr. Kenny joined the Investment Adviser in 1999 as a senior portfolio manager. Previously, he spent 13 years at Franklin Templeton where he was a portfolio manager of high yield municipal and municipal funds, Director of Municipal Research and Director of the Municipal Bond Department.
Scott Diamond Vice President	Portfolio Manager— Short Duration Tax-Free California Intermediate AMT-Free Municipal New York Intermediate AMT-Free Municipal Municipal Income High Yield Municipal	Since 2002 2005 2005 2002 2002	Mr. Diamond joined the Investment Adviser in 2002 as a portfolio manager. Before joining the Investment Adviser, Mr. Diamond worked for Prudential Financial for nine years where he served as the portfolio manager for national and state specific mutual funds, as well as managing the municipal portfolio of several institutional accounts.

30

SERVICE PROVIDERS

Ben Barber is a Senior Portfolio Manager and serves as the Head of the U.S. Municipal Investment Management Team. As the leader of the Municipal Investment Management Team, Mr. Barber is ultimately responsible for the composition of a Fund’s structure at both the security and sector level. Along with the other portfolio managers on the team, Mr. Barber has specific responsibilities including duration, term structure, trading, and credit research. Each portfolio manager is responsible for liaising with the Municipal Credit Research Department, and promoting his or her fixed income investment ideas to the other members of the team so that a consensus view might be achieved and implemented.

The Additional Statement provides information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and portfolio manager ownership of securities in the Funds.

   DISTRIBUTOR AND TRANSFER AGENT   

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor (the “Distributor”) of each Fund’s shares. Goldman Sachs, 71 S. Wacker Dr., Suite 500, Chicago, IL 60606, also serves as each Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.

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 shares acquired for its own account.

   ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER 
   ACCOUNTS MANAGED BY GOLDMAN SACHS   

The involvement of the Investment Adviser, 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 a Fund or limit a Fund’s investment activities. Goldman Sachs is a full service investment banking broker dealer, asset management and financial services organization and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, financer, advisor, market maker, trader, prime broker, lender, agent and principal, and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Funds directly and indirectly invest. Thus, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking

31

or other services. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Funds and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Funds. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Funds. The results of a Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs and it is possible that a Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Funds may, from time to time, enter into transactions in which Goldman Sachs or its other clients have an adverse interest. Furthermore, transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may adversely impact the Funds. Transactions by one or more Goldman Sachs advised clients or the Investment Adviser may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Funds. A Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Funds, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Funds or who engage in transactions with or for the Funds. For more information about conflicts of interest see the Additional Statement.

Under a securities lending program approved by the Funds’ Board of Trustees, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for each Fund to the extent that the Funds engage in the securities lending program. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of the cash received as collateral for the loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions.

32

SERVICE PROVIDERS

   LEGAL PROCEEDINGS   

On April 2, 2004, Lois Burke, a plaintiff identifying herself as a shareholder of the Goldman Sachs Internet Tollkeeper Fund, filed a purported class and derivative action lawsuit in the United States District Court for the Southern District of New York against The Goldman Sachs Group, Inc. (“GSG”), GSAM, the Trustees and Officers of the Goldman Sachs Trust (the “Trust”), and John Doe Defendants. In addition, certain of the Goldman Sachs Funds included in this Prospectus and certain other investment portfolios of the Trust were named as nominal defendants. On April 19 and May 6, 2004, additional class and derivative action lawsuits containing substantially similar allegations and requests for redress were filed in the United States District Court for the Southern District of New York. On June 29, 2004, the three complaints were consolidated into one action, In re Goldman Sachs Mutual Funds Fee Litigation, and on November 17, 2004, the plaintiffs filed a consolidated amended complaint against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman, Sachs, Goldman Sachs Variable Insurance Trust (“GSVIT”) the Trust, the Trustees and Officers of the Trust and John Doe Defendants (collectively, the “Defendants”) in the United States District Court for the Southern District of New York. Certain investment portfolios of the Trust and GSVIT (collectively, the “Goldman Sachs Funds”) were also named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005.

The second amended consolidated complaint, which is brought on behalf of all persons or entities who held shares in the Goldman Sachs Funds between April 2, 1999 and January 9, 2004, inclusive (the “Class Period”), asserts claims involving (i) violations of the Investment Company Act of 1940 (the “Investment Company Act”), and the Investment Advisers Act of 1940, (ii) common law breach of fiduciary duty, and (iii) unjust enrichment. The complaint alleges, among other things, that during the Class Period, the Defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Investment Company Act which were necessary to prevent such registration statements and reports from being materially false and misleading. In addition, the complaint alleges that the Goldman Sachs Funds paid excessive and improper investment advisory fees to GSAM and GSAMI also alleges that GSAM and GSAMI used Rule 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. The plaintiffs in the cases are seeking compensatory damages; rescission of GSAM’s and GSAMI’s investment advisory agreement and return of fees paid; an accounting of all Goldman Sachs Funds-related fees, commissions and soft

33

dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and reasonable costs and expenses, including counsel fees and expert fees. On January 13, 2006, all claims against the Defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision.

Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Goldman Sachs Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

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Dividends

Each Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:

n	Cash
n	Additional shares of the same class of the same Fund
n	Shares of the same or an equivalent class of another Goldman Sachs Fund. Special restrictions may apply. See the Additional Statement.

You may indicate your election on your Account Application. Any changes may be submitted in writing to Goldman Sachs at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the applicable Fund. If cash dividends are elected with respect to the Fund’s monthly net investment income dividends, then cash dividends must also be elected with respect to the non-long-term capital gains component, if any, of the Fund’s annual dividend.

The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains are declared and paid as follows:

	Investment Income		Capital Gains
	Dividends		Distributions
Fund	Declared	Paid	Declared and Paid
Short Duration Tax-Free	Daily	Monthly	Annually
California Intermediate AMT-Free Municipal	Daily	Monthly	Annually
New York Intermediate AMT-Free Municipal	Daily	Monthly	Annually
Municipal Income	Daily	Monthly	Annually
High Yield Municipal	Daily	Monthly	Annually

From time to time a portion of a Fund’s dividends may constitute a return of capital.

When you purchase shares of a Fund, part of the NAV per share may be represented by undistributed income or undistributed realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.

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Shareholder Guide

The following section will provide you with answers to some of the most often asked questions regarding buying and selling the Funds’ Institutional Shares.

   HOW TO BUY SHARES   

How Can I Purchase Institutional Shares Of The Funds?

You may purchase Institutional Shares on any business day at their NAV next determined after receipt of an order. No sales load is charged. You should either:

n

Place an order with Goldman Sachs at 1-800-621-2550 and wire federal funds to The Northern Trust Company (“Northern”), as subcustodian for State Street Bank and Trust Company (“State Street”) (the Funds’ custodian), on the next business day; or

n

Send a check or Federal Reserve draft payable to Goldman Sachs Funds—(Name of Fund and Class of Shares), 71 S. Wacker Dr., Suite 500 Chicago, IL 60606. The Funds will not accept a check drawn on foreign banks, third party checks, cashier’s checks or official checks, temporary checks, electronic checks, drawer checks, cash, money orders, travelers’ cheques or credit card checks. In limited situations involving the transfer of retirement assets, the Funds may accept cashier’s checks or official bank checks.

In order to make an initial investment in a Fund, you must furnish to the Fund or Goldman Sachs the Account Application. Purchases of Institutional Shares must be settled within three business days of receipt of a complete purchase order.

How Do I Purchase Shares Through A Financial Institution?

Certain institutions (including banks, trust companies, brokers and investment advisers) that provide recordkeeping, reporting and processing services to their customers may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers and may designate other intermediaries to accept such orders, if approved by the Trust. In these cases:

n	A Fund 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, and the order will be priced at the Fund’s NAV per share next determined after such acceptance (less any applicable redemption fee).
n	Authorized institutions or intermediaries will be responsible for transmitting accepted orders and payments to the Trust within the time period agreed upon by them.

You should contact your institution or intermediary to learn whether it is authorized to accept orders for the Trust. These institutions may receive payments from the

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SHAREHOLDER GUIDE

Funds or Goldman Sachs for the services provided by them with respect to the Funds’ Institutional Shares. These payments may be in addition to other payments borne by the Funds.

The Investment Adviser, Distributor and/or their affiliates may make payments to authorized dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds and other Goldman Sachs Funds. These payments are made out of the Investment Adviser’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Funds. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds and other Goldman Sachs Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, 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. The additional payments by the Investment Adviser, Distributor and/or their affiliates may also compensate Intermediaries for subaccounting, administrative and/or shareholder processing services that are in addition to the fees paid for these services by the Funds. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. Please refer to the “Payments to Intermediaries” section of the Additional Statement for more information about these payments.

The payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your authorized dealer or Intermediary for more information about the payments it receives and any potential conflicts of interest.

In addition to Institutional Shares, each Fund also offers other classes of shares to investors. These other share classes are subject to different fees and expenses (which affect performance), have different minimum investment requirements and are entitled to different services than Institutional Shares. Information regarding

37

these other share classes may be obtained from your sales representative or from Goldman Sachs by calling the number on the back cover of this Prospectus.

What Is My Minimum Investment In The Funds?

Type of Investor	Minimum Investment
n Banks, trust companies or other     depository institutions investing     for their own account or on behalf     of their clients n  Section 401(k), profit sharing,     money purchase pension, tax-     sheltered annuity, defined benefit     pension or other employee benefit     plans that are sponsored by one     or more employers (including     governmental or church     employers) or employee     organizations* n  State, county, city or any     instrumentality, department,     authority or agency thereof n  Corporations with at least $100     million in assets or in outstanding     publicly traded securities n  “Wrap” account sponsors     (provided they have an agreement     covering the arrangement with     GSAM) n  Registered investment advisers     investing for accounts for which     they receive asset-based fees n  Qualified non-profit organizations,     charitable trusts, foundations and endowments*	$1,000,000 in Institutional Shares of a Fund alone or in combination with other assets under the management of GSAM and its affiliates
n Individual investors n  Accounts over which GSAM or its     advisory affiliates have investment     discretion	$10,000,000
n Individual Retirement Accounts (IRAs)     for which GSAM or its advisory affiliates     act as fiduciary*	No minimum

    *
These Funds may not be appropriate for IRAs, other tax deferred or tax exempt accounts or for other investors who are not sensitive to federal, state or local income tax consequences of their investments. Please consult with your financial or tax adviser for more information.

The minimum investment requirement may be waived for current and former officers, partners, directors or employees of Goldman Sachs or any of its affiliates; brokerage or advisory clients of Goldman Sachs Private Wealth Management;

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SHAREHOLDER GUIDE

certain mutual fund “wrap” programs; and for other investors at the discretion of the Trust’s officers. No minimum amount is required for subsequent investments.

What Else Should I Know About Share Purchases?

The Trust reserves the right to:

n	Refuse to open an account if you fail 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).
n	Modify or waive the minimum investment amounts.
n	Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of Institutional Shares of a Fund is evident, or if purchases, sales or exchanges are, or a subsequent abrupt redemption might be, of a size that would disrupt the management of a Fund.
n	Close a Fund to new investors from time to time and reopen any such Fund whenever it is deemed appropriate by a Fund’s Investment Adviser.

Generally, the Funds will not allow non-U.S. citizens and certain U.S. citizens residing outside the United States to open an account directly with the Funds.

The Funds may allow you to purchase shares with securities instead of cash if consistent with a Fund’s investment policies and operations and if approved by the Fund’s Investment Adviser.

Customer Identification Program. Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other identifying information, for each investor who opens an account with the Funds. Applications without the required information may not be accepted by the Funds. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to: (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Funds are unable to verify an investor’s identity. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an account and redeeming an investor’s shares pursuant to the customer identification program.

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How Are Shares Priced?

The price you pay or receive when you buy, sell or exchange Institutional Shares is the Fund’s next determined NAV for a share class (as adjusted for any applicable redemption fee). The Funds calculate NAV as follows:

NAV = (Value of Assets of the Class)
- (Liabilities of the Class)
Number of Outstanding Shares of the Class

The Funds’ investments are valued based on market quotations, which may be furnished by a pricing service or provided by securities dealers. If accurate quotations are not readily available, or if the Investment Adviser believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined based on yield equivalents, a pricing matrix or other sources, under valuation procedures established by the Trustees. Debt obligations with a remaining maturity of 60 days or less are valued at amortized cost.

In addition, the Investment Adviser, consistent with applicable regulatory guidance, may determine to make an adjustment to the previous closing prices of securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in foreign markets; market disruptions or market closings; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements on earnings; significant litigation; and regulatory news such as governmental approvals.

One effect of using independent fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).

n NAV per share of each class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New York time) or such earlier or later time as

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SHAREHOLDER GUIDE

	the New York Stock Exchange or NASDAQ market may officially close. This occurs after the determination, if any, of income declared as a dividend. Fund shares will generally not be priced on any day the New York Stock Exchange is closed.
n	When you buy shares, you pay the NAV next calculated after the Funds receive your order in proper form.
n	When you sell shares, you receive the NAV next calculated after the Funds receive your order in proper form, less any applicable redemption fee.
n	On any business day 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. If a Fund does so, it will cease granting same business day credit for purchase and redemption orders received after the Fund’s closing time and credit will be given to the next business day.
n	The Trust reserves the right to reprocess purchase (including dividend re-investments), redemption and exchange transactions that were processed at an NAV other than a Fund’s official closing NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV as adjusted.
n	The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.

Note: The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York time. In the event the New York Stock Exchange does not open for business because of an emergency, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during an emergency situation, please call 1-800-621-2550.

When Will Shares Be Issued And Dividends Begin To Be Paid?

n Shares Purchased by Federal Funds Wire:

n	If a purchase order in proper form specifies a settlement date and is received before the Fund’s NAV is determined that day, shares will be issued and dividends will begin to accrue on the purchased shares on the later of (i) the business day after the purchase order is received; or (ii) the day that the federal funds wire is received by Northern.
n	If a purchase order in proper form does not specify a settlement date, shares will be issued and dividends will begin to accrue on the business day after payment is received. Failure to provide payment on settlement date may result in a delay in accrual.

41

  n If a Purchase order is placed through an Authorized Dealer that settles through the National Securities Clearing Corporation (“NSCC”), the purchase order will begin accruing on the NSCC settlement date.

n Shares Purchased by Check or Federal Reserve Draft:

  n If a purchase order in proper form is received before the Fund’s NAV is determined that day, shares will be issued and dividends will generally begin to accrue two days after receipt of check or payment.

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SHAREHOLDER GUIDE

   HOW TO SELL SHARES   

How Can I Sell Institutional Shares Of The Funds?

You may arrange to take money out of your account by selling (redeeming) some or all of your shares. Generally, each Fund will redeem its Institutional Shares upon request on any business day at their NAV next determined after receipt of such request in proper form, subject to any applicable redemption fee. You may request that redemption proceeds be sent to you by check or by wire (if the wire instructions are on record). Redemptions may be requested in writing or by telephone.

Instructions For Redemptions:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund name and Class of Shares
	n The dollar amount you want to sell
	n How and where to send the proceeds
	n Obtain a Medallion Signature Guarantee (see details below)
	n Mail the request to:     Goldman Sachs Funds     71 S. Wacker Drive, Suite 500     Chicago, IL 60606
By Telephone:	If you have elected the telephone redemption privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)

Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.

Certain institutions and intermediaries are authorized to accept redemption requests on behalf of the Funds as described under “How Do I Purchase Shares Through A Financial Institution?”

When Do I Need A Medallion Signature To Redeem Shares?

A Medallion signature guarantee may be required if:

n	You would like the redemption proceeds sent to an address that is not your address of record; or
n	You would like to change your current bank designations.

A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee

43

Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required for executors, trustees or corporations or when deemed appropriate by the Transfer Agent.

What Do I Need To Know About Telephone Redemption Requests?

The Trust, the Distributor and the Transfer Agent will not be liable for any loss you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs employs reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:

n	All telephone requests are recorded.
n	Any redemption request that requires money to go to an account or address other than that designated on the Account Application must be in writing and signed by an authorized person designated on the Account Application with a Medallion signature guarantee. The written request may be confirmed by telephone with both the requesting party and the designated bank account to verify instructions.
n	For the 30-day period following a change of address, telephone redemptions will only be filled by a wire transfer to the bank account designated in the Account Application (see immediately preceding bullet point). In order to receive the redemption by check during this time period, the redemption request must be a written, Medallion signature guaranteed letter.
n	The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic economic or market conditions.

How Are Redemption Proceeds Paid?

By Wire: You may arrange for your redemption proceeds to be wired as federal funds to the domestic bank account designated in your Account Application. The following general policies govern wiring redemption proceeds:

n	Redemption proceeds will normally be wired on the next business day in federal funds (for a total of one business day delay), but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
n	Although redemption proceeds will normally be wired as described above, under certain circumstances, redemption requests or payments may be postponed or suspended as permitted pursuant to Section 22(e) of the Investment Company Act. Generally, under that section, redemption requests or payments may be

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SHAREHOLDER GUIDE

	postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by the fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC by order permits the suspension of the right of redemption.
n	If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days. If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed one additional business day.
n	To change the bank designated on your Account Application, you must send written instructions signed by an authorized person designated on the Account Application with a Medallion signature guarantee, to the Transfer Agent.
n	Neither the Trust, Goldman Sachs nor any other institution assumes any responsibility for the performance of your bank or any intermediaries in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such intermediaries.

By Check: You may elect in writing to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of a properly executed redemption request. If you are selling shares you recently paid for by check, the Fund will pay you when your check has cleared, which may take up to 15 days.

What Do I Need To Know About Redemption Fee?

The Municipal Income, California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Funds use a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

The redemption fee does not apply to transactions involving the following:

n	Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.
n	Redemptions of shares that are acquired or redeemed in connection with the participation in a systematic withdrawal program or automatic investment plan.

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n	Redemptions of shares in connection with a regularly scheduled automatic rebalancing of assets by certain mutual fund asset allocation programs.
n	Redemptions of shares maintained in omnibus accounts by the Funds’ transfer agent on behalf of trust companies and bank trust departments investing assets held in a fiduciary, agency, advisory, custodial or similar capacity and over which the trust companies and bank trust departments or other plan fiduciaries or participants (in the case of certain retirement plans) have full or shared investment discretion.
n	Total or partial redemptions of shares held: (i) through retirement plans and accounts maintained pursuant to Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended, that are maintained by the Funds’ transfer agent on an omnibus basis; and (ii) by financial institutions providing hedging services in support of non-qualified deferred compensation plans offering the Goldman Sachs Funds where Fund shares are purchased and redeemed not more often than monthly on a date or dates determined by the financial institution or plan sponsor (or administrator).
n	Redemption of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.

The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future to reflect, among other factors, regulatory requirements mandated by the SEC.

In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as operational limitations, contractual limitations and further guidance from the SEC or other regulators.

What Else Do I Need to Know About Redemptions?

The following generally applies to redemption requests:

n	Institutional Shares of each Fund earn dividends declared on the day the shares are redeemed.
n	Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received.
n	Institutions (including banks, trust companies, brokers and investment advisers) are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, these institutions may set times by which they must receive

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SHAREHOLDER GUIDE

redemption requests. These institutions may also require additional documentation from you.

The Trust reserves the right to:

n	Redeem your shares in the event an Institution’s relationship with Goldman Sachs is terminated and you do not transfer your account to another Institution with a relationship with Goldman Sachs. The Trust will not be responsible for any loss in an investor’s account resulting from a redemption.
n	Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interest of the Trust.
n	Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities.
n	Reinvest any dividends or other distributions which you have elected to receive in cash should your check for such dividends or other distributions be returned to a Fund as undeliverable or remain uncashed for six months. In addition, that distribution and all future distributions payable to you will be reinvested at the NAV on the day of reinvestment in additional Institutional Shares of the Fund that pays the distributions. No interest will accrue on amounts represented by uncashed distribution or redemption checks.

Can I Exchange My Investment From One Fund To Another?

You may exchange Institutional Shares of a Fund at NAV for Institutional Shares of another Goldman Sachs Fund. Redemption of shares (including by exchange) that are held for 30 calendar days or less may, however, be subject to a redemption fee as described above under “What Do I Need To Know About The Redemption Fee?” The exchange privilege may be materially modified or withdrawn at any time upon 60 days’ written notice to you.

Instructions For Exchanging Shares:
By Writing:	n Write a letter of instruction that includes:
	n Name(s) and signature(s)
	n Account number
	n The Fund names and Class of Shares
	n The dollar amount to be exchanged
	n Mail the request to:     Goldman Sachs Funds     71 S. Wacker Drive, Suite 500     Chicago, IL 60606
By Telephone:	If you have elected the telephone exchange privilege on your Account Application:
	n 1-800-621-2550     (8:00 a.m. to 4:00 p.m. New York time)

47

You should keep in mind the following factors when making or considering an exchange:

n	You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange.
n	All exchanges which represent an initial investment in a Fund must satisfy the minimum initial investment requirements of that Fund or the entire balance of the original Fund account should be exchanged. This requirement may be waived at the discretion of the Trust.
n	Telephone exchanges normally will be made only to an identically registered account.
n	Exchanges are available only in states where exchanges may be legally made.
n	It may be difficult to make telephone exchanges in times of drastic economic or market conditions.
n	Goldman Sachs may use reasonable procedures described under “What Do I Need To Know About Telephone Redemption Requests?” in an effort to prevent unauthorized or fraudulent telephone exchange requests.
n	Exchanges into Goldman Sachs Funds that are closed to new investors may be restricted.
n	Exchanges into a Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund.

For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. You should consult your tax adviser concerning the tax consequences of an exchange.

What Types Of Reports Will I Be Sent Regarding Investments in Institutional Shares?

You will be provided with a printed confirmation of each transaction in your account and a monthly statement. A year-to-date statement for your account will be provided upon request made to Goldman Sachs. If your account is held in a “street name” you may receive your statements and conformations on a different schedule.

You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting Goldman Sachs Funds by phone at 1-800-621-2550 or by mail at Goldman Sachs Funds, 71 S. Wacker Dr., Suite 500, Chicago, IL 60606. The Funds will begin sending individual copies to you within 30 days after receipt of your revocation.

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SHAREHOLDER GUIDE

In addition, Institutions and other financial intermediaries will be responsible for providing any communications from a Fund to its shareholders, including but not limited to prospectuses, prospectus supplements, proxy materials and notices regarding the sources of dividend payments pursuant to Section 19 of the Investment Company Act.

   RESTRICTIONS ON EXCESSIVE TRADING PRACTICES   

Policies and Procedures on Excessive Trading Practices. In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view to longer term investment purposes only that are consistent with the investment policies and practices of the respective funds. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm fund performance and result in dilution in the value of Fund shares held by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive trading or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to a Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Trust or its shareholders or would subordinate the interest of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.

To deter excessive shareholder trading, the California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal and the Municipal Income Funds described in this Prospectus, certain other Fixed Income Funds, and the International Equity Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase subject to certain exceptions. See “Shareholder Guide—What Do I Need To Know About, The Redemption Fee?” for more information about the redemption fee, including transactions and certain omnibus accounts to which the redemption fee does not apply.

Pursuant to the policy adopted by the Board of Trustees, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive.

49

Goldman Sachs reviews on a regular, periodic basis available information relating to the trading activity in the Funds in order to assess the likelihood that a Fund may be the target of excessive trading. As part of its excessive trading surveillance process, Goldman Sachs, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. Consistent with the standards described above, if, in its judgment, Goldman Sachs detects excessive, short term trading, Goldman Sachs is authorized to reject or restrict a purchase or exchange request and may further seek to close an investor’s account with a Fund. Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.

Fund shares may be held through omnibus arrangements maintained by intermediaries such as broker-dealers, investment advisers, transfer agents, administrators and insurance companies. In addition Fund shares may be held in omnibus 401(k) plans, employee benefit plans and other group accounts. Omnibus accounts include multiple investors and such accounts typically provide the Funds with a net purchase or redemption request on any given day where the purchases and redemptions of Fund shares by the investors are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are not known by the Funds. A number of these financial intermediaries may not have the capability or may not be willing to apply the Funds’ market timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, a Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts is limited. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Funds and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance.

50

Taxation

As with any investment, you should consider how your investment in the Funds will be taxed. The tax information below is provided as general information. More tax information is available in the Additional Statement. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Funds.

   DISTRIBUTIONS   

Each Fund contemplates declaring as dividends each year all or substantially all of its income. The Funds expect to distribute “exempt-interest dividends” attributable to tax-exempt interest earned by those Funds. Exempt-interest dividends are generally not subject to federal income tax, but may be subject to state or local taxes. However, investments in tax-exempt bonds can also result in the recognition of income or gain by a Fund, and thereby cause a portion of the Fund’s distributions to shareholders to be taxable. Thus, if the value of a bond appreciates while the Fund owns it (aside from the appreciation attributable to original issue discount on that bond), and the Fund then sells the bond at a gain, that gain will generally not be exempt from tax—whether or not the interest income on the bond is exempt. Gain recognized by a Fund on sales of appreciated bonds will generally be short-term or long-term capital gain depending on whether the Fund has held the bonds for more than one year, but “market discount” bonds can cause the Fund to recognize ordinary income. “Market discount” is a discount at which a bond is purchased that is attributable to a decline in the value of the bond after its original issuance. The market discount is then taken into account ratably over the bond’s remaining term to maturity, and the portion that accrues during the Fund’s holding period for the bond is generally treated as taxable ordinary income to the extent of any realized gain on the bond upon disposition or maturity. Distributions attributable to ordinary income and short-term capital gain recognized by the Funds are generally taxable as ordinary income, while distributions attributable to long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.

You should note that exempt-interest dividends paid by the Funds may be a preference item when determining your federal alternative minimum tax liability. The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds intend, however, to invest predominantly in Municipal Securities that will not generate income that is a preference item for alternative minimum tax for non-corporate shareholders. In addition, exempt-interest dividends of all of the Funds are taken into account in determining the taxable portion of social security or railroad retirement benefits. Any interest on indebtedness incurred by you to purchase or carry shares in the Funds will not be deductible for federal income tax purposes.

51

If you buy shares of a Fund before it makes a taxable distribution, the distribution will be taxable to you even though it may actually be a return of a portion of your investment. This is know as “buying into a dividend.”

   SALES AND EXCHANGES   

Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this gain or loss is long-term or short-term depending on whether your holding period exceeds twelve months, except that any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. In addition, any loss realized on shares held for six months or less will be disallowed to the extent of any exempt-interest dividends that were received on the shares.

Any loss realized on a sale, exchange or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of that Fund. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.

   CALIFORNIA AND NEW YORK TAXES   

Except as stated below, you may be subject to state and local taxes on distributions paid by the Funds and on the redemption or exchange of Fund shares.

The California Intermediate AMT-Free Municipal Fund expects to pay dividends that generally are exempt from California State personal income tax. The New York Intermediate AMT-Free Municipal Fund expects to pay dividends that generally are exempt from New York State and City personal income taxes. These exemptions will apply, however, only to the dividends that are derived from interest paid on California or New York municipal obligations, respectively, or on certain federal obligations. For these purposes California and New York municipal obligations are obligations issued by or on behalf of the State of California or the State of New York, respectively, and their respective political subdivisions, agencies, instrumentalities, and public authorities and certain issuers located outside these states such as Puerto Rico, the U.S. Virgin Islands and Guam, the interest from which is

52

TAXATION

exempt from California State personal income tax or New York State and New York City personal income taxes.

The California Intermediate AMT-Free Municipal Fund and New York Intermediate AMT-Free Municipal Fund may also invest in taxable instruments or in Municipal Securities that are not California or New York municipal obligations. The Funds’ distributions of interest from municipal obligations other than California and New York municipal obligations, as applicable, may be subject to California and New York State and New York City personal income taxes. In addition, dividends paid by the Funds may be subject to California and New York corporate franchise and corporate income taxes.

   OTHER INFORMATION   

When you open your account, you should provide your Social Security Number or tax identification number on your Account Application. By law, each Fund must withhold 28% of your taxable distributions and any redemption proceeds if you do not provide your correct taxpayer identification number, or certify that it is correct, or if the IRS instructs the Fund to do so.

Investors that are generally exempt from U.S. tax on interest income, such as IRAs, other tax advantaged accounts, tax-exempt entities and non-U.S. investors, will not gain additional benefit from the tax-exempt status of the Fund’s distributions of interest attributable to exempt bonds. Because the Funds’ pre-tax returns will tend to be lower than those of funds that own taxable bonds of comparable quality, shares of the Funds will normally not be suitable investments for those kinds of investors. Moreover, investment in the Funds by IRAs and other tax advantaged retirement accounts is especially unsuitable because subsequent distributions made from such accounts to their holders generally will be subject to tax.

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Appendix A
Additional Information on Portfolio
Risks, Securities and Techniques

   A.  General Portfolio Risks   

The Funds will be subject to the risks associated with fixed-income securities. These risks include interest rate risk, credit risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed-income securities tends to increase (although some asset-backed securities will have less potential than other debt securities for capital appreciation during periods of declining rates). Conversely, when interest rates increase, the market value of fixed-income securities tends to decline. Credit risk involves the risk that the issuer or guarantor could default on its obligations, and a Fund will not recover its investment. Call risk and extension risk are normally present in asset-backed securities. For example, debtors have the option to prepay their loans. Therefore, the duration of an asset-backed security can either shorten (call risk) or lengthen (extension risk). In general, if interest rates on new loans fall sufficiently below the interest rates on existing outstanding loans, the rate of prepayment would be expected to increase. Conversely, if loan interest rates rise above the interest rates on existing outstanding loans, the rate of prepayment would be expected to decrease. In either case, a change in the prepayment rate can result in losses to investors.

The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for a Fund. A high rate of portfolio turnover (100% or more) involves correspondingly greater expenses which must be borne by a Fund and its shareholders and is also likely to result in higher short-term capital gains taxable to shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of a Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See “Financial Highlights” in Appendix B for a statement of the Funds’ (other than the California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds) historical portfolio turnover rates.

The following sections provide further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks. Additional information is provided in the Additional Statement, which is available upon request. Among other things, the Additional Statement describes certain fundamental investment restrictions that cannot be changed

54

APPENDIX A

without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in a Fund’s investment objective, you should consider whether that Fund remains an appropriate investment in light of your then current financial position and needs.

   B.  Other Portfolio Risks   

Fundamental Policies. As a matter of fundamental policy, under normal circumstances, at least 80% of the Net Assets of the Short Duration Tax-Free, California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal, Municipal Income and High Yield Municipal Funds (measured at the time of purchase) will be invested in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes), and, in the case of the Short Duration Tax Free, California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds, is not a tax preference item under the federal alternative minimum tax. In addition, as a matter of fundamental policy, at least 80% of the California Intermediate AMT-Free Municipal Fund’s and New York Intermediate AMT-Free Municipal Fund’s Net Assets (measured at the time of purchase) will be invested, under normal circumstances, in instruments that pay income which is exempt from California State personal income tax and New York State and City personal income taxes, respectively.

Risks of Investing in California and New York: The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds concentrate their investments in California and New York municipal obligations, respectively. Consequently, they are more susceptible to factors adversely affecting issuers of California and New York municipal obligations, and may be riskier than comparable municipal bond funds and money market funds that do not emphasize these issuers to this degree.

The California Intermediate AMT-Free Municipal Fund’s investments will be affected by political and economic developments within the State of California (“California”), and by the financial condition of California’s public authorities and political subdivisions. As of the end of 2005, California’s economy was recovering from a recession, with moderate growth predicted to mirror the national economy. The early 2000’s recession and stock market drop created State budget gaps as high as $38 billion, and a large budget deficit. Part of this deficit has been funded with the issuance of $11 billion of a total of $15 billion of sales-tax backed general obligation bonds approved by the voters in March 2004. However, the State

55

still faces a multi-billion dollar structural budget gap which must be addressed in future years. California voters in the past have approved amendments to the California Constitution and other measures that limit the taxing and spending authority of California government entities, and future initiatives could result in adverse consequences affecting California municipal obligations. In part as a result of such initiatives, both the state and local governments in California face fiscal difficulties in varying degrees.

These factors, among others (including the outcome of related pending litigation), could reduce the credit standing of certain issuers of California municipal obligations. A more detailed discussion of the risks of investing in California is included in the Additional Statement.

The New York Intermediate AMT-Free Municipal Fund’s investments will 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”). Certain substantial issuers of New York municipal obligations (including issuers whose obligations may be acquired by the Fund) have, at times, experienced serious financial difficulties. The default or credit rating downgrade of one of these issuers could affect the market values and marketability of all New York municipal obligations and hurt the Fund’s investment performance. However, strong demand for New York municipal obligations has also at times had the effect of permitting New York municipal obligations 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 issuers of New York municipal obligations could result in defaults or declines in the market values of those issuers’ existing obligations and, possibly, in the obligations of other issuers of New York municipal obligations. Although as of the date of this Prospectus, no issuers were in default with respect to the payment of their New York municipal obligations, the occurrence of any such default could materially affect adversely the market values and marketability of all New York municipal obligations and, consequently, the value of the Fund’s holdings. A more detailed discussion of the risks of investing in New York is included in the Additional Statement.

If California, New York, or any of their local governmental entities are unable to meet their financial obligations, the corresponding Fund’s income, NAV, ability to preserve or realize appreciation of capital or liquidity could be adversely affected. Also, neither of these Funds is a diversified fund under the Act (except to the extent that diversification is required for federal income tax purposes). Because they may invest a larger percentage of their assets in the securities of fewer issuers

56

APPENDIX A

than do diversified funds, these Funds 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.

In addition to the risk of nonpayment of California or New York municipal obligations, if any of these obligations decline in quality and are downgraded by an NRSRO, they may become ineligible for purchase by the Funds. Since there are large numbers of buyers of these instruments, the supply of California or New York municipal obligations that are eligible for purchase by the Funds could become inadequate at certain times.

Credit/Default Risks. Debt securities purchased by the Funds may include securities (including zero coupon bonds) issued by the U.S. government (and its agencies, instrumentalities and sponsored enterprises), state and municipal governmental entities, corporations, banks and other issuers. Some of these fixed-income securities are described in the next section below. Further information is provided in the Additional Statement.

Debt securities rated BBB- or higher by Standard & Poor’s Rating Group (“Standard & Poor’s”), or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB- or Baa3 are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is determined by the Investment Adviser to be of comparable credit quality. If a security satisfies a Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of the security, is in the best interests of a Fund and its shareholders.

The High Yield Municipal Fund may invest in fixed-income securities rated BB or Ba or below (or comparable unrated securities) which are commonly referred to as “junk bonds.” Junk bonds are considered predominantly speculative and may be questionable as to principal and interest payments.

In some cases, junk bonds may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will present greater speculative risks than those associated with

57

investment in investment grade bonds. Also, to the extent that the rating assigned to a security in a Fund’s portfolio is downgraded by a rating organization, the market price and liquidity of such security may be adversely affected.

Risks of Derivative Investments. A Fund’s transactions in options, futures, options on futures, swaps, interest rate caps, floors and collars, structured securities and inverse floating-rate securities involve additional risk of loss. A Fund may enter into a derivative investment for hedging purposes, for example in an effort to preserve a return or spread, protect against adverse price movements, manage portfolio duration or manage a Fund’s credit exposure. Even so, loss can result from a lack of correlation between changes in the value of derivative investments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative investments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices, interest rates or credit events.

In addition, each Fund may invest in derivative investments for non-hedging purposes (that is, to seek to increase total return) in connection with the management of the Fund, including the management of the Fund’s interest rate, duration and credit exposures. Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss. Particular derivative securities may be leveraged such that their exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is magnified.

Some floating-rate derivative debt securities can present more complex types of derivative and interest rate risks. For example, range floaters are subject to the risk that the coupon will be reduced below market rates if a designated interest rate floats outside of a specified interest rate band or collar. Dual index or yield curve floaters are subject to lower prices in the event of an unfavorable change in the spread between two designated interest rates.

Risks of Illiquid Securities. Each Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities include:

n	Domestic securities that are not readily marketable
n	Certain municipal leases and participation interests
n	Repurchase agreements and time deposits with a notice or demand period of more than seven days
n	Certain over-the-counter options
n	Certain structured securities and all swap transactions

58

APPENDIX A

n Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called “4(2) commercial paper” or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (“144A Securities”).

Investing in 144A Securities may decrease the liquidity of a Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:

n	U.S. Government Securities
n	Repurchase agreements collateralized by U.S. Government Securities

The Funds may invest more than 20% of their respective Net Assets in taxable investments and, with respect to the High Yield Municipal Fund, in high grade securities under unusual conditions. When a Fund’s assets are invested in such instruments, the Fund may not be achieving its investive objective.

   C.  Portfolio Securities and Techniques   

This section provides further information on certain types of securities and investment techniques that may be used by the Funds, including their associated risks.

The Funds may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Fund’s investment objective and policies. Further information is provided in the Additional Statement, which is available upon request.

Municipal Securities. The Funds may invest in securities and instruments issued by state and local government issuers. Municipal Securities in which a Fund may invest consist of bonds, notes, commercial paper and other instruments (including participation interests in such securities) issued by or on behalf of the states, territories and possessions of the United States (including the District of Columbia) and their political subdivisions, agencies or instrumentalities. The interest on tax-free Municipal Securities will normally be exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes but not necessarily exempt from federal alternative minimum tax or from state or local

59

taxes). Because of their tax-exempt status, the yields and market values of Municipal Securities may be more adversely impacted by changes in tax rates and policies than taxable fixed-income securities.

Municipal Securities include both “general” obligation and “revenue” bonds and may be issued to obtain funds for various purposes. General obligations are secured by the issuer’s pledge of its full faith, credit and taxing power. Revenue obligations are payable only from the revenues derived from a particular facility or class of facilities.

Municipal Securities are often issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Municipal Securities include private activity bonds, pre-refunded municipal securities and auction rate securities.

The obligations of the issuer to pay the principal of and interest on a Municipal Security are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest or imposing other constraints upon the enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power or ability of the issuer to pay when due the principal of or interest on a Municipal Security may be materially affected.

In addition, Municipal Securities include municipal leases, certificates of participation and “moral obligation” bonds. A municipal lease is an obligation issued by a state or local government to acquire equipment or facilities. Certificates of participation represent interests in municipal leases or other instruments, such as installment purchase agreements. Moral obligation bonds are supported by a moral commitment but not a legal obligation of a state or local government. Municipal leases, certificates of participation and moral obligation bonds frequently involve special risks not normally associated with general obligation or revenue bonds. In particular, these instruments permit governmental issuers to acquire property and equipment without meeting constitutional and statutory requirements for the issuance of debt. If, however, the governmental issuer does not periodically appropriate money to enable it to meet its payment obligations under these instruments, it cannot be legally compelled to do so. If a default occurs, it is likely that a Fund would be unable to obtain another acceptable source of payment. Some municipal leases, certificates of participation and moral obligation bonds may be illiquid.

60

APPENDIX A

Municipal Securities may also be in the form of a tender option bond, which is a Municipal Security (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 with the agreement of a third party, such as a bank, broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities to the institution. After payment of a fee to the financial institution that provides this option, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. An institution may 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 Fund’s duration. There is risk that a Fund 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. Certain tender option bonds may be illiquid.

Municipal Securities may be backed by letters of credit or other forms of credit enhancement issued by domestic or foreign banks 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 Securities. Letters of credit and other obligations of foreign banks and financial institutions 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 are generally not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks.

The Funds may invest 25% or more of the value of their respective total assets in Municipal Securities which are related in such a way that an economic, business or political development or change affecting one Municipal Security would also affect the other Municipal Security. For example, a Fund may invest all of its assets in (a) Municipal Securities 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 Securities whose issuers are in the same state; or (c) industrial development obligations. Concentration of a Fund’s investments in these Municipal Securities will subject the Fund, to a greater extent than if such investment was not so concentrated, to the risks of adverse economic, business or political developments affecting the particular state, industry or other area of concentration. On October 31, 2005, the High Yield Municipal Fund had invested

61

more than 25% of its assets in Municipal Securities of issuers located in Florida. Florida’s economy is influenced by numerous factors including transfer payments from the Federal government (social security benefits, pension benefits, etc.), population growth, interest rates, hurricane activity and business cycles affecting various major industries, including tourism, agriculture, construction and manufacturing. In addition, Florida is highly dependent upon sales and use taxes, which account for the majority of its General Fund revenues. The Florida Constitution does not permit a state or local personal income tax. The Florida Constitution may limit the State’s ability to raise revenues and may have an adverse effect on the State’s finances and political subdivisions. From time to time Florida and its political subdivisions have encountered financial difficulties. If these difficulties recur in the future, the value of the High Yield Municipal Fund could be adversely affected.

In purchasing Municipal Securities, each Fund intends to rely on opinions of bond counsel or counsel to the issuers for each issue as to the excludability of interest on such obligations from gross income for federal income tax purposes. A Fund will not undertake independent investigations concerning the tax-exempt status of such obligations, nor does it guarantee or represent that bond counsels’ opinions are correct. Bond counsels’ opinions will generally be based in part upon covenants by the issuers and related parties regarding continuing compliance with federal tax requirements. Tax laws contain numerous and complex requirements that must be satisfied on a continuing basis in order for bonds to be and remain tax-exempt. If the issuer of a bond or a user of a bond-financed facility fails to comply with such requirements at any time, interest on the bond could become taxable, retroactive to the date the obligation was issued. In that event, a portion of a Fund’s distributions attributable to interest the Fund received on such bond for the current year and for prior years could be characterized or recharacterized as taxable income.

U.S. Government Securities. Each Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (a) the full faith and credit of the U.S. Treasury; (b) the right of the issuer to borrow from the U.S. Treasury; (c) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (d) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components of stripped U.S. Government Securities are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation.

62

APPENDIX A

Custodial Receipts and Trust Certificates. Each Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities, Municipal Securities or other types of securities in which a Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes a Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. Each Fund may also invest in separately issued interests in custodial receipts and trust certificates.

Asset-Backed Securities. Each Fund may invest in asset-backed securities. Asset-backed securities are securities whose principal and interest payments are collateralized by pools of assets such as auto loans, credit card receivables, leases, installment contracts and personal property. Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, a Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. If the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that a Fund’s recoveries on repossessed collateral may not be available to support payments on the securities. In the event of a default, a Fund may suffer a loss if it cannot sell collateral quickly and receive the amount it is owed.

Corporate Debt Obligations; Trust Preferred Securities; Convertible Securities. The Funds may invest in corporate debt obligations, trust preferred securities and convertible securities. Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. A trust preferred security is a long dated bond (for example, 30 years) with preferred features. The preferred features are that payment of interest can be deferred for a specified period without initiating a default event. The securities are

63

generally senior in claim to standard preferred stock but junior to other bondholders. The Funds may also invest in other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities.

Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which a Fund invests are subject to the same rating criteria as its other investments in fixed-income securities. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.

Structured Securities and Inverse Floaters. The Funds may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may present a greater degree of market risk than many types of securities, and may be more volatile, less liquid and more difficult to price accurately than less complex securities.

Structured securities include, but are not limited to, inverse floating rate debt securities (“inverse floaters”). The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value.

64

APPENDIX A

Floating and Variable Rate Obligations. Each Fund may purchase floating and variable rate obligations. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels. 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. 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 interests in a pool of debt obligations held by a bank or other financial institutions.

Zero Coupon, Deferred Interest, Pay-In-Kind and Capital Appreciation Bonds. Each Fund may invest in zero coupon bonds, deferred interest, pay-in-kind and capital appreciation bonds. These bonds are issued at a discount from their face value because interest payments are typically postponed until maturity. Pay-in-kind securities are securities that have interest payable by the delivery of additional securities. The market prices of these securities generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit quality.

Options on Securities and Securities Indices. A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller) of the option the obligation to sell, the underlying instrument during the option period. Each Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest.

The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities markets. If the Investment Adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase a Fund’s transaction costs. Options written or purchased by the Funds may be

65

traded on either U.S. exchanges or over-the-counter. Over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.

Yield Curve Options. Each Fund may enter into options on the yield “spread” or differential between two securities. Such transactions are referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, such options present a risk of loss even if the yield of one of the underlying securities remains constant, or if the spread moves in a direction or to an extent which was not anticipated.

Futures Contracts and Options on Futures Contracts. Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A futures contract may be based on particular securities, securities indices and other financial instruments and indices. The Funds may engage in futures transactions on U.S. exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts, in order to seek to increase total return or to hedge against changes in interest rates, securities prices or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Pool Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

Futures contracts and related options present the following risks:

n While a Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance than if the Fund had not entered into any futures contracts or options transactions.

66

APPENDIX A

n	Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and a Fund may be exposed to additional risk of loss.
n	The loss incurred by a Fund in entering into futures contracts and in writing call options on futures is potentially unlimited and may exceed the amount of the premium received.
n	Futures markets are highly volatile and the use of futures may increase the volatility of a Fund’s NAV.
n	As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to a Fund.
n	Futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.

When-Issued Securities and Forward Commitments. 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 settlement time. When-issued securities are securities that have been authorized, but not yet issued. When-issued securities are purchased in order to secure what is considered to be an advantageous price or yield to the Fund at the time of entering into the transaction. A forward commitment involves entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, a Fund may dispose of when-issued securities or forward commitments prior to settlement if the Investment Adviser deems it appropriate.

Lending of Portfolio Securities. Each Fund may engage in securities lending. Securities lending involves the lending of securities owned by a Fund to financial institutions such as certain broker-dealers, including, as permitted by the SEC, Goldman Sachs. The borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. Government Securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by a Fund in short-term investments, including unregistered investment pools managed by the Investment Adviser or its affiliates and from which the Investment Adviser or its affiliates may receive fees. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or

67

appreciation, and a Fund will be responsible for any loss that might result from its investment of the borrowers’ collateral. If the Investment Adviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of a Fund (including the loan collateral). Loan collateral (including any investment of that collateral) is not subject to the percentage limitations described elsewhere in this Prospectus regarding investments in particular types of fixed-income and other securities.

A Fund may lend its securities to increase its income. A Fund may, however, experience delay in the recovery of its securities or incur a loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund or becomes insolvent.

Repurchase Agreements. Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. Each Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation.

If the other party or “seller” defaults, a Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, a Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.

Certain Funds, together with other registered investment companies having advisory agreements with the Investment 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.

Borrowings and Reverse Repurchase Agreements. Each Fund can borrow money from banks and other financial institutions, and certain Funds may enter into reverse repurchase agreements in amounts not exceeding one-third of a Fund’s total assets. A Fund may not make additional investments if borrowings exceed 5% of its total assets. Reverse repurchase agreements involve the sale of securities held by a Fund subject to the Fund’s agreement to repurchase them at a mutually agreed upon date and price (including interest). These transactions may be entered into as a temporary measure for emergency purposes or to meet redemption requests. Reverse repurchase agreements may also be entered into when the Investment Adviser expects that the interest income to be earned from the investment of the transaction proceeds will be greater than the related interest expense. Borrowings and reverse repurchase agreements involve leveraging. If the securities held by a

68

APPENDIX A

Fund decline in value while these transactions are outstanding, the NAV of the Fund’s outstanding shares will decline in value by proportionately more than the decline in value of the securities. In addition, reverse repurchase agreements involve the risk that the investment return earned by a Fund (from the investment of the proceeds) will be less than the interest expense of the transaction, that the market value of the securities sold by a Fund will decline below the price the Fund is obligated to pay to repurchase the securities, and that the securities may not be returned to the Fund.

Interest Rate Swaps, Credit Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses on an underlying security. Credit swaps give one party to a transaction (the buyer of the credit swap) the right to dispose of or acquire an asset (or group of assets), or the right to receive a payment from the other party, upon the occurrence of specified credit events. Total return swaps give a Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset in a total return swap declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty. The Funds may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.

Each Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As an example, when a Fund is the buyer of a credit default swap (commonly known as buying protection), it may make periodic payments to the seller of the credit default swap to obtain protection against a credit default on

69

a specified underlying asset (or group of assets). If a default occurs, the seller of the credit default swap may be required to pay the Fund the “notional value” of the credit default swap on a specified security (or group of securities). On the other hand, when a Fund is a seller of a credit default swap (commonly known as selling protection), in addition to the credit exposure the Fund has on the other assets held in its portfolio, the Fund is also subject to the credit exposure on the notional amount of the swap since, in the event of a credit default, the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) to the buyer of the credit default swap. A Fund will be the seller of a credit default swap only when the credit of the underlying asset is deemed by the Investment Adviser to meet the Fund’s minimum credit criteria at the time the swap is first entered into. The use of interest rate, credit and total return swaps, options on swaps, and interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Investment Adviser is incorrect in its forecasts of market values and interest rates or in its evaluation of the creditworthiness of swap counterparties and the issuers of the underlying assets, the investment performance of a Fund would be less favorable than it would have been if these investment techniques were not used.

Other Investment Companies. Each Fund may invest in securities of other investment companies subject to statutory limitations prescribed by the Investment Company Act. These limitations include a prohibition on any Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a Fund’s total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund. Pursuant to an exemptive order obtained from the SEC, other investment companies in which a Fund may invest include money market funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.

Non-Investment Grade Fixed-Income Securities. Non-investment grade fixed-income securities and unrated securities of comparable credit quality (commonly known as “junk bonds”) are considered predominantly speculative by traditional investment standards. In some cases, these obligations may be highly speculative and have poor prospects for reaching investment grade standing. Non-investment grade fixed-income securities are subject to the increased risk of an issuer’s

70

APPENDIX A

inability to meet principal and interest obligations. These securities, also referred to as high yield securities, may be subject to greater price volatility due to such factors as specific corporate or municipal developments, interest rate sensitivity, negative perceptions of the junk bond markets generally and less secondary market liquidity. Non-investment grade securities are issued by state, city, or local municipalities that may have difficulty in making all scheduled interest and principal payments.

The market value of non-investment grade fixed-income securities tends to reflect individual corporate or municipal developments to a greater extent than that of higher rated securities which react primarily to fluctuations in the general level of interest rates. As a result, a Fund’s ability to achieve its investment objectives may depend to a greater extent on the Investment Adviser’s judgment concerning the creditworthiness of issuers than funds which invest in higher-rated securities. Issuers of non-investment grade fixed-income securities may not be able to make use of more traditional methods of financing and their ability to service debt obligations may be affected more adversely than issuers of higher-rated securities by economic downturns, specific corporate or financial developments or the issuer’s inability to meet specific projected business forecasts. Negative publicity about the junk bond market and investor perceptions regarding lower rated securities, whether or not based on fundamental analysis, may depress the prices for such securities.

A holder’s risk of loss from default is significantly greater for non-investment grade fixed-income securities than is the case for holders of other debt securities because such non-investment grade securities are generally unsecured and are often subordinated to the rights of other creditors of the issuers of such securities. Investment by a Fund in defaulted securities poses additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by a Fund of its initial investment and any anticipated income or appreciation is uncertain.

The secondary market for non-investment grade fixed-income securities is concentrated in relatively few market makers and is dominated by institutional investors, including mutual funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as, and is more volatile than, the secondary market for higher-rated securities. In addition, market trading volume for high yield fixed-income securities is generally lower and the secondary market for such securities could shrink or disappear suddenly and without warning as a result of adverse market or economic conditions, independent of any specific adverse changes in the condition of a particular issuer. Because of the lack of sufficient market liquidity, a Fund may incur losses because it will be required to effect sales at a disadvantageous time

71

and then only at a substantial drop in price. These factors may have an adverse effect on the market price and a Fund’s ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for a Fund to obtain precise valuations of the high yield securities in its portfolio.

Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of non-investment grade securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the conditions of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality.

72

Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund’s financial performance for the past five years (or less if the Fund has been in operation for less than five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a Fund (assuming reinvestment of all dividends and distributions). The information has been audited by Ernst & Young, LLP, whose report, along with the Funds’ financial statements, is included in the Funds’ annual report (available upon request without charge). There are no financial highlights for the California Intermediate AMT-Free Municipal Fund and the New York Intermediate AMT-Free Municipal Fund because the fund commenced operations on November 1, 2005.

SHORT DURATION TAX-FREE FUND

		Short Duration Tax-Free Fund—Institutional Shares
		Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	10.39		$	10.44		$	10.36		$	10.25		$	9.94
Income (loss) from investment operations
Net investment incomea			0.28			0.23			0.21			0.31	c		0.42
Net realized and unrealized gain (loss)			(0.19	)		(0.05	)		0.09			0.12	c		0.32
	Total from investment operations		0.09			0.18			0.30			0.43			0.74
Distributions to shareholders
From net investment income			(0.29	)		(0.23	)		(0.22	)		(0.32	)		(0.43	)
Net asset value, end of year		$	10.19		$	10.39		$	10.44		$	10.36		$	10.25
Total returnb			0.86	%		1.75	%		2.93	%		4.23	%		7.60	%
Net assets at end of period (in 000s)		$	308,255		$	409,228		$	438,884		$	103,273		$	48,114
Ratio of net expenses to average net assets			0.39	%		0.39	%		0.40	%		0.39	%		0.39	%
Ratio of net investment income to average net assets			2.77	%		2.20	%		1.99	%		3.00	%c		4.19	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.52	%		0.50	%		0.52	%		0.62	%		0.85	%
Ratio of net investment income to average net assets			2.64	%		2.09	%		1.87	%		2.77	% c		3.73	%
Portfolio turnover rate			46	%		37	%		43	%		31	%		69	%

See page 76 for all footnotes.

73

MUNICIPAL INCOME FUND

		Municipal Income Fund— Institutional Shares
		For the Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, beginning of year		$	15.67		$	15.40		$	15.29		$	15.32		$	14.48
Income (loss) from investment operations
Net investment incomea			0.70			0.72			0.71			0.71	c		0.73
Net realized and unrealized gain (loss)			(0.08	)		0.26			0.11			(0.01	) c		0.82
	Total from investment operations		0.62			0.98			0.82			0.70			1.55
Distributions to shareholders
From net investment income			(0.70	)		(0.71	)		(0.71	)		(0.73	)		(0.71	)
Net asset value, end of year		$	15.59		$	15.67		$	15.40		$	15.29		$	15.32
Total returnb			4.02	%		6.52	%		5.45	%		4.71	%		10.91	%
Net assets at end of period (in 000s)		$	128,311		$	60,506		$	57,696		$	76,733		$	100,970
Ratio of net expenses to average net assets			0.54	%		0.54	%		0.55	%		0.54	%		0.54	%
Ratio of net investment income to average net assets			4.37	%		4.61	%		4.58	%		4.69	% c		4.86	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.70	%		0.72	%		0.73	%		0.71	%		0.78	%
Ratio of net investment income to average net assets			4.21	%		4.43	%		4.40	%		4.52	% c		4.62	%
Portfolio turnover rate			38	%		32	%		54	%		39	%		22	%

See page 76 for all footnotes.

74

APPENDIX B

HIGH YIELD MUNICIPAL FUND

		High Yield Municipal Bond Fund— Institutional Shares
		For the Years Ended October 31,
		2005			2004			2003			2002			2001
Net asset value, at beginning of year		$	10.91		$	10.66		$	10.34		$	10.57		$	10.18
Income (loss) from investment operations
Net investment incomea			0.59			0.59			0.59			0.61	c		0.64
Net realized and unrealized gain (loss)			0.19			0.23			0.32			(0.19	) c		0.40
	Total from investment operations		0.78			0.82			0.91			0.42			1.04
Distributions to shareholders
From net investment income			(0.58	)		(0.57	)		(0.59	)		(0.62	)		(0.65	)
From net realized gains			—			—			—			(0.03	)		—
	Total distributions		(0.58	)		(0.57	)		(0.59	)		(0.65	)		(0.65	)
Net asset value, end of year		$	11.11		$	10.91		$	10.66		$	10.34		$	10.57
Total returnb			7.31	%		7.93	%		9.02	%		4.07	%		10.48	%
Net assets at end of period (in 000s)		$	2,540,339		$	1,505,390		$	934,382		$	470,905		$	277,301
Ratio of net expenses to average net assets			0.58	%		0.59	%		0.60	%		0.59	%		0.59	%
Ratio of net investment income to average net assets			5.16	%		5.44	%		5.64	%		5.84	%c		6.09	%
Ratios assuming no expense reductions
Ratio of total expenses to average net assets			0.60	%		0.61	%		0.63	%		0.64	%		0.68	%
Ratio of net investment income to average net assets			5.14	%		5.42	%		5.61	%		5.79	%c		6.00	%
Portfolio turnover rate			28	%		41	%		54	%		52	%		61	%

See page 76 for all footnotes.

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Footnotes:

a	Calculated based on the average shares outstanding methodology.
b	Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales charge. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.
c	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premium and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was an impact of less than $0.01 per share to net investment income and net realized and unrealized gains and losses, and an impact to the ratio of net investment income to average net assets with and without expense reductions by less than 0.01% for the Short Duration Tax-Free and Municipal Income Funds and 0.04% for the High Yield Municipal Fund. Per share amounts, ratios and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in presentation.

76

Index

1 General Investment Management Approach
5 Fund Investment Objectives and Strategies
5	Goldman Sachs Short Duration Tax-Free Fund
7	Goldman Sachs California Intermediate AMT-Free Municipal Fund
9	Goldman Sachs New York Intermediate AMT-Free Municipal Fund
11	Goldman Sachs Municipal Income Fund
12	Goldman Sachs High Yield Municipal Fund
14 Other Investment Practices and Securities
16 Principal Risks of the Funds
20 Fund Performance
24 Fund Fees and Expenses
28 Service Providers
35 Dividends
36 Shareholder Guide
36	How to Buy Shares
43	How to Sell Shares
51 Taxation
54 Appendix A      Additional Information on      Portfolio Risks, Securities      and Techniques
73 Appendix B      Financial Highlights

Fixed Income Funds
Prospectus (Institutional Shares)

   FOR MORE INFORMATION   

Annual/Semi-annual Report

Additional information about the Funds’ investments is available in the Funds’ annual and semi-annual reports to shareholders. In the Funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds’ performance during the last fiscal year. The California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds commenced operations on November 1, 2005. The semi-annual report for the fiscal period ending April 30, 2006 will become available to shareholders in June 2006. The annual report for the fiscal year ending October 31, 2006 will become available to shareholders in December 2006.

Statement of Additional Information

Additional information about the Funds and their policies is also available in the Funds’ Additional Statement. The Additional Statement is incorporated by reference into this Prospectus (is legally considered part of this Prospectus).

The Funds’ annual and semi-annual reports, and the Additional Statement, are available free upon request by calling Goldman Sachs at 1-800-621-2550. You can also access and download the annual and semi-annual reports and the Additional Statement at the Funds’ website: http://www.gs.com/funds.

To obtain other information and for shareholder inquiries:

n By telephone:	1-800-621-2550
n By mail:	Goldman Sachs Funds 71 S. Wacker Dr., Suite 500 Chicago, IL 60606
n By e-mail:	gs-funds@gs.com
n On the Internet:	SEC EDGAR database – http://www.sec.gov Goldman Sachs – http://www.gs.com/funds

You may review and obtain copies of Fund documents (including the Additional Statement) by visiting the SEC’s public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-0102 or by electronic request to: publicinfo@sec.gov. Information on the operation of the public reference room may be obtained by calling the SEC at (202) 942-8090.

The Funds’ investment company registration number is 811-5349.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

FIPROMUNIINST

EX-99.17.K

GOLDMAN SACHS TRUST (the “Trust”)

GOLDMAN SACHS

MUNICIPAL FIXED INCOME FUNDS

Institutional Shares of

Goldman Sachs California Intermediate AMT-Free Municipal Fund

Goldman Sachs New York Intermediate AMT-Free Municipal Fund

Goldman Sachs Municipal Income Fund

Supplement dated December 13, 2006 to the

Prospectus dated February 28, 2006

Effective December 13, 2006, the California Intermediate AMT-Free Municipal Fund’s and New York Intermediate AMT-Free Municipal Fund’s weighted average credit quality will be a minimum of AA/ A+. As a result, the following replaces the tabular information regarding each Fund’s weighted average credit quality in the section of the Prospectus titled “Fund Investment Objectives and Strategies — Fund Facts:”

Credit Quality:  Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Weighted Average: AA/ A+ or better

Effective December 13, 2006, the Municipal Income Fund’s weighted average credit quality will be a minimum of A. As a result, the following replaces the tabular information regarding the Fund’s weighted average credit quality in the section of the Prospectus titled “Fund Investment Objectives and Strategies — Fund Facts:”

Credit Quality:  Minimum = BBB or Baa by a NRSRO at the time of purchase or, if unrated, determined by the Investment Adviser to be of comparable quality
Weighted Average: A or better

MUNFISTKI 12-06 EX-99.17.L 20 e27325exv99w17wl.htm EX-99.17.L: SUPPLEMENT

Goldman Sachs Trust (the “Trust”)

Goldman Sachs Municipal Fixed Income Funds

Class A, B, C, Service and Institutional Shares of

Goldman Sachs Municipal Income Fund

Goldman Sachs High Yield Municipal Fund

Class A, C and Institutional Shares of

Goldman Sachs California Intermediate AMT-Free Municipal Fund

Goldman Sachs New York Intermediate AMT-Free Municipal Fund

Supplement dated September 8, 2006 to the

Prospectuses dated February 28, 2006

     Effective November 10, 2006, the High Yield Municipal Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 60 calendar days or less. Prior to this date, no redemption fee was imposed on the redemption of shares. In addition, the Trust is amending certain exceptions to its redemption fee. Accordingly, effective November 10, 2006, the section “What Do I Need To Know About the Redemption Fee?” in the Shareholder Guide of the Prospectuses is hereby replaced by the following:

     The California Intermediate AMT-Free Municipal Fund, New York Intermediate AMT-Free Municipal Fund and Municipal Income Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. The High Yield Municipal Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 60 calendar days or less. For this purpose, the Funds use a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. The redemption fee will be paid to the Fund from which the redemption is made, and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of a Fund. The redemption fee may be collected by deduction from the redemption proceeds or, if assessed after the redemption transaction, through a separate billing.

     The redemption fee does not apply to transactions involving the following:

•  Redemptions of shares acquired by reinvestment of dividends or capital gains distributions.

•  Redemptions of shares that are acquired or redeemed in connection with participation in a systematic withdrawal program or automatic investment plan.

•  Redemptions of shares by other Goldman Sachs Funds (e.g., Goldman Sachs Asset Allocation Portfolios).

•  Redemptions of shares held through discretionary wrap programs or models programs that utilize regularly scheduled automatic rebalancing of assets and that have provided Goldman Sachs Asset Management, L.P. with a representation letter specifying certain operating policies and standards.

•  Redemptions of shares involving transactions other than participant initiated exchanges from retirement plans and accounts maintained pursuant to

Section 401 (tax-qualified pension, profit sharing, 401(k), money purchase and stock bonus plans), 403 (qualified annuity plans and tax-sheltered annuities) and 457 (deferred compensation plans for employees of tax-exempt entities or governments) of the Internal Revenue Code of 1986, as amended. Redemptions involving transactions other than participant initiated exchanges would include, for example: loans; required minimum distributions; rollovers; forfeiture; redemptions of shares to pay fees; plan level redemptions or exchanges; redemptions pursuant to systematic withdrawal programs; return of excess contribution amounts; hardship withdrawals; redemptions related to death, disability or qualified domestic relations order; and certain other transactions.

•  Redemptions of shares from accounts of financial institutions in connection with hedging services provided in support of nonqualified deferred compensation plans offering the Goldman Sachs Funds.

•  Redemption of shares where the Funds are made available as an underlying investment in certain group annuity contracts.

•  Redemption of shares that are issued as part of an investment company reorganization to which a Goldman Sachs Fund is a party.

     The Trust reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days’ prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future.

     In addition to the circumstances noted above, the Trust reserves the right to grant additional exceptions based on such factors as system limitations, operational limitations, contractual limitations and further guidance from the SEC or other regulators.

     If your shares are held through a financial intermediary in an omnibus or other group account, the Trust relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. The application of redemption fees and exceptions may vary and certain intermediaries may not apply the exceptions listed above. If you invest through a financial intermediary, please contact your intermediary for more information regarding when redemption fees will be applied to the redemption of your shares.

     In addition, effective November 10, 2006, the second sentence under “Can I Exchange My Investment From One Fund to Another?” in the Shareholder Guide is revised as follows:

Redemption of shares (including by exchange) of the California Intermediate AMT-Free Municipal Fund, New York Intermediate AMT-Free Municipal Fund and Municipal Income Fund that are held for 30 calendar days or less and redemption of shares (including by exchange) of the High Yield Municipal Fund that are held for 60 calendar days or less may however, be subject to a redemption fee as described above under “What Do I Need To Know About The Redemption Fee?”

2

     Furthermore, effective November 10, 2006, the first sentence of the second full paragraph under “Restrictions on Excessive Trading Practices — Policies and Procedures on Excessive Trading Practices” in the Shareholder Guide is revised as follows:

To deter excessive shareholder trading, the California Intermediate AMT-Free Municipal Fund, New York Intermediate AMT-Free Municipal Fund, Municipal Income Fund and High Yield Municipal Fund described in this Prospectus, certain other Fixed Income Funds and the International Equity Funds (which are offered in separate prospectuses) impose a redemption fee on redemptions made within 30 calendar days of purchase (60 calendar days of purchase with respect to the High Yield Municipal Fund and High Yield Fund) subject to certain exceptions.

     In addition, effective November 10, 2006, the word “None” in the line item “Redemption Fees” in the tables under “Fund Fees and Expenses” for the High Yield Municipal Fund is replaced with “2.00%” and the footnote relating to “Redemption Fees” in the tables under “Fund Fees and Expenses” is revised as follows:

A 2% redemption fee will be imposed on the redemption of shares (including by exchange) held for 30 calendar days or less with respect to the California Intermediate AMT-Free Municipal Fund, New York Intermediate AMT-Free Municipal Fund and Municipal Income Fund and 60 calendar days or less with respect to the High Yield Municipal Fund.

3

FIMUNISTCK 9-06

537921

EX-99.17.L

EX-99.17.L

EX-99.17.M

PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 29, 2006 AS AMENDED JANUARY 8, 2007

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
SERVICE SHARES
INSTITUTIONAL SHARES

GOLDMAN SACHS BALANCED FUND
GOLDMAN SACHS GROWTH AND INCOME FUND
GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND
GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND
GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND
GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND
GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND
GOLDMAN SACHS CAPITAL GROWTH FUND
GOLDMAN SACHS STRATEGIC GROWTH FUND
GOLDMAN SACHS GROWTH OPPORTUNITIES FUND
GOLDMAN SACHS SMALL/MID CAP GROWTH FUND
GOLDMAN SACHS MID CAP VALUE FUND
GOLDMAN SACHS SMALL CAP VALUE FUND
GOLDMAN SACHS LARGE CAP VALUE FUND
GOLDMAN SACHS CONCENTRATED INTERNATIONAL EQUITY FUND
GOLDMAN SACHS JAPANESE EQUITY FUND
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
GOLDMAN SACHS ASIA EQUITY FUND
GOLDMAN SACHS BRIC FUND (BRAZIL, RUSSIA, INDIA, CHINA)
GOLDMAN SACHS CONCENTRATED GROWTH FUND

(Equity Portfolios of Goldman Sachs Trust)

71 South Wacker Drive
Suite 500
Chicago, Illinois 60606

     This Statement of Additional Information (the “Additional Statement”) is not a Prospectus. This Additional Statement should be read in conjunction with the Prospectuses for the Class A Shares, Class B Shares, Class C Shares, Service Shares and Institutional Shares of: Goldman Sachs Balanced Fund, Goldman Sachs Growth and Income Fund, Goldman Sachs Structured Large Cap Value Fund, Goldman Sachs Structured U.S. Equity Fund, Goldman Sachs Structured Large Cap Growth Fund, Goldman Sachs Structured Small Cap Equity Fund, Goldman Sachs Structured International Equity Fund, Goldman Sachs Capital Growth Fund,

Goldman Sachs Strategic Growth Fund, Goldman Sachs Growth Opportunities Fund, Goldman Sachs Small/Mid Cap Growth Fund, Goldman Sachs Mid Cap Value Fund, Goldman Sachs Small Cap Value Fund, Goldman Sachs Large Cap Value Fund, Goldman Sachs Concentrated International Equity Fund, Goldman Sachs Japanese Equity Fund, Goldman Sachs International Small Cap Fund, Goldman Sachs Emerging Markets Equity Fund, Goldman Sachs Asia Equity Fund, Goldman Sachs BRIC Fund (Brazil, Russia, India, China), and Goldman Sachs Concentrated Growth Fund dated December 29, 2006 (the “Prospectuses”), as they may be further amended and/or supplemented from time to time, which may be obtained without charge from Goldman, Sachs & Co. by calling the telephone number, or writing to one of the addresses, listed below or from institutions (“Service Organizations”) acting on behalf of their customers.

     The audited financial statements and related report of PricewaterhouseCoopers LLP, independent registered public accounting firm, for each Fund contained in each Fund’s 2006 annual report are incorporated herein by reference in the section “Financial Statements.” No other portions of each Fund’s Annual Report are incorporated by reference. A Fund’s Annual Report may be obtained upon request and without charge by calling Goldman, Sachs & Co. toll free at 800-621-2550.

     GSAM^® is a registered service mark of Goldman, Sachs & Co.

- 2 -

TABLE OF CONTENTS

	Page
INTRODUCTION		B-1
INVESTMENT OBJECTIVES AND POLICIES		B-2
INVESTMENT RESTRICTIONS		B-53
TRUSTEES AND OFFICERS		B-56
MANAGEMENT SERVICES		B-66
POTENTIAL CONFLICTS OF INTEREST		B-93
PORTFOLIO TRANSACTIONS AND BROKERAGE		B-107
NET ASSET VALUE		B-114
PERFORMANCE INFORMATION		B-116
SHARES OF THE TRUST		B-120
TAXATION		B-127
FINANCIAL STATEMENTS		B-135
PROXY VOTING		B-135
PAYMENTS TO INTERMEDIARIES		B-136
OTHER INFORMATION		B-138
DISTRIBUTION AND SERVICE PLANS		B-141
OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE, PURCHASES, REDEMPTIONS, EXCHANGES AND DIVIDENDS		B-149
SERVICE PLAN AND SHAREHOLDER ADMINISTRATION PLAN		B-153
APPENDIX A DESCRIPTION OF SECURITIES RATINGS		1-A
APPENDIX B 2006 ISS PROXY VOTING GUIDELINES SUMMARY		1-B
APPENDIX C BUSINESS PRINCIPLES OF GOLDMAN, SACHS & CO.		1-C
APPENDIX D STATEMENT OF INTENTION (applicable only to Class A Shares)		1-D

     The date of this Additional Statement is December 29, 2006 as amended January 8, 2006.

- i -

GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser to:
Goldman Sachs Balanced Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs Structured Large Cap Value Fund
Goldman Sachs Structured U.S. Equity Fund
Goldman Sachs Structured Large Cap Growth Fund
Goldman Sachs Structured Small Cap Equity Fund
Goldman Sachs Structured International Equity Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs Strategic Growth Fund
Goldman Sachs Growth Opportunities Fund
Goldman Sachs Small/Mid Cap Growth Fund
Goldman Sachs Mid Cap Value Fund
Goldman Sachs Small Cap Value Fund
Goldman Sachs Large Cap Value Fund
Goldman Sachs Concentrated Growth Fund
32 Old Slip
New York, New York 10005

GOLDMAN, SACHS & CO.
Distributor
85 Broad Street
New York, New York 10004

GOLDMAN, SACHS & CO.
Transfer Agent
71 South Wacker Drive
Suite 500
Chicago, Illinois 60606

GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
Investment Adviser to:
Goldman Sachs Concentrated International Equity Fund
Goldman Sachs Japanese Equity Fund
Goldman Sachs International Small Cap Fund
Goldman Sachs Emerging Markets Equity Fund
Goldman Sachs Asia Equity Fund
Goldman Sachs BRIC Fund (Brazil, Russia, India, China)
Christchurch Court
10-15 Newgate Street
London, England EC1A7HD

Toll free (in U.S.) . . . 800-621-2550

INTRODUCTION

     Goldman Sachs Trust (the “Trust”) is an open-end, management investment company. The Trust is organized as a Delaware statutory trust and was established by a Declaration of Trust dated January 28, 1997. The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997. The following series of the Trust are described in this Additional Statement: Goldman Sachs Balanced Fund (“Balanced Fund”), Goldman Sachs Growth and Income Fund (“Growth and Income Fund”), Goldman Sachs Structured Large Cap Value Fund (formerly, CORE Large Cap Value Fund) (“Structured Large Cap Value Fund”), Goldman Sachs Structured U.S. Equity Fund (formerly, CORE U.S. Equity Fund) (“Structured U.S. Equity Fund”), Goldman Sachs Structured Large Cap Growth Fund (formerly, CORE Large Cap Growth Fund) (“Structured Large Cap Growth Fund”), Goldman Sachs Structured Small Cap Equity Fund (formerly, CORE Small Cap Equity Fund) (“Structured Small Cap Equity Fund”), Goldman Sachs Structured International Equity Fund (formerly, CORE International Equity Fund) (“Structured International Equity Fund”), Goldman Sachs Capital Growth Fund (“Capital Growth Fund”), Goldman Sachs Strategic Growth Fund (“Strategic Growth Fund”), Goldman Sachs Growth Opportunities Fund (“Growth Opportunities Fund”), Goldman Sachs Small/Mid Cap Growth Fund (“Small/Mid Cap Growth Fund”), Goldman Sachs Mid Cap Value Fund (“Mid Cap Value Fund”), Goldman Sachs Small Cap Value Fund (“Small Cap Value Fund”), Goldman Sachs Large Cap Value Fund (“Large Cap Value Fund”), Goldman Sachs Concentrated International Equity Fund (formerly the International Equity Fund) (“Concentrated International Equity Fund”), Goldman Sachs Japanese Equity Fund (“Japanese Equity Fund”), Goldman Sachs International Small Cap Fund (formerly, the International Growth Opportunities Fund) (“International Small Cap Fund”), Goldman Sachs Emerging Markets Equity Fund (“Emerging Markets Equity Fund”), Goldman Sachs Asia Equity Fund (formerly, the Asia Growth Fund) (“Asia Equity Fund”), Goldman Sachs BRIC Fund (Brazil, Russia, India, China) (“BRIC Fund”) and Goldman Sachs Concentrated Growth Fund (“Concentrated Growth Fund”) (collectively referred to herein as the “Funds”).

     The Funds, except the Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Large Cap Value, Japanese Equity, International Small Cap, BRIC and Concentrated Growth Funds were initially organized as a series of a corporation formed under the laws of the State of Maryland on September 27, 1989 and were reorganized as a Delaware statutory trust as of April 30, 1997. The Trustees of the Trust have authority under the Declaration of Trust to create and classify shares into separate series and to classify and reclassify any series or portfolio of shares into one or more classes without further action by shareholders. Pursuant thereto, the Trustees have created the Funds and other series. Additional series may be added in the future from time to time. Each Fund (except the BRIC Fund) currently offers five classes of shares: Class A Shares, Class B Shares, Class C Shares, Institutional Shares and Service Shares. The BRIC Fund currently offers three classes of shares: Class A Shares, Class C Shares and Institutional Shares. See “Shares of the Trust.”

     Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as the Investment Adviser to the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth Fund, Large Cap Value, Mid Cap Value, Small Cap Value, Large Cap Value, and Concentrated Growth Funds. Goldman Sachs Asset Management International (“GSAMI”) serves as the Investment Adviser to the Concentrated International

B-1

Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds. GSAM and GSAMI are sometimes individually referred to as an “Investment Adviser” and collectively herein as the “Investment Advisers.” In addition, Goldman Sachs serves as each Fund’s distributor and transfer agent. State Street Bank and Trust Company (“State Street”) serves as the custodian to the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Large Cap Value, Mid Cap Value, Small Cap Value, Large Cap Value, and Concentrated Growth Funds. JPMorganChase Bank, N.A. (“JPMorganChase”) serves as the custodian to the Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds.

     The following information relates to and supplements the description of each Fund’s investment policies contained in the Prospectuses. See the Prospectuses for a more complete description of the Funds’ investment objectives and policies. Investing in the Funds entails certain risks and there is no assurance that a Fund will achieve its objective. Capitalized terms used but not defined herein have the same meaning as in the Prospectuses.

INVESTMENT OBJECTIVES AND POLICIES

     Each Fund has a distinct investment objective and policies. There can be no assurance that a Fund’s objective will be achieved. Each Fund, except the Concentrated Growth and BRIC Funds, is a diversified open-end management company as defined in the Investment Company Act of 1940, as amended (the “Act”). Each of the Concentrated Growth and BRIC Funds is a non-diversified, open-end management company (as defined in the Act). The investment objective and policies of each Fund, and the associated risks of each Fund, are discussed in the Funds’ Prospectuses, which should be read carefully before an investment is made. All investment objectives and investment policies not specifically designated as fundamental may be changed without shareholder approval. However, with respect to the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Mid Cap Value, Small/Mid Cap Growth, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds, to the extent required by U.S. Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) or total assets (not including securities lending collateral and any investment of that collateral) in the particular type of investment suggested by its name. Additional information about the Funds, their policies, and the investment instruments they may hold, is provided below.

     Each Fund’s share price will fluctuate with market, economic and, to the extent applicable, foreign exchange conditions, so that an investment in any of the Funds may be worth more or less when redeemed than when purchased. None of the Funds should be relied upon as a complete investment program.

     The following discussion supplements the information in the Funds’ Prospectuses.

B-2

General Information Regarding The Funds

     The Investment Adviser may purchase for the Funds common stocks, preferred stocks, interests in real estate investment trusts, convertible debt obligations, convertible preferred stocks, equity interests in trusts, partnerships, joint ventures, limited liability companies and similar enterprises, warrants and stock purchase rights and synthetic and derivative instruments that have economic characteristics similar to equity securities (“equity investments”). The Investment Adviser utilizes first-hand fundamental research, including visiting company facilities to assess operations and to meet decision-makers, in choosing a Fund’s securities. The Investment Adviser may also use macro analysis of numerous economic and valuation variables to anticipate changes in company earnings and the overall investment climate. The Investment Adviser is able to draw on the research and market expertise of the Goldman Sachs Global Investment Research Department and other affiliates of the Investment Adviser, as well as information provided by other securities dealers. Equity investments in a Fund’s portfolio will generally be sold when the Investment Adviser believes that the market price fully reflects or exceeds the investments’ fundamental valuation or when other more attractive investments are identified.

     Value Style Funds. The Growth and Income, Mid Cap Value, Small Cap Value, and Large Cap Value Funds are managed using a value oriented approach. The Investment Adviser evaluates securities using fundamental analysis and intends to purchase equity investments that are, in its view, underpriced relative to a combination of such companies’ long-term earnings prospects, growth rate, free cash flow and/or dividend-paying ability. Consideration will be given to the business quality of the issuer. Factors positively affecting the Investment Adviser’s view of that quality include the competitiveness and degree of regulation in the markets in which the company operates, the existence of a management team with a record of success, the position of the company in the markets in which it operates, the level of the company’s financial leverage and the sustainable return on capital invested in the business. The Funds may also purchase securities of companies that have experienced difficulties and that, in the opinion of the Investment Adviser, are available at attractive prices.

     As of the date of this Additional Statement, the Goldman Sachs Mid Cap Value and Small Cap Value Funds (the “Closed Funds”) were generally closed to new investors. The following investors, however, may make purchases and reinvestments of dividends and capital gains into the Closed Funds:

• Current shareholders of the respective Closed Funds, but once a shareholder closes all accounts in a Closed Fund, additional investments into such Closed Fund may not be accepted;

• Certain employee benefit plans and certain financial institutions providing services to employee benefit plans, namely: (i) Qualified Defined Contribution and Benefit Plans (as defined below) making an initial investment of $10 million or less through financial institutions that, as of the closing date of the respective Closed Fund, had a contractual agreement with Goldman, Sachs & Co. to offer shares of or provide services to the respective Closed Fund; and (ii) certain financial institutions in connection with hedging services provided in support of non-qualified deferred compensation plans offering the Goldman Sachs Funds. Certain of the plans and institutions described in (i) and (ii) above may make an initial investment in excess of $10 million if the initial investment was expected to be less than $10 million at the time Goldman Sachs receives a preliminary written commitment to invest in the Closed Fund. Certain Qualified Defined Contribution and Benefit Plans include 401(k) plans, profit sharing plans and money purchase pension plans, 403(b) plans, and 457 plans;

• Members of the portfolio management teams of the respective Closed Fund; and

• Trustees and officers of the Trust.

B-3

     In addition, the following investors may make purchases and reinvestments of dividends and capital gains into the Mid Cap Value Fund only:

• Investors in a discretionary mutual fund wrap program where (i) such program together with non-discretionary mutual fund wrap programs maintained by the same sponsor had at least $10 million invested in the Fund as of the closing date of the Mid Cap Value Fund and (ii) the sponsor of such program has the appropriate controls in place to implement this Fund closure policy properly.

     Exchanges into a Closed Fund from other Goldman Sachs Funds are not permitted, except for current Closed Fund shareholders and for certain Qualified Defined Contribution and Benefit Plans and, in the case of the Mid Cap Value Fund, investors in certain discretionary mutual fund wrap programs permitted to invest after the closing date.

     The Closed Funds may resume sales of shares to new investors at some future date. Additionally, a Closed Fund may enter into asset purchase or other reorganization transactions with other investment companies that involve the issuance of shares the Closed Fund to new accounts, and such new accounts may continue to make additional purchases and reinvest dividends and capital gains into their accounts. Notwithstanding the foregoing, the Trust and Goldman, Sachs & Co. reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman, Sachs & Co. will not be liable for any loss resulting from rejected purchase or exchange orders.

     Growth Style Funds. The Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth Fund, and Concentrated Growth Funds are managed using a growth equity oriented approach. Equity investments for these Funds are selected based on their long-term prospects for above average growth. The Investment Adviser employs an investment strategy with three primary components. The first is to buy a business with the belief that wealth is created by the long-term ownership of a growing business. The second is to buy a high-quality business that exhibits high- quality growth criteria including strong business franchise, favorable long-term trends and excellent management. The third component of the strategy is to buy the business at an attractive valuation. The Investment Adviser maintains a long term outlook when implementing this disciplined investment process.

     Quantitative Style Funds. The Structured U.S. Equity, Structured Large Cap Growth, Structured Large Cap Value, Structured Small Cap Equity and Structured International Equity Funds (the “Structured Equity Funds”) are managed using both quantitative and fundamental techniques. The investment process and the proprietary multifactor model used to implement it are discussed below.

     The equity portion of the Balanced Fund is managed using quantitative techniques. The investment process and the model used to implement it, as described in the Additional Statement, are utilized in the management of the equity portion of the Balanced Fund.

     Investment Process. The Investment Adviser begins with a broad universe of U.S. equity investments for the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds (the “Structured U.S. Equity Funds”), and a broad universe of foreign equity investments for Structured International Equity Fund. As described more fully below, the Investment Adviser uses proprietary

B-4

multifactor models (the “Multifactor Models”) to forecast the returns of different markets, currencies and individual securities.

     In building a diversified portfolio for each Structured Equity Fund, the Investment Adviser utilizes optimization techniques to seek to construct the most efficient risk/return portfolio given each Structured Fund’s benchmark. Each portfolio is primarily composed of securities that the Investment Adviser believes maximize the portfolio’s risk/return tradeoff characteristics. Each portfolio holds industry weightings similar to those of the relevant Fund’s benchmark.

     Multifactor Models. The Multifactor Models are rigorous computerized rating systems for forecasting the returns of different equity markets, currencies and individual equity investments according to fundamental investment characteristics. The Structured U.S. Equity Funds use one Multifactor Model to forecast the returns of securities in the relevant forecast universe. The Structured International Equity Fund uses several Multifactor Models to forecast returns. Currently, the Structured International Equity Fund uses one model to forecast equity market returns, one model to forecast currency returns and six separate regional models to forecast individual equity security returns in 21 different countries. Despite this variety, all individual equity Multifactor Models incorporate common variables including measures of value, price momentum, profitability, earnings quality, management impact and analyst sentiment. All of the factors used in the Multifactor Models have been shown to significantly impact the performance of the securities, currencies and markets in the forecast universe.

     The weightings assigned to the factors in the individual equity Multifactor Models used by the Structured Equity Funds are derived using a statistical formulation that considers each factor’s historical performance, volatility and stability of ranking in different market environments. As such, the Multifactor Models are designed to evaluate each security using factors that are statistically related to returns over the long run. Because they include many disparate factors, the Investment Adviser believes that all the Multifactor Models are broader in scope and provide a more thorough evaluation than traditional investment processes. Securities and markets ranked highest by the relevant Multifactor Model do not have one dominant investment characteristic; rather, they possess an attractive combination of investment characteristics. By using a variety of relevant factors to select securities, currencies or markets, the Investment Adviser believes that the Fund will be better balanced and have more consistent performance than an investment portfolio that uses only one or two factors to select such investments.

     The Investment Adviser will monitor, and may occasionally suggest and make changes to, the method by which securities, currencies or markets are selected for or weighted in a Fund. Such changes (which may be the result of changes in the Multifactor Models or the method of applying the Multifactor Models) may include: (i) evolutionary changes to the structure of the Multifactor Models (e.g., the addition of new factors or a new means of weighting the factors); (ii) changes in trading procedures (e.g., trading frequency or the manner in which a Fund uses futures); or (iii) changes in the method by which securities, currencies or markets are weighted in a Fund. Any such changes will preserve a Fund’s basic investment philosophy of combining qualitative and quantitative methods of selecting securities using a disciplined investment process.

     Other Information. Since normal settlement for equity investments is three trading days (for certain international markets settlement may be longer), the Funds will need to hold cash balances to satisfy shareholder redemption requests. Such cash balances will normally range from 2% to 5% of a Fund’s net assets. Structured U.S. Equity Fund may enter into futures transactions only with respect to the S&P 500^TM Index and the Structured Large Cap Growth, Structured Large Cap Value and Structured Small Cap Equity

B-5

Funds may enter into futures transactions only with respect to a representative index in order to keep a Fund’s effective equity exposure close to 100%. Structured International Equity Fund may purchase other types of futures contracts. For example, if cash balances are equal to 5% of the net assets, the Fund may enter into long futures contracts covering an amount equal to 5% of the Fund’s net assets. As cash balances fluctuate based on new contributions or withdrawals, a Fund may enter into additional contracts or close out existing positions.

     Actively Managed International Funds. The Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity and Asia Equity Funds are managed using an active international approach, which utilizes a consistent process of stock selection undertaken by portfolio management teams located within each of the major investment regions, including Europe, Japan, Asia and the United States. In selecting securities, the Investment Adviser uses a bottom-up strategy based on first-hand fundamental research that is designed to give broad exposure to the available opportunities while seeking to add return primarily through stock selection. Equity investments for these Funds are evaluated based on three key factors—the business, the management and the valuation. The Investment Adviser ordinarily seeks securities that have, in the Investment Adviser’s opinion, superior earnings growth potential, sustainable franchise value with management attuned to creating shareholder value and relatively discounted valuations. In addition, the Investment Adviser uses a multi-factor risk model which seeks to ensure that deviations from the benchmark are justifiable.

Additional Information About the Balanced Fund

     The investment objective of the Balanced Fund is to provide long-term growth of capital and current income. The Fund seeks growth of capital primarily through investments in equity investments. The Fund seeks to provide current income through investment in fixed-income securities (bonds) and high dividend-paying stocks.

     The Balanced Fund is intended to provide a foundation on which an investor can build an investment portfolio or to serve as the core of an investment program, depending on the investor’s goals. The Balanced Fund is designed for relatively conservative investors who seek a combination of long-term capital growth and current income in a single investment. The Balanced Fund offers a portfolio of equity and fixed-income securities intended to provide less volatility than a portfolio completely invested in equity investments and greater diversification than a portfolio invested in only one asset class. The Balanced Fund may be appropriate for people who seek capital appreciation but are concerned about the volatility typically associated with a fund that invests solely in stocks and other equity investments.

     Fixed-Income Strategies Designed to Maximize Return and Manage Risk. GSAM’s approach to managing the fixed-income portion of the Balanced Fund’s portfolio seeks to provide high returns relative to a market benchmark, the Lehman Brothers Aggregate Bond Index (the “Index”), while also seeking to provide high current income. This approach emphasizes (i) sector allocation strategies which enable GSAM to tactically overweight or underweight one sector of the fixed-income market (i.e., mortgages, corporate bonds, U.S. Treasuries, non-dollar bonds, emerging market debt) versus another; (ii) individual security selection based on identifying relative value (fixed-income securities inexpensive relative to others in their sector); and (iii) to a lesser extent, strategies based on GSAM’s expectation of the direction of interest rates or the spread between short-term and long-term interest rates such as yield curve strategy.

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     The Index currently includes U.S. Government Securities and fixed-rate, publicly issued, U.S. dollar-denominated fixed income securities rated at least investment grade by two of the following NRSROS: Moody’s Investors Service, Standard & Poor’s or Fitch. The securities currently included in the Index have at least one year remaining to maturity; and are issued by the following types of issuers, with each category receiving a different weighting in the Index: U.S. Treasury; agencies, authorities or instrumentalities of the U.S. Government; issuers of mortgage-backed securities; utilities; industrial issuers; financial institutions; foreign issuers; and issuers of asset-backed securities. The Index is a trademark of Lehman Brothers. Inclusion of a security in the Index does not imply an opinion by Lehman Brothers as to its attractiveness or appropriateness for investment. Although Lehman Brothers obtains factual information used in connection with the Index from sources which it considers reliable, Lehman Brothers claims no responsibility for the accuracy, completeness or timeliness or such information and has no liability to any person for any loss arising from results obtained from the use of the Index data.

     GSAM seeks to manage fixed-income portfolio risk in a number of ways. These include diversifying the fixed-income portion of the Balanced Fund’s portfolio among various types of fixed-income securities and utilizing sophisticated quantitative models to understand how the fixed-income portion of the portfolio will perform under a variety of market and economic scenarios. In addition, GSAM uses extensive credit analysis to select and to monitor any investment-grade or non-investment grade bonds that may be included in the Balanced Fund’s portfolio. In employing this and other investment strategies, the GSAM team has access to extensive fundamental research and analysis available through Goldman Sachs and a broad range of other sources.

     A number of investment strategies will be used in selecting fixed-income securities for the Fund’s portfolio. GSAM’s fixed-income investment philosophy is to actively manage the portfolio within a risk-controlled framework. The Investment Adviser de-emphasizes interest rate anticipation by monitoring the duration of the portfolio within a narrow range of the Investment Adviser’s target duration, and instead focuses on seeking to add value through sector selection, security selection and yield curve strategies.

     The Investment Adviser uses derivative instruments to manage the duration of the Fund’s fixed income investment portfolio. These derivative instruments include financial futures contracts and swap transactions, as well as other types of derivatives, and can be used to shorten and lengthen the duration of the Fund’s fixed income investment portfolio. The Fund’s investments in derivative instruments, including financial futures contracts and swaps, can be significant. These transactions can result in sizeable realized and unrealized capital gains and losses relative to the gains and losses from the Fund’s investments in bonds and other securities.

     Interest rates, fixed-income securities prices, the prices of futures and other derivatives, and currency exchange rates can be volatile, and a variance in the degree of volatility or in the direction of the market from the Investment Adviser’s expectations may produce losses in a Fund’s investments in derivatives. In addition, a perfect correlation between a derivatives position and a fixed-income security position is generally impossible to achieve. As a result, the Investment Adviser’s use of derivatives may not be effective in fulfilling the Investment Adviser’s investment strategies and may contribute to losses that would not have been incurred otherwise.

     Market Sector Selection. Market sector selection for the fixed income portion of the Balanced Fund’s portfolio is the underweighting or overweighting of one or more market sectors (i.e., U.S. Treasuries, U.S. Government agency securities, corporate securities, mortgage-backed securities and asset-backed securities).

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GSAM may decide to overweight or underweight a given market sector or subsector (e.g., within the corporate sector, industrials, financial issuers and utilities) based on, among other things, expectations of future yield spreads between different sectors or subsectors.

     Issuer Selection. Issuer selection is the purchase and sale of fixed-income corporate securities based on a corporation’s current and expected credit standing (within the constraints imposed by the Balanced Fund’s minimum credit quality requirements). This strategy focuses on four types of corporate issuers. Selection of securities from the first type of issuers – those with low but stable credit – is intended to enhance total returns by providing incremental yield. Selecting securities from the second type of issuers – those with low and intermediate but improving credit quality – is intended to enhance total returns in two stages. Initially, these securities are expected to provide incremental yield. Eventually, price appreciation is expected to occur relative to alternative securities as credit quality improves, the credit ratings of nationally recognized statistical ratings organizations are upgraded, and credit spreads narrow. Securities from the third type of issuers – issuers with deteriorating credit quality – will be avoided, since total returns are typically enhanced by avoiding the widening of credit spreads and the consequent relative price depreciation. Finally, total returns can be enhanced by focusing on securities that are rated differently by different rating organizations. If the securities are trading in line with the higher published quality rating while GSAM concurs with the lower published quality rating, the securities would generally be sold and future potential price deterioration avoided. On the other hand, if the securities are trading in line with the lower published quality rating while the higher published quality rating is considered more realistic, the securities may be purchased in anticipation of the expected market re-evaluation and relative price appreciation.

     Yield Curve Strategy. Yield curve strategy consists of overweighting or underweighting different maturity sectors relative to a benchmark to take advantage of the shape of the yield curve. Three alternative maturity sector selections are available: a “barbell” strategy in which short and long maturity sectors are overweighted while intermediate maturity sectors are underweighted; a “bullet” strategy in which, conversely, short-and long-maturity sectors are underweighted while intermediate-maturity sectors are overweighted; and a “neutral yield curve” strategy in which the maturity distribution mirrors that of a benchmark.

Additional Information About the Concentrated International Equity Fund

     The Concentrated International Equity Fund invests, under normal circumstances, substantially all, and at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) in equity investments of companies that are organized outside the United States or whose securities are principally traded outside the United States. The Concentrated International Equity Fund seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30-45 companies that are considered by the Investment Adviser to be positioned for long-term capital appreciation.

     The Concentrated International Equity Fund’s Investment Advisor believes that outperformance achieved by investing in companies that demonstrate long-term earnings power, when purchased at attractive prices.

     The Investment Advisor’s Concentrated International Equity strategy is defined by a bottom-up, research driven approach to investing that seeks to identify the most attractive investment opportunities from a broad opportunity set and not to restrict itself to investing in only ‘value’ or ‘growth’ stocks. The following strengths are deemed key to the success of this investment strategy:

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Extensive resources

• Deep research team: A broad and deep research network comprises 45+ fundamental equity research analysts focused on generating the best investment ideas from around the world for the Concentrated International Equity Fund.

• Local presence and global perspective: Research analysts are located in Tokyo, Singapore, Shanghai, London, New York, Boston and Mumbai. This local presence ensures that the team conducts the frequency of meetings with company managements necessary to truly understand the businesses, while a familiarity with local languages, traditions and customs facilitates communication and the flow of information and insights from the managements during these meetings.

Team-based approach

• Experienced Portfolio Management team: GSAMI’s International Equity team comprises seven portfolio investment professionals with 15 years’ average investment experience. The team is headed by Mark Beveridge, CFA, who serves as Chief Investment Officer of Non-US Active Equity and has 21 years of investment experience. This depth of experience facilitates effective analysis of potential investment ideas for inclusion in the Concentrated International Equity Fund.

• Multiple teams discussing each stock: Investment ideas are first debated within the regional research teams, then presented to the broader research network at the twice-weekly Global Research Calls. Only if an idea is approved for the Buy List do the portfolio managers consider whether it warrants inclusion in the investment portfolio of the Concentrated International Equity Fund. This team-based approach enriches debate, strengthens the consistency of the Investment Adviser’s process and enhances the quality of its investment decisions.

Disciplined research

• Focus on long-term earnings power: The International Equity team defines long-term earnings power as the ability of a company to generate strong, sustainable earnings and to create value for shareholders. This concept is critical to how the team thinks about valuation. This focus on companies’ normalized earnings is deemed key to successful stock comparison and selection, and that a long-term view provides the opportunity to uncover mis-priced securities overlooked by the market’s short-term focus.

• Common valuation framework: A common valuation framework is used to ensure consistency when research analysts are valuing a company and comparing it to its peers globally, improve the dialogue between analysts and allows the portfolio managers to identify and purchase the best holding in any given industry.

Additional Information About The BRIC Fund

     The Fund invests, under normal circumstances, substantially all and at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) (“Net Assets”) in a concentrated portfolio of equity investments in Brazil, Russia, India and China (“BRIC countries”) or in issuers that

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participate in the markets of the BRIC countries by deriving a significant amount of their total revenue or profit from goods produced, sales made or services provided or maintaining a significant amount of their assets in BRIC countries. For the purpose of measuring the level of participation by issuers in the markets of BRIC countries in both the Prospectuses and the Additional Statement, “significant” means “50% or more.” The Investment Adviser may consider classifications by the World Bank, the International Finance Corporation or the United Nations and its agencies in determining whether a country is emerging or developed. An emerging country issuer is any company that:

     – Has a class of its securities whose principal securities market is in an emerging country;

     – Is organized under the laws of, or has a principal office in, an emerging country;

     – Derives 50% or more of its total revenue from goods produced, sales made or services provided in one or more emerging countries; or

     – Maintains 50% or more of its assets in one or more emerging countries.

     Under normal circumstances, the Fund maintains investments in at least four emerging countries, Brazil, Russia, India, and China. Allocation of the Fund’s investments will depend upon the relative attractiveness of the emerging country markets and particular issuers. In addition, macro-economic factors and the portfolio managers’ and Goldman Sachs economists’ views of the relative attractiveness of emerging countries and currencies are considered in allocating the Fund’s assets among emerging countries.

     The Fund may also invest up to 20% of its Net Assets in (i) fixed-income securities of private and government emerging country issuers, and (ii) equity and fixed-income securities, such as government, corporate and bank debt obligations, of developed country issuers.

     The Fund is managed using an active international approach, which utilizes a consistent process of stock selection undertaken by portfolio management teams located in London, Singapore, Shanghai and Mumbai. In selecting securities, the Investment Adviser uses a bottom-up strategy based on first-hand fundamental research that is designed to give broad exposure to the available opportunities while seeking to add return primarily through stock selection.

Corporate Debt Obligations

     Each Fund may, under normal market conditions, invest in corporate debt obligations, including obligations of industrial, utility and financial issuers. Corporate debt obligations include bonds, notes, debentures and other obligations of corporations to pay interest and repay principal. Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds may only invest in debt securities that are cash equivalents. Corporate debt obligations are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market liquidity.

     An economic downturn could severely affect the ability of highly leveraged issuers of junk bond securities to service their debt obligations or to repay their obligations upon maturity. Factors having an

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adverse impact on the market value of junk bonds will have an adverse effect on a Fund’s net asset value to the extent it invests in such securities. In addition, a Fund may incur additional expenses to the extent it is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings.

     The secondary market for junk bonds, which is concentrated in relatively few market makers, may not be as liquid as the secondary market for more highly rated securities. This reduced liquidity may have an adverse effect on the ability of Balanced, Growth and Income, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Mid Cap Value, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds to dispose of a particular security when necessary to meet their redemption requests or other liquidity needs. Under adverse market or economic conditions, the secondary market for junk bonds could contract further, independent of any specific adverse changes in the condition of a particular issuer. As a result, the Investment Advisers could find it difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under such circumstances, may be less than the prices used in calculating a Fund’s net asset value.

     Since investors generally perceive that there are greater risks associated with the medium to lower rated securities of the type in which Balanced, Growth and Income, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Mid Cap Value, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds may invest, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the fixed-income securities market, changes in perceptions of issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the fixed-income securities market, resulting in greater yield and price volatility.

     Another factor which causes fluctuations in the prices of fixed-income securities is the supply and demand for similarly rated securities. In addition, the prices of fixed-income securities fluctuate in response to the general level of interest rates. Fluctuations in the prices of portfolio securities subsequent to their acquisition will not affect cash income from such securities but will be reflected in a Fund’s net asset value.

     Medium to lower rated and comparable non-rated securities tend to offer higher yields than higher rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers. Since medium to lower rated securities generally involve greater risks of loss of income and principal than higher rated securities, investors should consider carefully the relative risks associated with investment in securities which carry medium to lower ratings and in comparable unrated securities. In addition to the risk of default, there are the related costs of recovery on defaulted issues. The Investment Adviser will attempt to reduce these risks through portfolio diversification and by analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends and corporate developments.

     The Investment Adviser employs its own credit research and analysis, which includes a study of existing debt, capital structure, ability to service debt and to pay dividends, the issuer’s sensitivity to economic conditions, its operating history and the current trend of earnings. The Investment Adviser continually monitors

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the investments in a Fund’s portfolio and evaluates whether to dispose of or to retain corporate debt obligations whose credit ratings or credit quality may have changed.

Commercial Paper and Other Short-Term Corporate Obligations

     The Funds may invest in commercial paper and other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities. Commercial paper represents short-term unsecured promissory notes issued in bearer form by banks or bank holding companies, corporations and finance companies.

U.S. Government Securities

     Each Fund may invest in U.S. Government Securities. Some U.S. Government Securities (such as Treasury bills, notes and bonds, which differ only in their interest rates, maturities and times of issuance) are supported by the full faith and credit of the United States. Others, such as obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises, are supported either by (i) the right of the issuer to borrow from the U.S. Treasury, (ii) the discretionary authority of the U.S. government to purchase certain obligations of the issuer or (iii) only the credit of the issuer. The U.S. government is under no legal obligation, in general, to purchase the obligations of its agencies, instrumentalities or sponsored enterprises. No assurance can be given that the U.S. government will provide financial support to the U.S. government agencies, instrumentalities or sponsored enterprises in the future.

     U.S. Government Securities include (to the extent consistent with the Act) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government, or its agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may also include (to the extent consistent with the Act) participations in loans made to foreign governments or their agencies that are guaranteed as to principal and interest by the U.S. government or its agencies, instrumentalities or sponsored enterprises. The secondary market for certain of these participations is extremely limited. In the absence of a suitable secondary market, such participations are regarded as illiquid.

     Each Fund may also purchase U.S. Government Securities in private placements and may also invest in separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury that are traded independently under the separate trading of registered interest and principal of securities program (“STRIPS”). Each Fund may also invest in zero coupon U.S. Treasury Securities and in zero coupon securities issued by financial institutions which represent a proportionate interest in underlying U.S. Treasury Securities. A zero coupon security pays no interest to its holder during its life and its value consists of the difference between its face value at maturity and its cost. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.

Bank Obligations

     Each Fund may invest in obligations issued or guaranteed by U.S. or foreign banks. Bank obligations, including without limitation, time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulation.

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     Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry.

Zero Coupon Bonds

     Each Fund’s investments in fixed-income securities may include zero coupon bonds. Zero coupon bonds are debt obligations issued or purchased at a discount from face value. The discount approximates the total amount of interest the bonds would have accrued and compounded over the period until maturity. Zero coupon bonds do not require the periodic payment of interest. Such investments benefit the issuer by mitigating its need for cash to meet debt service but also require a higher rate of return to attract investors who are willing to defer receipt of such cash. Such investments may experience greater volatility in market value than debt obligations which provide for regular payments of interest. In addition, if an issuer of zero coupon bonds held by a Fund defaults, the Fund may obtain no return at all on its investment. A Fund will accrue income on such investments for each taxable year which (net of deductible expenses, if any) is distributable to shareholders and which, because no cash is generally received at the time of accrual, may require the liquidation of other portfolio securities to obtain sufficient cash to satisfy the Fund’s distribution obligations.

Variable and Floating Rate Securities

     The interest rates payable on certain fixed-income securities in which a Fund may invest are not fixed and may fluctuate based upon changes in market rates. A variable rate obligation has an interest rate which is adjusted at pre-designated periods in response to changes in the market rate of interest on which the interest rate is based. Variable and floating rate obligations are less effective than fixed rate instruments at locking in a particular yield. Nevertheless, such obligations may fluctuate in value in response to interest rate changes if there is a delay between changes in market interest rates and the interest reset date for the obligation, or for other reasons.

Custodial Receipts and Trust Certificates

     Each Fund may invest in custodial receipts and trust certificates, which may be underwritten by securities dealers or banks, representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government securities, municipal securities or other types of securities in which the Funds may invest. The custodial receipts or trust certificates are underwritten by securities dealers or banks and may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. Government or other issuer of the securities held by the custodian or trustee. As a holder of custodial receipts and trust certificates, the Funds will bear their proportionate share of the fees and expenses charged to the custodial account or trust. The Funds may also invest in separately issued interests in custodial receipts and trust certificates.

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     Although under the terms of a custodial receipt or trust certificate the Funds would be typically authorized to assert their rights directly against the issuer of the underlying obligation, the Funds could be required to assert through the custodian bank or trustee those rights as may exist against the underlying issuers. Thus, in the event an underlying issuer fails to pay principal and/or interest when due, the Funds may be subject to delays, expenses and risks that are greater than those that would have been involved if the Funds had purchased a direct obligation of the issuer. In addition, in the event that the trust or custodial account in which the underlying securities have been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying securities would be reduced in recognition of any taxes paid.

     Certain custodial receipts and trust certificates may be synthetic or derivative instruments that have interest rates that reset inversely to changing short-term rates and/or have embedded interest rate floors and caps that require the issuer to pay an adjusted interest rate if market rates fall below or rise above a specified rate. Because some of these instruments represent relatively recent innovations, and the trading market for these instruments is less developed than the markets for traditional types of instruments, it is uncertain how these instruments will perform under different economic and interest-rate scenarios. Also, because these instruments may be leveraged, their market values may be more volatile than other types of fixed income instruments and may present greater potential for capital gain or loss. The possibility of default by an issuer or the issuer’s credit provider may be greater for these derivative instruments than for other types of instruments. In some cases, it may be difficult to determine the fair value of a derivative instrument because of a lack of reliable objective information and an established secondary market for some instruments may not exist. In many cases, the Internal Revenue Service (“IRS”) has not ruled on the tax treatment of the interest or payments received on the derivative instruments and, accordingly, purchases of such instruments are based on the opinion of counsel to the sponsors of the instruments.

Municipal Securities

     The Balanced Fund may invest in municipal securities. Municipal securities consist of bonds, notes and other instruments issued by or on behalf of states, territories and possessions of the United States (including the District of Columbia) and their political subdivisions, agencies or instrumentalities, the interest on which is exempt from regular federal income tax. Municipal securities are often issued to obtain funds for various public purposes. Municipal securities also include “private activity bonds” or industrial development bonds, which are issued by or on behalf of public authorities to obtain funds for privately operated facilities, such as airports and waste disposal facilities, and, in some cases, commercial and industrial facilities.

     The yields and market values of municipal securities are determined primarily by the general level of interest rates, the creditworthiness of the issuers of municipal securities and economic and political conditions affecting such issuers. Due to their tax exempt status, the yields and market prices of municipal securities may be adversely affected by changes in tax rates and policies, which may have less effect on the market for taxable fixed-income securities. Moreover, certain types of municipal securities, such as housing revenue bonds, involve prepayment risks which could affect the yield on such securities. The credit rating assigned to municipal securities may reflect the existence of guarantees, letters of credit or other credit enhancement features available to the issuers or holders of such municipal securities.

     Investments in municipal securities are subject to the risk that the issuer could default on its obligations. Such a default could result from the inadequacy of the sources or revenues from which interest and principal

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payments are to be made or the assets collateralizing such obligations. Revenue bonds, including private activity bonds, are backed only by specific assets or revenue sources and not by the full faith and credit of the governmental issuer.

     Dividends paid by the Funds from any tax-exempt interest they may receive will not be tax-exempt.

Mortgage-Backed Securities

     General Characteristics. Each Fund (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds) may invest in mortgage-backed securities. Each mortgage pool underlying mortgage-backed securities consists of mortgage loans evidenced by promissory notes secured by first mortgages or first deeds of trust or other similar security instruments creating a first lien on owner occupied and non-owner occupied one-unit to four-unit residential properties, multifamily (i.e., five or more) properties, agricultural properties, commercial properties and mixed use properties (the “Mortgaged Properties”). The Mortgaged Properties may consist of detached individual dwelling units, multifamily dwelling units, individual condominiums, townhouses, duplexes, triplexes, fourplexes, row houses, individual units in planned unit developments and other attached dwelling units. The Mortgaged Properties may also include residential investment properties and second homes.

     The investment characteristics of adjustable and fixed rate mortgage-backed securities differ from those of traditional fixed-income securities. The major differences include the payment of interest and principal on mortgage-backed securities on a more frequent (usually monthly) schedule, and the possibility that principal may be prepaid at any time due to prepayments on the underlying mortgage loans or other assets. These differences can result in significantly greater price and yield volatility than is the case with traditional fixed-income securities. As a result, if a Fund purchases mortgage-backed securities at a premium, a faster than expected prepayment rate will reduce both the market value and the yield to maturity from those which were anticipated. A prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity and market value. Conversely, if a Fund purchases mortgage-backed securities at a discount, faster than expected prepayments will increase, while slower than expected prepayments will reduce yield to maturity and market values. To the extent that a Fund invests in mortgage-backed securities, its Investment Adviser may seek to manage these potential risks by investing in a variety of mortgage-backed securities and by using certain hedging techniques.

     Government Guaranteed Mortgage-Backed Securities. There are several types of government guaranteed mortgage-backed securities currently available, including guaranteed mortgage pass-through certificates and multiple class securities, which include guaranteed Real Estate Mortgage Investment Conduit Certificates (“REMIC Certificates”), other collateralized mortgage obligations and stripped mortgage-backed securities. A Fund is permitted to invest in other types of mortgage-backed securities that may be available in the future to the extent consistent with its investment policies and objective.

     A Fund’s investments in mortgage-backed securities may include securities issued or guaranteed by the U.S. Government or one of its agencies, authorities, instrumentalities or sponsored enterprises, such as the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae securities are backed by the full faith and credit of the U.S. Government, which means that the U.S. Government guarantees

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that the interest and principal will be paid when due. Fannie Mae and Freddie Mac securities are not backed by the full faith and credit of the U.S. Government. Fannie Mae and Freddie Mac have the ability to borrow from the U.S. Treasury, and as a result, they are generally viewed by the market as high quality securities with low credit risks. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating federal sponsorship of Fannie Mae and Freddie Mac that issue guaranteed mortgage-backed securities. The Trust cannot predict what legislation, if any, may be proposed in the future in Congress as regards such sponsorship or which proposals, if any, might be enacted. Such proposals, if enacted, might materially and adversely affect the availability of government guaranteed mortgage-backed securities and a Fund’s liquidity and value.

     There is risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. A Fund may purchase U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae and Freddie Mac. The maximum potential liability of the issuers of some U.S. Government securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.

     Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate instrumentality of the United States. Ginnie Mae is authorized to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of mortgage loans insured by the Federal Housing Administration (“FHA Loans”), or guaranteed by the Veterans Administration (“VA Loans”), or by pools of other eligible mortgage loans. In order to meet its obligations under any guaranty, Ginnie Mae is authorized to borrow from the United States Treasury in an unlimited amount. The National Housing Act provided that the full faith and credit of the United States is pledged to the timely payment of principal and interest by Ginnie Mae of amounts due on Ginnie Mae certificates.

     Fannie Mae Certificates. Fannie Mae is a stockholder-owned corporation chartered under an act of the United States Congress. Generally, Fannie Mae Certificates are issued and guaranteed by Fannie Mae and represent an undivided interest in a pool of mortgage loans (a “Pool”) formed by Fannie Mae. Each Pool consists of residential mortgage loans (“Mortgage Loans”) either previously owned by Fannie Mae or purchased by it in connection with the formation of the Pool. The Mortgage Loans may be either conventional Mortgage Loans (i.e., not insured or guaranteed by any U.S. Government agency) or Mortgage Loans that are either insured by the Federal Housing Administration (“FHA”) or guaranteed by the Veterans Administration (“VA”). However, the Mortgage Loans in Fannie Mae Pools are primarily conventional Mortgage Loans. The lenders originating and servicing the Mortgage Loans are subject to certain eligibility requirements established by Fannie Mae.

     Fannie Mae has certain contractual responsibilities. With respect to each Pool, Fannie Mae is obligated to distribute scheduled installments of principal and interest after Fannie Mae’s servicing and guaranty fee, whether or not received, to Certificate holders. Fannie Mae also is obligated to distribute to holders of Certificates an amount equal to the full principal balance of any foreclosed Mortgage Loan, whether or not such principal balance is actually recovered. The obligations of Fannie Mae under its guaranty of the Fannie Mae Certificates are obligations solely of Fannie Mae.

     Freddie Mac Certificates. Freddie Mac is a publicly held U.S. Government sponsored enterprise. The principal activity of Freddie Mac currently is the purchase of first lien, conventional, residential mortgage loans

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and participation interests in such mortgage loans and their resale in the form of mortgage securities, primarily Freddie Mac Certificates. A Freddie Mac Certificate represents a pro rata interest in a group of mortgage loans or participations in mortgage loans (a “Freddie Mac Certificate group”) purchased by Freddie Mac.

     Freddie Mac guarantees to each registered holder of a Freddie Mac Certificate the timely payment of interest at the rate provided for by such Freddie Mac Certificate (whether or not received on the underlying loans). Freddie Mac also guarantees to each registered Certificate holder an ultimate collection of all principal of the related mortgage loans, without any offset or deduction, but does not, generally, guarantee the timely payment of scheduled principal. The obligations of Freddie Mac under its guaranty of Freddie Mac Certificates are obligations solely of Freddie Mac.

     The mortgage loans underlying the Freddie Mac and Fannie Mae Certificates consist of adjustable rate or fixed-rate mortgage loans with original terms to maturity of up to forty years. Substantially all of these mortgage loans are secured by first liens on one-to-four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards set forth in the law creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans, undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.

     Conventional Mortgage Loans. The conventional mortgage loans underlying the Freddie Mac and Fannie Mae Certificates consist of adjustable rate or fixed-rate mortgage loans normally with original terms to maturity of between five and thirty years. Substantially all of these mortgage loans are secured by first liens on one- to four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards set forth in the law creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans, undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.

     Mortgage Pass-Through Securities. To the extent consistent with its investment policies, each Fund (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds) may invest in both government guaranteed and privately issued mortgage pass-through securities (“Mortgage Pass-Throughs”); that is, fixed or adjustable rate mortgage-backed securities which provide for monthly payments that are a “pass-through” of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees or other amounts paid to any guarantor, administrator and/or servicer of the underlying mortgage loans. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate holders as to certain characteristics of the mortgage loans and as to the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. Upon a breach of any representation or warranty that materially and adversely affects the interests of the related certificate holders in a mortgage loan, the seller or servicer may be obligated either to cure the breach in all material respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate holders or the trustee for the material breach of any such representation or warranty by the seller or servicer.

     The following discussion describes only a few of the wide variety of structures of Mortgage Pass-Throughs that are available or may be issued.

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     Description of Certificates. Mortgage Pass-Throughs may be issued in one or more classes of senior certificates and one or more classes of subordinate certificates. Each such class may bear a different pass-through rate. Generally, each certificate will evidence the specified interest of the holder thereof in the payments of principal or interest or both in respect of the mortgage pool comprising part of the trust fund for such certificates.

     Any class of certificates may also be divided into subclasses entitled to varying amounts of principal and interest. If a REMIC election has been made, certificates of such subclasses may be entitled to payments on the basis of a stated principal balance and stated interest rate, and payments among different subclasses may be made on a sequential, concurrent, pro rata or disproportionate basis, or any combination thereof. The stated interest rate on any such subclass of certificates may be a fixed rate or one which varies in direct or inverse relationship to an objective interest index.

     Generally, each registered holder of a certificate will be entitled to receive its pro rata share of monthly distributions of all or a portion of principal of the underlying mortgage loans or of interest on the principal balances thereof, which accrues at the applicable mortgage pass-through rate, or both. The difference between the mortgage interest rate and the related mortgage pass-through rate (less the amount, if any, of retained yield) with respect to each mortgage loan will generally be paid to the servicer as a servicing fee. Since certain adjustable rate mortgage loans included in a mortgage pool may provide for deferred interest (i.e., negative amortization), the amount of interest actually paid by a mortgagor in any month may be less than the amount of interest accrued on the outstanding principal balance of the related mortgage loan during the relevant period at the applicable mortgage interest rate. In such event, the amount of interest that is treated as deferred interest will generally be added to the principal balance of the related mortgage loan and will be distributed pro rata to certificate-holders as principal of such mortgage loan when paid by the mortgagor in subsequent monthly payments or at maturity.

     Ratings. The ratings assigned by a rating organization to Mortgage Pass-Throughs address the likelihood of the receipt of all distributions on the underlying mortgage loans by the related certificate-holders under the agreements pursuant to which such certificates are issued. A rating organization’s ratings normally take into consideration the credit quality of the related mortgage pool, including any credit support providers, structural and legal aspects associated with such certificates, and the extent to which the payment stream on such mortgage pool is adequate to make payments required by such certificates. A rating organization’s ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments on the related mortgage loans. In addition, the rating assigned by a rating organization to a certificate may not address the remote possibility that, in the event of the insolvency of the issuer of certificates where a subordinated interest was retained, the issuance and sale of the senior certificates may be recharacterized as a financing and, as a result of such recharacterization, payments on such certificates may be affected.

     Credit Enhancement. Mortgage pools created by non-governmental issuers generally offer a higher yield than government and government-related pools because of the absence of direct or indirect government or agency payment guarantees. To lessen the effect of failures by obligors on underlying assets to make payments, mortgage pass-throughs may contain elements of credit support. Credit support falls generally into two categories: (i) liquidity protection and (ii) protection against losses resulting from default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pools of mortgages, the provision of a reserve fund, or a combination thereof, to ensure, subject to certain limitations, that scheduled payments on the underlying pool are made in a timely fashion. Protection against

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losses resulting from default ensures ultimate payment of the obligations on at least a portion of the assets in the pool. Such credit support can be provided by, among other things, payment guarantees, letters of credit, pool insurance, subordination, or any combination thereof.

     Subordination; Shifting of Interest; Reserve Fund. In order to achieve ratings on one or more classes of Mortgage Pass-Throughs, one or more classes of certificates may be subordinate certificates which provide that the rights of the subordinate certificate-holders to receive any or a specified portion of distributions with respect to the underlying mortgage loans may be subordinated to the rights of the senior certificate-holders. If so structured, the subordination feature may be enhanced by distributing to the senior certificate-holders on certain distribution dates, as payment of principal, a specified percentage (which generally declines over time) of all principal payments received during the preceding prepayment period (“shifting interest credit enhancement”). This will have the effect of accelerating the amortization of the senior certificates while increasing the interest in the trust fund evidenced by the subordinate certificates. Increasing the interest of the subordinate certificates relative to that of the senior certificates is intended to preserve the availability of the subordination provided by the subordinate certificates. In addition, because the senior certificate-holders in a shifting interest credit enhancement structure are entitled to receive a percentage of principal prepayments which is greater than their proportionate interest in the trust fund, the rate of principal prepayments on the mortgage loans may have an even greater effect on the rate of principal payments and the amount of interest payments on, and the yield to maturity of, the senior certificates.

     In addition to providing for a preferential right of the senior certificate-holders to receive current distributions from the mortgage pool, a reserve fund may be established relating to such certificates (the “Reserve Fund”). The Reserve Fund may be created with an initial cash deposit by the originator or servicer and augmented by the retention of distributions otherwise available to the subordinate certificate-holders or by excess servicing fees until the Reserve Fund reaches a specified amount.

     The subordination feature, and any Reserve Fund, are intended to enhance the likelihood of timely receipt by senior certificate-holders of the full amount of scheduled monthly payments of principal and interest due them and will protect the senior certificate-holders against certain losses; however, in certain circumstances the Reserve Fund could be depleted and temporary shortfalls could result. In the event the Reserve Fund is depleted before the subordinated amount is reduced to zero, senior certificate-holders will nevertheless have a preferential right to receive current distributions from the mortgage pool to the extent of the then outstanding subordinated amount. Unless otherwise specified, until the subordinated amount is reduced to zero, on any distribution date any amount otherwise distributable to the subordinate certificates or, to the extent specified, in the Reserve Fund will generally be used to offset the amount of any losses realized with respect to the mortgage loans (“Realized Losses”). Realized Losses remaining after application of such amounts will generally be applied to reduce the ownership interest of the subordinate certificates in the mortgage pool. If the subordinated amount has been reduced to zero, Realized Losses generally will be allocated pro rata among all certificate-holders in proportion to their respective outstanding interests in the mortgage pool.

     Alternative Credit Enhancement. As an alternative, or in addition to the credit enhancement afforded by subordination, credit enhancement for Mortgage Pass-Throughs may be provided by mortgage insurance, hazard insurance, by the deposit of cash, certificates of deposit, letters of credit, a limited guaranty or by such other methods as are acceptable to a rating agency. In certain circumstances, such as where credit enhancement is provided by guarantees or a letter of credit, the security is subject to credit risk because of its exposure to an external credit enhancement provider.

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     Voluntary Advances. Generally, in the event of delinquencies in payments on the mortgage loans underlying the Mortgage Pass-Throughs, the servicer agrees to make advances of cash for the benefit of certificate-holders, but generally will do so only to the extent that it determines such voluntary advances will be recoverable from future payments and collections on the mortgage loans or otherwise.

     Optional Termination. Generally, the servicer may, at its option with respect to any certificates, repurchase all of the underlying mortgage loans remaining outstanding at such time if the aggregate outstanding principal balance of such mortgage loans is less than a specified percentage (generally 5-10%) of the aggregate outstanding principal balance of the mortgage loans as of the cut-off date specified with respect to such series.

     Multiple Class Mortgage-Backed Securities and Collateralized Mortgage Obligations. A Fund may invest in multiple class securities including collateralized mortgage obligations (“CMOs”) and REMIC Certificates. These securities may be issued by U.S. Government agencies, instrumentalities and sponsored enterprises such as Fannie Mae or Freddie Mac or by trusts formed by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class mortgage-backed securities represent direct ownership interests in, a pool of mortgage loans or mortgage-backed securities the payments on which are used to make payments on the CMOs or multiple class mortgage-backed securities.

     Fannie Mae REMIC Certificates are issued and guaranteed as to timely distribution of principal and interest by Fannie Mae. In addition, Fannie Mae will be obligated to distribute the principal balance of each class of REMIC Certificates in full, whether or not sufficient funds are otherwise available.

     Freddie Mac guarantees the timely payment of interest on Freddie Mac REMIC Certificates and also guarantees the payment of principal as payments are required to be made on the underlying mortgage participation certificates (“PCs”). PCs represent undivided interests in specified level payment, residential mortgages or participations therein purchased by Freddie Mac and placed in a PC pool. With respect to principal payments on PCs, Freddie Mac generally guarantees ultimate collection of all principal of the related mortgage loans without offset or deduction but the receipt of the required payments may be delayed. Freddie Mac also guarantees timely payment of principal of certain PCs.

     CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie Mac are types of multiple class mortgage-backed securities. The REMIC Certificates represent beneficial ownership interests in a REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage-backed securities (the “Mortgage Assets”). The obligations of Fannie Mae or Freddie Mac under their respective guaranty of the REMIC Certificates are obligations solely of Fannie Mae or Freddie Mac, respectively.

     CMOs and REMIC Certificates are issued in multiple classes. Each class of CMOs or REMIC Certificates, often referred to as a “tranche,” is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the Mortgage Loans or the Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or REMIC Certificates to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs or REMIC Certificates on a monthly basis.

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     The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs or REMIC Certificates in various ways. In certain structures (known as “sequential pay” CMOs or REMIC Certificates), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs or REMIC Certificates in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs or REMIC Certificates until all other classes having an earlier final distribution date have been paid in full.

     Additional structures of CMOs and REMIC Certificates include, among others, “parallel pay” CMOs and REMIC Certificates. Parallel pay CMOs or REMIC Certificates are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.

     A wide variety of REMIC Certificates may be issued in parallel pay or sequential pay structures. These securities include accrual certificates (also known as “Z-Bonds”), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and planned amortization class (“PAC”) certificates, which are parallel pay REMIC Certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes or REMIC Certificates (the “PAC Certificates”), even though all other principal payments and prepayments of the Mortgage Assets are then required to be applied to one or more other classes of the PAC Certificates. The scheduled principal payments for the PAC Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying mortgage assets. These tranches tend to have market prices and yields that are much more volatile than other PAC classes.

     Stripped Mortgage-Backed Securities. The Balanced Fund may invest in stripped mortgage-backed securities (“SMBS”), which are derivative multiclass mortgage securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or non-governmental originators. Certain SMBS may not be readily marketable and will be considered illiquid for purposes of the Fund’s limitation on investments in illiquid securities. The Investment Adviser may determine that SMBS which are U.S. Government Securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. The market value of the class consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. The yields on a class of SMBS that receives all or most of the interest from Mortgage Assets are generally higher than prevailing market yields on other mortgage-backed securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped.

Inverse Floating Rate Securities

     The Balanced Fund may invest in leveraged inverse floating rate debt instruments (“inverse floaters”). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher

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degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. Accordingly, the duration of an inverse floater may exceed its stated final maturity. Certain inverse floaters may be deemed to be illiquid securities for purposes of a Fund’s 15% limitation on investments in such securities.

Asset-Backed Securities

     Each Fund (except the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds) may invest in asset-backed securities. Asset-backed securities represent participations in, or are secured by and payable from, assets such as motor vehicle installment sales, 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 assets are securitized through the use of trusts and 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 unaffiliated with the trust or corporation, or other credit enhancements may be present.

     Such securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset backed securities can be expected to accelerate. Accordingly, a Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. To the extent that a Fund invests in asset-backed securities, the values of such Fund’s portfolio securities will vary with changes in market interest rates generally and the differentials in yields among various kinds of asset-backed securities.

     Asset-backed securities present certain additional risks because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Credit card receivables are generally unsecured and the debtors on such receivables 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. Automobile receivables generally are secured, but by automobiles rather than residential real property. Most issuers of automobile receivables permit the loan servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would acquire an interest superior to that of the holders of the asset-backed securities. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of the automobile receivables may not have a proper security interest in the underlying automobiles. Therefore, if the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that the Fund’s recoveries on repossessed collateral may not be available to support payments on the securities.

Loan Participations

     The Balanced Fund may invest in loan participations. Such loans must be to issuers in whose obligations Balanced Fund may invest. A loan participation is an interest in a loan to a U.S. or foreign company or other borrower which is administered and sold by a financial intermediary. In a typical corporate loan

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syndication, a number of lenders, usually banks (co-lenders), lend a corporate borrower a specified sum pursuant to the terms and conditions of a loan agreement. One of the co-lenders usually agrees to act as the agent bank with respect to the loan.

     Participation interests acquired by the Balanced Fund may take the form of a direct or co-lending relationship with the corporate borrower, an assignment of an interest in the loan by a co-lender or another participant, or a participation in the seller’s share of the loan. When the Balanced Fund acts as co-lender in connection with a participation interest or when the Balanced Fund acquires certain participation interests, the Balanced Fund will have direct recourse against the borrower if the borrower fails to pay scheduled principal and interest. In cases where the Balanced Fund lacks direct recourse, it will look to the agent bank to enforce appropriate credit remedies against the borrower. In these cases, the Balanced Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation (such as commercial paper) of such borrower. For example, in the event of the bankruptcy or insolvency of the corporate borrower, a loan participation may be subject to certain defenses by the borrower as a result of improper conduct by the agent bank. Moreover, under the terms of the loan participation, the Balanced Fund may be regarded as a creditor of the agent bank (rather than of the underlying corporate borrower), so that the Balanced Fund may also be subject to the risk that the agent bank may become insolvent. The secondary market, if any, for these loan participations is limited and loan participations purchased by the Balanced Fund will normally be regarded as illiquid.

     For purposes of certain investment limitations pertaining to diversification of the Balanced Fund’s portfolio investments, the issuer of a loan participation will be the underlying borrower. However, in cases where the Balanced Fund does not have recourse directly against the borrower, both the borrower and each agent bank and co-lender interposed between the Balanced Fund and the borrower will be deemed issuers of a loan participation.

Futures Contracts and Options on Futures Contracts

     Each Fund may purchase and sell futures contracts and may also purchase and write call and put options on futures contracts. The Structured Large Cap Value, Structured Large Cap Growth and Structured Small Cap Equity Funds may only enter into such transactions with respect to a representative index. The Structured U.S. Equity Fund may enter into futures transactions only with respect to the S&P 500 Index. The other Funds may purchase and sell futures contracts based on various securities, securities indices, foreign currencies and other financial instruments and indices. Each Fund may engage in futures and related options transactions in order to seek to increase total return or to hedge against changes in interest rates, securities prices or, to the extent a Fund invests in foreign securities, currency exchange rates, or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

     Futures contracts entered into by a Fund have historically been traded on U.S. exchanges or boards of trade that are licensed and regulated by the Commodity Futures Trading Commission (the “CFTC”) or with respect to certain funds, on foreign exchanges. More recently, certain futures may also be traded either over-the-counter or on trading facilities such as derivatives transaction execution facilities, exempt boards of trade or

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electronic trading facilities that are licensed and/or regulated to varying degrees by the CFTC. Also, certain single stock futures and narrow based security index futures may be traded either over-the-counter or on trading facilities such as contract markets, derivatives transaction execution facilities and electronic trading facilities that are licensed and/or regulated to varying degrees by both the CFTC and the SEC, or on foreign exchanges.

     Neither the CFTC, National Futures Association, SEC nor any domestic exchange regulates activities of any foreign exchange or boards of trade, including the execution, delivery and clearing of transactions, or has the power to compel enforcement of the rules of a foreign exchange or board of trade or any applicable foreign law. This is true even if the exchange is formally linked to a domestic market so that a position taken on the market may be liquidated by a transaction on another market. Moreover, such laws or regulations will vary depending on the foreign country in which the foreign futures or foreign options transaction occurs. For these reasons, a Fund’s investments in foreign futures or foreign options transactions may not be provided the same protections in respect of transactions on United States exchanges. In particular, persons who trade foreign futures or foreign options contracts may not be afforded certain of the protective measures provided by the Commodity Exchange Act, the CFTC’s regulations and the rules of the National Futures Association and any domestic exchange, including the right to use reparations proceedings before the CFTC and arbitration proceedings provided by the National Futures Association or any domestic futures exchange. Similarly, those persons may not have the protection of the United States securities laws.

     Futures Contracts. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract).

     When interest rates are rising or securities prices are falling, a Fund can seek through the sale of futures contracts to offset a decline in the value of its current portfolio securities. When interest rates are falling or securities prices are rising, a Fund, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Similarly, each Fund (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) can purchase and sell futures contracts on a specified currency in order to seek to increase total return or to protect against changes in currency exchange rates. For example, each Fund (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) can purchase futures contracts on foreign currency to establish the price in U.S. dollars of a security quoted or denominated in such currency that such Fund has acquired or expects to acquire. As another example, certain Funds may enter into futures transactions to seek a closer correlation between a Fund’s overall currency exposures and the currency exposures of a Fund’s performance benchmark. The Balanced Fund may also use futures contracts to manage the term structure and duration of its fixed-income securities holdings in accordance with that Fund’s investment objective and policies.

     Positions taken in the futures market are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While a Fund will usually liquidate futures contracts on securities or currency in this manner, a Fund may instead make or take delivery of the underlying securities or currency whenever it appears economically advantageous for the Fund to do so. A clearing corporation associated with the exchange on which futures are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date.

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     Hedging Strategies. Hedging, by use of futures contracts, seeks to establish with more certainty than would otherwise be possible the effective price, rate of return or currency exchange rate on portfolio securities or securities that a Fund owns or proposes to acquire. A Fund may, for example, take a “short” position in the futures market by selling futures contracts to seek to hedge against an anticipated rise in interest rates or a decline in market prices or (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) foreign currency rates that would adversely affect the dollar value of such Fund’s portfolio securities. Similarly, each Fund (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) may sell futures contracts on a currency in which its portfolio securities are quoted or denominated, or sell futures contracts on one currency to seek to hedge against fluctuations in the value of securities quoted or denominated in a different currency if there is an established historical pattern of correlation between the two currencies. If, in the opinion of the applicable Investment Adviser, there is a sufficient degree of correlation between price trends for a Fund’s portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, a Fund may also enter into such futures contracts as part of a hedging strategy. Although under some circumstances prices of securities in a Fund’s portfolio may be more or less volatile than prices of such futures contracts, the Investment Advisers will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having a Fund enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting a Fund’s portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of a Fund’s portfolio securities would be substantially offset by a decline in the value of the futures position.

     On other occasions, a Fund may take a “long” position by purchasing such futures contracts. This may be done, for example, when a Fund anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices or currency exchange rates then available in the applicable market to be less favorable than prices or rates that are currently available.

     Options on Futures Contracts. The acquisition of put and call options on futures contracts will give a Fund the right (but not the obligation), for a specified price, to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, a Fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs.

     The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of a Fund’s assets. By writing a call option, a Fund becomes obligated, in exchange for the premium, to sell a futures contract if the option is exercised, which may have a value higher than the exercise price. The writing of a put option on a futures contract generates a premium, which may partially offset an increase in the price of securities that a Fund intends to purchase. However, a Fund becomes obligated (upon the exercise of the option) to purchase a futures contract if the option is exercised, which may have a value lower than the exercise price. Thus, the loss incurred by a Fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. A Fund will incur transaction costs in connection with the writing of options on futures.

     The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same financial instrument. There is no guarantee that such closing

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transactions can be effected. A Fund’s ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market.

     Other Considerations. A Fund will engage in transactions in futures contracts and related options transactions only to the extent such transactions are consistent with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”) for maintaining its qualification as a regulated investment company for federal income tax purposes. Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and, in certain cases, require the Fund to segregate cash or liquid assets. A Fund may cover its transactions in futures contracts and related options through the segregation of cash or liquid assets or by other means, in any manner permitted by applicable law.

     While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, unanticipated changes in interest rates, securities prices or currency exchange rates may result in a poorer overall performance for a Fund than if it had not entered into any futures contracts or options transactions. When futures contracts and options are used for hedging purposes, perfect correlation between a Fund’s futures positions and portfolio positions will be impossible to achieve. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and a Fund may be exposed to risk of loss.

     Perfect correlation between a Fund’s futures positions and portfolio positions will be difficult to achieve, particularly where futures contracts based on individual equity or corporate fixed-income securities are currently not available. In addition, it is not possible for a Fund to hedge fully or perfectly against currency fluctuations affecting the value of securities quoted or denominated in foreign currencies because the value of such securities is likely to fluctuate as a result of independent factors unrelated to currency fluctuations. The profitability of a Fund’s trading in futures depends upon the ability of the Investment Advisers to analyze correctly the futures markets.

Options on Securities and Securities Indices

     Writing Covered Options. Each Fund may write (sell) covered call and put options on any securities in which it may invest. The BRIC Fund may also, to the extent it invests in foreign securities, write (sell) put and call options on foreign currencies. A call option written by a Fund obligates such Fund to sell specified securities to the holder of the option at a specified price if the option is exercised on or before the expiration date. Depending upon the type of call option, the purchaser of a call option either (i) has the right to any appreciation in the value of the security over a fixed price (the “exercise price”) on a certain date in the future (the “expiration date”) or (ii) has the right to any appreciation in the value of the security over the exercise price at any time prior to the expiration of the option. If the purchaser does not exercise the option, a Fund pays the purchaser the difference between the price of the security and the exercise price of the option. The premium, the exercise price and the market value of the security determine the gain or loss realized by a Fund as the seller of the call option. A Fund can also repurchase the call option prior to the expiration date, ending its obligation. In this case, the cost of entering into closing purchase transactions will determine the gain or loss realized by the Fund. All call options written by a Fund are covered, which means that such Fund will own the securities subject to the option as long as the option is outstanding or such Fund will use the other methods described below. A Fund’s purpose in writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, a Fund may forego the opportunity to profit from an increase in the market price of the underlying security.

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     A put option written by a Fund would obligate such Fund to purchase specified securities from the option holder at a specified price if, depending upon the type of put option, either (i) the option is exercised at any time on or before the expiration date or (ii) the option is exercised on the expiration date. All put options written by a Fund would be covered, which means that such Fund will segregate cash or liquid assets with a value at least equal to the exercise price of the put option (less any margin on deposit) or will use the other methods described below. The purpose of writing such options is to generate additional income for the Fund. However, in return for the option premium, each Fund accepts the risk that it may be required to purchase the underlying securities at a price in excess of the securities’ market value at the time of purchase.

     In the case of a call option, the option is “covered” if a Fund owns the instrument underlying the call or has an absolute and immediate right to acquire that instrument without additional cash consideration (or, if additional cash consideration is required, liquid assets in such amount are segregated) upon conversion or exchange of other instruments held by it. A call option is also covered if a Fund holds a call on the same instrument as the option written where the exercise price of the option held is (i) equal to or less than the exercise price of the option written, or (ii) greater than the exercise price of the option written provided the Fund segregates liquid assets in the amount of the difference. A Fund may also cover options on securities by segregating cash or liquid assets, as permitted by applicable law, with a value, when added to any margin on deposit, that is equal to the market value of the securities in the case of a call option. A put option is also covered if a Fund holds a put on the same instrument as the option written where the exercise price of the option held is (i) equal to or higher than the exercise price of the option written, or (ii) less than the exercise price of the option written provided the Fund segregates liquid assets in the amount of the difference.

     A Fund may also write (sell) covered call and put options on any securities index comprised of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security.

     A Fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional consideration which has been segregated by the Fund) upon conversion or exchange of other securities in its portfolio. A Fund may also cover call and put options on a securities index by segregating cash or liquid assets, as permitted by applicable law, with a value, when added to any margin on deposit, that is equal to the market value of the underlying securities in the case of a call option, or the exercise price in the case of a put option, or by owning offsetting options as described above.

     A Fund may terminate its obligations under an exchange traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as “closing purchase transactions.”

     Purchasing Options. Each Fund may purchase put and call options on any securities in which it may invest or options on any securities index comprised of securities in which it may invest. A Fund may also, to

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the extent that it invests in foreign securities, purchase put and call options on foreign currencies. A Fund may also enter into closing sale transactions in order to realize gains or minimize losses on options it had purchased.

     A Fund may purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call option would entitle a Fund, in return for the premium paid, to purchase specified securities at a specified price during the option period. A Fund would ordinarily realize a gain on the purchase of a call option if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise such a Fund would realize either no gain or a loss on the purchase of the call option.

     A Fund may purchase put options in anticipation of a decline in the market value of securities in its portfolio (“protective puts”) or in securities in which it may invest. The purchase of a put option would entitle a Fund, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of a Fund’s securities. Put options may also be purchased by a Fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. A Fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise such a Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying portfolio securities.

     A Fund would purchase put and call options on securities indices for the same purposes as it would purchase options on individual securities. For a description of options on securities indices, see “Writing Covered Options” above.

     Yield Curve Options. The Balanced Fund may enter into options on the yield “spread” or differential between two securities. Such transactions are referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

     The Balanced Fund may purchase or write yield curve options for the same purposes as other options on securities. For example, the Fund may purchase a call option on the yield spread between two securities if it owns one of the securities and anticipates purchasing the other security and wants to hedge against an adverse change in the yield spread between the two securities. The Balanced Fund may also purchase or write yield curve options in an effort to increase current income if, in the judgment of the Investment Adviser, the Fund will be able to profit from movements in the spread between the yields of the underlying securities. The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, however, such options present risk of loss even if the yield of one of the underlying securities remains constant, if the spread moves in a direction or to an extent which was not anticipated.

     Yield curve options written by the Balanced Fund will be “covered.” A call (or put) option is covered if the Fund holds another call (or put) option on the spread between the same two securities and segregates cash or liquid assets sufficient to cover the Fund’s net liability under the two options. Therefore, the Fund’s liability for such a covered option is generally limited to the difference between the amount of such Fund’s liability under

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the option written by the Fund less the value of the option held by the Fund. Yield curve options may also be covered in such other manner as may be in accordance with the requirements of the counterparty with which the option is traded and applicable laws and regulations. Yield curve options are traded over-the-counter and established trading markets for these options may not exist.

     Risks Associated with Options Transactions. There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option or at any particular time. If a Fund is unable to effect a closing purchase transaction with respect to covered options it has written, the Fund will not be able to sell the underlying securities or dispose of segregated assets until the options expire or are exercised. Similarly, if a Fund is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

     Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

     There can be no assurance that higher trading activity, order flow or other unforeseen events might, at times, render certain of the facilities of the Options Clearing Corporation or various exchanges inadequate. Such events have, in the past, resulted in the institution by an exchange of special procedures, such as trading rotations, restrictions on certain types of order or trading halts or suspensions with respect to one or more options. These special procedures may limit liquidity.

     A Fund may purchase and sell both options that are traded on U.S. and foreign exchanges and options traded over-the-counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations.

     Transactions by each Fund in options on securities and indices will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options are traded governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facility or are held in one or more accounts or through one or more brokers. Thus, the number of options which a Fund may write or purchase may be affected by options written or purchased by other investment advisory clients of the Investment Advisers. An exchange, board of trade or other trading facility may order the liquidation of positions found to be in excess of these limits, and it may impose certain other sanctions.

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     The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of options to seek to increase total return involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices or interest rates. The successful use of options for hedging purposes also depends in part on the ability of the Investment Adviser to manage future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the Investment Adviser is incorrect in its expectation of changes in securities prices or determination of the correlation between the securities or securities indices on which options are written and purchased and the securities in a Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The writing of options could increase a Fund’s portfolio turnover rate and, therefore, associated brokerage commissions or spreads.

Real Estate Investment Trusts

     Each Fund may invest in shares of real estate investment trusts (“REITs”). REITs are pooled investment vehicles which invest primarily in real estate or real estate related loans. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Like regulated investment companies such as the Funds, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the Code. A Fund will indirectly bear its proportionate share of any expenses paid by REITs in which it invests in addition to the expenses paid by a Fund.

     Investing in REITs involves certain unique risks. Equity REITs may be affected by changes in the value of the underlying property owned by such REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified (except to the extent the Code requires), and are subject to the risks of financing projects. REITs are subject to heavy cash flow dependency, default by borrowers, self-liquidation, and the possibilities of failing to qualify for the exemption from tax for distributed income under the Code and failing to maintain their exemptions from the Act. REITs (especially mortgage REITs) are also subject to interest rate risks.

Warrants and Stock Purchase Rights

     Each Fund may invest in warrants or rights (in addition to those acquired in units or attached to other securities) which entitle the holder to buy equity securities at a specific price for a specific period of time. A Fund will invest in warrants and rights only if such equity securities are deemed appropriate by the Investment Adviser for investment by the Fund. The Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds have no present intention of acquiring warrants or rights. Warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.

Foreign Securities

     Each Fund may invest in securities of foreign issuers. The Balanced, Growth and Income, Capital Growth, Strategic Growth, Growth Opportunities and Concentrated Growth Funds may invest in the aggregate

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up to 20%, 25%, 25%, 25%, 25% and 25%, respectively, of their total assets (not including securities lending collateral and any investment of that collateral) in foreign securities. The Small/Mid Cap Growth, Mid Cap Value, Small Cap Value and Large Cap Value Funds may invest in the aggregate up to 25% of their respective net assets plus any borrowings (measured at the time of purchase) in foreign securities. The Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds will invest primarily in foreign securities under normal circumstances. With respect to the Structured U.S. Equity, Structured Large Cap Growth, Structured Large Cap Value and Structured Small Cap Equity Funds, equity securities of foreign issuers must be traded in the United States.

     Investments in foreign securities may offer potential benefits not available from investments solely in U.S. dollar-denominated or quoted securities of domestic issuers. Such benefits may include the opportunity to invest in foreign issuers that appear, in the opinion of the applicable Investment Adviser, to offer the opportunity for potential long-term growth of capital and income, the opportunity to invest in foreign countries with economic policies or business cycles different from those of the United States and the opportunity to take advantage of foreign stock markets that do not necessarily move in a manner parallel to U.S. markets.

     Investing in foreign securities involves certain special risks, including those discussed in the Funds’ Prospectuses and those set forth below, which are not typically associated with investing in U.S. dollar-denominated or quoted securities of U.S. issuers. Investments in foreign securities usually involve currencies of foreign countries. Accordingly, a Fund that invests in foreign securities may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations and may incur costs in connection with conversions between various currencies. The Balanced, Growth and Income, Structured International Equity, Capital Growth, Strategic Growth, Small/Mid Cap Growth, Growth Opportunities, Mid Cap Value, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Asia Equity, Emerging Markets Equity, BRIC and Concentrated Growth Funds may be subject to currency exposure independent of their securities positions. To the extent that a Fund is fully invested in foreign securities while also maintaining currency positions, it may be exposed to greater combined risk.

     Currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks or the failure to intervene or by currency controls or political developments in the United States or abroad.

     Since foreign issuers generally are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies, there may be less publicly available information about a foreign company than about a U.S. company. Volume and liquidity in most foreign securities markets are less than in the United States and securities of many foreign companies are less liquid and more volatile than securities of comparable U.S. companies. The securities of foreign issuers may be listed on foreign securities exchanges or traded in foreign over-the-counter markets. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although each Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed and

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unlisted companies than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States.

     Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when some of a Fund’s assets are uninvested and no return is earned on such assets. The inability of a Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the portfolio securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, limitations on the movement of funds and other assets between different countries, political or social instability, or diplomatic developments which could adversely affect a Fund’s investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.

     The BRIC Fund may invest in markets where custodial and/or settlement systems are not fully developed. The assets of the Fund that are traded in such markets and which have been entrusted to such sub-custodians may be exposed to risk in circumstances where the sub-custodian will have no liability.

     Each Fund may invest in foreign securities which take the form of sponsored and unsponsored American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) and (except for Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) may also invest in European Depositary Receipts (“EDRs”) or other similar instruments representing securities of foreign issuers (together, “Depositary Receipts”).

     ADRs represent the right to receive securities of foreign issuers deposited in a domestic bank or a correspondent bank. ADRs are traded on domestic exchanges or in the U.S. over-the-counter market and, generally, are in registered form. EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in the non-U.S. securities markets. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security.

     To the extent a Fund acquires Depositary Receipts through banks which do not have a contractual relationship with the foreign issuer of the security underlying the Depositary Receipts to issue and service such unsponsored Depositary Receipts, there may be an increased possibility that the Fund would not become aware of and be able to respond to corporate actions such as stock splits or rights offerings involving the foreign issuer in a timely manner. In addition, the lack of information may result in inefficiencies in the valuation of such instruments. Investment in Depositary Receipts does not eliminate all the risks inherent in investing in securities of non-U.S. issuers. The market value of Depositary Receipts is dependent upon the market value of the underlying securities and fluctuations in the relative value of the currencies in which the Depositary Receipts and the underlying securities are quoted. However, by investing in Depositary Receipts, such as ADRs, that are quoted in U.S. dollars, a Fund may avoid currency risks during the settlement period for purchases and sales.

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     As described more fully below, each Fund (except the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) may invest in countries with emerging economies or securities markets. Political and economic structures in many of such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of such countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. See “Investing in Emerging Markets, including Asia and Eastern Europe,” below.

     Investing in Emerging Countries, including Asia, Eastern Europe, Brazil, Russia, India and China. The Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds are intended for long-term investors who can accept the risks associated with investing primarily in equity and equity-related securities of foreign issuers, including emerging country issuers, as well as the risks associated with investments quoted or denominated in foreign currencies. The Balanced, Growth and Income, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Mid Cap Value, Small Cap Value and Concentrated Growth Funds may invest, to a lesser extent, in equity and equity-related securities of foreign issuers, including emerging country issuers.

     The securities markets of emerging countries are less liquid and subject to greater price volatility, and have a smaller market capitalization, than the U.S. securities markets. In certain countries, there may be fewer publicly traded securities and the market may be dominated by a few issues or sectors. Issuers and securities markets in such countries are not subject to as extensive and frequent accounting, financial and other reporting requirements or as comprehensive government regulations as are issuers and securities markets in the U.S. In particular, the assets and profits appearing on the financial statements of emerging country issuers may not reflect their financial position or results of operations in the same manner as financial statements for U.S. issuers. Substantially less information may be publicly available about emerging country issuers than is available about issuers in the United States.

     Emerging country securities markets are typically marked by a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of ownership of such securities by a limited number of investors. The markets for securities in certain emerging countries are in the earliest stages of their development. Even the markets for relatively widely traded securities in emerging countries may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the securities markets of developed countries. The limited size of many of these securities markets can cause prices to be erratic for reasons apart from factors that affect the soundness and competitiveness of the securities issuers. For example, prices may be unduly influenced by traders who control large positions in these markets. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets. The limited liquidity of emerging country securities may also affect a Fund’s ability to accurately value its portfolio securities or to acquire or dispose of securities at the price and time it wishes to do so or in order to meet redemption requests.

     With respect to investments in certain emerging market countries, antiquated legal systems may have an adverse impact on the Funds. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder’s investment, the

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notion of limited liability is less clear in certain emerging market countries. Similarly, the rights of investors in emerging market companies may be more limited than those of shareholders of U.S. corporations.

     Transaction costs, including brokerage commissions or dealer mark-ups, in emerging countries may be higher than in the United States and other developed securities markets. In addition, existing laws and regulations are often inconsistently applied. As legal systems in emerging countries develop, foreign investors may be adversely affected by new or amended laws and regulations. In circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the law.

     Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees. These restrictions may limit a Fund’s investment in certain emerging countries and may increase the expenses of the Fund. Certain emerging countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the company available for purchase by nationals. In addition, the repatriation of both investment income and capital from emerging countries may be subject to restrictions which require governmental consents or prohibit repatriation entirely for a period of time. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain aspects of the operation of a Fund. A Fund may be required to establish special custodial or other arrangements before investing in certain emerging countries.

     Emerging countries may be subject to a substantially greater degree of economic, political and social instability and disruption than is the case in the United States, Japan and most Western European countries. This instability may result from, among other things, the following: (i) authoritarian governments or military involvement in political and economic decision making, including changes or attempted changes in governments through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic or social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; (v) ethnic, religious and racial disaffection or conflict; and (vi) the absence of developed legal structures governing foreign private investments and private property. Such economic, political and social instability could disrupt the principal financial markets in which the Funds may invest and adversely affect the value of the Funds’ assets. A Fund’s investments can also be adversely affected by any increase in taxes or by political, economic or diplomatic developments.

     Certain Funds may seek investment opportunities within former “east bloc” countries in Eastern Europe. The BRIC Fund will also seek investment opportunities within China and Russia. Most of these countries had a centrally planned, socialist economy for a substantial period of time. The governments of many of these countries have more recently been implementing reforms directed at political and economic liberalization, including efforts to decentralize the economic decision-making process and move towards a market economy. However, business entities in China, Russia and many Eastern European countries do not have an extended history of operating in a market-oriented economy, and the ultimate impact of these countries’ attempts to move toward more market-oriented economies is currently unclear. In addition, any change in the leadership or policies of these countries may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect existing investment opportunities.

     The economies of emerging countries may differ unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance

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of payments. Many emerging countries have experienced in the past, and continue to experience, high rates of inflation. In certain countries inflation has at times accelerated rapidly to hyperinflationary levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries. Other emerging countries, on the other hand, have recently experienced deflationary pressures and are in economic recessions. The economies of many emerging countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners. In addition, the economies of some emerging countries are vulnerable to weakness in world prices for their commodity exports.

     A Fund’s income and, in some cases, capital gains from foreign stocks and securities will be subject to applicable taxation in certain of the countries in which it invests, and treaties between the U.S. and such countries may not be available in some cases to reduce the otherwise applicable tax rates. See “Taxation.”

     Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of a Fund remain uninvested and no return is earned on such assets. The inability of a Fund to make intended security purchases or sales due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the portfolio securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser.

     Investing in Japan. The Japanese Equity Fund invests primarily in Japanese companies. Japan’s economy grew substantially after World War II. The boom in Japan’s equity and property markets during the expansion of the late 1980’s supported high rates of investment and consumer spending on durable goods, but both of these components of demand subsequently retreated sharply following a decline in asset prices. More recently, Japan’s economic growth has been substantially below the levels of earlier decades. The banking sector has continued to suffer from non-performing loans and the economy generally has been subject to deflationary pressures. Many Japanese banks have required public funds to avert insolvency, and large amounts of bad debt have prevented banks from expanding their loan portfolios despite low discount rates. In 2003, Japan’s Financial Services Agency established the Industrial Revitalization Corporation Japan (“IRCJ”) to assist in cleaning up the non-performing loans of the Japanese banking sector. The IRCJ is modeled after the Resolution Trust Corporation, which was created in the United States to address the savings and loans crisis, and is scheduled to complete its work and be dissolved in 2008. However, several banks paid back all their public money in 2006. Recent economic performance has shown improvements with positive growth in gross domestic product in 2004 and 2005 and a reduction in non-performing loans since 2002.

     Like many European countries, Japan is experiencing a deterioration of its competitiveness. Factors contributing to this include high wages, a generous pension and universal health care system, an aging populace and structural rigidities. Japan is reforming its political process and deregulating its economy to address this situation. Among other things, the Japanese labor market is moving from a system of lifetime company employment in response to the need for increased labor mobility, and corporate governance systems are being introduced to new accounting rules, decision-making mechanisms and managerial incentives. Internal conflict over the proper way to reform the financial system will continue as Japan Post’s banking, insurance and delivery service undergoes privatization between 2007 and 2017. Japan’s huge government debt which currently totals 170% of GDP is also a major long-run problem.

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     The conservative Liberal Democratic Party has been in power since 1955, except for a short-lived coalition government formed from opposition parties in 1993 following the economic crisis of 1990-1992. Former Prime Minister Junichiro Koizumi focused on stabilizing the Japanese banking system to allow for sustained economic recovery. It is too soon to know where current Prime Minister Shinzo Abe, elected in September 2006, will focus. However, he has placed reformers on the Council of Economic and Fiscal Policy and indicated an interest in foreign policy. Future political developments may lead to changes in policy that might adversely affect a Fund’s investments.

     Japan’s heavy dependence on international trade has been adversely affected by trade tariffs and other protectionist measures as well as the economic condition of its trading partners. While Japan subsidizes its agricultural industry, only approximately 12% of its land is suitable for cultivation and the country must import 60% of its requirements for grains (other than rice) and fodder crops. In addition, its export industry, its most important economic sector, depends on imported raw materials and fuels, including iron ore, copper, oil and many forest products. As a result, Japan is sensitive to fluctuations in commodity prices. Japan’s high volume of exports, such as automobiles, machine tools and semiconductors, have caused trade tensions, particularly with the United States. Some trade agreements, however, have been implemented to reduce these tensions and members of the Council on Economic and Fiscal Policy have indicated an interest in seeking more free trade agreements. The relaxing of official and de facto barriers to imports, or hardships created by any pressures brought by trading partners, could adversely affect Japan’s economy. A substantial rise in world oil or commodity prices could also have a negative effect. The Japanese yen has fluctuated widely during recent periods. A weak yen is disadvantageous to U.S. shareholders investing in yen-denominated securities. A strong yen, however, could be an impediment to strong continued exports and economic recovery, because it makes Japanese goods sold in other countries more expensive and reduces the value of foreign earnings repatriated to Japan. Because the Japanese economy is so dependent on exports, any fall-off in exports may be seen as a sign of economic weakness, which may adversely affect the market.

     Reporting, accounting, and auditing practices for the Japanese market are similar to those in the United States, for the most part, with certain exceptions. In particular, the Japanese government does not require companies to provide the same depth and frequency of disclosure required by U.S. law.

     Geologically, Japan is located in a volatile area of the world, and has historically been vulnerable to earthquakes, volcanoes and other natural disasters. As demonstrated by the Kobe earthquake in January of 1995, in which 5,000 people were killed and billions of dollars of damage was sustained, these natural disasters can be significant enough to affect the country’s economy.

     Investing in Brazil. In addition to the risks listed above under “Foreign Securities” and “Investing in Emerging Countries, including Brazil, Russia, India and China,” investing in Brazil presents additional risks.

     The Brazilian government has exercised and continues to exercise substantial influence over many aspects of the private sector by legislation and regulation, including regulation of prices and wages.

     Brazilian law imposes certain limitations and controls which generally affect foreign investors in Brazil. Under current Brazilian law, the Fund may repatriate income received from dividends and interest earned on, and net realized capital gains from, its investments in Brazilian securities. Under current Brazilian law, whenever there occurs a serious imbalance in Brazil’s balance of payments or serious reasons to foresee the imminence of such an imbalance, the Monetary Council may, for a limited period, impose restrictions on

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foreign capital remittances abroad. Exchange control regulations, which may restrict repatriation of investment income, capital or the proceeds of securities sales by foreign investors, may limit the Fund’s ability to make sufficient distributions, within applicable time periods, to qualify for the favorable U.S. tax treatment afforded to regulated investment companies.

     The Fund is unable to predict whether further economic reforms or modifications to the existing policies by the Brazilian government may adversely affect the liquidity of the Brazilian stock market in the future.

     Investing in Russia. In addition to the risks listed above under “Foreign Securities” and “Investing in Emerging Countries, including Brazil, Russia, India and China,” investing in Russia presents additional risks.

     Investing in Russian securities is highly speculative and involves significant risks and special considerations not typically associated with investing in the securities markets of the U.S. and most other developed countries.

     Over the past century, Russia has experienced political, social and economic turbulence and has endured decades of communist rule under which tens of millions of its citizens were collectivized into state agricultural and industrial enterprises. Since the collapse of the Soviet Union, Russia’s government has been faced with the daunting task of stabilizing its domestic economy, while transforming it into a modern and efficient structure able to compete in international markets and respond to the needs of its citizens. However, to date, many of the country’s economic reform initiatives have floundered as the proceeds of International Monetary Fund and other economic assistance have been squandered or stolen. In this environment, there is always the risk that the nation’s government will abandon the current program of economic reform and replace it with radically different political and economic policies that would be detrimental to the interests of foreign investors. This could entail a return to a centrally planned economy and nationalization of private enterprises similar to what existed under the old Soviet Union.

     Terrorism and related geo-political risks have led, and may in the future lead, to increased short-term market volatility and may have adverse long-term effects on world economies and markets generally.

     Many of Russia’s businesses have failed to mobilize the available factors of production because the country’s privatization program virtually ensured the predominance of the old management teams that are largely non-market-oriented in their management approach. Poor accounting standards, inept management, pervasive corruption, insider trading and crime, and inadequate regulatory protection for the rights of investors all pose a significant risk, particularly to foreign investors. In addition, there is the risk that the Russian tax system will not be reformed to prevent inconsistent, retroactive, and/or exorbitant taxation, or, in the alternative, the risk that a reformed tax system may result in the inconsistent and unpredictable enforcement of the new tax laws.

     Compared to most national stock markets, the Russian securities market suffers from a variety of problems not encountered in more developed markets. There is little long-term historical data on the Russian securities market because it is relatively new and a substantial proportion of securities transactions in Russia are privately negotiated outside of stock exchanges. The inexperience of the Russian securities market and the limited volume of trading in securities in the market may make obtaining accurate prices on portfolio securities from independent sources more difficult than in more developed markets. Additionally, because of less stringent auditing and financial reporting standards that apply to U.S. companies, there is little solid corporate

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information available to investors. As a result, it may be difficult to assess the value or prospects of an investment in Russian companies. Stocks of Russian companies also may experience greater price volatility than stocks of U.S. companies.

     Because of the recent formation of the Russian securities market as well as the underdeveloped state of the banking and telecommunications systems, settlement, clearing and registration of securities transactions are subject to significant risks. Ownership of shares (except where shares are held through depositories that meet the requirements of the Act) is defined according to entries in the company’s share register and normally evidenced by extracts from the register or by formal share certificates. However, there is no central registration system for shareholders and these services are carried out by the companies themselves or by registrars located throughout Russia. These registrars are not necessarily subject to effective state supervision nor are they licensed with any governmental entity and it is possible for the Fund to lose its registration through fraud, negligence, or even mere oversight. While the Fund will endeavor to ensure that its interest continues to be appropriately recorded either itself or through a custodian or other agent inspecting the share register and by obtaining extracts of share registers through regular confirmations, these extracts have no legal enforceability and it is possible that subsequent illegal amendment or other fraudulent act may deprive the Fund of its ownership rights or improperly dilute its interests. In addition, while applicable Russian regulations impose liability on registrars for losses resulting from their errors, it may be difficult for the Fund to enforce any rights it may have against the registrar or issuer of the securities in the event of loss of share registration. Furthermore, significant delays or problems may occur in registering the transfer of securities, which could cause the Fund to incur losses due to a counterparty’s failure to pay for securities the Fund has delivered or the Fund’s inability to complete its contractual obligations because of theft or other reasons. The Fund also may experience difficulty in obtaining and/or enforcing judgments in Russia.

     The Russian economy is heavily dependent upon the export of a range of commodities including most industrial metals, forestry products, oil, and gas. Accordingly, it is strongly affected by international commodity prices and is particularly vulnerable to any weakening in global demand for these products.

     Foreign investors also face a high degree of currency risk when investing in Russian securities and a lack of available currency hedging instruments. In a surprise move in August 1998, Russia devalued the ruble, defaulted on short-term domestic bonds, and imposed a moratorium on the repayment of its international debt and the restructuring of the repayment terms. These actions have negatively affected Russian borrowers’ ability to access international capital markets and have had a damaging impact on the Russian economy. In light of these and other government actions, foreign investors face the possibility of further devaluations. In addition, there is the risk the government may impose capital controls on foreign portfolio investments in the event of extreme financial or political crisis. Such capital controls would prevent the sale of a portfolio of foreign assets and the repatriation of investment income and capital.

     Investing in India. In addition to the risks listed above under “Foreign Securities” and “Investing in Emerging Countries, including Brazil, Russia, India and China,” investing in India presents additional risks.

     Securities of many issuers in the Indian market may be less liquid and more volatile than securities of comparable domestic issuers, but may offer the potential for higher returns over the long term. The securities held by the Fund will generally be denominated in foreign currency, mainly the rupee. Accordingly, the value of the Fund will fluctuate depending on the rate of exchange between the U.S. dollar and the foreign currency. India has less developed clearance and settlement procedures, and there have been times when settlements have

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been unable to keep pace with the volume of securities and have been significantly delayed. The Indian stock exchanges have in the past been subject to repeated closure and there can be no certainty that this will not recur. In addition, significant delays are common in registering transfers of securities and the Fund may be unable to sell securities until the registration process is completed and may experience delays in receipt of dividends and other entitlements.

     The value of the Fund’s investments in Indian securities may also be affected by political and economic developments, social, religious or regional tensions, changes in government regulation and government intervention, high rates of inflation or interest rates and withholding tax affecting India. The risk of loss may also be increased because there may be less information available about Indian issuers since they are not subject to the extensive accounting, auditing and financial reporting standards and practices which are applicable in North America. There is also a lower level of regulation and monitoring of the Indian securities market and its participants than in other more developed markets.

     Foreign investment in the securities of issuers in India is usually restricted or controlled to some degree. In India, “Foreign Institutional Investors” (“FIIs”) may predominately invest in exchange-traded securities (and securities to be listed, or those approved on the over-the-counter exchange of India) subject to the conditions specified in the guidelines for Direct Foreign Investment by FIIs in India (the “Guidelines”), published in a Press Note dated September 14, 1992, issued by the Government of India, Ministry of Finance, Investment Division. FIIs have to apply for registration to the Securities and Exchange Board of India (“SEBI”) and to the Reserve Bank of India for permission to trade in Indian securities. The Guidelines require SEBI to take into account the track record of the FII, its professional competence, financial soundness, experience and other relevant criteria. SEBI must also be satisfied that suitable custodial arrangements are in place for the Indian securities. GSAM is a registered FII and the inclusion of the Fund in GSAM’s registration was approved by SEBI. FIIs are required to observe certain investment restrictions, including an account ownership ceiling of 5% of the total issued share capital of any one company. In addition, the shareholdings of all registered FIIs, together with the shareholdings of non-resident Indian individuals and foreign bodies corporate substantially owned by non-resident Indians, may not exceed 40% of the issued share capital of any one company (subject to that company’s approval). Only registered FIIs and non-Indian mutual funds that comply with certain statutory conditions may make direct portfolio investments in exchange-traded Indian securities. Income, gains and initial capital with respect to such investments are freely repatriable, subject to payment of applicable Indian taxes.

     There can be no assurance that these investment control regimes will not change in a way that makes it more difficult or impossible for the Fund to implement its investment objective or repatriate its income, gains and initial capital from these countries. Similar risks and considerations will be applicable to the extent the Fund invests in other countries.

     A tax of 10% plus surcharges is currently imposed on gains from sales of equities held not more than one year and sold on a recognized stock exchange in India. There is no tax on gains from sales of equities held for more than one year and sold on a recognized stock exchange in India. Gains from sales of equity securities in other cases are taxed at a rate of 30% plus surcharges (for securities held not more than one year) and 10% (for securities held for more than one year).

     The tax rate on gains from sales of listed debt securities is currently 10% plus surcharges if the securities have been held more than one year and 30% plus surcharges if the securities have been held not more than one

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year. Securities transaction tax applies for specified transactions at specified rates. India imposes a tax on interest on securities at a rate of 20% plus surcharges. This tax is imposed on the investor. India imposes a tax on dividends paid by an Indian company at a rate of 12.5% plus surcharges. This tax is imposed on the company which pays the dividends.

     A high proportion of the shares of many issuers in India may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment. The prices at which investments may be acquired may be affected by trading by persons with material non-public information and by securities transactions by brokers in anticipation of transactions by the Fund in particular securities. Similarly, volume and liquidity in the bond markets in India are less than in the United States and, at times, price volatility can be greater than in the United States. The limited liquidity of securities markets in India may also affect the ability to acquire or dispose of securities at the price and time it wishes to do so. In addition, India’s securities markets are susceptible to being influenced by large investors trading significant blocks of securities.

     India’s stock market is undergoing a period of growth and change which may result in trading volatility and difficulties in the settlement and recording of transactions, and in interpreting and applying the relevant law and regulations. The securities industry in India is comparatively underdeveloped. Stockbrokers and other intermediaries in India may not perform as well as their counterparts in the United States and other more developed securities markets.

     Political and economic structures in India are undergoing significant evolution and rapid development, and may lack the social, political and economic stability characteristic of the United States. The risks described above, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the values of investments in India and the availability of additional investments. The laws in India relating to limited liability of corporate shareholders, fiduciary duties of officers and directors, and the bankruptcy of state enterprises are generally less well developed than or different from such laws in the United States. It may be more difficult to obtain or enforce a judgment in the courts in India than it is in the United States. Monsoons and natural disasters also can affect the value of investments.

     The Investment Adviser will take into account the effects on returns of local taxation. India may require withholding on dividends paid on portfolio securities and on realized capital gains. In the past, these taxes have sometimes been substantial. There can be no assurance that repatriation of the Fund’s income, gains or initial capital from India can occur.

     India’s guidelines under which foreign investors, such as the Fund, may invest directly in Indian securities are new and evolving. There is no guarantee that the guidelines under which the Fund has been established will not be changed.

     Investing in China. In addition to the risks listed above under “Foreign Securities” and “Investing in Emerging Countries, including Brazil, Russia, India and China,” investing in China presents additional risks.

     Investing in China involves a high degree of risk and special considerations not typically associated with investing in other more established economies or securities markets. Such risks may include: (a) the risk of nationalization or expropriation of assets or confiscatory taxation; (b) greater social, economic and political

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uncertainty (including the risk of war); (c) dependency on exports and the corresponding importance of international trade; (d) the increasing competition from Asia’s other low-cost emerging economies; (e) greater price volatility and significantly smaller market capitalization of securities markets; (f) substantially less liquidity, particularly of certain share classes of Chinese securities; (g) currency exchange rate fluctuations and the lack of available currency hedging instruments; (h) higher rates of inflation; (i) controls on foreign investment and limitations on repatriation of invested capital and on the Fund’s ability to exchange local currencies for U.S. dollars; (j) greater governmental involvement in and control over the economy; (k) the risk that the Chinese government may decide not to continue to support the economic reform programs implemented since 1978 and could return to the prior, completely centrally planned, economy; (l) the fact that China companies, particularly those located in China, may be smaller, less seasoned and newly-organized companies; (m) the difference in, or lack of, auditing and financial reporting standards which may result in unavailability of material information about issuers, particularly in China; (n) the fact that statistical information regarding the economy of China may be inaccurate or not comparable to statistical information regarding the U.S. or other economies; (o) the less extensive, and still developing, regulation of the securities markets, business entities and commercial transactions; (p) the fact that the settlement period of securities transactions in foreign markets may be longer; (q) the willingness and ability of the Chinese government to support the Chinese and Hong Kong economies and markets is uncertain; (r) the risk that it may be more difficult, or impossible, to obtain and/or enforce a judgment than in other countries; and (s) the rapidity and erratic nature of growth, particularly in China, resulting in inefficiencies and dislocations.

     Investment in China is subject to certain political risks. Following the establishment of the People’s Republic of China by the Communist Party in 1949, the Chinese government renounced various debt obligations incurred by China’s predecessor governments, which obligations remain in default, and expropriated assets without compensation. There can be no assurance that the Chinese government will not take similar action in the future. The political reunification of China and Taiwan is a highly problematic issue and is unlikely to be settled in the near future. This situation poses a threat to Taiwan’s economy and could negatively affect its stock market. China has committed by treaty to preserve Hong Kong’s autonomy and its economic, political and social freedoms for fifty years from the July 1, 1997 transfer of sovereignty from Great Britain to China. However, if China would exert its authority so as to alter the economic, political or legal structures or the existing social policy of Hong Kong, investor and business confidence in Hong Kong could be negatively affected, which in turn could negatively affect markets and business performance.

     Forward Foreign Currency Exchange Contracts. The Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Mid Cap Value, Small Cap Value, Large Cap Value and Concentrated Growth Funds may enter into forward foreign currency exchange contracts for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. The Balanced, Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds may enter into forward foreign currency exchange contracts for hedging purposes, to seek to protect against anticipated changes in future foreign currency exchange rates and to seek to increase total return. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are generally charged at any stage for trades.

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     At the maturity of a forward contract a Fund may either accept or make delivery of the currency specified in the contract or, at or prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are often, but not always, effected with the currency trader who is a party to the original forward contract.

     A Fund may enter into forward foreign currency exchange contracts in several circumstances. First, when a Fund enters into a contract for the purchase or sale of a security denominated or quoted in a foreign currency, or when a Fund anticipates the receipt in a foreign currency of dividend or interest payments on such a security which it holds, the Fund may desire to “lock in” the U.S. dollar price of the security or the U.S. dollar equivalent of such dividend or interest payment, as the case may be. By entering into a forward contract for the purchase or sale, for a fixed amount of dollars, of the amount of foreign currency involved in the underlying transactions, the Fund will attempt to protect itself against an adverse change in the relationship between the U.S. dollar and the subject foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which such payments are made or received.

     Additionally, when the Investment Adviser believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, it may enter into a forward contract to sell, for a fixed amount of U.S. dollars, the amount of foreign currency approximating the value of some or all of such Fund’s portfolio securities quoted or denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Using forward contracts to protect the value of a Fund’s portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange, which a Fund can achieve at some future point in time. The precise projection of short-term currency market movements is not possible, and short-term hedging provides a means of fixing the U.S. dollar value of only a portion of a Fund’s foreign assets.

     Each Fund may engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value of securities quoted or denominated in a different currency. In addition, certain Funds may enter into foreign currency transactions to seek a closer correlation between a Fund’s overall currency exposures and the currency exposures of a Fund’s performance benchmark.

     The Balanced, Small/Mid Cap Growth, Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity and Asia Equity Funds may also enter into forward contracts to seek to increase total return. Unless otherwise covered in accordance with applicable regulations, cash or liquid assets of a Fund will be segregated in an amount equal to the value of the Fund’s total assets committed to the consummation of forward foreign currency exchange contracts. If the value of the segregated assets declines, additional cash or liquid assets will be segregated so that the value of the assets will equal the amount of a Fund’s commitments with respect to such contracts.

     While a Fund may enter into forward contracts to reduce currency exchange rate risks, transactions in such contracts involve certain other risks. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had

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not engaged in any such transactions. Moreover, there may be imperfect correlation between a Fund’s portfolio holdings of securities quoted or denominated in a particular currency and forward contracts entered into by such Fund. Such imperfect correlation may cause a Fund to sustain losses which will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

     Markets for trading foreign forward currency contracts offer less protection against defaults than is available when trading in currency instruments on an exchange. Forward contracts are subject to the risk that the counterparty to such contract will default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price. In addition, the institutions that deal in forward currency contracts are not required to continue to make markets in the currencies they trade and these markets can experience periods of illiquidity. A Fund will not enter into forward foreign currency exchange contracts, currency swaps or other privately negotiated currency instruments unless the credit quality of the unsecured senior debt or the claims-paying ability of the counterparty is considered to be investment grade by the Investment Adviser. To the extent that a substantial portion of a Fund’s total assets, adjusted to reflect the Fund’s net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries.

     Writing and Purchasing Currency Call and Put Options. A Fund may, to the extent that it invests in foreign securities, write and purchase put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of foreign portfolio securities and against increases in the U.S. dollar cost of foreign securities to be acquired. As with other kinds of option transactions, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received. If and when a Fund seeks to close out an option, the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against exchange rate fluctuations; however, in the event of exchange rate movements adverse to a Fund’s position, the Fund may forfeit the entire amount of the premium plus related transaction costs. Options on foreign currencies may be traded on U.S. and foreign exchanges or over-the-counter.

     Options on currency may also be used for cross-hedging purposes, which involves writing or purchasing options on one currency to seek to hedge against changes in exchange rates for a different currency with a pattern of correlation, or to seek to increase total return when the Investment Adviser anticipates that the currency will appreciate or depreciate in value, but the securities quoted or denominated in that currency do not present attractive investment opportunities and are not included in the Fund’s portfolio.

     A call option written by a Fund obligates a Fund to sell a specified currency to the holder of the option at a specified price if the option is exercised before the expiration date. A put option written by a Fund would obligate a Fund to purchase a specified currency from the option holder at a specified price if the option is exercised before the expiration date. The writing of currency options involves a risk that a Fund will, upon exercise of the option, be required to sell currency subject to a call at a price that is less than the currency’s market value or be required to purchase currency subject to a put at a price that exceeds the currency’s market value. Written put and call options on foreign currencies may be covered in a manner similar to written put and call options on securities and securities indices described under “Writing Covered Options” above.

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     A Fund may terminate its obligations under a call or put option by purchasing an option identical to the one it has written. Such purchases are referred to as “closing purchase transactions.” A Fund may enter into closing sale transactions in order to realize gains or minimize losses on options purchased by the Fund.

     A Fund may purchase call options on foreign currency in anticipation of an increase in the U.S. dollar value of currency in which securities to be acquired by a Fund are quoted or denominated. The purchase of a call option would entitle the Fund, in return for the premium paid, to purchase specified currency at a specified price during the option period. A Fund would ordinarily realize a gain if, during the option period, the value of such currency exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the call option.

     A Fund may purchase put options in anticipation of a decline in the U.S. dollar value of currency in which securities in its portfolio are quoted or denominated (“protective puts”). The purchase of a put option would entitle a Fund, in exchange for the premium paid, to sell specified currency at a specified price during the option period. The purchase of protective puts is usually designed to offset or hedge against a decline in the dollar value of a Fund’s portfolio securities due to currency exchange rate fluctuations. A Fund would ordinarily realize a gain if, during the option period, the value of the underlying currency decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of underlying currency or portfolio securities.

     As noted, in addition to using options for the hedging purposes described above, the Funds may use options on currency to seek to increase total return. The Funds may write (sell) covered put and call options on any currency in order to realize greater income than would be realized on portfolio securities transactions alone. However, in writing covered call options for additional income, the Funds may forego the opportunity to profit from an increase in the market value of the underlying currency. Also, when writing put options, the Funds accept, in return for the option premium, the risk that they may be required to purchase the underlying currency at a price in excess of the currency’s market value at the time of purchase.

     Special Risks Associated with Options on Currency. An exchange-traded options position may be closed out only on an options exchange that provides a secondary market for an option of the same series. Although a Fund will generally purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time. For some options no secondary market on an exchange may exist. In such event, it might not be possible to effect closing transactions in particular options, with the result that a Fund would have to exercise its options in order to realize any profit and would incur transaction costs upon the sale of underlying securities pursuant to the exercise of put options. If a Fund as a covered call option writer is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying currency (or security quoted or denominated in that currency), or dispose of the segregated assets, until the option expires or it delivers the underlying currency upon exercise.

     There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain of the facilities of the Options Clearing Corporation inadequate, and thereby result in the

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institution by an exchange of special procedures which may interfere with the timely execution of customers’ orders.

     A Fund may purchase and write over-the-counter options to the extent consistent with its limitation on investments in illiquid securities. Trading in over-the-counter options is subject to the risk that the other party will be unable or unwilling to close out options purchased or written by a Fund.

     The amount of the premiums, which a Fund may pay or receive, may be adversely affected as new or existing institutions, including other investment companies, engage in or increase their option purchasing and writing activities.

Currency Swaps, Mortgage Swaps, Credit Swaps, Total Return Swaps, Options on Swaps, Index Swaps and Interest Rate Swaps, Caps, Floors and Collars

     The Balanced, Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds may enter into currency swaps for both hedging purposes and to seek to increase total return. In addition, the Balanced Fund may enter into mortgage, credit, total return, index and interest rate swaps and other interest rate swap arrangements such as rate caps, floors and collars, for hedging purposes or to seek to increase total return. The Balanced Fund may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. Currency swaps involve the exchange by a Fund with another party of their respective rights to make or receive payments in specified currencies. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Index swaps involve the exchange by a Fund with another party of the respective amounts payable with respect to a notional principal amount at interest rates equal to two specified indices. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses of an underlying security. Credit swaps give one party to a transaction the right to dispose of or acquire an asset (or group of assets), or the right to receive from or make a payment to the other party, upon the occurrence of specified credit events. Total return swaps are contracts that obligate a party to pay or receive interest in exchange for the payment by the other party of the total return generated by a security, a basket of securities, an index or an index component. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.

     A great deal of flexibility is possible in the way swap transactions are structured. However, generally a Fund will enter into interest rate, total return, credit, mortgage and index swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net

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amount of the two payments. Interest rate, total return, credit, index and mortgage swaps do not normally involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate, total return, credit, index and mortgage swaps is normally limited to the net amount of interest payments that the Fund is contractually obligated to make. If the other party to an interest rate, total return, credit, index or mortgage swap defaults, the Fund’s risk of loss consists of the net amount of interest payments that the Fund is contractually entitled to receive. In contrast, currency swaps usually involve the delivery of a gross payment stream in one designated currency in exchange for the gross payment stream in another designated currency. Therefore, the entire payment stream under a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations. To the extent that the Fund’s exposure in a transaction involving a swap, a swaption or an interest rate floor, cap or collar is covered by the segregation of cash or liquid assets or otherwise, the Funds and the Investment Advisers believe that swaps do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to a Fund’s borrowing restrictions.

     A Fund will not enter into transactions involving swaps, caps, floors or collars unless the unsecured commercial paper, senior debt or claims paying ability of the other party thereto is considered to be investment grade by the Investment Adviser.

     The use of swaps, swaptions and interest rate caps, floors and collars is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If an Investment Adviser is incorrect in its forecasts of market values, credit quality, interest rates and currency exchange rates, the investment performance of a Fund would be less favorable than it would have been if this investment technique were not used. The Investment Advisers, under the supervision of the Board of Trustees, are responsible for determining and monitoring the liquidity of the Funds’ transactions in swaps, swaptions, caps, floors and collars.

Convertible Securities

     Each Fund may invest in convertible securities. Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted into or exchanged for a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest that is generally paid or accrued on debt or a dividend that is paid or accrued on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Convertible securities have unique investment characteristics, in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying common stock due to their fixed-income characteristics and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases.

     The value of a convertible security is a function of its “investment value” (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its “conversion value” (the security’s worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value normally declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors may also have an effect on the convertible security’s investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible

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security is governed principally by its investment value. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed-income security.

     A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by a Fund is called for redemption, the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on a Fund’s ability to achieve its investment objective, which, in turn, could result in losses to the Fund.

     In evaluating a convertible security, the Investment Adviser will give primary emphasis to the attractiveness of the underlying common stock. Convertible debt securities are equity investments for purposes of each Fund’s investment policies.

Preferred Securities

     Each Fund may invest in preferred securities. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of preferred stock on the occurrence of an event of default (such as a covenant default or filing of a bankruptcy petition) or other non-compliance by the issuer with the terms of the preferred stock. Often, however, on the occurrence of any such event of default or non-compliance by the issuer, preferred stockholders will be entitled to gain representation on the issuer’s board of directors or increase their existing board representation. In addition, preferred stockholders may be granted voting rights with respect to certain issues on the occurrence of any event of default.

Equity Swaps

     Each Fund may enter into equity swap contracts to invest in a market without owning or taking physical custody of securities in various circumstances, including circumstances where direct investment in the securities is restricted for legal reasons or is otherwise impracticable. Equity swaps may also be used for hedging purposes or to seek to increase total return. The counterparty to an equity swap contract will typically be a bank, investment banking firm or broker/dealer. Equity swap contracts may be structured in different ways. For example, a counterparty may agree to pay the Fund the amount, if any, by which the notional amount of the equity swap contract would have increased in value had it been invested in particular stocks (or an index of stocks), plus the dividends that would have been received on those stocks. In these cases, the Fund may agree to pay to the counterparty a floating rate of interest on the notional amount of the equity swap contract plus the amount, if any, by which that notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to the Fund on the equity swap contract should be the gain or loss on the notional amount plus dividends on the stocks less the interest paid by the Fund on the notional amount. In other cases, the counterparty and the Fund may each agree to pay the other the difference between the relative investment performances that would have been achieved if the notional amount of the equity swap contract had been invested in different stocks (or indices of stocks).

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     A Fund will generally enter into equity swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Payments may be made at the conclusion of an equity swap contract or periodically during its term. Equity swaps normally do not involve the delivery of securities or other underlying assets. Accordingly, the risk of loss with respect to equity swaps is normally limited to the net amount of payments that a Fund is contractually obligated to make. If the other party to an equity swap defaults, a Fund’s risk of loss consists of the net amount of payments that such Fund is contractually entitled to receive, if any. Inasmuch as these transactions are entered into for hedging purposes or are offset by segregated cash or liquid assets to cover the Funds’ exposure, the Funds and their Investment Advisers believe that transactions do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to a Fund’s borrowing restrictions.

     A Fund will not enter into swap transactions unless the unsecured commercial paper, senior debt or claims paying ability of the other party thereto is considered to be investment grade by the Investment Adviser. A Fund’s ability to enter into certain swap transactions may be limited by tax considerations.

Lending of Portfolio Securities

     Each Fund may lend portfolio securities. Under present regulatory policies, such loans may be made to institutions, such as brokers or dealers (including Goldman Sachs), and are required to be secured continuously by collateral in cash, cash equivalents, letters of credit or U.S. Government Securities maintained on a current basis at an amount, marked to market daily, at least equal to the market value of the securities loaned. Cash received as collateral for securities lending transactions may be invested in short-term investments. Investing the collateral subjects it to market depreciation or appreciation, and a Fund is responsible for any loss that may result from its investment of the borrowed collateral. A Fund will have the right to terminate a loan at any time and recall the loaned securities within the normal and customary settlement time for securities transactions. For the duration of the loan, a Fund will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned and will also receive compensation from investment of the collateral. A Fund will not have the right to vote any securities having voting rights during the existence of the loan, but a Fund may call the loan in anticipation of an important vote to be taken by the holders of the securities or the giving or withholding of their consent on a material matter affecting the investment. As with other extensions of credit there are risks of delay in recovering, or even loss of rights in, the collateral and loaned securities should the borrower of the securities fail financially. However, the loans will be made only to firms deemed to be of good standing, and when the consideration which can be earned currently from securities loans of this type is deemed to justify the attendant risk. In determining whether to lend securities to a particular borrower, and during the period of the loan, the creditworthiness of the borrower will be considered and monitored. It is intended that the value of securities loaned by a Fund will not exceed one-third of the value of a Fund’s total assets (including the loan collateral). Loan collateral (including any investment of the collateral) is not subject to the percentage limitations stated elsewhere in this Additional Statement or the Prospectuses regarding investing in fixed-income securities and cash equivalents.

     The Funds’ Board of Trustees has approved each Fund’s participation in a securities lending program and adopted policies and procedures relating thereto. Under the securities lending program, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for the Funds. For these services, the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of cash received as collateral for the loaned securities. In addition, the Fund may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions. The lending agent may, on behalf of the Funds, invest cash collateral received by the

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Funds for securities loans in, among other things, other registered or unregistered funds. These funds include private investing funds or money market funds that are managed by the Investment Adviser or its affiliates for the purpose of investing cash collateral generated from securities lending activities, and which pay the Investment Adviser or its affiliates for their services. The Funds’ Board of Trustees will periodically review securities loan transactions for which the Goldman Sachs affiliate has acted as lending agent for compliance with a Fund’s securities lending procedures. Goldman Sachs also has been approved as a borrower under the Funds’ securities lending program, subject to certain conditions.

When-Issued Securities and Forward Commitments

     Each Fund may purchase securities on a when-issued basis or purchase or sell securities on a forward commitment basis beyond the customary settlement time. These transactions involve a commitment by a Fund to purchase or sell securities at a future date. The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitment transactions are negotiated directly with the other party, and such commitments are not traded on exchanges. A Fund will generally purchase securities on a when-issued basis or purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, a Fund may dispose of or negotiate a commitment after entering into it. A Fund may also sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. A Fund may realize a capital gain or loss in connection with these transactions. For purposes of determining a Fund’s duration, the maturity of when-issued or forward commitment securities will be calculated from the commitment date. A Fund is generally required to segregate, until three days prior to the settlement date, cash and liquid assets in an amount sufficient to meet the purchase price unless the Fund’s obligations are otherwise covered. Alternatively, 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 security to be purchased declines prior to the settlement date or if the value of the security to be sold increases prior to the settlement date.

Investment in Unseasoned Companies

     Each Fund may invest in companies (including predecessors) which have operated less than three years. The securities of such companies may have limited liquidity, which can result in their being priced higher or lower than might otherwise be the case. In addition, investments in unseasoned companies are more speculative and entail greater risk than do investments in companies with an established operating record.

Private Investments in Public Equity

     The Small Cap Value Fund may purchase equity securities in a private placement that are issued by issuers who have outstanding, publicly-traded equity securities of the same class (“private investments in public equity” or “PIPES”). Shares in PIPES generally are not registered with the SEC until after a certain time period from the date the private sale is completed. This restricted period can last many months. Until the public registration process is completed, PIPES are restricted as to resale and the Fund cannot freely trade the securities. Generally such restrictions cause the PIPES to be illiquid during this time. PIPES may contain provisions that the issuer will pay specified financial penalties to the holder if the issuer does not publicly

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register the restricted equity securities within a specified period of time, but there is no assurance that the restricted equity securities will be publicly registered, or that the registration will remain in effect.

Other Investment Companies

     A Fund reserves the right to invest up to 10% of its total assets, calculated at the time of purchase, in the securities of other investment companies (including exchange-traded funds such as Standard & Poor’s Depositary Receipts in (“SPDRs”) and iShares^sm, as defined below) but, except as otherwise provided in the Act, may neither invest more than 5% of its total assets in the securities of any one investment company nor acquire more than 3% of the voting securities of any other investment company. Pursuant to an exemptive order obtained from the SEC, the Funds may invest in money market funds for which an Investment Adviser or any of its affiliates serves as investment adviser, administrator and/or distributor. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by investment companies in which it invests in addition to the management fees (and other expenses) paid by the Fund. However, to the extent that the Fund invests in a money market fund for which an Investment Adviser or any of its affiliates acts as Investment Adviser, the management fees payable by the Fund to an Investment Adviser will, to the extent required by the SEC, be reduced by an amount equal to the Fund’s proportionate share of the management fees paid by such money market fund to its Investment Adviser. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund.

     Exchange-traded funds are shares of unaffiliated investment companies issuing shares which are traded like traditional equity securities on a national stock exchange or the National Association of Securities Dealers Automated Quotations System (“NASDAQ”) National Market System. SPDRs are interests in a unit investment trust (“UIT”) that may be obtained from the UIT or purchased in the secondary market (SPDRs are listed on a stock exchange). The UIT was established to accumulate and hold a portfolio of common stocks that is intended to track the price performance and dividend yield of the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500”). SPDRs may be used for several reasons, including, but not limited to, facilitating the handling of cash flows or trading or reducing transaction costs. The price movement of SPDRs may not perfectly parallel the price activity of the S&P 500. The UIT will issue SPDRs in aggregations known as “Creation Units” in exchange for a “Portfolio Deposit” consisting of (i) a portfolio of securities substantially similar to the component securities (“Index Securities”) of the S&P 500, (ii) a cash payment equal to a pro rata portion of the dividends accrued on the UIT’s portfolio securities since the last dividend payment by the UIT, net of expenses and liabilities, and (iii) a cash payment or credit (“Balancing Amount”) designed to equalize the net asset value of the S&P 500 and the net asset value of a Portfolio Deposit.

     SPDRs are not individually redeemable, except upon termination of the UIT. To redeem, an investor must accumulate enough SPDRs to reconstitute a Creation Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon the existence of a secondary market. Upon redemption of a Creation Unit, an investor will receive Index Securities and cash identical to the Portfolio Deposit required of an investor wishing to purchase a Creation Unit that day.

     The price of SPDRs is derived from and based upon the securities held by the UIT. Accordingly, the level of risk involved in the purchase or sale of a SPDR is similar to the risk involved in the purchase or sale of traditional common stock, with the exception that the pricing mechanism for SPDRs is based on a basket of

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stocks. Disruptions in the markets for the securities underlying SPDRs purchased or sold by the Funds could result in losses on SPDRs.

     Each Fund (other than the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds) may also purchase shares of investment companies investing primarily in foreign securities, including “country funds.” Country funds have portfolios consisting primarily of securities of issuers located in specified foreign countries or regions. Each Fund may, subject to the limitations stated above, invest in iShares^sm and similar securities that invest in securities included in specified indices, including the MSCI^® indices for various countries and regions. iShares^sm are listed on a stock exchange and were initially offered to the public in 1996. The market prices of iShares^sm are expected to fluctuate in accordance with both changes in the asset values of their underlying indices and supply and demand of iShares^sm on the exchange on which the iShares^sm are listed. However, iShares^sm have a limited operating history and information is lacking regarding the actual performance and trading liquidity of iShares^sm for extended periods or over complete market cycles. In addition, there is no assurance that the requirements of a stock exchange necessary to maintain the listing of iShares^sm will continue to be met or will remain unchanged. In the event substantial market or other disruptions affecting iShares^sm should occur in the future, the liquidity and value of a Fund’s shares could also be substantially and adversely affected. If such disruptions were to occur, a Fund could be required to reconsider the use of iShares^sm as part of its investment strategy.

Repurchase Agreements

     Each Fund may enter into repurchase agreements with banks, brokers and securities dealers which furnish collateral at least equal in value or market price to the amount of their repurchase obligation. The Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity, BRIC and Balanced Funds may also enter into repurchase agreements involving certain foreign government securities. A repurchase agreement is an arrangement under which a Fund purchases securities and the seller agrees to repurchase the securities within a particular time and at a specified price. Custody of the securities is maintained by a Fund’s custodian (or subcustodian). The repurchase price may be higher than the purchase price, the difference being income to a Fund, or the purchase and repurchase prices may be the same, with interest at a stated rate due to a Fund together with the repurchase price on repurchase. In either case, the income to a Fund is unrelated to the interest rate on the security subject to the repurchase agreement.

     For purposes of the Act and generally for tax purposes, a repurchase agreement is deemed to be a loan from a Fund to the seller of the security. For other purposes, it is not always clear whether a court would consider the security purchased by a Fund subject to a repurchase agreement as being owned by a Fund or as being collateral for a loan by a Fund to the seller. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, a Fund may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. If the court characterizes the transaction as a loan and a Fund has not perfected a security interest in the security, a Fund may be required to return the security to the seller’s estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, a Fund would be at risk of losing some or all of the principal and interest involved in the transaction.

     Apart from the risk of 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 security subject to the repurchase agreement

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becomes less than the repurchase price (including accrued interest), a Fund will direct the seller of the security 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 provide for settlement 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.

     The Funds, together with other registered investment companies having advisory agreements with the Investment Advisers or their 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.

Reverse Repurchase Agreements

     The Balanced Fund may borrow money by entering into transactions called reverse repurchase agreements. Under these arrangements, the Fund will sell portfolio securities to dealers in U.S. Government Securities or members of the Federal Reserve System, with an agreement to repurchase the security on an agreed date, price and interest payment. Reverse repurchase agreements involve the possible risk that the value of portfolio securities the Fund relinquishes may decline below the price the Fund must pay when the transaction closes. Borrowings may magnify the potential for gain or loss on amounts invested resulting in an increase in the speculative character of the Fund’s outstanding shares.

     When the Balanced Fund enters into a reverse repurchase agreement, it places in a separate custodial account either liquid assets or other high-grade debt securities that have a value equal to or greater than the repurchase price. The account is thereafter monitored to make sure that an appropriate value is maintained. Reverse repurchase agreements are considered to be borrowings under the Act.

Short Sales

     The Funds (other than the Structured Equity Funds) may engage in short sales against the box. In a short sale, the seller sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. While a short sale is made by selling a security the seller does not own, a short sale is “against the box” to the extent that the seller contemporaneously owns or has the right to obtain, at no added cost, securities identical to those sold short. It may be entered into by a Fund, for example, to lock in a sales price for a security the Fund does not wish to sell immediately. If a Fund sells securities short against the box, it may protect itself from loss if the price of the securities declines in the future, but will lose the opportunity to profit on such securities if the price rises.

     If a Fund effects a short sale of securities at a time when it has an unrealized gain on the securities, it may be required to recognize that gain as if it had actually sold the securities (as a “constructive sale”) on the date it effects the short sale. However, such constructive sale treatment may not apply if a Fund closes out the short sale with securities other than the appreciated securities held at the time of the short sale and if certain other conditions are satisfied. Uncertainty regarding the tax consequences of effecting short sales may limit the extent to which a Fund may effect short sales.

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Mortgage Dollar Rolls

     When the Balanced Fund enters into a mortgage dollar roll, it will segregate cash or liquid assets in an amount equal to the forward purchase price until the settlement date.

Non-Diversified Status

     Since each of the Concentrated Growth and BRIC Funds is “non-diversified” under the Act, it is subject only to certain federal tax diversification requirements. Under federal tax laws, the Fund may, with respect to 50% of its total assets, invest up to 25% of its total assets in the securities of any issuer. With respect to the remaining 50% of the Fund’s total assets, (i) the Fund may not invest more than 5% of its total assets in the securities of any one issuer, and (ii) the Fund may not acquire more than 10% of the outstanding voting securities of any one issuer. These tests apply at the end of each quarter of the taxable year and are subject to certain conditions and limitations under the Code. These tests do not apply to United States Government Securities and regulated investment companies.

Portfolio Turnover

     Each Fund may engage in active short-term trading to benefit from price disparities among different issues of securities or among the markets for equity securities, or for other reasons. It is anticipated that the portfolio turnover may vary greatly from year to year as well as within a particular year, and may be affected by changes in the holdings of specific issuers, changes in country and currency weightings, cash requirements for redemption of shares and by requirements which enable the Funds to receive favorable tax treatment. The Funds are not restricted by policy with regard to portfolio turnover and will make changes in their investment portfolio from time to time as business and economic conditions as well as market prices may dictate.

INVESTMENT RESTRICTIONS

     The investment restrictions set forth below have been adopted by the Trust as fundamental policies that cannot be changed with respect to a Fund without the affirmative vote of the holders of a majority (as defined in the Act) of the outstanding voting securities of the affected Fund. The investment objective of each Fund and all other investment policies or practices of each Fund are considered by the Trust not to be fundamental and accordingly may be changed without shareholder approval. For purposes of the Act, a “majority of the outstanding voting securities” means the lesser of the vote of (i) 67% or more of the shares of the Trust or a Fund present at a meeting, if the holders of more than 50% of the outstanding shares of the Trust or a Fund are present or represented by proxy, or (ii) more than 50% of the shares of the Trust or a Fund.

     For purposes of the following limitations, any limitation which involves a maximum percentage shall not be considered 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, a Fund. With respect to the Funds’ fundamental investment restriction no. 3, asset coverage of at least 300% (as defined in the Act), inclusive of any amounts borrowed, must be maintained at all times.

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     As a matter of fundamental policy, a Fund may not:

(1)	Make any investment inconsistent with the Fund’s classification as a diversified company under the Act. This restriction does not, however, apply to any Fund classified as a non-diversified company under the Act.
(2)	Invest 25% or more of its total assets in the securities of one or more issuers conducting their principal business activities in the same industry (excluding the U.S. Government or any of its agencies or instrumentalities).
(3)	Borrow money, except (a) each Fund (other than the Concentrated Growth Fund, Small/Mid Cap Growth Fund and BRIC Fund) 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 Concentrated Growth Fund, Small/Mid Cap Growth Fund and BRIC Fund, to the extent permitted by applicable law, may borrow from banks (as defined in the Act), other affiliated investment companies and other persons or through reverse repurchase agreements in amounts up to 33 1/3% of its total assets (including the amount borrowed), (c) each Fund may, to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes, (d) each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities, (e) each Fund may purchase securities on margin to the extent permitted by applicable law and (f) each Fund may engage in transactions in mortgage dollar rolls which are accounted for as financings.
(4)	Make loans, except through (a) the purchase of debt obligations in accordance with the Fund’s investment objective and policies, (b) repurchase agreements with banks, brokers, dealers and other financial institutions, (c) loans of securities as permitted by applicable law, and (d) (Concentrated Growth Fund, Small/Mid Cap Growth Fund and BRIC Fund only) loans to affiliates of the Concentrated Growth Fund, Small/Mid Cap Growth Fund and BRIC Fund to the extent permitted by law.
(5)	Underwrite securities issued by others, except to the extent that the sale of portfolio securities by the Fund may be deemed to be an underwriting.
(6)	Purchase, hold or deal in real estate, although a Fund may purchase and sell securities that are secured by real estate or interests therein, securities of real estate investment trusts and mortgage-related securities and may hold and sell real estate acquired by a Fund as a result of the ownership of securities.
(7)	Invest in commodities or commodity contracts, except that the Fund may invest in currency and financial instruments and contracts that are commodities or commodity contracts.
(8)	Issue senior securities to the extent such issuance would violate applicable law.

     Each Fund may, notwithstanding any other fundamental 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 fundamental investment objective, restrictions and policies as the Fund.

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     In addition to the fundamental policies mentioned above, the Trustees have adopted the following non-fundamental policies which can be changed or amended by action of the Trustees without approval of shareholders. Again, for purposes of the following limitations, any limitation which involves a maximum percentage shall not be considered violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities by the Fund.

     A Fund may not:

(a)	Invest in companies for the purpose of exercising control or management.
(b)	Invest more than 15% of the Fund’s net assets in illiquid investments including illiquid repurchase agreements with a notice or demand period of more than seven days, securities which are not readily marketable and restricted securities not eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the “1933 Act”).
(c)	Purchase additional securities if the Fund’s borrowings (excluding covered mortgage dollar rolls) exceed 5% of its net assets.
(d)	Make short sales of securities, except that a Fund may make short sales against the box.

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TRUSTEES AND OFFICERS

     The business and affairs of the Funds are managed under the direction of the Board of Trustees subject to the laws of the State of Delaware and the Trust’s Declaration of Trust. The Trustees are responsible for deciding matters of general policy and reviewing the actions of the Trust’s service providers. The officers of the Trust conduct and supervise each Fund’s daily business operations.

     Trustees of the Trust

     Information pertaining to the Trustees of the Trust is set forth below. Trustees who are not deemed to be “interested persons” of the Trust as defined in the Act are referred to as “Independent Trustees.” Trustees who are deemed to be “interested persons” of the Trust are referred to as “Interested Trustees.”

Independent Trustees

				Number of
		Term of		Portfolios in
		Office and		Fund
	Position(s)	Length of		Complex
Name,	Held with	Time	Principal Occupation(s)	Overseen by		Other Directorships
Address and Age1	the Trust2	Served3	During Past 5 Years	Trustee4		Held by Trustee5
Ashok N. Bakhru Age: 64	Chairman of the Board of Trustees	Since 1991	President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President - Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors-III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).		77	None
			Chairman of the Board of Trustees — Goldman Sachs Mutual Fund Complex (registered investment companies).
John P. Coblentz, Jr. Age: 65	Trustee	Since 2003	Partner, Deloitte & Touche LLP (June 1975 — May 2003).		77	None
			Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

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Independent Trustees
				Number of
		Term of		Portfolios in
		Office and		Fund
	Position(s)	Length of		Complex
Name,	Held with	Time	Principal Occupation(s)	Overseen by		Other Directorships
Address and Age1	the Trust2	Served3	During Past 5 Years	Trustee4		Held by Trustee5
Patrick T. Harker Age: 47	Trustee	Since 2000	Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-January 2000); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).		77	None
			Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).
Mary P. McPherson Age: 71	Trustee	Since 1997	Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and, Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for not-for-profit institutions) (since 2005).		77	None
			Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).
Richard P. Strubel Age: 67	Trustee	Since 1987	Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).		77	Gildan Activewear Inc. (a clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (58 Portfolios).
			Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

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Interested Trustees
				Number of
		Term of		Portfolios in
		Office and		Fund
	Position(s)	Length of		Complex
Name,	Held with	Time	Principal Occupation(s)	Overseen by		Other Directorships
Address and Age1	the Trust2	Served3	During Past 5 Years	Trustee4		Held by Trustee5
*Alan A. Shuch Age: 56	Trustee	Since 1990	Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994 — May 1999); and Limited Partner, Goldman Sachs (December 1994 — May 1999).		77	None
			Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).
*Kaysie P. Uniacke Age: 45	Trustee &	Since 2001	Managing Director, Goldman Sachs (1997-Present).		77	None
	President	Since 2002	Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).
			President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies).
			Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997 — 2002) ( registered investment companies).
			Trustee — Gettysburg College.

*	These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1	Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno.
2	The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997.
3	Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
4	The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of August 31, 2006, the Trust consisted of 65 portfolios, including the Funds described in this Additional Statement, and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios.
5	This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

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Officers of the Trust

     Information pertaining to the officers of the Trust is set forth below.

Officers of the Trust

	Position(s)
	Held	Term of Office
Name, Age	With the	and Length of	Principal Occupation(s)
And Address	Trust	Time Served1	During Past 5 Years
Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45	President & Trustee	Since 2002 Since 2001	Managing Director, Goldman Sachs (1997-Present). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).
			President — Goldman Sachs Mutual Fund Complex (registered investment companies).
			Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
			Trustee — Gettysburg College.
John M. Perlowski 32 Old Slip New York, NY 10005 Age: 41	Treasurer	Since 1997	Managing Director, Goldman Sachs (November 2003 - Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Philip V. Giuca, Jr. 32 Old Slip New York, NY 10005 Age: 44	Assistant Treasurer	Since 1997	Vice President, Goldman Sachs (May 1992-Present). Assistant Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Peter Fortner 32 Old Slip New York, NY 10005 Age: 48	Assistant Treasurer	Since 2000	Vice President, Goldman Sachs (July 2000-Present); Associate, Prudential Insurance Company of America (November 1985-June 2000); and Assistant Treasurer, certain closed-end funds administered by Prudential (1999 and 2000).
			Assistant Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Kenneth G. Curran 32 Old Slip New York, NY 10005 Age: 42	Assistant Treasurer	Since 2001	Vice President, Goldman Sachs (November 1998-Present); and Senior Tax Manager, KPMG Peat Marwick (accountants) (August 1995-October 1998). Assistant Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).

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Officers of the Trust

	Position(s)
	Held	Term of Office
Name, Age	With the	and Length of	Principal Occupation(s)
And Address	Trust	Time Served1	During Past 5 Years
Charles Rizzo 32 Old Slip New York, NY 10005 Age: 48	Assistant Treasurer	Since 2005	Vice President, Goldman Sachs (August 2005-Present); Managing Director and Treasurer of Scudder Funds, Deutsche Asset Management (April 2003-June 2005); Director, Tax and Financial Reporting, Deutsche Asset Management (August 2002-April 2003); Vice President and Treasurer, Deutsche Global Fund Services (August 1999-August 2002).
			Assistant Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. Fitzpatrick 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 46	Vice President	Since 1997	Managing Director, Goldman Sachs (October 1999- Present); and Vice President of GSAM (April 1997-December 1999).
			Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
Jesse Cole 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 43	Vice President	Since 1998	Managing Director, Goldman Sachs (December 2006- Present); Vice President, GSAM (June 1998-Present); and Vice President, AIM Management Group, Inc. (investment adviser) (April 1996-June 1998).
			Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
Kerry K. Daniels 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 43	Vice President	Since 2000	Manager, Financial Control — Shareholder Services, Goldman Sachs (1986-Present). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James McNamara 32 Old Slip New York, NY 10005 Age: 44	Vice President	Since 2001	Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993 - April 1998).
			Vice President-Goldman Sachs Mutual Fund Complex (registered investment companies).
			Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004).

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Officers of the Trust

	Position(s)
	Held	Term of Office
Name, Age	With the	and Length of	Principal Occupation(s)
And Address	Trust	Time Served1	During Past 5 Years
Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37	Secretary	Since 2003	Managing Director, Goldman Sachs (December 2006- Present); Associate General Counsel, Goldman Sachs (2002-Present); Vice President (1999-2006) and Assistant General Counsel, Goldman Sachs (1999-2002).
			Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).
Dave Fishman 32 Old Slip New York, NY 10005 Age: 42	Assistant Secretary	Since 2001	Managing Director, Goldman Sachs (December 2001-Present); and Vice President, Goldman Sachs (1997-December 2001).
			Assistant Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).
Danny Burke 32 Old Slip New York, NY 10005 Age: 43	Assistant Secretary	Since 2001	Vice President, Goldman Sachs (1987-Present). Assistant Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).
Elizabeth D. Anderson 32 Old Slip New York, NY 10005 Age: 37	Assistant Secretary	Since 1997	Managing Director, Goldman Sachs (December 2002 - Present); Vice President, Goldman Sachs (1997-December 2002) and Fund Manager, GSAM (April 1996-Present).
			Assistant Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).

¹ Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.

Standing Board Committees

     The Board of Trustees has established seven standing committees in connection with their governance of the Funds — Audit, Governance and Nominating, Compliance, Valuation, Dividend, Schedule E and Contract Review.

     The Audit Committee oversees the audit process and provides assistance to the full Board of Trustees with respect to fund accounting, tax compliance and financial statement matters. In performing its responsibilities, the Audit Committee selects and recommends annually to the entire Board of Trustees an independent registered public accounting firm to audit the books and records of the Trust for the ensuing year, and reviews with the firm the scope and results of each audit. All of the Independent Trustees serve on the Audit Committee. The Audit Committee held four meetings during the fiscal year ended August 31, 2006.

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     The Governance and Nominating Committee has been established to: (i) assist the Board of Trustees in matters involving mutual fund governance and industry practices; (ii) select and nominate candidates for appointment or election to serve as Trustees who are not “interested persons” of the Trust or its investment adviser or distributor (as defined by the Act); and (iii) advise the Board of Trustees on ways to improve its effectiveness. All of the Independent Trustees serve on the Governance and Nominating Committee. The Governance and Nominating Committee held three meetings during the fiscal year ended August 31, 2006. As stated above, each Trustee holds office for an indefinite term until the occurrence of certain events. In filling Board vacancies, the Governance and Nominating Committee will consider nominees recommended by shareholders. Nominee recommendations should be submitted to the Trust at its mailing address stated in the Funds’ Prospectuses and should be directed to the attention of the Goldman Sachs Trust Governance and Nominating Committee.

     The Compliance Committee has been established for the purpose of overseeing the compliance processes: (i) of the Funds; and (ii) insofar as they relate to services provided to the Funds, of the Funds’ investment advisers, distributor, administrator (if any), and transfer agent, except that compliance processes relating to the accounting and financial reporting processes, and certain related matters, are overseen by the Audit Committee. In addition, the Compliance Committee provides assistance to the full Board of Trustees with respect to compliance matters. The Compliance Committee met four times during the fiscal year ended August 31, 2006. All of the Independent Trustees serve on the Compliance Committee.

     The Valuation Committee is authorized to act for the Board of Trustees in connection with the valuation of portfolio securities held by the Funds in accordance with the Trust’s Valuation Procedures. Mr. Shuch and Ms. Uniacke serve on the Valuation Committee. The Valuation Committee met twelve times during the fiscal year ended August 31, 2006.

     The Dividend Committee is authorized, subject to the ratification of Trustees who are not members of the committee, to declare dividends and capital gain distributions consistent with each Fund’s Prospectus. Currently, the sole member of the Trust’s Dividend Committee is Ms. Uniacke. During the fiscal year ended August 31, 2006, the Dividend Committee held two meetings with respect to the Funds included in this Additional Statement and six with respect to all of the Funds of the Trust (including the Funds included in this Additional Statement).

     The Schedule E Committee is authorized to address potential conflicts of interest regulated by the National Association of Securities Dealers, Inc. (“NASD”). The sole member of the Trust’s Schedule E Committee is Mr. Bakhru. The Schedule E Committee did not meet during the fiscal year ended August 31, 2006.

     The Contract Review Committee has been established for the purpose of overseeing the processes of the Board of Trustees for approving and monitoring the Funds’ investment management, distribution, transfer agency and other agreements with the Fund’s Investment Advisers and their affiliates. The Contract Review Committee is also responsible for overseeing the Board of Trustees processes for approving and reviewing the operation of the Funds’ distribution, service, shareholder administration and other plans, and any agreements related to the plans, whether or not such plans and agreements are adopted pursuant to Rule 12b-1 under

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the Act. The Contract Review Committee also provides appropriate assistance to the Board of Trustees in connection with the Board’s approval, oversight and review of the Funds’ other service providers including, without limitation, the Funds’ custodian/accounting agent, sub-transfer agents, professional (legal and accounting) firms and printing firms. The Contract Review Committee met three times during the fiscal year ended August 31, 2006. All of the Independent Trustees serve on the Contract Review Committee.

Trustee Ownership of Fund Shares

     The following table shows the dollar range of shares beneficially owned by each Trustee in the Funds and other portfolios of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust.

		Aggregate Dollar
		Range of Equity
		Securities in All
		Portfolios in Fund
	Dollar Range of	Complex Overseen By
Name of Trustee	Equity Securities in the Funds1	Trustee2
Ashok N. Bakhru	Capital Growth: Over $100,000 Structured U.S. Equity: Over $100,000 Mid Cap Value: Over $100,000	Over $100,000
John P. Coblentz, Jr.	Growth Opportunities: $50,001 — $100,000 Mid Cap Value: Over $100,000 Small Cap Value: $50,001 — $100,000 Emerging Markets Equity: $10,001 — $50,000	Over $100,000
Patrick T. Harker	Capital Growth: $50,001 — $100,000 Mid Cap Value: $10,001 — $50,000 Small Cap Value: $10,001 — $50,000 Concentrated International Equity: $10,001 — $50,000	Over $100,000
Mary P. McPherson	Capital Growth: $50,001 — $100,000 Mid Cap Value: $50,001 — $100,000 Small Cap Value: Over $100,000 Growth and Income: $1 — $10,000 Concentrated International Equity: $10,001 — $50,000	Over $100,000
Alan A. Shuch	Capital Growth: Over $100,000 Mid Cap Value: Over $100,000	Over $100,000
Richard P. Strubel	Small/Mid Cap Growth: Over $100,000 Mid Cap Value: Over $100,000	Over $100,000
Kaysie P. Uniacke	Strategic Growth: Over $100,000 Large Cap Value: Over $100,000 Mid Cap Value: Over $100,000	Over $100,000

1	Includes the value of shares beneficially owned by each Trustee in each Fund described in this Additional Statement as of December 31, 2005.
2	Includes Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, Goldman Sachs Trust consisted of 61 portfolios and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.

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     As of December 14, 2006 the Trustees and officers of the Trust as a group owned less than 1% of the outstanding shares of beneficial interest of each Fund.

Board Compensation

     The Trust pays each Independent Trustee an annual fee for his or her services as a Trustee of the Trust, plus an additional fee for each regular and special telephonic Board meeting, Governance and Nominating Committee meeting, Compliance Committee meeting, Contract Review Committee meeting and Audit Committee meeting attended by such Trustee. The Independent Trustees are also reimbursed for travel expenses incurred in connection with attending such meetings. The Trust may also pay the incidental costs of a Trustee to attend training or other types of conferences relating to the investment company industry.

     The following table sets forth certain information with respect to the compensation of each Trustee of the Trust for the fiscal year ended August 31, 2006:

Trustee Compensation

	Fund
					Structured				Structured		Structured
			Growth and		Large Cap		Structured		Large Cap		Small Cap
Name of Trustee	Balanced		Income		Value		U.S. Equity		Growth		Equity
Ashok N. Bakhru1	$	3,669	$	3,669	$	3,669	$	3,669	$	3,669	$	3,669
John P. Coblentz, Jr.		2,546		2,546		2,546		2,546		2,546		2,546
Patrick T. Harker		2,499		2,499		2,499		2,499		2,499		2,499
Mary P. McPherson		2,546		2,546		2,546		2,546		2,546		2,546
Alan A. Shuch		—		—		—		—		—		—
Wilma J. Smelcer2		2,546		2,546		2,546		2,546		2,546		2,546
Richard P. Strubel		2,546		2,546		2,546		2,546		2,546		2,546
Kaysie P. Uniacke		—		—		—		—		—		—

Trustee Compensation

	Fund
	Structured
	International		Capital		Strategic		Growth		Small/Mid		Mid Cap
Name of Trustee	Equity		Growth		Growth		Opportunities		Cap Growth		Value
Ashok N. Bakhru1	$	3,669	$	3,669	$	3,669	$	3,669	$	2,693	$	3,669
John P. Coblentz, Jr.		2,546		2,546		2,546		2,546		1,847		2,546
Patrick T. Harker		2,499		2,499		2,499		2,499		1,777		2,499
Mary P. McPherson		2,546		2,546		2,546		2,546		1,847		2,546
Alan A. Shuch		—		—		—		—		—		—
Wilma J. Smelcer2		2,546		2,546		2,546		2,546		1,847		2,546
Richard P. Strubel		2,546		2,546		2,546		2,546		1,847		2,546
Kaysie P. Uniacke		—		—		—		—		—		—

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Trustee Compensation

	Fund
					Concentrated
	Small Cap		Large Cap		International		Japanese		International
Name of Trustee	Value		Value		Equity		Equity		Small Cap
Ashok N. Bakhru1	$	3,669	$	3,669	$	3,669	$	3,669	$	3,669
John P. Coblentz, Jr.		2,546		2,546		2,546		2,546		2,546
Patrick T. Harker		2,499		2,499		2,499		2,499		2,499
Mary P. McPherson		2,546		2,546		2,546		2,546		2,546
Alan A. Shuch		—		—		—		—		—
Wilma J. Smelcer2		2,546		2,546		2,546		2,546		2,546
Richard P. Strubel		2,546		2,546		2,546		2,546		2,546
Kaysie P. Uniacke		—		—		—		—		—

Trustee Compensation

	Fund
	Emerging
Name of Trustee	Markets Equity		Asia Equity		BRIC		Concentrated Growth
Ashok N. Bakhru1	$	3,669	$	3,669		—	$	3,669
John P. Coblentz, Jr.		2,546		2,546		—		2,546
Patrick T. Harker		2,499		2,499		—		2,499
Mary P. McPherson		2,546		2,546		—		2,546
Alan A. Shuch		—		—		—		—
Wilma J. Smelcer2		2,546		2,546		—		2,546
Richard P. Strubel		2,546		2,546		—		2,546
Kaysie P. Uniacke		—		—		—		—

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Trustee Compensation

	Aggregate		Pension or Retirement		Total Compensation
	Compensation		Benefits Accrued as		From Fund Complex
Name of Trustee	from the Funds		Part of the Trust's Expenses		(including the Funds)3
Ashok N. Bakhru1	$	79,747		—	$	255,400
John P. Coblentz, Jr.		55,305		—		177,000
Patrick T. Harker		54,250		—		169,000
Mary P. McPherson		55,306		—		177,000
Alan A. Shuch		—		—		—
Wilma J. Smelcer2		55,305		—		177,000
Richard P. Strubel		55,306		—		177,000
Kaysie P. Uniacke		—		—		—

1	Includes compensation as Board Chairman.
2	Effective January 1, 2007, Ms. Smelcer resigned from the Board of Trustees.
3	The Fund Complex consists of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. Goldman Sachs Trust consisted of 64 portfolios and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios as of August 31, 2006.

Miscellaneous

     Class A Shares of the Funds may be sold at net asset value without payment of any sales charge to Goldman Sachs, its affiliates and their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of the above individuals. These and the Funds’ other sales load waivers are due to the nature of the investors and/or the reduced sales effort and expense that are needed to obtain such investments.

     The Trust, its Investment Advisers and principal underwriter have adopted codes of ethics under Rule 17j-1 of the Act that permit personnel subject to their particular codes of ethics to invest in securities, including securities that may be purchased or held by the Funds.

MANAGEMENT SERVICES

     As stated in the Funds’ Prospectuses, Goldman Sachs Asset Management, L.P. (“GSAM”) (formerly Goldman Sachs Funds Management, L.P.), 32 Old Slip, New York, New York 10005 serves as Investment Adviser to the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Mid Cap Value, Small Cap Value, Large Cap Value and Concentrated Growth Funds. GSAM is a subsidiary of The Goldman Sachs Group, Inc. and an affiliate of Goldman Sachs. Prior to the end of April 2003, Goldman Sachs Asset Management, a business unit of the Investment Management Division of Goldman Sachs served as the investment adviser to the Balanced, Growth and Income, Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Strategic Growth, Growth

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Opportunities, Mid Cap Value, Small Cap Value, Large Cap Value and Concentrated Growth Funds. In April 2003, GSAM assumed investment advisory responsibilities for those Funds. GSAMI, Christchurch Court, 10-15 Newgate Street, London, England EC1A7HD, serves as Investment Adviser to the Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds. GSAMI is also an affiliate of Goldman Sachs. See “Service Providers” in the Funds’ Prospectuses for a description of the applicable Investment Adviser’s duties to the Funds.

     Founded in 1869, Goldman Sachs is among the oldest and largest investment banking firms in the United States. Goldman Sachs is a leader in developing portfolio strategies and in many fields of investing and financing, participating in financial markets worldwide and serving individuals, institutions, corporations and governments. Goldman Sachs is also among the principal market sources for current and thorough information on companies, industrial sectors, markets, economies and currencies, and trades and makes markets in a wide range of equity and debt securities 24 hours a day. The firm is headquartered in New York with offices in countries throughout the world. It has trading professionals throughout the United States, as well as in London, Tokyo, Hong Kong and Singapore. The active participation of Goldman Sachs in the world’s financial markets enhances its ability to identify attractive investments. Goldman Sachs has agreed to permit the Funds to use the name “Goldman Sachs” or a derivative thereof as part of each Fund’s name for as long as each Fund’s Management Agreement is in effect.

     The Investment Advisers are able to draw on the substantial research and market expertise of Goldman Sachs, whose investment research effort is one of the largest in the industry. The Global Investment Research Department covers approximately 1,800 securities, more than 50 economies and over 25 stock markets. The in depth information and analyses generated by Goldman Sachs’ research analysts are available to the Investment Advisers.

     In addition, many of Goldman Sachs’ economists, securities analysts, portfolio strategists and credit analysts have consistently been highly ranked in respected industry surveys conducted in the United States and abroad. Goldman Sachs is also among the leading investment firms using quantitative analytics (now used by a growing number of investors) to structure and evaluate portfolios. For example, Goldman Sachs’ options evaluation model analyzes a security’s term, coupon and call option, providing an overall analysis of the security’s value relative to its interest risk.

     In managing the Funds, the Investment Advisers have access to Goldman Sachs’ economics research. The Economics Research Department based in London, conducts economic, financial and currency markets research which analyzes economic trends and interest and exchange rate movements worldwide. The Economics Research Department tracks factors such as inflation and money supply figures, balance of trade figures, economic growth, commodity prices, monetary and fiscal policies, and political events that can influence interest rates and currency trends. The success of Goldman Sachs’ international research team has brought wide recognition to its members. The team has earned top rankings in various external surveys such as Pensions and Investments, Forbes and Dalbar. These rankings acknowledge the achievements of the firm’s economists, strategists and equity analysts.

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     In allocating assets among foreign countries and currencies for the Funds, the Investment Advisers will have access to the Global Asset Allocation Model. The model is based on the observation that the prices of all financial assets, including foreign currencies, will adjust until investors globally are comfortable holding the pool of outstanding assets. Using the model, the Investment Advisers will estimate the total returns from each currency sector which are consistent with the average investor holding a portfolio equal to the market capitalization of the financial assets among those currency sectors. These estimated equilibrium returns are then combined with the expectations of Goldman Sachs’ research professionals to produce an optimal currency and asset allocation for the level of risk suitable for the Funds given its investment objectives and criteria.

     The Management Agreements provide that GSAM and GSAMI, in their capacity as Investment Advisers, may render similar services to others so long as the services under the Management Agreements are not impaired thereby. The Funds’ Management Agreements were approved by the Trustees of the Trust, including a majority of the Trustees of the Trust who are not parties to such agreement or “interested persons” (as such term is defined in the Act) of any party thereto (the “non-interested Trustees”) on June 15, 2006. A discussion regarding the Trustees’ basis for approving the Management Agreements in 2006 is available in the Trust’s annual reports dated August 31, 2006.

     These arrangements were most recently approved by the shareholders of each Fund (other than Concentrated Growth, Large Cap Value, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth, Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Emerging Markets Equity, Japanese Equity, International Small Cap and BRIC Funds) on April 21, 1997. The sole shareholder of the Small/Mid Cap Growth, Concentrated Growth, Large Cap Value, Strategic Growth, Growth Opportunities, Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Emerging Markets Equity, Japanese Equity, International Small Cap and BRIC Funds approved these arrangements on June 30, 2005, August 23, 2002, October 26, 1999, April 28, 1999, April 28, 1999, November 3, 1998, April 30, 1997, July 21, 1997, July 21, 1997, January 28, 1997, April 23, 1998, April 23, 1998 and June 27, 2006, respectively.

     Each Management Agreement will remain in effect until June 30, 2007 and will continue in effect with respect to the applicable Fund from year to year thereafter provided such continuance is specifically approved at least annually by (i) the vote of a majority of such Fund’s outstanding voting securities or a majority of the Trustees of the Trust, and (ii) the vote of a majority of the non-interested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such approval.

     Each Management Agreement will terminate automatically if assigned (as defined in the Act). Each Management Agreement is also terminable at any time without penalty by the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the applicable Fund on 60 days’ written notice to the applicable Investment Adviser or by the Investment Adviser on 60 days’ written notice to the Trust.

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     Pursuant to the Management Agreements the Investment Advisers are entitled to receive the fees set forth below, payable monthly based on such Fund’s average daily net assets.

		Actual Rate for the Fiscal
		Year Ended
Fund	Contractual Rate	August 31, 2006
GSAM
Balanced Fund	0.65% on the first $1 billion 0.59% over $1 billion up to $2 billion 0.56% over $2 billion		0.65	%
Growth and Income Fund	0.70% on the first $1 billion 0.63% over $1 billion up to $2 billion 0.60% over $2 billion		0.69	%
Structured Large Cap Value Fund	0.60% on the first $1 billion 0.54% over $1 billion up to $2 billion 0.51% over $2 billion		0.60	%
Structured U.S. Equity Fund	0.65% on the first $1 billion 0.59% over $1 billion up to $2 billion 0.56% over $2 billion		0.65	%
Structured Large Cap Growth Fund	0.65% on the first $1 billion 0.59% over $1 billion up to $2 billion 0.56% over $2 billion		0.65	%
Structured Small Cap Equity Fund	0.85% on the first $2 billion 0.77% over $2 billion		0.85	%
Structured International Equity Fund	0.85% on the first $1 billion 0.77% over $1 billion up to $2 billion 0.73% over $2 billion		0.83	%
Strategic Growth Fund	1.00% on the first $1 billion 0.90% over $1 billion up to $2 billion 0.86% over $2 billion		1.00	%
Growth Opportunities Fund	1.00% on the first $2 billion 0.90% over $2 billion		1.00	%
Small/Mid Cap Growth Fund	1.00% on the first $2 billion 0.90% over $2 billion		1.00	%
Mid Cap Value Fund	0.75% on the first $2 billion 0.68% over $2 billion		0.71	%
Small Cap Value Fund	1.00% on the first $2 billion 0.90% over $2 billion		1.00	%
Large Cap Value Fund	0.75% on the first $1 billion 0.68% over $1 billion up to $2 billion 0.65% over $2 billion		0.74	%
Concentrated Growth Fund	1.00% on the first $1 billion 0.90% over $1 billion up to $2 billion 0.86% over $2 billion		1.00	%

B-69

		Actual Rate for the Fiscal
		Year Ended
Fund	Contractual Rate	August 31, 2006
Capital Growth Fund	1.00% on the first $1 billion 0.90% over $1 billion up to $2 billion 0.80% over $2 billion		0.95	%
GSAMI
Concentrated International Equity Fund	1.00% on the first $1 billion 0.90% over $1 billion up to $2 billion 0.86% over $2 billion		1.00	%
Japanese Equity Fund	1.00% on the first $1 billion 0.90% over $1 billion up to $2 billion 0.86% over $2 billion		1.00	%
International Small Cap Fund	1.10% on the first $2 billion 0.99% over $2 billion		1.10	%
Emerging Markets Equity Fund	1.20% on the first $2 billion 1.08% over $2 billion		1.20	%
Asia Equity Fund	1.00% on the first $1 billion 0.90% over $1 billion up to $2 billion 0.86% over $2 billion		1.00	%
BRIC Fund	1.30% on first $2 billion 1.17% over $2 billion		1.27	%

Additionally, as of the date of this Additional Statement, the Investment Adviser was voluntarily waiving a portion of its management fee equal to 0.10%, 0.09%, 0.14%, 0.14%, 0.04%, 0.01% and 0.03% based on the average daily net assets of the Balanced Fund, Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Growth Fund, Structured International Equity Fund and BRIC Fund, respectively.

Prior to December 29, 2005, the contractual management fees for the Funds, except the Small/Mid Cap Growth Fund, Capital Growth Fund and BRIC Fund, were as follows:

Fund	Management Fee
GSAM
Balanced Fund		0.65	%
Growth and Income Fund		0.70	%
Structured Large Cap Value Fund		0.60	%
Structured U.S. Equity Fund		0.65	%
Structured Large Cap Growth Fund		0.65	%
Structured Small Cap Equity Fund		0.85	%

B-70

Fund	Management Fee
Structured International Equity Fund		0.85	%
Strategic Growth Fund		1.00	%
Growth Opportunities Fund		1.00	%
Mid Cap Value Fund		0.75	%
Small Cap Value Fund		1.00	%
Large Cap Value Fund		0.75	%
Concentrated Growth Fund		1.00	%
GSAMI
Concentrated International Equity Fund		1.00	%
Japanese Equity Fund		1.00	%
International Small Cap Fund		1.10	%
Emerging Markets Equity Fund		1.20	%
Asia Equity Fund		1.00	%

B-71

     For the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004 the amounts of the fees incurred by each Fund then in existence under the Management Agreements were as follows (with and without the fee limitations that were then in effect):

	Fiscal year ended				Fiscal year ended				Fiscal year ended
	August 31,				August 31,				August 31,
	2006				2005				2004
	With Fee		Without Fee		With Fee		Without Fee		With Fee		Without Fee
	Limitations		Limitations		Limitations		Limitations		Limitations		Limitations
Balanced Fund	$	1,400,984	$	1,400,984	$	1,479,382	$	1,479,382	$	1,273,313	$	1,273,313
Growth and Income Fund		7,548,780		7,560,961		6,436,508		6,436,508		4,518,567		4,518,567
Structured Large Cap Value Fund		5,176,467		5,744,521		2,540,099		2,540,099		1,879,530		1,879,530
Structured U.S. Equity Fund		6,790,112		7,837,833		5,299,857		5,545,073		4,834,401		5,275,594
Structured Large Cap Growth Fund		4,377,474		5,045,740		2,462,152		2,569,318		2,576,107		2,808,330
Structured Small Cap Equity Fund		5,580,026		5,789,624		3,903,906		3,913,268		2,558,067		2,558,067
Structured International Equity Fund		13,840,653		14,505,497		6,214,072		6,278,704		2,944,173		2,944,173
Capital Growth Fund		17,686,134		17,686,134		18,298,648		18,620,852		19,584,749		20,615,525
Strategic Growth Fund		3,382,742		3,382,742		3,517,819		3,517,819		3,135,807		3,135,807
Growth Opportunities Fund		21,169,810		21,184,220		15,208,391		15,208,391		9,551,981		9,551,981
Small/Mid Cap Growth Fund1		483,206		483,206		9,540		9,540		—		—
Mid Cap Value Fund		38,265,281		38,909,777		22,533,520		22,825,207		10,033,176		10,033,176
Small Cap Value Fund		19,809,103		19,809,593		18,413,239		18,413,239		12,772,759		12,772,759
Large Cap Value Fund		8,109,132		8,109,132		5,303,521		5,303,521		3,061,786		3,061,786
Concentrated International Equity Fund		4,523,547		4,523,547		4,185,303		4,185,303		4,847,216		4,847,216
Japanese Equity Fund		643,967		643,967		496,090		496,090		510,380		510,380
International Small Cap Fund		2,095,021		2,095,021		1,163,201		1,188,961		861,735		940,075
Emerging Markets Equity Fund		6,985,941		6,985,941		1,362,747		1,362,747		1,052,689		1,052,689
Asia Equity Fund		1,335,365		1,335,365		819,057		819,057		601,008		601,008
BRIC Fund2		27,689		27,689		—		—		—		—
Concentrated Growth Fund		1,696,174		1,696,174		1,259,093		1,259,093		976,341		976,341

1	The Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The BRIC Fund commenced operations on June 30, 2006.

     In addition to providing advisory services, under its Management Agreement, each Investment Adviser also: (i) supervises all non-advisory operations of each Fund that it advises; (ii) provides personnel to perform such executive, administrative and clerical services as are reasonably necessary to provide effective administration of each Fund; (iii) arranges for at each Fund’s expense: (a) the preparation of all required tax returns, (b) the preparation and submission of reports to existing shareholders, (c) the periodic updating of prospectuses and statements of additional information and (d) the preparation of reports to be filed with the SEC and other regulatory authorities; (iv) maintains each Fund’s records; and (v) provides office space and all necessary office equipment and services.

B-72

Portfolio Managers — Other Accounts Managed by the Portfolio Managers

     The following tables disclose other accounts within each type of category listed below for which the portfolio managers are jointly and primarily responsible for day to day portfolio management.

																Number of Accounts and Total Assets for Which Advisory Fee is Performance
	Number of Other Accounts Managed and Total Assets by Account Type*															Based*
	Registered															Registered
Name of	Investment					Other Pooled					Other					Investment				Other Pooled					Other
Portfolio Manager	Companies					Investment Vehicles					Accounts					Companies				Investment Vehicles					Accounts
						Number					Number					Number				Number					Number
	Number of		Assets			of		Assets			of		Assets			of		Assets		of		Assets			of		Assets
	Accounts		Managed			Accounts		Managed			Accounts		Managed			Accounts		Managed		Accounts		Managed			Accounts		Managed
Balanced Fund
Don Mulvihill		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0			30	$	9.2	bil
Robert C. Jones		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0			30	$	9.2	bil
Jonathan Beinner		83	$	36.4	bil		2	$	577	mil		1,551	$	114.4	bil		0		0		20	$	6.0	bil		26	$	14.0	bil
James B. Clark1		42	$	25.4	bil		2	$	577	mil		1,408	$	87.4	bil		0		0		15	$	5.9	bil		8	$	3.0	bil
Growth and Income Fund
Dolores Bamford		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Andrew Braun		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		2	$	337	mil		1	$	122.0	mil
Scott Carroll		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Sally Pope Davis		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Sean Gallagher		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		2	$	337	mil		1	$	122.0	mil
Lisa Parisi		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Edward Perkin		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Eileen Rominger		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		2	$	337	mil		1	$	122.0	mil
Structured Large Cap Value Fund
Melissa Brown		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0			30	$	9.2	bil
Robert C. Jones		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0			30	$	9.2	bil
Structured U.S. Equity Fund
Melissa Brown		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0			30	$	9.2	bil
Robert C. Jones		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0			30	$	9.2	bil

¹ These numbers only represent the U.S. funds James B. Clark managed.

B-73

																Number of Accounts and Total Assets for Which Advisory Fee is Performance
	Number of Other Accounts Managed and Total Assets by Account Type*															Based*
	Registered															Registered
Name of	Investment					Other Pooled					Other					Investment				Other Pooled				Other
Portfolio Manager	Companies					Investment Vehicles					Accounts					Companies				Investment Vehicles				Accounts
						Number					Number					Number				Number				Number
	Number of		Assets			of		Assets			of		Assets			of		Assets		of		Assets		of		Assets
	Accounts		Managed			Accounts		Managed			Accounts		Managed			Accounts		Managed		Accounts		Managed		Accounts		Managed
Structured Large Cap Growth Fund
Melissa Brown		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0		30	$	9.2	bil
Robert C. Jones		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0		30	$	9.2	bil
Structured Small Cap Equity Fund
Melissa Brown		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0		30	$	9.2	bil
Robert C. Jones		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0		30	$	9.2	bil
Structured International Equity Fund
Len Ioffe		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0		30	$	9.2	bil
Robert C. Jones		70	$	20.4	bil		38	$	19.8	bil		638	$	63.9	bil		0		0		0		0		30	$	9.2	bil
Capital Growth Fund
Steven M. Barry		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
Gregory H. Ekizian		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
David G. Shell		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
Strategic Growth Fund
Steven M. Barry		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
Gregory H. Ekizian		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
David G. Shell		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
Growth Opportunities Fund
Steven M. Barry		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
Gregory H. Ekizian		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil
David G. Shell		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None			13	$	2.07	bil

B-74

																Number of Accounts and Total Assets for Which Advisory Fee is Performance
	Number of Other Accounts Managed and Total Assets by Account Type*															Based*
	Registered															Registered
Name of	Investment					Other Pooled					Other					Investment				Other Pooled					Other
Portfolio Manager	Companies					Investment Vehicles					Accounts					Companies				Investment Vehicles					Accounts
						Number					Number					Number				Number					Number
	Number of		Assets			of		Assets			of		Assets			of		Assets		of		Assets			of		Assets
	Accounts		Managed			Accounts		Managed			Accounts		Managed			Accounts		Managed		Accounts		Managed			Accounts		Managed
Small/Mid Cap Growth
Steven M. Barry		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None				13	$	2.07	bil
Gregory H. Ekizian		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None				13	$	2.07	bil
David G. Shell		29	$	9.08	bil	None		None				424	$	16.93	bil	None		None		None		None				13	$	2.07	bil
Mid Cap Value Fund
Dolores Bamford		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
David L. Berdon		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Andrew Braun		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		2	$	337	mil		1	$	122.0	mil
Scott Carroll		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Sally Pope Davis		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
J. Kelly Flynn		19	$	11.5	bil		2	$	337	mil		53	$	2.0	bil		0		0		2	$	337	mil		1	$	126.0	mil
Sean Gallagher		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		2	$	337	mil		1	$	122.0	mil
Lisa Parisi		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Edward Perkin		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		2	$	337	mil		2	$	248.5	mil
Eileen Rominger		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		2	$	337	mil		1	$	122.0	mil
Small Cap Value Fund
Dolores Bamford		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Sally Pope Davis		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Scott Carroll		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
J. Kelly Flynn		19	$	11.58	bil		2	$	337	mil		53	$	2.0	bil		0		0		0	$	337	mil		1	$	126.0	mil
James Otness		6	$	2.4	bil		2	$	337	mil		22	$	812.7	mil		0		0		0	$	337	mil		1	$	126.0	mil
Lisa Parisi		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Edward Perkin		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Rob Crystal		6	$	2.4	bil		2	$	337	mil		22	$	812.7	mil		0		0		0	$	337	mil		1	$	126.0	mil

B-75

																Number of Accounts and Total Assets for Which Advisory Fee is Performance
	Number of Other Accounts Managed and Total Assets by Account Type*															Based*
	Registered															Registered
Name of	Investment					Other Pooled					Other					Investment				Other Pooled					Other
Portfolio Manager	Companies					Investment Vehicles					Accounts					Companies				Investment Vehicles					Accounts
						Number					Number					Number				Number					Number
	Number of		Assets			of		Assets			of		Assets			of		Assets		of		Assets			of		Assets
	Accounts		Managed			Accounts		Managed			Accounts		Managed			Accounts		Managed		Accounts		Managed			Accounts		Managed
Large Cap Value Fund
Dolores Bamford		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
David L. Berdon		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Andrew Braun		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		0	$337 mi				1	$	122.0	mil
Scott Carroll		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Sally Pope Davis		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Sean Gallagher		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		0	$	337	mil		1	$	122.0	mil
Lisa Parisi		31	$	14.6	bil		2	$	337	mil		278	$	8.7	bil		0		0		0	$	337	mil		2	$	248.5	mil
Eileen Rominger		23	$	12.1	bil		2	$	337	mil		256	$	8.0	bil		0		0		0	$	337	mil		1	$	122.0	mil
Concentrated International Equity Fund
Mark Beveridge		6	$	759	mil		0		0			9	$	1.1	bil		0		0		0		0			0		0
William Howard		6	$	759	mil		0		0			9	$	1.1	bil		0		0		0		0			0		0
Michael Stanes		6	$	759	mil		0		0			9	$	1.1	bil		0		0		0		0			0		0
Japanese Equity Fund
David Townshend		7	$	947	mil		0		0			9	$	363	mil		0		0		0		0			0		0
Hiroyuki Ito		5	$	379	mil		0		0			5	$	83	mil		0		0		0		0			0		0
International Small Cap Fund
Prashant Bhayani		1	$	233	mil		0		0			3	$	265	mil		0		0		0		0			0		0
David Lowish		1	$	233	mil		0		0			3	$	265	mil		0		0		0		0			0		0
Takeya Suzuki		2	$	568	mil		0		0			4	$	280	mil		0		0		0		0			0		0
Emerging Markets Equity Fund
Maria Gordon		4	$	999	mil		0		0			4	$	398	mil		0		0		0		0			0		0
Kenny Tjan		5	$	1.21	bil		0		0			4	$	398	mil		0		0		0		0			0		0
Asia Equity Fund
Siew-Hua Thio		1	$	520	mil		0		0			4	$	575	mil		0		0		0		0			0		0
BRIC Fund
Maria Gordon		4	$	1.9	bil		0		0			4	$	398	mil		0		0		0		0			0		0
Kenny Tjan		5	$	2.12	bil		0		0			4	$	399	mil		0		0		0		0			0		0

B-76

Number of Accounts and Total Assets for Which Advisory Fee is Performance

Number of Other Accounts Managed and Total Assets by Account Type*

Based*

Registered

Registered

Name of

Investment

Other Pooled

Other

Investment

Other Pooled

Other

Portfolio Manager

Companies

Investment Vehicles

Accounts

Companies

Investment Vehicles

Accounts

Number

Number

Number

Number

Number

Number of

Assets

of

Assets

of

Assets

of

Assets

of

Assets

of

Assets

Accounts

Managed

Accounts

Managed

Accounts

Managed

Accounts

Managed

Accounts

Managed

Accounts

Managed

Richard Flax

1

$

77

mil

0

0

0

0

0

0

0

0

0

0

Mark Syn

1

$

77

mil

0

0

0

0

0

0

0

0

0

0

Concentrated Growth Fund

Steven M. Barry

29

$

9.08

bil

None

None

424

$

16.93

bil

None

None

None

None

13

$

2.07

bil

Gregory H. Ekizian

29

$

9.08

bil

None

None

424

$

16.93

bil

None

None

None

None

13

$

2.07

bil

David G. Shell

29

$

9.08

bil

None

None

424

$

16.93

bil

None

None

None

None

13

$

2.07

bil

* The information is as of August 31, 2006.

B-77

     Conflicts of Interest. The Investment Advisers’ portfolio managers are often responsible for managing one or more of the Funds as well as other accounts, including proprietary accounts, separate accounts and other pooled investment vehicles, such as unregistered hedge funds. A portfolio manager may manage a separate account or other pooled investment vehicle which may have materially higher fee arrangements than the Fund and may also have a performance-based fee. The side-by-side management of these funds may raise potential conflicts of interest relating to cross trading, the allocation of investment opportunities and the aggregation and allocation of trades.

     The Investment Advisers have a fiduciary responsibility to manage all client accounts in a fair and equitable manner. They seek to provide best execution of all securities transactions and aggregate and then allocate securities to client accounts in a fair and timely manner. To this end, the Investment Advisers have developed policies and procedures designed to mitigate and manage the potential conflicts of interest that may arise from side-by-side management. In addition, the Investment Advisers and the Funds have adopted policies limiting the circumstances under which cross-trades may be effected between a Fund and another client account. The Investment Advisers conduct periodic reviews of trades for consistency with these policies. For more information about conflicts of interests that may arise in connection with the portfolio manager’s management of the Funds’ investments and the investments of other accounts, see “Potential Conflicts of Interest — Potential Conflicts Relating to the Allocation of Investment Opportunities Among the Funds and Other Goldman Sachs Accounts and Potential Conflicts Relating to Goldman Sachs’ and the Investment Adviser’s Proprietary Activities and Activities on Behalf of Other Accounts.”

Portfolio Managers — Compensation

     Value Team Base Salary and Performance Bonus. The Investment Adviser’s Value Team (“Value Team”) compensation package for its portfolio managers is comprised of a base salary and a performance bonus. The performance bonus is a function of each portfolio manager’s individual performance and his or her contribution to overall team performance. Portfolio managers are rewarded for their ability to outperform a benchmark while managing risk appropriately. Compensation is also influenced by the Value Team’s total revenues for the past year which in part is derived from advisory fees, and for certain accounts performance based fees. Anticipated compensation levels among competitor firms may also be considered, but are not a principal factor.

The performance bonus is significantly influenced by 3 year period of investment performance. The following criteria are considered:

– Individual performance (relative, absolute)

– Team performance (relative, absolute)

– Consistent performance that aligns with clients’ objectives

– Achievement of top rankings (relative and competitive)

B-78

     The benchmarks for these Funds are:

     Growth and Income Fund: Russell 1000^® Value Index

     Large Cap Value Fund: Russell 1000^® Value Index

     Mid Cap Value Fund: Russell Mid Cap^® Value Index

     Small Cap Value Fund: Russell 2000^® Value Index

Quantitative Domestic and Quantitative International Equity Portfolio Management Teams Base Salary and Performance Bonus.

     The Investment Adviser provides compensation packages for its investment professionals, which are comprised of a base salary and a performance bonus. The year-end performance bonus is a function of each professional’s individual performance; his or her contribution to the overall performance of the group; the performance of GSAM; the profitability of Goldman Sachs; and anticipated compensation levels among competitor firms.

     Portfolio management teams are rewarded for their ability to outperform a benchmark while managing risk exposure. An individual’s compensation depends on his/her contribution to the team as well as his/her ability to work as a member of the team.

     The portfolio management team’s performance measures are aligned with GSAM’s goals to: (1) exceed benchmark over one-year and three-year periods; (2) manage portfolios within a defined range around a targeted tracking error; (3) perform consistently with objectives and client commitments; (4) achieve top tier rankings and ratings; and (5) manage all similarly mandated accounts in a consistent manner.

     Performance-related remuneration for portfolio managers is significantly influenced by the following criteria: (1) overall portfolio performance and consistency of performance over time; (2) consistency of performance across accounts with similar profiles; (3) compliance with risk budgets; and (4) communication with other portfolio managers within the research process.

     In addition, detailed portfolio attribution is critical to the measurement process.

     The benchmarks for these Funds, and the equity portion of the Balanced Fund, are:

     Structured U.S. Equity Fund: S&P 500^® Index

     Structured Small Cap Equity Fund: Russell 2000^® Index

     Structured Large Cap Value Fund: Russell 1000^® Value Index

     Structured Large Cap Growth Fund: Russell 1000^® Growth Index

     Structured International Equity Fund: MSCI^® Europe, Australasia, Far East (“EAFE”) Index (unhedged)

     Balanced Fund: S&P 500^® Index

     Global Quantitative Equity Team Base Salary and Performance Bonus. The Investment Adviser and its Global Quantitative Equity Team’s (the “GQE Team”) compensation packages for its portfolio managers are comprised of a base salary and performance bonus. The

B-79

performance bonus is a function of each portfolio manager’s individual performance; his or her contribution to the overall performance of GQE Team strategies; and annual revenues in the investment strategy which in part is derived from advisory fees and, for certain accounts, performance based fees.

     The performance bonus for portfolio managers is significantly influenced by the following criteria: (1) whether the Team’s pre-tax performance exceeded performance benchmarks over a one, three and five year period; (2) whether the portfolio manager managed portfolios within a defined range around a targeted tracking error and risk budget; (3) consistency of performance across accounts with similar profiles; and (4) communication with other portfolio managers within the research process. In addition, the other factors that are also considered when the amount of performance bonus is determined: (1) whether the Team performed consistently with objectives and client commitments; (2) whether the Team achieved top tier rankings and ratings; and (3) whether the Team managed all similarly mandated accounts in a consistent manner. Benchmarks for measuring performance can either be broad based or narrow based indices which will vary based on client expectations.

     The GQE Team’s decision may also be influenced by the following: the performance of the Investment Adviser and anticipated compensation levels among competitive firms.

     Growth Investment Team Base Salary and Performance Bonus. The Investment Adviser’s Growth Team’s (the “Growth Team”) compensation packages for its portfolio managers are comprised of a base salary and performance bonus. The performance bonus is first and foremost tied to the Growth Team’s pre-tax performance for its clients and the Growth Team’s total revenues for the past year which in part is derived from advisory fees and for certain accounts, performance based fees. The Growth Team measures its performance on a market cycle basis which is typically measured over a three to seven year period, rather than being focused on short term gains in its strategies or short term contributions from a portfolio manager in any given year.

     The performance bonus for portfolio managers is significantly influenced by the following criteria: (1) whether the team performed consistently with objectives and client commitments; (2) whether the team’s performance exceeded performance benchmarks over a market cycle; (3) consistency of performance across accounts with similar profiles; and (4) communication with other portfolio managers within the research process. Benchmarks for measuring performance can either be broad based or narrow based indices which will vary based on client expectations.

     The benchmarks for these Funds are:

     Capital Growth Fund: Russell 1000^® Growth Index

     Growth Opportunities Fund: Russell Midcap^® Growth Index

     Strategic Growth Fund: Russell 1000^® Growth Index

     Concentrated Growth Fund: Russell 1000^® Growth Index

     Small/Mid Cap Growth Fund: Russell 2500^® Growth Index

B-80

     The Growth Team also considers each portfolio manager’s individual performance, his or her contribution to the overall performance of the strategy long-term and his/her ability to work as a member of the team. The Growth Team’s decision may also be influenced by the following: the performance of GSAM, the profitability of Goldman, Sachs & Co. and anticipated compensation levels among competitor firms.

     Active International Portfolio Management Team Base Salary and Performance Bonus. The Investment Adviser’s Active International Portfolio Management Team’s (the “International Team”) compensation packages for portfolio managers are comprised of a base salary and performance bonus. The performance bonus is a function of: each portfolio manager’s individual performance; the International Team’s total revenues for the past year which in part is derived from advisory fees and for certain accounts; performance based fees; his or her contribution to the overall performance of the International Team; the performance of the Investment Adviser; the profitability of Goldman, Sachs & Co.; and anticipated compensation levels among competitor firms. Portfolio managers are rewarded for their ability to outperform a benchmark over a three year period while managing risk exposure.

     The performance bonus for portfolio managers is significantly influenced by the following criteria: (1) overall portfolio performance; (2) consistency of performance across accounts with similar profiles; and (3) communication with other portfolio managers within the research process. In addition, the following factors involving the overall performance of the International Team are also considered when the amount of performance bonus is determined: (1) whether the team’s performance exceeded performance benchmarks over three-year periods; (2) whether the team performed consistently with objectives and client commitments; and (3) whether the team managed all similarly mandated accounts in a consistent manner.

     The benchmarks for these Funds are:

     Concentrated International Equity Fund: MSCI^® EAFE Index (unhedged)

     International Small Cap Fund: S&P/Citigroup EMI World ex-U.S. Index

     Emerging Markets Equity Fund: MSCI^® Emerging Markets Index

     Japanese Equity Fund: Tokyo Price Index (“TOPIX”) (unhedged)

     Asia Equity Fund: MSCI^® All Country Asia ex-Japan Index (unhedged)

     BRIC Fund (Brazil, Russia, India, China): MSCI^® EM BRIC 5-25 Constrained Index

     Fixed Income Team Base Salary and Performance Bonus. The Investment Adviser and its Fixed Income Team’s (the “Fixed Income Team”) compensation package for its portfolio managers is comprised of a base salary and performance bonus. The base salary is fixed. However, the performance bonus is a function of each portfolio manager’s individual performance; the Fixed Income Team’s total revenues for the past year which in part is derived from advisory fees and for certain accounts, performance based fees; his or her contribution to the overall performance of the Fixed Income Team; the performance of GSAM; the profitability of Goldman, Sachs & Co.; and anticipated compensation levels among competitor firms. Portfolio managers are rewarded for their ability to outperform a benchmark while managing risk exposure.

B-81

     The performance bonus for portfolio managers is significantly influenced by the following criteria: (1) overall pre-tax portfolio performance; (2) consistency of performance across accounts with similar profiles; (3) compliance with risk budgets; and (4) communication with other portfolio managers within the research process. In addition, the following factors involving the overall performance of the investment style team are also considered when the amount of performance bonus is determined: (1) whether the team’s performance exceeded performance benchmarks over one-year and three-year periods (for Fund specific benchmarks please see below); (2) whether the team managed portfolios within a defined range around a targeted tracking error; (3) whether the team performed consistently with objectives and client commitments; (4) whether the team achieved top tier rankings and ratings (a consideration secondary to the above); and (5) whether the team managed all similarly mandated accounts in a consistent manner.

     The benchmark for measuring performance of the fixed income portion of the Balanced Fund is:

     Balanced Fund: Lehman Brothers Aggregate Bond Index

     Other Compensation — All Teams. In addition to base salary and performance bonus, the Investment Adviser has a number of additional benefits/deferred compensation programs for all portfolio managers in place including (i) a 401k program that enables employees to direct a percentage of their pretax salary and bonus income into a tax-qualified retirement plan; (ii) a profit sharing program to which Goldman, Sachs & Co. makes a pretax contribution; and (iii) investment opportunity programs in which certain professionals are eligible to participate subject to certain net worth requirements. Portfolio managers may also receive grants of restricted stock units and/or stock options as part of their compensation.

     Certain GSAM portfolio managers may also participate in the firm’s Partner Compensation Plan, which covers many of the firm’s senior executives. In general, under the Partner Compensation Plan, participants receive a base salary and a bonus (which may be paid in cash or in the form of an equity-based award) that is linked to Goldman Sachs’ overall financial performance.

Portfolio Managers — Portfolio Managers’ Ownership of Securities in the Funds They Manage

     The following table shows the portfolio managers’ ownership of securities in the Funds they manage:

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Balanced Fund*
Don Mulvihill	Balanced Fund: $0
Robert C. Jones	Balanced Fund: $0
Jonathan A. Beinner	Balanced Fund: $0

B-82

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
James B. Clark	Balanced Fund: $0
Growth and Income Fund*
Dolores Bamford	Growth and Income Fund: $100,000 — $500,000
Andrew Braun	Growth and Income Fund: $10,000 — $50,000
Scott Carroll	Growth and Income Fund: $10,000 — $50,000
Sally Pope Davis	Growth and Income Fund: $10,000 — $50,000
Sean Gallagher	Growth and Income Fund: $10,000 — $50,000
Lisa Parisi	Growth and Income Fund: $10,000 — $50,000
Eileen Rominger	Growth and Income Fund: $100,000 — $500,000
Edward Perkin	Growth and Income Fund: $10,000 — $50,000
Structured Large Cap Value Fund*
Melissa Brown	Structured Large Cap Value Fund: $10,000 —
	$50,000
Robert C. Jones	Structured Large Cap Value Fund: $50,000 —
	$100,000
Structured U.S. Equity Fund*
Melissa Brown	Structured U.S. Equity Fund: $100,000 —
	$500,000
Robert C. Jones	Structured U.S. Equity Fund: $100,000 —
	$500,000
Structured Large Cap Growth Fund*
Melissa Brown	Structured Large Cap Growth Fund: $10,000
	— $50,000
Robert C. Jones	Structured Large Cap Growth Fund: $50,000
	— $100,000
Structured Small Cap Equity Fund*
Melissa Brown	Structured Small Cap Equity Fund: $50,000
	— $100,000
Robert C. Jones	Structured Small Cap Growth Fund: $50,000
	— $100,000

B-83

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Structured International Equity Fund*
Len Ioffe	Structured International Equity Fund:
	$10,000 — $50,000
Robert C. Jones	Structured International Equity Fund:
	$50,000 — $100,000
Capital Growth Fund*
Steven M. Barry	Capital Growth Fund: $100,000 — $500,000
Gregory H. Ekizian	Capital Growth Fund: $100,000 — $500,000
David G. Shell	Capital Growth Fund: $100,000 — $500,000
Strategic Growth Fund*
Steven M. Barry	Strategic Growth Fund: $100,000 — $500,000
Gregory H. Ekizian	Strategic Growth Fund: $100,000 — $500,000
David G. Shell	Strategic Growth Fund: $100,000 — $500,000
Growth Opportunities Fund*
Steven M. Barry	Growth Opportunities Fund: $100,000 —
	$500,000
Gregory H. Ekizian	Growth Opportunities Fund: $100,000 —
	$500,000
David G. Shell	Growth Opportunities Fund: $100,000 —
	$500,000
Small/Mid Cap Growth Fund*
Steven M. Barry	Small/Mid Cap Growth Fund: $50,000 —
	$100,000
Gregory H. Ekizian	Small/Mid Cap Growth Fund: $50,000 —
	$100,000
David G. Shell	Small/Mid Cap Growth Fund: $50,000 —
	$100,000
Mid Cap Value Fund*
Dolores Bamford	Mid Cap Value Fund: $100,000 — $500,000
David L. Berdon	Mid Cap Value Fund: $50,000 — $100,000
Andrew Braun	Mid Cap Value Fund: $50,000 — $100,000
Scott Carroll	Mid Cap Value Fund: $50,000 — $100,000
Sally Pope Davis	Mid Cap Value Fund: $100,000 — $500,000
Sean Gallagher	Mid Cap Value Fund: $100,000 — $500,000
Lisa Parisi	Mid Cap Value Fund: $100,000 — $500,000
Edward Perkin	Mid Cap Value Fund: $10,000 — $50,000
Eileen Rominger	Mid Cap Value Fund: $100,000 — $500,000
J. Kelly Flynn	Mid Cap Value Fund: $100,000 — $500,000

B-84

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Small Cap Value Fund*
Dolores Bamford	Small Cap Value Fund: $50,000 — $100,000
Scott Carroll	Small Cap Value Fund: $1 — $10,000
Rob Crystal	Small Cap Value Fund: $100,000 — $500,000
Sally Pope Davis	Small Cap Value Fund: $10,000 — $50,000
J. Kelly Flynn	Small Cap Value Fund: $100,000 — $500,000
James Otness	Small Cap Value Fund: $100,000 — $500,000
Lisa Parisi	Small Cap Value Fund: $100,000 — $500,000
Edward Perkin	Small Cap Value Fund: $1 — $10,000
Large Cap Value Fund*
Dolores Bamford	Large Cap Value Fund: $100,000 — $500,000
David L. Berdon	Large Cap Value Fund: $50,000 — $100,000
Andrew Braun	Large Cap Value Fund: $50,000 — $100,000
Scott Carroll	Large Cap Value Fund: $100,000 — $500,000
Sally Pope Davis	Large Cap Value Fund: $100,000 — $500,000
Sean Gallagher	Large Cap Value Fund: $100,000 — $500,000
Lisa Parisi	Large Cap Value Fund: $100,000 — $500,000
Eileen Rominger	Large Cap Value Fund: $500,000 — $1 million
Concentrated International Equity Fund*
Mark Beveridge	Concentrated International Equity Fund:
	$100,000 — $500,000
William Howard	Concentrated International Equity Fund:
	$1 — $10,000
Michael Stanes	Concentrated International Equity Fund: $0
Japanese Equity Fund*
David Townshend	Japanese Equity Fund: $0
Hiroyuki Ito	Japanese Equity Fund: $0
International Small Cap Fund*
Prashant Bhayani	International Small Cap Fund: $100,000 —
	$500,000
David Lowish	International Small Cap Fund: $0
Takeya Suzuki	International Small Cap Fund: $0

B-85

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Emerging Markets Equity Fund*
Maria Gordon	Emerging Markets Equity Fund: $1 — $10,000
Kenny Tjan	Emerging Markets Equity Fund: $1 — $10,000
Asia Equity Fund*
Siew-Hua Thio	Asia Equity Fund: $0
BRIC Fund*
Richard Flax	BRIC Fund: $1 — 10,000
Maria Gordon	BRIC Fund: $1 — $10,000
Mark Syn	BRIC Fund: $0
Kenny Tjan	BRIC Fund: $1 — $10,000
Concentrated Growth Fund*
Steven M. Barry	Concentrated Growth Fund: $100,000 — $500,000
Gregory H. Ekizian	Concentrated Growth Fund: $100,000 — $500,000
David G. Shell	Concentrated Growth Fund: over $1,000,000

* This information is as of August 31, 2006.

B-86

Distributor and Transfer Agent

     Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the exclusive distributor of shares of the Funds pursuant to a “best efforts” arrangement as provided by a distribution agreement with the Trust on behalf of each Fund. Shares of the Funds are offered and sold on a continuous basis by Goldman Sachs, acting as agent. Pursuant to the distribution agreement, after the Prospectuses and periodic reports have been prepared, set in type and mailed to shareholders, Goldman Sachs will pay for the printing and distribution of copies thereof used in connection with the offering to prospective investors. Goldman Sachs will also pay for other supplementary sales literature and advertising costs. Goldman Sachs may enter into sales agreements with certain investment dealers and other financial service firms (the “Authorized Dealers”) to solicit subscriptions for Class A, Class B and Class C Shares of the Funds. Goldman Sachs receives a portion of the sales charge imposed on the sale, in the case of Class A Shares, or redemption in the case of Class B and Class C Shares (and in certain cases, Class A Shares), of such Fund shares.

     Goldman Sachs retained approximately the following combined commissions on sales of Class A, Class B and Class C Shares during the following periods:

	Fiscal year ended		Fiscal year ended		Fiscal year ended
	August 31,		August 31,		August 31,
	2006		2005		2004
Balanced Fund	$	50,000	$	169,200	$	184,800
Growth and Income Fund		569,300		1,344,600		878,400
Structured Large Cap Value Fund		159,100		59,600		21,200
Structured U.S. Equity Fund		56,400		113,200		95,700
Structured Large Cap Growth Fund		22,100		24,600		19,200
Structured Small Cap Equity Fund		45,400		57,800		30,900
Structured International Equity Fund		241,500		137,900		26,200
Capital Growth Fund		181,800		335,700		355,300
Strategic Growth Fund		19,100		14,000		21,000
Growth Opportunities Fund		242,700		402,400		256,800
Small/Mid Cap Growth Fund1		41,900		1,500		0
Mid Cap Value Fund		347,700		1,707,000		655,200
Small Cap Value Fund		27,300		54,000		364,700
Large Cap Value Fund		194,100		233,000		66,000
Concentrated International Equity Fund		61,700		42,500		50,900
Japanese Equity Fund		22,300		3,300		5,400
International Small Cap Fund		33,600		30,900		31,600
Emerging Markets Equity Fund		164,200		18,400		10,500
Asia Equity Fund		22,600		8,400		11,000
BRIC Fund2		13,900		0		0
Concentrated Growth Fund		800		600		3,000

1	The Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The BRIC Fund commenced operations on June 30, 2006.

B-87

     Goldman Sachs, 71 South Wacker Drive, Suite 500, Chicago, IL 60606 serves as the Trust’s transfer agent. Under its transfer agency agreement with the Trust, Goldman Sachs has undertaken with the Trust to (i) record the issuance, transfer and redemption of shares, (ii) provide purchase and redemption confirmations and quarterly statements, as well as certain other statements, (iii) provide certain information to the Trust’s custodian and the relevant sub-custodian in connection with redemptions, (iv) provide dividend crediting and certain disbursing agent services, (v) maintain shareholder accounts, (vi) provide certain state Blue Sky and other information, (vii) provide shareholders and certain regulatory authorities with tax-related information, (viii) respond to shareholder inquiries, and (ix) render certain other miscellaneous services. For its transfer agency services, Goldman Sachs is entitled to receive a transfer agency fee equal, on an annualized basis, to 0.04% of average daily net assets with respect to each Fund’s Institutional and Service Shares and 0.19% of average daily net assets with respect to each Fund’s Class A, Class B and Class C Shares.

     As compensation for the services rendered to the Trust by Goldman Sachs as transfer agent and the assumption by Goldman Sachs of the expenses related thereto, Goldman Sachs received fees for the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004 from each Fund then in existence as follows under the fee schedules then in effect:

	Class A, B and C		Class A, B and C		Class A, B and C
	Fiscal year ended		Fiscal year ended		Fiscal year ended
	August 31,		August 31,		August 31,
	2006		2005		2004
Balanced Fund	$	405,597	$	424,996	$	368,033
Growth and Income Fund		2,028,753		1,724,006		1,216,080
Structured Large Cap Value Fund		610,177		331,289		245,201
Structured U.S. Equity Fund		1,251,422		1,141,885		1,051,678
Structured Large Cap Growth Fund		574,103		446,702		480,501
Structured Small Cap Equity Fund		422,139		346,508		268,148
Structured International Equity Fund		921,003		424,229		229,086
Capital Growth Fund		2,977,621		3,108,339		3,322,756
Strategic Growth Fund		295,807		362,353		373,075
Growth Opportunities Fund		2,287,902		1,822,290		1,343,978
Small/Mid Cap Growth Fund1		84,869		92		0
Mid Cap Value Fund		7,090,356		4,087,442		1,713,500
Small Cap Value Fund		2,400,344		2,441,974		1,972,802
Large Cap Value Fund		1,265,968		848,582		547,951
Concentrated International Equity Fund		724,342		665,058		708,012
Japanese Equity Fund		95,077		79,251		75,799
International Small Cap Fund		205,110		100,607		81,429
Emerging Markets Equity Fund		515,773		97,865		69,305
Asia Equity Fund		176,070		104,233		88,087
BRIC Fund2		637		0		0
Concentrated Growth Fund		128,503		121,214		112,481

1	The Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The BRIC Fund commenced operations on June 30, 2006. The BRIC Fund does not offer Class B Shares.

B-88

	Institutional Shares						Service Shares
	Fiscal year		Fiscal year		Fiscal year		Fiscal year		Fiscal period		Fiscal year
	Ended		Ended		Ended		Ended		Ended		Ended
	August 31,		August 31,		August 31,		August 31,		August 31,		August 31,
	2006		2005		2004		2006		2005		2004
Balanced Fund	$	825	$	1,565	$	874	$	0	$	1	$	3
Growth and Income Fund		7,363		4,668		1,629		374		477		557
Structured Large Cap Value Fund		216,392		99,325		73,520		247		270		161
Structured U.S. Equity Fund		150,076		81,788		56,439		4,395		3,960		3,520
Structured Large Cap Growth Fund		148,420		57,365		48,456		99		109		164
Structured Small Cap Equity Fund		159,361		94,881		43,726		14,364		16,324		20,202
Structured International Equity Fund		458,382		202,720		90,290		12,567		3,437		31
Capital Growth Fund		110,611		111,807		122,669		4,127		2,756		2,424
Strategic Growth Fund		73,025		64,305		46,825		9		123		65
Growth Opportunities Fund		367,519		223,243		98,732		4,241		1,453		405
Small/Mid Cap Growth Fund1		1,442		361		0		19		1		0
Mid Cap Value Fund		626,538		342,477		171,222		49,301		14,353		3,144
Small Cap Value Fund		271,975		212,285		91,708		15,822		10,260		3,876
Large Cap Value Fund		168,730		103,766		47,905		1,381		440		32
Concentrated International Equity Fund		28,150		27,211		44,455		299		189		379
Japanese Equity Fund		5,649		3,158		4,457		93		1		0
International Small Cap Fund		32,794		21,036		14,152		208		82		41
Emerging Markets Equity Fund		123,678		24,431		20,305		603		391		195
Asia Equity Fund		16,347		10,819		5,496		N/A		0		0
BRIC Fund2		717		0		0		N/A		N/A		N/A
Concentrated Growth Fund		40,793		24,844		15,372		0		0		1

1	The Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The BRIC Fund commenced operations on June 30, 2006. The BRIC Fund does not offer Service Shares.

B-89

          The Trust’s distribution and transfer agency agreements each provide that Goldman Sachs may render similar services to others so long as the services Goldman Sachs provides thereunder are not impaired thereby. Such agreements also provide that the Trust will indemnify Goldman Sachs against certain liabilities.

Expenses

          The Trust, on behalf of each Fund, is responsible for the payment of each Fund’s respective expenses. The expenses include, without limitation, the fees payable to the Investment Advisers, service fees and shareholder administration fees paid to Service Organizations, the fees and expenses of the Trust’s custodian and subcustodians, transfer agent fees and expenses, pricing service fees and expenses, brokerage fees and commissions, filing fees for the registration or qualification of the Trust’s shares under federal or state securities laws, expenses of the organization of the Funds, fees and expenses incurred by the Trust in connection with membership in investment company organizations including, but not limited to, the Investment Company Institute, taxes, interest, costs of liability insurance, fidelity bonds or indemnification, any costs, expenses or losses arising out of any liability of, or claim for damages or other relief asserted against, the Trust for violation of any law, legal, tax and auditing fees and expenses (including the cost of legal and certain accounting services rendered by employees of Goldman Sachs or its affiliates with respect to the Trust), expenses of preparing and setting in type Prospectuses, Additional Statements, proxy material, reports and notices and the printing and distributing of the same to the Trust’s shareholders and regulatory authorities, any expenses assumed by a Fund pursuant to its Distribution and Service Plans, compensation and expenses of its “non-interested” Trustees, the fees and expenses of pricing services, dividend expenses on short sales and extraordinary expenses, if any, incurred by the Trust. Except for fees and expenses under any service plan, shareholder administration plan or distribution and service plans applicable to a particular class and transfer agency fees and expenses, all Fund expenses are borne on a non-class specific basis.

          The imposition of the Investment Adviser’s fees, as well as other operating expenses, will have the effect of reducing the total return to investors. From time to time, the Investment Adviser may waive receipt of its fees and/or voluntarily assume certain expenses of a Fund, which would have the effect of lowering that Fund’s overall expense ratio and increasing total return to investors at the time such amounts are waived or assumed, as the case may be.

          As of the date of this Additional Statement, the Investment Advisers voluntarily have agreed to reduce or limit certain “Other Expenses” (excluding management fees, distribution and service fees, transfer agency fees, service fees, shareholder administration fees and expenses, taxes, interest, brokerage fees, and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) for the following Funds to the extent such expenses exceed the following percentage of each Fund’s average daily net assets:

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	Other
	Expenses
Balanced Fund		0.064	%
Growth and Income Fund		0.054	%
Structured Large Cap Value Fund		0.004	%
Structured U.S. Equity Fund		0.004	%
Structured Large Cap Growth Fund		0.004	%
Structured Small Cap Equity Fund		0.004	%
Structured International Equity Fund		0.004	%
Capital Growth Fund		0.004	%
Strategic Growth Fund		0.004	%
Growth Opportunities Fund		0.114	%
Small/Mid Cap Growth Fund		0.064	%
Mid Cap Value Fund		0.104	%
Small Cap Value Fund		0.064	%
Large Cap Value Fund		0.064	%
Concentrated International Equity Fund		0.104	%
Japanese Equity Fund		0.114	%
International Small Cap Fund		0.104	%
Emerging Markets Equity Fund		0.354	%
Asia Equity Fund		0.164	%
BRIC Fund		0.264	%
Concentrated Growth Fund		0.044	%

          Such reductions or limits, if any, are calculated monthly on a cumulative basis during each Funds’ fiscal year and may be discontinued or modified by the applicable Investment Adviser in its discretion at any time.

          Fees and expenses borne by the Funds relating to legal counsel, registering shares of a Fund, holding meetings and communicating with shareholders may include an allocable portion of the cost of maintaining an internal legal and compliance department. Each Fund may also bear an allocable portion of the Investment Adviser’s costs of performing certain accounting services not being provided by a Fund’s custodian.

Reimbursement

          For the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004 the amounts of certain “Other Expenses” of each Fund then in existence that were reduced or otherwise limited were as follows under the expense limitations that were then in effect:

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	Fiscal year ended		Fiscal year ended		Fiscal year ended
	August 31,		August 31,		August 31,
	2006		20053		2004
Balanced Fund	$	254,500	$	365,813	$	287,367
Growth and Income Fund		415		135,128		142,997
Structured Large Cap Value Fund		300,378		181,473		156,524
Structured U.S. Equity Fund		538,819		492,297		403,502
Structured Large Cap Growth Fund		376,394		374,111		288,235
Structured Small Cap Equity Fund		391,988		341,423		301,381
Structured International Equity Fund		841,504		0		310,261
Capital Growth Fund		733,776		787,640		553,830
Strategic Growth Fund		386,298		437,126		339,519
Growth Opportunities Fund		0		1,819		0
Small/Mid Cap Growth Fund1		460,598		145,245		0
Mid Cap Value Fund		0		0		0
Small Cap Value Fund		0		0		0
Large Cap Value Fund		0		47,451		133,359
Concentrated International Equity Fund		140,621		214,385		345,331
Japanese Equity Fund		247,731		279,144		311,948
International Small Cap Fund		281,369		298,125		373,233
Emerging Markets Equity Fund		0		76,663		133,073
Asia Equity Fund		359,924		318,204		363,918
BRIC Fund2		118,480		0		0
Concentrated Growth Fund		266,409		284,259		300,522

1	The Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The BRIC Fund commenced operations on June 30, 2006.
3	The above figures do not reflect a one time voluntary payment made by the transfer agent to the Funds relating to certain credits that reduced transfer agent fees.

Custodian and Sub-Custodians

          State Street, 225 Franklin Street, Boston, MA 02110, is the custodian of the Trust’s portfolio securities and cash for the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth Fund, Large Cap Value, Mid Cap Value, Small Cap Value, Large Cap Value and Concentrated Growth Funds. JPMorganChase, 270 Park Avenue, New York, New York 10017, is the custodian to the Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds. State Street and JPMorganChase also maintain the Trust’s accounting records for the Funds for which they serve as custodian. State Street may appoint domestic and foreign sub-custodians and use depositories from time to time to hold certain securities and other instruments purchased by the Trust in foreign countries and to hold cash and currencies for the Trust.

Independent Registered Public Accounting Firm

          PricewaterhouseCoopers LLP, 125 High Street, Boston, MA 02110, is the Funds’ independent registered public accounting firm. In addition to audit services, PricewaterhouseCoopers LLP prepares the Funds’ federal and state tax returns, and provides assistance on certain non-audit matters.

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POTENTIAL CONFLICTS OF INTEREST

Summary

          The Goldman Sachs Group, Inc. is a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization, and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, investment adviser, financer, advisor, market maker, proprietary trader, prime broker, lender and agent, and has other direct and indirect interests in the global fixed income, currency, commodity, equity and other markets in which the Funds invest. As a result, The Goldman Sachs Group, Inc., the asset management division of Goldman Sachs, the Investment Advisers, and their affiliates, directors, partners, trustees, managers, members, officers and employees (collectively for purposes of this “Potential Conflicts of Interest” section, “Goldman Sachs”), including those who may be involved in the management, sales, investment activities, business operations or distribution of the Funds, are engaged in businesses and have interests other than that of managing the Funds. The Funds will not be entitled to compensation related to such businesses. These activities and interests include potential multiple advisory, transactional, financial and other interests in securities, instruments and companies that may be directly or indirectly purchased or sold by the Funds and their service providers. Such additional businesses and interests may give rise to potential conflicts of interest. The following is a brief summary description of certain of these potential conflicts of interest:

• While the Investment Advisers will make decisions for the Funds in accordance with their obligations to manage the Funds appropriately, the fees, allocations, compensation and other benefits to Goldman Sachs (including benefits relating to business relationships of Goldman Sachs) arising from those decisions may be greater as a result of certain portfolio, investment, service provider or other decisions made by the Investment Advisers than they would have been had other decisions been made which also might have been appropriate for the Funds.

• Goldman Sachs, its sales personnel and other financial service providers may have conflicts associated with their promotion of the Funds or other dealings with the Funds that would create incentives for them to promote the Funds.

• While the allocation of investment opportunities among Goldman Sachs, the Funds and other funds and accounts managed by Goldman Sachs may raise potential conflicts because of financial or other interests of Goldman Sachs or its personnel, the Investment Advisers will not make allocation decisions solely based on such factors.

• The Investment Advisers will give advice to and make investment decisions for the Funds as they believe is in the fiduciary interests of the Funds. Advice given to the Funds or investment decisions made for the Funds may differ from, and may conflict with, advice account given or investment decisions made for Goldman Sachs or other funds or

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	accounts. For example, other funds or accounts managed by the Investment Advisers may sell short securities of an issuer in which the Funds have taken, or will take, a long position in the same securities. Actions taken with respect to Goldman Sachs or other funds or accounts may adversely impact the Funds, and actions taken by the Funds may benefit Goldman Sachs or other funds or accounts.
•	The Investment Adviser may buy for the Funds securities or obligations of issuers in which Goldman Sachs or other funds or accounts have made, or are making, an investment in securities or obligations that are subordinate or senior to securities of the Funds. For example, a Fund may invest in debt securities of an issuer at the same time that Goldman Sachs or other funds or accounts are investing, or currently have an investment, in equity securities of the same issuer. To the extent that the issuer experiences financial or operational challenges which may impact the price of its securities and its ability to meet its obligations, decisions by Goldman Sachs (including the Investment Adviser) relating to what actions to be taken may also raise conflicts of interests and Goldman Sachs may take actions for certain accounts that have negative impacts on other advisory accounts.
•	Goldman Sachs’ personnel may have varying levels of economic and other interests in accounts or products promoted or managed by such personnel as compared to other accounts or products promoted or managed by them.
•	Goldman Sachs will be under no obligation to provide to the Funds, or effect transactions on behalf of the Funds in accordance with, any market or other information, analysis, technical models or research in its possession. Goldman Sachs may have information material to the management of the Funds and may not share that information with relevant personnel of the Investment Adviser.
•	To the extent permitted by applicable law, the Funds may enter into transactions in which Goldman Sachs acts as principal, or in which Goldman Sachs acts on behalf of the Funds and the other parties to such transactions. Goldman Sachs will have potentially conflicting interests in connection with such transactions.
•	Goldman Sachs may act as broker, dealer, agent, lender or otherwise for the Funds and will retain all commissions, fees and other compensation in connection therewith.
•	Securities traded for the Funds may, but are not required to, be aggregated with trades for other funds or accounts managed by Goldman Sachs. When transactions are aggregated but it is not possible to receive the same price or execution on the entire volume of securities purchased or sold, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds.
•	Products and services received by the Investment Advisers or their affiliates from brokers in connection with brokerage services provided to the Funds and other funds or accounts

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	managed by Goldman Sachs may disproportionately benefit other of such funds and accounts based on the relative amounts of brokerage services provided to the Funds and such other funds and accounts.
•	While the Investment Advisers will make proxy voting decisions as they believe appropriate and in accordance with the Investment Advisers’ policies designed to help avoid conflicts of interest, proxy voting decisions made by the Investment Advisers with respect to a Fund’s portfolio securities may favor the interests of other clients or businesses of other divisions or units of Goldman Sachs.
•	Regulatory restrictions (including relating to the aggregation of positions among different funds and accounts) and internal Goldman Sachs policies may restrict investment activities of the Funds. Information held by Goldman Sachs could have the effect of restricting investment activities of the Funds.

          Prospective investors should carefully review the following section of this document which more fully describes these and other potential conflicts of interest presented by Goldman Sachs’ other businesses and interests.

          As a registered investment adviser under the Advisers Act, the Investment Advisers are required to file a Form ADV with the SEC. Form ADV contains information about assets under management, types of fee arrangements, types of investments, potential conflicts of interest, and other relevant information regarding the Investment Advisers. A copy of Part 1 of the Investment Advisers’ Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov).

Potential Conflicts Relating to Portfolio Decisions, the Sale of Fund Shares and the Allocation of Investment Opportunities

          Goldman Sachs’ Other Activities May Have an Impact on the Funds

          The Investment Advisers make decisions for the Funds in accordance with their obligations as the Investment Advisers of the Funds. However, Goldman Sachs’ other activities may have a negative effect on the Funds. As a result of the various activities and interests of Goldman Sachs as described in the first paragraph under “Summary” above, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or other services. It is also likely that the Funds will undertake transactions in securities in which Goldman Sachs makes a market or otherwise has other direct or indirect interests. In addition, while the Investment Advisers will make decisions for the Funds in accordance with their obligations to manage the Funds appropriately, the fees, allocations, compensation and other benefits (including benefits relating to business relationships of Goldman Sachs) arising from those decisions may be greater as a result of certain portfolio, investment, service provider or other decisions made by the Investment Advisers for the Funds than they would have been had other decisions been made which also might have been appropriate for the Funds.

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          Goldman Sachs conducts extensive broker-dealer, banking and other activities around the world and operates a business known as Goldman Sachs Security Services (“GSS”) which provides prime brokerage, administrative and other services to clients which may involve funds, markets and securities in which the Funds invest. These businesses will give GSS and many other parts of Goldman Sachs broad access to the current status of certain markets, investments and funds and detailed knowledge about fund operators. In addition, with respect to advisory account that invests in funds, given Goldman Sachs’ scale of activity in the prime brokerage market, it is likely that Goldman Sachs will act as a prime broker to one or more funds in which such advisory account may invest, in which case Goldman Sachs will have direct knowledge concerning the investments and transactions of such funds. As a result of the activities described in this paragraph and the access and knowledge arising from those activities, parts of Goldman Sachs may be in possession of information in respect of markets, investments and funds, which, if known to the Investment Adviser, might cause the Investment Adviser to seek to dispose of, retain or increase interests in investments held by the Funds or acquire certain positions on behalf of the Funds. Goldman Sachs will be under no duty to make any such information available to the Funds or personnel of the Investment Adviser making investment decisions on behalf of the Funds. In general, personnel of the Investment Adviser making investment decisions will make decisions based solely upon information known by such decision makers without regard to information known by other Goldman Sachs personnel.

Goldman Sachs’ Financial and Other Interests and Relationships May Incentivize Goldman Sachs to Promote the Sale of Fund Shares

          Goldman Sachs, its personnel and other financial service providers, have interests in promoting sales of the Funds. With respect to both Goldman Sachs and its personnel, the remuneration and profitability relating to services to and sales of the Funds or other products may be greater than the remuneration and profitability relating to services to and sales of other products that might be provided or offered. Goldman Sachs and its sales personnel may directly or indirectly receive a portion of the fees and commissions charged to the Funds or their shareholders. Goldman Sachs and its advisory or other personnel may also benefit from increased amounts of assets under management. Fees and commissions may also be higher than for other products or services, and the remuneration and profitability to Goldman Sachs and such personnel resulting from transactions on behalf of or management of the Funds may be greater than the remuneration and profitability resulting from other funds or products.

          Conflicts may arise in relation to sales-related incentives. Goldman Sachs and its personnel may receive greater compensation or greater profit in connection with the Funds than with an account advised by an unaffiliated investment adviser. Differentials in compensation may be related to the fact that Goldman Sachs may pay a portion of its advisory fee to the unaffiliated investment adviser, or to other compensation arrangements, including for portfolio management, brokerage transactions or account servicing. Any differential in compensation may create a financial incentive on the part of Goldman Sachs and its personnel to recommend the Funds over other accounts or products managed by unaffiliated investment advisers or to effect transactions differently in the Funds as compared to other accounts or products.

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          Goldman Sachs may also have relationships with, and purchase, or distribute or sell, services or products from or to, distributors, consultants and others who recommend the Funds, or who engage in transactions with or for the Funds. For example, Goldman Sachs regularly participates in industry and consultant sponsored conferences and may purchase educational, data related or other services from consultants or other third parties that it deems to be of value to its personnel and its business. The products and services purchased from consultants may include, but are not limited to, those that help Goldman Sachs understand the consultant’s points of view on the investment management process. Consultants and other parties that provide consulting or other services to potential investors in the Funds may receive fees from Goldman Sachs or the Funds in connection with the distribution of shares in the Funds or other Goldman Sachs products. For example, Goldman Sachs may enter into revenue or fee sharing arrangements with consultants, service providers, and other intermediaries relating to investments in mutual funds, collective trusts, or other products or services offered or managed by the Investment Advisers. Goldman Sachs may also pay a fee for membership in industry-wide or state and municipal organizations or otherwise help sponsor conferences and educational forums for investment industry participants including, but not limited to, trustees, fiduciaries, consultants, administrators, state and municipal personnel and other clients. Goldman Sachs’ membership in such organizations allows Goldman Sachs to participate in these conferences and educational forums and helps Goldman Sachs interact with conference participants and to develop an understanding of the points of view and challenges of the conference participants. In addition, Goldman Sachs’ personnel, including employees of Goldman Sachs, may have board, advisory, brokerage or other relationships with issuers, distributors, consultants and others that may have investments in the Funds or that may recommend investments in the Funds. In addition, Goldman Sachs, including the Investment Advisers, may make charitable contributions to institutions, including those that have relationships with clients or personnel of clients. Goldman Sachs’ personnel may also make political contributions. As a result of the relationships and arrangements described in this paragraph, consultants, distributors and other parties may have conflicts associated with their promotion of the Funds or other dealings with the Funds that create incentives for them to promote the Funds or certain portfolio transactions.

          To the extent permitted by applicable law, Goldman Sachs may make payments to authorized dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the Funds, Client/GS Accounts (defined below) and other products. In addition to placement fees, sales loads or similar distribution charges, such payments may be made out of Goldman Sachs’ assets, or amounts payable to Goldman Sachs rather than a separately identified charge to the Funds, Client/GS Accounts or other products. Such payments may compensate Intermediaries for, among other things: marketing the Funds, Client/GS Accounts and other products; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds, Client/GS Accounts and other products. The payments may also, to the extent permitted by applicable regulations, contribute to various non-cash and cash incentive arrangements to promote certain products, as well as sponsor various educational programs, sales contests and/or promotions. The additional payments by Goldman Sachs may also compensate Intermediaries for subaccounting, administrative and/or shareholder processing services that are in addition to the fees paid for these services by such products.

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          The payments made by Goldman Sachs may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend certain products based, at least in part, on the level of compensation paid.

Potential Conflicts Relating to the Allocation of Investment Opportunities Among the Funds and Other Goldman Sachs Accounts

          Goldman Sachs has potential conflicts in connection with the allocation of investments or transaction decisions for the Funds, including in situations in which Goldman Sachs or its personnel (including personnel of the Investment Advisers) have interests. For example, the Funds may be competing for investment opportunities with current or future accounts or funds managed or advised by Goldman Sachs (including the Investment Advisers). These accounts or funds may provide greater fees or other compensation (including performance based fees) to Goldman Sachs (including the Investment Advisers) or in which Goldman Sachs (including the Investment Advisers) or its personnel have an interest (collectively, the “Client/GS Accounts”).

          Goldman Sachs may manage or advise Client/GS Accounts that have investment objectives that are similar to those of the Funds and/or may seek to make investments in securities or other instruments in which the Funds may invest. This will create potential conflicts and potential differences among the Funds and other Client/GS Accounts, particularly where there is limited availability or limited liquidity for those investments. Such limited availability situations may exist, without limitation, in local and emerging markets, regulated industries, research and development trades, relative value or paired trades, IPO/new issues and limited issues. The Investment Advisers have developed policies and procedures that provide that they will allocate investment opportunities and make purchase and sale decisions among the Funds and other Client/GS Accounts in a manner that they consider, in their sole discretion and consistent with their fiduciary obligation to each Client/GS Account, to be reasonable. Allocations may be based on numerous factors and may not always be pro rata based on assets managed.

          The Investment Advisers will make allocation-related decisions for the Funds and other Client/GS Accounts with reference to numerous factors that may include, without limitation, (i) account investment horizons, investment objectives and guidelines; (ii) different levels of investment for different strategies; (iii) client-specific investment guidelines and restrictions; (iv) fully directed brokerage accounts; (v) tax sensitivity of accounts; (vi) suitability requirements; (vii) account turnover guidelines; (viii) availability of cash for investment; (ix) relative sizes and expected future sizes of applicable accounts; and/or (x) availability of other investment opportunities. Suitability considerations can include without limitation (i) relative attractiveness of a security to different accounts; (ii) concentration of positions in an account; (iii) appropriateness of a security for the benchmark of an account; (iv) an account’s risk tolerance, risk parameters and strategy allocations; (v) use of the opportunity as a replacement for a security the Investment Advisers believe to be attractive for an account but that for some reason cannot be held in the account; (vi) the need to hedge a short position in a pair trade; and/or (vii) the need to give a subset of accounts exposure to an industry. In addition to

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allocations of limited availability investments, the Investment Advisers may, from time to time, develop and implement new investment opportunities and/or trading strategies, and these strategies may not be allocated among all accounts (including the Fund) or pro rata, even if the strategy is consistent with objectives of all accounts. The Investment Advisers may make decisions based on such factors as strategic fit and other portfolio management considerations, including, without limitation, an account’s capacity for such strategy, the liquidity of the strategy and its underlying instruments, the account’s liquidity, the business risk of the strategy relative to the account’s overall portfolio make-up, and the lack of efficacy of, or return expectations from, the strategy for the account, and such other factors as the Investment Advisers deem relevant in their sole discretion. For example, such a determination may, but will not necessarily, include consideration of the fact that a particular strategy will not have a meaningful impact on an account given the overall size of the account, the limited availability of opportunities in the strategy and the availability of other strategies for the account. As a result, such a strategy may be allocated to some accounts managed by the Investment Advisers and not to others.

          Although allocating orders among the Funds and other Client/GS Accounts may create potential conflicts of interest because of the interests of Goldman Sachs or its personnel or because Goldman Sachs may receive greater fees or compensation from one of the Client/GS Account’s allocations, the Investment Advisers will not make allocation decisions based on such interests or greater fees or compensation.

          Allocation decisions among accounts may be more or less advantageous to any one account or group of accounts. As a result of the above, the Investment Advisers may determine that investment opportunities, strategies or particular purchases or sales are appropriate for one or more Client/GS Accounts or for themselves or an affiliate, but not for the Funds, or are appropriate for, or available to, the Funds but in different sizes, terms or timing than is appropriate for other Client/GS Accounts, or may determine not to allocate to or purchase or sell for Client/GS Accounts all investment transactions for which Client/GS Accounts may be eligible. Therefore, the amount, timing, structuring or terms of an investment by the Funds may differ from, and performance may be lower than, investments and performance of other Client/GS Accounts.

     The Investment Advisers and/or their affiliates manage accounts of clients of Goldman Sachs’ Private Wealth Management (“PWM”) business. Such PWM clients receive advice from Goldman Sachs by means of separate accounts (“PWM Separate Accounts”). With respect to the Funds, the Investment Advisers may follow a strategy that is expected to be similar over time to that delivered by the PWM Separate Accounts. Each of the Funds and the PWM Separate Account Clients are subject to independent management and, given the independence in the implementation of advice to these accounts, there can be no warranty that such investment advice will be implemented simultaneously. Neither the Investment Advisers (in the case of the Funds) nor their affiliates (in the case of PWM Separate Accounts), will know when advice issued has been executed (if at all) and, if so, to what extent. While each will use reasonable endeavors to procure timely execution, it is possible that prior execution for or on behalf of the PWM Separate Accounts could adversely affect the prices and availability of the securities, currencies and instruments in which the Funds invest.

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Other Potential Conflicts Relating to the Management of the Funds by the Investment Advisers

          Potential Restrictions and Issues Relating to Information Held by Goldman Sachs

          From time to time and subject to the Investment Advisers’ policies and procedures regarding information barriers, the Investment Advisers may consult with personnel in other areas of Goldman Sachs, or with persons unaffiliated with Goldman Sachs, or may form investment policy committees comprised of such personnel. The performance by such persons of obligations related to their consultation with personnel of the Investment Advisers could conflict with their areas of primary responsibility within Goldman Sachs or elsewhere. In connection with their activities with the Investment Advisers, such persons may receive information regarding the Investment Advisers’ proposed investment activities of the Funds that is not generally available to the public. There will be no obligation on the part of such persons to make available for use by the Funds any information or strategies known to them or developed in connection with their own client, proprietary or other activities. In addition, Goldman Sachs will be under no obligation to make available any research or analysis prior to its public dissemination.

          The Investment Advisers make decisions for the Funds based on the Funds’ investment programs. The Investment Advisers from time to time may have access to certain fundamental analysis and proprietary technical models developed by Goldman Sachs and its personnel. Goldman Sachs will not be under any obligation, however, to effect transactions on behalf of the Funds in accordance with such analysis and models.

          In addition, Goldman Sachs has no obligation to seek information or to make available to or share with the Funds any information, investment strategies, opportunities or ideas known to Goldman Sachs personnel or developed or used in connection with other clients or activities. Goldman Sachs and certain of its personnel, including the Investment Advisers’ personnel or other Goldman Sachs personnel advising or otherwise providing services to the Funds, may be in possession of information not available to all Goldman Sachs personnel, and such personnel may act on the basis of such information in ways that have adverse effects on the Funds.

          From time to time, Goldman Sachs may come into possession of material, non-public information or other information that could limit the ability of the Funds to buy and sell investments. The investment flexibility of the Funds may be constrained as a consequence. The Investment Advisers generally are not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for the Funds.

Potential Conflicts Relating to Goldman Sachs’ and the Investment Advisers’ Proprietary Activities and Activities On Behalf of Other Accounts

          The results of the investment activities of the Funds may differ significantly from the results achieved by Goldman Sachs for its proprietary accounts and from the results achieved by Goldman Sachs for other Client/GS Accounts. The Investment Advisers will manage the Funds and the other Client/GS Accounts they manage in accordance with their respective investment

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objectives and guidelines. However, Goldman Sachs may give advice, and take action, with respect to any current or future Client/GS Accounts that may compete or conflict with the advice the Investment Advisers may give to the Funds, or may involve a different timing or nature of action than with respect to the Funds.

          Transactions undertaken by Goldman Sachs or Client/GS Accounts may adversely impact the Funds. Goldman Sachs and one or more Client/GS Accounts may buy or sell positions while the Funds are undertaking the same or a differing, including potentially opposite, strategy, which could disadvantage the Funds. For example, a Fund may buy a security and Goldman Sachs or Client/GS Accounts may establish a short position in that same security. The subsequent short sale may result in impairment of the price of the security which the Fund holds. Conversely, the Fund may establish a short position in a security and Goldman Sachs or other Client/GS Accounts may buy that same security. The subsequent purchase may result in an increase of the price of the underlying position in the short sale exposure of the Fund and such increase in price would be to the Fund’s detriment. Conflicts may also arise because portfolio decisions regarding a Fund may benefit Goldman Sachs or other Client/GS Accounts. For example, the sale of a long position or establishment of a short position by a Fund may impair the price of the same security sold short by (and therefore benefit) Goldman Sachs or other Client/GS Accounts, and the purchase of a security or covering of a short position in a security by a Fund may increase the price of the same security held by (and therefore benefit) Goldman Sachs or other Client/GS Accounts.

          In addition, transactions in investments by one or more Client/GS Accounts and Goldman Sachs may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of a Fund, particularly, but not limited to, in small capitalization, emerging market or less liquid strategies. This may occur when portfolio decisions regarding a Fund are based on research or other information that is also used to support portfolio decisions for other Client/GS Accounts. When Goldman Sachs or a Client/GS Account implements a portfolio decision or strategy ahead of, or contemporaneously with, similar portfolio decisions or strategies for the Funds (whether or not the portfolio decisions emanate from the same research analysis or other information), market impact, liquidity constraints, or other factors could result in the Fund receiving less favorable trading results and the costs of implementing such portfolio decisions or strategies could be increased or the Fund could otherwise be disadvantaged. Goldman Sachs may, in certain cases, elect to implement internal policies and procedures designed to limit such consequences to Client/GS Accounts, which may cause a Fund to be unable to engage in certain activities, including purchasing or disposing of securities, when it might otherwise be desirable for it to do so.

          As noted above, the Investment Adviser may, but is not required to aggregate purchase or sale orders for the Funds with trades for other funds or accounts managed by Goldman Sachs, including Client/GS Accounts. When orders are aggregated for execution, it is possible that GS and GS employee interests will receive benefits from such transactions, even in limited capacity situations. While the Investment Adviser maintains policies and procedures that it believes are reasonably designed to deal with conflicts of interest that may arise in certain situations when purchase or sale orders for the Funds are aggregated for execution with orders for Client/GS Accounts, in some cases the Investment Adviser will make allocations to accounts in which Goldman Sachs and/or employees have an interest.

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          The Investment Adviser has established a trade sequencing and rotation policy for certain U.S. equity client accounts (including the Funds) and “wrap fee” accounts. The Investment Adviser does not generally aggregate trades on behalf of wrap fee accounts at the present time. “Wrap fees” usually cover execution costs only when trades are placed with the sponsor of the account. Trades through different sponsors are generally not aggregated. The Investment Adviser currently utilizes an asset-based trade sequencing and rotation policy for determining the order in which trades for institutional and wrap accounts are placed. Given current asset levels, the Investment Adviser’s trade sequencing and rotation policy provides that wrap accounts trade ahead of other accounts, including the Funds, 10% of the time. Other accounts, including the Funds, currently trade before wrap accounts 90% of the time. This is reflected in a ten week trade rotation schedule. The Investment Adviser may deviate from the rotation schedule under certain circumstances. These include situations, for example, where in the Investment Adviser’s view it is not practical for the wrap fee accounts to participate in certain types of trades or when there are unusually long delays in a given wrap sponsor’s execution of a particular trade. In addition, a portfolio management team may provide instructions simultaneously regarding the placement of a trade in lieu of the rotation schedule if the trade represents a relatively small proportion of the average daily trading volume of the relevant security.

          The directors, officers and employees of Goldman Sachs, including the Investment Advisers, may buy and sell securities or other investments for their own accounts (including through investment funds managed by Goldman Sachs, including the Investment Advisers). As a result of differing trading and investment strategies or constraints, positions may be taken by directors, officers and employees that are the same, different from or made at different times than positions taken for the Funds. To reduce the possibility that the Funds will be materially adversely affected by the personal trading described above, each of the Funds and Goldman Sachs, as each Fund’s Investment Adviser and distributor, has established policies and procedures that restrict securities trading in the personal accounts of investment professionals and others who normally come into possession of information regarding the Fund’s portfolio transactions. Each of the Funds and Goldman Sachs, as each Fund’s Investment Adviser and distributor, has adopted a code of ethics (collectively, the “Codes of Ethics”) in compliance with Section 17(j) of the Act and monitoring procedures relating to certain personal securities transactions by personnel of the Investment Advisers which the Investment Advisers deem to involve potential conflicts involving such personnel, Client/GS Accounts managed by the Investment Advisers and the Funds. The Codes of Ethics require that personnel of the Investment Advisers comply with all applicable federal securities laws and with the fiduciary duties and anti-fraud rules to which the Investment Advisers are subject. The Codes of Ethics can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. The Codes of Ethics are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies may also be obtained after paying a duplicating fee by writing the SEC’s Public Reference Section, Washington, DC 20549-0102, or by electronic request to publicinfo@sec.gov.

          Clients of Goldman Sachs (including Client/GS Accounts) may have, as a result of receiving client reports or otherwise, access to information regarding the Investment Advisers’

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transactions or views which may affect such clients’ transactions outside of accounts controlled by personnel of the Investment Advisers, and such transactions may negatively impact the performance of the Funds. The Funds may also be adversely affected by cash flows and market movements arising from purchase and sales transactions, as well as increases of capital in, and withdrawals of capital from, other Client/GS Accounts. These effects can be more pronounced in thinly traded and less liquid markets.

          The Investment Advisers’ management of the Funds may benefit Goldman Sachs. For example, the Funds may, subject to applicable law, invest directly or indirectly in the securities of companies affiliated with Goldman Sachs or which Goldman Sachs has an equity, debt or other interest. In addition, to the extent permitted by applicable law, the Funds may engage in investment transactions which may result in other Client/GS Accounts being relieved of obligations or otherwise divesting of investments or cause the Funds to have to divest certain investments. The purchase, holding and sale of investments by the Funds may enhance the profitability of Goldman Sachs’ or other Client/GS Accounts’ own investments in and its activities with respect to such companies.

          Goldman Sachs and one or more Client/GS Accounts (including the Funds) may also invest in different classes of securities of the same issuer. As a result, one or more Client/GS Accounts may pursue or enforce rights with respect to a particular issuer in which a Fund has invested, and those activities may have an adverse effect on the Fund. For example, if a Client/GS Account holds debt securities of an issuer and a Fund holds equity securities of the same issuer, if the issuer experiences financial or operations challenges, the Client/GS Account which holds the debt securities may seek a liquidation of the issuer, whereas the Fund which holds the equity securities may prefer a reorganization of the issuer. A Fund may be negatively impacted by Goldman Sachs’ and other Client/GS Accounts’ activities, and transactions for the Fund may be impaired or effected at prices or terms that may be less favorable than would otherwise have been the case had Goldman Sachs and other Client/GS Accounts not pursued a particular course of action with respect to the issuer of the securities. In addition, in certain instances personnel of the Investment Adviser may obtain information about the issuer that would be material to the management of other Client/GS Accounts which could limit the ability of personnel of the Investment Adviser to buy or sell securities of the issuer on behalf of the Funds.

          Goldman Sachs may create, write, sell or issue, or act as placement agent or distributor of, derivative instruments with respect to the Funds or with respect to underlying securities, currencies or instruments of the Funds, or which may be otherwise based on the performance of the Funds. In addition, to the extent permitted by applicable law, Goldman Sachs (including its personnel or Client/GS Accounts) may invest in the Funds, may hedge its derivative positions by buying or selling shares of the Funds, and reserves the right to redeem some or all of its investments at any time. These investments and redemptions may be significant and may be made without notice to the shareholders. The structure or other characteristics of the derivative instruments may have an adverse effect on the Funds. For example, the derivative instruments could represent leveraged investments in the Funds, and the leveraged characteristics of such investments could make it more likely, due to events of default or otherwise, that there would be significant redemptions of interests from the Funds more quickly than might otherwise be the

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case. Goldman Sachs, acting in commercial capacities in connection with such derivative instruments, may in fact cause such a redemption. This may have an adverse effect on the investment management and positions, flexibility and diversification strategies of the Funds and on the amount of fees, expenses and other costs incurred directly or indirectly for the account of the Funds.

          Potential Conflicts in Connection with Investments in Goldman Sachs Money Market Funds

          To the extent permitted by applicable law, a Fund may invest all or some of its short term cash investments in any money market fund advised or managed by Goldman Sachs. In connection with any such investments, a Fund, to the extent permitted by the Act, will pay its share of all expenses (other than advisory and administrative fees) of a money market fund in which it invests which may result in a Fund bearing some additional expenses.

          Goldman Sachs May In-Source or Outsource

          Subject to applicable law, Goldman Sachs, including the Investment Advisers, may from time to time and without notice to investors in-source or outsource certain processes or functions in connection with a variety of services that it provides to the Funds in its administrative or other capacities. Such in-sourcing or outsourcing may give rise to additional conflicts of interest.

Potential Conflicts That May Arise When Goldman Sachs Acts in a Capacity Other Than Investment Adviser to the Funds

          To the extent permitted by applicable law, the Funds may enter into transactions and invest in futures, securities, currencies, swaps, options, forward contracts or other instruments in which Goldman Sachs acting as principal or on a proprietary basis for its customers, serves as the counterparty. The Funds may also enter into cross transactions in which Goldman Sachs acts on behalf of the Fund and for the other party to the transaction. Goldman Sachs may have a potentially conflicting division of responsibilities to both parties to a cross transaction. For example, Goldman Sachs may represent both a Fund and another Client/GS Account in connection with the purchase of a security by the Fund, and Goldman Sachs may receive compensation or other payments from either or both parties, which could influence the decision of Goldman Sachs to cause the Fund to purchase such security. The Funds may engage in principal or cross transactions to the extent permitted by applicable law.

          Goldman Sachs may act as broker, dealer, agent, lender or advisor or in other commercial capacities for the Funds. It is anticipated that the commissions, mark-ups, mark-downs, financial advisory fees, underwriting and placement fees, sales fees, financing and commitment fees, brokerage fees, other fees, compensation or profits, rates, terms and conditions charged by Goldman Sachs will be in its view commercially reasonable, although Goldman Sachs, including its sales personnel, will have an interest in obtaining fees and other amounts that are favorable to Goldman Sachs and such sales personnel. The Funds may, to the extent permitted by applicable law, borrow funds from Goldman Sachs at rates and on other terms arranged with Goldman Sachs.

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          Goldman Sachs may be entitled to compensation when it acts in capacities other than as the Investment Advisers, and the Funds will not be entitled to any such compensation. For example, Goldman Sachs (and its personnel and other distributors) will be entitled to retain fees and other amounts that it receives in connection with its service to the Funds as broker, dealer, agent, lender, advisor or in other commercial capacities and no accounting to the Funds or their shareholders will be required, and no fees or other compensation payable by the Funds or their shareholders will be reduced by reason of receipt by Goldman Sachs of any such fees or other amounts.

          When Goldman Sachs acts as broker, dealer, agent, lender or advisor or in other commercial capacities in relation to the Funds, Goldman Sachs may take commercial steps in its own interests, which may have an adverse effect on the Funds. For example, in connection with lending arrangements involving the Funds, Goldman Sachs may require repayment of all or part of a loan at any time or from time to time.

          The Funds will be required to establish business relationships with their counterparties based on their own credit standing. Goldman Sachs, including the Investment Advisers, will not have any obligation to allow its credit to be used in connection with the Funds’ establishment of their business relationships, nor is it expected that the Funds’ counterparties will rely on the credit of Goldman Sachs in evaluating the Funds’ creditworthiness.

Potential Conflicts in Connection with Brokerage Transactions and Proxy Voting

          To the extent permitted by applicable law, purchases and sales of securities for a Fund may be bunched or aggregated with orders for other Client/GS Accounts. The Investment Advisers and their affiliates, however, are not required to bunch or aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that bunching or aggregating is not practicable, required or with cases involving client direction.

          Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with a bunched or aggregated order. Time zone differences, separate trading desks or portfolio management processes in a global organization may, among other factors, result in separate, non-aggregated executions.

          The Investment Advisers may select brokers (including, without limitation, affiliates of the Investment Advisers) that furnish the Investment Advisers, the Funds, other Client/GS Accounts or their affiliates or personnel, directly or through correspondent relationships, with research or other appropriate services which provide, in the Investment Advisers’ views, appropriate assistance to the Investment Advisers in the investment decision-making process (including with respect to futures, fixed-price offerings and over-the-counter transactions). Such

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research or other services may include, to the extent permitted by law, research reports on companies, industries and securities; economic and financial data; financial publications; proxy analysis; trade industry seminars; computer databases; quotation equipment and services; and research-oriented computer hardware, software and other services and products. Research or other services obtained in this manner may be used in servicing any or all of the Funds and other Client/GS Accounts, including in connection with Client/GS Accounts other than those that pay commissions to the broker relating to the research or other service arrangements. Such products and services may disproportionately benefit other Client/GS Accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other Client/GS Accounts. For example, research or other services that are paid for through one client’s commissions may not be used in managing that client’s account. In addition, other Client/GS Accounts may receive the benefit, including disproportionate benefits, of economies of scale or price discounts in connection with products and services that may be provided to the Funds and to such other Client/GS Accounts. To the extent that the Investment Advisers use soft dollars, they will not have to pay for those products and services themselves. The Investment Advisers may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Investment Advisers receive research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Advisers.

          The Investment Advisers may endeavor to execute trades through brokers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services the Investment Advisers believe are useful in their investment decision-making process. The Investment Advisers may from time to time choose not to engage in the above described arrangements to varying degrees.

          The Investment Advisers have adopted policies and procedures designed to prevent conflicts of interest from influencing proxy voting decisions that they make on behalf of advisory clients, including the Funds, and to help ensure that such decisions are made in accordance with the Investment Advisers’ fiduciary obligations to their clients. Nevertheless, notwithstanding such proxy voting policies and procedures, actual proxy voting decisions of the Investment Advisers may have the effect of favoring the interests of other clients or businesses of other divisions or units of Goldman Sachs and/or its affiliates provided that the Investment Advisers believe such voting decisions to be in accordance with their fiduciary obligations. For a more detailed discussion of these policies and procedures, see the section of this Additional Statement entitled “Proxy Voting.”

Potential Regulatory Restrictions on Investment Adviser Activity

          From time to time, the activities of a Fund may be restricted because of regulatory requirements applicable to Goldman Sachs and/or its internal policies designed to comply with, limit the applicability of, or otherwise relate to such requirements. A client not advised by Goldman Sachs would not be subject to some of those considerations. There may be periods when the Investment Advisers may not initiate or recommend certain types of transactions, or

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may otherwise restrict or limit their advice in certain securities or instruments issued by or related to companies for which Goldman Sachs is performing investment banking, market making or other services or has proprietary positions. For example, when Goldman Sachs is engaged in an underwriting or other distribution of securities of, or advisory services for, a company, the Funds may be prohibited from or limited in purchasing or selling securities of that company. Similar situations could arise if Goldman Sachs personnel serve as directors of companies the securities of which the Funds wish to purchase or sell. The larger the Investment Advisers’ investment advisory business and Goldman Sachs’ businesses, the larger the potential that these restricted list policies will impact investment transactions. However, if permitted by applicable law, the Funds may purchase securities or instruments that are issued by such companies or are the subject of an underwriting, distribution, or advisory assignment by Goldman Sachs, or in cases in which Goldman Sachs personnel are directors or officers of the issuer.

          The investment activities of Goldman Sachs for its proprietary accounts and for Client/GS Accounts may also limit the investment strategies and rights of the Funds. For example, in regulated industries, in certain emerging or international markets, in corporate and regulatory ownership definitions, and in certain futures and derivative transactions, there may be limits on the aggregate amount of investment by affiliated investors that may not be exceeded without the grant of a license or other regulatory or corporate consent or, if exceeded, may cause Goldman Sachs, the Funds or other Client/GS Accounts to suffer disadvantages or business restrictions. If certain aggregate ownership thresholds are reached or certain transactions undertaken, the ability of the Investment Advisers on behalf of clients (including the Funds) to purchase or dispose of investments, or exercise rights or undertake business transactions, may be restricted by regulation or otherwise impaired. As a result, the Investment Advisers on behalf of clients (including the Funds) may limit purchases, sell existing investments, or otherwise restrict or limit the exercise of rights (including voting rights) when the Investment Advisers, in their sole discretion, deem it appropriate.

PORTFOLIO TRANSACTIONS AND BROKERAGE

          The Investment Advisers are responsible for decisions to buy and sell securities for the Funds, the selection of brokers and dealers to effect the transactions and the negotiation of brokerage commissions, if any. Purchases and sales of securities on a securities exchange are effected through brokers who charge a negotiated commission for their services. Increasingly, securities traded over-the-counter also involve the payment of negotiated brokerage commissions. Orders may be directed to any broker including, to the extent and in the manner permitted by applicable law, Goldman Sachs.

          In the over-the-counter market, most securities have historically traded on a “net” basis with dealers acting as principal for their own accounts without a stated commission, although the price of a security usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price which includes an amount of compensation to the underwriter, generally referred to as the underwriter’s concession or discount. On occasion, certain money market instruments may be purchased directly from an issuer, in which case no commissions or discounts are paid.

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          In placing orders for portfolio securities of a Fund, the Investment Advisers are generally required to give primary consideration to obtaining the most favorable execution and net price available. This means that an Investment Adviser will seek to execute each transaction at a price and commission, if any, which provides the most favorable total cost or proceeds reasonably attainable in the circumstances. As permitted by Section 28(e) of the Securities Exchange Act of 1934 (“Section 28(e)”), a Fund may pay a broker which provides brokerage and research services to the Fund an amount of disclosed commission in excess of the commission which another broker would have charged for effecting that transaction. Such practice is subject to a good faith determination that such commission is reasonable in light of the services provided and to such policies as the Trustees may adopt from time to time. While the Investment Advisers generally seek reasonably competitive spreads or commissions, a Fund will not necessarily be paying the lowest spread or commission available. Within the framework of this policy, the Investment Advisers will consider research and investment services provided by brokers or dealers who effect or are parties to portfolio transactions of a Fund, the Investment Advisers and their affiliates, or their other clients. Such research and investment services are those which brokerage houses customarily provide to institutional investors and include research reports on particular industries and companies; economic surveys and analyses; recommendations as to specific securities; research products including quotation equipment and computer related programs; advice concerning the value of securities, the advisability of investing in, purchasing or selling securities and the availability of securities or the purchasers or sellers of securities; analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and performance of accounts; services relating to effecting securities transactions and functions incidental thereto (such as clearance and settlement); and other lawful and appropriate assistance to the Investment Advisers in the performance of their decision-making responsibilities.

          Such services are used by the Investment Advisers in connection with all of their investment activities, and some of such services obtained in connection with the execution of transactions for a Fund may be used in managing other investment accounts. Conversely, brokers furnishing such services may be selected for the execution of transactions of such other accounts, whose aggregate assets may be larger than those of a Fund’s, and the services furnished by such brokers may be used by the Investment Advisers in providing management services for the Trust. On occasion, a broker-dealer might furnish an Investment Adviser with a service which has a mixed use (i.e., the service is used both for investment and brokerage activities and for other activities). Where this occurs, an Investment Adviser will reasonably allocate the cost of the service, so that the portion or specific component which assists in investment and brokerage activities is obtained using portfolio commissions from the Funds or other managed accounts, and the portion or specific component which provides other assistance (for example, administrative or non-research assistance) is paid for by an Investment Adviser from its own funds.

          On occasions when an Investment Adviser deems the purchase or sale of a security to be in the best interest of a Fund as well as its other customers (including any other fund or other investment company or advisory account for which such Investment Adviser acts as investment adviser or sub-investment adviser), the Investment Adviser, to the extent permitted by applicable

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laws and regulations, may aggregate the securities to be sold or purchased for the Fund with those to be sold or purchased for such other customers in order to obtain the best net price and most favorable execution under the circumstances. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Investment Adviser in the manner it considers to be equitable and consistent with its fiduciary obligations to such Fund and such other customers. In some instances, this procedure may adversely affect the price and size of the position obtainable for a Fund.

          Commission rates in the U.S. are established pursuant to negotiations with the broker based on the quality and quantity of execution services provided by the broker in the light of generally prevailing rates. The allocation of orders among brokers and the commission rates paid are reviewed periodically by the Trustees.

          Certain Funds may participate in a commission recapture program. Under the program, participating broker-dealers rebate a percentage of commissions earned on Fund portfolio transactions to the particular Fund from which they were generated. The rebated commissions are expected to be treated as realized capital gains of the Funds.

          Subject to the above considerations, the Investment Advisers may use Goldman Sachs or an affiliate as a broker for a Fund. In order for Goldman Sachs or an affiliate, acting as agent, to effect any portfolio transactions for a Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the commissions, fees or other remuneration received by other brokers in connection with comparable transactions involving similar securities or futures contracts. Furthermore, the Trustees, including a majority of the Trustees who are not “interested” Trustees, have adopted procedures which are reasonably designed to provide that any commissions, fees or other remuneration paid to Goldman Sachs are consistent with the foregoing standard. Brokerage transactions with Goldman Sachs are also subject to such fiduciary standards as may be imposed upon Goldman Sachs by applicable law.

          Commission rates in the U.S. are established pursuant to negotiations with the broker based on the quality and quantity of execution services provided by the broker in the light of generally prevailing rates. For the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004, each Fund in existence paid brokerage commissions as follows. The amount of brokerage commissions paid by a Fund may vary substantially from year to year because of differences in shareholder purchase and redemption activity, portfolio turnover rates and other factors.

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									Amount of
									Transactions Effected		Total Brokerage
			Total Brokerage			Total Amount of			through Brokers		Commissions Paid
	Total Brokerage		Commissions Paid to			Transactions on which			Providing Proprietary		for Proprietary
	Commissions Paid		Goldman Sachs1			Commissions Paid 1			Research2		Research2
Fiscal Year Ended August 31, 2006
Balanced Fund	$	135,441	$	28,769(21	%)3	$	296,680,570(1	%)4	$	56,935,591	$	62,193
Growth and Income Fund		959,696		28,603 (3	%)3		1,089,641,503 (3	%)4		512,226,270		545,506
Structured Large Cap Value Fund		324,835		82,946 (26	%)3		2,068,943,462 (2	%)4		—		—
Structured U.S. Equity Fund		257,472		13,948 (5	%)3		2,178,918,662 (0	%)4		—		—
Structured Large Cap Growth Fund		219,586		35,663 (16	%)3		1,382,507,654 (3	%)4		—		—
Structured Small Cap Equity Fund		442,746		24,454 (6	%)3		1,687,440,090 (2	%)4		—		—
Structured International Equity Fund		916,069		132,339 (14	%)3		2,150,108,305 (0	%)4		—		—
Capital Growth Fund		1,853,742		103,481 (6	%)3		2,105,721,802 (1	%)4		974,001,857		1,088,577
Strategic Growth Fund		284,613		45,989 (16	%)3		374,020,397 (3	%)4		101,398,755		110,941
Growth Opportunities Fund		2,985,073		328,129 (11	%)3		3,363,446,940 (3	%)4		1,333,126,126		1,489,562
Small/Mid Cap Growth Fund		126,685		1,230 (1	%)3		133,692,471 (0	%)4		17,366,555		28,245
Mid Cap Value Fund		5,757,704		292,094 (5	%)3		5,970,461,589 (7	%)4		2,165,313,420		2,858,070
Small Cap Value Fund		3,263,280		23,022 (1	%)3		1,845,782,502 (0	%)4		828,809,997		1,714,651
Large Cap Value Fund		1,453,947		134,684 (9	%)3		1,656,807,587 (5	%)4		694,058,024		795,990
Concentrated International Equity Fund		644,532		26,934 (4	%)3		560,288,079 (5	%)4		334,622,094		559,792
Japanese Equity Fund		171,333		40,078 (23	%)3		88,528,991 (1	%)4		81,724,309		158,544
International Small Cap Fund		462,658		12,572 (3	%)3		229,745,931 (4	%)4		210,227,689		432,199
Emerging Markets Equity Fund		2,707,649		9,245 (0	%)3		1,704,918,226 (0	%)4		761,401,776		1,878,111
Asia Equity Fund		775,611		— (0	%)3		413,298,780 (1	%)4		188,848,479		651,117
BRIC Fund		19,342		— (0	%)3		16,371,807 (0	%)4		12,994,499		16,383
Concentrated Growth Fund		142,671		20,892 (15	%)3		190,753,564 (15	%)4		84,511,108		80,467

1	The figures in the table report brokerage commissions only from securities transactions. For the year ended August 31, 2006, Goldman Sachs earned approximately $29,000, $28,600, $83,900, $13,900, $35,700, $24,500, $132,300, $103,500, $46,000, $328,100, $1,200, $292,100, $23,000, $134,700, $26,900, $40,100, $12,600, $9,200, $0, $0 and $20,900 in brokerage commissions from portfolio transactions, including futures transactions, executed on behalf of the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth Fund, Mid Cap Value, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity, BRIC and Concentrated Growth Funds, respectively.
2	Beginning March 31, 2004, the Investment Advisers no longer participate in third party soft dollar arrangements whereby the Investment Advisers are provided third party research and/or investment services by brokerage houses executing transactions on behalf of the Funds. The information above reflects the full commission amounts paid to brokers that provide their own proprietary research to the Investment Advisers. Only a portion of such commission pays for research and the remainder of such commission is to compensate the broker for execution services, commitment of capital and other services related to the execution of brokerage transactions.
3	Percentage of total commissions paid to Goldman Sachs.
4	Percentage of total amount of transactions involving the payment of commissions effected through Goldman Sachs.

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	Total Brokerage		Total Brokerage			Total Amount of
	Commissions		Commissions Paid to			Transactions on which
	Paid		Goldman Sachs1			Commissions Paid 1
Fiscal Year Ended August 31, 2005
Balanced Fund	$	184,291	$	1,906(1	%)2	$	205,232,801(1	%)3
Growth and Income Fund		1,051,866		26,644 (3	%)2		981,652,146 (3	%)3
Structured Large Cap Value Fund		47,841		11,896 (25	%)2		162,483,723 (20	%)3
Structured U.S. Equity Fund		36,988		0 (0	%)2		116,860,314 (0	%)3
Structured Large Cap Growth Fund		75,235		15,577 (21	%)2		274,801,821 (13	%)3
Structured Small Cap Equity Fund		109,276		9,168 (8	%)2		211,811,356 (14	%)3
Structured International Equity Fund		161,361		0 (0	%)2		208,975,560 (0	%)3
Capital Growth Fund		1,616,446		6,966 (0	%)2		1,481,838,314 (1	%)3
Strategic Growth Fund		279,329		7,670 (3	%)2		295,693,279 (4	%)3
Growth Opportunities Fund		2,534,149		76,239 (3	%)2		2,363,381,317 (5	%)3
Small/Mid Cap Growth Fund		2,920		0 (0	%)2		5,863,032 (0	%)3
Mid Cap Value Fund		5,340,494		286,469 (5	%)2		5,416,698,213 (8	%)3
Small Cap Value Fund		3,251,167		18,976 (1	%)2		1,592,414,930 (0	%)3
Large Cap Value Fund		1,174,286		47,638 (4	%)2		1,217,830,095 (7	%)3
Concentrated International Equity Fund		684,288		35,833 (5	%)2		511,438,988 (5	%)3
Japanese Equity Fund		132,796		2,346 (2	%)2		73,176,568 (1	%)3
International Small Cap Fund		333,240		36,072 (11	%)2		157,626,926 (6	%)3
Emerging Markets Equity Fund		510,243		0 (0	%)2		244,249,147 (0	%)3
Asia Equity Fund		374,054		11,989 (3	%)2		119,479,066 (3	%)3
Concentrated Growth Fund		143,557		20,570 (14	%)2		139,576,081 (20	%)3

1	The figures in the table report brokerage commissions only from securities transactions. For the year ended August 31, 2005, Goldman Sachs earned approximately $19,100, $26,644, $25,700, $6,400, $26,700, $24,000, $68,800, $7,000, $7,700, $76,239, $0, $286,500, $19,000, $47,638, $40,600, $2,700, $38,800, $1,300, $12,000, and $20,600 in brokerage commissions from portfolio transactions, including futures transactions, executed on behalf of the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth Fund, Mid Cap Value, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and Concentrated Growth Funds, respectively.
2	Percentage of total commissions paid to Goldman Sachs.
3	Percentage of total amount of transactions involving the payment of commissions effected through Goldman Sachs.

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			Total Brokerage			Total Amount of
	Total Brokerage		Commissions Paid to			Transactions on which
	Commissions Paid		Goldman Sachs1			Commissions Paid 1
Fiscal Year Ended August 31, 2004
Balanced Fund	$	155,324	$	8,651(6	%)2	$	132,306,039(3	%)3
Growth and Income Fund		1,034,426		82,904 (8	%)2		822,891,462 (5	%)3
Structured Large Cap Value Fund		34,264		5,798 (17	%)2		102,908,831 (25	%)3
Structured U.S. Equity Fund		32,549		89 (0	%)2		82,190,074 (0	%)3
Structured Large Cap Growth Fund		53,956		3,634 (7	%)2		136,230,491 (14	%)3
Structured Small Cap Equity Fund		80,983		2,829 (3	%)2		142,225,115 (6	%)3
Structured International Equity Fund		35,554		— (0	%)2		55,940,072 (0	%)3
Capital Growth Fund		2,262,421		— (0	%)2		2,068,192,305 (0	%)3
Strategic Growth Fund		252,199		— (0	%)2		174,317,936 (0	%)3
Growth Opportunities Fund		1,774,851		8,166 (0	%)2		1,123,306,282 (0	%)3
Mid Cap Value Fund		3,312,046		98,319 (3	%)2		2,244,983,127 (3	%)3
Small Cap Value Fund		3,129,487		94,109 (3	%)2		1,711,677,310 (2	%)3
Large Cap Value Fund		896,603		92,085 (10	%)2		610,054,482 (6	%)3
Concentrated International Equity Fund		1,259,293		17,358 (1	%)2		861,046,247 (1	%)3
Japanese Equity Fund		148,955		1,395 (1	%)2		82,147,467 (1	%)3
International Small Cap Fund		279,842		18,602 (7	%)2		140,655,258 (3	%)3
Emerging Markets Equity Fund		552,286		4,157 (1	%)2		281,492,515 (0	%)3
Asia Equity Fund		334,438		9,531 (3	%)2		140,180,931 (2	%)3
Concentrated Growth Fund		130,387		7,170 (5	%)2		82,126,595 (5	%)3

1	The figures in the table report brokerage commissions only from securities transactions. For the year ended August 31, 2004, Goldman Sachs earned approximately $23,000, $83,000, $11,000, $5,000, $7,000, $10,000, $29,000, $0, $0, $8,000, $98,000, $94,000, $92,000, $67,000, $6,000, $20,000, $8,000, $10,000, and $7,000 in brokerage commissions from portfolio transactions, including futures transactions, executed on behalf of the Balanced, Growth and Income, Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Capital Growth, Strategic Growth, Growth Opportunities, Mid Cap Value, Small Cap Value, Large Cap Value, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and Concentrated Growth Funds, respectively.
2	Percentage of total commissions paid to Goldman Sachs.
3	Percentage of total amount of transactions involving the payment of commissions effected through Goldman Sachs.

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During the fiscal year ended August 31, 2006, the Funds’ regular broker-dealers, as defined in Rule 10b-1 under the Act, were Merrill Lynch & Co., Goldman Sachs & Co., SoundView, Spear, Leeds & Kellogg, UBS Warburg Dillon Reed AG, Credit Suisse First Boston, Citigroup Salomon Smith Barney, Lehman Brothers Inc., Morgan Stanley, J.P. Morgan Chase & Co., and Deutsche Bank Securities, Inc.

As of August 31, 2006, the Funds held the following amounts of securities of their regular broker-dealers, as defined in Rule 10b-1 under the Act, or their parents ($ in thousands).

Fund	Broker/Dealer	Amount
Balanced Fund	Citigroup	$	3,769
	J.P. Morgan Chase & Co.		375
	UBS		1,960
	Credit Suisse First Boston		1,500
Growth and Income Fund	Citigroup		31,949
	J.P. Morgan Chase & Co.		51,674
	Morgan Stanley		12,034
	Lehman Brothers		19,588
	Merrill Lynch		5,338
Structured Large Cap Value Fund	Merrill Lynch		5,820
	J.P. Morgan Chase & Co.		45,436
Structured U.S. Equity Fund	Merrill Lynch		24,824
	J.P. Morgan Chase & Co.		40,423
	Citigroup		9,365
Structured Large Cap Growth Fund	n/a
Structured Small Cap Equity Fund	n/a
Structured International Equity Fund	n/a
Capital Growth Fund	Merrill Lynch		15,140
	Morgan Stanley		19,336
Strategic Growth Fund	n/a
Growth Opportunities Fund	n/a
Small/Mid Cap Growth Fund	n/a
Mid Cap Value Fund	n/a
Small Cap Value Fund	n/a
Large Cap Value Fund	Citigroup		32,787
	Lehman Brothers		22,828
	Merrill Lynch		18,139
	J.P. Morgan Chase & Co.		59,947
Concentrated International Equity Fund	n/a
Japanese Equity Fund	n/a

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Fund	Broker/Dealer	Amount
International Small Cap Fund	n/a
Emerging Markets Equity Fund	n/a
Asia Equity Fund	n/a
BRIC Fund	n/a
Concentrated Growth	n/a

NET ASSET VALUE

     In accordance with procedures adopted by the Trustees, the net asset value per share of each class of each Fund is calculated by determining the value of the net assets attributed to each class of that Fund and dividing by the number of outstanding shares of that class. All securities are valued on each Business Day as of the close of regular trading on the New York Stock Exchange (normally, but not always, 4:00 p.m. New York time) or such later time as the New York Stock Exchange or NASDAQ market may officially close. The term “Business Day” means any day the New York Stock Exchange is open for trading, which is Monday through Friday except for holidays. The New York Stock Exchange is closed on the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday (observed), Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.

     The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York Time. The Trust reserves the right to reprocess purchase, redemption and exchange transactions that were initially processed at a net asset value other than the Fund’s official closing net asset value that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders based on the official closing net asset value. The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC. In addition, each Fund may compute its net asset value as of any time permitted pursuant to any exemption, order or statement of the SEC or its staff.

     Portfolio securities of a Fund for which accurate market quotations are available are valued as follows: (i) securities listed on any U.S. or foreign stock exchange or on the National Association of Securities Dealers Automated Quotations System (“NASDAQ”) will be valued at the last sale price or the official closing price on the exchange or system in which they are principally traded on the valuation date. If there is no sale on the valuation day, securities traded will be valued at the closing bid price, or if a closing bid price is not available, at either the exchange or system-defined close price on the exchange or system in which such securities are principally traded. If the relevant exchange or system has not closed by the above-mentioned time for determining a Fund’s net asset value, the securities will be valued at the last sale price or official closing price, or if not available at the bid price at the time the net asset value is determined; (ii) over-the-counter securities not quoted on NASDAQ will be valued at the last sale price on the valuation day or, if no sale occurs, at the last bid price at the time net asset value

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is determined; (iii) equity securities for which no prices are obtained under sections (i) or (ii) including those for which a pricing service supplies no exchange quotation or a quotation that is believed by the portfolio manager/trader to be inaccurate, will be valued at their fair value in accordance with procedures approved by the Board of Trustees; (iv) fixed-income securities with a remaining maturity of 60 days or more for which accurate market quotations are readily available will normally be valued according to dealer-supplied bid quotations or bid quotations from a recognized pricing service (e.g., Interactive Data Corp., Merrill Lynch, J.J. Kenny, Muller Data Corp., Bloomberg, EJV, Reuters or Standard & Poor’s); (v) fixed-income securities for which accurate market quotations are not readily available are valued by the Investment Advisers based on valuation models that take into account spread and daily yield changes on government securities in the appropriate market (i.e., matrix pricing); (vi) debt securities with a remaining maturity of 60 days or less are valued by the Investment Adviser at amortized cost, which the Trustees have determined to approximate fair value; and (vii) all other instruments, including those for which a pricing service supplies no exchange quotation or a quotation that is believed by the portfolio manager/trader to be inaccurate, will be valued in accordance with the valuation procedures approved by the Board of Trustees.

     The value of all assets and liabilities expressed in foreign currencies will be converted into U.S. dollar values at current exchange rates of such currencies against U.S. dollars last quoted by any major bank or pricing service. If such quotations are not available, the rate of exchange will be determined in good faith by or under procedures established by the Board of Trustees.

     Generally, trading in securities on European, Asian and Far Eastern securities exchanges and on over-the-counter markets in these regions is substantially completed at various times prior to the close of business on each Business Day in New York (i.e., a day on which the New York Stock Exchange is open for trading). In addition, European, Asian or Far Eastern securities trading generally or in a particular country or countries may not take place on all Business Days in New York. Furthermore, trading takes place in various foreign markets on days which are not Business Days in New York and days on which the Funds’ net asset values are not calculated. Such calculation does not take place contemporaneously with the determination of the prices of the majority of the portfolio securities used in such calculation. For Funds that invest a significant portion of assets in foreign equity securities, “Fair value” prices are provided by an independent fair value service (if available) and are intended to reflect more accurately the value of those securities at the time the Fund’s NAV is calculated. Fair value prices are used because many foreign markets operate at times that do not coincide with those of the major U.S. markets. Events that could affect the values of foreign portfolio holdings may occur between the close of the foreign market and the time of determining the NAV, and would not otherwise be reflected in the NAV. If the independent fair value service does not provide a fair value for a particular security or if the value does not meet the established criteria for the Funds, the most recent closing price for such a security on its principal exchange will generally be its fair value on such date.

     The proceeds received by each Fund and each other series of the Trust from the issue or sale of its shares, and all net investment income, realized and unrealized gain and proceeds thereof, subject only to the rights of creditors, will be specifically allocated to such Fund or particular series and constitute the underlying assets of that Fund or series. The underlying assets of each Fund will

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be segregated on the books of account, and will be charged with the liabilities in respect of such Fund and with a share of the general liabilities of the Trust. Expenses of the Trust with respect to the Funds and the other series of the Trust are generally allocated in proportion to the net asset values of the respective Funds or series except where allocations of expenses can otherwise be fairly made.

     The Trust has adopted a policy to handle certain NAV related errors occurring in the operation of the Funds, and under certain circumstances neither the Funds nor shareholders who purchase or sell shares during periods that errors accrue or occur may be recompensed in connection with the resolution of the error.

PERFORMANCE INFORMATION

     Each Fund may from time to time quote or otherwise use yield and total return information in advertisements, shareholder reports or sales literature. Average annual total return and yield are computed pursuant to formulas specified by the SEC.

     Thirty-day yield is derived by dividing net investment income earned during the period by the product of the average daily number of shares outstanding and entitled to receive dividends during the period and the maximum public offering price per share on the last day of such period. The results are compounded on a bond equivalent (semi-annual) basis and then annualized by assuming that yield is realized each month for twelve months and is reinvested every six months. Net investment income per share is equal to the dividends and interest earned during the period, reduced by accrued expenses for the period. The calculation of net investment income for these purposes may differ from the net investment income determined for accounting purposes.

     The distribution rate for a specified period is calculated by annualizing distributions of net investment income for such period and dividing this amount by the net asset value per share or maximum public offering price on the last day of the period.

     Average annual total return (before taxes) for a specified period is derived by calculating the actual dollar amount of the investment return on a $1,000 investment made at the maximum public offering price applicable to the relevant class at the beginning of the period, and then calculating the annual compounded rate of return which would produce that amount, assuming a redemption at the end of the period. This calculation assumes a complete redemption of the investment. It also assumes that all dividends and distributions are reinvested at net asset value on the reinvestment dates during the period.

     Average annual total return (after taxes on distributions) for a specified period is derived by calculating the actual dollar amount of the investment return on a $1,000 investment made at the maximum public offering price applicable to the relevant class at the beginning of the period, and then calculating the annual compounded rate of return (after federal income taxes on distributions but not redemptions) which would produce that amount, assuming a redemption at the end of the period. This calculation assumes a complete redemption of the investment but further assumes that the redemption has no federal income tax consequences. This calculation

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also assumes that all dividends and distributions, less the federal income taxes due on such distributions, are reinvested at net asset value on the reinvestment dates during the period. In calculating the impact of federal income taxes due on distributions, the federal income tax rates used correspond to the tax character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short-term capital gain rate for short-term capital gain distributions and long-term capital gain rate for long-term capital gain distributions). The highest individual marginal federal income tax rate in effect on the reinvestment date is applied to each component of the distributions on the reinvestment date. These tax rates may vary over the measurement period. The effect of applicable tax credits, such as the foreign tax credit, is also taken into account in accordance with federal tax law. The calculation disregards (i) the effect of phase-outs of certain exemptions, deductions and credits at various income levels, (ii) the impact of the federal alternative minimum tax and (iii) the potential tax liabilities other than federal tax liabilities (e.g., state and local taxes).

     Average annual total return (after taxes on distributions and redemptions) for a specified period is derived by calculating the actual dollar amount of the investment return on a $1,000 investment made at the maximum public offering price applicable to the relevant class at the beginning of the period, and then calculating the annual compounded rate of return (after federal income taxes on distributions and redemptions) which would produce that amount, assuming a redemption at the end of the period. This calculation assumes a complete redemption of the investment. This calculation also assumes that all dividends and distributions, less the federal income taxes due on such distributions, are reinvested at net asset value on the reinvestment dates during the period. In calculating the federal income taxes due on distributions, the federal income tax rates used correspond to the tax character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short-term capital gain rate for short-term capital gain distributions and long-term capital gain rate for long-term capital gain distributions). The highest individual marginal federal income tax rate in effect on the reinvestment date is applied to each component of the distributions on the reinvestment date. These tax rates may vary over the measurement period. The effect of applicable tax credits, such as the foreign tax credit, is taken into account in accordance with federal tax law. The calculation disregards the (i) effect of phase-outs of certain exemptions, deductions and credits at various income levels, (ii) the impact of the federal alternative minimum tax and (iii) the potential tax liabilities other than federal tax liabilities (e.g., state and local taxes). In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. The highest federal individual capital gains tax rate in effect on the redemption date is used in such calculation. The federal income tax rates used correspond to the tax character of any gains or losses (e.g., short-term or long-term). When the return after taxes on distributions and redemption of shares is higher than returns after taxes on distributions, it is because of realized losses. If realized losses occur upon the sale of shares, capital loss is recorded as a tax benefit which increases returns.

     Year-by-year total return and cumulative total return for a specified period are each derived by calculating the percentage rate required to make a $1,000 investment (made at the maximum public offering price with all distributions reinvested) at the beginning of such period equal to the actual value of such investment at the end of such period.

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     Total return calculations for Class A Shares reflect the effect of paying the maximum initial sales charge. Investment at a lower sales charge would result in higher performance figures. Total return calculations for Class B and Class C Shares reflect deduction of the applicable contingent deferred sales charge (“CDSC”) imposed upon redemption of Class B and Class C Shares held for the applicable period. Each Fund may also from time to time advertise total return on a cumulative, average, year-by-year or other basis for various specified periods by means of quotations, charts, graphs or schedules. In addition, each Fund may furnish total return calculations based on investments at various sales charge levels or at net asset value. An after-tax total return for a Fund may be calculated by taking its total return and subtracting applicable federal taxes from the portions of a Fund’s total return attributable to capital gain and ordinary income distributions. This after-tax total return may be compared to that of other mutual funds with similar investment objectives as reported by independent sources. Any performance information which is based on a Fund’s net asset value per Share would be reduced if any applicable sales charge were taken into account. 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 information is available. The Funds’ performance quotations do not reflect any fees charged by an Authorized Dealer, Service Organization or other financial intermediary to its customer accounts in connection with investments in the Funds.

     Occasionally, statistics may be used to specify Fund volatility or risk. Measures of volatility or risk are generally used to compare a Fund’s net asset value or performance relative to a market index. One measure of volatility is beta. Beta is the volatility of a Fund relative to the total market. A beta of more than 1.00 indicates volatility greater than the market, and a beta of less than 1.00 indicates volatility less than the market. Another measure of volatility or risk is standard deviation. Standard deviation is used to measure variability of net asset value or total return around an average, over a specified period of time. The premise is that greater volatility connotes greater risk undertaken in achieving performance. Each Fund’s performance will fluctuate, unlike bank deposits or other investments which pay a fixed yield for a stated period of time. Past performance is not necessarily indicative of future return. Actual performance will depend on such variables as portfolio quality, the type of portfolio instruments acquired, portfolio expenses and other factors. Performance is one basis investors may use to analyze a Fund as compared to other funds and other investment vehicles. However, the performance of other funds and other investment vehicles may not be comparable because of the foregoing variables, and differences in the methods used in valuing their portfolio instruments, computing net asset value and determining performance.

     The Structured Large Cap Growth Fund commenced operations on May 1, 1997. The performance information for periods before that date is for a predecessor separate account managed by the Investment Adviser which converted into Class A Shares as of the commencement date. The performance record of the separate account quoted by the Fund has been adjusted downward based on the expenses applicable to Class A Shares (the class into which the separate account transferred) to reflect the expenses that were expected to be incurred by the Fund during its initial year of operation. These expenses include any sales charges and

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asset-based charges (i.e., fees under Distribution and Service Plans) imposed and other operating expenses. Total return quotations are calculated pursuant to the methodology prescribed by the SEC for standardized performance calculations. Prior to May 1, 1997, the separate account was a separate investment advisory account under discretionary management by the Investment Adviser and had substantially similar investment objectives, policies and strategies as the Fund. Unlike the Fund, the separate account was not registered as an investment company under the Act and therefore was not subject to certain investment restrictions and operational requirements that are imposed on investment companies by the Act. If the separate account had been registered as an investment company under the Act, the separate account’s performance may have been adversely affected by such restrictions and requirements. On May 1, 1997, the separate account transferred a portion of its assets to the Fund in exchange for Fund shares. The performance record of each other class has been linked to the performance of the separate account (based on Class A expenses) and the Class A performance for any periods prior to commencement of operations of a class of shares.

     The Service Shares of the Balanced, Capital Growth, Small Cap Value, Growth and Income, Structured U.S. Equity, Structured Large Cap Growth and Concentrated International Equity Funds commenced operations on August 15, 1997, August 15, 1997, August 15, 1997, March 6, 1996, June 7, 1996, May 1, 1997 and March 6, 1996, respectively. The Service Shares of these Funds had no operating or performance history prior thereto. However, in accordance with interpretive positions expressed by the staff of the SEC, each of these Funds has adopted the performance records of its respective Class A Shares from that class’s inception date (October 12, 1994, April 20, 1990, October 22, 1992, February 5, 1993, May 24, 1991, November 11, 1991 and December 1, 1992, respectively) to the inception dates of Service Shares stated above. Quotations of performance data of these Funds relating to this period include the performance record of the applicable Class A Shares (excluding the impact of any applicable front-end sales charge). The performance records of the applicable Class A Shares reflect the expenses incurred by the particular Fund’s Class A Shares. These expenses include asset-based charges (i.e., fees under Distribution and Service Plans) and other operating expenses. Total return quotations are calculated pursuant to SEC-approved methodology.

     A Fund’s performance data will be based on historical results and will not be intended to indicate future performance. A Fund’s total return, yield and distribution rate will vary based on market conditions, portfolio expenses, portfolio investments and other factors. In addition to the Investment Adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund. The value of a Fund’s shares will fluctuate and an investor’s shares may be worth more or less than their original cost upon redemption. Performance may reflect expense limitations in effect. In their absence, performance would be reduced.

     Total return will be calculated separately for each class of shares in existence. Because each class of shares is subject to different expenses, total return with respect to each class of shares of a Fund will differ.

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SHARES OF THE TRUST

     The Funds, except the Structured Large Cap Value, Structured Large Cap Growth, Structured Small Cap Equity, Structured International Equity, Strategic Growth, Growth Opportunities, Small/Mid Cap Growth Fund, Large Cap Value, Japanese Equity, International Small Cap, Emerging Markets Equity, BRIC and Concentrated Growth Funds, were reorganized on April 30, 1997 from series of a Maryland corporation to part of Goldman Sachs Trust, a Delaware statutory trust, established by a Declaration of Trust dated January 28, 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. The Trustees also have authority to classify and reclassify any series of shares into one or more classes of shares. As of the date of this Additional Statement, the Trustees have classified the shares of each of the Funds (other than the BRIC Fund) into five classes: Institutional Shares, Service Shares, Class A Shares, Class B Shares and Class C Shares. The Trustees have classified shares of the BRIC Fund into three classes: Institutional Shares, Class A Shares and Class C Shares. Additional series and classes may be added in the future.

     Each Institutional Share, Service Share, Class A Share, Class B Share and Class C Share of a Fund represents a proportionate interest in the assets belonging to the applicable class of the Fund. All expenses of a Fund are borne at the same rate by each class of shares, except that fees under Service and Shareholder Administration Plans are borne exclusively by Service Shares, fees under Distribution and Service Plans are borne exclusively by Class A, Class B or Class C Shares and transfer agency fees and expenses are borne at different rates by different share classes. The Trustees may determine in the future that it is appropriate to allocate other expenses differently among classes of shares and may do so to the extent consistent with the rules of the SEC and positions of the IRS. Each class of shares may have different minimum investment requirements and be entitled to different shareholder services. With limited exceptions, shares of a class may only be exchanged for shares of the same or an equivalent class of another fund. See “Shareholder Guide” in the Prospectus and “Other Information Regarding Maximum Sales Charge, Purchases, Redemptions, Exchanges and Dividends” below. In addition, the fees and expenses set forth below for each class may be subject to voluntary fee waivers or reimbursements, as discussed more fully in the Funds’ Prospectuses.

     Institutional Shares may be purchased at net asset value without a sales charge for accounts in the name of an investor or institution that is not compensated by a Fund under a Plan for services provided to the institution’s customers.

     Service Shares may be purchased at net asset value without a sales charge for accounts held in the name of an institution that, directly or indirectly, provides certain shareholder administration services and shareholder liaison services to its customers, including maintenance of account records and processing orders to purchase, redeem and exchange Service Shares. Service Shares bear the cost of service fees and shareholder administration fees at the annual rate of up to 0.25% and 0.25%, respectively, of the average daily net assets of the Fund attributable to Service Shares.

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     Class A Shares are sold, with an initial sales charge of up to 5.5%, through brokers and dealers who are members of the National Association of Securities Dealers, Inc. (the “NASD”) and certain other financial service firms that have sales agreements with Goldman Sachs. Class A Shares bear the cost of distribution and service fees at the aggregate rate of up to 0.25% of the average daily net assets of such Class A Shares. With respect to Class A Shares, the distributor at its discretion may use compensation for distribution services paid under the Distribution and Services Plan for personal and account maintenance services and expenses so long as such total compensation under the Plan does not exceed the maximum cap on “service fees” imposed by the NASD.

     Class B Shares of the Funds are sold subject to a CDSC of up to 5.0% through brokers and dealers who are members of the NASD and certain other financial services firms that have sales arrangements with Goldman Sachs. Class B Shares 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 Class B Shares. Class B Shares also bear the cost of service fees at an annual rate of up to 0.25% of the average daily net assets attributable to Class B Shares.

     Class C Shares of the Funds are sold subject to a CDSC of up to 1.0% through brokers and dealers who are members of the NASD and certain other financial services firms that have sales arrangements with Goldman Sachs. Class C Shares 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 Class C Shares. Class C Shares also bear the cost of service fees at an annual rate of up to 0.25% of the average daily net assets attributable to Class C Shares.

     It is possible that an institution or its affiliate may offer different classes of shares (i.e., Institutional, Service, Class A Shares, Class B Shares and Class C Shares) to its customers and thus receive different compensation with respect to different classes of shares of each Fund. Dividends paid by each Fund, if any, with respect to each class of shares will be calculated in the same manner, at the same time on the same day and will be the same amount, except for differences caused by the fact that the respective transfer agency and Plan fees relating to a particular class will be borne exclusively by that class. Similarly, the net asset value per share may differ depending upon the class of shares purchased.

     Certain aspects of the shares may be altered after advance notice to shareholders if it is deemed necessary in order to satisfy certain tax regulatory requirements.

     When issued for the consideration described in the Funds’ Prospectuses, shares are fully paid and non-assessable. The Trustees may, however, cause shareholders, or shareholders of a particular series or class, to pay certain custodian, transfer agency, servicing or similar charges by setting off the same against declared but unpaid dividends or by reducing share ownership (or by both means). In the event of liquidation, shareholders are entitled to share pro rata in the net assets of the applicable class of the relevant Fund available for distribution to such shareholders. All shares are freely transferable and have no preemptive, subscription or conversion rights. The Trustees may require shareholders to redeem Shares for any reason under terms set by the Trustees.

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     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Balanced Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (62%).

     As of December 14, 2006, the following entity owned of record or beneficially more than 5% of the outstanding shares of the Growth and Income Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (69%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Structured Large Cap Value Fund: Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Aggressive Growth, Omnibus a/c CORE Large Cap Value Fund, P.O. Box 1713, Boston, MA 02105-1713 (7%); Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Growth Strategy, Omnibus a/c CORE Large Cap Value Fund, P.O. Box 1713, Boston, MA 02105-1713 (21%); Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Growth & Income Strategy, Omnibus a/c CORE Large Cap Value Fund, P.O. Box 1713, Boston, MA 02105-1713 (18%); Class A Shares, IMS & Co., for the exclusive benefit of various IMS customers, P.O. Box 173877, Denver, CO 80217-3877 (8%); Class A Shares, Nationwide Trust Co., c/o IPO Portfolio Accounting, P.O. Box 182029, Columbus, OH 43218-2029 (5%); Class A Shares, Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (8%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Structured U.S. Equity Fund: Institutional Class Shares, State Street Bank & Trust, Goldman Sachs Profit Sharing Master Trust, P.O. Box 1992, Boston, MA 02105-1992 (8%); Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (11%); Institutional Class Shares, SEI Private Trust Company, c/o First Tennessee, One Freedom Valley Drive, Oaks, PA 19456 (6%); Institutional Class Shares, SEI Private Trust Company, c/o First Tennessee, One Freedom Valley Drive, Oaks, PA 19456 (9%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Structured Large Cap Growth Fund: Class A Shares, IMS & Co., for the exclusive benefit of customers, P.O. Box 173877, Denver, CO 80217-3877 (10%); Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Aggressive Growth, Omnibus a/c CORE Large Cap Growth Fund, P.O. Box 1713, Boston, MA 02105-1713 (9%); Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Growth Strategy, Omnibus a/c CORE Large Cap Growth Fund, P.O. Box 1713, Boston, MA 02105-1713 (25%); Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Growth & Income Strategy, Omnibus a/c CORE Large Cap Growth Fund, P.O. Box 1713, Boston, MA 02105-1713 (21%); Class A Shares, Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (10%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Structured Small Cap Equity Fund: Institutional Class Shares, Mercer Trust Company, for the benefit of Thomson 401k Savings Plan, One Investors Way N-7-E, Norwood, MA 02062-1599 (5%); Institutional Class Shares, Fidelity Investments

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Institutional Operations Co., Inc., as agents for certain employee benefits plans, 100 Magellan Way, Covington, KY 41015-1999 (14%); Institutional Class Shares, State Street Bank & Trust, for the benefit of Goldman Sachs Growth Strategy, Omnibus a/c CORE Small Cap Equity Fund, P.O. Box 1713, Boston, MA 02105-1713 (5%); Institutional Class Shares, SEI Private Trust Company, c/o 683, One Freedom Valley Drive, Oaks, PA 19456 (11%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Structured International Equity Fund: Institutional Class Shares, State Street Bank and Trust Co., for the benefit of Goldman Sachs Aggressive Growth, Omnibus a/c CORE International Equity Fund, P.O. Box 1713, Boston, MA 02105-1713 (7%); Institutional Class Shares, State Street Bank and Trust Co., for the benefit of Goldman Sachs Growth Strategy, Omnibus a/c CORE International Equity Fund, P.O. Box 1713, Boston, MA 02105-1713 (18%); Institutional Class Shares, State Street Bank and Trust Co., for the benefit of Goldman Sachs Growth & Income Strategy, Omnibus a/c CORE International Equity Fund, P.O. Box 1713, Boston, MA 02105-1713 (15%); Class A Shares, IMS & Co., for the exclusive benefit of various IMS customers, P.O. Box 173877, Denver, CO 80217-3877 (7%); Class A Shares, Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (7%).

     As of December 14, 2006, the following entity owned of record or beneficially more than 5% of the outstanding shares of the Capital Growth Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (18%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Strategic Growth Fund: Institutional Class Shares, The Northern Trust Company, for the benefit of certain retirement savings plan, P.O. Box 92956, Chicago, IL 60675-2977 (5%); Institutional Class Shares, Charles Schwab & Co. Inc., special custody account for the benefit of customers, 9601 E. Panorama Circle, Mailstop DEN2-02-52, Englewood, CO 80112-3441 (5%); Institutional Class Shares, J.P. Morgan Chase Bank, for the benefit of certain retirement savings plan, c/o J.P. Morgan RPS MGMT RPTG Team, P.O. Box 419784, Kansas City, MO 64141-6784 (16%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Growth Opportunities Fund: Institutional Class Shares, Nationwide Trust Co., for the benefit of Deseret Mutual Savings Plans, 98 San Jacinto Blvd., Ste. 1100, Austin, TX 78701-4255 (7%); Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (7%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Small/Mid Cap Growth Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (6%); Class A Shares, GPC Securities Inc., as agent for Merrill Lynch Bank and Trust Co., for the benefit of certain retirement savings plan, P.O. Box 105779, Atlanta, GA 30348-5779 (7%); Class A Shares, GPC Securities Inc., as agent for Merrill Lynch Bank and Trust Co., for the benefit of certain retirement savings plan, P.O. Box 105779, Atlanta, GA 30348-5779 (60%).

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     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Mid Cap Value Fund: Institutional Class Shares, Fidelity Investments Institutional Operations Co., Inc., as agent for certain employee benefits plans, 100 Magellan Way, Covington, KY 41015-1999 (7%); Institutional Class Shares, State Street Bank & Trust, Goldman Sachs Profit Sharing Master Trust, P.O. Box 1992, Boston, MA 02105-1992 (5%); Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (7%); Class A Shares, Charles Schwab & Co., Inc., special custody account for the benefit of customers, 101 Montgomery Street, San Francisco, CA 94104-4122 (7%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Small Cap Value Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (7%); Institutional Class Shares, Fidelity Investments Institutional Operations Co., Inc., as agent for certain employee benefits plans, 100 Magellan Way, Covington, KY 41015-1999 (8%); Class A Shares, Hartford Life Insurance Co., for the benefit of its customer, P.O. Box 2999, Hartford, CT 06104-2999 (5%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Large Cap Value Fund: Institutional Class Shares, State Street Bank & Trust, Goldman Sachs Profit Sharing Master Trust, Josiah Quincy Building 5N, 200 Newport Avenue, North Quincy, MA 02171-2102 (5%); Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (6%).

     As of December 14, 2006, the following entity owned of record or beneficially more than 5% of the outstanding shares of the Concentrated International Equity Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (20%); Institutional Class Shares, Dane & Co., State Street Bank, for the benefit of its customer, P.O. Box 5496, Boston, MA 02206-5496 (6%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Japanese Equity Fund: Class A Shares, Goldman Sachs & Co., for the benefit of its customer, 85 Broad Street, New York, NY 10004-2434 (6%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the International Small Cap Fund: Institutional Class Shares, SEI Private Trust Co., c/o Suntrust SAS Accounting, One Freedom Valley Drive, Oaks, PA 19456 (5%); Institutional Class Shares, Goldman Sachs & Co., for the benefit of its customer, 85 Broad Street, New York, NY 10004-2434 (7%); Institutional Class Shares, Goldman Sachs & Co., for the benefit of its customer, 85 Broad Street, New York, NY 10004-2434 (12%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Emerging Markets Equity Fund: Institutional Class Shares, State Street Bank & Trust Co., for the benefit of Goldman Sachs Growth Strategy, Omnibus a/c Emerging Markets Equity Fund, P.O. Box 1713, Boston, MA 02105-1713 (5%);

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Institutional Class Shares, SEI Private Trust Co., c/o Suntrust Bank, One Freedom Valley Drive, Oaks, PA 19456 (12%).

     As of December 14, 2006, the following entity owned of record or beneficially more than 5% of the outstanding shares of the Asia Equity Fund: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (9%).

     As of December 14, 2006, the following entity owned of record or beneficially more than 5% of the outstanding shares of the BRIC: Class A Shares, Edward Jones & Co., 201 Progress Parkway, Maryland Heights, MO 63043-3009 (15%); Institutional Class Shares, Goldman Sachs Seed Account, 701 Mount Lucas Rd., Princeton, NJ 08540-1911 (16%).

     As of December 14, 2006, the following entities owned of record or beneficially more than 5% of the outstanding shares of the Concentrated Growth Fund: Institutional Class Shares, Vanguard Fiduciary Trust Company, Goldman Sachs Funds, P.O. Box 2600, Valley Forge, PA 19482-2600 (9%); Institutional Class Shares, Wells Fargo Bank, N.A., for the benefit of Alaska Railroad Corporation, P.O. Box 1533, Minneapolis, MN 55480-1533 (6%); Institutional Class Shares, Charles Schwab & Co. Inc., special custody account for the benefit of customers, 9601 E. Panorama Circle, Mailstop DEN2-02-052, Englewood, CO 80112-3441 (20%).

     The Act requires that where more than one series of shares exists, each series must be preferred over all other series in respect of assets specifically allocated to such series. In addition, 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 shares of each series affected by such matter. Rule 18f-2 further provides that a series shall be deemed to be affected by a matter unless the interests of each series in the matter are substantially identical or the matter does not affect any interest of such series. However, Rule 18f-2 exempts the selection of independent public accountants, the approval of principal distribution contracts and the election of trustees from the separate voting requirements of Rule 18f-2.

     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 the shareholders, either to one vote for each share or to one vote for each dollar of net asset value represented by such share on all matters presented to shareholders 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 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. The shareholders of the Trust will have

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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, employees and agents of the Trust unless the recipient is adjudicated (i) to be liable by reason of willful misfeasance, 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 the shareholder’s 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, in their sole discretion, that such action is in the best interest of the Trust, such series, such class or their respective shareholders. The Trustees may consider such factors as they, in their sole discretion, deem appropriate in making such determination, including (i) the inability of the Trust or any series or class to maintain its assets at an appropriate size; (ii) changes in laws or regulations governing the Trust, series, or class or affecting assets of the type in which it invests; or (iii) economic developments or trends having a significant adverse impact on the business or operations of the Trust or series.

     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 with substantially the same investment objective, restrictions and policies.

     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 adversely affect the voting rights of shareholders; (ii) that is required by law to be approved by shareholders; (iii) that would amend the provisions of the Declaration of Trust regarding amendments and supplements thereto; or (iv) that the Trustees determine to submit to shareholders.

     The Trustees may appoint separate Trustees with respect to one or more series or classes of the Trust’s shares (the “Series Trustees”). Series Trustees may, but are not required to, serve as Trustees of the Trust or any other series or class of the Trust. To the extent provided by the

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Trustees in the appointment of Series Trustees, the Series Trustees may have, to the exclusion of any other Trustees of the Trust, all the powers and authorities of Trustees under the Declaration of Trust with respect to such Series or Class, but may have no power or authority with respect to any other series or class.

Shareholder and Trustee Liability

     Under Delaware Law, the shareholders of the Funds 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 statutory trust shareholder liability exists in other states. As a result, to the extent that a Delaware statutory trust or a shareholder is subject to the jurisdiction of courts of such other states, the courts may not apply Delaware law and may thereby subject the Delaware statutory trust shareholders to liability. To guard against this risk, the Declaration of Trust contains an express disclaimer of shareholder 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 series of the Trust. The Declaration of Trust provides for indemnification by the relevant series for all loss suffered by a shareholder 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 shareholder for any act or obligation of the series and satisfy any judgment thereon. In view of the above, the risk of personal liability of shareholders of a Delaware statutory trust is remote.

     In addition to the requirements under Delaware law, the Declaration of Trust provides that shareholders of a series may bring a derivative action on behalf of the series only if the following conditions are met: (a) shareholders eligible to bring such derivative action under Delaware law who hold at least 10% of the outstanding shares of the series, or 10% of the outstanding shares of the class to which such action relates, shall join in the request for the Trustees to commence such action; and (b) the Trustees must be afforded a reasonable amount of time to consider such shareholder 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 shareholders making such request to reimburse the series 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.

TAXATION

     The following is a summary of certain additional U.S. federal income, and state and local, tax considerations regarding the purchase, ownership and disposition of shares in each Fund of the Trust that are not described in the Prospectus. This summary does not address

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special tax rules applicable to certain classes of investors, such as tax-exempt entities, insurance companies and financial institutions. Each prospective shareholder is urged to consult his or her own tax adviser with respect to the specific federal, state, local and foreign tax consequences of investing in each Fund. The summary is based on the laws in effect on the date of this Additional Statement, which are subject to change.

Fund Taxation

     Each Fund is treated as a separate taxable entity. Each Fund has elected to be treated and intends to qualify for each taxable year as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code.

     There are certain tax requirements that each Fund must follow if it is to avoid federal taxation. In their efforts to adhere to these requirements, the Funds may have to limit their investment activities in some types of instruments. Qualification as a regulated investment company under the Code requires, among other things, that (1) the Fund derive at least 90% of its gross income (including tax-exempt interest) for each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stocks or securities or foreign currencies or other income (including but not limited to gains from options, futures, and forward contracts) derived with respect to the Fund’s business of investing in such stocks, securities or currencies or net income derived from an interest in a qualified publicly traded partnership (the “90% gross income test”); and (2) the Fund diversify its holdings so that at the close of each quarter of its taxable year, (a) at least 50% of the fair market value of the Fund’s total (gross) assets is comprised of cash, cash items, 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 such Fund’s total assets and not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total (gross) assets is invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies), two or more issuers controlled by the Fund and engaged in the same, similar or related trades or businesses or certain publicly traded partnerships.

     For purposes of the 90% gross income test, income that a Fund earns from equity interests in certain entities that are not treated as corporations for U.S. tax purposes will generally have the same character for the Fund as in the hands of such an entity; consequently, a Fund may be required to limit its equity investments in such entities that earn fee income, rental income or other nonqualifying income. In addition, future Treasury regulations could provide that qualifying income under the 90% gross income test will not include gains from foreign currency transactions that are not directly related to a Fund’s principal business of investing in stock or securities or options and futures with respect to stock or securities. Using foreign currency positions or entering into foreign currency options, futures and forward or swap contracts for purposes other than hedging currency risk with respect to securities in a Fund’s portfolio or anticipated to be acquired may not qualify as “directly-related” under these tests.

     If a Fund complies with the provisions discussed above, then in any taxable year in which the Fund distributes, in compliance with the Code’s timing and other requirements, at least 90%

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of its “investment company taxable income” (which includes dividends, taxable interest, taxable accrued original issue discount and market discount income, income from securities lending, any net short-term capital gain in excess of net long-term capital loss, certain net realized foreign exchange gains and any other taxable income other than “net capital gain,” as defined below, and is reduced by deductible expenses), and at least 90% of the excess of its gross tax-exempt interest income (if any) over certain disallowed deductions, the Fund (but not its shareholders) will be relieved of federal income tax on any income of the Fund, including long-term capital gains, distributed to shareholders. However, if a Fund retains any investment company taxable income or “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), it will be subject to a tax at regular corporate rates on the amount retained. Because there are some uncertainties regarding the computation of the amounts deemed distributed to Fund shareholders for these purposes – including, in particular, uncertainties regarding the portion, if any, of amounts paid in redemption of Fund shares that should be treated as such distributions – there can be no assurance that each Fund will avoid corporate-level tax in each year.

     If a Fund retains any net capital gain, the Fund may designate the retained amount as undistributed capital gains in a notice to its shareholders who (1) if subject to U.S. federal income tax on long-term capital gains, will be required to include in income for federal income tax purposes, as long-term capital gain, their shares of that undistributed amount, and (2) will be entitled to credit their proportionate shares of the tax paid by the Fund against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds those liabilities. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by the amount of any such undistributed net capital gain included in the shareholder’s gross income and decreased by the federal income tax paid by the Fund on that amount of net capital gain. Each Fund intends to distribute for each taxable year to its shareholders all or substantially all of its investment company taxable income, net capital gain and any net tax-exempt interest. Exchange control or other foreign laws, regulations or practices may restrict repatriation of investment income, capital or the proceeds of securities sales by foreign investors such as the Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity or BRIC Funds and may therefore make it more difficult for such a Fund to satisfy the distribution requirements described above, as well as the excise tax distribution requirements described below. Each Fund generally expects, however, to be able to obtain sufficient cash to satisfy those requirements from new investors, the sale of securities or other sources. If for any taxable year a Fund does not qualify as a regulated investment company, it will be taxed on all of its taxable income and net capital gain at corporate rates, without any deduction for dividends paid, and its distributions to shareholders will be taxable as ordinary dividends to the extent of its current and accumulated earnings and profits.

     To avoid a 4% federal excise tax, each Fund must distribute (or be deemed to have distributed) by December 31 of each calendar year at least 98% of its taxable ordinary income for the calendar 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 all previous years that were not distributed for those years and on which the Fund paid no federal income tax. For federal income tax purposes, dividends declared by a Fund in October, November or

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December to shareholders of record on a specified date in such a month and paid during January of the following year are taxable to such shareholders, and deductible by the Fund, as if paid on December 31 of the year declared. Each Fund anticipates that it will generally make timely distributions of income and capital gains in compliance with these requirements so that it will generally not be required to pay the excise tax.

     For federal income tax purposes, each Fund is generally permitted to carry forward a net capital loss in any year to offset its own capital gains, if any, during the eight years following the year of the loss. These amounts are available to be carried forward to offset future capital gains to the extent permitted by the Code and applicable tax regulations. As of August 31, 2006, the following Funds had capital loss carryforwards approximating the amounts indicated, expiring in the years indicated:

	Capital Loss
Fund	Carryforward		Expiration
Growth and Income	$	1,571,147		2010
Structured U.S. Equity		21,317,839		2010
Structured Large Cap Growth		110,628,623		2010
		145,633,770		2011
Structured International Equity		506,100		2010
Capital Growth		222,589,151		2011
Strategic Growth		23,295,339		2010
		32,615,744		2011
		13,060,848		2012
		2,826,194		2013
Concentrated International Equity		106,700,469		2010
		320,228,093		2011
		69,572,929		2012
Japanese Equity		11,026,243		2010
		5,228,295		2011
		1,408,407		2012
International Small Cap		69,140,653		2010
		51,047,001		2011
Asia Equity		2,489,328		2007
		3,727,234		2009
		15,182,667		2010
		525,255		2011

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Gains and losses on the sale, lapse, or other termination of options and futures contracts, options thereon and certain forward contracts (except certain foreign currency options, forward contracts and futures contracts) will generally be treated as capital gains and losses. Certain of the futures contracts, forward contracts and options held by a Fund will be required to be “marked-to-market” for federal income tax purposes — that is, treated as having been sold at their fair market value on the last day of the Fund’s taxable year (or, for excise tax purposes, on the last day of the relevant period). These provisions may require a Fund to recognize income or gains without a concurrent receipt of cash. Any gain or loss recognized on actual or deemed sales of these futures contracts, forward contracts, or options will (except for certain foreign currency options, forward contracts, and futures contracts) be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. As a result of certain hedging transactions entered into by a Fund, it may be required to defer the recognition of losses on futures contracts, forward contracts, and options or underlying securities or foreign currencies to the extent of any unrecognized gains on related positions held by the Fund, and the characterization of gains or losses as long-term or short-term may be changed. The tax provisions described in this paragraph may affect the amount, timing and character of a Fund’s distributions to shareholders. Application of certain requirements for qualification as a regulated investment company and/or these tax rules to certain investment practices, such as dollar rolls, or certain derivatives such as interest rate swaps, floors, caps and collars and currency, total return, mortgage or index swaps may be unclear in some respects, and a Fund may therefore be required to limit its participation in those kinds of transactions. Certain tax elections may be available to a Fund to mitigate some of the unfavorable consequences described in this paragraph.

     Section 988 of the Code contains special tax rules applicable to certain foreign currency transactions and instruments which may affect the amount, timing and character of income, gain or loss recognized by a Fund. Under these rules, foreign exchange gain or loss realized with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. If a net foreign exchange loss treated as ordinary loss under Section 988 of the Code were to exceed a Fund’s investment company taxable income (computed without regard to such loss) for a taxable year, the resulting loss would not be deductible by the Fund or its shareholders in future years. Net loss, if any, from certain foreign currency transactions or instruments could exceed net investment income otherwise calculated for accounting purposes, with the result being either no dividends being paid or a portion of a Fund’s dividends being treated as a return of capital for tax purposes, nontaxable to the extent of a shareholder’s tax basis in his shares and, once such basis is exhausted, generally giving rise to capital gains.

     A Fund’s investment in zero coupon securities, deferred interest securities, certain structured securities or other securities bearing original issue discount or, if a Fund elects to include market discount in income currently, market discount, as well as any “marked-to-market” gain from certain options, futures or forward contracts, as described above, will in many cases cause it to realize income or gain before the receipt of cash payments with respect to these securities or contracts. For a Fund to obtain cash to enable the Fund to distribute any such income or gain, maintain its qualification as a regulated investment company and avoid federal

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income and excise taxes, a Fund may be required to liquidate portfolio investments sooner than it might otherwise have done.

     Investments in lower-rated securities may present special tax issues for a Fund to the extent actual or anticipated defaults may be more likely with respect to such securities. Tax rules are not entirely clear about issues such as when a Fund may cease to accrue interest, original issue discount, or market discount; when and to what extent deductions may be taken for bad debts or worthless securities; how payments received on obligations in default should be allocated between principal and income; and whether exchanges of debt obligations in a workout context are taxable. These and other issues will generally need to be addressed by a Fund, if it invests in such securities, in order to seek to eliminate or minimize any adverse tax consequences.

     If a Fund acquires stock (including, under proposed regulations, an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations (“passive foreign investment companies”), that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, rents, royalties or capital gain) or hold at least 50% of their assets in investments producing such passive income, the Fund could be subject to federal income tax and additional interest charges on “excess distributions” received from those companies or gain from the sale of stock in those companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction for such a tax. In some cases, elections may be available that would ameliorate these adverse tax consequences, but those elections would require the Fund to include each year certain amounts as income or gain (subject to the distribution requirements described above) without a concurrent receipt of cash. Each Fund may attempt to limit and/or to manage its holdings in passive foreign investment companies to minimize its tax liability or maximize its return from these investments.

Foreign Taxes

     Each Fund anticipates that it may be subject to foreign taxes on income (possibly including, in some cases, capital gains) from foreign securities. Tax conventions between certain countries and the United States may reduce or eliminate those foreign taxes in some cases. If, as may occur for the Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds, more than 50% of a Fund’s total assets at the close of a taxable year consists of stock or securities of foreign corporations, the Fund may file an election with the IRS pursuant to which the shareholders of the Fund will be required (1) to report as dividend income (in addition to taxable dividends actually received) their pro rata shares of foreign income taxes paid by the Fund that are treated as income taxes under U.S. tax regulations (which excludes, for example, stamp taxes, securities transaction taxes, and similar taxes) even though not actually received by those shareholders, and (2) to treat those respective pro rata shares as foreign income taxes paid by them, which they can claim either as a foreign tax credit, subject to applicable limitations, against their U.S. federal income tax liability or as an itemized deduction. (Shareholders who do not itemize deductions for federal income tax purposes will not, however, be able to deduct their

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pro rata portion of foreign taxes paid by a Fund, although those shareholders will be required to include their share of such taxes in gross income if the foregoing election is made by the Fund.)

     If a shareholder chooses to take credit for the foreign taxes deemed paid by such shareholder as a result of any such election by the Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds, the amount of the credit that may be claimed in any year may not exceed the same proportion of the U.S. tax against which such credit is taken which the shareholder’s taxable income from foreign sources (but not in excess of the shareholder’s entire taxable income) bears to his entire taxable income. For this purpose, distributions from long-term and short-term capital gains or foreign currency gains by a Fund will generally not be treated as income from foreign sources. This foreign tax credit limitation may also be applied separately to certain specific categories of foreign-source income and the related foreign taxes. As a result of these rules, which have different effects depending upon each shareholder’s particular tax situation, certain shareholders of the Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity and BRIC Funds may not be able to claim a credit for the full amount of their proportionate share of the foreign taxes paid by such Fund even if the election is made by that Fund.

     Shareholders who are not liable for U.S. federal income taxes, including retirement plans, other tax-exempt shareholders and non-U.S. shareholders, will ordinarily not benefit from the foregoing Fund election with respect to foreign taxes. Each year, if any, that the Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia Equity or BRIC Fund file the election described above, shareholders will be notified of the amount of (1) each shareholder’s pro rata share of qualified foreign taxes paid by the Fund and (2) the portion of Fund dividends that represents income from foreign sources. The other Funds will not be entitled to elect to pass foreign taxes and associated credits or deductions through to their shareholders because they will not satisfy the 50% requirement described above. If a Fund cannot or does not make this election, it may deduct its foreign taxes in computing the amount it is required to distribute.

Non-U.S. Shareholders

     The discussion above relates solely to U.S. federal income tax law as it applies to “U.S. persons” subject to tax under such law.

     For distributions attributable to a Fund’s taxable year beginning after December 31, 2007, shareholders who, as to the United States, are not “U.S. persons,” (i.e., are nonresident aliens, foreign corporations, fiduciaries of foreign trusts or estates, foreign partnerships or other non-U.S. investors) generally will be subject to U.S. federal withholding tax at the rate of 30% on distributions treated as ordinary income unless the tax is reduced or eliminated pursuant to a tax treaty or the distributions are effectively connected with a U.S. trade or business of the shareholder; but distributions of net capital gain, including amounts retained by a Fund which are designated as undistributed capital gains, to such a non-U.S. shareholder will not be subject to U.S. federal income or withholding tax unless the distributions are effectively connected with the

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shareholder’s trade or business in the United States or, in the case of a shareholder who is a nonresident alien individual, the shareholder is present in the United States for 183 days or more during the taxable year and certain other conditions are met. Non-U.S. shareholders may also be subject to U.S. federal withholding tax on deemed income resulting from any election by the Structured International Equity, Concentrated International Equity, Japanese Equity, International Small Cap, Emerging Markets Equity and Asia Equity Funds to treat qualified foreign taxes it pays as passed through to shareholders (as described above), but they may not be able to claim a U.S. tax credit or deduction with respect to such taxes.

     Under current provisions of the Code, for distributions attributable to a Fund’s taxable years beginning before January 1, 2008, non-U.S. shareholders generally will not be subject to U.S. federal income tax on distributions attributable to “portfolio interest” or short-term capital gains unless (1) the distributions are effectively connected with a U.S. trade or business of the shareholder, or (2) with respect to short-term capital gains, the shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met. If the distributions are effectively connected with a U.S. trade or business of a shareholder, then distributions will be subject to tax on a net income basis at the graduated rates applicable to U.S. individuals or domestic corporations. Distributions by each Fund that are attributable to short-term capital gains during the above periods will also generally be free of U.S. withholding tax; by contrast, there will be tax withheld with respect to distributions attributable to interest income of the Fund, so that non-U.S. shareholders who are exempt from U.S. federal income tax with respect to all or a portion of those interest-related dividends will need to file U.S. federal income tax returns to claim refunds of those withholding taxes.

     Any capital gain realized by a non-U.S. shareholder upon a sale or redemption of shares of a Fund will not be subject to U.S. federal income or withholding tax unless the gain is effectively connected with the shareholder’s trade or business in the U.S., or in the case of a shareholder who is a nonresident alien individual, the shareholder is present in the U.S. for 183 days or more during the taxable year and certain other conditions are met.

     Non-U.S. persons who fail to furnish a Fund with the proper IRS Form W-8 (i.e., W-8BEN, W-8ECI, W-8IMY or W-8EXP), or an acceptable substitute, may be subject to backup withholding at a 28% rate on dividends (including capital gain dividends) and on the proceeds of redemptions and exchanges.

     Also, non-U.S. shareholders of a Fund may be subject to U.S. estate tax with respect to their Fund shares.

     Each shareholder who is not a U.S. person should consult his or her tax adviser regarding the U.S. and non-U.S. tax consequences of ownership of shares of, and receipt of distributions from, the Funds.

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State and Local Taxes

     Each Fund may be subject to state or local taxes in jurisdictions in which the Fund is deemed to be doing business. In addition, in those states or localities that impose income taxes, the treatment of such a Fund and its shareholders under those jurisdictions’ tax laws may differ from the treatment under federal income tax laws, and an investment in such a Fund may have tax consequences for shareholders that are different from those of a direct investment in such Fund’s portfolio securities. Shareholders should consult their own tax advisers concerning state and local tax matters.

FINANCIAL STATEMENTS

     The audited financial statements and related reports of PricewaterhouseCoopers LLP, independent registered public accounting firm, contained in each Fund’s 2006 Annual Report are hereby incorporated by reference. The financial statements in each Fund’s Annual Report have been incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. No other parts of any Annual Report are incorporated by reference herein. A copy of the Annual Reports may be obtained upon request and without charge by writing Goldman, Sachs & Co., P.O. Box 06050, Chicago, Illinois 60606 or by calling Goldman, Sachs & Co., at the telephone number on the back cover of each Fund’s Prospectus.

PROXY VOTING

     The Trust, on behalf of the Funds, has delegated the voting of portfolio securities to the Investment Adviser. The Investment Adviser has adopted policies and procedures (the “Policy”) for the voting of proxies on behalf of client accounts for which the Investment Adviser has voting discretion, including the Funds. Under the Policy, the Investment Adviser’s guiding principles in performing proxy voting are to make decisions that: (i) favor proposals that tend to maximize a company’s shareholder value; and (ii) are not influenced by conflicts of interest. These principles reflect the Investment Adviser’s belief that sound corporate governance will create a framework within which a company can be managed in the interests of its shareholders.

     The principles and positions reflected in the Policy are designed to guide the Investment Adviser in voting proxies, and not necessarily in making investment decisions. Senior management of the Investment Adviser will periodically review the Policy to ensure that it continues to be consistent with the Investment Adviser’s guiding principles.

Public Equity Investments. To implement these guiding principles for investments in publicly-traded equities, the Investment Adviser follows proxy voting guidelines (the “Guidelines”) developed by Institutional Shareholder Services (“ISS”), except in certain circumstances, which are generally described below. The Guidelines embody the positions and factors the Investment Adviser generally considers important in casting proxy votes. They address a wide variety of individual topics, including, among others, shareholder voting rights, anti-takeover defenses, board structures, the election of directors, executive and director compensation, reorganizations,

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mergers, and various shareholder proposals. Attached as Appendix B is a summary of the Guidelines.

     ISS has been retained to review proxy proposals and make voting recommendations in accordance with the Guidelines. While it is the Investment Adviser’s policy generally to follow the Guidelines and recommendations from ISS, the Investment Adviser’s portfolio management teams (“Portfolio Management Teams”) retain the authority on any particular proxy vote to vote differently from the Guidelines or a related ISS recommendation, in keeping with their different investment philosophies and processes. Such decisions, however, remain subject to a review and approval process, including a determination that the decision is not influenced by any conflict of interest. In forming their views on particular matters, the Portfolio Management Teams are also permitted to consider applicable regional rules and practices, including codes of conduct and other guides, regarding proxy voting, in addition to the Guidelines and recommendations from ISS.

     In addition to assisting the Investment Adviser in developing substantive proxy voting positions, ISS also updates and revises the Guidelines on a periodic basis, and the revisions are reviewed by the Investment Adviser to determine whether they are consistent with the Investment Adviser’s guiding principles. ISS also assists the Investment Adviser in the proxy voting process by providing operational, recordkeeping and reporting services.

     The Investment Adviser is responsible for reviewing its relationship with ISS and for evaluating the quality and effectiveness of the various services provided by ISS. The Investment Adviser may hire other service providers to replace or supplement ISS with respect to any of the services the Investment Adviser currently receives from ISS.

     The Investment Adviser has implemented procedures that are intended to prevent conflicts of interest from influencing proxy voting decisions. These procedures include the Investment Adviser’s use of ISS as an independent third party, a review and approval process for individual decisions that do not follow ISS’s recommendations, and the establishment of information barriers between the Investment Adviser and other businesses within The Goldman Sachs Group, Inc.

     Fixed Income and Private Investments. Voting decisions with respect to fixed income securities and the securities of privately held issuers generally will be made by a Fund’s managers based on their assessment of the particular transactions or other matters at issue.

     Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on or through the Funds’ website at http://www.goldmansachsfunds.com and on the SEC’s website at http://www.sec.gov.

PAYMENTS TO INTERMEDIARIES

     The Investment Adviser, Distributor and/or their affiliates may make payments to Authorized Dealers, Service Organizations and other financial intermediaries (“Intermediaries”)

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from time to time to promote the sale, distribution and/or servicing of shares of the Funds. These payments (“Additional Payments”) are made out of the Investment Adviser’s, Distributor’s and/or their affiliates own assets, and are not an additional charge to the Funds or their shareholders. The Additional Payments are in addition to the distribution and service fees paid by the Funds described in the Funds’ Prospectuses and this Additional Statement, and are also in addition to the sales commissions payable to Intermediaries as set forth in the Prospectuses.

     These Additional Payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; “finders” or “referral fees” for directing investors to the Funds; marketing support fees for providing assistance in promoting the sale of Fund shares (which may include promotions in communications with the Intermediaries’ customers, registered representatives and salespersons); and/or other specified services intended to assist in the distribution and marketing of the Funds. In addition, the Investment Adviser, Distributor and/or their affiliates may make Additional Payments (including through sub-transfer agency and networking agreements) for subaccounting, administrative and/or shareholder processing services that are in addition to the transfer agent, shareholder administration, servicing and processing fees paid by the Funds. The Additional Payments made by the Investment Adviser, Distributor and their affiliates may be a fixed dollar amount; may be based on the number of customer accounts maintained by an Intermediary; may be based on a percentage of the value of shares sold to, or held by, customers of the Intermediary involved; or may be calculated on another basis. Furthermore, the Investment Adviser, Distributor and/or their affiliates may, to the extent permitted by applicable regulations, 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. The Investment Adviser, Distributor and their affiliates may also pay for the travel expenses, meals, lodging and entertainment of Intermediaries and their salespersons and guests in connection with educational, sales and promotional programs subject to applicable NASD regulations. The amount of these Additional Payments (excluding payments made through sub-transfer agency and networking agreements) is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. The Additional Payments are negotiated based on a range of factors, including but not limited to, ability to attract and retain assets (including particular classes of Funds’ shares), target markets, customer relationships, quality of service and industry reputation.

     For the fiscal year ended August 31, 2006, the Investment Adviser, Distributor and their affiliates made Additional Payments out of their own assets to approximately 91 Intermediaries. During the fiscal year ended August 31, 2006, the Investment Adviser, Distributor and their affiliates paid to Intermediaries approximately $50.4 million in Additional Payments (excluding payments made through sub-transfer agency and networking agreements) with respect to all funds of the Trust (including the Funds included in this Additional Statement) and an affiliated investment company, Goldman Sachs Variable Insurance Trust.

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     The Additional Payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries and may vary with respect to the type of fund (e.g., equity, fund, fixed income fund, specialty fund, asset allocation portfolio or money market fund) sold by the Intermediary. In addition, the Additional Payment arrangements may include breakpoints in compensation which provide that the percentage rate of compensation varies as the dollar value of the amount sold or invested through an Intermediary increases. The presence of these Additional Payments, the varying fee structure and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. Shareholders should contact their Authorized Dealer or other Intermediary for more information about the payments they receive and any potential conflicts of interest.

     Please contact your Intermediary if you have a question about whether your Intermediary receives the Additional Payments described above. For additional questions, please contact Goldman Sachs Funds at 1-800-621-2550.

OTHER INFORMATION

Selective Disclosure of Portfolio Holdings

     The Board of Trustees of the Trust and the Investment Adviser have adopted a policy on selective disclosure of portfolio holdings in accordance with regulations that seek to ensure that disclosure of information about portfolio securities is in the best interest of Fund shareholders and to address the conflicts between the interests of Fund shareholders and its service providers. The policy provides that neither a Fund nor its Investment Adviser, Distributor or any agent, or any employee thereof (“Fund Representative”) will disclose a Fund’s portfolio holdings information to any person other than in accordance with the policy. For purposes of the policy, “portfolio holdings information” means the Fund’s actual portfolio holdings, as well as nonpublic information about its trading strategies or pending transactions. Under the policy, neither a Fund nor any Fund Representative may solicit or accept any compensation or other consideration in connection with the disclosure of portfolio holdings information. A Fund Representative may provide portfolio holdings information to third parties if such information has been included in the Fund’s public filings with the SEC or is disclosed on the Funds’ publicly accessible website. Information posted on the Fund’s website may be separately provided to any person commencing the day after it is first published on the Funds’ website.

     Portfolio holdings information that is not filed with the SEC or posted on the publicly available website may be provided to third parties only if the third party recipients are required to keep all portfolio holdings information confidential and are prohibited from trading on the information they receive. Disclosure to such third parties must be approved in advance by the Investment Advisor’s legal or compliance department. Disclosure to providers of auditing, custody, proxy voting and other similar services for the Funds, as well as rating and ranking organizations, will generally be permitted; however, information may be disclosed to other third parties (including, without limitation, individuals, institutional investors, and intermediaries that

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sell shares of the Fund,) only upon approval by the Fund’s Chief Compliance Officer, who must first determine that the Fund has a legitimate business purpose for doing so and check with the Fund Transfer Agent to ascertain whether the third party has been identified as an excessive trader. In general, each recipient of non-public portfolio holdings information must sign a confidentiality and non-trading agreement, although this requirement will not apply when the recipient is otherwise subject to a duty of confidentiality. In accordance with the policy, the identity of those recipients who receive non-public portfolio holdings information on an ongoing basis is as follows: the Investment Advisers and their affiliates, the Funds’ independent registered public accounting firm, the Funds’ custodian, the Funds’ legal counsel- Drinker Biddle & Reath LLP, the Funds’ financial printer- Bowne, and the Funds’ proxy voting service- ISS. In addition, certain fixed income funds of the Trust provide non-public portfolio holdings information to Standard & Poor’s Rating Services to allow such Funds to be rated by it. These entities are obligated to keep such information confidential. Third party providers of custodial or accounting services to the Funds may release non-public portfolio holdings information of the Funds only with the permission of Fund Representatives. From time to time portfolio holdings information may be provided to broker-dealers solely in connection with a Fund seeking portfolio securities trading suggestions. In providing this information reasonable precautions, including limitations on the scope of the portfolio holdings information disclosed, are taken to avoid any potential misuse of the disclosed information. All marketing materials prepared by the Trust’s principal underwriter is reviewed by Goldman Sachs’ Compliance department for consistency with the Trust’s portfolio holdings disclosure policy.

     The Goldman Sachs’ equity funds currently intend to publish on the Trust’s website (http://www.goldmansachsfunds.com) complete portfolio holdings for each equity fund as of the end of each calendar quarter subject to a fifteen calendar day lag between the date of the information and the date on which the information is disclosed. In addition, the Goldman Sachs’ equity funds intend to publish on their website month-end top ten holdings subject to a ten calendar day lag between the date of the information and the date on which the information is disclosed. The Goldman Sachs non-money market fixed income Funds currently intend to publish complete portfolio holdings on their website as of the end of each fiscal quarter, subject to a thirty calendar day lag, and to post selected holdings information monthly on a ten calendar day lag. The Financial Square Prime Obligations Fund, Financial Square Money Market Fund, Institutional Liquid Assets Prime Obligations Portfolio and Institutional Liquid Assets Money Market Portfolio publish their holdings as of the end of each month subject to a thirty calendar day lag between the date of the information and the date on which the information is disclosed. The other Financial Square Funds and Institutional Liquid Assets money market funds publish their holdings as of the end of each calendar quarter subject to a thirty calendar day lag between the date of the information and the date on which the information is disclosed. A Fund may publish on the website complete portfolio holdings information more frequently if it has a legitimate business purpose for doing so.

     Under the policy, Fund Representatives will initially supply the Board of the Trustees with a list of third parties who receive portfolio holdings information pursuant to any ongoing arrangement. In addition, the Board is to receive information, on a quarterly basis, regarding any other disclosures of non-public portfolio holdings information that were permitted during the preceding quarter. In addition, the Board of Trustees is to approve at its meetings a list of Fund

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Representatives who are authorized to disclose portfolio holdings information under the policy. As of the date of this Additional Statement, only certain officers of the Trust as well as certain senior members of the compliance and legal groups of the Investment Adviser have been approved by the Board of Trustees to authorize disclosure of portfolio holdings information.

Miscellaneous

     Each Fund will redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for any one shareholder. Each Fund, however, reserves the right to pay redemptions exceeding $250,000 or 1% of the net asset value of the Fund at the time of redemption by a distribution in kind of securities (instead of cash) from such Fund. The securities distributed in kind would be readily marketable and would be valued for this purpose using the same method employed in calculating the Fund’s net asset value per share. See “Net Asset Value.” If a shareholder receives redemption proceeds in kind, the shareholder should expect to incur transaction costs upon the disposition of the securities received in the redemption.

     The right of a shareholder to redeem shares and the date of payment by each Fund may be suspended for more than seven days for any period during which the New York Stock Exchange is closed, other than the customary weekends or holidays, or when trading on such Exchange is restricted as determined by the SEC; or during any emergency, as determined by the SEC, as a result of which it is not reasonably practicable for such Fund to dispose of securities owned by it or fairly to determine the value of its net assets; or for such other period as the SEC may by order permit for the protection of shareholders of such Fund. (The Trust may also suspend or postpone the recordation of the transfer of shares upon the occurrence of any of the foregoing conditions.)

     As stated in the Prospectuses, the Trust may authorize Service Organizations, Authorized Dealers and other institutions 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 their customers and, if approved by the Trust, to designate other intermediaries to accept such orders. These institutions may receive payments from the Trust or Goldman Sachs for their services. Certain Service Organizations, Authorized Dealers or institutions may enter into sub-transfer agency agreements with the Trust or Goldman Sachs with respect to their services.

     In the interest of economy and convenience, the Trust does not issue certificates representing the Funds’ shares. Instead, the Transfer Agent maintains a record of each shareholder’s ownership. Each shareholder receives confirmation of purchase and redemption orders from the Transfer Agent. Fund shares and any dividends and distributions paid by the Funds are reflected in account statements from the Transfer Agent.

     The Prospectuses and this Additional Statement do not contain all the information included in the Registration Statement filed with the SEC under the 1933 Act with respect to the securities offered by the Prospectuses. Certain portions of the Registration Statement have been omitted from the Prospectuses and this Additional Statement pursuant to the rules and

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regulations of the SEC. The Registration Statement including the exhibits filed therewith may be examined at the office of the SEC in Washington, D.C.

     Statements contained in the Prospectuses or in this Additional Statement as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which the Prospectuses and this Additional Statement form a part, each such statement being qualified in all respects by such reference.

DISTRIBUTION AND SERVICE PLANS
(Class A Shares, Class B Shares and Class C Shares Only)

     Distribution and Service Plans. As described in the Prospectuses, the Trust has adopted, on behalf of Class A, Class B and Class C Shares of each Fund, distribution and service plans (each a “Plan”). See “Shareholder Guide — Distribution and Service Fees” in the Prospectus. The distribution fees payable under the Plans are subject to Rule 12b-1 under the Act, and finance distribution and other services that are provided to investors in the Funds, and enable the Funds to offer investors the choice of investing in either Class A, Class B or Class C Shares when investing in the Funds. In addition, distribution fees payable under the Plans may be used to assist the Funds in reaching and maintaining asset levels that are efficient for the Funds’ operations and investments.

     The Plans for each Fund were most recently approved by a majority vote of the Trustees of the Trust, including a majority of the non-interested Trustees of the Trust who have no direct or indirect financial interest in the Plans, cast in person at a meeting called for the purpose of approving the Plans on June 15, 2006.

     The compensation for distribution services payable under a Plan to Goldman Sachs may not exceed 0.25%, 0.75% and 0.75%, per annum of a Fund’s average daily net assets attributable to Class A, Class B and Class C Shares, respectively, of such Fund. Under the Plans for Class B and Class C Shares, Goldman Sachs is also entitled to receive a separate fee for personal and account maintenance services equal on an annual basis to 0.25% of each Fund’s average daily net assets attributable to Class B or Class C Shares. With respect to Class A Shares, the distributor at its discretion may use compensation for distribution services paid under the Plan for personal and account maintenance services and expenses so long as such total compensation under the Plan does not exceed the maximum cap on “service fees” imposed by the NASD.

     Each Plan is a compensation plan which provides for the payment of a specified fee without regard to the expenses actually incurred by Goldman Sachs. If such fee exceeds Goldman Sachs’ expenses, Goldman Sachs may realize a profit from these arrangements. The distribution fees received by Goldman Sachs under the Plans and CDSC on Class A, Class B and Class C Shares may be sold by Goldman Sachs as distributor to entities which provide financing for payments to Authorized Dealers in respect of sales of Class A, Class B and Class C Shares. To the extent such fees are not paid to such dealers, Goldman Sachs may retain such fees as

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compensation for its services and expenses of distributing the Funds’ Class A, Class B and Class C Shares.

     Under each Plan, Goldman Sachs, as distributor of each Fund’s Class A, Class B and Class C Shares, will provide to the Trustees of the Trust for their review, and the Trustees of the Trust will review at least quarterly, a written report of the services provided and amounts expended by Goldman Sachs under the Plans and the purposes for which such services were performed and expenditures were made.

     The Plans will remain in effect until June 30, 2007 and from year to year thereafter, provided that such continuance is approved annually by a majority vote of the Trustees of the Trust, including a majority of the non-interested Trustees of the Trust who have no direct or indirect financial interest in the Plans. The Plans may not be amended to increase materially the amount of distribution compensation described therein without approval of a majority of the outstanding Class A, Class B or Class C Shares of the affected Fund and affected share class, but may be amended without shareholder approval to increase materially the amount of non-distribution compensation. All material amendments of a Plan must also be approved by the Trustees of the Trust in the manner described above. A Plan may be terminated at any time as to any Fund 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 Class A, Class B or Class C Shares, respectively, of the affected Fund and affected share class. If a Plan was terminated by the Trustees of the Trust and no successor plan was adopted, the Fund would cease to make payments to Goldman Sachs under the Plan and Goldman Sachs would be unable to recover the amount of any of its unreimbursed expenditures. So long as a Plan is in effect, the selection and nomination of non-interested Trustees of the Trust will be committed to the discretion of the non-interested Trustees of the Trust. The Trustees of the Trust have determined that in their judgment there is a reasonable likelihood that the Plans will benefit the Funds and their Class A, Class B and Class C Shareholders.

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The following chart shows the distribution and service fees paid to Goldman Sachs for the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004 by each Fund then in existence pursuant to the Class A Plan:

	Fiscal year		Fiscal year		Fiscal year
	ended		ended		ended
	August 31,		August 31,		August 31,
	2006		2005		2004
Balanced Fund	$	457,088	$	466,557	$	392,563
Growth and Income Fund		2,439,320		1,987,617		1,345,021
Structured Large Cap Value Fund		699,776		334,913		234,638
Structured U.S. Equity Fund		1,324,785		1,116,751		976,536
Structured Large Cap Growth Fund		555,144		324,563		319,044
Structured Small Cap Equity Fund		443,067		349,991		248,630
Structured International Equity Fund		1,174,234		528,922		471,015
Capital Growth Fund		3,407,959		3,422,358		3,575,375
Strategic Growth Fund		338,780		420,863		430,747
Growth Opportunities Fund		2,496,462		1,940,626		1,365,833
Small/Mid Cap Growth Fund1		101,903		97		—
Mid Cap Value Fund		7,855,799		4,351,797		1,740,117
Small Cap Value Fund		2,619,415		2,591,593		2,037,564
Large Cap Value Fund		1,494,643		999,206		650,190
Concentrated International Equity Fund		866,469		780,199		1,452,991
Japanese Equity Fund		107,709		95,209		154,488
International Small Cap Fund		237,875		103,640		170,148
Emerging Markets Equity Fund		620,458		112,860		144,111
Asia Equity Fund		212,416		120,220		179,422
BRIC Fund2		665		0		0
Concentrated Growth Fund		167,342		158,432		147,191

1	The Class A Share class of the Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The Class A Share class of the BRIC Fund commenced operations on June 30, 2006.

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     The following chart shows the distribution and service fees paid to Goldman Sachs for the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004 by each Fund then in existence pursuant to the Class B Plan:

	Fiscal year		Fiscal year		Fiscal year
	ended		ended		ended
	August 31,		August 31,		August 31,
	2006		2005		2004
Balanced Fund	$	244,871	$	309,690	$	307,402
Growth and Income Fund		751,933		976,163		907,535
Structured Large Cap Value Fund		195,428		207,952		194,296
Structured U.S. Equity Fund		909,705		1,145,578		1,233,382
Structured Large Cap Growth Fund		535,270		736,171		896,993
Structured Small Cap Equity Fund		179,952		196,949		211,060
Structured International Equity Fund		91,706		73,209		64,791
Capital Growth Fund		1,291,566		1,819,941		2,199,289
Strategic Growth Fund		89,535		109,329		122,165
Growth Opportunities Fund		846,998		914,006		914,415
Small/Mid Cap Growth Fund1		8,380		75		—
Mid Cap Value Fund		2,230,154		1,964,249		1,329,226
Small Cap Value Fund		957,886		1,147,869		1,117,451
Large Cap Value Fund		246,051		216,778		157,572
Concentrated International Equity Fund		141,737		206,762		273,284
Japanese Equity Fund		29,067		19,615		19,852
International Small Cap Fund		53,520		42,179		25,946
Emerging Markets Equity Fund		105,357		45,206		26,205
Asia Equity Fund		46,920		49,044		40,251
Concentrated Growth Fund		2,445		1,025		889

¹ The Class B Share class of the Small/Mid Cap Growth Fund commenced operations on June 30, 2005.

B-144

     The following chart shows the distribution and service fees paid to Goldman Sachs for the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004 by each Fund then in existence pursuant to the Class C Plan:

	Fiscal year		Fiscal year		Fiscal year
	ended		ended		ended
	August 31,		August 31,		August 31,
	2006		2005		2004
Balanced Fund	$	61,501	$	60,905	$	59,363
Growth and Income Fund		168,433		147,084		112,796
Structured Large Cap Value Fund		216,928		196,023		157,681
Structured U.S. Equity Fund		377,591		397,338		395,621
Structured Large Cap Growth Fund		265,750		316,640		355,785
Structured Small Cap Equity Fund		269,567		226,815		205,727
Structured International Equity Fund		58,743		43,885		40,209
Capital Growth Fund		748,286		850,310		987,401
Strategic Growth Fund		112,228		114,343		118,400
Growth Opportunities Fund		1,208,745		914,486		695,828
Small/Mid Cap Growth Fund1		30,687		24		—
Mid Cap Value Fund		3,664,312		2,141,418		728,726
Small Cap Value Fund		1,197,845		1,338,256		1,115,463
Large Cap Value Fund		438,366		252,621		125,622
Concentrated International Equity Fund		204,717		172,748		159,519
Japanese Equity Fund		40,499		16,661		20,400
International Small Cap Fund		74,506		72,767		30,546
Emerging Markets Equity Fund		127,408		18,432		11,134
Asia Equity Fund		30,099		18,672		15,542
BRIC Fund2		693		0		0
Concentrated Growth Fund3		4,518		3,216		2,352

1	The Class C Share class of the Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	The Class C Share class of the BRIC Fund commenced operations on June 30, 2006.
3	The Class C Share class of the Concentrated Growth Fund commenced operations on September 3, 2002.

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     During the fiscal year ended August 31, 2006, Goldman Sachs incurred the following expenses in connection with distribution under the Class A Plan of each applicable Fund with Class A Shares then in existence:

							Printing and
			Compensation and				Mailing of
			Expenses of the		Allocable		Prospectuses to		Preparation and
			Distributor and Its		Overhead,		Other Than		Distribution of
	Compensation to		Sales		Telephone and		Current		Sales Literature
	Dealers1		Personnel		Travel Expenses		Shareholders		and Advertising		Totals
Fiscal Year Ended August 31, 2006:
Goldman Sachs Balanced Fund	$	500,555	$	209,811	$	0	$	0	$	0	$	710,366
Goldman Sachs Growth and Income Fund		2,484,221		823,601		589,242		51,942		97,582		4,046,588
Goldman Sachs Structured Large Cap Value Fund		709,098		351,301		231,659		20,421		38,364		1,350,844
Goldman Sachs Structured US Equity Fund		1,310,725		382,834		274,369		24,186		45,437		2,037,551
Goldman Sachs Structured Large Cap Growth Fund		514,617		209,835		151,712		12,283		23,075		911,522
Goldman Sachs Structured Small Cap Equity Fund		390,488		395,190		300,984		23,357		43,880		1,153,898
Goldman Sachs Structured International Equity Fund		527,154		2,066,947		1,535,275		135,335		254,252		4,518,961
Goldman Sachs Capital Growth Fund		2,985,729		2,177,002		1,399,942		260,417		231,840		7,054,931
Goldman Sachs Strategic Growth Fund		140,990		892,018		635,921		56,056		105,313		1,830,298
Goldman Sachs Growth Opportunities Fund		2,308,002		1,893,873		1,278,633		112,712		211,750		5,804,969
Goldman Sachs Small/Mid Cap Growth Fund		110,243		4,315		474,607		41,837		78,598		709,600
Goldman Sachs Mid Cap Value Fund		8,505,964		6,096,888		3,661,016		322,719		606,288		19,192,875
Goldman Sachs Small Capital Value Fund		2,415,127		1,848,514		1,351,798		119,161		223,867		5,958,468
Goldman Sachs Large Cap Value Fund		891,396		3,185,560		2,416,669		213,030		400,216		7,106,871
Goldman Sachs Concentrated International Equity Fund		567,815		864,443		647,194		57,050		107,180		2,243,682
Goldman Sachs Japanese Equity Fund		34,868		285,095		184,160		16,234		30,498		550,855
Goldman Sachs Intl Small Cap Fund		103,983		494,109		371,549		32,752		61,531		1,063,925
Goldman Sachs Emerging Markets Equity Fund		246,855		1,223,601		951,282		83,856		157,539		2,663,132
Goldman Sachs Asia Equity Fund		63,960		384,103		303,581		26,761		50,275		828,679
Goldman Sachs BRIC Fund		—		—		—		—		—		—
Goldman Sachs Concentrated Growth Fund		25,776		630,370		472,483		41,649		78,246		1,248,524

¹ Advance commissions paid to dealers of 1% on Class A Shares are considered deferred assets which are amortized over a period of 18 months; amounts presented above reflect amortization expense recorded during the period presented.

B-146

     During the fiscal year ended August 31, 2006 Goldman Sachs incurred the following expenses in connection with distribution under the Class B Plan of each applicable Fund with Class B Shares then in existence:

							Printing and
							Mailing of
			Compensation and		Allocable		Prospectuses to		Preparation and
			Expenses of the		Overhead,		Other Than		Distribution of
	Compensation to		Distributor and Its		Telephone and		Current		Sales Literature
	Dealers1		Sales Personnel		Travel Expenses		Shareholders		and Advertising		Totals
Fiscal Year Ended August 31, 2006:
Balanced Fund	$	94,249	$	54,084	$	0	$	0	$	0	$	148,333
Growth and Income Fund		545,707		193,713		116,828		10,298		19,348		885,895
Structured Large Cap Value Fund		86,625		24,030		14,530		1,281		2,406		128,873
Structured U.S. Equity Fund		296,829		157,547		100,019		8,817		16,564		579,776
Structured Large Cap Growth Fund		169,206		184,658		116,321		10,254		19,263		499,702
Structured Small Cap Equity Fund		68,102		48,220		28,953		2,552		4,795		152,622
Structured International Equity Fund		12,603		16,744		9,766		861		1,617		41,591
Capital Growth Fund		421,228		551,007		444,105		39,148		73,547		1,529,035
Strategic Growth Fund		68,274		39,820		21,932		1,933		3,632		135,591
Growth Opportunities Fund		785,493		331,841		187,769		16,552		31,096		1,352,751
Small/Mid Cap Growth Fund		5,465		—		17,708		1,561		2,933		27,666
Goldman Sachs Mid Cap Value Fund		1,685,624		717,631		399,257		35,195		66,120		2,903,826
Small Cap Value Fund		771,738		295,577		174,654		15,396		28,924		1,286,290
Large Cap Value Fund		195,149		82,286		762,550		67,219		126,283		1,233,487
Concentrated International Equity Fund		87,204		0		0		0		0		87,204
Japanese Equity Fund		26,766		20,474		10,419		918		1,726		60,303
International Small Cap Fund		78,579		37,942		20,454		1,803		3,387		142,165
Emerging Markets Equity Fund		63,494		60,340		35,161		3,099		5,823		167,917
Asia Equity Fund		34,006		21,563		13,098		1,155		2,169		71,991
Concentrated Growth Fund		1,883		2,062		1,193		105		198		5,441

¹ Advance commissions paid to dealers of 4% on Class B Shares are considered deferred assets which are amortized over a period of 6 years; amounts presented above reflect amortization expense recorded during the period presented.

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     During the fiscal year ended August 31, 2006 Goldman Sachs incurred the following expenses in connection with distribution under the Class C Plan of each applicable Fund with Class C Shares then in existence:

									Preparation and
			Compensation and				Printing and Mailing of		Distribution of
			Expenses of the		Allocable Overhead,		Prospectuses to Other		Sales
	Compensation to		Distributor and Its		Telephone and		Than Current		Literature and
	Dealers1		Sales Personnel		Travel Expenses		Shareholders		Advertising		Totals
Fiscal Year Ended August 31, 2006:
Balanced Fund	$	18,850	$	7,727	$	0	$	0	$	0	$	26,577
Growth and Income Fund		170,322		16,999		12,067		1,064		1,998		202,450
Structured Large Cap Value Fund		203,230		582		14,032		1,237		2,324		221,404
Structured U.S. Equity Fund		372,581		0		0		0		0		372,581
Structured Large Cap Growth Fund		268,346		1,743		0		0		0		270,089
Structured Small Cap Equity Fund		255,372		5,505		3,218		284		533		264,911
Structured International Equity Fund		25,227		21,960		13,497		1,190		2,235		64,108
Capital Growth Fund		741,902		48,345		27,134		2,392		4,494		824,267
Strategic Growth Fund		113,971		21,968		11,906		1,050		1,972		150,866
Growth Opportunities Fund		1,205,210		175,506		93,894		8,277		15,550		1,498,437
Small/Mid Cap Growth Fund		28,142		0		67,718		5,969		11,215		113,044
Mid Cap Value Fund		3,646,964		1,267,238		656,129		57,838		108,659		5,736,828
Small Cap Value Fund		1,217,311		82,365		50,132		4,419		8,302		1,362,529
Large Cap Value Fund		438,450		143,382		138,226		12,185		22,891		755,134
Concentrated International Equity Fund		184,352		0		500		44		83		184,980
Japanese Equity Fund		39,938		28,110		15,851		1,397		2,625		87,922
International Small Cap Fund		34,212		48,136		27,505		2,425		4,555		116,833
Emerging Markets Equity Fund		120,164		144,793		85,416		7,529		14,145		372,048
Asia Equity Fund		28,917		12,198		6,869		605		1,137		49,727
BRIC Fund		—		—		—		—		—		—
Concentrated Growth Fund		4,444		1,487		808		71		134		6,943

¹ Advance commissions paid to dealers of 1% on Class C Shares are considered deferred assets which are amortized over a period of 1 year; amounts presented above reflect amortization expense recorded during the period presented.

B-148

OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE, PURCHASES,
REDEMPTIONS, EXCHANGES AND DIVIDENDS
(Class A Shares, Class B Shares and Class C Shares Only)

     The following information supplements the information in the Prospectus under the captions “Shareholder Guide” and “Dividends.” Please see the Prospectus for more complete information.

Maximum Sales Charges

     Class A Shares of each Fund are sold with a maximum sales charge of 5.5%. Using the net asset value per share as of August 31, 2006, the maximum offering price of each Fund’s Class A Shares would be as follows:

			Maximum			Offering
	Net Asset		Sales			Price to
	Value		Charge			Public
Balanced Fund	$	20.68		5.5	%	$	21.88
Growth and Income Fund		28.45		5.5	%		30.11
Structured Large Cap Value Fund		13.99		5.5	%		14.80
Structured U.S. Equity Fund		31.79		5.5	%		33.64
Structured Large Cap Growth Fund		13.20		5.5	%		13.97
Structured Small Cap Equity Fund		13.76		5.5	%		14.56
Structured International Equity Fund		14.29		5.5	%		15.12
Capital Growth Fund		20.62		5.5	%		21.82
Strategic Growth Fund		9.03		5.5	%		9.56
Growth Opportunities Fund		20.81		5.5	%		22.02
Small/Mid Cap Growth Fund		10.42		5.5	%		11.03
Mid Cap Value Fund		36.84		5.5	%		38.98
Small Cap Value Fund		43.93		5.5	%		46.49
Large Cap Value Fund		13.80		5.5	%		14.60
Concentrated International Equity Fund		21.05		5.5	%		22.28
Japanese Equity Fund		11.65		5.5	%		12.33
International Small Cap Fund		18.16		5.5	%		19.22
Emerging Markets Equity Fund		19.91		5.5	%		21.07
Asia Equity Fund		15.60		5.5	%		16.51
BRIC Fund		10.45		5.5	%		11.06
Concentrated Growth Fund		12.98		5.5	%		13.74

     The actual sales charge that is paid by an investor on the purchase of Class A Shares may differ slightly from the sales charge listed above or in a Fund’s Prospectus due to rounding in the calculations. For example, the sales load disclosed above and in the Funds’ Prospectuses is only shown to one decimal place (i.e., 5.5%). The actual sales charge that is paid by an investor will be rounded to two decimal places. As a result of such rounding in the calculations, the actual sales load paid by an investor may be somewhat greater (e.g., 5.53%) or somewhat lesser (e.g., 5.48%) than that listed above or in the Prospectuses. Contact your financial advisor for further information.

B-149

Other Purchase Information/Sales Charge Waivers

     The sales charge waivers on the Funds’ shares are due to the nature of the investors involved and/or the reduced sales effort that is needed to obtain such investments.

     If shares of a Fund are held in a “street name” account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to the beneficial owner’s account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Funds will have no record of the beneficial owner’s transactions, a beneficial owner should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about the account. The transfer of shares in a “street name” account to an account with another dealer or to an account directly with the Fund involves special procedures and will require the beneficial owner to obtain historical purchase information about the shares in the account from the Authorized Dealer.

Right of Accumulation (Class A)

     A Class A shareholder qualifies for cumulative quantity discounts if the current purchase price of the new investment plus the shareholder’s current holdings of existing Class A, Class B or Class C Shares (acquired by purchase or exchange) of a Fund and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund total the requisite amount for receiving a discount. For example, if a shareholder owns shares with a current market value of $65,000 and purchases additional Class A Shares of any Goldman Sachs Fund with a purchase price of $45,000, the sales charge for the $45,000 purchase would be 3.75% (the rate applicable to a single purchase of $100,000 but less than $250,000). Class A, Class B and/or Class C Shares of the Funds and any other Goldman Sachs Fund purchased (i) by an individual, his spouse and his children, and (ii) by a trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account, will be combined for the purpose of determining whether a purchase will qualify for such right of accumulation and, if qualifying, the applicable sales charge level. For purposes of applying the right of accumulation, shares of the Funds and any other Goldman Sachs Fund purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, Class A, Class B and/or Class C Shares of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of the same business organization, groups of individuals represented by and investing on the recommendation of the same accounting firm, certain affinity groups or other similar organizations (collectively, “eligible persons”) may be combined for the purpose of determining whether a purchase will qualify for the right of accumulation and, if qualifying, the applicable sales charge level. This right of accumulation is subject to the following conditions: (i) the business organization’s, group’s or firm’s agreement to cooperate in the offering of the Fund’s shares to eligible persons; and (ii) notification to the relevant Fund at the time of purchase that the investor is eligible for this right of accumulation. In addition, in connection with SIMPLE IRA accounts, cumulative quantity discounts are available on a per plan basis if (i) your employee has been assigned a cumulative discount number by Goldman

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Sachs; and (ii) your account, alone or in combination with the accounts of other plan participants also invested in Class A, Class B and/or Class C Shares of Goldman Sachs Funds, totals the requisite aggregate amount as described in the Prospectus.

Statement of Intention (Class A)

     If a shareholder anticipates purchasing at least $50,000 of Class A Shares of a Fund alone or in combination with Class A Shares of any other Goldman Sachs Fund within a 13-month period, the shareholder may purchase shares of the Fund at a reduced sales charge by submitting a Statement of Intention (the “Statement”). Shares purchased pursuant to a Statement will be eligible for the same sales charge discount that would have been available if all of the purchases had been made at the same time. The shareholder or his Authorized Dealer must inform Goldman Sachs that the Statement is in effect each time shares are purchased. There is no obligation to purchase the full amount of shares indicated in the Statement. A shareholder may include the value of all Class A Shares on which a sales charge has previously been paid as an “accumulation credit” toward the completion of the Statement, but a price readjustment will be made only on Class A Shares purchased within ninety (90) days before submitting the Statement. The Statement authorizes the Transfer Agent to hold in escrow a sufficient number of shares which can be redeemed to make up any difference in the sales charge on the amount actually invested. For purposes of satisfying the amount specified on the Statement, the gross amount of each investment, exclusive of any appreciation on shares previously purchased, will be taken into account.

     The provisions applicable to the Statement, and the terms of the related escrow agreement, are set forth in Appendix D to this Additional Statement.

Cross-Reinvestment of Dividends and Distributions

     Shareholders may receive dividends and distributions in additional shares of the same class of a Fund or they may elect to receive them in cash or shares of the same class of other Goldman Sachs Funds or ILA Service Shares of the Prime Obligations Portfolio or the Tax-Exempt Diversified Portfolio, if they hold Class A Shares of a Fund, or ILA Class B or Class C Shares of the Prime Obligations Portfolio, if they hold Class B or Class C Shares of a Fund (the “ILA Portfolios”).

     A Fund shareholder should obtain and read the prospectus relating to any other Goldman Sachs Fund or ILA Portfolio and its shares and consider its investment objective, policies and applicable fees before electing cross-reinvestment into that Fund. The election to cross-reinvest dividends and capital gain distributions will not affect the tax treatment of such dividends and distributions, which will be treated as received by the shareholder and then used to purchase shares of the acquired fund. Such reinvestment of dividends and distributions in shares of other Goldman Sachs Funds or ILA Portfolios is available only in states where such reinvestment may legally be made.

B-151

Automatic Exchange Program

     A Fund shareholder may elect to exchange automatically a specified dollar amount of shares of a Fund for shares of the same class or an equivalent class of another Goldman Sachs Fund provided the minimum initial investment requirement has been satisfied. A Fund shareholder should obtain and read the prospectus relating to any other 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.

Class C Exchanges

     As stated in the Prospectuses, Goldman Sachs normally begins paying the annual 0.75% distribution fee on Class C Shares to Authorized Dealers after the shares have been held for one year. When an Authorized Dealer enters into an appropriate agreement with Goldman Sachs and stops receiving this payment on Class C Shares that have been beneficially owned by the Authorized Dealer’s customers for at least ten years, those Class C Shares may be exchanged for Class A Shares (which bear a lower distribution fee) of the same Fund at their relative net asset value without a sales charge in recognition of the reduced payment to the Authorized Dealer.

Systematic Withdrawal Plan

     A systematic withdrawal plan (the “Systematic Withdrawal Plan”) is available to shareholders of a Fund whose shares are worth at least $5,000. The Systematic Withdrawal Plan provides for monthly payments to the participating shareholder of any amount not less than $50.

     Dividends and capital gain distributions on shares held under the Systematic Withdrawal Plan are reinvested in additional full and fractional shares of the applicable Fund at net asset value. The Transfer Agent acts as agent for the shareholder in redeeming sufficient full and fractional shares to provide the amount of the systematic withdrawal payment. The Systematic Withdrawal Plan may be terminated at any time. Goldman Sachs reserves the right to initiate a fee of up to $5 per withdrawal, upon thirty (30) days written notice to the shareholder. Withdrawal payments should not be considered to be dividends, yield or income. If periodic withdrawals continuously exceed new purchases and reinvested dividends and capital gains distributions, the shareholder’s original investment will be correspondingly reduced and ultimately exhausted. The maintenance of a withdrawal plan concurrently with purchases of additional Class A, Class B or Class C Shares would be disadvantageous because of the sales charge imposed on purchases of Class A Shares or the imposition of a CDSC on redemptions of Class A, Class B or Class C Shares. The CDSC applicable to Class A, Class B or Class C Shares redeemed under a systematic withdrawal plan may be waived. See “Shareholder Guide” in the Prospectuses. In addition, each withdrawal constitutes a redemption of shares, and any gain or loss realized must be reported for federal and state income tax purposes. A shareholder should consult his or her own tax adviser with regard to the tax consequences of participating in the Systematic Withdrawal Plan. For further information or to request a Systematic Withdrawal Plan, please write or call the Transfer Agent.

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Class B Contingent Deferred Sales Charge- Shares Received in Connection with the Expedition Funds’ Reorganization

     Former Class B shareholders of the Expedition Equity Fund or Expedition Equity Income Fund who received Class B Shares of the Goldman Sachs Structured U.S. Equity Fund or Goldman Sachs Growth and Income Fund in connection with the reorganization of the Expedition Funds into the Trust will be charged a contingent deferred sales charge (a “CDSC”) on those Goldman Sachs Fund Class B Shares based on the CDSC schedule set forth below. Goldman Sachs Fund Class B Shares purchased by former Expedition Fund shareholders after the effective time of the Expedition Fund reorganization will be charged CDSCs according to the Goldman Sachs Fund CDSC schedule set forth in the Equity Funds’ prospectuses.

	CDSC as a Percentage of
Year since Purchase	Dollar Amount Subject to CDSC
First		4.00	%
Second		3.00	%
Third		3.00	%
Fourth		2.00	%
Fifth		1.00	%
Sixth		0.00	%
Seventh		0.00	%
Eighth		0.00	%

     Class B Shares will automatically convert to Class A Shares after eight years.

SERVICE PLAN AND SHAREHOLDER ADMINISTRATION PLAN
(Service Shares Only)

     The Funds have adopted a service plan and a separate shareholder administration plan (the “Plans”) with respect to the Service Shares which authorize the Funds to compensate Service Organizations for providing certain personal and account maintenance services and shareholder administration services to their customers who are or may become beneficial owners of such Shares. Pursuant to the Plans, each Fund enters into agreements with Service Organizations which purchase Service Shares of the Fund on behalf of their customers (“Service Agreements”). Under such Service Agreements the Service Organizations may perform some or all of the following services:

     (a) Personal and account maintenance services, including: (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 Fund; (ii) acting as liaison between the Service Organization’s 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

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Service 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.

     (b) Shareholder administration services, including: (i) acting or arranging for another party to act, as recordholder and nominee of the Service Shares beneficially owned by the Service Organization’s customers; (ii) establishing and maintaining, or assist in establishing and maintaining, individual accounts and records with respect to the Service Shares owned by each customer; (iii) processing, or assist in processing, confirmations concerning customer orders to purchase, redeem and exchange Service Shares; (iv) receiving and transmitting, or assist in receiving and transmitting funds representing the purchase price or redemption proceeds of such Service Shares; (v) facilitating the inclusion of Service Shares in accounts, products or services offered to the Service Organization’s customers by or through the Service Organization; (vi) processing dividend payments on behalf of customers; and (vii) performing other related services which do not constitute “any activity which is primarily intended to result in the sale of shares” within the meaning of Rule 12b-1 under the Act or “personal and account maintenance services” within the meaning of the NASD’s Conduct Rules.

     As compensation for such services, each Fund will pay each Service Organization a personal and account maintenance service fee and a shareholder administration service fee in an amount up to 0.25% and 0.25%, respectively, (on an annualized basis) of the average daily net assets of the Service Shares of such Fund attributable to or held in the name of such Service Organization.

     The amount of the service and shareholder administration fees paid by each Fund then in existence to Service Organizations pursuant to the Plans was as follows for the fiscal years ended August 31, 2006, August 31, 2005 and August 31, 2004.

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	Fiscal year		Fiscal year		Fiscal year
	Ended		Ended		Ended
	August 31,		August 31,		August 31,
	2006		2005		2004
Balanced Fund	$	7	$	16	$	36
Growth and Income Fund		4,680		5,960		6,980
Structured Large Cap Value Fund		3,093		3,379		2,019
Structured U.S. Equity Fund		54,938		49,503		44,001
Structured Large Cap Growth Fund		1,242		1,361		2,047
Structured Small Cap Equity Fund		179,551		204,045		252,519
Structured International Equity Fund		157,089		42,962		388
Capital Growth Fund		51,590		34,447		30,296
Strategic Growth Fund		121		1,539		809
Growth Opportunities Fund		53,012		18,158		5,056
Small/Mid Cap Growth Fund1		236		9		—
Mid Cap Value Fund		616,272		179,411		39,302
Small Cap Value Fund		197,778		128,252		48,450
Large Cap Value Fund		17,266		5,495		401
Concentrated International Equity Fund		3,734		2,364		4,737
Japanese Equity Fund		1,171		7		3
International Small Cap Fund		2,601		1,029		514
Emerging Markets Equity Fund		7,535		4,885		2,432
Asia Equity Fund		—		—		—
Concentrated Growth Fund2		11		10		9

1	The Small/Mid Cap Growth Fund commenced operations on June 30, 2005.
2	Prior to September 3, 2002, the Concentrated Growth Fund had not offered Service Shares.

     The Funds have adopted the Service Plan but not the Shareholder Administration Plan pursuant to Rule 12b-1 under the Act in order to avoid any possibility that service fees paid to the Service Organizations pursuant to the Service Agreements might violate the Act. Rule 12b-1, which was adopted by the SEC under the Act, regulates the circumstances under which an investment company or series thereof may bear expenses associated with the distribution of its shares. In particular, such an investment company or series thereof cannot engage directly or indirectly in financing any activity which is primarily intended to result in the sale of shares issued by the company unless it has adopted a plan pursuant to, and complies with the other requirements of, such Rule. The Trust believes that fees paid for the services provided in the Service Plan and described above are not expenses incurred primarily for effecting the distribution of Service Shares. However, should such payments be deemed by a court or the SEC to be distribution expenses, such payments would be duly authorized by the Plan. The Shareholder Administration Plan has not been adopted pursuant to Rule 12b-1 under the Act.

     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 a Fund in connection with the investment of fiduciary assets in Service Shares of a Fund. Service Organizations, including banks regulated by the Comptroller of the Currency, the Federal Reserve Board or the Federal Deposit Insurance Corporation, and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisers before investing fiduciary assets

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in Service Shares of a Fund. In addition, under some state securities laws, banks and other financial institutions purchasing Service Shares on behalf of their customers may be required to register as dealers.

     The Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or the related Service Agreements, most recently voted to approve the Plans and related Service Agreements at a meeting called for the purpose of voting on such Plans and Service Agreements on June 15, 2006. The Plans and related Service Agreements will remain in effect until June 30, 2007 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. The Service Plan may not be amended (but the Shareholder Administration Plan may be amended) to increase materially the amount to be spent for the services described therein without approval of the Service Shareholders of the affected Fund and all material amendments of each Plan must also be approved by the Trustees in the manner described above. The Plans may be terminated at any time by a majority of the Trustees as described above or by a vote of a majority of the affected Fund’s outstanding Service Shares. 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 Service Shares of the affected Fund on not more than sixty (60) days’ written notice to any other party to the Service Agreements. The Service Agreements will terminate automatically if assigned. So long as the Plans are in effect, the selection and nomination of those Trustees who are not interested persons will 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 Plans will benefit the Funds and the holders of Service Shares of the Funds.

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APPENDIX A

DESCRIPTION OF SECURITIES RATINGS

Short-Term Credit Ratings

     A Standard & Poor’s short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard & Poor’s for short-term issues:

     “A-1” — Obligations are rated in the highest category and indicate that 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” — The obligor’s capacity to meet its financial commitment on the obligation is satisfactory. Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in the higher rating categories.

     “A-3” — Obligor has adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

     “B” — An obligation is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. Ratings of “B1”, “B-2” and “B-3” may be assigned to indicate finer distinction within the “B” category.

     “C” — Obligations are currently vulnerable to nonpayment and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

     “D” — Obligations are in payment default. This rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

     Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also

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distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

     Moody’s Investors Service (“Moody’s”) short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.

     Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:

     “P-1” — Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

     “P-2” — Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

     “P-3” — Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

     “NP” — Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

     Fitch, Inc. / Fitch Ratings Ltd. (“Fitch”) short-term ratings scale applies to foreign currency and local currency ratings. A short-term rating has a time horizon of less than 13 months for most obligations, or up to three years for U.S. public finance, in line with industry standards, to reflect unique risk characteristics of bond, tax, and revenue anticipation notes that are commonly issued with terms up to three years. Short-term ratings thus place greater emphasis on the liquidity necessary to meet financial commitments in a timely manner. The following summarizes the rating categories used by Fitch for short-term obligations:

     “F1” — Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.

     “F2” — Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.

     “F3” — Securities possess fair credit quality. This designation indicates that the capacity for timely payment of financial commitments is adequate; however, near term adverse changes could result in a reduction to non investment grade.

     “B” — Securities possess speculative credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus vulnerability to near term adverse changes in financial and economic conditions.

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     “C” — Securities possess high default risk. Default is a real possibility. This designation indicates a capacity for meeting financial commitments which is solely reliant upon a sustained, favorable business and economic environment.

     “D” — Indicates an entity or sovereign that has defaulted on all of its financial obligations.

     “NR” — This designation indicates that Fitch does not publicly rate the associated issuer or issue.

     “WD” — This designation indicates that the rating has been withdrawn and is no longer maintained by Fitch.

     The following summarizes the ratings used by Dominion Bond Rating Service Limited (“DBRS”) for commercial paper and short-term debt:

     “R-1 (high)” — Short-term debt rated “R-1 (high)” is of the highest credit quality, and indicates an entity possessing unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an “R-1 (high)” rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results, and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an “R-1 (high)”, few entities are strong enough to achieve this rating.

     “R-1 (middle)” — Short-term debt rated “R-1 (middle)” is of superior credit quality and, in most cases, ratings in this category differ from “R-1 (high)” credits by only a small degree. Given the extremely tough definition DBRS has established for the “R-1 (high)” category, entities rated “R-1 (middle)” are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities.

     “R-1 (low)” — Short-term debt rated “R-1 (low)” is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt and profitability ratios are not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.

     “R-2 (high)” — Short-term debt rated “R-2 (high)” is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt, and profitability ratios is not as strong as credits rated in the “R-1 (low)” category. Relative to the latter category, other shortcomings often include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry.

     “R-2 (middle)” — Short-term debt rated “R-2 (middle)” is considered to be of adequate credit quality. Relative to the “R-2 (high)” category, entities rated “R-2 (middle)” typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or are negatively impacted by a weaker industry. Ratings in this category would be more vulnerable to adverse changes in financial and economic conditions.

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     “R-2 (low)” — Short-term debt rated “R-2 (low)” is considered to be at the lower end of adequate credit quality, typically having some combination of challenges that are not acceptable for an “R-2 (middle)” credit. However, “R-2 (low)” ratings still display a level of credit strength that allows for a higher rating than the “R-3” category, with this distinction often reflecting the issuer’s liquidity profile.

     “R-3” — Short-term debt rated “R-3” is considered to be at the lowest end of adequate credit quality, one step up from being speculative. While not yet defined as speculative, the R-3 category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside the issuer’s control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions.

     “R-4” — Short-term debt rated R-4 is speculative. R-4 credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with R-4 ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.

     “R-5” — Short-tern debt rated R-5 is highly speculative. There is a reasonably high level of uncertainty as to the ability of the entity to repay the obligations on a continuing basis in the future, especially in periods of economic recession or industry adversity. In some cases, short term debt rated R-5 may have challenges that if not corrected, could lead to default.

     “D” — A security rated “D” implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a “D” rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the “D” rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS.

Long-Term Credit Ratings

     The following summarizes the ratings used by Standard & Poor’s for long-term issues:

     “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 to a 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 strong.

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     “BBB” — An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

     Obligations rated “BB,” “B,” “CCC,” “CC” and “C” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

     “BB” — An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

     “B” — An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

     “CCC” — An obligation rated “CCC” is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

     “CC” — An obligation rated “CC” is currently highly vulnerable to nonpayment.

     “C” — A subordinated debt or preferred stock obligation rated “C” is currently highly vulnerable to nonpayment. The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A “C” also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.

     “D” — An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

     Plus (+) or minus (-) — The ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

     “NR” — This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.

     Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively

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lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

     The following summarizes the ratings used by Moody’s for long-term debt:

     “Aaa” — Obligations rated “Aaa” are judged to be of the highest quality, with minimal credit risk.

     “Aa” — Obligations rated “Aa” are judged to be of high quality and are subject to very low credit risk.

     “A” — Obligations rated “A” are considered upper-medium grade and are subject to low credit risk.

     “Baa” — Obligations rated “Baa” are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

     “Ba” — Obligations rated “Ba” are judged to have speculative elements and are subject to substantial credit risk.

     “B” — Obligations rated “B” are considered speculative and are subject to high credit risk.

     “Caa” — Obligations rated “Caa” are judged to be of poor standing and are subject to very high credit risk.

     “Ca” — Obligations rated “Ca” are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

     “C” — Obligations rated “C” are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

     Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

     The following summarizes long-term ratings used by Fitch:

     “AAA” — Securities considered to be of the highest credit quality. “AAA” ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

     “AA” — Securities considered to be of very high credit quality. “AA” ratings denote expectations of very low credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

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     “A” — Securities considered to be of high credit quality. “A” ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

     “BBB” — Securities considered to be of good credit quality. “BBB” ratings indicate that there is currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.

     “BB” — Securities considered to be speculative. “BB” ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.

     “B” — Securities considered to be highly speculative. “B” ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

     “CCC,” “CC” and “C” — Securities have high default risk. Default is a real possibility, and capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A “CC” rating indicates that default of some kind appears probable. “C” ratings signal imminent default.

     “RD” — Indicates an entity has failed to make due payments (within the applicable grace period) on some but not all material financial obligations, but continues to honor other classes of obligations.

     “D” — Indicates an entity or sovereign that has defaulted on all of its financial obligations.

     Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the “AAA” category or to categories below “CCC”.

     “NR” indicates that Fitch does not publicly rate the associated issue or issuer.

     The following summarizes the ratings used by DBRS for long-term debt:

     “AAA” — Long-term debt rated “AAA” is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present which would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a creditable track record of superior performance. Given the extremely high standard which DBRS has set for this category, few entities are able to achieve a “AAA” rating.

     “AA” — Long-term debt rated “AA” is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated “AAA” only to a

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small degree. Given the extremely restrictive definition DBRS has for the “AAA” category, entities rated “AA” are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.

     “A” — Long-term debt rated “A” is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of “AA” rated entities. While “A” is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities.

     “BBB” — Long-term debt rated “BBB” is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities.

     “BB” - Long-term debt rated “BB” is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the “BB” range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations.

     “B” — Long-term debt rated “B” is highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.

     “CCC”, CC” and “C” -Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated “B.” Long-term debt rated below “B” often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with “CC” and “C” normally used for lower ranking debt of companies for which the senior debt is rated in the “CCC” to “B” range.

     “D” - A security rated “D” implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, DBRS may not assign a “D” rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the “D” rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued or reinstated by DBRS.

     (“high”, “low”) — Each rating category is denoted by the subcategories “high” and “low”. The absence of either a “high” or “low” designation indicates the rating is in the “middle” of the category. The “AAA” and “D” categories do not utilize “high”, “middle”, and “low” as differential grades.

Municipal Note Ratings

     A Standard & Poor’s U.S. municipal note rating reflects the liquidity factors and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:

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• Amortization schedule-the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

• Source of payment-the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

     Note rating symbols are as follows:

     “SP-1” — The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay debt service are given a plus (+) designation.

     “SP-2” — The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

     “SP-3” — The issuers of these municipal notes exhibit speculative capacity to pay principal and interest.

     Moody’s uses three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (“MIG”) and are divided into three levels — “MIG-1” through “MIG-3”. In addition, those short-term obligations that are of speculative quality are designated “SG”, or speculative grade. MIG ratings expire at the maturity of the obligation. The following summarizes the ratings used by Moody’s for these short-term obligations:

     “MIG-1” — This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

     “MIG-2” — This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

     “MIG-3” — This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

     “SG” — This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

     In the case of variable rate demand obligations (“VRDOs”), a two-component rating is assigned; a long- or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or “VMIG” rating.

     When either the long- or short-term aspect of a VRDO is not rated, that piece is designated “NR”, e.g., “Aaa/NR” or “NR/VMIG-1”.

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     VMIG rating expirations are a function of each issue’s specific structural or credit features.

     “VMIG-1” — This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

     “VMIG-2” — This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

     “VMIG-3” — This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

     “SG” — This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

     Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings.

About Credit Ratings

A Standard & Poor’s issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.

Moody’s credit ratings must be construed solely as statements of opinion and not as statements of fact or recommendations to purchase, sell or hold any securities.

Fitch’s credit ratings provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving their money back in accordance with the terms on which they invested. Fitch’s credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.

DBRS credit ratings are not buy, hold or sell recommendations, but rather the result of qualitative and quantitative analysis focusing solely on the credit quality of the issuer and its underlying obligations.

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APPENDIX B

2006 ISS PROXY VOTING GUIDELINES SUMMARY

Auditors

Ratifying Auditors

Vote FOR proposals to ratify auditors, unless:

• An auditor has a financial interest in or association with the company, and is therefore not independent;

• There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position; or

• Fees for non-audit services are excessive.

Board of Directors

Voting on Director Nominees in Uncontested Elections

Vote CASE-BY-CASE on director nominees, examining, but not limited to, the following factors:

• Composition of the board and key board committees;

• Attendance at board and committee meetings;

• Corporate governance provisions and takeover activity;

• Disclosures under Section 404 of the Sarbanes-Oxley Act;

• Long-term company performance relative to a market and peer index;

• Extent of the director’s investment in the company;

• Existence of related party transactions;

• Whether the chairman is also serving as CEO;

• Whether a retired CEO sits on the board;

• Number of outside boards at which a director serves.

WITHHOLD from individual directors who:

• Attend less than 75 percent of the board and committee meetings without a valid excuse (such as illness, service to the nation, work on behalf of the company);

• Sit on more than six public company boards;

• Are CEOs of public companies who sit on the boards of more than two public companies besides their own (withhold only at their outside boards).

WITHHOLD from the entire board (except for new nominees, who should be considered on a CASE-BY-CASE basis) if:

• The company’s poison pill has a dead-hand or modified dead-hand feature. Withhold every year until this feature is removed;

• The board adopts or renews a poison pill without shareholder approval since the beginning of 2005, does not commit to putting it to shareholder vote within 12 months of adoption or reneges on a commitment to put the pill to a vote and has not yet been withheld from for this issue;

• The board failed to act on a shareholder proposal that received approval by a majority of the shares outstanding the previous year;

• The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years;

• The board failed to act on takeover offers where the majority of the shareholders tendered their shares;

• At the previous board election, any director received more than 50 percent withhold votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold rate;

• A Russell 3000 company underperformed its industry group (GICS group). The test will consist of the bottom performers within each industry group (GICS) based on a weighted

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average TSR. The weightings are as follows: 20 percent weight on 1-year TSR; 30 percent weight on 3-year TSR; and 50 percent weight on 5-year TSR. Company’s response to performance issues will be considered before withholding.

WITHHOLD from inside directors and affiliated outside directors when:

• The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating;

• The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee;

• The full board is less than majority independent.

WITHHOLD from the members of the Audit Committee if:

• The non-audit fees paid to the auditor are excessive;

• A material weakness identified in the Section 404 disclosures rises to a level of serious concern; there are chronic internal control issues and an absence of established effective control mechanisms.

WITHHOLD from the members of the Compensation Committee if:

• There is a negative correlation between chief executive pay and company performance;

• The company fails to submit one-time transfers of stock options to a shareholder vote;

• The company fails to fulfill the terms of a burn rate commitment they made to shareholders;

• The company has poor compensation practices.

WITHHOLD from directors, individually or the entire board, for egregious actions or failure to replace management as appropriate.

Classification/Declassification of the Board

Vote AGAINST proposals to classify the board. Vote FOR proposals to repeal classified boards and to elect all directors annually.

Independent Chair (Separate Chair/CEO)

Generally vote FOR shareholder proposals requiring the position of chair be filled by an independent director unless there are compelling reasons to recommend against the proposal, such as a counterbalancing governance structure. This should include all of the following:

• Designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties. (The role may alternatively reside with a presiding director, vice chairman, or rotating lead director; however the director must serve a minimum of one year in order to qualify as a lead director.);

• Two-thirds independent board;

• All-independent key committees;

• Established governance guidelines;

• The company does not under-perform its peers.

Majority Vote Shareholder Proposals

Generally vote FOR reasonably crafted shareholders proposals calling for directors to be elected with an affirmative majority of votes cast and/or the elimination of the plurality standard for electing directors (including binding resolutions requesting that the board amend the company’s bylaws), provided the proposal includes a carve-out for a plurality voting standard when there are more director nominees than board seats (e.g., contested elections). Consider voting AGAINST the shareholder proposal if the company has adopted a formal corporate governance policy that present a meaningful alternative to the majority voting standard and provide an adequate response to both new nominees as well as incumbent nominees who fail to receive a majority of votes cast.

At a minimum, a company’s policy should articulate the following elements to adequately address each director nominee who fails to receive an affirmative of majority of votes cast in an election:

• Established guidelines disclosed annually in the proxy statement concerning the process to follow for nominees who receive majority withhold votes;

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• The policy needs to outline a clear and reasonable timetable for all decision-making regarding the nominee’s status;

• The policy needs to specify that the process of determining the nominee’s status will be managed by independent directors and must exclude the nominee in question;

• An outline of a range of remedies (for example, acceptance of the resignation, maintaining the director but curing the underlying causes of the withheld votes, etc.);

• The final decision on the nominee’s status should be promptly disclosed via an SEC filing. The policy needs to include the timeframe for disclosure and require a full explanation of how the decision was reached.

In addition, the company should articulate to shareholders why its policy is the best structure for demonstrating accountability to shareholders.

Proxy Contests

Voting for Director Nominees in Contested Elections

Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:

• Long-term financial performance of the target company relative to its industry;

• Management’s track record;

• Background to the proxy contest;

• Qualifications of director nominees (both slates);

• Strategic plan of dissident slate and quality of critique against management;

• Likelihood that the proposed goals and objectives can be achieved (both slates);

• Stock ownership positions.

Reimbursing Proxy Solicitation Expenses

Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When voting in conjunction with support of a dissident slate, vote FOR the reimbursement of all appropriate proxy solicitation expenses associated with the election.

Takeover Defenses

Poison Pills

Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:

• Shareholders have approved the adoption of the plan; or

• The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e. the “fiduciary out” provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within twelve months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.

Vote FOR shareholder proposals calling for poison pills to be put to a vote within a time period of less than one year after adoption. If the company has no non-shareholder approved poison pill in place and has adopted a policy with the provisions outlined above, vote AGAINST the proposal. If these conditions are not met, vote FOR the proposal, but with the caveat that a vote within twelve months would be considered sufficient.

Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

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• No lower than a 20 percent trigger, flip-in or flip-over;

• A term of no more than three years;

• No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill;

• Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, ten percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.

Supermajority Vote Requirements

Vote AGAINST proposals to require a supermajority shareholder vote. Vote FOR proposals to lower supermajority vote requirements.

Mergers and Corporate Restructurings

For mergers and acquisitions, evaluate the proposed transaction based on these factors:

• Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable?

• Market reaction - How has the market responded to the proposed deal?

• Strategic rationale - Does the deal make sense strategically? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable.

• Negotiations and process - Were the terms of the transaction negotiated at arm’s length? Was the process fair and equitable?

• Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests.

• Governance - Will the combined company have a better or worse governance profile than the parties to the transaction?

State of Incorporation

Reincorporation Proposals

Vote CASE-BY-CASE on proposals to change a company’s state of incorporation, taking into consideration both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, comparative economic benefits, and a comparison of the jurisdictional laws. Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.

Capital Structure

Common Stock Authorization

Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance using a model developed by ISS. Vote FOR proposals to approve increases beyond the allowable increase when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain. In addition, for capital requests less than or equal to 300 percent of the current authorized shares that marginally fail the calculated allowable cap (i.e., exceed the allowable cap by no more than 5 percent), on a CASE-BY-CASE basis, vote FOR the increase based on the company’s performance and whether the company’s ongoing use of shares has shown prudence.

Issue Stock for Use with Rights Plan

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Vote AGAINST proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder approved shareholder rights plan (poison pill).

Preferred Stock

Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock). Vote AGAINST proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.

Vote FOR proposals to create “de-clawed” blank check preferred stock (stock that cannot be used as a takeover defense). Vote FOR proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. Vote CASE-BY-CASE on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s industry and performance in terms of shareholder returns.

Executive and Director Compensation

Equity Compensation Plans

Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the plan if:

• The total cost of the company’s equity plans is unreasonable;

• The plan expressly permits the repricing of stock options without prior shareholder approval;

• There is a disconnect between CEO pay and the company’s performance;

• The company’s three year burn rate exceeds the greater of 2 percent and the mean plus 1 standard deviation of its industry group; or

• The plan is a vehicle for poor pay practices.

Director Compensation

Vote CASE-BY-CASE on compensation plans for non-employee directors, based on the cost of the plans against the company’s allowable cap. Vote for the plan if ALL of the following qualitative factors in the board’s compensation plan are met and disclosed in the proxy statement:

• Stock ownership guidelines with a minimum of three times the annual cash retainer.

• Vesting schedule or mandatory holding/deferral period:

– A minimum vesting of three years for stock options or restricted stock; or

– Deferred stock payable at the end of a three-year deferral period.

• A balanced mix between cash and equity. If the mix is heavier on equity, the vesting schedule or deferral period should be more stringent, with the lesser of five years or the term of directorship.

• No retirement/benefits and perquisites for non-employee directors; and

• A table with a detailed disclosure of the cash and equity compensation for each non-employee director for the most recent fiscal year.

Disclosure of CEO Compensation-Tally Sheet

Companies should provide better and more transparent disclosure related to CEO pay. Consider withhold votes in the future from the compensation committee and voting against equity plans if compensation disclosure is not improved and a tally sheet is not provided.

Employee Stock Purchase Plans—Qualified Plans

Vote CASE-BY-CASE on qualified employee stock purchase plans. Vote FOR plans if:

• Purchase price is at least 85 percent of fair market value;

• Offering period is 27 months or less; and

• The number of shares allocated to the plan is ten percent or less of the outstanding shares.

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Employee Stock Purchase Plans—Non-Qualified Plans

Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR plans with:

• Broad-based participation (i.e., all employees with the exclusion of individuals with 5 percent or more of beneficial ownership of the company);

• Limits on employee contribution (a fixed dollar amount or a percentage of base salary);

• Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value;

• No discount on the stock price on the date of purchase since there is a company matching contribution.

Option Exchange Programs/Re-pricing Options

Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice options, taking into consideration historic trading patterns, rationale for the re-pricing, value-for-value exchange treatment of surrendered options, option vesting, term of the option, exercise price and participation. Vote FOR shareholder proposals to put option re-pricing to a shareholder vote.

Severance Agreements for Executives/Golden Parachutes

Vote FOR shareholder proposals to require golden parachutes or executive severance agreements to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts. Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes. An acceptable parachute should include:

• A trigger beyond the control of management;

• The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years prior to the year in which the change of control occurs;

• Change-in-control payments should be double-triggered, i.e., (1) after a change in the company’s ownership structure has taken place, and (2) termination of the executive as a result of the change in control.

Corporate Responsibility

Animal Rights

Generally vote AGAINST proposals to phase out the use of animals in product testing unless:

• The company is conducting animal testing programs that are unnecessary or not required by regulation;

• The company is conducting animal testing when suitable alternatives are accepted and used at peer firms;

• The company has been the subject of recent, significant controversy related to its testing programs.

Generally vote FOR proposals seeking a report on the company’s animal welfare standards.

Drug Pricing and Re-importation

Generally vote AGAINST proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing. Vote CASE-BY-CASE on proposals requesting that the company evaluate their product pricing considering:

• The existing level of disclosure on pricing policies;

• Deviation from established industry pricing norms;

• The company’s existing initiatives to provide its products to needy consumers;

• Whether the proposal focuses on specific products or geographic regions.

Generally vote FOR proposals requesting that companies report on the financial and legal impact of their policies regarding prescription drug re-importation unless such information is already publicly disclosed.

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Generally vote AGAINST proposals requesting that companies adopt specific policies to encourage or constrain prescription drug re-importation.

Genetically Modified Foods

Vote AGAINST proposals asking companies to voluntarily label genetically engineered (GE) ingredients in their products or alternatively to provide interim labeling and eventually eliminate GE ingredients due to the costs and feasibility of labeling and/or phasing out the use of GE ingredients.

Tobacco

Most tobacco-related proposals (such as on second-hand smoke, advertising to youth and spin-offs of tobacco-related business) should be evaluated on a CASE-BY-CASE basis.

Toxic Chemicals

Generally vote FOR resolutions requesting that a company discloses its policies related to toxic chemicals. Vote CASE-BY-CASE on resolutions requesting that companies evaluate and disclose the potential financial and legal risks associated with utilizing certain chemicals. Generally vote AGAINST resolutions requiring that a company reformulate its products within a certain timeframe unless such actions are required by law in specific markets.

Arctic National Wildlife Refuge

Generally vote AGAINST request for reports outlining potential environmental damage from drilling in the Arctic National Wildlife Refuge (ANWR) unless:

• New legislation is adopted allowing development and drilling in the ANWR region;

• The company intends to pursue operations in the ANWR; and

• The company has not disclosed an environmental risk report for its ANWR operations.

Concentrated Area Feeding Operations (CAFOs)

Vote FOR resolutions requesting that companies report to shareholders on the risks and liabilities associated with CAFOs unless:

• The company has publicly disclosed guidelines for its corporate and contract farming operations, including compliance monitoring; or

• The company does not directly source from CAFOs.

Global Warming and Kyoto Protocol Compliance

Generally vote FOR proposals requesting a report on greenhouse gas emissions from company operations and/or products unless this information is already publicly disclosed or such factors are not integral to the company’s line of business. Generally vote AGAINST proposals that call for reduction in greenhouse gas emissions by specified amounts or within a restrictive time frame unless the company lags industry standards and has been the subject of recent, significant fines or litigation resulting from greenhouse gas emissions.

Generally vote FOR resolutions requesting that companies outline their preparations to comply with standards established by Kyoto Protocol signatory markets unless:

• The company does not maintain operations in Kyoto signatory markets;

• The company already evaluates and substantially discloses such information; or,

• Greenhouse gas emissions do not significantly impact the company’s core businesses.

Political Contributions

Vote CASE-BY-CASE on proposals to improve the disclosure of a company’s political contributions considering: any recent significant controversy or litigation related to the company’s political contributions or governmental affairs; and the public availability of a policy on political contributions. Vote AGAINST proposals barring the company from making political contributions.

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Link Executive Compensation to Social Performance

Vote CASE-BY-CASE on proposals to review ways of linking executive compensation to social factors, such as corporate downsizings, customer or employee satisfaction, community involvement, human rights, environmental performance, predatory lending, and executive/employee pay disparities.

Outsourcing/Offshoring

Vote CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, considering: the risks associated with certain international markets; the utility of such a report; and the existence of a publicly available code of corporate conduct that applies to international operations.

Human Rights Reports

Vote CASE-BY-CASE on requests for reports detailing the company’s operations in a particular country and on proposals to implement certain human rights standards at company facilities or those of its suppliers and to commit to outside, independent monitoring.

Mutual Fund Proxies

Election of Directors

Vote CASE-BY-CASE on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.

Converting Closed-end Fund to Open-end Fund

Vote CASE-BY-CASE on conversion proposals, considering the following factors:

• Past performance as a closed-end fund;

• Market in which the fund invests;

• Measures taken by the board to address the discount; and

• Past shareholder activism, board activity, and votes on related proposals.

Establish Director Ownership Requirement

Generally vote AGAINST shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

Reimburse Shareholder for Expenses Incurred

Vote CASE-BY-CASE on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote FOR the reimbursement of the solicitation expenses.

Terminate the Investment Advisor

Vote CASE-BY-CASE on proposals to terminate the investment advisor, considering the following factors:

• Performance of the fund’s net asset value;

• The fund’s history of shareholder relations;

• The performance of other funds under the advisor’s management.

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APPENDIX C

BUSINESS PRINCIPLES OF GOLDMAN, SACHS & CO.

Goldman Sachs is noted for its Business Principles, which guide all of the firm’s activities and serve as the basis for its distinguished reputation among investors worldwide.

     Our client’s interests always come first. Our experience shows that if we serve our clients well, our own success will follow.

     Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.

     We take great pride in the professional quality of our work. We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.

     We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client’s problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.

     We make an unusual effort to identify and recruit the very best person for every job. Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.

     We offer our people the opportunity to move ahead more rapidly than is possible at most other places. We have yet to find limits to the responsibility that our best people are able to assume. Advancement depends solely on ability, performance and contribution to the Firm’s success, without regard to race, color, religion, sex, age, national origin, disability, sexual orientation, or any other impermissible criterion or circumstance.

     We stress teamwork in everything we do. While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the Firm and its clients.

     The dedication of our people to the Firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.

     Our profits are a key to our success. They replenish our capital and attract and keep our best people. It is our practice to share our profits generously with all who helped create them. Profitability is crucial to our future.

     We consider our size an asset that we try hard to preserve. We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.

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     We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs. We know that the world of finance will not stand still and that complacency can lead to extinction.

     We regularly receive confidential information as part of our normal client relationships. To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.

     Our business is highly competitive, and we aggressively seek to expand our client relationships. However, we must always be fair to competitors and must never denigrate other firms.

     Integrity and honesty are the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.

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Goldman, Sachs & Co.’s History of Excellence

1869

Is founded by Marcus Goldman

1882

Becomes a private partnership when Samuel Sachs joins the firm

1896

Joins New York Stock Exchange

1906

Takes Sears public

1925

Finances Warner Brothers to develop sound in movies

1933-69

Senior Partner Sidney J. Weinberg serves as adviser to five presidents: Roosevelt, Truman, Eisenhower, Kennedy, and Johnson

1956

Co-manages Ford’s initial public offering, the largest IPO to date

1985

Senior Partner John C. Whitehead named Deputy Secretary of State

1986

Takes Microsoft public

1988

Goldman Sachs Asset Management (GSAM) is established, formalizing the asset management capability that Goldman Sachs initiated in 1981 by managing money market funds for institutional clients; 50 employees

1995

Senior Partner Robert E. Rubin named Treasury Secretary

1996

GSAM acquires CIN Management ($23 B)

1997

Launches web site that delivers trading ideas, research reports, and analytical tools to clients worldwide

GSAM acquires Commodities Corp. ($1.6 B in hedge fund assets); Acquires Liberty Investment Management ($6B in growth assets)

1998

Takes ebay public

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1999

Goldman, Sachs & Co. becomes a public company

2001

GSAM assets under management pass $300B mark

2002

Advises and services 45% of the Forbes 400 ¹

Growth Team is awarded the year’s single largest U.S. institutional mandate

2003

Acquires The Ayco Company, L.P.; Announces it will combine Australian operation with JBWere to form Goldman Sachs JBWere

2006

May 2006 — Goldman Sachs Celebrates 25 years in Money Fund Industry

GSAM assets under management total approximately $575B; 1,100 professionals worldwide

1. Source: Forbes.com, October 2003. Reprinted by permission of Forbes Magazine^© 2004 Forbes Inc.

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APPENDIX D

STATEMENT OF INTENTION
(applicable only to Class A Shares)

     If a shareholder anticipates purchasing within a 13-month period Class A Shares of the Fund alone or in combination with Class A Shares of another Goldman Sachs Fund in the amount of $100,000 or more, the shareholder may obtain shares of the Fund at the same reduced sales charge as though the total quantity were invested in one lump sum by checking and filing the Statement of Intention in the Account Application. Income dividends and capital gain distributions taken in additional shares, as well as any appreciation on shares previously purchased, will not apply toward the completion of the Statement of Intention.

     To ensure that the reduced price will be received on future purchases, the investor must inform Goldman Sachs that the Statement of Intention is in effect each time shares are purchased. Subject to the conditions mentioned below, each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Account Application. The investor makes no commitment to purchase additional shares, but if the investor’s purchases within 13 months plus the value of shares credited toward completion do not total the sum specified, the investor will pay the increased amount of the sales charge prescribed in the Escrow Agreement.

Escrow Agreement

     Out of the initial purchase (or subsequent purchases if necessary), 5% of the dollar amount specified on the Account Application will be held in escrow by the Transfer Agent in the form of shares registered in the investor’s name. All income dividends and capital gains distributions on escrowed shares will be paid to the investor or to his or her order. When the minimum investment so specified is completed (either prior to or by the end of the 13th month), the investor will be notified and the escrowed shares will be released.

     If the intended investment is not completed, the investor will be asked to remit to Goldman Sachs any difference between the sales charge on the amount specified and on the amount actually attained. If the investor does not within 20 days after written request by Goldman Sachs pay such difference in the sales charge, the Transfer Agent will redeem, pursuant to the authority given by the investor in the Account Application, an appropriate number of the escrowed shares in order to realize such difference. Shares remaining after any such redemption will be released by the Transfer Agent.

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EX-99.17.N

PART B

STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 28, 2006, AS AMENDED JULY 12, 2006

Class A Shares
Class B Shares
Class C Shares
Service Shares
Institutional Shares
Administration Shares
Separate Account Institutional Shares

GOLDMAN SACHS ENHANCED INCOME FUND
GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
GOLDMAN SACHS GOVERNMENT INCOME FUND
GOLDMAN SACHS MUNICIPAL INCOME FUND
GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND
GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND
GOLDMAN SACHS U.S. MORTGAGES FUND
GOLDMAN SACHS CORE FIXED INCOME FUND
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
GOLDMAN SACHS GLOBAL INCOME FUND
GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND
GOLDMAN SACHS HIGH YIELD FUND
GOLDMAN SACHS EMERGING MARKETS DEBT FUND
(Each a portfolio of Goldman Sachs Trust)

Goldman Sachs Trust
71 South Wacker Drive
Suite 500
Chicago, Illinois 60606

     This Statement of Additional Information (the “Additional Statement”) is not a prospectus. This Additional Statement describes each of the above-referenced series of Goldman Sachs Trust. This Additional Statement should be read in conjunction with the Class A, Class B, Class C, Service, Institutional, Administration (Goldman Sachs Enhanced Income Fund only) and Separate Account Institutional (Goldman Sachs U.S. Mortgages and Goldman Sachs Investment Grade Credit Funds only) prospectuses of Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, Goldman Sachs Short Duration Government Fund, Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs Government Income Fund, Goldman Sachs Municipal Income Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York Intermediate AMT-Free Municipal Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund, Goldman Sachs Investment Grade Credit Fund, Goldman Sachs Global Income Fund, Goldman Sachs High Yield Municipal Fund, Goldman Sachs High Yield Fund and Goldman Sachs Emerging Markets Debt Fund (collectively, the “Funds” and each individually, a “Fund”), each dated February 28, 2006, as they may be further amended and/or supplemented from time to time (the “Prospectuses”). The Prospectuses may be obtained without charge from Goldman, Sachs & Co. by calling the telephone number, or writing to one of the addresses, listed below or from institutions (“Service Organizations”) acting on behalf of their customers. Goldman Sachs Enhanced Income Fund, Goldman Sachs U.S. Mortgages, Goldman Sachs Investment Grade Credit Fund and Goldman

Sachs Emerging Markets Debt Fund currently do not offer Class B, Class C or Service Shares and Goldman Sachs Ultra-Short Duration Government Fund currently does not offer Class B or Class C Shares. Goldman Sachs Short Duration Government Fund and Goldman Sachs Short Duration Tax-Free Fund currently do not offer Class B Shares. Goldman Sachs California Intermediate AMT-Free Municipal Fund and Goldman Sachs New York Intermediate AMT-Free Municipal Fund currently do not offer Class B or Service Shares.

GSAM^® is a registered service mark of Goldman, Sachs & Co.

The audited financial statements and related report of Ernst & Young LLP, independent registered public accounting firm for each Fund contained in each Fund’s 2005 Annual Report are incorporated herein by reference in the section “Financial Statements.” No other portions of the Funds’ Annual Report are incorporated herein by reference. A Fund’s Annual Report may be obtained upon request and without charge by calling Goldman, Sachs & Co. toll free at 800-621-2550. The Goldman Sachs California Intermediate AMT-Free Municipal Fund and Goldman Sachs New York Intermediate AMT-Free Municipal Fund commenced operations on November 1, 2005, and have not issued an annual report. A semi-annual report for the fiscal period end April 30, 2006 will become available in June 2006.

TABLE OF CONTENTS

	Page
INTRODUCTION		B-1
INVESTMENT OBJECTIVES AND POLICIES		B-2
DESCRIPTION OF INVESTMENT SECURITIES AND PRACTICES		B-16
INVESTMENT RESTRICTIONS		B-93
TRUSTEES AND OFFICERS		B-96
MANAGEMENT SERVICES		B-106
POTENTIAL CONFLICTS OF INTEREST		B-127
PORTFOLIO TRANSACTIONS AND BROKERAGE		B-143
SHARES OF THE TRUST		B-148
NET ASSET VALUE		B-154
TAXATION		B-156
PERFORMANCE INFORMATION		B-167
PROXY VOTING		B-169
PAYMENTS TO INTERMEDIARIES		B-171
OTHER INFORMATION		B-172
FINANCIAL STATEMENTS		B-174
OTHER INFORMATION REGARDING PURCHASES, REDEMPTIONS, EXCHANGES AND DIVIDENDS		B-174
DISTRIBUTION AND SERVICE PLANS		B-178
SERVICE PLAN AND SHAREHOLDER ADMINISTRATION PLAN		B-187
ADMINISTRATION PLAN		B-189
ACCOUNT SERVICE PLAN		B-190
APPENDIX A DESCRIPTION OF SECURITIES RATINGS		1-A
APPENDIX B 2005 ISS PROXY VOTING GUIDELINES SUMMARY		1-B
APPENDIX C BUSINESS PRINCIPLES OF GOLDMAN, SACHS & CO.		1-C
APPENDIX D STATEMENT OF INTENTION (applicable only to Class A Shares)		1-D

The date of this Additional Statement is February 28, 2006, as amended July 12, 2006.

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GOLDMAN SACHS ASSET MANAGEMENT, L.P.	GOLDMAN SACHS ASSET
Investment Adviser to:	MANAGEMENT INTERNATIONAL
Goldman Sachs Enhanced Income Fund	Investment Adviser to:
Goldman Sachs Ultra-Short Duration Government Fund	Goldman Sachs Global Income Fund
Goldman Sachs Short Duration Government Fund	Christchurch Court
Goldman Sachs Short Duration Tax-Free Fund	10-15 Newgate Street
Goldman Sachs Government Income Fund	London, England EC1A7HD
Goldman Sachs Municipal Income Fund
Goldman Sachs California Intermediate AMT-Free	GOLDMAN, SACHS & CO.
Municipal Fund	Distributor
Goldman Sachs New York Intermediate AMT-Free Municipal Fund	85 Broad Street New York, NY 10004
Goldman Sachs U.S. Mortgages Fund
Goldman Sachs Core Fixed Income Fund	GOLDMAN, SACHS & CO.
Goldman Sachs Investment Grade Credit Fund	Transfer Agent
Goldman Sachs High Yield Municipal Fund	71 South Wacker Drive
Goldman Sachs High Yield Fund	Suite 500
Goldman Sachs Emerging Markets Debt Fund	Chicago, Illinois 60606
32 Old Slip
New York, New York 10005

Toll free (in U.S.) .......800-621-2550

INTRODUCTION

     Goldman Sachs Trust (the “Trust”) is an open-end, management investment company. The Trust is organized as a Delaware statutory trust and was established by a Declaration of Trust dated January 28, 1997. The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997. The Trustees of the Trust have authority under the Declaration of Trust to create and classify shares into separate series and to classify and reclassify any series of shares into one or more classes without further action by shareholders. Pursuant thereto, the Trustees have created the following series, among others: Goldman Sachs Enhanced Income Fund (“Enhanced Income Fund”), Goldman Sachs Ultra-Short Duration Government Fund (formerly, Adjustable Rate Government Fund) (“Ultra-Short Duration Government Fund”), Goldman Sachs Short Duration Government Fund (“Short Duration Government Fund”), Goldman Sachs Short Duration Tax-Free Fund (“Short Duration Tax-Free Fund”), Goldman Sachs Government Income Fund (“Government Income Fund”), Goldman Sachs Municipal Income Fund (“Municipal Income Fund”), Goldman Sachs California Intermediate AMT-Free Municipal Fund (“California Municipal Fund”), Goldman Sachs New York Intermediate AMT-Free Municipal Fund (“New York Municipal Fund”), Goldman Sachs U.S. Mortgages Fund (“U.S. Mortgages Fund”), Goldman Sachs Core Fixed Income Fund (“Core Fixed Income Fund”), Goldman Sachs Investment Grade Credit Fund (“Investment Grade Credit Fund”), Goldman Sachs Global Income Fund (“Global Income Fund”), Goldman Sachs High Yield Municipal Fund (“High Yield Municipal Fund”), Goldman Sachs High Yield Fund (“High Yield Fund”) and Goldman Sachs Emerging Markets Debt Fund (“Emerging Markets Debt Fund”) (each referred to herein as a “Fund” and collectively as the “Funds”). Each Fund other than the California Municipal Fund, New York Municipal Fund, Global Income Fund, High Yield Municipal Fund and Emerging Markets Debt Fund is a diversified, open-end management investment company under the Investment Company Act of 1940, as amended (the “Act”). The California Municipal Fund, New York Municipal Fund, Global Income Fund, High Yield Municipal Fund and Emerging Markets Debt Fund are each a non-diversified, open-end management investment company. Short Duration Government Fund, Short Duration Tax-Free Fund, Government Income Fund, Municipal Income Fund, Core Fixed Income Fund, Global Income Fund, High Yield Municipal Fund and High Yield Fund are authorized to issue five classes of shares: Class A Shares, Class B Shares, Class C Shares, Service Shares and Institutional Shares. Enhanced Income Fund is authorized to issue three classes of shares: Class A, Administration and Institutional Shares. Ultra-Short Duration Government Fund is authorized to issue three classes of shares: Class A Shares, Service Shares and Institutional Shares. U.S. Mortgages and Investment Grade Credit Funds are authorized to issue three classes of shares: Class A Shares, Institutional Shares and Separate Account Institutional Shares. Emerging Markets Debt Fund is authorized to issue two classes of shares: Class A Shares and Institutional Shares. California Municipal Fund and New York Municipal Fund are authorized to issue three classes of shares: Class A Shares, Class C Shares and Institutional Shares. Additional series and classes may be added in the future from time to time.

     Goldman Sachs Asset Management, L.P. (“GSAM”) (formerly Goldman Sachs Funds Management, L.P.), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as the investment adviser to the Enhanced Income Fund, Ultra-Short Duration Government Fund, Short Duration Government Fund, Short Duration Tax-Free Fund, Government Income Fund, Municipal Income Fund, California Municipal Fund, New York Municipal Fund, U.S. Mortgages Fund, Core Fixed Income Fund, Investment Grade Credit Fund, High Yield Municipal Fund, High Yield Fund and Emerging Markets Debt Fund. Goldman Sachs Asset Management International (“GSAMI”), an affiliate of Goldman Sachs, serves as investment adviser to the Global Income Fund. GSAM and GSAMI are each sometimes referred to herein as an “Investment Adviser” and collectively herein as the “Investment Advisers.” In addition, Goldman Sachs serves as each Fund’s distributor and transfer agent. Each Fund’s custodian is State Street Bank and Trust Company.

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     Because each Fund’s shares may be redeemed upon request of a shareholder on any business day at net asset value, the Funds offer greater liquidity than many competing investments, such as certificates of deposit and direct investments in certain securities in which the respective Funds may invest. However, unlike certificates of deposits, shares of the Funds are not insured by the Federal Deposit Insurance Corporation.

     The following information relates to and supplements the description of each Fund’s investment policies contained in the Prospectuses. See the Prospectuses for a more complete description of the Funds’ investment objectives and policies. Investing in the Funds entails certain risks and there is no assurance that a Fund will achieve its objective. Capitalized terms used but not defined herein have the same meaning as in the Prospectuses.

     As used in the Additional Statement, the term “Taxable Funds” refers to the Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds. The term “Tax Exempt Funds” refers to the Short Duration Tax-Free, Municipal Income, High Yield Municipal, California Municipal and New York Municipal Funds.

     Experienced Management. Successfully creating and managing a portfolio of securities requires professionals with extensive experience. Goldman Sachs’ highly skilled portfolio management team brings together many years of experience in the analysis, valuation and trading of U.S. and foreign fixed-income securities.

INVESTMENT OBJECTIVES AND POLICIES

     Each Fund has a distinct investment objective and policies. There can be no assurance that a Fund’s objective will be achieved. The investment objective and policies of each Fund, and the associated risks of each Fund, are discussed in the Funds’ Prospectuses, which should be read carefully before an investment is made. All investment objectives and investment policies not specifically designated as fundamental may be changed without shareholder approval. However, with respect to the Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds, to the extent required by Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty days notice in the manner prescribed by the SEC before any change in a Fund’s policy to invest at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase), in the particular type of investment suggested by its name. With respect to the Short Duration Tax-Free Fund, Municipal Income Fund and High Yield Municipal Fund, such Funds’ policies to invest at least 80% of their net assets plus any borrowings for investment purposes (measured at the time of purchase) in tax exempt and municipal investments, as applicable, are fundamental policies that may not be changed without shareholder approval. With respect to the California Municipal Fund and New York Municipal Fund, as a matter of fundamental policy, under normal circumstances at least 80% of the net assets plus any borrowings for investment purposes (measured at the time of purchase) (“Net Assets”) of the California Municipal Fund and New York Municipal Fund will be invested in municipal obligations the interest on which is exempt from regular income tax (i.e., excluded from gross income for federal income tax purposes) and is not a tax preference item under the federal alternative minimum tax. In addition, in the case of the California Municipal Fund, as a matter of fundamental policy, at least 80% of the Fund’s Net Assets (measured at the time of purchase) will be invested, under normal circumstances, in instruments that pay income which is exempt from California State personal income tax. In addition, in the case of the New York Municipal Fund, as a matter of fundamental policy, at least 80% of the Fund’s Net Assets (measured at the time of purchase) will be invested, under normal circumstances, in instruments that pay income which is exempt

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from New York State and New York City personal income taxes. Additional information about the Funds, their policies, and the investment instruments they may hold is provided below.

     Each Fund’s share price will fluctuate with market, economic and, to the extent applicable, foreign exchange conditions, so that an investment in any of the Funds may be worth more or less when redeemed than when purchased. None of the Funds should be relied upon as a complete investment program.

     The following discussion supplements the information in the Funds’ Prospectuses.

Enhanced Income Fund

     Enhanced Income Fund is designed for investors who seek returns in excess of traditional money market products while maintaining an emphasis on preservation of capital and liquidity. The Fund invests, under normal circumstances, primarily in a portfolio of fixed income securities, including non-mortgage-backed U.S. government securities, corporate notes and commercial paper and fixed and floating rate asset-backed securities rated, at the time of purchase, at least A by a nationally recognized statistical rating organization (“NRSRO”) or, if unrated, determined by the Investment Adviser to be of comparable quality.

     A number of investment strategies will be used to achieve the Fund’s investment objective, including market sector selection, determination of yield curve exposure, and issuer selection. In addition, the Investment Adviser will attempt to take advantage of pricing inefficiencies in the fixed-income markets. Market sector selection is the underweighting or overweighting of one or more of the four market sectors (i.e., U.S. Treasuries, U.S. government agencies, corporate securities and asset-backed securities) in which the Fund primarily invests. The decision to overweight or underweight a given market sector is based on expectations of future yield spreads between different sectors. Yield curve exposure strategy consists of overweighting or underweighting different maturity sectors to take advantage of the shape of the yield curve. Issuer selection is the purchase and sale of fixed-income corporate securities based on a corporation’s current and expected credit standing. To take advantage of price discrepancies between securities resulting from supply and demand imbalances or other technical factors, the Fund may simultaneously purchase and sell comparable, but not identical, securities. The Investment Adviser will usually have access to the research of, and proprietary technical models developed by, Goldman Sachs and will apply quantitative and qualitative analysis in determining the appropriate allocations among the categories of issuers and types of securities.

     The Fund’s overall returns are generally likely to move in the opposite direction as interest rates. Therefore, when interest rates decline, the Fund’s return is likely to increase. Conversely, when interest rates increase, the Fund’s return is likely to decline. In exchange for accepting a higher degree of share price fluctuation, investors have the potential to achieve a higher return from the Fund than from shorter-term investments.

     In determining the maturity of an instrument, the Fund will treat the remaining maturity of a newly-issued security as five years in situations where the original maturity of the security exceeds that period by not more than forty-five days. In addition, a fixed income instrument that has a mandatory put or call feature that provides that the Fund will receive payment of the principal amount of the instrument from the issuer and/or an investment banker at a specified future date will be deemed to have a remaining maturity ending on that date, even though the stated final maturity of the instrument is later than the put or call date.

     Preservation of Capital. Enhanced Income Fund seeks to reduce principal fluctuation by maintaining a target duration equal to that of a six-month U.S. Treasury Bill (to One-Year Treasury Note Index) and an approximate interest rate sensitivity of a nine-month U.S. Treasury Bill, as well as utilizing certain interest rate hedging techniques. There is no assurance that these strategies will be successful.

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     Liquidity. Because the Fund’s shares may be redeemed upon request of a shareholder on any business day at net asset value, the Fund offers greater liquidity than many competing investments such as certificates of deposit and direct investments in certain securities in which the Fund may invest.

     A Sophisticated Investment Process. Enhanced Income Fund will attempt to control its exposure to interest rate risk, including overall market exposure and the spread risk of particular sectors and securities, through active portfolio management techniques. The Fund’s investment process starts with a review of trends for the overall economy as well as for different sectors of the fixed-income securities markets. Goldman Sachs’ portfolio managers then analyze yield spreads, implied volatility and the shape of the yield curve. In planning the Fund’s portfolio investment strategies, the Investment Adviser is able to draw upon the economic and fixed-income research resources of Goldman Sachs. The Investment Adviser will use a sophisticated analytical process including Goldman Sachs’ option-adjusted spread model to assist in structuring and maintaining the Fund’s investment portfolio. In determining the Fund’s investment strategy and making market timing decisions, the Investment Adviser will have access to input from Goldman Sachs’ economists and fixed-income analysts.

Ultra-Short Duration Government Fund and Short Duration Government Fund

     Ultra-Short Duration Government Fund is designed for investors who seek a high level of current income, consistent with low volatility of principal. Short Duration Government Fund is designed for investors who seek a high level of current income and secondarily, in seeking current income, may also wish to consider the potential for capital appreciation. Both Funds are appropriate for investors who seek the high credit quality of securities issued or guaranteed by the U.S. government, its agencies, instrumentalities or sponsored enterprises (“U.S. Government Securities”), without incurring the administrative and accounting burdens involved in direct investment.

     Market and economic conditions may affect the investments of the Ultra-Short Duration Government and Short Duration Government Funds differently than the investments normally purchased by other types of fixed-income investors. Relative to U.S. Treasury and non-fluctuating money market instruments, the market value of adjustable rate mortgage securities in which Ultra-Short Duration Government and Short Duration Government Funds may invest may be adversely affected by increases in market interest rates. Conversely, decreases in market interest rates may result in less capital appreciation for adjustable rate mortgage securities in relation to U.S. Treasury and money market investments.

     High Current Income. Ultra-Short Duration Government and Short Duration Government Funds seek a higher current yield than that offered by money market funds or by bank certificates of deposit and money market accounts. However, the Ultra-Short Duration Government and Short Duration Government Funds do not maintain a constant net asset value per share and are subject to greater fluctuations in the value of their shares than a money market fund. Unlike bank certificates of deposit and money market accounts, investments in shares of the Funds are not insured or guaranteed by any government agency. The Ultra-Short Duration Government and Short Duration Government Funds each seek to provide such high current income without sacrificing credit quality.

     Relative Low Volatility of Principal. Ultra-Short Duration Government Fund seeks to minimize net asset value fluctuations by investing primarily in U.S. Government Securities (including securities representing an interest in or collateralized by adjustable rate and fixed rate mortgage loans) and by maintaining a maximum duration of two years and a target duration equal to that of a Six-Month U.S. Treasury Bill Index to One-Year U.S. Treasury Note Index. This Fund utilizes certain active management techniques to seek to hedge interest rate risk. Short Duration Government Fund seeks to minimize net asset

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value fluctuations by utilizing certain interest rate hedging techniques and by maintaining a maximum duration of not more than three years. The duration target of Short Duration Government Fund is that of the 2-year U.S. Treasury Note Index plus or minus 0.5 years. There is no assurance that these strategies for Ultra-Short Duration Government Fund and Short Duration Government Fund will be successful.

     Professional Management and Administration. Investors who invest in securities of the Government National Mortgage Association (“Ginnie Mae”) and other mortgage-backed securities may prefer professional management and administration of their mortgage-backed securities portfolios. A well-diversified portfolio of such securities emphasizing minimal fluctuation of net asset value requires significant active management as well as significant accounting and administrative resources. Members of Goldman Sachs’ highly skilled portfolio management team bring together many years of experience in the analysis, valuation and trading of U.S. fixed-income securities.

Government Income Fund

     Government Income Fund is designed for investors who seek a high level of current income, consistent with safety of principal and the high credit quality of U.S. Government Securities, without incurring the administrative and account burdens involved in direct investment.

     Government Income Fund’s overall returns are generally likely to move in the opposite direction from interest rates. Therefore, when interest rates decline, Government Income Fund’s return is likely to increase. In exchange for accepting a higher degree of share price fluctuation, investors have the potential to achieve a higher return from Government Income Fund than from shorter-term investments.

     High Current Income. Government Income Fund is designed to have a higher current yield than a money market fund, since it can invest in longer-term, higher yielding securities, and may utilize certain investment techniques not available to a money market fund. Similarly, Government Income Fund’s yield is expected to exceed that offered by bank certificates of deposit and money market accounts. However, Government Income Fund does not maintain a constant net asset value per share and is subject to greater fluctuation in the value of its shares than a money market fund. Unlike bank certificates of deposit and money market accounts, investments in shares of Government Income Fund are not insured or guaranteed by any government agency. Government Income Fund seeks to provide high current income without, however, sacrificing credit quality.

     Liquidity. Because Government Income Fund’s shares may be redeemed upon request of a shareholder on any business day at net asset value, Government Income Fund offers greater liquidity than many competing investments such as certificates of deposit and direct investments in certain securities in which Government Income Fund may invest.

     A Sophisticated Investment Process. Government Income Fund’s investment process starts with a review of trends for the overall economy as well as for different sectors of the U.S. government and mortgage-backed securities markets. Goldman Sachs’ portfolio managers then analyze yield spreads, implied volatility and the shape of the yield curve. In planning Government Income Fund’s portfolio investment strategies, the Investment Adviser is able to draw upon the economic and fixed-income research resources of Goldman Sachs. The Investment Adviser will use a sophisticated analytical process involving Goldman Sachs’ proprietary mortgage prepayment model and option-adjusted spread model to structure and maintain the Government Income Fund’s investment portfolio. In determining the Government Income Fund’s investment strategy and in making market timing decisions, the Investment Adviser will have access to information from Goldman Sachs’ economists, fixed-income analysts and mortgage specialists.

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     Convenience of a Fund Structure. Government Income Fund eliminates many of the complications that direct ownership of U.S. Government Securities and mortgage-backed securities entails. Government Income Fund automatically reinvests all principal payments within the Fund and distributes only current income each month, thereby conserving principal and eliminating the investor’s need to segregate and reinvest the principal portion of each payment on his own.

Short Duration Tax-Free, Municipal Income, California Municipal, New York Municipal and High Yield Municipal Funds

     The Tax Exempt Funds are not money market funds. Short Duration Tax-Free Fund is designed for investors who seek a high level of current income, consistent with relatively low volatility of principal, that is exempt from regular federal income tax. Municipal Income Fund is designed for investors who seek a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital. High Yield Municipal Fund is designed for investors who seek a high level of current income that is exempt from regular federal income taxes as well as the potential for capital appreciation. The California Municipal Fund is designed for investors who seek a high level of current income that is exempt from regular federal income tax, the federal alternative minimum tax, and California State personal income tax and is consistent with preservation of capital. The New York Municipal Fund is designed for investors who seek a high level of current income that is exempt from regular federal income tax, the federal alternative minimum, and New York State and New York City personal income taxes and is consistent with preservation of capital.

     The Tax Exempt Funds are appropriate for investors who seek to invest in fixed-income securities issued by or on behalf of states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof (“Municipal Securities”) and who are able to accept greater risk with the possibility of higher returns than investors in municipal money market funds. While municipal money market funds almost always maintain a constant net asset value, they must meet stringent high quality credit standards, their portfolios must be broadly diversified and their portfolio securities must have remaining maturities of 397 days or less. An example of an “eligible” investment for the Tax Exempt Funds is an auction rate Municipal Security. These securities generally have higher yields than money market Municipal Securities, but are, in many cases, not eligible investments for municipal money market funds.

     In addition, unlike a municipal money market fund, the Tax Exempt Funds’ increased investment flexibility permits their portfolios to be more easily adjusted to reflect the shape of the current yield curve as well as to respond to anticipated developments that might affect the shape of the yield curve.

     The Municipal Securities in which the Short Duration Tax-Free, Municipal Income, California Municipal and New York Municipal Funds invest will be rated, at the time of purchase, at least BBB or Baa by an NRSRO or, if unrated, will be determined by the Investment Adviser to be of comparable quality. Municipal Securities rated BBB or Baa are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capability to pay interest and repay principal. Municipal Income Fund will have a weighted average credit quality equal to A for securities rated by an NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality. California Municipal and New York Municipal Funds will have a weighted average credit quality equal to AA/A+ for securities rated by an NRSRO or, if unrated, determined by the Investment Adviser to be of comparable quality. High Yield Municipal Fund will invest at least 65% of its total assets (not including securities lending collateral and any investment of that collateral) (measured at the time of purchase) in high-yield Municipal Securities rated, at the time of purchase, BBB or Baa or lower by a NRSRO or, if unrated, will be determined by the Investment Adviser to be of comparable quality. See also “High Yield Fund – Return on and Risks of High Yield Securities” for a discussion of risks that are generally

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applicable to High Yield Municipal Fund. The credit rating assigned to Municipal Securities may reflect the existence of guarantees, letters of credit or other credit enhancement features available to the issuers or holders of such Municipal Securities.

     Investors who wish to invest in Municipal Securities may find that a mutual fund structure offers some important advantages when compared to investing in individual Municipal Securities, including:

• The ratings given to Municipal Securities by the rating organizations are difficult to evaluate. For example, some Municipal Securities with relatively low credit ratings have yields comparable to Municipal Securities with much higher ratings. The credit research professionals at Goldman Sachs closely follow market events and are well positioned to judge current and expected credit conditions of municipal issuers;

• Because of the relative inefficiency of the secondary market in Municipal Securities, the value of an individual municipal security is often difficult to determine. As such, investors may obtain a wide range of different prices when asking for quotes from different dealers. In addition, a dealer may have a large inventory of a particular issue that it wants to reduce. Obtaining the best overall prices can require extensive negotiation, which is a function performed by the portfolio manager; and

• Market expertise is also an important consideration for municipal investors, and because the Tax Exempt Funds may take relatively large positions in different securities, the Tax Exempt Funds may be able to obtain more favorable prices in the Municipal Securities market than investors with relatively small positions.

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U.S. Mortgages Fund

Philosophy

     The U.S. Mortgages Fund seeks a high level of total return consisting of income and capital appreciation. The Fund invests, under normal circumstances, in securities representing direct or indirect interests in or that are collateralized by Mortgage-Backed Securities. Although the Investment Adviser considers macroeconomic trends — including the Investment Adviser’s expectations about interest rate trends and whether the curve will be flattening or steepening—the Investment Adviser’s investment approach to mortgages is mainly based on analyses of mortgage prepayments and measures of relative value.

     Much of the research focus is on understanding model risk, which requires the Investment Adviser to understand how popular prepayment models are biased under different market scenarios. The Investment Adviser constructs a view which attempts to gauge how popular prepayment models will predict prepay activity across the broad spectrum of different mortgage instruments which spans all the major fixed-rate, single family mortgage sectors — level-pay and balloon, agency and non-agency. The Investment Adviser develops an independent view of how these popular models may not have kept up with recent changes in the individual homeowner’s decision process. For example, there have been material changes over the last decade in the way in which homeowners have access to mortgage refinancing: from the evolution of the mortgage broker market to access via internet applications to current trends in underwriters soliciting their own mortgage holder base for refinancing. The Investment Adviser’s intent is to understand these changes and exploit them in its trading activity. The focus throughout is to uncover model predictive bias with respect to borrower behaviour and the decision-making of refinancing.

     Additionally, the Investment Adviser accesses and dissects individual mortgage pool information, which it believes can deliver an informational advantage under certain trading conditions.

     The Investment Adviser’s data-set distinguishes on the basis of mortgage characteristics such as loan type, coupon, pool originator, underwriter standards, prepay penalties, vintage, and dollar balance, as well as by environmental variables including interest rates and origination points (for the entire term structure of mortgage alternatives including level pay, balloon and adjustable rate), housing values, recording-tax rates and relevant government regulations – which are significant elements affecting the prepayment decision. These decisions are incorporated into trading decisions about which mortgages to hold and which to avoid.

     Specifically, the Investment Adviser expects to implement several investment strategies, as described below:

Sector/Subsector Strategies: The sector strategy would 1) attempt to take advantage of potential changes in general spread levels by overweighting and underweighting the spread duration of the portfolio relative to the index and 2) allocate risk among the different sectors in the mandate: passthroughs, collateralized mortgage obligations (“CMOs”), and Treasuries. The subsector strategy would allocate risk among the different subsectors in each sector: e.g. passthroughs whether to own GNMA vs. conventionals.

Security Selection: The Investment Adviser’s security selection strategy represents relative value investing. The Investment Adviser’s specialist team focuses on 1) finding the most attractive securities to place in the investment portfolios and 2) avoiding the least attractive securities in the index.

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     Among the Investment Adviser’s security selection strategies are:

1) Seasoning Strategies: The Investment Adviser believes that the market does not always correctly price the seasoning of a bond and its tendency to prepay in the future. By identifying these mispriced bonds, the Investment Adviser can construct a portfolio with more attractive interest rate sensitivity than that of the index.

2) Coupon Selection: By combining the Investment Adviser’s fundamental market views with the Investment Adviser’s quantitative models, the Investment Adviser believes that it can take advantage of potential mispricings across coupons. The Investment Adviser also believes that there are opportunities to generate absolute returns by monitoring the embedded delivery options in the To-Be-Allocated (“TBA”) market and by understanding the implied financing rate in TBA market for each coupon.

3) CMO vs. Passthrough Selection: There are often opportunities in the market to replicate passthrough securities by purchasing CMOs. This strategy may benefit an investment portfolio in two ways. First, it might be possible to purchase the replicating CMOs at a lower price than the passthrough. Second, the replicating CMOs may have the same price as the passthrough but have more attractive interest rate sensitivity characteristics.

Security Weighting: The Investment Adviser scales its positions as a function of the expected return and risk of the trade. Generally riskier trades will have smaller positions and less risky trades will have larger positions. For example, the Investment Adviser may cap the exposure from issuers in a particular rating category. This scaling occurs as a result of the Investment Adviser’s risk managed approach. When sizing the trade the Investment Adviser will consider its impact upon the tracking error of the investment portfolio and also the trades relative attractiveness to other perceived opportunities.

Yield Curve and Duration Management: These strategies attempt to take advantage of changes in the shape of the yield curve and the level of rates. While the Investment Adviser believes that it can add excess return through yield curve and duration management, the Investment Adviser also believes that within the context of the U.S. Mortgages Fund, these strategies contribute less to total return than other strategies. As a result the Investment Adviser expects to take less risk in this area.

     Consistent with the Investment Adviser’s overall fixed income investment philosophy for mortgage-backed security portfolios, the Investment Adviser actively manages mortgage portfolios within a risk-managed framework. The portfolio risk management process includes an effort to monitor and manage risk, but should not be confused with and does not imply low risk.

Core Fixed Income Fund

     Core Fixed Income Fund is designed for investors seeking a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index (the “Index”), without incurring the administrative and accounting burdens involved in direct investment. Such investors also prefer liquidity, experienced professional management and administration, a sophisticated investment process, and the convenience of a mutual fund structure. Core Fixed Income Fund may be appropriate as part of a balanced investment strategy consisting of stocks, bonds and cash or as a complement to positions in other types of fixed-income investments.

     The Index currently includes U.S. Government Securities and fixed-rate, publicly issued, U.S. dollar-denominated fixed-income securities rated at least Baa by Moody’s Investors Services, Inc. (“Moody’s”), or if a Moody’s rating is unavailable, the comparable Standard & Poor’s Ratings Group (“Standard &

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Poor’s”) rating is used. The securities currently included in the Index have at least one year remaining to maturity; and are issued by the following types of issuers, with each category receiving a different weighting in the Index: U.S. Treasury; agencies, authorities or instrumentalities of the U.S. government; issuers of mortgage-backed securities; utilities; industrial issuers; financial institutions; foreign issuers; and issuers of asset-backed securities. In pursuing its investment objective, the Fund uses the Index as its performance benchmark, but the Fund will not attempt to replicate the Index. The Fund may, therefore, invest in securities that are not included in the Index. The Index is a trademark of Lehman Brothers. Inclusion of a security in the Index does not imply an opinion by Lehman Brothers as to its attractiveness or appropriateness for investment. Although Lehman Brothers obtains factual information used in connection with the Index from sources which it considers reliable, Lehman Brothers claims no responsibility for the accuracy, completeness or timeliness of such information and has no liability to any person for any loss arising from results obtained from the use of the Index data.

     Core Fixed Income Fund’s overall returns are generally likely to move in the opposite direction from interest rates. Therefore, when interest rates decline, Core Fixed Income Fund’s return is likely to increase. Conversely, when interest rates increase, Core Fixed Income Fund’s return is likely to decline. However, the Investment Adviser believes that, given the flexibility of managers to invest in a diversified portfolio of securities, Core Fixed Income Fund’s return is not likely to decline as quickly as that of other fixed-income funds with a comparable average portfolio duration. In exchange for accepting a higher degree of potential share price fluctuation, investors have the opportunity to achieve a higher return from Core Fixed Income Fund than from shorter-term investments.

     A number of investment strategies will be used to achieve the Core Fixed Income Fund’s investment objective, including market sector selection, determination of yield curve exposure, and issuer selection. In addition, the Investment Adviser will attempt to take advantage of pricing inefficiencies in the fixed-income markets. Market sector selection is the underweighting or overweighting of one or more of the five market sectors (i.e., U.S. Treasuries, U.S. government agencies, corporate securities, mortgage-backed securities and asset-backed securities) in which the Fund primarily invests. The decision to overweight or underweight a given market sector is based on expectations of future yield spreads among different sectors. Yield curve exposure strategy consists of overweighting or underweighting different maturity sectors to take advantage of the shape of the yield curve. Issuer selection is the purchase and sale of corporate securities based on a corporation’s current and expected credit standing. To take advantage of price discrepancies between securities resulting from supply and demand imbalances or other technical factors, the Fund may simultaneously purchase and sell comparable, but not identical, securities. The Investment Adviser will usually have access to the research of, and proprietary technical models developed by, Goldman Sachs and will apply quantitative and qualitative analysis in determining the appropriate allocations among the categories of issuers and types of securities.

     A Sophisticated Investment Process. Core Fixed Income Fund will attempt to control its exposure to interest rate risk, including overall market exposure and the spread risk of particular sectors and securities, through active portfolio management techniques. Core Fixed Income Fund’s investment process starts with a review of trends for the overall economy as well as for different sectors of the fixed-income securities markets. Goldman Sachs’ portfolio managers then analyze yield spreads, implied volatility and the shape of the yield curve. In planning Core Fixed Income Fund’s portfolio investment strategies, the Investment Adviser is able to draw upon the economic and fixed-income research resources of Goldman Sachs. The Investment Adviser will use a sophisticated analytical process including Goldman Sachs’ proprietary mortgage prepayment model and option-adjusted spread model to assist in structuring and maintaining Core Fixed Income Fund’s investment portfolio. In determining Core Fixed Income Fund’s investment strategy and making market timing decisions, the Investment Adviser will have access to input from Goldman Sachs’ economists, fixed-income analysts and mortgage specialists.

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Investment Grade Credit Fund

     The Fund seeks a high level of total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers U.S. Credit Index. The Fund invests, under normal circumstances, at least 80% of its net assets in investment grade fixed income securities.

     The Fund’s strategy employs a process that combines both a top-down and bottom-up analysis to evaluate companies. The Investment Adviser relies primarily on sub-sector/industry allocation and security selection strategies in seeking to generate incremental return relative to the selected benchmark. To a lesser degree, the Investment Adviser also implements duration and yield curve management strategies.

     The Investment Adviser’s strategy for the Fund is based on maximizing its understanding of the factors that drive performance. The Investment Adviser’s security selection process begins with an analysis of the fundamentals of a given company and its industry, and goes on to include broader market factors as well as technical and execution issues. The Investment Adviser has organized its group to incorporate these elements into a process that pulls together the input of specialists within a collaborative framework. Portfolio managers and analysts sit on the trading desk together. This facilitates the frequent conversation between the various members of the corporate bond team.

     Fundamental research is performed by a global high grade research group with parts of the teams in New York and London. The Investment Adviser established this group to ensure comprehensive research into high grade credits, which may be overlooked by firms with only one credit research team. The Investment Adviser’s analysts develop investment rationales incorporating their assessment of a company’s return potential and risks.

     The discussion of investment ideas goes beyond fundamentals to incorporate the broader market views of the portfolio managers. Investment grade corporates are strongly affected by such factors as comparative industry trends, the economy and general overall trends in coverage and leverage ratios. These factors can have a significant impact on performance. The portfolio managers bring their awareness of these factors as a crucial input in the formulation of investment ideas.

     A final element of the process incorporates technical and execution issues. Adding value requires close attention to execution issues including market levels and the new issuance calendar. It is also crucial to stay apprised of dealer activity; being aware of which bonds are being traded by particular dealers promotes efficient trading, which plays directly through to better performance. The Investment Adviser’s traders help in this regard.

     The Investment Adviser’s process is enhanced by the full integration of its New York and London corporate bond teams. While the teams are focused on issue selection in their respective markets, they are able to leverage their peers’ insights to develop broader, better-informed credit views than they could on their own. This integration extends to the portfolio managers, who also develop views on market and industry trends jointly. In addition to helping the Investment Adviser to develop fuller investment views, this integration can also allow it to exploit structural inefficiencies that arise when global corporate issues are priced differently in different currencies.

Global Income Fund

     Global Income Fund is designed for investors seeking high total return, emphasizing current income and, to a lesser extent, opportunities for capital appreciation. However, investing in the Fund involves certain risks, and there is no assurance that the Fund will achieve its investment objective. The securities in which

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the Fund invests will be rated, at the time of purchase, at least BBB- or Baa3 by a NRSRO or, if unrated, will be determined by the Investment Adviser to be of comparable quality. However, at least 50% of the Fund’s total assets will be invested in securities having a rating from an NRSRO of AAA or Aaa at the time of purchase, or if unrated, will be determined by the Investment Adviser to be of comparable quality. Securities rated BBB or Baa are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capability to pay interest and repay principal.

     In selecting securities for the Fund, portfolio managers consider such factors as the security’s duration, sector and credit quality rating as well as the security’s yield and prospects for capital appreciation. In determining the countries and currencies in which the Fund will invest, the Fund’s portfolio managers form opinions based primarily on the views of Goldman Sachs’ economists as well as information provided by securities dealers, including information relating to factors such as interest rates, inflation, monetary and fiscal policies, taxation, and political climate. The portfolio managers apply the Black-Litterman Model (the “Model”) to their views to develop a portfolio that produces, in the view of the Investment Adviser, the optimal expected return for a given level of risk. The Model factors in the opinions of the portfolio managers, adjusting for their level of confidence in such opinions, with the views implied by an international capital asset pricing formula. The Model is also used in seeking to maintain the level of portfolio risk within the guidelines established by the Investment Adviser.

     High Income. Global Income Fund’s portfolio managers will seek out the highest yielding bonds in the global fixed-income market that meet the Global Income Fund’s credit quality standards and certain other criteria.

     Capital Appreciation. Investing in the foreign bond markets offers the potential for capital appreciation due to both interest rate and currency exchange rate fluctuations. The portfolio managers attempt to identify investments with appreciation potential by carefully evaluating trends affecting a country’s currency as well as a country’s fundamental economic strength. However, there is a risk of capital depreciation as a result of unanticipated interest rate and currency fluctuations.

     Portfolio Management Flexibility. Global Income Fund is actively managed. The Fund’s portfolio managers invest in countries that, in their judgment, meet the Fund’s investment guidelines and often have strong currencies and stable economies and in securities that they believe offer favorable performance prospects.

     Relative Stability of Principal. Global Income Fund may be able to reduce principal fluctuation by investing in foreign countries with economic policies or business cycles different from those of the United States and in foreign securities markets that do not necessarily move in the same direction or magnitude as the U.S. market. Investing in a broad range of U.S. and foreign fixed-income securities and currencies reduces the dependence of the Fund’s performance on developments in any particular market to the extent that adverse events in one market are offset by favorable events in other markets. The Fund’s policy of investing primarily in high quality securities may also reduce principal fluctuation. However, there is no assurance that these strategies will always be successful.

     Professional Management. Individual U.S. investors may prefer professional management of their global bond and currency portfolios because a well-diversified portfolio requires a large amount of capital and because the size of the global market requires access to extensive resources and a substantial commitment of time.

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High Yield Fund

     High Yield Fund’s Investment Process. High Yield Fund is appropriate for investors who seek a high level of current income and who also may wish to consider the potential for capital appreciation. A number of investment strategies are used to seek to achieve the Fund’s investment objective, including market sector selection, determination of yield curve exposure and issuer selection. In addition, the Investment Adviser will attempt to take advantage of pricing inefficiencies in the fixed-income markets. GSAM starts the investment process with economic analysis to determine broad growth trends, industry-specific events and market forecasts. The market value of non-investment grade fixed-income securities tends to reflect individual developments within a company to a greater extent than higher rated corporate debt or Treasury bonds that react primarily to fluctuations in interest rates. Therefore, determining the creditworthiness of issuers is critical. To that end, High Yield Fund’s portfolio managers have access to Goldman Sachs highly regarded Credit Research and Global Investment Research Departments, as well as analysis from the firm’s High Yield Research Group, a dedicated group of 15 professionals in the high yield and emerging market corporate bond research area, consisting of industry and regional market specialists. In addition, the Fund’s portfolio managers may review the opinions of the two largest independent credit rating agencies, Standard & Poor’s and Moody’s. High Yield Fund’s portfolio managers and credit analysts also conduct their own in-depth analysis of the issues considered for inclusion in the Fund’s portfolio. The portfolio managers and credit analysts evaluate such factors as a company’s competitive position, the strength of its balance sheet, its ability to withstand economic downturns and its potential to generate ample cash flow to service its debt. The ability to analyze accurately a company’s future cash flow by correctly anticipating the impact of economic, industry-wide and specific events are critical to successful high yield investing. GSAM’s goal is to identify companies with the potential to strengthen their balance sheets by increasing their earnings, reducing their debt or effecting a turnaround. GSAM analyzes trends in a company’s debt picture (i.e., the level of its interest coverage) as well as new developments in its capital structure on an ongoing basis. GSAM believes that this ongoing reassessment is more valuable than relying on a “snapshot” view of a company’s ability to service debt at one or two points in time.

     High Yield Fund’s portfolio is diversified among different sectors and industries on a global basis in an effort to reduce overall risk. While GSAM will avoid excessive concentration in any one industry, the Fund’s specific industry weightings are the result of individual security selection. Emerging market debt considered for the High Yield Fund’s portfolio will be selected by specialists knowledgeable about the political and economic structure of those economies.

     Return on and Risks of High Yield Securities. High yield bonds can deliver higher yields and total return than either investment grade corporate bonds or U.S. Treasury bonds. However, because these non-investment grade securities involve higher risks in return for higher income, they are best suited to long-term investors who are financially secure enough to withstand volatility and the risks associated with such investments. See “Description of Investment Securities and Practices.” Different types of fixed income securities may react differently to changes in the economy. High yield bonds, like stocks, tend to perform best when the economy is strong, inflation is low and companies experience healthy profits, which can lead to higher stock prices and higher credit ratings. Government bonds are likely to appreciate more in a weaker economy when interest rates are declining. In certain types of markets, adding some diversification in the high yield asset class may help to increase returns and decrease overall portfolio risk.

     For high yield, non-investment grade securities, as for most investments, there is a direct relationship between risk and return. Along with their potential to deliver higher yields and greater capital appreciation than most other types of fixed-income securities, high yield securities are subject to higher risk of loss, greater volatility and are considered speculative by traditional investment standards. The most significant risk associated with high yield securities is credit risk: the risk that the company issuing a high yield security may have difficulty in meeting its principal and/or interest payments on a timely basis. As a result, extensive

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credit research and diversification are essential factors in managing risk in the high yield arena. To a lesser extent, high yield bonds are also subject to interest rate risk: when interest rates increase, the value of fixed income securities tends to decline.

Emerging Markets Debt Fund

     The Emerging Markets Debt Fund seeks a high level of total return consisting of income and capital appreciation. The Fund invests, under normal circumstances, in fixed-income securities of issuers located in Emerging Countries. The Investment Adviser’s Emerging Markets Debt (“EMD”) investment philosophy strives to generate returns through an active, research-intensive, risk-managed approach. The Investment Adviser seeks to add value through country allocation, security selection, and market exposure strategies.

     The Investment Adviser believes that active management focused on fundamental research is critical for achieving long-term value for its clients’ portfolios. Emerging market debt can offer an attractive risk/return profile for investors who have the proper resources and experience to exploit the myriad opportunities in the market. The Investment Adviser’s process is built on fundamental analysis of emerging market countries and securities. In addition, the Investment Adviser’s process focuses on risk-adjusted returns, as the Investment Adviser believes that risk can have a material impact on long-term investment results. As a result, the Investment Adviser diversifies across sovereign credits and employs proprietary tools to manage overall portfolio risks.

Portfolio Construction. Currently, the Investment Adviser’s EMD strategy invests significantly in emerging market sovereign issues. As such, country selection is believed to be the most important factor in the portfolio construction process. The next most important factor is market exposure, where the Investment Adviser evaluates macro developments and assesses the net flows within countries. Another element in the portfolio construction process is security selection.

     Analysis of emerging market debt involves an understanding of the finances, political events, and macroeconomic condition of a country. The Investment Adviser’s research analysts analyze the “balance sheets” of the countries they follow. This may include evaluating factors such as balance of payments, tax revenues, and external and domestic debt. They also assess macroeconomic measures, which may include inflation, interest rates, growth prospects, and monetary policy. For some emerging market debt countries, politics is the key driver of performance. As a result, the Investment Adviser’s research analysts may spend a significant portion of their time following the political developments of the countries they cover.

     Fundamental analysis is combined with valuation techniques to determine relative value of securities. Although the Investment Adviser may believe a security is attractive from a fundamental point of view, the Investment Adviser may not believe the spread level is attractive relative to other credits. As a result, even if the Investment Adviser likes a country’s fundamentals, the Investment Adviser may not invest in it due to its valuation. Likewise, the Investment Adviser may believe that a certain country’s fundamentals are less positive but may invest in the country because the Investment Adviser believes the spread offers significant compensation for the additional risk.

     Using a variety of proprietary models, the Investment Adviser selects and sizes credits based on perceived relative value opportunities. The Investment Adviser also uses these tools in an effort to anticipate and manage portfolio risks.

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Types of Securities Used. Emerging market debt comprises fixed income securities issued mainly by governments, but also by quasi-sovereigns and corporations, of developing countries. The Investment Adviser typically expresses its view on a relative-to-benchmark basis, overweighting those securities the Investment Adviser believes will outperform and underweighting those countries the Investment Adviser believes will underperform.

     The types of financial instruments used in the Emerging Markets Debt Fund include Eurobonds, Brady bonds, tradable bank loans, local bonds, and other securities, which can include their associated derivatives.

     The EMD team may invest in liquid, long duration securities and employ active trading strategies that exploit market inefficiencies and arbitrage opportunities (e.g., between Brady Bonds and global bonds) that often exist in the EMD market. Given the limited diversification within the EMD sector, buying longer dated, more liquid, lower dollar price securities may be a preferred strategy.

     The Investment Adviser may use derivative instruments such as forwards and futures in the Emerging Markets Debt Fund in an attempt to hedge its currency exposures. However, due to the limited market for these instruments in emerging countries, a significant portion of the Fund’s currency exposure in emerging countries may not be covered by such instruments.

Research. Being part of GSAM’s wider Fixed Income and Currency Team, the EMD team interacts with the Investment Adviser’s fixed income and currency analysts and portfolio managers based in New York, London, and Tokyo. The Fixed Income and Currency Team employs a broad analysis of the macro-economic environment, credit risk factors, and quantitative relationships and plays a vital role in aspects of portfolio construction and strategy.

     In addition to internal research, the Investment Adviser may utilize external sources in its analysis and seek information from external consultants and sell-side economists and strategists. The Investment Adviser’s EMD team may draw on the resources of Goldman Sachs (e.g., GSAM Emerging Market Foreign Exchange, Emerging Market Equity and Quantitative Strategy) in the country and security selection process. The Investment Adviser’s research analysts also travel to Emerging Countries to seek additional insight on the macroeconomic and political developments. The Investment Adviser’s research analysts also obtain research publications from broker-dealers, supranational organizations (IMF), and academic sources.

     Portfolio managers and research analysts have access to external research (e.g., internet website, publications). In addition, market information is disseminated through electronic communications as well as regularly scheduled meetings. The members of the Emerging Market Debt investment team sit on the trading desk to facilitate efficient and timely flow of market information.

     Based on macroeconomic and political considerations, the Investment Adviser will have a negative, neutral, or positive recommendation on various Emerging Countries. In addition to these recommendations, the Investment Adviser considers which are the most attractive securities within those countries.

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DESCRIPTION OF INVESTMENT SECURITIES AND PRACTICES

U. S. Government Securities

     Each Fund may invest in U.S. Government Securities. Some U.S. Government Securities (such as Treasury bills, notes and bonds, which differ only in their interest rates, maturities and times of issuance) are supported by the full faith and credit of the United States. Others, such as obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises, are supported either by (i) the right of the issuer to borrow from the U.S. Treasury, (ii) the discretionary authority of the U.S. government to purchase certain obligations of the issuer or (iii) only the credit of the issuer. The U.S. government is under no legal obligation, in general, to purchase the obligations of its agencies, instrumentalities or sponsored enterprises. No assurance can be given that the U.S. government will provide financial support to the U.S. government agencies, instrumentalities or sponsored enterprises in the future.

     U.S. Government Securities include (to the extent consistent with the Act) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government, or its agencies, instrumentalities or sponsored enterprises. U.S. Government Securities also include (to the extent consistent with the Act) participations in loans made to foreign governments or their agencies that are guaranteed as to principal and interest by the U.S. government or its agencies, instrumentalities or sponsored enterprises. The secondary market for certain of these participations is extremely limited. In the absence of a suitable secondary market, such participations are regarded as illiquid.

     Each Fund may also purchase U.S. Government Securities in private placements and may also invest in separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury that are traded independently under the separate trading of registered interest and principal of securities program (“STRIPS”).

     Treasury Inflation-Protected Securities. Certain Funds may invest in U.S. Government securities, called “Treasury inflation-protected securities” or “TIPS,” which are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. The interest rate on TIPS is fixed at issuance, but over the life of the bond this interest may be paid on an increasing or decreasing principal value that has been adjusted for inflation. Although repayment of the original bond principal upon maturity is guaranteed, the market value of TIPS is not guaranteed, and will fluctuate.

     The values of TIPS generally fluctuate in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. If inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in the value of TIPS. In contrast, if nominal interest rates were to increase at a faster rate than inflation, real interest rates might rise, leading to a decrease in the value of TIPS. If inflation is lower than expected during the period a Fund holds TIPS, a Fund may earn less on the TIPS than on a conventional bond. If interest rates rise due to reasons other than inflation (for example, due to changes in the currency exchange rates), investors in TIPS may not be protected to the extent that the increase is not reflected in the bonds’ inflation measure. There can be no assurance that the inflation index for TIPS will accurately measure the real rate of inflation in the prices of goods and services.

     Any increase in principal value of TIPS caused by an increase in the consumer price index is taxable in the year the increase occurs, even though a Fund holding TIPS will not receive cash representing the increase at that time. As a result, a Fund could be required at times to liquidate other investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements as a regulated investment company.

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     If a Fund invests in Treasury-inflation protected securities (“TIPS”), it will be required to treat as original issue discount any increase in the principal amount of the securities that occurs during the course of its taxable year. If a Fund purchases such inflation protected securities that are issued in stripped form either as stripped bonds or coupons, it will be treated as if it had purchased a newly issued debt instrument having original issue discount.

     Because a Fund is required to distribute substantially all of its net investment income (including accrued original issue discount), a Fund’s investment in either zero coupon bonds or TIPS may require a Fund to distribute to shareholders an amount greater than the total cash income it actually receives. Accordingly, in order to make the required distributions, a Fund may be required to borrow or liquidate securities.

Custodial Receipts and Trust Certificates

     Each Fund may invest in custodial receipts and trust certificates, which may be underwritten by securities dealers or banks, representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities, Municipal Securities or other types of securities in which a Fund may invest. The custodial receipts or trust certificates are underwritten by securities dealers or banks and may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities law purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. As a holder of custodial receipts and trust certificates, a Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. The Funds may also invest in separately issued interests in custodial receipts and trust certificates.

     Although under the terms of a custodial receipt or trust certificate a Fund would be typically authorized to assert its rights directly against the issuer of the underlying obligation, the Fund could be required to assert through the custodian bank or trustee those rights as may exist against the underlying issuers. Thus, in the event an underlying issuer fails to pay principal and/or interest when due, a Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the issuer. In addition, in the event that the trust or custodial account in which the underlying securities have been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying securities would be reduced in recognition of any taxes paid.

     Certain custodial receipts and trust certificates may be synthetic or derivative instruments that have interest rates that reset inversely to changing short-term rates and/or have embedded interest rate floors and caps that require the issuer to pay an adjusted interest rate if market rates fall below or rise above a specified rate. Because some of these instruments represent relatively recent innovations, and the trading market for these instruments is less developed than the markets for traditional types of instruments, it is uncertain how these instruments will perform under different economic and interest-rate scenarios. Also, because these instruments may be leveraged, their market values may be more volatile than other types of fixed income instruments and may present greater potential for capital gain or loss. The possibility of default by an issuer or the issuer’s credit provider may be greater for these derivative instruments than for other types of instruments. In some cases, it may be difficult to determine the fair value of a derivative instrument because of a lack of reliable objective information and an established secondary market for some instruments may not exist. In many cases, the Internal Revenue Service has not ruled on the tax treatment of the interest or payments received on the derivative instruments and, accordingly, purchases of such instruments are based on the opinion of counsel to the sponsors of the instruments.

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Mortgage Loans and Mortgage-Backed Securities

     The Taxable Funds (other than the Enhanced Income Fund and Emerging Markets Debt Fund) may each invest in mortgage loans and mortgage pass-through securities and other securities representing an interest in or collateralized by adjustable and fixed-rate mortgage loans (“Mortgage-Backed Securities”).

     Mortgage-Backed Securities (including collateralized mortgage obligations, REMICs and stripped mortgage-backed securities described below) are subject to both call risk and extension risk. Because of these risks, these securities can have significantly greater price and yield volatility than with traditional fixed-income securities.

     General Characteristics. Each mortgage pool underlying Mortgage-Backed Securities consists of mortgage loans evidenced by promissory notes secured by first mortgages or first deeds of trust or other similar security instruments creating a first lien on owner occupied and non-owner occupied one-unit to four-unit residential properties, multi-family (i.e., five or more) properties, agricultural properties, commercial properties and mixed use properties (the “Mortgaged Properties”). The Mortgaged Properties may consist of detached individual dwelling units, multi-family dwelling units, individual condominiums, townhouses, duplexes, triplexes, fourplexes, row houses, individual units in planned unit developments and other attached dwelling units. The Mortgaged Properties may also include residential investment properties and second homes.

     The investment characteristics of adjustable and fixed rate Mortgage-Backed Securities differ from those of traditional fixed-income securities. The major differences include the payment of interest and principal on Mortgage-Backed Securities on a more frequent (usually monthly) schedule, and the possibility that principal may be prepaid at any time due to prepayments on the underlying mortgage loans or other assets. These differences can result in significantly greater price and yield volatility than is the case with traditional fixed-income securities. As a result, if a Fund purchases Mortgaged-Backed Securities at a premium, a faster than expected prepayment rate will reduce both the market value and the yield to maturity from those which were anticipated. A prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity and market value. Conversely, if a Fund purchases Mortgage-Backed Securities at a discount, faster than expected prepayments will increase, while slower than expected prepayments will reduce yield to maturity and market values. To the extent that a Fund invests in Mortgage-Backed Securities, its Investment Adviser may seek to manage these potential risks by investing in a variety of Mortgage-Backed Securities and by using certain hedging techniques.

     Prepayments on a pool of mortgage loans are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors (such as changes in mortgagors’ housing needs, job transfers, unemployment, mortgagors’ equity in the mortgage properties and servicing decisions). The timing and level of prepayments cannot be predicted. A predominant factor affecting the prepayment rate on a pool of mortgage loans is, however, the difference between the interest rates on outstanding mortgage loans and prevailing mortgage loan interest rates (giving consideration to the cost of any refinancing). Generally, prepayments on mortgage loans will increase during a period of falling mortgage interest rates and decrease during a period of rising mortgage interest rates. Accordingly, the amounts of prepayments available for reinvestment by a Fund are likely to be greater during a period of declining mortgage interest rates. If general interest rates decline, such prepayments are likely to be reinvested at lower interest rates than the Fund was earning on the mortgage-backed securities that were prepaid. Due to these factors, mortgage-backed securities may be less effective than U.S. Treasury and other types of debt securities of similar maturity at maintaining yields during periods of declining interest rates. Because the Funds’ investments are interest-rate sensitive, each Fund’s performance will depend in part upon the ability of the Fund to anticipate and respond to fluctuations in market interest rates and to utilize appropriate strategies to maximize returns to the Fund, while attempting to minimize the associated risks

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to its investment capital. Prepayments may have a disproportionate effect on certain mortgage-backed securities and other multiple class pass-through securities, which are discussed below.

     The rate of interest on mortgage-backed securities is normally lower than the interest rates paid on the mortgages included in the underlying pool due to the annual fees paid to the servicer of the mortgage pool for passing through monthly payments to certificate holders and to any guarantor, such as the Government National Mortgage Association (“Ginnie Mae”), and due to any yield retained by the issuer. Actual yield to the holder may vary from the coupon rate, even if adjustable, if the mortgage-backed securities are purchased or traded in the secondary market at a premium or discount. In addition, there is normally some delay between the time the issuer receives mortgage payments from the servicer and the time the issuer makes the payments on the mortgage-backed securities and this delay reduces the effective yield to the holder of such securities.

     The issuers of certain mortgage-backed obligations may elect to have the pool of mortgage loans (or indirect interests in mortgage loans) underlying the securities treated as a real estate mortgage investment conduit (“REMIC”), which is subject to special federal income tax rules. A description of the types of mortgage-backed securities in which the Funds may invest is provided below. The descriptions are general and summary in nature, and do not detail every possible variation of the types of securities that are permissible for the Funds.

     Adjustable Rate Mortgage Loans (“ARMs”). The Taxable Funds (other than the Enhanced Income and Emerging Markets Debt Fund) may invest in ARMs. ARMs generally provide for a fixed initial mortgage interest rate for a specified period of time. Thereafter, the interest rates (the “Mortgage Interest Rates”) may be subject to periodic adjustment based on changes in the applicable index rate (the “Index Rate”). The adjusted rate would be equal to the Index Rate plus a fixed percentage spread over the Index Rate established for each ARM at the time of its origination. ARMs allow a Fund to participate in increases in interest rates through periodic increases in the securities coupon rates. During periods of declining interest rates, coupon rates may readjust downward resulting in lower yields to a Fund.

     Adjustable interest rates can cause payment increases that some mortgagors may find difficult to make. However, certain ARMs may provide that the Mortgage Interest Rate may not be adjusted to a rate above an applicable lifetime maximum rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs may also be subject to limitations on the maximum amount by which the Mortgage Interest Rate may adjust for any single adjustment period (the “Maximum Adjustment”). Other ARMs (“Negatively Amortizing ARMs”) may provide instead or as well for limitations on changes in the monthly payment on such ARMs. Limitations on monthly payments can result in monthly payments which are greater or less than the amount necessary to amortize a Negatively Amortizing ARM by its maturity at the Mortgage Interest Rate in effect in any particular month. In the event that a monthly payment is not sufficient to pay the interest accruing on a Negatively Amortizing ARM, any such excess interest is added to the principal balance of the loan, causing negative amortization, and will be repaid through future monthly payments. It may take borrowers under Negatively Amortizing ARMs longer periods of time to build up equity and may increase the likelihood of default by such borrowers. In the event that a monthly payment exceeds the sum of the interest accrued at the applicable Mortgage Interest Rate and the principal payment which would have been necessary to amortize the outstanding principal balance over the remaining term of the loan, the excess (or “accelerated amortization”) further reduces the principal balance of the ARM. Negatively Amortizing ARMs do not provide for the extension of their original maturity to accommodate changes in their Mortgage Interest Rate. As a result, unless there is a periodic recalculation of the payment amount (which there generally is), the final payment may be substantially larger than the other payments. These limitations on periodic increases in interest rates and on changes in monthly payments protect borrowers from unlimited interest rate and payment increases, but may result in increased credit exposure and prepayment risks for lenders.

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     ARMs also have the risk of prepayments. The rate of principal prepayments with respect to ARMs has fluctuated in recent years. The value of Mortgage-Backed Securities that are structured as pass through mortgage securities that are collateralized by ARMs are less likely to rise during periods of declining interest rates to the same extent as fixed-rate securities. Accordingly, ARMs may be subject to a greater rate of principal repayments in a declining interest rate environment resulting in lower yields to a Fund. For example, if prevailing interest rates fall significantly, ARMs could be subject to higher prepayment rates (than if prevailing interest rates remain constant or increase) because the availability of low fixed-rate mortgages may encourage mortgagors to refinance their ARMs to “lock-in” a fixed-rate mortgage. On the other hand, during periods of rising interest rates, the value of ARMs will lag behind changes in the market rate. ARMs are also typically subject to maximum increases and decreases in the interest rate adjustment which can be made on any one adjustment date, in any one year, or during the life of the security. In the event of dramatic increases or decreases in prevailing market interest rates, the value of a Fund’s investment in ARMs may fluctuate more substantially since these limits may prevent the security from fully adjusting its interest rate to the prevailing market rates. As with fixed-rate mortgages, ARM prepayment rates vary in both stable and changing interest rate environments.

     There are two main categories of indices which provide the basis for rate adjustments on ARMs: those based on U.S. Treasury securities and those derived from a calculated measure, such as a cost of funds index or a moving average of mortgage rates. Commonly utilized indices include the one-year, three-year and five-year constant maturity Treasury rates, the three-month Treasury bill rate, the 180-day Treasury bill rate, rates on longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost of Funds, the one-month, three-month, six-month or one-year London Interbank Offered Rate, the prime rate of a specific bank or commercial paper rates. Some indices, such as the one-year constant maturity Treasury rate, closely mirror changes in market interest rate levels. Others, such as the 11th District Federal Home Loan Bank Cost of Funds index, tend to lag behind changes in market rate levels and tend to be somewhat less volatile. The degree of volatility in the market value of a Fund that holds ARMs and, therefore, in the net asset value of its shares, will be a function of the length of the interest rate reset periods and the degree of volatility in the applicable indices.

     Fixed-Rate Mortgage Loans. Generally, fixed-rate mortgage loans included in a mortgage pool (the “Fixed-Rate Mortgage Loans”) will bear simple interest at fixed annual rates and have original terms to maturity ranging from 5 to 40 years. Fixed-Rate Mortgage Loans generally provide for monthly payments of principal and interest in substantially equal installments for the term of the mortgage note in sufficient amounts to fully amortize principal by maturity, although certain Fixed-Rate Mortgage Loans provide for a large final “balloon” payment upon maturity.

     Legal Considerations of Mortgage Loans. The following is a discussion of certain legal and regulatory aspects of the mortgage loans in which the Taxable Funds (other than the Enhanced Income Fund and Emerging Markets Debt Fund) may invest. These regulations may impair the ability of a mortgage lender to enforce its rights under the mortgage documents. These regulations may adversely affect the Funds’ investments in Mortgage-Backed Securities (including those issued or guaranteed by the U.S. government, its agencies or instrumentalities) by delaying the Funds’ receipt of payments derived from principal or interest on mortgage loans affected by such regulations.

1. Foreclosure. A foreclosure of a defaulted mortgage loan may be delayed due to compliance with statutory notice or service of process provisions, difficulties in locating necessary parties or legal challenges to the mortgagee’s right to foreclose. Depending upon market conditions, the ultimate proceeds of the sale of foreclosed property may not equal the amounts owed on the Mortgage-Backed Securities.

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	Furthermore, courts in some cases have imposed general equitable principles upon foreclosure generally designed to relieve the borrower from the legal effect of default and have required lenders to undertake affirmative and expensive actions to determine the causes for the default and the likelihood of loan reinstatement.
2.	Rights of Redemption. In some states, after foreclosure of a mortgage loan, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property, which right may diminish the mortgagee’s ability to sell the property.
3.	Legislative Limitations. In addition to anti-deficiency and related legislation, numerous other federal and state statutory provisions, including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of a secured mortgage lender to enforce its security interest. For example, a bankruptcy court may grant the debtor a reasonable time to cure a default on a mortgage loan, including a payment default. The court in certain instances may also reduce the monthly payments due under such mortgage loan, change the rate of interest, reduce the principal balance of the loan to the then-current appraised value of the related mortgaged property, alter the mortgage loan repayment schedule and grant priority of certain liens over the lien of the mortgage loan. If a court relieves a borrower’s obligation to repay amounts otherwise due on a mortgage loan, the mortgage loan servicer will not be required to advance such amounts, and any loss may be borne by the holders of securities backed by such loans. In addition, numerous federal and state consumer protection laws impose penalties for failure to comply with specific requirements in connection with origination and servicing of mortgage loans.
4.	“Due-on-Sale” Provisions. Fixed-rate mortgage loans may contain a so-called “due-on-sale” clause permitting acceleration of the maturity of the mortgage loan if the borrower transfers the property. The Garn-St. Germain Depository Institutions Act of 1982 sets forth nine specific instances in which no mortgage lender covered by that Act may exercise a “due-on-sale” clause upon a transfer of property. The inability to enforce a “due-on-sale” clause or the lack of such a clause in mortgage loan documents may result in a mortgage loan being assumed by a purchaser of the property that bears an interest rate below the current market rate.
5.	Usury Laws. Some states prohibit charging interest on mortgage loans in excess of statutory limits. If such limits are exceeded, substantial penalties may be incurred and, in some cases, enforceability of the obligation to pay principal and interest may be affected.

     Government Guaranteed Mortgage-Backed Securities. There are several types of government guaranteed Mortgage-Backed Securities currently available, including guaranteed mortgage pass-through certificates and multiple class securities, which include guaranteed Real Estate Mortgage Investment Conduit Certificates (“REMIC Certificates”), other collateralized mortgage obligations and stripped Mortgage-Backed Securities. The Taxable Funds (other than the Enhanced Income Fund and Emerging Markets Debt Fund) are permitted to invest in other types of Mortgage-Backed Securities that may be available in the future to the extent consistent with their respective investment policies and objectives. Ginnie Mae securities are backed by the full faith and credit of the U.S. Government, which means that the U.S. Government guarantees that the interest and principal will be paid when due. Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) securities are not backed by the full faith and credit of the U.S. Government. Fannie Mae and Freddie Mac have the ability to borrow from the U.S. Treasury, and as a result, they are generally viewed by the market as high quality securities with low credit risks. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating federal sponsorship Fannie Mae and Freddie Mac that issue guaranteed Mortgage-Backed Securities. The Trust cannot predict what legislation, if any, may be proposed in the future in Congress as regards such sponsorship or which proposals, if any, might be enacted. Such proposals, if enacted, might

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materially and adversely affect the availability of government guaranteed Mortgage-Backed Securities and the Funds’ liquidity and value.

     There is risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. A Fund may purchase U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae and Freddie Mac. The maximum potential liability of the issuers of some U.S. Government securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.

Guaranteed Mortgage Pass-Through Securities

     Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate instrumentality of the United States. Ginnie Mae is authorized to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of mortgage loans insured by the Federal Housing Administration (“FHA”), or guaranteed by the Veterans Administration (“VA”), or by pools of other eligible mortgage loans. In order to meet its obligations under any guaranty, Ginnie Mae is authorized to borrow from the U.S. Treasury in an unlimited amount. The National Housing Act provides that the full faith and credit of the United States is pledged to the timely payment of principal and interest by Ginnie Mae of amounts due on Ginnie Mae certificates.

     Fannie Mae Certificates. Fannie Mae is a stockholder-owned corporation chartered under an act of the United States Congress. Generally, Fannie Mae Certificates are issued and guaranteed by Fannie Mae and represent an undivided interest in a pool of mortgage loans (a “Pool”) formed by Fannie Mae. A Pool consists of residential mortgage loans either previously owned by Fannie Mae or purchased by it in connection with the formation of the Pool. The mortgage loans may be either conventional mortgage loans (i.e., not insured or guaranteed by any U.S. government agency) or mortgage loans that are either insured by the FHA or guaranteed by the VA. However, the mortgage loans in Fannie Mae Pools are primarily conventional mortgage loans. The lenders originating and servicing the mortgage loans are subject to certain eligibility requirements established by Fannie Mae.

     Fannie Mae has certain contractual responsibilities. With respect to each Pool, Fannie Mae is obligated to distribute scheduled installments of principal and interest after Fannie Mae’s servicing and guaranty fee, whether or not received, to Certificate holders. Fannie Mae also is obligated to distribute to holders of Certificates an amount equal to the full principal balance of any foreclosed mortgage loan, whether or not such principal balance is actually recovered. The obligations of Fannie Mae under its guaranty of the Fannie Mae Certificates are obligations solely of Fannie Mae.

     Freddie Mac Certificates. Freddie Mac is a publicly held U.S. government sponsored enterprise. A principal activity of Freddie Mac currently is the purchase of first lien, conventional, residential mortgage loans and participation interests in such mortgage loans and their resale in the form of mortgage securities, primarily Freddie Mac Certificates. A Freddie Mac Certificate represents a pro rata interest in a group of mortgage loans or participations in mortgage loans (a “Freddie Mac Certificate group”) purchased by Freddie Mac.

     Freddie Mac guarantees to each registered holder of a Freddie Mac Certificate the timely payment of interest at the rate provided for by such Freddie Mac Certificate (whether or not received on the underlying loans). Freddie Mac also guarantees to each registered Certificate holder ultimate collection of all principal of the related mortgage loans, without any offset or deduction, but does not, generally, guarantee the timely payment of scheduled principal. The obligations of Freddie Mac under its guaranty of Freddie Mac Certificates are obligations solely of Freddie Mac.

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     The mortgage loans underlying the Freddie Mac and Fannie Mae Certificates consist of adjustable rate or fixed-rate mortgage loans with original terms to maturity of up to forty years. These mortgage loans are usually secured by first liens on one-to-four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans, undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.

     Conventional Mortgage Loans. The conventional mortgage loans underlying the Freddie Mac and Fannie Mae Certificates consist of adjustable rate or fixed-rate mortgage loans normally with original terms to maturity of between five and thirty years. Substantially all of these mortgage loans are secured by first liens on one- to four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards set forth in the law creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans, undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.

     Mortgage Pass-Through Securities. To the extent consistent with their investment policies, the Taxable Funds (other than the Enhanced Income Fund and Emerging Markets Debt Fund) may invest in both government guaranteed and privately issued mortgage pass-through securities (“Mortgage Pass-Throughs”), that are fixed or adjustable rate Mortgage-Backed Securities which provide for monthly payments that are a “pass-through” of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees or other amounts paid to any guarantor, administrator and/or servicer of the underlying mortgage loans. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate holders as to certain characteristics of the mortgage loans and as to the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. Upon a breach of any representation or warranty that materially and adversely affects the interests of the related certificate holders in a mortgage loan, the seller or servicer generally may be obligated either to cure the breach in all material respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate holders or the trustee for the material breach of any such representation or warranty by the seller or servicer.

     The following discussion describes only a few of the wide variety of structures of Mortgage Pass-Throughs that are available or may be issued.

     Description of Certificates. Mortgage Pass-Throughs may be issued in one or more classes of senior certificates and one or more classes of subordinate certificates. Each such class may bear a different pass-through rate. Generally, each certificate will evidence the specified interest of the holder thereof in the payments of principal or interest or both in respect of the mortgage pool comprising part of the trust fund for such certificates.

     Any class of certificates may also be divided into subclasses entitled to varying amounts of principal and interest. If a REMIC election has been made, certificates of such subclasses may be entitled to payments on the basis of a stated principal balance and stated interest rate, and payments among different subclasses may be made on a sequential, concurrent, pro rata or disproportionate basis, or any combination thereof. The stated interest rate on any such subclass of certificates may be a fixed rate or one which varies in direct or inverse relationship to an objective interest index.

     Generally, each registered holder of a certificate will be entitled to receive its pro rata share of monthly distributions of all or a portion of principal of the underlying mortgage loans or of interest on the

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principal balances thereof, which accrues at the applicable mortgage pass-through rate, or both. The difference between the mortgage interest rate and the related mortgage pass-through rate (less the amount, if any, of retained yield) with respect to each mortgage loan will generally be paid to the servicer as a servicing fee. Since certain adjustable rate mortgage loans included in a mortgage pool may provide for deferred interest (i.e., negative amortization), the amount of interest actually paid by a mortgagor in any month may be less than the amount of interest accrued on the outstanding principal balance of the related mortgage loan during the relevant period at the applicable mortgage interest rate. In such event, the amount of interest that is treated as deferred interest will generally be added to the principal balance of the related mortgage loan and will be distributed pro rata to certificate-holders as principal of such mortgage loan when paid by the mortgagor in subsequent monthly payments or at maturity.

     Multiple Class Mortgage-Backed Securities and Collateralized Mortgage Obligations. Each Taxable Fund (other than the Enhanced Income Fund and Emerging Markets Debt Fund) may invest in multiple class securities including collateralized mortgage obligations (“CMOs”) and REMIC Certificates. These securities may be issued by U.S. government agencies, instrumentalities or sponsored enterprises such as Fannie Mae or Freddie Mac or, to the extent consistent with a Fund’s investment policies, by trusts formed by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class Mortgage-Backed Securities represent direct ownership interests in, a pool of mortgage loans or Mortgage-Backed Securities the payments on which are used to make payments on the CMOs or multiple class Mortgage-Backed Securities.

     Fannie Mae REMIC Certificates are issued and guaranteed as to timely distribution of principal and interest by Fannie Mae. In addition, Fannie Mae will be obligated to distribute the principal balance of each class of REMIC Certificates in full, whether or not sufficient funds are otherwise available.

     Freddie Mac guarantees the timely payment of interest on Freddie Mac REMIC Certificates and also guarantees the payment of principal as payments are required to be made on the underlying mortgage participation certificates (“PCs”). PCs represent undivided interests in specified level payment, residential mortgages or participations therein purchased by Freddie Mac and placed in a PC pool. With respect to principal payments on PCs, Freddie Mac generally guarantees ultimate collection of all principal of the related mortgage loans without offset or deduction but the receipt of the required payments may be delayed. Freddie Mac also guarantees timely payment of principal of certain PCs.

     CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie Mac are types of multiple class Mortgage-Backed Securities. The REMIC Certificates represent beneficial ownership interests in a REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed Mortgage-Backed Securities (the “Mortgage Assets”). The obligations of Fannie Mae or Freddie Mac under their respective guaranty of the REMIC Certificates are obligations solely of Fannie Mae or Freddie Mac, respectively.

     CMOs and REMIC Certificates are issued in multiple classes. Each class of CMOs or REMIC Certificates, often referred to as a “tranche,” is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the mortgage loans or the Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or REMIC Certificates to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs or REMIC Certificates on a monthly basis.

     The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs or REMIC Certificates in various ways. In certain structures (known as “sequential pay” CMOs or

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REMIC Certificates), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs or REMIC Certificates in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs or REMIC Certificates until all other classes having an earlier final distribution date have been paid in full.

     Additional structures of CMOs and REMIC Certificates include, among others, “parallel pay” CMOs and REMIC Certificates. Parallel pay CMOs or REMIC Certificates are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.

     A wide variety of REMIC Certificates may be issued in parallel pay or sequential pay structures. These securities include accrual certificates (also known as “Z-Bonds”), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and planned amortization class (“PAC”) certificates, which are parallel pay REMIC Certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes or REMIC Certificates (the “PAC Certificates”), even though all other principal payments and prepayments of the Mortgage Assets are then required to be applied to one or more other classes of the PAC Certificates. The scheduled principal payments for the PAC Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying Mortgage Assets. These tranches tend to have market prices and yields that are much more volatile than other PAC classes.

     Stripped Mortgage-Backed Securities. The Taxable Funds (other than the Enhanced Income Fund and Emerging Markets Debt Fund) may invest in stripped mortgage-backed securities (“SMBS”), which are derivative multiclass mortgage securities, issued or guaranteed by the U.S. government, its agencies or instrumentalities or, to the extent consistent with a Fund’s investment policies, non-governmental originators. Certain SMBS may not be readily marketable and will be considered illiquid for purposes of each Fund’s limitation on investments in illiquid securities. The Investment Adviser may determine that SMBS which are U.S. Government Securities are liquid for purposes of each Fund’s limitation on investments in illiquid securities. The market value of the class consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. The yields on a class of SMBS that receives all or most of the interest from Mortgage Assets are generally higher than prevailing market yields on other Mortgage-Backed Securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped. A Fund’s investment in SMBS may require the Fund to sell certain of its portfolio securities to generate sufficient cash to satisfy certain income distribution requirements.

Privately Issued Mortgage-Backed Securities

     Ultra-Short Duration Government Fund, Government Income Fund, U.S. Mortgages Fund, Core Fixed Income Fund, Investment Grade Credit Fund, Global Income Fund, and High Yield Fund may invest in privately issued Mortgage-Backed Securities. Privately issued Mortgage-Backed Securities are generally backed by pools of conventional (i.e., non-government guaranteed or insured) mortgage loans. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate-holders as to certain characteristics of the mortgage loans and as to the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. Upon a breach of any representation or warranty that materially and adversely affects the interests of the related certificate-holders in a mortgage loan, the seller or servicer generally will be obligated either to cure the breach in all material

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respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate-holders or the trustee for the material breach of any such representation or warranty by the seller or servicer.

     Ratings. The ratings assigned by a rating organization to Mortgage Pass-Throughs address the likelihood of the receipt of all distributions on the underlying mortgage loans by the related certificate-holders under the agreements pursuant to which such certificates are issued. A rating organization’s ratings normally take into consideration the credit quality of the related mortgage pool, including any credit support providers, structural and legal aspects associated with such certificates, and the extent to which the payment stream on such mortgage pool is adequate to make payments required by such certificates. A rating organization’s ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments on the related mortgage loans. In addition, the rating assigned by a rating organization to a certificate may not address the remote possibility that, in the event of the insolvency of the issuer of certificates where a subordinated interest was retained, the issuance and sale of the senior certificates may be recharacterized as a financing and, as a result of such recharacterization, payments on such certificates may be affected.

     Credit Enhancement. Mortgage pools credited by non-governmental issuers generally offer a higher yield than government and government-related pools because of the absence of direct or indirect government or agency payment guarantees. To lessen the effect of failures by obligors on underlying assets to make payments. Mortgage Pass-Throughs may contain elements of credit support. Credit support falls generally into two categories: (i) liquidity protection and (ii) protection against losses resulting from default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pools of mortgages, the provision of a reserve fund, or a combination thereof, to ensure, subject to certain limitations, that scheduled payments on the underlying pool are made in a timely fashion. Protection against losses resulting from default ensures ultimate payment of the obligations on at least a portion of the assets in the pool. Such credit support can be provided by, among other things, payment guarantees, letters of credit, pool insurance, subordination, or any combination thereof.

     Subordination; Shifting of Interest; Reserve Fund. In order to achieve ratings on one or more classes of Mortgage Pass-Throughs, one or more classes of certificates may be subordinate certificates which provide that the rights of the subordinate certificate-holders to receive any or a specified portion of distributions with respect to the underlying mortgage loans may be subordinated to the rights of the senior certificate-holders. If so structured, the subordination feature may be enhanced by distributing to the senior certificate-holders on certain distribution dates, as payment of principal, a specified percentage (which generally declines over time) of all principal payments received during the preceding prepayment period (“shifting interest credit enhancement”). This will have the effect of accelerating the amortization of the senior certificates while increasing the interest in the trust fund evidenced by the subordinate certificates. Increasing the interest of the subordinate certificates relative to that of the senior certificates is intended to preserve the availability of the subordination provided by the subordinate certificates. In addition, because the senior certificate-holders in a shifting interest credit enhancement structure are entitled to receive a percentage of principal prepayments which is greater than their proportionate interest in the trust fund, the rate of principal prepayments on the mortgage loans may have an even greater effect on the rate of principal payments and the amount of interest payments on, and the yield to maturity of, the senior certificates.

     In addition to providing for a preferential right of the senior certificate-holders to receive current distributions from the mortgage pool, a reserve fund may be established relating to such certificates (the “Reserve Fund”). The Reserve Fund may be created with an initial cash deposit by the originator or servicer and augmented by the retention of distributions otherwise available to the subordinate certificate-holders or by excess servicing fees until the Reserve Fund reaches a specified amount.

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     The subordination feature, and any Reserve Fund, are intended to enhance the likelihood of timely receipt by senior certificate-holders of the full amount of scheduled monthly payments of principal and interest due to them and will protect the senior certificate-holders against certain losses; however, in certain circumstances the Reserve Fund could be depleted and temporary shortfalls could result. In the event that the Reserve Fund is depleted before the subordinated amount is reduced to zero, senior certificate-holders will nevertheless have a preferential right to receive current distributions from the mortgage pool to the extent of the then outstanding subordinated amount. Unless otherwise specified, until the subordinated amount is reduced to zero, on any distribution date any amount otherwise distributable to the subordinate certificates or, to the extent specified, in the Reserve Fund will generally be used to offset the amount of any losses realized with respect to the mortgage loans (“Realized Losses”). Realized Losses remaining after application of such amounts will generally be applied to reduce the ownership interest of the subordinate certificates in the mortgage pool. If the subordinated amount has been reduced to zero, Realized Losses generally will be allocated pro rata among all certificate-holders in proportion to their respective outstanding interests in the mortgage pool.

     Alternative Credit Enhancement. As an alternative, or in addition to the credit enhancement afforded by subordination, credit enhancement for Mortgage Pass-Throughs may be provided by mortgage insurance, hazard insurance, by the deposit of cash, certificates of deposit, letters of credit, a limited guaranty or by such other methods as are acceptable to a rating agency. In certain circumstances, such as where credit enhancement is provided by guarantees or a letter of credit, the security is subject to credit risk because of its exposure to an external credit enhancement provider.

     Voluntary Advances. Generally, in the event of delinquencies in payments on the mortgage loans underlying the Mortgage Pass-Throughs, the servicer may agree to make advances of cash for the benefit of certificate-holders, but generally will do so only to the extent that it determines such voluntary advances will be recoverable from future payments and collections on the mortgage loans or otherwise.

     Optional Termination. Generally, the servicer may, at its option with respect to any certificates, repurchase all of the underlying mortgage loans remaining outstanding at such time if the aggregate outstanding principal balance of such mortgage loans is less than a specified percentage (generally 5-10%) of the aggregate outstanding principal balance of the mortgage loans as of the cut-off date specified with respect to such series.

Asset-Backed Securities

     Asset-backed securities represent participations in, or are secured by and payable from, assets such as motor vehicle installment sales, 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 assets are securitized through the use of trusts and 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 unaffiliated with the trust or corporation, or other credit enhancements may be present.

     Each Fund may invest in asset-backed securities. The Short Duration Government Fund may only invest in asset-backed securities that are issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. Such securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, a Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. To

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the extent that a Fund invests in asset-backed securities, the values of such Fund’s portfolio securities will vary with changes in market interest rates generally and the differentials in yields among various kinds of asset-backed securities.

     Asset-backed securities present certain additional risks because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to Mortgage Assets. Credit card receivables are generally unsecured and the debtors on such receivables 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. Automobile receivables generally are secured, but by automobiles rather than residential real property. Most issuers of automobile receivables permit the loan servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would acquire an interest superior to that of the holders of the asset-backed securities. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of the automobile receivables may not have a proper security interest in the underlying automobiles. Therefore, if the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, a Fund will be unable to possess and sell the underlying collateral and that a Fund’s recoveries on repossessed collateral may not be available to support payments on these securities.

Loan Participations

     The Investment Grade Credit Fund, High Yield Fund, and Emerging Markets Debt Fund may invest in loan participations. A loan participation is an interest in a loan to a U.S. or foreign company or other borrower which is administered and sold by a financial intermediary. In a typical corporate loan syndication, a number of lenders, usually banks (co-lenders), lend a corporate borrower a specified sum pursuant to the terms and conditions of a loan agreement. One of the co-lenders usually agrees to act as the agent bank with respect to the loan.

     Participation interests acquired by the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund may take the form of a direct or co-lending relationship with the corporate borrower, an assignment of an interest in the loan by a co-lender or another participant, or a participation in the seller’s share of the loan. When the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund acts as co-lender in connection with a participation interest or when the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund acquires certain participation interests, the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund will have direct recourse against the borrower if the borrower fails to pay scheduled principal and interest. In cases where the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund lacks direct recourse, it will look to the agent bank to enforce appropriate credit remedies against the borrower. In these cases, the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation (such as commercial paper) of such borrower. For example, in the event of the bankruptcy or insolvency of the corporate borrower, a loan participation may be subject to certain defenses by the borrower as a result of improper conduct by the agent bank. Moreover, under the terms of the loan participation, the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund may be regarded as a creditor of the agent bank (rather than of the underlying corporate borrower), so that the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund may also be subject to the risk that the agent bank may become insolvent. The secondary market, if any, for these loan participations is limited and loan participations purchased by the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund will normally be regarded as illiquid.

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     For purposes of certain investment limitations pertaining to diversification of the Fund’s portfolio investments, the issuer of a loan participation will be the underlying borrower. However, in cases where the Investment Grade Credit Fund, High Yield Fund, or Emerging Markets Debt Fund do not have recourse directly against the borrower, both the borrower and each agent bank and co-lender interposed between the Fund and the borrower will be deemed issuers of a loan participation.

Zero Coupon, Deferred Interest, Pay-in-Kind and Capital Appreciation Bonds

     Each Fund may invest in zero coupon, deferred interest, pay-in-kind (“PIK”) and capital appreciation bonds. Zero coupon, deferred interest and capital appreciation bonds are debt securities issued or sold at a discount from their face value and which do not entitle the holder to any periodic payment of interest prior to maturity or a specified date. The original issue discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, the liquidity of the security and the perceived credit quality of the issuer. These securities also may take the form of debt securities that have been stripped of their unmatured interest coupons, the coupons themselves or receipts or certificates representing interests in such stripped debt obligations or coupons. The market prices of zero coupon, deferred interest, capital appreciation bonds and PIK securities generally are more volatile than the market prices of interest bearing securities and are likely to respond to a greater degree to changes in interest rates than interest bearing securities having similar maturities and credit quality.

     PIK securities may be debt obligations or preferred shares that provide the issuer with the option of paying interest or dividends on such obligations in cash or in the form of additional securities rather than cash. Similar to zero coupon bonds and deferred interest bonds, PIK securities are designed to give an issuer flexibility in managing cash flow. PIK securities that are debt securities can be either senior or subordinated debt and generally trade flat (i.e., without accrued interest). The trading price of PIK debt securities generally reflects the market value of the underlying debt plus an amount representing accrued interest since the last interest payment.

     Zero coupon, deferred interest, capital appreciation and PIK securities involve the additional risk that, unlike securities that periodically pay interest to maturity, a Fund will realize no cash until a specified future payment date unless a portion of such securities is sold and, if the issuer of such securities defaults, a Fund may obtain no return at all on its investment. In addition, even though such securities do not provide for the payment of current interest in cash, the Funds are nonetheless required to accrue income on such investments for each taxable year and generally are required to distribute such accrued amounts (net of deductible expenses, if any) to avoid being subject to tax. Because no cash is generally received at the time of the accrual, a Fund may be required to liquidate other portfolio securities to obtain sufficient cash to satisfy federal tax distribution requirements applicable to the Fund. A portion of the discount with respect to stripped tax exempt securities or their coupons may be taxable. See “Taxation.”

Variable and Floating Rate Securities

     The interest rates payable on certain securities in which each Fund may invest are not fixed and may fluctuate based upon changes in market rates. A variable rate obligation has an interest rate which is adjusted at pre-designated periods in response to changes in the market rate of interest on which the interest rate is based. Variable and floating rate obligations are less effective than fixed rate instruments at locking in a particular yield. Nevertheless, such obligations may fluctuate in value in response to interest rate changes if there is a delay between changes in market interest rates and the interest reset date for the obligation.

     Each Fund (other than the Enhanced Income Fund and Emerging Markets Debt Fund) may invest in “leveraged” inverse floating rate debt instruments (“inverse floaters”), including “leveraged inverse floaters.” The interest rate on inverse floaters resets in the opposite direction from the market rate of interest to which

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the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. Accordingly, the duration of an inverse floater may exceed its stated final maturity. Certain inverse floaters may be deemed to be illiquid securities for purposes of each Fund’s limitation on illiquid investments.

Preferred Stock, Warrants and Rights

     The Enhanced Income, Core Fixed Income, Investment Grade Credit, High Yield, and Emerging Markets Debt Funds may invest in preferred stock and the High Yield and Emerging Markets Debt Funds may invest in warrants and rights. Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default (such as a covenant default or filing of a bankruptcy petition) or other non-compliance by the issuer with the terms of the preferred stock. Often, however, on the occurrence of any such event of default or non-compliance by the issuer, preferred stockholders will be entitled to gain representation on the issuer’s board of directors or increase their existing board representation. In addition, preferred stockholders may be granted voting rights with respect to certain issues on the occurrence of any event of default.

     Warrants and other rights are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.

Corporate Debt Obligations

     Enhanced Income, Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield Municipal, High Yield and Emerging Markets Debt Funds may invest in corporate debt obligations, including obligations of industrial, utility and financial issuers. Corporate debt obligations include bonds, notes, debentures and other obligations of corporations to pay interest and repay principal. Corporate debt obligations are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market liquidity.

     Fixed income securities rated BBB or Baa are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. Medium to lower rated and comparable non-rated securities tend to offer higher yields than higher rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers. Since medium to lower rated securities generally involve greater risks of loss of income and principal than higher rated securities, investors should consider carefully the relative risks associated with investment in securities which carry medium to lower ratings and in comparable unrated securities. In addition to the risk of default, there are the related costs of recovery on defaulted issues. The Funds’ Investment Advisers will attempt to reduce these risks through portfolio diversification and by analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends and corporate developments. The Investment Adviser continually monitors the investments in a Fund’s portfolio and evaluates whether to dispose of or to retain corporate debt obligations whose credit ratings or credit quality may have changed.

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Commercial Paper and Other Short-Term Corporate Obligations

     Enhanced Income, Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield Municipal, High Yield and Emerging Markets Debt Funds may invest in commercial paper and other short-term obligations payable in U.S. dollars and issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities. Commercial paper represents short-term unsecured promissory notes issued in bearer form by banks or bank holding companies, corporations and finance companies.

Trust Preferreds

     Enhanced Income, Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield Municipal, High Yield and Emerging Markets Debt Funds may invest in trust preferred securities. A trust preferred or capital security is a long dated bond (for example 30 years) with preferred features. The preferred features are that payment of interest can be deferred for a specified period without initiating a default event. From a bondholder’s viewpoint, the securities are senior in claim to standard preferred but are junior to other bondholders. From the issuer’s viewpoint, the securities are attractive because their interest is deductible for tax purposes like other types of debt instruments.

High Yield Securities

     High Yield Municipal, High Yield and Emerging Markets Debt Funds may invest in bonds rated BB or below by Standard & Poor’s or Ba or below by Moody’s (or comparable rated and unrated securities). These bonds are commonly referred to as “junk bonds” and are considered speculative. The ability of their issuers to make principal and interest payments may be questionable. In some cases, such bonds may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will entail greater risks than those associated with investment grade bonds (i.e., bonds rated AAA, AA, A or BBB by Standard and Poor’s or Aaa, Aa, A or Baa by Moody’s). Analysis of the creditworthiness of issuers of high yield securities may be more complex than for issuers of higher quality debt securities, and the ability of a Fund to achieve its investment objective may, to the extent of its investments in high yield securities, be more dependent upon such creditworthiness analysis than would be the case if the Fund were investing in higher quality securities. See Appendix A for a description of the corporate bond and preferred stock ratings by Standard & Poor’s, Moody’s, Fitch, Inc. (“Fitch”) and Dominion Bond Rating Service Limited (“DBRS”).

     The amount of high yield, fixed-income securities proliferated in the 1980s and early 1990s as a result of increased merger and acquisition and leveraged buyout activity. Such securities are also issued by less-established corporations desiring to expand. Risks associated with acquiring the securities of such issuers generally are greater than is the case with higher rated securities because such issuers are often less creditworthy companies or are highly leveraged and generally less able than more established or less leveraged entities to make scheduled payments of principal and interest. High yield securities are also issued by governmental issuers that may have difficulty in making all scheduled interest and principal payments.

     The market values of high yield, fixed-income securities tends to reflect those individual corporate or municipal developments to a greater extent than do those of higher rated securities, which react primarily to fluctuations in the general level of interest rates. Issuers of such high yield securities are often highly leveraged, and may not be able to make use of more traditional methods of financing. Their ability to service

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debt obligations may be more adversely affected than issuers of higher rated securities by economic downturns, specific corporate or governmental developments or the issuers’ inability to meet specific projected business forecasts. These non-investment grade securities also tend to be more sensitive to economic conditions than higher-rated securities. Negative publicity about the junk bond market and investor perceptions regarding lower-rated securities, whether or not based on fundamental analysis, may depress the prices for such securities.

     Since investors generally perceive that there are greater risks associated with non-investment grade securities of the type in which the High Yield Municipal, High Yield and Emerging Markets Debt Funds invest, the yields and prices of such securities may tend to fluctuate more than those for higher-rated securities. In the lower quality segments of the fixed-income securities market, changes in perceptions of issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the fixed-income securities market, resulting in greater yield and price volatility.

     Another factor which causes fluctuations in the prices of high yield, fixed-income securities is the supply and demand for similarly rated securities. In addition, the prices of fixed-income securities fluctuate in response to the general level of interest rates. Fluctuations in the prices of portfolio securities subsequent to their acquisition will not affect cash income from such securities but will be reflected in the High Yield Municipal Fund’s, the High Yield Fund’s and the Emerging Markets Debt Fund’s net asset value.

     The risk of loss from default for the holders of high yield, fixed-income securities is significantly greater than is the case for holders of other debt securities because such high yield, fixed-income securities are generally unsecured and are often subordinated to the rights of other creditors of the issuers of such securities. Investment by the High Yield Municipal, High Yield and Emerging Markets Debt Funds in already defaulted securities poses an additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by the High Yield Municipal, High Yield and Emerging Markets Debt Funds of their initial investment and any anticipated income or appreciation is uncertain. In addition, the High Yield Municipal, High Yield and Emerging Markets Debt Funds may incur additional expenses to the extent that they are required to seek recovery relating to the default in the payment of principal or interest on such securities or otherwise protect their interests. The High Yield Municipal, High Yield and Emerging Markets Debt Funds may be required to liquidate other portfolio securities to satisfy annual distribution obligations of the Funds in respect of accrued interest income on securities which are subsequently written off, even though the High Yield Municipal, High Yield and Emerging Markets Debt Funds have not received any cash payments of such interest.

     The secondary market for high yield, fixed-income securities is concentrated in relatively few markets and is dominated by institutional investors, including mutual funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as and is more volatile than the secondary market for higher-rated securities. In addition, the trading volume for high-yield, fixed-income securities is generally lower than that of higher rated securities and the secondary market for high yield, fixed-income securities could contract under adverse market or economic conditions independent of any specific adverse changes in the condition of a particular issuer. These factors may have an adverse effect on the ability of the High Yield Municipal, High Yield and Emerging Markets Debt Funds to dispose of particular portfolio investments. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the net asset value of the High Yield Municipal, High Yield and Emerging Markets Debt Funds. A less liquid secondary market also may make it more difficult for the High Yield Municipal, High Yield and Emerging Markets Debt Funds to obtain precise valuations of the high yield securities in their portfolios.

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     The adoption of new legislation could adversely affect the secondary market for high yield securities and the financial condition of issuers of these securities. The form of any future legislation, and the probability of such legislation being enacted, is uncertain.

     Non-investment grade or high-yield, fixed-income securities also present risks based on payment expectations. High yield, fixed-income securities frequently contain “call” or buy-back features which permit the issuer to call or repurchase the security from its holder. If an issuer exercises such a “call option” and redeems the security, the High Yield Municipal, High Yield and Emerging Markets Debt Funds may have to replace such security with a lower-yielding security, resulting in a decreased return for investors. In addition, if the High Yield Municipal, High Yield and Emerging Markets Debt Funds experience net redemptions of their shares, they may be forced to sell their higher-rated securities, resulting in a decline in the overall credit quality of the portfolios of the High Yield Municipal, High Yield and Emerging Markets Debt Funds and increasing the exposure of the High Yield Municipal, High Yield and Emerging Markets Debt Funds to the risks of high yield securities.

     Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of non-investment grade securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the conditions of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality. Investments in non-investment grade and comparable unrated obligations will be more dependent on the Investment Adviser’s credit analysis than would be the case with investments in investment-grade debt obligations. The Investment Adviser employs its own credit research and analysis, which includes a study of an issuer’s existing debt, capital structure, ability to service debt and to pay dividends, sensitivity to economic conditions, operating history and current trend of earnings. The Investment Adviser continually monitors the investments in the portfolios of the High Yield Municipal, High Yield and Emerging Markets Debt Funds and evaluates whether to dispose of or to retain non-investment grade and comparable unrated securities whose credit ratings or credit quality may have changed.

     Because the market for high yield securities is still relatively new and has not weathered a major economic recession, it is unknown what effects such a recession might have on such securities. A widespread economic downturn could result in increased defaults and losses.

Investing in Central and South American Countries

     A significant portion of the Emerging Markets Debt Fund’s portfolio may be invested in issuers located in Central and South American countries. The economies of Central and South American countries have experienced considerable difficulties in the past decade, including high inflation rates, high interest rates and currency devaluations. As a result, Central and South American securities markets have experienced great volatility. In addition, a number of Central and South American countries are among the largest emerging country debtors. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies.

     In the past, many Central and South American countries have experienced substantial, and in some periods extremely high, rates of inflation for many years. High inflation rates have also led to high interest rates. Inflation and rapid fluctuations in inflation rates have had, and could, in the future, have very negative effects on the economies and securities markets of certain Central and South American countries. Many of the currencies of Central and South American countries have experienced steady devaluation relative to the U.S. dollar, and major devaluations have historically occurred in certain countries. Any devaluations in the currencies in which the Fund’s portfolio securities are denominated

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may have a detrimental impact on the Fund. There is also a risk that certain Central and South American countries may restrict the free conversion of their currencies into other currencies. Some Central and South American countries may have managed currencies which are not free floating against the U.S. dollar. This type of system can lead to sudden and large adjustments in the currency that, in turn, can have a disruptive and negative effect on foreign investors. Certain Central and South American currencies may not be internationally traded and it would be difficult for the Fund to engage in foreign currency transactions designed to protect the value of the Fund’s interests in securities denominated in such securities.

     In addition, substantial limitations may exist in certain countries with respect to the Fund’s ability to repatriate investment income, capital or the proceeds of sales of securities by foreign investors. The Fund could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the Fund of any restrictions on investments.

     The emergence of the Central and South American economies and securities markets will require continued economic and fiscal discipline that has been lacking at times in the past, as well as stable political and social conditions. Governments of many Central and South American countries have exercised and continue to exercise substantial influence over many aspects of the private sector. The political history of certain Central and South American countries has been characterized by political uncertainty, intervention by the military in civilian and economic spheres and political corruption. Such developments, if they were to recur, could reverse favorable trends toward market and economic reform, privatization and removal of trade barriers.

     International economic conditions, particularly those in the United States, as well as world prices for oil and other commodities may also influence the recovery of the Central and South American economies. Because commodities such as oil and gas, minerals and metals represent a significant percentage of the region’s exports, the economies of Central and South American countries are particularly sensitive to fluctuations in commodity prices. As a result, the economies in many of these countries can experience significant volatility.

     Certain Central and South American countries have entered into regional trade agreements that would, among other things, reduce barriers among countries, increase competition among companies and reduce government subsidies in certain industries. No assurance can be given that these changes will result in the economic stability intended. There is a possibility that these trade arrangements will not be implemented, will be implemented but not completed or will be completed but then partially or completely unwound. It is also possible that a significant participant could choose to abandon a trade agreement, which could diminish its credibility and influence. Any of these occurrences could have adverse effects on the markets of both participating and non-participating countries, including share appreciation or depreciation of participant’s national currencies and a significant increase in exchange rate volatility, a resurgence in economic protectionism, an undermining of confidence in the Central and South American markets, an undermining of Central and South American economic stability, the collapse or slowdown of the drive towards Central and South American economic unity, and/or reversion of the attempts to lower government debt and inflation rates that were introduced in anticipation of such trade agreements. Such developments could have an adverse impact on the Fund’s investments in Central and South America generally or in specific countries participating in such trade agreements.

Bank Obligations

     Enhanced Income, Ultra-Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may each invest in obligations issued or guaranteed by U.S. and, except with respect to U.S. Mortgages Fund,

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foreign banks. (Government Income Fund may only invest in U.S. dollar denominated securities.) Bank obligations, including without limitation time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be obligations only of the issuing branch pursuant to the terms of the specific obligations or government regulation.

     Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. Foreign banks are subject to different regulations and are generally permitted to engage in a wider variety of activities than U.S. banks. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operations of this industry.

Municipal Securities

     Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may invest in Municipal Securities, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes but not necessarily exempt from the federal alternative minimum tax or from the income taxes of any state or local government). Under normal circumstances, the California Municipal and New York Municipal Funds, intend to invest primarily in Municipal Securities, the interest on which is exempt from regular federal income tax, the federal alternative minimum tax, California State personal income tax (in the case of the California Municipal Fund) and New York State and New York City personal income taxes (in the case of the New York Municipal Fund). In addition, Municipal Securities include participation interests in such securities the interest on which is, in the opinion of bond counsel or counsel selected by the Investment Adviser, excluded from gross income for federal income tax purposes and, as applicable, from California State or New York State and New York City personal income taxes. Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may revise their definition of Municipal Securities in the future to include other types of securities that currently exist, the interest on which is or will be, in the opinion of such counsel, excluded from gross income for federal income tax purposes, provided that investing in such securities is consistent with each Fund’s investment objective and policies. Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, Core Fixed Income, High Yield Municipal, High Yield, U.S. Mortgages and Investment Grade Credit Funds may also invest in taxable Municipal Securities.

     The yields and market values of municipal securities are determined primarily by the general level of interest rates, the creditworthiness of the issuers of municipal securities and economic and political conditions affecting such issuers. The yields and market prices of municipal securities may be adversely affected by changes in tax rates and policies, which may have less effect on the market for taxable fixed-income securities. Moreover, certain types of municipal securities, such as housing revenue bonds, involve prepayment risks which could affect the yield on such securities. The credit rating assigned to municipal securities may reflect the existence of guarantees, letters of credit or other credit enhancement features available to the issuers or holders of such municipal securities.

     Dividends paid by the Funds, other than the Tax Exempt Funds, that are derived from interest paid on both tax exempt and taxable Municipal Securities will be taxable to the Funds’ shareholders.

     Municipal Securities are often issued to obtain funds for various public purposes including refunding

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outstanding obligations, obtaining funds for general operating expenses, and obtaining funds to lend to other public institutions and facilities. Municipal Securities also include certain “private activity bonds” or industrial development bonds, which are issued by or on behalf of public authorities to provide financing aid to acquire sites or construct or equip facilities within a municipality for privately or publicly owned corporations.

     Investments in municipal securities are subject to the risk that the issuer could default on its obligations. Such a default could result from the inadequacy of the sources or revenues from which interest and principal payments are to be made or the assets collateralizing such obligations. Revenue bonds, including private activity bonds, are backed only by specific assets or revenue sources and not by the full faith and credit of the governmental issuer.

     The two principal classifications of Municipal Securities are “general obligations” and “revenue obligations.” General obligations are secured by the issuer’s pledge of its full faith and credit for the payment of principal and interest, although the characteristics and enforcement of general obligations may vary according to the law applicable to the particular issuer. Revenue obligations, which include, but are not limited to, private activity bonds, resource recovery bonds, certificates of participation and certain municipal notes, are not backed by the credit and taxing authority of the issuer, and are payable solely from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Nevertheless, the obligations of the issuer of a revenue obligation may be backed by a letter of credit, guarantee or insurance. General obligations and revenue obligations may be issued in a variety of forms, including commercial paper, fixed, variable and floating rate securities, tender option bonds, auction rate bonds, zero coupon bonds, deferred interest bonds and capital appreciation bonds.

     In addition to general obligations and revenue obligations, there is a variety of hybrid and special types of Municipal Securities. There are also numerous differences in the security of Municipal Securities both within and between these two principal classifications.

     For the purpose of applying a Fund’s investment restrictions, the identification of the issuer of a Municipal Security which is not a general obligation is made by the Investment Adviser based on the characteristics of the Municipal Security, the most important of which is the source of funds for the payment of principal and interest on such securities.

     An entire issue of Municipal Securities may be purchased by one or a small number of institutional investors, including one or more Funds. Thus, the issue may not be said to be publicly offered. Unlike some securities that are not publicly offered, a secondary market exists for many Municipal Securities that were not publicly offered initially and such securities may be readily marketable.

     The credit rating assigned to Municipal Securities may reflect the existence of guarantees, letters of credit or other credit enhancement features available to the issuers or holders of such Municipal Securities.

     The obligations of the issuer to pay the principal of and interest on a Municipal Security 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, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest or imposing other constraints upon the enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power or ability of the issuer to pay when due principal of or interest on a Municipal Security may be materially affected.

     While the Municipal Income Fund, California Municipal Fund, New York Municipal Fund, High Yield Municipal Fund and Short Duration Tax-Free Fund, under normal circumstances, invest substantially

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all of their assets in Municipal Securities, the recognition of certain accrued market discount income (if the Funds acquire Municipal Securities or other obligations at a market discount), income from investments other than Municipal Securities and any capital gains generated from the disposition of investments, will result in taxable income. In addition to federal income tax, shareholders may be subject to state, local or foreign taxes on distributions of such income received from the Funds.

     From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on Municipal Securities. For example, under the Tax Reform Act of 1986, interest on certain private activity bonds must be included in an investor’s federal alternative minimum taxable income, and corporate investors must include all tax exempt interest in their federal alternative minimum taxable income. The Trust cannot predict what legislation, if any, may be proposed in the future in Congress as regards the federal income tax status of interest on Municipal Securities or which proposals, if any, might be enacted. Such proposals, if enacted, might materially and adversely affect the availability of Municipal Securities for investment by the Tax Exempt Funds and the Funds’ liquidity and value. In such an event the Board of Trustees would reevaluate the Funds’ investment objectives and policies.

     Municipal Leases, Certificates of Participation and Other Participation Interests. Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may invest in municipal leases, certificates of participation and other participation interests. A municipal lease is an obligation in the form of a lease or installment purchase which is issued by a state or local government to acquire equipment and facilities. Income from such obligations is generally exempt from state and local taxes in the state of issuance. Municipal leases frequently involve special risks not normally associated with general obligations or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the governmental issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt issuance limitations are deemed to be inapplicable because of the inclusion in many leases or contracts of “non-appropriation” clauses that relieve the governmental issuer of any obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. In addition, such leases or contracts may be subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering or the failure to fully recover a Fund’s original investment. To the extent that a Fund invests in unrated municipal leases or participates in such leases, the credit quality rating and risk of cancellation of such unrated leases will be monitored on an ongoing basis.

     Certificates of participation represent undivided interests in municipal leases, installment purchase agreements or other instruments. The certificates are typically issued by a trust or other entity which has received an assignment of the payments to be made by the state or political subdivision under such leases or installment purchase agreements.

     Certain municipal lease obligations and certificates of participation may be deemed to be illiquid for the purpose of the Funds’ limitation on investments in illiquid securities. Other municipal lease obligations and certificates of participation acquired by a Fund may be determined by the Investment Adviser, pursuant to guidelines adopted by the Trustees of the Trust, to be liquid securities for the purpose of such limitation. In determining the liquidity of municipal lease obligations and certificates of participation, the Investment Adviser will consider a variety of factors, including: (i) the willingness of dealers to bid for the security; (ii)

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the number of dealers willing to purchase or sell the obligation and the number of other potential buyers; (iii) the frequency of trades or quotes for the obligation; and (iv) the nature of the marketplace trades. In addition, the Investment Adviser will consider factors unique to particular lease obligations and certificates of participation affecting the marketability thereof. These include the general creditworthiness of the issuer, the importance to the issuer of the property covered by the lease and the likelihood that the marketability of the obligation will be maintained throughout the time the obligation is held by a Fund.

     Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, Core Fixed Income, High Yield Municipal, High Yield, U.S. Mortgages and Investment Grade Credit Funds may purchase participations in Municipal Securities held by a commercial bank or other financial institution. Such participations provide a Fund with the right to a pro rata undivided interest in the underlying Municipal Securities. In addition, such participations generally provide a Fund with the right to demand payment, on not more than seven days’ notice, of all or any part of such Fund’s participation interest in the underlying Municipal Securities, plus accrued interest.

     Municipal Notes. Municipal Securities in the form of notes generally are used to provide for short-term capital needs, in anticipation of an issuer’s receipt of other revenues or financing, and typically have maturities of up to three years. Such instruments may include tax anticipation notes, revenue anticipation notes, bond anticipation notes, tax and revenue anticipation notes and construction loan notes. Tax anticipation notes are issued to finance the working capital needs of governments. Generally, they are issued in anticipation of various tax revenues, such as income, sales, property, use and business taxes, and are payable from these specific future taxes. Revenue anticipation notes are issued in expectation of receipt of other kinds of revenue, such as federal revenues available under federal revenue sharing programs. Bond anticipation notes are issued to provide interim financing until long-term bond financing can be arranged. In most cases, the long-term bonds then provide the funds needed for repayment of the notes. Tax and revenue anticipation notes combine the funding sources of both tax anticipation notes and revenue anticipation notes. Construction loan notes are sold to provide construction financing. These notes are secured by mortgage notes insured by the FHA; however, the proceeds from the insurance may be less than the economic equivalent of the payment of principal and interest on the mortgage note if there has been a default. The obligations of an issuer of municipal notes are generally secured by the anticipated revenues from taxes, grants or bond financing. An investment in such instruments, however, presents a risk that the anticipated revenues will not be received or that such revenues will be insufficient to satisfy the issuer’s payment obligations under the notes or that refinancing will be otherwise unavailable.

     Tax Exempt Commercial Paper. Issues of commercial paper typically represent short-term, unsecured, negotiable promissory notes. These obligations are issued by state and local governments and their agencies to finance working capital needs of municipalities or to provide interim construction financing and are paid from general revenues of municipalities or are refinanced with long-term debt. In most cases, tax exempt commercial paper is backed by letters of credit, lending agreements, note repurchase agreements or other credit facility agreements offered by banks or other institutions.

     Pre-Refunded Municipal Securities. The principal of and interest on pre-refunded Municipal Securities are no longer paid from the original revenue source for the securities. Instead, the source of such payments is typically an escrow fund consisting of U.S. Government Securities. The assets in the escrow fund are derived from the proceeds of refunding bonds issued by the same issuer as the pre-refunded Municipal Securities. Issuers of Municipal Securities use this advance refunding technique to obtain more favorable terms with respect to securities that are not yet subject to call or redemption by the issuer. For example, advance refunding enables an issuer to refinance debt at lower market interest rates, restructure debt to improve cash flow or eliminate restrictive covenants in the indenture or other governing instrument for the pre-refunded Municipal Securities. However, except for a change in the revenue source from which principal and interest payments are made, the pre-refunded Municipal Securities remain outstanding on their original

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terms until they mature or are redeemed by the issuer. Pre-refunded Municipal Securities are often purchased at a price which represents a premium over their face value.

     Private Activity Bonds. Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may each invest in certain types of Municipal Securities, generally referred to as industrial development bonds (and referred to under current tax law as private activity bonds), which are issued by or on behalf of public authorities to obtain funds to provide privately operated housing facilities, airport, mass transit or port facilities, sewage disposal, solid waste disposal or hazardous waste treatment or disposal facilities and certain local facilities for water supply, gas or electricity. Other types of industrial development bonds, the proceeds of which are used for the construction, equipment, repair or improvement of privately operated industrial or commercial facilities, may constitute Municipal Securities, although the current federal tax laws place substantial limitations on the size of such issues. A Tax Exempt Fund’s distributions of its interest income from private activity bonds may subject certain investors to the federal alternative minimum tax whereas a Taxable Fund’s distributions of any tax exempt interest it receives from any source will be taxable for regular federal income tax purposes.

     Tender Option Bonds. A tender option bond is a Municipal Security (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 with the agreement of a third party, such as a bank, broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities to the institution and receive the face value thereof. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the bond’s fixed coupon rate and the rate, as determined by a remarketing or similar agent at or near the commencement of such period, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax exempt rate. However, an institution will not be obligated to accept tendered bonds in the event of certain defaults or a significant downgrade in the credit rating assigned to the issuer of the bond. 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. Tender option bonds are deemed to be liquid unless, in the opinion of the Investment Adviser, the credit quality of the bond issuer and the financial institution is deemed, in light of the Fund’s credit quality requirements, to be inadequate and the bond would not otherwise be readily marketable. The Tax Exempt Funds intend to invest in tender option bonds the interest on which will, in the opinion of bond counsel, counsel for the issuer of interests therein or counsel selected by the Investment Adviser, be exempt from regular federal income tax. However, because there can be no assurance that the Internal Revenue Service (the “IRS”) will agree with such counsel’s opinion in any particular case, there is a risk that a Tax Exempt Fund will not be considered the owner of such tender option bonds and thus will not be entitled to treat such interest as exempt from such tax. Additionally, the federal income tax treatment of certain other aspects of these investments, including the proper tax treatment of tender option bonds and the associated fees in relation to various regulated investment company tax provisions is unclear. The Tax Exempt Funds intend to manage their portfolios in a manner designed to eliminate or minimize any adverse impact from the tax rules applicable to these investments.

     Auction Rate Securities. Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may invest in auction rate securities. Auction rate securities include auction rate Municipal Securities and auction rate preferred securities issued by closed-end investment companies that invest primarily in Municipal Securities (collectively, “auction rate securities”). Provided that the auction mechanism is successful, auction rate securities usually permit the holder to sell the securities in an auction at par value at specified intervals. The dividend is reset by “Dutch” auction in which bids are made by broker-dealers and other institutions for a

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certain amount of securities at a specified minimum yield. The dividend rate set by the auction is the lowest interest or dividend rate that covers all securities offered for sale. While this process is designed to permit auction rate securities to be traded at par value, there is some risk that an auction will fail due to insufficient demand for the securities. A Fund will take the time remaining until the next scheduled auction date into account for purpose of determining the securities’ duration.

     Dividends on auction rate preferred securities issued by a closed-end fund may be designated as exempt from federal income tax to the extent they are attributable to exempt income earned by the fund on the securities in its portfolio and distributed to holders of the preferred securities, provided that the preferred securities are treated as equity securities for federal income tax purposes and the closed-end fund complies with certain tests under the Internal Revenue Code of 1986, as amended (the “Code”).

     A Fund’s investments in auction rate securities of closed-end funds are subject to the limitations prescribed by the Act and certain state securities regulations. The Funds will indirectly bear their proportionate share of any management and other fees paid by such closed-end funds in addition to the advisory fees payable directly by the Funds.

     Insurance. Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may invest in “insured” tax exempt Municipal Securities. Insured Municipal Securities are securities for which scheduled payments of interest and principal are guaranteed by a private (non-governmental) insurance company. The insurance only entitles a Fund to receive the face or par value of the securities held by the Fund. The insurance does not guarantee the market value of the Municipal Securities or the value of the shares of a Fund.

     Ultra-Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, California Municipal, New York Municipal, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, High Yield Municipal and High Yield Funds may utilize new issue or secondary market insurance. A new issue insurance policy is purchased by a bond issuer who wishes to increase the credit rating of a security. By paying a premium and meeting the insurer’s underwriting standards, the bond issuer is able to obtain a high credit rating (usually, Aaa from Moody’s or AAA from Standard & Poor’s) for the issued security. Such insurance is likely to increase the purchase price and resale value of the security. New issue insurance policies generally are non-cancelable and continue in force as long as the bonds are outstanding.

     A secondary market insurance policy is purchased by an investor (such as a Fund) subsequent to a bond’s original issuance and generally insures a particular bond for the remainder of its term. The Funds may purchase bonds which have already been insured under a secondary market insurance policy by a prior investor, or the Funds may directly purchase such a policy from insurers for bonds which are currently uninsured.

     An insured Municipal Security acquired by a Fund will typically be covered by only one of the above types of policies. All of the insurance policies used by a Fund will be obtained only from insurance companies rated, at the time of purchase, A by Moody’s or Standard & Poor’s, or if unrated, determined by the Investment Adviser to be of comparable quality. The Municipal Securities invested in by High Yield Municipal Fund and High Yield Fund will not be subject to this requirement.

     Standby Commitments. In order to enhance the liquidity of Municipal Securities, the Tax Exempt Funds 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 “standby commitment” or liquidity put, depending on its characteristics. The aggregate price which a Fund pays for securities with standby commitments may be higher than the price

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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 a Tax Exempt Fund. 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 a Tax Exempt Fund. In considering whether a security meets a Tax Exempt Fund’s quality standards, the particular Tax Exempt Fund will look to the creditworthiness of the party providing the Fund with the right to sell as well as the quality of the security itself.

     The Tax Exempt Funds value Municipal Securities 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 Tax Exempt Fund’s net asset value. The cost of a standby commitment is carried as unrealized depreciation from the time of purchase until it is exercised or expires. Since the value of a standby commitment is dependent on the ability of the standby commitment writer to meet its obligation to repurchase, a Tax Exempt Fund’s policy is to enter into standby commitment transactions only with banks, brokers or dealers which present a minimal risk of default.

     The Investment Adviser understands that the IRS has issued a favorable revenue ruling to the effect that, under specified circumstances, a registered investment company will be the owner of tax exempt municipal obligations acquired subject to a put option. The IRS has subsequently announced that it will not ordinarily issue advance ruling letters as to the identity of the true owner of property in cases involving the sale of securities or participation interests therein if the purchaser has the right to cause the security, or the participation interest therein, to be purchased by either the seller or a third party. The Tax Exempt Funds intend to take the position that they are the owner of any Municipal Securities acquired subject to a standby commitment or acquired or held with certain other types of put rights and that tax exempt interest earned with respect to such Municipal Securities will be tax exempt in their hands. There is no assurance that standby commitments will be available to the Tax Exempt Funds nor have the Tax Exempt Funds assumed that such commitments would continue to be available under all market conditions.

     Call Risk and Reinvestment Risk. Municipal Securities may include “call” provisions which permit the issuers of such securities, at any time or after a specified period, to redeem the securities prior to their stated maturity. In the event that Municipal Securities held in a Fund’s portfolio are called prior to the maturity, the Fund will be required to reinvest the proceeds on such securities at an earlier date and may be able to do so only at lower yields, thereby reducing the Fund’s return on its portfolio securities.

     Tobacco Settlement Revenue Bonds. The Short Duration Tax-Free Fund, Municipal Income Fund, California Municipal Fund, New York Municipal Fund and High Yield Municipal Fund may each invest a portion of its assets in tobacco settlement revenue bonds. Tobacco settlement revenue bonds are municipal obligations that are backed entirely by expected revenues to be derived from lawsuits involving tobacco related deaths and illnesses which were settled between certain states and American tobacco companies. Tobacco settlement revenue bonds are secured by an issuing state’s proportionate share in the Master Settlement Agreement (“MSA”). The MSA is an agreement, reached out of court in November 1998 between 46 states and nearly all of the U.S. tobacco manufacturers. The MSA provides for annual payments in perpetuity by the manufacturers to the states in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. A number of states have securitized the future flow of those payments by selling bonds pursuant to indentures or through distinct governmental entities created for such purpose. The principal and interest payments on the bonds are backed by the future revenue flow related to the MSA. Annual

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payments on the bonds, and thus risk to a Fund, are highly dependent on the receipt of future settlement payments to the state or its governmental entity.

     The actual amount of future settlement payments, is further dependent on many factors, including, but not limited to, annual domestic cigarette shipments, reduced cigarette consumption, increased taxes on cigarettes, inflation, financial capability of tobacco companies, continuing litigation and the possibility of tobacco manufacturer bankruptcy. The initial and annual payments made by the tobacco companies will be adjusted based on a number of factors, the most important of which is domestic cigarette consumption. If the volume of cigarettes shipped in the U.S. by manufacturers participating in the settlement decreases significantly, payments due from them will also decrease. Demand for cigarettes in the U.S. could continue to decline due to price increases needed to recoup the cost of payments by tobacco companies. Demand could also be affected by: anti-smoking campaigns, tax increases, reduced advertising, enforcement of laws prohibiting sales to minors; elimination of certain sales venues such as vending machines; and the spread of local ordinances restricting smoking in public places. As a result, payments made by tobacco manufacturers could be negatively impacted if the decrease in tobacco consumption is significantly greater than the forecasted decline. A market share loss by the MSA companies to non-MSA participating tobacco manufacturers would cause a downward adjustment in the payment amounts. A participating manufacturer filing for bankruptcy also could cause delays or reductions in bond payments. The MSA itself has been subject to legal challenges and has, to date, withstood those challenges.

Foreign Investments

     Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may invest in securities of foreign issuers and Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may invest in fixed-income securities quoted or denominated in a currency other than U.S. dollars. Investment in foreign securities may offer potential benefits that are not available from investing exclusively in U.S. dollar-denominated domestic issues. Foreign countries may have economic policies or business cycles different from those of the U.S. and markets for foreign fixed-income securities do not necessarily move in a manner parallel to U.S. markets. Investing in the securities of foreign issuers also involves, however, certain special considerations, including those set forth below, which are not typically associated with investing in U.S. issuers. Investments in the securities of foreign issuers often involve currencies of foreign countries and Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations and may incur costs in connection with conversions between various currencies. To the extent that a Fund is fully invested in foreign securities while also maintaining currency positions, it may be exposed to greater combined risk. A Fund also may be subject to currency exposure independent of its securities positions.

     Currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks or the failure to intervene or by currency controls or political developments in the United States or abroad. To the extent that a substantial portion of a Fund’s total assets, adjusted to reflect the Fund’s net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries. A Fund’s net currency positions may expose it to risks independent of its securities positions. In addition, if the payment declines in value against

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the U.S. dollar before such income is distributed as dividends to shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.

     Since foreign issuers generally are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies, there may be less publicly available information about a foreign company than about a comparable U.S. company. Volume and liquidity in most foreign bond markets are less than in the United States markets and securities of many foreign companies are less liquid and more volatile than securities of comparable U.S. companies. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although each Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities markets and exchanges, brokers, dealers and listed and unlisted companies than in the United States and the legal remedies for investors may be more limited than the remedies available in the United States. For example, there may be no comparable provisions under certain foreign laws to insider trading and similar investor protection securities laws that apply with respect to securities transactions consummated in the United States. Mail service between the United States and foreign countries may be slower or less reliable than within the United States, thus increasing the risk of delayed settlement of portfolio transactions or loss of certificates for portfolio securities.

     Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of Enhanced Income Fund, Investment Grade Credit Fund, Core Fixed Income Fund, Global Income Fund, High Yield Fund, or Emerging Markets Debt Fund is uninvested and no return is earned on such assets. The inability of Enhanced Income Fund, Core Fixed Income Fund, Investment Grade Credit Fund, Global Fund Income Fund, High Yield Fund, or Emerging Markets Debt Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to Enhanced Income Fund, Investment Grade Credit Fund, Core Fixed Income Fund, Global Income Fund, High Yield Fund, or Emerging Markets Debt Fund due to subsequent declines in value of the portfolio securities, or, if Enhanced Income Fund, Core Fixed Income Fund, Investment Grade Credit Fund, Global Income Fund, High Yield Fund, or Emerging Markets Debt Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, limitations on the movement of funds and other assets between different countries, political or social instability, or diplomatic developments which could adversely affect Enhanced Income, Core Fixed Income, Investment Grade Credit, High Yield, Global Income, or Emerging Markets Debt Funds’ investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources self-sufficiency and balance of payments position.

Investing in Emerging Countries

     Market Characteristics. Of the Core Fixed Income, Investment Grade Credit, Global Income, and High Yield Funds’ investments in foreign securities, 10%, 10%, 10% and 25% of their respective total assets may be invested in emerging countries. The Emerging Markets Debt Fund is not limited in the amount of its assets that may be invested in emerging countries. Investment in debt securities of emerging country issuers involve special risks. The development of a market for such securities is a relatively recent phenomenon and debt securities of most emerging country issuers are less liquid and are generally subject to greater price volatility than securities of issuers in the United States and other developed countries. In certain countries, there may be fewer publicly traded securities, and the market may be dominated by a few issuers or sectors.

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The markets for securities of emerging countries may have substantially less volume than the market for similar securities in the United States and may not be able to absorb, without price disruptions, a significant increase in trading volume or trade size. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets. The less liquid the market, the more difficult it may be for a Fund to price accurately its portfolio securities or to dispose of such securities at the times determined to be appropriate. The risks associated with reduced liquidity may be particularly acute to the extent that a Fund needs cash to meet redemption requests, to pay dividends and other distributions or to pay its expenses.

     A Fund’s purchase and sale of portfolio securities in certain emerging countries may be constrained by limitations as to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on the aggregate trading volume by or holdings of a Fund, the Investment Adviser, its affiliates and their respective clients and other service providers. A Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.

     Securities markets of emerging countries may also have less efficient clearance and settlement procedures than U.S. markets, making it difficult to conduct and complete transactions. Delays in the settlement could result in temporary periods when a portion of a Fund’s assets is uninvested and no return is earned thereon. Inability to make intended security purchases could cause the Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities could result either in losses to a Fund due to subsequent declines in value of the portfolio security or, if a Fund has entered into a contract to sell the security, could result in possible liability of a Fund to the purchaser.

     Transaction costs, including brokerage commissions and dealer mark-ups, in emerging countries may be higher than in the U.S. and other developed securities markets. As legal systems in emerging countries develop, foreign investors may be adversely affected by new or amended laws and regulations. In circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the law.

     With respect to investments in certain emerging countries, antiquated legal systems may have an adverse impact on the Funds. For example, while the potential liability of a shareholder of a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder’s investment, the notion of limited liability is less clear in certain emerging market countries. Similarly, the rights of investors in emerging market companies may be more limited than those of investors of U.S. corporations.

     Economic, Political and Social Factors. Emerging countries may be subject to a greater degree of economic, political and social instability than the United States, Japan and most Western European countries, and unanticipated political and social developments may affect the value of a Fund’s investments in emerging countries and the availability to the Fund of additional investments in such countries. Moreover, political and economic structures in many emerging countries may be undergoing significant evolution and rapid development. Instability may result from, among other things: (i) authoritarian governments or military involvement in political and economic decision-making, including changes or attempted changes in government through extra-constitutional means; (ii) popular unrest associated with demands for improved economic, political and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; (v) ethnic, religious and racial disaffection and conflict; and (vi) the absence of developed legal structures governing foreign private property. Many emerging countries have experienced in the past, and continue to experience, high rates of inflation. In certain countries, inflation has at times accelerated rapidly to hyperinflationary levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries. The economies of many emerging countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and the economic

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conditions of their trading partners. In addition, the economies of some emerging countries may differ unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position.

     Restrictions on Investment and Repatriation. Certain emerging countries require governmental approval prior to investments by foreign persons or limit investments by foreign persons to only a specified percentage of an issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the issuer available for purchase by nationals. Repatriation of investment income and capital from certain emerging countries is subject to certain governmental consents. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect the operation of a Fund.

     Sovereign Debt Obligations. Investment in sovereign debt can involve a high degree of risk. The governmental entity that controls the repayment of sovereign debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A governmental entity’s willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the governmental entity’s policy towards the International Monetary Fund and the political constraints to which a governmental entity may be subject. Governmental entities may also be dependent on expected disbursements from foreign governments, multilateral agencies and others abroad to reduce principal and interest on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a governmental entity’s implementation of economic reforms and/or economic performance and the timely service of such debtor’s obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties’ commitments to lend funds to the governmental entity, which may further impair such debtor’s ability or willingness to services its debts in a timely manner. Consequently, governmental entities may default on their sovereign debt. Holders of sovereign debt (including the Fund) may be requested to participate in the rescheduling of such debt and to extend further loans to governmental agencies.

     Emerging country governmental issuers are among the largest debtors to commercial banks, foreign governments, international financial organizations and other financial institutions. Certain emerging country governmental issuers have not been able to make payments of interest on or principal of debt obligations as those payments have come due. Obligations arising from past restructuring agreements may affect the economic performance and political and social stability of those issuers.

     The ability of emerging country governmental issuers to make timely payments on their obligations is likely to be influenced strongly by the issuer’s balance of payments, including export performance, and its access to international credits and investments. An emerging country whose exports are concentrated in a few commodities could be vulnerable to a decline in the international prices of one or more of those commodities. Increased protectionism on the part of an emerging country’s trading partners could also adversely affect the country’s exports and tarnish its trade account surplus, if any. To the extent that emerging countries receive payment for their exports in currencies other than dollars or non-emerging country currencies, the emerging country issuer’s ability to make debt payments denominated in dollars or non-emerging market currencies could be affected.

     To the extent that an emerging country cannot generate a trade surplus, it must depend on continuing loans from foreign governments, multilateral organizations or private commercial banks, aid payments from foreign governments and on inflows of foreign investment. The access of emerging countries to these forms of external funding may not be certain, and a withdrawal of external funding could adversely affect the

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capacity of emerging country governmental issuers to make payments on their obligations. In addition, the cost of servicing emerging country debt obligations can be affected by a change in international interest rates since the majority of these obligations carry interest rates that are adjusted periodically based upon international rates.

     Another factor bearing on the ability of emerging countries to repay debt obligations is the level of international reserves of a country. Fluctuations in the level of these reserves affect the amount of foreign exchange readily available for external debt payments and thus could have a bearing on the capacity of emerging countries to make payments on these debt obligations.

     As a result of the foregoing or other factors, a governmental obligor, especially in an emerging country, may default on its obligations. If such an event occurs, a Fund may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign sovereign debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign sovereign debt obligations in the event of default under the commercial bank loan agreements.

     Brady Bonds. Certain foreign debt obligations commonly referred to as “Brady Bonds” are created through the exchange of existing commercial bank loans to foreign borrowers for new obligations in connection with debt restructurings under a plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the “Brady Plan”).

     Brady Bonds may be collateralized or uncollateralized and issued in various currencies (although most are dollar-denominated) and they are actively traded in the over-the-counter secondary market. Certain Brady Bonds are collateralized in full as to principal due at maturity by zero coupon obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities having the same maturity (“Collateralized Brady Bonds”). Brady Bonds are not, however, considered to be U.S. Government Securities.

     Dollar-denominated, Collateralized Brady Bonds may be fixed rate bonds or floating rate bonds. Interest payments on Brady Bonds are often collateralized by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of rolling interest payments or, in the case of floating rate bonds, initially is equal to at least one year’s rolling interest payments based on the applicable interest rate at that time and is adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to “value recovery payments” in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Brady Bonds are often viewed as having three or four valuation components: (i) collateralized repayment of principal at final maturity; (ii) collateralized interest payments; (iii) uncollateralized interest payments; and (iv) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the “residual risk”). In the event of a default with respect to Collateralized Brady Bonds as a result of which the payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon obligations held as collateral for the payment of principal will not be distributed to investors, nor will such obligations be sold and the proceeds distributed. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds, which will continue to be outstanding, at which time the face amount of the collateral will equal the principal payments which would have been due on the Brady Bonds in the normal course. In addition, in light of the residual risk of Brady Bonds and, among other factors, the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds should be viewed as speculative.

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     Restructured Investments. Included among the issuers of emerging country debt securities are entities organized and operated solely for the purpose of restructuring the investment characteristics of various securities. These entities are often organized by investment banking firms which receive fees in connection with establishing each entity and arranging for the placement of its securities. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments, such as Brady Bonds, and the issuance by the entity of one or more classes of securities (“Restructured Investments”) backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued Restructured Investments to create securities with different investment characteristics such as varying maturities, payment priorities or investment rate provisions. Because Restructured Investments of the type in which the Fund may invest typically involve no credit enhancement, their credit risk will generally be equivalent to that of the underlying instruments.

     The Investment Grade Credit Fund and Emerging Markets Debt Fund are permitted to invest in a class of Restructured Investments that is either subordinated or unsubordinated to the right of payment of another class. Subordinated Restructured Investments typically have higher yields and present greater risks than unsubordinated Restructured Investments. Although the Emerging Markets Debt Fund’s and Investment Grade Credit Fund’s purchases of subordinated Restructured Investments would have a similar economic effect to that of borrowing against the underlying securities, such purchases will not be deemed to be borrowing for purposes of the limitations placed on the extent of the Funds’ assets that may be used for borrowing.

     Certain issuers of Restructured Investments may be deemed to be “investment companies” as defined in the Act. As a result, the Investment Grade Credit Fund’s and Emerging Markets Debt Fund’s investments in these Restructured Investments may be limited by the restrictions contained in the Act. Restructured Investments are typically sold in private placement transactions, and there currently is no active trading market for most Restructured Investments.

     Forward Foreign Currency Exchange Contracts. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may enter into forward foreign currency exchange contracts for hedging purposes and to seek to increase total return. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market and are conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are generally charged at any stage for trades.

     At the maturity of a forward contract, Core Fixed Income Fund, Investment Grade Credit Fund, Global Income Fund, High Yield Fund, or Emerging Markets Debt Fund may either accept or make delivery of the currency specified in the contract or, at or prior to maturity, enter into a closing purchase transaction involving the purchase or sale of an offsetting contract. Closing purchase transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract.

     Core Fixed Income Fund, Investment Grade Credit Fund, Global Income Fund, High Yield Fund, or Emerging Markets Debt Fund may enter into forward foreign currency exchange contracts for hedging purposes in several circumstances. First, when a Fund enters into a contract for the purchase or sale of a security quoted or denominated in a foreign currency, or when a Fund anticipates the receipt in a foreign currency of a dividend or interest payment on such a security which it holds, a Fund may desire to “lock in” the U.S. dollar price of the security or the U.S. dollar equivalent of such dividend or interest payment, as the case may be. By entering into a forward contract for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying transactions, a Fund may attempt to protect

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itself against an adverse change in the relationship between the U.S. dollar and the subject foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which such payments are made or received.

     Additionally, when the Investment Adviser believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, it may enter into a forward contract to sell, for a fixed amount of U.S. dollars, the amount of foreign currency approximating the value of some or all of a Fund’s portfolio securities quoted or denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Using forward contracts to protect the value of a Fund’s portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange which a Fund can achieve at some future point in time. The precise projection of short-term currency market movements is not possible, and short-term hedging provides a means of fixing the U.S. dollar value of only a portion of a Fund’s foreign assets.

     Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value of securities denominated or quoted in a different currency if the Investment Adviser determines that there is a pattern of correlation between the two currencies. In addition, certain Funds may enter into foreign currency transactions to seek a closer correlation between a Fund’s overall currency exposures and the currency exposures of a Fund’s performance benchmark.

     Unless otherwise covered, cash or liquid assets will be segregated in an amount equal to the value of the Fund’s assets committed to the consummation of forward foreign currency exchange contracts requiring the Fund to purchase foreign currencies and forward contracts entered into to seek to increase total return. The segregated assets will be marked-to-market. If the value of the segregated assets declines, additional liquid assets will be segregated so that the value will equal the amount of the Fund’s commitments with respect to such contracts. Global Income, Core Fixed Income, Investment Grade Credit, High Yield, and Emerging Markets Debt Funds will not enter into a forward contract with a term of greater than one year.

     While Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain other risks. Thus, while the Funds may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for a Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between a Fund’s portfolio holdings of securities quoted or denominated in a particular currency and forward contracts entered into by a Fund. Such imperfect correlation may cause the Fund to sustain losses which will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

     Markets for trading forward foreign currency contracts offer less protection against defaults than is available when trading in currency instruments on an exchange. Forward contracts are subject to the risk that the counterparty to such contract will default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive a Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price. In addition, the institutions that deal in forward currency contracts are not required to continue to make markets in the currencies they trade and these markets can experience periods of illiquidity. A Fund will not enter into forward foreign currency exchange contracts, unless the credit quality of the unsecured senior debt or the claims-paying ability of the counterparty is considered to be investment grade by the Investment Adviser. To the extent that a substantial portion of a

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Fund’s total assets, adjusted to reflect the Fund’s net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries.

Interest Rate Swaps, Mortgage Swaps, Credit Swaps, Currency Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars

     Each Fund may enter into interest rate, credit and total return swaps. Each Fund may also enter into interest rate caps, floors and collars. In addition, Ultra-Short Duration Government, Short Duration Government, Government Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income and High Yield Funds may enter into mortgage swaps; and Core Fixed Income, Investment Grade Credit, High Yield, Global Income and Emerging Markets Debt Funds may enter into currency swaps. Each Fund may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions.

     Each Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As examples, a Fund may enter into swap transactions for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities a Fund anticipates purchasing at a later date, or to gain exposure to certain markets in an economical way.

     Swap agreements are two party contracts entered into primarily by institutional investors. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or “swapped” between the parties are generally calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency or security, or in a “basket” of securities representing a particular index. As examples, interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses of an underlying security. Credit swaps give one party to a transaction the right to dispose of or acquire an asset (or group of assets), or the right to receive from or make a payment to the other party, upon the occurrence of specified credit events. Currency swaps involve the exchange of the parties’ respective rights to make or receive payments in specified currencies. Total return swaps are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component.

     A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.

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     A great deal of flexibility is possible in the way swap transactions are structured. However, generally a Fund will enter into interest rate, total return, credit and mortgage swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate, total return, credit and mortgage swaps do not normally involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate, total return, credit and mortgage swaps is normally limited to the net amount of payments that a Fund is contractually obligated to make. If the other party to an interest rate, total return, credit or mortgage swap defaults, a Fund’s risk of loss consists of the net amount of payments that such Fund is contractually entitled to receive, if any. In contrast, currency swaps may involve the delivery of the entire principal amount of one designated currency in exchange for the other designated currency. Therefore, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations.

     A credit swap may have as reference obligations one or more securities that may, or may not, be currently held by a Fund. The protection “buyer” in a credit swap is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the swap provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. A Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, a Fund generally receives an upfront payment or a rate of income throughout the term of the swap provided that there is no credit event. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap. If a credit event occurs, the value of any deliverable obligation received by the Fund as seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund.

     To the extent that a Fund’s exposure in a transaction involving a swap, swaption or an interest rate floor, cap or collar is covered by the segregation of cash or liquid assets, or is covered by other means in accordance with SEC guidance, the Funds and the Investment Adviser believe that the transactions do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to a Fund’s borrowing restrictions.

     The Funds will not enter into any interest rate, total return, mortgage or credit swap transactions unless the unsecured commercial paper, senior debt or claims-paying ability of the other party is rated either A or A-1 or better by Standard & Poor’s or A or P-1 or better by Moody’s or their equivalent ratings. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds will not enter into any currency swap transactions unless the unsecured commercial paper, senior debt or claims–paying ability of the other party thereto is rated investment grade by Standard & Poor’s or Moody’s, or, if unrated by such rating organization, determined to be of comparable quality by the Investment Adviser.

     The use of interest rate, mortgage, credit, total return and currency swaps, as well as interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. If the Investment Adviser is incorrect in its forecasts of market values, credit quality, interest rates and currency exchange rates,

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the investment performance of a Fund would be less favorable than it would have been if these investment instruments were not used.

     In addition, these transactions can involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, swaps are subject to illiquidity risk, counterparty risk, credit risk and pricing risk. Because they are two party contracts and because they may have terms of greater than seven days, swap transactions may be considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap counterparty. Many swaps are complex and often valued subjectively. Swaps may be subject to pricing or “basis” risk, which exists when a particular swap becomes extraordinarily expensive relative to historical prices or the price of corresponding cash market instruments. Under certain market conditions it may not be economically feasible to imitate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity. If a swap transaction is particularly large or if the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses.

     The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with the markets for other similar instruments which are traded in the interbank market. The Investment Adviser, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Funds’ transactions in swaps, swaptions, caps, floors and collars.

Options on Securities and Securities Indices

     Writing Covered Options. Each Fund may write (sell) covered call and put options on any securities in which it may invest or on any securities index consisting of securities in which it may invest. A Fund may write such options on securities that are listed on national domestic securities exchanges or foreign securities exchanges or traded in the over-the-counter market. A call option written by a Fund obligates such Fund to sell specified securities to the holder of the option at a specified price if the option is exercised before the expiration date. All call options written by a Fund are covered, which means that such Fund will own the securities subject to the option so long as the option is outstanding or such Fund will use the other methods described below. The Fund’s purpose in writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, a Fund may forego the opportunity to profit from an increase in the market price of the underlying security.

     A put option written by a Fund obligates the Fund to purchase specified securities from the option holder at a specified price if the option is exercised before the expiration date. All put options written by a Fund would be covered, which means that such Fund will segregate cash or liquid assets with a value at least equal to the exercise price of the put option (less any margin on deposit) or will use the other methods described below. The purpose of writing such options is to generate additional income for the Fund. However, in return for the option premium, each Fund accepts the risk that it may be required to purchase the underlying securities at a price in excess of the securities’ market value at the time of purchase.

     In the case of a call option, the option is “covered” if a Fund owns the instrument underlying the call or has an absolute and immediate right to acquire that instrument without additional cash consideration (or, if additional cash consideration is required, liquid assets in such amount are segregated) upon conversion or exchange of other instruments held by it. A call option is also covered if a Fund holds a call on the same instrument as the option written where the exercise price of the option held is (i) equal to or less than the exercise price of the option written, or (ii) greater than the exercise price of the option written provided the Fund segregates liquid assets in the amount of the difference. A put option is also covered if a Fund holds a

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put on the same security as the option written where the exercise price of the option held is (i) equal to or higher than the exercise price of the option written, or (ii) less than the exercise price of the option written provided the Fund segregates liquid assets in the amount of the difference. In the case of the Core Fixed Income Fund, Investment Grade Credit Fund, Global Income Fund, High Yield Fund, or Emerging Markets Debt Fund segregated cash or liquid assets may be quoted or denominated in any currency.

     A Fund may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as “closing purchase transactions.”

     Each Fund may also write (sell) covered call and put options on any securities index consisting of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash settlement payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security.

     A Fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index or by having an absolute and immediate right to acquire such securities without additional cash consideration (or if additional cash consideration is required, liquid assets in such amount are segregated) upon conversion or exchange of other securities held by it. The Funds may also cover call and put options on a securities index by segregating cash or liquid assets, as permitted by applicable law, with a value, when added to any margin on deposit, that is equal to the market value of the underlying securities in the case of a call option or the exercise price in the case of a put option or by owning offsetting options as described above.

     The writing of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of options to seek to increase total return involves the risk of loss if the Investment Adviser is incorrect in its expectation of fluctuations in securities prices or interest rates. The successful use of options for hedging purposes also depends in part on the ability of the Investment Adviser to predict future price fluctuations and the degree of correlation between the options and securities markets. If the Investment Adviser is incorrect in its expectation of changes in securities prices or determination of the correlation between the securities indices on which options are written and purchased and the securities in a Fund’s investment portfolio, the investment performance of the Fund will be less favorable than it would have been in the absence of such options transactions. The writing of options could increase a Fund’s portfolio turnover rate and, therefore, associated brokerage commissions or spreads.

     Purchasing Options. Each Fund may purchase put and call options on any securities in which it may invest or options on any securities index consisting of securities in which it may invest. A Fund may also, to the extent that it invests in foreign securities, purchase put and call options on foreign currencies. In addition, a Fund may enter into closing sale transactions in order to realize gains or minimize losses on options it had purchased.

     A Fund may purchase call options in anticipation of an increase, or put options in anticipation of a decrease (“protective puts”), in the market value of securities of the type in which it may invest. The purchase of a call option would entitle a Fund, in return for the premium paid, to purchase specified securities at a specified price during the option period. A Fund would ordinarily realize a gain on the purchase of a call option if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the call option. The purchase of a put option would entitle a Fund, in exchange for the premium paid, to

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sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of a Fund’s securities. Put options may also be purchased by a Fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. A Fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to cover the premium and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of put options may be offset by countervailing changes in the value of the underlying portfolio securities.

     A Fund may purchase put and call options on securities indices for the same purposes as it may purchase options on securities. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security.

     Writing and Purchasing Currency Call and Put Options. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may write covered put and call options and purchase put and call options on foreign currencies in an attempt to protect against declines in the U.S. dollar value of foreign portfolio securities and against increases in the U.S. dollar cost of foreign securities to be acquired. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may also use options on currency to cross-hedge, which involves writing or purchasing options on one currency to seek to hedge against changes in exchange rates for a different currency with a pattern of correlation. As with other kinds of option transactions, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received. If an option that a Fund has written is exercised, the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against exchange rate fluctuations; however, in the event of exchange rate movements adverse to a Fund’s position, the Fund may forfeit the entire amount of the premium plus related transaction costs. In addition, Core Fixed Income, Global Income and High Yield Funds may purchase call options on currency to seek to increase total return.

     A call option written by Core Fixed Income, Investment Grade Credit, Global Income, High Yield, or Emerging Markets Debt Funds obligates the Fund to sell specified currency to the holder of the option at a specified price if the option is exercised at any time before the expiration date. A put option written by a Fund obligates the Fund to purchase specified currency from the option holder at a specified price if the option is exercised at any time before the expiration date. The writing of currency options involves a risk that a Fund will, upon exercise of the option, be required to sell currency subject to a call at a price that is less than the currency’s market value or be required to purchase currency subject to a put at a price that exceeds the currency’s market value.

     A Fund may terminate its obligations under a written call or put option by purchasing an option identical to the one written. Such purchases are referred to as “closing purchase transactions.” A Fund may enter into closing sale transactions in order to realize gains or minimize losses on purchased options.

     Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may purchase call options in anticipation of an increase in the U.S. dollar value of currency in which securities to be acquired by the Fund are denominated or quoted. The purchase of a call option would entitle a Fund, in return for the premium paid, to purchase specified currency at a specified price during the option period. A Fund would ordinarily realize a gain if, during the option period, the value of such currency exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise, the Fund would realize either no gain or a loss on the purchase of the call option.

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     Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may purchase put options in anticipation of a decline in the U.S. dollar value of currency in which securities in its portfolio are denominated or quoted (“protective puts”). The purchase of a put option would entitle Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds, in exchange for the premium paid, to sell specified currency at a specified price during the option period. The purchase of protective puts is designed merely to offset or hedge against a decline in the U.S. dollar value of a Fund’s portfolio securities due to currency exchange rate fluctuations. A Fund would ordinarily realize a gain if, during the option period, the value of the underlying currency decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise, the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying currency.

     In addition to using options for the hedging purposes described above, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may use options on currency to seek to increase total return. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may write (sell) covered put and call options on any currency in an attempt to realize greater income than would be realized on portfolio securities transactions alone. However, in writing covered call options for additional income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may forego the opportunity to profit from an increase in the market value of the underlying currency. Also, when writing put options, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds accept, in return for the option premium, the risk that they may be required to purchase the underlying currency at a price in excess of the currency’s market value at the time of purchase.

     Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may purchase call options to seek to increase total return in anticipation of an increase in the market value of a currency. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds would ordinarily realize a gain if, during the option period, the value of such currency exceeded the sum of the exercise price, the premium paid and transaction costs. Otherwise Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds would realize either no gain or a loss on the purchase of the call option. Put options may be purchased by the Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds for the purpose of benefiting from a decline in the value of currencies which they do not own. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds would ordinarily realize a gain if, during the option period, the value of the underlying currency decreased below the exercise price sufficiently to more than cover the premium and transaction costs. Otherwise, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds would realize either no gain or a loss on the purchase of the put option.

     Yield Curve Options. Each Fund may enter into options on the yield “spread” or differential between two securities. Such transactions are referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

     A Fund may purchase or write yield curve options for the same purposes as other options on securities. For example, a Fund may purchase a call option on the yield spread between two securities if the Fund owns one of the securities and anticipates purchasing the other security and wants to hedge against an

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adverse change in the yield spread between the two securities. A Fund may also purchase or write yield curve options in an effort to increase current income if, in the judgment of the Investment Adviser, the Fund will be able to profit from movements in the spread between the yields of the underlying securities. The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, however, such options present a risk of loss even if the yield of one of the underlying securities remains constant, or if the spread moves in a direction or to an extent which was not anticipated.

     Yield curve options written by a Fund will be “covered.” A call (or put) option is covered if the Fund holds another call (or put) option on the spread between the same two securities and segregates cash or liquid assets sufficient to cover the Fund’s net liability under the two options. Therefore, a Fund’s liability for such a covered option is generally limited to the difference between the amount of the Fund’s liability under the option written by the Fund less the value of the option held by the Fund. Yield curve options may also be covered in such other manner as may be in accordance with the requirements of the counterparty with which the option is traded and applicable laws and regulations. Yield curve options are traded over-the-counter, and established trading markets for these options may not exist.

     Risks Associated with Options Transactions. There is no assurance that a liquid secondary market on a domestic or foreign options exchange will exist for any particular exchange-traded option or at any particular time. If a Fund is unable to effect a closing purchase transaction with respect to covered options it has written, the Fund will not be able to sell the underlying securities or dispose of assets held in a segregated account until the options expire or are exercised. Similarly, if a Fund is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

     Reasons for the absence of a liquid secondary market on an exchange include, but are not limited to, the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

     A Fund may purchase and sell both options that are traded on U.S. and foreign exchanges and options traded over-the-counter with broker-dealers and other types of institutions that make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that the broker-dealers or financial institutions participating in such transactions will not fulfill their obligations.

     Transactions by a Fund in options will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options are traded governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facilities or are held in one or more accounts or through one or more brokers. Thus, the number of options which a Fund may write or purchase may be affected by options written or purchased by other investment advisory clients or the Funds’ Investment Adviser. An exchange, board of trade or other trading facility may order the liquidation of positions found to be in excess of these limits, and it may impose certain other sanctions.

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Futures Contracts and Options on Futures Contracts

     Each Fund may purchase and sell various kinds of futures contracts, and purchase and write call and put options on any of such futures contracts. A Fund may also enter into closing purchase and sale transactions with respect to any of such contracts and options. The futures contracts may be based on various securities (such as U.S. Government Securities), securities indices, foreign currencies in the case of the Global Income, Core Fixed Income, Investment Grade Credit, High Yield and Emerging Markets Debt Funds and any other financial instruments and indices. Financial futures contracts used by each of the Funds include interest rate futures contracts including, among others, Eurodollar futures contracts. Eurodollar futures contracts are U.S. dollar-denominated futures contracts that are based on the implied forward London Interbank Offered Rate (LIBOR) of a three-month deposit.

     A Fund may engage in futures and related options transactions in order to seek to increase total return or to hedge against changes in interest rates, securities prices or, if a Fund invests in foreign securities, currency exchange rates, or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. Each Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.

     Futures contracts entered into by a Fund have historically been traded on U.S. exchanges or boards of trade that are licensed and regulated by the CFTC or on foreign exchanges. More recently, certain futures may also be traded either over-the-counter or on trading facilities such as derivatives transaction execution facilities, exempt boards of trade or electronic trading facilities that are licensed and/or regulated to varying degrees by the CFTC. Also, certain single stock futures and narrow based security index futures may be traded either over-the-counter or on trading facilities such as contract markets, derivatives transaction execution facilities and electronic trading facilities that are licensed and/or regulated to varying degrees by both the CFTC and the SEC or on foreign exchanges.

     Neither the CFTC, National Futures Association, SEC nor any domestic exchange regulates activities of any foreign exchange or boards of trade, including the execution, delivery and clearing of transactions, or has the power to compel enforcement of the rules of a foreign exchange or board of trade or any applicable foreign law. This is true even if the exchange is formally linked to a domestic market so that a position taken on the market may be liquidated by a transaction on another market. Moreover, such laws or regulations will vary depending on the foreign country in which the foreign futures or foreign options transaction occurs. For these reasons, a Fund’s investments in foreign futures or foreign options transactions may not be provided the same protections in respect of transactions on United States exchanges. In particular, persons who trade foreign futures or foreign options contracts may not be afforded certain of the protective measures provided by the Commodity Exchange Act, the CFTC’s regulations and the rules of the National Futures Association and any domestic exchange, including the right to use reparations proceedings before the CFTC and arbitration proceedings provided by the National Futures Association or any domestic futures exchange. Similarly, these persons may not have the protection of the U.S. securities laws.

     Futures Contracts. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments or currencies for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract).

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     When interest rates are rising or securities prices are falling, a Fund can seek to offset a decline in the value of its current portfolio securities through the sale of futures contracts. When interest rates are falling or securities prices are rising, a Fund, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may purchase and sell futures contracts on a specified currency in order to seek to increase total return or to protect against changes in currency exchange rates. For example, these Funds may seek to offset anticipated changes in the value of a currency in which its portfolio securities, or securities that it intends to purchase, are quoted or denominated by purchasing and selling futures contracts on such currencies. As another example, certain Funds may enter into futures transactions to seek a closer correlation between a Fund’s overall currency exposures and the currency exposures of a Fund’s performance benchmark.

     Positions taken in the futures markets are not normally held to maturity but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures contracts on securities or currency will usually be liquidated in this manner, a Fund may instead make, or take, delivery of the underlying securities or currency whenever it appears economically advantageous to do so. A clearing corporation associated with the exchange on which futures on securities or currency are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date.

     Hedging Strategies. When a Fund uses futures for hedging purposes, the Fund often seeks to establish with more certainty than would otherwise be possible the effective price or rate of return on portfolio securities (or securities that the Fund proposes to acquire) or the exchange rate of currencies in which portfolio securities are quoted or denominated. A Fund may, for example, take a “short” position in the futures market by selling futures contracts to seek to hedge against an anticipated rise in interest rates or a decline in market prices or foreign currency rates that would adversely affect the U.S. dollar value of the Fund’s portfolio securities. Such futures contracts may include contracts for the future delivery of securities held by a Fund or securities with characteristics similar to those of a Fund’s portfolio securities. Similarly, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may each sell futures contracts on any currencies in which its portfolio securities are quoted or denominated or sell futures contracts on one currency to seek to hedge against fluctuations in the value of securities quoted or denominated in a different currency if there is an established historical pattern of correlation between the two currencies. If, in the opinion of the Investment Adviser, there is a sufficient degree of correlation between price trends for a Fund’s portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the Funds may also enter into such futures contracts as part of a hedging strategy. Although under some circumstances prices of securities in a Fund’s portfolio may be more or less volatile than prices of such futures contracts, the Investment Adviser will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having a Fund enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting a Fund’s portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of a Fund’s portfolio securities would be substantially offset by a decline in the value of the futures position.

     On other occasions, a Fund may take a “long” position by purchasing futures contracts. This may be done, for example, when a Fund anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices or currency exchange rates then available in the applicable market to be less favorable than prices that are currently available.

     Options on Futures Contracts. The acquisition of put and call options on futures contracts will give a Fund the right (but not the obligation) for a specified price to sell or to purchase, respectively, the

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underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, a Fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs.

     The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of a Fund’s assets. By writing a call option, a Fund becomes obligated, in exchange for the premium, to sell a futures contract if the option is exercised, which may have a value higher than the exercise price. The writing of a put option on a futures contract generates a premium which may partially offset an increase in the price of securities that a Fund intends to purchase. However, a Fund becomes obligated (upon exercise of the option) to purchase a futures contract if the option is exercised, which may have a value lower than the exercise price. Thus, the loss incurred by a Fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. The Funds will incur transaction costs in connection with the writing of options on futures.

     The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same financial instrument. There is no guarantee that such closing transactions can be effected. A Fund’s ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market.

     Other Considerations. The Funds will engage in transactions in futures contracts and related options transactions only to the extent such transactions are consistent with the requirements of the Code for maintaining their qualifications as regulated investment companies for federal income tax purposes.

     Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and may require the Funds to segregate cash or liquid assets, as permitted by applicable law, in an amount equal to the underlying value of such contracts and options.

     While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, while a Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates or securities prices or currency exchange rates may result in a poorer overall performance for a Fund than if it had not entered into any futures contracts or options transactions. When futures contracts and options are used for hedging purposes, perfect correlation between a Fund’s futures positions and portfolio positions will be impossible to achieve. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and a Fund may be exposed to risk of loss.

     Perfect correlation between a Fund’s futures positions and portfolio positions will be difficult to achieve, particularly where futures contracts based on specific fixed-income securities or specific currencies are not available. In addition, it is not possible to hedge fully or protect against currency fluctuations affecting the value of securities quoted or denominated in foreign currencies because the value of such securities is likely to fluctuate as a result of independent factors unrelated to currency fluctuations. The profitability of a Fund’s trading in futures depends upon the ability of the Investment Adviser to analyze correctly the futures markets.

Combined Transactions

     A Fund may enter into multiple transactions, including multiple options transactions, multiple futures transactions, multiple currency transactions (including forward currency contracts) and multiple interest rate and other swap transactions and any combination of futures, options, currency and swap transactions (“component” transactions) as part of a single or combined strategy when, in the opinion of the Investment Adviser, it is in the best interests of a Fund to do so. A combined transaction will usually contain elements of

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risk that are present in each of its component transactions. Although combined transactions are normally entered into based on the Investment Adviser’s judgment that the combined strategies will reduce risk or otherwise more effectively achieve the desired portfolio management goal, it is possible that the combination will instead increase such risks or hinder achievement of the portfolio management objective.

Mortgage Dollar Rolls

     The Taxable Funds (other than Enhanced Income Fund, High Yield Fund and Emerging Markets Debt Fund) may enter into mortgage “dollar rolls” in which a Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar, but not identical securities on a specified future date. During the roll period, a Fund loses the right to receive principal and interest paid on the securities sold. However, a Fund would benefit to the extent of any difference between the price received for the securities sold and the lower forward price for the future purchase or fee income plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. All cash proceeds will be invested in instruments that are permissible investments for the applicable Fund. Each Fund will segregate until the settlement date cash or liquid assets, as permitted by applicable law, in an amount equal to its forward purchase price.

     For financial reporting and tax purposes, the Funds treat mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate transaction involving a sale. The Funds do not currently intend to enter into mortgage dollar rolls for financing and do not treat them as borrowings.

     Mortgage dollar rolls involve certain risks including the following: if the broker-dealer to whom a Fund sells the security becomes insolvent, a Fund’s right to purchase or repurchase the mortgage-related securities subject to the mortgage dollar roll may be restricted. Also, the instrument which a Fund is required to repurchase may be worth less than an instrument which a Fund originally held. Successful use of mortgage dollar rolls will depend upon the Investment Adviser’s ability to manage a Fund’s interest rate and mortgage prepayments exposure. For these reasons, there is no assurance that mortgage dollar rolls can be successfully employed. The use of this technique may diminish the investment performance of a Fund compared with what such performance would have been without the use of mortgage dollar rolls.

Convertible Securities

     The Enhanced Income, Short Duration Tax-Free, Municipal Income, California Municipal, New York Municipal, Core Fixed Income, Investment Grade Credit, High Yield Municipal, High Yield and Emerging Markets Debt Funds may invest in convertible securities. Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted into or exchanged for a specified amount of common stock (or other securities) of the same or different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest that is generally paid or accrued on debt or a dividend that is paid or accrued on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Convertible securities have unique investment characteristics, in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying common stock due to their fixed-income characteristics and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases.

     The value of a convertible security is a function of its “investment value” (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its “conversion value” (the security’s worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value normally declining as interest rates increase and increasing as

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interest rates decline. The credit standing of the issuer and other factors may also have an effect on the convertible security’s investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed-income security.

     A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by a Fund is called for redemption, the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on a Fund’s ability to achieve its investment objective, which, in turn, could result in losses to the Fund. To the extent that a Fund holds a convertible security, or a security that is otherwise converted or exchanged for common stock (e.g., as a result of a restructuring), the Fund may, consistent with its investment objective, hold such common stock in its portfolio.

Lending of Portfolio Securities

     Each Fund may lend portfolio securities. Under present regulatory policies, such loans may be made to institutions, such as brokers or dealers (including Goldman Sachs), and are required to be secured continuously by collateral in cash, cash equivalents, letters of credit or U.S. Government Securities maintained on a current basis at an amount, marked to market daily, at least equal to the market value of the securities loaned. Cash received as collateral for securities lending transactions may be invested in short-term investments. Investing the collateral subjects it to market depreciation or appreciation, and a Fund is responsible for any loss that may result from its investment of the borrowed collateral. A Fund will have the right to terminate a loan at any time and recall the loaned securities within the normal and customary settlement time for securities transactions. For the duration of the loan, a Fund will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned and will also receive compensation from investment of the collateral. A Fund will not have the right to vote any securities having voting rights during the existence of the loan, but a Fund may call the loan in anticipation of an important vote to be taken by the holders of the securities or the giving or withholding of their consent on a material matter affecting the investment. As with other extensions of credit there are risks of delay in recovering, or even loss of rights in, the collateral and loaned securities should the borrower of the securities fail financially. However, the loans will be made only to firms deemed to be of good standing, and when the consideration which can be earned currently from securities loans of this type is deemed to justify the attendant risk. In determining whether to lend securities to a particular borrower and during the period of the loan, the creditworthiness of the borrower will be considered and monitored. It is intended that the value of securities loaned by a Fund will not exceed one-third of the value of the Fund’s total assets (including the loan collateral).

     The Funds’ Board of Trustees has approved each Fund’s participation in a securities lending program and adopted policies and procedures relating thereto. Under the securities lending program, the Funds have retained an affiliate of the Investment Adviser to serve as the securities lending agent for the Funds. For these services the lending agent may receive a fee from the Funds, including a fee based on the returns earned on the Funds’ investment of cash received as collateral for the loaned securities. In addition, the Funds may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Funds’ portfolio investment transactions. The lending agent may, on behalf of the Funds, invest cash collateral received by the Funds for securities loans in, among other things, other registered or unregistered funds. These funds include private investing funds or money market funds that

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are managed by the Investment Adviser or its affiliates for the purpose of investing cash collateral generated from securities lending activities and which pay the Investment Adviser or its affiliates for these services. The Funds’ Board of Trustees will periodically review securities loan transactions for which the Goldman Sachs affiliate has acted as lending agent for compliance with the Fund’s securities lending procedures. Goldman Sachs also has been approved as a borrower under the Funds’ securities lending program, subject to certain conditions.

Restricted and Illiquid Securities

     Each Fund may purchase securities that are not registered or that are offered in an exempt non-public offering (“Restricted Securities”) under the Securities Act of 1933, as amended (“1933 Act”), including securities eligible for resale to “qualified institutional buyers” pursuant to Rule 144A under the 1933 Act. However, a Fund will not invest more than 15% of its net assets in illiquid investments, which include repurchase agreements with a notice or demand period of more than seven days, certain SMBS, certain municipal leases, certain over-the-counter options, securities that are not readily marketable and Restricted Securities unless, based upon a review of the trading markets for the specific Restricted Securities, such Restricted Securities are determined to be liquid. The Trustees have adopted guidelines and delegated to the Investment Advisers the function of determining and monitoring the liquidity of the Funds’ portfolio securities. This investment practice could have the effect of increasing the level of illiquidity in a Fund to the extent that qualified institutional buyers become for a time uninterested in purchasing these Restricted Securities.

     The purchase price and subsequent valuation of Restricted Securities may reflect a discount from the price at which such securities trade when they are not restricted, since the restriction make them less liquid. The amount of the discount from the prevailing market price is expected to vary depending upon the type of security, the character of the issuer, the party who will bear the expenses of registering the Restricted Securities and prevailing supply and demand conditions.

When-Issued and Forward Commitment Securities

     Each Fund may purchase securities on a when-issued basis or purchase or sell securities on a forward commitment basis beyond the customary settlement time. These transactions involve a commitment by a Fund to purchase or sell securities at a future date. The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitment transactions are negotiated directly with the other party, and such commitments are not traded on exchanges. The Funds will generally 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, the Funds may dispose of or negotiate a commitment after entering into it. A Fund may also sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Funds may realize capital gains or losses in connection with these transactions. For purposes of determining each Fund’s duration, the maturity of when-issued or forward commitment securities for fixed-rate obligations will be calculated from the commitment date. Each Fund is generally required to segregate, until three days prior to settlement date, cash and liquid assets in an amount sufficient to meet the purchase price unless the Fund’s obligations are otherwise covered. Alternatively, each Fund may enter into offsetting contracts for the forward sale of other securities that it owns. Securities purchased or sold on a when-issued or forward commitment basis involve a risk of loss if the value of the security to be purchased declines prior to the settlement date or if the value of the security to be sold increases prior to the settlement date.

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Other Investment Companies

     Each Fund reserves the right to invest up to 10% of its total assets, calculated at the time of purchase, in the securities of other investment companies (including exchange-traded funds such as iShares^sm, as defined below), but may neither invest more than 5% of its total assets in the securities of any one investment company nor acquire more than 3% of the voting securities of any other investment company. Pursuant to an exemptive order obtained from the SEC, the Funds may invest in money market funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator and/or distributor. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by investment companies in which it invests in addition to the management fees and other expenses paid by the Fund. However, to the extent that a Fund invests in a money market fund for which the Investment Adviser or any of its affiliates acts as investment adviser, the management fees payable by the Fund to the Investment Adviser will, to the extent required by the SEC, be reduced by an amount equal to the Fund’s proportionate share of the management fees paid by such money market fund to the Investment Adviser or its affiliates. Although the Funds do not expect to do so in the foreseeable future, each Fund is authorized to invest substantially all of its assets in a single open-end investment company or series thereof that has substantially the same investment objective, policies and fundamental restrictions as the Fund.

     Core Fixed Income Fund, Investment Grade Credit, Global Income Fund, High Yield, and Emerging Markets Debt Funds may also purchase shares of investment companies investing primarily in foreign securities, including “country funds.” Country funds have portfolios consisting primarily of securities of issuers located in specified foreign countries or regions. U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may invest in iShares^sm and similar securities. iShares^sm are shares of an investment company that invests substantially all of its assets in securities included in various securities indices including, except with respect to U.S. Mortgages Fund, foreign securities indices. iShares^sm are listed on a stock exchange and were initially offered to the public in 1996. The market prices of iShares^sm are expected to fluctuate in accordance with both changes in the asset values of their underlying indices and supply and demand of iShares^sm on a stock exchange. To date, iShares^sm have traded at relatively modest discounts and premiums to the NAVs. However, iShares^sm have a limited operating history and information is lacking regarding the actual performance and trading liquidity of iShares^sm for extended periods or over complete market cycles. In addition, there is no assurance that the requirements of a stock exchange necessary to maintain the listing of iShares^sm will continue to be met or will remain unchanged. In the event substantial market or other disruptions affecting iShares^sm should occur in the future, the liquidity and value of a Fund’s shares could also be substantially and adversely affected. If such disruptions were to occur, a Fund could be required to reconsider the use of iShares^sm as part of its investment strategy.

Repurchase Agreements

     Each Fund may enter into repurchase agreements with banks, brokers, and dealers which furnish collateral at least equal in value or market price to the amount of their repurchase obligation. With respect to Enhanced Income Fund, Core Fixed Income Fund, Global Income Fund, High Yield and Emerging Markets Debt Funds, these repurchase agreements may involve foreign government securities. A repurchase agreement is an arrangement under which a Fund purchases securities and the seller agrees to repurchase the securities within a particular time and at a specified price. Custody of the securities is maintained by each Fund’s custodian (or sub-custodian). The repurchase price may be higher than the purchase price, the difference being income to a Fund, or the purchase and repurchase prices may be the same, with interest at a stated rate due to a Fund together with the repurchase price on repurchase. In either case, the income to a Fund is unrelated to the interest rate on the security subject to the repurchase agreement.

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     For purposes of the Act, and generally for tax purposes, a repurchase agreement is deemed to be a loan from a Fund to the seller of the security. For other purposes, it is not always clear whether a court would consider the security purchased by a Fund subject to a repurchase agreement as being owned by a Fund or as being collateral for a loan by a Fund to the seller. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, a Fund may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in value of the security. If the court characterizes the transaction as a loan and a Fund has not perfected a security interest in the security, the Fund may be required to return the security to the seller’s estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, a Fund would be at risk of losing some or all of the principal and interest involved in the transaction.

     Apart from the risk of 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 security subject to the repurchase agreement becomes less than the repurchase price (including accrued interest), each Fund will direct the seller of the security 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 provide for settlement 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.

     The Funds, together with other registered investment companies having management agreements with the Investment Advisers or their 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.

Reverse Repurchase Agreements

     Each Fund (other than the Enhanced Income Fund) may borrow money by entering into transactions called reverse repurchase agreements. Under these arrangements, a Fund will sell portfolio securities to dealers in U.S. Government Securities or members of the Federal Reserve System, with an agreement to repurchase the security on an agreed date, price and interest payment. In the case of the Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds, these reverse repurchase agreements may involve foreign government securities. Reverse repurchase agreements involve the possible risk that the value of portfolio securities a Fund relinquishes may decline below the price a Fund must pay when the transaction closes. Borrowings may magnify the potential for gain or loss on amounts invested resulting in an increase in the speculative character of a Fund’s outstanding shares.

     When a Fund enters into a reverse repurchase agreement, it places in a separate custodial account either liquid assets or other high grade debt securities that have a value equal to or greater than the repurchase price. The account is then continuously monitored by the Investment Adviser to make sure that an appropriate value is maintained. Reverse repurchase agreements are considered to be borrowings under the Act.

Taxable Investments

     The Tax Exempt Funds may invest in the taxable money market instruments described in the foregoing sections. When a Fund’s assets are invested in such instruments, a Fund may not be achieving its investment objective of providing income except from federal and/or applicable state or local taxes.

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Special Risk Considerations Relating to California Municipal Obligations

     The financial condition of the State of California (“California” or the “State”), its public authorities and local governments could affect the market values and marketability of, and therefore the net asset value per share and the interest income of, the California Municipal Fund, or result in the default of existing obligations, including obligations which may be held by the California Municipal Fund. 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 Additional Statement. The information contained in such publicly available documents has not been independently verified. It should be noted that the creditworthiness of obligations issued by local issuers may be unrelated to the creditworthiness of California, and that there is no obligation on the part of California to make payment on such local obligations in the event of default in the absence of a specific guarantee or pledge provided by California.

     Overview

     Following several years of very strong growth in the late 1990s, which produced large State revenue surpluses, the State’s financial condition started to worsen since the start of 2001, with the combination of a mild Statewide economic recession (but with a severe downturn in the high technology sector centered in the San Francisco Bay Area) and a dramatic decline in revenue from capital gains and stock option activity resulting from the decline in stock market levels after mid-2000. Over several years, revenues proved to be substantially lower than projections, largely because of continued weakness in the economy and stock markets. This resulted in an accumulated budget deficit by June 30, 2003 estimated at over $10 billion, and caused a severe cash shortage.

     In October, 2003, a successful recall election resulted in the replacement of the prior Governor with new Governor Arnold Schwarzenegger. On March 2, 2004, voters approved two companion ballot propositions which had been sponsored by the Governor. Proposition 57 authorized issuance of $15 billion of “economic recovery bonds” to fund previous budget deficits. About $11 billion of these bonds were issued in the spring of 2004 to fund the accumulated budget deficits and provide about $2 billion for the 2004-05 fiscal year budget. Proposition 58 implemented changes in state budget procedures designed to mandate adoption of balanced budgets in the future, to grant greater mid-year budget adjustment powers, to require creation of a budget reserve, and to prohibit future long-term borrowing to finance budget deficits. See “Recent Financial Results – Balanced Budget Amendment” below.

     The final 2004-05 and 2005-06 fiscal year budgets continued the pattern of recent years, with a combination of expenditure reductions, one-time funding mechanisms and borrowing from both external markets, other State funds and local governments. Although revenue results in the last two fiscal years have exceeded projections, budgets have been balanced using borrowing and other one-time techniques. The Administration estimates the State continues to have an underlying “structural deficit” between ongoing revenue sources and ongoing program requirements, including repayment of previous budgetary borrowings. The Administration has estimated, in the Governor’s Budget for 2006-07, released January 10, 2006, that continuing strong revenue results, mirroring a growing economy in the State, will give the State an ending budgetary surplus at June 30, 2006 of about $6.5 billion. While this surplus will be sufficient to allow the 2006-07 budget to be in balance, future budgets will show a recurrence of the structural deficit unless more permanent actions are taken.

     The State faced serious cash flow difficulties in the period 2002-2004 as a result of ongoing budget deficits and severely reduced revenues. It resorted to a series of external borrowings starting in the fall of 2001 to assure sufficient cash resources to pay its ongoing obligations, including maturing cash flow notes. The State issued $14 billion of cash flow notes to fund its requirements in the 2003-04 fiscal

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year, maturing in June, 2004. Repayment of this borrowing was accomplished with a combination of ongoing revenues and proceeds from the issuance of the economic recovery bonds approved at the March 2004 election. The State’s cash flow borrowing was reduced to $6 billion in 2004-05 and $3 billion in 2005-06, and has been limited to covering normal cash management requirements during the fiscal year. Although about $3.75 billion of economic recovery bond capacity remains, the State budget still contains a large structural deficit. Unless this structural deficit can be addressed on a long-term basis, the State may continue to require access to external capital markets to meet its cash requirements.

     The expenditure reductions and budget pressures in recent years on the State budget have resulted in continuing fiscal pressures on local governments throughout the State. As part of the 2004-05 State budget, the Governor reached an agreement to borrow $1.3 billion for each of two years, to be repaid after the 2005-06 fiscal year, from cities, counties, redevelopment agencies and other districts, in return for a constitutional amendment which would severely restrict such borrowings in the future. Several years of budget borrowing from transportation funds have left many State and local transportation construction projects without adequate funds.

     Economic Factors

     California’s economy is the largest among the 50 states and one of the largest 5 or 6 in the world. The State’s population of about 37 million (July 1, 2005 estimate) represents about 12-1/2% of the total United States population and grew by 26% in the 1980s, more than double the national rate. Population growth slowed to less than 1% annually in the early 1990’s due to a serious economic recession. For the decade of the 2000s, growth has returned to between 1 and 1.5 percent annually since 1997. The bulk of population growth in the State is due to births and foreign immigration.

     Total personal income in the State, at an estimated $1,338 billion in 2005, accounts for about 13% of all personal income in the nation. Total civilian employment was over 16.8 million in 2005, the majority of which is in the service, trade and manufacturing sectors.

     California began a period of strong economic growth in 1994 in virtually all sectors, particularly in high technology manufacturing and services, including computer software and other services, entertainment, tourism, and construction, and also with very strong growth in exports. The California economy outpaced the nation during this period. By the end of 2000, unemployment in the State had dropped to under 5%, its lowest level in three decades. In 2001, the State finally showed the impact of the nationwide economic slowdown, coupled with a cyclical downturn in the high technology sector (including Internet-related businesses) and entered a mild recession. International trade also slowed between 2001 and 2003 reflecting weakness in overseas economies (particularly in Asia). Job losses were concentrated in the San Francisco Bay Area, particularly in high technology industries; economic conditions have been better in other parts of the State.

     Statewide, modest job growth resumed in the second half of 2003 and has continued through 2005. Nonfarm payroll employment in 2005 was about 1.5 percent higher than in 2004. The unemployment rate in 2005, averaging 5.4 percent, was the lowest in four years, and almost one percent lower than 2004. Most significantly, in 2005 economic growth in San Francisco Bay Area was at almost the same level as in Southern California. Personal income also showed strong growth, with a 6.0 percent gain in 2005 as compared to the year earlier. Residential construction and existing home sales remained strong in 2004 and the first three quarters of 2005, in part due to low interest rates, but home sales slowed somewhat as the year progressed. After several weak years, nonresidential construction grew more strongly in 2004 and 2005. Exports through California ports reversed their declines of several years and showed year-over-year increases in 2003, 2004 and 2005. In January, 2006, the State Department of

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Finance projected continued growth in the economy in 2006 but at a more moderate rate than before. California’s economic growth will remain tied to the overall national economy.

     Constitutional Limitations on Taxes, Other Charges and Appropriations

Limitation on Property Taxes. Certain California debt obligations 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 powers of California local governments and districts are limited by Article XIIIA of the California Constitution, enacted by the voters in 1978 and commonly known as “Proposition 13.” Briefly, Article XIIIA limits the rate of ad valorem property taxes to 1% of full cash value of 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 were filed challenging the acquisition-based assessment system of Proposition 13, but it was upheld by the U.S. Supreme Court in 1992. Article XIIIA prohibits local governments from raising revenues through ad valorem taxes above the 1% limit; it also requires voters of any governmental unit to give two-thirds approval to levy any “special tax.”

Limitations on Other Taxes, Fees and Charges. On November 5, 1996, the voters of the State approved Proposition 218, called the “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local agencies to levy and collect both existing and future taxes, assessments, fees and charges.

     Article XIIIC requires that all new or increased local taxes be submitted to the voters before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes require a two-thirds vote.

     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

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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 certainty the outcome of such cases.

Appropriations Limits. The State and its local governments are subject to an annual “appropriations limit” imposed by Article XIIIB of the California Constitution, enacted by the voters in 1979 and significantly amended by Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the State or any covered local government from spending “appropriations subject to limitation” in excess of the appropriations limit imposed. “Appropriations subject to limitation” are authorizations to spend “proceeds of taxes,” which consist of tax revenues and certain other funds, including proceeds from regulatory licenses, user charges or other fees, to the extent that such proceeds exceed the cost of providing the product or service, but “proceeds of taxes” exclude 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 to comply with mandates of courts or the federal government, (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 transfers of service responsibilities between government 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% of any excess, with the other 50% paid to schools and community colleges. With more liberal annual adjustment factors since 1988, and depressed revenues in the early 1990’s because of the recession, few governments have been operating near their spending limits, but this condition may change over time. Local governments may by voter approval exceed their spending limits for up to four years. Because of extraordinary revenue receipts in fiscal year 1999-2000, State appropriations were estimated to be about $975 million above the limit. However, since the State was $2.1 billion below its limit in fiscal year 2000-01, resulting in no excess over the two-year period, no refunds were made. 1999-2000 was the only fiscal year since the late 1980’s when State appropriations were above the limit. The State Department of Finance estimates the State was about $7.6 billion below the limit in 2004-05, and will be about $11.3 billion below its limit in 2005-06.

     Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of the California Constitution, the ambiguities and possible inconsistencies in 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 Debt Obligations or on the ability of the State or local governments to pay debt service on such California Debt Obligations. It is not possible, at the present time, to predict the outcome of any pending litigation with respect to the ultimate scope, impact or constitutionality of these Articles or the impact of any such determinations upon State agencies or local governments, or upon their ability to pay debt service on their obligations. Further 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.

     Obligations of the State of California

     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

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higher education. As of November 1, 2005, the State had outstanding approximately $34.5 billion of long-term general obligation bonds and $7.8 billion of lease-purchase debt supported by the State General Fund. The State also had about $12.4 billion of general obligation bonds which were supported by other revenues, including economic recovery bonds payable from a special sales tax. As of November 1, 2005 the State had about $30.0 billion of authorized and unissued General Fund-supported long-term general obligation bonds and $3.2 billion of authorized and unissued lease-purchase debt. In the 2004-05 fiscal year, debt service on General Fund-supported general obligation bonds and lease purchase debt was approximately 4.85% of General Fund revenues. See also “Bond Ratings” below.

     Obligations of State Agencies

     A number of State agencies and authorities issue obligations secured or payable from specified revenue streams. These obligations are not payable from the State’s General Fund and carry different ratings than the State’s general obligation bonds. The State’s Department of Water Resources has been one of the largest issuers of revenue bonds in recent years, with over $13 billion of outstanding bonds secured by power and water users. The California Housing Finance Agency has issued over $7 billion of bonds secured by mortgage loans made for single family and multi-family housing units. None of these revenue bonds is backed by the State’s faith and credit or taxing power.

     Recent Financial Results

     The principal sources of General Fund tax revenues in 2004-05 were the California personal income tax (52 percent of total tax revenues), the sales and use tax (31 percent), and the corporation tax (11 percent). A large portion of personal income tax receipts was derived from capital gains realizations and stock option income. While these sources were extraordinarily strong in the late 1990’s and 2000, they are particularly volatile. The Department of Finance has projected that this source of revenue dropped from $17.6 billion, or 25% of all General Fund revenues in 1999-2000 to $5.2 billion, or 7% in 2001-02; this represents the bulk of the total General Fund revenue shortfall in this period. This source was projected to increase to about 12% of General Fund revenues in 2004-05 and about 13% in 2005-06.

     The State 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, but which is required to be replenished as soon as sufficient revenues are available. Year-end balances in the SFEU are included for financial reporting purposes in the General Fund balance.

     Throughout the 1980’s, State spending increased rapidly as the State 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 State General Fund revenues (currently about 35 percent).

     The substantial declines in the stock markets have adversely affected the earnings of State pension funds, and have created unfunded future pension liabilities, where there had been surpluses several years ago. The State’s annual contributions to the Public Employee’s Retirement System have increased from $157 million in the 2000-01 fiscal year to $2.4 billion in the 2005-06 fiscal year. The State will pay about $895 million in the 2005-06 fiscal year for “pay as you go” funding for health benefits for retired State employees. Starting in fiscal year 2007-08, accounting rules will require the State to estimate the actuarial cost of this future liability; the State has not computed this liability to date. Once an actuarial estimate is made, the State’s credit ratings may be affected if the State does not reduce or manage the unfunded liability.

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Balanced Budget Amendment

     On March 2, 2004, voters approved Proposition 58, a constitutional amendment called the “Balanced Budget Amendment,” which will affect future State budgeting procedures. This amendment was linked to Proposition 57, also approved by the voters, which authorized issuance of $15 billion of long-term general obligation bonds, additionally secured by a 1/4 cent increment of the State’s sales tax, which will eliminate the accumulated budget deficits through June 30, 2004 and certain additional obligations incurred by the State.

     The Balanced Budget Amendment will require the Legislature, starting in the 2004-05 fiscal year, to enact a budget bill in which General Fund expenditures do not exceed estimated General Fund revenues and available reserves After passage of the budget act, if the Governor determines that the State is facing substantial revenue shortfalls or spending deficiencies, the Governor may declare a fiscal emergency, and propose legislation to address the emergency. The Legislature would be called in to special session to address this proposal. If the Legislature failed to send legislation to the Governor to address the fiscal emergency within 45 days, it would be prohibited from acting on any other bills or adjourning until fiscal legislation is passed.

     The Amendment also creates a special reserve called the Budget Stabilization Account in the State General Fund. Beginning in the 2006-07 fiscal year, a portion of estimated annual General Fund revenues would be transferred by the Controller into the Account not later than September 30 of each year. The transfer begins at 1 percent of revenues, and increases annually to reach a level of 3 percent. (The initial transfer of about $920 million in September 2006 is included in the Governor’s proposed budget for 2006-07.) The transfers would continue until the Budget Stabilization Account reaches a balance of the greater of $8 billion or 5 percent of General Fund revenue. Moneys in the Account may be used to make up for unexpected budget imbalances, but will then have to be replenished with future transfers until the target level is reached. The annual transfer can be suspended by the Governor by an executive order issued not later than June 1 of the preceding fiscal year. The Amendment requires that one half of the Budget Stabilization Account deposits, up to an aggregate of $5 billion, shall be transferred to the State Treasurer to provide for early redemption of the economic recovery bonds approved by Proposition 57.

     A final provision of the Amendment will prohibit future long-term bond issuances for the purpose of funding budget deficits, once the bonds authorized by Proposition 57 are issued. Short term borrowing for cash flow management will continue to be authorized.

State-local Fiscal Relations

     In November, 2004, voters approved Proposition 1A, which made significant changes in the fiscal relationship between the State and local governments. In return for a $2.6 billion contribution to State budgets in the 2004-05 and 2005-06 fiscal years, Proposition 1A prohibits the State from accessing local governments’ property tax, sales tax and vehicle license fee revenues except under limited circumstances. Starting in the 2008-09 fiscal year the State can borrow up to 8 percent of local property tax revenues but only if the Governor declares a fiscal hardship and with 2/3 approval of each house of the Legislature. This amount must be repaid within three years, and such borrowing can only be done twice in any ten-year period. Proposition 1A also strengthens requirements for the State to reimburse local governments if it enacts certain kinds of laws which mandate increased local spending. Proposition 1A is intended to produce greater certainty for local governments, but will reduce the State’s options for dealing with budget shortfalls in the future.

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Recent Budgets Prior to 2004-05

     The economy, and especially the stock markets, grew strongly during the second half of the 1990’s, and as a result, the General Fund took in substantially greater tax revenues (an aggregate of more than $20 billion over the six fiscal years 1995-96 through 2000-01) than were initially planned when the budgets were enacted. These additional funds were largely directed to school spending as mandated by Proposition 98, and to make up shortfalls from reduced federal health and welfare aid in 1995-96 and 1996-97. In 1998-99 through 2000-01, new spending programs were also enacted, particularly for education, new capital outlay projects were funded from current receipts, and significant tax reductions were enacted. The Department of Finance estimates that the State’s budget reserve (the SFEU) reached a high point of $8.7 billion at June 30, 2000. In the ensuing three years, the combination of continuing high spending levels and substantially reduced revenues resulting from the economic slowdown and stock market decline brought the estimated balance of the SFEU to a negative $8.6 billion by June 30, 2003.

     The growth in General Fund revenues since 1994-95 resulted in significant increases in State funding for local school districts under Proposition 98, an initiative measure adopted in 1988 which guarantees a minimum percentage of General Fund revenues for K-14 schools. From the 1994-95 level of about $4,200 per pupil, annual State funding has increased to over $7,000 per pupil in the 2005-06 fiscal year. A significant amount of the new moneys have been directed to specific educational reforms, including reduction of class sizes in many grade levels.

     An important element of Budget Acts during the years of large capital gains receipts was agreement on substantial tax cuts. The largest of these was a phased-in cut in the Vehicle License Fee (an annual tax on the value of cars registered in the State, the “VLF”). Starting on January 1, 1999, the VLF was reduced by 25 percent, which was increased in steps to a 67.5% reduction effective January 1, 2001. Under pre-existing law, VLF funds were automatically transferred to cities and counties, so the new legislation provided for the General Fund to make up the reductions. The full 67.5% percent VLF cut was offset by transfers of about $4.2 billion annually from the General Fund. Other miscellaneous business and personal tax cuts and tax credits were of a much smaller overall amount.

     The previous Governor attempted to raise the VLF back to its 1998 level because of shortfalls in General Fund money in 2003 to make the “offset” to cities and counties. Subsequently, the newly elected Governor Schwarzenegger reversed this action and committed to retain the VLF cut and the offset to local governments. A subsequent Constitutional Amendment has replaced the offset with a larger share of local property taxes for cities and counties.

     The severe downturn in General Fund revenues in the years after 2000 made adoption of State budgets very difficult. Expenditures were much greater than revenues, resulting in several successive years of budget deficits, which reached almost $10 billion by June 30, 2003. Budgets were enacted using a combination of spending reductions, borrowing from special funds, one-time accounting and other actions, borrowing from local governments, funding shifts and deferrals, and external borrowing. In March, 2004, voters approved issuance of up to $15 billion of “economic recovery bonds” which were designed to repay the accumulated budget deficits over time, using a special, dedicated one-quarter cut state sales tax. About $11.3 billion of these bonds were issued in the Spring of 2004. About $9.3 billion was allocated to eliminate the accumulated, prior budget deficit, and $2.0 billion was allocated to help balance the 2004-05 Budget. No further economic recovery bonds have been issued, nor are any proposed for the 2005-06 or 2006-07 fiscal years, but the authorization remains for issuance of the balance of these bonds.

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Fiscal Year 2004-05 Budget

Governor’s Budget Proposals. The Proposed 2004-05 Governor’s Budget (the “2005 Governor’s Budget”) released on January 9, 2004 by the new Schwarzenegger Administration, reported that, in the absence of corrective action to change existing policies, operating deficits of about $14 billion would be incurred for the 2004-05 fiscal year. The original 2003-04 Budget Act estimated a budget reserve (SFEU) at June 30, 2004 of about $2 billion. The 2004 Governor’s Budget revised this estimate to about $290 million, assuming enactment of certain mid-year budget adjustment proposals (which were not adopted).

2004-05 Budget Act. Following lengthy negotiations between the Governor and the Legislature, the 2004 Budget Act was adopted on July 29, 2004. The Budget Act projected General Fund revenues and transfers of $77.3 billion (including application of $2 billion of economic recovery bond proceeds). Expenditures were estimated at $80.7 billion (the gap being made up from carryover resources from the prior year) and the year-end reserve at June 30, 2005 was estimated at $768 million. In October, 2004, the State issued $6 billion of revenue anticipation notes, due June 30, 2005, to cover normal cash flow needs during the fiscal year. The major features of the 2004 Budget Act were the following:

     1. Suspension of Proposition 98. — The minimum Proposition 98 funding guarantee for public schools was suspended, to save about $2 billion. This still provided an increase in funding for public schools to cover enrollment growth and inflation. (When final revenue results for 2004-05 were counted, well above the estimates made when the budget was adopted, the waiver of the minimum funding guarantee resulted in a saving of almost $4 billion.)

     2. Spending Reductions — Cuts were made in General Fund support for higher education, to be offset by fee increases. After 2004-05, the Governor promised to allow a uniform fee increase policy, and to start to restore funding to State universities. As a result of budget cuts, State higher education units had to limit admissions for the first time in many years. Limited reductions were made in health and welfare costs, saving about $1 billion. The Governor proposed a wide range of reductions in health and social services programs which will largely take effect in future years.

     3. External Borrowing/Pension Costs — The budget included a reduction in pension costs for new employees for the first two years of employment. The Governor also proposed a $929 million pension obligation bond issuance assuming timely and successful appeal of a lawsuit which blocked an earlier pension obligation bond issue. This proposal was not implemented before June 30, 2005, because of continuing litigation.

     4. Other Borrowing — The budget reduced General Fund payments to schools by transferring an additional $1.3 billion of city and county property taxes to school districts. This was incorporated into Proposition 1A, and was repeated in 2005-06. The budget also saved $1.1 billion by suspending planned General Fund transfer of gasoline tax moneys for the Transportation Investment Fund enacted several years earlier in better fiscal times. The budget included a proposal to use moneys from new tribal gaming compacts with five tribes to obtain about $300 million of new General Fund revenue (a figure later reduced to $16 million) and to sell about $1 billion of bonds secured by future tribal payments to repay the loans from the Transportation Investment Fund to accelerate construction of transportation projects. This bond transaction did not occur pending the outcome of certain litigation.

     In the May Revision of the 2005-06 Proposed Governor’s Budget, released on May 13, 2005 (“2006 May Revision”), the State Department of Finance estimated that the 2004-05 fiscal year would end with a larger budget reserve than was projected when the 2004 Budget Act was passed. This was due to a combination of higher than expected revenues resulting from a stronger economy, and better than

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expected results from a tax amnesty program. Both revenues and expenditures for 2004-05 were projected to increase from initial estimates, to $79.5 billion and $82.0 billion, respectively.

Fiscal Year 2005-06 Budget

     The initial 2006 Governor’s Budget, released January 10, 2005, projected that revenues for the 2005-06 fiscal year would increase from the prior year by about $5.2 billion, as a result of the improving economy. However, under current programs and laws, the Governor stated that expenditures would increase by $10 billion. To close an estimated $9 billion budget gap, the Governor proposed a number of budget solutions, without tax increases, to be coupled with fundamental reforms which would have to approved by the voters. In the 2006 May Revision, the Administration estimated that improved revenues from stronger economic conditions had reduced the budget gap to about $4 billion. This permitted the Administration to revise its projected budget solutions.

     The 2005 Budget Act was signed by the Governor on July 11, 2005. General Fund revenues and transfers are projected to increase 5.7 percent, from $79.9 billion in fiscal year 2004-05 to $84.5 billion in fiscal year 2005-06. The 2005 Budget Act contains General Fund appropriations of $90.0 billion, compared to $81.7 billion in 2004-05. The difference between revenues and expenditures in fiscal year 2005-06 is funded by using a part of the $7.5 billion fund balance at June 30, 2005. The June 30, 2006 reserve is projected to be $1.302 billion, compared to an estimated June 30, 2005 reserve of $6.857 billion. About $900 million of this reserve will be set aside for payment in fiscal year 2006-07 of tax refunds and other adjustments related to the tax amnesty program implemented in early 2005.

     The 2005 Budget Act also includes Special Fund expenditures of $23.3 billion and Bond Fund expenditures of $4.0 billion. The state issued $3.0 billion of Revenue Anticipation Notes (RANs) to meet the its short-term cash flow needs for fiscal year 2005-06, the smallest cash flow borrowing in five years.

     The 2005 Budget Act was substantially similar to the Governor’s May Revision proposals. It contained the following major components:

     1. Proposition 98—General Fund expenditures increased by $2.582 billion, or 7.6 percent, to $36.6 billion. The Budget Act fully funded enrollment growth and a 4.23 percent cost of living increase. Per pupil spending under Proposition 98 was projected to be $7,402, compared to $7,023 in the previous year. The Budget reflected savings of $3.8 billion resulting from the waiver of the minimum funding guarantee in 2004-05, which will be restored to the Proposition 98 budget in future years as General Fund revenue growth exceeds personal income growth.

     2. Higher Education—The 2005 Budget Act provided for total Higher Education funding of $17.8 billion from all revenue sources, including $10.2 billion General Fund. General Fund support for both the UC and CSU was increased by $134 million (about 5 percent) compared to 2004-05. The Budget Act assumed fee increases for undergraduate and graduate students.

     3. Health and Human Services—The 2005 Budget Act increased General Fund expenditures by $2.1 billion, or 8.5 percent, to $27.1 billion for Health and Human Services programs. The Budget reflected the suspension of the July 2005 and July 2006 CalWORKs grant cost-of-living-adjustments (COLAs), yielding General Fund savings of $136 million in 2005-06 and $139 million in 2006-07. The Budget further assumed the January 2006 and January 2007 COLAs for SSI/SSP recipients will be suspended for estimated General Fund savings of $132 million in 2005-06, $407.5 million in 2006-07, and $281 million in 2007-08. The Budget also included federal fiscal relief of $223 million due to progress in implementing a single, statewide automated child support system.

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     4. Vehicle License Fee Gap Loan Repayment—The 2005 Budget Act fully repaid the $1.2 billion that local governments lost between July and October of 2003, when the Vehicle License Fee offset program was temporarily suspended. The state was not required to repay the gap loan until August of 2006. This payment was made in August, 2005.

     5. Transportation Funding—The Proposition 42 provision for sales taxes on gasoline to be used for transportation projects was fully funded at an estimated $1.3 billion. (The original budget proposal called for the suspension of this transfer to boost General Fund revenues.) The Budget Act includes a proposal, originally included in the 2004-05 budget, to provide about $1 billion for transportation programs from the sale of future receipts of gaming revenues from new compacts with several Indian tribes. The sale, and a related bond issue, are waiting for resolution of litigation concerning these compacts.

     6. Financial Instruments—The Governor’s original plan to sell $1.7 billion of additional deficit financing bonds was deleted from the budget following higher revenue estimates in the May Revision of the Governor’s Budget. The 2005 Budget Act assumed the state’s issuance of pension obligation bonds to fund approximately $525 million of the state’s 2005-06 retirement obligation to the California Public Employees’ Retirement System. However, because of an adverse trial court decision in a lawsuit challenging the validity of these bonds, and the time which would be required for an appeal, these bonds will not be issued before June 30, 2006, and other funds will be required make the pension fund payment. The Budget further reflected the receipt of $525 million in August, 2005 from the refinancing of tobacco securitization bonds. The original 2005-06 Governor’s Budget had included a proposal to issue $464 million of judgment bonds to finance the pending settlement of the Paterno lawsuit, but subsequent developments led to the removal of this proposal from the budget. The State settled three related lawsuits through stipulated judgments. The largest settlement, in the amount of $428 million, provides for the State to make annual payments of $42.8 million per year, plus interest, for ten years; the payments are subject to annual appropriation by the Legislature. The first year’s payment, as well as $36 million to fully discharge the other two stipulated judgments, is included in the 2005 Budget Act.

     7. Taxes — The Budget Act contains no new taxes.

2006-07 Governor’s Proposed Budget

     The 2006-07 Governor’s Budget, released on January 10, 2006, estimates that the operating deficit for 2006-07 will be $6.3 billion. About $1.6 billion of this gap, however, is based on prepayments and scheduled payments from the General Fund to other funds and sources, which were used to balance earlier budgets, leaving what the Administration termed as an “effective operating deficit” of about $4.7 billion.

     The 2006-07 Governor’s Budget projects to end fiscal year 2006-07 with a $613 million total reserve, including $460 million in the newly created Budget Stabilization Account. General Fund revenues and transfers for fiscal year 2006-07 are projected at $91.5 billion, an increase of $3.9 billion compared with revised estimates for fiscal year 2005-06. The 2006-07 Governor’s Budget, among other assumptions, reflects an increase in major revenues of $4.8 billion, or 5.7 percent, due to continued economic growth.

     General Fund expenditures for fiscal year 2006-07 are projected at $97.9 billion, an increase of $7.6 billion, or 8.4%, compared with revised estimates for 2005-06. The Budget would be balanced by using the estimated 2005-06 ending fund balance of $7.0 billion.

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The 2006-07 Governor’s Budget has the following major components:

1. Proposition 98—General Fund expenditures are proposed at $40.5 billion, which is an increase of $4.1 billion, or 11.4 percent, compared to the revised 2005-06 estimate. When property taxes are taken into account, the total Proposition 98 guarantee is $54.3 billion, which is an increase of $4.3 billion, or 8.7 percent. This level of funding also reflects $1.7 billion in Proposition 98 spending above the level that otherwise would have been required by the Proposition 98 guarantee for 2006-07.

2. Higher Education—The 2006-07 Governor’s Budget proposes General Fund expenditures at $11.2 billion, an increase of $1.1 billion, or 10.5 percent. The 2006-07 Governor’s Budget proposes additional funding of $75 million for UC and $54.4 million for CSU so that no student fee increase would be required in 2006-07.

3. Health and Human Services—The 2006-07 Governor’s Budget proposes $28.4 billion General Fund to be spent on Health and Human Services programs, which is an increase of $1.2 billion, or 4.4 percent, from the revised 2005-06 estimate. This net increase includes, among other things, the following major adjustments: (1) Caseload and other workload increases totaling $1.3 billion; (2) CalWORKs (the State welfare program) reductions of $198.9 million to maintain expenditures at the federally required level of state funding; and (3) Savings of $48.1 million in 2006-07 and over $185 million in 2007-08 by continuing to suspend certain cost-of-living adjustments until July 2008.

4. Transportation Funding—The 2006-07 Governor’s Budget includes $1.4 billion to fully fund Proposition 42 in 2006-07 and $920 million for advance payment of a portion of the 2004-05 Proposition 42 loan due in 2007-08 (including interest). Approximately $430 million (including interest) remains to be paid in 2007-08. (Proposition 42 dedicates the sales tax on gasoline to transportation purposes, but allows suspension when budgetary needs arise, which was done for several years, giving rise to a repayment obligation.)

5. Budget Stabilization Account—The 2006-07 Governor’s Budget includes a total of $920 million to be transferred to the Budget Stabilization Account (BSA), pursuant to Proposition 58. Half of this amount, or $460 million, will remain in the BSA as a reserve. The other half will be further transferred for the purpose of early retirement of Economic Recovery Bonds.

Strategic Growth Plan

     The Governor proposed a comprehensive Strategic Growth Plan, which is the first installment of a 20-year investment in the state’s infrastructure in the following five areas: transportation and air quality, education, flood control and water supply, public safety, and court and other public service infrastructure. Specifically, this plan lays out more than $222 billion in infrastructure investments over the first ten years, of which $68 billion will be financed with General Obligation (GO) Bonds, and the remainder will come from a mixture of existing and new funding sources. The GO bonds would be put before the citizens of California over a series of elections between 2006 and 2014. The Department of Finance estimates that the increase in debt service costs associated with the Strategic Growth Plan will amount to approximately one percentage point in the state’s debt service ratio (annual cost for debt service as a percentage of General Fund revenues) and will keep the debt service ratio below six percent over the next 20 years. In addition, the Governor is proposing a constitutional amendment to prohibit the state from issuing debt that would exceed the 6 percent debt service ratio.

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     As part of the Strategic Growth Plan, the Governor is proposing a constitutional amendment to permanently protect Proposition 42 funds for transportation and eliminate the option for future governors and legislatures to suspend the allocation. In addition, the Governor proposes the following cost-saving reforms: (1) legislation to provide authority to use design-build contracting, where the main contractor performs most design as well as construction services under one contract; (2) legislation authorizing design-sequencing, where some construction can begin while design of other elements is being finished; and (3) expanded authority to fund and deliver projects through a variety of public-private partnerships.

     Legislative Analyst’s Office Report

     On November 16, 2005, the independent Legislative Analyst’s Office (“LAO”) released a report titled “California’s Fiscal Outlook: LAO Projections 2005-06 through 2010-11.” In this report the LAO stated that the State’s budget outlook had improved considerably, but that budget challenges remained in the form of a structural deficit of several billion dollars for upcoming years.

     With respect to the 2005-06 fiscal year, the LAO estimated that General Fund revenues exceeded estimates by $1 billion for 2004-05, and would exceed estimates by $2.8 billion in 2005-06. In contrast, expenditures in 2005-06 were expected to be about $80 million under budget. As a result, the year-end budget reserve at June 30, 2006 was estimated to increase from the original projection of $1.3 billion to a revised estimate of $5.2 billion. Much of this reserve would be needed to balance the 2006-07 budget, for which the LAO predicted a structural deficit of about $4 billion. (These estimates have not been updated since the release of the 2006-07 Governor’s Budget in January, 2006.)

     The report also noted that the 2005-06 budget contained about $2 billion in ongoing budgetary savings, mainly for education under Proposition 98 and social services. In addition, much of the additional revenue generated by the improving economy was used to repay a loan to local governments and to delay issuance of additional deficit financing bonds. Despite these positive developments, the LAO projected that structural deficits would continue in the future, peaking at $4.3 billion in 2007-08, and reducing to $600 million in 2010-11. These estimates assume there will not be a major economic downturn, and also do not take into account making transfers from the General Fund to the Budget Stabilization Account (see “Balanced Budget Amendment” above).

Cash Flow Requirements

     The State typically funds its day-to-day operating requirements of the General Fund from revenue receipts, interfund borrowing from special funds, and external borrowing in the form of revenue anticipation notes (“RANs”), which fund annual cash flow requirements and are repaid within the same fiscal year, and revenue anticipation warrants (“RAWs”) which are issued only when it is necessary to bridge a budgetary deficit over the end of a fiscal year. The State’s ongoing revenue shortfalls and budget deficits incurred in the last three fiscal years, along with certain unique factors associated with the State’s energy crisis in 2001, placed severe pressure on the State’s cash resources, and required an unprecedented amount of short-term cash flow borrowing.

     The State sold a record $12.5 billion of RANs in October 2002, due in June 2003, to cover its cash flow needs. By mid-winter 2003 it became evident that the State would have a cash shortfall by the end of June 2003, when the $12.5 billion RANs came due. Accordingly, the State issued $11 billion of RAWs, also a record, on June 18, 2003 to pay the RANs and other obligations coming due in June 2003, and to cover cash flow requirements through late August. To sell these RAWs, the State was required to obtain credit support from a group of financial institutions. The State issued $3 billion of RANs in October 2003 to fund the remainder of its cash management needs for the 2003-04 fiscal year. For the first time, the entire State RAN issue was supported by external bank credit.

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     All of the RAWs and RANs due in June 2004 were paid, from a combination of available revenues and proceeds from the sale of economic recovery bonds. For the 2004-05 year, the State issued $6 billion of RANs as part of its normal cash management program, which were paid on June 30, 2005. The State issued $3 billion of RANs for cash management in the 2005-06 fiscal year. The State has about $3.75 billion of economic recovery bond authorization remaining which can assist in cash management. If it is unable to bring its ongoing structural budget deficit into balance, it may again face cash flow problems in the future and may have to rely on access to public capital markets to maintain adequate cash flow to pay its obligations.

     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. After 1996, through the end of 2000, the three major rating agencies raised their ratings of California’s general obligation bonds as high as “AA” from Standard & Poor’s, “Aa2” from Moody’s and “AA” from Fitch. Starting in December 2002, as the State’s budget and cash condition worsened, all three rating agencies reduced the ratings of California’s general obligation bonds to the “BBB” level. With improved economic conditions and fiscal results, and issuance of economic recovery bonds to reduce cash flow risks, the State’s ratings have been raised and as of February 1, 2006, were Standard & Poor’s “A,” Fitch “A” and Moody’s “A2.” The economic recovery bonds bear higher ratings, in the “AA-” range, because of the additional pledge of a dedicated stream of sales tax revenues.

     There can be no assurance that current 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 creditworthiness of obligations issued by the State of California, and that there is no obligation on the part of the State to make payment on such local obligations in the event of default.

     Legal Proceedings

     The State is involved in certain legal proceedings (described in the State’s recent financial statements) that, if decided against the State, may require the State to make significant future expenditures or may substantially impair revenues. If the State eventually loses any of these cases, the final remedies may not have to be implemented in one year.

     Obligations of Other Issuers

Other Issuers of California Debt Obligations. There are a number of State agencies, instrumentalities and political subdivisions of the State 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.

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 the State’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 to assist municipal issuers to raise revenues. Total local assistance from the State’s General Fund was budgeted at approximately 75% of General Fund expenditures in recent years, including the effect of implementing reductions in certain aid programs. To reduce State General Fund support for school districts, the 1992-93 and 1993-94 Budget Acts caused local governments to transfer $3.9 billion of

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property tax revenues to school districts, representing loss of the post-Proposition 13 “bailout” aid. Local governments have in return received greater revenues and greater flexibility to operate health and welfare programs. The enactment of Proposition 1A in November 2004 will substantially change the ability of the State to use local government taxing sources to aid the State budget. See “Recent Financial Results—State-local Fiscal Relations” above.

     In 1997, a new program provided for the State to substantially take over funding for local trial courts (saving cities and counties some $400 million annually). In recent years, the State has provided over $350 million to support local law enforcement costs. To the extent the State 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. The recent economic slowdown in the State, with its corresponding reduction in State and local revenues, will put additional pressure on local government finances in the coming years.

     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.

     Local governments are facing substantial increases in future pension liabilities and health care costs for retirees, and increases in current contribution rates, as a result of (a) generous new retirements benefits granted to employees during recent economic boom times, and (b) reduced earnings resulting from the stock market declines during the 2000-2003 period.

Assessment Bonds. California debt obligations 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. Based on a series of court decisions, certain long-term lease obligations, though typically payable from the general fund of the State or a municipality, are not considered “indebtedness” requiring voter approval. Such leases, however, 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

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may not be paid when due. Although litigation is brought from time to time which challenges the constitutionality of such lease arrangements, the California Supreme Court issued a ruling in August, 1998 which reconfirmed the legality of these financing methods.

     Other Considerations

     The repayment of industrial development securities or single family mortgage revenue bonds secured by real property may be affected by California laws limiting foreclosure rights of creditors. Under California law, mortgage loans secured by single family homes can be prepaid at any time without penalty, except in the first five years of the loan, and subject to limits on the size of the penalty. Such prepayments may affect the ability of the issuer of single family mortgage bonds to repay the bonds. 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 a major natural disaster such as an earthquake), the tax increment revenue may be insufficient to make principal and interest payments on these bonds. Both Moody’s and S&P suspended ratings on California tax allocation bonds after the enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis.

     Proposition 87, approved by California voters in 1988, requires that all revenues produced by a tax rate increase go directly to the taxing entity which increased such tax rate to repay that entity’s general obligation indebtedness. As a result, redevelopment agencies (which, typically, are the issuers of tax allocation securities) no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter-approved bonded indebtedness.

     The effect of these various constitutional and statutory changes upon the ability of California municipal securities issuers to pay interest and principal on their obligations remains unclear. Furthermore, other measures affecting the taxing or spending authority of California or its political subdivisions may be approved or enacted in the future. Legislation has been or may be introduced which would modify existing taxes or other revenue-raising measures or which either would further limit or, alternatively, would increase the abilities of state and local governments to impose new taxes or increase existing taxes. It is not possible, at present, to predict the extent to which any such legislation will be enacted. Nor is it possible, at present, to determine the impact of any such legislation on securities held in the California Municipal Fund, 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 securities.

     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 has had any long-term negative economic impact. Any obligation in the California Municipal Fund 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 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.

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Special Risk Considerations Relating to New York Municipal Obligations

     Some of the significant financial considerations relating to the Goldman Sachs New York Municipal Fund’s investments in New York municipal obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from the Annual Information Statement of the State of New York (“AIS”) as supplemented and contained in official statements relating to issues of New York municipal obligations 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.

     Financial Disclosure for the State of New York

     The State of New York’s most recently completed fiscal year began on April 1, 2004 and ended on March 31, 2005. The most recent published AIS was dated May 4, 2005, and was updated on August 8, 2005, November 2, 2005 and January 26, 2006. The information of the State comes from the Department of Budget (“DOB”). The AIS is available at: www.budget.state.ny.us/investor/ais/ais.html.

     The State’s current fiscal year began on April 1, 2005 and ends on March 31, 2006. On March 8, 2005, the State Legislature enacted appropriations for all State-supported, contingent contractual, and certain other debt service obligations for the entire 2005-06 fiscal year. On March 31, 2005, the Legislature completed action on the remaining appropriations and accompanying legislation constituting the budget for the 2005-06 fiscal year. Subsequently, on April 12, 2005, the Legislature enacted certain amendments to the 2005-06 Enacted Budget.

     The State accounts for all of its spending and receipts by the fund in which the activity takes place, and the broad category or purpose of that activity. The State’s four major fund types (collectively, “All Funds”) include:

     1) General Fund, which receives most of the State’s tax revenue and accounts for spending on programs that are not supported directly by dedicated fees and revenues;

     2) Special Revenue Funds, which receive Federal grants, certain dedicated taxes, fees and other revenues that are used for a specified purpose;

     3) Capital Project Funds, which account for costs incurred in the construction and reconstruction of roads, bridges, prisons, and other infrastructure projects; and

     4) Debt Service Funds, which pay principal, interest and related expenses on long-term bonds issued by the State and its public authorities.

     Special Considerations. Many complex political, social, and economic forces influence the State’s economy and finances, which may in turn affect the State’s Financial Plan. These forces may affect the State from fiscal year to fiscal year and are influenced by governments, institutions, and events that are not subject to the State’s control. The State’s Financial Plan (explained under “State Budget”) is also necessarily 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 State economies. The DOB believes that its current estimates related to the performance of the State and national economies are reasonable. However, there can be no assurance that actual results will not differ materially and adversely from the current forecast.

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     The following provides a description of some of the risks the State is continuing to monitor. The risks presented herein are not comprehensive. Accordingly, readers should refer to the AIS for a more complete review of present risks, including the status of school finance litigation, Native American land claims, and other actions affecting the State.

     •       Prior to certain Executive Budget recommendations, DOB projected a potential imbalance of $751 million in 2006-07 and gaps in the range of $3 billion to $4 billion in future years. While current-year results are favorable, the State’s structural imbalance persists, although at levels greatly reduced from recent years. Left unchecked, spending would grow by $3.6 billion in 2006-07, driven in part by the State cap on local Medicaid costs and the takeover of the local share of the Family Health Plus (FHP) program, both of which help relieve pressure on local property taxes. Health care inflation, school aid increases, State employee salaries and benefits, and the loss of one-time resources used to balance the 2005-06 budget also contribute to spending growth in 2006-07. Strong revenue growth is expected to more than compensate for the phase-out, effective January 1, 2006, of the temporary personal income tax (a “PIT”) surcharge imposed in the aftermath of September 11^th, but is not enough to eliminate the gap.

     •       The new Medicare prescription drug program became available to all Medicare beneficiaries on January 1, 2006. The Federal government now requires the states to finance a portion of this program. Each state’s payment will correspond closely to the spending it would have made on prescription drugs through Medicaid for those recipients who are eligible for both Medicaid and Medicare (“dually eligible”). For New York, the Medicare Part D program is particularly complicated because certain drugs now available to dually eligible individuals through Medicaid will not be covered under Part D, and must be fully financed by the State under Medicaid. The State estimates that Part D implementation could cost $72 million in the current year growing to roughly $400 million in 2006-07 and $500 million in 2007-08.

     •      The State is a defendant in several court cases that could ultimately result in costs to the State Financial Plan. The most significant is Campaign for Fiscal Equity v. State of New York, in which the State Court of Appeals directed the State to implement a remedy by July 30, 2004 that would guarantee that all children in New York City have the opportunity to receive a sound basic education (SBE). In August 2004, the State Supreme Court directed a panel of three Special Masters to report and make recommendations on the measures the State had taken to bring its school financing system into constitutional compliance with respect to New York City schools. The Special Masters submitted their report to the Court on November 30, 2004. The report recommended (a) an annual increase of $5.6 billion in education aid to New York City to be phased in over four years and (b) $9.2 billion for school construction and renovation to be phased in over five years. In February 2005, the State Supreme Court adopted the recommendations of the Special Masters, requiring the State to comply with those recommendations within 90 days. The State filed an appeal in April 2005 and the Appellate Court is expected to issue a ruling by June 2006. The 2006-07 Executive Budget proposes a combination of traditional school aid and continued funding for the SBE aid program as part of a comprehensive plan to comply with the Court’s order. Under a plan proposed by the Governor, revenues from video lottery terminals (“VLTs”) will be used for SBE. So far, VLTs have been implemented at five of the State’s racetracks. Four other racetracks have received authorization to operate VLTs, and are in various stages of implementation. Two major facilities located at Yonkers and Aqueduct Raceways are expected to begin operations in October 2006 and October 2007, respectively. These two facilities are expected to produce the majority of the growth of VLT receipts under current law. The 2006-07 Executive Budget recommends $700 million of funding for SBE, growing to $1.5 billion by school year 2008-09. Under the Governor’s plan, New York City would receive approximately 60% of the annual SBE aid.

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     •      Other litigation includes ongoing claims by several Indian Nations alleging wrongful possession of lands by the State and several counties, as well as claims involving the adequacy of shelter allowances for families on public assistance. The State has implemented a court-ordered increase in the shelter allowance schedule for public assistance families. However, the plaintiffs are challenging the adequacy of the increase and, thus, further Court proceedings are pending.

     •      The Federal government is currently auditing Medicaid claims submitted since 1993 under the School Supportive Health Services Program. At this point, these audits have not been finalized, and, as a result, the liability of the State and school districts for any disallowances cannot be determined. Federal regulations include an appeals process that could postpone repayment of any disallowances. The current Financial Plan assumes the Federal government will fully reimburse these costs. In addition, a portion of Federal Medicaid payments related to School Supportive Health Services have been deferred by the Federal Centers for Medicare and Medicaid Services pending finalization of audits. Since the State has continued to reimburse local school districts for these costs, these Federal deferrals, if not resolved, could negatively impact the Financial Plan. Alternatively, if the State suspends reimbursement, local governments could be adversely affected.

     •      The Office of the Inspector General (“OIG”) of the Department of Health and Human Services is conducting six audits of aspects of New York State’s School Supportive Health Services program with regard to Medicaid reimbursement that cover $1.5 billion in claims submitted between 1990 and 2001. To date the OIG of the Department of Health and Human Services has issued three final audit reports, which cover claims submitted by upstate school districts for speech pathology and transportation services and New York City for speech pathology services. In these reports, OIG recommends that the State refund to the Centers for Medicare and Medicaid Services (“CMS”) $173 million of the $362 million in claims for upstate speech pathology services, $17 million of $72 million for upstate transportation services, and $436 million of the $551 million in claims submitted for New York City speech pathology services. New York State disagrees with the audit findings on several grounds and has requested that these be withdrawn. Federal regulations include an appeals process that could postpone repayment of any disallowances. While CMS has not taken any action with regard to the recommended disallowances by OIG, CMS is deferring 25 percent of New York City claims and 9.7 percent of claims submitted by the rest of the State pending the completion of the audits. Since the State has continued to reimburse school districts for these costs these Federal deferrals have resulted in higher costs, as reflected in the State’s latest Financial Plan.

     •      The State has discontinued intergovernmental transfer payments as of March 31, 2005 pending the approval of a State Plan Amendment. These payments are related to disproportionate share hospital payments to public hospitals throughout the State, including those operated by the New York City Health and Hospital Corporation, the State University of New York (“SUNY”) and the counties. If these payments are not approved in 2005-06 and beyond, the State’s health care financing system could be adversely affected.

     •      The State was involved in litigation challenging the use of proceeds from the conversion of Empire Blue Cross/Blue Shield from a not-for-profit corporation to a for-profit corporation. On June 20, 2005, the Court of Appeals ruled in favor of the State in this litigation. As a result, the State Comptroller has transferred the Empire proceeds received to date ($754 million) that were held in escrow pending resolution of the court to the Health Care Reform Act (“HCRA”) Resources Fund. On September 27, 2005, WellPoint and WellChoice (or Empire or Empire Blue Cross) announced that the two companies had agreed to merge. Under the merger, WellPoint will provide WellChoice stockholders a blend of cash and stock. As a result of this transaction, the New York Public Asset Fund, which owns about 52 million shares of WellChoice stock and is the State’s agent in the transaction, is expected to

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receive approximately $2 billion in cash in 2005-06, plus about 27 million shares of WellPoint common stock.

     If the transaction closes during the first quarter of calendar 2006, HCRA would receive $2 billion in cash in 2005-06, or approximately $850 million more than originally planned. The expected merger of WellChoice, Inc. and WellPoint, Inc. would eliminate the most significant known risk to the State’s 2005-06 Financial Plan.

     •      As a result of Hurricanes Katrina and Rita and the related surge in energy prices, the State is expecting to pay more to supply heat and electricity to its buildings, including the Department of Corrections and Mental Hygiene facilities and the SUNY campus, and to fuel its fleet of cars, including State Police and Transportation vehicles. The Governor has proposed a legislative package to promote greater energy efficiency and to mitigate the impact of higher energy costs. Similarly, the Legislature is evaluating a range of policy options to mitigate the impact of higher energy prices on businesses and households. The potential fiscal impact of these proposals is not reflected in the current Financial Plan.

     State Economy. New York’s economy has been growing since September 2003, a trend DOB expects will continue, albeit more modestly, over the four-year period of the State’s Financial Plan (2005- 06 through 2008-09). DOB now estimates underlying revenue growth of 11 percent in the current year (the second year in a row in which revenues have grown at this rate), and still-strong 8 percent growth in 2006-07. For 2006, DOB projects total employment growth of 0.8 percent and private sector growth of 0.9 percent.

     In addition to the risks associated with the national economic forecast, there exist specific risks to the State economy. Another attack targeted at New York City would once again disproportionately affect the State economy, resulting in lower income and employment growth than reflected in the current forecast. Higher energy prices and the potential for greater pass-through to core inflation, combined with a growing rate of capacity utilization and a tightening labor market, raise the probability that the Federal Reserve will over-tighten. Such an outcome could negatively affect the financial markets, which would also disproportionately affect the New York State economy. In addition, the State’s real estate market could decline more than anticipated, which would negatively affect household consumption and taxable capital gains realizations. These effects could ripple through the economy, affecting both employment and wages.

     In contrast, should the national and world economies grow faster than expected, a stronger upturn in stock prices, along with even stronger activity in mergers and acquisitions and other Wall Street activities is possible, resulting in higher wage and bonuses growth than projected. It is important to recall that the financial markets, which are so pivotal to the direction of the downstate economy, are notoriously difficult to forecast. With the economy becoming increasingly globalized, and the pace of both technological and regulatory change accelerating, projecting finance industry revenues and profits has never been more challenging.

     New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State’s economy is diverse, with a comparatively large share of the nation’s financial activities, information, education, and health services employment, and a very small share of the nation’s farming and mining activity. The State’s location and its air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries.

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     State Budget. The Executive Budget is the Governor’s constitutionally mandated annual submission to the Legislature which contains his recommended program for the forthcoming fiscal year. It projects disbursements and expenditures needed to carry out the Governor’s recommended programs and receipts and revenues expected to be available for such purpose. The recommendations contained in the Executive Budget serve as the basis for the State Financial Plan which is adjusted after the Legislature acts on the Governor’s submission. Under the State Constitution, the Governor is required each year to propose an Executive Budget that is balanced on a cash basis.

     The State Financial Plan sets forth projections of State receipts and disbursements in the governmental fund types for each fiscal year and is prepared by the Director of the DOB, based initially upon the recommendations contained in the Executive Budget. After the budget is enacted, the State Financial Plan is adjusted to reflect revenue measures, appropriation bills and certain related bills enacted by the Legislature. It serves as the basis for the administration of the State’s finances by the DOB.

     The Comptroller is responsible for the investment of substantially all State moneys. By law, such moneys may be invested only in obligations issued or guaranteed by the Federal government or the State, obligations of certain Federal agencies that are not guaranteed by the Federal government, certain general obligations of other states, direct obligations of the State’s municipalities and obligations of certain public authorities, certain short-term corporate obligations, certain bankers’ acceptances, and certificates of deposit secured by legally qualified governmental securities. All securities in which the State invests moneys held by funds administered within the State Treasury must mature within 12 years of the date they are purchased. Money impounded by the Comptroller for payment of Tax and Revenue Anticipation Notes may only be invested, subject to the provisions of the State Finance Law, in (i) obligations of the Federal government, (ii) certificates of deposit secured by such obligations, or (iii) obligations of or obligations guaranteed by agencies of the Federal government as to which the payment of principal and interest is guaranteed by the Federal government.

     In recent years, the State has closed projected budget gaps which DOB estimated at $5.0 billion (1995-96), $3.9 billion (1996-97); $2.3 billion (1997-98); less than $1 billion (in each of the fiscal years 1998-99 through 2000-01); $6.8 billion (2002-03); $2.8 billion (2003-04) and $5 billion (2004-2005). While the current fiscal year is balanced, the magnitude of future budget gaps requires timely and aggressive measures to restore structural balance. The Governor is continuing implementation of a fiscal management plan that includes measures intended to reduce costs and generate recurring savings in the outyears. The State faces potential General Fund budget gaps of $751 million in 2006-07, and $3.2 billion in 2007-08.

     General Fund. The General Fund is the principal operating fund of 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 DOB projects a net General Fund surplus estimate of $2.0 billion for the 2005-06 fiscal year. Strong growth in tax collections, particularly in business taxes and the PIT, has led DOB to raise its General Fund receipts forecast for the current year by $1.4 billion. At the same time, projected General Fund disbursements have been revised upward by over $300 million, mainly for Medicaid and transit aid payments now planned for 2005-06 rather than 2006-07. Aside from these transactions, spending trends for the State’s major programs remain generally consistent with previous forecasts.

     DOB reported a 2004-05 General Fund surplus of $1.2 billion. Total receipts, including transfers from other funds, were $43.8 billion. Disbursements, including transfers to other funds, totaled $43.6 billion. The General Fund ended the 2004-05 fiscal year with a balance of $1.2 billion, which included

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dedicated balances of $872 million in the Tax Stabilization Reserve Fund (“TSRF”) (after a $78 million deposit at the close of 2004-05), the Contingency Reserve Fund (“CRF”) ($21 million), and the Community Projects Fund (“CPF”) ($325 million).

     All Funds. All Funds receipts for 2004-05 totaled $100.6 billion, a decrease of $546 million from the February Financial Plan projections. The variance was primarily the result of lower-than-expected collections from Federal grants, partially offset by higher-than-expected receipts from miscellaneous receipts and taxes. All Funds disbursements for 2004-05 totaled $100.7 billion, a decrease of $514 million from the February Financial Plan projections. The decline in State Funds spending of $54 million, combined with a decline in Federal Funds spending of $460 million, account for the variance. In addition to the State Funds variance described above, Federal funds for education programs and World Trade Center reimbursement were revised downward.

     Personal Income Taxes. PIT net receipts for 2004-05 reached $27.997 billion, an increase of $352 million (1.5 percent) from 2003-04 due largely to a modestly improved economic environment and the second-year impact of the temporary three-year PIT increase enacted in 2003. The increase is partially offset by a $1.63 billion lower contribution from the refund reserve account. Net of refund reserve transactions, All Funds income tax receipts grew 8.8 percent over 2002-03 results.

     General Fund PIT receipts are projected to increase from 2004-05. The increase is due to continued economic improvement in 2005 (stronger withholding and estimated tax payments), strong payments on 2004 tax liability (higher final returns and extensions offset slightly by an increase in refunds) and a smaller deposit into the PIT refund reserve account. This amount is offset by a larger deposit to the Revenue Bond Tax Fund (“RBTF”).

* * * *

     Additional information regarding the state budget as well as historical financial results for the 2003-2004, 2002-2003 and 2001-2002 fiscal years are available in the State Annual Information Statement.

     2006-07 Proposed Executive Budget. DOB projects the State would end the 2006-07 fiscal year with a General Fund balance of $3.8 billion (7.6 percent of spending) if the Legislature enacts the Executive Budget recommendations (discussed below) in their entirety. The balance consists of $1.0 billion in undesignated reserves and $2.8 billion in reserves designated to finance existing or planned commitments. The projected closing balance is $528 million above the level estimated for 2005-06.

     The undesignated reserves consist of $945 million in the State’s Rainy Day Reserve, which has a balance that is at the statutory maximum of 2 percent, and $21 million in the Contingency Reserve for litigation risks. The designated reserves include $275 million for potential labor settlements with unions that have not yet reached agreements in the current round of contracts, $236 million in the Community Projects Fund to finance existing legislative and gubernatorial initiatives, $2.0 billion from the 2005-06 surplus that is planned to be used in equal amounts to lower the projected 2007-08 and 2008-09 budget gaps, and $250 million for debt reduction.

     To permanently improve the State’s reserve levels, the Executive again will submit legislation in 2006-07 to increase the maximum size of the State’s Rainy Day Reserve from 2 percent to a minimum of 5 percent of General Fund spending.

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     The Executive Budget eliminates the entire potential imbalance in 2006-07 and reduces the budget gap projected for 2007-08 to less than $1.9 billion. The Budget proposals address the structural imbalance by (a) restraining spending in the fastest-growing programs in the State Budget, particularly Medicaid, (b) setting aside the entire $2.0 billion from the expected 2005-06 surplus to help reduce the potential gaps in 2007-08 and 2008-09, and (c) financing $250 million in reserves that will be used in the future to lower State debt. The proposals also include significant new tax reductions and spending initiatives.

     Spending restraint constitutes the vast majority of the gap-closing plan of $2.1 billion, before recommended spending additions, tax policy changes, and new reserves for debt reduction. Proposals to slow Medicaid growth account for over 60 percent of the total savings. Other initiatives to restrain spending include performance incentives for tuition assistance grants, flexibility for the State’s public universities to raise tuition absent sufficient administrative cost-savings, and the imposition of stricter benefit limits for public assistance families that fail to meet work participation requirements. The budget also includes proposals to maximize Federal aid and achieve savings in State agency operations.

     The Budget dedicates more than $227 million in one-time resources (the entire amount of one-time actions proposed), consisting mainly of routine transfers of available cash balances from other funds, to help finance $250 million to reduce debt. Fee increases are minimal. Absent the recommended tax reductions and spending initiatives described below, the gap-closing plan would produce a surplus in 2006-07 and structurally-balanced budgets in 2007-08 and 2008-09 without the use of reserves.

     To help address the combined State and local tax burden, the Executive Budget proposes a tax reduction program valued at over $3.6 billion when it becomes fully effective. The package includes eliminating the “marriage penalty” for personal income taxpayers, increasing the tax relief provided to seniors through the School Tax Relief (STAR) program, a new STAR Plus program, reducing the top PIT rate to 6.75 percent, eliminating the estate and gift tax, authorizing an education tax credit for families with students enrolled in under-performing schools, and establishing an energy tax credit for senior citizens. The Executive Budget also recommends two sales-tax-free weeks on clothing purchases of up to $250, rather than reverting to a full-year $100 exemption as scheduled.

     The Budget recommends increased spending for several programmatic initiatives. These includes cost-of-living increases for mental hygiene service providers, funding to expand crime-fighting programs, incentive-based aid increases for local governments, and increased funding for the Environmental Protection Fund.

     The Executive Budget recommendations hold annual spending growth in the General Fund and All Governmental Funds to below the projected rate of inflation, after excluding the incremental cost of the State Medicaid cap, FHP takeover, and the new STAR Plus program, all of which provide local property tax and mandate relief. Total spending also grows more slowly than projected growth in personal income.

     Aside from where noted, the 2006-07 Financial Plan does not set aside specific reserves to cover potential costs that could materialize as a result of Federal disallowances or other Federal actions that could adversely affect the State’s projections of receipts and disbursements.

     Limitations on State Supported Debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake a long-term general obligation borrowing (i.e., borrowing for more than one year) unless the borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no constitutional limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the

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State. However, the Debt Reform Act of 2000 (“Debt Reform Act”) imposed statutory limitations on new State-supported debt issued on and after April 1, 2000. Except as noted in the next sentence, the State Constitution also provides that general obligation bonds must be paid in equal annual principal installments or installments that result in substantially level or declining debt service payments, mature within 40 years after issuance, and begin to amortize not more than one year after the issuance of such bonds. General obligation housing bonds must be paid within 50 years after issuance, with principal commencing no more than three years after issuance. However, the Debt Reform Act limits the maximum term of State-supported bonds, including general obligation bonds, to 30 years.

     The Debt Reform Act imposes phased-in caps on new debt outstanding and new debt service costs, limits the use of debt to capital works and purposes only, and establishes a maximum term of 30 years on such debt. The cap on new State-supported debt outstanding began at 0.75 percent of personal income in 2000-01 and will gradually increase until it is fully phased-in at 4 percent of personal income in 2010-11. Similarly, the cap on new State-supported debt service costs began at 0.75 percent of total governmental funds receipts in 2000-01 and will gradually increase until it is fully phased in at 5 percent in 2013-14.

     The Debt Reform Act requires that the limitations on the issuance of State-supported debt and debt service costs be calculated by October 31 of each year and reported in the quarterly Financial Plan Update most proximate to such date. If the calculations for new State-supported debt outstanding and debt service costs are less than the State-supported debt outstanding and debt service costs permitted under the Debt Reform Act, new State-supported debt may continue to be issued. However, if either the debt outstanding or the debt service cap is met or exceeded, the State would be precluded from contracting new State-supported debt until the next annual cap calculation is made and State-supported debt is found to be within the appropriate limitations. The prohibition on issuing new State-supported debt if the caps are met or exceeded provides a significant incentive to treat the debt caps as absolute limits that should not be reached, and therefore DOB intends to manage subsequent capital plans and issuance schedules under these limits.

     Pursuant to the provisions of the Debt Reform Act, the most recent annual calculation of the limitations imposed by the Debt Reform Act was reported in the Financial Plan Update most proximate to October 31, 2004. On October 30, 2004, the State reported that it was in compliance with both debt caps. DOB projects that debt outstanding and debt service costs for 2004-05 and the entire five-year forecast period through 2009-10 will also be within the statutory caps.

     The State has also enacted statutory limits on the amount of variable rate obligations and interest rate exchange agreements that authorized issuers of State-supported debt may enter into. The statute limits the use of debt instruments which result in a variable rate exposure (e.g., variable rate obligations and interest rate exchange agreements) to no more than 15 percent of total outstanding State-supported debt, and limits the use of interest rate exchange agreements to a total notional amount of no more than 15 percent of total outstanding State-supported debt.

     As of March 31, 2005, State-supported debt in the amount of $40.7 billion was outstanding, resulting in a variable rate exposure cap and an interest rate exchange agreement cap of about $6.1 billion each. As discussed below, as of March 31, 2005, both the amount of outstanding variable rate instruments resulting in a variable rate exposure and interest rate exchange agreements are less than the authorized totals of 15 percent of total outstanding State-supported debt, and are projected to be below the caps for the entire forecast period through 2009-10.

     All interest rate exchange agreements are subject to various statutory restrictions such as minimum counterparty ratings, monthly reporting requirements, and the adoption of interest rate

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exchange agreement guidelines. All the authorized issuers have adopted uniform guidelines as required by statute. As of March 31, 2005, the State had $4.15 billion in total variable rate exposure, including amounts reserved for LIBOR swaps (or about 10.2 percent of total State-supported debt outstanding), and has entered into a total notional amount of $5.97 billion in interest rate exchange agreements (or about 14.7 percent of total State-supported debt outstanding). These ratios are expected to increase over the five-year projections but remain below the 15 percent limitations.

     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’s authorities and public benefit corporations (“Authorities”). The State has never been called upon to make any direct payments pursuant to any such guarantees. 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.

     State Finance Law requires the Governor to submit a five-year Capital Program and Financing Plan (the “Capital Plan”) with the Executive Budget, and update the Capital Plan by the later of July 30 or 90 days after the enactment of the State Budget. The Governor submitted the Capital Plan as part of the Executive Budget on January 17, 2006. State-supported debt levels are projected to increase from $42.6 billion in 2005-06 to $49 billion in 2009-10, or 3.6 percent annually. The vast majority of the increase is for transportation ($2.6 billion excluding the bond act), higher education ($1.9 billion) and General Obligation bonds ($600 million).

     In 2001, legislation was enacted to provide for the issuance by certain State authorities of State PIT Revenue Bonds, which are expected to become the primary financing vehicle for a broad range of State-supported debt programs authorized to be secured by service contract or lease-purchase payments. These State PIT Revenue Bonds are expected to reduce borrowing costs by improving the marketability and creditworthiness of State-supported obligations and by permitting the consolidation of multiple bonding programs to reduce administrative costs.

     The legislation provides that 25 percent of PIT receipts (excluding refunds owed to taxpayers and deposits to STAR be deposited to the RBTF for purposes of making debt service payments on these bonds, with excess amounts returned to the General Fund. In the event that (i) the State Legislature fails to appropriate amounts required to make all debt service payments on the State PIT Revenue Bonds or (ii) having been appropriated and set aside pursuant to a certificate of the Director of the Budget, financing agreement payments have not been made when due on the bonds, the legislation requires that PIT receipts continue to be deposited to the RBTF until amounts on deposit in the Fund equal the greater of 25 percent of annual PIT receipts or $6 billion.

     The State issued its first State PIT Revenue Bonds (in an aggregate principal amount of $225 million) on May 9, 2002. As of March 31, 2005, approximately $4.5 billion of State PIT Revenue Bonds have been issued and outstanding.

     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

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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.

     State Credit Ratings. 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 5, 1999, S&P affirmed its A rating on the State’s outstanding bonds. On March 10, 2000, S&P assigned its A+ rating on New York State’s long-term general obligations. On December 19, 2000, S&P assigned its AA rating on New York State’s long-term general obligations.

     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. On March 5, 1999, Moody’s affirmed its A2 rating with a stable outlook to the State’s general obligations. In June 2000, Moody’s revised its outlook on the State’s general obligations from stable to positive. On December 6, 2002, Moody’s changed its outlook on the State’s general obligation bonds from stable to negative but retained its A2 rating. On July 5, 2005, the State’s general obligations were upgraded to A1. On December 21, 2005, Moody’s again upgraded New York’s general obligations to Aa3.

     On June 5, 2003, Fitch Ratings assigned its AA- rating on New York’s long-term general obligations.

     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 New York State or its officers or employees could have a substantial or long-term adverse effect on New York 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; and (3) a challenge to the funding for New York City public schools.

     Adverse developments in the proceedings described above, other 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 2005-06 Financial Plan. The State believes that the 2005-06 Financial Plan includes sufficient reserves to offset the costs associated with the payment of judgments that may be required during the 2005-06 fiscal year. These reserves include (but are not limited to) amounts appropriated for Court of Claims payments and projected fund balances in the General Fund. In addition, any amounts ultimately required to be paid by the State may be subject to settlement or may be paid over a multi-year period. There can be no assurance, however, that adverse decisions in legal proceedings against the State would not exceed the amount of all potential 2005-06 Financial Plan resources available for the payment of judgments, and could therefore affect the ability of the State to maintain a balanced 2005-06 Financial Plan.

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     Details regarding outstanding litigation are located in the AIS.

     Authorities. The fiscal stability of New York State is related, in part, to the 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.

     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 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.

     For purposes of analyzing the financial condition of the State, debt of the State and of certain public authorities may be classified as State-supported debt, which includes general obligation debt of the State and lease-purchase and contractual obligations of public authorities (and municipalities) where debt service is paid from State appropriations (including dedicated tax sources, and other revenues such as patient charges and dormitory facilities rentals). In addition, a broader classification, referred to as State-related debt, includes State-supported debt, as well as certain types of contingent obligations, including moral obligation financings, certain contingent contractual-obligation financing arrangements, and State-guaranteed debt described above, where debt service is expected to be paid from other sources and State appropriations are contingent in that they may be made and used only under certain circumstances. As of December 31, 2005, there were 18 public authorities that had outstanding debt of $100 million or more, and the aggregate outstanding debt, including refunding bonds, of these State public authorities was $120.4 billion, only a portion of which constitutes State-supported or State-related debt.

     New York City and Other Localities. The fiscal health of the State may also be affected by the fiscal health of New York City, which continues to receive significant financial assistance from the State. State aid contributes to the city’s ability to balance its budget and meet its cash requirements. The State may also be affected by the ability of the City, and certain entities issuing debt for the benefit of the City, to market their securities successfully in the public credit markets.

     The City regularly produces Official Statements in connection with the issuance of its bonds and notes. Copies of these are required to be filed with and are available from the nationally recognized municipal securities information repositories. Reference is made to such Official Statements for information about the City. The information about the City which is indicated herein is not a summary and is necessarily incomplete.

     New York City Fiscal Budget: The 2006 Executive Budget is $49.7 billion. This is the twenty-sixth consecutive budget which is balanced under generally accepted accounting principles (“GAAP”). For fiscal year 2005 an operating surplus of $3,271 million is projected, which will be used to help

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balance the 2006 Executive Budget. The Executive Budget and Financial Plan include $3,271 million of discretionary transfers and prepayments in 2005, reflecting discretionary transfers of $1,704 million to the budget stabilization account and $88 million in lease debt service due in fiscal year 2006, subsidy prepayments of $208 million to the Transit Authority, $172 million to the New York City Health and Hospitals Corporation and $152 million to the Library Systems, and a Miscellaneous Budget grant of $947 million to the Transitional Finance Authority in fiscal year 2005, which increases PIT revenue by $947 million in fiscal year 2006. The 2005 forecast provides for a general reserve of $40 million to offset any adverse changes, which may surface during the remainder of the fiscal year or during the audit of the operating results. Savings from State actions of $317 million and requests for Federal assistance of $50 million are assumed in the budget. The 2006 budget provides for a general reserve of $300 million.

     The City of New York’s Financial Plan for 2006 through 2009 (the “Financial Plan”) fiscal years projects that the 2006 fiscal year will end balanced in accordance with GAAP and projects budget gaps of $4.5 billion, $4.5 billion and $3.9 billion in fiscal years 2007 through 2009, respectively, after implementation of a gap-reduction program. The City’s Financial Plans have normally projected significant budget gaps in the later years of such plans.

     In response to the City’s fiscal crisis in 1975, the State took action to assist the City in returning to fiscal stability. Among those actions, the State established the Municipal Assistance Corporation for the City of New York (“NYC MAC”) to provide financing assistance to the City; the New York State Financial Control Board (the “Control Board”) to oversee the City’s financial affairs; and the Office of the State Deputy Comptroller for the City of New York (“OSDC”) to assist the Control Board in exercising its powers and responsibilities. A “control period” existed from 1975 to 1986, during which the City was subject to certain statutorily-prescribed fiscal controls. The Control Board terminated the control period in 1986 when certain statutory conditions were met. State law requires the Control Board to reimpose a control period upon the occurrence, or “substantial likelihood and imminence” of the occurrence, of certain events, including (but not limited to) a City operating budget deficit of more than $100 million or impaired access to the public credit markets.

     For each of its 1981 through 2004 fiscal years, the City has achieved balanced operating results in accordance with the applicable GAAP after discretionary and other transfers. The City prepares a four-year financial plan annually and updates it periodically, and prepares a comprehensive annual financial report each October describing its most recent fiscal year. Although the audit of 2005 fiscal year is not yet completed, it is expected that the 2005 fiscal year will be the same.

     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.

     The City’s general obligations bonds currently are rated “A1” by Moody’s, “A+” by S&P and “A+” by Fitch, Inc. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely.

     Currently, the City and certain of its Covered Organizations (i.e., those organizations which receive or may receive moneys from the City directly, indirectly or contingently) operate under the City’s Financial Plan. The City’s Financial Plan summarizes its capital, revenue and expense projections and outlines proposed gap-closing programs for years with projected budget gaps. The City’s projections set forth in its Financial Plan are based on various assumptions and contingencies, some of which are uncertain and may not materialize. Unforeseen developments (such as the September 11, 2001 World

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Trade Center attack) and changes in major assumptions could significantly affect the City’s ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements.

     On February 12, 2004, the OSDC issued a report that concluded that New York City had overcome its most serious fiscal challenge since the 1970s. The report cautioned that continued progress toward recurring budget balance will depend upon sustained economic improvement, an affordable labor agreement, and a reduction in the projected growth in nondiscretionary spending.

     For June 2005, the OSDC issued a report that expenditures during fiscal years 2006 through 2008 are projected to exceed the June 2004 estimates by $1.7 billion, $2 billion, and $2.5 billion, respectively. Although the impact in fiscal year 2006 should be mostly offset by higher-than-anticipated revenues, the unexpected spending caused the budget gaps to widen by $468 million in fiscal year 2007 and by $1.3 billion in fiscal year 2008.

     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 any potential future budget deficits. Although the City has consistently maintained balanced budgets and is projected to achieve balanced operating results for the current fiscal year, there can be no assurance that the gap-closing actions proposed in its Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City’s economic base.

     The projections set forth in the City’s Financial Plan are based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City’s ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements.

     To successfully implement its Financial Plan, the City and certain entities issuing debt for the benefit of the City must market their securities successfully. This debt is issued to finance the rehabilitation of the City’s infrastructure and other capital needs and to refinance existing debt, as well as to finance seasonal needs. In recent years, the State Constitutional debt limit would have prevented the City from entering into new capital contracts. To prevent disruptions in the capital program, actions were taken to increase the City’s capital financing capacity by enabling financings to benefit the City, which do not count against the City’s Constitutional debt limit. These include the creation of the New York City Transitional Finance Authority (“TFA”) in 1997 and the Tobacco Settlement Asset Securitization Corporation in 1999. Such actions, combined with the City’s remaining capacity, have enabled the City to project that it has sufficient financing capacity to complete its current Ten-Year Capital Strategy, which extends through fiscal year 2015.

     The City Comptroller, OSDC, the Control Board and other agencies and public officials from time to time issue reports and make public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City’s financial plans. These reports are generally available at websites maintained by the City Comptroller, OSDC, the Control Board

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and others. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment.

     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 fiscal year.

     Municipalities and school districts have engaged in substantial short-term and long-term borrowings. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding.

     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 the State, the 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 the 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 State assistance in the future.

Non-Diversified Status

     Since California Municipal Fund, New York Municipal Fund, Global Income Fund, High Yield Municipal Fund and Emerging Markets Debt Fund are each “non-diversified” under the Act, they are subject only to certain federal tax diversification requirements. Under federal tax laws, California Municipal Fund, New York Municipal Fund, Global Income Fund, High Yield Municipal Fund and Emerging Markets Debt Fund may each, with respect to 50% of its total assets, invest up to 25% of its total assets in the securities of any issuer. With respect to the remaining 50% of each Fund’s total assets, (i) the Fund may not invest more than 5% of its total assets in the securities of any one issuer, and (ii) the Fund may not acquire more than 10% of the outstanding voting securities of any one issuer. These tests apply at the end of each quarter of the taxable year and are subject to certain conditions and limitations under the Code. These tests do not apply to investments in United States Government Securities and regulated investment companies.

Portfolio Maturity

     Dollar-weighted average maturity is derived by multiplying the value of each investment by the time remaining to its maturity, adding these calculations, and then dividing the total by the value of a Fund’s portfolio. An obligation’s maturity is typically determined on a stated final maturity basis, although there are some exceptions. For example, if an issuer of an instrument takes advantage of a maturity-shortening device, such as a call, refunding, or redemption provision, the date on which the instrument is expected to be called, refunded, or redeemed may be considered to be its maturity date. There is no guarantee that the expected call, refund or redemption will occur and a Fund’s average maturity may lengthen beyond the Investment Adviser’s expectations should the expected call refund or redemption not occur. Similarly, in calculating its dollar-weighted average maturity, a fund may determine the maturity of a variable or floating rate obligation according to the interest rate reset date, or the date principal can be recovered on demand, rather than the date of ultimate maturity.

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Portfolio Turnover

     Each Fund may engage in active short-term trading to benefit from yield disparities among different issues of securities or among the markets for fixed-income securities, or for other reasons. It is anticipated that the portfolio turnover rate of each Fund will vary from year to year, and may be affected by changes in the holdings of specific issuers, changes in country and currency weightings, cash requirements for redemption of shares and by requirements which enable the Funds to receive favorable tax treatment. The Funds are not restricted by policy with regard to portfolio turnover and will make changes in their investment portfolio from time to time as business and economic conditions as well as market prices may dictate. During the fiscal year ended October 31, 2005, the Short Duration Government, Government Income and Core Fixed Income Funds’ portfolio turnover decreased significantly from the portfolio turnover rate which occurred during the October 31, 2004 fiscal year because the Funds participated less actively in the mortgage TBA market than they had in the 2004 fiscal year. Conversely, the high portfolio turnover rates of the U.S. Mortgages Fund during the fiscal years ended October 31, 2005 and October 31, 2004 were a result of that Fund’s participation in the mortgage TBA market. When a Fund purchases a TBA mortgage, it can either receive the underlying pools of the TBA mortgage or roll it forward a month. The portfolio turnover rate increases when a Fund rolls the TBA forward.

INVESTMENT RESTRICTIONS

     The investment restrictions set forth below have been adopted by the Trust as fundamental policies that cannot be changed without the affirmative vote of the holders of a majority of the outstanding voting securities (as defined in the Act) of the affected Fund. In addition, the policies of Short Duration Tax-Free Fund, Municipal Income Fund and High Yield Municipal Fund to invest under normal market conditions and the policies of the California Municipal Fund and New York Municipal Fund to invest under normal circumstances, at least 80% of their respective net assets plus any borrowings for investment purposes (measured at the time of purchase) in Municipal Securities the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax purposes) and, in the case of Short Duration Tax-Free Fund, California Municipal Fund and New York Municipal Fund only, is not a tax preference item under the federal alternative minimum tax, are fundamental policies. In addition, as a matter of fundamental policy, at least 80% of the California Municipal Fund’s and New York Municipal Fund’s net assets plus any borrowings for investment purposes (measured at the time of purchase) will be invested, under normal circumstances, in instruments that pay income which is exempt from California State personal income tax and New York State and City personal income taxes, respectively. The investment objective of each Fund and all other investment policies or practices of the Funds are considered by the Trust not to be fundamental and accordingly may be changed without shareholder approval. As defined in the Act, “a majority of the outstanding voting securities” of a Fund means the vote of (i) 67% or more of the shares of a Fund present at a meeting, if the holders of more than 50% of the outstanding shares of a Fund are present or represented by proxy, or (ii) more than 50% of the shares of a Fund.

     For the purposes of the limitations (except for the asset coverage requirement with respect to borrowings), any limitation which involves a maximum percentage shall not be considered 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, a Fund. With respect to the Tax Exempt Funds, the identification of the issuer of a Municipal Security that is not a general obligation is made by the Investment Adviser based on the characteristics of the Municipal Security, the most important of which is the source of funds for the payment of principal and interest on such security.

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As a matter of fundamental policy, a Fund may not:

(1)	Make any investment inconsistent with the Fund’s classification as a diversified company under the Act. This restriction does not, however, apply to any Fund classified as a non-diversified company under the Act;
(2)	Invest more than 25% of its total assets in the securities of one or more issuers conducting their principal business activities in the same industry (excluding the U.S. Government or its agencies or instrumentalities); provided that during normal market conditions, the U.S. Mortgages Fund intends to invest at least 25% of the value of its total assets in mortgage-related securities. (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 industry of their parents if their activities are primarily related to financing the activities of their parents.) This restriction does not apply to investments in Municipal Securities which have been pre-refunded by the use of obligations of the U.S. Government or any of its agencies or instrumentalities. Each of the Municipal Income, California Municipal, New York Municipal, Short Duration Tax-Free and High Yield Municipal Funds may invest 25% or more of the value of its total assets in Municipal Securities which are related in such a way that an economic, business or political development or change affecting one Municipal Security would also affect the other Municipal Securities. These Municipal Securities include (a) Municipal Securities, the interest on which is paid solely from revenues of 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 Securities whose issuers are in the same state; and (c) industrial development obligations;
(3)	Borrow money, except (a) each Fund (other than the California Municipal Fund, New York Municipal Fund, U.S. Mortgages Fund, Investment Grade Credit Fund and Emerging Markets Debt Fund), 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 U.S. Mortgages Fund, Investment Grade Credit Fund, Emerging Markets Debt Fund, California Municipal Fund and New York Municipal Fund, to the extent permitted by applicable law, may borrow from banks (as defined in the Act), other affiliated investment companies and other persons or through reverse repurchase agreements in amounts up to 33-1/3% of its total assets (including the amount borrowed); (c) the Fund may, to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes; (d) the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities; (e) the Fund may purchase securities on margin to the extent permitted by applicable law; and (f) the Fund may engage in transactions in mortgage dollar rolls which are accounted for as financings;
(4)	Make loans, except through (a) the purchase of debt obligations in accordance with the Fund’s investment objective and policies; (b) repurchase agreements with banks, brokers, dealers and other financial institutions; (c) loans of securities as permitted by applicable law; and (d) (California Municipal, New York Municipal, U.S. Mortgages, Investment Grade Credit and Emerging Markets Debts Funds only) loans to affiliates of the Fund to the extent permitted by law;

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(5)	Underwrite securities issued by others, except to the extent that the sale of portfolio securities by the Fund may be deemed to be an underwriting;
(6)(a)	For each Fund other than Core Fixed Income Fund, purchase, hold or deal in real estate, although a Fund may purchase and sell securities that are secured by real estate or interests therein, securities of real estate investment trusts and mortgage-related securities and may hold and sell real estate acquired by a Fund as a result of the ownership of securities;
	(6)(b) In the case of Core Fixed Income Fund, purchase, hold or deal in real estate (including real estate limited partnerships) or oil, gas or mineral leases, although the Fund may purchase and sell securities that are secured by real estate or interests therein, may purchase mortgage-related securities and may hold and sell real estate acquired by the Fund as a result of the ownership of securities;
(7)	Invest in commodities or commodity contracts, except that the Fund may invest in currency and financial instruments and contracts that are commodities or commodity contracts; and
(8)	Issue senior securities to the extent such issuance would violate applicable law.

     Notwithstanding any other fundamental investment restriction or policy, each Fund may invest some or all of its assets in a single open-end investment company or series thereof with substantially the same fundamental investment objective, restrictions and policies as the Fund.

     In addition to the fundamental policies mentioned above, the Trustees have adopted the following non-fundamental policies which can be changed or amended by action of the Trustees without approval of shareholders. Again, for purposes of the following limitations, any limitation which involves a maximum percentage shall not be considered violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities by the Fund.

A Fund may not:

(1)	Invest in companies for the purpose of exercising control or management;
(2)	Invest more than 15% of the Fund’s net assets in illiquid investments, including illiquid repurchase agreements with a notice or demand period of 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;
(3)	Purchase additional securities if the Fund’s borrowings (excluding covered mortgage dollar rolls) exceed 5% of its net assets; or
(4)	Make short sales of securities, except short sales against-the-box.

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TRUSTEES AND OFFICERS

     The business and affairs of the Funds are managed under the direction of the Board of Trustees subject to the laws of the State of Delaware and the Trust’s Declaration of Trust. The Trustees are responsible for deciding matters of general policy and reviewing the actions of the Trust’s service providers. The officers of the Trust conduct and supervise each Fund’s daily business operations.

     Trustees of the Trust

     Information pertaining to the Trustees of the Trust is set forth below. Trustees who are not deemed to be “interested persons” of the Trust as defined in the Act are referred to as “Independent Trustees.” Trustees who are deemed to be “interested persons” of the Trust are referred to as “Interested Trustees.”

	Independent Trustees
				Number of
		Term of		Portfolios in
		Office and		Fund
	Position(s)	Length of		Complex
Name,	Held with	Time	Principal Occupation(s)	Overseen by		Other Directorships
Address and Age1	the Trust2	Served3	During Past 5 Years	Trustee4		Held by Trustee5
Ashok N. Bakhru Age: 63	Chairman of the Board of Trustees	Since 1991	President, ABN Associates (July 1994–March 1996 and November 1998–Present); Executive Vice President – Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996–November 1998); Director of Arkwright Mutual Insurance Company (1984–1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors–III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).		72	None
			Chairman of the Board of Trustees – Goldman Sachs Mutual Fund Complex (registered investment companies).

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	Independent Trustees
				Number of
		Term of		Portfolios in
		Office and		Fund
	Position(s)	Length of		Complex
Name,	Held with	Time	Principal Occupation(s)	Overseen by		Other Directorships
Address and Age1	the Trust2	Served3	During Past 5 Years	Trustee4		Held by Trustee5
John P. Coblentz, Jr. Age: 64	Trustee	Since 2003	Partner, Deloitte & Touche LLP (June 1975 – May 2003).		72	None
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).
Patrick T. Harker Age: 47	Trustee	Since 2000	Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997–August 2000).		72	None
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).
Mary P. McPherson Age: 70	Trustee	Since 1997	Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986–1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for not-for-profit institutions) (since 2005).		72	None
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).
Wilma J. Smelcer Age: 56	Trustee	Since 2001	Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).		72	Lawson Products Inc. (distributor of industrial products).
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).

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	Independent Trustees
				Number of
		Term of		Portfolios in
		Office and		Fund
	Position(s)	Length of		Complex
Name,	Held with	Time	Principal Occupation(s)	Overseen by		Other Directorships
Address and Age1	the Trust2	Served3	During Past 5 Years	Trustee4		Held by Trustee5
Richard P. Strubel Age: 66	Trustee	Since 1987	Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990–1999).		72	Gildan Activewear Inc. (a clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).
			Interested Trustees
*Alan A. Shuch Age: 56	Trustee	Since 1990	Advisory Director – GSAM (May 1999-Present); Consultant to GSAM (December 1994 – May 1999); and Limited Partner, Goldman Sachs (December 1994 — May 1999).		72	None
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).
*Kaysie P. Uniacke Age: 45	Trustee &	Since 2001	Managing Director, GSAM (1997-Present).		72	None
	President	Since 2002
			Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies).
			President – Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies).
			Assistant Secretary – Goldman Sachs Mutual Fund Complex (1997 – 2002) ( registered investment companies).
			Trustee, Gettysburg College.

*	These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1	Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno.
2	The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997.

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3	Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
4	The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of October 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Additional Statement, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
5	This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Officers of the Trust

     Information pertaining to the officers of the Trust is set forth below.

Officers of the Trust

	Position(s)
	Held	Term of Office
Name, Age	With the	and Length of	Principal Occupation(s)
And Address	Trust	Time Served1	During Past 5 Years
Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45	President & Trustee	Since 2002 Since 2001	Managing Director, GSAM (1997-Present). Trustee – Goldman Sachs Mutual Fund Complex (registered investment companies). President – Goldman Sachs Mutual Fund Complex (registered investment companies). Assistant Secretary – Goldman Sachs Mutual Fund Complex (1997–2002) (registered investment companies). Trustee, Gettysburg College.
John M. Perlowski 32 Old Slip New York, NY 10005 Age: 41	Treasurer	Since 1997	Managing Director, Goldman Sachs (November 2003 – Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer – Goldman Sachs Mutual Fund Complex (registered investment companies).
Philip V. Giuca, Jr. 32 Old Slip New York, NY 10005 Age: 43	Assistant Treasurer	Since 1997	Vice President, Goldman Sachs (May 1992-Present). Assistant Treasurer – Goldman Sachs Mutual Fund Complex (registered investment companies).

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Officers of the Trust

	Position(s)
	Held	Term of Office
Name, Age	With the	and Length of	Principal Occupation(s)
And Address	Trust	Time Served1	During Past 5 Years
Peter Fortner 32 Old Slip New York, NY 10005 Age: 48	Assistant Treasurer	Since 2000	Vice President, Goldman Sachs (July 2000-Present); Associate, Prudential Insurance Company of America (November 1985–June 2000); and Assistant Treasurer, certain closed-end funds administered by Prudential (1999 and 2000). Assistant Treasurer – Goldman Sachs Mutual Fund Complex (registered investment companies).
Kenneth G. Curran 32 Old Slip New York, NY 10005 Age: 42	Assistant Treasurer	Since 2001	Vice President, Goldman Sachs (November 1998-Present); and Senior Tax Manager, KPMG Peat Marwick (accountants) (August 1995–October 1998). Assistant Treasurer – Goldman Sachs Mutual Fund Complex (registered investment companies).
Charles Rizzo 32 Old Slip New York, NY 10005 Age:48	Assistant Treasurer	Since 2005	Vice President, Goldman Sachs (August 2005-Present); Managing Director and Treasurer of Scudder Funds, Deutsche Asset Management (April 2003-June 2005); Director, Tax and Financial Reporting, Deutsche Asset Management (August 2002-April 2003); Vice President and Treasurer, Deutsche Global Fund Services (August 1999-August 2002). Assistant Treasurer- Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. Fitzpatrick 71 South Wacker Drive Suite 500	Vice President	Since 1997	Managing Director, Goldman Sachs (October 1999– Present); and Vice President of GSAM (April 1997–December 1999).
Chicago, IL 60606 Age: 46			Vice President – Goldman Sachs Mutual Fund Complex (registered investment companies).
Jesse Cole 71 South Wacker Drive Suite 500	Vice President	Since 1998	Vice President, GSAM (June 1998-Present); and Vice President, AIM Management Group, Inc. (investment adviser) (April 1996–June 1998).
Chicago, IL 60606 Age: 42			Vice President – Goldman Sachs Mutual Fund Complex (registered investment companies).
Kerry K. Daniels 71 South Wacker Drive Suite 500	Vice President	Since 2000	Manager, Financial Control – Shareholder Services, Goldman Sachs (1986-Present).
Chicago, IL 60606 Age: 43			Vice President – Goldman Sachs Mutual Fund Complex (registered investment companies).

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Officers of the Trust

	Position(s)
	Held	Term of Office
Name, Age	With the	and Length of	Principal Occupation(s)
And Address	Trust	Time Served1	During Past 5 Years
James McNamara 32 Old Slip New York, NY 10005 Age: 43	Vice President	Since 2001	Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998–December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993 – April 1998). Vice President—Goldman Sachs Mutual Fund Complex (registered investment companies). Trustee –– Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004).
Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37	Secretary	Since 2003	Vice President and Associate General Counsel, Goldman Sachs (2002–Present); Vice President and Assistant General Counsel, Goldman Sachs (1999-2002). Secretary – Goldman Sachs Mutual Fund Complex (registered investment companies).
Dave Fishman 32 Old Slip New York, NY 10005 Age: 41	Assistant Secretary	Since 2001	Managing Director, Goldman Sachs (December 2001–Present); and Vice President, Goldman Sachs (1997–December 2001). Assistant Secretary – Goldman Sachs Mutual Fund Complex (registered investment companies).
Danny Burke 32 Old Slip New York, NY 10005 Age: 43	Assistant Secretary	Since 2001	Vice President, Goldman Sachs (1987–Present). Assistant Secretary – Goldman Sachs Mutual Fund Complex (registered investment companies).
Elizabeth D. Anderson 32 Old Slip New York, NY 10005 Age: 36	Assistant Secretary	Since 1997	Managing Director, Goldman Sachs (December 2002 – Present); Vice President, Goldman Sachs (1997-December 2002) and Fund Manager, GSAM (April 1996–Present). Assistant Secretary – Goldman Sachs Mutual Fund Complex (registered investment companies).

¹ Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.

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Standing Board Committees

     The Board of Trustees has established seven standing committees in connection with their governance of the Funds – Audit, Governance and Nominating, Compliance, Valuation, Dividend, Schedule E and Contract Review.

     The Audit Committee oversees the audit process and provides assistance to the full Board of Trustees with respect to fund accounting, tax compliance and financial statement matters. In performing its responsibilities, the Audit Committee selects and recommends annually to the entire Board of Trustees an independent registered public accounting firm to audit the books and records of the Trust for the ensuing year, and reviews with the firm the scope and results of each audit. All of the Independent Trustees serve on the Audit Committee. The Audit Committee held four meetings during the fiscal year ended October 31, 2005.

     The Governance and Nominating Committee has been established to: (i) assist the Board of Trustees in matters involving mutual fund governance and industry practices; (ii) select and nominate candidates for appointment or election to serve as Trustees who are not “interested persons” of the Trust or its investment adviser or distributor (as defined by the Act); and (iii) advise the Board of Trustees on ways to improve its effectiveness. All of the Independent Trustees serve on the Governance and Nominating Committee. The Governance and Nominating Committee held two meetings during the fiscal year ended October 31, 2005. As stated above, each Trustee holds office for an indefinite term until the occurrence of certain events. In filling Board vacancies, the Governance and Nominating Committee will consider nominees recommended by shareholders. Nominee recommendations should be submitted to the Trust at its mailing address stated in the Funds’ Prospectuses and should be directed to the attention of Goldman Sachs Trust Governance and Nominating Committee.

     The Compliance Committee has been established for the purpose of overseeing the compliance processes: (i) of the Funds; and (ii) insofar as they relate to services provided to the Funds, of the Funds’ investment advisers, distributor, administrator (if any), and transfer agent, except that compliance processes relating to the accounting and financial reporting processes, and certain related matters, are overseen by the Audit Committee. In addition, the Compliance Committee provides assistance to the full Board of Trustees with respect to compliance matters. The Compliance Committee was formed on May 6, 2004 and met two times during the fiscal year ended October 31, 2005. All of the Independent Trustees serve on the Compliance Committee.

     The Valuation Committee is authorized to act for the Board of Trustees in connection with the valuation of portfolio securities held by the Funds in accordance with the Trust’s Valuation Procedures. Mr. Shuch and Ms. Uniacke serve on the Valuation Committee. During the fiscal year ended October 31, 2005, the Valuation Committee held nine meetings.

     The Dividend Committee is authorized, subject to the ratification of Trustees who are not members of the committee, to declare dividends and capital gain distributions consistent with each Fund’s Prospectus. Currently, the sole member of the Trust’s Dividend Committee is Ms. Uniacke. During the fiscal year ended October 31, 2005, the Dividend Committee held 59 meetings with respect to the Funds included in this Additional Statement and 82 meetings with respect to all of the Funds of the Trust (including the Funds included in this Additional Statement).

     The Schedule E Committee is authorized to address potential conflicts of interest regulated by the National Association of Securities Dealers, Inc. (“NASD”). Currently, Mr. Bakhru is the sole member of this committee. The Schedule E Committee did not meet during the fiscal year ended October 31, 2005.

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     The Contract Review Committee has been established for the purpose of overseeing the processes of the Board of Trustees for approving and monitoring the Funds’ investment management, distribution, transfer agency and other agreements with the Fund’s investment advisers and their affiliates. The Contract Review Committee is also responsible for overseeing the Board of Trustees processes for approving and reviewing the operation of the Funds’ distribution, service, shareholder administration and other plans, and any agreements related to the plans, whether or not such plans and agreements are adopted pursuant to Rule 12b-1 under the 1940 Act. The Contract Review Committee also provides appropriate assistance to the Board of Trustees in connection with the Board’s approval, oversight and review of the Funds’ other service providers including, without limitation, the Funds’ custodian/accounting agent, sub-transfer agents, professional (legal and accounting) firms and printing firms. The Contract Review Committee was formed on November 4, 2004 and met three times during the fiscal year ended October 31, 2005. All of the Independent Trustees serve on the Contract Review Committee.

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Trustee Ownership of Fund Shares

     The following table shows the dollar range of shares beneficially owned by each Trustee in the Funds and other portfolios of the Trust and Goldman Sachs Variable Insurance Trust.

		Aggregate Dollar Range of
		Equity Securities in All
	Dollar Range of	Portfolios in Fund Complex
Name of Trustee	Equity Securities in the Funds1	Overseen By Trustee2
Ashok N. Bakhru	High Yield Fund: Over $100,000	Over $100,000
John P. Coblentz, Jr.	High Yield Fund: Over $100,000	Over $100,000
Patrick T. Harker	None	Over $100,000
Mary P. McPherson	Ultra-Short Duration Government Fund: $10,001 — $50,000 Government Income Fund: $50,000 — $100,000	Over $100,000
Alan A. Shuch	None	Over $100,000
Wilma J. Smelcer	Core Fixed Income Fund: Over $100,000	Over $100,000
Richard P. Strubel	None	Over $100,000
Kaysie P. Uniacke	Short Duration Government Fund: $50,001-$100,000 High Yield Municipal Fund: Over $100,000	Over $100,000

1	Includes the value of shares beneficially owned by each Trustee in each Fund described in this Additional Statement as of December 31, 2005.
2	Includes the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Additional Statement, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.

     As of January 31, 2006, the Trustees and officers of the Trust as a group owned less than 1% of the outstanding shares of beneficial interest of each Fund.

Board Compensation

     The Trust pays each Independent Trustee an annual fee for his or her services as a Trustee of the Trust, plus an additional fee for each regular and special telephonic Board meeting, Governance and Nominating Committee, Compliance Committee, Contract Review Committee and Audit Committee meeting attended by such Trustee. The Independent Trustees are also reimbursed for travel expenses incurred in

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connection with attending such meetings. The Trust may also pay the incidental costs of a Trustee to attend training or other types of conferences relating to the investment company industry.

     The following tables set forth certain information with respect to the compensation of each Trustee of the Trust for the fiscal year ended October 31, 2005:

Trustee Compensation

			Ultra-Short
			Duration		Short Duration		Short Duration		Government
Name of Trustee	Enhanced Income		Government		Government		Tax-Free		Income
Ashok N. Bakhru1	$	2,619.07	$	2,619.07	$	2,619.07	$	2,619.04	$	2,619.07
John P. Coblentz, Jr.		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Patrick T. Harker		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Mary P. McPherson		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Alan A. Shuch		—		—		—		—		—
Richard P. Strubel		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Wilma J. Smelcer		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Kaysie P. Uniacke		—		—		—		—		—

Trustee Compensation

			California		New York
Name of Trustee	Municipal Income		Municipal*		Municipal*		U.S. Mortgages		Core Fixed Income
Ashok N. Bakhru1	$	2,619.04	$	—	$	—	$	2,619.70	$	2,619.07
John P. Coblentz, Jr.		1,785.71		—		—		1,785.88		1,785.71
Patrick T. Harker		1,785.71		—		—		1,785.88		1,785.71
Mary P. McPherson		1,785.71		—		—		1,785.88		1,785.71
Alan A. Shuch		—		—		—		—		—
Richard P. Strubel		1,785.71		—		—		1,785.88		1,785.71
Wilma J. Smelcer		1,785.71		—		—		1,785.88		1,785.71
Kaysie P. Uniacke		—		—		—		—		—

Trustee Compensation

	Investment Grade				High Yield				Emerging
Name of Trustee	Credit		Global Income		Municipal		High Yield		Markets Debt
Ashok N. Bakhru1	$	2,619.07	$	2,619.04	$	2,619.04	$	2,619.04	$	2,619.04
John P. Coblentz, Jr.		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Patrick T. Harker		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Mary P. McPherson		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Alan A. Shuch		—		—		—		—		—
Richard P. Strubel		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Wilma J. Smelcer		1,785.71		1,785.71		1,785.71		1,785.71		1,785.71
Kaysie P. Uniacke		—		—		—		—		—

^* The California Municipal and New York Municipal Funds did not commence operations until November 1, 2005.

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			Pension or Retirement
	Aggregate		Benefits Accrued as		Total Compensation
	Compensation		Part of the Trust’s		From Fund Complex
Name of Trustee	from the Funds		Expenses		(including the Funds)2
Ashok N. Bakhru1	$	34,048.18	$	—	$	165,000
John P. Coblentz		23,214.40		—		112,500
Patrick T. Harker		23,214.40		—		112,500
Mary P. McPherson		23,214.40		—		112,500
Alan A. Shuch		—		—		—
Richard P. Strubel		23,214.40		—		112,500
Wilma J. Smelcer		23,214.40		—		112,500
Kaysie P. Uniacke		—		—		—

1	Includes compensation as Board Chairman.
2	The Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. The Trust consisted of 61 portfolios and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios as of October 31, 2005.

Miscellaneous

     Class A Shares of the Funds may be sold at net asset value without payment of any sales charge to Goldman Sachs, its affiliates and their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of the above individuals. These and the Funds’ other sales load waivers are due to the nature of the investors and/or the reduced sales effort and expense that are needed to obtain such investments.

     The Trust, its Investment Advisers and principal underwriter have adopted codes of ethics under Rule 17j-1 of the Act that permit personnel subject to their particular codes of ethics to invest in securities, including securities that may be purchased or held by the Funds.

MANAGEMENT SERVICES

     As stated in the Funds’ Prospectuses, GSAM (formerly Goldman Sachs Funds Management, L.P.), 32 Old Slip, New York, New York 10005, serves as the Investment Adviser to Enhanced Income Fund, Ultra-Short Duration Government Fund, Short Duration Government Fund, Short Duration Tax-Free Fund, Government Income Fund, Municipal Income Fund, California Municipal Fund, New York Municipal Fund, U.S. Mortgages Fund, Core Fixed Income Fund, Investment Grade Credit Fund, High Yield Municipal Fund, High Yield Fund, and Emerging Markets Debt Fund, pursuant to Management Agreements. GSAM is a subsidiary of The Goldman Sachs Group, Inc. and an affiliate of Goldman Sachs. Prior to the end of April, 2003, Goldman Sachs Asset Management, a business unit of the Investment Management Division of Goldman Sachs served as the investment adviser to the Enhanced Income Fund, Short Duration Tax-Free Fund, Government Income Fund, Municipal Income Fund, Core Fixed Income Fund, High Yield Municipal Fund and High Yield Fund. On or about April 26, 2003, GSAM assumed investment advisory responsibilities for those Funds. GSAMI, Procession House, Christchurch Court, 10-15 Newgate Street, London, England EC1A7HD, an affiliate of Goldman Sachs, serves as Investment Adviser to Global Income Fund pursuant to a Management Agreement. As a company with unlimited liability under the laws of

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England, GSAMI is regulated by the Investment Management Regulatory Organization Limited, a United Kingdom self-regulatory organization, in the conduct of its investment advisory business. GSAMI is also an affiliate of Goldman Sachs. See “Service Providers” in the Funds’ Prospectuses for a description of the applicable Investment Adviser’s duties to the Funds.

     Founded in 1869, Goldman Sachs is among the oldest and largest investment banking firms in the United States. Goldman Sachs is a leader in developing portfolio strategies and in many fields of investing and financing, participating in financial markets worldwide and serving individuals, institutions, corporations and governments. Goldman Sachs is also among the principal market sources for current and thorough information on companies, industrial sectors, markets, economies and currencies, and trades and makes markets in a wide range of equity and debt securities 24 hours a day. The firm is headquartered in New York with 44 offices in 26 countries. It has trading professionals throughout the United States, as well as in London, Tokyo, Hong Kong and Singapore. The active participation of Goldman Sachs in the world’s financial markets enhances its ability to identify attractive investments. Goldman Sachs has agreed to permit the Funds to use the name “Goldman Sachs” or a derivative thereof as part of each Fund’s name for as long as a Fund’s Management Agreement is in effect.

     The Investment Advisers are able to draw on the substantial research and market expertise of Goldman Sachs, whose investment research effort is one of the largest in the industry. The Goldman Sachs Global Investment Research Department covers approximately 2,400 companies, over 50 economies and over 25 markets. The in-depth information and analyses generated by Goldman Sachs’ research analysts are available to the Investment Advisers.

     In addition, many of Goldman Sachs’ economists, securities analysts, portfolio strategists and credit analysts have consistently been highly ranked in respected industry surveys conducted in the United States and abroad. Goldman Sachs is also among the leading investment firms using quantitative analytics (now used by a growing number of investors) to structure and evaluate portfolios. For example, Goldman Sachs’ options evaluation model analyzes a security’s term, coupon and call option, providing an overall analysis of the security’s value relative to its interest risk.

     In planning the Tax Exempt Funds’ strategies, the portfolio managers also evaluate and monitor individual issues by using analytical techniques that have traditionally been applied to corporate bonds and Mortgage-Backed Securities. In particular, the Investment Adviser’s embedded option valuation model provides a picture of an individual security’s relative value and the portfolio’s overall interest rate risk. By constantly reviewing the positions of securities within the portfolio, the Investment Adviser looks for opportunities to enhance the Tax Exempt Funds’ yields by fine-tuning the portfolio, using quantitative tools designed for municipal portfolio management. The Investment Adviser has assembled an experienced team of professionals for selection of the Tax Exempt Funds’ portfolio securities.

     In structuring Ultra-Short Duration Government Fund’s and Short Duration Government Fund’s respective securities portfolio, the Investment Adviser will review the existing overall economic and mortgage market trends. The Investment Adviser will then study yield spreads, the implied volatility and the shape of the yield curve. The Investment Adviser will then apply this analysis to a list of eligible securities that meet the respective Fund’s investment guidelines. With respect to Ultra-Short Duration Government Fund, this analysis is used to plan a two-part portfolio, which will consist of a core portfolio of ARMs and a “relative value” portfolio of other mortgage assets that can enhance portfolio returns and lower risk (such as investments in CMO floating-rate tranches and interest-only SMBS).

     With respect to Ultra-Short Duration Government Fund, Short Duration Government Fund, Government Income Fund, U.S. Mortgages Fund, Core Fixed Income Fund, Investment Grade Credit Fund, and High Yield Fund, the applicable Investment Adviser expects to utilize Goldman Sachs’ sophisticated

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option-adjusted analytics to help make strategic asset allocations within the markets for U.S. Government Securities, Mortgage-Backed Securities and other securities and to employ this technology periodically to re-evaluate the Funds’ investments as market conditions change. Goldman Sachs has also developed a prepayment model designed to estimate mortgage prepayments and cash flows under different interest rate scenarios. Because a Mortgage-Backed Security incorporates the borrower’s right to prepay the mortgage, the Investment Adviser uses a sophisticated option-adjusted spread (OAS) model to measure expected returns. A security’s OAS is a function of the level and shape of the yield curve, volatility and the applicable Investment Adviser’s expectation of how a change in interest rates will affect prepayment levels. Since the OAS model assumes a relationship between prepayments and interest rates, the Investment Adviser considers it a better way to measure a security’s expected return and absolute and relative values than yield to maturity. In using OAS technology, the Investment Adviser will first evaluate the absolute level of a security’s OAS and consider its liquidity and its interest rate, volatility and prepayment sensitivity. The Investment Adviser will then analyze its value relative to alternative investments and to its own investments. The Investment Adviser will also measure a security’s interest rate risk by computing an option adjusted duration (OAD). The Investment Adviser believes a security’s OAD is a better measurement of its price sensitivity than cash flow duration, which systematically misstates portfolio duration. The Investment Adviser also evaluates returns for different mortgage market sectors and evaluates the credit risk of individual securities. This sophisticated technical analysis allows the Investment Adviser to develop portfolio and trading strategies using Mortgage-Backed Securities that are believed to be superior investments on a risk-adjusted basis and which provide the flexibility to meet the respective Fund’s duration targets and cash flow pattern requirements.

     Because the OAS is adjusted for the differing characteristics of the underlying securities, the OAS of different Mortgage-Backed Securities can be compared directly as an indication of their relative value in the market. The Investment Adviser also expects to use OAS-based pricing methods to calculate projected security returns under different, discrete interest rate scenarios, and Goldman Sachs’ proprietary prepayment model to generate yield estimates under these scenarios. The OAS, scenario returns, expected returns, and yields of securities in the mortgage market can be combined and analyzed in an optimal risk-return matching framework.

     The Investment Adviser will use OAS analytics to choose what it believes is an appropriate portfolio of investments for Ultra-Short Duration Government Fund, Short Duration Government Fund, Government Income Fund, U.S. Mortgages Fund, Core Fixed Income Fund, Investment Grade Credit Fund, and High Yield Fund from a universe of eligible investments. In connection with initial portfolio selections, in addition to using OAS analytics as an aid to meeting each Fund’s particular composition and performance targets, the Investment Adviser will also take into account important market criteria like the available supply and relative liquidity of various mortgage securities in structuring the portfolio.

     The Investment Adviser also expects to use OAS analytics to evaluate the mortgage market on an ongoing basis. Changes in the relative value of various Mortgage-Backed Securities could suggest tactical trading opportunities for the Funds. The Investment Adviser will have access to both current market analysis as well as historical information on the relative value relationships among different Mortgage-Backed Securities. Current market analysis and historical information is available in the Goldman Sachs database for most actively traded Mortgage-Backed Securities.

     Goldman Sachs has agreed to provide the Investment Adviser, on a non-exclusive basis, use of its mortgage prepayment model, OAS model and any other proprietary services which it now has or may develop, to the extent such services are made available to other similar customers. Use of these services by the Investment Adviser with respect to a Fund does not preclude Goldman Sachs from providing these services to third parties or using such services as a basis for trading for its own account or the account of others.

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     With respect to the Enhanced Income Fund, the Investment Adviser will review the existing overall economic trends in structuring the Fund’s securities portfolio. The Investment Adviser will then study yield spreads, the implied volatility and the shape of the yield curve. The Investment Adviser will then apply this analysis to a list of eligible securities that meet the Fund’s investment guidelines. The Investment Adviser expects to utilize Goldman Sachs’ sophisticated option-adjusted analytics to help make strategic asset allocations within the markets for U.S. Government and other securities and to employ this technology periodically to re-evaluate the Fund’s investments as market conditions change.

     The fixed-income research capabilities of Goldman Sachs available to the Investment Advisers include the Goldman Sachs Fixed Income Research Department and the Credit Department. The Fixed Income Research Department monitors developments in U.S. and foreign fixed-income markets, assesses the outlooks for various sectors of the markets and provides relative value comparisons, as well as analyzes trading opportunities within and across market sectors. The Fixed Income Research Department is at the forefront in developing and using computer-based tools for analyzing fixed-income securities and markets, developing new fixed-income products and structuring portfolio strategies for investment policy and tactical asset allocation decisions. The Credit Department tracks specific governments, regions and industries and from time to time may review the credit quality of a Fund’s investments.

     In addition to fixed-income research and credit research, the Investment Adviser, in managing Global Income Fund and Emerging Markets Debt Fund, is supported by Goldman Sachs’ economics research. The Economics Research Department, based in London, conducts economic, financial and currency markets research which analyzes economic trends and interest and exchange rate movements worldwide. The Economics Research Department tracks factors such as inflation and money supply figures, balance of trade figures, economic growth, commodity prices, monetary and fiscal policies, and political events that can influence interest rates and currency trends. The success of Goldman Sachs’ international research team has brought wide recognition to its members. The team has earned top rankings in various external surveys such as Pensions and Investments, Forbes and Dalbar. These rankings acknowledge the achievements of the firm’s economists, strategists and equity analysts.

     In allocating assets in the Investment Grade Credit Fund’s, Global Income Fund’s and Emerging Markets Debt Fund’s portfolios among currencies, the Investment Adviser will have access to the Global Asset Allocation Model. The model is based on the observation that the prices of all financial assets, including foreign currencies, will adjust until investors globally are comfortable holding the pool of outstanding assets. Using the model, the Investment Adviser will estimate the total returns from each currency sector which are consistent with the average investor holding a portfolio equal to the market capitalization of the financial assets among those currency sectors. These estimated equilibrium returns are then combined with the expectations of Goldman Sachs’ research professionals to produce an optimal currency and asset allocation for the level of risk suitable for a Fund given its investment objectives and criteria.

     The Management Agreements provide that GSAM and GSAMI, in their capacity as Investment Advisers, may each render similar services to others so long as the services under the Management Agreements are not impaired thereby. The Management Agreements were most recently approved by the Trustees of the Trust, including a majority of the Trustees of the Trust who are not parties to such agreements or “interested persons” (as such term is defined in the Act) of any party thereto (the “non-interested Trustees”), on June 16, 2005 (and August 4, 2005 for the California Municipal and New York Municipal Funds). A discussion regarding the Trustees’ basis for approving the Management Agreements for each Fund in 2005 other than the California and New York Municipal Funds is available in the Trust’s annual report dated October 31, 2005. The applicable Fund’s Management Agreement was approved by the shareholders of Ultra-Short Duration Government Fund on October 30, 1991, the shareholders of Short Duration Government Fund

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on March 27, 1989, the sole initial shareholder of Short Duration Tax-Free Fund on September 25, 1992, the sole initial shareholder of Core Fixed Income Fund on October 29, 1993, the sole initial shareholder of High Yield Municipal Fund on March 1, 2000, the sole initial shareholder of Enhanced Income Fund on July 28, 2000, the sole initial shareholder of Emerging Markets Debt Fund on August 28, 2003, the sole initial shareholders of U.S. Mortgages and Investment Grade Credit Fund on October 30, 2003, the sole initial shareholders of California Municipal and New York Municipal Funds on November 1, 2005 and the shareholders of each other Fund on April 21, 1997. Each Management Agreement will remain in effect until June 30, 2006 and will continue in effect with respect to the applicable Fund from year to year thereafter provided such continuance is specifically approved at least annually by (i) the vote of a majority of the outstanding voting securities of such Fund or a majority of the Trustees of the Trust, and (ii) the vote of a majority of the non-interested Trustees of the Trust cast in person at a meeting called for the purpose of voting on such approval.

     Each Management Agreement will terminate automatically if assigned (as defined in the Act). Each Management Agreement is also terminable at any time without penalty by the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the applicable Fund on 60 days’ written notice to the applicable Investment Adviser and by the Investment Adviser on 60 days’ written notice to the Trust.

     At the August 4, 2005 meeting the Board of Trustees reviewed the written and oral presentations provided by the Investment Adviser in connection with the Trustees’ consideration of the Management Agreement for the California Municipal Fund and New York Municipal Fund. The Trustees also reviewed, with the advice of legal counsel, their responsibilities under applicable law and met in executive session without representatives of the Investment Adviser present. Among other things, the Trustees reviewed the Management Agreement as it applied to the California Municipal and New York Municipal Funds, including information regarding the terms of the Management Agreement; the fees and expenses to be paid by the Funds; the Investment Adviser’s proposal to voluntarily reimburse certain expenses of the Funds that exceeded a specified level; other benefits to be derived by the Investment Adviser and its affiliates from their relationship with the Funds; and a comparison of the Funds’ fees and expenses with those paid by other similar mutual funds. The Trustees also considered the investment performance of other municipal Funds managed by the Investment Adviser, which the Trustees believed to have been competitive.

     In connection with their approval of the Management Agreement for the California Municipal and New York Municipal Funds, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and the other, non-advisory, services provided to the Funds by the Investment Adviser and its affiliates. These services include services as the Funds’ transfer agent and distributor. The Trustees noted that many of the portfolio personnel who would be providing services to the Funds were currently providing services to other investment portfolios of the Trust. The Trustees believed that the Investment Adviser was able to provide quality services to the Funds.

     The Trustees also considered the contractual fee rates payable by the California Municipal and New York Municipal Funds under the Management Agreement. In this regard, information on the fees payable by the Funds and the Funds’ total operating expense ratios were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. The comparisons of the Funds’ fee rates and total operating expense ratios were prepared by a third-party consultant. These comparisons assisted the Trustees in evaluating the reasonableness of the management fees paid by the Funds.

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     The Trustees also considered the breakpoints in the contractual fee rates payable by the California Municipal and New York Municipal Funds under the Management Agreement. In approving these fee breakpoints, the Trustees considered the Investment Adviser’s potential economies of scale, and whether the Funds and their shareholders would participate in the benefits of these economies. In this regard, the Trustees considered the projected amount of assets in the Funds, and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. The Trustees agreed that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels. The Trustees also recognized that the Funds were new and the Investment Adviser did not expect to show a profit on its services to the Funds until the Funds’ assets had grown.

     In addition, the Trustees considered the other benefits that would be received by the Investment Adviser and its affiliates from the California Municipal and New York Municipal Funds as stated above, including the fees received by them for transfer agency and distribution services. After deliberation, the Trustees concluded that the management fees paid by Funds were reasonable in light of the services provided by the Investment Adviser, its projected costs and the Funds’ reasonably foreseeable asset levels, and that the Management Agreement should be approved.

     Pursuant to the Management Agreements, the Investment Advisers are entitled to receive the fees set forth below, payable monthly based on each respective Fund’s average daily net assets. In addition, as of the date of this Additional Statement the Investment Advisers are voluntarily limiting their management fees for certain Funds to the annual rates also listed below:

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		Actual Rate for the Fiscal Year
		Ended
Fund	Contractual Rate	October 31, 2005
GSAM Enhanced Income Fund	0.25% on the first $1 billion		0.20	%*
	0.23% on the next $1 billion
	0.22% over $2 billion
Ultra-Short Duration Government Fund	0.40% on the first $1 billion		0.40	%
	0.36% on the next $1 billion
	0.34% over $2 billion
Short Duration Government Fund	0.50% on the first $1 billion		0.50	%
	0.45% on the next $1 billion
	0.43% over $2 billion
Short Duration Tax-Free Fund	0.40% on the first $1 billion		0.35	%*
	0.36% on the next $1 billion
	0.34% over $2 billion
Government Income Fund	0.54% on the first $1 billion		0.54	%**
	0.49% on the next $1 billion
	0.47% over $2 billion
Municipal Income Fund	0.55% on the first $1 billion		0.50	%*
	0.50% on the next $1 billion
	0.48% over $2 billion
California Municipal Fund***	0.45% on the first $1 billion		—
	0.41% on the next $1 billion
	0.39% over $2 billion
New York Municipal Fund***	0.45% on the first $1 billion		—
	0.41% on the next $1 billion
	0.39% over $2 billion
U.S. Mortgages Fund	0.40% on the first $1 billion		0.33	%*
	0.36% on the next $1 billion
	0.34% over $2 billion
Core Fixed Income Fund	0.40% on the first $1 billion		0.39	%
	0.36% on the next $1 billion
	0.34% over $2 billion
Investment Grade Credit Fund	0.40% on the first $1 billion		0.33	%*
	0.36% on the next $1 billion
	0.34% over $2 billion
High Yield Municipal Fund	0.55% on the first $2 billion		0.52	%
	0.50% over $2 billion

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		Actual Rate for the Fiscal Year
		Ended
Fund	Contractual Rate	October 31, 2005
GSAM High Yield Fund	0.70% on the first $2 billion		0.70	%
	0.63% over $2 billion
Emerging Markets Debt Fund	0.80% on the first $2 billion		0.80	%
	0.72% over $2 billion
GSAMI Global Income Fund**	0.65% on the first $1 billion		0.65	%
	0.59% on the next $1 billion
	0.56% over $2 billion

*	The Investment Adviser has voluntarily agreed not to impose a portion of the management fee on the Enhanced Income, Short Duration Tax-Free, Municipal Income, U.S. Mortgages and Investment Grade Credit Funds equal to 0.05%, 0.05%, 0.05%, 0.07% and 0.07%, respectively, of such Fund’s average daily net assets. In the absence of such fee waivers, the management fees for the Enhanced Income, Short Duration Tax-Free, Municipal Income, U.S. Mortgages and Investment Grade Credit Funds would be equal to 0.25%, 0.40%, 0.55%, 0.40% and 0.40% respectively.
**	The Government Income Fund voluntarily waived its management fee from 0.65% to 0.54% prior to February 25, 2005.
***	The California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005.

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     Prior to July 1, 2005, the Funds’ management fees as an annual percentage of average daily net assets were as follows:

	Contractual			Waiver			Net
Fund*	Annual Rate			Annual Rate			Annual Rate
Enhanced Income Fund		0.25	%		0.05	%		0.20	%
Ultra-Short Duration Government Fund		0.40	%		—			0.40	%
Short Duration Government Fund		0.50	%		—			0.50	%
Short Duration Tax-Free Fund		0.40	%		0.05	%		0.35	%
Government Income Fund		0.65	%		0.11	%		0.54	%**
Municipal Income Fund		0.55	%		0.05	%		0.50	%
U.S. Mortgages Fund		0.40	%		0.07	%		0.33	%
Core Fixed Income Fund		0.40	%		—			0.40	%
Investment Grade Credit Fund		0.40	%		0.07	%		0.33	%
Global Income Fund		0.65	%		—			0.65	%
High Yield Municipal Fund		0.55	%		—			0.55	%
High Yield Fund		0.70	%		—			0.70	%
Emerging Markets Debt Fund		0.80	%		—			0.80	%

*	The California Municipal Fund and New York Municipal Fund did not commence operations until November 1, 2005.
**	The Government Income Fund voluntarily waived its management fee from 0.65% to 0.54% prior to February 25, 2005.

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     GSAM and GSAMI may discontinue or modify the above limitations in the future at their discretion.

     For the fiscal years ended October 31, 2005, 2004 and 2003, the amounts of the fees (net of fee waivers) incurred by each Fund then in existence under the Management Agreements were as follows:

	Fiscal Year ended		Fiscal Year ended		Fiscal Year ended
	October 31,		October 31,		October 31,
Fund	2005		2004		2003
Enhanced Income Fund(1)	$	951,054	$	2,263,764	$	4,303,909
Ultra-Short Duration Government Fund		4,437,953		7,825,039		15,143,195
Short Duration Government Fund		4,220,570		4,398,879		4,434,803
Short Duration Tax-Free Fund(2)		1,883,079		2,333,263		1,845,484
Government Income Fund(3)		3,888,539		3,343,727		2,924,585
Municipal Income Fund(4)		1,827,453		1,237,295		1,143,407
California Municipal Fund(5)		—		—		—
New York Municipal Fund(5)		—		—		—
U.S. Mortgages Fund(6)		1,136,988		644,305		N/A
Core Fixed Income Fund(7)		6,601,112		4,979,196		4,826,035
Investment Grade Credit Fund(6)		468,536		108,791		N/A
Global Income Fund(8)		2,286,269		2,187,384		2,724,238
High Yield Municipal Fund(9)		21,589,978		14,155,853		7,970,469
High Yield Fund		14,200,370		17,332,653		18,002,553
Emerging Markets Debt Fund(10)		331,555		146,509		15,543

(1)	Had fee waivers not been in effect, Enhanced Income Fund would have paid advisory fees of $1,189,054, $2,829,705 and $5,379,887, respectively, for the fiscal years ended October 31, 2005, October 31, 2004 and October 31, 2003.
(2)	Had fee waivers not been in effect, Short Duration Tax-Free Fund would have paid advisory fees of $2,152,090, $3,028,686 and $2,109,148, respectively, for the years ended October 31, 2005, October 31, 2004 and October 31, 2003.
(3)	Had fee waivers not been in effect, Government Income Fund would have paid advisory fees of $4,113,539, $4,024,857 and $3,520,334, respectively, for the years ended October 31, 2005 October 31, 2004 and October 31, 2003.
(4)	Had fee waivers not been in effect, Municipal Income Fund would have paid advisory fees of $2,010,197, $3,028,686 and $1,361,025, respectively, for the years ended October 31, 2005, October 31, 2004 and October 31, 2003.
(5)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005.
(6)	U.S. Mortgages and Investment Grade Credit Funds commenced operations on November 3, 2003. Had the expense limitations not been in effect, U.S. Mortgages and Investment Grade Credit Funds would have paid advisory fees of $1,377,988 and $567,536, respectively for the years ended October 31, 2005 and $780,976 and $131,867, respectively for the years ended October 31, 2004.

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(7)	Had fee waivers not been in effect, Core Fixed Income Fund would have paid advisory fees of $6,718,087 for the fiscal year ended October 31, 2005.
(8)	Had fee waivers not been in effect, Global Income Fund would have paid advisory fees of $2,544,236, $3,028,686 and $4,265,398, respectively, for the years ended October 31, 2005, October 31, 2004 and October 31, 2003.
(9)	Had fee waivers not been in effect, High Yield Municipal Fund would have paid advisory fees of $22,035,116 for the fiscal year ended October 31, 2005.
(10)	Emerging Markets Debt Fund commenced operations on August 29, 2003.

     Each Investment Adviser performs administrative services for the applicable Funds under the Management Agreement. Such administrative services include, subject to the general supervision of the Trustees of the Trust, (i) providing supervision of all aspects of the Funds’ non-investment operations (other than certain operations performed by others pursuant to agreements with the Funds); (ii) providing the Funds, to the extent not provided pursuant to the agreement with the Trust’s custodian, transfer and dividend disbursing agent or agreements with other institutions, with personnel to perform such executive, administrative and clerical services as are reasonably necessary to provide effective administration of the Funds; (iii) arranging, to the extent not provided pursuant to such agreements, for the preparation, at the Funds’ expense, of each Fund’s tax returns, reports to shareholders, periodic updating of the Funds’ prospectuses and statements of additional information, and reports filed with the SEC and other regulatory authorities; (iv) providing the Funds, to the extent not provided pursuant to such agreements, with adequate office space and certain related office equipment and services; and (v) maintaining all of the Funds’ records other than those maintained pursuant to such agreements.

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Portfolio Managers – Other Accounts Managed by the Portfolio Managers

     The following tables discloses other accounts within each type of category listed below for which the portfolio managers are jointly and primarily responsible for day to day portfolio management.

	Number of Other Accounts Managed and Total Assets by Account Type*									Number of Accounts and Total Assets for Which Advisory Fee is Performance Based*
Name of	Registered									Registered
Portfolio	Investment			Other Pooled			Other			Investment				Other Pooled				Other
Manager	Companies			Investment Vehicles			Accounts			Companies				Investment Vehicles				Accounts
	Number			Number			Number			Number				Number				Number
	of		Assets	of		Assets	of		Assets	of		Assets		of		Assets		of		Assets
	Accounts		Managed	Accounts		Managed	Accounts		Managed	Accounts		Managed		Accounts		Managed		Accounts		Managed
Enhanced Income Fund
U.S. Fixed Income Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm		192	43,074mm		—		—		5	4,832mm			5	2,386mm
Christopher Sullivan		8	4,078mm		16	10,250mm		192	43,074mm		—		—		5	4,832mm			5	2,386mm
James McCarthy		7	4,936mm		1	784mm		36	13,330mm		—		—		—		—		7	4,537mm
Thomas D. Teles		11	8,329mm		15	10,084mm		212	54,474mm		—		—		6	4,832mm			12	6,923mm
James Cielinski		8	3,622mm		36	19,017mm		279	66,857mm		—		—		10	6,369mm			16	9,620mm
Mark Van Wyk		15	9,014mm		11	11,035mm		227	55,333mm		—		—		5	4,832mm			12	6,923mm
Peter D. Dion		11	8,329mm		15	10,084mm		212	54,474mm		—		—		6	4,832mm			12	6,923mm
Ultra-Short Duration Government Fund
U.S. Fixed Income Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm		192	43,074mm		—		—		5	4,832mm			5	2,386mm
Christopher Sullivan		8	4,078mm		16	10,250mm		192	43,074mm		—		—		5	4,832mm			5	2,386mm
James McCarthy		7	4,936mm		1	784mm		36	13,330mm		—		—		—		—		7	4,537mm
Thomas D. Teles		11	8,329mm		15	10,084mm		212	54,474mm		—		—		6	4,832mm			12	6,923mm

B-117

	Number of Other Accounts Managed and Total Assets by Account Type*										Number of Accounts and Total Assets for Which Advisory Fee is Performance Based*
Name of	Registered										Registered
Portfolio	Investment			Other Pooled				Other			Investment				Other Pooled				Other
Manager	Companies			Investment Vehicles				Accounts			Companies				Investment Vehicles				Accounts
	Number			Number				Number			Number				Number				Number
	of		Assets	of		Assets		of		Assets	of		Assets		of		Assets		of		Assets
	Accounts		Managed	Accounts		Managed		Accounts		Managed	Accounts		Managed		Accounts		Managed		Accounts		Managed
Mark Van Wyk		15	9,014mm		11	11,035mm			227	55,333mm		—		—		5	4,832mm			12	6,923mm
Peter D. Dion		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Short Duration Government Fund
U.S. Fixed Income Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
Christopher Sullivan		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
James McCarthy		7	4,936mm		1	784mm			36	13,330mm		—		—		—		—		7	4,537mm
Thomas D. Teles		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Mark Van Wyk		15	9,014mm		11	11,035mm			227	55,333mm		—		—		5	4,832mm			12	6,923mm
Peter D. Dion		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Short Duration Tax-Free Fund
U.S. Fixed Income- Municipal Investment Management Team
Ben Barber		3	5,774mm		—		—		914	11,878mm		—		—		—		—		—		—
Scott Diamond		1	463mm		—		—		914	11,878mm		—		—		—		—		—		—

B-118

	Number of Other Accounts Managed and Total Assets by Account Type*										Number of Accounts and Total Assets for Which Advisory Fee is Performance Based*
Name of	Registered										Registered
Portfolio	Investment			Other Pooled				Other			Investment				Other Pooled				Other
Manager	Companies			Investment Vehicles				Accounts			Companies				Investment Vehicles				Accounts
	Number			Number				Number			Number				Number				Number
	of		Assets	of		Assets		of		Assets	of		Assets		of		Assets		of		Assets
	Accounts		Managed	Accounts		Managed		Accounts		Managed	Accounts		Managed		Accounts		Managed		Accounts		Managed
Government Income Fund
U.S. Fixed Income Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
Christopher Sullivan		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
James McCarthy		7	4,936mm		1	784mm			36	13,330mm		—		—		—		—		7	4,537mm
Mark Van Wyk		15	9,014mm		11	11,035mm			227	55,333mm		—		—		5	4,832mm			12	6,923mm
Peter D. Dion		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Municipal Income Fund
U.S. Fixed Income- Municipal Investment Management Team
Ben Barber		3	5,774mm		—		—		914	11,878mm		—		—		—		—		—		—
Scott Diamond		1	463mm		—		—		914	11,878mm		—		—		—		—		—		—
California Municipal Fund
U.S. Fixed Income-Municipal Team
Ben Barber		3	5,774mm		—		—		914	11,878mm		—		—		—		—		—		—
Scott Diamond		1	463mm		—		—		914	11,878mm		—		—		—		—		—		—
Tom Kenny		25	18,023mm		49	23,894mm			1274	97,146mm		—		—		14	6,525mm			29	11,799mm

B-119

	Number of Other Accounts Managed and Total Assets by Account Type*										Number of Accounts and Total Assets for Which Advisory Fee is Performance Based*
Name of	Registered										Registered
Portfolio	Investment			Other Pooled				Other			Investment				Other Pooled				Other
Manager	Companies			Investment Vehicles				Accounts			Companies				Investment Vehicles				Accounts
	Number			Number				Number			Number				Number				Number
	of		Assets	of		Assets		of		Assets	of		Assets		of		Assets		of		Assets
	Accounts		Managed	Accounts		Managed		Accounts		Managed	Accounts		Managed		Accounts		Managed		Accounts		Managed
New York Municipal Fund
U.S. Fixed Income-Municipal Team
Ben Barber		3	5,774mm		—		—		914	11,878mm		—		—		—		—		—		—
Scott Diamond		1	463mm		—		—		914	11,878mm		—		—		—		—		—		—
Tom Kenny		25	18,023mm		49	23,894mm			1274	97,146mm		—		—		14	6,525mm			29	11,799mm
U.S. Mortgages Fund
U.S. Fixed Income Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
Thomas D. Teles		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Peter D. Dion		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Stephen Warren		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
Core Fixed Income Fund
U.S. Fixed Income Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
Christopher Sullivan		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
James McCarthy		7	4,936mm		1	784mm			36	13,330mm		—		—		—		—		7	4,537mm
Thomas D. Teles		11	8,329mm		15	10,084mm			212	54,474mm		—		—		6	4,832mm			12	6,923mm
James Cielinski		8	3,622mm		36	19,017mm			279	66,857mm		—		—		10	6,369mm			16	9,620mm
Mark Van Wyk		15	9,014mm		11	11,035mm			227	55,333mm		—		—		5	4,832mm			12	6,923mm

B-120

Number of Other Accounts Managed and Total Assets by Account Type*

Number of Accounts and Total Assets for Which Advisory Fee is Performance Based*

Name of

Registered

Registered

Portfolio

Investment

Other Pooled

Other

Investment

Other Pooled

Other

Manager

Companies

Investment Vehicles

Accounts

Companies

Investment Vehicles

Accounts

Number

Number

Number

Number

Number

Number

of

Assets

of

Assets

of

Assets

of

Assets

of

Assets

of

Assets

Accounts

Managed

Accounts

Managed

Accounts

Managed

Accounts

Managed

Accounts

Managed

Accounts

Managed

Peter D. Dion

11

8,329mm

15

10,084mm

212

54,474mm

—

—

6

4,832mm

12

6,923mm

Investment Grade Credit Fund

U.S. Fixed Income Investment Management Team

James B. Clark

8

4,078mm

16

10,250mm

192

43,074mm

—

—

5

4,832mm

5

2,386mm

James Cielinski

8

3,622mm

36

19,017mm

279

66,857mm

—

—

10

6,369mm

16

9,620mm

Ben Johnson

8

3,622mm

36

19,017mm

279

66,857mm

—

—

10

6,369mm

16

9,620mm

Global Income Fund

U.S. Fixed Income Investment Management Team

James Cielinski

8

3,622mm

36

19,017mm

279

66,857mm

—

—

10

6,369mm

16

9,620mm

Global Fixed Income-Investment Management Team

Andrew Wilson

2

566mm

33

12,260mm

116

27,588mm

—

—

11

4,735mm

15

7,289mm

Philip Moffitt

2

566mm

33

12,260mm

116

27,588mm

—

—

11

4,735mm

15

7,289mm

Jennifer Youde

—

—

—

—

21

5,603mm

—

—

—

—

2

1,608mm

B-121

	Number of Other Accounts Managed and Total Assets by Account Type*										Number of Accounts and Total Assets for Which Advisory Fee is Performance Based*
Name of	Registered										Registered
Portfolio	Investment			Other Pooled				Other			Investment				Other Pooled				Other
Manager	Companies			Investment Vehicles				Accounts			Companies				Investment Vehicles				Accounts
	Number			Number				Number			Number				Number				Number
	of		Assets	of		Assets		of		Assets	of		Assets		of		Assets		of		Assets
	Accounts		Managed	Accounts		Managed		Accounts		Managed	Accounts		Managed		Accounts		Managed		Accounts		Managed
High Yield Municipal Fund
U.S. Fixed Income- Municipal Investment Management Team
Ben Barber		3	5,774mm		—		—		914	11,878mm		—		—		—		—		—		—
Tom Kenny		25	18,023mm		49	23,894mm			1274	97,146mm		—		—		14	6,525mm			29	11,799mm
Scott Diamond		1	463mm		—		—		914	11,878mm		—		—		—		—		—		—
High Yield Fund
U.S. Fixed Income-High Yield Investment Management Team
Andrew Jessop		7	3,221mm		5	7,057mm			34	11,665mm		—		—		2	3,004mm			3	616mm
Diana Gordon, Ph.D		7	3,221mm		5	7,057mm			34	11,665mm		—		—		2	3,004mm			3	616mm
Rob Cignarella		7	3,221mm		5	7,057mm			34	11,665mm		—		—		2	3,004mm			3	616mm
Emerging Markets Debt Fund
U.S. Fixed Income-Investment Management Team
James B. Clark		8	4,078mm		16	10,250mm			192	43,074mm		—		—		5	4,832mm			5	2,386mm
Samuel Finkelstein		6	4,565mm		10	9,007mm			11	12,038mm		—		—		2	3,004mm			1	251mm
Ricardo Penfold		6	4,565mm		10	9,007mm			11	12,038mm		—		—		2	3,004mm			1	251mm
Owi Ruivivar, Ph.D		6	4,565mm		10	9,007mm			11	12,038mm		—		—		2	3,004mm			1	251mm

* The information is as of October 31, 2005.

B-122

     Conflicts of Interest. The Investment Adviser’s portfolio managers are often responsible for managing one or more of the Funds as well as other accounts, including proprietary accounts, separate accounts and other pooled investment vehicles, such as unregistered hedge funds. A portfolio manager may manage a separate account or other pooled investment vehicle which may have materially higher fee arrangements than the Funds and may also have a performance-based fee. The side-by-side management of these funds may raise potential conflicts of interest relating to cross trading, the allocation of investment opportunities and the aggregation and allocation of trades.

     The Investment Adviser has a fiduciary responsibility to manage all client accounts in a fair and equitable manner. The Investment Adviser seeks to provide best execution of all securities transactions and aggregate and then allocate securities to client accounts in a fair and timely manner. To this end, the Investment Adviser has developed policies and procedures designed to mitigate and manage the potential conflicts of interest that may arise from side-by-side management. In addition, the Investment Adviser and the Funds have adopted policies limiting the circumstances under which cross-trades may be effected between a Fund and another client account. The Investment Adviser conducts periodic reviews of trades for consistency with these policies. For more information about conflicts of interests that may arise in connection with the portfolio managers’ management of the Funds’ investments and the investments of other accounts, see “Potential Conflicts of Interest – Potential Conflicts Relating to the Allocation of Investment Opportunities Among the Funds and Other Goldman Sachs Accounts and Potential Conflicts Relating to Goldman Sachs’ and the Investment Adviser’s Proprietary Activities and Activities on Behalf of Other Accounts.”

Portfolio Managers — Compensation

     The Investment Adviser’s Fixed Income Team’s (the “Fixed Income Team”) compensation package for its portfolio managers is comprised of a base salary and performance bonus. The base salary is fixed. However, the performance bonus is a function of each portfolio manager’s individual performance; the Fixed Income Team’s total revenues for the past year which in part is derived from advisory fees and for certain accounts, performance based fees; his or her contribution to the overall performance of the Fixed Income team; the performance of GSAM; the profitability of Goldman, Sachs & Co.; and anticipated compensation levels among competitor firms. Portfolio managers are rewarded for their ability to outperform a benchmark while managing risk exposure.

     The performance bonus for portfolio managers is significantly influenced by the following criteria: (1) overall pre-tax portfolio performance; (2) consistency of performance across accounts with similar profiles; (3) compliance with risk budgets; and (4) communication with other portfolio managers within the research process. In addition, the following factors involving the overall performance of the investment style team are also considered when the amount of performance bonus is determined: (1) whether the teams’ performance exceeded performance benchmarks over one-year and three-year periods (for Fund specific benchmark’s please see below); (2) whether the team managed portfolios within a defined range around a targeted tracking error; (3) whether the team performed consistently with objectives and client commitments; (4) whether the team achieved top tier rankings and ratings (a consideration secondary to the above); and (5) whether the team managed all similarly mandated accounts in a consistent manner.

B-123

The benchmarks for measuring performance of these Funds are:

Enhanced Income Fund: Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note 1 ndex

Ultra-Short Duration Government Fund: Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index

Short Duration Government Fund: Two-Year U.S. Treasury Note Index

Short Duration Tax-Free Fund: Lehman Brothers 1-3 Year Municipal Bond Index

Government Income Fund: Lehman Brothers Government/Mortgage Index

Municipal Income Fund: Lehman Brothers Aggregate Municipal Bond Index

California Municipal Fund: Lehman Brothers CA 1-10 Year Municipal Bond Index

New York Municipal Fund: Lehman Brothers NY 1-10 Year Municipal Bond Index

U.S. Mortgages Fund: Lehman Brothers Securitized Index

Core Fixed Income Fund: Lehman Brothers Aggregate Bond Index

Investment Grade Credit Fund: Lehman Brothers U.S. Credit Index

Global Income Fund: J.P. Morgan Global Government Bond Index (hedged)

High Yield Municipal Fund: Lehman Brothers High Yield Municipal Bond Index and Lehman Brothers Aggregate Municipal Bond Index

High Yield Fund: Lehman Brothers U.S. Corporate High Yield Bond Index — 2% Issuer Capped

Emerging Markets Debt Fund: J.P. Morgan EMBI Global Diversified Index

     Other Compensation. In addition to base salary and performance bonus, the Investment Adviser has a number of additional benefits/deferred compensation programs for all portfolio managers in place including: (i) a 401(k) program that enables employees to direct a percentage of their pretax salary and bonus income into a tax-qualified retirement plan; (ii) a profit sharing program to which Goldman, Sachs & Co. makes a pretax contribution; and (iii) investment opportunity programs in which certain professionals are eligible to participate subject to certain net worth requirements. Portfolio managers may also receive grants of restricted stock units and/or stock options as part of their compensation.

     Certain GSAM portfolio managers may also participate in the firm’s Partner Compensation Plan, which covers many of the firm’s senior executives. In general, under the Partner Compensation Plan, participants receive a base salary and a bonus (which may be paid in cash or in the form of an equity-based award) that is linked to Goldman Sachs’ overall financial performance.

Portfolio Managers – Portfolio Managers’ Ownership of Shares of the Funds They Manage

     The following table shows the portfolio managers’ ownership of shares of the Funds they manage.

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Enhanced Income Fund
James B. Clark	Enhanced Income Fund: $0
Christopher Sullivan	Enhanced Income Fund: $0
James McCarthy	Enhanced Income Fund: $0
Thomas D. Teles	Enhanced Income Fund: $0
James Cielinski	Enhanced Income Fund: $0
Mark Van Wyk	Enhanced Income Fund: $0
Peter D. Dion	Enhanced Income Fund: $0

B-124

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Ultra-Short Duration Government Fund
James B. Clark	Ultra-Short Duration Government Fund: $0
Christopher Sullivan	Ultra-Short Duration Government Fund: $0
James McCarthy	Ultra-Short Duration Government Fund: $0
Thomas D. Teles	Ultra-Short Duration Government Fund: $0
Mark Van Wyk	Ultra-Short Duration Government Fund: $0
Peter D. Dion	Ultra-Short Duration Government Fund: $0
Short Duration Government Fund
James B. Clark	Short Duration Government Fund: $0
Christopher Sullivan	Short Duration Government Fund: $0
James McCarthy	Short Duration Government Fund: $0
Thomas D. Teles	Short Duration Government Fund: $0
Mark Van Wyk	Short Duration Government Fund: $10,000 — $50,000
Peter D. Dion	Short Duration Government Fund: $0
Short Duration Tax-Free Fund
Ben Barber	Short Duration Tax-Free Fund: $0
Scott Diamond	Short Duration Tax-Free Fund: $1 — $10,000
Government Income Fund
James B. Clark	Government Income Fund: $0
Christopher Sullivan	Government Income Fund: $0
James McCarthy	Government Income Fund: $0
Mark Van Wyk	Government Income Fund: $0
Peter D. Dion	Government Income Fund: $0
Municipal Income Fund
Ben Barber	Municipal Income Fund: $0
Scott Diamond	Municipal Income Fund: $0
California Municipal Fund
Ben Barber	California Municipal Fund: $0
Scott Diamond	California Municipal Fund: $0
Tom Kenny	California Municipal Fund: $0
New York Municipal Fund
Ben Barber	New York Municipal Fund: $0
Scott Diamond	New York Municipal Fund: $0
Tom Kenny	New York Municipal Fund: $0
U.S. Mortgages Fund
James B. Clark	U.S. Mortgages Fund: $0
Thomas D. Teles	U.S. Mortgages Fund: $0
Peter D. Dion	U.S. Mortgages Fund: $0
Stephen Warren	U.S. Mortgages Fund: $0

B-125

	Dollar Range of Equity Securities Beneficially
Name of Portfolio Manager	Owned by Portfolio Manager*
Core Fixed Income Fund
James B. Clark	Core Fixed Income Fund: $0
Christopher Sullivan	Core Fixed Income Fund: $0
James McCarthy	Core Fixed Income Fund: $0
Thomas D. Teles	Core Fixed Income Fund: $0
James Cielinski	Core Fixed Income Fund: $0
Mark Van Wyk	Core Fixed Income Fund: $0
Peter D. Dion	Core Fixed Income Fund: $0
Investment Grade Credit Fund
James B. Clark	Investment Grade Credit Fund: $0
James Cielinski	Investment Grade Credit Fund: $0
Ben Johnson	Investment Grade Credit Fund: $0
Global Income Fund
James Cielinski	Global Income Fund: $0
Andrew Wilson	Global Income Fund: $0
Philip Moffitt	Global Income Fund: $0
Jennifer Youde	Global Income Fund: $0
High Yield Municipal Fund
Ben Barber	High Yield Municipal Fund: $50,000 — $100,000
Tom Kenny	High Yield Municipal Fund: $1- $10,000
Scott Diamond	High Yield Municipal Fund: $1 — $10,000
High Yield Fund
Andrew Jessop	High Yield Fund: $1 — $10,000
Diana Gordon, Ph.D	High Yield Fund: $10,000 — $50,000
Rob Cignarella	High Yield Fund: $1 — $10,000
Emerging Markets Debt Fund
James B. Clark	Emerging Markets Debt Fund: $0
Samuel Finkelstein	Emerging Markets Debt Fund: $0
Ricardo Penfold	Emerging Markets Debt Fund: $0
Owi Ruivivar, Ph.D	Emerging Markets Debt Fund: $0

* This information is as of October 31, 2005.

B-126

POTENTIAL CONFLICTS OF INTEREST

Summary

     The Goldman Sachs Group, Inc. is a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization, and a major participant in global financial markets. As such, it acts as an investor, investment banker, research provider, investment manager, investment adviser, financer, advisor, market maker, proprietary trader, prime broker, lender and agent, and has other direct and indirect interests in the global fixed income, currency, commodity, equity and other markets in which the Funds invest. As a result, The Goldman Sachs Group, Inc., the asset management division of Goldman Sachs, the Investment Advisers, and their affiliates, directors, partners, trustees, managers, members, officers and employees (collectively for purposes of this “Potential Conflicts of Interest” section, “Goldman Sachs”), including those who may be involved in the management, sales, investment activities, business operations or distribution of the Funds, are engaged in businesses and have interests other than that of managing the Funds. The Funds will not be entitled to compensation related to such businesses. These activities and interests include potential multiple advisory, transactional, financial and other interests in securities, instruments and companies that may be directly or indirectly purchased or sold by the Funds and their service providers. Such additional businesses and interests may give rise to potential conflicts of interest. The following is a brief summary description of certain of these potential conflicts of interest:

• While the Investment Advisers will make decisions for the Funds in accordance with their obligations to manage the Funds appropriately, the fees, allocations, compensation and other benefits to Goldman Sachs (including benefits relating to business relationships of Goldman Sachs) arising from those decisions may be greater as a result of certain portfolio, investment, service provider or other decisions made by the Investment Advisers than they would have been had other decisions been made which also might have been appropriate for the Funds.

• Goldman Sachs, its sales personnel and other financial service providers may have conflicts associated with their promotion of the Funds or other dealings with the Funds that would create incentives for them to promote the Funds.

• While the allocation of investment opportunities among Goldman Sachs, the Funds and other funds and accounts managed by Goldman Sachs may raise potential conflicts because of financial or other interests of Goldman Sachs or its personnel, the Investment Advisers will not make allocation decisions solely based on such factors.

• The Investment Advisers will give advice to and make investment decisions for the Funds as they believe is in the fiduciary interests of the Funds. Advice given to the Funds or investment decisions made for the Funds may differ from, and may conflict with, advice given or investment decisions made for Goldman Sachs or other funds or accounts. Actions taken with respect to Goldman Sachs or other funds or accounts may adversely impact the Funds, and actions taken by the Funds may benefit Goldman Sachs or other funds or accounts.

• Goldman Sachs’ personnel may have varying levels of economic and other interests in accounts or products promoted or managed by such personnel as compared to other accounts or products promoted or managed by them.

• Goldman Sachs will be under no obligation to provide to the Funds, or effect transactions on behalf of the Funds in accordance with, any market or other information, analysis, technical models or research in its possession.

B-127

• To the extent permitted by applicable law, the Funds may enter into transactions in which Goldman Sachs acts as principal, or in which Goldman Sachs acts on behalf of the Funds and the other parties to such transactions. Goldman Sachs will have potentially conflicting interests in connection with such transactions.

• Goldman Sachs may act as broker, dealer, agent, lender or otherwise for the Funds and will retain all commissions, fees and other compensation in connection therewith.

• Securities traded for the Funds may, but are not required to, be aggregated with trades for other funds or accounts managed by Goldman Sachs. When transactions are aggregated but it is not possible to receive the same price or execution on the entire volume of securities purchased or sold, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds.

• Products and services received by the Investment Advisers or their affiliates from brokers in connection with brokerage services provided to the Funds and other funds or accounts managed by Goldman Sachs may disproportionately benefit other of such funds and accounts based on the relative amounts of brokerage services provided to the Funds and such other funds and accounts.

• While the Investment Advisers will make proxy voting decisions as they believe appropriate and in accordance with the Investment Advisers’ policies designed to help avoid conflicts of interest, proxy voting decisions made by the Investment Advisers with respect to a Fund’s portfolio securities may favor the interests of other clients or businesses of other divisions or units of Goldman Sachs.

• Regulatory restrictions (including relating to the aggregation of positions among different funds and accounts) and internal Goldman Sachs policies may restrict investment activities of the Funds. Information held by Goldman Sachs could have the effect of restricting investment activities of the Funds.

Prospective investors should carefully review the following section of this document which more fully describes these and other potential conflicts of interest presented by Goldman Sachs’ other businesses and interests.

     As a registered investment adviser under the Advisers Act, the Investment Advisers are required to file a Form ADV with the U.S. Securities and Exchange Commission. Form ADV contains information about assets under management, types of fee arrangements, types of investments, potential conflicts of interest, and other relevant information regarding the Investment Advisers. A copy of Part 1 of the Investment Advisers’ Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov).

Potential Conflicts Relating to Portfolio Decisions, the Sale of Fund Shares and the Allocation of Investment Opportunities

     Goldman Sachs’ Other Activities May Have an Impact on the Funds

     The Investment Advisers make decisions for the Funds in accordance with their obligations as the Investment Advisers of the Funds. However, Goldman Sachs’ other activities may have a negative effect on the Funds. As a result of the various activities and interests of Goldman Sachs as described in the first paragraph under “Summary” above, it is likely that the Funds will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or

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other services. It is also likely that the Funds will undertake transactions in securities in which Goldman Sachs makes a market or otherwise has other direct or indirect interests. In addition, while the Investment Advisers will make decisions for the Funds in accordance with their obligations to manage the Funds appropriately, the fees, allocations, compensation and other benefits (including benefits relating to business relationships of Goldman Sachs) arising from those decisions may be greater as a result of certain portfolio, investment, service provider or other decisions made by the Investment Advisers for the Funds than they would have been had other decisions been made which also might have been appropriate for the Funds.

Goldman Sachs’ Financial and Other Interests and Relationships May Incentivize Goldman Sachs to Promote the Sale of Fund Shares

     Goldman Sachs, its personnel and other financial service providers, have interests in promoting sales of the Funds. With respect to both Goldman Sachs and its personnel, the remuneration and profitability relating to services to and sales of the Funds or other products may be greater than the remuneration and profitability relating to services to and sales of other products that might be provided or offered. Goldman Sachs and its sales personnel may directly or indirectly receive a portion of the fees and commissions charged to the Funds or their shareholders. Goldman Sachs and its advisory or other personnel may also benefit from increased amounts of assets under management. Fees and commissions may also be higher than for other products or services, and the remuneration and profitability to Goldman Sachs and such personnel resulting from transactions on behalf of or management of the Funds may be greater than the remuneration and profitability resulting from other funds or products.

     Conflicts may arise in relation to sales-related incentives. Goldman Sachs and its personnel may receive greater compensation or greater profit in connection with the Funds than with an account advised by an unaffiliated investment adviser. Differentials in compensation may be related to the fact that Goldman Sachs may pay a portion of its advisory fee to the unaffiliated investment adviser, or to other compensation arrangements, including for portfolio management, brokerage transactions or account servicing. Any differential in compensation may create a financial incentive on the part of Goldman Sachs and its personnel to recommend the Funds over other accounts or products managed by unaffiliated investment advisers or to effect transactions differently in the Funds as compared to other accounts or products.

     Goldman Sachs may also have relationships with, and purchase, or distribute or sell, services or products from or to, distributors, consultants and others who recommend the Funds, or who engage in transactions with or for the Funds. For example, Goldman Sachs regularly participates in industry and consultant sponsored conferences and may purchase educational, data related or other services from consultants or other third parties that it deems to be of value to its personnel and its business. The products and services purchased from consultants may include, but are not limited to, those that help Goldman Sachs understand the consultant’s points of view on the investment management process. Consultants and other parties that provide consulting or other services to potential investors in the Funds may receive fees from Goldman Sachs or the Funds in connection with the distribution of shares in the Funds or other Goldman Sachs products. For example, Goldman Sachs may enter into revenue or fee sharing arrangements with consultants, service providers, and other intermediaries relating to investments in mutual funds, collective trusts, or other products or services offered or managed by the Investment Advisers. Goldman Sachs may also pay a fee for membership in industry-wide or state and municipal organizations or otherwise help sponsor conferences and educational forums for investment industry participants including, but not limited to, trustees, fiduciaries, consultants, administrators, state and municipal personnel and other clients. Goldman Sachs’ membership in such organizations allows Goldman Sachs to participate in these conferences and educational forums and helps Goldman Sachs

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interact with conference participants and to develop an understanding of the points of view and challenges of the conference participants. In addition, Goldman Sachs’ personnel, including employees of Goldman Sachs, may have board, advisory, brokerage or other relationships with issuers, distributors, consultants and others that may have investments in the Funds or that may recommend investments in the Funds. In addition, Goldman Sachs, including the Investment Advisers, may make charitable contributions to institutions, including those that have relationships with clients or personnel of clients. Goldman Sachs’ personnel may also make political contributions. As a result of the relationships and arrangements described in this paragraph, consultants, distributors and other parties may have conflicts associated with their promotion of the Funds or other dealings with the Funds that create incentives for them to promote the Funds or certain portfolio transactions. Goldman Sachs may also pay a fee for membership in industry-wide or state and municipal organizations or otherwise help sponsor conferences and educational forums for investment industry participants including, but not limited to, trustees, fiduciaries, consultants, administrators, state and municipal personnel and other clients. Goldman Sachs’ membership in such organizations allows Goldman Sachs to participate in these conferences and educational forums and helps Goldman Sachs interact with conference participants and develop an understanding of the points of view and challenges of the conference participants. In addition, Goldman Sachs personnel, including employees of the Investment Advisers, may have board, advisory, brokerage or other relationships with issuers, distributors, consultants and others that may have investments in the Funds or that may recommend investments in the Funds or distribute the Funds. In addition, Goldman Sachs, including the Investment Advisers, may make charitable contributions to institutions, including those that have relationships with clients or personnel of clients. Personnel of Goldman Sachs may also make political contributions. As a result of the relationships and arrangements described in this paragraph, consultants, distributors and other parties may have conflicts associated with their promotion of the Funds or other dealings with the Funds that would create incentives for them to promote the Funds or certain portfolio transactions.

     To the extent permitted by applicable law, Goldman Sachs may make payments to authorized dealers and other financial intermediaries (“Intermediaries”) from time to time to promote the Funds, Client/GS Accounts (defined below) and other products. In addition to placement fees, sales loads or similar distribution charges, such payments may be made out of Goldman Sachs’ assets, or amounts payable to Goldman Sachs rather than a separately identified charge to the Funds, Client/GS Accounts or other products. Such payments may compensate Intermediaries for, among other things: marketing the Funds, Client/GS Accounts and other products; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Funds, Client/GS Accounts and other products. The payments may also, to the extent permitted by applicable regulations, contribute to various non-cash and cash incentive arrangements to promote certain products, as well as sponsor various educational programs, sales contests and/or promotions. The additional payments by Goldman Sachs may also compensate Intermediaries for subaccounting, administrative and/or shareholder processing services that are in addition to the fees paid for these services by such products.

     The payments made by Goldman Sachs may be different for different Intermediaries. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend certain products based, at least in part, on the level of compensation paid.

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Potential Conflicts Relating to the Allocation of Investment Opportunities Among the Funds and Other Goldman Sachs Accounts

     Goldman Sachs has potential conflicts in connection with the allocation of investments or transaction decisions for the Funds, including in situations in which Goldman Sachs or its personnel (including personnel of the Investment Advisers) have interests. For example, the Funds may be competing for investment opportunities with current or future accounts or funds managed or advised by Goldman Sachs (including the Investment Advisers). These accounts or funds may provide greater fees or other compensation (including performance based fees) to Goldman Sachs (including the Investment Advisers) or in which Goldman Sachs (including the Investment Advisers) or its personnel have an interest (collectively, the “Client/GS Accounts”).

     Goldman Sachs may manage or advise Client/GS Accounts that have investment objectives that are similar to those of the Funds and/or may seek to make investments in securities or other instruments in which the Funds may invest. This will create potential conflicts and potential differences among the Funds and other Client/GS Accounts, particularly where there is limited availability or limited liquidity for those investments. Such limited availability situations may exist, without limitation, in local and emerging markets, regulated industries, research and development trades, relative value or paired trades, IPO/new issues and limited issues. The Investment Advisers have developed policies and procedures that provide that they will allocate investment opportunities and make purchase and sale decisions among the Funds and other Client/GS Accounts in a manner that they consider, in their sole discretion and consistent with their fiduciary obligation to each Client/GS Account, to be reasonable.

     The Investment Advisers will make allocations for the Funds and other Client/GS Accounts with reference to numerous factors that may include, without limitation, (i) account investment horizons, investment objectives and guidelines; (ii) different levels of investment for different strategies; (iii) client-specific investment guidelines and restrictions; (iv) fully directed brokerage accounts; (v) tax sensitivity of accounts; (vi) suitability requirements; (vii) account turnover guidelines; (viii) availability of cash for investment; (ix) relative sizes and expected future sizes of applicable accounts; and/or (x) availability of other investment opportunities. Suitability considerations can include without limitation (i) relative attractiveness of a security to different accounts; (ii) concentration of positions in an account; (iii) appropriateness of a security for the benchmark of an account; (iv) an account’s risk tolerance, risk parameters and strategy allocations; (v) use of the opportunity as a replacement for a security the Investment Advisers believe to be attractive for an account but that for some reason cannot be held in the account; (vi) the need to hedge a short position in a pair trade; and/or (vii) the need to give a subset of accounts exposure to an industry. In addition to allocations of limited availability investments, the Investment Advisers may, from time to time, develop and implement new investment opportunities and/or trading strategies, and these strategies may not be allocated among all accounts (including the Fund) or pro rata, even if the strategy is consistent with objectives of all accounts. The Investment Advisers may make decisions based on such factors as strategic fit and other portfolio management considerations, including, without limitation, an account’s capacity for such strategy, the liquidity of the strategy and its underlying instruments, the account’s liquidity, the business risk of the strategy relative to the account’s overall portfolio make-up, and the lack of efficacy of, or return expectations from, the strategy for the account, and such other factors as the Investment Advisers deem relevant in their sole discretion. For example, such a determination may, but will not necessarily, include consideration of the fact that a particular strategy will not have a meaningful impact on an account given the overall size of the account, the limited availability of opportunities in the strategy and the availability of other strategies for the account. As a result, such a strategy may be allocated to some accounts managed by the Investment Advisers and not to others.

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     Although allocating orders among the Funds and other Client/GS Accounts may create potential conflicts of interest because of the interests of Goldman Sachs or its personnel or because Goldman Sachs may receive greater fees or compensation from one of the Client/GS Account’s allocations, the Investment Advisers will not make allocation decisions based on such interests or greater fees or compensation.

     Allocation decisions among accounts may be more or less advantageous to any one account or group of accounts. As a result of the above, the Investment Advisers may determine that investment opportunities, strategies or particular purchases or sales are appropriate for one or more Client/GS Accounts or for themselves or an affiliate, but not for the Funds, or are appropriate for, or available to, the Funds but in different sizes, terms or timing than is appropriate for other Client/GS Accounts, or may determine not to allocate to or purchase or sell for Client/GS Accounts all investment transactions for which Client/GS Accounts may be eligible. Therefore, the amount, timing, structuring or terms of an investment by the Funds may differ from, and performance may be lower than, investments and performance of other Client/GS Accounts.

     The Investment Advisers and/or their affiliates manage accounts of clients of Goldman Sachs’ Private Wealth Management (“PWM”) business. Such PWM clients receive advice from Goldman Sachs by means of separate accounts (“PWM Separate Accounts”). With respect to the Funds, the Investment Advisers may follow a strategy that is expected to be similar over time to that delivered by the PWM Separate Accounts. Each of the Funds and the PWM Separate Account Clients are subject to independent management and, given the independence in the implementation of advice to these accounts, there can be no warranty that such investment advice will be implemented simultaneously. Neither the Investment Advisers (in the case of the Funds) nor their affiliates (in the case of PWM Separate Accounts), will know when advice issued has been executed (if at all) and, if so, to what extent. While each will use reasonable endeavors to procure timely execution, it is possible that prior execution for or on behalf of the PWM Separate Accounts could adversely affect the prices and availability of the securities, currencies and instruments in which the Funds invest.

Other Potential Conflicts Relating to the Management of the Funds by the Investment Advisers

     Potential Restrictions and Issues Relating to Information Held by Goldman Sachs

     From time to time and subject to the Investment Advisers’ policies and procedures regarding information barriers, the Investment Advisers may consult with personnel in other areas of Goldman Sachs, or with persons unaffiliated with Goldman Sachs, or may form investment policy committees comprised of such personnel. The performance by such persons of obligations related to their consultation with personnel of the Investment Advisers could conflict with their areas of primary responsibility within Goldman Sachs or elsewhere. In connection with their activities with the Investment Advisers, such persons may receive information regarding the Investment Advisers’ proposed investment activities of the Funds that is not generally available to the public. There will be no obligation on the part of such persons to make available for use by the Funds any information or strategies known to them or developed in connection with their own client, proprietary or other activities. In addition, Goldman Sachs will be under no obligation to make available any research or analysis prior to its public dissemination.

     The Investment Advisers make decisions for the Funds based on the Funds’ investment programs. The Investment Advisers from time to time may have access to certain fundamental analysis and proprietary technical models developed by Goldman Sachs and its personnel. Goldman Sachs will not be under any obligation, however, to effect transactions on behalf of the Funds in accordance with such analysis and models.

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     In addition, Goldman Sachs has no obligation to seek information or to make available to or share with the Funds any information, investment strategies, opportunities or ideas known to Goldman Sachs personnel or developed or used in connection with other clients or activities. Goldman Sachs and certain of its personnel, including the Investment Advisers’ personnel or other Goldman Sachs personnel advising or otherwise providing services to the Funds, may be in possession of information not available to all Goldman Sachs personnel, and such personnel may act on the basis of such information in ways that have adverse effects on the Funds.

     From time to time, Goldman Sachs may come into possession of material, non-public information or other information that could limit the ability of the Funds to buy and sell investments. The investment flexibility of the Funds may be constrained as a consequence. The Investment Advisers generally are not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for the Funds.

Potential Conflicts Relating to Goldman Sachs’ and the Investment Advisers’ Proprietary Activities and Activities On Behalf of Other Accounts

     The results of the investment activities of the Funds may differ significantly from the results achieved by Goldman Sachs for its proprietary accounts and from the results achieved by Goldman Sachs for other Client/GS Accounts. The Investment Advisers will manage the Funds and the other Client/GS Accounts they manage in accordance with their respective investment objectives and guidelines. However, Goldman Sachs may give advice, and take action, with respect to any current or future Client/GS Accounts that may compete or conflict with the advice the Investment Advisers may give to the Funds, or may involve a different timing or nature of action than with respect to the Funds.

     Transactions undertaken by Goldman Sachs or Client/GS Accounts may adversely impact the Funds. Goldman Sachs and one or more Client/GS Accounts may buy or sell positions while the Funds are undertaking the same or a differing, including potentially opposite, strategy, which could disadvantage the Funds. For example, a Fund may buy a security and Goldman Sachs or Client/GS Accounts may establish a short position in that same security. The subsequent short sale may result in impairment of the price of the security which the Fund holds. Conversely, the Fund may establish a short position in a security and Goldman Sachs or other Client/GS Accounts may buy that same security. The subsequent purchase may result in an increase of the price of the underlying position in the short sale exposure of the Fund and such increase in price would be to the Fund’s detriment.

     In addition, transactions in investments by one or more Client/GS Accounts and Goldman Sachs may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of a Fund, particularly, but not limited to, in small capitalization, emerging market or less liquid strategies. This may occur when portfolio decisions regarding a Fund are based on research or other information that is also used to support portfolio decisions for other Client/GS Accounts. When Goldman Sachs or a Client/GS Account implements a portfolio decision or strategy ahead of, or contemporaneously with, similar portfolio decisions or strategies for the Funds (whether or not the portfolio decisions emanate from the same research analysis or other information), market impact, liquidity constraints, or other factors could result in the Fund receiving less favorable trading results and the costs of implementing such portfolio decisions or strategies could be increased or the Fund could otherwise be disadvantaged. Goldman Sachs may, in certain cases, elect to implement internal policies and procedures designed to limit such consequences to Client/GS Accounts, which may cause a Fund to be unable to engage in certain activities, including purchasing or disposing of securities, when it might otherwise be desirable for it to do so.

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     Conflicts may also arise because portfolio decisions regarding a Fund may benefit other Client/GS Accounts. For example, the sale of a long position or establishment of a short position by a Fund may impair the price of the same security sold short by (and therefore benefit) Goldman Sachs or other Client/GS Accounts, and the purchase of a security or covering of a short position in a security by a Fund may increase the price of the same security held by (and therefore benefit) Goldman Sachs or other Client/GS Accounts.

     The directors, officers and employees of Goldman Sachs, including the Investment Advisers, may buy and sell securities or other investments for their own accounts (including through investment funds managed by Goldman Sachs, including the Investment Advisers). As a result of differing trading and investment strategies or constraints, positions may be taken by directors, officers and employees that are the same, different from or made at different times than positions taken for the Funds. To reduce the possibility that the Funds will be materially adversely affected by the personal trading described above, each of the Funds and Goldman Sachs, as each Fund’s Investment Adviser and distributor, has established policies and procedures that restrict securities trading in the personal accounts of investment professionals and others who normally come into possession of information regarding the Fund’s portfolio transactions. Each of the Funds and Goldman Sachs, as each Fund’s Investment Adviser and distributor, has adopted a code of ethics (collectively, the “Codes of Ethics”) in compliance with Section 17(j) of the Act and monitoring procedures relating to certain personal securities transactions by personnel of the Investment Advisers which the Investment Advisers deem to involve potential conflicts involving such personnel, Client/GS Accounts managed by the Investment Advisers and the Funds. The Codes of Ethics require that personnel of the Investment Advisers comply with all applicable federal securities laws and with the fiduciary duties and anti-fraud rules to which the Investment Advisers are subject. The Codes of Ethics can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. The Codes of Ethics are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies may also be obtained after paying a duplicating fee by writing the SEC’s Public Reference Section, Washington, DC 20549-0102, or by electronic request to publicinfo@sec.gov.

     Clients of Goldman Sachs (including Client/GS Accounts) may have, as a result of receiving client reports or otherwise, access to information regarding the Investment Advisers’ transactions or views which may affect such clients’ transactions outside of accounts controlled by personnel of the Investment Advisers, and such transactions may negatively impact the performance of the Funds. The Funds may also be adversely affected by cash flows and market movements arising from purchase and sales transactions, as well as increases of capital in, and withdrawals of capital from, other Client/GS Accounts. These effects can be more pronounced in thinly traded and less liquid markets.

     The Investment Advisers’ management of the Funds may benefit Goldman Sachs. For example, the Funds may, subject to applicable law, invest directly or indirectly in the securities of companies affiliated with Goldman Sachs or which Goldman Sachs has an equity, debt or other interest. In addition, to the extent permitted by applicable law, the Funds may engage in investment transactions which may result in other Client/GS Accounts being relieved of obligations or otherwise divesting of investments or cause the Funds to have to divest certain investments. The purchase, holding and sale of investments by the Funds may enhance the profitability of Goldman Sachs’ or other Client/GS Accounts’ own investments in and its activities with respect to such companies.

     Goldman Sachs and Client/GS Accounts may pursue or enforce rights with respect to an issuer in which a Fund has invested, and those activities may have an adverse effect on the Fund. As a result, prices, availability, liquidity and terms of the Fund’s investments may be negatively impacted by Goldman Sachs’ and other Client/GS Accounts’ activities, and transactions for the Fund may be impaired or effected at prices or terms that may be less favorable than would otherwise have been the case.

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     Goldman Sachs may create, write, sell or issue, or act as placement agent or distributor of, derivative instruments with respect to the Funds or with respect to underlying securities, currencies or instruments of the Funds, or which may be otherwise based on the performance of the Funds. In addition, to the extent permitted by applicable law, Goldman Sachs (including its personnel or Client/GS Accounts) may invest in the Funds, may hedge its derivative positions by buying or selling shares of the Funds, and reserves the right to redeem some or all of its investments at any time. These investments and redemptions may be significant and may be made without notice to the shareholders. The structure or other characteristics of the derivative instruments may have an adverse effect on the Funds. For example, the derivative instruments could represent leveraged investments in the Funds, and the leveraged characteristics of such investments could make it more likely, due to events of default or otherwise, that there would be significant redemptions of interests from the Funds more quickly than might otherwise be the case. Goldman Sachs, acting in commercial capacities in connection with such derivative instruments, may in fact cause such a redemption. This may have an adverse effect on the investment management and positions, flexibility and diversification strategies of the Funds and on the amount of fees, expenses and other costs incurred directly or indirectly for the account of the Funds.

     Potential Conflicts in Connection with Investments in Goldman Sachs Money Market Funds

     To the extent permitted by applicable law, a Fund may invest all or some of its short term cash investments in any money market fund advised or managed by Goldman Sachs. In connection with any such investments, a Fund, to the extent permitted by the Act, will pay its share of all expenses (other than advisory and administrative fees) of a money market fund in which it invests which may result in a Fund bearing some additional expenses.

     Goldman Sachs May In-Source or Outsource

     Subject to applicable law, Goldman Sachs, including the Investment Advisers, may from time to time and without notice to investors in-source or outsource certain processes or functions in connection with a variety of services that it provides to the Funds in its administrative or other capacities. Such in-sourcing or outsourcing may give rise to additional conflicts of interest.

Potential Conflicts That May Arise When Goldman Sachs Acts in a Capacity Other Than Investment Adviser to the Funds

     To the extent permitted by applicable law, the Funds may enter into transactions and invest in futures, securities, currencies, swaps, options, forward contracts or other instruments in which Goldman Sachs acting as principal or on a proprietary basis for its customers, serves as the counterparty. The Funds may also enter into cross transactions in which Goldman Sachs acts on behalf of the Fund and for the other party to the transaction. Goldman Sachs may have a potentially conflicting division of responsibilities to both parties to a cross transaction. For example, Goldman Sachs may represent both a Fund and another Client/GS Account in connection with the purchase of a security by the Fund, and Goldman Sachs may receive compensation or other payments from either or both parties, which could influence the decision of Goldman Sachs to cause the Fund to purchase such security. The Funds may engage in principal or cross transactions to the extent permitted by applicable law.

     Goldman Sachs may act as broker, dealer, agent, lender or advisor or in other commercial capacities for the Funds. It is anticipated that the commissions, mark-ups, mark-downs, financial advisory fees, underwriting and placement fees, sales fees, financing and commitment fees, brokerage fees, other fees, compensation or profits, rates, terms and conditions charged by Goldman Sachs will be in

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its view commercially reasonable, although Goldman Sachs, including its sales personnel, will have an interest in obtaining fees and other amounts that are favorable to Goldman Sachs and such sales personnel. The Funds may, to the extent permitted by applicable law, borrow funds from Goldman Sachs at rates and on other terms arranged with Goldman Sachs.

     Goldman Sachs may be entitled to compensation when it acts in capacities other than as the Investment Advisers, and the Funds will not be entitled to any such compensation. For example, Goldman Sachs (and its personnel and other distributors) will be entitled to retain fees and other amounts that it receives in connection with its service to the Funds as broker, dealer, agent, lender, advisor or in other commercial capacities and no accounting to the Funds or their shareholders will be required, and no fees or other compensation payable by the Funds or their shareholders will be reduced by reason of receipt by Goldman Sachs of any such fees or other amounts.

     When Goldman Sachs acts as broker, dealer, agent, lender or advisor or in other commercial capacities in relation to the Funds, Goldman Sachs may take commercial steps in its own interests, which may have an adverse effect on the Funds. For example, in connection with lending arrangements involving the Funds, Goldman Sachs may require repayment of all or part of a loan at any time or from time to time.

     The Funds will be required to establish business relationships with their counterparties based on their own credit standing. Goldman Sachs, including the Investment Advisers, will not have any obligation to allow its credit to be used in connection with the Funds’ establishment of their business relationships, nor is it expected that the Funds’ counterparties will rely on the credit of Goldman Sachs in evaluating the Funds’ creditworthiness.

Potential Conflicts in Connection with Brokerage Transactions and Proxy Voting

     Purchases and sales of securities for a Fund may be bunched or aggregated with orders for other Client/GS Accounts. The Investment Advisers and their affiliates, however, are not required to bunch or aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that bunching or aggregating is not practicable, required or with cases involving client direction.

     Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with a bunched or aggregated order.

     The Investment Advisers may select brokers (including, without limitation, affiliates of the Investment Advisers) that furnish the Investment Advisers, the Funds, other Client/GS Accounts or their affiliates or personnel, directly or through correspondent relationships, with research or other appropriate services which provide, in the Investment Advisers’ views, appropriate assistance to the Investment Advisers in the investment decision-making process (including with respect to futures, fixed-price offerings and over-the-counter transactions). Such research or other services may include, to the extent permitted by law, research reports on companies, industries and securities; economic and financial data; financial publications; proxy analysis; trade industry seminars; computer data bases; quotation equipment and services; and research-oriented computer hardware, software and other services and products. Research or other services obtained in this manner may be used in servicing any or all of the Funds and other Client/GS Accounts, including in connection with Client/GS Accounts other than those that pay

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commissions to the broker relating to the research or other service arrangements. Such products and services may disproportionately benefit other Client/GS Accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other Client/GS Accounts. For example, research or other services that are paid for through one client’s commissions may not be used in managing that client’s account. In addition, other Client/GS Accounts may receive the benefit, including disproportionate benefits, of economies of scale or price discounts in connection with products and services that may be provided to the Funds and to such other Client/GS Accounts. To the extent that the Investment Advisers use soft dollars, they will not have to pay for those products and services themselves. The Investment Advisers may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Investment Advisers receive research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Advisers.

     The Investment Advisers may endeavor to execute trades through brokers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services the Investment Advisers believe are useful in their investment decision-making process. The Investment Advisers may from time to time choose not to engage in the above described arrangements to varying degrees.

     The Investment Advisers have adopted policies and procedures designed to prevent conflicts of interest from influencing proxy voting decisions that they make on behalf of advisory clients, including the Funds, and to help ensure that such decisions are made in accordance with the Investment Advisers’ fiduciary obligations to their clients. Nevertheless, notwithstanding such proxy voting policies and procedures, actual proxy voting decisions of the Investment Advisers may have the effect of favoring the interests of other clients or businesses of other divisions or units of Goldman Sachs and/or its affiliates provided that the Investment Advisers believe such voting decisions to be in accordance with their fiduciary obligations. For a more detailed discussion of these policies and procedures, see the section of this Additional Statement entitled “Proxy Voting.”

Potential Regulatory Restrictions on Investment Adviser Activity

     From time to time, the activities of a Fund may be restricted because of regulatory requirements applicable to Goldman Sachs and/or its internal policies designed to comply with, limit the applicability of, or otherwise relate to such requirements. A client not advised by Goldman Sachs would not be subject to some of those considerations. There may be periods when the Investment Advisers may not initiate or recommend certain types of transactions, or may otherwise restrict or limit their advice in certain securities or instruments issued by or related to companies for which Goldman Sachs is performing investment banking, market making or other services or has proprietary positions. For example, when Goldman Sachs is engaged in an underwriting or other distribution of securities of, or advisory services for, a company, the Funds may be prohibited from or limited in purchasing or selling securities of that company. Similar situations could arise if Goldman Sachs personnel serve as directors of companies the securities of which the Funds wish to purchase or sell. The larger the Investment Advisers’ investment advisory business and Goldman Sachs’ businesses, the larger the potential that these restricted list policies will impact investment transactions. However, if permitted by applicable law, the Funds may purchase securities or instruments that are issued by such companies or are the subject of an underwriting, distribution, or advisory assignment by Goldman Sachs, or in cases in which Goldman Sachs personnel are directors or officers of the issuer.

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     The investment activities of Goldman Sachs for its proprietary accounts and for Client/GS Accounts may also limit the investment strategies and rights of the Funds. For example, in regulated industries, in certain emerging or international markets, in corporate and regulatory ownership definitions, and in certain futures and derivative transactions, there may be limits on the aggregate amount of investment by affiliated investors that may not be exceeded without the grant of a license or other regulatory or corporate consent or, if exceeded, may cause Goldman Sachs, the Funds or other Client/GS Accounts to suffer disadvantages or business restrictions. If certain aggregate ownership thresholds are reached or certain transactions undertaken, the ability of the Investment Advisers on behalf of clients (including the Funds) to purchase or dispose of investments, or exercise rights or undertake business transactions, may be restricted by regulation or otherwise impaired. As a result, the Investment Advisers on behalf of clients (including the Funds) may limit purchases, sell existing investments, or otherwise restrict or limit the exercise of rights (including voting rights) when the Investment Advisers, in their sole discretion, deem it appropriate.

Distributor and Transfer Agent

     Goldman Sachs, 85 Broad Street, New York, New York 10004 serves as the exclusive distributor of shares of the Funds pursuant to a “best efforts” arrangement as provided by a distribution agreement with the Trust on behalf of each Fund. Shares of the Funds are offered and sold on a continuous basis by Goldman Sachs, acting as agent. Pursuant to the distribution agreement, after the Funds’ Prospectuses and periodic reports have been prepared, set in type and mailed to shareholders, Goldman Sachs will pay for the printing and distribution of copies thereof used in connection with the offering to prospective investors. Goldman Sachs will also pay for other supplementary sales literature and advertising costs. Goldman Sachs may enter into sales agreements with certain investment dealers and other financial service firms (the “Authorized Dealers”) to solicit subscriptions for Class A, Class B and Class C Shares of each of the Funds that offer such classes of shares. Goldman Sachs receives a portion of the sales load imposed on the sale, in the case of Class A Shares, or redemption in the case of Class A, Class B and Class C Shares, of such Fund shares. Goldman Sachs retained approximately the following combined commissions on sales of Class A, B and C Shares during the following periods:

	Fiscal year ended		Fiscal year ended		Fiscal year ended
	October 31,		October 31,		October 31,
	2005		2004		2003
Enhanced Income Fund(1)	$	1,100	$	1,500	$	4,200
Ultra-Short Duration Government Fund(1)		11,300		24,700		128,100
Short Duration Government Fund		11,000		25,300		193,900
Short Duration Tax-Free Fund		2,500		0		441,400
Government Income Fund		53,500		40,400		156,800
Municipal Income Fund		96,300		44,000		251,800
California Municipal Fund(2)		—		—		—
New York Municipal Fund(2)		—		—		—
U.S. Mortgages Fund (3)		100		5,300		—
Core Fixed Income Fund		208,800		151,100		816,000
Investment Grade Credit Fund(3)		600		400		—
Global Income Fund		19,700		13,800		58,800
High Yield Municipal Fund		276,200		290,000		1,819,000
High Yield Fund		534,300		381,600		4,146,000
Emerging Markets Debt Fund(4)		13,600		900		0

⁽¹⁾ Enhanced Income and Ultra-Short Duration Government Funds do not offer Class B and C Shares.

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(2)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
(3)	U.S. Mortgages and Investment Grade Credit Funds commenced operations on November 3, 2003 and do not offer Class B and C Shares.
(4)	Emerging Markets Debt Fund commenced operations on August 29, 2003 and does not offer Class B and C Shares.

     Goldman Sachs, 71 South Wacker Drive, Suite 500, Chicago, IL 60606 serves as the Trust’s transfer and dividend disbursing agent. Under its transfer agency agreement with the Trust, Goldman Sachs has undertaken with the Trust with respect to each Fund to: (i) record the issuance, transfer and redemption of shares; (ii) provide purchase and redemption confirmations and quarterly statements, as well as certain other statements; (iii) provide certain information to the Trust’s custodian and the relevant subcustodian in connection with redemptions; (iv) provide dividend crediting and certain disbursing agent services; (v) maintain shareholder accounts; (vi) provide certain state Blue Sky and other information; (vii) provide shareholders and certain regulatory authorities with tax-related information; (viii) respond to shareholder inquiries; and (ix) render certain other miscellaneous services. For its transfer agency services, Goldman Sachs is entitled to receive a transfer agency fee equal, on an annualized basis, to 0.04% of average daily net assets with respect to each Fund’s Institutional, Administration, Service and Separate Account Institutional Shares and 0.16% of average daily net assets with respect to each Fund’s Class A, Class B and Class C Shares (less transfer agency expenses borne by a share class). Prior to July 1, 2005, Goldman Sachs was entitled to receive a transfer agency fee equal, on an annualized basis, to 0.19% of the average daily net assets with respect to each Fund’s Class A, Class B and Class C Shares.

     As compensation for the services rendered to the Trust by Goldman Sachs as transfer and dividend disbursing agent and the assumption by Goldman Sachs of the expenses related thereto, Goldman Sachs received fees for the fiscal years ended October 31, 2005, 2004 and 2003, from each Fund then in existence as follows under the fee schedules then in effect:

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	Fiscal year ended October 31, 2005
	Class A, B		Institutional		Service		Administration		Separate Account
	and C Shares		Shares		Shares		Shares		Institutional
Enhanced Income Fund	$	178,867	$	136,882	$	—	$	14,192	$	—
Ultra-Short Duration Government Fund		457,516		324,561		18,611		—		—
Short Duration Government Fund		752,082		165,733		4,869		—		—
Short Duration Tax-Free Fund		344,416		139,114		22		—		—
Government Income Fund		1,169,793		21,028		5,060		—		—
Municipal Income Fund		439,987		48,028		133		—		—
California Municipal Fund(1)		—		—		—		—		—
New York Municipal Fund(1)		—		—		—		—		—
U.S. Mortgages Fund(2)		16,705		36,068		—		—		98,045
Core Fixed Income Fund		1,188,429		394,686		11,760		—		—
Investment Grade Credit Fund(2)		6,453		884		—		—		54,424
Global Income Fund		375,989		57,029		215		—		—
High Yield Municipal Fund		3,526,568		813,302		—		—		—
High Yield Fund		2,239,118		314,021		595		—		—
Emerging Markets Debt Fund		24,897		10,835		—		—		—

(1)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
(2)	U.S. Mortgages and Investment Grade Credit Funds commenced operations on November 3, 2003.

	Fiscal year ended October 31, 2004
	Class A, B		Institutional		Service		Administration		Separate Account
	and C Shares		Shares		Shares		Shares		Institutional
Enhanced Income Fund	$	468,640	$	335,418	$	0	$	18,674	$	—
Ultra-Short Duration Government Fund		962,444		560,051		19,833		—		—
Short Duration Government Fund		847,340		171,162		2,361		—		—
Short Duration Tax-Free Fund		425,662		177,022		24		—		—
Government Income Fund		925,213		49,282		3,620		—		—
Municipal Income Fund		358,384		23,410		124		—		—
California Municipal Fund(1)		—		—		—		—		—
New York Municipal Fund(1)		—		—		—		—		—
U.S. Mortgages Fund(2)		2,749		47,428		—		—		30,091
Core Fixed Income Fund		990,928		281,291		8,013		—		—
Investment Grade Credit Fund(2)		1,250		4,348		—		—		8,512
Global Income Fund		448,104		40,045		225		—		—
High Yield Municipal Fund		2,534,818		495,871		—		—		—
High Yield Fund		2,885,887		382,452		430		—		—
Emerging Markets Debt Fund		7,211		5,807		—		—		—

(1)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
(2)	U.S. Mortgages and Investment Grade Credit Funds commenced operations on November 3, 2003.

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	Fiscal year ended October 31, 2003
	Class A, B								Separate
	and C		Institutional		Service		Administration		Account
	Shares		Shares		Shares		Shares		Institutional
Enhanced Income Fund	$	1,190,231	$	602,424	$	—	$	7,783	$	—
Ultra-Short Duration Government Fund		2,058,958		1,053,416		27,439		—		—
Short Duration Government Fund		909,255		159,341		4,021		—		—
Short Duration Tax-Free Fund		405,608		125,448		73		—		—
Government Income Fund		740,008		55,940		4,905		—		—
Municipal Income Fund		311,479		25,809		89		—		—
California Municipal Fund(1)		—		—		—		—		—
New York Municipal Fund(1)		—		—		—		—		—
U.S. Mortgages Fund(2)		—		—		—		—		—
Core Fixed Income Fund		862,445		291,225		9,811		—		—
Investment Grade Credit Fund(2)		—		—		—		—		—
Global Income Fund		578,994		45,387		365		—		—
High Yield Municipal Fund		1,594,565		243,973		—		—		—
High Yield Fund		2,959,608		405,368		274		—		—
Emerging Markets Debt Fund(3)		61		764		—		—		—

(1)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
(2)	U.S. Mortgages and Investment Grade Credit Funds commenced operations on November 3, 2003.
(3)	Emerging Markets Debt Fund commenced operations on August 29, 2003.

     The foregoing distribution and transfer agency agreements each provide that Goldman Sachs may render similar services to others so long as the services each provides thereunder to the Funds are not impaired thereby. Each such agreement also provides that the Trust will indemnify Goldman Sachs against certain liabilities.

Expenses

     The Trust, on behalf of each Fund, is responsible for the payment of each Fund’s respective expenses. The expenses include, without limitation, the fees payable to the Investment Advisers, service fees, account service fees, shareholder administration fees and administration fees paid to Service Organizations, the fees and expenses of the Trust’s custodian and subcustodians, transfer agent fees and expenses, brokerage fees and commissions, filing fees for the registration or qualification of the Trust’s shares under federal or state securities laws, expenses of the organization of the Trust, fees and expenses incurred by the Trust in connection with membership in investment company organizations, including, but not limited to, the Investment Company Institute, taxes, interest, costs of liability insurance, fidelity bonds or indemnification, any costs, expenses or losses arising out of any liability of, or claim for damages or other relief asserted against, the Trust for violation of any law, legal, tax and auditing fees and expenses (including the cost of legal and certain accounting services rendered by employees of Goldman Sachs, or its affiliates, with respect to the Trust), expenses of preparing and setting in type Prospectuses, Additional Statements, proxy material, reports and notices and the printing and distributing of the same to

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the Trust’s shareholders and regulatory authorities, shareholder expenses, any expenses assumed by a Fund pursuant to its distribution and service plans, the compensation and expenses of its “non-interested” Trustees, the fees and expenses of pricing services and extraordinary expenses, if any, incurred by the Trust. Except for fees and expenses under any service plan, account service plan, administration plan, shareholder administration plan or distribution and service plan applicable to a particular class and transfer agency fees and expenses, all Fund expenses are borne on a non-class specific basis.

     Fees and expenses of legal counsel, registering shares of each Fund, holding meetings and communicating with shareholders may include an allocable portion of the cost of maintaining an internal legal and compliance department. Each Fund may also bear an allocable portion of the costs incurred by the Investment Advisers in performing certain accounting services not being provided by the Trust’s custodian.

     The imposition of the Investment Advisers’ fees, as well as other operating expenses, will have the effect of reducing the total return to investors. From time to time, the Investment Advisers may waive receipt of fees and/or voluntarily assume certain expenses of a Fund, which would have the effect of lowering that Fund’s overall expense ratio and increasing total return to investors at the time such amounts are waived or assumed, as the case may be.

     As of the date of this Additional Statement, the Investment Advisers have voluntarily agreed to reduce or limit certain “Other Expenses” (excluding management fees, service share fees, account service fees, shareholder administration fees, administration fees, distribution and service fees, transfer agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses) to the extent such expenses exceed to the following percentage of each Fund’s average daily net assets:

	Other
Fund	Expenses
Enhanced Income Fund		0.014	%
Ultra-Short Duration Government Fund		0.054	%
Short Duration Government Fund		0.004	%
Short Duration Tax-Free Fund		0.004	%
Government Income Fund		0.004	%
Municipal Income Fund		0.004	%
California Municipal Fund		0.044	%
New York Municipal Fund		0.044	%
U.S. Mortgages Fund		0.004	%
Core Fixed Income Fund		0.104	%
Investment Grade Credit Fund		0.004	%
Global Income Fund		0.004	%
High Yield Municipal Fund		0.004	%
High Yield Fund		0.024	%
Emerging Markets Debt Fund		0.044	%

     Such reductions or limits are calculated monthly on a cumulative basis during the Funds’ fiscal year. The Investment Advisers may modify or discontinue such expense limitations or the limitations on the management fees, described above under “Management — Investment Advisers,” in the future at their discretion. For the fiscal years ended October 31, 2005, October 31, 2004 and October 31, 2003, “Other Expenses” of each Fund were reduced by the Investment Advisers in the following amounts under expense limitations that were then in effect:

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Reimbursements

	Fiscal year ended		Fiscal year ended		Fiscal year ended
	October 31,		October 31,		October 31,
Fund	2005		2004		2003
Enhanced Income	$	450,634	$	305,616	$	231,198
Ultra-Short Duration Government		21,233		—		—
Short Duration Government		485,007		527,867		492,335
Short Duration Tax-Free		408,364		390,895		336,512
Government Income		486,279		483,071		420,219
Municipal Income		386,874		330,438		306,432
California Municipal Fund(1)		—		—		—
New York Municipal Fund(1)		—		—		—
U.S. Mortgages Fund(2)		304,602		361,990		—
Core Fixed Income		—		—		—
Investment Grade Credit Fund(2)		252,008		317,668		—
Global Income		537,794		571,527		575,339
High Yield Municipal		838,215		618,666		422,192
High Yield Fund		422,975		483,832		429,120
Emerging Markets Debt Fund(3)		250,936		309,322		77,210

(1)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
(2)	U.S. Mortgages and Investment Grade Credit Funds commenced operations on November 3, 2003.
(3)	Emerging Markets Debt Fund commenced operations on August 29, 2003.

Custodian and Sub-Custodians

     State Street Bank and Trust Company (“State Street”), 225 Franklin Street, Boston, Massachusetts 02110, is the custodian of the Trust’s portfolio securities and cash. State Street also maintains the Trust’s accounting records. State Street may appoint domestic and foreign sub-custodians and use depositories from time to time to hold certain securities and other instruments purchased by the Trust in foreign countries and to hold cash and currencies for the Trust.

Independent Registered Public Accounting Firm

     Ernst & Young LLP, 5 Times Square, New York, New York 10036 is the Funds’ independent registered public accounting firm. In addition to audit services, Ernst & Young LLP prepares the Funds’ federal and state tax returns, and provides assistance on certain non-audit matters.

PORTFOLIO TRANSACTIONS AND BROKERAGE

     The portfolio transactions for the Funds are generally effected at a net price without a broker’s commission (i.e., a dealer is dealing with a Fund as principal and receives compensation equal to the spread between the dealer’s cost for a given security and the resale price of such security). In certain foreign countries, debt securities are traded on exchanges at fixed commission rates. In connection with portfolio transactions, the Management Agreements provide that the Investment Advisers shall attempt to obtain the

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most favorable execution and net price available. The Management Agreements provide that, on occasions when an Investment Adviser deems the purchase or sale of a security to be in the best interests of a Fund as well as its other customers (including any other fund or other investment company or advisory account for which an Investment Adviser or an affiliate acts as Investment Adviser), a Fund, to the extent permitted by applicable laws and regulations, may aggregate the securities to be sold or purchased for the Fund with those to be sold or purchased for such other customers in order to obtain the best net price and most favorable execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the applicable Investment Adviser in the manner it considers to be most equitable and consistent with its fiduciary obligations to the applicable Fund and such other customers. In some instances, this procedure may adversely affect the size and price of the position obtainable for a Fund. The Management Agreements permit each Investment Adviser, in its discretion, to purchase and sell portfolio securities to and from dealers who provide the Trust with brokerage or research services in which dealers may execute brokerage transactions at a higher cost to the Fund. Brokerage and research services furnished by firms through which the Funds effect their securities transactions may be used by the Investment Adviser in servicing other accounts and not all of these services may be used by the Investment Advisers in connection with the specific Fund generating the brokerage credits. Such research or other services may include research reports on companies, industries and securities; economic and financial data; financial publications; computer data bases; quotation equipment and services; and research-oriented computer hardware, software and other services. The fees received under the Management Agreements are not reduced by reason of an Investment Adviser receiving such brokerage and research services.

     Such services are used by an Investment Adviser in connection with all of its investment activities, and some of such services obtained in connection with the execution of transactions of a Fund may be used in managing other investment accounts. Conversely, brokers furnishing such services may be selected for the execution of transactions of such other accounts, whose aggregate assets may be larger than those of a Fund, and the services furnished by such brokers may be used by an Investment Adviser in providing management services for the Trust. On occasion, a broker-dealer might furnish an Investment Adviser with a service which has a mixed use (i.e., the service is used both for investment and brokerage activities and for other activities). Where this occurs, an Investment Adviser will reasonably allocate the cost of the service, so that the portion or specific component which assists in investment and brokerage activities is obtained using portfolio commissions from the Funds or other managed accounts, and the portion or specific component which provides other assistance (for example, administrative or non-research assistance) is paid for by an Investment Adviser from its own funds.

     The Funds are prohibited, in accordance with Rule 12b-1 under the 1940 Act, from compensating a broker or dealer for any promotion or sale of Fund shares by directing to such broker or dealer the Trust’s portfolio transactions or by making any payment to such broker or dealer received or to be received (which payment may include commissions, mark-ups or mark-downs or other fees) from the Trust’s portfolio transactions effected through another broker or dealer. However, the Funds may direct portfolio transactions to a broker or dealer that promotes or sells shares of the Trust if the Trust’s Board of Trustees approve policies and procedures designed to ensure that the selection of such brokers is not influenced by considerations about the sale of Trust shares. Accordingly, the Trustees (including a majority of the Trustees who are not interested Trustees) have approved policies permitting the Trust to direct portfolio securities transactions to a broker or dealer that promotes or sells shares of the Trust subject to the prohibitions that: i) all persons responsible for selecting such brokers or dealers (including but not limited to trading desk personnel and portfolio managers) may not take into account in connection with their selections the promotion or sale of shares issued by the Trust or any other registered investment company, and ii) the Trust, the Investment Advisers and Goldman, Sachs & Co. as the Trust’s distributor may not enter into any agreement or understanding where the Trust or the Investment Advisers direct, or are expected to direct, portfolio transactions or any payment to a broker or dealer in consideration for the promotion or sale of shares of the Trust or any other registered investment company.

B-144

     On January 1, 2005, certain Funds began to participate in a Fund commission recapture program. Under the program, participating broker-dealers rebate a percentage of commissions earned on the Fund portfolio transactions to the particular Fund from which they were generated. The rebated commissions are expected to be treated as realized capital gains of the Funds.

     Subject to the above considerations, the Investment Advisers may use Goldman Sachs or an affiliate as a broker for a Fund. In order for Goldman Sachs or an affiliate, acting as agent, to effect securities or futures transactions for a Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the commissions, fees or other remuneration received by other brokers in connection with comparable transactions involving similar securities or futures contracts. Furthermore, the Trustees, including a majority of the Trustees who are not “interested” Trustees, have adopted procedures which are reasonably designed to provide that any commissions, fees or other remuneration paid to Goldman Sachs are consistent with the foregoing standard. Brokerage transactions with Goldman Sachs are also subject to such fiduciary standards as may be imposed upon Goldman Sachs by applicable law. The amount of brokerage commissions paid by a Fund may vary substantially from year to year because of differences in shareholder purchase and redemption activity, portfolio turnover rates and other factors. The difference in total brokerage commissions paid with respect to the Enhanced Income Fund and Ultra-Short Duration Government Fund for the last two fiscal years is attributable to these Funds entering into fewer futures transactions for the year ended October 31, 2005.

     For the fiscal year ended October 31, 2005, the Funds paid approximate brokerage commissions as follows:

									Amount of
			Total						Transactions		Brokerage
			Brokerage						Effected		Commissions
	Total		Commissions						through		Paid to
	Brokerage		Paid to			Total Amount of			Brokers		Brokers
Fiscal Year Ended	Commissions		Goldman			Transactions on which			Providing		Providing
October 31, 2005	Paid1		Sachs			Commissions Paid3			Research5		Research5
Enhanced Income Fund	$	45,834	$	45,834(100	%)2	$	2,423,831,046(100	%)4		—		—
Ultra-Short Duration Government Fund		157,624		157,624(100	%)2		8,452,080,759(100	%)4		—		—
Short Duration Government Fund		125,958		125,958(100	%)2		7,709,494,075(100	%)4		—		—
Short Duration Tax-Free Fund		—		- (0	%)2		- (0	%)4		—		—
Government Income Fund		69,459		69,459(100	%)2		3,892,950,475(100	%)4		—		—
Municipal Income Fund		—		- (0	%)2		- (0	%)4		—		—
California Municipal Fund6		—		- (0	%)2		- (0	%)4		—		—
New York Municipal Fund6		—		- (0	%)2		- (0	%)4		—		—
U.S. Mortgages Fund7		28,284		28,284 (100	%)2		1,699,153,525(100	%)4		—		—
Core Fixed Income Fund		167,840		167,840(100	%)2		9,641,592,311(100	%)4		—		—
Investment Grade Credit Fund7		16,667		16,667 (100	%)2		871,059,679(100	%)4		—		—
Global Income Fund		—		- (0	%)2		- (0	%)4		—		—
High Yield Municipal Fund		—		- (0	%)2		- (0	%)4		—		—
High Yield Fund		14,962		14,962(100	%)2		7,781,305(0	%)4		—		—
Emerging Markets Debt Fund8		1,120		1,120(100	%)2		47,719,322 (100	%)4		—		—

B-145

1	The figures in the table report broker commissions from futures transactions.
2	Percentage of total commissions paid to Goldman Sachs.
3	Refers to Market Value of Futures Contracts.
4	Percentage of total amount of transactions involving the payment of commissions effected through Goldman Sachs.
5	Beginning March 31, 2004, the Investment Advisers no longer participate in third party soft dollar arrangements whereby the Investment Advisers are provided third party research and/or investment services by brokerage houses executing transactions on behalf of the Funds. The information above reflects the full commission amounts paid to brokers that provide their own services, commitment of capital and other services related to the execution of brokerage transactions.
6	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005.
7	U.S. Mortgages and Investment Grade Credit Fund commenced operations on November 3, 2003.
8	Emerging Markets Debt Fund commenced operations on August 29, 2003.

     For the fiscal year ended October 31, 2004, the Funds paid approximate brokerage commissions as follows:

	Total Brokerage		Total Brokerage		Total Amount of Transactions
Fiscal Year Ended	Commissions		Commissions Paid		on which
October 31, 2004	Paid1		to Goldman Sachs		Commissions Paid2
Enhanced Income Fund	$	149,374	$	149,374	$	3,468,448,900
Ultra-Short Duration Government Fund		293,945		293,945		5,985,661,888
Short Duration Government Fund		235,778		235,778		4,387,075,241
Short Duration Tax-Free Fund		—		—		—
Government Income Fund		81,847		81,847		1,837,682,460
Municipal Income Fund		—		—		—
California Municipal Fund3		—		—		—
New York Municipal Fund3		—		—		—
U.S. Mortgages Fund4		8,766		8,766		176,685,776
Core Fixed Income Fund		160,681		160,681		3,120,938,211
Investment Grade Credit Fund4		3,728		3,728		70,353,488
Global Income Fund		—		—		—
High Yield Municipal Fund		—		—		—
High Yield Fund		—		—		—
Emerging Markets Debt Fund5		—		—		—

1	The figures in the table report broker commissions from futures transactions.
2	Refers to Market Value of Futures Contracts.
3	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
4	U.S. Mortgages and Investment Grade Credit Fund commenced operations on November 3, 2003.
5	Emerging Markets Debt Fund commenced operations on August 29, 2003.

B-146

     For the fiscal year ended October 31, 2003, the Funds paid approximate brokerage commissions as follows:

	Total Brokerage		Total Brokerage		Total Amount of
	Commissions		Commissions Paid		Transactions on which
Fiscal Year Ended October 31, 2003	Paid1		to Goldman Sachs		Commissions Paid2
Enhanced Income Fund	$	262,380	$	262,380	$	4,190,298,822
Ultra-Short Duration Government Fund		532,924		532,924		7,778,245,292
Short Duration Government Fund		176,256		176,256		2,832,764,427
Short Duration Tax-Free Fund		—		—		—
Government Income Fund		89,030		89,030		1,085,308,757
Municipal Income Fund		—		—		—
California Municipal Fund3		—		—		—
New York Municipal Fund3		—		—		—
U.S. Mortgages Fund4		—		—		—
Core Fixed Income Fund		174,676		174,676		2,086,540,900
Investment Grade Credit Fund4		—		—		—
Global Income Fund		—		—		—
High Yield Municipal Fund		—		—		—
High Yield Fund		—		—		—
Emerging Markets Debt Fund5		—		—		—

1	The figures in the table report broker commissions from futures transactions.
2	Refers to Market Value of Futures Contracts.
3	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005.
4	U.S. Mortgages and Investment Grade Credit Fund commenced operations on November 3, 2003.
5	Emerging Markets Debt Fund commenced operations on August 29, 2003.

     During the fiscal year ended October 31, 2005, the Funds’ regular broker-dealers, as defined in Rule 10b-1 under the Act, were: Merrill Lynch, Pierce, Fenner & Smith, Inc., UBS Warburg LLC, State Street Brokerage Services, Morgan Stanley and Co., Inc., JP Morgan Chase & Co., Citigroup/Salomon, Credit Suisse First Boston, Lehman Brothers, Inc., Goldman, Sachs & Co., Liquidnetinc and Bank of America.

     As of October 31, 2005, Ultra-Short Duration Government, Short Duration Government Fund, Short Duration Tax-Free Fund, Municipal Income Fund, High Yield Fund, Global Income Fund, Emerging Markets Debt Fund, Investment Grade Credit Fund, U.S. Mortgages Fund, High Yield Municipal Fund, California Municipal Fund, New York Municipal Fund and U.S. Mortgages Fund held no securities of their regular broker-dealers. As of the same date, Enhanced Income Fund, Core Fixed Income Fund, Investment Grade Credit Fund and Global Income Fund held the following amounts of securities of their regular broker-dealers, as defined in rule 10b-1 under the Act, or their parents ($ in thousands):

Fund	Broker/Dealer	Amount (000s)
Enhanced Income Fund	C.S. First Boston Corp.	$	2,072
	Lehman Brothers, Inc.		2,132
	Morgan Stanley		4,780
Core Fixed Income Fund	Bank of America		513
	Citigroup		2,225
	Merrill Lynch		2,068
	Morgan Stanley		2,974

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Fund	Broker/Dealer	Amount (000s)
Investment Grade Credit Fund	C.S. First Boston Corp.		786
	JP Morgan Chase & Co.		1,417
	Lehman Brothers, Inc.		1,365
	Bank of America		1,864
	Morgan Stanley		2,727
	Citigroup		222
Global Income Fund	Bank of America		175
	Citigroup		1,253
	C.S. First Boston Corp.		1,384

SHARES OF THE TRUST

     Each Fund is a series of Goldman Sachs Trust, a Delaware statutory trust established by an Agreement and Declaration of Trust dated January 28, 1997. The Funds (except Enhanced Income Fund, High Yield Municipal Fund, U.S. Mortgages Fund, Investment Grade Credit Fund, Emerging Markets Debt Fund, California Municipal Fund and New York Municipal Fund) were previously series of Goldman Sachs 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. The Trustees also have authority to classify and reclassify any series of shares into one or more classes of shares. As of the date of this Additional Statement, the Trustees have authorized: (i) the issuance of five classes of shares of Short Duration Government Fund, Short Duration Tax-Free Fund, Government Income Fund, Municipal Income Fund, Core Fixed Income Fund, Global Income Fund, High Yield Municipal Fund and High Yield Fund: Institutional Shares, Service Shares, Class A Shares, Class B Shares and Class C Shares; (ii) the issuance of three classes of shares of Ultra-Short Duration Government Fund: Institutional Shares, Service Shares and Class A Shares; (iii) the issuance of three classes of shares of Enhanced Income Fund: Institutional, Administration and Class A Shares; (iv) the issuance of two classes of shares of Emerging Markets Debt Fund: Class A Shares and Institutional Shares; (v) the issuance of three classes of shares of U.S. Mortgages Fund and Investment Grade Credit Fund: Class A Shares, Institutional Shares and Separate Account Institutional Shares; and (vi) the issuance of three classes of shares of California Municipal and New York Municipal Fund: Institutional Shares, Class A Shares and Class C Shares. Additional series and classes may be added in the future. The Goldman Sachs Short Duration Government Fund and Goldman Sachs Short Duration Tax Free Fund no longer offer Class B Shares, except that current Class B shareholders may continue to reinvest dividends and capital gains into their accounts.

     Each Institutional Share, Service Share, Administration Share, Separate Account Institutional Share, Class A Share, Class B Share and Class C Share of a Fund represents a proportionate interest in the assets belonging to the applicable class of the Fund. All expenses of a Fund are borne at the same rate by each class of shares, except that fees under the Service and Shareholder Administration Plans are borne exclusively by Service Shares, fees under the Administration Plan are borne exclusively by Administration Shares, fees under Distribution and Service Plans are borne exclusively by Class A, Class B or Class C Shares, fees under Account Service Plans borne exclusively by Class A and Institutional Shares (U.S. Mortgages and Investment Grade Credit Funds only) and transfer agency fees are borne at different rates by Class A, Class B or Class C Shares than Institutional, Administration, Separate Account Institutional and Service Shares. The

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Trustees may determine in the future that it is appropriate to allocate other expenses differently among classes of shares and may do so to the extent consistent with the rules of the SEC and positions of the IRS. Each class of shares may have different minimum investment requirements and be entitled to different shareholder services. With limited exceptions, shares of a class may only be exchanged for shares of the same or an equivalent class of another series. See “Shareholder Guide” in the Prospectus and “Other Information Regarding Purchases, Redemptions, Exchanges and Dividends” below. In addition, the fees and expenses set forth below for each class may be subject to voluntary fee waivers or reimbursements, as discussed in the Funds’ Prospectuses.

     Except for the U.S. Mortgages and Investment Grade Credit Funds, Institutional Shares may be purchased at net asset value without a sales charge for accounts in the name of an investor or institution that is not compensated by a Fund for services provided to the institution’s customers. Institutional Shares of the U.S. Mortgages Fund and Investment Grade Credit Fund may be purchased at net asset value without a sales charge for accounts in the name of an institution that, directly or indirectly, provides certain account services to its customers including maintenance of account records and processing orders to purchase, redeem and exchange Institutional Shares. Institutional Shares of U.S. Mortgages Fund and Investment Grade Credit Fund bear the cost of account service fees at the annual rate of up to 0.05% of the average daily net assets of a Fund attributable to Institutional Shares.

     Administration Shares may be purchased at net asset value without a sales charge for accounts held in the name of an institution that provides certain account administration to its customers, including maintenance of account records and processing orders to purchase, redeem and exchange Administration Shares. Administration Shares bear the cost of account administration fees at the annual rate of up to 0.25% of the average daily net assets of such Administration Shares.

     Service Shares may be purchased at net asset value without a sales charge for accounts held in the name of an institution that, directly or indirectly, provides certain shareholder administration services and shareholder liaison services to its customers, including maintenance of account records and processing orders to purchase, redeem and exchange Service Shares. Service Shares bear the cost of service fees and shareholder administration fees at the annual rate of up to 0.25% and 0.25%, respectively, of the average daily net assets of the Fund attributed to Service Shares.

     Separate Account Institutional Shares may be purchased at net asset value without a sales charge for accounts in the name of an investor or institution that is not compensated by a Fund for services provided to the institution’s customers.

     Class A Shares are sold, with an initial sales charge, through brokers and dealers who are members of the NASD and certain other financial service firms that have sales agreements with Goldman Sachs. Class A Shares of the Funds bear the cost of distribution (Rule 12b-1) fees at the aggregate rate of up to 0.25% of the average daily net assets of such Class A Shares. With respect to Class A Shares, the Distributor at its discretion may use compensation for distribution services paid under the Distribution and Services Plan for personal and account maintenance services and expenses so long as such total compensation under the Plan does not exceed the maximum cap on “service fees” imposed by the NASD. Class A Shares of U.S. Mortgages Fund and Investment Grade Credit Fund also bear the cost of account service fees at the annual rate of up to 0.05% of the average daily net assets of a Fund attributable to Class A Shares.

     Class B and Class C Shares of the Funds are sold subject to a contingent deferred sales charge (“CDSC”) through brokers and dealers who are members of the NASD and certain other financial services firms that have sales arrangements with Goldman Sachs. Class B and Class C Shares bear the cost of distribution (Rule 12b-1) fees at the aggregate rate of up to 0.75% and 0.75%, respectively of the average

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daily net assets attributed to Class B and Class C Shares. Class B and Class C Shares also bear the cost of service fees at an annual rate of up to 0.25% of the average daily net assets attributed to such Shares.

     It is possible that an institution or its affiliate may offer different classes of shares (i.e., Institutional, Administration, Service, Separate Account Institutional, Class A, Class B and Class C Shares) to its customers and thus receive different compensation with respect to different classes of shares of each Fund. Dividends paid by each Fund, if any, with respect to each class of shares will be calculated in the same manner, at the same time on the same day and will be in the same amount, except for differences caused by the fact that the respective transfer agency and Plan fees relating to a particular class will be borne exclusively by that class. Similarly, the net asset value per share may differ depending upon the class of shares purchased.

     Certain aspects of the shares may be altered, after advance notice to shareholders, if it is deemed necessary in order to satisfy certain tax regulatory requirements.

     When issued, for the consideration described in the Funds’ Prospectuses shares are fully paid and non-assessable. The Trustees may, however, cause shareholders, or shareholders of a particular series or class, to pay certain custodian, transfer, servicing or similar agent charges by setting of the same against declared but unpaid dividends or by reducing share ownership (or by both means). In the event of liquidation of a Fund, shareholders of that Fund are entitled to share pro rata in the net assets of the applicable class of the relevant Fund available for distribution to such shareholders. All shares are freely transferable and have no preemptive, subscription or conversion rights. The Trustees may require Shareholders to redeem Shares for any reason under terms set by the Trustees.

     In the interest of economy and convenience, the Trust does not issue certificates representing the Funds’ shares. Instead, the Transfer Agent maintains a record of each shareholder’s ownership. Each shareholder receives confirmation of purchase and redemption orders from the Transfer Agent. Fund shares and any dividends and distributions paid by the Funds are reflected in account statements from the Transfer Agent.

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the Enhanced Income Fund: Institutional Shares; Illumina Inc., 9885 Towne Centre Drive, San Diego, CA 92121-1975 (15.31%); Institutional Shares, University of Notre Dame, c/o Goldman Sachs Asset Management, 32 Old Slip, New York, NY 10005-3500 (15.74%); Institutional Shares, NFS LLC FEBO, The Northern Trust Company, FBO Account, P.O. Box 92956, Chicago, IL 60675-2956 (12.08%); Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (6.37%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the Ultra-Short Duration Government Fund: Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad Street, New York, NY 10004-2434 (12.36%); Institutional Shares, Watertown Savings Bank, 60 Main St., Watertown, MA 02472-4422 (9.86%); Class A Shares, Charles Schwab & Co., Inc., Special Custody Acct for the Benefit of Customers, Attn: Mutual Funds, 101 Montgomery St., San Francisco, CA 94104-4122 (5.77%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the Short Duration Government Fund: Institutional Shares, State Street Bank & Trust Co. Cust, GS Trust-Balanced Strategy Short Duration Fund, P.O. Box 1713, Boston, MA 02105-1713 (12.29%); Institutional Shares, Goldman, Sachs & Co., c/o Mutual Funds Ops, 85 Broad St., New York, NY 10004-2434 (15.58%); Class A Shares, HUBCO, Regions Financial Corporation, Attn: Trust Operations, 2^nd Floor, 298 W. Valley Ave., Birmingham, AL 35209-4816 (5.65%).

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     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the Short Duration Tax-Free Fund: Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (6.59%); Institutional Shares, Charles Schwab & Co., Inc., Special Custody Account for the Benefit of Customers, Attn: Mutual Funds, 9601 E. Panorama Circle, Englewood, CO 80112-3441 (5.57%).

     As of January 31, 2006, the following entity owned of record or beneficially 5% or more of the outstanding shares of the Government Income Fund: Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (6.52%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the Municipal Income Fund: Class A Shares, Edward Jones & Co., Attn: Mutual Fund Shareholder Accounting, 201 Progress Pkwy., Maryland Hts., MO 63043-3009 (15.65%); Institutional Shares, A.G. Edwards Trust Company FSB, FBO Trust Clients, Attn: Operations, P.O. Box 66734, Saint Louis, MO 63166-6734 (5.82%); Institutional Shares, Compass Bank, Attn: Trust Oper 3^rd Level S, P.O. Box 10566, Birmingham, AL 35296-0566 (7.72%); Institutional Shares, Compass Bank, Attn: Trust Oper 3^rd Level S, P.O. Box 10566, Birmingham, AL 35296-0566 (5.57%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the California Municipal Fund: Class A Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (21.56%); Class A Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (6.76%); Class A Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (5.19%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the New York Municipal Fund: Institutional Shares, Goldman Sachs Seed Account, Attn: IMD Controllers, 701 Mount Lucas Rd., Princeton, NJ 08540-1911 (65.58%); Class A Shares, Goldman, Sachs & Co., c/o Mutual Funds Ops, 85 Broad St., New York, NY 10004-2434 (6.18%).

     As of January 31, 2006, the following entities owned of record or beneficially more than 5% or more of the outstanding shares of the Global Income Fund: Class A Shares, Charles Schwab & Co., Inc. Special Custody Acct., for Benefit of Customers, Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA 94104-4122 (12.71%); Institutional Shares: State Street Bank & Trust Co. Cust., FBO Goldman Sachs Balanced Strategy Omnibus A/C – Global Income Fund, P.O. Box 1713, Boston, MA 02105-1713 (5.31%); Institutional Shares, State Street Bank & Trust Co. Cust., FBO Goldman Sachs Growth & Income Strategy Omnibus A/C Global Income, P.O. Box 1713, Boston, MA 02105-1713 (29.58%); Institutional Shares, State Street Bank & Trust Co. Cust., FBO Goldman Sachs Growth Strategy Omnibus A/C – Global Income Fund, P.O. Box 1713, Boston, MA 02105-1713 (6.52%).

     As of January 31, 2006, the following entity owned of record or beneficially 5% or more of the outstanding shares of the High Yield Municipal Fund: Institutional Shares, Microsoft Capital Group LP, 1 Microsoft Way, Redmond, WA 98052-8300 (5.92%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of the High Yield Fund: Class A Shares, Edward Jones & Co., Attn: Mutual Fund Shareholder Accounting, 201 Progress Pkwy., Maryland Hts., MO 63043-3009 (9.98%); Class A Shares, Charles Schwab & Co., Special Custody Account for the Benefit of Customers, Attn: Mutual Funds, 101 Montgomery St., San Francisco, CA 94104-4122 (6.20%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of Emerging Markets Debt Fund: Class A Shares, IMS & Co., For the Exclusive Benefit

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of Various IMS Customers, P.O. Box 173877, Denver, CO 80217-3877 (7.51%); Institutional Class, State Street Bank & Trust Co. Cust., GS Trust – Growth & Income Strategy, P.O. Box 1713, Boston, MA 02105-1713 (23.27%); Institutional Class, State Street Bank & Trust Co. Cust., GS Trust – Growth Strategy, P.O. Box 1713, Boston, MA 02105-1713 (17.08%); Class A Shares, Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (5.51%); Class A Shares, Charles Schwab & Co., Inc., Special Custody Account for the Benefit of Customers, attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA 94104-4122 (5.28%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of U.S. Mortgages Fund: Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops., 85 Broad Street, New York, NY 10004-2434 (7.33%); Institutional Shares, SOMPO Japan Insurance Co. of America, Attn: Tammy Van Dunk, Two World Financial Center, 43^rd Fl., 225 Liberty St., New York, NY 10281-1008 (6.90%); Separate Account Institutional Shares: Bakery Workers Fund, c/o GSAM, Attn: Seth Healy, 32 Old Slip, Fl. 31, New York, NY 10005-3500 (21.55%); Separate Account Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops, 85 Broad St., New York, NY 10004-2434 (7.27%).

     As of January 31, 2006, the following entities owned of record or beneficially 5% or more of the outstanding shares of Investment Grade Credit Fund: Separate Account Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops., 85 Broad Street, New York, NY 10004-2434 (7.80%); Separate Account Institutional Shares, Goldman, Sachs & Co., c/o Mutual Fund Ops., 85 Broad St., New York, NY 10004-2434 (11.74%).

     The Act requires that where more than one series of shares exists, each series must be preferred over all other series in respect of assets specifically allocated to such series. 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 shares of each series affected by such matter. Rule 18f-2 further provides that a series shall be deemed to be affected by a matter unless the interests of each series in the matter are substantially identical or the matter does not affect any interest of such series. However, Rule 18f-2 exempts the selection of independent public accountants, the approval of principal distribution contracts and the election of trustees from the separate voting requirements of Rule 18f-2.

     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 the shareholders, either to one vote for each share or to one vote for each dollar of net asset value represented by such share on all matters presented to shareholders 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 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. 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, employees and agents of the Trust unless the recipient is adjudicated (i) to be liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office; or (ii) not to

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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 the shareholder’s 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, in their sole discretion, that such action is in the best interest of the Trust, such series, such class or their shareholders. The Trustees may consider such factors as they, in their sole discretion, deem appropriate in making such determination, including (i) the inability of the Trust or any series or class to maintain its assets at an appropriate size; (ii) changes in laws or regulations governing the Trust or series 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 of the Trust or series.

     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 with substantially the same investment objective, restrictions and policies.

     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 adversely affect the voting rights of shareholders; (ii) that is required by law to be approved by shareholders; (iii) that would amend the provisions of the Declaration of Trust regarding amendments; or (iv) that the Trustees determine to submit to shareholders.

     The Trustees may appoint separate Trustees with respect to one or more series or classes of the Trust’s shares (the “Series Trustees”). Series Trustees may, but are not required to, serve as Trustees of the Trust or any other series or class of the Trust. To the extent provided by the Trustees in the appointment of Series Trustees, the Series Trustees may have, to the exclusion of any other Trustees of the Trust, all the powers and authorities of Trustees under the Declaration of Trust with respect to such series or class, but may have no power or authority with respect to any other series or class.

Shareholder and Trustee Liability

     Under Delaware law, the shareholders of the Funds 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 statutory trust shareholder liability exists in other states. As a result, to the extent that a Delaware statutory trust or a shareholder is subject to the jurisdiction of courts of such other states, the courts may not apply Delaware law and may thereby subject the Delaware statutory trust shareholders to liability. To guard against this risk, the Declaration of Trust contains an express disclaimer of shareholder 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 series of the Trust. The Declaration of Trust provides for

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indemnification by the relevant series for all loss suffered by a shareholder 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 shareholder for any act or obligation of the series and satisfy any judgment thereon. In view of the above, the risk of personal liability of shareholders of a Delaware statutory trust is remote.

     In addition to the requirements under Delaware law, the Declaration of Trust provides that shareholders of a series may bring a derivative action on behalf of the series only if the following conditions are met: (i) shareholders eligible to bring such derivative action under Delaware law who hold at least 10% of the outstanding shares of the series, or 10% of the outstanding shares of the class to which such action relates, shall join in the request for the Trustees to commence such action; and (ii) the Trustees must be afforded a reasonable amount of time to consider such shareholder 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 shareholders making such request to reimburse the Fund 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.

NET ASSET VALUE

     In accordance with procedures adopted by the Trustees of the Trust, the net asset value per share of each class of each Fund is calculated by determining the value of the net assets attributed to each class of that Fund and dividing by the number of outstanding shares of that class. All securities are valued on each Business Day as of the close of regular trading on the New York Stock Exchange (normally, but not always, 4:00 p.m. New York time) or such earlier or later time as the New York Stock Exchange or NASDAQ market may officially close. The term “Business Day” means any day the New York Stock Exchange is open for trading, which is Monday through Friday except for holidays. The New York Stock Exchange is closed on the following holidays: New Year’s Day (observed), Martin Luther King, Jr. Day, Washington’s Birthday (observed), Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.

     The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York Time. The Trust reserves the right to reprocess purchase, redemption and exchange transactions that were initially processed at a net asset value other than the Fund’s official closing net asset value (as the same may be subsequently adjusted), and to recover amounts from (or distribute amounts to) shareholders based on the official closing net asset value. The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC. In addition, each Fund may compute its net asset value as of any time permitted pursuant to any exemption, order or statement of the SEC or its staff.

     For the purpose of calculating the net asset value of the Funds, investments are valued under valuation procedures established by the Trustees. Portfolio securities, for which accurate market quotations are readily available, other than money market instruments, are valued via electronic feeds to the custodian bank containing dealer-supplied bid quotations or bid quotations from a recognized pricing service. Securities for which a pricing service either does not supply a quotation or supplies a quotation that is believed by the Investment Adviser to be inaccurate, will be valued based on bid-side broker quotations. Securities for which the custodian bank is unable to obtain an external price as provided above or with respect to which the Investment Adviser believes an external price does not reflect accurate market values, will be

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valued by the Investment Adviser in good faith based on valuation models that take into account spread and daily yield changes on government securities (i.e., matrix pricing). Other securities are valued as follows: (i) overnight repurchase agreements will be valued at cost; (ii) term repurchase agreements (i.e., those whose maturity exceeds seven days) and swaps, caps, collars and floors will be valued at the average of the bid quotations obtained daily from at least one dealer; (iii) debt securities with a remaining maturity of 60 days or less are valued at amortized cost, which the Trustees have determined to approximate fair value; (iv) spot and forward foreign currency exchange contracts will be valued using a pricing service such as Reuters (if quotations are unavailable from a pricing service or, if the quotations by the Investment Adviser are believed to be inaccurate, the contracts will be valued by calculating the mean between the last bid and asked quotations supplied by at least one independent dealers in such contracts); (v) exchange-traded options and futures contracts will be valued by the custodian bank at the last sale price on the exchange where such contracts and options are principally traded if accurate quotations are readily available; and (vi) over-the-counter options will be valued by a broker identified by the portfolio manager/trader.

     Other securities, including those for which a pricing service supplies no exchange quotation or a quotation that is believed by the portfolio manager/trader to be inaccurate, will be valued at fair value as stated in the valuation procedures which were approved by the Board of Trustees.

     The value of all assets and liabilities expressed in foreign currencies will be converted into U.S. dollar values at current exchange rates of such currencies against U.S. dollars last quoted by any major bank. If such quotations are not available, the rate of exchange will be determined in good faith by or under procedures established by the Board of Trustees.

     Generally, trading in securities on European, Asian and Far Eastern securities exchanges and on over-the-counter markets in these regions is substantially completed at various times prior to the close of business on each Business Day in New York (i.e., a day on which the New York Stock Exchange is open for trading). In addition, European, Asian or Far Eastern securities trading generally or in a particular country or countries may not take place on all Business Days in New York. Furthermore, trading takes place in various foreign markets on days which are not Business Days in New York and days on which the Funds’ net asset values are not calculated. Such calculation does not take place contemporaneously with the determination of the prices of the majority of the portfolio securities used in such calculation. The Funds’ investments are valued based on market quotations which may be furnished by a pricing service or provided by securities dealers. If accurate market quotations are not readily available, or if the Investment Adviser believes that such quotations or prices do not accurately reflect fair value, the fair value of the Funds’ investments may be determined based on yield equivalents, a pricing matrix or other sources, under valuation procedures established by the Trustees.

     The proceeds received by each Fund and each other series of the Trust from the issue or sale of its shares, and all net investment income, realized and unrealized gain and proceeds thereof, subject only to the rights of creditors, will be specifically allocated to such Fund or particular series and constitute the underlying assets of that Fund or series. The underlying assets of each Fund will be segregated on the books of account, and will be charged with the liabilities in respect of such Fund and with a share of the general liabilities of the Trust. Expenses of the Trust with respect to the Funds and the other series of the Trust are generally allocated in proportion to the net asset values of the respective Funds or series except where allocations of direct expenses can otherwise be fairly made.

     The Trust has adopted a policy to handle certain NAV related errors occurring in the operation of the Funds, and under certain circumstances neither the Funds nor shareholders who purchase or sell shares during periods that errors accrue or occur may be recompensed in connection with the resolution of the error.

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TAXATION

     The following is a summary of the principal U.S. federal income, and certain state and local, tax considerations regarding the purchase, ownership and disposition of shares in each Fund of the Trust. This summary does not address special tax rules applicable to certain classes of investors, such as tax exempt entities, insurance companies and financial institutions. Each prospective shareholder is urged to consult his or her own tax adviser with respect to the specific federal, state, local and foreign tax consequences of investing in each Fund. The summary is based on the laws in effect on the date of this Additional Statement, which are subject to change.

General

     Each Fund is a separate taxable entity. Each Fund has elected to be treated and intends to qualify for each taxable year as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code. To qualify as such, a Fund must satisfy certain requirements relating to the sources of its income, diversification of its assets and distribution of its income to shareholders. As a regulated investment company, a Fund will not be subject to federal income or excise tax on any net investment income and net realized capital gains that are distributed to its shareholders in accordance with certain timing requirements of the Code.

     There are certain tax requirements that each Fund must follow in order to avoid federal taxation. In their efforts to adhere to these requirements, the Funds may have to limit their investment activities in some types of instruments. Qualification as a regulated investment company under the Code requires, among other things, that (i) a Fund derive at least 90% of its gross income (including tax exempt interest) for its taxable year from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stocks or securities, or foreign currencies or other income (including but not limited to gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies (the “90% gross income test”); and (ii) a Fund diversify its holdings so that, at the close of each quarter of its taxable year, (a) at least 50% of the market value of its total (gross) assets is comprised of cash, cash items, U.S. Government Securities, securities of other regulated investment companies and other securities limited in respect of any one issuer to an amount not greater in value than 5% of the value of the Fund’s total assets and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total (gross) assets is invested in the securities of any one issuer (other than U.S. Government Securities and securities of other regulated investment companies) or two or more issuers controlled by a Fund and engaged in the same, similar or related trades or businesses.

     Future Treasury regulations could provide that qualifying income under the 90% gross income test will not include gains from foreign currency transactions that are not directly related to the principal business of the Core Fixed Income Fund, Global Income Fund, High Yield Fund and Emerging Markets Debt Fund in investing in stock or securities or options and futures with respect to stock or securities. Using foreign currency positions or entering into foreign currency options, futures and forward contracts for purposes other than hedging currency risk with respect to securities in Core Fixed Income Fund, Global Income Fund, High Yield Fund and Emerging Markets Debt Fund or anticipated to be acquired may not qualify as “directly related” under these tests.

     As a regulated investment company, a Fund will not be subject to U.S. federal income tax on the portion of its income and capital gains that it distributes to its shareholders in any taxable year for which it distributes, in compliance with the Code’s timing and other requirements, at least 90% of its “investment company taxable income” (which includes dividends, taxable interest, taxable original issue discount income, market discount income, income from securities lending, net short-term capital gain in excess of net long-term capital loss, certain net realized foreign exchange gains, and any other taxable income other than “net

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capital gain” as defined below and is reduced by deductible expenses) and at least 90% of the excess of its gross tax exempt interest income, if any, over certain disallowed deductions (“net tax exempt interest”). A Fund may retain for investment its “net capital gain” (which consists of the excess of its net long-term capital gain over its net short-term capital loss). However, if a Fund retains any investment company taxable income or net capital gain, it will be subject to tax at regular corporate rates on the amount retained. If a Fund retains any net capital gain, that Fund may designate the retained amount as undistributed net capital gain in a notice to its shareholders who, if subject to U.S. federal income tax on long-term capital gains, (i) will be required to include in income for federal income tax purposes, as long-term capital gain, their shares of such undistributed amount; and (ii) will be entitled to credit their proportionate shares of the tax paid by that Fund against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by the amount of undistributed net capital gain included in the shareholder’s gross income and decreased by the federal income tax paid by the Fund on that amount of net capital gain. Each Fund intends to distribute for each taxable year to its shareholders all or substantially all of its investment company taxable income (if any), net capital gain and any net tax exempt interest. Exchange control or other foreign laws, regulations or practices may restrict repatriation of investment income, capital or the proceeds of securities sales by foreign investors such as the Enhanced Income, Core Fixed Income Fund, Global Income Fund, High Yield Fund, and Emerging Markets Debt Fund and may therefore make it more difficult for these Funds to satisfy the distribution requirements described above, as well as the excise tax distribution requirements described below. However, these Funds generally expect to be able to obtain sufficient cash to satisfy such requirements from new investors, the sale of securities or other sources. If for any taxable year a Fund does not qualify as a regulated investment company, it will be taxed on all of its investment company taxable income and net capital gain at corporate rates, its net tax exempt interest (if any) may be subject to the alternative minimum tax, and its distributions to shareholders will be taxable as ordinary dividends to the extent of its current and accumulated earnings and profits.

     For federal income tax purposes, each Fund is permitted to carry forward a net capital loss in any year to offset its own capital gains, if any, during the eight years following the year of the loss. On October 31, 2005 the Funds had the following amounts of capital loss carryforwards:

			Years of
	Amount		Expiration
Enhanced Income Fund	$	7,623,029		2009
		65,331,932		2010
		7,471,508		2012
Ultra-Short Duration Government Fund		304,645		2006
		1,739,320		2007
		2,563,050		2008
		55,038,717		2010
		55,920,321		2011
		24,528,394		2012
		7,818,636		2013
Short Duration Government Fund		3,752,449		2007
		2,289,664		2008
		2,403,563		2011
		9,994,195		2012
		10,870,073		2013

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			Years of
	Amount		Expiration
Short Duration Tax-Free Fund		183,057		2007
		1,858,014		2008
		2,563,121		2012
		3,111,684		2013
Government Income Fund		—		—
Municipal Income Fund		736,796		2007
		3,726,522		2008
		872,080		2011
		873,613		2012
California Municipal Fund(1)		—		—
New York Municipal Fund(1)		—		—
U.S. Mortgages Fund		936,116		2013
Core Fixed Income Fund		—		—
Investment Grade Credit Fund		419,692		2013
Global Income Fund		26,255,374		2010
		28,737,453		2011
		1,611,665		2012
High Yield Municipal Fund		3,914,571		2011
		23,410,699		2012
High Yield Fund		3,216,115		2011
Emerging Markets Debt Fund		—		—

⁽¹⁾ California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005.

     These amounts are available to be carried forward to offset future capital gains to the extent permitted by the Code and applicable tax regulations.

     In order to avoid a 4% federal excise tax, each Fund must distribute or be deemed to have distributed by December 31 of each calendar year at least 98% of its taxable ordinary income for such year, at least 98% of the excess of its capital gains over its capital losses (generally computed on the basis of the one-year period ending on October 31 of such year) and 100% of any taxable ordinary income and the excess of capital gains over capital losses for the prior year that were not distributed during such year and on which the Fund did not pay federal income tax. The Funds anticipate that they will generally make timely distributions of income

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and capital gains in compliance with these requirements so that they will generally not be required to pay the excise tax.

     For federal income tax purposes, dividends declared by a Fund in October, November or December as of a record date in such a month that are actually paid in January of the following year will be treated as if they were received by shareholders on December 31 of the year declared.

     The Tax Exempt Funds may purchase Municipal Securities together with the right to resell the securities to the seller at an agreed-upon price or yield within a specified period prior to the maturity date of the securities. Such a right to resell is commonly known as a “put” and is also referred to as a “standby commitment.” The Tax Exempt Funds may pay for a standby commitment either separately, in cash, or in the form of a higher price for the securities that are acquired subject to the standby commitment, thus increasing the cost of securities and reducing the yield otherwise available. Additionally, the Tax Exempt Funds may purchase beneficial interests in Municipal Securities held by trusts, custodial arrangements or partnerships and/or combined with third-party puts and other types of features such as interest rate swaps; those investments may require the Fund to pay “tender fees” or other fees for the various features provided.

     The IRS has issued a revenue ruling to the effect that, under specified circumstances, a registered investment company will be the owner of tax exempt municipal obligations acquired subject to a put option. The IRS has also issued private letter rulings to certain taxpayers (which do not serve as precedent for other taxpayers) to the effect that tax exempt interest received by a regulated investment company with respect to such obligations will be tax exempt in the hands of the company and may be distributed to its shareholders as exempt-interest dividends. The IRS has subsequently announced that it will not ordinarily issue advance ruling letters as to the identity of the true owner of property in cases involving the sale of securities or participation interests therein if the purchaser has the right to cause the security, or the participation interest therein, to be purchased by either the seller or a third party. Each of the Tax Exempt Funds intends to take the position that it is the owner of any municipal obligations acquired subject to a standby commitment or other third party put and that tax exempt interest earned with respect to such municipal obligations will be tax exempt in its hands. There is no assurance that the IRS will agree with such position in any particular case. Additionally, the federal income tax treatment of certain other aspects of these investments, including the treatment of tender fees paid by these Funds, in relation to various regulated investment company tax provisions is unclear.

     Gains and losses on the sale, lapse, or other termination of options and futures contracts, options thereon and certain forward contracts (except certain foreign currency options, forward contracts and futures contracts) will generally be treated as capital gains and losses. Certain of the futures contracts, forward contracts and options held by a Fund will be required to be “marked-to-market” for federal income tax purposes, that is, treated as having been sold at their fair market value on the last day of the Fund’s taxable year. These provisions may require a Fund to recognize income or gains without a concurrent receipt of cash. Any gain or loss recognized on actual or deemed sales of these futures contracts, forward contracts or options will (except for certain foreign currency options, forward contracts, and futures contracts) be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. As a result of certain hedging transactions entered into by a Fund, that Fund may be required to defer the recognition of losses on futures or forward contracts and options or underlying securities or foreign currencies to the extent of any unrecognized gains on related positions held by the Fund and the characterization of gains or losses as long-term or short-term may be changed. The tax provisions described above applicable to options, futures and forward contracts may affect the amount, timing, and character of a Fund’s distributions to shareholders. Certain tax elections may be available to the Funds to mitigate some of the unfavorable consequences described in this paragraph.

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     Section 988 of the Code contains special tax rules applicable to certain foreign currency transactions and instruments that may affect the amount, timing and character of income, gain or loss recognized by Core Fixed Income Fund, Investment Grade Credit Fund, Global Income Fund, High Yield Fund, and Emerging Markets Debt Fund. Under these rules, foreign exchange gain or loss realized by these Funds with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. If a net foreign exchange loss treated as ordinary loss under Section 988 of the Code were to exceed a Fund’s investment company taxable income (computed without regard to such loss) for a taxable year, the resulting loss would not be deductible by the Fund or its shareholders in future years. Net loss, if any, from certain foreign currency transactions or instruments could exceed net investment income otherwise calculated for accounting purposes with the result being either no dividends being paid or a portion of Core Fixed Income Fund’s, Investment Grade Credit Fund’s, Global Income Fund’s, High Yield Fund’s or Emerging Markets Debt Fund’s dividends being treated as a return of capital for tax purposes, nontaxable to the extent of a shareholder’s tax basis in his or her shares and, once such basis is exhausted, generally giving rise to capital gains.

     Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield, and Emerging Markets Debt Funds may be subject to foreign taxes on income (possibly including, in some cases, capital gains) from foreign securities. Tax conventions between certain countries and the United States may reduce or eliminate such taxes in some cases. If more than 50% of Investment Grade Credit Fund’s, Global Income Fund’s or Emerging Markets Debt Fund’s total assets at the close of any taxable year consist of stock or securities of foreign corporations and it meets the distribution requirements described above, such Fund will generally qualify to file an election with the IRS pursuant to which shareholders of the Fund would be required to (i) include in ordinary gross income (in addition to taxable dividends actually received) their pro rata shares of foreign income taxes paid by the Fund that are treated as income taxes under U.S. tax regulations (which excludes, for example, stamp taxes, securities transaction taxes, and similar taxes) even though not actually received by such shareholders; and (ii) treat such respective pro rata portions as foreign income taxes paid by them. These Funds may or may not make this election for any particular taxable year. Enhanced Income, Core Fixed Income and High Yield Funds will not satisfy the 50% requirement described above and, therefore, will not make this election. Enhanced Income, Core Fixed Income and High Yield Funds and, if they do not make the election, Global Income, Emerging Markets Debt and Investment Grade Credit Fund will, however, be entitled to deduct such taxes in computing the amounts they are required to distribute.

     If Global Income Fund, Emerging Markets Debt Fund or Investment Grade Credit Fund make this election, their shareholders may then deduct such pro rata portions of qualified foreign taxes in computing their taxable incomes, or, alternatively, use them as foreign tax credits, subject to applicable limitations, against their U.S. federal income taxes. Shareholders who do not itemize deductions for federal income tax purposes will not, however, be able to deduct their pro rata portion of qualified foreign taxes paid by the Fund, although such shareholders will be required to include their shares of such taxes in gross income if these Funds makes the election referred to above.

     If a shareholder chooses to take a credit for the foreign taxes deemed paid by such shareholder as a result of any such election by Global Income, Emerging Markets Debt or Investment Grade Credit Fund, the amount of the credit that may be claimed in any year may not exceed the same proportion of the U.S. tax against which such credit is taken which the shareholder’s taxable income from foreign sources (but not in excess of the shareholder’s entire taxable income) bears to his or her entire taxable income. For this purpose, distributions from long-term and short-term capital gains or foreign currency gains by these will generally not be treated as income from foreign sources. This foreign tax credit limitation may also be applied separately to certain specific categories of foreign-source income and the related foreign taxes. As a result of these

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rules, which have different effects depending upon each shareholder’s particular tax situation, certain shareholders of Global Income, Emerging Markets or Investment Grade Credit Fund may not be able to claim a credit for the full amount of their proportionate shares of the foreign taxes paid by the Fund.

     Shareholders who are not liable for U.S. federal income taxes, including tax exempt shareholders, will ordinarily not benefit from this election. Each year, if any, that Investment Grade Credit, Global Income or Emerging Markets Debt Fund files the election described above, its shareholders will be notified of the amount of (i) each shareholder’s pro rata share of qualified foreign income taxes paid by the Fund; and (ii) the portion of Fund dividends which represents income from each foreign country.

     If Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield or Emerging Markets Debt Funds acquire stock (including, under proposed regulations, an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations (“passive foreign investment companies”) that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, rents, royalties or capital gain) or hold at least 50% of their assets in investments producing such passive income, the Fund could be subject to federal income tax and additional interest charges on “excess distributions” received from such companies or gain from the sale of such stock in such companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction for such a tax. Certain elections may, if available, ameliorate these adverse tax consequences, but any such election would require the Fund to recognize taxable income or gain without the concurrent receipt of cash. The Enhanced Income, Core Fixed Income, Investment Grade Credit, Global Income, High Yield and Emerging Markets Debt Funds may limit and/or manage their holdings in passive foreign investment companies to minimize their tax liability or maximize their return from these investments.

     A Fund’s investment in zero coupon securities, deferred interest securities, capital appreciation bonds or other securities bearing original issue discount or, if a Fund elects to include market discount in income currently, market discount, as well as any “mark-to-market” gain from certain options, futures or forward contracts, as described above, will generally cause it to realize income or gain prior to the receipt of cash payments with respect to these securities or contracts. In order to obtain cash to enable it to distribute this income or gain, maintain its qualification as a regulated investment company and avoid federal income or excise taxes, a Fund may be required to liquidate portfolio securities that it might otherwise have continued to hold.

     Investment in lower-rated securities may present special tax issues for a Fund to the extent actual or anticipated defaults may be more likely with respect to such securities. Tax rules are not entirely clear about issues such as when a Fund may cease to accrue interest, original issue discount, or market discount; when and to what extent deductions may be taken for bad debts or worthless securities; how payment received on obligations in default should be allocated between principal and income; and whether exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by a Fund, if it invests in such securities, in order to seek to eliminate or minimize any adverse tax consequences.

     The federal income tax rules applicable to mortgage dollar rolls and interest rate, currency and total return swaps, options on swaps, floors, caps and collars are unclear in certain respects, and a Fund may also be required to account for these instruments under tax rules in a manner that, under certain circumstances, may limit its transactions in these instruments.

Taxable U.S. Shareholders – Distributions

     Tax Exempt Funds. Each Tax Exempt Fund expects to qualify to pay “exempt-interest dividends,” as defined in the Code. To qualify to pay exempt-interest dividends, the applicable Fund must, at the close of

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each quarter of its taxable year, have at least 50% of the value of its total assets invested in Municipal Securities whose interest is excluded from gross income under Section 103(a) of the Code. In purchasing Municipal Securities, each Tax Exempt Fund intends to rely on opinions of bond counsel or counsel to the issuers for each issue as to the excludability of interest on such obligations from gross income for federal income tax purposes. A Tax Exempt Fund will not undertake independent investigations concerning the tax exempt status of such obligations, nor does it guarantee or represent that bond counsels’ opinions are correct. Bond counsels’ opinions will generally be based in part upon covenants by the issuers and related parties regarding continuing compliance with federal tax requirements. Tax laws not only limit the purposes for which tax exempt bonds may be issued and the supply of such bonds, but also contain numerous and complex requirements that must be satisfied on a continuing basis in order for bonds to be and remain tax exempt. If the issuer of a bond or a user of a bond-financed facility fails to comply with such requirements at any time, interest on the bond could become taxable, retroactive to the date the obligation was issued. In that event, a portion of a Tax Exempt Fund’s distributions attributable to interest the Fund received on such bond for the current year and for prior years could be characterized or recharacterized as taxable income. The availability of tax exempt obligations and the value of a Tax Exempt Fund’s portfolio may be affected by restrictive federal income tax legislation enacted in recent years or by similar, future legislation. If a Tax Exempt Fund satisfies the applicable requirements, dividends paid by the Fund which are attributable to tax exempt interest on Municipal Securities and designated by the Fund as exempt-interest dividends in a written notice mailed to its shareholders within 60 days after the close of its taxable year may be treated by shareholders as items of interest excludable from their gross income under Section 103(a) of the Code. Exempt-interest dividends a Tax Exempt Fund receives from other regulated investment companies, including exempt-interest dividends on auction rate preferred securities of such companies held by a Fund, are treated as interest on Municipal Securities and may be distributed by a Tax Exempt Fund as exempt-interest dividends. The recipient of tax exempt income is required to report such income on his or her federal income tax return. The Code provides that interest on indebtedness incurred or continued to purchase or carry shares of a Tax Exempt Fund is not deductible to the extent attributable to exempt-interest dividends.

     Although all or a substantial portion of the dividends paid by a Tax Exempt Fund may be excluded by shareholders of such Fund from their gross income for federal income tax purposes, each Tax Exempt Fund may purchase private activity bonds, the interest from which (including a Fund’s distributions attributable to such interest) may be a preference item for purposes of the federal alternative minimum tax (both individual and corporate). All exempt-interest dividends from a Tax Exempt Fund, whether or not attributable to private activity bond interest, may increase a corporate shareholder’s liability, if any, for corporate alternative minimum tax, and will be taken into account in determining the extent to which a shareholder’s Social Security or certain railroad retirement benefits are taxable.

     The Tax Exempt Funds are not intended to constitute a balanced investment program and are not designed for investors seeking capital appreciation or maximum tax exempt income irrespective of fluctuations in principal. Shares of the Tax Exempt Funds would not be suitable for tax exempt institutions and may not be suitable for retirement plans qualified under Section 401 of the Code, H.R. 10 plans and individual retirement accounts since such plans and accounts are generally tax exempt and, therefore, would not gain any additional benefit from the Funds’ dividends being tax exempt. In addition, the Tax Exempt Funds may not be an appropriate investment for persons or entities that are “substantial users” of facilities financed by private activity bonds or “related persons” thereof. “Substantial user” is defined under U.S. Treasury Regulations to include a non-exempt person which regularly uses a part of such facilities in its trade or business and whose gross revenues derived with respect to the facilities financed by the issuance of bonds are more than 5% of the total revenues derived by all users of such facilities, which occupies more than 5% of the usable area of such facilities or for which such facilities or a part thereof were specifically constructed, reconstructed or acquired. “Related persons” include certain related natural persons, affiliated corporations, partnerships and its partners and an S corporation and its shareholders. A shareholder is advised to consult his or her tax adviser with respect to whether exempt-interest dividends retain the exclusion under Section

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103(a) if such shareholder would be treated as a “substantial user” under Section 147(a)(1) with respect to some or all of the tax exempt obligations held by a Tax Exempt Fund.

     All Funds. Distributions from investment company taxable income, whether reinvested in additional shares or paid in cash, as defined above, are generally taxable to shareholders who are subject to tax as ordinary income whether paid in cash or reinvested in additional shares. However, distributions to noncorporate shareholders attributable to dividends received by the Funds from U.S. and certain foreign corporations will generally be taxed at the long-term capital gain rate (described below), as long as certain other requirements are met. For these lower rates to apply, the noncorporate shareholders must have owned their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund’s ex-dividend date. Taxable distributions include distributions from any Fund, including the Tax Exempt Funds, that are attributable to (i) taxable income, including but not limited to dividends, taxable bond interest, recognized market discount income, original issue discount income accrued with respect to taxable bonds, income from repurchase agreements, income from securities lending, income from dollar rolls, income from interest rate, currency, total return swaps, options on swaps, caps, floors and collars, and a portion of the discount from certain stripped tax exempt obligations or their coupons; or (ii) capital gains from the sale of securities or other investments (including from the disposition of rights to when-issued securities prior to issuance) or from options, futures or certain forward contracts. Any portion of such taxable distributions that is attributable to a Fund’s net capital gain, as defined above, may be designated by the Fund as a “capital gain dividend,” taxable to shareholders as long-term capital gain whether received in cash or additional shares and regardless of the length of time their shares of a Fund have been held.

     It is expected that distributions made by the Funds will ordinarily not qualify for the dividends-received deduction for corporations because qualifying distributions may be made only from a Fund’s dividend income that it receives from stock in U.S. domestic corporations. The Funds do not intend to purchase stock of domestic corporations other than in limited instances, distributions from which may in rare cases qualify as dividends for this purpose. The dividends-received deduction, if available, is reduced to the extent the shares with respect to which the dividends are received are treated as debt-financed under the federal income tax law and is eliminated if the shares are deemed to have been held for less than a minimum period, generally 46 days. Receipt of certain distributions qualifying for the deduction may result in reduction of the tax basis of the corporate shareholder’s shares and may give rise to or increase its liability for federal corporate alternative minimum tax.

     Distributions in excess of a Fund’s current and accumulated earnings and profits, as computed for federal income tax purposes, will first reduce a shareholder’s basis in his or her shares and, after the shareholder’s basis is reduced to zero, will generally constitute capital gains to a shareholder who holds his or her shares as capital assets.

     Shareholders receiving a distribution in the form of newly issued shares will be treated for U.S. federal income tax purposes as receiving a distribution in an amount equal to the amount of cash that they would have received had they elected to receive cash and will have a cost basis in the shares received equal to such amount.

     After the close of each calendar year, each Fund will inform shareholders of the federal income tax status of its dividends and distributions for such year, including the portion of such dividends, if any, that qualifies as tax exempt or as capital gain, the portion, if any, that should be treated as a tax preference item for purposes of the federal alternative minimum tax and the foreign tax credits, if any, associated with such dividends. Shareholders who have not held shares of a Tax Exempt Fund for such Fund’s full taxable year may have designated as tax exempt or as a tax preference item a percentage of distributions which is not equal to the actual amount of tax exempt income or tax preference item income earned by the Fund during the period of their investment in the Fund.

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     All distributions, whether received in shares or in cash, as well as redemptions and exchanges, must be reported by each shareholder who is required to file a U.S. federal income tax return.

     Different tax treatment, including penalties on certain excess contributions and deferrals, certain pre-retirement and post-retirement distributions, and certain prohibited transactions is accorded to accounts maintained as qualified retirement plans. Shareholders should consult their tax advisers for more information.

Taxable U.S. Shareholders — Sale of Shares

     When a shareholder’s shares are sold, redeemed or otherwise disposed of in a transaction that is treated as a sale for tax purposes, the shareholder will generally recognize gain or loss equal to the difference between the shareholder’s adjusted tax basis in the shares and the cash, or fair market value of any property, received. (To aid in computing its tax basis, a shareholder should generally retain its account statements for the period that it held shares.) If the shareholder holds the shares as a capital asset at the time of sale, the character of the gain or loss should be capital, and treated as long-term if the shareholder’s holding period is more than one year, and short-term otherwise, subject to the rules described below. Shareholders should consult their own tax advisers with reference to their particular circumstances to determine whether a redemption (including an exchange) or other disposition of Fund shares is properly treated as a sale for tax purposes, as is assumed in this discussion. All or a portion of a sales charge paid in purchasing Class A shares of a Fund cannot be taken into account for purposes of determining gain or loss on the redemption or exchange of such shares within 90 days after their purchase to the extent shares of that Fund or another fund are subsequently acquired without payment of a sales charge pursuant to the reinvestment or exchange privilege. Any disregarded portion of such charge will result in an increase in the shareholder’s tax basis in the shares subsequently acquired. If a shareholder received a capital gain dividend with respect to shares and such shares have a tax holding period of six months or less at the time of the sale or redemption, then any loss the shareholder realizes on the sale or redemption will be treated as a long-term capital loss to the extent of such capital gain dividend. Also, any losses realized by shareholders who dispose of shares of the Tax Exempt Funds with a tax holding period of six months or less are disallowed to the extent of any exempt-interest dividends received with respect to such shares. Additionally, any loss realized on a sale or redemption of shares of a Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of the same Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of the Fund. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired. The long-term capital gain rate applicable to individuals, estates, and trusts is generally 15%.

Backup Withholding

     Each Fund will be required to report to the IRS all taxable distributions, as well as gross proceeds from the redemption or exchange of Fund shares, except in the case of certain exempt recipients, i.e., corporations and certain other investors distributions to which are exempt from the information reporting provisions of the Code. Under the backup withholding provisions of Code Section 3406 and applicable Treasury regulations, all such reportable distributions and proceeds may be subject to backup withholding of federal income tax at the specified rate of 28% in the case of non-exempt shareholders who fail to furnish the Funds with their correct taxpayer identification number (“TIN”) and with certain required certifications or if the IRS or a broker notifies the Funds that the number furnished by the shareholder is incorrect or that the shareholder is subject to backup withholding as a result of failure to report interest or dividend income. However, any taxable distributions from a Tax Exempt Fund will not be subject to backup withholding if the applicable Fund reasonably estimates that at least 95% of its distributions will be exempt-interest dividends. A Fund may refuse to accept an application that does not contain any required taxpayer identification number or certification that the number provided is correct. If the backup withholding provisions are applicable, any

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such distributions and proceeds, whether taken in cash or reinvested in shares, will be reduced by the amounts required to be withheld. Any amounts withheld may be credited against a shareholder’s U.S. federal income tax liability. If a shareholder does not have a TIN, it should apply for one immediately by contacting the local office of the Social Security Administration or the Internal Revenue Service (IRS). Backup withholding could apply to payments relating to a shareholder’s account while it is waiting receipt of a TIN. Special rules apply for certain entities. For example, for an account established under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor should be furnished. In addition, non-U.S. shareholders will be required to provide the Fund with the proper IRS Form W-8 or appropriate substitute (as discussed below) in order to avail themselves of this withholding tax exemption. Investors should consult their tax advisers about the applicability of the backup withholding provisions.

Sunset of Tax Provisions

     Some of the tax provisions described above are subject to sunset provisions. Specifically, a sunset provision provides that the 15% long-term capital gain rate and the taxation of dividends at the long-term capital gain rate will revert back to a prior version of these provisions in the Code for taxable years beginning after December 31, 2008.

Non-U.S. Shareholders

     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. Distributions attributable to a Fund’s taxable year beginning before January 1, 2005 or after December 31, 2007 from investment company taxable income to a shareholder who is not a U.S. person will be subject to U.S. withholding tax at the rate of 30% (or a lower rate provided by an applicable tax treaty) unless the distributions are effectively connected with a U.S. trade or business of the shareholder, in which case the distributions will be subject to tax on a net income basis at the graduated rates applicable to U.S. individuals or domestic corporations. Under recent changes to the Code, for distributions attributable to a Fund’s taxable year beginning after December 31, 2004 and before January 1, 2008, non-U.S. shareholders generally will not be subject to withholding tax on distributions attributable to “portfolio interest” or short-term capital gains unless (1) the distributions are effectively connected with a U.S. trade or business of the shareholder, or (2) with respect to short-term capital gains, the shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met.

     Distributions of net capital gain, including amounts retained by a Fund which are designated as undistributed capital gains, to a shareholder who is not a U.S. person will not be subject to U.S. federal income or withholding tax unless the distributions are effectively connected with the shareholder’s trade or business in the United States or, in the case of a shareholder who is a nonresident alien individual, the shareholder is present in the United States for 183 days or more during the taxable year and certain other conditions are met. Non-U.S. shareholders may also be subject to U.S. withholding tax on deemed income resulting from any election by Investment Grade Credit Fund, Global Income Fund or Emerging Markets Debt Fund to treat qualified foreign taxes it pays as passed through to shareholders (as described above), but they may not be able to claim a U.S. tax credit or deduction with respect to such taxes.

     Any capital gain realized by a shareholder who is not a U.S. person upon a sale or redemption of shares of a Fund will not be subject to U.S. federal income or withholding tax unless the gain is effectively connected with the shareholder’s trade or business in the United States, or in the case of a shareholder who is a nonresident alien individual, the shareholder is present in the United States for 183 days or more during the taxable year and certain other conditions are met.

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     Non-U.S. persons who fail to furnish a Fund with the proper IRS Form W-8 (i.e., W-8 BEN, W-8 ECI, W-8 IMY or W-8 EXP) or an acceptable substitute may be subject to backup withholding at the specified rate of 28% on dividends (including on capital gain dividends) and the proceeds of redemptions and exchanges. Also, non-U.S. shareholders may be subject to estate tax. Each shareholder who is not a U.S. person should consult his or her tax adviser regarding the U.S. and non-U.S. tax consequences of ownership of shares of and receipt of distributions from a Fund.

State and Local Taxes

     A Fund may be subject to state or local taxes in certain jurisdictions in which the Fund may be deemed to be doing business. A state income (and possibly local income and/or intangible property) tax exemption is generally available to the extent (if any) 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. In addition, in those states or localities which have income tax laws, the treatment of a Fund and its shareholders under such laws may differ from their treatment under federal income tax laws, and investment in a Fund may have tax consequences for shareholders different from those of a direct investment in such Fund’s portfolio securities. Shareholders should consult their own tax advisers concerning these matters. See also the discussion below of applicable provisions of California and New York law.

     California State Taxation. The following discussion of California tax law assumes that the California Municipal Fund 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 California Municipal Fund intends to qualify for each taxable year under California law to pay “exempt-interest dividends” which will be exempt from the California State personal income tax.

     Individual shareholders of the California Municipal Fund who reside in California will not be subject to California State personal income tax on distributions received from the Fund to the extent such distributions are exempt-interest dividends attributable to interest on obligations the interest on which is exempt from California State personal income tax provided that the Fund 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 California Municipal Fund which are attributable to sources other than those described in the preceding sentence will generally be taxable to such shareholders 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. Distributions other than exempt-interest dividends are includible 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 shareholders and will be treated as ordinary dividend income for such purposes. In addition, such distributions may be includible in income subject to the alternative minimum tax.

     Interest on indebtedness incurred or continued by shareholders to purchase or carry shares of the California Municipal Fund will not be deductible for California State personal income tax purposes.

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     New York City and State Taxation. Individual shareholders who are residents of New York State will be able to exclude for New York State personal income tax purposes the portion of any New York Municipal Fund dividend that is properly designated as an exempt-interest dividend and that 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 New York Municipal Fund 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 shareholders who are residents of New York City will also be able to exclude such income for New York City personal income tax purposes. Interest on indebtedness incurred or continued by a shareholder to purchase or carry shares of the New York Municipal Fund is not deductible for New York State or New York City personal income tax purposes. Distributions from the New York Municipal Fund that are attributable to sources other than those described in this paragraph will generally be taxable to such shareholders as ordinary income. In addition dividends paid by the New York Municipal Fund may be subject to New York franchise and corporate income taxes.

     Long-term capital gains, if any, that are distributed by the New York Municipal Fund and are properly designated as capital gain dividends will be treated as capital gains for New York State and New York City personal income tax purposes in the hands of New York State and New York City residents.

PERFORMANCE INFORMATION

     Each Fund may from time to time quote or otherwise use yield and total return information in advertisements, shareholder reports or sales literature. Thirty-day yield and average annual total return values are computed pursuant to formulas specified by the SEC. Each Fund may also from time to time quote distribution rates in reports to shareholders and in sales literature.

     Thirty-day yield is derived by dividing net investment income earned during the period by the product of the average daily number of shares outstanding and entitled to receive dividends during the period and the maximum public offering price per share on the last day of such period. Yield is then annualized by assuming that yield is realized each month for 12 months and is reinvested every six months. Net investment income per share is equal to the dividends and interest earned during the period, reduced by accrued expenses for the period. The calculation of net investment income for these purposes may differ from the net investment income determined for accounting purposes.

     Tax equivalent yield represents the yield an investor would have to earn to equal, after taxes, a Tax Exempt Fund’s tax-free yield. Tax equivalent yield is calculated by dividing a Tax Exempt Fund’s tax exempt yield by one minus a stated federal and/or state tax rate.

     Distribution rate for a specified period is calculated by annualizing distributions of net investment income for such period and dividing this amount by the net asset value per share or maximum public offering price on the last day of the period.

     Average annual total return (Before Taxes) for a specified period is derived by calculating the actual dollar amount of the investment return on a $1,000 investment made at the maximum public offering price applicable to the relevant class at the beginning of the period, and then calculating the annual compounded rate of return which would produce that amount, assuming a redemption at the end of the period. This calculation assumes a complete redemption of the investment. It also assumes that all dividends and distributions are reinvested at net asset value on the reinvestment dates during the period.

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     Average annual total return (After Taxes on Distributions) for a specified period is derived by calculating the actual dollar amount of the investment return on a $1,000 investment made at the maximum public offering price applicable to the relevant class at the beginning of the period, and then calculating the annual compounded rate of return (after federal income taxes on distributions but not redemptions) which would produce that amount, assuming a redemption at the end of the period. This calculation assumes a complete redemption of the investment but further assumes that the redemption has no federal income tax consequences. This calculation also assumes that all dividends and distributions, less the federal income taxes due on such distributions, are reinvested at net asset value on the reinvestment dates during the period. In calculating the impact of federal income taxes due on distributions, the federal income tax rates used correspond to the tax character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short-term capital gain rate for short-term capital gain distributions and long-term capital gain rate for long-term capital gain distributions). The highest individual marginal federal income tax rate in effect on the reinvestment date is applied to each component of the distributions on the reinvestment date. These tax rates may vary over the measurement period. The effect of applicable tax credits, such as the foreign tax credit, is also taken into account in accordance with federal tax law. The calculation disregards (i) the effect of phase-outs of certain exemptions, deductions and credits at various income levels, (ii) the impact of the federal alternative minimum tax, and (iii) the potential tax liabilities other than federal tax liabilities (e.g., state and local taxes).

     Average annual total return (After Taxes on Distributions and Redemptions) for a specified period is derived by calculating the actual dollar amount of the investment return on a $1,000 investment made at the maximum public offering price applicable to the relevant class at the beginning of the period, and then calculating the annual compounded rate of return (after federal income taxes on distributions and redemptions) which would produce that amount, assuming a redemption at the end of the period. This calculation assumes a complete redemption of the investment. This calculation also assumes that all dividends and distributions, less the federal income taxes due on such distributions, are reinvested at net asset value on the reinvestment dates during the period. In calculating the federal income taxes due on distributions, the federal income tax rates used correspond to the tax character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short-term capital gain rate for short-term capital gain distributions and long-term capital gain rate for long-term capital gain distributions). The highest individual marginal federal income tax rate in effect on the reinvestment date is applied to each component of the distributions on the reinvestment date. These tax rates may vary over the measurement period. The effect of applicable tax credits, such as the foreign tax credit, is taken into account in accordance with federal tax law. The calculation disregards the (i) effect of phase-outs of certain exemptions, deductions and credits at various income levels, (ii) the impact of the federal alternative minimum tax, and (iii) the potential tax liabilities other than federal tax liabilities (e.g., state and local taxes). In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. The highest federal individual capital gains tax rate in effect on the redemption date is used in such calculation. The federal income tax rates used correspond to the tax character of any gains or losses (e.g., short-term or long-term). When the return after taxes on distributions and redemption of shares is higher than returns after taxes on distributions, it is because of realized losses. If realized losses occur upon the sale of shares, capital loss is recorded as a tax benefit which increases returns.

     The Service Shares of Global Income Fund commenced operations on March 12, 1997; the Service Shares of Government Income and Municipal Income Funds commenced operations on August 15, 1997. The Service Shares of these Funds had no operating or performance history prior thereto. However, in accordance with interpretive positions expressed by the staff of the SEC, each of these Funds has adopted the performance records of its respective Class A Shares from the class’s inception date (August 2, 1991, February 10,1993 and July 20, 1993, respectively) to the inception dates of the Service Shares. Quotations of performance data of these Funds relating to this period include the performance record of the applicable Class

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A Shares (excluding the impact of any applicable front-end sales charge). The performance records of the applicable Class A Shares reflect the expenses actually incurred by the Fund. These expenses include any asset-based sales charges (i.e., fees under distribution and service plans) imposed and other operating expenses. The difference in fees between Service Shares and Class A Shares may impact performance ratings and rankings for a class of shares. Total return quotations are calculated pursuant to SEC-approved methodology.

     Year-by-year total return and cumulative total return for a specified period are each derived by calculating the percentage rate required to make a $1,000 investment (made at the maximum public offering price per share with all distributions reinvested) at the beginning of such period equal to the actual total value of such investment at the end of such period.

     Total return calculations for Class A Shares reflect the effect of paying the maximum initial sales charge. Investment at a lower sales charge would result in higher performance figures. Total return calculations for Class B and Class C Shares reflect deduction of the applicable CDSC imposed upon redemption of Class B and Class C Shares held for the applicable period. Each Fund may also from time to time advertise total return on a cumulative, average, year-by-year or other basis for various specified periods by means of quotations, charts, graphs or schedules. In addition, each Fund may furnish total return calculations based on investments at various sales charge levels or at net asset value. An after-tax total return for a Fund may be calculated by taking its total return and subtracting applicable federal taxes from the portions of a Fund’s total return attributable to capital gain and ordinary income distributions. This after-tax total return may be compared to that of other mutual funds with similar investment objectives as reported by independent sources. Any performance information which is based on a Fund’s net asset value per share would be reduced if any applicable sales charge were taken into account. 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 information is available. A Fund’s performance quotations do not reflect any fees charged by an Authorized Dealer, Service Organization or other financial intermediary to its customer accounts in connection with investments in the Fund.

     Performance data is based on historical results and is not intended to indicate future performance. Total return, 30-day yield, tax equivalent yield and distribution rate will vary based on changes in market conditions, portfolio expenses, portfolio investments and other factors. The value of a Fund’s shares will fluctuate and an investor’s shares may be worth more or less than their original cost upon redemption.

     Performance quotations will be calculated separately for each class of shares in existence. Because each class of shares is subject to different expenses, the performance of each class of shares of a Fund will differ.

PROXY VOTING

     The Trust, on behalf of the Funds, has delegated the voting of portfolio securities to the Investment Adviser. The Investment Adviser has adopted policies and procedures (the “Policy”) for the voting of proxies on behalf of client accounts for which the Investment Adviser has voting discretion, including the Funds. Under the Policy, the Investment Adviser’s guiding principles in performing proxy voting are to make decisions that: (i) favor proposals that tend to maximize a company’s shareholder value; and (ii) are not influenced by conflicts of interest. These principles reflect the Investment Adviser’s belief that sound corporate governance will create a framework within which a company can be managed in the interests of its shareholders.

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     The principles and positions reflected in the Policy are designed to guide the Investment Adviser in voting proxies, and not necessarily in making investment decisions. Senior management of the Investment Adviser will periodically review the Policy to ensure that it continues to be consistent with the Investment Adviser’s guiding principles.

     Public Equity Investments. To implement these guiding principles for investments in publicly-traded equities, the Investment Adviser follows proxy voting guidelines (the “Guidelines”) developed by Institutional Shareholder Services (“ISS”), except in certain circumstances, which are generally described below. The Guidelines embody the positions and factors the Investment Adviser generally considers important in casting proxy votes. They address a wide variety of individual topics, including, among others, shareholder voting rights, anti-takeover defenses, board structures, the election of directors, executive and director compensation, reorganizations, mergers, and various shareholder proposals. Attached as Appendix B is a summary of the Guidelines.

     ISS has been retained to review proxy proposals and make voting recommendations in accordance with the Guidelines. While it is the Investment Adviser’s policy generally to follow the Guidelines and recommendations from ISS, the Investment Adviser’s portfolio management teams (“Portfolio Management Teams”) retain the authority on any particular proxy vote to vote differently from the Guidelines or a related ISS recommendation, in keeping with their different investment philosophies and processes. Such decisions, however, remain subject to a review and approval process, including a determination that the decision is not influenced by any conflict of interest. In forming their views on particular matters, the Portfolio Management Teams are also permitted to consider applicable regional rules and practices, including codes of conduct and other guides, regarding proxy voting, in addition to the Guidelines and recommendations from ISS.

     In addition to assisting the Investment Adviser in developing substantive proxy voting positions, ISS also updates and revises the Guidelines on a periodic basis, and the revisions are reviewed by the Investment Adviser to determine whether they are consistent with the Investment Adviser’s guiding principles. ISS also assists the Investment Adviser in the proxy voting process by providing operational, recordkeeping and reporting services.

     The Investment Adviser is responsible for reviewing its relationship with ISS and for evaluating the quality and effectiveness of the various services provided by ISS. The Investment Adviser may hire other service providers to replace or supplement ISS with respect to any of the services the Investment Adviser currently receives from ISS.

     The Investment Adviser has implemented procedures that are intended to prevent conflicts of interest from influencing proxy voting decisions. These procedures include the Investment Adviser’s use of ISS as an independent third party, a review and approval process for individual decisions that do not follow ISS’s recommendations, and the establishment of information barriers between the Investment Adviser and other businesses within The Goldman Sachs Group, Inc.

     Fixed Income and Private Investments. Voting decisions with respect to fixed income securities and the securities of privately held issuers generally will be made by a Fund’s managers based on their assessment of the particular transactions or other matters at issue.

     Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on or through the Funds’ website at http://www.gs.com/funds and on the SEC’s website at http://www.sec.gov.

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PAYMENTS TO INTERMEDIARIES

     The Investment Adviser, Distributor and/or their affiliates may make payments to Authorized Dealers, Service Organizations and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Funds. These payments (“Additional Payments”) are made out of the Investment Adviser’s, Distributor’s and/or their affiliates own assets, and are not an additional charge to the Funds or their shareholders. The Additional Payments are in addition to the distribution and service fees paid by the Funds described in the Funds’ Prospectuses and this Additional Statement, and are also in addition to the sales commissions payable to Intermediaries as set forth in the Prospectuses.

     These Additional Payments are intended to compensate Intermediaries for, among other things: marketing shares of the Funds, which may consist of payments relating to Funds included on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; “finders” or “referral fee” for directing investors to the Funds; marketing support fees for providing assistance in promoting the sale of Fund Shares (which may include promotions in communications with the Intermediaries’ customers, registered representatives, and sales persons); and/or other specified services intended to assist in the distribution and marketing of the Funds. In addition, the Investment Adviser, Distributor and/or their affiliates may make Additional Payments (including through sub-transfer agency and networking agreements) for sub-accounting, administrative and/or shareholder processing services that are in addition to the transfer agent, shareholder administration, servicing and processing fees paid by the Funds. The Additional Payments made by the Investment Adviser, Distributor and their affiliates may be a fixed dollar amount; may be based on the number of customer accounts maintained by an Intermediary; may be based on a percentage of the value of shares sold to, or held by, customers of the Intermediary involved; or may be calculated on another basis. Furthermore, the Investment Adviser, Distributor and/or their affiliates may, to the extent permitted by applicable regulations, 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. The Investment Adviser, Distributor and their affiliates may also pay for the travel expenses, meals, lodging and entertainment of Intermediaries and their salespersons and guests in connection with educational, sales and promotional programs subject to applicable NASD regulations. The amount of these Additional Payments (excluding payments made through sub-transfer agency and networking agreements) is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. The Additional Payments are negotiated based on a range of factors, including but not limited to, ability to attract and retain assets (including particular classes of Funds’ shares), target markets, customer relationships, quality of service and industry reputation.

     For the fiscal year ended October 31, 2005, the Investment Adviser, distributor and their affiliates made Additional Payments out of their own assets to approximately 115 Intermediaries. During the fiscal year ended October 31, 2005, the Investment Adviser, distributor and their affiliates paid to Intermediaries approximately $39 million in Additional Payments (including payments made through sub-transfer agency and networking agreements) with respect to all of the funds of the Trust (including the Funds included in this Additional Statement).

     The Additional Payments made by the Investment Adviser, Distributor and/or their affiliates may be different for different Intermediaries and may vary with respect to the type of fund (e.g., equity, fund, fixed income fund, specialty fund, asset allocation portfolio or money market fund) sold by the Intermediary. In addition, the Additional Payment arrangements may include breakpoints in compensation which provide that the percentage rate of compensation varies as the dollar value of the amount sold or invested through an Intermediary increases. The presence of these Additional Payments,

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the varying fee structure and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based on, at least in part, the level of compensation paid. Shareholders should contact their Authorized Dealer or other Intermediary for more information about the payments they receive and any potential conflicts of interest.

     Please contact your Intermediary if you have a question about whether your Intermediary receives the Additional Payments described above. For additional questions, please contact Goldman Sachs Funds at 1-800-621-2550.

OTHER INFORMATION

Selective Disclosure of Portfolio Holdings

     The Board of Trustees of the Trust and the Investment Adviser have adopted a policy on selective disclosure of portfolio holdings in accordance with regulations that seek to ensure that disclosure of information about portfolio securities is in the best interest of Fund shareholders and to address the conflicts between the interests of shareholders and its service providers. The policy provides that neither a Fund nor its Investment Adviser, Distributor or any agent, or any employee thereof (“Fund Representative”) will disclose a Fund’s portfolio holdings information to any person other than in accordance with the policy. For purposes of the policy, “portfolio holdings information” means the Fund’s actual portfolio holdings, as well as nonpublic information about its trading strategies or pending transactions. Under the policy, neither a Fund nor any Fund Representative may solicit or accept any compensation or other consideration in connection with the disclosure of portfolio holdings information. A Fund Representative may provide portfolio holdings information to third parties if such information has been included in the Fund’s public filings with the SEC or is disclosed on the Funds’ publicly accessible website. Information posted on the Fund’s website may be separately provided to any person commencing the day after it is first published on the Funds’ website.

     Portfolio holdings information that is not filed with the SEC or posted on the publicly available website may be provided to third parties only if the third party recipients are required to keep all portfolio holdings information confidential and are prohibited from trading on the information they receive. Disclosure to such third parties must be approved in advance by the Investment Advisor’s legal or compliance department. Disclosure to providers of auditing, custody, proxy voting and other similar services for the Funds, as well as rating and ranking organizations, will generally be permitted; however, information may be disclosed to other third parties (including, without limitation, individuals, institutional investors, and intermediaries that sell shares of the Fund,) only upon approval by the Fund’s Chief Compliance Officer, who must first determine that the Fund has a legitimate business purpose for doing so and check with the Fund Transfer Agent to ascertain whether the third party has been identified as an excessive trader. In general, each recipient of non-public portfolio holdings information must sign a confidentiality and non-trading agreement, although this requirement will not apply when the recipient is otherwise subject to a duty of confidentiality. In accordance with the policy, the identity of those recipients who receive non-public portfolio holdings information on an ongoing basis is as follows: the Investment Advisers and their affiliates, the Funds’ independent registered public accounting firm, the Funds’ custodian, the Funds’ legal counsel- Drinker Biddle & Reath LLP, the Funds’ financial printer- Bowne, and the Funds’ proxy voting service- ISS. These entities are obligated to keep such information confidential. Third party providers of custodial or accounting services to the Funds may release non-public portfolio holdings information of the Funds only with the permission of Fund Representatives. From time to time portfolio holdings information may be provided to broker-dealers solely in connection with a Fund seeking portfolio securities trading suggestions. In providing this information reasonable

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precautions, including limitations on the scope of the portfolio holdings information disclosed, are taken to avoid any potential misuse of the disclosed information. All marketing materials prepared by the Trust’s principal underwriter is reviewed by Goldman Sachs’ Compliance department for consistency with the Trust’s portfolio holdings disclosure policy.

     The Goldman Sachs equity funds currently intend to publish on the Trust’s website (http://www.gs.com/funds) complete portfolio holdings for each equity fund as of the end of each calendar quarter subject to a fifteen calendar day lag between the date of the information and the date on which the information is disclosed. In addition, the Goldman Sachs equity funds intend to publish on their website month-end top ten holdings subject to a ten calendar day lag between the date of the information and the date on which the information is disclosed. The Funds described in this Additional Statement currently intend to publish complete portfolio holdings on their website as of the end of each fiscal quarter, subject to a thirty calendar day lag, and to post selected holdings information monthly on a ten calendar day lag. The Financial Square Prime Obligations Fund, Financial Square Money Market Fund, Institutional Liquid Assets Prime Obligations Portfolio and Institutional Liquid Assets Money Market Portfolio publish their holdings as of the end of each month subject to a thirty calendar day lag between the date of the information and the date on which the information is disclosed. The other Financial Square and Institutional Liquid Assets money market funds publish their holdings as of the end of each calendar quarter subject to a thirty calendar day lag between the date of the information and the date on which the information is disclosed. A Fund may publish on the website complete portfolio holdings information more frequently if it has a legitimate business purpose for doing so.

     Under the policy, Fund Representatives will initially supply the Board of the Trustees with a list of third parties who receive portfolio holdings information pursuant to any ongoing arrangement. In addition, the Board is to receive information, on a quarterly basis, regarding any other disclosures of non-public portfolio holdings information that were permitted during the preceding quarter. In addition, the Board of Trustees is to approve at its meetings a list of Fund Representatives who are authorized to disclose portfolio holdings information under the policy. As of the date of this Additional Statement, only certain officers of the Trust as well as certain senior members of the compliance and legal groups of the Investment Adviser have been approved by the Board of Trustees to authorize disclosure of portfolio holdings information.

Miscellaneous

     A Fund will redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90- day period for any one shareholder. Each Fund, however, reserves the right to pay redemptions exceeding $250,000 or 1% of the net asset value of each respective Fund at the time of redemption by a distribution in kind of securities (instead of cash) from such Fund. The securities distributed in kind would be readily marketable and would be valued for this purpose using the same method employed in calculating each Fund’s net asset value per share. See “Net Asset Value.” If a shareholder receives redemption proceeds in kind, the shareholder should expect to incur transaction costs upon the disposition of the securities received in the redemption.

     The right of a shareholder to redeem shares and the date of payment by each Fund may be suspended for more than seven days for any period during which the New York Stock Exchange is closed, other than the customary weekends or holidays, or when trading on such Exchange is restricted as determined by the SEC; or during any emergency, as determined by the SEC, as a result of which it is not reasonably practicable for such Fund to dispose of securities owned by it or fairly to determine the value of its net assets; or for such other period as the SEC may by order permit for the protection of shareholders of such Fund. (The Trust may also suspend or postpone the recordation of the transfer of shares upon the occurrence of any of the foregoing conditions.)

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     The Prospectuses and this Additional Statement do not contain all the information included in the Registration Statement filed with the SEC under the 1933 Act with respect to the securities offered by the Prospectuses. Certain portions of the Registration Statement have been omitted from the Prospectuses and this Additional Statement pursuant to the rules and regulations of the SEC. The Registration Statement including the exhibits filed therewith may be examined at the office of the SEC in Washington, D.C.

     Statements contained in the Prospectuses or in this Additional Statement as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which the Prospectuses and this Additional Statement form a part, each such statement being qualified in all respects by such reference.

FINANCIAL STATEMENTS

The audited financial statements and related report of Ernst & Young LLP, independent registered public accounting firm, contained in each Fund’s Annual Report are hereby incorporated by reference. The audited financial statements in each Fund’s 2005 Annual Report have been incorporated by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. A copy of the 2005 Annual Report may be obtained upon request and without charge by writing Goldman, Sachs & Co., P.O. Box 06050, Chicago, Illinois 60606 or by calling Goldman, Sachs & Co., at the telephone number on the back cover of each Fund’s Prospectus. No other portions of the Funds’ Annual Report are incorporated herein by reference. The California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. The semi-annual report for the California Municipal Fund and New York Municipal Fund for the fiscal period ended April 30, 2006 will become available in June 2006.

OTHER INFORMATION REGARDING PURCHASES,
REDEMPTIONS, EXCHANGES AND DIVIDENDS
(Class A Shares, Class B Shares and Class C Shares Only)

     The following information supplements the information in the Prospectus under the captions “Shareholder Guide” and “Dividends.” Please see the Prospectus for more complete information.

Other Purchase Information/Sales Charge Waivers

     Class A Shares of the Funds may be sold at NAV without payment of any sales charge to state-sponsored 529 college savings plans. The sales charge waivers on the Funds’ shares are due to the nature of the investors involved and/or the reduced sales effort that is needed to obtain such investments.

     If shares of a Fund are held in a “street name” account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to the beneficial owner’s account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Funds will have no record of the beneficial owner’s transactions, a beneficial owner should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about the account. The transfer of shares in a “street name” account to an account with another dealer or to an account directly with the Fund involves special procedures and will require the beneficial owner to obtain historical purchase information about the shares in the account from the Authorized Dealer.

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Right of Accumulation — (Class A)

     A Class A shareholder qualifies for cumulative quantity discounts if the current purchase price of the new investment plus the shareholder’s current holdings of existing Class A, Class B and/or Class C Shares (acquired by purchase or exchange) of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund total the requisite amount for receiving a discount. For example, if a shareholder owns shares with a current market value of $65,000 and purchases additional Class A Shares of the same Fund with a purchase price of $45,000, the sales charge for the $45,000 purchase would be 3.0% (the rate applicable to a single purchase of $100,000 or more). Class A, Class B and/or Class C Shares of the Funds and Class B and/or Class C Shares of any other Goldman Sachs Fund purchased (i) by an individual, his spouse and his children; and (ii) by a trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account, will be combined for the purpose of determining whether a purchase will qualify for such right of accumulation and, if qualifying, the applicable sales charge level. For purposes of applying the right of accumulation, shares of the Funds and any other Goldman Sachs Fund purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, Class A, Class B and/or Class C Shares of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of the same business organization or by groups of individuals represented by and investing on the recommendation of the same accounting firm, certain affinity groups or other similar organizations (collectively, “eligible persons”) may be combined for the purpose of determining whether a purchase will qualify for the right of accumulation and, if qualifying, the applicable sales charge level. This right of accumulation is subject to the following conditions: (i) the business organization’s, group’s or firm’s agreement to cooperate in the offering of the Funds’ shares to eligible persons; and (ii) notification to the Funds at the time of purchase that the investor is eligible for this right of accumulation. In addition, in connection with SIMPLE IRA accounts, cumulative quantity discounts are available on a per plan basis if (i) your employee has been assigned a cumulative discount number by Goldman Sachs; and (ii) your account, alone or in combination with the accounts of other plan participants also invested in Class A, Class B and/or Class C shares of the Goldman Sachs Funds totals the requisite aggregate amount as described in the Prospectuses.

Statement of Intention — (Class A)

     If a shareholder anticipates purchasing at least $100,000 ($500,000 in the case of Enhanced Income and Ultra-Short Duration Government Funds and $250,000 in the case of Short Duration Government and Short Duration Tax-Free Funds), not counting reinvestments of dividends and distributions, of Class A Shares of a Fund alone or in combination with Class A Shares of any other Goldman Sachs Fund within a 13-month period, the shareholder may purchase shares of the Fund at a reduced sales charge by submitting a Statement of Intention (the “Statement”). Shares purchased pursuant to a Statement will be eligible for the same sales charge discount that would have been available if all of the purchases had been made at the same time. The shareholder or his Authorized Dealer must inform Goldman Sachs that the Statement is in effect each time shares are purchased. There is no obligation to purchase the full amount of shares indicated in the Statement. A shareholder may include the value of all Class A Shares on which a sales charge has previously been paid as an “accumulation credit” toward the completion of the Statement, but a price readjustment will be made only on Class A Shares purchased within 90 days before submitting the Statement. The Statement authorizes the Transfer Agent to hold in escrow a sufficient number of shares which can be redeemed to make up any difference in the sales charge on the amount actually invested. For purposes of satisfying the amount specified on the Statement, the gross amount of each investment, exclusive of any appreciation on shares previously purchased, will be taken into account.

B-175

     The provisions applicable to the Statement, and the terms of the related escrow agreement, are set forth in Appendix C to this Additional Statement.

Cross-Reinvestment of Dividends and Distributions

     Shareholders may receive dividends and distributions in additional shares of the same class of the Fund in which they have invested or they may elect to receive them in cash or shares of the same class of other mutual funds sponsored by Goldman Sachs (the “Goldman Sachs Funds”) or ILA Service Shares of the Prime Obligations Fund or the Tax Exempt Diversified Fund, if they hold Class A Shares of a Fund, or ILA Class B or Class C Shares of the Prime Obligations Fund, if they hold Class B or Class C Shares of a Fund (the “ILA Funds”).

     A Fund shareholder should obtain and read the prospectus relating to the other Goldman Sachs Fund or ILA Fund and its shares and consider its investment objective, policies and applicable fees before electing cross-reinvestment into that Fund. The election to cross-reinvest dividends and capital gain distributions will not affect the tax treatment of such dividends and distributions, which will be treated as received by the shareholder and then used to purchase shares of the acquired fund. Such reinvestment of dividends and distributions in shares of other Goldman Sachs Funds or ILA Funds is available only in states where such reinvestment may legally be made.

Automatic Exchange Program

     A Fund shareholder may elect to exchange automatically a specified dollar amount of shares of the Fund for shares of the same class or an equivalent class of another Goldman Sachs Fund provided the minimum initial investment requirement has been satisfied. A Fund shareholder should obtain and read the prospectus relating to the other 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.

Class C Exchanges

     As stated in the Prospectuses, Goldman Sachs normally begins paying the annual 0.75% distribution fee on Class C Shares to Authorized Dealers after the shares have been held for one year. When an Authorized Dealer enters into an appropriate agreement with Goldman Sachs and stops receiving this payment on Class C Shares that have been beneficially owned by the Authorized Dealer’s customers for at least ten years, those Class C Shares may be exchanged for Class A Shares (which bear a lower distribution fee) of the same Fund at their relative net asset value without a sales charge in recognition of the reduced payment to the Authorized Dealer.

Systematic Withdrawal Plan

     A systematic withdrawal plan (the “Systematic Withdrawal Plan”) is available to shareholders of a Fund whose shares are worth at least $5,000. The Systematic Withdrawal Plan provides for monthly payments to the participating shareholder of any amount not less than $50.

     Dividends and capital gain distributions on shares held under the Systematic Withdrawal Plan are reinvested in additional full and fractional shares of the applicable Fund at net asset value. The Transfer Agent acts as agent for the shareholder in redeeming sufficient full and fractional shares to provide the amount of the systematic withdrawal payment. The Systematic Withdrawal Plan may be terminated at any time. Goldman Sachs reserves the right to initiate a fee of up to $5 per withdrawal, upon 30 days written notice to the shareholder. Withdrawal payments should not be considered to be dividends, yield or income.

B-176

If periodic withdrawals continuously exceed new purchases and reinvested dividends and capital gains distributions, the shareholder’s original investment will be correspondingly reduced and ultimately exhausted. The maintenance of a withdrawal plan concurrently with purchases of additional Class A, Class B or Class C Shares would be disadvantageous because of the sales charge imposed on purchases of Class A Shares or the imposition of a CDSC on redemptions of Class A, Class B and Class C Shares. The CDSC applicable to Class B and Class C Shares redeemed under a Systematic Withdrawal Plan may be waived. See “Shareholder Guide” in the Prospectuses. In addition, each withdrawal constitutes a redemption of shares, and any gain or loss realized must be reported for federal and state income tax purposes. A shareholder should consult his or her own tax adviser with regard to the tax consequences of participating in the Systematic Withdrawal Plan. For further information or to request a Systematic Withdrawal Plan, please write or call the Transfer Agent.

Offering Price of Class A Shares

     Class A Shares of Government Income, Municipal Income, Core Fixed Income, Global Income, High Yield Municipal, High Yield, Emerging Markets Debt, U.S. Mortgages, Investment Grade Credit, California Municipal and New York Municipal Funds are sold at a maximum sales charge of 4.5%, Enhanced Income Fund and Ultra-Short Duration Government Fund at 1.5% and Short Duration Government and Short Duration Tax-Free Funds at 2%. Using the offering price as of October 31, 2005, the maximum offering price of the Class A shares of each Fund’s shares would be as follows:

	Net Asset		Maximum			Offering Price
Fund	Value		Sales Charge			to Public
Enhanced Income Fund	$	9.68		1.5	%	$	9.83
Ultra-Short Duration Government Fund	$	9.27		1.5	%	$	9.41
Short Duration Government Fund	$	9.65		2.0	%	$	9.85
Short Duration Tax-Free Fund	$	10.20		2.0	%	$	10.41
Government Income Fund	$	14.57		4.5	%	$	15.26
Municipal Income Fund	$	15.59		4.5	%	$	16.32
California Municipal Fund	$	10.00		4.5	%	$	10.45
New York Municipal Fund	$	10.00		4.5	%	$	10.45
U.S. Mortgages Fund	$	9.82		4.5	%	$	10.28
Core Fixed Income Fund	$	9.87		4.5	%	$	10.34
Investment Grade Credit Fund	$	9.93		4.5	%	$	10.40
Global Income Fund	$	13.25		4.5	%	$	13.87
High Yield Municipal Fund	$	11.11		4.5	%	$	11.63
High Yield Fund	$	7.81		4.5	%	$	8.18
Emerging Markets Debt Fund	$	11.75		4.5	%	$	12.30

* The California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005 and the maximum offering price is based on the Funds’ initial net asset value per share.

     The actual sales charge that is paid by an investor on the purchase of Class A Shares may differ slightly from the sales charge listed above or in a Fund’s Prospectus due to rounding in the calculations. For example, the sales load disclosed above and in the Funds’ Prospectuses is only shown to one decimal place (e.g., 4.5%). The actual sales charge that is paid by an investor will be rounded to two decimal places. As a result of such rounding in the calculations, the actual sales load paid by an investor may be somewhat greater (4.53%) or somewhat lesser (4.48%) than that listed above or in the Prospectuses. Contact your financial advisor for further information.

B-177

Class B Contingent Deferred Sales Charge- Shares Received in Connection with the Expedition Funds’ Reorganization

Former Class B shareholders of the Expedition Investment Grade Bond Fund or Expedition Tax-Free Investment Grade Bond Fund who received Class B Shares of the Goldman Sachs Core Fixed Income or Goldman Sachs Municipal Income Fund in connection with the reorganization of the Expedition Funds into the Trust will be charged a contingent deferred sales charge (a “CDSC”) on those Goldman Sachs Fund Class B Shares based on the CDSC schedule set forth below. Goldman Sachs Fund Class B Shares purchased by former Expedition Fund shareholders after the effective time of the Expedition Fund reorganization will be charged CDSCs according to the Goldman Sachs Fund CDSC schedule set forth in the Prospectuses.

	CDSC as a Percentage of Dollar Amount
Year since Purchase	Subject to CDSC
First	4.00%
Second	3.00%
Third	3.00%
Fourth	2.00%
Fifth	1.00%
Sixth	0.00%
Seventh	0.00%
Eighth	0.00%

Class B Shares will automatically convert to Class A Shares after eight years.

DISTRIBUTION AND SERVICE PLANS
(Class A Shares, Class B Shares and Class C Shares Only)

     Distribution and Service Plans. As described in the Prospectus, the Trust has adopted, on behalf of Class A, Class B and Class C Shares of each Fund, distribution and service plans (each a “Plan”). See “Shareholder Guide – Distribution and Service Fees” in the Prospectus. The distribution fees payable under the Plans are subject to Rule 12b-1 under the Act and finance distribution and other services that are provided to investors in the Funds and enable the Funds to offer investors the choice of investing in either Class A, Class B or Class C Shares when investing in the Funds. In addition, the distribution fees payable under the Plans may be used to assist the Funds in reaching and maintaining asset levels that are efficient for the Funds’ operations and investments.

     The Plans for each Fund were most recently approved on June 16, 2005 (and August 4, 2005 for the California Municipal and New York Municipal Funds) by a majority vote of the Trustees of the Trust, including a majority of the non-interested Trustees of the Trust who have no direct or indirect financial interest in the Plans, cast in person at a meeting called for the purpose of approving the Plans.

     The compensation for distribution services payable under a Plan to Goldman Sachs may not exceed 0.25%, 0.75% and 0.75% per annum of a Fund’s average daily net assets attributable to Class A, Class B and Class C Shares, respectively, of such Fund.

     Under the Plans for Class B and Class C Shares, Goldman Sachs is also entitled to received a separate fee for personal and account maintenance services equal to an annual basis of 0.25% of each Fund’s average daily net assets attributable to Class A, Class B or Class C Shares. With respect to Class

B-178

A Shares, the Distributor at its discretion may use compensation for distribution services paid under the Plan for personal and account maintenance services and expenses so long as such total compensation under the Plan does not exceed the maximum cap on “service fees” imposed by the NASD.

     Currently, Goldman Sachs has voluntarily agreed not to impose a portion of the distribution and service fees, pursuant to the Plan equal to 0.15% of the average daily net assets attributable to Class B Shares of the Short Duration Government and Short Duration Tax-Free Funds. Goldman Sachs may modify or discontinue such limitation in the future at its discretion.

     Each Plan is a compensation plan which provides for the payment of a specified fee without regard to the expenses actually incurred by Goldman Sachs. If such fee exceeds Goldman Sachs’ expenses, Goldman Sachs may realize a profit from these arrangements. The distribution fees received by Goldman Sachs under the Plans and CDSC on Class A, Class B and Class C Shares may be sold by Goldman Sachs as distributor to entities which provide financing for payments to Authorized Dealers in respect of sales of Class A, Class B and Class C Shares. To the extent such fees are not paid to such dealers, Goldman Sachs may retain such fees as compensation for its services and expenses of distributing the Funds’ Class A, Class B and Class C Shares.

     Under each Plan, Goldman Sachs, as distributor of each Fund’s Class A, Class B and Class C Shares, will provide to the Trustees of the Trust for their review, and the Trustees of the Trust will review at least quarterly a written report of the services provided and amounts expended by Goldman Sachs under the Plans and the purposes for which such services were performed and expenditures were made.

     The Plans will remain in effect until June 30, 2006 and from year to year thereafter, provided that such continuance is approved annually by a majority vote of the Trustees of the Trust, including a majority of the non-interested Trustees of the Trust who have no direct or indirect financial interest in the Plans. The Plans may not be amended to increase materially the amount of distribution compensation described therein without approval of a majority of the outstanding Class A, Class B or Class C Shares of the affected Fund and affected share class but may be amended without shareholder approval to increase materially the amount of non-distribution compensation. All material amendments of a Plan must also be approved by the Trustees of the Trust in the manner described above. A Plan may be terminated at any time as to any Fund 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 Class A, Class B or Class C Shares, respectively, of the affected Fund and affected share class. If a Plan was terminated by the Trustees of the Trust and no successor plan was adopted, the Fund would cease to make payments to Goldman Sachs under the Plan and Goldman Sachs would be unable to recover the amount of any of its unreimbursed expenditures. So long as a Plan is in effect, the selection and nomination of non-interested Trustees of the Trust will be committed to the discretion of the non-interested Trustees of the Trust. The Trustees of the Trust have determined that in their judgment there is a reasonable likelihood that the Plans will benefit the Funds and their Class A, Class B and Class C shareholders.

B-179

For the fiscal years ended October 31, 2005, 2004 and 2003, each Fund then in existence paid Goldman Sachs the following distribution and service fees under the Class A Plan:

	Fiscal year ended		Fiscal year ended		Fiscal year ended
Fund	October 31, 2005		October 31, 2004		October 31, 2003
Enhanced Income Fund
With fee waivers	$	244,838	$	616,631	$	1,566,094
Without fee waivers		244,838		616,631		1,566,094
Ultra-Short Duration Government Fund
With fee waivers		628,901		1,266,373		2,709,156
Without fee waivers		628,901		1,266,373		2,709,156
Short Duration Government Fund
With fee waivers		784,506		739,575		741,540
Without fee waivers		784,506		739,575		741,540
Short Duration Tax-Free Fund
With fee waivers		433,600		486,053		440,031
Without fee waivers		433,600		486,053		440,031
Government Income Fund
With fee waivers		1,515,352		1,069,521		777,036
Without fee waivers		1,515,352		1,069,521		777,036
Municipal Income Fund
With fee waivers		559,881		421,454		355,113
Without fee waivers		559,881		421,454		355,113
California Intermediate Municipal Fund(1)
With fee waivers		—		—		—
Without fee waivers		—		—		—
New York Municipal Fund(1)
With fee waivers		—		—		—
Without fee waivers		—		—		—
U.S. Mortgages Fund(2)
With fee waivers		23,041		3,616		—
Without fee waivers		23,041		3,616		—
Core Fixed Income Fund
With fee waivers		1,523,050		1,154,947		977,764
Without fee waivers		1,523,050		1,154,947		977,764
Investment Grade Credit Fund(2)
With fee waivers		9,033		1,644		—
Without fee waivers		9,033		1,644		—
Global Income Fund

B-180

	Fiscal year ended		Fiscal year ended		Fiscal year ended
Fund	October 31, 2005		October 31, 2004		October 31, 2003
With fee waivers		428,181		777,008		1,269,918
Without fee waivers		428,181		777,008		1,269,918
High Yield Municipal Fund
With fee waivers		4,633,552		3,087,608		1,896,357
Without fee waivers		4,633,552		3,087,608		1,896,357
High Yield Fund
With fee waivers		2,669,899	$	3,421,768	$	3,615,764
Without fee waivers		2,669,899		3,421,768		3,615,764
Emerging Markets Debt Fund(3)
With fee waivers		35,893		9,488		80
Without fee waivers		35,893		14,200		160

1	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005.
2	U.S. Mortgages Fund and Investment Grade Credit Fund commenced operations on November 3, 2003.
3	Emerging Markets Debt Fund commenced operations on August 29, 2003.

     During the fiscal year ended October 31, 2005, Goldman Sachs incurred the following distribution expenses under the Class A Plan on behalf of Enhanced Income, Ultra-Short Duration Government, Short Duration Government, Short Duration Tax-Free, Government Income, Municipal Income, U.S. Mortgages, Core Fixed Income, Investment Grade Credit, Global Income, High Yield Municipal, High Yield and Emerging Markets Debt Funds.

B-181

							Printing and
			Compensation		Allocable		Mailing of
			and Expenses of		Overhead,		Prospectuses to		Preparation and
			the Distributor		Telephone and		Other than		Distribution of
	Compensation		and Its Sales		Travel		Current		Sales Literature
Fund(1)	to Dealers(2)		Personnel		Expenses		Shareholders		and Advertising
Enhanced Income Fund	$	16,755	$	316,484	$	9,387	$	614	$	961
Ultra-Short Duration Government Fund		414,496		1,058,317		97,407		6,374		9,967
Short Duration Government Fund		895,010		609,488		61,267		4,009		6,269
Short Duration
Tax-Free Fund		225,713		476,794		21,499		1,407		2,200
Government Income Fund		1,651,756		1,174,050		137,291		8,984		14,048
Municipal Income Fund		252,683		558,379		27,863		1,823		2,851
U.S. Mortgages Fund		6,512		18,559		73		5		7
Core Fixed Income Fund		827,784		1,444,260		79,519		5,204		8,137
Investment Grade Credit Fund		238		11,289		135		9		14
Global Income Fund		384,588		479,497		48,791		3,193		4,993
High Yield Municipal Fund		923,130		4,948,087		115,593		7,564		11,828
High Yield Fund		1,577,722		3,289,301		230,904		15,110		23,627
Emerging Markets Debt Fund		36,711		43,094		1,314		86		134

1	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.
2	Advance commissions paid to dealers of 1% on Class A Shares are considered deferred assets which are amortized over a period of eighteen months; amounts presented above reflect amortization expense recorded during the period presented.

B-182

For the fiscal years ended October 31, 2005, 2004 and 2003, each Fund paid Goldman Sachs the following distribution and service fees under the Class B Plan:

	Fiscal year ended		Fiscal year ended		Fiscal year ended
Fund(1)	October 31, 2005		October 31, 2004		October 31, 2003
Short Duration Government Fund
With fee waivers	$	262,150	$	373,054	$	471,878
Without fee waivers		308,412		438,887		555,152
Short Duration Tax-Free Fund
With fee waivers		30,541		55,106		51,561
Without fee waivers		35,930		63,372		60,658
Government Income Fund
With fee waivers		288,247		373,456		521,718
Without fee waivers		288,247		373,456		521,718
Municipal Income Fund
With fee waivers		142,198		146,728		162,721
Without fee waivers		142,198		146,728		162,721
Core Fixed Income Fund
With fee waivers		307,311		345,533		390,869
Without fee waivers		307,311		345,533		390,869
Global Income Fund
With fee waivers		282,519		344,027		389,596
Without fee waivers		282,519		344,027		389,596
High Yield Municipal Fund
With fee waivers		488,661		468,022		438,715
Without fee waivers		488,661		468,022		438,715
High Yield Fund
With fee waivers		1,087,680		998,441		778,596
Without fee waivers		1,087,680		998,441		778,596

⁽¹⁾ Enhanced Income Fund, Ultra-Short Duration Government Fund, California Municipal Fund, New York Municipal Fund, Emerging Markets Debt Fund, U.S. Mortgages Fund and Investment Grade Credit Fund currently do not offer Class B Shares.

B-183

During the fiscal year ended October 31, 2005, Goldman Sachs incurred the following expenses in connection with distribution under the Class B Plan on behalf of each of the following Funds:

												Preparation
			Compensation						Printing and			and
			and Expenses			Allocable			Mailing of			Distribution
			of the			Overhead,			Prospectuses			of Sales
			Distributor and			Telephone			to Other than			Literature
	Compensation		Its Sales			And Travel			Current			And
Fund	To Dealers(1)		Personnel			Expenses			Shareholders			Advertising
Short Duration Government Fund	$	85,564	$	125,949		$	16,061		$	1,051		$	1,643
Short Duration Tax-Free Fund		19,836		14,756			1,820			119			186
Government Income Fund		428,787		(5,536	)		(521	)		(34	)		(53	)
Municipal Income Fund		169,801		22,344			3,185			208			326
Core Fixed Income Fund		388,708		33,191			6,312			413			646
Global Income Fund		417,607		44,429			7,153			468			732
High Yield Municipal Fund		575,022		(15,991	)		585			38			60
High Yield Fund		1,318,376		222,452			34,566			2,262			3,537

¹ Advance commissions paid to dealers of 4% on Class B Shares are considered deferred assets which are amortized over a period of six years; amounts presented above reflect amortization expense recorded during the period presented.

B-184

For the fiscal years ended October 31, 2005, 2004 and 2003, each Fund paid Goldman Sachs the following distribution and service fees under the Class C Plan:

	Fiscal year ended		Fiscal year ended		Fiscal year ended
Fund(1),(2)	October 31, 2005		October 31, 2004		October 31, 2003
Short Duration Government Fund
With fee waivers	$	729,675	$	1,062,497	$	1,264,238
Without fee waivers		729,675		1,062,497		1,264,238
Short Duration Tax-Free Fund
With fee waivers		131,504		241,008		313,994
Without fee waivers		131,504		241,008		313,994
Government Income Fund
With fee waivers		199,162		218,004		264,919
Without fee waivers		199,162		218,004		264,919
Municipal Income Fund
With fee waivers		69,170		53,688		56,189
Without fee waivers		69,170		53,688		56,189
Core Fixed Income Fund
With fee waivers		234,552		250,090		237,261
Without fee waivers		234,552		250,090		237,261
Global Income Fund
With fee waivers		90,991		96,261		117,905
Without fee waivers		90,991		96,261		117,905
High Yield Municipal Fund
With fee waivers		708,413		522,692		368,303
Without fee waivers		708,413		522,692		368,303
High Yield Fund
With fee waivers		655,389		503,364		335,236
Without fee waivers		655,389		503,364		335,236

(1)	Enhanced Income Fund, Ultra-Short Duration Government Fund, Emerging Markets Debt Fund, U.S. Mortgages Fund and Investment Grade Credit Fund currently do not offer Class C Shares.
(2)	California Municipal Fund and New York Municipal Fund commenced operations on November 1, 2005. Therefore, no information is available for this period.

B-185

     During the fiscal year ended October 31, 2005, Goldman Sachs incurred the following expenses in connection with distribution under the Class C Plan on behalf of each of the following Funds:

							Printing and
			Compensation		Allocable		Mailing of
			and Expenses of		Overhead,		Prospectuses to		Preparation and
			the Distributor		Telephone		Other than		Distribution of
	Compensation to		and Its Sales		and Travel		Current		Sales Literature
Fund	Dealer(1)		Personnel		Expenses		Shareholders		and Advertising
Short Duration Government Fund	$	864,765	$	152,428	$	18,064	$	1,182	$	1,848
Short Duration Tax-Free Fund		144,606		21,055		2,428		159		248
Government Income Fund		190,672		34,488		4,349		285		445
Municipal Income Fund		83,254		12,120		1,831		120		187
Core Fixed Income Fund		238,431		58,057		7,430		486		760
Global Income Fund		97,621		22,516		2,614		171		267
High Yield Municipal Fund		710,713		140,189		17,287		1,131		1,769
High Yield Fund		727,978		142,214		17,384		1,138		1,779

¹ Advance commissions paid to dealers of 1% on Class C Shares are considered deferred assets which are amortized over a period of one year; amounts presented above reflect amortization expense recorded during the period presented.

B-186

SERVICE PLAN AND SHAREHOLDER ADMINISTRATION PLAN
(Service Shares Only)

     Each Fund (other than the Enhanced Income Fund, Emerging Markets Debt Fund, U.S. Mortgages Fund, Investment Grade Credit Fund, California Municipal Fund and New York Municipal Fund) has adopted a service plan and a separate shareholder administration plan (the “Plans”) with respect to its Service Shares which authorize it to compensate Service Organizations for providing personal and account maintenance services and shareholder administration services to their customers who are or may become beneficial owners of such Shares. Pursuant to the Plans, a Fund will enter into agreements with Service Organizations which purchase Service Shares of the Fund on behalf of their customers (“Service Agreements”). Under such Service Agreements, the Service Organizations may perform some or all of the following services:

     (i) Personal and account maintenance services, including: (a) 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 Fund; (b) acting as liaison between the Service Organization’s customers and the Trust, including obtaining information from the Trust and assisting the Trust in correcting errors and resolving problems; (c) 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; (d) responding to investor requests for prospectuses; (e) displaying and making prospectuses available on the Service Organization’s premises; and (f) assisting customers in completing application forms, selecting dividend and other account options and opening custody accounts with the Service Organization.

     (ii) Shareholder administration services, including: (a) acting or arranging for another party to act, as recordholder and nominee of the Service Shares beneficially owned by the Service Organization’s customers; (b) establishing and maintaining or assist in establishing and maintaining individual accounts and records with respect to the Service Shares owned by each customer; (c) processing or assist in processing confirmations concerning customer orders to purchase, redeem and exchange Service Shares; (d) receiving and transmitting or assist in receiving and transmitting funds representing the purchase price or redemption proceeds of such Service Shares; (e) facilitating the inclusion of Service Shares in accounts, products or services offered to the Service Organization’s customers by or through the Service Organization; (f) processing dividend payments on behalf of customers; and (g) performing other related services which do not constitute “any activity which is primarily intended to result in the sale of shares” within the meaning of Rule 12b-1 under the Act or “personal and account maintenance services” within the meaning of the NASD’s Conduct Rules.

     As compensation for such services, a Fund will pay each Service Organization a personal and account maintenance service fee and a shareholder administration service fee in an amount up to 0.25% and 0.25%, respectively (on an annualized basis), of the average daily net assets of the Service Shares of such Fund attributable to or held in the name of such Service Organization.

     For the fiscal years ended October 31, 2005, October 31, 2004 and October 31, 2003, fees were paid by the Funds to Service Organizations under Servicing Agreements as follows.

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	Fiscal year ended		Fiscal year ended		Fiscal year ended
Fund(1)	October 31, 2005		October 31, 2004		October 31, 2003
Ultra-Short Duration Government Fund	$	232,632	$	247,913	$	342,986
Short Duration Government Fund		60,859		29,516		50,263
Short Duration Tax-Free Fund		273		295		917
Government Income Fund		63,252		45,244		61,303
Municipal Income Fund		1,658		1,555		1,115
Core Fixed Income Fund		146,994		100,161		122,639
Global Income Fund		2,694		2,817		4,567
High Yield Municipal Fund		—		—		—
High Yield Fund		7,442		5,381		3,424

⁽¹⁾ Enhanced Income Fund, Emerging Markets Debt Fund, U.S. Mortgages Fund, Investment Grade Credit Fund, California Municipal Fund and New York Municipal Fund currently do not offer Service Shares.

     The Funds have adopted the service plan but not the shareholder administration plan pursuant to Rule 12b-1 under the Act in order to avoid any possibility that service fees paid to the Service Organizations pursuant to the Service Agreements might violate the Act. Rule 12b-1, which was adopted by the SEC under the Act, regulates the circumstances under which an investment company or series thereof may bear expenses associated with the distribution of its shares. In particular, such an investment company or series thereof cannot engage directly or indirectly in financing any activity which is primarily intended to result in the sale of shares issued by the company unless it has adopted a plan pursuant to, and complies with the other requirements of, such Rule. The Trust believes that fees paid for the services provided in the service plan and described above are not expenses incurred primarily for effecting the distribution of Service Shares. However, should such payments be deemed by a court or the SEC to be distribution expenses, such payments would be duly authorized by the service plan. The shareholder administration plan has not been adopted pursuant to Rule 12b-1 under the Act.

     Conflict of interest restrictions (including the Employee Retirement Income Security Act of 1974, as amended) may apply to a Service Organization’s receipt of compensation paid by a Fund in connection with the investment of fiduciary assets in Service Shares of such Fund. Service Organizations, including banks regulated by the Comptroller of the Currency, the Federal Reserve Board or the Federal Deposit Insurance Corporation, and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities regulators, are urged to consult their legal advisers before investing fiduciary assets in Service Shares of the Funds. In addition, under some state securities laws, banks and other financial institutions purchasing Service Shares on behalf of their customers may be required to register as dealers.

     The Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plans or the related Service Agreements, most recently voted to approve each Fund’s Plans and Service Agreements at a meeting called for the purpose of voting on such Plans and Service Agreements on June 16, 2005. The Enhanced Income Fund, Emerging Markets Debt Fund, U.S. Mortgages Fund, Investment Grade Credit Fund, California Municipal Fund and New York Municipal Fund do not offer Service Shares. The Plans and Service Agreements will remain in effect until June 30, 2006, and will continue in effect thereafter only if such continuance is specifically approved annually by a vote of the Board of Trustees in the manner described above. The service plan may not be amended (but the shareholder administration plan may be amended) to

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increase materially the amount to be spent for the services described therein without approval of the shareholders of the affected Fund, and all material amendments of each Plan must also be approved by the Board of Trustees in the manner described above. The Plans may be terminated at any time by a majority of the Trustees who are not interested person of the Trust and who have no direct or indirect financial interest in the operation of the Plans and Service Agreements or by vote of a majority of the outstanding Service Shares of the affected Fund. The Service Agreements may be terminated at any time, without payment of any penalty, by vote of a majority of such Trustees or by a vote of a majority of the outstanding Service Shares of the affected Fund on not more than 60 days’ written notice to any other party to the Service Agreements.

     The Service Agreements will terminate automatically if assigned. So long as the Plans are in effect, the selection and nomination of those Trustees who are not interested persons will be committed to the discretion of the Trust’s Nominating Committee, which consists of all of the non-interested members of the Board of Trustees. The Board of Trustees has determined that, in its judgment, there is a reasonable likelihood that the Plans will benefit the Funds and the holders of Service Shares.

ADMINISTRATION PLAN
(Administration Shares Only)

     The Enhanced Income Fund has adopted an administration plan (the “Plan”) with respect to its Administration Shares which authorizes it to compensate Service Organizations for providing certain account administration services to their customers who are beneficial owners of such Shares. Pursuant to the Plan, the Fund enters into agreements with Service Organizations which purchase Administration Shares on behalf of their customers (“Service Agreements”). Under such Service Agreements the Service Organizations may agree to perform some or all of the following services: (i) act, directly or through an agent, as the shareholder of record and nominee for customers; (ii) maintain account records for customers who beneficially own Administration Shares of the Fund; (iii) receive and transmit, or assist in receiving and transmitting, funds for purchases and redemptions; (iv) provide facilities to answer questions and handle correspondence from customers regarding their accounts; and (v) issue, or assist in issuing, confirmations for transactions in shares by customers. As compensation for such services, the Fund will pay each Service Organization an account administration fee in an amount up to 0.25% (on an annualized basis) of the average daily net assets of the Administration Shares of the Fund attributable to or held in the name of such Service Organization.

     For the fiscal periods ended October 31, 2003, October 31, 2004 and October 31, 2005, fees of $48,643, $116,710 and $88,703 were paid by the Enhanced Income Fund under the Plan, respectively.

     Conflict of interest restrictions (including the Employee Retirement Income Security Act of 1974, as amended) may apply to a Service Organization’s receipt of compensation paid by a Fund in connection with the investment of fiduciary assets in Administration Shares of the Fund. Service Organizations, including banks regulated by the Comptroller of the Currency, the Federal Reserve Board or the Federal Deposit Insurance Corporation, and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisers before investing fiduciary assets in Administration Shares of the Fund. In addition, under some state securities laws, banks and other financial institutions purchasing Administration Shares on behalf of their customers may be required to register as dealers.

     The Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or the related Service Agreements, most recently voted to approve the Plan and Service Agreements with respect to the Fund at a meeting called for the purpose of voting on such Plan and Service Agreements on June 16, 2005. The Plan and Service Agreements will remain in effect until June 30, 2006 and will continue in effect thereafter only if

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such continuance is specifically approved annually by a vote of the Board of Trustees in the manner described above.

     Unless approved by the Board of Trustees in the manner described above, the Plan may not be amended to increase materially the amount to be spent for the services described therein and other material amendments of the Plan may not be made. The Plan may be terminated at any time by 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 Plan or the related Service Agreements or by vote of a majority of the Fund’s outstanding Administration Shares. The Service Agreements may be terminated at any time, without payment of any penalty, by a vote of a majority of such Trustees or by a vote of a majority of the outstanding Administration Shares of the Fund on not more than 60 days’ written notice to any other party to the Service Agreements. The Service Agreements will terminate automatically if assigned. So long as the Plan is in effect, the selection and nomination of those Trustees who are not interested persons will be committed to the discretion of the non-interested Trustees of the Trust. The Board of Trustees has determined that, in its judgment, there is a reasonable likelihood that the Plan will benefit the Fund and the holders of its Administration Shares.

ACCOUNT SERVICE PLAN
(Class A and Institutional Shares Only)

     The U.S. Mortgages and Investment Grade Credit Funds have adopted account service plans (the “Plans”) with respect to their Class A and Institutional Shares which authorize them to compensate Goldman Sachs for providing certain account services, personal and account maintenance services, and other services performed and expenses incurred by Goldman Sachs that are intended to facilitate or improve the provision of account services and/or personal and account maintenance services of Authorized Dealers in the case of Class A Shares or Service Organizations in the case of Institutional Shares to their customers who are beneficial owners of such Shares (“Customers”).

     Account services under the Plans include, without limitation, (i) acting or arranging for another party to act, as recordholder and nominee of Class A or Institutional Shares beneficially owned by Customers; (ii) establishing and maintaining or assist in establishing and maintaining individual accounts and records with respect to Class A or Institutional Shares owned by each Customer; (iii) processing or assist in processing confirmations concerning customer orders to purchase, redeem and exchange Class A or Institutional Shares; (iv) receiving and transmitting or assist in receiving and transmitting funds representing the purchase price or redemption proceeds of such Class A or Institutional Shares; (v) providing services to Customers intended to facilitate or improve their understanding of the benefits and risks of a Fund to Customers; (vi) facilitating or assist in facilitating electronic or computer trading and/or processing in a Fund or providing or assist in providing electronic, computer or other information regarding a Fund to Customers; and (vii) performing other related services which do not constitute “any activity which is primarily intended to result in the sale of shares” within the meaning of Rule 12b-1 under the Act or “personal and account maintenance services” within the meaning of the NASD’s Conduct Rules.

     Personal and account maintenance services under the Plans 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 Fund; (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 Authorized Dealers’ or Service Organizations’ premises; (vi) assisting Customers in

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completing application forms, selecting dividend and other account options and operating custody accounts with the Authorized Dealers or Service Organizations; and (vii) performing other related services which constitute “personal and account maintenance services” within the meaning of the NASD’s Conduct Rules but do not constitute “any activity which is primarily intended to result in the sale of shares” within the meaning of Rule 12b-1 under the Act.

     As compensation for such services, each Fund will pay Goldman Sachs an account service fee in an amount up to 0.05% (on an annualized basis) of the average daily net assets of the Class A or Institutional Shares of such Fund. The Plans provide for account service fees to Goldman Sachs without regard to the expenses actually incurred by Goldman Sachs. If the fees exceed Goldman Sachs’ expenses, Goldman Sachs may realize a profit from these arrangements. Goldman Sachs will determine the amount (if any) of the account service fee to be paid to one or more Authorized Dealers in the case of Class A Shares or Service Organizations in the case of Institutional Shares. Payments to Authorized Dealers or Service Organizations will be subject to agreements entered into with Goldman Sachs (“Service Agreements”). In no event will the amount paid to Goldman Sachs or any Authorized Dealer under the Plan for Class A Shares and the Trust’s Class A Distribution and Service Plan for “personal and account maintenance services and expenses” exceed the maximum limit on “service fees” as those terms are defined in Section 2830 of the Conduct Rules of the NASD. For the fiscal year ended October 31, 2005 and the fiscal period ended October 31, 2004, the U.S. Mortgages and Investment Grade Credit Funds paid the following in fees pursuant to the Plans.

	Fiscal Year Ended				Fiscal Period ended
	October 31, 2005				October 31, 2004
Fund	Class A		Institutional		Class A		Institutional
U.S. Mortgages Fund	$	4,608	$	45,084	$	727	$	59,281
Investment Grade Credit Fund	$	1,806	$	1,105	$	329	$	5,345

     Conflict of interest restrictions (including the Employee Retirement Income Security Act of 1974) may apply to an Authorized Dealer’s or Service Organization’s receipt of compensation paid by Goldman Sachs in connection with the investment of fiduciary assets in Class A or Institutional Shares of a Fund. Authorized Dealers and Service Organizations, including banks regulated by the Comptroller of the Currency, the Federal Reserve Board or the Federal Deposit Insurance Corporation, and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisers before investing fiduciary assets in Class A or Institutional Shares of a Fund. In addition, under some state securities laws, banks and other financial institutions purchasing Class A or Institutional Shares on behalf of their Customers may be required to register as dealers.

     The Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plans or the related Service Agreements, most recently voted to approve the Plans and related Service Agreements with respect to the Funds on June 16, 2005 in each instance at a meeting called for the purpose of voting on such Plan and Service Agreements. The Plans and related Service Agreements will remain in effect until June 30, 2006 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. The Plans may be amended to increase materially the amount to be spent for the services described therein without approval of the shareholders of the affected Fund’s Class A and Institutional Class. All material amendments of the Plans must be approved by the Trustees in the manner described above. A Plan may be terminated at any time by 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 Plan and Service Agreements or by a vote of a majority of the outstanding Class A or Institutional Shares of

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the affected Fund. The Service Agreements may be terminated at any time, without payment of any penalty, by vote of a majority of such Trustees or by a vote of a majority of the outstanding Class A or Institutional Shares of the affected Fund on not more than sixty (60) days’ written notice to any other party to the Service Agreements. The Service Agreements will terminate automatically if assigned. So long as the Plans are in effect, the selection and nomination of those Trustees who are not interested persons will be committed to the discretion of the non-interested Trustees. The Trustees have determined that, in its judgment, there is a reasonable likelihood that the Plans will benefit the Funds and the holders of Class A and Institutional Shares.

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APPENDIX A

DESCRIPTION OF SECURITIES RATINGS

Short-Term Credit Ratings

     A Standard & Poor’s short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard & Poor’s for short-term issues:

     “A-1” – Obligations are rated in the highest category and indicate that 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” – The obligor’s capacity to meet its financial commitment on the obligation is satisfactory. Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in the highest rating category.

     “A-3” – Obligor has adequate capacity to meet its financial obligations. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

     “B” – An obligation is more vulnerable to nonpayment than obligations rated “B”. The obligor currently has the capacity to meet its financial commitment on the obligation; however, adverse business, financial or economic conditions will likely impair the obligor’s capacity to meet its financial commitment on the obligation.

     “C” – Obligations are currently highly vulnerable to nonpayment. The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar actions taken but payments on this obligation are being continued.

     “R” – An obligor rated “R” is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.

     “D” – Obligor has failed to pay one or more of its financial obligations (rated or unrated) when it came due. The “D” rating category is used when the default will be a general default and the obligor will fail to pay all or substantially all of its obligations as they come due. An “SD” rating is assigned when the obligor has selectively defaulted on a specific issue class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.

     “N.R.” – An issuer designated N.R. is not rated.

     Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key

1-A

factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

     Moody’s Investors Service (“Moody’s”) short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.

     Moody’s employs the following:

     “P-1” – Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

     “P-2” – Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

     “P-3” – Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term debt obligations.

     “NP” – Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

     Fitch Ratings, Inc. (“Fitch”) short-term ratings scale applies to foreign currency and local currency. A short-term rating has a time horizon of less than 13 months for most obligations, or up to three years for U.S. public finance in line with industry standards, to reflect unique risk characteristics of bond, tax, and revenue anticipation notes that are commonly issued with terms up to three years. Short-term ratings thus place greater emphasis on the liquidity necessary to meet financial commitments in a timely manner. The following summarizes the rating categories used by Fitch for short-term obligations:

     “F1” – Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.

     “F2” – Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.

     “F3” – Securities possess fair credit quality. This designation indicates that the capacity for timely payment of financial commitments is adequate; however, near term adverse changes could result in a reduction to non investment grade.

2-A

     “B” – Securities possess speculative credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.

     “C” – Securities possess high default risk. Default is a real possibility. This designation indicates a capacity for meeting financial commitments which is solely reliant upon a sustained, favorable business and economic environment.

     “RD” – Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other obligations.

     “D” – Indicates an entity or sovereign that has defaulted on all of its financial obligations.

     “NR” – This designation indicates that Fitch does not publicly rate the issuer or issue in question.

     “Withdrawn” – A rating is withdrawn when Fitch deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced, or for any other reason Fitch deems sufficient.

     The following summarizes the ratings used by Dominion Bond Rating Service Limited (“DBRS”) for commercial paper and short-term debt:

     “R-1 (high)” — Short-term debt rated “R-1 (high)” is of the highest credit quality, and indicates an entity possessing an unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an “R-1 (high)” rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an “R-1 (high)”, few entities are strong enough to achieve this rating.

     “R-1 (middle)” – Short-term debt rated “R-1 (middle)” is of superior credit quality and, in most cases, ratings in this category differ from “R-1 (high)” credits by only a small degree. Given the extremely tough definition DBRS has established for the “R-1 (high)” category, entities rated “R-1 (middle)” are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities.

     “R-1 (low)” – Short-term debt rated “R-1 (low)” is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt and profitability ratios are not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.

     “R-2 (high)” – Short-term debt rated “R-2 (high)” is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt, and profitability ratios is not as strong as credits rated in the “R-1 (low)” category. Relative to the latter category, other shortcomings often

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include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry.

     “R-2 (middle)” – Short-term debt rated “R-2 (middle)” is considered to be of adequate credit quality. Relative to the “R-2 (high)” category, entities rated “R-2 (middle)” typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or hold a weaker industry position. Ratings in this category would also be more vulnerable to adverse changes in financial and economic conditions.

     “R-2 (low)” – Short-term debt rated “R-2 (low)” is considered to be of only adequate credit quality, one step up from being speculative. While not yet defined as speculative, the “R-2 (low)” category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside of the issuer’s control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions.

     “R-3 (high),” “R-3 (middle),” “R-3 (low)” – Short-term debt rated “R-3” is speculative, and within the three sub-set grades, the capacity for timely repayment ranges from mildly speculative to doubtful. “R-3” credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with “R-3” ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.

     “D” – A security rated “D” implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a “D” rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the “D” rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued, or reinstated by DBRS.

Long-Term Credit Ratings

     The following summarizes the ratings used by Standard & Poor’s for long-term issues:

     “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 strong.

4-A

     “BBB” – An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

     Obligations rated “BB,” “B,” “CCC,” “CC,” and “C” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

     “BB” – An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

     “B” – An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

     “CCC” – An obligation rated “CCC” is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

     “CC” – An obligation rated “CC” is currently highly vulnerable to nonpayment.

     “C” – The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued.

     “D” – An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

     Plus (+) or minus (-) – The ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

     “N.R.” – Not rated.

     Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay Foreign Currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

5-A

     The following summarizes the ratings used by Moody’s for long-term debt:

     “Aaa” – Obligations rated “Aaa” are judged to be of the highest quality, with minimal credit risk.

     “Aa” – Obligations rated “Aa” are judged to be of high quality and are subject to very low credit risk.

     “A” – Obligations rated “A” are considered upper-medium grade and are subject to low credit risk.

     “Baa” – Obligations rated “Baa” are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

     “Ba” – Obligations rated “Ba” are judged to have speculative elements and are subject to substantial credit risk.

     “B” – Obligations rated “B” are considered speculative and are subject to high credit risk.

     “Caa” – Obligations rated “Caa” are judged to be of poor standing and are subject to very high credit risk.

     “Ca” – Obligations rated “Ca” are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

     “C” – Obligations rated “C” are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

     Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

     The following summarizes long-term ratings used by Fitch:

     “AAA” – Securities considered to be investment grade and of the highest credit quality. “AAA” ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

     “AA” – Securities considered to be of very high credit quality. “AA” ratings denote expectations of very low credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

     “A” – Securities considered to be investment grade and of high credit quality. “A” ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

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     “BBB” – Securities considered to be investment grade and of good credit quality. “BBB” ratings indicate that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.

     “BB” – Securities considered to be speculative. “BB” ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.

     “B” – Securities considered to be highly speculative. “B” ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

     “CCC,” “CC” and “C” – Securities have high default risk. Default is a real possibility, and capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A “CC” rating indicates that default of some kind appears probable. “C” ratings signal imminent default.

     “RD” – Indicates an entity has failed to make due payments (within the applicable grace period) on some but not all material financial obligations, but continues to honor other classes of obligations.

     “D” – Indicates an entity or sovereign that has defaulted on all of its financial obligations.

     Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the “AAA” category or to categories below “CCC”.

     “NR” indicates that Fitch does not rate the issuer or issue in question.

     The following summarizes the ratings used by DBRS for long-term debt:

     “AAA” — Long-term debt rated “AAA” is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present which would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a creditable track record of superior performance. Given the extremely high standard which DBRS has set for this category, few entities are able to achieve a “AAA” rating.

     “AA” – Long-term debt rated “AA” is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated “AAA” only to a small degree. Given the extremely restrictive definition DBRS has for the “AAA” category, entities rated “AA” are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.

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     “A” – Long-term debt rated “A” is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of “AA” rated entities. While “A” is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities.

     “BBB” – Long-term debt rated “BBB” is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities.

     “BB” – Long-term debt rated “BB” is defined to be speculative and non investment-grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the “BB” range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations.

     “B” – Long-term debt rated “B” is highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.

     “CCC”, CC” and “C” –Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated “B.” Long-term debt rated below “B” often has characteristics which, if not remedied, may lead to default. In practice, there is little difference between these categories, with “CC” and “C” normally used for lower ranking debt of companies for which the senior debt is rated in the “CCC” to “B” range.

     “D” – A security rated “D” implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, DBRS may not assign a “D” rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the “D” rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is suspended, discontinued or reinstated by DBRS.

     (“high”, “low”) – Each rating category is denoted by the subcategories “high” and “low”. The absence of either a “high” or “low” designation indicates the rating is in the “middle” of the category. The “AAA” and “D” categories do not utilize “high”, “middle”, and “low” as differential grades.

Municipal Note Ratings

     A Standard & Poor’s note rating reflects the liquidity factors and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:

• Amortization schedule – the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

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• Source of payment – the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

     Note rating symbols are as follows:

     “SP-1” – The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay debt service are given a plus (+) designation.

     “SP-2” – The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

     “SP-3” – The issuers of these municipal notes exhibit speculative capacity to pay principal and interest.

     Moody’s uses three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (“MIG”) and are divided into three levels – “MIG-1” through “MIG-3”. In addition, those short-term obligations that are of speculative quality are designated “SG”, or speculative grade. MIG ratings expire at the maturity of the obligation. The following summarizes the ratings used by Moody’s for these short-term obligations:

     “MIG-1” – This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.

     “MIG-2” – This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

     “MIG-3” – This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

     “SG” – This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

     In the case of variable rate demand obligations (“VRDOs”), a two-component rating is assigned; a long- or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or “VMIG” rating.

     When either the long- or short-term aspect of a VRDO is not rated, that piece is designated “NR”, e.g., “Aaa/NR” or “NR/VMIG-1”.

     VMIG rating expirations are a function of each issue’s specific structural or credit features.

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     “VMIG-1” – This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

     “VMIG-2” – This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

     “VMIG-3” – This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

     “SG” – This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

     Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings.

About Credit Ratings

A Standard & Poor’s issuer credit rating is a current opinion of an obligor’s overall capacity (its creditworthiness) to pay its financial obligations. This opinion focuses on the obligor’s capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation, as it does take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. In addition, it does not take into account the creditworthiness of the guarantors, insurers, or other forms of credit enhancement on the obligation. The issuer’s rating is not a recommendation to purchase, sell, or hold a financial obligation issued by an obligor, as it does not comment on market price or suitability for a particular investor.

Moody’s credit ratings must be construed solely as statements of opinion and not as statements of fact or recommendations to purchase, sell or hold any securities.

Fitch credit ratings are an opinion on the relative ability of an entity’s financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving their money back in accordance with the terms on which they invested. Fitch’s credit-ratings cover the global spectrum of corporate, sovereign (including supra-national and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.

DBRS credit ratings are not buy, hold or sell recommendations, but rather the result of qualitative and quantitative analysis focusing solely on the credit quality of the issuer and its underlying obligations.

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APPENDIX B

2005 ISS PROXY VOTING GUIDELINES SUMMARY

The following is a concise summary of the ISS proxy voting policy guidelines for 2005.

1. Auditors

Vote CASE-BY-CASE on shareholder proposals on auditor rotation, taking into account these factors:

• Tenure of the audit firm

• Establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for both audit quality and competitive price

• Length of the rotation period advocated in the proposal

• Significant audit-related issues

• Number of audit committee meetings held each year

• Number of financial experts serving on the committee

2. Board of Directors

Voting on Director Nominees in Uncontested Elections

Generally, vote CASE-BY-CASE. But WITHHOLD votes from:

• Insiders and affiliated outsiders on boards that are not at least majority independent

• Directors who sit on more than six boards, or on more than two public boards in addition to their own if they are CEOs of public companies

• Directors who adopt a poison pill without shareholder approval since the company’s last annual meeting and there is no requirement to put the pill to shareholder vote within 12 months of its adoption

• Directors who serve on the compensation committee when there is a negative correlation between chief executive pay and company performance (fiscal year end basis)

• Directors who have failed to address the issue(s) that resulted in any of the directors receiving more than 50% withhold votes out of those cast at the previous board election

Classification/Declassification of the Board

Vote AGAINST proposals to classify the board.

Vote FOR proposals to repeal classified boards and to elect all directors annually.

Independent Chairman (Separate Chairman/CEO)

Vote FOR shareholder proposals asking that the chairman and CEO positions be separated (independent chairman), unless the company has a strong countervailing governance structure, including a lead director, two-thirds independent board, all independent key committees, and established governance guidelines. Additionally, the company should not have underperformed its peers.

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Majority of Independent Directors/Establishment of Committees

Vote FOR shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the ISS definition of independence.

Open Access (shareholder resolution)

Vote CASE-BY-CASE basis, taking into account the ownership threshold proposed in the resolution and the proponent’s rationale.

3. Shareholder Rights

Shareholder Ability to Act by Written Consent

Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.

Vote FOR proposals to allow or make easier shareholder action by written consent.

Shareholder Ability to Call Special Meetings

Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.

Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.

Supermajority Vote Requirements

Vote AGAINST proposals to require a supermajority shareholder vote.

Vote FOR proposals to lower supermajority vote requirements.

Cumulative Voting

Vote AGAINST proposals to eliminate cumulative voting.

Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company’s other governance provisions.

Confidential Voting

Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election. In proxy contests, support confidential voting proposals only if dissidents agree to the same policy that applies to management.

4. Proxy Contests

Voting for Director Nominees in Contested Elections

Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management’s track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.

Reimbursing Proxy Solicitation Expenses

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Vote CASE-BY-CASE. Where ISS recommends in favor of the dissidents, we also recommend voting for reimbursing proxy solicitation expenses.

5. Poison Pills

Vote FOR shareholder proposals that ask a company to submit its poison
pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company’s poison pill and management proposals to ratify a poison pill.

6. Mergers and Corporate Restructurings

Vote CASE-BY-CASE on mergers and corporate restructurings based on such features as the fairness opinion, pricing, strategic rationale, and the negotiating process.

7. Reincorporation Proposals

Proposals to change a company’s state of incorporation should be evaluated on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, and a comparison of the jurisdictional laws. Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.

8. Capital Structure

Common Stock Authorization

Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis using a model developed by ISS.

Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.

Vote FOR proposals to approve increases beyond the allowable increase when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

Dual-class Stock

Vote AGAINST proposals to create a new class of common stock with superior voting rights.

Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:

• It is intended for financing purposes with minimal or no dilution to current shareholders

• It is not designed to preserve the voting power of an insider or significant shareholder

9. Executive and Director Compensation

ISS applies a quantitative methodology, but for Russell 3000 companies will also apply a pay-for-performance overlay in assessing equity-based compensation plans.

Vote AGAINST a plan if the cost exceeds the allowable cap.

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Vote FOR a plan if the cost is reasonable (below the cap) unless any of the following conditions apply:

• The plan expressly permits repricing of underwater options without shareholder approval; or

• There is a disconnect between the CEO’s pay and performance (an increase in pay and a decrease in performance), the main source for the pay increase is equity-based, and the CEO participates in the plan being voted on

• The company’s most recent three-year burn rate is excessive and is an outlier within its peer group

A company that has triggered the burn rate policy may avoid an AGAINST vote recommendation, if it commits to meet the industry average burn rate over the next three years. The above general voting guidelines for pay for performance may change if the compensation committee members can demonstrate improved performance in an additional public filing such as a DEFA 14A or 8K. To demonstrate improved performance, committee members should review all components of a CEO’s compensation and prepare a tally sheet with dollar amounts under various payout scenarios. The committee should also have the sole authority to hire and fire outside compensation consultants.

Director Compensation

Before recommending a vote FOR a director equity plan, ISS will review the company’s proxy statement for the following qualitative features:

• Stock ownership guidelines (a minimum of three times the annual cash retainer)

• Vesting schedule or mandatory holding/deferral period (minimum vesting of three years for stock options or restricted stock)

• Balanced mix between cash and equity

• Non-employee directors should not receive retirement benefits/perquisites

• Detailed disclosure of cash and equity compensation for each director

Management Proposals Seeking Approval to Reprice Options

Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:

• Historic trading patterns

• Rationale for the repricing

• Value-for-value exchange

• Option vesting

• Term of the option

• Exercise price

• Participation

• Treatment of surrendered options

Qualified Employee Stock Purchase Plans

Vote on qualified employee stock purchase plans on a CASE-BY-CASE basis.

Vote FOR qualified employee stock purchase plans where all of the following apply:

• Purchase price is at least 85 percent of fair market value

• Offering period is 27 months or less, and

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• Potential voting power dilution (VPD) is 10 percent or less.

Vote AGAINST qualified employee stock purchase plans where any of the opposite conditions occur.

Nonqualified Employee Stock Purchase Plans

Vote on nonqualified employee stock purchase plans on a CASE-BY-CASE basis.

Vote FOR nonqualified plans with all the following features:

• Broad-based participation

• Limits on employee contribution (a fixed dollar amount or a percentage of base salary)

• Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value

• No discount on the stock price on the date of purchase since there is a company matching contribution

Vote AGAINST nonqualified employee stock purchase plans if they do not meet the above criteria.

Shareholder Proposals on Compensation

Generally vote CASE-BY-CASE, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. But generally vote FOR shareholder proposals that:

• Advocate the use of performance-based awards like indexed, premium-priced, and performance-vested options or performance-based shares, unless the proposal is overly restrictive or the company already substantially uses such awards.

• Call for a shareholder vote on extraordinary benefits contained in Supplemental Executive Retirement Plans (SERPs).

10. Social and Environmental Issues

These issues cover a wide range of topics, including consumer and public safety, environment and energy, general corporate issues, labor standards and human rights, military business, and workplace diversity.

In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.

Vote:

• FOR proposals for the company to amend its Equal Employment Opportunity (EEO) Statement to include reference to sexual orientation, unless the change would result in excessive costs for the company.

• AGAINST resolutions asking for the adopting of voluntary labeling of ingredients or asking for companies to label until a phase out of such ingredients has been completed.

• CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, with consideration of the risks associated with certain international markets, the utility of such a report to shareholders, and the existence of a publicly available code of corporate conduct that applies to international operations.

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APPENDIX C

BUSINESS PRINCIPLES OF GOLDMAN, SACHS & CO.

Goldman Sachs is noted for its Business Principles, which guide all of the firm’s activities and serve as the basis for its distinguished reputation among investors worldwide.

     Our client’s interests always come first. Our experience shows that if we serve our clients well, our own success will follow.

     Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.

     We take great pride in the professional quality of our work. We have an uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.

     We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client’s problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.

     We make an unusual effort to identify and recruit the very best person for every job. Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.

     We offer our people the opportunity to move ahead more rapidly than is possible at most other places. We have yet to find limits to the responsibility that our best people are able to assume. Advancement depends solely on ability, performance and contribution to the Firm’s success, without regard to race, color, religion, sex, age, national origin, disability, sexual orientation, or any other impermissible criterion or circumstance.

     We stress teamwork in everything we do. While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the Firm and its clients.

     The dedication of our people to the Firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.

     Our profits are a key to our success. They replenish our capital and attract and keep our best people. It is our practice to share our profits generously with all who helped create them. Profitability is crucial to our future.

     We consider our size an asset that we try hard to preserve. We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.

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     We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs. We know that the world of finance will not stand still and that complacency can lead to extinction.

     We regularly receive confidential information as part of our normal client relationships. To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.

     Our business is highly competitive, and we aggressively seek to expand our client relationships. However, we must always be fair to competitors and must never denigrate other firms.

     Integrity and honesty are the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.

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Goldman, Sachs & Co.’s History of Excellence

1869

Is founded by Marcus Goldman

1882

Becomes a private partnership when Samuel Sachs joins the firm

1896

Joins New York Stock Exchange

1906

Takes Sears public

1925

Finances Warner Brothers to develop sound in movies

1933-69

Senior Partner Sidney J. Weinberg serves as adviser to five presidents: Roosevelt, Truman, Eisenhower, Kennedy, and Johnson

1956

Co-manages Ford’s initial public offering, the largest IPO to date

1985

Senior Partner John C. Whitehead named Deputy Secretary of State

1986

Takes Microsoft public

1988

Goldman Sachs Asset Management (GSAM) is established, formalizing the asset management capability that Goldman Sachs initiated in 1981 by managing money market funds for institutional clients; 50 employees

1990s

Investment Banking Division is #1 in M&A for seven years in the 1990s

1995

Senior Partner Robert E. Rubin named Treasury Secretary

1996

GSAM acquires CIN Management ($23 B)

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1997

Launches web site that delivers trading ideas, research reports, and analytical tools to clients worldwide

GSAM acquires Commodities Corp. ($1.6 B in Hedge Fund assets); Acquires Liberty Investment Management ($6B in growth assets)

1998

Takes ebay public

1999

Goldman, Sachs & Co. becomes a public company

2001

GSAM AUM pass $300B mark

2002

Advises and services 45% of the Forbes 400 ¹

Growth Team is awarded the year’s single largest U.S. institutional mandate

2003

Acquires The Ayco Company, L.P.; Announces it will combine Australian operation with JBWere to form Goldman Sachs JBWere

1. Source: Forbes.com, October 2003. Reprinted by permission of Forbes Magazine^© 2004 Forbes Inc.

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APPENDIX D

STATEMENT OF INTENTION
(applicable only to Class A Shares)

     If a shareholder anticipates purchasing within a 13-month period Class A Shares of a Fund alone or in combination with Class A Shares of another Goldman Sachs Fund in the amount of $100,000 or more in the case of the Government Income, Municipal Income, Core Fixed Income, Global Income, High Yield Municipal, High Yield, Emerging Markets Debt, U.S. Mortgages, Investment Grade Credit, California Municipal and New York Municipal Funds; $250,000 or more in the case of the Short Duration Government and Short Duration Tax-Free Funds; and $500,000 or more in the case of the Enhanced Income Fund and Ultra-Short Duration Government Fund, the shareholder may obtain shares of the Fund at the same reduced sales charge as though the total quantity were invested in one lump sum by checking and filing the Statement of Intention in the Account Application. Income dividends and capital gain distributions taken in additional shares, as well as any appreciation on shares previously purchased, will not apply toward the completion of the Statement of Intention.

     To ensure that the reduced price will be received on future purchases, the investor must inform Goldman Sachs that the Statement of Intention is in effect each time shares are purchased. Subject to the conditions mentioned below, each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Account Application. The investor makes no commitment to purchase additional shares, but if the investor’s purchases within 13 months plus the value of shares credited toward completion do not total the sum specified, the investor will pay the increased amount of the sales charge prescribed in the Escrow Agreement.

Escrow Agreement

     Out of the initial purchase (or subsequent purchases if necessary), 5% of the dollar amount specified on the Account Application will be held in escrow by the Transfer Agent in the form of shares registered in the investor’s name. All income dividends and capital gains distributions on escrowed shares will be paid to the investor or to his or her order. When the minimum investment so specified is completed (either prior to or by the end of the 13th month), the investor will be notified and the escrowed shares will be released.

     If the intended investment is not completed, the investor will be asked to remit to Goldman Sachs any difference between the sales charge on the amount specified and on the amount actually attained. If the investor does not within 20 days after written request by Goldman Sachs pay such difference in the sales charge, the Transfer Agent will redeem, pursuant to the authority given by the investor in the Account Application, an appropriate number of the escrowed shares in order to realize such difference. Shares remaining after any such redemption will be released by the Transfer Agent.

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EX-99.17.O

Goldman Sachs Funds

STRUCTURED EQUITY FUNDS Annual Report August 31, 2006 

Long-term capital growth potential through diversified portfolios of equity investments using a proprietary quantitative approach to stock selection and portfolio construction.

Goldman Sachs Structured Equity Funds

n	GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND
n	GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND
n	GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND
n	GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND
n	GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

The Structured Large Cap Value Fund invests in a broadly diversified portfolio of large-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions.

The Structured U.S. Equity Fund invests in a broadly diversified portfolio of U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions.

The Structured Large Cap Growth Fund invests in a broadly diversified portfolio of large-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions.

The Structured Small Cap Equity Fund invests in a broadly diversified portfolio of small-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Stocks of smaller companies are often more volatile and less liquid and present greater risks than stocks of larger companies. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.

The Structured International Equity Fund invests in a broadly diversified portfolio of equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Foreign and emerging market securities may be more volatile than investments in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.

Effective December 30, 2005, the CORE^SM Large Cap Value, CORE^SM U.S. Equity, CORE^SM Large Cap Growth, CORE^SM Small Cap Equity and CORE^SM International Equity Funds were renamed, respectively, the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Domestic Structured Investment Process

n Comprehensive – We calculate expected excess returns for more than 3,000 stocks on a daily basis.

n  Rigorous – We evaluate stocks based on fundamental investment criteria that have outperformed historically. n Objective – Our stock selection process is free from the emotion that can lead to biased investment decisions.

n Our computer optimization process allocates risk to our best investment ideas and constructs funds that strive to neutralize systematic risks and deliver better returns. n We use a unique, proprietary risk model that is more precise, more focused and faster to respond because it seeks to identify, track and manage risk specific to our process, using daily data.

Fully invested, well-diversified portfolio that:

n  Maintains style, sector, risk and capitalization characteristics similar to the benchmark.

n  Offers broad access to a clearly defined equity universe. n Aims to generate excess returns that are positive, consistent and repeatable.

1

PORTFOLIO RESULTS

Structured Large Cap Value Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Structured Large Cap Value Fund during the one-year reporting period that ended August 31, 2006.

  Performance Review

Over the one-year period that ended August 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 13.43%, 12.56%, 12.66%, 13.92% and 13.35%, respectively. These returns compare to the 13.96% cumulative total return of the Fund’s benchmark, the Russell 1000 Value Index (with dividends reinvested), over the same time period.

While the Fund generated solid returns during the period, it lagged its benchmark. Among the investment themes, Analyst Sentiment detracted from excess returns for the period, as stocks that have become increasingly positive in the eyes of sell-side research analysts underperformed. In contrast, returns to other investment themes were positive overall during the reporting period. Management Impact and Momentum were the biggest positive contributors to relative returns. Earnings Quality and Valuation also enhanced results, as did Profitability, albeit less significantly.

  Portfolio Management Process

We calculate expected returns on over 3,000 U.S. stocks on a daily basis. The stocks we select for our portfolios are determined using proprietary models developed by the Quantitative Equity team. Our models are based on six investment themes:

The Valuation theme attempts to identify stocks that we believe are not appropriately priced by the market, by typically comparing a company’s intrinsic, or underlying value, to its current market price. Momentum attempts to predict a change in a stock caused by an under-reaction to company-specific information. Analyst Sentiment looks at how the views of Wall Street analysts about a company’s earnings and prospects are changing over time. Profitability assesses whether the company has good profit margins and operating efficiency. Earnings Quality evaluates what percentage of a company’s earnings are coming from more persistent, cash-based sources, as opposed to accounting accruals, such as accounts payable, accounts receivable, inventories, future tax liability and future interest expenses. Finally, Management Impact assesses a company’s management strategy and behavior.

These themes are generally a composite of a number of factors, which are computed on an industry-neutral basis, so that individual stocks are evaluated relative to their industry peers. The six themes have been selected because we believe they:

n  Offer fundamental investment appeal,

n  Demonstrate a statistically significant ability to forecast returns, and

n  Work well in a variety of market environments and across different types of stocks.

2

PORTFOLIO RESULTS

In addition, since the correlation between these themes is low, each brings new information to the overall evaluation of a stock’s attractiveness and contributes to a better buy/sell decision. The weights on the six investment themes vary depending on their expected returns and risk and diversification benefits, along with their anticipated impact on portfolio turnover. Theme weights are updated daily to reflect current market conditions.

  Portfolio Positioning

In managing the Structured products, we take minimal size and sector bets. We strive to add value versus each Fund’s respective index through individual stock selection. Our quantitative process seeks out stocks with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive and companies with strong profit margins and sustainable earnings that use their capital to enhance shareholder value. Over the long term, these factors have contributed positively to the Fund’s returns, and they typically work well at various times and under different market environments.

  Portfolio Highlights

Stock selection was positive overall among sectors during the reporting period. The Fund’s holdings in the Industrials and Information Technology sectors contributed the most to relative performance over the period. In contrast, holdings in the Financials sector detracted the most from relative performance. In terms of individual stocks, overweights in Archer-Daniels- Midland Co. and Monsanto Co. were the largest contributors to relative returns during the period. In contrast, an underweight in BellSouth Corp. and an overweight in UnionBanCal Corp. detracted from Fund performance the most during the period.

  Outlook

Looking ahead, we continue to believe that cheaper stocks should outpace more expensive ones and good momentum stocks should do better than poor momentum stocks. We also prefer companies about which fundamental research analysts are becoming more positive, and firms that are profitable, have sustainable earnings, and use their capital to enhance shareholder value. As such, we anticipate remaining fully invested and expect that the value we add over time will be due to stock selection as opposed to sector or size allocations.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Quantitative Equity Investment Team

New York, September 22, 2006

3

FUND BASICS

Structured Large Cap Value Fund

as of August 31, 2006

PERFORMANCE REVIEW

September 1, 2005–August 31, 2006	Fund Total Return (based on NAV)1			Russell 1000 Value Index2
Class A		13.43	%		13.96	%
Class B		12.56			13.96
Class C		12.66			13.96
Institutional		13.92			13.96
Service		13.35			13.96

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Russell 1000 Value Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with lower price-to-book ratios and lower forecasted growth values. The Index is unmanaged and the figures for the Index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS³

For the period ended 6/30/06	One Year			Five Years			Since Inception			Inception Date
Class A		7.74	%		5.22	%		5.08	%	12/31/98
Class B		8.10			5.28			5.07		12/31/98
Class C		12.20			5.61			5.09		12/31/98
Institutional		14.52			6.82			6.28		12/31/98
Service		13.94			6.32			5.78		12/31/98

³ The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 5.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

4

FUND BASICS

TOP 10 HOLDINGS AS OF 8/31/06⁴

Holding	% of Net Assets			Line of Business
Exxon Mobil Corp.		6.8	%	Oil & Gas
Bank of America Corp.		4.9		Banks
J.P. Morgan Chase & Co.		3.8		Diversified Financials
Pfizer, Inc.		3.4		Pharmaceuticals
Wells Fargo & Co.		2.6		Banks
Citigroup, Inc.		2.5		Diversified Financials
Time Warner, Inc.		2.5		Media
AT&T, Inc.		2.1		Diversified Telecommunication Services
Merck & Co., Inc.		2.1		Pharmaceuticals
Wachovia Corp.		2.0		Banks

⁴ The top 10 holdings may not be representative of the Fund’s future investments.

SECTOR ALLOCATION⁵

Percentage of Net Assets

⁵ The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and/or securities lending collateral. Please see Schedule of Investments for additional information on repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

5

PORTFOLIO RESULTS

Structured U.S. Equity Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Structured U.S. Equity Fund during the one-year reporting period that ended August 31, 2006.

  Performance Review

Over the one-year period that ended August 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 9.51%, 8.72%, 8.73%, 9.97% and 9.39%, respectively. These returns compare to the 8.88% cumulative total return of the Fund’s benchmark, the S&P 500 Index (with dividends reinvested), over the same time period.

The returns to the investment themes were positive overall during the reporting period. Momentum was the largest positive contributor to relative returns as companies with strong momentum characteristics outperformed their industry counterparts. Other themes that enhanced results were Valuation, Management Impact, and Earnings Quality. Profitability also added value, albeit less significantly. On the downside, Analyst Sentiment was the only theme to detract from excess returns for the period, as stocks that have become increasingly positive in the eyes of the sell-side research analysts underperformed.

  Portfolio Management Process

We calculate expected returns on over 3,000 U.S. stocks on a daily basis. The stocks we select for our portfolios are determined using proprietary models developed by the Quantitative Equity team. Our models are based on six investment themes:

The Valuation theme attempts to identify stocks that we believe are not appropriately priced by the market, by typically comparing a company’s intrinsic, or underlying value, to its current market price. Momentum attempts to predict a change in a stock caused by an under-reaction to company-specific information. Analyst Sentiment looks at how the views of Wall Street analysts about a company’s earnings and prospects are changing over time. Profitability assesses whether the company has good profit margins and operating efficiency. Earnings Quality evaluates what percentage of a company’s earnings are coming from more persistent, cash-based sources, as opposed to accounting accruals, such as accounts payable, accounts receivable, inventories, future tax liability and future interest expenses. Finally, Management Impact assesses a company’s management strategy and behavior.

These themes are generally a composite of a number of factors, which are computed on an industry-neutral basis, so that individual stocks are evaluated relative to their industry peers. The six themes have been selected because we believe they:

n	Offer fundamental investment appeal,
n	Demonstrate a statistically significant ability to forecast returns, and
n	Work well in a variety of market environments and across different types of stocks.

6

PORTFOLIO RESULTS

In addition, since the correlation between these themes is low, each brings new information to the overall evaluation of a stock’s attractiveness and contributes to a better buy/sell decision. The weights on the six investment themes vary depending on their expected returns and risk and diversification benefits, along with their anticipated impact on portfolio turnover. Theme weights are updated daily to reflect current market conditions.

  Portfolio Positioning

In managing the Structured products, we take minimal size and sector bets. We strive to add value versus each Fund’s respective index through individual stock selection. Our quantitative process seeks out stocks with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive and companies with strong profit margins and sustainable earnings that use their capital to enhance shareholder value. Over the long term, these factors have contributed positively to the Fund’s returns, and they typically work well at various times and under different market environments.

  Portfolio Highlights

Stock selection was positive overall among sectors during the reporting period, most notably in the Information Technology sector. On the downside, the Fund’s holdings in the Telecommunications Services sector detracted the most from relative performance. In terms of individual stocks, overweights in Archer-Daniels-Midland Co. and Monsanto Co. were the largest contributors to relative performance during the period, while overweights in Johnson & Johnson and Intel Corp. detracted from Fund performance the most during the period.

  Outlook

Looking ahead, we continue to believe that cheaper stocks should outpace more expensive ones and good momentum stocks should do better than poor momentum stocks. We also prefer companies about which fundamental research analysts are becoming more positive, and firms that are profitable, have sustainable earnings, and use their capital to enhance shareholder value. As such, we anticipate remaining fully invested and expect that the value we add over time will be due to stock selection as opposed to sector or size allocations.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Quantitative Equity Investment Team

New York, September 22, 2006

7

FUND BASICS

Structured U.S. Equity Fund

as of August 31, 2006

PERFORMANCE REVIEW

September 1, 2005–August 31, 2006	Fund Total Return (based on NAV)1			S&P 500 Index2
Class A		9.51	%		8.88	%
Class B		8.72			8.88
Class C		8.73			8.88
Institutional		9.97			8.88
Service		9.39			8.88

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The S&P 500 Index is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The Index is unmanaged and the figures for the Index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS³

For the period ended 6/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		5.10	%		2.49	%		7.48	%		9.35	%	5/24/91
Class B		5.41			2.53			7.33			7.46		5/1/96
Class C		9.38			2.89			n/a			4.50		8/15/97
Institutional		11.69			4.07			8.57			10.20		6/15/95
Service		11.08			3.55			8.03			9.73	4	5/24/91

3

The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 5.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

4

Performance data for Service Shares prior to June 7, 1996 (commencement of operations) is that of Class A Shares (excluding the impact of front-end sales charges applicable to Class A Shares since Service Shares are not subject to any sales charges). Performance of Class A Shares of the Structured U.S. Equity Fund reflects the expenses applicable to the Fund’s Class A Shares. The fees applicable to Service Shares are different from those applicable to Class A Shares which impact performance ratings and rankings for a class of shares.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

8

FUND BASICS

TOP 10 HOLDINGS AS OF 8/31/06⁵

Holding	% of Net Assets			Line of Business
Exxon Mobil Corp.		5.0	%	Oil & Gas
Bank of America Corp.		3.5		Banks
Pfizer, Inc.		3.3		Pharmaceuticals
J.P. Morgan Chase & Co.		2.9		Diversified Financials
Cisco Systems, Inc.		2.8		Communications Equipment
Wells Fargo & Co.		2.6		Banks
Hewlett-Packard Co.		2.5		Computers & Peripherals
General Electric Corp.		2.3		Industrial Conglomerates
Microsoft Corp.		2.2		Software
Time Warner, Inc.		2.2		Media

⁵ The top 10 holdings may not be representative of the Fund’s future investments.

SECTOR ALLOCATION⁶

Percentage of Net Assets

⁶ The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and/or securities lending collateral. Please see Schedule of Investments for additional information on repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

9

PORTFOLIO RESULTS

Structured Large Cap Growth Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Structured Large Cap Growth Fund during the one-year reporting period that ended August 31, 2006.

  Performance Review

Over the one-year period that ended August 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 5.21%, 4.40%, 4.49%, 5.66% and 5.39%, respectively. These returns compare to the 3.68% cumulative total return of the Fund’s benchmark, the Russell 1000 Growth Index (with dividends reinvested), over the same time period.

Over the reporting period, returns to the investment themes were positive overall. Valuation was the largest positive contributor to relative returns, as inexpensive companies outperformed their more richly valued industry counterparts. Other themes that enhanced results were Momentum, Management Impact and Earnings Quality. Profitability and Analyst Sentiment also added value for the period, albeit less significantly.

  Portfolio Management Process

We calculate expected returns on over 3,000 U.S. stocks on a daily basis. The stocks we select for our portfolios are determined using proprietary models developed by the Quantitative Equity team. Our models are based on six investment themes:

The Valuation theme attempts to identify stocks that we believe are not appropriately priced by the market, by typically comparing a company’s intrinsic, or underlying value, to its current market price. Momentum attempts to predict a change in a stock caused by an under-reaction to company-specific information. Analyst Sentiment looks at how the views of Wall Street analysts about a company’s earnings and prospects are changing over time. Profitability assesses whether the company has good profit margins and operating efficiency. Earnings Quality evaluates what percentage of a company’s earnings are coming from more persistent, cash-based sources, as opposed to accounting accruals, such as accounts payable, accounts receivable, inventories, future tax liability and future interest expenses. Finally, Management Impact assesses a company’s management strategy and behavior.

These themes are generally a composite of a number of factors, which are computed on an industry-neutral basis, so that individual stocks are evaluated relative to their industry peers. The six themes have been selected because we believe they:

n  Offer fundamental investment appeal,

n  Demonstrate a statistically significant ability to forecast returns, and

n  Work well in a variety of market environments and across different types of stocks.

10

PORTFOLIO RESULTS

In addition, since the correlation between these themes is low, each brings new information to the overall evaluation of a stock’s attractiveness and contributes to a better buy/sell decision. The weights on the six investment themes vary depending on their expected returns and risk and diversification benefits, along with their anticipated impact on portfolio turnover. Theme weights are updated daily to reflect current market conditions.

  Portfolio Positioning

In managing the Structured products, we take minimal size and sector bets. We strive to add value versus each Fund’s respective index through individual stock selection. Our quantitative process seeks out stocks with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive and companies with strong profit margins and sustainable earnings that use their capital to enhance shareholder value. Over the long term, these factors have contributed positively to the Fund’s returns, and they typically work well at various times and under different market environments.

  Portfolio Highlights

Stock selection was positive overall among sectors during the reporting period. The Fund’s holdings in the Information Technology sector contributed the most to relative performance over the period. In contrast, holdings in the Health Care and Energy sectors detracted the most from relative performance. In terms of individual stocks, overweights in Archer-Daniels- Midland Co. and Google, Inc. were the largest contributors to relative returns during the period. In contrast, overweights in Starbucks Corp. and Comcast Corp. detracted from Fund performance during the period.

  Outlook

Looking ahead, we continue to believe that cheaper stocks should outpace more expensive ones and good momentum stocks should do better than poor momentum stocks. We also prefer companies about which fundamental research analysts are becoming more positive, and firms that are profitable, have sustainable earnings, and use their capital to enhance shareholder value. As such, we anticipate remaining fully invested and expect that the value we add over time will be due to stock selection as opposed to sector or size allocations.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Quantitative Equity Investment Team

New York, September 22, 2006

11

FUND BASICS

Structured Large Cap Growth Fund

as of August 31, 2006

PERFORMANCE REVIEW

September 1, 2005–August 31, 2006	Fund Total Return (based on NAV)1			Russell 1000 Growth Index2
Class A		5.21	%		3.68	%
Class B		4.40			3.68
Class C		4.49			3.68
Institutional		5.66			3.68
Service		5.39			3.68

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Russell 1000 Growth Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with higher price-to-book ratios and higher forecasted growth values. The Index is unmanaged and the figures for the Index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS³

For the period ended 6/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		2.29	%		-0.76	%		5.39	%		9.20	%	11/11/91
Class B		2.54			-0.80			n/a			3.41		5/1/97
Class C		6.53			-0.39			n/a			1.63		8/15/97
Institutional		8.76			0.75			6.36	4		9.88	4	11/11/91
Service		8.50			0.29			5.90	4		9.56	4	11/11/91

3

The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 5.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

4

Performance data for Institutional and Service Shares prior to May 1, 1997 (commencement of operations) is that of Class A Shares. Class A Share performance for such period is that of a predecessor separate account (which converted into Class A Shares) adjusted to reflect the higher fees and expenses applicable to the Fund’s Class A Shares. Although the predecessor separate account was managed by Goldman Sachs Asset Management in a manner and pursuant to investment objectives in all material respects equivalent to management and investment objectives of the Structured Large Cap Growth Fund, the separate account was not registered under the Investment Company Act of 1940, as amended (the “Act”) and was not subject to certain investment restrictions imposed by the Act. If it had registered under the Act, performance might have been adversely affected. The fees applicable to Institutional and Service Shares are different from those applicable to Class A Shares, which impacts performance ratings and rankings for a class of shares.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

12

FUND BASICS

TOP 10 HOLDINGS AS OF 8/31/06⁵

Holding	% of Net Assets			Line of Business
Microsoft Corp.		5.0	%	Software
Cisco Systems, Inc.		3.6		Communications Equipment
Johnson & Johnson		3.1		Pharmaceuticals
Hewlett-Packard Co.		2.6		Computers & Peripherals
Texas Instruments, Inc.		2.3		Semiconductor Equipment & Products
The Boeing Co.		2.3		Aerospace & Defense
Amgen, Inc.		2.2		Biotechnology
Monsanto Co.		2.0		Chemicals
General Electric Co.		1.9		Industrial Conglomerates
Wells Fargo & Co.		1.8		Banks

⁵ The top 10 holdings may not be representative of the Fund’s future investments.

SECTOR ALLOCATION⁶

Percentage of Net Assets

⁶ The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and/or securities lending collateral. Please see Schedule of Investments for additional information on repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

13

PORTFOLIO RESULTS

Structured Small Cap Equity Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Structured Small Cap Equity Fund during the one-year reporting period that ended August 31, 2006.

  Performance Review

Over the one-year period that ended August 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 2.42%, 1.66%, 1.65%, 2.77% and 2.30%, respectively. These returns compare to the 9.36% cumulative total return of the Fund’s benchmark, the Russell 2000 Index (with dividends reinvested), over the same time period.

While our investment themes worked in general, it was difficult to capture their performance in the small cap sector of the market. Over much of the last year our themes worked well in an “ideal” environment; if we traded the portfolio every day and did not have to be concerned with or pay transaction costs we believe the Fund’s performance would have been closer to the performance of the Fund’s benchmark. An important part of our portfolio management process is being cognizant of potential transaction costs and attempting to minimize them, thus we only trade securities in the Fund’s portfolio if we expect a benefit to the portfolio’s expected return after accounting for the transactions costs. We also limit how much of the average daily volume we’re willing to trade, because trading more volume generally leads to higher transaction costs. These “constraints” were much more costly to the portfolio in the last 12 months than we would have expected, and their effect was not generally picked up by looking only at our theme returns. However, in August many of the factors on which we tilt in order to beat the index, such as price momentum and earnings response variables, also produced negative returns, and this hurt performance further. In fact, some of the factors had one of their worst months ever in August. It is unusual for so many of our factors to produce negative returns at the same time, and therefore we expect to see performance recover going forward. Additionally, from time to time we will experience periods where specific stock events negatively impact performance, though over time these occurrences tend to even out with periods of positive contributions. Over the current reporting period, situations that impacted the Fund’s returns included a variety of unfavorable earnings surprises; some of the underweight holdings were impacted by mergers and acquisitions activity; and large-scale reactions to news flows. As we expect the factors to work well over time, the impact of trading constraints to be smaller, and events such as earnings surprises to cancel out or contribute positively over time, we encourage our shareholders to continue to view their investment in the Fund and its performance with a longer-term outlook.

  Portfolio Management Process

We calculate expected returns on over 3,000 U.S. stocks on a daily basis. The stocks we select for our portfolios are determined using proprietary models developed by the Quantitative Equity team. Our models are based on six investment themes:

The Valuation theme attempts to identify stocks that we believe are not appropriately priced by the market, by typically comparing a company’s intrinsic, or underlying value, to its current market price. Momentum attempts to predict a change in a stock caused by an under-reaction to company-specific information. Analyst Sentiment looks at how the views of Wall Street analysts about a company’s earnings and prospects are changing over time. Profitability assesses whether the company has good profit margins and operating efficiency. Earnings Quality evaluates what percentage of a company’s earnings are coming

14

PORTFOLIO RESULTS

from more persistent, cash-based sources, as opposed to accounting accruals, such as accounts payable, accounts receivable, inventories, future tax liability and future interest expenses. Finally, Management Impact assesses a company’s management strategy and behavior.

These themes are generally a composite of a number of factors, which are computed on an industry-neutral basis, so that individual stocks are evaluated relative to their industry peers. The six themes have been selected because we believe they:

n	Offer fundamental investment appeal,
n	Demonstrate a statistically significant ability to forecast returns, and
n	Work well in a variety of market environments and across different types of stocks.

In addition, since the correlation between these themes is low, each brings new information to the overall evaluation of a stock’s attractiveness and contributes to a better buy/sell decision. The weights on the six investment themes vary depending on their expected returns and risk and diversification benefits, along with their anticipated impact on portfolio turnover. Theme weights are updated daily to reflect current market conditions.

  Portfolio Positioning

In managing the Structured products, we take minimal size and sector bets. We strive to add value versus each Fund’s respective index through individual stock selection. Our quantitative process seeks out stocks with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive and companies with strong profit margins and sustainable earnings that use their capital to enhance shareholder value. Over the long term, these factors have contributed positively to the Fund’s returns, and they typically work well at various times and under different market environments.

  Portfolio Highlights

Stock selection was negative overall among sectors during the reporting period. The Fund’s holdings in the Financials and Healthcare sectors detracted the most from relative performance over the period. In contrast, the Fund’s holdings in the Energy and Industrials sectors contributed the most to relative performance over the period. In terms of individual stocks, overweights in Stewart Information Services Corp. and Building Material Holding Corp. detracted the most from Fund performance during the period. In contrast, overweights in Veritas DGC, Inc. and WESCO International, Inc. were the largest contributors to relative returns for the period.

  Outlook

Looking ahead, we continue to believe that cheaper stocks should outpace more expensive ones and good momentum stocks should do better than poor momentum stocks. We also prefer companies about which fundamental research analysts are becoming more positive, and firms that are profitable, have sustainable earnings, and use their capital to enhance shareholder value. As such, we anticipate remaining fully invested and expect that the value we add over time will be due to stock selection as opposed to sector or size allocations.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Quantitative Equity Investment Team

New York, September 22, 2006

15

FUND BASICS

Structured Small Cap Equity Fund

as of August 31, 2006

PERFORMANCE REVIEW

September 1, 2005–August 31, 2006	Fund Total Return (based on NAV)1			Russell 2000 Index2
Class A		2.42	%		9.36	%
Class B		1.66			9.36
Class C		1.65			9.36
Institutional		2.77			9.36
Service		2.30			9.36

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charge.
2	The Russell 2000 Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000 Index. The Index is unmanaged and the figures for the Index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS³

For the period ended 6/30/06	One Year			Five Years			Since Inception			Inception Date
Class A		5.41	%		8.36	%		7.45	%	8/15/97
Class B		5.28			8.41			7.33		8/15/97
Class C		9.67			8.78			7.36		8/15/97
Institutional		12.00			10.02			8.56		8/15/97
Service		11.40			9.48			8.03		8/15/97

³ The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 5.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

16

FUND BASICS

TOP 10 HOLDINGS AS OF 8/31/06⁴

Holding	% of Net Assets			Line of Business
Veritas DGC, Inc.		1.7	%	Energy Equipment & Services
Illumina, Inc.		1.6		Health Care Equipment & Supplies
RealNetworks, Inc.		1.5		Internet Software & Services
Swift Energy Co.		1.5		Oil & Gas
IKON Office Solutions, Inc.		1.5		Office Electronics
American Home Mortgage Investment Co.		1.5		Real Estate
Jones Lang LaSalle, Inc.		1.4		Real Estate
Papa John’s International, Inc.		1.4		Hotels, Restaurants & Leisure
New Century Financial Corp. (REIT)		1.2		Real Estate
MicroStrategy, Inc.		1.2		Software

⁴ The top 10 holdings may not be representative of the Fund’s future investments.

SECTOR ALLOCATION⁵

Percentage of Net Assets

⁵ The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral. Please see Schedule of Investments for additional information on repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

17

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

International Structured Investment Process

n Comprehensive – We forecast returns on over 5,000 stocks, 21 countries and 9 currencies on a daily basis.

n  Rigorous – We evaluate stocks, countries, and currencies based on fundamental investment criteria that have outperformed historically. n Objective – Our stock and equity market selection process is free from emotion that can lead to biased investment decisions.

n Our computer optimization process allocates risk to our best investment ideas and constructs funds that strive to neutralize systematic risks and deliver better returns. n We use unique, proprietary risk models that are more precise, more focused and faster to respond because they seek to identify, track and manage risk specific to our process, using daily data.

Fully invested, well-diversified International portfolio that:

n  Blends top-down market views with bottom-up stock selection.

n  Maintains style, sector, risk and capitalization characteristics similar to the benchmark. n Aims to achieve excess returns by taking intentional country bets and many small diversified stock positions.

18

PORTFOLIO RESULTS

Structured International Equity Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Structured International Equity Fund during the one-year reporting period that ended August 31, 2006.

  Performance Review

Over the one-year period that ended August 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 24.02%, 23.18%, 23.10%, 24.52% and 23.87%, respectively. These returns compare to the 24.78% cumulative total return of the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index (unhedged, with dividends reinvested), over the same time period.

The Structured International Equity Fund is designed to add value through two uncorrelated sources of return: security selection and intentional country over- and underweights relative to the benchmark. During the 12-month reporting period, the Fund’s stock selection strategy contributed slightly to relative performance while the country selection strategy detracted from relative performance.

  Portfolio Management Process

We calculate expected returns on over 5,000 international stocks on a daily basis. The stocks we select for our portfolios are determined using proprietary models developed by the Quantitative Equity team. Our models are based on six investment themes:

The Valuation theme attempts to identify stocks that we believe are not appropriately priced by the market, by typically comparing a company’s intrinsic, or underlying value, to its current market price. Momentum attempts to predict a change in a stock caused by an under-reaction to company-specific information. Analyst Sentiment looks at how the views of Wall Street analysts about a company’s earnings and prospects are changing over time. Profitability assesses whether the company has good profit margins and operating efficiency. Earnings Quality evaluates what percentage of a company’s earnings are coming from more persistent, cash- based sources, as opposed to accounting accruals, such as accounts payable, accounts receivable, inventories, future tax liability and future interest expenses. Finally, Management Impact assesses a company’s management strategy and behavior.

These themes are generally a composite of a number of factors, which are computed on an industry-neutral basis, so that individual stocks are evaluated relative to their industry peers. The six themes have been selected because we believe they:

n	Offer fundamental investment appeal,
n	Demonstrate a statistically significant ability to forecast returns, and
n	Work well in a variety of market environments and across different types of stocks.

In addition, since the correlation between these themes is low, each brings new information to the overall evaluation of a stock’s attractiveness and contributes to a better buy/sell decision. The weights on the six investment themes vary depending on their expected returns and risk and diversification benefits, along with their anticipated impact on portfolio turnover. Theme weights are updated daily to reflect current market conditions.

19

PORTFOLIO RESULTS

  Portfolio Positioning

In managing the Structured International Equity Fund, we take minimal size and sector bets. We strive to add value versus the Fund’s index through stock and country selection. Our quantitative process seeks out stocks, countries, and currencies with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive and companies with strong profit margins and sustainable earnings that use their capital to enhance shareholder value. We also prefer countries and currencies that exhibit strong economic growth, countries with favorable risk/return tradeoffs, and currencies that are associated with positive expected fund flows. Over the long term, these factors have contributed positively to the Fund’s returns, and they typically work well at various times and under different market environments.

  Regional Allocations

In terms of countries, an overweight position in Netherlands and an underweight in Italy were the most successful for the period. On the downside, overweights in Norway and Hong Kong were the least successful positions over the reporting period.

  Sector Allocations

Our strategy is sector-neutral relative to the benchmark within countries. Any deviations in sector weights at the Fund level are the result of our country and stocks selection decisions. During the period, holdings in the Telecommunication Services sector contributed the most to relative performance. Conversely, holdings in the Industrials and Materials sectors lagged their peers in the benchmark the most.

  Stock Selection

Within countries, stock selection was the strongest in Austria and Italy. In contrast, stock selection was the weakest in Japan and Spain for the period.

  Outlook

Looking ahead, we continue to believe that cheaper stocks should outpace more expensive ones and good momentum stocks should do better than poor momentum stocks. We also prefer companies about which fundamental research analysts are becoming more positive, and firms that are profitable, have sustainable earnings, and use their capital to enhance shareholder value. As such, we anticipate remaining fully invested and expect that the value we add over time will be due to stock selection as opposed to sector or size allocations.

As always, we thank you for your investment and look forward to your continued confidence.

Goldman Sachs Quantitative Equity Investment Team

New York, September 22, 2006

20

FUND BASICS

Structured International Equity Fund

as of August 31, 2006

PERFORMANCE REVIEW

September 1, 2005–August 31, 2006	Fund Total Return (based on NAV)1			MSCI EAFE Index2
Class A		24.02	%		24.78	%
Class B		23.18			24.78
Class C		23.10			24.78
Institutional		24.52			24.78
Service		23.87			24.78

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index (unhedged) is a market capitalization-weighted composite of securities in 21 developed markets. The Index is unmanaged and the figures for the Index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS³

For the period ended 6/30/06	One Year			Five Years			Since Inception			Inception Date
Class A		20.18	%		9.24	%		4.44	%	8/15/97
Class B		21.19			9.53			4.54		8/15/97
Class C		25.13			9.80			4.55		8/15/97
Institutional		27.59			11.06			5.73		8/15/97
Service		27.12			10.54			5.22		8/15/97

³ The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 5.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. The Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. Performance figures do not reflect the deduction of the redemption fee. If reflected, the redemption fee would reduce the performance quoted.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

21

FUND BASICS

TOP 10 HOLDINGS AS OF 8/31/06⁴

Holding	% of Net Assets			Line of Business
Roche Holding AG		4.2	%	Pharmaceuticals
BASF AG		3.6		Chemicals
Deutsche Bank AG		3.2		Banks
Norsk Hydro ASA		3.1		Oil & Gas
Zurich Financial Services AG		3.0		Insurance
Fortis		2.4		Diversified Financials
BNP Paribas SA		2.3		Banks
E. on AG		2.2		Electric Utilities
Aegon NV		2.0		Insurance
Koninklijke KPN NV		1.8		Diversified Telecommunication Services

⁴ The top 10 holdings may not be representative of the Fund’s future investments.

22

GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND

Performance Summary

August 31, 2006

The following graph shows the value, as of August 31, 2006, of a $10,000 investment made on December 31, 1998 (commencement of operations) in Institutional Shares at NAV of the Goldman Sachs Structured Large Cap Value Fund. For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000 Value Index (with dividends reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, portfolio operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a portfolio.

Structured Large Cap Value Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested December 31, 1998 to August 31, 2006.

Average Annual Total Return through August 31, 2006	Since Inception		Five Years		One Year
Class A (commenced December 31, 1998)
Excluding sales charges		6.19%		8.15%		13.43%
Including sales charges		5.42%		6.94%		7.18%
Class B (commenced December 31, 1998)
Excluding contingent deferred sales charges		5.39%		7.34%		12.56%
Including contingent deferred sales charges		5.39%		7.03%		7.45%
Class C (commenced December 31, 1998)
Excluding contingent deferred sales charges		5.42%		7.37%		12.66%
Including contingent deferred sales charges		5.42%		7.37%		11.64%
Institutional Class (commenced December 31, 1998)		6.61%		8.60%		13.92%
Service Class (commenced December 31, 1998)		6.10%		8.07%		13.35%

23

GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND

Schedule of Investments

August 31, 2006

Shares		Description	Value
Common Stocks – 96.4%
Aerospace & Defense – 2.7%
	301,400	Northrop Grumman Corp.	$	20,136,534
	166,800	The Boeing Co.		12,493,320
				32,629,854
Air Freight & Couriers – 0.2%
	11,100	FedEx Corp.		1,121,433
	24,700	Ryder System, Inc.		1,220,674
				2,342,107
Banks – 13.8%
	1,140,848	Bank of America Corp.		58,719,447
	49,443	Bank of Hawaii Corp.		2,413,807
	79,750	BB&T Corp.		3,413,300
	31,100	Cathay General Bancorp.		1,159,719
	97,700	Hudson City Bancorp, Inc.		1,275,962
	16,500	M&T Bank Corp.		2,020,590
	82,400	North Fork Bancorp., Inc.		2,261,056
	161,400	Regions Financial Corp.		5,808,786
	16,000	SunTrust Banks, Inc.		1,222,400
	379,000	U.S. Bancorp		12,154,530
	244,100	UnionBanCal Corp.		14,621,590
	441,000	Wachovia Corp.		24,091,830
	28,000	Washington Mutual, Inc.		1,172,920
	911,500	Wells Fargo & Co.		31,674,625
	36,800	Zions Bancorp.		2,906,832
				164,917,394
Beverages – 0.1%
	28,000	PepsiCo., Inc.		1,827,840
Chemicals – 1.9%
	109,400	Ashland, Inc.		6,907,516
	336,682	Monsanto Co.		15,972,194
				22,879,710
Commercial Services & Supplies – 0.7%
	58,400	Convergys Corp.*		1,218,808
	111,600	Manpower, Inc.		6,596,676
				7,815,484
Communications Equipment – 0.9%
	432,800	Cisco Systems, Inc.*		9,517,272
	115,900	Tellabs, Inc.*		1,181,021
				10,698,293
Computers & Peripherals – 2.0%
	658,250	Hewlett-Packard Co.		24,065,620
Diversified Financials – 11.1%
	258,500	AmeriCredit Corp.*		6,072,165
	236,000	Ameriprise Financial, Inc.		10,792,280
	17,700	Capital One Financial Corp.		1,293,870
	611,200	Citigroup, Inc.		30,162,720
	484,867	Countrywide Financial Corp.		16,388,505
	206,600	E*Trade Financial Corp.*		4,873,694
	995,100	J.P. Morgan Chase & Co.		45,436,266
	40,900	Jefferies Group, Inc.		1,019,228
	79,150	Merrill Lynch & Co., Inc.		5,819,899
	160,300	Principal Financial, Inc.		8,534,372
	53,358	SEI Investments Co.		2,723,392
				133,116,391
Diversified Telecommunication Services – 4.6%
	800,280	AT&T, Inc.		24,912,716
	287,500	CenturyTel, Inc.		11,448,250
	271,932	Embarq Corp.*		12,821,594
	343,500	Sprint Nextel Corp.		5,812,020
				54,994,580
Electric Utilities – 5.2%
	51,000	Alliant Energy Corp.		1,866,090
	112,700	American Electric Power Co., Inc.		4,111,296
	39,600	Exelon Corp.		2,414,808
	183,300	FirstEnergy Corp.		10,459,098
	472,500	PG&E Corp.		19,811,925
	30,000	Progress Energy, Inc.		1,329,900
	246,393	Reliant Energy, Inc.*		3,316,450
	278,200	TXU Corp.		18,419,622
				61,729,189
Electrical Equipment – 0.5%
	81,900	Energizer Holdings, Inc.*		5,475,834
Energy Equipment & Services – 0.1%
	18,200	Schlumberger Ltd.		1,115,660
Food & Drug Retailing – 0.4%
	166,500	Safeway, Inc.		5,149,845
Food Products – 2.6%
	517,500	Archer-Daniels-Midland Co.		21,305,475
	122,500	Dean Foods Co.*		4,853,450
	324,192	Tyson Foods, Inc.		4,775,348
				30,934,273
Healthcare Equipment & Supplies – 0.9%
	351,900	Applera Corp. – Applied Biosystems Group		10,785,735
Healthcare Providers & Services – 2.0%
	433,500	AmerisourceBergen Corp.		19,143,360
	10,700	CIGNA Corp.		1,209,849
	55,800	Humana, Inc.*		3,399,894
				23,753,103
Hotels, Restaurants & Leisure – 0.1%
	30,100	Carnival Corp.		1,261,190
Household Products – 1.6%
	148,396	Colgate-Palmolive Co.		8,882,985
	161,500	Procter & Gamble Co.		9,996,850
				18,879,835

 The accompanying notes are an integral part of these financial statements.

24

GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND

Shares		Description	Value
Common Stocks – (continued)
Industrial Conglomerates – 1.8%
	403,500	General Electric Co.	$	13,743,210
	126,384	Reynolds American, Inc.		8,223,807
				21,967,017
Insurance – 8.9%
	217,300	AMBAC Financial Group, Inc.		18,816,007
	50,600	American International Group, Inc.		3,229,292
	146,900	CNA Financial Corp.*(a)		5,093,023
	579,400	Genworth Financial, Inc.		19,948,742
	540,600	Loews Corp.		20,802,288
	212,848	MBIA, Inc.		13,117,822
	151,900	Old Republic International Corp.		3,174,710
	23,800	Prudential Financial, Inc.		1,747,158
	257,495	Radian Group, Inc.		15,418,801
	25,900	Safeco Corp.		1,494,689
	22,200	The Allstate Corp.		1,286,268
	74,150	W.R. Berkley Corp.		2,595,250
				106,724,050
IT Consulting & Services – 1.4%
	365,349	Computer Sciences Corp.*		17,310,236
Leisure Equipment & Products – 0.1%
	74,938	Marvel Entertainment, Inc.*(a)		1,606,671
Machinery – 0.2%
	53,500	Terex Corp.*		2,350,255
Marine – 0.4%
	76,601	Overseas Shipholding Group, Inc.		5,109,287
Media – 6.6%
	716,177	CBS Corp. Class B		20,446,853
	390,979	Clear Channel Communications, Inc.		11,354,030
	38,400	Comcast Corp.*		1,344,000
	34,300	The McGraw-Hill Companies., Inc.		1,917,713
	461,900	The Walt Disney Co.		13,695,335
	1,812,200	Time Warner, Inc.		30,118,764
				78,876,695
Metals & Mining – 0.1%
	19,200	United States Steel Corp.		1,116,864
Multiline Retail – 0.9%
	114,100	Costco Wholesale Corp.		5,338,739
	80,645	Dillard’s, Inc.		2,514,511
	76,800	Wal-Mart Stores, Inc.		3,434,496
				11,287,746
Oil & Gas – 11.9%
	164,333	Chevron Corp.		10,583,045
	24,348	ConocoPhillips		1,544,394
	360,550	Devon Energy Corp.		22,530,769
	1,206,161	Exxon Mobil Corp.		81,620,915
	64,700	Holly Corp.		2,964,554
	43,100	Pioneer Natural Resources Co.		1,797,701
	245,900	Sunoco, Inc.		17,682,669
	76,800	XTO Energy, Inc.		3,515,136
				142,239,183
Paper & Forest Products – 0.4%
	226,400	Louisiana-Pacific Corp.		4,428,384
Pharmaceuticals – 5.5%
	612,900	Merck & Co., Inc.		24,853,095
	1,473,800	Pfizer, Inc.		40,617,928
				65,471,023
Real Estate – 3.3%
	26,800	Archstone-Smith Trust (REIT)		1,425,224
	503,000	Equity Office Properties Trust (REIT)		18,656,270
	129,300	HRPT Properties Trust		1,499,880
	71,600	iStar Financial, Inc. (REIT)		3,001,472
	21,400	Jones Lang LaSalle, Inc.		1,781,764
	192,000	New Century Financial Corp. (REIT)(a)		7,432,320
	20,800	ProLogis (REIT)		1,174,368
	37,200	SL Green Realty Corp.		4,150,032
				39,121,330
Road & Rail – 0.3%
	70,200	CSX Corp.		2,121,444
	25,900	Norfolk Southern Corp.		1,106,707
				3,228,151
Software – 0.1%
	89,700	Cadence Design Systems, Inc.*		1,473,771
Specialty Retail – 2.0%
	260,900	AutoNation, Inc.*		5,069,287
	192,308	Circuit City Stores, Inc.		4,540,392
	304,238	Office Depot, Inc.*		11,208,128
	149,100	United Rentals, Inc.*		3,229,506
				24,047,313
Textiles & Apparel – 0.2%
	73,438	Jones Apparel Group, Inc.		2,298,609
Tobacco – 0.7%
	153,300	UST, Inc.		8,103,438
Wireless Telecommunication Services – 0.2%
	45,100	United States Cellular Corp.*		2,703,745
TOTAL COMMON STOCKS
(Cost $1,058,649,909)			$	1,153,835,705

The accompanying notes are an integral part of these financial statements. 

25

GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND

Schedule of Investments (continued)

August 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Repurchase Agreement(b) – 2.7%
Joint Repurchase Agreement Account II
$	32,400,000		5.28	%		09/01/2006	$	32,400,000
Maturity Value: $32,404,753
(Cost $32,400,000)
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
(Cost $1,091,049,909)							$	1,186,235,705

Shares		Description	Value
Securities Lending Collateral – 0.8%
	9,095,250	Boston Global Investment Trust – Enhanced Portfolio	$	9,095,250
(Cost $9,095,250)
TOTAL INVESTMENTS – 99.9%
(Cost $1,100,145,159)			$	1,195,330,955
OTHER ASSETS IN EXCESS OF   LIABILITIES – 0.1%				1,769,888
NET ASSETS – 100.0%			$	1,197,100,843

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

*	Non-income producing security.
(a)	All or portion of security is on loan.
(b)	Joint repurchase agreement was entered into on August 31, 2006. Additional information appears on page 49.

INVESTMENT ABBREVIATION:
REIT	—	Real Estate Investment Trust

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At August 31, 2006, the following futures contracts were open as follows:

	Number of		Settlement	Market		Unrealized
Type	Contracts Long		Month	Value		Gain
S&P Mini 500 Index		591	September 2006	$	38,580,480	$	162,402

 The accompanying notes are an integral part of these financial statements.

26

GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND

Performance Summary

August 31, 2006

The following graph shows the value, as of August 31, 2006, of a $10,000 investment made on September 1, 1996 in Class A Shares (including a maximum sales charge of 5.5%) of the Goldman Sachs Structured U.S. Equity Fund. For comparative purposes, the performance of the Fund’s benchmark, the Standard and Poor’s 500 Index (with dividends reinvested) (“S&P 500 Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class B, Class C, Institutional and Service Shares will vary from Class A Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, portfolio operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a portfolio.

Structured U.S. Equity Fund’s 10 Year Performance

Performance of a $10,000 Investment, Distributions Reinvested September 1, 1996 to August 31, 2006.

Average Annual Total Return through August 31, 2006	Since Inception		Ten Years		Five Years		One Year
Class A (commenced May 24, 1991)
Excluding sales charges		9.84%		8.72%		5.83%		9.51%
Including sales charges		9.43%		8.11%		4.64%		3.48%
Class B (commenced May 1, 1996)
Excluding contingent deferred sales charges		7.60%		7.96%		5.05%		8.72%
Including contingent deferred sales charges		7.60%		7.96%		4.72%		3.72%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		4.71%		n/a		5.06%		8.73%
Including contingent deferred sales charges		4.71%		n/a		5.06%		7.73%
Institutional Class (commenced June 15, 1995)		10.31%		9.21%		6.26%		9.97%
Service Class (commenced June 7, 1996)		8.08%		8.66%		5.72%		9.39%

27

GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND

Schedule of Investments

August 31, 2006

Shares		Description	Value
Common Stocks – 99.1%
Aerospace & Defense – 3.9%
	371,000	Northrop Grumman Corp.	$	24,786,510
	330,573	The Boeing Co.		24,759,918
	71,600	United Technologies Corp.		4,490,036
				54,036,464
Banks – 9.0%
	947,884	Bank of America Corp.		48,787,590
	324,944	Hudson City Bancorp, Inc.		4,243,769
	32,288	M&T Bank Corp.		3,953,988
	38,400	Mercantile Bankshares Corp.		1,418,112
	132,900	Regions Financial Corp.		4,783,071
	467,475	U.S. Bancorp		14,991,923
	38,448	UnionBanCal Corp.		2,303,035
	133,025	Wachovia Corp.		7,267,156
	31,900	Washington Mutual, Inc.		1,336,291
	1,019,112	Wells Fargo & Co.		35,414,142
				124,499,077
Biotechnology – 2.1%
	311,800	Amgen, Inc.*		21,180,574
	183,472	Celgene Corp.*		7,465,476
				28,646,050
Chemicals – 2.6%
	163,265	Ashland, Inc.		10,308,552
	527,352	Monsanto Co.		25,017,579
				35,326,131
Commercial Services & Supplies – 1.4%
	45,817	Global Payments, Inc.		1,743,337
	202,484	Manpower, Inc.		11,968,829
	174,486	Waste Management, Inc.		5,981,380
				19,693,546
Communications Equipment – 3.0%
	1,756,400	Cisco Systems, Inc.*		38,623,236
	303,900	Tellabs, Inc.*		3,096,741
				41,719,977
Computers & Peripherals – 2.5%
	947,700	Hewlett-Packard Co.		34,647,912
Diversified Financials – 7.4%
	143,500	AmeriCredit Corp.*(a)		3,370,815
	35,000	Ameriprise Financial, Inc.		1,600,550
	189,770	Citigroup, Inc.		9,365,150
	392,200	Countrywide Financial Corp.		13,256,360
	885,300	J.P. Morgan Chase & Co.		40,422,798
	337,599	Merrill Lynch & Co., Inc.		24,823,654
	176,000	Principal Financial, Inc.		9,370,240
				102,209,567
Diversified Telecommunication Services – 2.9%
	476,800	AT&T, Inc.		14,842,784
	194,300	CenturyTel, Inc.		7,737,026
	257,763	Embarq Corp.*		12,153,525
	332,330	Sprint Nextel Corp.		5,623,024
				40,356,359
Electric Utilities – 4.2%
	160,000	American Electric Power Co., Inc.(a)		5,836,800
	64,000	FirstEnergy Corp.		3,651,840
	539,948	PG&E Corp.		22,640,020
	388,701	TXU Corp.		25,735,893
				57,864,553
Electrical Equipment – 0.6%
	116,100	Energizer Holdings, Inc.*		7,762,446
Electronic Equipment & Instruments – 0.2%
	123,200	Ingram Micro, Inc.*		2,217,600
Energy Equipment & Services – 0.3%
	65,200	Dresser-Rand Group, Inc.*		1,333,340
	49,900	Schlumberger Ltd.(a)		3,058,870
				4,392,210
Food & Drug Retailing – 0.5%
	221,500	Safeway, Inc.(a)		6,850,995
Food Products – 2.7%
	602,751	Archer-Daniels-Midland Co.		24,815,259
	195,200	Kraft Foods, Inc.(a)		6,619,232
	442,300	Tyson Foods, Inc.		6,515,079
				37,949,570
Healthcare Equipment & Supplies – 1.0%
	364,800	Applera Corp. – Applied Biosystems Group		11,181,120
	19,900	Becton, Dickinson and Co.		1,387,030
	17,776	Fisher Scientific International, Inc.*		1,390,616
				13,958,766
Healthcare Providers & Services – 4.4%
	522,569	AmerisourceBergen Corp.		23,076,647
	71,600	Caremark Rx, Inc.		4,148,504
	61,300	Express Scripts, Inc.*		5,154,104
	130,000	Humana, Inc.*		7,920,900
	414,000	McKesson Corp.		21,031,200
				61,331,355
Hotels, Restaurants & Leisure – 0.9%
	38,941	Darden Restaurants, Inc.		1,378,511
	37,400	Marriott International, Inc.		1,408,484
	37,500	McDonald’s Corp.		1,346,250
	287,000	Starbucks Corp.*		8,899,870
				13,033,115

 The accompanying notes are an integral part of these financial statements.

28

GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND

Shares		Description	Value
Common Stocks – (continued)
Household Products – 1.5%
	117,263	Colgate-Palmolive Co.	$	7,019,363
	220,569	Procter & Gamble Co.		13,653,221
				20,672,584
Industrial Conglomerates – 3.3%
	952,320	General Electric Co.		32,436,019
	196,412	Reynolds American, Inc.(a)		12,780,529
				45,216,548
Insurance – 6.1%
	135,227	AMBAC Financial Group, Inc.		11,709,306
	594,600	Genworth Financial, Inc.		20,472,078
	628,988	Loews Corp.		24,203,459
	263,221	MBIA, Inc.(a)		16,222,310
	102,600	Radian Group, Inc.		6,143,688
	123,000	The Chubb Corp.		6,169,680
				84,920,521
Internet Software & Services – 1.6%
	58,900	Google, Inc.*		22,295,417
IT Consulting & Services – 1.9%
	482,018	Computer Sciences Corp.*		22,838,013
	89,400	First Data Corp.		3,841,518
				26,679,531
Machinery – 0.2%
	62,580	Illinois Tool Works, Inc.		2,747,262
Media – 6.5%
	782,281	CBS Corp. Class B		22,334,123
	485,783	Clear Channel Communications, Inc.		14,107,138
	70,500	The McGraw-Hill Companies, Inc.		3,941,655
	666,132	The Walt Disney Co.		19,750,814
	1,795,258	Time Warner, Inc.		29,837,188
				89,970,918
Metals & Mining – 0.1%
	26,700	Newmont Mining Corp.		1,368,375
Multiline Retail – 0.8%
	240,250	Costco Wholesale Corp.		11,241,297
Oil & Gas – 9.6%
	53,504	Anadarko Petroleum Corp.		2,509,873
	20,200	Apache Corp.		1,318,656
	407,744	Devon Energy Corp.(a)		25,479,922
	19,337	EOG Resources, Inc.		1,253,424
	1,020,216	Exxon Mobil Corp.		69,038,017
	235,400	Sunoco, Inc.		16,927,614
	53,367	Ultra Petroleum Corp.*		2,649,138
	313,900	XTO Energy, Inc.		14,367,203
				133,543,847
Pharmaceuticals – 6.5%
	29,000	Forest Laboratories, Inc.*		1,449,420
	41,437	Johnson & Johnson		2,679,317
	660,745	Merck & Co., Inc.		26,793,210
	1,660,615	Pfizer, Inc.		45,766,549
	259,800	Wyeth		12,652,260
				89,340,756
Real Estate – 1.1%
	32,500	Archstone-Smith Trust (REIT)		1,728,350
	163,900	Equity Office Properties Trust (REIT)		6,079,051
	33,800	Kimco Realty Corp. (REIT)		1,404,390
	88,383	New Century Financial Corp. (REIT)(a)		3,421,306
	18,800	SL Green Realty Corp.		2,097,328
				14,730,425
Road & Rail – 1.7%
	343,200	CSX Corp.		10,371,504
	111,600	Norfolk Southern Corp.		4,768,668
	97,830	Union Pacific Corp.		7,860,640
				23,000,812
Semiconductor Equipment & Products – 1.8%
	754,367	Texas Instruments, Inc.		24,584,821
Software – 2.6%
	1,188,240	Microsoft Corp.		30,525,885
	296,556	Synopsys, Inc.*		5,622,702
				36,148,587
Specialty Retail – 3.3%
	542,775	AutoNation, Inc.*		10,546,118
	528,431	Circuit City Stores, Inc.		12,476,256
	589,787	Office Depot, Inc.*		21,727,753
	69,100	United Rentals, Inc.*		1,496,706
				46,246,833
Textiles & Apparel – 0.2%
	75,602	Jones Apparel Group, Inc.		2,366,343
Tobacco – 0.5%
	144,200	UST, Inc.		7,622,412
Wireless Telecommunication Services – 0.2%
	44,910	United States Cellular Corp.*		2,692,355
TOTAL COMMON STOCKS
(Cost $1,235,129,943)			$	1,371,885,337

The accompanying notes are an integral part of these financial statements. 

29

GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND

Schedule of Investments (continued)

August 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Repurchase Agreement(b) – 0.8%
Joint Repurchase Agreement Account II
$	10,900,000		5.28	%		09/01/2006	$	10,900,000
Maturity Value: $10,901,599
(Cost $10,900,000)
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
(Cost $1,246,029,943)							$	1,382,785,337

Shares		Description	Value
Securities Lending Collateral – 4.0%
	55,463,875	Boston Global Investment Trust – Enhanced Portfolio	$	55,463,875
(Cost $55,463,875)
TOTAL INVESTMENTS – 103.9%
(Cost $1,301,493,818)			$	1,438,249,212
LIABILITIES IN EXCESS OF OTHER   ASSETS – (3.9)%				(54,242,385	)
NET ASSETS – 100.0%			$	1,384,006,827

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

*	Non-income producing security.
(a)	All or portion of security is on loan.
(b)	Joint repurchase agreement was entered into on August 31, 2006. Additional information appears on page 49.

Investment Abbreviation:
REIT	—	Real Estate Investment Trust

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At August 31, 2006, the following futures contracts were open as follows:

	Number of		Settlement	Market		Unrealized
Type	Contracts Long		Month	Value		Gain
S&P Mini 500 Index		183	September 2006	$	11,946,240	$	156,152

 The accompanying notes are an integral part of these financial statements.

30

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND

Performance Summary

August 31, 2006

The following graph shows the value, as of August 31, 2006, of a $10,000 investment made on May 1, 1997 (commencement of operations) in Institutional Shares at NAV of the Goldman Sachs Structured Large Cap Growth Fund. For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000 Growth Index (with dividends reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C, and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, portfolio operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a portfolio.

Structured Large Cap Growth Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested May 1, 1997 to August 31, 2006.

Average Annual Total Return through August 31, 2006	Since Inception		Five Years		One Year
Class A (commenced May 1, 1997)
Excluding sales charges		4.16%		2.85%		5.21%
Including sales charges		3.53%		1.69%		-0.57%
Class B (commenced May 1, 1997)
Excluding contingent deferred sales charges		3.40%		2.08%		4.40%
Including contingent deferred sales charges		3.40%		1.71%		-0.60%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		1.65%		2.08%		4.49%
Including contingent deferred sales charges		1.65%		2.08%		3.49%
Institutional Class (commenced May 1, 1997)		4.56%		3.27%		5.66%
Service Class (commenced May 1, 1997)		4.06%		2.79%		5.39%

31

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND

Schedule of Investments

August 31, 2006

Shares		Description	Value
Common Stocks – 97.8%
Aerospace & Defense – 4.5%
	170,600	Northrop Grumman Corp.	$	11,397,786
	260,050	The Boeing Co.		19,477,745
	126,600	United Technologies Corp.		7,939,086
				38,814,617
Auto Components – 0.3%
	52,600	Autoliv, Inc.		2,972,952
Banks – 1.9%
	21,200	Bank of America Corp.		1,091,164
	451,500	Wells Fargo & Co.		15,689,625
				16,780,789
Beverages – 0.1%
	12,000	PepsiCo., Inc.		783,360
Biotechnology – 3.4%
	273,500	Amgen, Inc.*		18,578,855
	31,800	Biogen Idec, Inc.*		1,403,652
	14,000	Cephalon, Inc.*		798,280
	107,250	Genentech, Inc.*		8,850,270
				29,631,057
Chemicals – 2.2%
	31,800	Ashland, Inc.		2,007,852
	355,600	Monsanto Co.		16,869,664
				18,877,516
Commercial Services & Supplies – 2.2%
	31,400	CSG Systems International, Inc.*		845,288
	108,100	Global Payments, Inc.		4,113,205
	196,300	Manpower, Inc.		11,603,293
	40,200	MoneyGram International, Inc.		1,262,280
	21,600	The Brink’s Co.		1,230,552
				19,054,618
Communications Equipment – 3.9%
	1,417,600	Cisco Systems, Inc.*		31,173,024
	119,900	Motorola, Inc.		2,803,262
				33,976,286
Computers & Peripherals – 4.3%
	602,650	Hewlett-Packard Co.		22,032,884
	10,700	International Business Machines Corp.		866,379
	88,100	Lexmark International, Inc.*		4,939,767
	520,900	Western Digital Corp.*		9,532,470
				37,371,500
Diversified Financials – 2.9%
	193,300	AmeriCredit Corp.*(a)		4,540,617
	24,900	Ameriprise Financial, Inc.		1,138,677
	146,700	Countrywide Financial Corp.		4,958,460
	258,500	E*Trade Financial Corp.*		6,098,015
	41,952	Moody’s Corp.		2,566,623
	61,500	SEI Investments Co.		3,138,960
	63,800	T. Rowe Price Group, Inc.		2,811,028
				25,252,380
Diversified Telecommunication Services – 1.0%
	117,100	CenturyTel, Inc.		4,662,922
	63,107	Embarq Corp.*		2,975,495
	77,347	Sprint Nextel Corp.		1,308,711
				8,947,128
Electric Utilities – 2.3%
	115,200	PG&E Corp.		4,830,336
	226,400	TXU Corp.		14,989,944
				19,820,280
Electrical Equipment – 1.6%
	72,000	Emerson Electric Co.		5,914,800
	112,500	Energizer Holdings, Inc.*		7,521,750
				13,436,550
Electronic Equipment & Instruments – 1.7%
	71,400	Agilent Technologies, Inc.*		2,296,224
	128,800	Arrow Electronics, Inc.*		3,593,520
	72,200	Ingram Micro, Inc.*		1,299,600
	64,700	PerkinElmer, Inc.		1,192,421
	30,300	Tech Data Corp.*		1,057,167
	40,600	Tektronix, Inc.		1,150,604
	101,800	Waters Corp.*		4,341,770
				14,931,306
Energy Equipment & Services – 0.6%
	86,100	BJ Services Co.		2,954,091
	46,000	Tidewater, Inc.		2,190,060
				5,144,151
Food & Drug Retailing – 0.6%
	117,600	Safeway, Inc.		3,637,368
	61,300	The Kroger Co.		1,459,553
				5,096,921
Food Products – 1.8%
	324,700	Archer-Daniels-Midland Co.		13,367,899
	144,600	Tyson Foods, Inc.(a)		2,129,958
				15,497,857
Healthcare Equipment & Supplies – 2.5%
	397,900	Applera Corp. – Applied Biosystems Group		12,195,635
	55,000	Becton, Dickinson and Co.		3,833,500
	37,600	Dade Behring Holdings, Inc.		1,522,424
	88,500	Medtronic, Inc.		4,150,650
				21,702,209

 The accompanying notes are an integral part of these financial statements.

32

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND

Shares		Description	Value
Common Stocks – (continued)
Healthcare Providers & Services – 6.1%
	309,000	AmerisourceBergen Corp.	$	13,645,440
	21,500	Caremark Rx, Inc.		1,245,710
	152,900	Express Scripts, Inc.*		12,855,832
	169,500	Humana, Inc.*		10,327,635
	265,000	McKesson Corp.		13,462,000
	18,900	Sierra Health Services, Inc.*		810,810
				52,347,427
Hotels, Restaurants & Leisure – 3.4%
	134,800	Darden Restaurants, Inc.		4,771,920
	288,406	Marriott International, Inc.		10,861,370
	446,000	Starbucks Corp.*		13,830,460
				29,463,750
Household Durables – 0.1%
	14,200	Toro Co.		568,142
Household Products – 0.3%
	39,500	Colgate-Palmolive Co.		2,364,470
Industrial Conglomerates – 2.0%
	476,600	General Electric Co.		16,232,996
	31,100	Tyco International Ltd.		813,265
				17,046,261
Insurance – 3.5%
	39,700	AMBAC Financial Group, Inc.		3,437,623
	358,400	Loews Corp.		13,791,232
	163,048	MBIA, Inc.		10,048,648
	17,200	Radian Group, Inc.		1,029,936
	60,600	W.R. Berkley Corp.		2,121,000
				30,428,439
Internet Software & Services – 1.2%
	20,575	Google, Inc.*		7,788,255
	132,900	McAfee, Inc.*		3,024,804
				10,813,059
IT Consulting & Services – 2.3%
	15,900	Automatic Data Processing, Inc.		750,480
	246,250	Computer Sciences Corp.*		11,667,325
	47,200	Electronic Data Systems Corp.		1,124,776
	145,300	First Data Corp.		6,243,541
				19,786,122
Machinery – 0.7%
	34,800	Caterpillar, Inc.		2,308,980
	67,300	Terex Corp.*		2,956,489
	25,100	Timken Co.		804,204
				6,069,673
Marine – 0.2%
	25,900	Overseas Shipholding Group, Inc.		1,727,530
Media – 6.4%
	468,059	CBS Corp. Class B		13,363,084
	362,700	Clear Channel Communications, Inc.		10,532,808
	128,600	The McGraw-Hill Companies., Inc.		7,190,026
	326,900	The Walt Disney Co.		9,692,585
	850,000	Time Warner, Inc.		14,127,000
				54,905,503
Metals & Mining – 0.2%
	34,800	Newmont Mining Corp.		1,783,500
Multiline Retail – 3.1%
	302,200	Costco Wholesale Corp.		14,139,938
	116,100	Dillard’s, Inc.		3,619,998
	199,600	Wal-Mart Stores, Inc.		8,926,112
				26,686,048
Oil & Gas – 3.5%
	109,700	Devon Energy Corp.		6,855,153
	22,800	EOG Resources, Inc.		1,477,896
	41,700	Exxon Mobil Corp.		2,821,839
	116,050	Sunoco, Inc.		8,345,156
	37,300	Valero Energy Corp.		2,141,020
	179,400	XTO Energy, Inc.		8,211,138
				29,852,202
Pharmaceuticals – 6.6%
	37,500	Endo Pharmaceuticals Holdings, Inc.*		1,238,625
	100,400	Hospira, Inc.*		3,677,652
	419,400	Johnson & Johnson		27,118,404
	339,700	Merck & Co., Inc.		13,774,835
	52,600	Mylan Laboratories, Inc.		1,068,832
	338,300	Pfizer, Inc.		9,323,548
	17,900	Wyeth		871,730
				57,073,626
Real Estate – 1.3%
	55,900	Jones Lang LaSalle, Inc.		4,654,234
	69,900	New Century Financial Corp. (REIT)(a)		2,705,829
	32,400	SL Green Realty Corp.		3,614,544
				10,974,607
Road & Rail – 3.2%
	470,700	CSX Corp.		14,224,554
	284,000	Norfolk Southern Corp.		12,135,320
	15,600	Union Pacific Corp.		1,253,460
				27,613,334

The accompanying notes are an integral part of these financial statements. 

33

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND

Schedule of Investments (continued)

August 31, 2006

Shares		Description	Value
Common Stocks – (continued)
Semiconductor Equipment & Products – 3.9%
	59,100	Advanced Micro Devices, Inc.*	$	1,476,909
	257,500	Freescale Semiconductor, Inc. Class B*		7,959,325
	41,350	Intel Corp.		807,979
	95,200	LSI Logic Corp.*		766,360
	141,900	Micron Technology, Inc.*		2,452,032
	614,500	Texas Instruments, Inc.		20,026,555
				33,489,160
Software – 7.0%
	449,700	Cadence Design Systems, Inc.*		7,388,571
	59,200	Fair Isaac Corp.		2,072,592
	66,400	Intuit Inc.*		2,006,608
	1,664,500	Microsoft Corp.		42,761,005
	192,500	Red Hat, Inc.*		4,473,700
	85,100	Synopsys, Inc.*		1,613,496
				60,315,972
Specialty Retail – 3.5%
	230,100	AutoNation, Inc.*		4,470,843
	469,623	Circuit City Stores, Inc.		11,087,799
	365,900	Office Depot, Inc.*		13,479,756
	51,000	United Rentals, Inc.*		1,104,660
				30,143,058
Textiles & Apparel – 0.2%
	59,400	Jones Apparel Group, Inc.		1,859,220
Tobacco – 1.1%
	10,050	Altria Group, Inc.		839,477
	160,600	UST, Inc.		8,489,316
				9,328,793
Trading Companies & Distributors – 0.1%
	26,400	MSC Industrial Direct Co., Inc.		1,039,104
Wireless Telecommunication Services – 0.1%
	18,900	Leap Wireless International, Inc.*		874,314
	9,400	Telephone & Data Systems, Inc. Special Shares		385,212
				1,259,526
TOTAL COMMON STOCKS
(Cost $795,279,091)			$	845,030,003

Principal		Interest			Maturity
Amount		Rate			Date		Value
Repurchase Agreement(b) – 1.6%
Joint Repurchase Agreement Account II
$	13,700,000		5.28	%		09/01/2006	$	13,700,000
Maturity Value: $13,702,010
(Cost $13,700,000)
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
(Cost $808,979,091)							$	858,730,003

Shares		Description	Value
Securities Lending Collateral – 0.9%
	7,559,200	Boston Global Investment Trust – Enhanced Portfolio	$	7,559,200
(Cost $7,559,200)
TOTAL INVESTMENTS – 100.3%
(Cost $816,538,291)			$	866,289,203
LIABILITIES IN EXCESS OF   OTHER ASSETS – (0.3)%				(2,437,651	)
NET ASSETS – 100.0%			$	863,851,552

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

*	Non-income producing security.
(a)	All or portion of security is on loan.
(b)	Joint repurchase agreement was entered into on August 31, 2006. Additional information appears on page 49.

Investment Abbreviation:
REIT	—	Real Estate Investment Trust

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At August 31, 2006, the following futures contracts were open as follows:

	Number of		Settlement	Market		Unrealized
Type	Contracts Long		Month	Value		Gain
S&P Mini 500 Index		249	September 2006	$	16,254,720	$	49,475

 The accompanying notes are an integral part of these financial statements.

34

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Performance Summary

August 31, 2006

The following graph shows the value, as of August 31, 2006, of a $10,000 investment made on August 15, 1997 (commencement of operations) in Institutional Shares at NAV of the Goldman Sachs Structured Small Cap Equity Fund. For comparative purposes, the performance of the Fund’s benchmark, the Russell 2000 Index (with dividends reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, portfolio operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a portfolio.

Structured Small Cap Equity Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested August 15, 1997 to August 31, 2006.

Average Annual Total Return through August 31, 2006	Since Inception		Five Years		One Year
Class A (commenced August 15, 1997)
Excluding sales charges		7.54%		10.26%		2.42%
Including sales charges		6.88%		9.02%		-3.24%
Class B (commenced August 15, 1997)
Excluding contingent deferred sales charges		6.75%		9.45%		1.66%
Including contingent deferred sales charges		6.75%		9.09%		-3.42%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		6.77%		9.43%		1.65%
Including contingent deferred sales charges		6.77%		9.43%		0.63%
Institutional Class (commenced August 15, 1997)		7.96%		10.68%		2.77%
Service Class (commenced August 15, 1997)		7.44%		10.16%		2.30%

35

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Schedule of Investments

August 31, 2006

Shares		Description	Value
Common Stocks – 100.0%
Aerospace & Defense – 2.3%
	69,800	AAR Corp.*	$	1,557,238
	28,000	Curtiss-Wright Corp.		870,520
	82,500	Kaman Corp.		1,477,575
	24,500	Ladish Co., Inc.*		856,765
	92,650	Triumph Group, Inc.*		4,072,894
	155,350	United Industrial Corp.(a)		8,368,704
				17,203,696
Air Freight & Couriers – 0.2%
	50,200	EGL, Inc.*		1,534,614
Auto Components – 0.5%
	197,700	ArvinMeritor, Inc.		2,935,845
	14,300	Autoliv, Inc.		808,236
				3,744,081
Banks – 8.7%
	43,400	Accredited Home Lenders Holding Co.*		1,385,762
	39,650	Bank of Hawaii Corp.		1,935,713
	24,900	Bank of the Ozarks, Inc.		794,808
	130,600	BankUnited Financial Corp.		3,365,562
	63,900	Brookline Bancorp, Inc.		853,065
	6,609	Cascade Bancorp		234,884
	74,731	Cathay General Bancorp.		2,786,719
	24,800	Central Pacific Financial Corp.		897,512
	71,700	City National Corp.		4,717,860
	167,300	Corus Bankshares, Inc.(a)		3,648,813
	39,500	Downey Financial Corp.		2,424,905
	38,850	First Charter Corp.		943,667
	12,750	First Citizens BancShares, Inc.		2,496,450
	49,200	First Indiana Corp.		1,202,940
	3,741	First Regional Bancorp*		105,683
	60,300	FirstFed Financial Corp.*(a)		3,066,858
	20,675	IBERIABANK Corp.		1,205,352
	21,111	Intervest Bancshares Corp.*		887,084
	57,200	Mercantile Bankshares Corp.		2,112,396
	29,000	Mid-State Bancshares		785,030
	131,400	Nara Bancorp, Inc.		2,430,900
	37,700	Pacific Capital Bancorp.		1,054,092
	122,210	PFF Bancorp, Inc.		4,410,559
	29,598	Preferred Bank		1,658,968
	27,100	PrivateBancorp, Inc.		1,203,240
	53,200	Provident Financial Services, Inc.		992,180
	98,000	Republic Bancorp, Inc.		1,267,140
	56,500	Signature Bank*		1,856,025
	42,500	Sterling Bancshares, Inc.		881,450
	25,700	Sterling Financial Corp.		849,642
	45,500	Summit Bancshares, Inc.		1,290,380
	30,400	Susquehanna Bancshares, Inc.		743,888
	49,382	SVB Financial Group*		2,231,573
	18,100	Tompkins Trustco, Inc.		811,966
	23,280	TriCo Bancshares		573,386
	39,700	Trustmark Corp.		1,253,329
	56,500	Umpqua Holdings Corp.		1,546,405
	46,400	United Community Financial Corp.		589,744
	21,100	Whitney Holding Corp.		742,087
	38,900	Wilmington Trust Corp.		1,713,545
	115,000	Wilshire Bancorp, Inc.		2,234,450
				66,186,012
Biotechnology – 1.6%
	399,652	Alkermes, Inc.*		6,534,310
	107,100	Applera Corp. – Celera Genomics Group*		1,490,832
	23,183	ArQule, Inc.*		117,770
	19,300	Cephalon, Inc.*		1,100,486
	11,500	IDEXX Laboratories, Inc.*		1,058,115
	30,200	Kendle International, Inc.*		797,884
	71,500	Millennium Pharmaceuticals, Inc.*		776,490
				11,875,887
Building Products – 0.3%
	50,000	Universal Forest Products, Inc.		2,438,000
Chemicals – 1.6%
	73,867	A. Schulman, Inc.		1,742,522
	45,928	Innospec, Inc.		1,259,805
	82,103	NewMarket Corp.		5,084,639
	45,700	OM Group, Inc.*		1,828,000
	47,600	Penford Corp.		744,464
	32,900	Spartech Corp.		741,237
	25,900	Stepan Co.		763,532
				12,164,199
Commercial Services & Supplies – 6.5%
	86,486	Administaff, Inc.		2,988,091
	1,100	Amrep Corp.*		47,597
	205,384	Arbitron, Inc.		7,706,008
	57,100	Bowne & Co., Inc.		880,482
	36,900	Cenveo, Inc.*		774,900
	47,700	Consolidated Graphics, Inc.*		2,965,986
	85,200	Convergys Corp.*		1,778,124
	11,682	CPI Corp.		460,621
	320,400	CSG Systems International, Inc.*(a)		8,625,168
	44,700	Global Payments, Inc.		1,700,835
	28,200	ICT Group, Inc.*		816,390
	3,892	Lightbridge, Inc.*		46,315
	54,227	NCO Group, Inc.*		1,420,747
	88,900	PHH Corp.*		2,232,279
	77,800	Pre-Paid Legal Services, Inc.(a)		2,922,168
	56,202	SITEL Corp.*		168,606
	527,206	Spherion Corp.*		3,938,229
	70,500	StarTek, Inc.		801,585
	51,400	TeleTech Holdings, Inc.*		776,140
	36,600	The Brink’s Co.		2,085,102

 The accompanying notes are an integral part of these financial statements.

36

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Shares		Description	Value
Common Stocks – (continued)
Commercial Services & Supplies – (continued)
	82,000	The Standard Register Co.	$	1,052,060
	125,929	Volt Information Sciences, Inc.*		5,369,613
				49,557,046
Communications Equipment – 2.2%
	52,225	Anaren, Inc.*		1,178,196
	950,400	Brocade Communications Systems, Inc.*		5,892,480
	75,700	DSP Group, Inc.*		1,852,379
	68,500	InterDigital Communications Corp.*		2,276,255
	217,300	Polycom, Inc.*		5,169,567
	90,898	Symmetricom, Inc.*		678,099
				17,046,976
Computers & Peripherals – 1.3%
	226,600	Hypercom Corp.*		2,116,444
	162,836	Intergraph Corp.*		6,083,553
	61,300	Synaptics, Inc.*(a)		1,550,277
				9,750,274
Construction & Engineering – 1.1%
	157,100	EMCOR Group, Inc.*		8,709,624
Distributors – 0.5%
	227,370	Brightpoint, Inc.*		3,783,437
	200	The Andersons, Inc.		8,202
				3,791,639
Diversified Financials – 3.7%
	72,900	Cash America International, Inc.		2,687,823
	223,400	CBIZ, Inc.*(a)		1,742,520
	139,198	CompuCredit Corp.*(a)		4,057,622
	90,732	EZCORP, Inc.*		3,563,046
	171,000	First Cash Financial Services, Inc.*		3,561,930
	56,750	Investment Technology Group, Inc.*		2,622,417
	24,000	Jackson Hewitt Tax Service, Inc.		758,400
	63,400	Knight Capital Group, Inc.*		1,106,964
	13,600	Piper Jaffray Cos., Inc.*		796,688
	84,195	Portfolio Recovery Associates, Inc.*(a)		3,344,225
	48,409	Thomas Weisel Partners Group, Inc.*		703,383
	83,400	World Acceptance Corp.*		3,333,498
				28,278,516
Diversified Telecommunication Services – 0.5%
	100,741	CT Communications, Inc.		2,321,073
	141,500	Ditech Networks, Inc.*		1,246,615
				3,567,688
Electric Utilities – 0.8%
	32,300	Alliant Energy Corp.		1,181,857
	30,800	Cleco Corp.		768,768
	32,000	NorthWestern Corp.		1,114,880
	162,717	Reliant Energy, Inc.*		2,190,171
	24,846	UIL Holdings Corp.		907,873
				6,163,549
Electrical Equipment – 1.7%
	102,000	A.O. Smith Corp.		4,091,220
	104,600	Encore Wire Corp.*(a)		3,928,776
	37,800	General Cable Corp.*		1,456,434
	6,356	Superior Essex, Inc.*		226,973
	30,900	The Genlyte Group, Inc.*		2,024,877
	45,600	Woodward Governor Co.		1,535,352
				13,263,632
Electronic Equipment & Instruments – 2.8%
	71,100	Coherent, Inc.*		2,578,086
	279,250	Exar Corp.*		3,903,915
	41,000	Greatbatch, Inc.*		1,002,860
	93,000	Ingram Micro, Inc.*		1,674,000
	91,000	KEMET Corp.*		748,930
	67,150	Methode Electronics, Inc.		533,171
	231,150	Plexus Corp.*		4,581,393
	148,400	Sirenza Microdevices, Inc.*(a)		1,375,668
	49,100	Tech Data Corp.*		1,713,099
	52,400	Teledyne Technologies, Inc.*		2,009,016
	73,500	TTM Technologies, Inc.*		945,210
				21,065,348
Energy Equipment & Services – 2.4%
	87,500	Input/Output, Inc.*(a)		872,375
	83,550	Universal Compression Holdings, Inc.*		4,547,626
	211,400	Veritas DGC, Inc.*(a)		12,593,098
				18,013,099
Food & Drug Retailing – 2.4%
	109,325	Flowers Foods, Inc.		2,968,174
	146,781	Longs Drug Stores Corp.		6,668,261
	143,709	Performance Food Group Co.*		3,536,678
	436,300	Terra Industries, Inc.*(a)		3,202,442
	95,500	The Great Atlantic & Pacific Tea Co., Inc.(a)		2,189,815
				18,565,370
Food Products – 1.7%
	33,200	MGP Ingredients, Inc.(a)		799,788
	1,664	Pilgrim’s Pride Corp.		40,535
	27,900	Ralcorp Holdings, Inc.*		1,380,213
	1,579	Seaboard Corp.		2,210,600
	40,800	Sensient Technologies Corp.		820,896
	173,625	USANA Health Sciences, Inc.*(a)		7,771,455
				13,023,487
Gas Utilities – 0.0%
	5,926	Nicor, Inc.(a)		258,729

The accompanying notes are an integral part of these financial statements. 

37

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Schedule of Investments (continued)

August 31, 2006

Shares		Description	Value
Common Stocks – (continued)
Health Care Equipment & Supplies – 5.0%
	24,400	Bio-Rad Laboratories, Inc.*	$	1,791,204
	53,463	Candela Corp.*		557,619
	81,160	Haemonetics Corp.*		3,780,433
	353,734	Illumina, Inc.*		11,913,761
	374,025	Immucor, Inc.*		7,768,499
	96,600	Molecular Devices Corp.*		2,319,366
	60,900	Palomar Medical Technologies, Inc.*		2,417,730
	111,000	SurModics, Inc.*(a)		3,882,780
	119,900	Viasys Healthcare, Inc.*		3,179,748
	21,000	Zoll Medical Corp.*		796,110
				38,407,250
Health Care Providers & Services – 4.2%
	63,700	Alderwoods Group, Inc.*		1,260,623
	142,900	AMERIGROUP Corp.*		4,507,066
	114,400	Genesis HealthCare Corp.*		5,209,776
	15,900	Magellan Health Services, Inc.*		764,313
	43,300	Molina Healthcare, Inc.*		1,603,832
	113,350	Odyssey HealthCare, Inc.*		1,818,134
	24,300	Owens & Minor, Inc.		781,731
	23,500	PAREXEL International Corp.*		777,850
	22,129	Per-Se Technologies, Inc.*		504,320
	80,800	PSS World Medical, Inc.*		1,567,520
	148,500	Sierra Health Services, Inc.*		6,370,650
	117,900	Stewart Enterprises, Inc.		681,462
	199,150	Sunrise Senior Living, Inc.*		5,876,916
				31,724,193
Hotels, Restaurants & Leisure – 3.9%
	69,500	Bob Evans Farms, Inc.		1,969,630
	35,700	CEC Entertainment, Inc.*		1,138,116
	68,700	Century Casinos, Inc.*		704,175
	170,500	Choice Hotels International, Inc.		6,463,655
	87,800	Landry’s Restaurants, Inc.		2,401,330
	97,060	Live Nation, Inc.*		2,036,319
	64,238	Lone Star Steakhouse & Saloon, Inc.		1,752,412
	32,300	O’Charley’s, Inc.*		597,227
	308,000	Papa John’s International, Inc.*		10,472,000
	440,540	Six Flags, Inc.*(a)		2,299,619
				29,834,483
Household Durables – 1.6%
	234,300	American Greetings Corp.(a)		5,745,036
	106,000	Furniture Brands International, Inc.(a)		2,029,900
	92,500	Kimball International, Inc. Class B		1,631,700
	35,300	Lifetime Brands, Inc.		704,588
	30,200	Toro Co.		1,208,302
	31,147	Universal Electronics, Inc.*		560,335
				11,879,861
Insurance – 2.4%
	62,300	Argonaut Group, Inc.*		1,915,725
	35,881	FBL Financial Group, Inc.		1,189,814
	113,000	LandAmerica Financial Group, Inc.(a)		7,146,120
	29,500	Ohio Casualty Corp.		765,525
	11,052	Reinsurance Group of America, Inc.		571,167
	4,745	Seabright Insurance Holdings*		60,072
	188,050	Stewart Information Services Corp.		6,414,386
				18,062,809
Internet & Catalog Retail – 0.0%
	20,118	Systemax, Inc.*		230,351
Internet Software & Services – 3.6%
	281,450	Digital Insight Corp.*		7,320,514
	87,400	InfoSpace, Inc.*		1,942,902
	1,055,066	RealNetworks, Inc.*		11,637,378
	146,204	SonicWALL, Inc.*		1,500,053
	75,500	TheStreet.com, Inc.		812,380
	342,200	United Online, Inc.		3,925,034
				27,138,261
IT Consulting & Services – 1.1%
	169,100	Agilysys, Inc.		2,286,232
	264,400	Redback Networks, Inc.*		4,928,416
	39,500	SYNNEX Corp.*		878,085
				8,092,733
Leisure Equipment & Products – 0.2%
	71,700	Marvel Entertainment, Inc.*(a)		1,537,248
Machinery – 1.6%
	28,500	EnPro Industries, Inc.*		896,040
	45,400	Insteel Industries, Inc.		946,136
	58,200	NACCO Industries, Inc.		7,771,446
	42,700	SPX Corp.		2,254,560
				11,868,182
Media – 0.8%
	77,700	Belo Corp.		1,266,510
	73,200	Catalina Marketing Corp.		2,097,180
	488	Cox Radio, Inc.*		7,740
	39,800	LodgeNet Entertainment Corp.*		756,598
	57,300	Scholastic Corp.*		1,722,438
				5,850,466
Metals & Mining – 1.4%
	331,300	Ryerson Tull, Inc.		7,016,934
	323,500	USEC, Inc.		3,270,585
	39,200	Wheeling-Pittsburgh Corp.*		690,704
				10,978,223

 The accompanying notes are an integral part of these financial statements.

38

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Shares		Description	Value
Common Stocks – (continued)
Multi-Utilities – 0.8%
	219,073	Avista Corp.	$	5,310,330
	34,400	Westar Energy, Inc.		839,016
				6,149,346
Multiline Retail – 1.3%
	136,100	Big Lots, Inc.*		2,497,435
	137,245	Dillard’s, Inc.		4,279,299
	213,258	Retail Ventures, Inc.*(a)		3,055,987
				9,832,721
Office Electronics – 1.5%
	787,756	IKON Office Solutions, Inc.		11,225,523
Oil & Gas – 2.9%
	106,100	Berry Petroleum Co.		3,313,503
	139,651	Holly Corp.		6,398,809
	258,400	Swift Energy Co.*		11,307,584
	65,706	TransMontaigne, Inc.*		745,106
				21,765,002
Paper & Forest Products – 0.1%
	77,900	Buckeye Technologies, Inc.*		633,327
Personal Products – 0.3%
	26,700	NBTY, Inc.*		850,662
	175,644	Parlux Fragrances, Inc.*(a)		1,046,838
				1,897,500
Pharmaceuticals – 1.8%
	287,250	Alpharma, Inc.		6,015,015
	33,764	Caraco Pharmaceutical Laboratories Ltd.*		382,883
	46,907	Combinatorx, Inc.*		354,148
	90,800	King Pharmaceuticals, Inc.*		1,472,776
	33,600	Mylan Laboratories, Inc.		682,752
	26,461	New River Pharmaceuticals, Inc.*(a)		690,103
	74,350	Perrigo Co.		1,200,009
	118,200	Watson Pharmaceuticals, Inc.*		3,030,648
				13,828,334
Real Estate – 8.8%
	1,613	Acadia Realty Trust		39,744
	349,570	American Home Mortgage Investment Corp.		11,081,369
	158,114	Commercial Net Lease Realty		3,516,455
	56,200	Entertainment Properties Trust		2,802,132
	30,510	Equity One, Inc.		767,327
	289,550	FelCor Lodging Trust, Inc.		6,210,848
	248,300	HRPT Properties Trust		2,880,280
	46,500	Inland Real Estate Corp.		750,975
	94,600	Jer Investors Trust, Inc.		1,578,874
	127,974	Jones Lang LaSalle, Inc.		10,655,115
	119,450	National Health Investors, Inc.		3,265,763
	235,995	New Century Financial Corp. (REIT)(a)		9,135,366
	135,200	NorthStar Realty Finance Corp.		1,621,048
	33,625	PS Business Parks, Inc.		2,055,160
	77,400	RAIT Investment Trust (REIT)		2,165,652
	317,450	Senior Housing Properties Trust		6,460,108
	198,300	Spirit Finance Corp. (REIT)		2,250,705
				67,236,921
Road & Rail – 1.1%
	180,900	Dollar Thrifty Automotive Group, Inc.*		7,720,812
	15,764	U. S. Xpress Enterprises, Inc.*		328,364
	23,285	Universal Truckload Services, Inc.*		642,666
				8,691,842
Semiconductor Equipment & Products – 2.3%
	981,993	Atmel Corp.*		5,666,100
	831,428	Cirrus Logic, Inc.*		6,086,053
	368,850	MPS Group, Inc.*		5,186,031
	89,800	Virage Logic Corp.*		746,238
				17,684,422
Software – 3.5%
	80,700	ANSYS, Inc.*		3,771,918
	114,000	Blackbaud, Inc.		2,634,540
	22,400	Fair Isaac Corp.		784,224
	76,900	Mentor Graphics Corp.*		1,115,050
	182,100	Merge Technologies, Inc.*(a)		1,349,361
	96,100	MicroStrategy, Inc.*(a)		8,764,320
	38,300	Sybase, Inc.*		883,581
	146,700	Synopsys, Inc.*		2,781,432
	240,889	TradeStation Group, Inc.*		3,529,024
	23,300	Transaction Systems Architects, Inc.*		772,861
	30,448	Witness Systems, Inc.*		494,780
				26,881,091
Specialty Retail – 4.0%
	68,800	Charlotte Russe Holdings, Inc.*		1,836,960
	80,500	Christopher & Banks Corp.		1,960,175
	25,800	Citi Trends, Inc.*(a)		810,894
	258,580	Dress Barn, Inc.*(a)		4,563,937
	21,800	Group 1 Automotive, Inc.		987,540
	30,054	Gymboree Corp.*		1,008,312
	17,300	OfficeMax, Inc.		718,469
	185,600	Payless ShoeSource, Inc.*		4,354,176
	45,300	Rush Enterprises, Inc.*		792,750
	144,300	Sonic Automotive, Inc.(a)		3,051,945
	186,439	Stage Stores, Inc.		4,914,532
	32,500	The Cato Corp.		754,975
	83,800	United Auto Group, Inc.		1,711,196
	120,300	United Rentals, Inc.*		2,605,698
				30,071,559
Textiles & Apparel – 2.8%
	161,597	Guess?, Inc.*		6,593,158
	82,500	Hartmarx Corp.*		492,525

The accompanying notes are an integral part of these financial statements. 

39

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Schedule of Investments (continued)

August 31, 2006

Shares		Description	Value
Common Stocks – (continued)
Textiles & Apparel – (continued)
	214,400	Jones Apparel Group, Inc.	$	6,710,720
	80,200	Kellwood Co.		2,198,282
	51,150	Perry Ellis International, Inc.*		1,379,004
	174,000	Skechers U.S.A., Inc.*		3,939,360
				21,313,049
Wireless Telecommunication Services – 0.2%
	37,100	Leap Wireless International, Inc.*		1,716,246
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
(Cost $710,152,536)			$	760,732,409
Securities Lending Collateral – 13.0%
	99,117,675	Boston Global Investment Trust – Enhanced Portfolio	$	99,117,675
(Cost $99,117,675)
TOTAL INVESTMENTS – 113.0%
(Cost $809,270,211)			$	859,850,084
LIABILITIES IN EXCESS OF OTHER   ASSETS – (13.0)%				(98,644,076	)
NET ASSETS – 100.0%			$	761,206,008

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

*	Non-income producing security.
(a)	All or portion of security is on loan.

Investment Abbreviation:
REIT	—	Real Estate Investment Trust

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At August 31, 2006, the following futures contracts were open as follows:

	Number of		Settlement	Market		Unrealized
Type	Contracts Long		Month	Value		Gain
Russell Mini 2000 Index		29	September 2006	$	2,092,930	$	47,852

 The accompanying notes are an integral part of these financial statements.

40

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Performance Summary

August 31, 2006

The following graph shows the value, as of August 31, 2006, of a $10,000 investment made on August 15, 1997 (commencement of operations) in Institutional Shares at NAV of the Goldman Sachs Structured International Equity Fund. For comparative purposes, the performance of the Fund’s benchmark, the Morgan Stanley Capital International Europe, Australasia, Far East Index (unhedged, with dividends reinvested) (“MSCI EAFE Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, portfolio operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a portfolio.

Structured International Equity Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested August 15, 1997 to August 31, 2006.

Average Annual Total Return through August 31, 2006	Since Inception		Five Years		One Year
Class A (commenced August 15, 1997)
Excluding sales charges		5.47%		12.09%		24.02%
Including sales charges		4.81%		10.82%		17.20%
Class B (commenced August 15, 1997)
Excluding contingent deferred sales charges		4.91%		11.44%		23.18%
Including contingent deferred sales charges		4.91%		11.17%		18.14%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		4.91%		11.42%		23.10%
Including contingent deferred sales charges		4.91%		11.42%		22.09%
Institutional Class (commenced August 15, 1997)		6.09%		12.70%		24.52%
Service Class (commenced August 15, 1997)		5.58%		12.14%		23.87%

41

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Schedule of Investments

August 31, 2006

Shares		Description	Value
Common Stocks – 95.5%
Australia – 1.6%
	15,522	APN News & Media Ltd. (Media)	$	59,073
	40,111	Australia & New Zealand Banking Group Ltd. (Banks)		832,776
	27,432	Australian Stock Exchange Ltd. (Diversified Financials)		690,156
	595,345	AXA Asia Pacific Holdings Ltd. (Insurance)		2,967,944
	95,204	CFS Gandel Retail Trust (Real Estate)		137,957
	87,235	Challenger Financial Services Group Ltd. (Diversified Financials)		233,134
	87,748	Coles Myer Ltd. (Food & Drug Retailing)		936,570
	177,128	Commonwealth Bank of Australia (Banks)		6,172,768
	213,402	Commonwealth Property Office Fund (Real Estate)		231,165
	26,022	CSL Ltd. (Pharmaceuticals)		1,007,800
	57,444	CSR Ltd. (Construction Materials)		137,862
	217,021	DB RREEF Trust (Real Estate)		259,094
	243,527	General Property Trust (Real Estate)		849,232
	347,493	Goodman Fielder Ltd.* (Food Products)		561,687
	117,318	Harvey Norman Holdings Ltd. (Multiline Retail)		307,651
	481,121	ING Industrial Fund (Real Estate)		885,279
	301,043	Investa Property Group (Real Estate)		544,236
	161,958	Leighton Holdings Ltd. (Construction & Engineering)		2,447,228
	62,373	Lend Lease Corp., Ltd. (Real Estate)		747,446
	56,596	Mirvac Group (Real Estate)		197,363
	1,584	PaperlinX Ltd. (Paper & Forest Products)		4,155
	2,156	Perpetual Ltd. (Diversified Financials)		119,730
	169,283	Qantas Airways Ltd. (Airlines)		443,885
	99,866	QBE Insurance Group Ltd. (Insurance)		1,816,206
	156,474	Rio Tinto Ltd.(a) (Metals & Mining)		8,683,850
	300,494	Santos Ltd. (Oil & Gas)		2,567,289
	197,301	Stockland (Real Estate)		1,089,664
	561,875	Symbion Health Ltd. (Air Freight & Couriers)		1,390,882
	556,284	Telstra Corp. Ltd.(a) (Diversified Telecommunication Services)		1,529,479
	27,569	Westpac Banking Corp. (Banks)		491,364
	104,486	Woolworths Ltd. (Food & Drug Retailing)		1,649,294
				39,992,219
Austria – 1.9%
	7,346	Andritz AG (Machinery)		1,158,456
	13,589	Boehler-Uddeholm AG (Metals & Mining)		731,171
	4,560	Flughafen Wien AG (Transportation Infrastructure)		369,664
	160,000	Oesterreichische Elektrizitaetswirtschafts AG (Verbund)(a) (Electric Utilities)		8,058,066
	323,426	Telekom Austria AG (Diversified Telecommunication Services)		7,933,519
	732,529	voestalpine AG(a) (Metals & Mining)		27,754,385
				46,005,261
Belgium – 3.6%
	85,705	Agfa Gevaert NV (Leisure Equipment & Products)		2,010,491
	51,811	Bekaert NV (Electrical Equipment)		5,084,654
	2,604	Cofinimmo (Real Estate)		454,948
	8,761	Compagnie Maritime Belge SA (Marine)		297,057
	91,548	Delhaize Group (Food & Drug Retailing)		6,968,175
	226,678	Dexia (Banks)		5,823,358
	1,529,714	Fortis(a) (Diversified Financials)		59,566,001
	21,015	Mobistar SA (Diversified Telecommunication Services)		1,727,780
	1,039	S.A. D’ Ieteren NV (Distributors)		347,134
	118,664	UCB SA(a) (Pharmaceuticals)		6,955,869
				89,235,467
Denmark – 1.0%
	11,350	Bang & Olufsen A/S Class B(a) (Household Durables)		1,163,048
	52,150	Carlsberg A/S Class B (Beverages)		4,052,375
	443,600	Danske Bank A/S (Banks)		17,061,346
	115,700	H. Lundbeck A/S(a) (Pharmaceuticals)		2,665,336
				24,942,105
France – 9.2%
	320,312	Air France (Transportation - Airlines)		8,743,740
	532,572	BNP Paribas SA(a) (Banks)		56,627,201
	182,590	Bouygues SA (Wireless Telecommunication Services)		9,619,677

 The accompanying notes are an integral part of these financial statements.

42

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Shares		Description	Value
Common Stocks – (continued)
France – (continued)
	577,776	Cap Gemini SA(a) (IT Consulting & Services)	$	31,687,243
	114,461	Carrefour SA (Food & Drug Retailing)		7,066,316
	50,143	Casino Guichard-Perrachon SA (Food & Drug Retailing)		4,304,290
	128,358	Credit Agricole SA(a) (Banks)		5,215,802
	278,705	European Aeronautic Defence & Space Co.(a) (Aerospace & Defense)		8,410,603
	45,900	Gaz de France (GDF)(a) (Oil & Gas)		1,708,209
	86,285	Pinault-Printemps-Redoute SA(a) (Multiline Retail)		11,913,556
	308,840	Publicis Groupe (Media)		12,199,654
	114,246	Schneider Electric SA(a) (Electrical Equipment)		12,186,449
	42,678	Societe BIC SA(a) (Commercial Services & Supplies)		2,655,944
	102,305	Societe Generale Series A(a) (Banks)		16,524,510
	263,541	Sodexho Alliance SA (Hotels, Restaurants & Leisure)		14,101,512
	402,843	STMicroelectronics NV (Semiconductor Equipment & Products)		6,639,168
	447,591	Vivendi Universal SA(a) (Media)		15,387,723
				224,991,597
Germany – 13.4%
	1,081,491	BASF AG(a) (Chemicals)		89,233,529
	63,236	Beiersdorf AG (Personal Products)		3,501,546
	53,726	Commerzbank AG (Banks)		1,877,795
	689,784	Deutsche Bank AG(a) (Banks)		78,901,340
	1,882,478	Deutsche Lufthansa AG (Airlines)		37,303,630
	423,942	E.ON AG (Electrical Utilities)		53,907,650
	49,681	Fresenius Medical Care AG(a) (Healthcare Providers & Services)		6,546,156
	43,534	Hochtief AG (Construction & Engineering)		2,479,179
	233,554	Merck KGaA(a) (Pharmaceuticals)		23,191,867
	155,735	Muenchener Rueckversicherungs-Gesellschaft AG(a) (Insurance)		23,480,162
	245,126	ThyssenKrupp AG(a) (Metals & Mining)		8,354,969
	2,074	Wincor Nixdorf AG (Computers & Peripherals)		288,920
				329,066,743
Hong Kong – 3.0%
	371,000	ASM Pacific Technology Ltd. (Semiconductor Equipment & Products)		1,922,223
	687,000	Boc Hong Kong Holdings Ltd. (Banks)		1,506,537
	2,949,000	Cathay Pacific Airways Ltd. (Airlines)		5,500,164
	526,000	Cheung Kong (Holdings) Ltd. (Real Estate)		5,809,280
	1,342,000	CLP Holdings Ltd. (Electric Utilities)		8,486,093
	26,000	Foxconn International Holdings Ltd.* (Wireless Telecommunication Services)		68,982
	366,000	Giordano International Ltd. (Specialty Retail)		207,380
	1,200,000	Henderson Land Development Co. Ltd. (Real Estate)		6,776,218
	775,500	Hong Kong Electric Holdings Ltd. (Electric Utilities)		3,707,948
	853,000	Hong Kong Exchanges & Clearing Ltd. (Diversified Financials)		5,805,598
	876,000	Hutchison Whampoa Ltd. (Industrial Conglomerates)		7,946,616
	2,000	Kerry Properties Ltd. (Real Estate)		7,544
	182,000	Li & Fung Ltd. (Distributors)		433,630
	862,000	Link REIT (Real Estate)		1,789,575
	2,857,000	New World Development Co., Ltd. (Real Estate)		5,121,203
	146,000	Shangri-La Asia Ltd. (Hotels, Restaurants & Leisure)		289,266
	191,500	Swire Pacific Ltd. Series A (Diversified Financials)		2,100,750
	581,000	Television Broadcasts Ltd. (Media)		3,297,655
	362,000	Texwinca Holdings Ltd. (Textiles & Apparel)		237,596
	773,600	The Bank of East Asia Ltd. (Banks)		3,440,602
	2,120,000	The Wharf (Holdings) Ltd. (Real Estate)		7,158,827
	209,500	Wing Hang Bank Ltd. (Banks)		2,007,248
	322,000	Yue Yuen Industrial (Holdings) Ltd. (Specialty Retail)		931,499
				74,552,434
Italy – 1.7%
	1,987,199	Banca Monte dei Paschi di Siena S.p.A.(a) (Banks)		12,087,707
	174,671	Benetton Group S.p.A. (Textiles & Apparel)		2,613,930
	411,671	Fiat S.p.A.*(a) (Automobiles)		5,900,825

The accompanying notes are an integral part of these financial statements. 

43

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Schedule of Investments (continued)

August 31, 2006

Shares		Description	Value
Common Stocks – (continued)
Italy – (continued)
	797,025	Finmeccanica S.p.A. (Aerospace & Defense)	$	17,652,814
	88,369	Italcementi S.p.A.(a) (Construction Materials)		2,179,599
				40,434,875
Japan – 22.4%
	41,800	Aderans Co., Ltd. (Personal Products)		1,080,563
	5,600	Aisin Seiki Co., Ltd. (Auto Components)		169,251
	1,013,600	Alps Electric Co., Ltd. (Electronic Equipment & Instruments)		11,323,133
	786,000	AMADA Co., Ltd. (Machinery)		8,181,002
	135,600	Aoyama Trading Co., Ltd. (Specialty Retail)		4,390,297
	163,800	Asahi Breweries Ltd. (Beverages)		2,400,615
	59,400	Autobacs Seven Co., Ltd. (Specialty Retail)		2,448,072
	137,800	Canon Sales Co., Inc. (Office Electronics)		3,261,121
	246,700	Canon, Inc. (Office Electronics)		12,255,632
	202,000	Central Glass Co., Ltd. (Building Products)		1,123,440
	254	Central Japan Railway Co. (Road & Rail)		2,743,913
	836,000	Dai Nippon Printing Co., Ltd. (Commercial Services & Supplies)		12,421,157
	2,900,000	Daiwa Securities Group, Inc. (Diversified Financials)		34,326,014
	412	East Japan Railway Co. (Road & Rail)		3,035,895
	214,000	Fuji Electric Holdings Co. Ltd. (Electrical Equipment)		1,081,447
	45,800	Fuji Soft ABC, Inc. (Software)		1,344,176
	365,000	Fujikura Ltd. (Electrical Equipment)		4,293,385
	968,000	Gunze Ltd. (Textiles & Apparel)		5,661,051
	2,410	Hakuhodo DY Holdings, Inc. (Commercial Services & Supplies)		160,982
	911,000	Hankyu Department Stores, Inc.(a) (Multiline Retail)		7,222,430
	151,000	Hino Motor, Ltd.(a) (Machinery)		811,790
	8,300	Hitachi High-Technologies Corp. (Trading Companies & Distributors)		218,243
	2,618,000	Hitachi Ltd. (Electronic Equipment & Instruments)		16,570,186
	155,400	Hokkaido Electric Power Co., Inc. (Electric Utilities)		3,834,504
	1,064,300	Honda Motor Co. Ltd. (Automobiles)		36,015,774
	224	Japan Prime Realty Investment Corp. (Real Estate)		663,030
	20	Japan Real Estate Investment Corp. (Real Estate)		172,035
	25	Japan Retail Fund Investment Corp. (Real Estate)		180,312
	144,000	Kamigumi Co. Ltd. (Marine)		1,150,159
	116,000	Kubota Corp. (Machinery)		948,245
	17,000	Kyocera Corp. (Electronic Components & Instruments)		1,462,579
	17,800	Kyushu Electric Power Co., Inc. (Electric Utilities)		423,994
	58,200	Lawson, Inc. (Food & Drug Retailing)		2,027,230
	41,300	Leopalace21 Corp. (Real Estate)		1,457,566
	608,000	Matsushita Electric Industrial Co., Ltd. (Household Durables)		12,948,469
	1,325,000	Mitsubishi Chemical Holdings Corp. (Chemicals)		8,672,990
	1,926,000	Mitsubishi Heavy Industries Ltd. (Machinery)		8,035,341
	149	Mitsubishi Tokyo Financial Group, Inc. (Banks)		2,021,312
	1,278,000	Mitsui Chemicals, Inc. (Chemicals)		8,948,777
	35,000	Mitsui Sumitomo Insurance Co. Ltd. (Insurance)		425,092
	25,400	Namco Bandai Holdings, Inc. (Leisure Equipment & Products)		398,861
	184,000	Nichirei Corp. (Food Products)		1,029,165
	4,000	Nintendo Co., Ltd. (Software)		817,717
	85	Nippon Building Fund, Inc. (Real Estate)		832,351
	379,000	Nippon Express Co. Ltd. (Road & Rail)		2,049,448
	2,766,000	Nippon Oil Corp. (Oil & Gas)		20,934,623
	785,000	Nippon Sheet Glass Co. Ltd. (Building Materials)		3,779,541
	9,947,000	Nippon Steel Corp. (Metals & Mining)		41,393,072
	6,579	Nippon Telephone & Telegraph Corp. (Diversified Telecommunication Services)		33,142,025
	821,000	Nippon Yusen Kabushiki Kaisha (Marine)		5,070,133
	376,000	Nishi-Nippon City Bank Ltd. (Banks)		1,817,440
	376,000	Nisshin Seifun Group, Inc. (Food Products)		4,012,148
	21	Nomura Real Estate Office Fund, Inc. (Real Estate)		163,621

 The accompanying notes are an integral part of these financial statements.

44

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Shares		Description	Value
Common Stocks – (continued)
Japan – (continued)
	44,300	Nomura Research Institute Ltd. (IT Consulting & Services)	$	5,880,224
	370,000	NSK Ltd. (Machinery)		2,946,071
	1,029	NTT Data Corp. (IT Consulting & Services)		4,732,111
	817,000	Obayashi Corp. (Construction & Engineering)		5,645,547
	2,760	OBIC Co. Ltd. (IT Consulting & Services)		553,318
	477,000	Osaka Gas Co., Ltd. (Gas Utilities)		1,753,255
	88,000	Pioneer Corp. (Household Durables)		1,677,755
	17,100	Q.P. Corp. (Food Products)		157,029
	300	Resona Holdings, Inc. (Banks)		940,792
	496,000	Ricoh Co. Ltd. (Office Electronics)		9,704,328
	37,400	Santen Pharmaceutical Co., Ltd. (Pharmaceuticals)		920,855
	50	Sapporo Hokuyo Holdings, Inc. (Banks)		548,832
	391,000	Seino Transportation Co., Ltd. (Road & Rail)		4,470,486
	137,200	Shimachu Co. Ltd. (Specialty Retail)		3,852,615
	230,000	Shionogi & Co., Ltd. (Pharmaceuticals)		4,127,685
	2,153,000	Sompo Japan Insurance, Inc. (Insurance)		28,333,372
	816,600	Sony Corp. (Household Durables)		35,421,622
	190,000	Sumitomo Bakelite Co., Ltd. (Chemicals)		1,521,491
	771,000	Sumitomo Chemical Co., Ltd. (Chemicals)		6,051,086
	19,000	Sumitomo Corp. (Distribution/Wholesale)		255,516
	1,057,100	Sumitomo Electric Industries Ltd. (Electrical Equipment)		13,596,101
	2,515	Sumitomo Mitsui Financial Group, Inc. (Banks)		28,206,211
	43,000	Sumitomo Realty & Development Co. Ltd. (Real Estate)		1,260,499
	39,000	Suruga Bank Ltd. (Regional Banks)		492,024
	77,000	Suzuken Co., Ltd. (Healthcare Providers & Services)		2,867,536
	34,000	Taisho Pharmaceutical Co., Ltd. (Pharmaceuticals)		663,714
	32,800	Takeda Chemical Industries Ltd. (Pharmaceuticals)		2,167,369
	286,000	Tanabe Seiyaku Co., Ltd. (Pharmaceuticals)		3,637,117
	483,000	The Bank of Fukuoka Ltd. (Banks)		3,699,359
	590,000	The Bank of Yokohama Ltd. (Banks)		4,641,013
	245,000	The Chiba Bank Ltd. (Banks)		2,271,534
	191,000	The Gunma Bank Ltd. (Banks)		1,462,575
	387,000	The Sumitomo Trust & Banking Co. Ltd. (Diversified Financials)		4,098,011
	62,100	Tokyo Broadcasting System, Inc. (Media)		1,390,522
	18,000	Tokyo Style Co. Ltd. (Textiles & Apparel)		211,916
	159,000	Tokyu Land Corp. (Real Estate)		1,380,021
	894,000	Toppan Printing Co., Ltd. (Commercial Services & Supplies)		10,096,261
	276,000	Toshiba Corp. (Computers & Peripherals)		1,957,640
	34,000	Toyo Suisan Kaisha Ltd. (Food Products)		517,464
	16,600	Uni-Charm Corp. (Household Products)		926,394
	20,630	USS Co. Ltd. (Specialty Retail)		1,396,322
	298	West Japan Railway Co. (Road & Rail)		1,270,130
	62,200	Yamaha Corp. (Leisure Equipment & Products)		1,286,903
				550,341,975
Netherlands – 8.7%
	2,812,124	Aegon NV (Insurance)		50,248,673
	388,065	ASML Holding NV* (Semiconductor Equipment & Products)		8,518,850
	386,713	Heineken NV(a) (Beverages)		17,931,457
	3,632,535	Koninklijke (Royal) KPN NV (Diversified Telecommunication Services)		44,854,565
	174,488	Koninklijke (Royal) Philips Electronics NV (Household Durables)		5,986,722
	156,240	Koninklijke DSM NV (Chemicals)		6,181,194
	117,916	Oce NV(a) (Office Electronics)		2,047,995
	65,377	Rodamco Europe NV(a) (Real Estate)		7,062,024
	634,118	Royal Dutch Shell PLC Series B (Oil & Gas)		21,866,202
	410,332	TNT NV (Air Freight & Couriers)		15,434,921
	1,375,908	Unilever NV (Food Products)		32,810,411
	66,925	Vedior NV (Commercial Services & Supplies)		1,237,308
				214,180,322

The accompanying notes are an integral part of these financial statements. 

45

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Schedule of Investments (continued)

August 31, 2006

Shares		Description	Value
Common Stocks – (continued)
Norway – 5.4%
	60,000	DNB NOR ASA (Banks)	$	776,477
	2,915,600	Norsk Hydro ASA (Oil & Gas)		75,099,413
	596,300	Orkla ASA (Beverages)		29,211,686
	869,300	Statoil ASA (Oil & Gas)		23,470,330
	372,600	Telenor ASA (Diversified Telecommunication Services)		4,718,632
				133,276,538
Singapore – 1.4%
	316,000	Allgreen Properties Ltd. (Real Estate)		292,919
	220,575	Ascendas Real Estate Investment Trust (Real Estate)		288,297
	1,197,000	Capitaland Ltd. (Real Estate)		3,614,130
	289,000	CapitaMall Trust (Real Estate)		433,218
	228,112	Cycle & Carriage Ltd. (Distributors)		1,620,852
	239,000	DBS Group Holdings Ltd. (Banks)		2,728,560
	237,500	Fraser and Neave Ltd. (Beverages)		599,680
	1,000	Haw Par Corp. Ltd. (Industrial Conglomerates)		3,743
	205,000	Keppel Corp. Ltd. (Diversified Financials)		1,952,206
	169,000	Neptune Orient Lines Ltd. (Marine)		206,773
	881,880	SembCorp Industries Ltd. (Construction & Engineering)		1,948,556
	531,000	Singapore Airlines Ltd. (Airlines)		4,451,798
	480,000	Singapore Exchange Ltd. (Diversified Financials)		1,210,649
	286,000	Singapore Press Holdings Ltd. (Media)		722,677
	115,000	Singapore Technologies Engineering Ltd. (Aerospace & Defense)		213,283
	1,985,780	Singapore Telecommunications Ltd. (Wireless Telecommunication Services)		3,141,917
	2,896,000	ST Assembly Test Services Ltd.* (Semiconductor Equipment & Products)		1,858,381
	469,000	Suntec Real Estate Investment Trust (Real Estate)		387,091
	860,000	United Overseas Bank Ltd. (Banks)		8,519,490
	107,200	United Overseas Land Ltd. (Hotels, Restaurants & Leisure)		213,677
	294,000	Want Want Holdings Ltd. (Food Products)		440,603
	50,000	Wing Tai Holdings Ltd. (Real Estate)		57,798
				34,906,298
Spain – 1.3%
	926,837	Endesa SA (Electric Utilities)		32,358,247
Sweden – 1.6%
	294,300	Electrolux AB – Series B(a) (Household Durables)		4,550,905
	272,000	Husqvarna AB* (Consumer Durables)		2,937,021
	312,000	Skanska AB Series B (Construction & Engineering)		4,915,774
	14,000	SSAB Svenskt Stal AB (Metals & Mining)		269,406
	479,600	Swedish Match AB Co. (Tobacco)		8,110,229
	2,884,000	TeliaSonera AB(a) (Diversified Telecommunication Services)		17,843,406
				38,626,741
Switzerland – 11.3%
	613,916	ABB Ltd. (Electrical Equipment)		8,169,153
	216,004	Adecco SA (Commercial Services & Supplies)		12,615,051
	19,677	Amcor Ltd. (Containers & Packaging)		100,750
	151,316	Compagnie Financiere Richemont AG (Specialty Retail)		7,191,691
	398,236	Credit Suisse Group (Banks)		22,195,852
	5,606	Geberit AG (Building Products)		6,522,693
	8,971	Givaudan SA (Chemicals)		7,231,228
	1,459	Kuoni Reisen Holding AG* (Hotels, Restaurants & Leisure)		762,928
	15,089	Nestle SA (Food Products)		5,184,137
	8,793	PSP Swiss Property AG* (Real Estate)		456,892
	2,701	Rieter Holding AG (Machinery)		1,161,770
	564,234	Roche Holding AG (Pharmaceuticals)		103,961,024
	11,972	Serono SA (Biotechnology)		8,361,706
	13,764	Swatch Group AG (Textiles & Apparel)		2,682,565
	53,178	Swisscom AG(a) (Diversified Telecommunication Services)		17,861,691
	323,237	Zurich Financial Services AG (Insurance)		73,680,946
				278,140,077
United Kingdom – 8.0%
	421,886	3i Group PLC (Diversified Financials)		7,643,298
	233,768	Alliance Boots PLC (Food & Drug Retailing)		3,431,893
	219,280	Amvescap PLC (Diversified Financials)		2,263,460
	84,124	Anglo American PLC (Metals & Mining)		3,639,928

 The accompanying notes are an integral part of these financial statements.

46

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Shares		Description	Value
Common Stocks – (continued)
United Kingdom – (continued)
	438,445	AstraZeneca PLC (Pharmaceuticals)	$	28,452,283
	204,110	Barclays PLC (Banks)		2,557,266
	671,785	BHP Billiton PLC (Metals & Mining)		12,815,713
	74,413	BP PLC ADR (Oil & Gas)		5,063,805
	612,235	British Airways PLC* (Airlines)		4,788,088
	2,986,971	BT Group PLC (Diversified Telecommunication Services)		14,040,292
	79,735	Bunzl PLC (Trading Companies & Distributors)		990,611
	429,752	Centrica PLC (Gas Utilities)		2,414,219
	109,315	Compass Group PLC (Hotels, Restaurants & Leisure)		531,447
	476,500	Corus Group PLC (Metals & Mining)		3,557,526
	65,541	Davis Service Group PLC (Industrial Conglomerates)		604,602
	2,402,348	Dixons Group PLC (Specialty Retail)		9,381,803
	172,742	First Choice Holidays PLC (Hotels, Restaurants & Leisure)		698,351
	499,928	HBOS PLC (Banks)		9,547,164
	191,548	HSBC Holdings PLC (Banks)		3,475,932
	23,120	IMI PLC (Machinery)		222,536
	31,300	Inchcape PLC (Specialty Retail)		295,762
	124,067	International Power PLC (Electric Utilities)		750,195
	184,020	Man Group PLC (Diversified Financials)		1,479,874
	264,332	Mitchells & Butler PLC (Hotels, Restaurants & Leisure)		2,816,324
	18,550	Novo-Nordisk A/S (Pharmaceuticals)		1,371,561
	286,183	Rolls-Royce Group PLC* (Aerospace & Defense)		2,377,863
	2,898,856	Royal & Sun Alliance Insurance Group PLC (Insurance)		7,643,914
	476,833	Royal Bank of Scotland Group PLC (Banks)		16,174,132
	298,450	Royal Dutch Shell PLC Series B (Oil & Gas)		10,667,841
	117,017	Royal Dutch Shell PLC ADR (Oil & Gas)		8,373,736
	60,760	Schroders PLC (Diversified Financials)		1,051,015
	331,939	Tate & Lyle PLC (Food Products)		4,627,893
	350,915	Trinity Mirror PLC (Media)		3,044,355
	460,072	Unilever PLC (Personal Products)		10,998,716
	131,983	United Business Media PLC (Media)		1,550,855
	733,401	WPP Group PLC (Commercial Services & Supplies)		8,937,153
				198,281,406
TOTAL COMMON STOCKS
(Cost $2,054,708,436)			$	2,349,332,305

Units		Expiration Month	Value
Warrant*(a) – 0.0%
Swisscom AG
	53,178	09/2006	$	135,229
(Cost $0)

Principal		Interest			Maturity
Amount		Rate			Date		Value
Short-Term Obligation – 3.3%
State Street Bank & Trust Euro – Time Deposit
$	80,657,000		4.85	%		09/01/2006	$	80,657,000
(Cost $80,657,000)
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
(Cost $2,135,365,436)							$	2,430,124,534

The accompanying notes are an integral part of these financial statements. 

47

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Schedule of Investments (continued)

August 31, 2006

Shares		Description	Value
Securities Lending Collateral – 6.7%
	165,387,503	Boston Global Investment Trust – Enhanced Portfolio	$	165,387,503
(Cost $165,387,503)
TOTAL INVESTMENTS – 105.5%
(Cost $2,300,752,939)			$	2,595,512,037
LIABILITIES IN EXCESS OF OTHER   ASSETS – (5.5)%				(135,956,697	)
NET ASSETS – 100.0%			$	2,459,555,340

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

*	Non-income producing security.
(a)	All or portion of security is on loan.

Investment Abbreviations:
ADR	—	American Depositary Receipt
REIT	—	Real Estate Investment Trust

	As a % of
	Net Assets
Investments Industry Classifications†
Aerospace & Defense		1.2	%
Air Freight & Couriers		0.7
Airlines		2.5
Automobiles		1.7
Banks		13.0
Beverages		2.2
Biotechnology		0.3
Building Products		0.5
Chemicals		5.2
Commercial Services & Supplies		2.0
Computers & Peripherals		0.1
Construction & Engineering		0.7
Construction Materials		0.1
Consumer Durables		0.1
Distributors		0.1
Diversified Financials		5.0
Diversified Telecommunication Services		5.8
Electric Utilities		4.5
Electrical Equipment		1.8
Electronic Equipment & Instruments		1.2
Food & Drug Retailing		1.1
Food Products		2.0
Gas Utilities		0.2
Health Care Providers & Services		0.4
Hotels, Restaurants & Leisure		0.8
Household Durables		2.5
Industrial Conglomerates		0.3
Insurance		7.7
IT Consulting & Services		1.7
Leisure Equipment & Products		0.1
Machinery		1.0
Marine		0.3
Media		1.5
Metals & Mining		4.4
Multiline Retail		0.8
Office Electronics		1.1
Oil & Gas		6.9
Personal Products		0.6
Pharmaceuticals		7.2
Real Estate		2.1
Road & Rail		0.6
Semiconductor Equipment & Products		0.8
Short-term Investments*		10.0
Software		0.1
Specialty Retail		1.2
Textiles & Apparel		0.5
Tobacco		0.3
Trading Companies & Distributors		0.1
Wireless Telecommunication Services		0.5
TOTAL INVESTMENTS		105.5	%

†	Industry concentrations greater than one-tenth of one percent are disclosed.
*	Short-term investments include short-term obligations and securities lending collateral.

 The accompanying notes are an integral part of these financial statements.

48

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At August 31, 2006, the following futures contracts were open as follows:

	Number of		Settlement	Market		Unrealized
Type	Contracts Long		Month	Value		Gain
FTSE 100 Index		272	September 2006	$	30,574,338	$	1,971
SPI 200 Index		81	September 2006		7,891,229		122,446
Hang Seng Index		22	September 2006		2,457,912		57,585
40 S&P/MIB Index		15	September 2006		3,653,486		52,965
DAX Index		26	September 2006		4,880,731		54,545
Dow Jones Euro Stoxx 50 Index		406	September 2006		19,817,590		211,146
CAC 40 – 10 EURO Index		84	September 2006		5,560,548		52,636
IBEX 35 Index		17	September 2006		2,648,175		25,610
TOPIX Index		177	September 2006		24,643,852		375,527
				$	102,127,861	$	954,431

JOINT REPURCHASE AGREEMENT ACCOUNT II — At August 31, 2006, the Funds had undivided interests in the Joint Repurchase Agreement Account II, as follows:

Fund	Principal Amount
Structured Large Cap Value	$	32,400,000
Structured U.S. Equity		10,900,000
Structured Large Cap Growth		13,700,000

	Principal		Interest			Maturity	Maturity
Repurchase Agreements	Amount		Rate			Date	Value
Banc of America Securities LLC	$	3,000,000,000		5.28	%	09/01/2006	$	3,000,440,000
Barclays Capital PLC		3,000,000,000		5.28		09/01/2006		3,000,440,000
Credit Suisse First Boston LLC		1,400,000,000		5.28		09/01/2006		1,400,205,333
Deutsche Bank Securities, Inc.		1,915,000,000		5.29		09/01/2006		1,915,281,399
Greenwich Capital Markets		300,000,000		5.28		09/01/2006		300,044,000
Merrill Lynch		500,000,000		5.28		09/01/2006		500,073,333
Morgan Stanley & Co.		1,000,000,000		5.28		09/01/2006		1,000,146,667
UBS Securities LLC		2,373,000,000		5.28		09/01/2006		2,373,348,040
Wachovia Capital Markets		250,000,000		5.28		09/01/2006		250,036,667
TOTAL	$	13,738,000,000					$	13,740,015,439

At August 31, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 6.35%, due 09/01/2006 to 06/29/2016; Federal Home Loan Mortgage Association, 2.63% to 14.00%, due 01/01/2007 to 09/01/2036; and Federal National Mortgage Association, 0.00% to 14.00%, due 10/01/2006 to 09/01/2036. The aggregate market value of the collateral, including accrued interest, was $13,996,119,280.

The accompanying notes are an integral part of these financial statements. 

49

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statements of Assets and Liabilities

August 31, 2006

		Structured Large
		Cap Value Fund
Assets:
Investments in securities, at value (identified cost $1,091,049,909, $1,246,029,943, $808,979,091, $710,152,536 and $2,135,365,436, respectively) — (including $8,751,070, $54,679,277, $7,308,853, $96,698,231 and $156,553,089 of securities on loan, respectively)		$	1,186,235,705
Foreign currencies, at value (identified cost $2,033,877, Structured International Equity only)			—
Securities lending collateral, at value (cost $9,095,250, $55,463,875, $7,559,200, $99,117,675 and $165,387,503, respectively)			9,095,250
Cash(a)			4,522,347
Receivables:
	Fund shares sold		6,192,828
	Dividends and interest, at value		3,316,432
	Due from broker/variation margin(b)		15,504
	Investment securities sold, at value		—
	Reimbursement from adviser		43,122
	Foreign tax reclaims, at value		—
	Securities lending income		2,047
Other assets			4,700
Total assets			1,209,427,935
Liabilities:
Payables:
	Payable upon return of securities loaned		9,095,250
	Fund shares repurchased		2,368,204
	Investment securities purchased		—
	Amounts owed to affiliates		690,431
	Due to broker/variation margin		—
Accrued expenses			173,207
Total liabilities			12,327,092
Net Assets:
Paid-in capital			1,055,313,389
Accumulated undistributed net investment income			2,711,472
Accumulated net realized gain (loss) on investment, futures and foreign currency transactions			43,727,784
Net unrealized gain on investments, futures and translation of assets denominated in foreign currencies			95,348,198
NET ASSETS		$	1,197,100,843
Net Assets:
	Class A	$	438,245,063
	Class B		19,200,242
	Class C		22,767,573
	Institutional		715,190,664
	Service		1,697,301
Shares Outstanding:
	Class A		31,316,077
	Class B		1,383,154
	Class C		1,638,415
	Institutional		51,101,465
	Service		120,753
Total shares of beneficial interest outstanding, $0.001 par value (unlimited number of shares authorized)			85,559,864
Net asset value, offering and redemption price per share:(c)
	Class A		$13.99
	Class B		13.88
	Class C		13.90
	Institutional		14.00
	Service		14.06

(a)	Includes restricted cash of $4,440,000, $1,225,000, $1,714,300 and $1,120,000, respectively for the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds relating to initial margin requirements on futures transactions.
(b)	Includes $4,964,821 for the Structured International Equity Fund relating to initial margin requirements on futures transactions.
(c)	Maximum public offering price per share (NAV per share multiplied by 1.0582) for Class A Shares of the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity, and Structured International Equity Funds is $14.80, $33.64, $13.97, $14.56 and $15.12, respectively. At redemption, Class B and Class C Shares may be subject to a contingent deferred sales charge, assessed on the amount equal to the lesser of the current NAV or the original purchase price of the shares.

 The accompanying notes are an integral part of these financial statements.

50

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Structured U.S.		Structured Large			Structured Small		Structured International
Equity Fund		Cap Growth Fund			Cap Equity Fund		Equity Fund
$	1,382,785,337	$	858,730,003		$	760,732,409	$	2,430,124,534
	—		—			—		2,030,724
	55,463,875		7,559,200			99,117,675		165,387,503
	1,255,099		1,762,122			2,025,906		962
	1,583,615		3,236,018			2,145,768		15,316,945
	3,231,402		1,422,769			350,152		4,295,280
	4,575		6,613			—		11,003,946
	—		—			3,643,855		181,959
	64,844		48,759			76,543		242,816
	—		—			—		403,561
	6,244		1,385			90,269		121,265
	5,299		3,869			3,135		6,918
	1,444,400,290		872,770,738			868,185,712		2,629,116,413
	55,463,875		7,559,200			99,117,675		165,387,503
	3,553,123		625,789			1,188,037		1,916,830
	—		—			5,779,992		—
	951,181		549,995			651,504		1,904,553
	—		—			1,160		—
	425,284		184,202			241,336		352,187
	60,393,463		8,919,186			106,979,704		169,561,073
	1,219,511,120		1,068,860,429			665,585,859		2,024,920,051
	9,432,894		2,753,041			2,959,402		32,130,286
	18,151,267		(257,562,305	)		42,033,022		106,773,717
	136,911,546		49,800,387			50,627,725		295,731,286
$	1,384,006,827	$	863,851,552		$	761,206,008	$	2,459,555,340
$	611,999,464	$	310,385,872		$	185,507,741	$	739,860,622
	78,109,902		41,946,531			16,196,695		10,306,333
	36,628,284		22,810,847			25,898,922		7,110,260
	644,250,108		488,448,022			504,101,562		1,661,908,866
	13,019,069		260,280			29,501,088		40,369,259
	19,250,586		23,521,286			13,482,194		51,785,036
	2,610,560		3,401,175			1,276,571		731,696
	1,230,033		1,849,209			2,033,633		504,790
	19,835,225		35,974,280			35,416,672		113,883,608
	413,263		19,868			2,170,456		2,820,399
	43,339,667		64,765,818			54,379,526		169,725,529
	$31.79	$	13.20		$	13.76	$	14.29
	29.92		12.33			12.69		14.09
	29.78		12.34			12.74		14.09
	32.48		13.58			14.23		14.59
	31.50		13.10			13.59		14.31

The accompanying notes are an integral part of these financial statements. 

51

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statements of Operations

For the Year Ended August 31, 2006

		Structured Large Cap
		Value Fund(a)
Investment income:
Dividends(b)		$	18,569,080
Interest (including securities lending income of $27,282, $45,910, $40,711, $672,963 and $1,858,889, respectively)			1,141,886
Total income			19,710,966
Expenses:
Management fees			5,176,467
Distribution and service fees(c)			1,112,132
Transfer Agent fees(c)			826,816
Custody and accounting fees			198,682
Printing fees			74,832
Registration fees			77,970
Service share fees			3,093
Professional fees			49,532
Trustee fees			15,230
Other			57,586
Total expenses			7,592,340
Less — expense reductions			(892,304	)
Net expenses			6,700,036
NET INVESTMENT INCOME			13,010,930
Realized and unrealized gain (loss) on investment, futures and foreign currency related transactions:
Net realized gain (loss) from:
	Investment transactions		59,006,822
	Futures transactions		(313,141	)
	Foreign currency related transactions		—
Net change in unrealized gain (loss) on:
	Investments		33,043,082
	Futures		349,761
	Translation of assets and liabilities denominated in foreign currencies		—
Net realized and unrealized gain on investment, futures and foreign currency related transactions			92,086,524
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	105,097,454

(a)	Effective December 30, 2005, the CORE Large Cap Value Fund, CORE U.S. Equity Fund, CORE Large Cap Growth Fund, CORE Small Cap Equity Fund, and CORE International Equity Fund changed their names to Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Equity Fund, and Structured International Equity Fund, respectively.
(b)	For the Structured Small Cap Equity and Structured International Equity Funds, foreign taxes withheld on dividends were $1,453 and $4,762,928, respectively.
(c)	Class specific distribution, service and transfer agent fees were as follows:

	Distribution and Service Fees						Transfer Agent Fees
Fund	Class A		Class B		Class C		Class A		Class B		Class C		Institutional		Service
Structured Large Cap Value	$	699,776	$	195,428	$	216,928	$	531,830	$	37,131	$	41,216	$	216,392	$	247
Structured U.S. Equity		1,324,785		909,705		377,591		1,006,836		172,844		71,742		150,076		4,395
Structured Large Cap Growth		555,144		535,270		265,750		421,909		101,701		50,493		148,420		99
Structured Small Cap Equity		443,067		179,952		269,567		336,730		34,191		51,218		159,361		14,364
Structured International Equity		1,174,234		91,706		58,743		892,418		17,424		11,161		458,382		12,567

 The accompanying notes are an integral part of these financial statements.

52

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Structured U.S.			Structured Large Cap			Structured Small Cap			Structured International
Equity Fund(a)			Growth Fund(a)			Equity Fund(a)			Equity Fund(a)
$	18,208,337		$	7,728,886		$	7,186,652		$	42,104,316
	465,974			865,289			1,142,370			5,671,122
	18,674,311			8,594,175			8,329,022			47,775,438
	6,790,112			4,377,474			5,580,026			13,840,653
	2,612,081			1,356,164			892,586			1,324,683
	1,405,893			722,622			595,864			1,391,952
	212,103			171,802			204,845			942,061
	90,105			62,712			64,984			151,530
	75,006			60,536			65,001			121,308
	54,938			1,242			179,551			157,089
	66,532			58,841			49,932			55,994
	15,230			15,230			15,230			15,230
	121,636			73,435			88,730			64,392
	11,443,636			6,900,058			7,736,749			18,064,892
	(1,628,072	)		(1,059,584	)		(621,207	)		(1,534,878	)
	9,815,564			5,840,474			7,115,542			16,530,014
	8,858,747			2,753,701			1,213,480			31,245,424
	71,738,092			24,962,984			63,020,041			125,225,093
	(36,059	)		(320,231	)		203,499			4,205,562
	—			—			—			1,246,889
	9,763,484			5,636,127			(56,782,492	)		181,272,428
	137,231			79,636			(30,142	)		650,443
	—			—			—			6,093
	81,602,748			30,358,516			6,410,906			312,606,508
$	90,461,495		$	33,112,217		$	7,624,386		$	343,851,932

The accompanying notes are an integral part of these financial statements. 

53

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statements of Changes in Net Assets

		Structured Large Cap Value Fund(a)						Structured U.S. Equity Fund(a)
		For the			For the			For the			For the
		Year Ended			Year Ended			Year Ended			Year Ended
		August 31, 2006			August 31, 2005			August 31, 2006			August 31, 2005
From operations:
Net investment income (loss)		$	13,010,930		$	4,870,818		$	8,858,747		$	7,033,430
Net realized gain from investment transactions, futures and foreign currency related transactions			58,693,681			25,961,507			71,702,033			104,510,572
Payments by affiliates to reimburse certain security claims			—			18,876			—			23,962
Net change in unrealized gain (loss) on investments, futures and translation of assets and liabilities denominated in foreign currencies			33,392,843			33,596,127			9,900,715			(13,872,021	)
Net increase in net assets resulting from operations			105,097,454			64,447,328			90,461,495			97,695,943
Distributions to shareholders:
From net investment income
	Class A Shares		(2,873,123	)		(1,025,718	)		(1,716,964	)		(3,420,217	)
	Class B Shares		(44,614	)		(11,169	)		—			(41,912	)
	Class C Shares		(56,450	)		(14,127	)		—			(52,661	)
	Institutional Shares		(7,678,282	)		(2,753,498	)		(1,696,849	)		(1,704,060	)
	Service Shares		(4,076	)		(4,526	)		(30,886	)		(71,315	)
From net realized gains
	Class A Shares		(4,285,315	)		(2,342,830	)		—			—
	Class B Shares		(363,911	)		(451,577	)		—			—
	Class C Shares		(405,173	)		(405,671	)		—			—
	Institutional Shares		(9,199,305	)		(3,867,997	)		—			—
	Service Shares		(11,795	)		(12,197	)		—			—
Total distributions to shareholders			(24,922,044	)		(10,889,310	)		(3,444,699	)		(5,290,165	)
From share transactions:
Net proceeds from sales of shares			928,703,576			316,236,675			298,683,756			166,333,532
Proceeds received in connection with mergers			—			—			317,455,844			125,038,947
Reinvestment of dividends and distributions			24,360,857			10,736,120			2,815,736			5,032,901
Cost of shares repurchased			(449,399,467	)		(99,518,657	)		(226,017,702	)		(187,054,388	)
Net increase in net assets resulting from share transactions			503,664,966			227,454,138			392,937,634			109,350,992
TOTAL INCREASE			583,840,376			281,012,156			479,954,430			201,756,770
Net assets:
Beginning of year			613,260,467			332,248,311			904,052,397			702,295,627
End of year		$	1,197,100,843		$	613,260,467		$	1,384,006,827		$	904,052,397
Accumulated undistributed net investment income		$	2,711,472		$	923,423		$	9,432,894		$	4,018,983

(a)	Effective December 30, 2005, the CORE Large Cap Value Fund, CORE U.S. Equity Fund, CORE Large Cap Growth Fund, CORE Small Cap Equity Fund and CORE International Equity Fund changed their names to Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Equity Fund and the Structured International Equity Fund, respectively.
(b)	Net of $12,509 in redemption fees remitted to the Structured International Equity Fund.
(c)	Net of $6,445 in redemption fees remitted to the Structured International Equity Fund.

 The accompanying notes are an integral part of these financial statements.

54

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Structured Large Cap Growth Fund(a)						Structured Small Cap Equity Fund(a)						Structured International Equity Fund(a)
For the			For the			For the			For the			For the			For the
Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
August 31, 2006			August 31, 2005			August 31, 2006			August 31, 2005			August 31, 2006			August 31, 2005
$	2,753,701		$	1,077,659		$	1,213,480		$	(101,205	)	$	31,245,424		$	13,698,655
	24,642,753			23,507,224			63,223,540			41,546,526			130,677,544			73,385,628
	—			400,102			—			110,026			—			—
	5,715,763			20,077,834			(56,812,634	)		57,076,950			181,928,964			69,369,356
	33,112,217			45,062,819			7,624,386			98,632,297			343,851,932			156,453,639
	(61,768	)		—			—			—			(2,922,097	)		(1,196,017	)
	—			—			—			—			(10,166	)		—
	—			—			—			—			(7,525	)		—
	(1,056,728	)		—			—			—			(9,610,748	)		(4,841,952	)
	—			—			—			—			(228,125	)		(1,256	)
	—			—			(11,827,515	)		(6,678,795	)		(2,262,969	)		—
	—			—			(1,545,039	)		(1,107,652	)		(56,886	)		—
	—			—			(2,159,938	)		(1,181,208	)		(35,333	)		—
	—			—			(23,891,295	)		(8,958,753	)		(5,464,148	)		—
	—			—			(2,922,036	)		(2,176,185	)		(176,662	)		—
	(1,118,496	)		—			(42,345,823	)		(20,102,593	)		(20,774,659	)		(6,039,225	)
	551,621,998			262,095,454			374,245,022			333,222,428			1,389,843,174			635,895,579
	—			—			130,127,854			—			—			45,116,496
	1,112,044			—			38,670,425			18,095,444			19,338,652			5,426,787
	(247,018,355	)		(123,313,314	)		(313,773,175	)		(206,052,053	)		(298,767,113	)(b)		(212,498,117	)(c)
	305,715,687			138,782,140			229,270,126			145,265,819			1,110,414,713			473,940,745
	337,709,408			183,844,959			194,548,689			223,795,523			1,433,491,986			624,355,159
	526,142,144			342,297,185			566,657,319			342,861,796			1,026,063,354			401,708,195
$	863,851,552		$	526,142,144		$	761,206,008		$	566,657,319		$	2,459,555,340		$	1,026,063,354
$	2,753,041		$	1,117,836		$	2,959,402		$	1,150,592		$	32,130,286		$	13,559,057

The accompanying notes are an integral part of these financial statements. 

55

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements

August 31, 2006

1. ORGANIZATION

Goldman Sachs Trust (the “Trust”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended, (the “Act”) as an open-end management investment company. The Trust includes the Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Equity Fund, and Structured International Equity Fund collectively, the “Funds” or individually a “Fund”. Each Fund is a diversified portfolio offering five classes of shares — Class A, Class B, Class C, Institutional and Service. Class A shares of the Funds are sold with a front-end sales charge of up to 5.50%. Class B shares of the Funds are sold with a contingent deferred sales charge that declines from 5.00% to zero, depending upon the period of time the shares are held. Class C shares of the Funds are sold with a contingent deferred sales charge of 1.00% during the first 12 months. Institutional and Service Class shares of the Funds are not subject to a sales charge. Goldman, Sachs & Co. (“Goldman Sachs”) as distributor of the Funds receives such sales loads of which a certain portion may be retained. Effective December 30, 2005, CORE Large Cap Value Fund, CORE U.S. Equity Fund, CORE Large Cap Growth Fund, CORE Small Cap Equity Fund and CORE International Equity Fund, changed their names to Structured Large Cap Value Fund, Structured U.S. Equity Fund, Structured Large Cap Growth Fund, Structured Small Cap Equity Fund and the Structured International Equity Fund, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Funds. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system or for investments in securities traded on a foreign securities exchange for which an independent fair value service is not available are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities and investment companies are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on the valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.

     Investments in securities traded on foreign securities exchange are valued daily at fair value determined by an independent fair value service (if available) under valuation procedures approved by the Board of Trustees consistent with applicable regulatory guidance. The independent service takes into account multiple factors including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates.

     Investing in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and have delayed settlements, and their prices may be more volatile than those of comparable securities in the United States.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Funds, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted. In addition, it is the Funds’ policy to accrue for estimated capital gains taxes on foreign securities held by the Funds, which are subject to taxes.

56

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

     Net investment income (other than class-specific expenses) and unrealized and realized gains or losses are allocated daily to each class of shares of the respective Fund based upon the relative proportion of net assets of each class.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Funds on a straight-line and/or “pro-rata” basis depending upon the nature of the expense.

     Class A, Class B and Class C shareholders of the Funds bear all expenses and fees relating to their respective Distribution and Service Plans. Service Shares bear all expenses and fees relating to their Service and Shareholder Administration Plans. Each class of shares of the Funds separately bears its respective class-specific Transfer Agency fees.

D. Federal Taxes and Distributions to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions, if any, are declared and paid quarterly for the Goldman Sachs Structured Large Cap Value Fund and annually for all other Funds. Capital gains distributions, if any, are declared and paid annually for all Funds. Net capital losses are carried forward to future years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gain distributions.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules, which may differ from generally accepted accounting principles. Therefore, the source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gains, or as a tax return of capital.

     In addition, distributions paid by the Funds’ investments in real estate investment trusts (“REITs”) often include a “return of capital” which is recorded by the Funds as a reduction of the cost basis of the securities held. The Code requires a REIT to distribute at least 95% of its taxable income to investors. In many cases, however, because of “non-cash” expenses such as property depreciation, a REIT’s cash flow will exceed its taxable income. The REIT may distribute this excess cash to offer a more competitive yield. This portion of the Funds’ distributions is deemed a return of capital and is generally not taxable to shareholders.

E. Foreign Currency Translations — The books and records of the Funds are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valuations, foreign currency and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.

     Net realized and unrealized gain (loss) on foreign currency transactions will represent: (i) foreign exchange gains and losses from the sale and holdings of foreign currencies; (ii) currency gains and losses between trade date and settlement date on investment securities transactions and forward exchange contracts; and (iii) gains and losses from the difference between amounts of dividends, interest, and foreign withholding taxes recorded and the amounts actually received. The effect of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statements of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain (loss) on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized gain (loss) on foreign currency related transactions.

F. Futures Contracts — The Funds may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Funds are required to segregate cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Funds, dependant on the fluctuations in the value of the contracts, and are recorded for

57

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements (continued)

August 31, 2006

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

financial reporting purposes as unrealized gains or losses. When contracts are closed, the Funds realize a gain or loss which is reported in the Statement of Operations.

     The use of futures contracts involve, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statement of Assets and Liabilities. Changes in the value of a futures contract may not directly correlate with changes in the value of the underlying securities. The risk may decrease the effectiveness of the Funds’ strategies and potentially result in a loss.

G. Segregation Transactions — As set forth in the prospectus, the Funds may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Funds are required to segregate liquid assets with a current value equal to or greater than the market value of the corresponding transactions.

H. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Funds, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Funds may be delayed or limited and there may be a decline in the value of the collateral during the period while the Funds seek to assert their rights. The underlying securities for all repurchase agreements are held in safekeeping at the Funds’ custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and terms and conditions contained therein, the Funds, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“GSAM”), or its affiliates, may transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements.

3. AGREEMENTS

GSAM, an affiliate of Goldman Sachs, serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Funds. Under the Agreement, GSAM manages the Funds, subject to the general supervision of the Trust’s Board of Trustees. As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Funds’ business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of each Fund’s average daily net assets.

58

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

3. AGREEMENTS (continued)

     GSAM has entered into a fee reduction commitment for the Funds which was implemented on a voluntary basis beginning July 1, 2005 and on a contractual basis as of December 29, 2005 to achieve the rates listed below.

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Structured Large Cap Value		0.60	%	First $1 Billion
		0.54		Next $1 Billion
		0.51		Over $2 Billion
Structured U.S. Equity		0.65		First $1 Billion
		0.59		Next $1 Billion
		0.56		Over $2 Billion
Structured Large Cap Growth		0.65		First $1 Billion
		0.59		Next $1 Billion
		0.56		Over $2 Billion
Structured Small Cap Equity		0.85		First $2 Billion
		0.77		Over $2 Billion
Structured International Equity		0.85		First $1 Billion
		0.77		Next $1 Billion
		0.73		Over $2 Billion

     Additionally, from the period from July 1, 2005 – December 29, 2005, GSAM voluntarily agreed to waive a portion of its Management fees equal to 0.01% and 0.04% based on the average daily net assets of Structured Small Cap Equity and Structured International Equity, respectively. Effective December 29, 2005, GSAM has voluntarily agreed to waive a portion of its Management fees equal to 0.09%, 0.14%, 0.14%, 0.04% and 0.04% based on the average daily net assets of Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity, respectively. As a result of these fee waivers, the Management fees for the first $1 billion of the average daily net assets of Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured International Equity are equal to 0.51%, 0.51%, 0.51% and 0.81%, respectively. The Management fee is equal to 0.81% for the first $2 billion of the average daily net assets of Structured Small Cap Equity as a result of fee waivers. Prior to December 29, 2005, the Management Fees for the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and the Structured International Funds as an annual percentage rate of average daily net assets were 0.60%, 0.65%, 0.65%, 0.85% and 0.85%, respectively.

     GSAM has voluntarily agreed to limit certain “Other Expenses” (excluding Management fees, Distribution and Service fees, Transfer Agency fees and expenses, Service Share fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Effective December 29, 2005, GSAM voluntarily agreed to limit certain Other Expenses of the Funds as an annual percentage rate of average daily net assets to 0.004%. Prior to December 29, 2005, the Other Expense limitations for Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity were 0.064%, 0.004%, 0.024%, 0.044% and 0.124%, respectively. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any.

     The Trust, on behalf of each Fund, has adopted Distribution and Service Plans (the “Plans”). Under the Plans, Goldman Sachs and/or authorized dealers are entitled to a monthly fee for distribution services equal to, on an annual basis, 0.25%, 0.75% and 0.75% of the average daily net assets attributable to Class A, Class B and Class C Shares, respectively. Additionally, Goldman Sachs and/or authorized dealers are entitled to receive, under the Plans, a separate fee for personal and

59

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements (continued)

August 31, 2006

3. AGREEMENTS (continued)

account maintenance services equal to, on an annual basis, 0.25% of the average daily net assets attributable to Class B and Class C Shares.

     Goldman Sachs serves as Distributor of the shares of the Funds pursuant to a Distribution Agreement. Goldman Sachs may retain a portion of the Class A sales load and Class B and Class C contingent deferred sales charges. During the year ended August 31, 2006, Goldman Sachs advised the Funds that it retained the following approximate amounts:

			Contingent Deferred
	Sales Load		Sales Charge
Fund	Class A		Class B		Class C
Structured Large Cap Value	$	159,000	$	100	$	—
Structured U.S. Equity		56,400		—		—
Structured Large Cap Growth		21,600		500		—
Structured Small Cap Equity		44,900		200		300
Structured International Equity		241,300		200		—

     All classes of the Structured International Equity Fund charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. Redemption fees are reimbursed to the Fund and reflected as a reduction in share redemptions on the Statement of Changes in Net Assets. Redemption fees are credited to Paid-in capital and are allocated to each share class of the Fund on a pro-rata basis at the time of payment.

     Goldman Sachs also serves as the Transfer Agent of the Funds for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly at an annual rate as follows: 0.19% of the average daily net assets for Class A, Class B and Class C Shares and 0.04% of the average daily net assets for Institutional and Service Shares.

     The Trust, on behalf of each Fund, has adopted a Service Plan and Shareholder Administration Plan for Service Shares. These plans allow for Service Shares to compensate service organizations for providing varying levels of personal and account administration and shareholder administration services to their customers who are beneficial owners of such shares. The Service Plan and Shareholder Administration Plan provides for compensation to the service organizations in an amount equal to, on an annual basis, 0.25% and 0.25%, respectively, of the average daily net assets of the Service Shares.

     For the year ended August 31, 2006, GSAM has voluntarily waived certain management fees and agreed to reimburse certain expenses. In addition, the Funds have entered into certain offset arrangements with the custodian and the transfer agent resulting in a reduction in the Funds’ expenses. These expense reductions were as follows (in thousands):

					Expense Credits
	Management Fee		Other Expense		Custody		Transfer Agent		Total Expense
Fund	Waiver		Reimbursement		Fee		Fee		Reductions
Structured Large Cap Value	$	568	$	300	$	15	$	9	$	892
Structured U.S. Equity		1,048		538		15		27		1,628
Structured Large Cap Growth		668		377		4		11		1,060
Structured Small Cap Equity		210		392		11		8		621
Structured International Equity		665		842		16		12		1,535

60

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

3. AGREEMENTS (continued)

     As of August 31, 2006, the amounts owed to affiliates were as follows (in thousands):

	Management		Distribution and		Transfer
Fund	Fees		Service Fees		Agent Fees		Total
Structured Large Cap Value	$	482	$	116	$	92	$	690
Structured U.S. Equity		589		225		137		951
Structured Large Cap Growth		358		118		74		550
Structured Small Cap Equity		521		76		55		652
Structured International Equity		1,569		164		172		1,905

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds of sales and maturities of long-term securities for the year ended August 31, 2006, were as follows:

Fund	Purchases		Sales and Maturities
Structured Large Cap Value	$	1,549,017,085	$	1,066,577,945
Structured U.S. Equity		1,697,193,559		1,332,226,596
Structured Large Cap Growth		1,032,681,954		730,838,899
Structured Small Cap Equity		1,151,566,055		978,539,229
Structured International Equity		2,035,832,247		946,510,501

For the year ended August 31, 2006, Goldman Sachs earned approximately $83,900, $13,900, $35,700, $24,500 and $132,300 of brokerage commissions from portfolio transactions including futures transactions, executed on behalf of the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds, respectively.

     During the year ended August 31, 2005, GSAM voluntarily agreed to reimburse the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth and Structured Small Cap Equity Funds for $18,876, $23,962, $400,102 and $110,026, respectively, for certain class action settlements in which the Funds were eligible to participate.

5. SECURITIES LENDING

Pursuant to exemptive relief granted by the SEC and the terms and conditions contained therein, the Funds may lend their securities through a securities lending agent, Boston Global Advisers (“BGA”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Funds’ security lending procedures, the loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. The market value of the loaned securities is determined at the close of business of the funds at their last sale price or official closing price on the principal exchange or system on which they are traded and any additional required collateral is delivered to the funds on the next business day. As with other extensions of credit, the Funds bear the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.

     Both the Funds and BGA receive compensation relating to the lending of the Funds’ securities. The amounts earned by the Funds for the year ended August 31, 2006 are reported parenthetically under Investment Income on the Statements of Operations. The Funds invest the cash collateral received in connection with securities lending transactions in the Enhanced

61

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Notes to Financial Statements (continued)

August 31, 2006

5. SECURITIES LENDING (continued)

Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Funds bear the risk of incurring a loss from the investment of cash collateral due to either credit or market factors. Both the Funds and BGA receive compensation relating to the lending of the Funds’ securities.

     The table below details securities lending activity as of, and for the year ended August 31, 2006:

							Earnings Received
					Earnings of BGA		by the Funds
					Relating to		From Lending to		Amount Payable to
	Market Value of		Cash Collateral		Securities		Goldman		Goldman Sachs
	Securities on		Received for Loans		Loaned for the		Sachs for		Upon Return of
	Loan as of		Outstanding as of		Year Ended		the Year Ended		Securities Loaned as
Fund	August 31, 2006		August 31, 2006		August 31, 2006		August 31, 2006		of August 31, 2006
Structured Large Cap Value	$	8,751,070	$	9,095,250	$	4,588	$	3,368	$	407,500
Structured U.S. Equity		54,679,277		55,463,875		7,169		2,714		—
Structured Large Cap Growth		7,308,853		7,559,200		6,268		3,259		—
Structured Small Cap Equity		96,698,231		99,117,675		103,501		132,864		15,216,200
Structured International Equity		156,553,089		165,387,503		293,768		462,820		8,687,490

6. LINE OF CREDIT FACILITY

The Funds participate in a $400,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Funds must own securities having a market value in excess of 300% of each Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. The committed facility also requires a fee to be paid by the Funds based on the amount of the commitment that has not been utilized. For the year ended August 31, 2006, the Funds did not have any borrowings under this facility.

7. TAX INFORMATION

The tax character of distributions paid during the fiscal year ended August 31, 2006 was as follows:

										Structured
		Structured Large		Structured U.S.		Structured Large		Structured Small		International
		Cap Value		Equity		Cap Growth		Cap Equity		Equity Fund
Distributions paid from:
Ordinary income		$	10,656,545	$	3,444,699	$	1,118,496	$	7,466,659	$	12,778,661
Net long-term Capital Gains			14,265,499		—		—		34,879,164		7,995,998
	Total taxable distributions	$	24,922,044	$	3,444,699	$	1,118,496	$	42,345,823	$	20,774,659

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GOLDMAN SACHS STRUCTURED EQUITY FUNDS

7. TAX INFORMATION (continued)

     The tax character of distributions paid during the fiscal year ended August 31, 2005 was as follows:

										Structured
		Structured Large		Structured U.S.		Structured Large		Structured Small		International
		Cap Value		Equity		Cap Growth		Cap Equity		Equity Fund
Distributions paid from:
Ordinary income		$	3,809,038	$	5,290,165	$	—		$—	$	6,039,225
Net long-term Capital Gains			7,080,272		—		—		20,102,593		—
	Total taxable distributions	$	10,889,310	$	5,290,165	$	—		$20,102,593	$	6,039,225

     As of August 31, 2006, the components of accumulated earnings (losses) on a tax basis were as follows:

												Structured
		Structured Large		Structured U.S.			Structured Large			Structured Small		International
		Cap Value		Equity			Cap Growth			Cap Equity		Equity Fund
Undistributed ordinary income — net		$	11,276,577	$	8,455,945		$	2,268,154		$	1,351,103	$	66,364,881
Undistributed long-term capital gains			36,530,354		44,701,126			—			43,040,260		67,581,530
Total undistributed earnings		$	47,806,931	$	53,157,701		$	2,268,154		$	44,391,363	$	133,946,411
Capital loss carryforward:1
	Expiring 2010		—		(21,317,839	)		(110,628,623	)		—		(506,100	)
	Expiring 2011		—					(145,633,770	)		—		—
Total capital loss carryforward 2			—		(21,317,839	)		(256,262,393	)		—		(506,100	)
Unrealized gains — net			93,980,523		132,656,475			48,985,362			51,228,786		301,194,978
Total accumulated earnings (losses) — net		$	141,787,454	$	164,495,707		$	(205,008,877	)	$	95,620,149	$	434,635,289

1	Expiration occurs on August 31 of the year indicated. Due to fund mergers, utilization of these losses may be limited under the Internal Revenue Code.
2	The Structured U.S. Equity Fund, Structured Large Cap Growth Fund and Structured International Equity Fund utilized approximately $30,022,000, $22,680,000 and $9,236,000, respectively, of their capital loss carryforwards.

     As of August 31, 2006, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:

														Structured
		Structured Large			Structured U.S.			Structured Large			Structured Small			International
		Cap Value			Equity			Cap Growth			Cap Equity			Equity Fund
Tax Cost		$	1,101,350,432		$	1,305,592,737		$	817,303,841		$	808,621,298		$	2,295,289,247
Gross unrealized gain			108,816,182			144,150,023			62,141,256			77,288,056			307,645,758
Gross unrealized loss			(14,998,061	)		(11,649,700	)		(13,205,369	)		(26,107,122	)		(12,886,660	)
	Net unrealized security gain		93,818,121			132,500,323			48,935,887			51,180,934			294,759,098
	Net unrealized gain on other investments		162,402			156,152			49,475			47,852			6,435,880
Total unrealized gain		$	93,980,523		$	132,656,475		$	48,985,362		$	51,228,786		$	301,194,978

     The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark-to-market gains (losses) on Section 1256 contracts, differences related to the tax treatment of partnerships and passive foreign investment company investments.

63

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements (continued)

August 31, 2006

7. TAX INFORMATION (continued)

     In order to present certain components of the Funds’ capital accounts on a tax basis, certain reclassifications have been recorded to the Funds’ accounts. These reclassifications have no impact on the net asset value of the Funds. Reclassifications result primarily from the difference in the tax treatment of net operating losses, Passive Foreign Investment Company investments, and redemptions utilized as distributions.

						Accumulated
			Accumulated			Undistributed
			Net Realized			Net Investment
Fund	Paid-in Capital		Gain (Loss)			Income
Structured Large Cap Value	$	11,659,496	$	(11,093,160	)	$	(566,336	)
Structured U.S. Equity		434,370		(434,233	)		(137	)
Structured Small Cap Equity		6,792,755		(7,388,085	)		595,330
Structured International Equity		5,643,966		(5,748,432	)		104,466

8. OTHER MATTERS

As of August 31, 2006, Goldman, Sachs & Co. Profit Sharing Master Trust was the beneficial owner of approximately 9% and 6% of the outstanding (Institutional) shares of the Structured U.S. Equity Fund and Structured Small Cap Equity Fund, respectively. In addition, the following Goldman Sachs Asset Allocation Portfolios were beneficial owners of certain Funds with amounts greater than 5% as of August 31, 2006 (as a percentage of outstanding Institutional shares):

				Goldman Sachs						Goldman Sachs
	Goldman Sachs			Growth and Income			Goldman Sachs			Equity Growth
	Balanced Strategy			Strategy			Growth Strategy			Strategy
Fund	Portfolio			Portfolio			Portfolio			Portfolio
Structured Large Cap Value		3	%		18	%		20	%		7	%
Structured Large Cap Growth		2			19			23			9
Structured International Equity		3			16			18			7

Mergers and Reorganizations — At a meeting held on August 5, 2004, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (“the Agreement”) providing for the tax-free acquisition of the Golden Oak International Equity into the Goldman Sachs Structured International Equity Fund. The acquisition was completed on September 28, 2004.

     Pursuant to the Agreement, the assets and liabilities of the Golden Oak International Equity (“Acquired Fund”) Institutional Class and Class A were transferred into the Goldman Sachs Structured International Equity (“Survivor Fund”) Institutional Class and Class A, respectively, in a tax-free exchange as follows:

	Exchanged Shares				Acquired Fund’s
	of Survivor		Value of		Shares Outstanding
Survivor/Acquired Fund	Issued		Exchanged Shares		as of September 28, 2004
Goldman Sachs Structured International Equity Class A/Golden Oak International Equity Class A		143,778	$	1,370,167		174,727
Goldman Sachs Structured International Equity Fund Institutional Class/Golden Oak International Equity Institutional Class		4,500,559	$	43,746,329		5,554,976

     The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation and capital loss carryforwards. Utilization of the Acquired Fund’s capital loss carryforward may be limited under the Internal Revenue Code.

64

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

8. OTHER MATTERS (continued)

										Survivor Fund’s
	Survivor Fund’s		Acquired Fund’s							Aggregate
	Aggregate		Aggregate		Acquired		Acquired			Net Assets
	Net Assets		Net Assets		Fund’s		Fund’s			immediately
	before		before		Unrealized		Capital Loss			after
Survivor/Acquired Funds	acquisition		acquisition		Appreciation		Carryforward			acquisition
Goldman Sachs Structured International Equity/ Golden Oak International Equity	$	414,212,685	$	45,116,496	$	3,622,910	$	(4,590,913	)	$	459,329,181

     At a meeting held on November 4, 2004, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (“the Agreement”) providing for the tax-free acquisition of the Expedition Equity Fund into the Goldman Sachs Structured U.S. Equity Fund. The acquisition was completed on February 28, 2005.

     Pursuant to the Agreement, the assets and liabilities of the Expedition Equity (“Acquired Fund”) Institutional Class, Class A and Class B were transferred into the Goldman Sachs Structured U.S. Equity (“Survivor”) Institutional Class, Class A and Class B, respectively, in a tax-free exchange as follows:

	Exchanged Shares				Acquired Fund’s
	of Survivor		Value of		Shares Outstanding
Survivor/Acquired Fund	Issued		Exchanged Shares		as of February 28, 2005
Goldman Sachs Structured U.S. Equity Class A/ Expedition Equity Class A		234,940	$	6,634,688		799,756
Goldman Sachs Structured U.S. Equity Class B/ Expedition Equity Class B		522,540		13,993,554		1,770,335
Goldman Sachs Structured U.S. Equity Institutional Class/ Expedition Equity Institutional Class		3,631,659		104,410,705		12,455,438

     The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.

										Survivor Fund’s
	Survivor Fund’s		Acquired Fund’s							Aggregate
	Aggregate		Aggregate		Acquired		Acquired			Net Assets
	Net Assets		Net Assets		Fund’s		Funds’			immediately
	before		before		Unrealized		Capital Loss			after
Survivor/Acquired Fund	acquisition		acquisition		Appreciation		Carryforward			acquisition
Goldman Sachs Structured U.S. Equity Fund/ Expedition Equity	$	791,212,862	$	125,038,947	$	18,353,229	$	(79,989,096	)	$	916,251,809

     At a meeting held on December 14, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (“the Agreement”) providing for the tax-free acquisition of the First Funds Core Equity Portfolio by the Goldman Sachs Structured U.S. Equity Fund and the First Funds Capital Appreciation Portfolio by the Goldman Sachs Structured Small Cap Equity Fund. On April 7, 2006, the Board of Trustees approved certain amendments to the Agreement and Plan of Reorganization. The acquisition was completed on June 5, 2006.

     Pursuant to the Agreement, the assets and liabilities of the First Funds Core Equity Portfolio and the First Funds Capital Appreciation Portfolio (each an “Acquired Fund”) Class I, Class A, Class B and Class C were transferred into the Goldman

65

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements (continued)

August 31, 2006

8. OTHER MATTERS (continued)

Sachs Structured U.S. Equity Fund and the Goldman Sachs Structured Small Cap Equity Fund (each a “Survivor Fund”) Institutional Class, Class A and Class B, respectively, in a tax free exchange as follows:

	Exchanged Shares				Acquired Fund’s
	of Survivor		Value of		Shares Outstanding
Survivor/Acquired Fund	Issued		Exchanged Shares		as of June 5, 2006
Goldman Sachs Structured U.S. Equity Class A/ First Funds Core Equity Portfolio Class A		978,718	$	30,761,079		1,891,444
Goldman Sachs Structured U.S. Equity Class A/ First Funds Core Equity Portfolio Class C		831,164		26,123,429		1,701,135
Goldman Sachs Structured U.S. Equity Class B/ First Funds Core Equity Portfolio Class B		243,801		7,223,819		463,904
Goldman Sachs Structured U.S. Equity Institutional Class/ First Funds Core Equity Portfolio Class I		7,897,369		253,347,517		15,536,316
Goldman Sachs Structured Small Cap Equity Class A/ First Funds Capital Appreciation Portfolio Class A		242,404		3,541,520		298,468
Goldman Sachs Structured Small Cap Equity Class A/ First Funds Capital Appreciation Portfolio Class C		36,325		530,704		48,454
Goldman Sachs Structured Small Cap Equity Class B/ First Funds Capital Appreciation Portfolio Class B		127,675		1,722,346		150,246
Goldman Sachs Structured Small Cap Equity Institutional Class/ First Funds Capital Appreciation Portfolio Class I		8,234,016		124,333,284		10,138,925

The following chart shows each Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and each Acquired Fund’s unrealized appreciation.

							Survivor Fund’s
	Survivor Fund’s		Acquired Fund’s				Aggregate
	Aggregate		Aggregate		Acquired		Net Assets
	Net Assets		Net Assets		Fund’s		immediately
	before		before		Unrealized		after
Survivor/Acquired Fund	acquisition		acquisition		Appreciation		acquisition
Goldman Sachs Structured U.S. Equity/ First Funds Core Equity Portfolio	$	1,015,801,262	$	317,455,844	$	34,533,591	$	1,333,257,106
Goldman Sachs Structured Small Cap Equity/ First Funds Capital Appreciation Portfolio	$	682,529,826	$	130,127,854	$	19,883,232	$	812,657,680

Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds including these Funds, and the Trustees and Officers of the Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. These Funds, along with certain other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of

66

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

8. OTHER MATTERS (continued)

fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals in similar litigation.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class and derivative action lawsuit will have a material adverse financial impact on the Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

New Accounting Pronouncements — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.

     On September 15, 2006, the FASB released Statement Financial Accounting Standard No. 157 (“FAS 157”) Fair Value Measurement which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. The standard is not expected to materially impact the Fund’s financial statements.

9. SUBSEQUENT EVENT

Mergers and Reorganizations — At a meeting held on May 11, 2006, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Agreement”) providing for the tax-free acquisition of the Goldman Sachs Research Select Fund by the Goldman Sachs Structured U.S. Equity Fund. Following the approval of the Board of Trustees and shareholders of the Goldman Sachs Research Select Fund, the acquisition was completed on September 25, 2006.

67

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements (continued)

August 31, 2006

10. SUMMARY OF SHARE TRANSACTIONS

Share activity is as follows:

	Structured Large Cap Value Fund
	For the Year Ended						For the Year Ended
	August 31, 2006						August 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		25,532,218		$	345,499,377			8,442,890		$	102,286,779
Shares issued in connection with merger		—			—			—			—
Shares converted from Class B(a)		69,556			912,765			29,581			360,703
Reinvestment of dividends and distributions		532,010			6,989,988			275,453			3,308,458
Shares repurchased		(9,505,137	)		(127,546,622	)		(3,064,759	)		(36,828,135	)
		16,628,647			225,855,508			5,683,165			69,127,805
Class B Shares
Shares sold		229,911			3,042,680			223,430			2,676,204
Shares issued in connection with merger		—			—			—			—
Reinvestment of dividends and distributions		27,326			353,752			33,408			399,119
Shares converted to Class A		(70,167	)		(912,765	)		(29,825	)		(360,703	)
Shares repurchased		(430,798	)		(5,687,157	)		(392,351	)		(4,713,426	)
		(243,728	)		(3,203,490	)		(165,338	)		(1,998,806	)
Class C Shares
Shares sold		527,302			6,992,195			574,083			6,868,263
Reinvestment of dividends and distributions		32,767			424,719			32,914			393,527
Shares repurchased		(561,874	)		(7,452,153	)		(504,742	)		(6,075,965	)
		(1,805	)		(35,239	)		102,255			1,185,825
Institutional Shares
Shares sold		42,516,476			571,488,724			16,747,719			204,004,866
Shares issued in connection with merger		—			—			—			—
Reinvestment of dividends and distributions		1,262,081			16,578,172			552,422			6,619,164
Shares repurchased		(23,009,917	)		(307,840,152	)		(4,428,406	)		(51,716,817	)
		20,768,640			280,226,744			12,871,735			158,907,213
Service Shares
Shares sold		121,591			1,680,600			33,319			400,563
Reinvestment of dividends and distributions		1,089			14,226			1,317			15,852
Shares repurchased		(64,699	)		(873,383	)		(15,480	)		(184,314	)
		57,981			821,443			19,156			232,101
NET INCREASE (DECREASE)		37,209,735		$	503,664,966			18,510,973		$	227,454,138

(a)  Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.

68

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

10. SUMMARY OF SHARE TRANSACTIONS (continued)

Structured U.S. Equity Fund												Structured Large Cap Growth Fund
For the Year Ended						For the Year Ended						For the Year Ended						For the Year Ended
August 31, 2006						August 31, 2005						August 31, 2006						August 31, 2005
Shares			Dollars			Shares			Dollars			Shares			Dollars			Shares			Dollars
	4,613,451		$	142,873,179			3,817,252		$	106,115,210			15,276,119		$	199,732,380			6,107,993		$	73,626,115
	1,809,882			56,884,508			234,940			6,634,688			—			—			—			—
	386,363			11,746,340			195,024			5,372,733			447,436			5,815,347			88,745			1,052,643
	54,042			1,639,094			116,505			3,286,613			4,541			59,855			—			—
	(3,995,041	)		(122,652,714	)		(3,412,663	)		(94,828,489	)		(5,495,448	)		(72,501,227	)		(3,768,736	)		(44,490,893	)
	2,868,697			90,490,407			951,058			26,580,755			10,232,648			133,106,355			2,428,002			30,187,865
	116,019			3,354,017			200,079			5,224,404			132,890			1,642,170			177,675			2,011,348
	243,801			7,223,819			522,540			13,993,554			—			—			—			—
	—			—			1,419			38,000			—			—			—			—
	(409,321	)		(11,746,340	)		(205,980	)		(5,372,733	)		(477,079	)		(5,815,347	)		(94,046	)		(1,052,643	)
	(1,285,974	)		(37,134,431	)		(1,307,824	)		(34,212,836	)		(1,805,964	)		(22,106,869	)		(2,003,340	)		(22,604,976	)
	(1,335,475	)		(38,302,935	)		(789,766	)		(20,329,611	)		(2,150,153	)		(26,280,046	)		(1,919,711	)		(21,646,271	)
	204,239			5,908,011			301,821			7,880,311			167,316			2,058,876			158,700			1,793,715
	—			—			1,789			47,717			—			—			—			—
	(375,281	)		(10,835,948	)		(493,515	)		(12,925,965	)		(830,159	)		(10,301,976	)		(764,504	)		(8,662,729	)
	(171,042	)		(4,927,937	)		(189,905	)		(4,997,937	)		(662,843	)		(8,243,100	)		(605,804	)		(6,869,014	)
	4,477,783			140,971,110			1,504,363			43,409,655			25,906,686			348,090,391			14,878,459			184,619,266
	7,897,369			253,347,517			3,631,659			104,410,705			—			—			—			—
	37,172			1,148,613			55,473			1,591,529			77,882			1,052,189			—			—
	(1,648,028	)		(51,535,457	)		(1,462,411	)		(41,242,690	)		(10,489,114	)		(142,036,561	)		(4,008,711	)		(47,339,167	)
	10,764,296			343,931,783			3,729,084			108,169,199			15,495,454			207,106,019			10,869,748			137,280,099
	182,926			5,577,439			134,243			3,703,952			7,283			98,181			3,781			45,010
	932			28,029			2,468			69,042			—			—			—			—
	(128,228	)		(3,859,152	)		(139,080	)		(3,844,408	)		(5,698	)		(71,722	)		(18,179	)		(215,549	)
	55,630			1,746,316			(2,369	)		(71,414	)		1,585			26,459			(14,398	)		(170,539	)
	12,182,106		$	392,937,634			3,698,102		$	109,350,992			22,916,691		$	305,715,687			10,757,837		$	138,782,140

69

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Notes to Financial Statements (continued)

August 31, 2006

10. SUMMARY OF SHARE TRANSACTIONS (continued)

	Structured Small Cap Equity Fund
	For the Year Ended						For the Year Ended
	August 31, 2006						August 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		8,153,980		$	117,078,380			5,800,199		$	77,871,561
Shares issued in connection with merger		278,729			4,072,224			—			—
Shares converted from Class B(a)		113,275			1,614,534			14,332			186,045
Reinvestment of dividends and distributions		813,060			11,244,622			477,055			6,249,416
Shares repurchased		(6,523,181	)		(93,312,132	)		(5,013,806	)		(67,263,693	)
		2,835,863			40,697,628			1,277,780			17,043,329
Class B Shares
Shares sold		127,749			1,704,896			204,747			2,590,389
Shares issued in connection with merger		127,675			1,722,346			—			—
Reinvestment of dividends and distributions		106,848			1,369,787			81,647			1,005,077
Shares converted to Class A(a)		(122,183	)		(1,614,534	)		(15,234	)		(186,045	)
Shares repurchased		(401,916	)		(5,326,308	)		(531,641	)		(6,667,472	)
		(161,827	)		(2,143,813	)		(260,481	)		(3,258,051	)
Class C Shares
Shares sold		882,834			11,784,175			637,975			8,111,339
Reinvestment of dividends and distributions		152,774			1,966,195			85,890			1,060,746
Shares repurchased		(827,711	)		(10,902,937	)		(701,355	)		(8,821,128	)
		207,897			2,847,433			22,510			350,957
Institutional Shares
Shares sold		15,688,113			230,700,270			16,915,181			233,298,330
Shares issued in connection with merger		8,234,016			124,333,284			—			—
Reinvestment of dividends and distributions		1,580,760			22,541,641			646,629			8,684,223
Shares repurchased		(12,082,876	)		(182,619,082	)		(7,148,812	)		(99,558,812	)
		13,420,013			194,956,113			10,412,998			142,423,741
Service Shares
Shares sold		921,548			12,977,301			857,491			11,350,809
Reinvestment of dividends and distributions		113,254			1,548,180			84,436			1,095,982
Shares repurchased		(1,532,095	)		(21,612,716	)		(1,786,301	)		(23,740,948	)
		(497,293	)		(7,087,235	)		(844,374	)		(11,294,157	)
NET INCREASE (DECREASE)		15,804,653		$	229,270,126			10,608,433		$	145,265,819

(a)  Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.

70

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Structured International Equity Fund
	For the Year Ended						For the Year Ended
	August 31, 2006						August 31, 2005
	Shares			Dollars			Shares			Dollars
		33,603,419		$	446,667,684			16,693,893		$	179,600,914
		—			—			143,778			1,370,167
		73,208			947,165			11,411			119,709
		408,328			4,969,353			107,079			1,120,041
		(7,401,756	)		(96,221,866	)		(5,577,909	)		(60,404,374	)
		26,683,199			356,362,336			11,378,252			121,806,457
		336,131			4,338,428			193,712			2,067,416
		—			—			—			—
		5,222			62,977			—			—
		(74,128	)		(947,165	)		(11,549	)		(119,709	)
		(235,976	)		(3,006,076	)		(165,944	)		(1,755,991	)
		31,249			448,164			16,219			191,716
		162,983			2,146,302			136,148			1,452,028
		3,061			36,944			—			—
		(79,389	)		(1,043,407	)		(117,796	)		(1,251,939	)
		86,655			1,139,839			18,352			200,089
		68,630,073			920,070,546			39,786,594			430,630,065
		—			—			4,500,559			43,746,329
		1,135,451			14,079,590			404,691			4,305,919
		(14,300,707	)		(193,365,457	)		(13,240,749	)		(147,797,277	)
		55,464,817			740,784,679			31,451,095			330,885,036
		1,273,906			16,620,214			2,010,483			22,145,156
		15,544			189,788			78			827
		(381,277	)		(5,130,307	)		(113,395	)		(1,288,536	)
		908,173			11,679,695			1,897,166			20,857,447
		83,174,093		$	1,110,414,713			44,761,084		$	473,940,745

71

GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions
			investment operations									to shareholders
	Net asset		Net
	value,		investment			Net realized			Total from			From net			From net
	beginning		income			and unrealized			investment			investment			realized			Total
Year - Share Class	of year		(loss)(a)			gain (loss)			operations			income			gains			distributions
FOR THE YEARS ENDED AUGUST 31,
2006 - A	$	12.69	$	0.17		$	1.51		$	1.68		$	(0.14	)	$	(0.24	)	$	(0.38	)
2006 - B		12.59		0.07			1.49			1.56			(0.03	)		(0.24	)		(0.27	)
2006 - C		12.60		0.07			1.50			1.57			(0.03	)		(0.24	)		(0.27	)
2006 - Institutional		12.69		0.23			1.50			1.73			(0.18	)		(0.24	)		(0.42	)
2006 - Service		12.73		0.17			1.50			1.67			(0.10	)		(0.24	)		(0.34	)
2005 - A		11.15		0.12			1.76			1.88			(0.09	)		(0.25	)		(0.34	)
2005 - B		11.06		0.03			1.76			1.79			(0.01	)		(0.25	)		(0.26	)
2005 - C		11.07		0.03			1.76			1.79			(0.01	)		(0.25	)		(0.26	)
2005 - Institutional		11.14		0.17			1.77			1.94			(0.14	)		(0.25	)		(0.39	)
2005 - Service		11.18		0.11			1.77			1.88			(0.08	)		(0.25	)		(0.33	)
2004 - A		9.48		0.04			1.75			1.79			(0.12	)		—			(0.12	)
2004 - B		9.40		(0.04	)		1.74			1.70			(0.04	)		—			(0.04	)
2004 - C		9.42		(0.04	)		1.73			1.69			(0.04	)		—			(0.04	)
2004 - Institutional		9.47		0.09			1.74			1.83			(0.16	)		—			(0.16	)
2004 - Service		9.50		0.03			1.76			1.79			(0.11	)		—			(0.11	)
2003 - A		8.74		0.10			0.74			0.84			(0.10	)		—			(0.10	)
2003 - B		8.67		0.03			0.73			0.76			(0.03	)		—			(0.03	)
2003 - C		8.68		0.03			0.74			0.77			(0.03	)		—			(0.03	)
2003 - Institutional		8.74		0.13			0.73			0.86			(0.13	)		—			(0.13	)
2003 - Service		8.74		0.09			0.74			0.83			(0.07	)		—			(0.07	)
2002 - A		10.31		0.07			(1.57	)		(1.50	)		(0.07	)		—			(0.07	)
2002 - B		10.24		—	(c)		(1.56	)		(1.56	)		(0.01	)		—			(0.01	)
2002 - C		10.25		—	(c)		(1.56	)		(1.56	)		(0.01	)		—			(0.01	)
2002 - Institutional		10.31		0.11			(1.57	)		(1.46	)		(0.11	)		—			(0.11	)
2002 - Service		10.31		0.07			(1.58	)		(1.51	)		(0.06	)		—			(0.06	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total returns could be reduced if sales or redemption charges were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)	Amount is less than $0.005 per share.
(d)	Amount is less than 0.005% per share.

 The accompanying notes are an integral part of these financial statements.

72

GOLDMAN SACHS STRUCTURED LARGE CAP VALUE FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets,		Ratio of			net investment			Ratio of			net investment
Net asset					end of		net expenses			income to			total expenses			income (loss)			Portfolio
value, end		Total			year		to average			average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	13.99		13.43	%	$	438,245		0.99	%		1.31	%		1.10	%		1.20	%		127	%
	13.88		12.56			19,200		1.75			0.49			1.84			0.40			127
	13.90		12.66			22,768		1.75			0.51			1.84			0.41			127
	14.00		13.92			715,191		0.59			1.69			0.69			1.59			127
	14.06		13.35			1,697		1.11			1.28			1.20			1.19			127
	12.69		17.13			186,441		1.10			0.99			1.14			0.95			132
	12.59		16.32			20,479		1.85			0.22			1.89			0.18			132
	12.60		16.32			20,666		1.85			0.22			1.89			0.18			132
	12.69		17.69			384,875		0.70			1.39			0.74			1.35			132
	12.73		17.06			799		1.20			0.87			1.24			0.83			132
	11.15		18.93			100,374		1.10			0.95			1.15			0.90			154
	11.06		18.09			19,819		1.85			0.19			1.90			0.14			154
	11.07		17.97			17,027		1.85			0.19			1.90			0.14			154
	11.14		19.41			194,541		0.70			1.36			0.75			1.31			154
	11.18		18.89			487		1.20			0.84			1.25			0.79			154
	9.48		9.70			79,866		1.11			1.13			1.22			1.02			102
	9.40		8.83			18,077		1.86			0.38			1.97			0.27			102
	9.42		8.95			13,798		1.86			0.37			1.97			0.26			102
	9.47		10.03			145,059		0.71			1.52			0.82			1.41			102
	9.50		9.58			327		1.21			1.02			1.32			0.91			102
	8.74		(14.61	)		76,472		1.11			0.76			1.20			0.67			112
	8.67		(15.28	)		18,828		1.86			0.00(d	)		1.95			(0.09	)		112
	8.68		(15.26	)		12,533		1.86			0.01			1.95			(0.08	)		112
	8.74		(14.25	)		108,613		0.71			1.15			0.80			1.06			112
	8.74		(14.70	)		281		1.21			0.72			1.30			0.63			112

73

GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions
			investment operations									to shareholders
	Net asset
	value,		Net			Net realized			Total from			From net
	beginning		investment			and unrealized			investment			investment
Year - Share Class	of year		income (loss)(a)			gain (loss)			operations			income
FOR THE YEARS ENDED AUGUST 31,
2006 - A	$	29.13	$	0.24		$	2.53		$	2.77		$	(0.11	)
2006 - B		27.52		—	(d)		2.40			2.40			—
2006 - C		27.39		0.01			2.38			2.39			—
2006 - Institutional		29.72		0.38			2.56			2.94			(0.18	)
2006 - Service		28.88		0.21			2.50			2.71			(0.09	)
2005 - A		25.81		0.26	(c)		3.28			3.54			(0.22	)
2005 - B		24.39		0.05	(c)		3.09			3.14			(0.01	)
2005 - C		24.30		0.05	(c)		3.07			3.12			(0.03	)
2005 - Institutional		26.32		0.36	(c)		3.37			3.73			(0.33	)
2005 - Service		25.60		0.23	(c)		3.25			3.48			(0.20	)
2004 - A		22.57		0.11			3.20			3.31			(0.07	)
2004 - B		21.42		(0.08	)		3.05			2.97			—
2004 - C		21.34		(0.08	)		3.04			2.96			—
2004 - Institutional		23.00		0.21			3.27			3.48			(0.16	)
2004 - Service		22.40		0.08			3.19			3.27			(0.07	)
2003 - A		20.18		0.09			2.31			2.40			(0.01	)
2003 - B		19.28		(0.06	)		2.20			2.14			—
2003 - C		19.20		(0.06	)		2.20			2.14			—
2003 - Institutional		20.57		0.17			2.37			2.54			(0.11	)
2003 - Service		20.03		0.07			2.30			2.37			—
2002 - A		24.30		0.04			(4.16	)		(4.12	)		—
2002 - B		23.39		(0.13	)		(3.98	)		(4.11	)		—
2002 - C		23.29		(0.12	)		(3.97	)		(4.09	)		—
2002 - Institutional		24.68		0.14			(4.25	)		(4.11	)		—
2002 - Service		24.15		0.02			(4.14	)		(4.12	)		—

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)	Reflects income recognized from a special dividend which amounted to $0.10 per share and .03% of average net assets.
(d)	Amount is less than $0.005.

 The accompanying notes are an integral part of these financial statements.

74

GOLDMAN SACHS STRUCTURED U.S. EQUITY FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets,		Ratio of			net investment			Ratio of			net investment
Net asset					end of		net expenses			income (loss)			total expenses			income (loss)			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	31.79		9.51	%	$	611,999		0.99	%		0.79	%		1.15	%		0.64	%		129	%
	29.92		8.72			78,110		1.75			0.01			1.90			(0.13	)		129
	29.78		8.73			36,628		1.75			0.03			1.90			(0.12	)		129
	32.48		9.97			644,250		0.59			1.22			0.75			1.06			129
	31.50		9.39			13,019		1.09			0.70			1.25			0.55			129
	29.13		13.75			477,204		1.09			0.93	(c)		1.19			0.83	(c)		142
	27.52		12.87			108,595		1.84			0.19	(c)		1.94			0.09	(c)		142
	27.39		12.86			38,380		1.84			0.20	(c)		1.94			0.10	(c)		142
	29.72		14.16			269,545		0.69			1.23	(c)		0.79			1.13	(c)		142
	28.88		13.61			10,328		1.15			0.84	(c)		1.25			0.74	(c)		142
	25.81		14.71			398,346		1.13			0.43			1.25			0.31			112
	24.39		13.87			115,492		1.88			(0.32	)		2.00			(0.44	)		112
	24.30		13.87			38,656		1.88			(0.32	)		2.00			(0.44	)		112
	26.32		15.18			140,587		0.73			0.83			0.85			0.71			112
	25.60		14.60			9,215		1.23			0.33			1.35			0.21			112
	22.57		11.90			351,673		1.15			0.44			1.26			0.33			74
	21.42		11.10			118,993		1.90			(0.31	)		2.01			(0.42	)		74
	21.34		11.15			36,546		1.90			(0.31	)		2.01			(0.42	)		74
	23.00		12.40			131,457		0.75			0.84			0.86			0.73			74
	22.40		11.83			7,717		1.25			0.34			1.36			0.23			74
	20.18		(16.95	)		340,934		1.14			0.19			1.24			0.09			74
	19.28		(17.57	)		125,243		1.89			(0.57	)		1.99			(0.67	)		74
	19.20		(17.56	)		36,223		1.89			(0.56	)		1.99			(0.66	)		74
	20.57		(16.65	)		163,439		0.74			0.59			0.84			0.49			74
	20.03		(17.06	)		6,484		1.24			0.09			1.34			(0.01	)		74

75

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions to
			investment operations									shareholders
	Net asset		Net
	value,		investment			Net realized			Total from			From net			From net
	beginning		income			and unrealized			investment			investment			realized			Total
Year-Share Class	of year		(loss)(a)			gain (loss)			operations			income			gains			distributions
FOR THE YEARS ENDED AUGUST 31,
2006 - A	$	12.55	$	0.04		$	0.61		$	0.65		$	—	(f)	$	—		$	—	(f)
2006 - B		11.81		(0.06	)		0.58			0.52			—			—			—
2006 - C		11.81		(0.06	)		0.59			0.53			—			—			—
2006 - Institutional		12.89		0.09			0.64			0.73			(0.04	)		—			(0.04	)
2006 - Service		12.43		0.02			0.65			0.67			—			—			—
2005 - A		11.13		0.04	(c)		1.38	(d)		1.42			—			—			—
2005 - B		10.55		(0.04	)(c)		1.30	(d)		1.26			—			—			—
2005 - C		10.55		(0.04	)(c)		1.30	(d)		1.26			—			—			—
2005 - Institutional		11.38		0.08	(c)		1.43	(d)		1.51			—			—			—
2005 - Service		11.04		0.04	(c)		1.35	(d)		1.39			—			—			—
2004 - A		10.33		(0.01	)		0.81			0.80			—			—			—
2004 - B		9.87		(0.09	)		0.77			0.68			—			—			—
2004 - C		9.87		(0.09	)		0.77			0.68			—			—			—
2004 - Institutional		10.52		0.03			0.83			0.86			—			—			—
2004 - Service		10.26		(0.02	)		0.80			0.78			—			—			—
2003 - A		9.06		(0.01	)		1.28			1.27			—			—			—
2003 - B		8.72		(0.07	)		1.22			1.15			—			—			—
2003 - C		8.72		(0.07	)		1.22			1.15			—			—			—
2003 - Institutional		9.19		0.03			1.30			1.33			—			—			—
2003 - Service		9.01		(0.02	)		1.27			1.25			—			—			—
2002 - A		11.51		(0.03	)		(2.38	)		(2.41	)		—			(0.04	)		(0.04	)
2002 - B		11.16		(0.11	)		(2.29	)		(2.40	)		—			(0.04	)		(0.04	)
2002 - C		11.17		(0.11	)		(2.30	)		(2.41	)		—			(0.04	)		(0.04	)
2002 - Institutional		11.63		0.01			(2.41	)		(2.40	)		—			(0.04	)		(0.04	)
2002 - Service		11.45		(0.04	)		(2.36	)		(2.40	)		—			(0.04	)		(0.04	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)	Reflects income recognized from a special dividend which amounted to $0.03 per share and 0.30% of average net assets.
(d)	Reflects an increase of $0.01 due to payments by affiliates during the period to reimburse certain security claims.
(e)	Performance has not been restated to reflect the impact of security claims recorded during the period. If restated, the performance would have been 12.67%, 11.85%, 11.85%, 13.18% and 12.50% for Class A, Class B, Class C, Institutional and Service Shares, respectively.
(f)	Amount is less than $0.005 per share.

 The accompanying notes are an integral part of these financial statements.

76

GOLDMAN SACHS STRUCTURED LARGE CAP GROWTH FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end of		net expenses			income (loss)			total expenses			income (loss)			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	13.20		5.21	%	$	310,386		1.00	%		0.28	%		1.16	%		0.12	%		111	%
	12.33		4.40			41,947		1.76			(0.52	)		1.91			(0.67	)		111
	12.34		4.49			22,811		1.76			(0.52	)		1.91			(0.67	)		111
	13.58		5.66			488,448		0.60			0.69			0.76			0.53			111
	13.10		5.39			260		1.10			0.15			1.26			(0.01	)		111
	12.55		12.76	(e)		166,792		1.11			0.37	(c)		1.24			0.24	(c)		146
	11.81		11.94	(e)		65,545		1.86			(0.32	)(c)		1.99			(0.45	)(c)		146
	11.81		11.94	(e)		29,672		1.86			(0.32	)(c)		1.99			(0.45	)(c)		146
	12.89		13.27	(e)		263,906		0.71			0.65	(c)		0.84			0.52	(c)		146
	12.43		12.59	(e)		227		1.21			0.38	(c)		1.34			0.25	(c)		146
	11.13		7.74			120,872		1.15			(0.10	)		1.29			(0.24	)		149
	10.55		6.89			78,810		1.90			(0.85	)		2.04			(0.99	)		149
	10.55		6.89			32,901		1.90			(0.85	)		2.04			(0.99	)		149
	11.38		8.17			109,353		0.75			0.31			0.89			0.17			149
	11.04		7.60			361		1.25			(0.20	)		1.39			(0.34	)		149
	10.33		14.02			127,317		1.18			(0.07	)		1.31			(0.20	)		119
	9.87		13.19			91,084		1.93			(0.82	)		2.06			(0.95	)		119
	9.87		13.19			36,553		1.93			(0.82	)		2.06			(0.95	)		119
	10.52		14.47			114,524		0.78			0.33			0.91			0.20			119
	10.26		13.87			410		1.28			(0.17	)		1.41			(0.30	)		119
	9.06		(21.04	)		139,593		1.17			(0.32	)		1.27			(0.42	)		113
	8.72		(21.61	)		99,959		1.92			(1.06	)		2.02			(1.16	)		113
	8.72		(21.68	)		41,627		1.92			(1.07	)		2.02			(1.17	)		113
	9.19		(20.74	)		131,590		0.77			0.08			0.87			(0.02	)		113
	9.01		(21.06	)		409		1.27			(0.41	)		1.37			(0.51	)		113

77

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions to
			investment operations									shareholders
	Net asset		Net
	value,		investment			Net realized			Total from			From net			From net
	beginning		income			and unrealized			investment			investment			realized			Total
Year - Share Class	of year		(loss)(a)			gain (loss)			operations			income			gains			distributions
FOR THE YEARS ENDED AUGUST 31,
2006 - A	$	14.55	$	—	(c)	$	0.35		$	0.35		$	—		$	(1.14	)	$	(1.14	)
2006 - B		13.60		(0.10	)		0.33			0.23			—			(1.14	)		(1.14	)
2006 - C		13.64		(0.10	)		0.34			0.24			—			(1.14	)		(1.14	)
2006 - Institutional		14.95		0.06			0.36			0.42			—			(1.14	)		(1.14	)
2006 - Service		14.40		(0.01	)		0.34			0.33			—			(1.14	)		(1.14	)
2005 - A		12.24		(0.02	)		3.02			3.00			—			(0.69	)		(0.69	)
2005 - B		11.56		(0.11	)		2.84			2.73			—			(0.69	)		(0.69	)
2005 - C		11.60		(0.11	)		2.84			2.73			—			(0.69	)		(0.69	)
2005 - Institutional		12.52		0.04			3.08			3.12			—			(0.69	)		(0.69	)
2005 - Service		12.13		(0.03	)		2.99			2.96			—			(0.69	)		(0.69	)
2004 - A		11.61		(0.04	)		1.38			1.34			(0.02	)		(0.69	)		(0.71	)
2004 - B		11.06		(0.13	)		1.32			1.19			—			(0.69	)		(0.69	)
2004 - C		11.10		(0.13	)		1.32			1.19			—			(0.69	)		(0.69	)
2004 - Institutional		11.84		0.01			1.41			1.42			(0.05	)		(0.69	)		(0.74	)
2004 - Service		11.53		(0.05	)		1.36			1.31			(0.02	)		(0.69	)		(0.71	)
2003 - A		9.36		0.02			2.23			2.25			—			—			—
2003 - B		8.99		(0.05	)		2.12			2.07			—			—			—
2003 - C		9.01		(0.05	)		2.14			2.09			—			—			—
2003 - Institutional		9.51		0.06			2.27			2.33			—			—			—
2003 - Service		9.30		0.01			2.22			2.23			—			—			—
2002 - A		10.59		—	(c)		(0.83	)		(0.83	)		—			(0.40	)		(0.40	)
2002 - B		10.26		(0.08	)		(0.79	)		(0.87	)		—			(0.40	)		(0.40	)
2002 - C		10.29		(0.07	)		(0.81	)		(0.88	)		—			(0.40	)		(0.40	)
2002 - Institutional		10.76		0.04			(0.85	)		(0.81	)		(0.04	)		(0.40	)		(0.44	)
2002 - Service		10.55		0.01			(0.84	)		(0.83	)		(0.02	)		(0.40	)		(0.42	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)	Amount is less than $0.005 per share.
(d)	Amount is less than 0.005% per share.

 The accompanying notes are an integral part of these financial statements.

78

GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets,		Ratio of			net investment			Ratio of			net investment
Net asset					end of		net expenses			income (loss)			total expenses			income (loss)			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	13.76		2.42	%	$	185,508		1.27	%		—	%(d)		1.37	%		(0.09	)%		151	%
	12.69		1.66			16,197		2.02			(0.75	)		2.11			(0.84	)		151
	12.74		1.65			25,899		2.02			(0.75	)		2.11			(0.84	)		151
	14.23		2.77			504,101		0.87			0.40			0.97			0.30			151
	13.59		2.30			29,501		1.37			(0.09	)		1.46			(0.18	)		151
	14.55		24.97			154,877		1.33			(0.15	)		1.41			(0.23	)		149
	13.60		24.07			19,555		2.08			(0.89	)		2.16			(0.97	)		149
	13.64		24.09			24,901		2.08			(0.90	)		2.16			(0.98	)		149
	14.95		25.57			328,912		0.93			0.25			1.01			0.17			149
	14.40		24.86			38,412		1.43			(0.26	)		1.51			(0.34	)		149
	12.24		11.87			114,684		1.33			(0.30	)		1.43			(0.40	)		153
	11.56		11.08			19,642		2.08			(1.04	)		2.18			(1.14	)		153
	11.60		11.05			20,915		2.08			(1.05	)		2.18			(1.15	)		153
	12.52		12.31			145,003		0.93			0.10			1.03			—	(d)		153
	12.13		11.79			42,618		1.43			(0.40	)		1.53			(0.50	)		153
	11.61		24.04			89,340		1.34			0.25			1.52			0.07			149
	11.06		23.03			19,408		2.09			(0.51	)		2.27			(0.69	)		149
	11.10		23.09			16,463		2.09			(0.51	)		2.27			(0.69	)		149
	11.84		24.50			111,957		0.94			0.65			1.12			0.47			149
	11.53		23.87			40,775		1.44			0.15			1.62			(0.03	)		149
	9.36		(8.20	)		57,014		1.34			0.01			1.58			(0.23	)		136
	8.99		(8.88	)		16,854		2.09			(0.74	)		2.33			(0.98	)		136
	9.01		(8.95	)		11,504		2.09			(0.74	)		2.33			(0.98	)		136
	9.51		(7.93	)		57,683		0.94			0.39			1.18			0.15			136
	9.30		(8.27	)		28,999		1.44			0.15			1.68			(0.09	)		136

79

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions
			investment operations									to shareholders
	Net asset
	value,		Net			Net realized			Total from			From net			From net
	beginning		investment			and unrealized			investment			investment			realized			Total
Year - Share Class	of year		income (loss)(a)			gain (loss)			operations			income			gains			distributions
FOR THE YEARS ENDED AUGUST 31,
2006 - A	$	11.70	$	0.21		$	2.57		$	2.78		$	(0.11	)	$	(0.08	)	$	(0.19	)
2006 - B		11.53		0.08			2.57			2.65			(0.01	)		(0.08	)		(0.09	)
2006 - C		11.54		0.09			2.56			2.65			(0.02	)		(0.08	)		(0.10	)
2006 - Institutional		11.93		0.27			2.61			2.88			(0.14	)		(0.08	)		(0.22	)
2006 - Service		11.73		0.18			2.59			2.77			(0.11	)		(0.08	)		(0.19	)
2005 - A		9.49		0.18			2.10			2.28			(0.07	)		—			(0.07	)
2005 - B		9.37		0.08			2.08			2.16			—			—			—
2005 - C		9.37		0.08			2.09			2.17			—			—			—
2005 - Institutional		9.68		0.22			2.14			2.36			(0.11	)		—			(0.11	)
2005 - Service		9.54		0.29			1.98			2.27			(0.08	)		—			(0.08	)
2004 - A		7.66		0.10			1.80			1.90			(0.07	)		—			(0.07	)
2004 - B		7.56		0.04			1.80			1.84			(0.03	)		—			(0.03	)
2004 - C		7.56		0.04			1.79			1.83			(0.02	)		—			(0.02	)
2004 - Institutional		7.80		0.15			1.84			1.99			(0.11	)		—			(0.11	)
2004 - Service		7.70		0.15			1.77			1.92			(0.08	)		—			(0.08	)
2003 - A		7.35		0.08			0.28			0.36			(0.05	)		—			(0.05	)
2003 - B		7.24		0.04			0.28			0.32			—	(c)		—			—	(c)
2003 - C		7.25		0.04			0.28			0.32			(0.01	)		—			(0.01	)
2003 - Institutional		7.49		0.12			0.29			0.41			(0.10	)		—			(0.10	)
2003 - Service		7.39		0.10			0.27			0.37			(0.06	)		—			(0.06	)
2002 - A		8.38		0.03			(1.06	)		(1.03	)		—			—			—
2002 - B		8.29		(0.01	)		(1.04	)		(1.05	)		—			—			—
2002 - C		8.30		(0.01	)		(1.04	)		(1.05	)		—			—			—
2002 - Institutional		8.50		0.08			(1.07	)		(0.99	)		(0.02	)		—			(0.02	)
2002 - Service		8.41		0.05			(1.07	)		(1.02	)		—			—			—

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
(c)	Amount is less than $0.005 per share.

 The accompanying notes are an integral part of these financial statements.

80

GOLDMAN SACHS STRUCTURED INTERNATIONAL EQUITY FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets,		Ratio of			net investment			Ratio of			net investment
Net asset					end of		net expenses			income (loss)			total expenses			income (loss)			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	14.29		24.02	%	$	739,861		1.26	%		1.63	%		1.35	%		1.54	%		59	%
	14.09		23.18			10,306		2.02			0.64			2.11			0.55			59
	14.09		23.10			7,110		2.02			0.67			2.11			0.58			59
	14.59		24.52			1,661,909		0.86			2.01			0.95			1.92			59
	14.31		23.87			40,369		1.37			1.38			1.46			1.29			59
	11.70		24.12			293,591		1.39			1.64			1.40			1.63			73
	11.53		23.05			8,075		2.14			0.75			2.15			0.74			73
	11.54		23.16			4,824		2.14			0.75			2.15			0.74			73
	11.93		24.51			697,144		0.99			1.96			1.00			1.95			73
	11.73		23.93			22,429		1.49			2.33			1.50			2.32			73
	9.49		24.85			130,291		1.59			1.08			1.68			0.99			99
	9.37		24.31			6,408		2.16			0.45			2.25			0.36			99
	9.37		24.28			3,747		2.16			0.43			2.25			0.34			99
	9.68		25.71			261,118		1.01			1.65			1.10			1.56			99
	9.54		25.08			144		1.51			1.55			1.60			1.46			99
	7.66		5.00			95,015		1.67			1.12			1.84			0.95			122
	7.56		4.45			5,574		2.17			0.56			2.34			0.39			122
	7.56		4.38			3,646		2.17			0.64			2.34			0.47			122
	7.80		5.64			158,021		1.02			1.73			1.19			1.56			122
	7.70		5.14			31		1.52			1.45			1.69			1.28			122
	7.35		(12.29	)		72,405		1.67			0.38			1.82			0.23			115
	7.24		(12.67	)		6,434		2.17			(0.07	)		2.32			(0.22	)		115
	7.25		(12.65	)		3,963		2.17			(0.07	)		2.32			(0.22	)		115
	7.49		(11.68	)		188,858		1.02			1.02			1.17			0.87			115
	7.39		(12.13	)		18		1.52			0.60			1.67			0.45			115

81

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Goldman Sachs Trust — Structured Equity Funds:

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Structured Large Cap Value Fund (formerly, Goldman Sachs CORE Large Cap Value Fund), Goldman Sachs Structured U.S. Equity Fund (formerly, Goldman Sachs CORE US Equity Fund), Structured Large Cap Growth Fund (formerly, Goldman Sachs CORE Large Cap Growth Fund), Structured Small Cap Equity Fund (formerly, Goldman Sachs CORE Small Cap Equity Fund, and Structured International Equity Fund (formerly, Goldman Sachs CORE International Fund) (collectively “the Structured Equity Funds”), portfolios of the Goldman Sachs Trust, at August 31, 2006, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Structured Equity Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at August 31, 2006, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 27, 2006

82

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Fund Expenses (Unaudited) — Six Month Period Ended August 31, 2006

          As a shareholder of Class A, Class B, Class C, Institutional or Service Shares of the Funds you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments (with respect to Class A Shares), contingent deferred sales charges (loads) on redemptions (with respect to Class B and Class C Shares), and redemption fees (with respect to Class A, Class B, Class C, Institutional and Service Shares, if any); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Class A, Class B and Class C Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in Class A, Class B, Class C, Institutional and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

          The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from March 1, 2006 through August 31, 2006.

Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.

Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

          Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Structured Large Cap Value Fund							Structured U.S. Equity Fund							Structured Large Cap Growth Fund							Structured Small Cap Equity Fund							Structured International Equity Fund
						Expenses							Expenses							Expenses							Expenses							Expenses
	Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the
	Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended
Share Class	3/1/06		8/31/06			8/31/06*		3/1/06		8/31/06			8/31/06*		3/1/06		8/31/06			8/31/06*		3/1/06		8/31/06			8/31/06*		3/1/06		8/31/06			8/31/06*
Class A
Actual	$	1,000.00	$	1,043.10		$	4.91	$	1,000.00	$	1,020.50		$	4.85	$	1,000.00	$	985.10		$	4.77	$	1,000.00	$	950.90		$	6.17	$	1,000.00	$	1,087.50		$	6.48
Hypothetical 5% return		1,000.00		1,020.40	+		4.85		1,000.00		1,020.41	+		4.85		1,000.00		1,020.40	+		4.86		1,000.00		1,018.88	+		6.38		1,000.00		1,019.00	+		6.27
Class B
Actual		1,000.00		1,039.30			8.74		1,000.00		1,017.00			8.65		1,000.00		981.70			8.50		1,000.00		947.70			9.84		1,000.00		1,083.80			10.40
Hypothetical 5% return		1,000.00		1,016.63	+		8.65		1,000.00		1,016.63	+		8.65		1,000.00		1,016.63	+		8.65		1,000.00		1,015.10	+		10.18		1,000.00		1,015.23	+		10.05
Class C
Actual		1,000.00		1,039.40			8.74		1,000.00		1,016.70			8.65		1,000.00		981.70			8.50		1,000.00		947.20			9.83		1,000.00		1,083.00			10.39
Hypothetical 5% return		1,000.00		1,016.63	+		8.65		1,000.00		1,016.63	+		8.65		1,000.00		1,016.63	+		8.65		1,000.00		1,015.10	+		10.18		1,000.00		1,015.23	+		10.06
Institutional
Actual		1,000.00		1,045.70			2.84		1,000.00		1,022.0			2.82		1,000.00		987.60			2.77		1,000.00		952.50			4.20		1,000.00		1,088.80			4.37
Hypothetical 5% return		1,000.00		1,022.43	+		2.81		1,000.00		1,022.42	+		2.82		1,000.00		1,022.42	+		2.82		1,000.00		1,020.90	+		4.35		1,000.00		1,021.02	+		4.23
Service
Actual		1,000.00		1,043.40			5.50		1,000.00		1,020.10			5.36		1,000.00		985.00			5.27		1,000.00		950.30			6.65		1,000.00		1,086.60			7.00
Hypothetical 5% return		1,000.00		1,019.83	+		5.43		1,000.00		1,019.90	+		5.36		1,000.00		1,019.90	+		5.36		1,000.00		1,018.38	+		6.89		1,000.00		1,018.50	+		6.77

*   Expenses for each share class are calculated using each Fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended August 31, 2006. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were as follows:

Fund	Class A			Class B			Class C			Institutional			Service
Structured Large Cap Value		0.95	%		1.70	%		1.70	%		0.55	%		1.07	%
Structured U.S. Equity		0.95			1.70			1.70			0.55			1.05
Structured Large Cap Growth		0.95			1.70			1.70			0.55			1.05
Structured Small Cap Equity		1.25			2.00			2.00			0.85			1.35
Structured International Equity		1.23			1.98			1.98			0.83			1.33

+  Hypothetical expenses are based on each Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses.

83

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statement Regarding Basis for Approval of Management Agreement (Unaudited)

     The Trustees oversee the management of Goldman Sachs Trust (the “Trust”), and review the investment performance and expenses of the investment funds covered by this Report (the “Funds”) at regularly scheduled meetings held during the Funds’ fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Funds.

     The Management Agreement was most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreement or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).

     To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Funds’ investment performance, expenses and other matters at other regularly scheduled meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreement including: (a) the Funds’ investment performance; (b) the Funds’ management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Funds that exceed specified levels; (d) the Investment Adviser’s potential economies of scale and the breakpoints implemented in 2005 for the fees payable by the Funds under the Management Agreement; (e) the relative expense levels of the Funds; (f) information on the advisory fees charged by the Investment Adviser to institutional accounts; (g) the Investment Adviser’s profitability with respect to the Trust and the Funds; (h) the quality of the non-advisory services provided to the Funds; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of the Trustees’ contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Funds.

     At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management teams; (d) the groups within the Investment Adviser that support the portfolio management teams, including the legal and compliance departments, the credit department, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Funds for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreement; (i) the administrative services provided under the Management Agreement, including the nature and extent of the Investment Adviser’s oversight of the Funds’ other service providers including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various types of potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Funds’ investment performance, fees and expenses, including the Funds’ expense trends over time and the breakpoints in the contractual fee rates under the Management Agreement that were approved in 2005.

84

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)

     In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the commission rates paid by the Funds on brokerage transactions, the Investment Adviser’s receipt of research services in connection with those transactions, and the payment of Rule 12b-1 distribution and service fees by the Funds. Information was also provided to the Trustees relating to the Funds’ portfolio turnover rates, revenue sharing by the Investment Adviser, portfolio manager compensation and the alignment of the interests of the Funds and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser or its affiliates present.

     The presentations made at the Contract Review Committee meetings and at the Annual Contract Meeting encompassed the Funds and other mutual fund portfolios for which the Board of Trustees has responsibility. While the Management Agreement for all of the Funds was approved at the same Annual Contract Meeting, the Trustees considered the Management Agreement as it applied to each Fund separately.

     In evaluating the Management Agreement at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Funds. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreement, including: (a) information on the investment performance of the Funds in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Funds invest; (c) compliance reports; and (d) expenses borne by the Funds. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that were provided to investors who had invested in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and discussed the broad range of other investment choices that are available to those investors.

     In connection with their approval of the Management Agreement, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Funds by the Investment Adviser and its affiliates. These services include services as the Funds’ transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Funds’ portfolio securities transactions and sales loads on the sale of certain classes of shares offered by the Funds. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Funds and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Funds and the Investment Adviser, including education and training initiatives.

85

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)

     The Trustees also considered the investment performance of the Funds and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Funds to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Funds’ investment performance relative to their respective performance benchmarks. This information on the Funds’ investment performance was provided for one, three, five and ten (where applicable) year periods. In addition, the Trustees considered the investment performance trends of the Funds over time, and reviewed the investment performance of the Funds in light of their respective investment objectives and policies, as well as in light of periodic analyses of their respective quality and risk profiles. In addition, the Trustees considered whether the Funds had operated within their investment policies, and their record of compliance with their investment limitations. The Trustees believed that the Funds were providing investment performance within a competitive range for long-term investors.

     The Board of Trustees also considered the contractual fee rates payable by the Funds under the Management Agreement. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Funds, which included both advisory and administrative services that were directed to the needs and operations of the Funds as registered mutual funds. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Funds and the Funds’ total operating expense ratios (before and after voluntary fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Funds’ fee rates and total operating expense ratios were prepared by the Outside Data Provider.

     More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Funds. The analyses provided a comparison of the Funds’ management fees to relevant peer groups and category universes; an expense analysis which compared each Fund’s expenses to a peer group and a category universe; and a five-year history comparing each Fund’s expenses to a category average. The analyses also compared the Funds’ transfer agency fees, custody and accounting fees and other expenses to peer groups and medians. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition, the Trustees noted the Investment Adviser’s voluntary undertaking to limit the Funds’ total expense ratios (excluding certain expenses) to specified levels. In addition, the Trustees noted the Investment Adviser’s voluntary waivers of a portion of its management fees for each of the Funds that were implemented at the beginning of the year.

86

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)

     The Board of Trustees also considered the reduction in the contractual fee rates payable by the Structured U.S. Equity Fund and Structured Large Cap Growth Fund under the Management Agreements that were approved by the Trustees in 2004, and the breakpoints in the contractual fee rates under the Management Agreement for each of the Funds that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the respective Funds:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Structured Large Cap Value Fund		0.60	%		First $1  Billion
		0.54			Next $1  Billion
		0.51			Over $2  Billion
Structured U.S. Equity Fund		0.65			First $1  Billion
		0.59			Next $1  Billion
		0.56			Over $2  Billion
Structured Large Cap Growth Fund		0.65			First $1  Billion
		0.59			Next $1  Billion
		0.56			Over $2  Billion
Structured Small Cap Equity Fund		0.85			First $2  Billion
		0.77			Over $2  Billion
Structured International Equity Fund		0.85			First $1  Billion
		0.77			Next $1  Billion
		0.73			Over $2  Billion

In approving these new fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Funds and their shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Funds; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.

87

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)

     The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Funds as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Funds. In this regard, the Trustees noted that the Investment Adviser had adopted a policy to cease obtaining third party non-broker research based on the Funds’ brokerage commissions. In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Funds. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.

     After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Funds were reasonable in light of the services provided by the Investment Adviser, its costs and the Funds’ current and reasonably anticipated asset levels, and that the Management Agreement should be approved and continued.

88

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Trustees and Officers (Unaudited)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Ashok N. Bakhru Age: 64	Chairman of the Board of Trustees	Since 1991	President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003). Chairman of the Board of Trustees — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
John P. Coblentz, Jr. Age: 65	Trustee	Since 2003	Partner, Deloitte & Touche LLP (June 1975-May 2003). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Patrick T. Harker Age: 47	Trustee	Since 2000	Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Mary P. McPherson Age: 71	Trustee	Since 1997	Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Wilma J. Smelcer Age: 57	Trustee	Since 2001	Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Lawson Products Inc. (distributor of industrial products).

89

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Trustees and Officers (Unaudited) (continued)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Richard P. Strubel Age: 67	Trustee	Since 1987	Vice Chairman and Director, Cardean Leaning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Gildan Activewear Inc. (clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
*Alan A. Shuch Age: 56	Trustee	Since 1990	Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
*Kaysie P. Uniacke Age: 45	Trustee   &	Since 2001	Managing Director, GSAM (1997-Present).	77	None
	President	Since 2002	Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College

*	These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1	Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno.
2	The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997.
3	Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
4	The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of August 31, 2006, the Trust consisted of 65 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios.
5	This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726

90

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*

		Term of
		Office and
	Position(s) Held	Length of
Name, Age And Address	With the Trust	Time Served1	Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45	President & Trustee	Since 2002 Since 2001	Managing Director, GSAM (1997-Present). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College
James A. Fitzpatrick 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 46	Vice President	Since 1997	Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara 32 Old Slip New York, NY 10005 Age: 43	Vice President	Since 2001	Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004).
John M. Perlowski 32 Old Slip New York, NY 10005 Age: 41	Treasurer	Since 1997	Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37	Secretary	Since 2006	Vice President and Associate General Counsel, Goldman Sachs (2002-Present); Vice President and Assistant General Counsel, Goldman Sachs (1999-2002). Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).

1	Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*	Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

91

GOLDMAN SACHS STRUCTURED EQUITY FUNDS

Goldman Sachs Trust — Structured Equity Funds — Tax Information (Unaudited)

       For the year ended August 31, 2006, 73.84%, 100%, 100%, and 64.22% of the dividends paid from net investment company taxable income by the Structured Large Cap Value, Structured Large Cap Growth, Structured U.S. Equity and Structured Small Cap Equity Funds, respectively, qualify for the dividends received deduction available to corporations.

       From distributions paid during the year ended August 31, 2006, the total amount of income received by the Structured International Equity Fund from sources within foreign countries and possessions of the United States was $0.0827 per share, all of which is attributable to qualified passive income. The total amount of taxes paid by the Fund to such countries was $0.0063 per share. A separate notice containing the country-by-country components of these totals has been previously mailed to shareholders.

       Pursuant to Section 852 of the Internal Revenue Code, the Structured Large Cap Value, Structured Small Cap Equity and Structured International Equity Funds designate $23,174,783, $40,736,789 and $10,896,919, respectively, as capital gain dividends paid during the year ended August 31, 2006. Of the amounts designated by the Structured Large Cap Value, Structured Small Cap Equity and Structured International Equity Funds, $23,156,302, $40,704,362 and $10,896,919, respectively, are taxed at a maximum rate of 15% while the balance (if any) is taxed at a maximum rate of 25%.

       For the year ended August 31, 2006, 100%, 100%, 100%, 46.74% and 91.94% of the dividends paid from net investment company taxable income by the Structured Large Cap Value, Structured U.S. Equity, Structured Large Cap Growth, Structured Small Cap Equity and Structured International Equity Funds, respectively, qualify for the reduced tax rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.

92

FUNDS PROFILE

Goldman Sachs Funds

Goldman Sachsis a premier financial services firm, known since 1869 for creating thoughtful and customized investment solutions in complex global markets.

Today, The Investment Management Divisionof Goldman Sachs serves a diverse set of clients worldwide, including private institutions, public entities and individuals. With portfolio management teams located around the world — and $582.1 billion in assets under management as of June 30, 2006 — our investment professionals bring firsthand knowledge of local
markets to every investment decision, making us one of the few truly global asset managers.

GOLDMAN SACHS FUNDS

In building a globally diversified portfolio, you can select from more than 50 Goldman Sachs Funds and gain access to investment opportunities across borders, investment styles, asset classes and security capitalizations.

Money Market Funds¹

Fixed Income Funds
▪  Enhanced Income Fund
▪  Ultra-Short Duration
Government Fund
▪  Short Duration Government Fund
▪  Short Duration Tax-Free Fund
▪  California Intermediate AMT-Free Municipal Fund
▪  New York Intermediate AMT-Free Municipal Fund
▪  Tennessee Municipal Fund
▪  Municipal Income Fund
▪  U.S. Mortgages Fund
▪  Government Income Fund
▪  Core Fixed Income Fund
▪  Investment Grade Credit Fund
▪  Global Income Fund
▪  High Yield Municipal Fund
▪  High Yield Fund
▪  Emerging Markets Debt Fund Domestic Equity Funds
▪  Structured U.S. Equity Fund²
▪  Structured U.S. Equity Flex Fund
▪  Structured Large Cap Value Fund²
▪  Structured Large Cap Growth Fund²
▪  Growth and Income Fund
▪  Large Cap Value Fund
▪  Capital Growth Fund
▪  Strategic Growth Fund
▪  Concentrated Growth Fund
▪  Mid Cap Value Fund
▪  Growth Opportunities Fund
▪  Small/ Mid Cap Growth Fund
▪  Structured Small Cap Equity Fund²
▪  Small Cap Value Fund International Equity Funds
▪  Structured International Equity Fund²
▪  Structured International Equity Flex Fund
▪  International Equity Fund
▪  Japanese Equity Fund
▪  International Small Cap Fund²
▪  Asia Equity Fund²
▪  Emerging Markets Equity Fund
▪  BRIC Fund (Brazil, Russia, India, China)

Asset Allocation Funds³
▪  Asset Allocation Portfolios
▪  Balanced Fund

Specialty Funds³
▪  U.S. Equity Dividend and
Premium Fund
▪  Structured Tax-Managed Equity Fund²
▪  Real Estate Securities Fund
▪  International Real Estate
Securities Fund
▪  Tollkeeper Fund^SM

1	An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.
2	Effective December 30, 2005, the Asia Growth Fund was renamed the Asia Equity Fund and the International Growth Opportunities Fund was renamed the International Small Cap Fund. Also effective December 30, 2005, the CORE International Equity, CORE Small Cap Equity, CORE Large Cap Growth, CORE Large Cap Value and CORE U.S. Equity Funds were renamed, respectively, the Structured International Equity, Structured Small Cap Equity, Structured Large Cap Growth, Structured Large Cap Value Funds and Structured U.S. Equity. Effective January 6, 2006, the CORE Tax-Managed Equity Fund was renamed the Structured Tax-Managed Equity Fund.
3	Individual Funds within the Asset Allocation and Specialty categories will have various placement on the risk/return spectrum and may have greater or lesser risk than that indicated by the placement of the general Asset Allocation or Specialty category.

The Goldman Sachs Tollkeeper Fund^SM is a registered service mark of Goldman, Sachs & Co.

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32ND FLOOR, NEW YORK, NEW YORK 10005

TRUSTEES
Ashok N. Bakhru, Chairman
John P. Coblentz, Jr.
Patrick T. Harker
Mary Patterson McPherson
Alan A. Shuch
Wilma J. Smelcer
Richard P. Strubel
Kaysie P. Uniacke OFFICERS
Kaysie P. Uniacke, President
James A. Fitzpatrick, Vice President
James A. McNamara, Vice President
John M. Perlowski, Treasurer
Peter V. Bonanno, Secretary

GOLDMAN, SACHS & CO.
Distributor and Transfer Agent GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser

Visit our Web site at www.goldmansachsfunds.com to obtain the most recent month-end returns.

The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how a Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (I) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (II) on the Securities and Exchange Commission Web site at http://www.sec.gov.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended November 30, 2004 and every first and third fiscal quarter thereafter, the Funds’ Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. When available, the Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders).

Holdings and allocations shown are unaudited, and may not be representative of current or future investments. Holdings and allocations may not include the Funds’ entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (MSCI) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (S&P) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

CORE^SM is a registered service mark of Goldman, Sachs & Co.

This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.

Copyright 2006 Goldman, Sachs & Co. All rights reserved. 06-1551 STRUCTAR / 125.8K / 10-06

EX-99.17.P

Goldman Sachs Funds

SHORT DURATION TAXABLE FIXED INCOME FUNDS Annual Report October 31, 2006 

Current income potential from portfolios that invest in a variety of fixed income securities.

Goldman Sachs Short Duration Taxable Fixed Income Funds

n	GOLDMAN SACHS ENHANCED INCOME FUND
n	GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND
n	GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

The Goldman Sachs Enhanced Income Fund is not a money market fund. Investors in this Fund should understand that the net asset value of the Fund will fluctuate, which may result in a loss of the principal amount invested. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.

The Goldman Sachs Ultra-Short Duration Government Fund is not a money market fund. Investors in this Fund should understand that the net asset value of the Fund will fluctuate, which may result in a loss of the principal amount invested. The Fund’s net asset value and yield are not guaranteed by the U.S. government or by its agencies, instrumentalities or sponsored enterprises. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.

The Goldman Sachs Short Duration Government Fund is not a money market fund. Investors in this Fund should understand that the net asset value of the Fund will fluctuate, which may result in a loss of the principal amount invested. The Fund’s net asset value and yield are not guaranteed by the U.S. government or by its agencies, instrumentalities or sponsored enterprises. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

What Distinguishes Goldman Sachs’
Fixed Income Investment Process?

At Goldman Sachs Asset Management (“GSAM”), the goal of our fixed income investment process is to provide consistent, strong performance by actively managing our portfolios within a research-intensive, risk-managed framework.

A key element of our fixed income investment philosophy is to evaluate the broadest opportunity set to capture relative value across sectors and instruments. Our integrated investment process involves managing dynamically along the risk/return spectrum, as we continue to develop value-added strategies through:

n	Assess relative value among sectors (such as mortgages and corporates) and sub-sectors
n	Leverage the vast resources of Goldman Sachs in selecting securities for each portfolio

n	Team approach to decision making
n	Manage risk by avoiding significant sector and interest rate bets
n	Careful management of yield curve strategies — while closely managing portfolio duration

Fixed Income portfolios that:

n	Include domestic investment options, income opportunities, and access to areas of specialization
n	Capitalize on GSAM’s industry-renowned credit research capabilities
n	Use a risk-managed framework to seek total return, recognizing the importance of investors’ capital accumulation goals as well as their need for income

1

PORTFOLIO RESULTS

Enhanced Income Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Enhanced Income Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, Institutional and Administration Shares generated cumulative total returns, without sales charges, of 4.26%, 4.66% and 4.29%, respectively. These returns compare to the 4.65% and 4.33% cumulative total returns of the Fund’s benchmarks, the Six-Month U.S. Treasury Bill Index and the One-Year U.S. Treasury Note Index, respectively, over the same time period.

A combination of top-down and bottom-up strategies impacted the Fund’s performance relative to its benchmarks over the period. Top-down strategies included our duration positioning and cross-sector strategies. The Fund held a short duration position over the period in anticipation of higher interest rates. This strategy helped enhance relative results as interest rates rose meaningfully. Cross-sector strategies also lent support to the Fund’s performance versus its benchmarks. Within our cross-sector strategies, the Fund continued to emphasize shorter-term, higher credit quality securities. The Fund’s exposures were primarily to the agency, corporate and asset-backed sectors, which all performed well over the period, contributing to performance relative to the benchmarks. However, within our bottom-up strategies, selection of specific securities across the various sectors had a mixed impact on relative performance. Due to its focus on high quality, the Fund did not benefit from the rally of lower credit quality securities over the period. In addition, the Fund’s holdings of Treasury Inflation Protected Securities (“TIPS”) and select asset-backed auto securities modestly detracted from the Fund’s performance relative to its benchmarks. Offsetting this was the positive impact from our continued emphasis on short-dated agency securities.

  Market Review

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields rose across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence as well as strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices which lessened inflationary concerns and prompted the Fed to pause its tightening policy. Credit spreads also continued to tighten over the reporting period, as the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Investment grade sectors continued to post strong performance relative to Treasuries over the reporting period, with the mortgage sector generating the best results. Credit spreads also tightened, supported by strong fundamentals and continued corporate profit growth.

2

PORTFOLIO RESULTS

  Investment Objective

The Fund seeks to generate return in excess of traditional money market products while maintaining an emphasis on preservation of capital and liquidity.

It is important to note that the Fund is not a money market fund and its net asset value will fluctuate.

  Investment Strategies

The Fund targets a duration of nine months, with diversified holdings in high credit quality sectors including U.S. Treasuries, agency, corporate, asset-backed and money market instruments. The Fund invests in securities with a minimum credit quality of “A” by a Nationally Recognized Statistical Rating Organization (“NRSRO”) at the time of purchase or, if unrated, determined by the investment adviser to be of comparable quality. Although securities held in this portfolio may have maturities greater than one year, the portfolio duration can be hedged to approximate the interest rate sensitivity of the 9-month Treasury bill by investing in floating rate debt and through the use of interest rate futures contracts. The Fund uses derivatives, including, but not limited to, Treasury futures, Eurodollar futures and swaps, primarily as a tool to manage interest rate exposure, volatility, term structure, convexity (the rate of change in the portfolio’s duration as yields change), and sector exposure. The Fund may also use derivatives to express our interest rate outlook.

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, or changing interest rates. In addition, futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

The Fund was defensively positioned for much of the reporting period, maintaining a short duration position, due to our belief that interest rates would move higher. The Fund continued to emphasize shorter-term, higher quality securities with the potential, we believed, to enhance results. The Fund’s largest exposure was to quasi-government securities, specifically agency debentures, where we have been finding value at the shorter end of the curve. Within governments, we implemented a position in TIPS, based on our outlook for inflation. The Fund’s exposure to the corporate sector was trimmed as we wait for more attractive security selection opportunities to emerge in that sector.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income Management Team

November 21, 2006

3

FUND BASICS

Enhanced Income Fund

as of October 31, 2006

PERFORMANCE REVIEW

				Six-Month			One-Year
November 1, 2005–	Fund Total Return			U.S. Treasury			U.S. Treasury			30-Day
October 31, 2006	(based on NAV)1			Bill Index2			Note Index2			Standardized Yield3
Class A		4.26	%		4.65	%		4.33	%		4.43	%
Institutional		4.66			4.65			4.33			4.87
Administration		4.29			4.65			4.33			4.62

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index, as reported by Merrill Lynch, do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year			Five Years			Since Inception			Inception Date
Class A		2.46	%		1.91	%		3.04	%	8/2/00
Institutional		4.55			2.61			3.68		8/2/00
Administration		4.07			2.33			3.40		8/2/00

⁴  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 1.5% for Class A Shares. Because Institutional and Administration Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

4

FUND BASICS

SECTOR ALLOCATION⁵

Percentage of Net Assets

5	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
6	“Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company.

5

PORTFOLIO RESULTS

Ultra-Short Duration Government Fund

Dear Shareholder:

This report provides an overview on the performance of the Goldman Sachs Ultra-Short Duration Government Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, Institutional and Service Shares generated cumulative total returns, without sales charges, of 4.20%, 4.36% and 3.93%, respectively. These returns compare to the 4.65% and 4.33% cumulative total returns of the Fund’s benchmarks, the Six-Month U.S. Treasury Bill Index and the One-Year U.S. Treasury Note Index, respectively, over the same time period.

A combination of top-down and bottom-up strategies impacted the Fund’s performance relative to its benchmarks over the period. Top-down strategies included our duration positioning and cross-sector strategies. The Fund held a short duration position over the period in anticipation of higher interest rates. This strategy helped enhance relative results as interest rates rose over the period. Cross-sector strategies also lent support to performance. In particular, the Fund’s exposures to the collateralized and government sectors contributed positively to the Fund’s performance relative to its benchmarks as investment grade sectors outperformed Treasuries over the period. Within our bottom-up strategies, security selection had a mixed impact on performance versus the Fund’s benchmarks. Within mortgages, we focused on securities with less sensitivity to changes in volatility. In particular, we favored seasoned 15-year pass-throughs, adjustable-rate mortgages (“ARMs”) and shorter duration collateralized mortgage obligations (“CMOs”). While these securities positively impacted performance, select commercial mortgage-backed securities (“CMBS”), as well as agency debentures underperformed. Treasury selection also detracted from the Fund’s performance relative to its benchmarks over the period. In particular, our selection of Treasury Inflation Protected Securities (“TIPS”) had an adverse impact on the Fund’s relative performance.

  Market Review

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence as well as strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices which lessened inflationary concerns and prompted the Fed to pause its tightening policy. Credit spreads also continued to tighten over the reporting period, as the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Investment grade sectors continued to post strong performance relative to Treasuries over the reporting period, with the mortgage sector generating the best results. Credit spreads also tightened, supported by strong fundamentals and continued corporate profit growth.

6

PORTFOLIO RESULTS

  Investment Objective

The Fund seeks a high level of current income, consistent with low volatility of principal.

  Investment Strategies

The Fund seeks to meet its objective by investing at least 80% of its net assets in U.S. government securities including securities representing an interest in or collateralized by adjustable rate and fixed rate mortgage loans. The Fund uses derivatives, including, but not limited to, Treasury futures, Eurodollar futures and swaps, primarily as a tool to manage interest rate exposure, volatility, term structure, convexity (the rate of change in the portfolio’s duration as yields change), and sector exposure. The Fund may also use derivatives to express our interest rate outlook.

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

Over the period, the Fund continued to focus on security selection and sub-sector strategies across the collateralized and government sectors in an effort to enhance results. Within mortgages, the Fund’s primary exposures were to ARMs, CMOs, and pass-through sub-sectors. We tactically adjusted the Fund’s exposures to take advantage of changing relative opportunities within the market. For example, we eliminated the Fund’s allocation to quasi-government securities in favor of the mortgage sector as we found attractively priced securities within the pass-through and ARM subsectors. We also modestly decreased the Fund’s bias to home equity asset-backed securities, as valuations within the sector became less compelling. Within governments, we implemented a position in TIPS based on our outlook for inflation. We positioned the Fund defensively for much of the period and maintained a short duration position relative to the Index. This was due to our belief that interest rates would move higher.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income Investment Management Team

November 21, 2006

7

FUND BASICS

Ultra-Short Duration Government Fund

as of October 31, 2006

PERFORMANCE REVIEW

				Six-Month			One-Year
November 1, 2005–	Fund Total Return			U.S. Treasury			U.S. Treasury			30-Day
October 31, 2006	(based on NAV)1			Bill Index2			Note Index2			Standardized Yield3
Class A		4.20	%		4.65	%		4.33	%		3.67	%
Institutional		4.36			4.65			4.33			4.10
Service		3.93			4.65			4.33			3.60

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index, as reported by Merrill Lynch, do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		2.61	%		2.17	%		3.84	%		4.14	%	5/15/95
Institutional		4.43			2.86			4.38			4.68		7/17/91
Service		3.89			2.39			N/A			3.77		3/27/97

⁴  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 1.5% for Class A Shares. Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

8

FUND BASICS

SECTOR ALLOCATION⁵

Percentage of Net Assets

5	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
6	“Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company.

9

PORTFOLIO RESULTS

Short Duration Government Fund

Dear Shareholder:

This report provides an overview on the performance of the Goldman Sachs Short Duration Government Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 3.84%, 3.24%, 3.09%, 4.13% and 3.72%, respectively. These returns compare to the 3.94% cumulative total return of the Fund’s benchmark, the Two-Year U.S. Treasury Note Index, over the same time period.

A combination of top-down and bottom-up strategies impacted the Fund’s performance relative to its benchmark over the period. Top-down strategies included our duration positioning and cross-sector strategies. The Fund held a short duration position relative to its benchmark, the Two-Year U.S. Treasury Note Index, in anticipation of higher interest rates. This strategy helped enhance relative results as interest rates rose meaningfully over the period. Cross-sector strategies also lent support to performance. In particular, the Fund’s exposures to the collateralized and government sectors contributed positively to the Fund’s performance relative to its benchmark as investment grade sectors outperformed Treasuries over the period. Within our bottom-up strategies, security selection had a mixed impact on results. Within mortgages, we focused on securities with less sensitivity to changes in volatility. In particular, we favored seasoned 15-year pass-throughs, adjustable-rate mortgages (“ARMs”), and shorter duration collateralized mortgage obligations (“CMOs”). While these securities positively impacted the Fund’s performance versus its benchmark, select agency debentures detracted from relative results. Treasury selection was also a drag on performance over the period. In particular, our selection of Treasury Inflation Protected Securities (“TIPS”) had an adverse impact on the Fund’s performance relative to its benchmark.

  Market Review

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence as well as strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices which lessened inflationary concerns and prompted the Fed to pause its tightening policy. Credit spreads also continued to tighten over the reporting period, as the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Investment grade sectors continued to post strong performance relative to Treasuries over the reporting period, with the mortgage sector generating the best results. Credit spreads also tightened, supported by strong fundamentals and continued corporate profit growth.

10

PORTFOLIO RESULTS

  Investment Objective

The Fund seeks a high level of current income and may also consider the potential for capital appreciation.

  Investment Strategies

In seeking to meet its objective, the Fund invests in a diversified portfolio of U.S. government securities. The Fund uses derivatives, including, but not limited to, Treasury futures, Eurodollar futures and swaps, primarily as a tool to manage interest rate exposure, volatility, term structure, convexity (the rate of change in the portfolio’s duration as yields change) and sector exposure. The Fund may also use derivatives to express our interest rate outlook.

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

Over the period, the Fund continued to focus on security selection and sub-sector strategies to enhance results. Within mortgages, the Fund’s primary exposures were to ARMs, CMOs, and pass-through sub-sectors. We tactically adjusted the Fund’s exposures to take advantage of changing relative opportunities within the market. For example, we decreased the Fund’s allocation to quasi-government securities in favor of the mortgage sector as we found attractively priced securities within the pass-through and ARMs subsectors. However, we continue to find value within short-dated agency paper and the Fund maintained a meaningful exposure to the quasi-government sector at the end of the period. Within governments, we implemented a position in TIPS based on our outlook for inflation. We positioned the Fund defensively for much of the period and maintained a short duration position relative to the Index. This was due to our belief that interest rates would move higher.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income Investment Management Team

November 21, 2006

11

FUND BASICS

Short Duration Government Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return			Two-Year U.S.			30-Day
October 31, 2006	(based on NAV)1			Treasury Note Index2			Standardized Yield3
Class A		3.84	%		3.94	%		3.42	%
Class B		3.24			3.94			2.89
Class C		3.09			3.94			2.74
Institutional		4.13			3.94			3.86
Service		3.72			3.94			3.36

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Two-Year U.S. Treasury Note Index, as reported by Merrill Lynch, does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		1.23	%		2.44	%		N/A			4.32	%	5/1/97
Class B		0.66			2.24			N/A			3.93		5/1/97
Class C		1.65			2.10			N/A			3.61		8/15/97
Institutional		3.82			3.26			5.04	%		5.99		8/15/88
Service		3.31			2.75			4.52			4.63		4/10/96

⁴  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 2% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (2% maximum declining to 0% after three years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

12

FUND BASICS

SECTOR ALLOCATION⁵

Percentage of Net Assets

5	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
6	“Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company.

13

GOLDMAN SACHS ENHANCED INCOME FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on August 2, 2000 (commencement of operations) in the Institutional Shares of the Goldman Sachs Enhanced Income Fund. For comparative purposes, the performance of the Fund’s benchmarks, the Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index (“Six-Month T-Bill Index/One-Year T-Note Index”), as well as the Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index (“Lehman 1-2 Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A and Administration Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/ industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.

Enhanced Income Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested August 2, 2000 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Five Years		One Year
Class A (commenced August 2, 2000)
Excluding sales charges		3.30%		2.20%		4.26%
Including sales charges		3.06%		1.88%		2.67%
Institutional Class (commenced August 2, 2000)		3.69%		2.58%		4.66%
Administration Class (commenced August 2, 2000)		3.41%		2.28%		4.29%

14

GOLDMAN SACHS ENHANCED INCOME FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Corporate Bonds – 28.8%
Banks – 6.0%
Credit Suisse First Boston New York(a)
$	2,000,000		6.500	%		05/01/08	$	2,036,050
Credit Suisse First Boston USA, Inc.
	2,975,000		4.125			01/15/10		2,886,895
Huntington National Bank
	1,750,000		4.650			06/30/09		1,727,973
Keybank National Association
	1,100,000		7.300			05/01/11		1,193,588
Popular North America, Inc.
	1,200,000		5.200			12/12/07		1,195,389
Union Planters Corp.
	1,500,000		7.750			03/01/11		1,643,383
Washington Mutual, Inc.
	2,000,000		4.000			01/15/09		1,952,178
								12,635,456
Brokerage – 2.3%
Morgan Stanley
	5,000,000		4.000			01/15/10		4,832,244
Life Insurance – 5.2%
AXA Financial, Inc.
	2,125,000		7.750			08/01/10		2,303,209
ING Security Life Institutional Funding(a)
	2,500,000		4.250			01/15/10		2,440,945
Jackson National Life Insurance Co.(a)
	2,000,000		5.250			03/15/07		2,002,284
Monumental Global Funding(a)
	4,390,000		5.200			01/30/07		4,387,252
								11,133,690
Noncaptive-Consumer – 4.9%
American General Finance Corp.
	1,500,000		4.875			05/15/10		1,479,800
HSBC Finance Corp.
	7,000,000		4.125			11/16/09		6,800,429
John Deere Capital Corp.
	2,000,000		5.400			04/07/10		2,013,614
								10,293,843
Property/Casualty Insurance – 3.1%
ACE Ltd.
	6,487,000		6.000			04/01/07		6,498,229
Wireless Telecommunications – 4.4%
Verizon Wireless Capital LLC
	9,250,000		5.375			12/15/06		9,248,020
Wirelines Telecommunications – 2.9%
Ameritech Capital Funding
	375,000		6.250			05/18/09		380,639
Deutsche Telekom International Finance BV
	1,500,000		8.000			06/15/10		1,637,342
GTE California, Inc.
	2,875,000		7.650			03/15/07		2,897,721
SBC Communications, Inc.
	1,375,000		4.125			09/15/09		1,334,221
								6,249,923
TOTAL CORPORATE BONDS
(Cost $61,348,758)							$	60,891,405
Agency Debentures – 48.5%
Federal Home Loan Bank
$	6,600,000		3.500	%		01/18/07	$	6,573,435
	5,100,000		3.625			02/16/07		5,074,143
	3,000,000		4.250			04/16/07		2,985,567
	6,730,000		4.500			08/24/07		6,692,218
	7,000,000		4.000	(b)		12/03/07		6,855,114
	10,000,000		4.500	(b)		03/07/08		9,983,482
Federal Home Loan Mortgage Corp.
	4,000,000		5.238	(b)		12/27/06		3,999,872
	11,628,000		0.000	(c)		01/15/07		11,504,545
	5,000,000		4.500			04/18/07		4,978,730
	15,000,000		4.250			06/23/08		14,840,340
Federal National Mortgage Association
	4,000,000		5.257	(b)		12/22/06		4,000,000
	5,000,000		2.750			02/06/07		4,965,720
	7,750,000		3.740			06/14/07		7,679,188
	5,000,000		5.500			01/15/08		5,024,455
Government Loan Trust Series 1-Z(c)
	7,644,000		0.000			04/01/07		7,482,842
TOTAL AGENCY DEBENTURES
(Cost $102,783,140)							$	102,639,651
Asset-Backed Securities – 5.6%
Autos – 5.6%
AmeriCredit Automobile Receivables Trust Series 2006-AF, Class A3
$	2,000,000		5.560	%		09/06/11	$	2,013,125
Capital One Auto Finance Trust Series 2006-A, Class A3
	3,500,000		5.330			11/15/10		3,508,687
Honda Auto Receivables Owner Trust Series 2005-4, Class A2
	3,790,153		4.320			01/21/08		3,782,530
Long Beach Auto Receivables Trust Series 2006-A, Class A4
	2,500,000		5.500			05/15/13		2,521,875
TOTAL ASSET-BACKED SECURITIES
(Cost $11,789,359)							$	11,826,217

The accompanying notes are an integral part of these financial statements. 

15

GOLDMAN SACHS ENHANCED INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
U.S. Treasury Obligations – 7.7%
United States Treasury Inflation Protected Bonds
$	5,154,424		3.500	%		01/15/11	$	5,361,606
United States Treasury Notes
	11,000,000		4.625			02/29/08		10,971,642
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $16,309,360)							$	16,333,248
Repurchase Agreement(d) – 5.3%
Joint Repurchase Agreement Account II
$	11,200,000		5.316	%		11/01/06	$	11,200,000
Maturity Value: $11,201,654
(Cost $11,200,000)
TOTAL INVESTMENTS – 95.9%
(Cost $203,430,617)							$	202,890,521
OTHER ASSETS IN EXCESS OF LIABILITIES – 4.1%								8,576,265
NET ASSETS – 100.0%							$	211,466,786

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $10,866,531, which represents approximately 5.1% of net assets as of October 31, 2006.
(b)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(c)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(d)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 31.

 The accompanying notes are an integral part of these financial statements.

16

GOLDMAN SACHS ENHANCED INCOME FUND

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:

	Number of
	Contracts			Settlement					Unrealized
Type	Long (Short)			Month		Market Value			Gain (Loss)
Eurodollars		(19	)		December 2006	$	(4,495,163	)	$	41,183
Eurodollars		100			March 2007		23,695,000			45,910
2 Year U.S. Treasury Notes		(138	)		December 2006		(28,208,062	)		(53,202	)
5 Year U.S. Treasury Notes		(55	)		December 2006		(5,805,938	)		(34,982	)
TOTAL						$	(14,814,163	)	$	(1,091	)

INTEREST RATE SWAP CONTRACT — At October 31, 2006, the Fund had an outstanding swap contract with the following terms:

Rates Exchanged

Notional

Payments

Payments

Amount

Termination

received by

made by

Unrealized

Swap Counterparty

(000s)

Date

the Fund

the Fund

Loss

J.P. Morgan Securities, Inc.

$

20,000

02/17/11

3 month LIBOR

5.091

%

$

(30,468

)

LIBOR—London Interbank Offered Rate

The accompanying notes are an integral part of these financial statements. 

17

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in the Institutional Shares of the Goldman Sachs Ultra-Short Duration Government Fund. For comparative purposes, the performance of the Fund’s benchmarks, the Six-Month U.S. Treasury Bill Index and One-Year U.S. Treasury Note Index (“Six-Month T-Bill Index/ One-Year T-Note Index”), as well as the Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index (“Lehman 1-2 Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.

Ultra-Short Duration Government Fund’s 10 Year Performance

Performance of a $10,000 Investment, Distributions Reinvested November 1, 1996 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Ten Years		Five Years		One Year
Class A (commenced May 15, 1995)
Excluding sales charges		4.27%		3.97%		2.35%		4.20%
Including sales charges		4.13%		3.81%		2.04%		2.65%
Institutional Class (commenced July 17, 1991)		4.68%		4.34%		2.70%		4.36%
Service Class (commenced March 27, 1997)		3.78%		n/a		2.25%		3.93%

18

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – 90.1%
Adjustable Rate FHLMC(a) – 8.7%
$	118,218		5.009	%		08/01/16	$	118,296
	163,846		5.016			08/01/18		163,769
	144,811		5.064			11/01/18		146,354
	766,601		5.864			11/01/18		771,466
	39,439		4.930			02/01/19		39,426
	36,132		7.041			02/01/19		36,464
	124,637		5.134			03/01/19		124,859
	75,482		5.366			03/01/19		75,874
	116,605		4.560			06/01/19		116,142
	150,049		5.615			07/01/19		150,637
	2,048,780		5.447			11/01/19		2,069,362
	1,482,179		6.911			11/01/19		1,527,197
	157,384		5.287			01/01/20		158,112
	174,303		5.134			05/01/21		174,673
	66,874		6.096			01/01/25		68,012
	125,773		5.134			10/01/26		125,902
	1,301,055		6.597			08/01/28		1,331,832
	818,033		7.260			01/01/29		826,552
	885,133		7.057			05/01/29		893,109
	237,768		7.233			05/01/29		237,414
	101,142		5.134			06/01/29		101,389
	91,499		5.450			09/01/29		92,936
	1,525,397		7.215			02/01/30		1,549,523
	235,290		6.782			03/01/30		237,506
	715,980		7.246			03/01/30		719,481
	131,860		4.874			04/01/30		132,607
	168,004		5.215			06/01/30		168,463
	550,518		6.864			12/01/30		552,515
	15,349		5.944			01/01/31		15,542
	190,740		4.880			02/01/31		190,693
	57,040		6.873			05/01/31		57,800
	49,754		5.281			06/01/31		50,009
	32,783		5.637			11/01/31		33,123
	5,079,425		7.403			12/01/31		5,241,897
	3,487,860		7.603			12/01/31		3,571,656
	35,095		5.677			10/01/32		35,317
	20,499		5.978			02/01/33		20,714
	2,375,313		3.940			07/01/33		2,313,216
	3,255,635		3.885			09/01/33		3,157,933
	141,179		4.400			11/01/33		140,265
	208,603		6.294			11/01/33		207,778
	1,157,633		5.601			05/01/35		1,169,030
	6,517,049		4.583			08/01/35		6,370,877
	1,871,616		0.000	(d)		01/15/36		1,746,551
	2,891,616		0.000	(d)		05/15/36		2,793,809
								39,826,082
Adjustable Rate FNMA(a) – 27.6%
	198,569		6.445			03/01/17		198,902
	1,038,264		6.675			04/01/17		1,069,565
	142,380		5.340			08/01/17		142,337
	142,521		5.009			09/01/17		142,467
	239,652		5.134			09/01/17		239,541
	73,603		6.714			11/01/17		74,241
	148,842		4.875			12/01/17		148,914
	578,951		4.906			03/01/18		579,365
	195,296		5.376			03/01/18		195,189
	1,940,513		4.888			07/01/18		1,941,870
	378,017		6.686			08/01/18		386,584
	644,131		5.127			10/01/18		640,759
	189,056		5.134			10/01/18		188,874
	94,881		5.187			10/01/18		95,523
	213,166		5.293			10/01/18		212,304
	281,808		6.496			10/01/18		283,399
	60,246		5.340			11/01/18		60,599
	14,346		6.004			11/01/18		14,438
	79,136		5.125			12/01/18		79,672
	284,314		4.895			01/01/19		284,603
	844,506		5.290			04/01/19		853,446
	45,633		5.330			04/01/19		45,543
	2,168,768		4.879			05/01/19		2,180,502
	719,470		5.340			05/01/19		717,997
	402,348		4.966			06/01/19		404,376
	443,703		5.109			06/01/19		445,406
	337,588		7.319			07/01/19		348,024
	726,436		5.129			08/01/19		734,491
	705,917		5.262			08/01/19		713,372
	94,561		5.340			09/01/19		95,155
	33,511		6.570			09/01/19		33,760
	104,020		5.384			11/01/19		105,129
	3,009,910		6.924			11/01/19		3,099,242
	28,520		5.224			04/01/20		28,759
	884,661		6.834			05/01/20		911,275
	823,202		4.780			06/01/20		827,228
	252,805		5.122			06/01/20		251,469
	453,770		5.157			11/01/20		458,815
	882,988		5.553			12/25/20		881,723
	525,721		5.273			03/01/21		533,637
	207,635		6.848			09/01/21		210,382
	116,677		5.455			12/01/21		116,107
	1,964,720		5.466			01/01/22		1,986,435
	73,093		6.837			02/01/22		75,340
	200,821		5.219			05/20/22		203,506
	6,401,270		6.548			12/01/22		6,450,737
	427,837		6.761			02/01/23		430,314
	19,669		6.219			12/01/23		19,803
	1,153,324		6.988			01/01/24		1,173,760
	1,113,039		7.348			03/01/24		1,149,484
	10,469,300		5.102			04/01/24		10,425,203
	1,005,568		5.163			06/20/24		1,024,843

The accompanying notes are an integral part of these financial statements. 

19

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
Adjustable Rate FNMA(a) – (continued)
$	46,198		5.968	%		08/01/24	$	46,077
	418,604		6.630			01/01/25		430,738
	2,344,427		4.620			03/25/27		2,360,834
	81,299		5.340			06/01/27		81,707
	56,128		5.340			12/01/27		56,409
	111,642		5.340			01/01/28		111,653
	257		6.597			01/01/28		256
	352,924		6.783			05/01/28		359,725
	91,767		7.468			06/01/28		92,658
	44,185		6.881			09/01/28		44,463
	901,735		5.217			01/01/29		908,739
	44,980		4.799			06/01/29		45,195
	77,107		5.134			06/01/29		77,701
	45,497		6.912			06/01/29		46,485
	1,657,106		5.557			05/01/30		1,666,973
	5,447		7.525			02/01/31		5,511
	103,388		6.744			05/01/31		103,961
	523,753		7.000			06/01/31		535,289
	1,870,601		5.664			07/01/31		1,888,106
	335,040		6.125			08/01/31		334,430
	363,481		7.135			08/01/31		367,240
	79,165		7.152			08/01/31		79,444
	779,343		5.513			11/01/31		787,718
	463,719		5.609			12/01/31		469,262
	188,694		5.490			01/01/32		193,346
	304,958		6.863			01/01/32		316,270
	43,209		5.475			02/01/32		43,805
	492,412		6.340			02/01/32		492,341
	40,342		5.538			03/01/32		40,928
	186,887		5.608			03/01/32		186,843
	2,093,797		6.114			03/01/32		2,146,475
	1,054,009		5.536			04/01/32		1,055,123
	225,088		6.500			04/01/32		230,092
	356,964		5.258			05/01/32		367,555
	125,658		6.607			05/01/32		126,927
	325,707		6.367			07/01/32		328,735
	35,380		4.400			08/01/32		35,094
	602,494		4.786			09/01/32		607,106
	1,407,979		5.199			09/01/32		1,401,890
	76,097		6.680			09/01/32		76,517
	175,451		7.105			09/01/32		176,686
	176,208		5.358			10/01/32		179,472
	112,025		6.589			10/01/32		113,438
	211,819		4.884			12/01/32		211,319
	26,744		6.113			12/01/32		27,251
	1,425,200		4.652			01/01/33		1,427,706
	866,941		4.951			01/01/33		871,351
	2,190,869		4.891			02/01/33		2,176,530
	2,474,486		4.486			03/01/33		2,487,121
	10,574,360		4.719			03/01/33		10,571,255
	8,887,958		4.737			03/01/33		8,820,473
	159,798		4.040			04/01/33		158,023
	1,013,745		4.833			04/01/33		1,017,940
	1,841,365		4.702			05/01/33		1,835,071
	4,456,745		3.874			07/01/33		4,408,943
	1,060,839		3.958			07/01/33		1,039,882
	2,511,073		3.999			07/01/33		2,460,562
	140,766		5.291			08/01/33		142,282
	3,426,726		3.851			10/01/33		3,399,684
	9,099,395		3.959			12/01/33		8,965,873
	327,780		4.319			01/01/34		323,218
	84,713		6.352			02/01/34		86,265
	4,905,172		4.703			10/01/34		4,864,543
	2,710,467		4.360			04/01/35		2,645,636
	3,432,713		4.688			10/01/35		3,405,856
	55,625		5.380			05/01/36		56,027
	20,691		6.464			11/01/38		20,991
	354,031		5.963			06/01/40		357,644
	1,523,101		6.476			07/01/40		1,533,112
	42,988		5.763			02/01/41		43,328
								126,291,512
Adjustable Rate GNMA(a) – 13.0%
	7,137,161		4.000			11/20/33		7,059,119
	9,688,487		3.750			02/20/34		9,534,518
	5,264,555		3.750			04/20/34		5,146,991
	25,496,258		4.500			08/20/34		25,265,616
	4,664,153		4.750			08/20/34		4,641,328
	7,884,820		4.500			12/20/34		7,857,205
								59,504,777
Adjustable Rate Non-Agency(a) – 6.4%
Bank of America Mortgage Securities Series 2002-J, Class A2
	939,394		4.879			09/25/32		935,748
Bear Stearns Adjustable Rate Mortgage Trust Series 2003-5, Class 1A1
	232,723		5.979			08/25/33		235,856
Countrywide Home Loans Series 2003-37, Class 1A1
	148,854		5.876			08/25/33		148,610
CS First Boston Mortgage Securities Corp. Series 2003-AR9, Class 2A2
	2,896,619		5.100			03/25/33		2,883,393
Impac CMB Trust Series 2003-6, Class A
	2,086,815		5.960			07/25/33		2,087,416
Indy Mac Index Mortgage Loan Trust Series 2004-AR4, Class 1A
	2,180,595		4.505			08/25/34		2,185,682
Sequoia Mortgage Trust Series 2004-10, Class A3A
	3,932,877		5.737			11/20/34		3,937,842
Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1
	6,663,494		4.976			10/25/35		6,671,175
Wells Fargo Mortgage Backed Securities Trust Series 2006-AR2, Class 2A3
	10,196,594		5.092			03/25/36		10,137,273
								29,222,995

 The accompanying notes are an integral part of these financial statements.

20

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
CMBS – 1.6%
Interest Only(a)(b)(c) – 1.6%
Bear Stearns Commercial Mortgage Securities, Inc. Series 2001-TOP2, Class X2
$	142,041,083		1.071	%		02/15/35	$	2,331,235
Salomon Brothers Mortgage Securities VII Series 2002-Key2, Class X2
	88,598,000		2.043			03/18/36		5,007,276
TOTAL CMBS							$	7,338,511
CMO – 11.3%
Interest Only(c) – 0.1%
FHLMC Series 2586, Class NX
	3,010,739		4.500			08/15/16		307,798
FNMA REMIC Trust Series 1990-145, Class B
	2,170,100		4.961			12/25/20		43,050
								350,848
Inverse Floaters(a) – 0.3%
FHLMC Series 1606, Class SC
	1,154,865		9.596			11/15/08		1,186,475
Inverse Floating Rate – Interest Only(a)(c) – 0.0%
FNMA Series 1996-40, Class SG
	1,208,731		7.775			03/25/09		87,749
FNMA REMIC Trust Series 1996-20, Class SB
	988,786		9.367			10/25/08		68,427
								156,176
PAC – 1.2%
FHLMC Series 1377, Class H
	385,450		6.000			09/15/07		384,493
FHLMC Series 2113, Class TE
	3,009,526		6.000			01/15/14		3,053,396
FNMA REMIC Trust Series 1992-193, Class HD
	602,957		7.000			11/25/07		603,923
FNMA REMIC Trust Series 1993-225, Class WC
	1,294,390		6.500			12/25/13		1,328,428
								5,370,240
Regular Floater(a) – 4.4%
Collateralized Mortgage Securities Corp. Series N, Class 2
	394,237		6.000			08/25/17		388,662
FHLMC Series 1509, Class F
	2,892,432		6.375			04/15/08		2,900,296
FHLMC Series 1606, Class FC
	4,239,770		5.177			11/15/08		4,224,651
FHLMC Series 1612, Class FD
	443,238		5.177			11/15/08		442,729
FHLMC Series 1661, Class FD
	3,268,055		6.875			01/15/09		3,294,573
FHLMC Series 1665, Class FA
	108,761		4.210			06/15/23		108,116
FHLMC Series 1826, Class F
	247,952		5.775			09/15/21		249,996
FNMA REMIC Trust Series 1993-190, Class F
	2,548,855		5.327			10/25/08		2,542,290
FNMA REMIC Trust Series 1993-196, Class FD
	214,958		5.177			10/25/08		213,971
FNMA REMIC Trust Series 1993-214, Class FA
	662,482		6.144			12/25/08		666,374
FNMA REMIC Trust Series 1993-233, Class FA
	537,381		5.177			12/25/08		536,715
FNMA Series 1993-231, Class FE
	1,934,461		6.244			12/25/08		1,946,523
FNMA Series 1998-66, Class FC
	442,306		5.820			11/17/28		445,644
FNMA Series 2001-70, Class OF
	2,187,087		6.270			10/25/31		2,233,359
								20,193,899
Sequential Fixed Rate – 4.8%
FHLMC Series 1216, Class GC
	202,250		7.000			03/15/07		202,191
FHLMC Series 1246, Class J
	52,070		7.500			05/15/07		52,039
FHLMC Series 1423, Class FF
	1,658,759		7.000			12/15/07		1,654,635
FHLMC Series 1720, Class PJ
	1,390,509		7.250			01/15/24		1,410,912
First Nationwide Trust Series 2001-4, Class 1A1
	1,819,703		6.750			09/21/31		1,813,187
FNMA REMIC Trust Series 1993-014, Class A
	1,002		6.000			02/25/08		1,000
FNMA REMIC Trust Series 1993-121, Class Z
	8,497,250		7.000			07/25/23		8,831,400
FNMA REMIC Trust Series 1993-135, Class PG
	443,208		6.250			07/25/08		442,186
FNMA REMIC Trust Series 1993-212, Class PC
	191,620		4.500			09/25/08		190,904
FNMA REMIC Trust Series 1996-14, Class J
	323,947		6.150			03/25/09		324,414
FNMA Series 1994-72, Class J
	7,271,800		6.000			06/25/23		7,293,091
								22,215,959
Support – 0.5%
FHLMC Series 1639, Class M
	2,198,921		6.000			12/15/08		2,204,467
TOTAL CMO							$	51,678,064

The accompanying notes are an integral part of these financial statements. 

21

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
FHLMC – 5.5%
$	1,642,447		7.000	%		02/01/09	$	1,655,684
	940,836		7.000			03/01/09		950,354
	1,982,541		7.000			04/01/09		1,996,717
	961,986		7.000			05/01/09		972,857
	892,368		7.000			06/01/09		902,452
	664,905		7.500			06/01/09		671,864
	218,458		6.500			03/01/13		222,886
	436,283		6.500			04/01/13		445,126
	225,167		6.500			05/01/13		229,731
	460,342		6.500			06/01/13		469,672
	1,058,099		5.000			12/01/13		1,052,322
	1,147,858		4.000			01/01/14		1,110,146
	3,662,777		8.000			12/01/15		3,834,851
	574,166		6.000			05/01/17		582,390
	797,486		7.000			04/01/21		825,833
	437,119		7.000			08/01/21		452,656
	2,790,938		7.000			03/01/22		2,888,458
	1,200,332		7.000			05/01/22		1,242,274
	4,478,673		7.000			06/01/22		4,635,166
	65,270		7.000			12/01/25		67,596
								25,209,035
FNMA – 16.0%
	6,644,052		4.000			05/01/10		6,438,056
	7,422,555		4.000			06/01/10		7,192,422
	1,541,436		6.000			09/01/11		1,553,193
	1,960,859		6.500			04/01/12		2,000,012
	3,931,067		6.000			05/01/12		3,965,090
	965,962		6.500			05/01/12		985,249
	3,028,517		6.000			06/01/12		3,054,732
	857,523		6.500			06/01/12		874,645
	13,377,161		5.500			01/01/13		13,445,975
	3,035,042		4.500			08/01/13		2,971,451
	13,122,376		4.500			09/01/13		12,859,906
	1,439,588		8.000			01/01/16		1,508,219
	970,971		7.000			03/01/17		998,133
	397,513		7.000			05/01/17		408,633
	10,637,695		5.500			03/01/18		10,676,931
	1,330,141		5.500			04/01/18		1,335,047
	393,814		7.000			07/01/21		408,079
	624,209		7.000			11/01/21		646,820
	302,776		7.000			12/01/21		313,744
	515,936		7.000			01/01/22		534,626
	115,620		7.000			02/01/22		119,808
	351,852		7.000			01/01/28		364,477
	583,923		6.500			04/01/33		596,517
								73,251,765
GNMA – 0.0%
	49,699		7.000			12/15/25		51,686
	170,583		7.000			04/15/26		176,944
								228,630
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $419,342,617)							$	412,551,371
Asset-Backed Security(a) – 0.6%
Home Equity – 0.6%
Countrywide Home Equity Loan Trust Series 2004-G, Class 2A
$	2,614,527		5.540	%		12/15/29	$	2,620,261
(Cost $2,609,216)
U.S. Treasury Obligations – 3.5%
United States Treasury Bonds
$	2,900,000		4.500	%		02/15/36	$	2,798,952
United States Treasury Inflation Protected Securities
	1,665,165		1.875			07/15/13		1,612,477
	1,324,128		2.000			01/15/14		1,290,559
	2,487,795		2.000			07/15/14		2,423,267
	4,088,019		1.875			07/15/15		3,936,967
	4,139,278		2.500			07/15/16		4,198,780
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $16,063,734)							$	16,261,002
Repurchase Agreement(e) – 4.6%
Joint Repurchase Agreement Account II
$	21,100,000		5.316	%		11/01/06	$	21,100,000
Maturity Value: $21,103,116
(Cost $21,100,000)
TOTAL INVESTMENTS – 98.8%
(Cost $459,115,567)							$	452,532,634
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.2%								5,280,213
NET ASSETS – 100.0%							$	457,812,847

 The accompanying notes are an integral part of these financial statements.

22

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(b)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $7,338,511, which represents approximately 1.6% of net assets as of October 31, 2006.
(c)	Represents security with notional principal amount. The actual effective yield of this security is different than the stated interest rate.
(d)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(e)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 31.

Investment Abbreviations:
CMBS	—	Commercial Mortgage-Backed Securities
CMO	—	Collateralized Mortgage Obligations
FHLMC	—	Federal Home Loan Mortgage Corp.
FNMA	—	Federal National Mortgage Association
GNMA	—	Government National Mortgage Association
PAC	—	Planned Amortization Class
REMIC	—	Real Estate Mortgage Investment Conduit

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:

	Number of
	Contracts			Settlement	Market			Unrealized
Type	Long (Short)			Month	Value			Gain (Loss)
Eurodollars		159		December 2006	$	37,617,412		$	18,285
Eurodollars		64		March 2007		15,164,800			25,782
Eurodollars		64		June 2007		15,192,000			36,583
Eurodollars		3		September 2007		713,437			1,002
Eurodollars		3		December 2007		714,338			1,415
Eurodollars		3		March 2008		714,638			1,602
Eurodollars		2		June 2008		476,325			1,018
U.S. Treasury Bonds		92		December 2006		10,364,375			216,178
2 Year U.S. Treasury Notes		(379	)	December 2006		(77,469,969	)		12,814
5 Year U.S. Treasury Notes		(691	)	December 2006		(72,943,688	)		(517,119	)
10 Year U.S. Treasury Notes		(73	)	December 2006		(7,899,968	)		(56,022	)
TOTAL					$	(77,356,300	)	$	(258,462	)

The accompanying notes are an integral part of these financial statements. 

23

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Schedule of Investments (continued)

October 31, 2006

ADDITIONAL INVESTMENT INFORMATION (continued)

INTEREST RATE SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:

				Rates Exchanged
						Upfront
	Notional			Payments	Payments	Payments
Swap	Amount		Termination	received by	made by	made by		Unrealized
Counterparty	(000s)		Date	the Fund	the Fund	the Fund		Gain (Loss)
J.P. Morgan Securities, Inc.	$	30,000	02/17/11	3 month LIBOR	5.091%	$	—	$	(47,275	)
Banc of America Securities LLC (a)		24,000	12/20/11	5.600%	3 month LIBOR		443,611		154,268
Deutsche Bank Securities, Inc. (a)		28,400	12/20/13	5.650%	3 month LIBOR		753,165		196,457
Bank of America Securities LLC		41,000	11/12/19	3 month LIBOR	5.068%		—		(29,576	)
TOTAL						$	1,196,776	$	273,874

(a) Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur in December 2006.

LIBOR— London Interbank Offered Rate

 The accompanying notes are an integral part of these financial statements.

24

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in the Institutional Shares of the Goldman Sachs Short Duration Government Fund. For comparative purposes, the performance of the Fund’s benchmark, the Two-Year U.S. Treasury Note Index (“Two-Year T-Note Index”), as well as the Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index (“Lehman Short (1-3) Gov’t Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.

Short Duration Government Fund’s 10 Year Performance

Performance of a $10,000 Investment, Distributions Reinvested November 1, 1996 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Ten Years			Five Years		One Year
Class A (commenced May 1, 1997)
Excluding sales charges		4.55%		n/a			2.69%		3.84%
Including sales charges		4.32%		n/a			2.28%		1.74%
Class B (commenced May 1, 1997)
Excluding contingent deferred sales charges		3.93%		n/a			2.09%		3.24%
Including contingent deferred sales charges		3.93%		n/a			2.09%		1.18%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		3.60%		n/a			1.92%		3.09%
Including contingent deferred sales charges		3.60%		n/a			1.92%		2.07%
Institutional Class (commenced August 15, 1988)		5.98%		4.96	%		3.08%		4.13%
Service Class (commenced April 10, 1996)		4.62%		4.44	%		2.57%		3.72%

25

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – 56.7%
Adjustable Rate FHLMC(a) – 7.1%
$	258,536		5.771	%(b)		05/01/18	$	257,985
	180,453		5.841			10/01/25		181,831
	13,614,486		4.147			09/01/34		13,525,795
	6,964,437		4.819			11/01/34		6,951,679
	2,956,696		4.218			02/01/35		2,935,818
	5,599,981		4.123			03/01/35		5,551,020
	3,733,838		4.179			03/01/35		3,703,152
	2,123,930		4.229			03/01/35		2,112,780
	16,080,622		4.456			06/01/35		15,774,043
	6,925,719		4.880			08/01/35		6,884,991
	3,617,938		4.551			11/01/35		3,544,128
								61,423,222
Adjustable Rate FNMA(a) – 19.4%
	412,506		6.474			11/01/17		412,651
	588,355		4.769			02/01/18		593,443
	291,360		2.588			02/25/18		268,325
	369,056		10.000			02/25/18		415,009
	292,943		6.614			06/01/18		300,929
	602,831		6.643			03/01/19		606,995
	438,748		6.834			05/01/20		451,947
	608,144		6.394			12/01/20		610,826
	233,018		5.844			01/01/23		236,895
	17,160,167		5.370			11/25/28		17,171,292
	12,483,661		5.930			08/01/29		12,661,038
	452,962		5.533			07/01/32		454,561
	677,328		5.637			07/01/32		681,696
	1,604,675		5.280			01/01/33		1,608,009
	11,326,043		4.228			05/01/33		11,224,242
	1,887,954		3.916			08/01/33		1,844,567
	6,548,464		5.340			08/01/33		6,640,725
	4,283,408		3.851			10/01/33		4,249,605
	7,367,031		4.420			02/01/34		7,290,923
	4,528,993		4.265			03/01/34		4,458,812
	5,214,534		2.945			05/01/34		5,198,579
	2,697,836		3.019			05/01/34		2,690,885
	6,556,737		4.218			06/01/34		6,586,197
	4,639,809		4.280			07/01/34		4,646,891
	7,946,069		4.703			10/01/34		7,880,253
	6,454,673		4.775			10/01/34		6,451,109
	3,954,843		4.559			12/01/34		3,933,526
	2,001,177		4.066			02/01/35		1,981,047
	4,538,566		4.112			02/01/35		4,495,519
	2,245,799		4.279			02/01/35		2,234,148
	3,114,306		4.212			03/01/35		3,091,528
	5,541,966		4.237			03/01/35		5,511,266
	6,572,634		5.034			03/01/35		6,505,003
	2,071,006		4.249			04/01/35		2,057,477
	8,649,835		4.360			04/01/35		8,442,942
	6,670,216		4.681			04/01/35		6,589,395
	2,061,120		4.324			05/01/35		2,025,992
	8,747,797		4.739			08/01/35		8,602,636
	6,234,092		4.725			10/01/35		6,172,607
								167,279,490
Adjustable Rate GNMA(a) – 6.7%
	3,568,581		4.000			11/20/33		3,529,559
	4,513,133		3.750			02/20/34		4,441,411
	7,891,301		3.750			05/20/34		7,715,122
	2,165,979		4.500			05/20/34		2,148,044
	5,131,225		4.500			07/20/34		5,080,368
	4,083,720		4.750			08/20/34		4,063,735
	14,257,783		4.500			09/20/34		14,129,045
	8,731,053		4.750			09/20/34		8,735,729
	3,049,168		4.750			10/20/34		3,024,530
	4,668,900		4.750			12/20/34		4,648,964
								57,516,507
CMO – 8.1%
Interest Only(c) – 0.1%
FHLMC Series 2575, Class IB
	2,530,606		5.500			08/15/30		251,116
FHLMC Series 2586, Class NX
	1,680,894		4.500			08/15/16		171,843
								422,959
Inverse Floaters(a) – 0.0%
FNMA REMIC Trust Series 1990-134, Class SC
	65,858		13.584			11/25/20		78,460
GNMA Series 2001-59, Class SA
	23,792		9.035			11/16/24		26,999
								105,459
IOette(c) – 0.0%
FHLMC Series 1161, Class U
	1,600		1,172.807			11/15/21		3,082
PAC – 3.0%
FHLMC Series 1327, Class HA
	176,550		7.500			07/15/07		176,146
FHLMC Series 1377, Class H
	907,393		6.000			09/15/07		905,139
FHLMC Series 1475, Class K
	360,484		7.000			02/15/08		359,614
FHLMC Series 1556, Class H
	1,511,904		6.500			08/15/13		1,539,388
FHLMC Series 1601, Class PL
	701,463		6.000			10/15/08		701,015
FHLMC Series 1606, Class H
	1,163,026		6.000			11/15/08		1,162,016
FHLMC Series 1703, Class GB
	1,481,838		6.500			02/15/09		1,479,610
FHLMC Series 1916, Class PC
	3,648,460		6.750			12/15/11		3,711,980
FHLMC Series 2812, Class OA
	1,122,144		5.000			08/15/20		1,117,411
FHLMC Series 3028, Class MB
	7,958,587		5.000			12/15/26		7,924,249
FNMA Series 1993-118, Class J
	75,777		6.500			06/25/08		75,470

 The accompanying notes are an integral part of these financial statements.

26

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
PAC – (continued)
FNMA Series 1993-207, Class G
$	1,353,272		6.150	%		04/25/23	$	1,355,967
FNMA Series 2005-87, Class CL
	5,578,924		5.000			10/25/35		5,537,877
								26,045,882
Planned Amortization – Interest Only(c) – 0.0%
FHLMC Series 1587, Class HA
	83,852		6.500			10/15/08		3,178
Principal Only(d) – 0.0%
FNMA REMIC Trust Series G92-28, Class A
	572		0.000			05/25/07		566
Regular Floater(a) – 1.3%
FHLMC
	2,807,424		0.000			01/15/36		2,619,827
FHLMC Series 3151, Class KY
	3,954,042		0.000			05/15/36		3,804,129
FNMA Series 2001-60, Class OF
	3,280,631		6.270			10/25/31		3,340,754
FNMA Series 2001-70, Class OF
	1,640,315		6.270			10/25/31		1,675,019
								11,439,729
Sequential Fixed Rate – 3.3%
FHLMC Series 108, Class G
	752,787		8.500			12/15/20		750,010
FHLMC Series 1429, Class G
	272,364		7.000			11/15/07		271,727
FHLMC Series 1564, Class H
	1,292,345		6.500			08/15/08		1,292,412
FHLMC Series 1655, Class K
	7,605,566		6.500			01/15/09		7,609,832
FHLMC Series 1980, Class Z
	2,674,507		7.000			07/01/27		2,766,259
FHLMC Series 2019, Class Z
	2,747,345		6.500			12/15/27		2,825,182
FNMA REMIC Trust Series 1989-66, Class J
	994,333		7.000			09/25/19		1,034,171
FNMA REMIC Trust Series 1990-16, Class E
	597,381		9.000			03/25/20		645,515
FNMA REMIC Trust Series 1992-142, Class K
	463,894		7.000			08/25/07		464,064
FNMA REMIC Trust Series 1992-33, Class K
	1,853,525		8.500			03/25/18		1,943,492
FNMA REMIC Trust Series 1993-028, Class PJ
	174,076		7.000			03/25/08		173,696
FNMA REMIC Trust Series 199 3-052, Class J
	1,300,626		6.500			04/25/08		1,299,992
FNMA REMIC Trust Series 1993-121, Class Z
	4,720,694		7.000			07/25/23		4,906,333
FNMA REMIC Trust Series 1993-126, Class PG
	1,364,425		6.500			07/25/08		1,368,170
FNMA REMIC Trust Series 1993-135, Class PG
	506,524		6.250			07/25/08		505,356
GNMA REMIC Trust Series 1995-3, Class DQ
	119,551		8.050			06/16/25		127,552
								27,983,763
TAC – 0.4%
FNMA REMIC Trust Series 1994-18, Class D
	3,327,482		6.750			02/25/24		3,344,986
TOTAL CMO							$	69,349,604
FHLMC – 6.1%
	5,409,253		4.500			05/01/08		5,204,524
	21,046		7.000			01/01/09		21,284
	22,718		7.000			02/01/09		22,974
	16,484		7.000			03/01/09		16,602
	29,576		7.000			04/01/09		29,887
	49,343		7.000			05/01/09		49,900
	3,791		6.500			05/01/10		3,860
	37,473		6.500			06/01/10		38,152
	506,888		6.500			07/01/10		516,088
	69,139		7.000			07/01/10		69,920
	878		6.500			08/01/10		894
	90,024		7.000			01/01/11		90,668
	47,224		7.000			12/01/12		48,387
	178,485		6.500			01/01/13		182,103
	134,233		6.500			04/01/13		136,954
	268,250		6.500			05/01/13		273,687
	117,558		6.500			06/01/13		119,941
	1,246,811		4.000			09/01/13		1,207,208
	90,761		6.500			10/01/13		92,601
	1,287,063		4.000			11/01/13		1,245,903
	1,587,149		5.000			12/01/13		1,578,483
	1,721,786		4.000			01/01/14		1,665,219
	1,451,617		4.000			05/01/14		1,402,162
	709,440		4.500			06/01/14		694,236
	7,575,153		5.000			10/01/14		7,534,053
	2,949,985		4.500			10/01/14		2,884,221
	1,655,112		4.000			11/01/14		1,595,857
	3,036,556		4.500			11/01/14		2,970,411
	15,704,526		4.500			03/01/15		15,351,827
	2,222,908		4.000			03/01/15		2,141,354
	1,163,368		4.500			08/01/15		1,123,799
	103,045		8.500			10/01/15		109,361
	1,267,397		8.000			12/01/15		1,326,938
	56,285		7.000			03/01/16		57,733
	2,161,503		7.000			04/01/22		2,237,029
	53,131		7.500			01/01/31		54,982
								52,099,202
FNMA – 9.3%
	1,477		7.000			11/01/07		1,479
	35,997		7.000			12/01/07		36,039
	1,005		7.000			05/01/08		1,013
	4,714		7.000			08/01/08		4,719
	319,889		7.000			09/01/08		322,129

The accompanying notes are an integral part of these financial statements. 

27

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
FNMA – (continued)
$	6,760		7.000	%		12/01/09	$	6,801
	8,067,777		4.000			05/01/10		7,817,639
	61,936		8.500			05/01/10		63,806
	8,412,230		4.000			06/01/10		8,151,412
	882		7.000			06/01/10		889
	4,288		7.000			08/01/10		4,389
	2,975		7.000			01/01/11		2,995
	52,409		7.000			07/01/11		53,637
	848		7.000			11/01/11		854
	5,448,493		5.500			01/01/13		5,476,488
	3,035,042		4.500			08/01/13		2,971,451
	15,851,785		4.500			09/01/13		15,534,663
	8,481,397		4.000			11/01/13		8,197,693
	71,528		6.000			01/01/14		72,707
	223,271		6.000			03/01/14		226,954
	27,493		5.500			04/01/14		27,441
	1,434,008		4.000			01/01/15		1,375,542
	720,857		4.500			01/01/15		703,185
	4,609		8.500			09/01/15		4,909
	278,583		8.500			10/01/15		296,773
	50,204		8.500			12/01/15		53,378
	1,564,493		5.500			01/01/17		1,570,443
	502,032		5.500			03/01/18		503,697
	1,337,257		5.500			07/01/18		1,342,190
	687,540		5.500			08/01/18		690,076
	949,670		5.500			09/01/18		953,172
	2,744,555		5.500			12/01/18		2,754,977
	5,606,604		5.500			01/01/19		5,627,924
	2,829,067		5.500			05/01/19		2,839,825
	201,780		7.000			11/01/19		209,734
	146,076		8.000			02/01/31		152,824
	4,361,828		6.000			03/01/33		4,397,014
	7,182,895		6.500			04/01/33		7,337,813
								79,788,674
GNMA – 0.0%
	56,569		6.500			06/15/08		56,785
	23,908		6.500			07/15/08		23,999
	88,350		6.500			08/15/08		88,687
	46,560		6.500			09/15/08		46,738
	11,023		6.500			10/15/08		11,065
	2,831		6.500			11/15/08		2,842
	9,594		9.000			12/15/08		9,890
	4,020		6.500			01/15/09		4,050
	18,245		9.000			01/15/09		19,043
	773		6.500			03/15/09		776
	3,509		6.500			04/15/09		3,535
	48,031		6.500			05/15/09		48,383
	6,066		6.500			07/15/09		6,110
	12,067		6.500			11/15/09		12,155
	5,549		9.000			01/15/10		5,847
	39,987		9.000			07/15/12		42,786
								382,691
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $493,370,306)							$	487,839,390
Agency Debentures – 28.8%
FHLB
$	10,000,000		2.900	%(a)		06/11/07	$	9,859,950
	15,000,000		3.828	(a)		09/07/07		14,862,490
	21,500,000		4.000	(a)		12/03/07		21,054,994
	39,000,000		4.800			05/02/08		38,927,499
	7,000,000		3.790			11/28/08		6,844,908
FHLMC
	4,380,000		3.000			12/15/06		4,367,180
	10,000,000		2.415			04/12/07		9,872,580
	40,900,000		4.500			04/18/07		40,726,011
	9,500,000		2.550			04/19/07		9,380,120
	5,000,000		3.500			04/15/08		4,898,255
	19,000,000		4.480			09/19/08		18,838,093
FNMA
	12,000,000		3.550			01/12/07		11,956,500
	10,000,000		3.550			11/16/07		9,840,440
	9,700,000		3.650			11/30/07		9,551,221
	35,000,000		4.200			03/24/08		34,590,115
Small Business Administration
	394,566		7.200			06/01/17		410,687
	717,000		6.300			05/01/18		736,415
	890,061		6.300			06/01/18		914,432
TOTAL AGENCY DEBENTURES
(Cost $248,309,588)							$	247,631,890
U.S. Treasury Obligations – 6.5%
United States Treasury Inflation Protected Securities
$	2,331,231		1.875	%		07/15/13	$	2,257,468
	2,868,944		2.000			01/15/14		2,796,211
	3,677,610		2.000			07/15/14		3,582,220
	6,813,365		1.875			07/15/15		6,561,611
	924,534		2.000			01/15/16		898,170
	7,672,808		2.500			07/15/16		7,783,105
United States Treasury Notes
	23,100,000		4.875			08/15/09		23,229,035
	4,100,000		4.500			02/15/16		4,067,647
United States Treasury Principal-Only STRIPS(d)
	10,500,000		0.000			11/15/21		5,077,506
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $56,233,601)							$	56,252,973

 The accompanying notes are an integral part of these financial statements.

28

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Repurchase Agreement(e) – 7.8%
Joint Repurchase Agreement Account II
$	67,200,000		5.316	%		11/01/06	$	67,200,000
Maturity Value: $67,209,923
(Cost $67,200,000)
TOTAL INVESTMENTS – 99.8%
(Cost $865,113,495)							$	858,924,253
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.2%								1,325,457
NET ASSETS – 100.0%							$	860,249,710

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(b)	A portion of this security is segregated as collateral for initial margin requirement on futures transactions.
(c)	Represents security with notional principal amount. The actual effective yield of this security is different than the stated interest rate.
(d)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(e)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 31.

Investment Abbreviations:
CMO	—	Collateralized Mortgage Obligations
FHLB	—	Federal Home Loan Bank
FHLMC	—	Federal Home Loan Mortgage Corp.
FNMA	—	Federal National Mortgage Association
GNMA	—	Government National Mortgage Association
PAC	—	Planned Amortization Class
REMIC	—	Real Estate Mortgage Investment Conduit
STRIPS	—	Separate Trading of Registered Interest and Principal of Securities
TAC	—	Targeted Amortization Class

The accompanying notes are an integral part of these financial statements. 

29

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Schedule of Investments (continued)

October 31, 2006

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:

	Number of
	Contracts			Settlement	Market			Unrealized
Type	Long (Short)			Month	Value			Gain (Loss)
Eurodollars		(145	)	December 2006	$	(34,305,187	)	$	(16,805	)
Eurodollars		180		March 2007		42,651,000			37,138
Eurodollars		418		June 2007		99,222,750			(147,959	)
Eurodollars		798		September 2007		189,774,375			180,721
Eurodollars		588		December 2007		140,010,150			518,951
Eurodollars		406		March 2008		96,714,275			365,520
Eurodollars		162		June 2008		38,582,325			131,699
U.S. Treasury Bonds		48		December 2006		5,407,500			6,809
2 Year U.S. Treasury Notes		248		December 2006		50,692,750			93,390
5 Year U.S. Treasury Notes		(566	)	December 2006		(59,748,375	)		(407,144	)
10 Year U.S. Treasury Notes		(350	)	December 2006		(37,876,563	)		(268,599	)
TOTAL					$	531,125,000		$	493,721

INTEREST RATE SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts

with the following terms:

					Rates Exchanged
							Upfront
	Notional				Payments	Payments	Payments
Swap	Amount		Termination		Received by	Made by	made by		Unrealized
Counterparty	(000s)		Date		the Fund	the Fund	the Fund		Gain (Loss)
J.P. Morgan Securities, Inc.	$	55,000		02/17/11	3 month LIBOR	5.091%	$	—	$	(86,672	)
Banc of America Securities LLC (a)		10,000		12/20/11	5.600%	3 month LIBOR		184,838		64,278
Deutsche Bank Securities, Inc. (a)		43,500		12/20/13	5.650%	3 month LIBOR		1,153,616		300,911
J.P. Morgan Securities, Inc.		50,000		03/07/16	3 month LIBOR	5.182%		—		(207,445	)
TOTAL							$	1,338,454	$	71,072

(a) Represents forward settling interest rate swaps whose effective dates of commencement of accruals and cash flows occur in December 2006.

LIBOR—London Interbank Offered Rate

 The accompanying notes are an integral part of these financial statements.

30

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

ADDITIONAL INVESTMENT INFORMATION

JOINT REPURCHASE AGREEMENT ACCOUNT II — At October 31, 2006, the Funds had undivided interests in the Joint Repurchase Agreement Account II, as follows:

Fund	Principal Amount
Enhanced Income	$	11,200,000
Ultra-Short Duration Government		21,100,000
Short Duration Government		67,200,000

	Principal		Interest			Maturity	Maturity
Repurchase Agreements	Amount		Rate			Date	Value
ABN Amro, Inc.	$	500,000,000		5.32	%	11/01/06	$	500,073,889
Banc of America Securities LLC		2,750,000,000		5.31		11/01/06		2,750,405,625
Barclays Capital PLC		200,000,000		5.31		11/01/06		200,029,500
Barclays Capital PLC		2,000,000,000		5.32		11/01/06		2,000,295,557
Bear Stearns		500,000,000		5.32		11/01/06		500,073,889
“Credit Suisse Securities (USA) LLC”		750,000,000		5.32		11/01/06		750,110,834
Greenwich Capital Markets		300,000,000		5.32		11/01/06		300,044,334
Merrill Lynch		500,000,000		5.31		11/01/06		500,073,750
Wachovia Bank		250,000,000		5.31		11/01/06		250,036,875
UBS Securities LLC		2,700,200,000		5.32		11/01/06		2,700,399,027
TOTAL	$	10,450,200,000					$	10,451,543,280

At October 31, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 5.75%, due 12/14/06 to 09/22/15; Federal Home Loan Mortgage Association, 2.35% to 9.50%, due 11/17/06 to 09/01/36; Federal National Mortgage Association, 0.00% to 11.00%, due 11/1/06 to 11/01/36; Government National Mortgage Association, 4.50% to 9.00%, due 10/15/09 to 10/15/36 and U.S. Treasury Notes, 4.25% to 4.88% due 03/31/11 to 01/15/14. The aggregate market value of the collateral, including accrued interest, was $10,679,289,697.

The accompanying notes are an integral part of these financial statements. 

31

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statements of Assets and Liabilities

October 31, 2006

					Ultra-Short
		Enhanced Income			Duration			Short Duration
		Fund			Government Fund			Government Fund
Assets:
Investments in securities, at value (identified cost $203,430,617, $459,115,567 and $865,113,495, respectively)		$	202,890,521		$	452,532,634		$	858,924,253
Cash(a)			1,154,419			1,969,580			3,013,612
Receivables:
	Investment securities sold		—			975,779			49,038,794
	Interest		1,876,806			2,355,100			4,633,543
	Swap contracts, at value (includes upfront payments made of $0, $1,196,776 and $1,338,454, respectively)		—			1,547,501			1,703,643
	Fund shares sold		7,509,157			513,442			5,981,863
	Reimbursement from investment adviser		—			—			45,963
	Due from broker		—			35,688			232,256
	Other assets		931			1,816			2,179
Total assets			213,431,834			459,931,540			923,576,106
Liabilities:
Payables:
	Investment securities purchased		—			—			59,500,895
	Fund shares repurchased		1,449,495			307,196			2,067,296
	Swap contracts, at value		30,468			76,851			294,117
	Income distribution		151,456			960,208			700,442
	Amounts owed to affiliates		86,022			252,508			538,991
	Due to broker		39,146			276,782			—
Accrued expenses			208,461			245,148			224,655
Total liabilities			1,965,048			2,118,693			63,326,396
Net Assets:
Paid-in capital			289,367,517			608,715,897			897,208,242
Accumulated undistributed net investment income			3,223,079			5,857,318			3,103,565
Accumulated net realized loss on investments, futures and swaps			(80,552,155	)		(150,192,849	)		(34,437,419	)
Net unrealized loss on investments, futures and swaps			(571,655	)		(6,567,519	)		(5,624,678	)
NET ASSETS		$	211,466,786		$	457,812,847		$	860,249,710
Net Assets:
	Class A	$	36,333,460		$	122,379,313		$	323,915,261
	Class B		—			—			14,433,183
	Class C		—			—			41,690,717
	Institutional		173,430,029			317,956,017			468,033,311
	Administration		1,703,297			—			—
	Service		—			17,477,517			12,177,238
Shares Outstanding:
	Class A		3,733,929			13,201,321			33,513,723
	Class B		—			—			1,497,962
	Class C		—			—			4,339,918
	Institutional		17,846,274			34,292,258			48,556,051
	Administration		175,330			—			—
	Service		—			1,877,977			1,264,894
Total shares outstanding, $0.001 par value (unlimited number of shares authorized)			21,755,533			49,371,556			89,172,548
Net asset value, offering and redemption price per share:(b)
	Class A		$9.73		$	9.27		$	9.67
	Class B		—			—			9.64
	Class C		—			—			9.61
	Institutional		9.72			9.27			9.64
	Administration		9.71			—			—
	Service		—			9.31			9.63

(a)

Includes restricted cash of $1,100,000, $1,200,000 and $1,150,000, relating to initial margin requirements and collateral on futures transactions for the Enhanced Income, Ultra-Short Duration Government and Short Duration Government Funds, respectively, and includes restricted cash of $765,502, and $650,480 relating to swap contracts for the Ultra-Short Duration Government and Short Duration Government Funds, respectively.

(b)

Maximum public offering price per share for Class A shares of the Enhanced Income, Ultra-Short Duration Government (NAV per share multiplied by 1.0152), and Short Duration Government (NAV per share multiplied by 1.0204) is $9.88, $9.41 and $9.87, respectively. At redemption, Class B and Class C shares may be subject to a contingent deferred sales charge, assessed on the amount equal to the lesser of the current net asset value or the original purchase price of the shares.

 The accompanying notes are an integral part of these financial statements.

32

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statements of Operations

For the Year Ended October 31, 2006

					Ultra-Short
		Enhanced Income			Duration			Short Duration
		Fund			Government Fund			Government Fund
Investment income:
Interest		$	11,737,016		$	27,588,775		$	37,283,052
Total income			11,737,016			27,588,775			37,283,052
Expenses:
Management fees			666,924			2,556,486			4,378,386
Distribution and Service fees(a)			120,096			394,114			1,480,041
Transfer Agent fees(a)			164,354			444,824			821,004
Custody and accounting fees			115,297			229,043			250,262
Printing fees			73,323			105,997			114,677
Professional fees			77,395			77,348			78,045
Service share fees			—			149,895			63,435
Registration fees			30,000			61,858			95,565
Trustee fees			16,201			16,201			16,201
Administration share fees			5,230			—			—
Other			20,759			115,754			131,066
Total expenses			1,289,579			4,151,520			7,428,682
Less — expense reductions			(441,320	)		(288,331	)		(710,692	)
Net expenses			848,259			3,863,189			6,717,990
NET INVESTMENT INCOME			10,888,757			23,725,586			30,565,062
Realized and unrealized gain (loss) on investment, futures and swap contracts:
Net realized gain (loss) from:
	Investment transactions		(1,001,036	)		(1,318,591	)		(2,513,638	)
	Futures transactions		(64,921	)		338,010			(4,015,292	)
	Swap contracts		137,469			237,145			672,743
Net change in unrealized gain (loss) on:
	Investments		1,778,263			3,663,604			5,553,001
	Futures		173,281			(423,323	)		3,502,070
	Swap contracts		(193,200	)		665,522			63,959
Net realized and unrealized gain on investment, futures and swaps			829,856			3,162,367			3,262,843
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	11,718,613		$	26,887,953		$	33,827,905

(a)  Class specific Distribution and Service and Transfer Agent fees were as follows:

	Distribution and Service Fees						Transfer Agent Fees
Fund	Class A		Class B		Class C		Class A		Class B		Class C		Institutional		Administration		Service
Enhanced Income	$	120,096		—		—	$	76,861		—		—	$	86,656	$	837		—
Ultra-Short Duration		394,114		—		—		252,233		—		—		180,599		—	$	11,992
Short Duration		814,244	$	186,331	$	479,466		521,116	$	29,813	$	76,715		188,285		—		5,075

The accompanying notes are an integral part of these financial statements. 

33

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statements of Changes in Net Assets

		Enhanced Income Fund
		For the			For the
		Year Ended			Year Ended
		October 31, 2006			October 31, 2005
From operations:
Net investment income		$	10,888,757		$	15,404,397
Net realized gain (loss) on investment, futures and swaps			(928,488	)		319,507
Net change in unrealized gain (loss) on investments, futures and swaps			1,758,344			(6,054,751	)
Net increase in net assets resulting from operations			11,718,613			9,669,153
Distributions to shareholders:
From net investment income
	Class A Shares		(1,725,816	)		(3,080,374	)
	Class B Shares		—			—
	Class C Shares		—			—
	Institutional Shares		(8,607,037	)		(11,243,434	)
	Service Shares		—			—
	Administration Shares		(78,128	)		(1,077,520	)
Total distributions to shareholders			(10,410,981	)		(15,401,328	)
From share transactions:
Proceeds from sales of shares			91,969,372			194,684,640
Reinvestment of dividends and distributions			8,268,469			11,851,596
Cost of shares repurchased			(259,653,464	)		(512,923,498	)
Net increase (decrease) in net assets resulting from share transactions			(159,415,623	)		(306,387,262	)
TOTAL INCREASE (DECREASE)			(158,107,991	)		(312,119,437	)
Net assets:
Beginning of year			369,574,777			681,694,214
End of year		$	211,466,786		$	369,574,777
Accumulated undistributed net investment income		$	3,223,079		$	3,382,149

 The accompanying notes are an integral part of these financial statements.

34

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Ultra-Short Duration Government Fund						Short Duration Government Fund
For the			For the			For the			For the
Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2006			October 31, 2005			October 31, 2006			October 31, 2005
$	23,725,586		$	27,491,068		$	30,565,062		$	21,936,398
	(743,436	)		(5,946,240	)		(5,856,187	)		(6,752,840	)
	3,905,803			6,756,839			9,119,030			(10,787,877	)
	26,887,953			28,301,667			33,827,905			4,395,681
	(6,223,589	)		(6,763,599	)		(11,610,473	)		(8,341,407	)
	—			—			(545,672	)		(622,550	)
	—			—			(1,349,261	)		(1,399,821	)
	(19,392,406	)		(24,901,988	)		(18,526,665	)		(12,590,303	)
	(1,107,707	)		(1,200,162	)		(437,876	)		(309,545	)
	—			—			—			—
	(26,723,702	)		(32,865,749	)		(32,469,947	)		(23,263,626	)
	162,254,987			304,348,452			469,962,243			551,955,365
	13,988,599			17,776,193			22,536,617			15,890,221
	(536,074,946	)		(1,085,815,792	)		(572,153,138	)		(454,192,933	)
	(359,831,360	)		(763,691,147	)		(79,654,278	)		113,652,653
	(359,667,109	)		(768,255,229	)		(78,296,320	)		94,784,708
	817,479,956			1,585,735,185			938,546,030			843,761,322
$	457,812,847		$	817,479,956		$	860,249,710		$	938,546,030
$	5,857,318		$	7,294,860		$	3,103,565		$	4,830,615

The accompanying notes are an integral part of these financial statements. 

35

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements

October 31, 2006

1. ORGANIZATION

Goldman Sachs Trust (the “Trust”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes Goldman Sachs Enhanced Income Fund (“Enhanced Income”), Goldman Sachs Ultra-Short Duration Government Fund (“Ultra-Short Duration Government”) and Goldman Sachs Short Duration Government Fund (“Short Duration Government”) (collectively, the “Funds” or individually a “Fund”). Each Fund is a diversified portfolio of the Trust. Enhanced Income offers three classes of shares — Class A, Institutional and Administration. Ultra-Short Duration Government offers three classes of shares — Class A, Institutional and Service. Short Duration Government offers five classes of shares — Class A, Class B, Class C, Institutional and Service. Class A shares charge a maximum initial sales charge of 1.50% for Enhanced Income and Ultra-Short Duration Government, and 2.00% for Short Duration Government. The contingent deferred sales charge for Class B shares is 2.00% maximum declining to zero after three years for Short Duration Government. The Class C shares of Short Duration Government have a contingent deferred sales charge of 1.00% during the first 12 months. Institutional, Administration and Service Class of the Funds are not subject to a sales charge. Goldman, Sachs & Co. (“Goldman Sachs”), as distributor of the Funds, receives such sales loads of which a certain portion may be retained.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Funds. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Portfolio securities for which market quotations are readily available are valued at market value on the basis of quotations furnished by a pricing service or provided by dealers in such securities. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Portfolio securities for which market quotations are not readily available or are deemed not to reflect market value by the investment advisor are valued based on yield equivalents, pricing matrices or other sources, under valuation procedures established by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted. Market discounts, original issue discount and market premiums on debt securities are accreted/ amortized to interest income over the life of the security with a corresponding adjustment in the cost basis of that security. Net investment income (other than class specific expenses) and unrealized and realized gains or losses are allocated daily to each class of shares of the respective Funds based upon the relative proportion of net assets of each class.

     Certain mortgage security paydown gains and losses are recorded as interest income (loss) and included in interest income in the accompanying Statements of Operations. Original issue discounts (OID) on debt securities are accreted to interest income over the life of the security with a corresponding increase in the cost basis of that security.

     Pursuant to applicable law and procedures adopted by the Trust’s Board of Trustees, securities transactions in portfolio securities (including futures transactions) may be effected from time to time through Goldman Sachs or an affiliate. In order for Goldman Sachs or an affiliate, acting as agent, to effect securities or futures transactions for a Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the

36

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

commissions, fees or other remuneration received by other brokers in connection with comparable transactions involving similar securities or futures contracts.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Funds on a straight-line and/or “pro-rata” basis depending upon the nature of the expense.

     Class A, Class B and Class C shareholders of the Funds bear all expenses and fees relating to their respective Distribution and Service Plans. Service Shares bear all expenses and fees relating to their Service and Shareholder Administration Plans. Administration Shares bear all expenses and fees relating to their Administration Plan. Each class of shares of the Funds separately bear its respective class-specific Transfer Agency fees.

D. Federal Taxes and Distribution to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable and tax-exempt income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. Net capital losses are carried forward to future years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gain distributions.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules, which may differ from generally accepted accounting principles. Therefore, the source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gains, or as a tax return of capital.

E. Forward Sales Contracts — The Funds may enter into forward security sales of mortgage-backed securities in which the Fund sells securities in the current month for delivery of securities defined by pool stipulated characteristics on a specified future date. The value of the contract is recorded as an asset and a liability on the Funds’ records with the difference between its market value and expected cash proceeds recorded as an unrealized gain or loss. Gains or losses are realized upon delivery of the security sold.

37

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

F. Futures Contracts — The Funds may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Funds are required to segregate cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Funds, dependent on the fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Funds realize a gain or loss which is reported in the Statement of Operations.

     The use of futures contracts involve, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statements of Assets and Liabilities. Changes in the value of a futures contract may not directly correlate with changes in the value of the underlying securities. The risk may decrease the effectiveness of the Funds’ strategies and potentially result in a loss.

G. Mortgage Dollar Rolls — The Funds may enter into mortgage “dollar rolls” in which the Funds sell securities in the current month (or delivery) and simultaneously contract with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. For financial reporting and tax reporting purposes, the Funds treat mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate transaction involving a sale.

     During the settlement period between sale and repurchase, the Funds will not be entitled to accrued interest and/or receive principal payments on the securities sold. Dollar roll transactions involve the risk that the market value of the securities sold by the Funds may decline below the repurchase price of those securities. In the event the buyer of the securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Funds’ use of proceeds of the transaction may be restricted pending a determination by, or with respect to, the other party.

H. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase the securities at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Funds, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Funds may be delayed or limited and there may be a decline in the value of the collateral during the period while the Funds seek to assert their rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and terms and conditions contained therein, the Funds, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“GSAM”), or its affiliates, may transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements.

38

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

I. Segregation Transactions — As set forth in the prospectus, the Funds may enter into certain derivative transactions to seek to increase total return. Futures contracts, swap contracts, written options, mortgage dollar rolls, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Funds are required to segregate liquid assets with a current value equal to or greater than the market value of the corresponding transactions.

J. Swap Contracts — The Funds may enter into swap transactions for hedging purposes or to seek to increase total return. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the interest payment to be received by the Funds and/or the termination value at the end of the contract. Therefore, the Funds consider the creditworthiness of each counterparty to a contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. Entering into these agreements involves, to varying degrees, market, liquidity, elements of credit, legal and documentation risk in excess of amounts recognized in the Statement of Assets and Liabilities.

     An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices, rates or indices for a specified amount of an underlying notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.

     Swaps are marked to market daily using either pricing vendor quotations, counterparty prices or models prices and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. An upfront payment made and/or received by the Funds, is recorded as an asset and/or liability on the Statement of Assets and Liabilities and is only recorded as a realized gain or loss when either the contract’s term ends. Periodic payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are also realized upon early termination of the swap agreements.

K. Treasury Inflation-Protected Securities — The Funds may invest in Treasury Inflation-Protected Securities (“TIPS”), specially structured bonds in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index (“CPI”). The adjustments for interest income due to inflation are reflected in interest income in the statement of operations. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.

39

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

L. Securities purchased on a when-issued or delayed-delivery basis — The Funds may purchase securities on a when-issued or delayed-delivery basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. In addition to the normal credit and market risks, transactions with delayed settlement dates may expose the Funds to greater risk that such transactions may not be consummated.

3. AGREEMENTS

GSAM, an affiliate of Goldman Sachs, serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Funds. Under the Agreement, GSAM manages the Funds, subject to the general supervision of the Trust’s Board of Trustees.

     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Funds’ business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”), computed daily and payable monthly, equal to an annual percentage rate of each Fund’s average daily net assets.

     GSAM receives a Management fee on a contractual basis at the following rates:

				Ultra-Short			Short
	Enhanced			Duration			Duration
Average Daily Net Assets	Income			Government			Government
Up to $1 billion		0.25	%		0.40	%		0.50	%
Next $1 billion		0.23			0.36			0.45
Over $2 billion		0.22			0.34			0.43

40

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

3. AGREEMENTS (continued)

     Prior to February 28, 2006, the contractual Management fees for Enhanced Income, Ultra-Short Duration Government and Short Duration Government Funds as an annual percentage rate of average daily net assets were 0.25%, 0.40% and 0.50%, respectively. Prior to February 28, 2006, GSAM entered into a voluntary fee reduction commitment for Enhanced Income, Ultra-Short Duration Government and Short Duration Government Funds in order to achieve the rates in the above table. In addition, GSAM voluntarily agreed to waive its management fee to 0.20% as an annual percentage rate of average daily net assets of Enhanced Income for the fiscal year ended October 31, 2006.

     GSAM has voluntarily agreed to limit certain “Other Expenses” (excluding Management fees, Distribution and Service fees, Transfer Agency fees and expenses, Service Share fees, Account Service fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended October 31, 2006, the Other Expense limitations for the Enhanced Income, Ultra-Short Duration Government and Short Duration Government as an annual percentage rate of average daily net assets were 0.014%. 0.054% and 0.004%, respectively.

     The Trust, on behalf of each Fund, has adopted Distribution and Service Plans. Under the Plans, Goldman Sachs and/or authorized dealers are entitled to a monthly fee for distribution services equal to, on an annual basis, 0.25% of the Enhanced Income and Ultra-Short Duration Government’s average daily net assets attributable to Class A shares and 0.25%, 0.75% and 0.75% for the Short-Duration Government’s average daily net assets attributable to Class A, Class B and Class C shares, respectively. Additionally, Goldman Sachs and/or authorized dealers are entitled to receive, under the Plans, a separate fee for personal and account maintenance services equal to, on an annual basis, 0.25% of Short Duration Government’s average daily net assets attributable to Class B and Class C Shares. For the year ended October 31, 2006, Goldman Sachs has voluntarily agreed to waive a portion of the Distribution and Service fees equal to 0.15% of the average daily net assets attributable to the Class B shares of Short Duration Government.

     Goldman Sachs serves as Distributor of the shares of the Funds pursuant to a Distribution Agreement. Goldman Sachs may retain a portion of the Class A sales load and Class B and Class C contingent deferred sales charges. During the year ended October 31, 2006, Goldman Sachs advised the Funds that it retained approximately $3,800, $9,500 and $9,300 of Class A sales loads for Enhanced Income, Ultra-Short Duration Government and Short Duration Government, respectively. Goldman Sachs did not retain any portion of Class B or Class C contingent deferred sales charges for the year ended October 31, 2006.

     Goldman Sachs serves as Transfer Agent of the Funds. The Fees charged for such transfer agency services are calculated daily and payable monthly at an annual rate as follows: 0.16% of the average daily net assets for Class A, Class B and Class C Shares, and 0.04% of the average daily net assets for Administration (Enhanced Income only), Institutional and Service shares.

     The Trust, on behalf of the Ultra-Short Duration and Short Duration Government, has adopted a Service Plan and a Shareholder Administration Plan for the Service Shares. In addition, the Trust on behalf of Enhanced Income, has adopted an Administration Plan for Administration Shares. These plans allow for Service and Administration Shares to compensate service organizations for providing varying levels of personal and account administration and shareholder administration services to their customers who are beneficial owners of such shares. The Service Plan, Shareholder Administration Plan and Administration Plan provide for compensation to the service organizations in an amount equal to, on an annualized basis, 0.25%, 0.25% and 0.25% respectively, of the average daily net assets of each share class.

41

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

3. AGREEMENTS (continued)

     For the year ended October 31, 2006, GSAM and the Distributor have voluntarily agreed to waive certain fees and reimburse other expenses. In addition, the Funds have entered into certain offset arrangements with the custodian and transfer agent resulting in a reduction of the Funds’ expenses. For the year ended October 31, 2006, expense reductions were as follows (in thousands):

	Fee Waivers						Fee Credits
			Class B
			Distribution		Other						Total
	Management		and Service		Expense		Custody		Transfer		Expense
Fund	Fees		Fees		Reimbursement		Fees		Agent Fees		Reductions
Enhanced Income	$	133	$	—	$	296	$	7	$	5	$	441
Ultra-Short Duration Government		—		—		261		14		13		288
Short Duration Government		—		28		651		5		27		711

     At October 31, 2006, the amounts owed to affiliates of the Trust were as follows (in thousands):

	Management		Distribution and		Over		Transfer
Fund	Fees		Service Fees		Reimbursement		Agent Fees		Total
Enhanced Income	$	35	$	8	$	33	$	10	$	86
Ultra-Short Duration Government		161		26		37		29		253
Short Duration Government		357		115		—		67		539

42

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long-term securities for the year ended October 31, 2006, were as follows:

			Purchases		Sales and		Sales and Maturities
	Purchases of		(Excluding		Maturities of		(Excluding
	U.S. Government		U.S. Government		U.S. Government		U.S. Government
	and Agency		and Agency		and Agency		and Agency
Fund	Obligations		Obligations)		Obligations		Obligations)
Enhanced Income	$	135,836,771	$	31,032,601	$	186,487,894	$	110,469,330
Ultra-Short Duration Government		323,225,666		19,926,094		473,777,116		44,936,954
Short Duration Government		888,605,466		—		835,897,838		6,070,539

     For the year ended October 31, 2006, Enhanced Income, Ultra-Short Duration Government and Short Duration Government paid commissions of approximately $14,500, $76,800 and $108,100, respectively, in connection with futures contracts entered into with Goldman Sachs.

5. LINE OF CREDIT FACILITY

The Funds participate in a $400,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Funds must own securities having a market value in excess of 300% of each Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. The committed facility also requires a fee to be paid by the Funds based on the amount of the commitment that has not been utilized. For the year ended October 31, 2006, the Funds did not have any borrowings under this facility.

43

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

6. TAX INFORMATION

The tax character of distributions paid during the fiscal year ended October 31, 2006 was as follows:

				Ultra-Short
		Enhanced		Duration		Short Duration
		Income		Government		Government
Distributions paid from:
Ordinary Income		$	10,410,981	$	26,723,702	$	32,469,947
	Total taxable distributions	$	10,410,981	$	26,723,702	$	32,469,947

     The tax character of distributions paid during the fiscal year ended October 31, 2005 was as follows:

				Ultra-Short
		Enhanced		Duration		Short Duration
		Income		Government		Government
Distributions paid from:
Ordinary Income		$	15,401,328	$	32,865,749	$	23,263,626
	Total taxable distributions	$	15,401,328	$	32,865,749	$	23,263,626

     As of October 31, 2006, the components of accumulated earnings (losses) on a tax basis were as follows:

					Ultra-Short
		Enhanced			Duration			Short Duration
		Income			Government			Government
Undistributed ordinary income — net		$	3,389,606		$	5,988,837		$	2,497,914
Capital loss carryforward:1
	Expiring 2007		—			(1,739,320	)		(3,752,449	)
	Expiring 2008		—			(2,563,050	)		(2,289,664	)
	Expiring 2009		(7,623,028	)		—			—
	Expiring 2010		(65,331,932	)		(55,038,717	)		—
	Expiring 2011		—			(55,920,321	)		(2,403,563	)
	Expiring 2012		(7,471,508	)		(24,528,394	)		(9,994,195	)
	Expiring 2013		—			(7,818,636	)		(10,870,073	)
	Expiring 2014		(126,777	)		(2,842,873	)		(4,628,086	)
Total capital loss carryforward		$	(80,553,245	)	$	(150,451,311	)	$	(33,938,030	)
Timing differences (dividends payable and straddles)			(151,456	)		(960,208	)		(700,442	)
Unrealized losses — net			(585,636	)		(5,480,368	)		(4,817,974	)
Total accumulated earnings (losses) — net		$	(77,900,731	)	$	(150,903,050	)	$	(36,958,532	)

¹  Expiration occurs on October 31 of the year indicated.

44

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

6. TAX INFORMATION (continued)

     As of October 31, 2006, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:

				Ultra-Short
	Enhanced			Duration			Short Duration
	Income			Government			Government
Tax Cost	$	203,430,868		$	458,758,867		$	863,776,553
Gross unrealized gain		331,540			1,373,430			388,980
Gross unrealized loss		(871,887	)		(7,599,663	)		(5,241,280	)
Net unrealized security loss	$	(540,347	)	$	(6,226,233	)	$	(4,852,300	)
Net unrealized gain (loss) on other investments		(45,289	)		745,865			34,326
Net unrealized gain (loss)		(585,636	)		(5,480,368	)		(4,817,974	)

     The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, differences related to the tax treatment of swap payments, amortization of swaps, market discount accretion and premium amortization and net mark-to-market gains (losses) on 1256 futures contracts.

     In order to present certain components of each Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Funds’ accounts. These reclassifications have no impact on the net asset value of the Funds. Reclassifications result primarily from the difference in the tax treatment of certain bonds, swap reclasses and expiring capital loss carryforwards.

							Accumulated
				Accumulated			Undistributed
				Net Realized			Net Investment
Fund	Paid-in-Capital			Gain (Loss)			Income
Enhanced Income	$	—		$	636,846		$	(636,846	)
Ultra-Short Duration Government		(189,105	)		(1,371,469	)		1,560,574
Short Duration Government		2,032,826			(2,210,661	)		177,835

45

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

7. OTHER MATTERS

Fund’s Concentration — The following Goldman Sachs Asset Allocation Portfolios were beneficial owners of the Funds with amounts greater than 5% as of October 31, 2006 (as a percentage of outstanding Institutional shares):

	Goldman Sachs
	Balanced Strategy
Fund	Portfolio
Short Duration Government		16	%

Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds (including these Funds) and the Trustees and Officers of the Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. These Funds, along with certain other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, the plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals in similar litigation.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuit will have a material adverse financial impact on the Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

46

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

7. OTHER MATTERS (continued)

New Accounting Pronouncements — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, the advisor is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.

     On September 15, 2006, FASB released Statement Financial Accounting Standard No. 157 “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The advisor does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required.

47

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

8. SUMMARY OF SHARE TRANSACTIONS

Share activity is as follows:

	Enhanced Income Fund
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		807,711		$	7,836,561			3,273,708		$	32,131,000
Reinvestment of dividends and distributions		157,073			1,524,361			255,998			2,487,587
Shares converted from Class B(a)		—			—			—			—
Shares repurchased		(4,012,187	)		(38,907,129	)		(12,140,930	)		(118,108,073	)
		(3,047,403	)		(29,546,207	)		(8,611,224	)		(83,489,486	)
Class B Shares
Shares sold		—			—			—			—
Reinvestment of dividends and distributions		—			—			—			—
Shares converted to Class A(a)		—			—			—			—
Shares repurchased		—			—			—			—
		—			—			—			—
Class C Shares
Shares sold		—			—			—			—
Reinvestment of dividends and distributions		—			—			—			—
Shares repurchased		—			—			—			—
		—			—			—			—
Institutional Shares
Shares sold		8,684,184			84,122,386			16,755,467			162,548,083
Reinvestment of dividends and distributions		688,347			6,671,147			956,147			9,279,095
Shares repurchased		(22,697,873	)		(219,788,611	)		(36,934,548	)		(358,792,517	)
		(13,325,342	)		(128,995,078	)		(19,222,934	)		(186,965,339	)
Administration Shares
Shares sold		1,076			10,425			571			5,557
Reinvestment of dividends and distributions		7,530			72,961			8,742			84,914
Shares repurchased		(98,919	)		(957,724	)		(3,719,906	)		(36,022,908	)
		(90,313	)		(874,338	)		(3,710,593	)		(35,932,437	)
Service Shares
Shares sold		—			—			—			—
Reinvestment of dividends and distributions		—			—			—			—
Shares repurchased		—			—			—			—
		—			—			—			—
NET INCREASE (DECREASE)		(16,463,058	)	$	(159,415,623	)		(31,544,751	)	$	(306,387,262	)

(a)  Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.

48

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Ultra-Short Duration Government Fund												Short Duration Government Fund
For the Year Ended						For the Year Ended						For the Year Ended						For the Year Ended
October 31, 2006						October 31, 2005						October 31, 2006						October 31, 2005
Shares			Dollars			Shares			Dollars			Shares			Dollars			Shares			Dollars
	9,154,321		$	84,913,632			7,090,046		$	65,947,984			17,086,232		$	164,614,524			16,119,801		$	157,145,812
	574,801			5,333,667			605,691			5,629,485			898,070			8,655,248			636,497			6,200,433
	—			—			—			—			54,921			529,346			76,808			749,858
	(17,057,784	)		(158,263,237	)		(27,221,342	)		(253,299,076	)		(18,450,188	)		(177,749,661	)		(15,539,948	)		(151,651,244	)
	(7,328,662	)		(68,015,938	)		(19,525,605	)		(181,721,607	)		(410,965	)		(3,950,543	)		1,293,158			12,444,859
	—			—			—			—			5,379			51,663			21,756			212,307
	—			—			—			—			42,154			405,091			45,365			440,791
	—			—			—			—			(55,081	)		(529,346	)		(77,081	)		(749,858	)
	—			—			—			—			(947,722	)		(9,104,071	)		(1,456,332	)		(14,154,775	)
	—			—			—			—			(955,270	)		(9,176,663	)		(1,466,292	)		(14,251,535	)
	—			—			—			—			673,735			6,453,281			740,225			7,181,679
	—			—			—			—			88,567			848,712			90,335			875,150
	—			—			—			—			(2,372,280	)		(22,728,566	)		(4,090,955	)		(39,666,616	)
	—			—			—			—			(1,609,978	)		(15,426,573	)		(3,260,395	)		(31,609,787	)
	8,296,310			77,049,254			25,001,463			230,212,155			30,851,098			296,373,070			39,169,692			380,331,180
	818,134			7,598,141			1,186,132			11,043,037			1,292,234			12,422,946			848,057			8,238,392
	(37,833,332	)		(351,285,511	)		(87,234,896	)		(812,931,349	)		(37,348,354	)		(359,048,174	)		(25,084,059	)		(243,720,363	)
	(28,718,888	)		(266,638,116	)		(61,047,301	)		(571,676,157	)		(5,205,022	)		(50,252,158	)		14,933,690			144,849,209
	—			—			—			—			—			—			—			—
	—			—			—			—			—			—			—			—
	—			—			—			—			—			—			—			—
	—			—			—			—			—			—			—			—
	31,362			292,101			874,933			8,188,313			257,280			2,469,705			729,615			7,084,387
	113,380			1,056,791			118,204			1,103,671			21,309			204,620			13,967			135,455
	(2,846,267	)		(26,526,198	)		(2,094,203	)		(19,585,367	)		(366,964	)		(3,522,666	)		(514,727	)		(4,999,935	)
	(2,701,525	)		(25,177,306	)		(1,101,066	)		(10,293,383	)		(88,375	)		(848,341	)		228,855			2,219,907
	(38,749,075	)	$	(359,831,360	)		(81,673,972	)	$	(763,691,147	)		(8,269,610	)	$	(79,654,278	)		11,729,016		$	113,652,653

49

GOLDMAN SACHS ENHANCED INCOME FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from
			investment operations
										Distributions
	Net asset									to shareholders
	value,		Net		Net realized			Total from		from net
	beginning		investment		and unrealized			investment		investment
Year - Share Class	of year		income(a)		gain (loss)			operations		income
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	9.68	$	0.37	$	0.04		$	0.41	$	(0.36	)
2006 - Institutional		9.67		0.40		0.04		$	0.44		(0.39	)
2006 - Administration		9.67		0.38		0.03		$	0.41		(0.37	)
2005 - A		9.78		0.28		(0.10	)		0.18		(0.28	)
2005 - Institutional		9.77		0.32		(0.10	)		0.22		(0.32	)
2005 - Administration		9.78		0.30		(0.12	)		0.18		(0.29	)
2004 - A		9.99		0.25		(0.19	)		0.06		(0.27	)
2004 - Institutional		9.98		0.30		(0.20	)		0.10		(0.31	)
2004 - Administration		9.99		0.27		(0.19	)		0.08		(0.29	)
2003 - A		10.13		0.33		(0.15	)		0.18		(0.32	)
2003 - Institutional		10.12		0.37		(0.15	)		0.22		(0.36	)
2003 - Administration		10.13		0.33		(0.14	)		0.19		(0.33	)
2002 - A		10.26		0.38		(0.13	)		0.25		(0.38	)
2002 - Institutional		10.26		0.42		(0.14	)		0.28		(0.42	)
2002 - Administration		10.27		0.40		(0.14	)		0.26		(0.40	)

(a)

Calculated based on the average shares outstanding methodology.

(b)

Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.

 The accompanying notes are an integral part of these financial statements.

50

GOLDMAN SACHS ENHANCED INCOME FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end		net expenses			income			total expenses			income			Portfolio
value, end		Total			of year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	9.73		4.26	%	$	36,333		0.62	%		3.77	%		0.78	%		3.61	%		67	%
	9.72		4.66			173,430		0.25			4.15			0.41			3.99			67
	9.71		4.29			1,703		0.50			3.91			0.66			3.75			67
	9.68		1.88			65,645		0.64			2.94			0.79			2.80			49
	9.67		2.28			301,362		0.25			3.34			0.40			3.19			49
	9.67		1.92			2,568		0.50			3.09			0.65			2.94			49
	9.78		0.63			150,537		0.65			2.61			0.73			2.53			51
	9.77		1.04			492,276		0.25			3.02			0.33			2.94			51
	9.78		0.79			38,881		0.50			2.75			0.58			2.67			51
	9.99		1.77			378,378		0.65			3.28			0.71			3.22			41
	9.98		2.18			1,106,956		0.25			3.65			0.31			3.59			41
	9.99		1.93			50,463		0.50			3.34			0.56			3.28			41
	10.13		2.48			810,768		0.65			3.70			0.72			3.63			65
	10.12		2.79			2,071,378		0.25			4.17			0.32			4.10			65
	10.13		2.53			18,965		0.50			3.91			0.57			3.84			65

51

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from
			investment operations
											Distributions
	Net asset										to shareholders
	value,		Net			Net realized			Total from		from net
	beginning		investment			and unrealized			investment		investment
Year - Share Class	of year		income(a)			gain (loss)			operations		income
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	9.27	$	0.32		$	(0.05	)	$	0.37	$	(0.37	)
2006 - Institutional		9.28		0.35			(0.05	)		0.40		(0.41	)
2006 - Service		9.31		0.31			(0.05	)		0.36		(0.36	)
2005 - A		9.33		0.20			(0.01	)		0.19		(0.25	)
2005 - Institutional		9.34		0.23			—	(e)		0.23		(0.29	)
2005 - Service		9.37		0.19			(0.01	)		0.18		(0.24	)
2004 - A		9.47		0.19			(0.04	)		0.15		(0.29	)
2004 - Institutional		9.48		0.23			(0.04	)		0.19		(0.33	)
2004 - Service		9.50		0.18			(0.03	)		0.15		(0.28	)
2003 - A		9.66		0.24			(0.11	)		0.13		(0.32	)
2003 - Institutional		9.68		0.28			(0.12	)		0.16		(0.36	)
2003 - Service		9.69		0.23			(0.11	)		0.12		(0.31	)
2002 - A		9.79		0.31	(d)		(0.06	)(d)		0.25		(0.38	)
2002 - Institutional		9.81		0.35	(d)		(0.06	)(d)		0.29		(0.42	)
2002 - Service		9.82		0.31	(d)		(0.07	)(d)		0.24		(0.37	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	Includes the effect of mortgage dollar roll transactions.
(d)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was to decrease net investment income per share by $0.05, increase net realized and unrealized gains and losses per share by $0.05, and decrease the ratio of net investment income to average net assets with and without expense reductions by 0.48%.
(e)	Amount is less than $0.005 per share.

 The accompanying notes are an integral part of these financial statements.

52

GOLDMAN SACHS ULTRA-SHORT DURATION GOVERNMENT FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end		net expenses			income			total expenses			income			Portfolio
value, end		Total			of year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate(c)
$	9.27		4.20	%	$	122,379		0.86	%		3.46	%		0.91	%		3.41	%		57	%
	9.27		4.36			317,956		0.49			3.83			0.54			3.78			57
	9.31		3.93			17,478		0.99			3.32			1.04			3.27			57
	9.27		1.98			190,210		0.89			2.20			0.89			2.20			71
	9.28		2.49			584,628		0.49			2.59			0.50			2.58			71
	9.31		1.97			42,642		0.99			2.06			1.00			2.05			71
	9.33		1.61			373,650		0.88			2.12			0.88			2.12			103
	9.34		2.02			1,158,844		0.48			2.49			0.48			2.49			103
	9.37		1.61			53,241		0.98			1.95			0.98			1.95			103
	9.47		1.40			768,910		0.86			2.55			0.86			2.55			102
	9.48		1.69			1,967,845		0.46			2.95			0.46			2.95			102
	9.50		1.29			67,480		0.96			2.43			0.96			2.43			102
	9.66		2.57			1,000,977		0.88			3.21	(d)		0.88			3.21	(d)		144
	9.68		2.98			2,646,847		0.48			3.65	(d)		0.48			3.65	(d)		144
	9.69		2.46			35,883		0.98			3.20	(d)		0.98			3.20	(d)		144

53

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions
			investment operations									to shareholders
	Net asset
	value,		Net			Net realized			Total from			From net			From
	beginning		investment			and unrealized			investment			investment			paid-in			Total
Year - Share Class	of year		income(a)			gains (loss)			operations			income			capital			distributions
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	9.65	$	0.33		$	0.03		$	0.36		$	(0.34	)	$	—		$	(0.34	)
2006 - B		9.62		0.26			0.05			0.31			(0.29	)		—			(0.29	)
2006 - C		9.59		0.26			0.03			0.29			(0.27	)		—			(0.27	)
2006 - Institutional		9.63		0.37			0.02			0.39			(0.38	)		—			(0.38	)
2006 - Service		9.61		0.32			0.03			0.35			(0.33	)		—			(0.33	)
2005 - A		9.86		0.24			(0.19	)		0.05			(0.26	)		—			(0.26	)
2005 - B		9.83		0.19			(0.20	)		(0.01	)		(0.20	)		—			(0.20	)
2005 - C		9.81		0.17			(0.20	)		(0.03	)		(0.19	)		—			(0.19	)
2005 - Institutional		9.84		0.29			(0.20	)		0.09			(0.30	)		—			(0.30	)
2005 - Service		9.82		0.23			(0.19	)		0.04			(0.25	)		—			(0.25	)
2004 - A		9.99		0.24			(0.06	)		0.18			(0.30	)		(0.01	)		(0.31	)
2004 - B		9.95		0.19			(0.06	)		0.13			(0.24	)		(0.01	)		(0.25	)
2004 - C		9.93		0.17			(0.06	)		0.11			(0.22	)		(0.01	)		(0.23	)
2004 - Institutional		9.96		0.28			(0.05	)		0.23			(0.33	)		(0.02	)		(0.35	)
2004 - Service		9.95		0.22			(0.05	)		0.17			(0.29	)		(0.01	)		(0.30	)
2003 - A		10.12		0.35			(0.14	)		0.21			(0.34	)		—			(0.34	)
2003 - B		10.09		0.29			(0.15	)		0.14			(0.28	)		—			(0.28	)
2003 - C		10.07		0.27			(0.14	)		0.13			(0.27	)		—			(0.27	)
2003 - Institutional		10.10		0.39			(0.15	)		0.24			(0.38	)		—			(0.38	)
2003 - Service		10.09		0.34			(0.15	)		0.19			(0.33	)		—			(0.33	)
2002 - A		10.04		0.37	(d)		0.14	(d)		0.51			(0.43	)		—			(0.43	)
2002 - B		10.01		0.31	(d)		0.14	(d)		0.45			(0.37	)		—			(0.37	)
2002 - C		9.99		0.28	(d)		0.16	(d)		0.44			(0.36	)		—			(0.36	)
2002 - Institutional		10.02		0.42	(d)		0.13	(d)		0.55			(0.47	)		—			(0.47	)
2002 - Service		10.01		0.37	(d)		0.13	(d)		0.50			(0.42	)		—			(0.42	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	Includes the effect of mortgage dollar roll transactions.
(d)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was to decrease net investment income per share by $0.06, increase net realized and unrealized gains and losses per share by $0.06, and decrease the ratio of net investment income to average net assets with and without expense reduction by 0.63%.

 The accompanying notes are an integral part of these financial statements.

54

GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end		net expenses			income			total expenses			income			Portfolio
value, end		Total			of year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate(c)
$	9.67		3.84	%	$	323,915		0.91	%		3.35	%		0.99	%		3.27	%		100	%
	9.64		3.24			14,433		1.51			2.73			1.74			2.50			100
	9.61		3.09			41,691		1.66			2.59			1.74			2.51			100
	9.64		4.13			468,033		0.54			3.72			0.62			3.64			100
	9.63		3.72			12,177		1.04			3.22			1.12			3.14			100
	9.65		0.50			327,365		0.93			2.50			0.99			2.44			98
	9.62		(0.10	)		23,602		1.54			1.95			1.74			1.75			98
	9.59		(0.35	)		57,078		1.69			1.80			1.74			1.75			98
	9.63		0.89			517,492		0.54			2.87			0.60			2.81			98
	9.61		0.39			13,009		1.04			2.38			1.10			2.32			98
	9.86		1.81			321,863		0.94			2.41			1.00			2.35			249
	9.83		1.31			38,526		1.54			1.85			1.75			1.64			249
	9.81		1.16			90,317		1.69			1.71			1.75			1.65			249
	9.84		2.33			382,008		0.54			2.79			0.60			2.73			249
	9.82		1.72			11,047		1.04			2.22			1.10			2.16			249
	9.99		2.11			317,379		0.95			3.46			1.01			3.40			184
	9.95		1.41			50,580		1.55			2.87			1.76			2.66			184
	9.93		1.26			130,087		1.70			2.71			1.76			2.65			184
	9.96		2.43			415,210		0.55			3.86			0.61			3.80			184
	9.95		1.92			6,156		1.05			3.36			1.11			3.30			184
	10.12		5.26			246,763		0.94			3.69	(d)		1.04			3.59	(d)		194
	10.09		4.65			49,874		1.54			3.09	(d)		1.79			2.84	(d)		194
	10.07		4.50			95,458		1.69			2.84	(d)		1.79			2.74	(d)		194
	10.10		5.69			280,452		0.54			4.20	(d)		0.64			4.10	(d)		194
	10.09		5.17			11,471		1.04			3.70	(d)		1.14			3.60	(d)		194

55

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees
Goldman Sachs Trust

We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, and Goldman Sachs Short Duration Government Fund (three of the funds comprising the Goldman Sachs Trust) (the “Funds”), as of October 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Enhanced Income Fund, Goldman Sachs Ultra-Short Duration Government Fund, and Goldman Sachs Short Duration Government Fund at October 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

New York, New York

December 21, 2006

56

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Fund Expenses (Unaudited) — Six Month Period Ended October 31, 2006

          As a shareholder of Class A, Class B, Class C, Institutional, Service or Administration Shares of the Funds you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments (with respect to Class A Shares), contingent deferred sales charges (loads) on redemptions (with respect to Class B and C shares), and redemption fees (if any); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Class A, Class B and Class C Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in Class A, Class B, Class C, Institutional, Service and Administration Shares of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

          The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2006 through October 31, 2006.

Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.

Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

          Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Enhanced Income Fund							Ultra-Short Duration Government Fund							Short Duration Government Fund
						Expenses							Expense							Expenses
	Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the
	Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended
Share Class	05/01/06		10/31/06			10/31/06*		05/01/06		10/31/06			10/31/06*		05/01/06		10/31/06			10/31/06*
Class A
Actual	$	1,000.00	$	1,022.80		$	3.16	$	1,000.00	$	1,019.70		$	4.38	$	1,000.00	$	1,024.10		$	4.66
Hypothetical 5% return		1,000.00		1,022.08	+		3.16		1,000.00		1,020.86	+		4.39		1,000.00		1,021.88	+		4.65
Class B
Actual		N/A		N/A			N/A		N/A		N/A			N/A		1,000.00		1,020.10			7.71
Hypothetical 5% return		N/A		N/A			N/A		N/A		N/A			N/A		1,000.00		1,017.57	+		7.70
Class C
Actual		N/A		N/A			N/A		N/A		N/A			N/A		1,000.00		1,019.40			8.47
Hypothetical 5% return		N/A		N/A			N/A		N/A		N/A			N/A		1,000.00		1,016.82	+		8.46
Institutional
Actual		1,000.00		1,025.80			1.27		1,000.00		1,020.50			2.50		1,000.00		1,025.00			2.78
Hypothetical 5% return		1,000.00		1,023.95	+		1.27		1,000.00		1,022.73	+		2.50		1,000.00		1,021.54	+		2.77
Administration
Actual		1,000.00		1,023.50			2.55		N/A		N/A			N/A		N/A		N/A			N/A
Hypothetical 5% return		1,000.00		1,022.69	+		2.55		N/A		N/A			N/A		N/A		N/A			N/A
Service
Actual		N/A		N/A			N/A		1,000.00		1,018.90			5.04		1,000.00		1,022.50			5.32
Hypothetical 5% return		N/A		N/A			N/A		1,000.00		1,020.21	+		5.04		1,000.00		1,019.94	+		5.31

*   Expenses for each share class are calculated using the Fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 10/31/06. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized expense ratios for the period were as follows:

Fund	Class A			Class B		Class C		Institutional			Service			Administration
Enhanced Income		0.62	%		N/A		N/A		0.25	%		N/A			0.50	%
Ultra-Short Duration Government		0.86			N/A		N/A		0.49			0.99	%		N/A
Short Duration Government		0.91			1.51		1.66		0.54			1.04			N/A

+  Hypothetical expenses are based on each Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses.

57

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited)

     The Trustees oversee the management of Goldman Sachs Trust (the “Trust”), and review the investment performance and expenses of the investment funds covered by this Report (the “Funds”) at regularly scheduled meetings held during the Funds’ fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreements (the “Management Agreements”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Funds.

     The Management Agreements were most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreements or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).

     To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Funds’ investment performance, expenses and other matters at other regularly scheduled meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreements including: (a) the Funds’ investment performance; (b) the Funds’ management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Funds that exceed specified levels; (d) the Investment Adviser’s potential economies of scale and the breakpoints implemented in 2005 for the fees payable by the Funds under the Management Agreements; (e) the relative expense levels of the Funds; (f) information on the advisory fees charged by the Investment Adviser to institutional accounts; (g) the Investment Adviser’s profitability with respect to the Trust and the Funds; (h) the quality of the non-advisory services provided to the Funds; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of the Trustees’ contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Funds.

     At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management teams; (d) the groups within the Investment Adviser that support the portfolio management teams, including the legal and compliance departments, the credit department, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Funds for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreements; (i) the administrative services provided under the Management Agreements, including the nature and extent of the Investment Adviser’s oversight of the Funds’ other service providers including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various types of potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Funds’ investment performance, fees and expenses, including the Funds’ expense trends over time and the breakpoints in the contractual fee rates under the Management Agreements that were approved in 2005.

58

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the payment of Rule 12b-1 distribution and service fees by the Funds. Information was also provided to the Trustees relating to the Funds’ portfolio turnover rates, revenue sharing by the Investment Adviser, portfolio manager compensation and the alignment of the interests of the Funds and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser or its affiliates present.

     The presentations made at the Contract Review Committee meetings and at the Annual Contract Meeting encompassed the Funds and other mutual fund portfolios for which the Board of Trustees has responsibility. While the Management Agreements for all of the Funds were approved at the same Annual Contract Meeting, the Trustees considered the applicable Management Agreement as it applied to each Fund separately.

     In evaluating the Management Agreements at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Funds. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreements, including: (a) information on the investment performance of the Funds in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Funds invest; (c) compliance reports; and (d) expenses borne by the Funds. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that were provided to investors who had invested in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and the broad range of other investment choices that are available to those investors.

     In connection with their approval of the Management Agreements, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Funds by the Investment Adviser and its affiliates. These services include services as the Funds’ transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Funds’ portfolio securities transactions and sales loads on the sale of certain classes of shares offered by the Funds. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Funds and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Funds and the Investment Adviser, including education and training initiatives.

59

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     The Trustees also considered the investment performance of the Funds and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Funds to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Funds’ investment performance relative to their respective performance benchmarks. For Funds that had been in existence for the respective periods, this information on the Funds’ investment performance was provided for one, three, five and ten (where applicable) year periods. In addition, the Trustees considered the investment performance trends of the Funds over time, and reviewed the investment performance of the Funds in light of their respective investment objectives, policies and credit and duration parameters, as well as in light of periodic analyses of their respective quality and risk profiles. In addition, the Trustees considered whether the Funds had operated within their investment policies, and their record of compliance with their investment limitations. The Trustees believed that the Funds were providing investment performance within a competitive range for long-term investors.

     The Board of Trustees also considered the contractual fee rates payable by the Funds under the Management Agreements. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Funds, which included both advisory and administrative services that were directed to the needs and operations of the Funds as registered mutual funds. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Funds and the Funds’ total operating expense ratios (before and after voluntary fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Funds’ fee rates and total operating expense ratios were prepared by the Outside Data Provider.

     More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Funds. The analyses provided a comparison of the Funds’ management fees to relevant peer groups and category universes; an expense analysis which compared each Fund’s expenses to a peer group and a category universe; and a five-year history comparing each Fund’s expenses to a category average. The analyses also compared the Funds’ transfer agency fees, custody and accounting fees and other expenses to peer groups and medians. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition, the Trustees noted the Investment Adviser’s voluntary undertaking to limit the Funds’ total expense ratios (excluding certain expenses) to specified levels.

     The Board of Trustees also considered the breakpoints in the contractual fee rates under the Management Agreements for each of the Funds that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the respective Funds:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Enhanced Income Fund		0.25	%	First $	1 Billion
		0.23	%	Next $	1 Billion
		0.22	%	Over $	2 Billion
Ultra-Short Duration Government Fund		0.40	%	First $	1 Billion
		0.36	%	Next $	1 Billion
		0.34	%	Over $	2 Billion
Short Duration Government Fund		0.50	%	First $	1 Billion
		0.45	%	Next $	1 Billion
		0.43	%	Over $	2 Billion

60

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     In approving these fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Funds and their shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Funds; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.

     The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Funds as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Funds. The Trustees noted the reduction of the transfer agency fees on Class A, Class B and Class C Shares of the Funds in 2005. In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Funds. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.

     After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Funds were reasonable in light of the services provided by the Investment Adviser, its costs and the Funds’ current and reasonably anticipated asset levels, and that the Management Agreements should be approved and continued.

61

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Trustees and Officers (Unaudited)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Ashok N. Bakhru Age: 64	Chairman of the Board of Trustees	Since 1991	President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003). Chairman of the Board of Trustees — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
John P. Coblentz, Jr. Age: 65	Trustee	Since 2003	Partner, Deloitte & Touche LLP (June 1975-May 2003). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Patrick T. Harker Age: 48	Trustee	Since 2000	Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-2000); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Mary P. McPherson Age: 71	Trustee	Since 1997	Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Wilma J. Smelcer Age: 57	Trustee	Since 2001	Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Lawson Products Inc. (distributor of industrial products).

62

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Trustees and Officers (Unaudited) (continued)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Richard P. Strubel Age: 67	Trustee	Since 1987	Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Gildan Activewear Inc. (clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (58 Portfolios).

Interested Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
*Alan A. Shuch Age: 57	Trustee	Since 1990	Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
*Kaysie P. Uniacke Age: 45	Trustee   &	Since 2001	Managing Director, GSAM (1997-Present).	77	None
	President	Since 2002	Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College

*	These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1	Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno.
2	The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997.
3	Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
4	The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of October 31, 2006, the Trust consisted of 65 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios.
5	This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

63

GOLDMAN SACHS SHORT DURATION TAXABLE FIXED INCOME FUNDS

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*

		Term of
		Office and
	Position(s) Held	Length of
Name, Age And Address	With the Trust	Time Served1	Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45	President & Trustee	Since 2002 Since 2001	Managing Director, Goldman Sachs (1997-Present). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College
James A. Fitzpatrick 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 46	Vice President	Since 1997	Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara 32 Old Slip New York, NY 10005 Age: 44	Vice President	Since 2001	Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski 32 Old Slip New York, NY 10005 Age: 42	Treasurer	Since 1997	Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37	Secretary	Since 2006	[Managing Director, Goldman Sachs (December 2006-Present)]; Associate General Counsel, Goldman Sachs (2002-Present); Vice President, Goldman Sachs (1999-2002). Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).

1	Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*	Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

64

FUNDS PROFILE

Goldman Sachs Funds

Goldman Sachs is a premier financial services firm, known since 1869 for creating thoughtful and customized investment solutions in complex global markets.

Today, The Investment Management Division of Goldman Sachs serves a diverse set of clients worldwide, including private institutions, public entities and individuals. With portfolio management teams located around the world — and $610.2 billion in assets under management as of September 30, 2006 — our investment professionals bring firsthand knowledge of local markets to every investment decision, making us one of the few truly global asset managers.

        GOLDMAN SACHS FUNDS

In building a globally diversified portfolio, you can select from more than 50 Goldman Sachs Funds and gain access to investment opportunities across borders, investment styles, asset classes and security capitalizations.

Money Market Funds¹
Fixed Income Funds
▪  Enhanced Income Fund
▪  Ultra-Short Duration Government Fund
▪  Short Duration Government Fund
▪  Short Duration Tax-Free Fund
▪  California Intermediate AMT-Free Municipal Fund
▪  New York Intermediate AMT-Free Municipal Fund
▪  Tennessee Municipal Fund
▪  Municipal Income Fund
▪  U.S. Mortgages Fund
▪  Government Income Fund
▪  Core Fixed Income Fund
▪  Core Plus Fixed Income Fund
▪  Investment Grade Credit Fund
▪  Global Income Fund
▪  High Yield Municipal Fund
▪  High Yield Fund
▪  Emerging Markets Debt Fund Domestic Equity Funds
▪  Balanced Fund
▪  Growth and Income Fund
▪  Structured Large Cap Value²
▪  Large Cap Value
▪  Structured U.S. Equity Fund²
▪  Structured U.S. Equity Flex Fund
▪  Structured Large Cap Growth Fund²
▪  Capital Growth Fund
▪  Strategic Growth Fund
▪  Concentrated Growth Fund
▪  Mid Cap Value Fund
▪  Growth Opportunities Fund
▪  Small/ Mid Cap Growth Fund
▪  Structured Small Cap Equity Fund²
▪  Small Cap Value Fund International Equity Funds
▪  Structured International Equity Fund²
▪  Structured International Equity Flex Fund
▪  Concentrated International Equity Fund²
▪  Japanese Equity Fund
▪  International Small Cap Fund²
▪  Asia Equity Fund²
▪  Emerging Markets Equity Fund
▪  BRIC Fund (Brazil, Russia, India, China)

Asset Allocation Funds³

Specialty Funds³
▪  U.S. Equity Dividend and Premium Fund
▪  Structured Tax-Managed Equity Fund²
▪  Real Estate Securities Fund
▪  International Real Estate Securities Fund
▪  Tollkeeper Fund^sm

1	An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.
2	Effective December 30, 2005, the Asia Growth Fund was renamed the Asia Equity Fund and the International Growth Opportunities Fund was renamed the International Small Cap Fund. Also effective December 30, 2005, the CORE International Equity, CORE Small Cap Equity, CORE Large Cap Growth, CORE Large Cap Value and CORE U.S. Equity Funds were renamed, respectively, the Structured International Equity, Structured Small Cap Equity, Structured Large Cap Growth, Structured Large Cap Value Funds and Structured U.S. Equity. Effective January 6, 2006, the CORE Tax-Managed Equity Fund was renamed the Structured Tax-Managed Equity Fund. Effective December 26, 2006, the International Equity Fund was renamed the Concentrated International Equity Fund.
3	Individual Funds within the Asset Allocation and Specialty categories will have various placement on the risk/return spectrum and may have greater or lesser risk than that indicated by the placement of the general Asset Allocation or Specialty category.

The Goldman Sachs Tollkeeper Fund^sm is a registered service mark of Goldman, Sachs & Co.

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32ND FLOOR, NEW YORK, NEW YORK 10005

TRUSTEES
Ashok N. Bakhru, Chairman
John P. Coblentz, Jr.
Patrick T. Harker
Mary Patterson McPherson
Alan A. Shuch
Wilma J. Smelcer
Richard P. Strubel
Kaysie P. Uniacke OFFICERS
Kaysie P. Uniacke, President
James A. Fitzpatrick, Vice President
James A. McNamara, Vice President
John M. Perlowski, Treasurer
Peter V. Bonanno, Secretary

GOLDMAN, SACHS & CO.
Distributor and Transfer Agent GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser

Visit our Web site at www.goldmansachsfunds.com to obtain the most recent month-end returns.

The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how a Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (I) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (II) on the Securities and Exchange Commission Web site at http://www.sec.gov.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended January 31, 2005 and every first and third fiscal quarter thereafter, the Funds’ Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. When available, the Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders).

Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Funds’ entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.

Copyright 2006 Goldman, Sachs & Co. All rights reserved. 
06-1986 SDTFIAR/ 19.5K/ 12-06

EX-99.17.Q

Goldman Sachs Funds

MUNICIPAL FIXED INCOME FUNDS Annual Report October 31, 2006 

High current income potential from portfolios that invest primarily in municipal securities.

Goldman Sachs Municipal Fixed Income Funds

n	GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
n	GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND
n	GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND
n	GOLDMAN SACHS MUNICIPAL INCOME FUND
n	GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND
n	GOLDMAN SACHS TENNESSEE MUNICIPAL FUND

Goldman Sachs Short Duration Tax-Free Fund is not a money market fund. Investors in this Fund should understand that the net asset value of the Fund will fluctuate, which may result in a loss of the principal amount invested. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. Under normal conditions, the Short Duration Tax-Free Fund will invest at least 80% of its net assets in municipal securities, the interest on which is exempt from regular federal income tax and is not a tax preference item under the federal alternative minimum tax. Under normal conditions, the Fund’s investments in private activity bonds and taxable investments will not exceed, in the aggregate, 20% of the Fund’s net assets. The interest from private activity bonds (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. The Fund may be adversely impacted by changes in tax law rates and policies, and is not suited for IRAs and other tax-exempt or deferred accounts.

Goldman Sachs California Intermediate AMT-Free Municipal Fund invests in municipal securities, the interest on which is exempt from regular federal income tax and California State personal income tax. Up to 20% of the Fund’s net assets may include securities whose income may be subject to the federal alternative minimum tax and state income taxes. The Fund is non-diversified and may invest more of its assets in fewer issuers than diversified funds, may be more susceptible to adverse developments affecting any single issuer held in its portfolio and may be susceptible to greater losses because of these developments. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The Fund may be adversely impacted by changes in tax law rates and policies, and are not suited for IRAs, and other tax-exempt or deferred accounts.

Goldman Sachs New York Intermediate AMT-Free Municipal Fund invests in municipal securities, the interest on which is exempt from regular federal income tax and New York State personal income tax. Up to 20% of the Fund’s net assets may include securities whose income may be subject to the federal alternative minimum tax and state income taxes. The Fund is non-diversified and may invest more of its assets in fewer issuers than diversified funds, may be more susceptible to adverse developments affecting any single issuer held in its portfolio and may be susceptible to greater losses because of these developments. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The Fund may be adversely impacted by changes in tax law rates and policies, and are not suited for IRAs, and other tax-exempt or deferred accounts.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

GOLDMAN SACHS TAX-FREE FUNDS

Goldman Sachs Municipal Income Fund invests in municipal securities, the interest on which is exempt from regular federal income tax. The Fund may include securities whose income may be subject to the federal alternative minimum tax and state income taxes. The Fund may be adversely impacted by changes in tax law rates and policies, and is not suited for IRAs and other tax-exempt or deferred accounts. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.

Goldman Sachs High Yield Municipal Fund invests in high yield municipal securities that, at the time of purchase, are medium quality or noninvestment grade. High yield, lower rated securities involve greater price volatility and present greater risks than higher rated fixed income securities. At times, the High Yield Municipal Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may also include securities whose income is subject to the federal alternative minimum tax and state income tax. The Fund is nondiversified and may invest more of its assets in fewer issuers than diversified funds, may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be susceptible to greater losses because of these developments. The Fund may be adversely impacted by changes in tax law rates and policies, and is not suited for IRAs and other tax-exempt or deferred accounts. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.

Goldman Sachs Tennessee Municipal Fund invests in municipal securities, the interest on which is exempt from regular federal income tax and Tennessee State personal income tax. Up to 20% of the Fund’s net assets may include securities whose income may be subject to Tennessee State personal income taxes. The Fund is non-diversified and may invest more of its assets in fewer issuers than diversified funds, may be more susceptible to adverse developments affecting any single issuer held in its portfolio and may be susceptible to greater losses because of these developments. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The Fund may be adversely impacted by changes in tax law rates and policies, and are not suited for IRAs, and other tax-exempt or deferred accounts.

IRS Circular 230 Disclosure: Goldman Sachs does not provide legal, tax or accounting advice. Any statement contained in this communication (including any attachments) concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Clients of Goldman Sachs should obtain their own independent tax advice based on their particular circumstances.

1

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

What Distinguishes Goldman Sachs’
Fixed Income Investment Process?

At Goldman Sachs Asset Management (“GSAM”), the goal of our fixed income investment process is to provide consistent, strong performance by actively managing our portfolios within a research-intensive, risk-managed framework.

A key element of our fixed income investment philosophy is to evaluate the broadest opportunity set to capture relative value across sectors and instruments. Our integrated investment process involves managing dynamically along the risk/return spectrum, as we continue to develop value-added strategies through:

n	Assess relative value among states, sectors and sub-sectors
n	Leverage the vast resources of Goldman Sachs in selecting securities for each portfolio

n	Team approach to decision making
n	Manage risk by avoiding significant sector and interest rate bets
n	Careful management of yield curve strategies — while closely managing portfolio duration

Fixed Income portfolios that:

n	Include domestic investment options, tax-free income opportunities, and access to areas of specialization
n	Capitalize on GSAM’s industry-renowned credit research capabilities
n	Use a risk-managed framework to seek total return, recognizing the importance of investors’ capital accumulation goals as well as their need for income

2

PORTFOLIO RESULTS

Short Duration Tax-Free Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Short Duration Tax-Free Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 3.09%, 2.48%, 2.33%, 3.48% and 2.96%, respectively. These returns compared to the 3.12% cumulative total return of the Fund’s benchmark, the Lehman Brothers 1-3 Year Municipal Bond Index, over the same time period.

During the reporting period, the primary drivers of performance versus the benchmark were security selection and an exposure to holdings in the lower end of the investment grade spectrum. Class A, B, C and Service Shares were positively impacted by the same strategies, however, unlike the Institutional Shares, they did not outperform the benchmark due to higher expenses.

  Market Environment

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve.

Credit spreads also continued to tighten over the reporting period. Investor demand for lower-quality securities was strong, as increased fundamental strength and maturing economic recovery provided municipalities with ample tax receipts. Other entities, such as hospitals, also continued to strengthen their financial positions.

The municipal yield curve flattened almost as dramatically as did the Treasury curve, with the spread between 2-year and 30-year yields narrowing from 149 basis points at the end of October 2005 to 54 basis points at the end of October 2006. The municipal market had not seen spreads this flat in over 20 years. Short-term yields rose in response to the Fed’s tightening campaign while longer-term yields actually fell as a result of robust demand for longer maturity municipals. Inflation, a key determinant of longer-term yields, remained in check and approached levels within the Fed’s comfort zone. Crude oil prices, after steadily rising through August 2006, dropped sharply at the end of the third quarter and into October, ending at roughly $60 per barrel. While the price of gold, which is thought by some investors to be a leading indicator of inflation, rose overall during the period, it leveled off from July through October.

Supply in the primary municipal market remained robust. However, due to a decline in refinancings, the overall level of supply was slightly lower than the preceding 12 month period. Overall, municipal market supply was $374 billion for the trailing one-year, an approximate 3% decline. This slight dip in supply, coupled with strong demand from retail, institutional and hedge fund investors, drove the outperformance of municipals versus equivalent maturity Treasuries.

3

PORTFOLIO RESULTS

  Investment Objective

The Fund seeks a high level of current income, consistent with relatively low volatility of principal, that is exempt from regular federal income tax.

  Investment Strategies

In seeking to meet the Fund’s objective, under normal market conditions, we invest at least 80% of the Fund’s net assets in municipal securities, for which the interest is exempt from regular federal income tax and is not a tax preference item under the federal alternative minimum tax. In addition, the Fund may invest in derivative securities, including futures and swaps, primarily for duration management purposes or to take advantage of temporary opportunities in the marketplace. Derivatives are not used for speculative purposes.

  Factors Affecting Performance

The Fund’s security selection and an overweight to A and BBB rated securities enhanced returns over the 12 month period. With the economy strong, defaults low and spreads narrowing, we thought it was an opportune time to pursue potentially higher returns by owning some bonds at the lower end of the investment-grade spectrum. The Fund was rewarded for that decision. Security selection was another positive factor for the Fund during the period. For example, bonds held by the Fund that were issued by the Rhode Island Health and Education Authority for South County Hospital Healthcare System performed well, as they were pre-refunded. As a result of the pre-refunding process, the bonds significantly appreciated in value. Credit selection within Oregon and Louisiana during the third quarter also added to total returns.

Offsetting those positive security selection decisions were a few negative factors. While we maintained a duration that was modestly shorter than that of the benchmark for much of the period, it would have improved performance if we had shortened the Fund’s duration more aggressively in the first half of 2006 and extended slightly in the third quarter of 2006. The year has thus far been characterized by a sell-off in first and second quarters, followed by a rally in the third quarter. Additionally, the Fund experienced outflows in June. Accommodating these outflows in a market that was selling off was detrimental to the Fund’s total return.

4

PORTFOLIO RESULTS

  Outlook

While we believe there will be a year-end boost to growth from falling energy prices, we look for below average growth over the next 12 months from a combination of a softer housing market and the lagging effects of tighter monetary policy. We believe that the Fed will be slow to cut rates in an effort to bring inflation back in line with its preferred ranges. We do not believe that there will be a severe housing-led downturn. The outlook for growth depends on the extent to which a housing slowdown impacts the broader economy. While the net effect could prove a drag on growth, we believe a steady equity market and softening energy prices should provide some relief to the consumer.

We believe that municipals will perform in line with the taxable markets over the next few months. We also believe that, despite the municipal curve’s relative steepness to Treasuries, its potential to flatten further is limited.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income – Municipal Investment Management Team

November 17, 2006

5

FUND BASICS

Short Duration Tax-Free Fund

as of October 31, 2006

PERFORMANCE REVIEW

				Lehman Brothers
November 1, 2005–	Fund Total Return			1-3 Year Municipal			30-Day Taxable			30-Day
October 31, 2006	(based on NAV)1			Bond Index2			Equivalent Yield3			Standardized Yield4
Class A		3.09	%		3.12	%		5.03	%		3.27	%
Class B		2.48			3.12			4.22			2.74
Class C		2.33			3.12			3.98			2.59
Institutional		3.48			3.12			5.71			3.71
Service		2.96			3.12			4.94			3.21

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers 1-3 Year Municipal Bond Index, an unmanaged index, represents investment grade municipal bonds with maturities greater than one year and less than 4 years, and does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Taxable Equivalent Yield of the Fund is calculated by dividing the current 30-Day Standardized Yield by 1 minus the highest 2006 federal income tax rate of 35%.
4	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁵

For the period Ended 9/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		0.59	%		1.87	%		n/a			3.10	%	5/1/97
Class B		0.00			1.65			n/a			2.69		5/1/97
Class C		0.87			1.52			n/a			2.42		8/15/97
Institutional		3.13			2.68			3.75	%		3.86		10/1/92
Service		2.52			2.19			3.23			3.39		9/20/94

⁵  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 2% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (2% maximum declining to 0% after three years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

6

SECTOR ALLOCATION⁶

Percentage of Net Assets

⁶  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

7

PORTFOLIO RESULTS

California Intermediate AMT-Free Municipal Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs California Intermediate AMT-Free Municipal
Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, C and Institutional Shares generated cumulative total returns, without sales charges, of 4.34%, 3.66% and 4.84%, respectively. These returns compare to the 4.41% cumulative total return of the Fund’s benchmark, the Lehman Brothers CA 1-10 Year Municipal Bond Index, over the same time period.

During the reporting period, the Fund’s overweight to the long end of the yield curve enhanced results, as did security selection and an exposure to holdings in the lower end of the investment grade spectrum. Class A and C Shares were positively impacted by the same strategies, however, unlike the Institutional Shares, they did not outperform the benchmark due to higher expenses.

  Market Environment

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve.

Credit spreads also continued to tighten over the reporting period. Investor demand for lower-quality securities was strong, as increased fundamental strength and maturing economic recovery provided municipalities with ample tax receipts. Other entities, such as hospitals, also continued to strengthen their financial positions. Despite the fact that California’s housing market has declined, the state has enjoyed stronger job growth this year over last year. Thus far, the impact of the housing market slowdown has been mostly limited to sectors related to real estate and home building.

The municipal yield curve flattened almost as dramatically as did the Treasury curve, with the spread between 2-year and 30-year yields narrowing from 149 basis points at the end of October 2005 to 54 basis points at the end of October 2006. The municipal market had not seen spreads this flat in over 20 years. Short-term yields rose in response to the Fed’s tightening campaign while longer-term yields actually fell as a result of robust demand for longer maturity municipals. Inflation, a key determinant of longer- term yields, remained in check and approached levels within the Fed’s comfort zone. Crude oil prices, after steadily rising through August 2006, dropped sharply at the end of the third quarter and into October, ending at roughly $60 per barrel. While the price of gold, which is thought by some investors to be a leading indicator of inflation, rose overall during the period, it leveled off from July through October.

8

PORTFOLIO RESULTS

Supply in the primary municipal market remained robust. However, due to a decline in refinancings, the overall level of supply was slightly lower than the preceding 12 month period. Overall, municipal market supply was $374 billion for the trailing one-year, an approximate 3% decline. This slight dip in supply, coupled with strong demand from retail, institutional, and hedge fund investors, drove the outperformance of municipals versus equivalent maturity Treasuries.

  Investment Objective

The Fund seeks a high level of current income that is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax, is exempt from California State personal income tax, and is consistent with preservation of capital. As a secondary objective, the Fund seeks to maximize after-tax total return consistent with the Fund’s intermediate duration and AA/A+ average credit quality.

  Factors Affecting Performance

Term structure, credit quality, and security selection all contributed to the Fund’s returns over the 12-month period. In particular, the Fund’s overweight to the long end of the curve benefited performance, as longer-term municipals outperformed their shorter-term counterparts over the period. Additionally, given that lower quality credits also outperformed, the Fund’s overweight to BBB rated issues enhanced returns. With defaults low and spreads narrowing, we thought it was an opportune time to pursue potentially higher returns by owning some bonds at the lower end of the investment grade spectrum. The Fund was rewarded for that decision. Finally, the Fund’s exposure to the land sector and tobacco bonds boosted performance.

Detracting from the Fund’s performance was a lack of exposure to zero-coupon bonds, as they enhanced the Index’s performance over the period.

9

PORTFOLIO RESULTS

  Outlook

While we believe there will be a year-end boost to growth from falling energy prices, we look for below average growth over the next 12 months from a combination of a softer housing market and the lagging effects of tighter monetary policy. We believe that the Fed will be slow to cut rates in an effort to bring inflation back in line with its preferred ranges. We do not believe that there will be a severe housing-led downturn. The outlook for growth depends on the extent to which a housing slowdown impacts the broader economy. While the net effect could prove a drag on growth, we believe a steady equity market and softening energy prices should provide some relief to the consumer.

We believe that municipals will perform in line with the taxable markets over the next few months. We also believe that, despite the municipal curve’s relative steepness to Treasuries, its potential to flatten further is limited.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income – Municipal Investment Management Team

November 17, 2006

10

FUND BASICS

California Intermediate AMT-Free Municipal Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return			Lehman CA 1-10-Year			30-Day Taxable			30-Day
October 31, 2006	(based on NAV)1			Municipal Bond Index2			Equivalent Yield3			Standardized Yield4
Class A		4.34	%		4.41	%		5.05	%		3.28	%
Class C		3.66			4.41			4.14			2.69
Institutional		4.84			4.41			5.86			3.81

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers CA 1-10 Year Municipal Bond Index, with income reinvested, is representative of municipal bonds with maturities ranging from 1–10 years. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Taxable Equivalent Yield of the Fund is calculated by dividing the current 30-Day Standardized Yield by 1 minus the highest 2006 federal income tax rate of 35%.
4	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁵

For the period ended 9/30/06	Since Inception		Inception Date
Class A		-0.82%		11/1/05
Class C		2.21		11/1/05
Institutional		4.31		11/1/05

⁵  The Standardized Total Returns are average annual total returns or cumulative total returns (only if the performance period is one year or less) as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. The Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. The performance figures do not reflect the deduction of the redemption fee. If reflected, the redemption fee would reduce the performance quoted.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns.
Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

11

FUND BASICS

SECTOR ALLOCATION AS OF 10/31/06⁶

Percentage of Net Assets

⁶  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

12

PORTFOLIO RESULTS

New York Intermediate AMT-Free Municipal Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs New York Intermediate AMT-Free Municipal Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, C and Institutional Shares generated cumulative total returns, without sales charges, of 3.74%, 2.98% and 4.12%, respectively. These returns compare to the 4.34% cumulative total return of the Fund’s benchmark, the Lehman Brothers NY 1-10 Year Municipal Bond Index, over the same time period.

During the reporting period, the Fund generated positive results, but underperformed its benchmark. The primary detractor from the Fund’s results versus the benchmark was its short duration position. This was detrimental to relative results given the sharp rally in longer maturity municipals during the second half of the reporting period. The Fund’s term structure positioning, which consisted of an overweight to the front end of the yield curve, also hurt relative performance. During the 12-month reporting period, the front end of the yield curve underperformed. These negative factors more than offset the positive aspects of the Fund’s exposure to credit securities.

  Market Environment

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve.

Credit spreads also continued to tighten over the 12-month period. Investors continued to gain confidence with lower quality securities, as increased fundamental strength and maturing economic recovery provided municipalities with ample tax receipts. Other entities, such as hospitals, also continued to strengthen their financial positions. New York State’s fiscal picture improved, driven by constructive trends in the economy and tax revenues. The state’s robust financial services sector particularly drove a strengthening in the local economy.

The municipal yield curve flattened almost as dramatically as did the Treasury curve, with the spread between 2-year and 30-year yields narrowing from 149 basis points at the end of October 2005 to 54 basis points at the end of October 2006. The municipal market had not seen spreads this flat in over 20 years. Short-term yields rose in response to the Fed’s tightening campaign while longer-term yields actually fell as a result of robust demand for longer maturity municipals. Inflation, a key determinant of longer-term yields, remained in check and approached levels within the Fed’s comfort zone. Crude oil prices, after steadily rising through August 2006, dropped sharply at the end of the third quarter and into

13

PORTFOLIO RESULTS

October, ending at roughly $60 per barrel. While the price of gold, which is thought by some investors to be a leading indicator of inflation, rose overall during the period, it leveled off from July through October.

Supply in the primary municipal market remained robust. However, due to a decline in refinancings, the overall level of supply was slightly lower than the preceding 12 month period. Overall, municipal market supply was $374 billion for the trailing one-year, an approximate 3% decline. This slight dip in supply, coupled with strong demand from retail, institutional, and hedge fund investors, drove the outperformance of municipals versus equivalent maturity Treasuries.

  Investment Objective

The Fund seeks a high level of current income that is exempt from regular federal income tax, is not a tax preference item under the federal alternative minimum tax, is exempt from New York State and City personal income taxes, and is consistent with preservation of capital. As a secondary objective, the Fund seeks to maximize after-tax total return consistent with the Fund’s intermediate duration and AA/ A+ average credit quality.

  Factors Affecting Performance

The Fund’s structure and maturity profiles were negative contributors to performance over the 12-month period. For example, the Fund’s exposure to several bonds with call risk detracted from returns. We held these securities, as they were, at one point, candidates for pre-refunding. However, as the yield curve flattened, the specified price at which the bonds were to be redeemed (or called) was unattractive and hurt the Fund’s performance. Regarding maturity structure, the Fund had little exposure to outperforming long bonds. Bonds we did hold beyond the Index’s maturity profile had the aforementioned short call structure, which caused underperformance as the curve flattened.

Somewhat offsetting those negative factors was a positive contribution from our overweight to credit securities. The Fund maintained a higher exposure to outperforming BBB rated bonds than the Index, which added to returns over the period.

14

PORTFOLIO RESULTS

  Outlook

While we believe there will be a year-end boost to growth from falling energy prices, we look for below average growth over the next 12 months from a combination of a softer housing market and the lagged effects of tighter monetary policy. We believe that the Fed will be slow to cut rates in an effort to bring inflation back in line with its preferred ranges. We do not believe that there will be a severe housing-led downturn. The outlook for growth depends on the extent to which a housing slowdown impacts the broader economy. While the net effect could prove a drag on growth, we believe a steady equity market and softening energy prices should provide some relief to the consumer.

We believe that municipals will perform in line with the taxable markets over the next few months. We also believe that, despite the municipal curve’s relative steepness to Treasuries, its potential to flatten further is limited.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income – Municipal Investment Management Team

November 17, 2006

15

FUND BASICS

New York Intermediate AMT-Free Municipal Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return			Lehman NY 1-10-Year			30-Day Taxable			30-Day
October 31, 2006	(based on NAV)1			Municipal Bond Index2			Equivalent Yield3			Standardized Yield4
Class A		3.74	%		4.34	%		4.82	%		3.13	%
Class C		2.98			4.34			3.86			2.51
Institutional		4.12			4.34			5.62			3.65

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance reflects the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers NY 1-10 Year Municipal Bond Index, with income reinvested, is representative of municipal bonds with maturities ranging from 1–10 years. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Taxable Equivalent Yield of the Fund is calculated by dividing the current 30-Day Standardized Yield by 1 minus the highest 2006 federal income tax rate of 35%.
4	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁵

For the period ended 9/30/06	Since Inception			Inception Date
Class A		-1.38	%		11/1/05
Class C		1.65			11/1/05
Institutional		3.71			11/1/05

⁵  The Standardized Total Returns are average annual total returns or cumulative total returns (only if the performance period is one year or less) as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. The Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. The performance figures do not reflect the deduction of the redemption fee. If reflected, the redemption fee would reduce the performance quoted.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

16

FUND BASICS

SECTOR ALLOCATION AS OF 10/31/06⁶

Percentage of Net Assets

⁶  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

17

PORTFOLIO RESULTS

Municipal Income Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Municipal Income Fund during the one-year
reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 5.59%, 4.87%, 4.80%, 5.98% and 5.51%, respectively. These returns compared to the 5.75% cumulative total return of the Fund’s benchmark, the Lehman Brothers Aggregate Municipal Bond Index, over the same time period.

During the reporting period, the primary drivers of performance versus the benchmark were security selection and an exposure to credit securities. Class A, B, C and Service Shares were positively impacted by the same strategies, however, unlike the Institutional Shares, they did not outperform the benchmark due to higher expenses.

  Market Environment

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve.

Credit spreads also continued to tighten over the reporting period. Investor demand for lower-quality securities was strong, as increased fundamental strength and maturing economic recovery provided municipalities with ample tax receipts. Other entities, such as hospitals, also continued to strengthen their financial positions.

The municipal yield curve flattened almost as dramatically as did the Treasury curve, with the spread between 2-year and 30-year yields narrowing from 149 basis points at the end of October 2005 to 54 basis points at the end of October 2006. The municipal market had not seen spreads this flat in over 20 years. Short-term yields rose in response to the Fed’s tightening campaign while longer-term yields actually fell as a result of robust demand for longer maturity municipals. Inflation, a key determinant of longer- term yields, remained in check and approached levels within the Fed’s comfort zone. Crude oil prices, after steadily rising through August 2006, dropped sharply at the end of the third quarter and into October, ending at roughly $60 per barrel. While the price of gold, which is thought by some investors to be a leading indicator of inflation, rose overall during the period, it leveled off from July through October.

Supply in the primary municipal market remained robust. However, due to a decline in refinancings, the overall level of supply was slightly lower than the preceding 12 month period. Overall, municipal market supply was $374 billion for the trailing one-year, an approximate 3% decline. This slight dip in supply, coupled with strong demand from retail, institutional, and hedge fund investors, drove the outperformance of municipals versus equivalent maturity Treasuries.

18

PORTFOLIO RESULTS

  Investment Objective

The Fund seeks a high level of current income that is exempt from regular federal income tax, consistent with preservation of capital.

  Investment Strategies

In seeking to meet the Fund’s objective, we invest at least 80% of the Fund’s net assets in municipal securities, from which the interest is exempt from regular federal income tax. In addition, the Fund may invest in derivative securities, including futures and swaps, primarily for duration management purposes or to take advantage of temporary opportunities in the marketplace. Derivatives are not used for speculative purposes.

  Factors Affecting Performance

Security selection and overall credit exposure were positive contributors to the Fund’s performance during the period. For example, bonds we held that were issued by the Tobacco Settlement Authority of Iowa performed well, as they were pre-refunded. As a result of the pre-refunding process, the bonds were upgraded from Baa3/ BBB to Aaa, subsequently appreciating in value. Aside from that specific holding, the Fund’s general overweight to the tobacco sector aided performance. Overall, the Fund’s overweight to A and BBB rated securities enhanced returns. With the economy strong, defaults low and spreads narrowing, we thought it was an opportune time to pursue potentially higher returns by owning some bonds at the lower end of the investment-grade spectrum. The Fund was rewarded for that decision.

Offsetting our positive performances in credit securities were a few negative factors. While we maintained a duration that was modestly shorter than that of the benchmark for much of the period, it would have improved performance if we had shortened the Fund’s duration more aggressively in the first half of 2006, and extended slightly in the third quarter of 2006. The year has thus far been characterized by a sell-off in the first and second quarters, followed by a rally in the third quarter.

19

PORTFOLIO RESULTS

  Outlook

While we believe there will be a year-end boost to growth from falling energy prices, we look for below average growth over the next 12 months from a combination of a softer housing market and the lagged effects of tighter monetary policy. We believe that the Fed will be slow to cut rates in an effort to bring inflation back in line with its preferred ranges. We do not believe that there will be a severe housing-led downturn. The outlook for growth depends on the extent to which a housing slowdown impacts the broader economy. While the net effect could prove a drag on growth, we believe a steady equity market and softening energy prices should provide some relief to the consumer.

We believe that municipals will perform in line with the taxable markets over the next few months. We also believe that, despite the municipal curve’s relative steepness to Treasuries, its potential to flatten further is limited.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income — Municipal Investment Management Team

November 17, 2006

20

FUND BASICS

Municipal Income Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return		Lehman Brothers Aggregate		30-Day Taxable		30-Day
October 31, 2006	(based on NAV)1		Municipal Bond Index2		Equivalent Yield3		Standardized Yield4
Class A		5.59%		5.75%		5.71%		3.71%
Class B		4.87		5.75		4.83		3.14
Class C		4.80		5.75		4.83		3.14
Institutional		5.98		5.75		6.55		4.26
Service		5.51		5.75		5.78		3.76

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Taxable Equivalent Yield of the Fund is calculated by dividing the current 30-Day Standardized Yield by 1 minus the highest 2006 federal income tax rate of 35%.
4	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁵

For the period ended 9/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		-0.37	%		4.07	%		5.07	%		5.04	%	7/20/93
Class B		-1.63			3.83			4.77			4.87		5/1/96
Class C		2.58			4.25			n/a			4.36		8/15/97
Institutional		4.71			5.45			n/a			5.54		8/15/97
Service		4.18			4.91			5.496			5.366		7/20/93

5

The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. The Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. The performance figures do not reflect the deduction of the redemption fee. If reflected, the redemption fee would reduce the performance quoted.

6

Performance data for Service Shares prior to 8/15/97 (commencement of operations) is that of Class A Shares (excluding the impact of front-end sales charges applicable to Class A Shares since Service Shares are not subject to any sales charges). Performance of Class A Shares in the Fund reflects the expenses applicable to the Fund’s Class A Shares. The fees applicable to Service Shares are different from those applicable to Class A Shares which impact performance ratings and rankings for a class of shares.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns.
Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

21

FUND BASICS

SECTOR ALLOCATION⁷

Percentage of Net Assets

⁷  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

22

PORTFOLIO RESULTS

High Yield Municipal Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs High Yield Municipal Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C and Institutional Shares generated cumulative total returns, without sales charges, of 9.05%, 8.24%, 8.24% and 9.45%, respectively. These returns compare to the 11.87% and 5.75% cumulative total returns of the Fund’s benchmarks, the Lehman Brothers High Yield Municipal Bond Index and the Lehman Brothers Aggregate Municipal Bond Index, respectively, over the same time period.

The Fund typically holds both investment grade and high yield securities, as we believe there are generally attractive opportunities in both sectors. As a result, the Fund is benchmarked to both the Lehman Brothers High Yield Municipal Bond Index and the Lehman Brothers Aggregate Municipal Bond Index. During the reporting period, the primary drivers of performance versus the benchmark were security selection and sector rotation. The fund outperformed the investment grade index, as lower credit quality bonds outperformed higher credit quality bonds. However, for the same reason, the Fund underperformed the high yield index, as it held a lower exposure to non-investment grade securities than did the high yield index.

  Market Environment

High yield municipals continued to outperform investment grade municipals, aided by a robust U.S. economy that resulted in a healthy flow of tax revenues at the municipal level. In addition, significant improvements in specific sectors, such as healthcare, airlines and utilities benefited the high yield municipal market. With many issuers enjoying improving credit quality, credit spreads narrowed, boosting prices in the municipal sector.

Higher quality, investment grade securities, which tend to correlate more directly with the Treasury market, generally underperformed lower quality bonds due to the upward trend in Treasury yields. A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields sold off across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve.

Credit spreads also continued to tighten over the reporting period. Investor demand for lower-quality securities was strong, as increased fundamental strength and maturing economic recovery provided municipalities with ample tax receipts. Other entities, such as hospitals, also continued to strengthen their financial positions.

23

PORTFOLIO RESULTS

The municipal yield curve flattened almost as dramatically as did the Treasury curve, with the spread between 2-year and 30-year yields narrowing from 149 basis points at the end of October 2005 to 54 basis points at the end of October 2006. The municipal market had not seen spreads this flat in over 20 years. Short-term yields rose in response to the Fed’s tightening campaign while longer-term yields actually fell as a result of robust demand for longer maturity municipals. Inflation, a key determinant of longer-term yields, remained in check and approached levels within the Fed’s comfort zone. Crude oil prices, after steadily rising through August 2006, dropped sharply at the end of the third quarter and into October, ending at roughly $60 per barrel. While the price of gold, which is thought by some investors to be a leading indicator of inflation, rose overall during the period, it leveled off from July through October.

Supply in the primary municipal market remained robust. However, due to a decline in refinancings, the overall level of supply was slightly lower than the preceding 12 month period. Overall, municipal market supply was $374 billion for the trailing one-year, an approximate 3% decline. This slight dip in supply, coupled with strong demand from retail, institutional, and hedge fund investors, drove the outperformance of municipals versus equivalent maturity Treasuries.

  Investment Objective

The Fund seeks a high level of current income that is exempt from regular federal income tax and may also consider the potential for capital appreciation.

  Investment Strategies

In seeking to meet the Fund’s objective, we invest at least 80% of the Fund’s net assets in municipal securities, for which the interest is exempt from regular federal income tax. In addition, the Fund may invest in derivative securities, including futures and swaps, primarily for duration management purposes or to take advantage of temporary opportunities in the marketplace. Derivatives are not used for speculative purposes.

  Factors Affecting Performance

Sector rotation and security selection continued to contribute positively to the Fund’s total returns. For example, an increase in the Fund’s exposure to unsecured airline-backed bonds was one factor aiding performance during the period. Cost-cutting, reduced capacity and better pricing power all helped the sector. On the security selection side, certain opportunistic trades contributed to performance during the period. For example, we purchased bonds backed by automaker General Motors (GM) after they sold off sharply in response to GM’s own well-publicized financial challenges and the bankruptcy filing by

24

PORTFOLIO RESULTS

auto parts company Delphi, which was spun off from GM in 1999. As GM’s credit prospects stabilized later in the period, we sold the bonds at a significant profit.

Offsetting these positive contributions from sector and security selection was the Fund’s overall underweight to non-investment grade bonds and its bias towards higher quality bonds during the reporting period. As credit spreads continued to tighten, high yield municipals widely outperformed investment grade municipals over the review period. The Fund continued to hold securities with an average credit quality of BBB. Since its inception, the Fund has generally held a mix of investment-grade and high yield securities, as we feel there are attractive opportunities in both sectors.

  Outlook

While we believe there will be a year-end boost to growth from falling energy prices, we look for below average growth over the next 12 months from a combination of a softer housing market and the lagged effects of tighter monetary policy. We believe that the Fed will be slow to cut rates in an effort to bring inflation back in line with its preferred ranges. We do not believe that there will be a severe housing-led downturn. The outlook for growth depends on the extent to which a housing slowdown impacts the broader economy. While the net effect could prove a drag on growth, we believe a steady equity market and softening energy prices should provide some relief to the consumer.

We believe that municipals will perform in line with the taxable markets over the next few months. We also believe that, despite the municipal curve’s relative steepness to Treasuries, its potential to flatten further is limited. We believe that high yield municipal valuations will hold firmly going into 2007 due to strong fundamentals, increasing demand, and healthy supply levels. Despite narrowing spreads, we remain positive on the high yield municipal asset class as a strategic investment.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income – Municipal Investment Management Team

November 17, 2006

25

FUND BASICS

High Yield Municipal Fund

as of October 31, 2006

PERFORMANCE REVIEW

			Lehman		Lehman Brothers
	Fund		Brothers High		Aggregate		30-Day		30-Day
November 1, 2005–	Total Return		Yield Municipal		Municipal		Taxable		Standardized
October 31, 2006	(based on NAV)1		Bond Index2		Bond Index3		Equivalent Yield4		Yield5
Class A		9.05%		11.87%		5.75%		6.57%		4.27%
Class B		8.24		11.87		5.75		5.72		3.72
Class C		8.24		11.87		5.75		5.72		3.72
Institutional		9.45		11.87		5.75		7.46		4.85

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers High Yield Municipal Bond Index is an unmanaged index made up of bonds that are non-investment grade, unrated, or rated below Ba1 by Moody’s Investors Service with a remaining maturity of at least one year. The Index does not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
4	The 30-Day Taxable Equivalent Yield of the Fund is calculated by dividing the current 30-Day Standardized Yield by 1 minus the highest 2006 federal income tax rate of 35%.
5	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁶

For the period ended 9/30/06	One Year			Five Years			Since Inception			Inception Date
Class A		2.80	%		6.12	%		6.91	%		4/3/00
Class B		1.66			5.92			6.87			4/3/00
Class C		5.82			6.31			6.87			4/3/00
Institutional		7.96			7.53			8.09			4/3/00

⁶  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

26

FUND BASICS

SECTOR ALLOCATION⁷

Percentage of Net Assets

⁷  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

27

FUND BASICS

PORTFOLIO RESULTS

Tennessee Municipal Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Tennessee Municipal Fund for the period from June 5, 2006 through October 31, 2006.

  Performance Review

The Goldman Sachs Tennessee Municipal Fund (the “Fund”) first began operations as the First Funds Tennessee Tax-Free Portfolio (the “Predecessor Fund”). On June 5, 2006, the Predecessor Fund was reorganized as a new portfolio of the Goldman Sachs Trust. Over the period from June 5, 2006 (when the Predecessor Fund reorganized into the Fund) through October 31, 2006, the Goldman Sachs Tennessee Municipal Fund’s Class A, Class C and Institutional Shares generated cumulative total returns of 2.87%, 2.56% and 3.02%, respectively. These returns compared to the 3.28% cumulative total return of the Fund’s Benchmark, the Lehman Brothers Aggregate Municipal Bond Index, over the same time period.

During the reporting period, the Fund generated positive results, but underperformed its benchmark. This was primarily due to the Fund’s short duration position versus the benchmark as interest rates fell during the period.

  Market Environment

The Federal Reserve Board (the “Fed”) raised interest rates another 25 basis points at the beginning of the Fund’s inception in June of 2006, bringing the targeted federal funds rate to 5.25%. Over their next three meetings, the Fed held rates steady at 5.25%, taking cues from a series of softer economic data releases. The Treasury yield curve flattened from June through October, with yields under one year rising and yields across the balance of the curve falling. For example, three-month Treasury yields rose from 4.80% to 5.09%. Over the same period, 10-year Treasury yields fell from 5.00% to 4.68%. The municipal yield curve also flattened, though yields rallied across all maturities, with 2-year yields falling 12 basis points and 30-year yields falling 46 basis points.

  Investment Objective

The Fund seeks a high level of current income that is exempt from regular federal income tax and Tennessee State personal income tax and is consistent with preservation of capital.

  Investment Strategies

The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in fixed-income securities issued by or on behalf of the State of Tennessee and its political subdivisions, agencies, instrumentalities and public authorities and other states, territories and possessions of the United States (including the District of Columbia) and the political subdivisions, agencies and instrumentalities thereof, the interest on which is exempt from regular federal income tax (i.e., excluded from gross income for federal income tax

28

PORTFOLIO RESULTS

purposes) and is exempt from Tennessee State personal income tax. The Fund may also invest up to 20% of its net assets in municipal securities that are subject to Tennessee State personal income tax. The Fund may invest up to 100% of its net assets in private activity bonds, the interest on which (including the Fund’s distributions of such interest) may be a preference item for purposes of the federal alternative minimum tax. 100% of the Fund’s portfolio will be invested in U.S. dollar-denominated securities.

  Factors Affecting Performance

For the period from the reorganization on June 5, 2006 through October 31, 2006, the Fund underperformed the Lehman Brothers Aggregate Municipal Bond Index. This was largely due to the Fund’s short duration position. This Fund’s main objective since the reorganization has been to extend its maturity to a market neutral duration. As rates rallied across the curve over the review period, this short duration position detracted from relative performance. Since the reorganization, the Fund has continued to focus on reorganizing its portfolio to resemble more closely the duration and maturity profile of its new benchmark, the Lehman Brothers Aggregate Municipal Bond Index.

  Outlook

While we believe there will be a year-end boost to growth from falling energy prices, we look for below average growth over the next 12 months from a combination of a softer housing market and the lagging effects of tighter monetary policy. We believe that the Fed will be slow to cut rates in an effort to bring inflation back in line with its preferred ranges. We do not believe that there will be a severe housing-led downturn. The outlook for growth depends on the extent to which a housing slowdown impacts the broader economy. While the net effect could prove a drag on growth, we believe a steady equity market and softening energy prices should provide some relief to the consumer.

We believe that municipals will perform in line with the taxable markets over the next few months. We also believe that, despite the municipal curve’s relative steepness to Treasuries, its potential to flatten further is limited.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income – Municipal Investment Management Team

November 17, 2006

29

FUND BASICS

Tennessee Municipal Fund

as of October 31, 2006

PERFORMANCE REVIEW

June 5, 2006–	Fund Total Return			Lehman Brothers Aggregate			30-Day Taxable			30-Day
October 31, 2006	(based on NAV)1			Municipal Bond Index2			Equivalent Yield3			Standardized Yield4
Class A		2.87	%		3.28	%		5.02	%		3.26	%
Class C		2.56			3.28			4.15			2.70
Institutional		3.02			3.28			5.82			3.78

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers Aggregate Municipal Bond Index is an unmanaged broad-based total return index composed of approximately 8,000 investment grade, fixed rate, and tax-exempt issues, with a remaining maturity of at least one year. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Taxable Equivalent Yield of the Fund is calculated by dividing the current 30-Day Standardized Yield by 1 minus the highest 2006 federal income tax rate of 35%.
4	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁵

For the period ended 9/30/06	Since Inception			Inception Date
Class A		-2.33	%	6/5/06
Class C		1.01		6/5/06
Institutional		2.38		6/5/06

⁵  The Goldman Sachs Tennessee Municipal Fund first began operations as the Tennessee Tax-Free Portfolio of First Funds (the “Predecessor Fund”). On June 5, 2006, the Predecessor Fund was reorganized as a new portfolio of the Goldman Sachs Trust. Performance of the Predecessor Fund prior to the reorganization is not provided in the above tables because, as part of the reorganization, the Predecessor Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. Additional total return information about the Predecessor Fund is provided in the Financial Highlights table, which is part of this report.

The Standardized Total Returns are average annual total returns or cumulative total returns (only if the performance period is one year or less) as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase).

Because Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. The Fund will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. The performance figures do not reflect the deduction of the redemption fee. If reflected, the redemption fee would reduce the performance quoted.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

30

FUND BASICS

SECTOR ALLOCATION AS OF 10/31/06⁶

Percentage of Net Assets

⁶  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.

31

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in the Institutional Shares of the Goldman Sachs Short Duration Tax-Free Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers 1-3 Year Municipal Bond Index (“Lehman 1-3 Year Muni Bond Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of fund shares. Performance of Class A, Class B, Class C and Service Shares will vary from the Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decision regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

Short Duration Tax-Free Fund’s 10 Year Performance

Performance of a $10,000 Investment, with distributions reinvested, from November 1, 1996 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Ten Years		Five Years		One Year
Class A (commenced May 1, 1997)
Excluding sales charges		3.33%		n/a		2.24%		3.09%
Including sales charges		3.11%		n/a		1.83%		1.01%
Class B (commenced May 1, 1997)
Excluding contingent deferred sales charges		2.70%		n/a		1.63%		2.48%
Including contingent deferred sales charges		2.70%		n/a		1.63%		0.43%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		2.43%		n/a		1.48%		2.33%
Including contingent deferred sales charges		2.43%		n/a		1.48%		1.30%
Institutional Class (commenced October 1, 1992)		3.86%		3.71%		2.64%		3.48%
Service Class (commenced September 20, 1994)		3.39%		3.19%		2.15%		2.96%

32

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – 91.1%
Alabama – 2.3%
Alexander City Alabama Special Care Facilities Financing Authority Medical Facilities RB Refunding for Russell Hospital Corp. Series 2006 A (BBB-)
$	2,910,000		5.000	%		12/01/11	$	2,952,952
Health Care Authority RB Refunding for Baptist Health Series 2006 D (GO OF AUTH) (BBB+/A3)
	600,000		5.000			11/15/09		618,528
Jefferson County Alabama Limited Obligation School Warrants RB Series 2004 A (A+/A2)
	4,000,000		5.000			01/01/08		4,059,720
								7,631,200
Arizona – 0.6%
Pinal County Arizona Industrial Development Authority RB for Correctional Facilities Contract Florence West Prison Project Series 2006 A (ACA)(A)
	750,000		4.500			10/01/09		760,800
Queen Creek Arizona Improvement District No. 001 Series 2006 (BBB-/Baa2)
	1,000,000		5.000			01/01/09		1,021,510
								1,782,310
Arkansas – 0.9%
Springdale Arkansas Sales & Use Tax RB Series 2004 (MBIA) (Aaa)
	1,945,000		4.000			07/01/16		1,948,909
Washington County Hospital RB Refunding for Regional Medical Center Series 2005 B (BBB/Baa2)
	1,000,000		5.000			02/01/11		1,042,590
								2,991,499
California – 9.5%
Alameda County COPS Refunding for Santa Rita Jail Project Series 1993 (ETM) (MBIA) (AAA/Aaa)
	3,495,000		5.375			06/01/09		3,583,249
California Health Facilities Financing Authority RB for Catholic Healthcare West Unrefunded Balance Series 2004 H (A/A3)(a)
	3,785,000		4.450			07/01/11		3,853,357
California Health Facilities Financing Authority RB for Catholic West Series 2004 H (A/A3) (b)
	340,000		4.450			07/01/11		353,321
California Infrastructure & Economic Development Bank Variable RB for J Paul Getty-A-RMKT 8/2/06 Series 2003 (AAA/Aaa)(a)
	4,650,000		3.900			12/01/11		4,733,560
California State Department of Water Resource Power Supply RB Series 2002 A (FSA) (AAA/Aaa)
	1,250,000		5.250			05/01/11		1,342,400
California State GO Bonds Variable Purpose Series 2004 (A+/A1)
	6,500,000		5.000			04/01/11		6,878,755
California Statewide Communities Development Authority RB for Daughters of Charity Health Series 2005 F (BBB+)
	410,000		5.000			07/01/07		413,243
	1,000,000		5.000			07/01/08		1,016,990
Coachella Valley California Water District Improvement Bond Act of 1913/1915 Limited Obligation Improvement Assessment District 70 Series 2006
	100,000		4.100			09/02/09		99,995
	100,000		4.350			09/02/11		100,351
Del Mar Race Track Authority RB Series 2005 (BBB-)
	1,000,000		5.000			08/15/08		1,019,230
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 B (ETM) (AAA/Aaa)
	2,000,000		5.000			06/01/10		2,097,940
Los Altos California School District GO Bonds Refunding for AD Valorem Property Tax Series 2006 (AA/Aa2)
	500,000		4.000			08/01/07		502,165
Tobacco Securitization Authority of Southern California Tobacco Settlement RB for Asset Backed Bonds Senior Series 2002 A (AAA/Aaa)(b)
	4,590,000		5.250			06/01/12		4,991,258
								30,985,814
Colorado – 1.4%
Colorado Health Facilities Authority RB for Covenant Retirement Communities, Inc. Series 2005 (BBB)
	250,000		4.500			12/01/07		251,140
	400,000		4.500			12/01/08		403,064
	500,000		4.500			12/01/09		505,135
	500,000		5.000			12/01/10		515,285
Colorado Health Facilities Authority RB for Evangelical Lutheran Series 2005 (A-/A3)
	255,000		5.000			06/01/08		259,715
	275,000		5.000			06/01/09		283,432
East Quincy Highlands Metropolitan District GO Bonds Series 2002 (LOC-U.S. Bank N.A.) (Aa1) (b)
	2,230,000		2.250			12/01/06		2,227,703
								4,445,474
Delaware – 1.1%
Delaware State Health Facilities Authority RB for Beebe Medical Center Project Series 2005 A (BBB+/Baa1)
	605,000		5.000			06/01/09		620,403
New Castle County Delaware GO Bonds Series 2006 A (AAA/Aaa)
	2,915,000		5.000			07/15/11		3,111,967
								3,732,370
Florida – 5.3%
Broward County Florida Resource Recovery RB Refunding for Wheelabrator Series 2001 A (AA/A3)
	4,000,000		5.375			12/01/10		4,171,400
Halifax Hospital Medical Center Hospital RB for Refunding & Improvement Series 2006 A (BBB+)
	1,000,000		5.000			06/01/13		1,057,300
	855,000		5.000			06/01/14		906,377
Highlands County Florida Health Facilities Authority RB for Adventist Health/Sunbelt Hospital Series 2002 (A+/A2)(a)
	2,450,000		3.950			09/01/12		2,449,902

The accompanying notes are an integral part of these financial statements. 

33

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Highlands County Florida Health Facilities Authority RB Refunding for Adventist Health Hospital Series 2005 B (A+/A2)
$	400,000		5.000	%		11/15/08	$	409,616
	500,000		5.000			11/15/09		516,595
Huntington Community Development District RB for Special Assessment Series 2004 B
	3,485,000		5.000			05/01/09		3,476,915
Leesburg Florida Hospital RB for Leesburg Regional Medical Center Project Series 2003 A (BBB+/Baa1)
	1,820,000		5.000			07/01/08		1,846,827
Meadow Pointe II Community Development District RB for Capital Improvement Series 2004 (Baa3)
	610,000		2.375			05/01/07		602,649
	625,000		2.800			05/01/08		604,475
	300,000		3.000			05/01/09		288,000
Meadow Pointe III Community Development District RB for Capital Improvement Series 2004 B
	710,000		5.000			05/01/09		709,716
Tampa Palms Florida Open Space & Transportation Community Development District Revenue for Special Assessment Refunding Capital Improvement Area 7 Project Series 2004 (MBIA) (AAA/Aaa)
	310,000		3.125			05/01/09		306,357
								17,346,129
Georgia – 3.2%
Atlanta Georgia RB for Airport and Marina Improvements Series 2000 A (FGIC) (AAA/Aaa)(b)
	2,500,000		5.500			01/01/10		2,670,675
Butts County Georgia Sales Tax GO Bonds Series 2006 (AMBAC) (Aaa)
	2,000,000		4.250			03/01/11		2,057,240
Dekalb County Development Authority RB for Dekalb Senior Center Project Series 2004
	1,400,000		4.850			06/01/09		1,406,678
Downtown Savannah Authority RB Refunding for Public Improvement Series 2005 (AA/A1)
	1,530,000		4.000			01/01/07		1,530,857
	2,760,000		4.000			01/01/08		2,772,972
								10,438,422
Guam – 0.3%
Guam Education Financing Foundation COPS Public School Facilities Project Series 2006 A (A-)
	1,080,000		5.000			10/01/08		1,101,038
Idaho – 0.3%
Madison County Idaho Hospital COPS Refunding Series 2006 (BBB-)
	120,000		4.125			09/01/08		119,774
	250,000		4.375			09/01/10		250,643
	425,000		5.000			09/01/11		437,134
								807,551
Illinois – 6.8%
Chicago Illinois Park District Harbour Facilities RB for Airport and Marina Improvements Series 2000 (XLCA) (AAA/Aaa)(b)
	4,610,000		5.650			01/01/11		4,976,034
Chicago Illinois Park District Parking Facility RB Series 1999 (ACA) (A/Baa1)(b)
	4,015,000		6.000			01/01/10		4,302,755
Chicago Illinois Tax Increment Junior Lien for Near South Redevelopment Project Series 2001 A (ACA)(A)
	300,000		5.000			11/15/11		313,272
Chicago Illinois Tax Increment RB for Central Loop Redevelopment Series 2000 A (ACA)(A)
	1,000,000		6.500			12/01/06		1,001,810
Illinois Development Finance Authority RB for Revolving Fund Master Trust Series 2002 (Aaa)
	2,500,000		5.000			03/01/07		2,511,825
Illinois Educational Facilities Authority RB for Loyola University Chicago Series 1991 A (ETM) (AAA)
	775,000		7.000			07/01/07		792,779
Illinois Health Facilities Authority RB for Hospital Sisters Services, Inc. Series 1998 A (MBIA) (Aaa)
	4,375,000		5.250			06/01/09		4,516,444
Illinois State Sales Tax RB for Public Improvements Series 2006 (FSA) (AAA/Aaa)
	1,040,000		5.000			06/15/08		1,063,618
	2,700,000		5.000			06/15/11		2,858,166
								22,336,703
Indiana – 0.3%
Indiana Health & Educational Facilities Finance Authority Hospital RB Refunding for Clarian Health Obligation Group Series 2006 B (A+/A2)
	1,000,000		5.000			02/15/10		1,038,540
Iowa – 0.7%
Iowa Finance Authority Health Facilities RB Refunding for Development Care Initiatives Project Series 2006 A (BBB-)
	1,000,000		5.000			07/01/07		1,005,300
	1,285,000		5.000			07/01/09		1,307,796
								2,313,096
Kansas – 0.5%
Kansas State Development Finance Authority Health Facilities RB for Hays Medical Center, Inc. Series 2005 L (A2)
	425,000		4.000			11/15/08		427,057
	500,000		5.250			11/15/10		525,530
Lawrence Kansas Hospital RB for Lawrence Memorial Hospital Series 2006 (A3)
	330,000		5.000			07/01/07		332,825
	350,000		5.000			07/01/10		364,091
								1,649,503

 The accompanying notes are an integral part of these financial statements.

34

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Kentucky – 4.7%
Kentucky Economic Development Finance Authority RB for Norton Healthcare, Inc. Series 2000 C (MBIA) (ETM) (AAA/Aaa)
$	1,775,000		5.250	%		10/01/07	$	1,801,128
Logan/Todd Regional Water Commission of Kentucky RB Refunding Series 2003 (MIG1)
	13,500,000		4.000			02/01/07		13,509,585
								15,310,713
Louisiana – 2.5%
City of New Orleans GO Bonds for Public Improvement Series 1999 (FSA) (AAA/Aaa)(b)
	3,390,000		5.875			11/01/09		3,614,994
Ernest N. Morial — Exhibit Hall Authority Special Tax Series 2003 A (ETM) (AMBAC) (AAA/Aaa)
	1,080,000		5.000			07/15/07		1,091,427
Livingston Parish Louisiana RB Certificates of Indebtedness Series 2005
	2,500,000		4.750			05/01/15		2,501,000
Morehouse Parish PCRB Refunding for International Paper Co. Project Series 2001 A (BBB/Baa3)
	800,000		5.250			11/15/13		854,704
								8,062,125
Maryland – 2.2%
Maryland State Community Development Administration Department RB Refunding for Residential Housing & Community Development Series 2006 C (MIG1)
	5,000,000		3.375			03/07/07		4,994,450
Maryland State Department of Transportation RB Series 2004 (AAA/Aa2)
	2,000,000		5.000			05/01/09		2,069,600
								7,064,050
Massachusetts – 1.2%
Massachusetts State Health & Educational Facilities Authority RB for Emerson Hospital Series 2005 E (Radian) (AA)
	445,000		5.000			08/15/10		461,403
	780,000		5.000			08/15/11		815,677
	465,000		5.000			08/15/12		489,259
Massachusetts State Health & Educational Facilities Authority RB for Harvard Pilgrim Health Series 1998 A (FSA) (AAA/Aaa)
	2,000,000		5.250			07/01/09		2,068,220
								3,834,559
Michigan – 4.1%
Detroit Michigan School District Building & Site Improvement Series 2003 B (FGIC) (AAA/Aaa)
	5,035,000		5.000			05/01/13		5,430,902
Kalamazoo Michigan Hospital Finance Authority Hospital Facilities RB Refunding for Bronson Methodist Hospital Series 2005 A (MBIA) (Aaa)
	4,000,000		5.000			10/15/08		4,101,440
Michigan State Hospital Finance Authority RB Refunding for Henry Ford Health System Series 2006 A (A/A1)
	500,000		5.000			11/15/07		506,525
	400,000		5.000			11/15/08		410,092
	500,000		5.000			11/15/10		523,375
Monroe County Hospital Finance Authority Hospital RB Refunding for Mercy Memorial Hospital Corporate Obligations Series 2006 (BBB-/Baa3)
	200,000		5.000			06/01/07		200,908
	250,000		5.000			06/01/08		252,975
	250,000		5.000			06/01/09		254,402
	845,000		5.000			06/01/10		864,959
	980,000		5.000			06/01/12		1,013,673
								13,559,251
Minnesota – 0.8%
Minneapolis Minnesota Health Care Systems RB for Fairview Health Services Series 2002 B (MBIA) (AAA/Aaa)
	1,430,000		5.125			05/15/08		1,462,661
Minnesota State Municipal Power Agency Electric RB Series 2005 (A3)
	1,110,000		4.000			10/01/09		1,121,833
								2,584,494
Mississippi – 0.3%
Mississippi Hospital Equipment & Facilities Authority RB Refunding & Improvement for South Central Hospital Series 2006 (BBB+)
	1,105,000		4.000			12/01/08		1,106,503
Missouri – 0.1%
Cameron Missouri Industrial Development Authority Health Facilities RB for Cameron Community Hospital Series 2000 (ACA)(A)
	345,000		5.875			12/01/06		345,379
Montana – 0.3%
Forsyth Montana PCRB Refunding Portland General Series 1998-A RMKT 5/1/03 (BBB+/Baa1)(a)
	1,000,000		5.200			05/01/09		1,024,900
Nevada – 1.4%
Clark County Airport RB Sub Lien Series 1998 A (MBIA) (AAA/Aaa)
	1,250,000		6.000			07/01/08		1,297,887
Nevada Department of Business and Industry Capital Appreciation RB for Las Vegas Monorail Series 2000 (ETM) (AMBAC) (AAA/Aaa)(c)
	800,000		0.000			01/01/07		795,120
North Las Vegas Nevada Local Improvement Special Assessment RB Refunding for Sub-Special Improvement District No. 60-B Series 2006
	340,000		4.350			12/01/09		341,741
	680,000		4.600			12/01/11		687,494
	750,000		4.700			12/01/12		761,985
	650,000		4.800			12/01/14		663,208
								4,547,435

The accompanying notes are an integral part of these financial statements. 

35

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Schedule of Investments (continued)

October 31, 2006

Principal			Interest			Maturity
Amount			Rate			Date		Value
Municipal Debt Obligations – (continued)
New Hampshire – 1.0%
New Hampshire Health & Education Facilities Authority Hospital RB for Catholic Medical Center Series 2006 (BBB+/Baa1)
$	215,000			5.000	%		07/01/09	$	220,803
	355,000			5.000			07/01/11		371,170
New Hampshire Health & Education Facilities Authority RB for The Memorial Hospital Series 2006 (Baa3)
	355,000			5.000			06/01/10		365,735
	375,000			5.250			06/01/11		390,848
	395,000			5.250			06/01/12		409,019
New Hampshire Health and Education Facilities Authority RB for Southern New Hampshire Medical Center Series 2004 A (A-)
	1,475,000			4.000			10/01/08		1,480,354
									3,237,929
New Jersey – 6.6%
New Jersey Economic Development Authority RB for Cigarette Tax Series 2004 (BBB/Baa2)
	3,750,000			5.000			06/15/07		3,779,512
New Jersey Health Care Facilities Financing Authority Department of Human Services RB for Greystone Park Psychiatric Hospital Series 2005 (AA-/A1)
	1,000,000			5.000			09/15/10		1,048,970
New Jersey State Educational Facilities Authority RB for Fairleigh Dickinson University Series 2004 C (BBB-)
	1,300,000			5.000			07/01/07		1,304,446
	1,405,000			5.000			07/01/08		1,424,572
New Jersey State Transportation Trust Fund Authority RB for Transportation Systems Series 2001 C (FSA) (AAA/Aaa)
	5,285,000			5.750			12/15/12		5,888,283
New Jersey State Turnpike Authority Turnpike RB Series 2000 A (MBIA) (AAA/Aaa)(b)
	1,750,000			5.750			01/01/10		1,865,150
New Jersey Tobacco Settlement Financing Corp. RB for Public Improvement Series 2002 (BBB/Baa3)
	5,300,000			5.750			06/01/32		5,667,979
Tobacco Settlement Financing Corp. RB Series 2003 (BBB/Baa3)
	640,000			4.375			06/01/19		640,416
									21,619,328
New York – 3.6%
Monroe County Industrial Development Agency Civic Facilities RB for Highland Hospital Project Series 2005 (BBB+/Baa1)
	1,300,000			5.000			08/01/12		1,363,336
	1,480,000			5.000			08/01/13		1,563,058
New York City GO Bonds Series 1998 F (FGIC-TCRS) (AAA/Aaa)
	4,700,000			5.375			08/01/09		4,850,541
New York City Industrial Development Authority Civic Facility RB for Polytechnic University Project Series 2000 (BB+/Ba3)
	250,000			5.200			11/01/07		252,095
New York GO Bonds Refunding Series 1996 A (MBIA-IBC) (AAA/Aaa)
	500,000			6.250			08/01/08		508,310
New York GO Bonds Refunding Series 2002 C (AA-/A1)
	2,000,000			5.250			08/01/10		2,110,940
Tobacco Settlement Financing Corp. RB Series B-1 (AA-/A1)
	1,000,000			5.000			06/01/10		1,041,460
									11,689,740
North Carolina – 0.4%
North Carolina Eastern Municipal Power RB Refunding Series 2003 C (BBB/Baa2)
	1,190,000			5.000			01/01/08		1,204,387
Ohio – 0.5%
Ohio GO Bonds for Higher Educational Capital Facilities Series 2000 A (AA+/Aa1)
	1,775,000			5.000			02/01/07		1,781,088
Oklahoma – 1.2%
Comanche County Hospital Authority RB Series 2004 (Radian) (AA/Aa3)
	1,000,000			4.500			07/01/09		1,014,220
Oklahoma County Finance Authority Educational Facilities Lease RB for Western Heights Public Schools Project Series 2006 (AAA)
	1,390,000			5.000			09/01/10		1,463,003
Oklahoma School Districts & County RANS COPS Program Series 2006 C
	1,500,000			4.500			06/29/07		1,501,575
									3,978,798
Oregon – 1.6%
Klamath Falls Oregon Intercommunity Hospital Authority RB for Merle West Medical Center Project Series 2002 (BBB)
	400,000			5.500			09/01/11		424,100
	550,000			5.600			09/01/12		590,579
	520,000			5.900	(b)		09/01/12		584,813
	550,000			5.800	(b)		09/01/12		615,686
	325,000			5.800			09/01/14		352,934
	305,000			5.900			09/01/15		331,294
Lane County Oregon School District No. 19 Springfield GO Bonds Series 1997 (FGIC) (AAA/Aaa)
	1,230,000			6.000			10/15/10		1,339,187
Tri-County Metropolitan Transportation District RB for Payroll Tax & Grant Receipt Series 2006 (MBIA) (AAA/Aaa)
	1,000,000			5.000			05/01/12		1,070,260
									5,308,853
Pennsylvania – 4.4%
Allegheny County Hospital Development Authority RB for University of Pittsburg Medical Center
	Series 2003 B (A+/Aa3	)
	3,000,000			5.000			06/15/10		3,124,590
Pennsylvania GO Bonds First Series 2001 (AA/Aa2)
	1,000,000			5.000			01/15/10		1,043,450

 The accompanying notes are an integral part of these financial statements.

36

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Pennsylvania – (continued)
Pennsylvania Hills Township GO Bonds Series 1995 (AMBAC) (AAA/Aaa)
$	750,000		5.000	%		12/01/06	$	750,862
Pennsylvania State Higher Educational Facilities Authority RB for University of Pennsylvania Health Systems Series 2005 A (A+/A2)
	2,300,000		5.000			08/15/08		2,353,015
Pennsylvania State Higher Educational Facilities Authority RB for Widener University Series 2003 (BBB+)
	795,000		5.000			07/15/08		805,804
	1,000,000		5.000			07/15/09		1,019,130
Pennsylvania State Higher Educational Facilities Authority State System RB Series 2006 AE (MBIA) (Aaa)
	1,895,000		5.000			06/15/09		1,964,452
	2,340,000		5.000			06/15/12		2,507,614
Philadelphia Water and Wastewater RB Series 1999 (AMBAC) (AAA/Aaa)
	750,000		5.000			12/15/06		751,208
								14,320,125
Puerto Rico – 3.1%
Puerto Rico Commonwealth Government Development Bank RB Senior Notes Series 2006 B (BBB/Baa3)
	5,000,000		5.000			12/01/09		5,171,100
Puerto Rico Public Finance Corp. RB Commonwealth Appropriations Series 2004 A (LOC-Government Bank for Puerto Rico) (BBB-/Ba1)(a)
	4,700,000		5.750			02/01/12		5,101,521
								10,272,621
Rhode Island – 0.9%
Rhode Island State Health & Educational Building Corp. RB for Hospital Financing Series 2003 A (Baa2)(b)
	585,000		4.300			09/15/08		592,307
	610,000		4.500			09/15/08		619,803
	635,000		4.750			09/15/08		648,043
Rhode Island State Health & Educational Building Corp. RB for Hospital Financing Series 2003 A (ETM) (Baa2)
	485,000		4.000			09/15/08		488,453
Rhode Island State Health & Educational Building Corp. RB for Providence Public School Financing Project Series 2006 A (FSA) (AAA/Aaa)
	555,000		4.000			05/15/12		566,599
								2,915,205
South Carolina – 4.9%
Beaufort County School District GO BANS (SCSDE) (MIG1)
	3,250,000		4.500			02/28/07		3,259,165
Lexington One School Facilities Corp. Installment Purchase RB for Lexington County School District No. 1 Series 2006 (A1)
	500,000		5.000			12/01/10		523,800
Richland County RB Refunding for International Paper Co. Project Series 2002 A (BBB/Baa3)
	3,000,000		4.250			10/01/07		3,007,890
South Carolina Jobs Economic Development Authority Hospital Facilities RB for Palmetto Health Alliance Series 2003 C (BBB+/Baa1)(b)
	1,780,000		6.875			08/01/13		2,114,462
South Carolina Jobs Economic Development Authority Hospital Facilities RB Refunding & Improvement for Palmetto Series 2003 C (ACA)(A)
	3,035,000		5.000			08/01/08		3,090,601
South Carolina Tobacco Settlement Revenue Management Authority RB Series 2001 B (BBB/Baa3)
	3,750,000		6.000			05/15/22		3,986,813
								15,982,731
Tennessee – 3.0%
Johnson City Health & Educational Facilities Board Hospital RB for First Mortgage Mountain States Series 2006 A (BBB+/Baa2)
	955,000		4.500			07/01/08		962,554
	670,000		4.500			07/01/09		678,348
	665,000		4.500			07/01/10		676,870
Memphis Tennessee GO Bonds Refunding for General Improvement Series 2005 (MBIA) (AAA/Aaa)
	4,430,000		5.000			10/01/11		4,710,862
Shelby County Health Educational & Housing Facilities Board RB PA 1277 A (RITES) (AA) (a)(d)
	2,250,000		6.815			10/01/08		2,441,970
Shelby County Health Educational & Housing Facilities Board RB PA 1277 B (RITES) (AA)(d)
	320,000		6.815			09/01/08		346,125
								9,816,729
Texas – 3.6%
Brazoria County Texas Health Facilities Development Corp. RB for Brazosport Memorial Hospital Series 2004 (Radian) (AA/Aa3)
	1,065,000		5.000			07/01/09		1,092,115
Harris County Texas Health Facilities Development Corp. RB for Christus Health Series 1999 A (ETM) (MBIA) (AAA/Aaa)
	400,000		5.250			07/01/07		404,436
Harris County Texas Health Facilities Development Corp. RB for Christus Health Unrefunded Balance Series 1999 A (MBIA) (AAA/Aaa)
	2,600,000		5.250			07/01/07		2,623,894
Mesquite Texas Health Facilities Development Corp. RB for Christian Care Retirement Facility Series 2005 (BBB-)
	150,000		5.000			02/15/07		150,360
	170,000		5.000			02/15/08		171,734
	395,000		5.000			02/15/09		401,099
	610,000		5.000			02/15/10		622,157
Sam Rayburn Texas Municipal Power Agency RB Refunding (Radian) (AA/Aa3)
	2,000,000		5.000			10/01/08		2,045,260
Tomball Texas Hospital Authority Refunding RB Series 2005 (Baa3)
	1,140,000		5.000			07/01/08		1,153,509

The accompanying notes are an integral part of these financial statements. 

37

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Texas – (continued)
Travis County Health Facilities Development Corp. RB for Acension Health Credit Series 1999 A (AMBAC) (AAA/Aaa)(b)
$	3,000,000		5.875	%		11/15/09	$	3,221,340
								11,885,904
Utah – 0.6%
Salt Lake County Utah Municipal Building Authority Lease RB Series 1999 (AA+/Aa1)(b)
	2,000,000		5.500			10/01/09		2,105,760
Virginia – 3.4%
Fairfax County Virginia Economic Development Authority Lease RB for Public Uses Complex Project Series 2006 (AA+/Aa1)
	2,650,000		5.000			05/15/10		2,773,808
Harrisonburg Virginia Public Improvement GO Bonds Series 2006 (FSA) (AAA/Aaa)
	1,190,000		5.000			02/01/10		1,245,728
	1,250,000		5.000			02/01/11		1,322,787
Pocahontas Parkway Association Virginia Toll Road RB for Capital Appreciation Senior Series 1998 B (AAA)(b)(c)
	4,130,000		0.000			08/15/08		3,178,902
Rappahannock Virginia Regional Jail Authority Facilities RB GANS Series 2006 (MIG1)
	2,500,000		4.250			12/01/09		2,530,700
								11,051,925
Washington – 0.6%
King County Washington Public Hospital District No. 002 GO Bonds Refunding & Improvement for Evergreen Healthcare Series 2006 (MBIA) (AAA/Aaa)
	1,000,000		4.000			12/01/10		1,012,370
	1,000,000		5.000			12/01/11		1,058,230
								2,070,600
Wisconsin – 1.0%
Badger Power Marketing Authority, Inc. Transmission Delivery Facilities RB Series 1993 (ETM) (AMBAC) (AAA/Aaa)
	105,000		5.300			10/01/08		108,461
Badger Power Marketing Authority, Inc. Transmission Delivery Facilities RB Series 1993 Unrefunded Balance (AMBAC) (AAA/Aaa)
	520,000		5.300			10/01/08		529,672
Wisconsin State Health & Educational Facilities Authority RB for Fort Healthcare, Inc. Project Series 2004 (BBB+)
	665,000		4.000			05/01/07		665,512
	695,000		4.000			05/01/08		694,798
	715,000		4.000			05/01/09		712,648
Wisconsin State Health & Educational Facilities Authority RB for Upland Hills Health, Inc. Series 2006 A (BBB)
	125,000		4.125			05/15/09		125,281
	260,000		4.125			05/15/10		260,549
Wisconsin State Health & Educational Facilities Authority RB for Upland Hills Health, Inc. Series 2006 B (BBB)
	105,000		4.125			05/15/10		105,221
								3,202,142
TOTAL STATE-SPECIFIC MUNICIPAL DEBT OBLIGATIONS
(Cost $296,677,611)							$	297,731,715
Other Municipals – 6.5%
MMA Financial CDD Senior Securitization Trust RB for Various States Bartram Springs Passthru Series 2003 B (A1)(e)
$	6,038,074		3.375	%		11/01/08	$	5,900,466
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series A-3 (A3)(a)(e)
	2,000,000		4.950			09/30/12		2,029,580
Tax Exempt Municipal Infrastructure Improvement Trust Certificates RB Series 2005 A Class A (A1)
	9,976,000		4.050			05/04/10		9,918,239
Tax Exempt Municipal Infrastructure Improvement Trust Certificates RB Series 2006 A (A1)
	3,000,000		4.220			11/02/10		3,017,220
TOTAL OTHER MUNICIPALS
(Cost $21,050,381)							$	20,865,505
TOTAL INVESTMENTS – 97.6%
(Cost $318,479,052)							$	319,348,428
OTHER ASSETS IN EXCESS OF
LIABILITIES – 2.4%								7,891,732
NET ASSETS – 100.0%							$	327,240,160

 The accompanying notes are an integral part of these financial statements.

38

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the next interest reset dates.
(b)	Prerefunded security. Maturity date disclosed is prerefunding date.
(c)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(d)	Inverse variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(e)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $7,930,046, which represents approximately 2.4% of net assets as of October 31, 2006.

Security ratings disclosed, if any, are issued by Standard & Poor’s/Moody’s Investors Service/Fitch and are unaudited. A brief description of the ratings is available in the Fund’s Statement of Additional Information.

The portfolio had the following insurance concentration at 10% or greater of net assets at October 31, 2006: MBIA 11.23%.

Investment Abbreviations:
ACA	—	Insured by American Capital Access
AMBAC	—	Insured by American Municipal Bond Assurance Corp.
BANS	—	Bond Anticipation Notes
CDD	—	Community Development District
COPS	—	Certificates of Participation
ETM	—	Escrow to Maturity
FGIC	—	Insured by Financial Guaranty Insurance Co.
FGIC-TCRS	—	Insured by Financial Guaranty Insurance Co. - Transferable Custodial Receipts
FSA	—	Insured by Financial Security Assurance Co.
GANS	—	Grant Anticipation Notes
GO	—	General Obligation
LOC	—	Letter of Credit
MBIA	—	Insured by Municipal Bond Investors Assurance
MBIA-IBC	—	Insured by Municipal Bond Investors Assurance - Insured Bond Certificates
PCRB	—	Pollution Control Revenue Bond
Radian	—	Insured by Radian Asset Assurance
RANS	—	Revenue Anticipation Notes
RB	—	Revenue Bond
RMKT	—	Remarketed
RITES	—	Residual Interest Tax Exempt Securities
SCSDE	—	South Carolina State Department of Education
XLCA	—	Insured by XL Capital Assurance, Inc.

ADDITIONAL INVESTMENT INFORMATION

INTEREST RATE SWAP CONTRACT — At October 31, 2006, the Fund had an outstanding swap contract with the following terms:

					Rates Exchanged
	Notional				Payments	Payments
Swap	Amount		Termination		received by	made by	Unrealized
Counterparty	(000s)		Date		the Fund	the Fund	Loss
JP Morgan (a)	$	12,000		12/07/2026	BMA Municipal Swap Index	4.138%	$	(406,950	)

(a)   Represents forward starting interest rate swap whose effective date of commencement of accruals and cash flows is December 7, 2006.

BMA — Bond Market Association

The accompanying notes are an integral part of these financial statements. 

39

GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 2005 (commencement of operations) in Class A Shares (with the maximum sales charge of 4.5%) of the Goldman Sachs California Intermediate AMT-Free Municipal Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers CA 1-10 Year Municipal Bond Index, is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of fund shares. Performance of Class C and Institutional Shares will vary from Class A Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

California Intermediate AMT-Free Municipal Fund’s Lifetime Performance

Performance of a $10,000 Investment, with distributions reinvested, from November 1, 2005 to October 31, 2006.

	One Year/
Average Annual Total Return through October 31, 2006	Since Inception
Class A (commenced November 1, 2005)
Excluding sales charges		4.34%
Including sales charges		-0.34%
Class C (commenced November 1, 2005)
Excluding contingent deferred sales charges		3.66%
Including contingent deferred sales charges		2.63%
Institutional Class (commenced November 1, 2005)		4.84%

40

GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – 95.6%
California – 87.8%
Abag Finance Authority RB for Non-Profit Corp. for San Diego Hospital Association Series 2001 A (BBB+/Baa1)
$	725,000		6.125	%		08/15/20	$	789,133
Abag Finance Authority RB for Non-Profit Corps. Sansum-Santa Barbara Series 2002 A (A+)
	1,500,000		5.500			04/01/21		1,588,980
Banning Utilities Authority Water Enterprise RB for Refunding and Improvement Projects Series 2005 (FGIC) (AAA/Aaa)
	1,135,000		5.000			11/01/22		1,220,965
Brentwood Infrastructure Financing Authority Special Assessment Series 2005 B
	235,000		5.000			09/02/25		237,735
California Educational Facilities Authority RB for California Institute of Technology Series 2003 A (AAA/Aaa)(a)
	1,000,000		5.000			10/01/11		1,070,380
California Health Facilities Financing Authority RB for Catholic Healthcare West Unrefunded Balance Series 2004 H (A/A3)(b)
	805,000		4.450			07/01/11		819,538
California Health Facilities Financing Authority RB for Catholic West Series 2004 H (A/A3) (a)
	70,000		4.450			07/01/11		72,743
California Infrastructure & Economic Development Bank RB for LA County Department of Public Social Services Series 2003 (AMBAC) (AAA/Aaa)
	505,000		5.750			09/01/23		575,781
California State Department of Transportation RANS for Federal Highway Grant Series 2004 A (FGIC) (AAA/Aaa)
	1,000,000		5.000			02/01/12		1,074,220
California State Department Water Resources Power Supply RB Series 2002 A (MBIA) (AAA/Aaa)
	200,000		5.250			05/01/10		211,688
California State Economic Recovery GO Bonds Series 2004 B (AA+/Aa3)(b)
	2,500,000		5.000			07/01/07		2,524,825
California State Economic Recovery RB Series 2004 A (AA+/Aa3)
	425,000		5.000			01/01/09		438,137
California State GO Bonds Refunded Series 1998 (A+/A1)
	1,100,000		6.000			02/01/08		1,134,628
California State GO Bonds Series 2003 (A+/A1)
	1,000,000		5.250			02/01/15		1,095,460
California State GO Bonds Series 2004 (A+/A1)
	500,000		4.000			02/01/09		505,440
California State Public Works Board RB for Department of Mental Health Coalinga Series 2004 A (A/A2)
	1,000,000		5.000			06/01/11		1,055,980
California State Public Works Board RB Refunding for Department of Health Services Series 2005 K (A/A2)
	200,000		5.000			11/01/22		212,344
California State University of Fresno Association Inc. RB for Auxiliary Organization Event Center Series 2002 (Ba1)(a)
	910,000		6.750			07/01/12		1,027,290
California Statewide Communities Development Authority RB for Daughters of Charity Health Series 2005 F (BBB+)
	750,000		5.000			07/01/07		755,932
California Statewide Communities Development Authority RB for Kaiser Permanente Series 2002 C (A-1/VMIG2)(b)
	725,000		3.850			06/01/12		726,066
California Statewide Communities Development Authority TRANS for Tulare County Series 2006 B (SP-1+/MIG1)
	1,250,000		4.500			07/31/07		1,259,387
Cathedral City Improvement Bond Act of 1915 Special Assessment for Cove Improvement District 04-02 Series 2005
	740,000		5.000			09/02/20		755,311
Central Coast Water Authority RB Refunding for State Water Project Regional Facilities Series 2006 A (FSA) (AAA/Aaa)
	1,200,000		4.000			10/01/10		1,225,692
Chino Community Facilities District Special Tax No. 2 Series 2006
	200,000		5.000			09/01/26		202,434
Coachella Valley Water District Improvement Bond Act of 1913-1915 Special Assessment for Obligation Improvement District 70 Series 2006
	300,000		5.000			09/02/20		303,420
Colton Junction Unified School District GO Bonds for Election of 2001 Series 2006 C (FGIC) (AAA/Aaa)
	500,000		5.250			02/01/22		546,430
Coronado Community Development Agency Tax Allocation Refunding for Coronado Community Development Project Series 2006 (FGIC) (AAA/Aaa)
	1,000,000		5.000			09/01/22		1,074,660
Del Mar Race Track Authority RB Series 2005 (BBB-)
	600,000		5.000			08/15/09		617,214
Eastern Municipal Water District Community Facilities Special Tax for Cottonwood District 2004-27 Series 2006
	100,000		5.000			09/01/27		101,689
Eastern Municipal Water District Community Facilities Special Tax for Mahogany District 2005-40 Series 2006
	300,000		5.000			09/01/26		303,417
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 B (AAA/Aaa)(a)
	2,065,000		5.500			06/01/13		2,292,914
Kings River Conservation District California Revenue COPS for Peaking Project Series 2004 (Baa1)
	1,455,000		5.000			05/01/10		1,508,733
Lake Elsinore Unified School District Community Facilities District Special Tax Series 2005-3
	275,000		5.000			09/01/25		280,291
Lammersville School District Community Facilities District No. 2002 Special Tax for Mountain House Series 2006
	250,000		5.000			09/01/26		254,418
Los Angeles County Public Works Financing Authority Special Assessment RB Refunding for L.A. Regal Park & Open Space Series 2005 (FSA) (AAA/Aaa)
	400,000		5.000			10/01/10		423,092
Los Angeles Unified School District GO Bonds Series 2003 A (MBIA) (AAA/Aaa)
	1,250,000		5.375			07/01/16		1,388,125
Manteca Unified School District GO Bonds Refunding Series 2005 (FGIC) (AAA/Aaa)
	775,000		5.000			08/01/20		835,822

The accompanying notes are an integral part of these financial statements. 

41

GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
California – (continued)
Mission Springs Water District Improvement Bond Act of 1915 Special Assessment for District No. 13 Series 2005
$	275,000		5.000	%		09/02/21	$	277,846
Moreno Valley Unified School District Community Facilities District No. 2004-5
	400,000		5.200			09/01/36		408,332
New Haven Unified School District GO Bonds Refunding Series 2005 (MBIA) (AAA/Aaa)
	1,250,000		5.250			08/01/21		1,380,762
Palmdale Improvement Bond Act of 1915 Special Assessment District No. 2006-1 Series 2006
	500,000		5.000			09/02/36		503,200
Palo Alto Improvement Bond Act 1915 Special Assessment for University Avenue Area Off Shore Parking Series 2002 A (BBB)
	355,000		5.250			09/02/16		363,105
	400,000		5.250			09/02/17		409,064
Poway Unified School District Special Tax Community Facilities District No. 6-4 South Ranch Series 2005
	200,000		4.850			09/01/20		203,372
Riverside County Public Financing Authority Tax Allocation Revenue Redevelopment Project Area No. 1 for Mid County Series 2006 B (MBIA) (AAA/Aaa)
	575,000		5.000			10/01/15		632,201
Sacramento North Natomas Community Facilities 97-01 Special Tax Series 2005
	765,000		5.000			09/01/23		780,438
San Diego County & School District TRANS Series 2006 A (SP-1+/MIG1)
	1,250,000		4.500			07/27/07		1,259,275
San Diego Redevelopment Agency Tax Allocation for Centre City Redevelopment Subseries 2006 A (AMBAC) (AAA/Aaa)
	1,000,000		5.000			09/01/13		1,087,820
San Gabriel Unified School District GO Bonds Prerefunded Series 2002 A (FSA) (AAA/Aaa)(a)
	445,000		5.375			08/01/12		489,024
Sierra View Local Health Care District RB Refunding Series 1998 (A-)
	500,000		5.400			07/01/22		515,875
South Orange County Public Financing Authority Special Tax for Ladera Ranch Series 2005 A (AMBAC) (AAA/Aaa)
	200,000		5.000			08/15/21		212,696
Tobacco Securitization Authority of Southern California Tobacco Settlement RB for Asset Backed Bonds Senior Series 2002 A (AAA/Aaa)(a)
	1,180,000		5.250			06/01/12		1,283,156
								40,316,480
Puerto Rico – 5.3%
Puerto Rico Commonwealth Government Development Bank RB Senior Notes Series 2006 B (BBB/Baa3)
	1,500,000		5.000			12/01/09		1,551,330
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities RB for Ana G Mendez University System Project Series 2006 (BBB-)
	270,000		5.000			03/01/09		275,748
	575,000		5.000			03/01/12		598,115
								2,425,193
U.S. Virgin Islands – 2.5%
Virgin Islands Public Finance Authority RB Senior Lien Matching Fund Loan Note Series 2004 A (BBB)
	1,100,000		5.000			10/01/08		1,120,614
TOTAL MUNICIPAL DEBT OBLIGATIONS
(Cost $43,273,749)							$	43,862,287
Short Term Investments – 6.5%
California – 6.5%
California Infrastructure & Economic Development Bank (AMBAC) (AAA/Aaa)(b)
$	1,550,000		3.450	%		11/01/06	$	1,550,000
Newport Beach VRDN RB for Hoag Memorial Presbyterian Hospital Series 1992 (A-1+/VMIG1) (b)(c)
	1,450,000		3.360			11/01/06		1,450,000
								3,000,000
TOTAL SHORT TERM INVESTMENTS
(Cost $3,000,000)							$	3,000,000
TOTAL INVESTMENTS – 102.1%
(Cost $46,273,749)							$	46,862,287
LIABILITIES IN EXCESS OF OTHER ASSETS – (2.1)%								(963,162	)
NET ASSETS – 100.0%							$	45,899,125

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Prerefunded security. Maturity date disclosed is prerefunding date.
(b)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the next interest reset dates.
(c)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.

                                           Security ratings disclosed are issued by Standard & Poor’s/Moody’s Investors Service/Fitch and are unaudited. A description of the ratings is available in the Fund’s Statement of Additional Information.

                                           The Portfolio had the following insurance concentration at 10% or greater of net assets at October 31, 2006: FGIC 10.35%.

Investment Abbreviations:
AMBAC	—	Insured by American Municipal Bond Assurance Corp.
COPS	—	Certificates of Participation
FGIC	—	Insured by Financial Guaranty Insurance Co.
FSA	—	Insured by Financial Security Assurance Co.
GO	—	General Obligation
MBIA	—	Insured by Municipal Bond Investors Assurance
RANS	—	Revenue Anticipation Notes
RB	—	Revenue Bond
TRANS	—	Tax Revenue Anticipation Notes
VRDN	—	Variable Rate Demand Notes

 The accompanying notes are an integral part of these financial statements.

42

GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 2005 (commencement of operations) in Class A Shares (with the maximum sales charge of 4.5%) of the Goldman Sachs New York Intermediate AMT-Free Municipal Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers NY 1-10 Year Municipal Bond Index, is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of fund shares. Performance of Class C and Institutional Shares will vary from Class A Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

New York Intermediate AMT-Free Municipal Fund’s Lifetime Performance

Performance of a $10,000 Investment, with distributions reinvested, from November 1, 2005 to October 31, 2006.

	One Year/
Average Annual Total Return through October 31, 2006	Since Inception
Class A (commenced November 1, 2005)
Excluding sales charges		3.74%
Including sales charges		-0.92%
Class C (commenced November 1, 2005)
Excluding contingent deferred charges		2.98%
Including contingent deferred charges		1.96%
Institutional Class (commenced November 1, 2005)		4.12%

43

GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – 95.7%
New York – 88.8%
Albany County GO Bonds Refunding Series 2002 (FGIC) (AAA/Aaa)
$	500,000		5.000	%		06/01/13	$	540,055
Albany Municipal Water Finance Authority Second Resolution RB 2003 A (MBIA) (AAA/Aaa)
	425,000		5.000			12/01/11		434,822
Amherst Industrial Development Agency Civic Facility RB for Daeman College Mandatory Tender Series 2006 A (Radian) (Manufactures & Traders SPA) (AA)(a)
	490,000		4.200			10/01/11		497,595
Buffalo Fiscal Stability Authority Special Tax for Sales Tax & State Aid Series 2006 A (Aa2)
	430,000		4.000			09/01/07		431,862
Erie County GO Bonds Refunding Series 2005 D-1 (MBIA) (AAA/Aaa)
	300,000		5.000			06/01/21		322,875
Islip GO for Public Improvement 2006 (AA+/Aa2)
	515,000		4.000			07/15/10		523,662
Kings Point GO Bonds Refunding Series 2005 (Aaa)
	285,000		5.000			06/15/12		305,566
Long Island Power Authority Electric System RB Series 1998 A (AMBAC) (AAA/Aaa)
	325,000		5.500			12/01/11		353,571
Long Island Power Authority Electric Systems RB Series 2006 D (A-/A3)
	200,000		4.000			09/01/10		202,758
Metropolitan Transportation Authority Dedicated Tax Fund RB Series 2004 A (MBIA) (AAA/Aaa)
	600,000		5.000			11/15/10		633,342
Monroe County Industrial Development Agency Civic Facilities RB for Highland Hospital of Rochester Refunding Series 2005 (BBB+/Baa1)
	280,000		5.000			08/01/12		293,642
Monroe County Industrial Development Agency Civic Facilities RB for Highland Hospital of Rochester Refunding Series 2005 (BBB+/Baa1)
	300,000		5.000			08/01/22		311,823
Nassau County Industrial Development Agency Civic Facility RB for North Shore Health System Project Refunding Series 2001 D (A3)
	400,000		5.625			11/01/09		418,172
New York City Health & Hospital Corp. RB for Health Systems Refunding Series 2003 A (AMBAC) (AAA/Aaa)
	500,000		5.000			02/15/11		526,920
New York City Housing Development Corp. RB for Housing Authority Capital Funding Project Series 2005 A (FGIC) (AAA/Aaa)
	300,000		5.000			07/01/11		318,786
New York City Transitional Finance Authority RB Refunding for Future Tax Secured Series 2004 D2 (AAA/Aa2)
	275,000		5.000			11/01/11		293,362
New York GO Bonds Refunding Series 2002 C (AA-/A1)
	500,000		5.250			08/01/10		527,735
New York GO Bonds Series 2000 A Pre-Refunded (XLCA-ICR) (AAA/Aaa)(b)
	200,000		6.500			05/15/10		221,686
New York GO Bonds Series 2003 A (AA-/A1)
	500,000		5.000			08/01/12		533,065
New York GO Bonds Series 2003 D (AA-/A1)
	520,000		5.250			10/15/18		563,025
New York State Dormitory Authority Lease RB for Court Facilities Series 2003 A (ETM) (A+/A2)
	200,000		5.000			05/15/07		201,622
New York State Dormitory Authority RB for City University Systems Conservation Fifth Generation Series 2003 A (AA-/A1)
	200,000		5.250			01/01/13		216,356
New York State Dormitory Authority RB for Columbia University Series 2001 A Pre-Refunded (AAA/Aaa)(b)
	225,000		5.250			07/01/11		243,904
New York State Dormitory Authority RB for North Shore Long Island Jewish Group Series 2003 (A3)
	460,000		5.000			05/01/07		462,383
New York State Dormitory Authority RB Non State Supported Debt for Columbia University Series 2006 A (AAA/Aaa)
	300,000		5.000			07/01/10		315,744
New York State Dormitory Authority RB Non State Supported Debt for Kaleida Hospital Health Series 2006 (FHA) (AAA)
	260,000		4.000			08/15/14		262,938
New York State Dormitory Authority RB Non State Supported Debt for New York University Hospitals Center Series 2006 (BB/Ba2)
	500,000		5.000			07/01/13		515,590
New York State Dormitory Authority RB Non State Supported Debt Insured for Siena College Series 2006 (MBIA) (Aaa)
	400,000		5.000			07/01/13		432,640
New York State Dormitory Authority State Personnel Income Tax RB for Education Series 2005 F (AAA)
	200,000		5.000			03/15/10		209,376
New York State Environmental Facilities Corp. State Clean Water & Drinking RB for Revolving Funds Pooled Funding Program Series 2002 F (AAA/Aaa)
	325,000		5.250			11/15/20		352,196
New York State GO Bonds Refunding Series 1998 F (AA/Aa3)
	500,000		5.250			09/15/13		520,620
New York State Thruway Authority Highway & Bridge Second Gen RB Series 2003 B (FSA) (AAA/Aaa)
	250,000		5.000			04/01/12		267,442
New York State Thruway Authority Service Contract RB for Local Highway & Bridge Series 1999 Pre-Refunded (MBIA) (AAA/Aaa)(b)
	225,000		5.625			04/01/09		238,185
New York State Urban Development Corp. RB for Correctional & Youth Facilities Services Mandatory Tender Series 2003 A (AA-)(a)
	550,000		5.250			01/01/09		567,523
Orange County GO Refunding Bonds Series 2005 A (Aa1)
	500,000		5.000			07/15/13		540,700
Rensselaer County Industrial Development Agency Civic Facility RB for Rensselaer Polytechnic Institution Series 2006 (XLCA) (AAA/Aaa)
	200,000		4.250			03/01/12		206,048

 The accompanying notes are an integral part of these financial statements.

44

GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
New York – (continued)
Rome City School District GO Bonds Refunding Series 2005 (FGIC) (Aaa)
$	415,000		5.000	%		06/15/13	$	448,412
Sales Tax Asset Receivables Corporation RB Series 2004 A (MBIA) (AAA/Aaa)
	335,000		5.250			10/15/19		367,813
Saratoga County Industrial Development Agency Civic Facilities RB for Saratoga Hospital Project Series 2004 A (BBB+)
	225,000		5.000			12/01/08		229,797
Saratoga County Industrial Development Agency Civic Facilities RB for Saratoga Hospital Project Series 2004 A (BBB+)
	500,000		5.000			12/01/07		505,680
Suffolk County Industrial Development Agency Civic Facilities RB for Dowling College Series Refunding 2006 A (ACA)(A)
	300,000		5.000			06/01/18		316,335
Suffolk County Industrial Development Agency Continuing Care Retirement RB for Jeffersons Ferry Project Refunding Series 2006 (BBB-)
	250,000		5.000			11/01/12		260,765
Suffolk County Water Authority Waterworks RB Senior Lien Series 1993 (ETM) (MBIA) (AAA/Aaa)
	25,000		5.100			06/01/07		25,240
Suffolk County Water Authority Waterworks RB Unrefunded Balance Senior Lien Series 1993 (MBIA) (AAA/Aaa)
	275,000		5.100			06/01/07		277,502
Tobacco Settlement Financing Corp. RB for New York Asset Backed Bonds Series A-1 (AA-/A1)
	2,250,000		5.500			06/01/18		2,445,277
Triborough Bridge & Tunnel Authority RB for General Purpose Refunding Series 1999 A Pre-Refunded (AAA/Aa2)
	325,000		5.250			07/01/09		341,052
								19,025,464
Puerto Rico – 6.9%
Puerto Rico Commonwealth GO Bonds Refunding for Public Improvement Mandatory Tender Series 2003 C (MBIA) (AAA/Aaa)(a)
	325,000		5.000			07/01/28		332,417
Puerto Rico Commonwealth Government Development Bank RB Senior Notes Series 2006 B (BBB/Baa3)
	150,000		5.000			12/01/09		155,133
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities RB for Ana G Mendez University System Project Series 2006 (BBB-)
	225,000		5.000			03/01/09		229,790
Puerto Rico Public Finance Corp. RB Commonwealth Appropriations Mandatory Tender Series 2004 A (LOC-Government Development Bank for Puerto Rico) (BBB-/BA-1)(a)
	700,000		5.750			02/01/27		759,801
								1,477,141
TOTAL MUNICIPAL DEBT OBLIGATIONS
(Cost $20,309,273)							$	20,502,605
Short-Term Investments – 2.8%
New York – 2.8%
New York City Transitional Finance Authority VRDN RB for Future Tax Secured Series 2002 C4 (Landesbank Hessen-Thuringen SPA) (A-1+/VMIG1)(c)
$	300,000		3.580	%		11/16/06	$	300,000
New York State Dormitory Authority VRDN RB for Cornell University Series 1990 B (Morgan Guaranty Trust) (A-1+/VMIG1)(c)
	300,000		3.620			11/01/06		300,000
								600,000
TOTAL SHORT-TERM INVESTMENTS
(Cost $600,000)							$	600,000
TOTAL INVESTMENTS – 98.5%
(Cost $20,909,273)							$	21,102,605
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.5%								330,295
NET ASSETS – 100.0%							$	21,432,900

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the next interest reset dates.
(b)	Prerefunded security. Maturity date disclosed is prerefunding date.
(c)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.

                      Security ratings disclosed are issued by Standard & Poor’s/Moody’s Investors Service/Fitch and are unaudited. A description of the ratings is available in the Fund’s Statement of Additional Information.

                      The Portfolio had the following insurance concentration at 10% or greater of net assets at October 31, 2006: MBIA 14.30%.

Investment Abbreviations:
ACA	—	Insured by American Capital Access
AMBAC	—	Insured by American Municipal Bond Assurance Corp.
ETM	—	Escrow to Maturity
FGIC	—	Insured by Financial Guaranty Insurance Co.
FHA	—	Insured by Federal Housing Administration
FSA	—	Insured by Financial Security Assurance Co.
GO	—	General Obligation
LOC	—	Letter of Credit
MBIA	—	Insured by Municipal Bond Investors Assurance
Radian	—	Insured by Radian Asset Assurance
RB	—	Revenue Bond
SPA	—	Stand-by Purchase Agreement
VRDN	—	Variable Rate Demand Notes
XLCA	—	Insured by XL Capital Assurance, Inc.
XLCA-ICR	—	Insured by XL Capital Assurance, Inc. — Insured Custodial Receipts.

The accompanying notes are an integral part of these financial statements. 

45

GOLDMAN SACHS MUNICIPAL INCOME FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in Class A Shares (with the maximum sales charge of 4.5%) of the Goldman Sachs Municipal Income Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Aggregate Municipal Bond Index (“Lehman Aggregate Muni Bond Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of fund shares. Performance of Class B, Class C, Institutional and Service Shares will vary from Class A Shares due to differences in fees and loads. In addition to the investment adviser’s decision regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

Municipal Income Fund’s 10 Year Performance

Performance of a $10,000 Investment, with distributions reinvested, from November 1, 1996 to October 31, 2006.

Average Annual Total Return though October 31, 2006	Since Inception		Ten Years		Five Years		One Year
Class A (commenced July 20, 1993)
Excluding sales charges		5.42%		5.48%		4.92%		5.59%
Including sales charges		5.06%		4.99%		3.96%		0.87%
Class B (commenced May 1, 1996)
Excluding contingent deferred sales charges		4.89%		4.70%		4.15%		4.87%
Including contingent deferred sales charges		4.89%		4.70%		3.75%		-0.30%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		4.38%		n/a		4.14%		4.80%
Including contingent deferred sales charges		4.38%		n/a		4.14%		3.77%
Institutional Class (commenced August 15, 1997)		5.57%		n/a		5.33%		5.98%
Service Class (commenced August 15, 1997)		5.11%		n/a		4.82%		5.51%

46

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – 99.4%
Alabama – 2.7%
Alabama State Municipal Electric Authority Power Supply RB Series 2003 A (MBIA) (Aaa)
$	1,000,000		5.000	%		09/01/33	$	1,052,160
Alabama State Public School & College Authority RB for Capital Improvement Series 1999 D (AA/Aa2)
	1,150,000		5.750			08/01/19		1,228,694
Alexander City Special Care Facilities Financing Authority Medical Facilities RB for Russell Hospital Corp. Series 2006 A (BBB-)
	1,780,000		5.750			12/01/36		1,874,376
Birmingham Alabama GO Bonds for Capital Improvement Warrants Series 2000 A (AA/Aa3)
	1,000,000		5.550			08/01/21		1,070,250
DCH Health Care Authority Health Care Facilities RB Series 2006 (A+/A1)
	1,000,000		5.125			06/01/36		1,051,340
Health Care Authority RB for Baptist Health Series 2006 D (BBB+/A3)
	575,000		5.000			11/15/17		609,719
	100,000		5.000			11/15/21		104,964
Jefferson County Alabama Limited Obligation School Warrants RB Series 2004 A (A+/A2)
	3,500,000		5.250			01/01/11		3,698,975
Montgomery Alabama GO Bonds Warrants Series 1997 A (AA/Aa2)(a)
	1,000,000		5.100			04/01/07		1,026,350
Tuscaloosa GO Bonds Warrants Series 2000 (AA/Aa3)(a)
	1,000,000		5.650			01/01/10		1,071,790
								12,788,618
Alaska – 2.0%
Alaska State Housing Finance Corp. RB for General Housing Series 2005 A (FGIC) (AAA/Aaa)
	4,000,000		5.250			12/01/34		4,290,720
Alaska State Housing Finance Corp. RB Series 1999 A (MBIA) (AAA/Aaa)
	2,490,000		6.000			06/01/49		2,584,172
Anchorage Alaska Water RB Refunding Series 2004 (MBIA) (AAA/Aaa)
	1,000,000		5.125			05/01/29		1,064,240
Northern Tobacco Securitization Corp. RB for Alaska Asset Backed Bonds Series 2001 (AAA/Aaa)(a)
	1,500,000		5.500			06/01/11		1,620,570
								9,559,702
Arizona – 2.1%
Arizona School Facilities Board RB for State School Trust Series 2004 A (AMBAC) (AAA/Aaa)
	3,410,000		5.750			07/01/18		3,862,711
Maricopa County MF Hsg. IDA RB for Place Five and Greenery Apartments Series 1996 A (ETM) (AAA)
	530,000		5.850			01/01/08		535,735
Maricopa County Unified School District No. 41 Gilbert GO Bonds Prerefunded Series 1995 (FSA) (AAA/Aaa)(a)
	2,304,000		6.250			07/01/08		2,405,261
Maricopa County Unified School District No. 41 Gilbert GO Bonds Unrefunded Balance Series 1995 (FSA) (AAA/Aaa)
	196,000		6.250			07/01/15		204,355
Northern Arizona University RB Series 2003 (FGIC) (AAA/Aaa)
	1,235,000		5.500			06/01/25		1,370,356
Queen Creek Improvement District No. 001 Series 2006 Special Assessment (BBB-/Baa2)
	500,000		5.000			01/01/26		511,640
Yavapai County IDA Solid Waste Disposal RB for Waste Management Inc. Project Series 2002 (AMT) (BBB)(b)
	1,000,000		4.000			06/01/10		991,760
								9,881,818
Arkansas – 1.4%
Arkansas Development Finance Authority Hospital RB for Washington Regional Medical Center Series 2000 (BBB/Baa2)(a)
	4,000,000		7.250			02/01/10		4,439,120
Paragould Sales and Use Tax RB Series 2001 (AMBAC) (AAA/Aaa)
	1,000,000		5.100			06/01/18		1,035,110
	135,000		5.050			06/01/21		135,174
Washington County Hospital RB Refunding for Regional Medical Center Series 2005 A (BBB/Baa2)
	150,000		5.000			02/01/35		153,965
Washington County Hospital RB Refunding for Regional Medical Center Series 2005 B (BBB/Baa2)
	160,000		4.250			02/01/15		160,654
	675,000		5.000			02/01/25		698,456
	150,000		5.000			02/01/30		154,068
								6,776,547
California – 14.7%
Abag Finance Authority RB for Non-Profit Corp. for San Diego Hospital Association Series 2001 A (BBB+/Baa1)
	275,000		6.125			08/15/20		299,326
California County Tobacco Securitization Agency RB for Stanislaus Series 2006 A (BBB)(c)
	2,775,000		0.000			06/01/46		297,119
California County Tobacco Securitization Agency RB for Stanislaus Series 2006 B (BBB-)(c)
	450,000		0.000			06/01/46		42,534
California County Tobacco Securitization Agency Refunding Asset Backed RB for Merced County Series 2005 A (Baa3)
	275,000		5.125			06/01/38		282,623
California County Tobacco Securitization Agency Refunding Asset Backed RB for Sonoma County Corp. Series 2005 (BBB)
	125,000		5.125			06/01/38		128,465
	75,000		5.250			06/01/45		77,467
California Educational Facilities Authority RB for Pepperdine University Series 2005 A (AMBAC) (Aaa)
	5,000,000		5.000			12/01/35		5,295,300

The accompanying notes are an integral part of these financial statements. 

47

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
California – (continued)
California Infrastructure & Economic Development Bank RB for LA County Department of Public Social Services Series 2003 (AMBAC) (AAA/Aaa)
$	1,000,000		5.750	%		09/01/23	$	1,140,160
California State Economic Recovery GO Bonds Series B (AA+/Aa3)(b)(d)
	2,500,000		5.000			07/01/08		2,560,700
California State Economic Recovery GO Bonds Series A (AA+/Aa3)(d)
	3,750,000		5.250			07/01/14		4,154,012
California State GO Bonds Series 2003 (A+/A1)
	1,000,000		5.250			02/01/33		1,057,650
California State GO for Unrefunded Balance Series 2000 (FGIC) (AAA/Aaa)(a)
	75,000		5.250			09/01/10		79,854
California State GO Prerefunded Bonds Series 2000 (FGIC) (AAA/Aaa)(a)
	1,205,000		5.250			09/01/10		1,282,988
California State Public Works Board Lease RB for UCLA Replacement Hospital Series 2002 A (FSA) (AAA/Aaa)
	2,000,000		5.375			10/01/19		2,173,020
California State University Fresno Association, Inc. RB for Senior Auxiliary Organization Event Center Series 2002 (Baa3)(a)
	1,000,000		6.000			07/01/12		1,132,240
California Statewide Communities Development Authority VRDN for Kaiser Series 2001 C (A+)
	250,000		5.250			08/01/31		267,700
Cathedral City Improvement Bond Act of 1915 Special Assessment for Cove Improvement District 04-02 Series 2005
	250,000		5.000			09/02/20		255,173
Chabot-Las Positas Community College District GO Bonds for Capital Appreciation Bonds Series 2006 C (AMBAC) (AAA/Aaa)(c)
	6,340,000		0.000			08/01/35		1,542,459
Chino Community Facilities District Special Tax Assessment No. 2
	500,000		5.000			09/01/36		503,900
Chula Vista Community Facilities District Special Tax No. 7 for Otay Ranch Villiage Eleven Series 2006 I
	250,000		5.100			09/01/26		255,770
	1,570,000		5.125			09/01/36		1,601,871
Coachella Valley Water District Improvement Bond Act 1913 to 1915 for Limited Obligation Improvement Assessment
	1,000,000		5.100			09/02/26		1,019,150
Del Mar Race Track Authority RB Series 2005 (BBB-)
	200,000		5.000			08/15/25		208,448
Eastern Municipal Water District Community Facilities Special Tax District No. 2003-25 Improvement Area D
	425,000		5.000			09/01/36		426,203
Eastern Municipal Water District Community Facilities Special Tax District No. 2004-29 Sun Ranch
	500,000		5.000			09/01/29		506,085
	1,000,000		5.000			09/01/36		1,008,270
Eastern Municipal Water District Community Facilities Special Tax District No. 2005-40 Mahogany
	410,000		5.000			09/01/36		412,751
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Asset Backed Bonds Series 2005 A (AMBAC-TCRS) (AAA/Aaa)
	3,000,000		5.000			06/01/45		3,147,030
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Asset Backed Bonds Series 2005 A (FGIC-TCRS) (AAA/Aaa)
	1,000,000		5.000			06/01/45		1,049,010
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Enhanced Asset Backed Bonds Series 2005 A (Radian-IBC) (AA)
	1,500,000		5.000			06/01/45		1,562,580
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-1 (BBB/Baa3)
	1,225,000		6.750			06/01/39		1,404,364
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-3 (BBB/Baa3)
	350,000		7.875			06/01/42		430,493
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-5 (BBB/Baa3)
	650,000		7.875			06/01/42		799,487
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 B (AAA/Aaa)(a)
	7,800,000		5.500			06/01/13		8,660,886
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2005 A (A/A2)
	2,800,000		5.000			06/01/45		2,887,080
Jurupa Community Services District Special Tax Community Facilities District No. 19 Eastvale
	1,500,000		5.000			09/01/36		1,505,415
Kaweah Delta Health Care District RB Series 2004 (A3)
	325,000		6.000			08/01/34		355,309
Kings River Conservation District California Revenue COPS for Peaking Project Series 2004 (Baa1)
	300,000		5.000			05/01/11		313,989
	300,000		5.000			05/01/12		316,332
	285,000		5.000			05/01/15		304,719
Lafayette Redevelopment Agency Tax Allocation RB for Lafayette Redevelopment Project Series 2005 (Radian) (AA)
	120,000		5.000			08/01/35		125,057
Lake Elsinore Unified School District Community Facilities District Special Tax Series 2005-3
	595,000		5.000			09/01/25		606,448
Los Angeles Unified School District GO Bonds for Election of 1997 Series 2002 E (MBIA) (AAA/Aaa)(a)
	1,000,000		5.125			07/01/12		1,084,890
Los Angeles Unified School District GO Bonds Series 2003 A (MBIA) (AAA/Aaa)(a)
	2,500,000		5.375			07/01/13		2,776,250
Menlo Park GO Bonds Series 2002 (Aa1)
	1,000,000		5.250			08/01/27		1,075,220

 The accompanying notes are an integral part of these financial statements.

48

GOLDMAN SACHS MUNICIPAL INCOME FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
California – (continued)
Metropolitan Water District Waterworks RB Refunding Series 2001 A (AA+/Aa2)
$	1,000,000		5.100	%		07/01/25	$	1,052,870
Palo Alto Improvement Bond Act of 1915 for Special Assessment University Avenue Area off Street Parking Series 2002 A (BBB)
	955,000		5.250			09/02/15		976,898
Poway California Unified School District Special Tax Community Facilities District 6-4 South Series 2005
	250,000		5.125			09/01/35		255,330
Sacramento North Natomas Community Facilities 97-01 Special Tax Series 2005
	1,190,000		5.000			09/01/29		1,207,767
Sacramento Special Tax Refunding for North Natomas Community Facilities 97-01 Series 2005
	565,000		5.000			09/01/25		574,543
San Diego Unified School District GO Bonds for Election 1998 Series 2002 D (FGIC) (AAA/Aaa)
	1,000,000		5.250			07/01/24		1,091,770
San Gabriel Unified School District GO Bonds Unrefunded Balance Series 2002 A (FSA) (AAA/Aaa)
	55,000		5.375			08/01/21		59,784
Sierra View Local Health Care District RB Refunding Series 1998 (A-)
	500,000		5.400			07/01/22		515,875
Tobacco Securitization Authority Northern California Tobacco Settlement RB for Asset Backed Bonds Series 2005 A-1 (BBB/Baa3)
	350,000		5.500			06/01/45		367,615
Tobacco Securitization Authority RB for Southern California Tobacco Settlement Asset Backed Bonds Series 2002 A (AAA/Aaa)(a)
	3,000,000		5.625			06/01/12		3,318,810
Tobacco Securitization Authority Southern California Tobacco Settlement RB for Asset Backed Bonds Series 2006 A-1 (BBB/Baa3)
	1,860,000		5.125			06/01/46		1,900,362
Torrance California COPS Refunding & Public Improvement Project Series 2005 B (AMBAC) (AAA/Aaa)
	310,000		5.250			06/01/34		335,107
University of California RB for Multiple Purpose Projects Series 2001 M (FGIC) (AAA/Aaa)
	1,000,000		5.125			09/01/22		1,047,720
	1,000,000		5.125			09/01/23		1,046,890
								70,167,138
Colorado – 2.6%
Adams Colorado RB VRDN Series 2006-1260 (FHA/MBIA) (AAA)(d)
	455,000		9.750			02/01/31		578,446
Aurora Centretech Metropolitan District GO Bonds Series 1998 C (BNP Paribas LOC) (AA)(b)
	2,000,000		4.875			12/01/08		2,038,500
Colorado Health Facilities Authority RB for Covenant Retirement Communities Inc. Series 2005 (BBB)
	1,150,000		5.000			12/01/35		1,168,929
Colorado Health Facilities Authority RB for Hospital Poudre Valley Health Care Series 2005 F (BBB+/Baa2)
	1,000,000		5.000			03/01/25		1,031,540
Colorado Health Facilities Authority RB for Portercare Adventist Health System Series 2001 (A2)(a)
	500,000		6.500			11/15/11		570,875
Denver City & County GO Bonds for Various Purposes Series 1999 B (AA+/Aa1)
	1,000,000		5.625			08/01/07		1,015,130
E-470 Public Highway Authority RB Series 2004 B (MBIA) (AAA/Aaa)(c)
	5,000,000		0.000			09/01/27		1,811,100
La Plata County School District No. 9-R Durango GO Bonds Series 2002 (MBIA) (Aaa)(a)
	1,000,000		5.250			11/01/12		1,090,500
SBC Metropolitan District GO Refunding Series 2005 (ACA) (A)
	500,000		5.000			12/01/29		517,690
Tower Metropolitan District GO Bonds Refunding and Improvement Series 2005 (Radian) (AA/Aa3)
	140,000		5.000			12/01/35		145,270
West Metro Fire Protection District GO Series 2006 A(MBIA) (Aaa)
	2,200,000		5.250			12/01/26		2,422,354
								12,390,334
Connecticut – 1.5%
Connecticut State Development Authority PCRB Refunding for Connecticut Light & Power Co. RMKT 9/23/98 Series 1993 A (BBB-/Baa1)
	2,500,000		5.850			09/01/28		2,632,425
Connecticut State GO Bonds Refunding Series C (AA/Aa3)(d)
	4,000,000		5.500			12/15/13		4,496,860
								7,129,285
District Of Columbia – 1.3%
District of Columbia Tobacco Settlement Financing Corp. RB for Asset Backed Bonds Series 2001 (BBB/Baa3)
	765,000		6.250			05/15/24		819,430
	1,000,000		6.500			05/15/33		1,199,430
Metropolitan Washington DC Airports Authority RB Series 2005 A (AMT) (MBIA) (AAA/Aaa)
	2,000,000		5.000			10/01/35		2,087,600
Metropolitan Washington DC Airports Authority RB Series 2006 A (AMT) (FSA) (AAA/Aaa)
	2,000,000		5.000			10/01/35		2,095,480
								6,201,940
Florida – 7.5%
Arbor Greene Community Development District Special Assessment for Refunding Revenue Series 2006 (BBB+)
	1,600,000		5.000			05/01/19		1,685,936
Bobcat Trail Community Development District RB Refunding for Capital Improvement Series 2005
	1,225,000		5.200			05/01/29		1,232,521

The accompanying notes are an integral part of these financial statements. 

49

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Bridgewater Wesley Chapel Community Development District RB for Capital Improvement Series 2005
$	2,465,000		5.750	%		05/01/35	$	2,549,821
Coconut Cay Community Development District of Florida Special Assessment Series 2006
	1,000,000		5.375			05/01/36		1,015,570
Covington Park Community Development District Special Assessment Refunding for Capital Improvement Series 2005 (A-)
	715,000		5.000			05/01/21		728,878
Crossings at Fleming Island Community Development District RB for Special Assignment Series 2000 B (MBIA) (AAA/Aaa)
	1,765,000		5.800			05/01/16		1,900,976
Diamond Hill Community Development District Tax Allocation for Capital Improvement Series 2004
	1,705,000		6.000			05/01/34		1,787,556
Double Branch Community Development District Special Assessment Series 2005 A
	575,000		5.350			05/01/34		579,922
Florida State GO Bonds Department of Transportation Right of Way Series 1997 B (AAA/Aaa) (a)
	1,000,000		5.500			07/01/07		1,023,010
Hamal Community Development District Special Assessment for Refunding and Improvement Series 2006 A (MBIA) (AAA)
	2,755,000		5.375			05/01/22		3,047,691
	130,000		4.750			05/01/31		134,233
High Ridge Quantum Community Development District Special Assessment for Boynton Beach Series 2005 A
	1,935,000		5.750			05/01/35		1,958,375
Hollywood Community Redevelopment Agency RB for Beach CRA Series 2004 (Baa2)
	300,000		5.625			03/01/24		320,850
Jacksonville Economic Development Community Health Care Facilities RB for Mayo Clinic Series 2006 (AA/Aa2)
	825,000		5.000			11/15/36		865,161
Keys Cove Community Development District Special Assessment Series 2004
	1,210,000		5.875			05/01/35		1,274,057
Longleaf Community Development District Special Assessment Refunding Series 2006
	1,350,000		5.375			05/01/30		1,371,019
Marsh Harbour Community Development District Special Assessment Series 2005 A
	965,000		5.450			05/01/36		988,980
Meadow Pointe III Community Development District RB for Capital Improvement Series 2004 A
	985,000		6.000			05/01/35		1,025,099
North Springs Improvement District RB Refunding for Water Management Series 2005 A
	195,000		5.375			05/01/24		199,116
North Springs Improvement District RB Refunding for Water Management Series 2005 B
	450,000		5.500			05/01/35		460,535
Oakstead Community Development District Capital Improvement Refunding Series 2006 A-1 (MBIA) (AAA/Aaa)
	145,000		4.500			05/01/32		145,000
Orange County Florida Health Facilities Authority RB for Orlando Regional Healthcare Hospital Series 2006 B (A/A2)
	135,000		4.750			11/15/36		137,067
Palm Beach County GO Bonds Series 1999 A (AAA/Aaa)(a)
	1,000,000		5.450			08/01/09		1,050,010
Pinellas County Educational Facilities Authority RB for Eckerd College Project Series 2006 (ACA)(A)
	250,000		5.250			10/01/29		266,498
	175,000		4.750			10/01/31		178,602
Port Everglades Authority RB Series 1986 (ETM) (AAA/Aaa)
	2,785,000		7.125			11/01/16		3,273,210
Sail Harbour Community Development District Special Assessment Series 2005 A
	1,000,000		5.500			05/01/36		1,023,400
Sonoma Bay Community Development District Special Assessment Series 2005 A
	650,000		5.450			05/01/36		663,449
Sumter Landing Community Development District Recreational RB Series 2005 A (MBIA)
(AAA/Aaa)
	250,000		4.625			10/01/30		254,100
Tampa Palms Open Space and Transportation Community Development District Revenue Special Assessment for Capital Improvement Area 7 Project Series 2004 (MBIA) (AAA/Aaa)
	250,000		4.000			05/01/13		255,308
	1,400,000		4.500			05/01/18		1,483,874
Thousand Oaks Community Development District Special Assessment RB Series 2005 A1
	985,000		5.350			05/01/35		1,002,631
Villagewalk of Bonita Springs Community Development District Special Assessment for Capital Improvements Series 2005
	1,000,000		5.600			05/01/36		1,024,930
Volusia County Educational Facility Authority RB Refunding for Embry-Riddle Aeronautical Series 2005 (Radian) (AA/Aa3)
	650,000		5.000			10/15/35		676,631
								35,584,016
Georgia – 2.0%
Augusta Georgia Water & Sewer RB Series 2004 (FSA) (AAA/Aaa)
	7,000,000		5.250			10/01/39		7,598,010
Chatham County Hospital Authority RB for Hospital Improvement Memorial Health University Series 2004 A (A-/A3)
	325,000		5.500			01/01/34		345,709
Georgia State GO Bonds Series 1992 B (AAA/Aaa)
	1,000,000		6.000			03/01/12		1,119,980
Georgia State GO Bonds Series 2005 A (MBIA) (AAA/Aaa)
	400,000		2.000			09/01/24		286,248
								9,349,947

 The accompanying notes are an integral part of these financial statements.

50

GOLDMAN SACHS MUNICIPAL INCOME FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Guam – 0.1%
Guam Education Financing Foundation COPS for Public School Facilities Project Series 2006 A (A-)
$	250,000		5.000	%		10/01/12	$	262,230
	175,000		5.000			10/01/23		183,211
								445,441
Hawaii – 0.8%
Hawaii State Airport Systems RB Series 2000 B (AMT) (FGIC) (AAA/Aaa)
	3,500,000		6.625			07/01/17		3,872,820
Illinois – 5.0%
Cary Illinois Special Tax Refunding for Special Service Area No. 1 Series 2006 (Radian) (AA)
	1,945,000		5.000			03/01/30		2,013,795
Chicago Illinois GO Bonds Series 2000 C (FGIC) (AAA/Aaa)(a)
	1,365,000		5.500			07/01/10		1,468,535
Chicago Illinois GO Bonds Unrefunded Balance Series 2000 C (FGIC) (AAA/Aaa)
	815,000		5.500			01/01/19		872,172
Chicago Illinois Ohare International Airport RB for General Airport 3rd Lien Series 2003 A-1 (XLCA) (AAA/Aaa)
	490,000		5.250			01/01/34		521,821
Chicago Illinois Tax Increment for Near South Redevelopment Project Series 2001 A (ACA) (A)
	1,250,000		6.250			11/15/13		1,379,450
Chicago Illinois Tax Increment Junior Lien for Central Loop Redevelopment Project Series 2000 A (ACA) (A)
	2,000,000		6.500			12/01/08		2,097,040
Chicago Illinois Tax Increment Junior Lien for Near South Redevelopment Project Series 2001 A (ACA) (A)
	750,000		5.000			11/15/11		783,180
Illinois Development Finance Authority PCRB for Amerencips Series 2000 A (BB+/Baa3)(b)
	2,300,000		5.500			02/28/14		2,326,013
Illinois Educational Facilities Authority Student Housing RB for Educational Advancement Fund University Center Project Series 2002 (Aaa)(a)
	2,000,000		6.250			05/01/12		2,272,100
Illinois Educational Facilities Authority Student Housing RB for Educational Advancement Fund University Center Project Series 2002 (Baa3)
	1,500,000		6.250			05/01/34		1,519,665
Illinois Finance Authority RB Refunding for Proctor Hospital Series 2006 (BBB-/Baa3)
	400,000		5.125			01/01/25		407,836
Illinois Finance Authority Solid Waste Disposal RB for Waste Management Inc. Project Series 2005 A (AMT) (BBB)
	400,000		5.050			08/01/29		413,724
Illinois State GO First Series 2002 (MBIA) (AAA/Aaa)
	3,000,000		5.375			07/01/19		3,248,010
Lake County Community Consolidated School District No. 041 GO Bonds Series 1999 A (FSA) (AAA/Aaa)
	2,725,000		9.000			11/01/16		3,852,278
Lombard Public Facilities Corp. RB for Conference Center and Hotel First Tier Series 2005 A-2 (ACA) (A)
	425,000		5.500			01/01/36		455,931
								23,631,550
Indiana – 0.7%
Delaware County Hospital Authority RB for Cardinal Health Systems Obligation Group Series 2006 (Baa2)
	240,000		5.250			08/01/36		250,589
Indiana Health & Educational Facilities Finance Authority Hospital RB for Clarian Health Obligations Series 2006 A (A+/A2)
	1,000,000		5.000			02/15/39		1,038,300
Indianapolis Airport Authority RB for Special Facilities Federal Express Corp. Project Series 2004 (AMT) (BBB/Baa2)
	640,000		5.100			01/15/17		681,331
Vanderburgh County Redevelopment Commission Tax Allocation for Tax Increment Series 2006 (A-)
	1,400,000		5.250			02/01/31		1,475,222
								3,445,442
Iowa – 0.7%
Coralville COPS Series 2006 D (A2)
	1,325,000		5.250			06/01/22		1,409,005
Tobacco Settlement Authority of Iowa RB for Asset Backed Bonds Series 2005 C (BBB/Baa3)
	1,875,000		5.375			06/01/38		1,959,731
								3,368,736
Kansas – 0.2%
Wichita Hospital RB for Refunding and Improvement Facilities Series 2001 III (A+)
	1,000,000		5.500			11/15/25		1,059,520
Kentucky – 0.8%
Kentucky Economic Development Finance Authority System RB Prerefunded for Norton Healthcare Series 2000 C (MBIA) (AAA/Aaa)(a)
	1,085,000		6.000			10/01/13		1,251,515
Kentucky Economic Development Finance Authority System RB Prerefunded for Norton Healthcare Series 2000 C (MBIA) (AAA/Aaa)
	2,165,000		6.000			10/01/18		2,480,094
								3,731,609
Louisiana – 1.3%
De Soto Parish Environmental Improvement RB Refunding for International Paper Co. Project Series 2004 A (AMT) (BBB/Baa3)
	675,000		5.000			11/01/18		692,435
Louisiana State Offshore Terminal Authority Deepwater Port RB for Loop LLC Project Series 2003 C (A/A3)
	1,000,000		5.250			09/01/15		1,072,750
	500,000		5.250			09/01/16		534,835

The accompanying notes are an integral part of these financial statements. 

51

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Louisiana – (continued)
New Orleans Levee District Public Improvement RB Series 1995 (FSA) (AAA/Aaa)
$	1,340,000		5.950	%		11/01/15	$	1,369,025
Tobacco Settlement Financing Corp. RB Series 2001 B (BBB/Baa3)
	1,285,000		5.500			05/15/30		1,347,618
	1,220,000		5.875			05/15/39		1,296,006
								6,312,669
Maine – 0.5%
Maine Municipal Bond Bank RB Series 2005 E (AAA/Aa1)
	2,165,000		5.000			11/01/34		2,306,981
Maryland – 2.8%
Anne Arundel County Special Obligation RB for Aundel Mills Project Series 2004 (AA+/Aa1)
	1,500,000		5.125			07/01/29		1,615,455
Baltimore RB for Wastewater Projects Series 2005 B (MBIA) (AAA/Aaa)
	3,260,000		5.000			07/01/35		3,459,708
Frederick County Special Tax for Lake Linganore Village Community Development Series 2001 A (Radian) (AA)
	500,000		5.600			07/01/20		542,405
	1,000,000		5.700			07/01/29		1,083,530
Maryland State Department of Transportation RB (AAA/Aa2)(d)
	2,300,000		5.000			05/01/14		2,508,288
Maryland State Health & Higher Educational Facilities Authority RB for Maryland Institute College of Art (Baa1)
	1,000,000		5.000			06/01/35		1,033,800
	1,000,000		5.000			06/01/40		1,032,230
Maryland State Health & Higher Educational Facilities Authority RB for Maryland Institute College of Art Series 2001 (Baa1)
	500,000		5.500			06/01/32		523,405
Maryland State Health & Higher Educational Facilities Authority RB for Medstar Health Series 2004 (BBB+/Baa1)
	500,000		5.375			08/15/24		534,860
	750,000		5.500			08/15/33		798,735
								13,132,416
Massachusetts – 2.9%
Massachusetts Bay Transportation Authority (AAA/Aa1)(a)
	1,000,000		5.000			07/01/14		1,090,170
Massachusetts State GO Bonds for Consolidated Loan Series 2000 A (AAA/Aa2)(a)
	2,000,000		6.000			02/01/10		2,161,520
Massachusetts State GO Bonds Series 1996 D (AMBAC) (AAA/Aaa)
	3,000,000		4.500			11/01/15		3,000,000
Massachusetts State Health & Educational Facilities Authority RB for Milton Hospital Series 2005 D (BBB-)
	575,000		5.500			07/01/40		599,282
Massachusetts State Health and Educational Facilities Authority RB for Emerson Hospital Series 2005 E (Radian) (AA)
	2,275,000		5.000			08/15/35		2,354,966
Massachusetts State Health and Educational Facilities Authority RB for Harvard Pilgrim Health Series 1998 A (FSA) (AAA/Aaa)
	3,750,000		5.250			07/01/12		3,890,213
Massachusetts State Health and Educational Facilities Authority RB for UMass Memorial Issue Series 2005 D (BBB/Baa2)
	300,000		5.000			07/01/33		305,895
Massachusetts State School Building Authority Sales Tax RB Series 2005 A (FSA) (AAA/Aaa)
	500,000		5.000			08/15/30		530,230
								13,932,276
Michigan – 0.8%
Michigan State Hospital Finance Authority RB for Ascension Health Credit Series 1999 A (MBIA) (AAA/Aaa)(a)
	2,000,000		6.125			11/15/09		2,166,620
Michigan State Hospital Finance Authority RB Refunding for Henry Ford Health Systems Series 2006 A (A/A1)
	625,000		5.000			11/15/38		652,050
Pontiac Tax Increment Finance Authority RB for Tax Increment Development Area No. 3 Series 2002 (ACA) (A)
	1,000,000		5.375			06/01/17		1,065,270
								3,883,940
Minnesota – 0.7%
Minnesota State Municipal Power Agency RB Series 2005 (A3)
	3,000,000		5.000			10/01/35		3,129,150
Mississippi – 0.2%
Mississippi Business Finance Corp. PCRB for Systems Energy Resources Inc. Project Series 1998 (BBB-/Ba1)
	685,000		5.875			04/01/22		687,808
Mississippi Hospital Equipment & Facilities Authority RB Refunding & Improvement for South Central Hospital Series 2006 (BBB+)
	175,000		5.250			12/01/26		185,826
								873,634
Missouri – 1.7%
Cameron IDA Health Facilities RB Insured by Cameron Community Hospital Series 2000 (ACA)(A)
	1,800,000		6.250			12/01/21		1,949,274
Missouri State Development Finance Board Infrastructure Facilities RB for Branson Landing Project Series 2005 A (BBB+/Baa1)
	270,000		4.750			06/01/25		274,366
	1,325,000		5.000			06/01/35		1,356,508
Missouri State Environmental Improvement & Energy Resource Authority RB for Kansas City Power & Light Series 1993 (BBB/A2)
	515,000		4.000			01/02/12		517,127
Missouri State Health and Educational Facilities Authority RB for St. Lukes Episcopal-Presbyterian Hospital Series 2001 (FSA) (AAA/Aaa)
	1,000,000		5.500			12/01/15		1,080,580

 The accompanying notes are an integral part of these financial statements.

52

GOLDMAN SACHS MUNICIPAL INCOME FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Missouri – (continued)
Truman State University Housing System RB Series 2004 (AMBAC) (Aaa)
$	3,000,000		5.000	%		06/01/30	$	3,155,970
								8,333,825
Montana(b) – 0.2%
Forsyth Montana PCRB Refunding Portland General Series 1998-A RMKT 5/1/03 (BBB+/Baa1)
	1,000,000		5.200			05/01/09		1,024,900
Nevada – 2.2%
Clark County Industrial Development RB for Southwest Gas Corp. Project Series 2003 C (BBB-/Baa3)(b)
	765,000		5.450			03/01/13		800,955
Las Vegas New Convention and Visitors Authority RB Series 1999 (AMBAC) (AAA/Aaa)(a)
	2,500,000		6.000			07/01/09		2,678,825
Nevada Department of Business and Industry RB for Las Vegas Monorail Project 1st Tier Series 2000 (AMBAC) (AAA/Aaa)
	2,500,000		5.625			01/01/32		2,696,075
North Las Vegas Local Improvement Special Assessment Refunding for Special Improvement District No. 60 Series 2006 B
	1,765,000		5.100			12/01/22		1,818,215
North Las Vegas Special Assessment for Local Improvement District No. 60 Subseries 2006 B
	770,000		4.850			12/01/15		787,371
Washoe County GO Bonds for Reno Sparks Convention Series 2000 A (FSA) (AAA/Aaa)(a)
	1,585,000		6.375			01/01/10		1,718,663
								10,500,104
New Hampshire – 0.7%
New Hampshire Health and Education Facilities Authority RB for Catholic Medical Center Series 2006 (BBB+/Baa1)
	190,000		5.000			07/01/36		197,064
New Hampshire Health and Educational Facilities Authority RB for Healthcare Systems Covenant Health Series 2002 (A)
	500,000		6.000			07/01/22		543,190
New Hampshire Municipal Bond Bank RB Series 2003 (MBIA) (AAA/Aaa)
	1,000,000		5.250			08/15/19		1,095,950
New Hampshire State Business Finance Authority RB for Waste Management Inc. Project Series 2002 (AMT) (BBB)
	1,250,000		5.200			05/01/27		1,306,150
								3,142,354
New Jersey – 3.4%
New Jersey Economic Development Authority RB for Cigarette Tax Series 2004 (Radian) (AA)
	1,085,000		5.500			06/15/16		1,202,842
New Jersey Health Care Facilities Financing Authority RB for Children’s Specialized Hospital Series 2005 A (Baa3)
	600,000		5.000			07/01/24		612,006
	175,000		5.500			07/01/30		184,163
New Jersey Health Care Facilities Financing Authority RB for Palisades Medical Center of New York Healthcare Series 2002 (BBB-/Baa3)
	500,000		6.500			07/01/21		548,930
New Jersey Health Care Facilities Financing Authority RB for South Jersey Hospital Series 2006 (Baa1)
	200,000		5.000			07/01/36		207,912
	625,000		5.000			07/01/46		646,256
New Jersey State GO Bonds Refunding Series 1999 F (AA/Aa3)
	1,000,000		5.500			08/01/11		1,082,580
New Jersey State Transportation Trust Fund Authority RB for Transportation System Series 2003 C (AAA/Aaa)(a)
	3,000,000		5.500			06/15/13		3,332,820
New Jersey Tobacco Settlement Financing Corp. RB for Public Improvement Series 2002 (BBB/Baa3)
	5,215,000		5.750			06/01/32		5,577,077
Tobacco Settlement Financing Corp. RB for New Jersey Asset Backed Bonds Series 2002 (BBB/Baa3)
	2,370,000		6.000			06/01/37		2,563,653
Tobacco Settlement Financing Corp. RB Series 2003 (BBB/Baa3)
	300,000		6.750			06/01/39		342,996
								16,301,235
New Mexico – 0.8%
Farmington PCRB Public Service Co. New Mexico Series 1997 D (BBB/Baa2)
	3,530,000		6.375			04/01/22		3,634,241
New York – 6.1%
Long Island Power Authority Electric Systems RB General Series 2006 C (A-/A3)
	1,240,000		5.000			09/01/35		1,310,941
Metropolitan Transportation Authority RB Refunding for Transportation Series 2002 F (MBIA) (AAA/Aaa)
	1,000,000		5.250			11/15/27		1,078,630
Metropolitan Transportation Authority RB Refunding Series A (AMBAC) (AAA/Aaa)(d)
	2,000,000		5.500			11/15/15		2,212,400
New York City GO Bonds Series 1997 C (MBIA-IBC) (AAA/Aaa)(a)
	45,000		5.375			11/15/07		46,329
New York City GO Bonds Unrefunded Balance Series 1997 C (MBIA-IBC) (AAA/Aaa)
	700,000		5.375			11/15/17		719,516
New York City IDA Civic Facility RB for Polytechnic University Project Series 2000 (BB+/Ba3)
	1,250,000		6.000			11/01/20		1,331,150
New York City IDA RB for Queens Baseball Stadium-Pilot Series 2006 (AMBAC) (AAA/Aaa)
	3,475,000		5.000			01/01/36		3,708,763
New York City Transitional Finance Authority RB for Future Tax Secured Series 2002 C (FGIC) (AAA/Aaa)
	1,000,000		5.250			08/01/14		1,084,880

The accompanying notes are an integral part of these financial statements. 

53

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
New York – (continued)
New York City Transitional Finance Authority RB Refunding Future Tax Secured Series A (AAA/Aa1)(d)
$	2,000,000		5.500	%		11/01/11	$	2,163,740
New York State Dormitory Authority Non State Supported Debt RB for NYU Hospital Center Series 2006 A (BB/Ba2)
	750,000		5.000			07/01/26		765,390
New York State Dormitory Authority RB for Montefiore Hospital Series 2004 (FGIC/FHA) (AAA/Aaa)
	2,500,000		5.000			08/01/29		2,643,350
New York State Dormitory Authority RB for North Shore University Hospital Series 1998 (MBIA) (AAA/Aaa)
	1,500,000		5.500			11/01/14		1,692,015
New York State Environmental Facilities Corp. State Clean Water & Drinking RB for Revolving Funds Pooled Funding Program Series 2002 F (AAA/Aaa)
	175,000		5.250			11/15/20		189,644
Suffolk County Industrial Development Agency Civic Facilities RB for Dowling College Series 2006 A (ACA)(A)
	1,000,000		5.000			06/01/36		1,036,160
Tobacco Settlement Financing Corp. RB for New York Asset Backed Bonds Series 2003 A-1 (AA-/A1)
	2,600,000		5.500			06/01/19		2,855,034
Tobacco Settlement Financing Corp. RB Series 2003 C-1 (AA-/A1)
	5,000,000		5.500			06/01/19		5,490,450
Triborough Bridge & Tunnel Authority RB for General Purpose Series 1999 A (AAA/Aa2)(a)
	675,000		5.250			07/01/09		708,338
								29,036,730
North Carolina – 2.2%
Charlotte North Carolina Water & Sewer System RB Series 2001 (AAA/Aa1)
	1,000,000		5.125			06/01/26		1,059,680
North Carolina Capital Facilities Finance Agency RB for Duke University Project Series 2002 A (AA+/Aa1)
	2,000,000		5.125			07/01/42		2,101,220
North Carolina Eastern Municipal Power Agency Power System RB Series 2003 C (BBB/Baa2)
	500,000		5.375			01/01/16		535,215
	850,000		5.375			01/01/17		907,477
North Carolina Eastern Municipal Power Agency Power System RB Series 2003 D (BBB/Baa2)
	600,000		5.125			01/01/23		623,874
North Carolina Medical Care Community Hospital RB for Northeast Medical Center Project Series 2000 (AMBAC) (AAA/Aaa)
	3,000,000		5.500			11/01/25		3,195,930
North Carolina Municipal Power Agency No. 1 Catawba Electric RB Series 2003 A (BBB+/A3)
	450,000		5.500			01/01/13		487,021
Winston-Salem North Carolina Water & Sewer Systems RB Refunding Series 2001 (AAA/Aa2)(a)
	1,500,000		5.250			06/01/11		1,620,915
								10,531,332
North Dakota – 0.0%
Ward County Health Care Facilities RB for Trinity Obligated Group Series 2006 (BBB+)
	150,000		5.125			07/01/25		157,391
Ohio – 1.8%
Marysville RB Wastewater Treatment System Series 2006 (XLCA) (AAA/Aaa)
	1,670,000		5.250			12/01/24		1,834,428
	1,755,000		5.250			12/01/25		1,926,270
	1,350,000		5.250			12/01/26		1,479,398
Ohio Housing Finance Agency Mortgage RB for Residential Mortgaged Backed Securities Series 2006 E (AMT) (FNMA/GNMA) (Aaa)
	1,500,000		5.000			09/01/36		1,537,560
Pickerington Local School District GO Bonds for School Facilities Construction & Improvement Series 2001 (FGIC) (AAA/Aaa)(a)
	500,000		5.250			12/01/11		539,645
Summit County Port Authority Program Development RB for Twinsburg Township Project Series 2005 D (BBB+)
	655,000		5.125			05/15/25		680,663
Toledo-Lucas County of Ohio Port Authority Development RB for Northwest Ohio Bond FD-Truckload Series 2005 C (AMT) (BBB+)
	435,000		5.125			11/15/25		443,978
								8,441,942
Oklahoma – 0.1%
Norman Oklahoma Regional Hospital Authority RB Series 2005 (BBB-)
	250,000		5.375			09/01/36		260,515
Oregon – 0.5%
Klamath Falls Intercommunity Hospital Authority RB Prerefunded for Merle West Medical Center Series 2002 (BBB)(a)
	1,255,000		6.125			09/01/12		1,426,119
Klamath Falls Intercommunity Hospital Authority RB Unrefunded Balance for Merle West Medical Center Series 2002 (BBB)
	745,000		6.125			09/01/22		812,952
								2,239,071
Pennsylvania – 0.8%
Montgomery County Higher Education & Health Authority RB for Catholic Health Systems East Series 2004 C (A/A1)
	150,000		5.375			11/15/34		161,487
Pennsylvania Economic Development Financing Authority Exempt Facilities RB for Amtrak Project Series 2001 A (AMT) (BBB/A3)
	2,000,000		6.250			11/01/31		2,174,360
Pennsylvania Intergovernmental Cooperative Authority Special Tax Revenue Refunding for Philadelphia Funding Program Series 1999 (FGIC) (AAA/Aaa)
	1,000,000		5.250			06/15/15		1,039,800

 The accompanying notes are an integral part of these financial statements.

54

GOLDMAN SACHS MUNICIPAL INCOME FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Pennsylvania – (continued)
Pennsylvania State Public School Building Authority RB for Montgomery County Community College Project Series 2005 (AMBAC) (Aaa)
$	160,000		5.000	%		05/01/24	$	170,952
St. Mary Hospital Authority RB Refunding for Catholic Health East Series 2004 B (A/A1)
	225,000		5.375			11/15/34		240,649
								3,787,248
Puerto Rico – 4.2%
Puerto Rico Commonwealth GO Bonds Public Improvement Series 2006 A (BBB/Baa3)
	1,575,000		5.250			07/01/30		1,693,471
Puerto Rico Commonwealth GO Bonds Refunding Public Improvement Series 2006 B (BBB/Baa3)
	2,125,000		5.000			07/01/35		2,220,944
Puerto Rico Commonwealth Government Development Bank RB Senior Notes Series 2006 B (BBB/Baa3)
	6,625,000		5.000			12/01/09		6,851,707
Puerto Rico Commonwealth Highway and Transportation Authority RB Series 1996 Y (XLCA) (AAA/Aaa)
	2,500,000		5.000			07/01/36		2,671,700
Puerto Rico Commonwealth Infrastructure Financing Authority RB Series 2005 B (BBB/Baa3)
	1,525,000		5.000			07/01/41		1,587,982
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Series 2006 B (BBB+/Baa3)
	1,250,000		5.000			07/01/25		1,318,513
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Series 2006 B (BBB+/Baa3)
	1,250,000		5.000			07/01/37		1,310,450
	1,250,000		5.000			07/01/46		1,305,438
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities RB for Ana G Mendez University System Project Series 2006 (BBB-)
	425,000		5.000			03/01/36		437,423
Puerto Rico Public Finance Corp. RB Commonwealth Appropriations Series 2004 A (LOC-Government Bank for Puerto Rico) (BBB-/Ba1)(b)
	700,000		5.750			02/01/12		759,801
								20,157,429
South Carolina – 3.0%
Georgetown County Environmental Improvement RB for International Paper Co. Project Series A (AMT) (BBB/Baa3)
	2,500,000		5.000			08/01/30		2,526,100
Grand Strand Water & Sewer Authority South Carolina Waterworks & Sewer Systems RB Series 2001 (FSA) (AAA/Aaa)
	5,000,000		5.000			06/01/31		5,214,600
Greenville County School District Installment Purchase RB Prerefunded for Building Equity Series 2002 (AA-/Aa3)(a)
	550,000		6.000			12/01/12		625,570
Greenville County School District Installment Purchase RB Prerefunded Balance for Building Equity Series 2002 (AA-/Aaa)
	450,000		6.000			12/01/12		513,148
Lancaster County School District GO Bonds Series 1999 (FSA) (AAA/Aaa)
	1,000,000		5.100			03/01/15		1,055,160
Medical University Hospital Authority RB for Hospital Facilities Series 2004 A (MBIA/FHA) (AAA/Aaa)
	4,000,000		5.000			08/15/31		4,194,080
								14,128,658
Tennessee – 2.3%
Elizabethton Health and Educational Board RB First Mortgage Series 2000 B (MBIA) (AAA/Aaa)
	2,000,000		6.250			07/01/15		2,350,560
Johnson City Health & Educational Facilities Board Hospital RB for First Mortgage Mountain States Health Series 2006 A (BBB+/Baa2)
	775,000		5.500			07/01/36		833,241
Johnson City Health and Educational Facilities Board Hospital for Mountain States Health RB First Mortgage Series 2000 A (MBIA) (AAA/Aaa)
	3,000,000		6.250			07/01/16		3,562,800
McMinnville Housing Authority RB First Mortgage for Beersheba Heights Tower Series 1997 (Baa1)
	485,000		6.000			10/01/09		497,251
Shelby County Health Educational & Housing Facilities Board RB PA 1277 A (RITES) (AA)(b)(d)
	810,000		6.815			10/01/08		879,109
Shelby County Health Educational & Housing Facilities Board RB PA 1277 B (RITES) (AA)(d)
	120,000		6.815			09/01/08		129,797
Sullivan County Health Educational & Housing Facilities Board Hospital RB for Wellmont Health System Project Series 2006 C (BBB+)
	625,000		5.250			09/01/36		653,769
Tennessee Housing Development Agency RB for Homeownership Program 1 Series 2000 (AMT) (AA/Aa2)
	2,130,000		5.850			07/01/11		2,245,489
								11,152,016
Texas – 6.1%
Alliance Airport Authority Special Facilities RB for Fedex Corp. Project Series 2006 (AMT) (BBB/Baa2)
	1,000,000		4.850			04/01/21		1,018,880
Brazos River Authority PCRB for TXU Electric Co. Project Series 1999 A (AMT) (BBB-/Baa2)
	700,000		7.700			04/01/33		815,108
Brazos River Authority PCRB for TXU Electric Co. Project Series 1999 C (AMT) (BBB-/Baa2)
	1,200,000		7.700			03/01/32		1,398,048
Brazos River Authority PCRB for TXU Electric Co. Project Series 2001 C (AMT) (BBB-/Baa2)(b)
	1,045,000		5.750			11/01/11		1,109,163
Brazos River Authority RB for Reliant Energy Inc. Project Series 1999 A (BBB-/Ba1)
	1,250,000		5.375			04/01/19		1,286,187
Fort Bend County Municipal Utilities District No. 30 GO Bonds Series 2004 (FSA) (AAA/Aaa)
	2,015,000		5.750			09/01/27		2,210,838

The accompanying notes are an integral part of these financial statements. 

55

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Texas – (continued)
Frisco Independent School District GO Bonds Series 2002 (PSF-GTD) (Aaa)
$	1,000,000		5.125	%		08/15/30	$	1,048,560
Grand Prairie Independent School District GO Bonds Series 2003 (FSA) (AAA/Aaa)
	1,000,000		5.375			02/15/18		1,088,990
Gregg County Health Facilities Development Corp. RB for Good Shepherd Medical Center Project Series 2000 (Radian) (AA/Aa3)
	3,000,000		6.375			10/01/25		3,331,800
Gulf Coast Waste Disposal Authority Texas Waste Disposal RB for Valero Energy Corp. Project Series 2001 (AMT) (BBB-/Baa3)
	1,000,000		6.650			04/01/32		1,090,400
Harris County Hospital District RB (MBIA) (AAA/Aaa)
	2,050,000		6.000			02/15/16		2,216,419
Hidalgo County Health Services RB for Mission Hospital Inc. Project Series 2005 (BBB/Baa2)
	700,000		5.000			08/15/19		715,813
Mesquite Independent School District GO Bonds Refunding Series 2002 (PSF-GTD) (AAA)
	1,160,000		5.500			08/15/21		1,265,850
Mesquite Texas Health Facilities Development Corp. RB for Christian Care Retirement Facilities (BBB-)
	150,000		5.500			02/15/25		157,633
	250,000		5.625			02/15/35		263,930
Metropolitan Health Facilities Development Corp. RB for Wilson N. Jones Memorial Hospital Project Series 2001 (B1)
	1,300,000		6.625			01/01/11		1,333,358
Schertz GO Bonds Series 2006 (MBIA) (AAA/Aaa)
	1,715,000		5.250			02/01/25		1,873,655
	1,900,000		5.250			02/01/27		2,069,651
Tomball Hospital Authority RB Refunding Series 2005 (Baa3)
	650,000		5.000			07/01/20		660,224
	750,000		5.000			07/01/23		757,755
University of Texas RB for Fing System Series 2003 B (AAA/Aaa)
	1,000,000		5.250			08/15/20		1,080,960
Waxahachie Independent School District GO Bonds Capital Appreciating Prerefunding Series 2000 (PSF-GTD) (Aaa)(a)(c)
	1,775,000		0.000			08/15/10		1,281,763
Waxahachie Independent School District GO Bonds Capital Appreciating Unrefunded Balance Series 2000 (PSF-GTD) (Aaa)(c)
	80,000		0.000			08/15/13		61,561
Williamson County GO Bonds for Road Series 2002 (FSA) (AAA/Aaa)(a)
	1,040,000		5.250			02/15/12		1,122,358
								29,258,904
U.S. Virgin Islands – 0.2%
Virgin Islands Public Finance Authority RB for Senior Lien Matching Fund Loan Note Series 2004 A (BBB)
	500,000		5.000			10/01/14		532,560
	500,000		5.250			10/01/16		539,195
								1,071,755
Utah – 0.4%
Tooele County Hazardous Waste Treatment RB for Union Pacific Project Series 1992 A (AMT) (BBB/Baa2)
	2,000,000		5.700			11/01/26		2,091,020
Virginia – 0.8%
Bristol Virginia Utilities System RB Refunding Series 2003 (MBIA) (AAA/Aaa)
	1,850,000		5.250			07/15/26		1,990,249
Chesapeake IDA PCRB for Virginia Electric & Power Project Series 1985 (BBB/Baa1)
	750,000		5.250			02/01/08		752,985
Virginia Commonwealth Transportation Board RB for Northern Virginia Transportation District Program Series 1999 A (AA+/Aa1)(a)
	1,000,000		5.500			05/15/09		1,056,730
								3,799,964
Washington – 4.2%
Chelan County Public Utilities District No. 001 RB for Chelan Hydro Project Series 1997 D (AMT) (MBIA) (AAA/Aaa)
	2,500,000		6.350			07/01/28		2,586,150
King County Sewer RB Series 1999-2 (FGIC) (AAA/Aaa)(a)
	3,965,000		6.250			01/01/09		4,224,906
Skagit County Public Hospital District No. 002 GO Refunding Bonds for Improvement Series 2005 (MBIA) (Aaa)
	3,700,000		5.000			12/01/30		3,907,089
Tacoma Washington GO Bonds Series 2004 (MBIA) (AAA/Aaa)
	4,000,000		5.000			12/01/30		4,231,200
Vancouver Downtown Redevelopment Authority RB for Conference Center Project Series 2003 A (ACA)(A)
	3,025,000		6.000			01/01/34		3,325,201
Washington Housing Finance Commission RB for Single Family Program Series 2000 5-NR (FNMA/FHLMC/GNMA) (Aaa)
	185,000		5.700			06/01/16		190,406
Washington State GO Bonds Series 2000 B (AAA/Aa1)(a)
	1,000,000		6.000			01/01/10		1,071,670
Washington State Health Care Facilities Authority RB for Group Health Corp. Series 2006 (Radian) (AA)
	450,000		5.000			12/01/36		470,281
								20,006,903

 The accompanying notes are an integral part of these financial statements.

56

GOLDMAN SACHS MUNICIPAL INCOME FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
West Virginia – 0.8%
Berkeley County Public Sewer RB Series 2006 A
$	120,000		5.000	%		10/01/22	$	118,955
Monongalia County Building Community Hospital RB for Monongalia General Hospital Series 2005 A (A-)
	1,380,000		5.250			07/01/25		1,449,428
	1,190,000		5.250			07/01/35		1,244,668
West Virginia State GO Bonds for State Road Series 2000 (FGIC) (AAA/Aaa)(a)
	1,000,000		5.625			06/01/10		1,078,630
								3,891,681
Wisconsin – 1.6%
Badger Tobacco Asset Securitization Corp. RB Asset Backed Bonds Series 2002 (BBB/Baa3)
	1,000,000		6.375			06/01/32		1,086,180
Wisconsin State GO Bonds Series 1999 C (AA-/Aa3)(a)
	5,380,000		6.250			05/01/10		5,847,899
Wisconsin State Health & Educational Facilities Authority RB for Upland Hills Health, Inc. Series 2006 A (BBB)
	375,000		5.125			05/15/29		391,522
Wisconsin State Health & Educational Facilities Authority RB for Upland Hills Health, Inc. Series 2006 B (BBB)
	100,000		5.000			05/15/36		102,205
								7,427,806
TOTAL STATE-SPECIFIC MUNICIPAL DEBT OBLIGATIONS
(Cost $448,702,362)							$	473,332,553
Other Municipals – 1.4%
GMAC Municipal Mortgage Trust Series A AMT (A3)(b)(e)
$	525,000		4.150	%		10/31/09	$	523,100
GMAC Municipal Mortgage Trust Series A-1 AMT (A3)(b)(e)
	375,000		4.900			10/31/14		387,776
GMAC Municipal Mortgage Trust Series A-2 AMT (A3)(b)(e)
	1,350,000		5.300			10/31/19		1,429,448
GMAC Municipal Mortgage Trust Series B (Baa1)(b)(e)
	1,350,000		5.600			10/31/19		1,434,699
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series C-3 (Baa2)(b)(e)
	2,000,000		5.500			09/30/15		2,074,000
Tax Exempt Municipal Infrastructure Improvement Trust Certificates RB Series 2005 A Class A (A1)
	997,000		4.050			05/04/10		991,227
TOTAL OTHER MUNICIPALS
(Cost $6,598,576)							$	6,840,250
TOTAL INVESTMENTS – 100.8%
(Cost $455,300,938)							$	480,172,803
LIABILITIES IN EXCESS OF OTHER ASSETS – (0.8)%								(3,686,115	)
NET ASSETS – 100.0%							$	476,486,688

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Prerefunded security. Maturity date disclosed is prerefunding date.
(b)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the next interest reset dates.
(c)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(d)	Security represents fixed rate bond exchanged in conjunction with floating rate notes issued (see Note 2).
(e)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $5,849,023, which represents approximately 1.2% of net assets as of October 31, 2006.

Security ratings disclosed, if any, are issued by Standard & Poor’s/Moody’s Investors Service/Fitch and are unaudited. A brief description of the ratings is available in the Fund’s Statement of Additional Information.

The accompanying notes are an integral part of these financial statements. 

57

GOLDMAN SACHS MUNICIPAL INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Investment Abbreviations:
ACA	—	Insured by American Capital Access
AMBAC	—	Insured by American Municipal Bond Assurance Corp.
AMBAC-TCRS	—	Insured by American Municipal Bond Assurance Corp. - Transferable Custodial Receipts
AMT	—	Alternative Minimum Tax
COPS	—	Certificates of Participation
CRA	—	Community Reinvestment Act
ETM	—	Escrow to Maturity
FGIC	—	Insured by Financial Guaranty Insurance Co.
FGIC-TCRS	—	Insured by Financial Guaranty Insurance Co. - Transferable Custodial Receipts
FHA	—	Insured by Federal Housing Administration
FHLMC	—	Insured by Federal Home Loan Mortgage Corp.
FNMA	—	Insured by Federal National Mortgage Association
FSA	—	Insured by Financial Security Assurance Co.
GNMA	—	Insured by Government National Mortgage Association
GO	—	General Obligation
IDA	—	Industrial Development Authority
LOC	—	Letter of Credit
MBIA	—	Insured by Municipal Bond Investors Assurance
MBIA-IBC	—	Insured by Municipal Bond Investors Assurance - Insured Bond Certificates
MF Hsg	—	Multi-Family Housing
PCRB	—	Pollution Control Revenue Bond
PSF-GTD	—	Guaranteed by Permanent School Fund
Radian	—	Insured by Radian Asset Assurance
Radian-IBC	—	Insured by Radian Asset Assurance - International Bancshares Corporation
RB	—	Revenue Bond
RMKT	—	Remarketed
VRDN	—	Variable Rate Demand Notes
XLCA	—	Insured by XL Capital Assurance, Inc.

ADDITIONAL INVESTMENT INFORMATION

INTEREST RATE SWAP CONTRACT — At October 31, 2006, the Fund had an outstanding swap contract with the following terms:

				Rates Exchanged
	Notional			Payments	Payments
Swap	Amount		Termination	received by	made by		Unrealized
Counterparty	(000s)		Date	the Fund	the Fund		Loss
JP Morgan (a)	$	13,000	12/07/2026	BMA Municipal Swap Index		4.138%	$	(440,863	)

(a)   Represents forward starting interest rate swap whose effective date of commencement of accruals and cash flows is December 7, 2006.

BMA — Bond Market Association

 The accompanying notes are an integral part of these financial statements.

58

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value as of October 31, 2006, of a $10,000 investment made on April 3, 2000 (commencement of operations) in the Institutional Shares of the Goldman Sachs High Yield Municipal Fund. For comparative purposes, the performance of the Fund’s benchmarks, the Lehman Brothers Aggregate Municipal Bond Index and Lehman Brothers High Yield Municipal Bond Index (“Lehman Aggregate Muni Bond Index and Lehman High Yield Muni Bond Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of fund shares. Performance of Class A, Class B and Class C Shares will vary from the Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decision regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

High Yield Municipal Fund’s Lifetime Performance

Performance of a $10,000 Investment, with distributions reinvested, from April 3, 2000 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Five Years		One Year
Class A (commenced April 3, 2000)
Excluding sales charges		7.71%		7.12%		9.05%
Including sales charges		6.96%		6.13%		4.18%
Class B (commenced April 3, 2000)
Excluding contingent deferred sales charges		6.91%		6.32%		8.24%
Including contingent deferred sales charges		6.91%		5.93%		3.04%
Class C (commenced April 3, 2000)
Excluding contingent deferred sales charges		6.91%		6.32%		8.24%
Including contingent deferred sales charges		6.91%		6.32%		7.20%
Institutional Class (commenced April 3, 2000)		8.13%		7.54%		9.45%

59

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – 99.6%
Alabama – 1.9%
Alexander City Special Care Facilities Financing Authority Medical Facilities RB for Russell Hospital Corp. Series 2006 A (BBB-)
$	3,405,000		5.375	%		12/01/16	$	3,537,523
	4,425,000		5.500			12/01/21		4,622,930
	5,775,000		5.625			12/01/26		6,076,051
	12,100,000		5.750			12/01/36		12,741,542
Butler Industrial Development Board Solid Waste Disposal RB for Georgia Pacific Corp. Project Series 2004 (AMT)(B)
	5,000,000		5.750			09/01/28		5,120,050
Courtland Industrial Development Board Environmental Improvements RB Refunding for International Paper Co. Project Series 2006 A (AMT) (BBB/Baa3)
	4,315,000		5.000			08/01/27		4,358,193
Courtland Industrial Development Board PCRB Refunding for International Paper Co. Projects Series 2005 A (BBB/Baa3)
	5,000,000		5.000			06/01/25		5,147,400
Courtland Industrial Development Board Solid Waste Disposal RB Refunding for International Paper Co. Projects Series 2005 A (AMT) (BBB/Baa3)
	9,400,000		5.200			06/01/25		9,721,574
DCH Health Care Authority Health Care Facilities RB Series 2006 (A+/A1)
	17,000,000		5.125			06/01/36		17,872,780
Sylacauga Health Care Authority RB for Coosa Valley Medical Center Series 2005 A
	6,900,000		5.375			08/01/15		7,014,678
	7,600,000		6.000			08/01/25		7,954,160
	5,000,000		6.000			08/01/35		5,200,300
University of Alabama at Birmingham Hospital RB Series 2006 A (A+/A1)
	47,905,000		5.000			09/01/36		49,864,793
								139,231,974
Alaska – 0.2%
Northern Tobacco Securitization Corp. RB for Alaska Asset Backed Bonds Series 2001 (AAA/Aaa)(a)
	9,160,000		5.500			06/01/11		9,896,281
Northern Tobacco Securitization Corporate Settlement RB for Asset Backed Bonds Series 2000 (AAA/Aaa)(a)
	4,270,000		6.200			06/01/10		4,547,080
								14,443,361
Arizona – 0.4%
Apache County IDA PCRB for Tuscon Electric Power Co. Project Series 1998 A (B+/Baa3)
	5,000,000		5.850			03/01/28		5,024,000
Apache County IDA PCRB for Tuscon Electric Power Co. Project Series 1998 B (B+/Baa3)
	5,000,000		5.875			03/01/33		5,023,600
Gila County Industrial Development Authority RB Refunding for Environmental Asarco, Inc. Series 1998(b)
	6,750,000		5.550			01/01/27		7,563,375
Maricopa County PCRB for Public Service Palo Verde Series 2003 A (BBB/Baa2)(c)
	4,000,000		4.000			07/01/09		3,986,840
Queen Creek Improvement District No. 001 Series 2006 Special Assessment (BBB-/Baa2)
	600,000		5.000			01/01/20		617,748
	1,000,000		5.000			01/01/21		1,028,300
	2,000,000		5.000			01/01/26		2,046,560
	3,000,000		5.000			01/01/32		3,051,600
University Medical Center Corp. RB Series 2004 (BBB+/Baa1)
	2,150,000		5.000			07/01/24		2,234,409
Yavapai County IDA Hospital Facilities RB for Regional Medical Center 2003 A (Baa2)
	1,250,000		6.000			08/01/33		1,351,887
								31,928,319
Arkansas – 0.4%
Jefferson County PCRB Refunding for Entergy, Inc. Project Series 2006 (A-/Baa1)
	10,120,000		4.600			10/01/17		10,274,937
Little River County RB for Georgia Pacific Corp. Project Series 1998 (AMT) (B2)
	3,010,000		5.600			10/01/26		3,036,337
Washington County Hospital RB Refunding for Regional Medical Center Series 2005 A (BBB/Baa2)
	1,850,000		5.000			02/01/35		1,898,896
Washington County Hospital RB Refunding for Regional Medical Center Series 2005 B (BBB/Baa2)
	8,325,000		5.000			02/01/25		8,614,294
	6,850,000		5.000			02/01/30		7,035,772
								30,860,236
California – 17.2%
Abag Finance Authority for Non-Profit Corps. Community Facilities District Special Tax No. 2004-2 Windemere Ranch Series 2004
	3,855,000		6.000			09/01/27		4,125,775
	4,900,000		6.000			09/01/34		5,227,712
Abag Finance Authority RB for Non-Profit Corps. Sansum-Santa Barbara Series 2002 A (A+)
	2,000,000		5.500			04/01/21		2,118,640
	2,750,000		5.600			04/01/26		2,905,897
Brentwood California Infrastructure Refunding Authority RB CIFP Series 2004-1
	1,350,000		5.750			09/02/24		1,396,548
	2,200,000		5.800			09/02/28		2,276,208
	2,500,000		5.875			09/02/34		2,587,200
Brentwood Infrastructure Financing Authority Special Assessment Series 2005 B
	535,000		5.150			09/02/32		542,062
California County Tobacco Securitization Agency RB for Stanislaus Series 2006 A (BBB)(d)
	40,725,000		0.000			06/01/46		4,360,426
California County Tobacco Securitization Agency RB for Stanislaus Series 2006 B (BBB-)(d)
	6,550,000		0.000			06/01/46		619,106
California County Tobacco Securitization Agency RB for Alameda County Asset Backed Bonds Series 2002 (Baa3)
	555,000		5.750			06/01/29		586,491

 The accompanying notes are an integral part of these financial statements.

60

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
California – (continued)
California County Tobacco Securitization Agency RB for Kern County Asset Backed Bonds Series 2002 B (BBB)
$	195,000		6.000	%		06/01/29	$	208,937
California County Tobacco Securitization Agency RB for Stanislaus Series 2006 C (BB)(d)
	42,250,000		0.000			06/01/55		1,845,480
California County Tobacco Securitization Agency RB for Stanislaus Series 2006 D(d)
	98,000,000		0.000			06/01/55		3,081,120
California Department Water Resources Power Supply RB Series A (AMBAC) (AAA/Aaa)(e)
	10,000,000		5.500			05/01/14		11,032,200
California Educational Facilities Authority RB for Dominican University Series 2001 (Baa3)
	1,445,000		5.750			12/01/30		1,487,469
California Educational Facilities Authority RB for Golden Gate University Series 2005 (Baa3)
	2,000,000		5.000			10/01/36		2,049,040
California Educational Facilities Authority RB for Pomona College Series 2005 A (AAA/Aaa)
	4,150,000		5.000			07/01/45		4,367,792
California Housing Finance Agency RB VRDN for Home Mortgage Series 2005 H (AMT) (Dexia Credit Local SPA) (AA-/Aa2)(c)
	8,960,000		3.620			11/07/06		8,960,000
California State Department Water Resources Power Supply RB Series A (FSA) (AAA/Aaa)(e)
	36,500,000		5.250			05/01/11		39,198,080
California State Economic Recovery GO Bonds Series B (AA+/Aa3)(c)(e)
	25,000,000		5.000			07/01/08		25,607,000
California State Economic Recovery GO Bonds Series A (AA+/Aa3)(e)
	25,000,000		5.250			07/01/14		27,686,250
California State Economic Recovery GO Bonds Series B (AA+/Aa3)(c)(e)
	2,500,000		5.000			07/01/08		2,560,700
California State Economic Recovery GO Bonds Series A (AA+/Aa3)(e)
	16,250,000		5.250			07/01/14		17,994,988
California State GO Bonds Series 2003 (A+/A1)
	1,000,000		5.250			02/01/15		1,095,460
California State GO Bonds Series 2004 (A+/A1)
	14,080,000		5.000			02/01/33		14,695,859
California State GO for Various Purposes Series 2006 (AMBAC) (AAA/Aaa)
	7,370,000		4.500			03/01/35		7,334,477
California Statewide Communities Development Authority RB for Golden Gate Park Series 2005 (First Republic Bank LOC)
	26,500,000		6.000			12/01/11		27,552,580
California Statewide Communities Development Authority for Kaiser Series 2001 C (A+)
	3,750,000		5.250			08/01/31		4,015,500
California Statewide Communities Development Authority RB for Notre Dame De Namur University Series 2003
	3,000,000		6.625			10/01/33		3,182,400
California Statewide Financing Authority Tobacco Settlement RB Asset Backed Pooled Tobacco Security Series 2002 A (Baa3)
	3,000,000		6.000			05/01/37		3,241,950
California Statewide Financing Authority Tobacco Settlement RB Capital Appreciation Turbo Pooled Program Series 2006 A (BBB)(d)
	100,000,000		0.000			06/01/46		8,992,000
California Statewide Financing Authority Tobacco Settlement RB Capital Appreciation Turbo Pooled Program Series 2006 B (BBB-)(d)
	35,000,000		0.000			06/01/46		3,245,200
Carlsbad Improvement Bond Act of 1915 Special Assessment for District No. 2003-01 Series 2004
	3,305,000		6.000			09/02/34		3,453,328
Cathedral City Improvement Bond Act of 1915 Special Assessment for Cove Improvement District 04-02 Series 2005
	1,090,000		5.000			09/02/30		1,107,277
	1,340,000		5.050			09/02/35		1,363,035
Chino Community Facilities District Special Tax No. 03-3 Improvement Area 1 Series 2004
	655,000		5.500			09/01/22		692,584
	565,000		5.550			09/01/23		596,973
	365,000		5.600			09/01/24		385,615
	1,300,000		5.700			09/01/29		1,375,816
	1,420,000		5.750			09/01/34		1,499,705
Chula Vista Community Facilities District Special Tax No. 07-I-Otay Ranch Village Eleven Series 2004
	1,700,000		5.700			09/01/24		1,800,181
	2,300,000		5.800			09/01/28		2,441,151
	3,150,000		5.875			09/01/34		3,335,377
Del Mar Race Track Authority RB Series 2005 (BBB-)
	2,300,000		5.000			08/15/25		2,397,152
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Enhanced Asset Backed Bonds Series 2003 B (AAA/Aaa)(a)
	3,810,000		5.625			06/01/13		4,258,170
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Asset Backed Bonds Series 2005 A (AMBAC-TCRS) (AAA/Aaa)
	146,385,000		5.000			06/01/45		153,559,329
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Asset Backed Bonds Series 2005 A (FGIC-TCRS) (AAA/Aaa)
	14,500,000		5.000			06/01/45		15,210,645
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Enhanced Asset Backed Bonds Series 2005 A (AMBAC) (AAA/Aaa)
	5,280,000		5.000			06/01/30		5,529,691
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Enhanced Asset Backed Bonds Series 2005 A (FGIC) (AAA/Aaa)
	10,000,000		5.000			06/01/35		10,534,100
	60,000,000		5.000			06/01/38		63,072,000

The accompanying notes are an integral part of these financial statements. 

61

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
California – (continued)
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB for Enhanced Asset Backed Bonds Series 2005 A (Radian-IBC) (AA)
$	32,000,000		5.000	%		06/01/45	$	33,335,040
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-1 (BBB/Baa3)
	20,485,000		6.750			06/01/39		23,484,414
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-2 (BBB/Baa3)
	6,000,000		7.900			06/01/42		7,388,520
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-3 (BBB/Baa3)
	2,650,000		7.875			06/01/42		3,259,447
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-4 (BBB/Baa3)
	3,000,000		7.800			06/01/42		3,676,980
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 A-5 (BBB/Baa3)
	8,330,000		7.875			06/01/42		10,245,733
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2003 B (AAA/Aaa)(a)
	44,670,000		5.500			06/01/13		49,600,228
Golden State Tobacco Securitization Corp. California Tobacco Settlement RB Series 2005 A (A/A2)
	163,845,000		5.000			06/01/45		168,940,579
Hawthorne Community Redevelopment Agency Tax Allocation for Hawthorne Plaza Project Series 2001
	2,375,000		6.875			07/01/20		2,438,911
HI Desert California Memorial Health Care District RB Refunding Series 1998
	2,250,000		5.500			10/01/15		2,266,088
	2,000,000		5.500			10/01/19		2,019,900
Kaweah Delta Health Care District RB Series 2004 (A3)
	3,675,000		6.000			08/01/34		4,017,730
Lafayette Redevelopment Agency Tax Allocation RB for Lafayette Redevelopment Project Series 2005 (Radian) (AA)
	1,495,000		5.000			08/01/35		1,557,999
Lake Elsinore Improvement Bond Act 1915 for Special Assessment District No. 93-1 Series 2000
	1,865,000		7.000			09/02/30		2,026,714
Lake Elsinore Unified School District Community Facilities District Special Tax Series 2005-3
	1,435,000		5.050			09/01/30		1,463,585
	690,000		5.050			09/01/35		701,516
Lincoln Special Tax for Community Facilities District No. 2003-1 Series 2004
	3,445,000		5.950			09/01/28		3,722,701
	2,990,000		6.000			09/01/34		3,226,868
Long Beach Special Tax for Community Facilities District No. 6 Pike Series 2002
	5,000,000		6.300			10/01/32		5,287,500
Los Angeles Community College District GO Bonds Series A (MBIA) (AAA/Aaa)(e)
	5,000,000		5.500			08/01/14		5,448,901
Los Angeles Community College District GO Bonds Series A (MBIA) (AAA/Aaa)(e)
	5,000,000		5.500			08/01/15		5,450,249
Los Angeles Community Facilities District Special Tax Escrow 4 Playa Vista Phase 1 Series 2003 (AMBAC) (AAA/Aaa)
	12,325,000		4.750			09/01/31		12,607,366
Los Angeles Regional Airports Improvement Corp. Lease RB Refunding for Facilities Sublease LA International Series 2002 A (B/Caa2)
	5,000,000		7.125			12/01/24		5,537,150
Los Angeles Regional Airports Improvement Corp. Lease RB Refunding for Facilities Sublease LA International Series 2002 B AMT (B/Caa2)
	2,000,000		7.500			12/01/24		2,253,420
Los Angeles Regional Airports Improvement Corp. RB for Facilities Sublease Continental Airlines Series 1994 (AMT)(B)
	935,000		9.250			08/01/24		938,020
Los Angeles Regional Airports Improvement Corp. RB Series 2002 C (AMT) (B/Caa2)
	1,580,000		6.125			12/01/07		1,599,181
	11,520,000		7.000			12/01/12		12,256,243
	70,425,000		7.500			12/01/24		79,348,552
Merced Community Facilities District No. 2003-1 Special Tax Series 2005
	1,000,000		5.000			09/01/30		1,022,180
	1,000,000		5.100			09/01/35		1,021,710
Moorpark Community Facilities District No. 2004-1 Special Tax for Moorpark Highlands Series 2006
	4,530,000		5.300			09/01/38		4,669,116
Murrieta Community Facilities District Special Tax for No. 3 Creekside Village Improvement Area 1 Series 2005
	1,660,000		5.200			09/01/35		1,686,610
Oakley Public Finance Authority RB Series 2004
	1,365,000		5.875			09/02/24		1,434,069
	1,910,000		6.000			09/02/28		2,006,493
	2,405,000		6.000			09/02/34		2,524,553
Oceanside Community Development Commerce Tax Allocation for Downtown Redevelopment Project Series 2002 (Baa3)
	1,500,000		5.750			09/01/25		1,576,860
Palo Alto Improvement Bond Act 1915 Special Assessment for University Avenue Area Off Shore Parking Series 2002 A (BBB)
	650,000		5.250			09/02/16		664,840
	655,000		5.250			09/02/17		669,842
Poway California Unified School District Special Tax Community Facilities District 6-4 South Series 2005
	3,050,000		5.125			09/01/35		3,115,026
Poway Unified School District Special Tax Community Facilities District No. 14 Area A Series 2006
	1,770,000		5.125			09/01/26		1,812,905
	5,000,000		5.250			09/01/36		5,153,550
Rancho Santiago Community College District GO Bonds Capital Appreciation for Election 2002 Series 2006 C (FSA) (AAA/Aaa)(d)
	2,620,000		0.000			09/01/24		1,199,646
	19,150,000		0.000			09/01/27		7,594,890
	14,630,000		0.000			09/01/28		5,526,629
Roseville Community Facilities District Special Tax No. 1-Westpark Series 2005
	3,500,000		5.200			09/01/36		3,563,000

 The accompanying notes are an integral part of these financial statements.

62

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
California – (continued)
Sacramento North Natomas Community Facilities 97-01 Special Tax Series 2005
$	450,000		5.000	%		09/01/23	$	459,081
	1,160,000		5.000			09/01/24		1,181,124
	1,000,000		5.000			09/01/29		1,014,930
	3,040,000		5.100			09/01/35		3,091,133
San Joaquin Hills Transportation Corridor Agency Toll Road RB Capital Appreciation Refunding Series 1997 A (MBIA) (AAA/Aaa)(d)
	80,000,000		0.000			01/15/31		26,930,400
	141,000,000		0.000			01/15/34		41,252,370
Sierra View Local Health Care District RB Refunding Series 1998 (A-)
	7,525,000		5.400			07/01/22		7,763,919
Temecula Valley Unified School District Community Facilities District Special Tax No. 02-2 Series 2005
	1,530,000		5.000			09/01/25		1,538,017
	3,395,000		5.125			09/01/35		3,411,432
Tobacco Securitization Authority Northern California Tobacco Settlement RB for Asset Backed Bonds Series 2005 A-1 (BBB/Baa3)
	4,650,000		5.500			06/01/45		4,884,034
Tobacco Securitization Authority of Southern California Tobacco Settlement RB for Asset Backed Bonds Senior Series 2002 A (AAA/Aaa)(a)
	15,070,000		5.250			06/01/12		16,387,419
Tobacco Securitization Authority RB for Southern California Tobacco Settlement Asset Backed Bonds Series 2002 A (AAA/Aaa)(a)
	8,895,000		5.625			06/01/12		9,840,272
Tobacco Securitization Authority Southern California Tobacco Settlement RB for Asset Backed Bonds Series 2006 A-1 (BBB/Baa3)
	55,000,000		5.000			06/01/37		55,935,550
	28,140,000		5.125			06/01/46		28,750,638
Upland Community Facilities District Special Tax for 2003-2 San Antonio Improvement Series 2004 1-A
	4,000,000		6.000			09/01/34		4,192,680
Valley Health System Hospital RB Refunding & Improvement Project Series 1996 A (B+)
	2,230,000		6.500			05/15/15		2,246,970
	5,770,000		6.500			05/15/25		5,785,521
Valley Health Systems COPS Refunding Project Series 1993 (B+)
	20,380,000		6.875			05/15/23		20,546,097
								1,253,345,717
Colorado – 1.0%
Adams Colorado RB Series 2006-1260 (FHA/MBIA) (AAA)(e)
	6,605,000		9.750			02/01/31		8,397,003
Colorado Health Facilities Authority RB for Covenant Retirement Communities Inc. Series 2005 (BBB)
	16,850,000		5.000			12/01/35		17,127,351
Colorado Health Facilities Authority RB for Hospital Poudre Valley Health Care Series 2005 F (BBB+/Baa2)
	10,000,000		5.000			03/01/25		10,315,400
Cross Creek Metropolitan District No. 2 Refunding for Limited Tax Series 2006
	4,500,000		6.125			12/01/37		4,603,365
Eagle Bend Metropolitan GO Bonds District No. 2 Series 2004 (Radian) (AA/Aa3)
	1,000,000		5.000			12/01/20		1,048,010
McKay Landing Metropolitan GO Bonds District No. 2 Series 2000
	1,500,000		7.500			12/01/19		1,615,305
McKay Landing Metropolitan GO Bonds District No. 2 Subseries 2004 A
	2,000,000		7.500			12/01/34		2,079,260
Saddle Rock South Metropolitan GO Bonds Mill Levy Obligation Series 2000
	3,000,000		7.200			12/01/19		3,204,750
Tablerock Metropolitan District Colorado GO Bonds
	2,750,000		7.000			12/01/33		2,886,702
University of Colorado Hospital Authority RB Series 2006 A (Baa1)
	4,500,000		5.000			11/15/37		4,662,180
	3,000,000		5.250			11/15/39		3,165,660
Vista Ridge Metropolitan District GO Bonds Refunding & Improvement Limited Tax Series 2006 A (Radian) (AA/Aa3)
	1,000,000		5.000			12/01/26		1,050,880
	1,010,000		5.125			12/01/40		1,057,319
Vista Ridge Metropolitan District GO Bonds Refunding Limited Tax Subseries 2006 B
	1,750,000		6.625			12/01/40		1,785,910
Vista Ridge Metropolitan District GO Bonds Series 2001(a)
	9,575,000		7.500			06/01/09		10,366,469
								73,365,564
Connecticut – 0.6%
Connecticut State Development Authority PCRB Refunding for Western Mass RMKT 9/23/98 Series 1993 A (BBB/Baa2)
	16,190,000		5.850			09/01/28		17,047,585
Connecticut State GO Bonds Refunding Series C (AA/Aa3)(e)
	10,450,000		5.500			12/15/13		11,747,047
Connecticut State Health and Educational Facility Authority RB for St. Mary’s Hospital Corp. Series 1997 E (Ba3)
	695,000		5.875			07/01/22		692,067
University of Connecticut GO Bonds Series A (MBIA) (AAA/Aaa)(e)
	10,610,000		5.000			01/15/13		11,436,728
								40,923,427
Delaware – 0.1%
Bridgeville Special Obligation RB for Heritage Shores Special Development District Series 2005 A
	6,847,000		5.450			07/01/35		6,981,064
Bridgeville Special Obligation RB for Heritage Shores Special Development District Series 2005 B
	500,000		5.125			07/01/35		501,765
Delaware State Health Facilities Authority RB for Beebe Medical Center Project Series 2004 A (BBB+/Baa1)
	1,250,000		5.500			06/01/24		1,335,250

The accompanying notes are an integral part of these financial statements. 

63

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Delaware – (continued)
Delaware State Health Facilities Authority RB for Beebe Medical Center Project Series 2005 A (BBB+/Baa1)
$	1,000,000		5.000	%		06/01/24	$	1,041,720
	1,000,000		5.000			06/01/30		1,030,200
								10,889,999
District Of Columbia – 0.8%
District of Columbia Housing Finance Agency Mortgage RB for Single Family Series 1997 B (GNMA/FNMA) (AMT) (AAA)
	340,000		6.350			06/01/28		343,240
District of Columbia Tobacco Settlement Financing Corp. RB Capital Appreciation for Asset Backed Bonds Series 2006 A (BBB)(d)
	388,560,000		0.000			06/15/46		35,024,798
District of Columbia Tobacco Settlement Financing Corp. RB for Asset Backed Bonds Series 2001 (BBB/Baa3)
	1,525,000		6.250			05/15/24		1,633,504
	6,000,000		6.500			05/15/33		7,196,580
Washington D.C. Metropolitan Area Transportation Authority Gross Revenue RB (MBIA) (AAA/Aaa) (e)
	11,150,000		5.000			01/01/10		11,665,782
								55,863,904
Florida – 32.1%
Aberdeen Community Development District Special Assessment Series 2005
	13,000,000		5.500			05/01/36		13,296,140
Amelia National Community Development District RB for Capital Improvement Series 2004 A
	4,805,000		6.300			05/01/35		5,147,212
Amelia National Community Development District RB for Capital Improvement Series 2006 A
	2,000,000		5.375			05/01/37		2,031,140
Anthem Park Community Development District RB for Capital Improvement Series 2004
	2,800,000		5.800			05/01/36		2,930,480
Arborwood Community Development District Capital Improvement RB for Centex Homes Project Series 2006 A-1
	42,000,000		5.500			05/01/36		43,216,740
Arborwood Community Development District Capital Improvement RB for Centex Homes Project Series 2006 A-2
	28,800,000		5.250			05/01/36		29,522,304
Arborwood Community Development District Capital Improvement RB for Centex Homes Project Series 2006 B-2
	5,900,000		5.100			05/01/16		5,989,208
Arborwood Community Development District Capital Improvement RB Series 2006
	30,000,000		5.250			05/01/16		30,815,400
Arborwood Community Development District RB for School Site Acquisition Project Series 2005
	6,115,000		5.500			05/01/14		6,281,145
Arborwood Community Development District Special Assessment for Master Infrastructure Projects Series 2005 A
	26,375,000		5.350			05/01/36		26,699,149
Arlington Ridge Community Development District Special Assessment Series 2006 A
	10,500,000		5.500			05/01/36		10,796,835
Ballantrae Community Development District RB for Capital Improvement Series 2004
	4,865,000		6.000			05/01/35		5,168,868
Bay Laurel Center Community Development District Special Assessment Indigo Series 2006
	1,770,000		5.450			05/01/37		1,810,391
Baywinds Community Development District Special Assessment Series 2006 A
	1,000,000		5.250			05/01/37		1,004,190
Baywinds Community Development District Special Assessment Series 2006 B
	1,500,000		4.900			05/01/12		1,519,335
Bellalago Educational Facilities Benefits District RB for Capital Improvement Series 2004 A
	7,000,000		6.000			05/01/33		7,286,720
Bellalago Educational Facilities Benefits District RB for Capital Improvement Series 2004 B
	6,135,000		5.800			05/01/34		6,338,007
Belmont Community Development District Capital Improvement Revenue Special Assessment Series 2006 B
	10,000,000		5.125			11/01/14		10,219,300
Bluewaters Community Development District Special Assessment Series 2004
	2,965,000		6.000			05/01/35		3,141,773
Bobcat Trail Community Development District RB Refunding for Capital Improvement Series 2005
	2,445,000		5.200			05/01/29		2,460,012
Bonita Springs Vasari Community Development District RB for Capital Improvement Series 2001 A
	7,635,000		6.950			05/01/32		8,237,783
Bonnet Creek Resort Community Development District Special Assessment RB Series 2002
	1,000,000		7.125			05/01/12		1,094,930
	10,000,000		7.375			05/01/34		10,957,900
	2,000,000		7.500			05/01/34		2,203,300
Brandy Creek Community Development District Special Assessment Series 2003 A
	3,425,000		6.350			05/01/34		3,647,899
Brandy Creek Community Development District Special Assessment Series 2003 B
	105,000		5.400			05/01/09		105,509
Brandy Creek Community Development District Special Assessment Series 2006 A
	2,715,000		5.600			05/01/37		2,785,943
Bridgewater Community Development District Special Assessment Series 2004 A
	13,320,000		6.000			05/01/35		13,867,585
Bridgewater Wesley Chapel Community Development District RB for Capital Improvement Series 2005
	3,550,000		5.750			05/01/35		3,672,156
Briger Community Development District Special Assessment RB Series 2002 A
	2,895,000		6.750			05/01/33		3,090,181
Brighton Lakes Community Development District Special Assessment Series 2004 A
	1,480,000		6.125			05/01/35		1,577,724

 The accompanying notes are an integral part of these financial statements.

64

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Brooks of Bonita Springs II Community Development District RB for Capital Improvement Series 2000 A (AAA)(a)
$	5,800,000		7.000	%		05/01/08	$	6,196,140
Brooks of Bonita Springs II Community Development District RB for Capital Improvement Series 2003 A
	1,590,000		6.125			05/01/34		1,637,811
Capital Region Community Development District RB for Capital Improvement Series 2002 A
	11,805,000		6.700			05/01/32		13,083,245
Capital Region Community Development District Special Assessment for Capital Improvement Series 2001 A-1
	1,065,000		6.700			05/01/31		1,128,378
Capital Region Community Development District Special Assessment for Capital Improvement Series 2001 A-2
	2,800,000		6.850			05/01/31		2,997,120
Capital Trust Agency RB for Seminole Tribe Convention Series 2003 A (AAA)(a)(f)
	3,000,000		8.950			10/01/12		3,749,550
Catalina at Winkler Preserve Community Development District Special Assessment Series 2005
	3,560,000		5.600			05/01/36		3,642,948
Cedar Pointe Community Development District Special Assessment for Florida Capital Improvements Series 2005 A
	6,005,000		5.375			05/01/35		6,088,049
Celebration Community Development District Special Assessment Series 2003 A
	2,930,000		6.400			05/01/34		3,128,683
Century Gardens Community Development District Special Assessment Series 2004
	2,350,000		5.900			05/01/34		2,426,563
CFM Community Development District RB for Capital Improvement Series 2004 A
	21,570,000		6.250			05/01/35		23,222,262
CFM Community Development District RB for Capital Improvement Series 2004 B
	1,725,000		5.875			05/01/14		1,773,749
City Center Community Development District Special Assessment Series 2005 A
	7,320,000		6.125			05/01/36		7,483,675
Clearwater Cay Community Development District RB BANS Series 2005
	23,650,000		5.375			12/01/06		23,653,074
Coconut Cay Community Development District of Florida Special Assessment Series 2006
	3,000,000		5.375			05/01/36		3,046,710
Colonial Country Club Community Development District Florida Capital Improvement RB Series 2003
	11,120,000		6.400			05/01/33		11,961,784
Concord Station Community Development District RB for Capital Improvement Series 2005
	1,895,000		5.000			05/01/15		1,918,290
	16,110,000		5.300			05/01/35		16,339,567
Concorde Estates Community Development District RB for Capital Improvement Series 2004 A
	2,340,000		5.850			05/01/35		2,457,211
Concorde Estates Community Development District RB for Capital Improvement Series 2004 B
	895,000		5.000			05/01/11		902,402
Connerton West Community Development District for Special Assessment Capital Improvement Series 2004 A-1
	2,975,000		5.950			05/01/35		3,084,212
Connerton West Community Development District for Special Assessment Capital Improvement Series 2004 A-2
	2,290,000		5.850			05/01/24		2,338,823
	1,590,000		5.950			05/01/36		1,630,768
Copper Oaks Community Development District Special Assessment Series 2005 A
	3,620,000		5.450			05/01/35		3,689,902
Copper Oaks Community Development District Special Assessment Series 2005 B
	1,140,000		4.875			05/01/10		1,144,172
Cory Lakes Community Development District for Special Assessment Series 2001 A
	515,000		8.375			05/01/17		574,271
Cory Lakes Community Development District for Special Assessment Series 2001 B
	565,000		8.375			05/01/17		599,103
Country Greens Community Development District Special Assessment RB Series 2003
	5,965,000		6.625			05/01/34		6,428,898
Covington Park Community Development District RB for Capital Improvement Series 2004 A
	1,115,000		6.250			05/01/34		1,175,400
Covington Park Community Development District RB for Capital Improvement Series 2004 B
	140,000		5.300			11/01/09		140,633
Covington Park Community Development District Refunding Special Assessment for Capital Improvement Series 2005 (A-)
	1,000,000		5.000			05/01/31		1,018,000
Crossings at Fleming Island Community Development District RB for Special Assessment Series 2000 C
	4,660,000		7.050			05/01/15		4,983,171
Cutler Cay Community Development District Special Assessment Series 2004
	4,630,000		6.125			05/01/24		4,846,314
	2,480,000		6.300			05/01/34		2,664,611
Diamond Hill Community Development District Tax Allocation for Capital Improvement Series 2004
	1,740,000		6.000			05/01/34		1,824,251
Double Branch Community Development District Special Assessment Series 2002 A
	10,855,000		6.700			05/01/34		11,963,730
Double Branch Community Development District Special Assessment Series 2003 B
	880,000		5.375			05/01/08		883,837
Double Branch Community Development District Special Assessment Series 2003 C
	30,000		5.125			05/01/08		30,079
Double Branch Community Development District Special Assessment Series 2005 A
	985,000		5.350			05/01/34		993,432
Dupree Lakes Community Development District Capital Improvement Revenue Special Assessment Series 2006 A
	1,905,000		5.375			05/01/37		1,934,661

The accompanying notes are an integral part of these financial statements. 

65

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Dupree Lakes Community Development District Capital Improvement Revenue Special Assessment Series 2006 B
$	1,920,000		5.000	%		05/01/12	$	1,941,965
Durbin Crossing Community Development District Special Assessment Series 2005 A
	48,995,000		5.500			05/01/37		50,203,217
Durbin Crossing Community Development District Special Assessment Series 2005 B-1
	3,000,000		4.875			11/01/10		3,005,490
Durbin Crossing Community Development District Special Assessment Series 2005 B-2
	8,750,000		4.875			11/01/10		8,756,912
East Homestead Community Development District Special Assessment Revenue Series 2006 B
	1,000,000		5.000			05/01/11		1,013,000
East Homestead Community Development District Special Assessment Series 2005
	4,000,000		5.450			05/01/36		4,103,400
East Park Development District Special Assessment Series 2002
	5,175,000		6.850			05/01/33		5,599,246
Escambia County Environmental Improvement RB Refunding for International Paper Co. Project Series 2006 A (BBB/Baa3)
	12,250,000		5.000			08/01/26		12,362,332
Escambia County PCRB International Paper Series 2006 A (BBB/Baa3)
	2,850,000		4.700			04/01/15		2,927,634
Fishhawk Community Development District II Special Assessment RB Series 2003 A
	5,840,000		6.250			05/01/34		6,205,993
Fishhawk Community Development District II Special Assessment RB Series 2003 B
	65,000		5.000			11/01/07		65,129
Fishhawk Community Development District II Special Assessment RB Series 2004 A
	2,435,000		6.125			05/01/34		2,588,527
Fleming Island Plantation Community Development District RB for Special Assessment Series 2000 B
	4,585,000		7.300			05/01/15		4,931,167
Forest Creek Community Development District Special Assessment for Capital Improvement Series 2005 B
	2,000,000		4.850			05/01/11		2,013,800
Gateway Services Community Development District Special Assessment for Stoneybrook Project Series 2003
	1,570,000		5.500			07/01/08		1,577,850
Gateway Services Community Development District Special Assessment for Sun City Center-Fort Meyers Project Series 2003 A
	2,605,000		6.500			05/01/33		2,769,193
Gateway Services Community Development District Special Assessment for Sun City Center-Fort Meyers Project Series 2003 B
	890,000		5.500			05/01/10		900,725
Gateway Services District Water & Sewer RB Refunding Series 2003
	2,110,000		6.000			10/01/19		2,143,254
Glen St. Johns Community Development District Special Assessment BANS Series 2006
	6,405,000		5.100			09/01/07		6,404,359
Grand Hampton Community Development District RB for Capital Improvement Series 2003
	5,200,000		6.150			05/01/34		5,503,628
Grand Hampton Community Development District RB for Capital Improvement Series 2005
	4,045,000		5.500			05/01/36		4,129,541
Grand Haven Community Development District Special Assessment Series 2002
	200,000		6.125			11/01/07		200,242
Grand Haven Community Development District Special Assessment Series 2003
	35,000		5.200			11/01/07		34,986
Grand Haven Community Development District Special Assessment Series 2004 B
	60,000		5.000			05/01/09		60,302
Greater Lakes/Sawgrass Bay Community Development District Special Assessment Series 2006 A
	4,500,000		5.500			05/01/38		4,592,880
Greyhawk Landing Community Development District Special Assessment Series 2002 A
	2,975,000		7.000			05/01/33		3,222,312
Greyhawk Landing Community Development District Special Assessment Series 2002 B
	635,000		6.250			05/01/09		643,014
Griffin Lakes Community Development District Special Assessment Series 2002 A
	4,435,000		6.700			05/01/33		4,919,302
Habitat Community Development RB Series 2004
	4,745,000		5.850			05/01/35		4,979,308
Halifax Hospital Medical Center RB Series 1999 A (AAA)(a)
	955,000		7.250			10/01/10		1,096,550
Hamal Community Development District Special Assessment for Refunding and Improvement Series 2006 A (MBIA) (AAA)
	1,870,000		4.750			05/01/31		1,930,887
Hamal Community Development District Special Assessment Series 2001 (AAA)(a)
	3,725,000		6.750			05/01/11		4,234,655
Hammocks Community Development District Special Assessment Series 2005 A
	6,020,000		5.500			05/01/37		6,123,303
Hammocks Community Development District Special Assessment Series 2005 B
	1,600,000		4.875			11/01/10		1,606,272
Harbor Bay Community Development District Special Assessment for Capital Improvement Series 2001 A
	2,280,000		7.000			05/01/33		2,445,528
Harbour Isles Community Development District Special Assessment Series 2004
	4,310,000		6.125			05/01/35		4,588,469
Harbourage at Braden River Community Development District Special Assessment for Capital Improvement Series 2003 A
	2,930,000		6.125			05/01/34		3,055,844

 The accompanying notes are an integral part of these financial statements.

66

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Heritage Bay Community Development District RB for Capital Improvements Series 2005
$	16,125,000		5.500	%		05/01/36	$	16,588,594
Heritage Harbor South Community Development District RB for Capital Improvement Series 2002 A
	3,890,000		6.500			05/01/34		4,212,909
Heritage Harbor South Community Development District RB for Capital Improvement Series 2003 A
	1,225,000		6.200			05/01/35		1,299,505
Heritage Harbor South Community Development District RB for Capital Improvement Series 2003 B
	1,720,000		5.250			11/01/08		1,728,927
Heritage Harbour Market Place Community Development District Special Assessment for Capital Improvement Series 2005
	9,000,000		5.600			05/01/36		9,234,630
Heritage Isle at Viera Community Development District Special Assessment Series 2004 A
	3,140,000		6.000			05/01/35		3,258,566
Heritage Isle at Viera Community Development District Special Assessment Series 2004 B
	1,055,000		5.000			11/01/09		1,057,173
Heritage Isle at Viera Community Development District Special Assessment Series 2005
	7,195,000		5.550			05/01/37		7,331,633
Heritage Isles Community Development District RB for Special Assessment Series 2002
	750,000		5.900			11/01/06		750,000
Heritage Lake Park Community Development District Special Assessment Series 2004 B
	4,765,000		5.100			11/01/09		4,775,054
Heritage Lake Park Community Development Special Assessment Series 2005
	1,700,000		5.700			05/01/36		1,749,980
Heritage Landing Community Development District Special Assessment Series 2005
	11,000,000		5.600			05/01/36		11,290,840
Heritage Park Community Development District RB for Special Assessment Series 2004 A
	5,830,000		6.300			05/01/35		6,263,985
Highlands Community Development District Special Assessment Series 2005
	3,750,000		5.550			05/01/36		3,851,625
Hollywood Community Redevelopment Agency RB for Beach CRA Series 2004 (Baa2)
	2,700,000		5.625			03/01/24		2,887,650
Hypoluxo/Haverhill Community Development District Special Assessment Series 2002 A
	1,350,000		6.750			05/01/33		1,451,061
Indian Trace Development District Special Assessment for Isles at Weston Project Series 2003
	1,910,000		5.500			05/01/33		1,937,218
Indigo Community Development District for Capital Improvement Special Assessment Series 2005
	9,000,000		5.750			05/01/36		9,232,380
Islands at Doral Florida Special Assessment Series 2003
	1,790,000		6.375			05/01/35		1,907,925
Islands at Doral III Community Development District Special Assessment Series 2004 A
	10,860,000		5.900			05/01/35		11,375,307
Islands at Doral Ne Community Development District Special Assessment Series 2004
	1,835,000		6.250			05/01/34		1,957,468
Jacksonville Economic Development Community Health Care Facilities RB for Mayo Clinic Series 2006 (AA/Aa2)
	11,675,000		5.000			11/15/36		12,243,339
K-Bar Ranch Community Development District Special Assessment Series 2006
	1,000,000		5.450			05/01/36		1,025,850
Keys Cove Community Development District II Series 2005
	2,935,000		5.500			05/01/36		3,009,813
Keys Cove Community Development District Special Assessment Series 2004
	1,205,000		5.875			05/01/35		1,268,793
Killarney Community Development District Special Assessment Series 2004 A
	2,505,000		6.000			05/01/35		2,610,461
Killarney Community Development District Special Assessment Series 2004 B
	3,395,000		5.125			05/01/09		3,399,787
Laguna Lakes Community Development District Florida Special Assessment RB Series 2003 A
	2,390,000		6.400			05/01/33		2,537,128
Laguna Lakes Community Development District Florida Special Assessment RB Series 2003 B
	50,000		5.250			11/01/07		49,981
Lake Ashton II Community Development District Special Assessment for Capital Improvement Series 2005 B
	1,000,000		4.875			11/01/10		1,007,060
Lake Powell Residential Golf Community Development District Special Assessment Series 2000 A
	2,360,000		7.450			05/01/22		2,514,887
	3,635,000		7.500			05/01/32		3,888,578
Lakes by the Bay South Community Development District Special Assessment RB Series 2004 A
	7,480,000		6.100			05/01/23		8,002,628
	5,000,000		6.250			05/01/34		5,363,250
Lakes by the Bay South Community Development District Special Assessment RB Series 2004 B
	5,845,000		5.300			05/01/09		5,858,502
Lakewood Ranch Community Development District No. 4 Special Assessment RB Series 2004
	2,105,000		5.950			05/01/34		2,192,336
Lakewood Ranch Community Development District No. 5 Special Assessment RB Series 2001 A
	4,150,000		6.700			05/01/31		4,445,563
Lakewood Ranch Community Development District No. 6 Capital Improvements RB Special Assessment Series 2005 A
	8,495,000		5.700			05/01/36		8,715,445
Lakewood Ranch Community Development District No. 6 RB for Capital Improvement Series 2004 A
	5,785,000		6.125			05/01/34		6,089,522
Lakewood Ranch Stewardship District RANS for Centre and New Projects Series 2006
	28,645,000		6.000			06/01/07		28,669,348

The accompanying notes are an integral part of these financial statements. 

67

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Lakewood Ranch Stewardship District Special Assessment for Lake Club Project Series 2005
$	4,710,000		4.875	%		08/01/10	$	4,727,568
Lakewood Ranch Stewardship District Special Assessment RB for Lake Club Project Series 2006 B
	9,000,000		5.000			05/01/13		9,028,980
Lakewood Ranch Stewardship District Special Assessment Revenue for Country Club East Project Series 2006
	23,000,000		5.400			05/01/37		23,388,010
Lakewood Ranch Stewardship District Special Assessment Series 2006 A
	15,000,000		5.500			05/01/36		15,285,000
Landmark at Doral Community Development District Special Assessment Series 2006 A
	4,000,000		5.500			05/01/38		4,054,720
Lee County IDA Health Care Facilities RB for Shell Point Village Project Series 1999 A (BBB-)
	7,000,000		5.500			11/15/29		7,179,340
Lexington Oaks Community Development District Special Assessment Series 2002 A
	2,500,000		6.700			05/01/33		2,668,825
Live Oak Community Development District No. 001 Special Assessment Series 2003 A
	4,390,000		6.300	%		05/01/34		4,639,308
Live Oak Community Development District No. 001 Special Assessment Series 2003 B
	160,000		5.300			05/01/08		160,696
Live Oak Community Development District No. 002 Special Assessment Series 2004 A
	6,155,000		5.850			05/01/35		6,326,971
Live Oak Community Development District No. 002 Special Assessment Series 2004 B
	6,985,000		5.000			11/01/09		6,988,423
Longleaf Community Development District Special Assessment Refunding Series 2005
	6,150,000		5.400			05/01/30		6,256,272
Longleaf Community Development District Special Assessment Refunding Series 2006
	3,000,000		5.375			05/01/30		3,046,710
Longleaf Community Development District Special Assessment Series 2001
	710,000		7.250			05/01/09		720,465
Maple Ridge Community Development District Special Assessment Series 2000 A
	1,510,000		7.150			05/01/31		1,622,102
Marshall Creek Community Development District Special Assessment Series 2002
	2,860,000		6.625			05/01/32		3,048,302
Meadow Pines Community Development District Special Assessment RB Series 2004 A
	6,920,000		6.250			05/01/34		7,413,811
Meadow Pointe III Community Development District RB for Capital Improvement Series 2001 A
	2,890,000		6.850			05/01/33		3,111,490
Meadow Pointe III Community Development District RB for Capital Improvement Series 2003 A
	3,875,000		6.400			05/01/34		4,168,764
Meadow Pointe III Community Development District RB for Capital Improvement Series 2003 B
	495,000		5.250			11/01/07		495,000
Meadow Pointe III Community Development District RB for Capital Improvement Series 2004 A
	985,000		6.000			05/01/35		1,025,099
Meadow Pointe IV Community Development District RB for Capital Improvement Series 2003 A
	2,720,000		6.300			05/01/34		2,898,894
Meadow Pointe IV Community Development District Special Assessment for Capital Improvements Series 2005
	4,455,000		5.250			05/01/15		4,532,829
Meadow Pointe IV Community Development District Tax Allocation for Capital Improvement Series 2004 A
	3,005,000		6.000			05/01/36		3,175,684
Mediterra North Community Development District RB for Capital Improvement Series 2001 A
	4,670,000		6.800			05/01/31		5,012,591
Mediterra South Community Development District RB for Capital Improvement Series 1999 A
	460,000		6.950			05/01/31		479,072
Mediterra South Community Development District RB for Capital Improvement Series 2001
	1,540,000		6.850			05/01/31		1,638,868
Mediterra South Community Development District RB for Capital Improvement Series 2003 A
	4,910,000		6.375			05/01/34		5,274,666
Mediterra South Community Development District RB for Capital Improvement Series 2003 B
	2,500,000		5.500			05/01/10		2,522,475
Mediterranea Community Development District Special Assessment Series 2006 A
	1,550,000		5.600			05/01/37		1,595,865
Miami Beach Health Facilities Authority Hospital RB for Mount Sinai Medical Center Florida Project Series 1998 (BB+)
	7,720,000		5.375			11/15/28		7,876,484
Miami Beach Health Facilities Authority Hospital RB for Mount Sinai Medical Center Series 2001 A (BB+/Ba1)
	4,975,000		6.125			11/15/11		5,357,826
Miami Beach Health Facilities Authority Hospital RB for Mount Sinai Medical Center Series 2004 (BB+/Ba1)
	13,600,000		6.750			11/15/29		15,335,632
Middle Village Community Development District Special Assessment Series 2004 A
	5,785,000		5.800			05/01/22		6,027,739
	15,620,000		6.000			05/01/35		16,411,465
Middle Village Community Development District Special Assessment Series 2004 B
	1,460,000		5.000			05/01/09		1,464,307
Middle Village Community Development District Special Assessment Series 2004 C
	540,000		5.125			05/01/09		541,588
Mira Lago West Community Development District Special Assessment for Capital Improvement Series 2005
	960,000		5.375			05/01/36		976,550

 The accompanying notes are an integral part of these financial statements.

68

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Montecito Community Development District Special Assessment Series 2006 A
$	1,900,000		5.500	%		05/01/37	$	1,943,035
Montecito Community Development District Special Assessment Series 2006 B
	7,930,000		5.100			05/01/13		8,021,671
Monterey/Congress Community Development District Special Assessment Series 2005 A
	4,045,000		5.375			05/01/36		4,107,981
Monterra Community Development District Special Assessment Series 2005 A
	22,000,000		5.500			05/01/36		22,729,520
Monterra Community Development District Special Assessment Series 2005 B
	30,000,000		5.000			11/01/10		30,201,600
Monterra Community Development District Special Assessment Series 2006 B
	31,000,000		5.125			11/01/14		31,783,680
Moody River Estates Community Development District Capital Improvement RB Series 2005
	7,000,000		5.350			05/01/36		7,072,940
Narcoossee Community Development District Special Assessment Series 2002 A
	4,845,000		6.850			05/01/33		5,250,478
Narcoossee Community Development District Special Assessment Series 2002 B
	70,000		5.750			05/01/08		70,307
New Port Tampa Bay Community Development District Special Assessment Series 2006 A
	1,000,000		5.875			05/01/38		1,034,680
North Springs Improvement District RB Refunding for Water Management Series 2005 A
	2,640,000		5.375			05/01/24		2,695,730
North Springs Improvement District RB Refunding for Water Management Series 2005 B
	5,915,000		5.500			05/01/35		6,053,470
North Springs Improvement District Special Assessment for Parkland Golf Country Club Series 2005 A-1
	8,000,000		5.450			05/01/26		8,143,440
North Springs Improvement District Special Assessment for Parkland Golf Country Club Series 2005 A-2
	4,000,000		5.500			05/01/26		4,074,280
North Springs Improvement District Special Assessment for Parkland Golf Country Club Series 2005 B-1
	2,750,000		5.125			05/01/15		2,791,415
North Springs Improvement District Special Assessment RB for Heron Bay North Assessment Area Series 2006 A
	2,550,000		5.200			05/01/27		2,570,273
Oak Creek Community Development District Special Assessment Series 2004
	1,750,000		5.800			05/01/35		1,835,295
Oakstead Community Development District Capital Improvement Refunding Series 2006 A-1 (MBIA) (AAA/Aaa)
	2,000,000		4.500			05/01/32		2,000,000
Oakstead Community Development District RB for Capital Improvement Series 2002 A(a)
	4,625,000		6.875			05/01/12		5,257,607
Oakstead Community Development District RB for Capital Improvement Series 2002 B
	75,000		5.900			05/01/07		75,000
Old Palm Community Development District Special Assessment for Palm Beach Gardens Series 2004 A
	6,730,000		5.900			05/01/35		7,072,961
Old Palm Community Development District Special Assessment for Palm Beach Gardens Series 2004 B
	2,900,000		5.375			05/01/14		2,978,648
Orange County Florida Health Facilities Authority RB for Orlando Regional Healthcare Hospital Series 2006 B (A/A2)
	1,865,000		4.750			11/15/36		1,893,553
Orange County Health Facilities Authority RB for Orlando Lutheran Healthcare Series 2005
	1,100,000		5.375			07/01/20		1,106,710
	1,000,000		5.700			07/01/26		1,018,720
Orlando Urban Community Development District Special Assessment for Capital Improvement Series 2004
	930,000		6.000			05/01/20		999,490
	4,500,000		6.250			05/01/34		4,824,045
Orlando Urban Community Development District Special Assessment Series 2001 A
	7,710,000		6.950			05/01/33		8,376,915
Overoaks Community Development District Special Assessment for Capital Improvement Series 2004 A
	2,275,000		6.125			05/01/35		2,437,458
Overoaks Community Development District Special Assessment for Capital Improvement Series 2004 B
	6,880,000		5.125			05/01/09		6,924,582
Palm Beach County Plantation Community Development District Special Assessment RB Series 2004 A
	7,075,000		6.250			05/01/34		7,542,162
Palm Coast Park Community Development District Special Assessment Series 2006
	10,000,000		5.700			05/01/37		10,244,300
Palm Glades Community Development District Special Assessment Series 2006 A
	1,300,000		5.300			05/01/36		1,320,033
Palma Sola Trace Community Development District RB for Capital Improvement Series 2005
	3,945,000		5.750			05/01/35		4,036,406
Panther Trace Community Development District Special Assessment Series 2002 A
	1,645,000		7.250			05/01/33		1,820,982
Panther Trace II Community Development District Special Assessment Series 2005 A
	6,855,000		5.600			05/01/35		7,019,040
Panther Trace II Community Development District Special Assessment Series 2006
	11,265,000		5.125			11/01/13		11,519,364
Panther Trails Community Development District Special Assessment Series 2005
	3,810,000		5.600			05/01/36		3,925,176
Park Place Community Development District Special Assessment Series 2003
	4,430,000		6.375			05/01/34		4,749,624

The accompanying notes are an integral part of these financial statements. 

69

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Parklands Lee Community Development District Special Assessment Series 2004 A
$	3,950,000		5.800	%		05/01/35	$	4,075,926
Parklands Lee Community Development District Special Assessment Series 2004 B
	270,000		5.125			05/01/11		271,315
Parklands West Community Development District Special Assessment Series 2001 A
	3,330,000		6.900			05/01/32		3,538,025
Parkway Center Community Development District Special Assessment Series 2000 A
	478,601		8.250			05/01/31		484,895
Paseo Community Development District Capital Improvement RB Series 2005 A
	10,555,000		5.400			05/01/36		10,756,600
Pier Park Community Development District RB for Capital Improvement Series 2002 1
	10,125,000		7.150			05/01/34		10,932,772
Pine Island Community Development District Special Assessment Series 2004
	5,435,000		5.300			11/01/10		5,429,185
	11,630,000		5.750			05/01/35		12,204,522
Pinellas County Educational Facilities Authority RB for Eckerd College Project Series 2006 (ACA)(A)
	3,750,000		5.250			10/01/29		3,997,463
	2,325,000		4.750			10/01/31		2,372,849
Poinciana Community Development District Special Assessment Series 2000 A
	5,675,000		7.125			05/01/31		6,102,781
Portico Community Development District Capital Improvement Revenue Special Assessment Series 2006
	3,000,000		5.450			05/01/37		3,068,460
Principal One Community Development District Jacksonville Special Assessment Series 2005
	1,000,000		5.650			05/01/35		1,021,850
Quarry Community Development District Special Assessment Series 2006
	64,000,000		5.250			05/01/16		65,450,880
Renaissance Community Development District RB for Capital Improvement Series 2002 A
	7,105,000		7.000			05/01/33		7,642,493
Renaissance Community Development District RB for Capital Improvement Series 2002 B
	325,000		6.250			05/01/08		328,153
Reunion East Community Development District Special Assessment Series 2002 A
	19,010,000		7.200			05/01/22		20,759,870
	2,450,000		7.375			05/01/33		2,716,683
Reunion East Community Development District Special Assessment Series 2002 B
	965,000		5.900			11/01/07		967,577
Reunion East Community Development District Special Assessment Series 2005
	12,880,000		5.800			05/01/36		13,403,572
Reunion West Community Development District Special Assessment Series 2004
	25,500,000		6.250			05/01/36		27,006,795
River Bend Community Development District Capital Improvement RB Series 2005
	8,880,000		5.450			05/01/35		9,034,956
River Hall Community Development District RB for Capital Improvement Series 2005
	7,000,000		5.450			05/01/36		7,145,740
Rivercrest Community Development District Special Assessment Series 2001
	5,360,000		7.000			05/01/32		5,773,631
Riverside Park Community Development District Special Assessment Series 2004
	1,955,000		6.125			05/01/34		2,032,144
Saddlebrook Community Development District Special Assessment Series 2001 A
	4,935,000		6.900			05/01/33		5,314,403
Saddlebrook Community Development District Special Assessment Series 2001 B
	20,000		6.250			05/01/09		20,364
Sail Harbour Community Development District Special Assessment Series 2005 A
	6,960,000		5.500			05/01/36		7,122,864
Sampson Creek Community Development District Capital Improvement Special Assessment Series 2000 A
	2,220,000		6.950			05/01/31		2,373,691
Sandy Creek Community Development District Special Assessment Series 2005 A
	10,550,000		5.700			05/01/37		10,860,170
Sandy Creek Community Development District Special Assessment Series 2005 B
	15,000,000		5.000			11/01/10		15,053,700
Seven Oaks Community Development District I RB Special Assessment Series 2002
	250,000		5.600			11/01/07		249,400
Seven Oaks Community Development District II RB Special Assessment Series 2003 A
	4,635,000		6.400			05/01/34		4,978,407
Seven Oaks Community Development District II RB Special Assessment Series 2004 A
	4,940,000		5.875			05/01/35		5,114,925
Seven Oaks Community Development District II RB Special Assessment Series 2004 B
	2,285,000		5.000			05/01/09		2,291,832
Shingle Creek Community Development District Capital Improvement RB Series 2006
	2,000,000		5.750			05/01/15		2,055,920
	4,000,000		6.100			05/01/25		4,250,880
	35,000,000		6.125			05/01/37		37,018,100
South Bay Community Development District RB for Capital Improvement Series 2005 A
	22,755,000		5.950			05/01/36		23,921,876
South Bay Community Development District RB for Capital Improvement Series 2005 B-1
	11,690,000		5.125			11/01/09		11,751,139
South Bay Community Development District RB for Capital Improvement Series 2005 B-2
	4,000,000		5.375			05/01/13		4,092,360

 The accompanying notes are an integral part of these financial statements.

70

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
South Fork Community Development District RB Special Assessment Series 2004 A-1
$	510,000		5.900	%		05/01/34	$	523,377
South Fork Community Development District RB Special Assessment Series 2004 A-2
	1,800,000		5.900			05/01/35		1,858,176
South Fork Community Development RB Series 2003
	2,455,000		6.150			05/01/33		2,645,680
South Fork East Community Development District Capital Improvement RB Series 2005
	9,000,000		5.350			05/01/36		9,110,610
South Village Community Development District RB for Capital Improvement Series 2005 A
	13,320,000		5.700			05/01/35		13,738,648
South-Dade Venture Community Development District Special Assessment Series 2004
	2,660,000		6.000			05/01/24		2,822,366
Southern Hills Plantation I Community Development District RB for Capital Improvement Series 2004
	8,290,000		5.800			05/01/35		8,499,074
Southern Hills Plantation II Community Development District Capital Improvement Special Assessment Series 2004
	3,520,000		5.850			05/01/34		3,583,466
Spicewood Community Development District Special Assessment Series 2003 A
	2,925,000		6.100			05/01/34		3,081,956
St. Johns Forest Community Development District RB for Capital Improvement Series 2003 A
	4,955,000		6.125			05/01/34		5,341,639
St. Johns Forest Community Development District RB for Capital Improvement Series 2003 B
	475,000		5.300			05/01/10		481,764
Sterling Hill Community Development District RB for Capital Improvement Series 2003 A
	4,000,000		6.200			05/01/35		4,190,120
Sterling Hill Community Development District RB for Capital Improvement Series 2003 B
	1,940,000		5.500			11/01/10		1,965,278
Stonegate Community Development District RB Special Assessment Series 2004
	2,245,000		6.125			05/01/34		2,371,034
Stonelake Ranch Community Development District Special Assessment Series 2004 A
	3,495,000		5.900			05/01/34		3,628,194
Summerville Community Development District Special Assessment Series 2006
	1,000,000		5.500			05/01/36		1,016,100
Sumter County IDA RB for North Sumter Utility Co. LLC Project Series 2002 (AMT)
	6,690,000		6.800			10/01/32		6,977,670
Sumter County IDA RB for North Sumter Utility Co. LLC Project Series 2003 (AMT)
	4,525,000		6.900			10/01/34		4,731,657
Sumter Landing Community Development District Recreational RB SubSeries 2005 B
	6,475,000		5.700			10/01/38		6,617,450
Suncoast Community Development District RB for Capital Improvement Series 2004 A
	5,300,000		5.875			05/01/34		5,469,971
Tern Bay Community Development District Special Assessment for Capital Improvement Series 2005 B
	7,500,000		5.000			05/01/15		7,657,350
The Quarry Community Development District Special Assessment Series 2005 A-1
	55,350,000		5.500			05/01/36		56,735,964
The Quarry Community Development District Special Assessment Series 2005 A-2
	6,310,000		5.250			05/01/36		6,439,292
Thousand Oaks Community Development District Special Assessment RB Series 2005 A1
	4,785,000		5.350			05/01/35		4,870,651
Thousand Oaks Community Development District Special Assessment RB Series 2005 A2
	1,000,000		5.350			05/01/36		1,012,290
Tisons Landing Community Development District Special Assessment RB Series 2005 A
	2,600,000		5.625			05/01/37		2,654,080
Tisons Landing Community Development District Special Assessment RB Series 2005 B
	4,000,000		5.000			11/01/11		4,034,520
Tolomato Community Development District Special Assessment Series 2006
	63,500,000		5.400			05/01/37		64,470,280
Tomoka Community Development District Series 2004 A
	8,150,000		6.100			05/01/35		8,605,177
Town Center at Palm Coast Community Development District Special Assessment for Capital Improvement Series 2005
	9,880,000		6.000			05/01/36		10,290,909
Trails Community Development District Special Assessment BANS Series 2006
	7,660,000		5.100			09/01/07		7,654,715
Turnbull Creek Community Development District Special Assessment Series 2005
	6,915,000		5.800			05/01/35		7,126,530
University Place Community Development District Special Assessment Series 2001 A
	1,650,000		7.000			05/01/32		1,780,631
Venetian Community Development District RB for Capital Improvement Series 2002 A
	3,800,000		6.750			05/01/34		4,084,544
Verandah East Community Development District Special Assessment Capital Improvement Series 2006 A
	2,000,000		5.400			05/01/37		2,037,740
Verano Center Community Development District Special Assessment for Community Infrastructure Project Series 2006 A
	8,000,000		5.375			05/01/37		8,065,280
Verano Center Community Development District Special Assessment for Community Infrastructure Project Series 2006 B
	8,700,000		5.000			11/01/12		8,731,494
	7,000,000		5.000			11/01/13		7,060,690

The accompanying notes are an integral part of these financial statements. 

71

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Verona Walk Community Development District Capital Improvement Revenue Special Assessment Series 2006
$	9,520,000		5.375	%		05/01/37	$	9,668,226
Verona Walk Community Development District RB for Capital Improvement Series 2004
	6,900,000		5.850			05/01/35		7,154,196
Village Center Community Development District Recreational RB SubSeries 1998 B
	1,930,000		8.250			01/01/17		1,979,080
Village Center Community Development District Recreational RB SubSeries 1998 C
	2,145,000		7.375			01/01/19		2,249,805
Village Center Community Development District Recreational RB SubSeries 2003
	4,005,000		6.350			01/01/18		4,286,872
Village Center Community Development District Recreational RB SubSeries 2004 B
	5,570,000		5.875			01/01/15		5,838,975
Village Community Development District No. 3 Special Assessment Series 2002
	7,000,000		6.500			05/01/32		7,540,820
Village Community Development District No. 4 Special Assessment Series 2000
	2,630,000		7.150			05/01/18		2,859,678
Village Community Development District No. 4 Special Assessment Series 2002
	3,900,000		6.875			05/01/22		4,250,064
	5,650,000		6.950			05/01/32		6,145,787
Village Community Development District No. 4 Special Assessment Series 2003
	500,000		6.500			05/01/33		537,770
Village Community Development District No. 5 Special Assessment Series 2002 A
	16,300,000		6.500			05/01/33		17,612,639
Village Community Development District No. 5 Special Assessment Series 2003 A
	3,875,000		6.000			05/01/22		4,112,499
	21,500,000		6.100			05/01/34		23,085,625
Village Community Development District No. 6 Special Assessment RB Series 2004
	5,455,000		5.625			05/01/22		5,643,743
	44,125,000		5.800			05/01/35		45,827,784
Village Community Development District No. 7 Special Assessment Series 2006
	89,570,000		5.375			05/01/36		91,585,325
Villages of Westport Community Development District RB for Capital Improvement Series 2005 A
	12,700,000		5.700			05/01/35		13,069,443
Villagewalk of Bonita Springs Community Development District Special Assessment for Capital Improvements Series 2005
	5,505,000		5.600			05/01/36		5,642,240
Villasol Community Development District Special Assessment RB Series 2003 A
	4,065,000		6.600			05/01/34		4,361,664
Villasol Community Development District Special Assessment RB Series 2003 B
	685,000		5.375			05/01/08		687,987
Vista Lakes Community Development District RB for Capital Improvement Series 2002 A
	3,615,000		6.750			05/01/34		3,921,480
Vizcaya in Kendall Community Development District BANS Series 2005
	15,000,000		5.125			12/01/06		15,005,850
Walnut Creek Community Development District Special Assessment Series 2000 A
	3,755,000		7.300			05/01/21		4,034,147
Waterchase Community Development District RB for Capital Improvement Series 2001 A
	2,820,000		6.700			05/01/32		3,026,368
Watergrass Community Development District Special Assessment Series 2005 A
	6,230,000		5.500			05/01/36		6,366,562
Watergrass Community Development District Special Assessment Series 2005 B
	1,500,000		4.875			11/01/10		1,511,625
Waterlefe Community Development District RB for Capital Improvement Series 2001 A
	935,000		6.950			05/01/31		999,870
Waters Edge Community Development District Capital Improvement RB Series 2006 A-2
	1,275,000		5.400			05/01/39		1,285,391
Waters Edge Community Development District Capital Improvement RB Series 2006 B
	1,000,000		5.000			11/01/12		1,004,190
Waters Edge Community Development District RB for Capital Improvement Series 2005
	2,000,000		5.300			05/01/36		2,023,300
Wentworth Estates Community Development District Special Assessment Series 2006 A
	15,000,000		5.625			05/01/37		15,458,100
Wentworth Estates Community Development District Special Assessment Series 2006 B
	9,550,000		5.125			11/01/12		9,699,075
West Villages Improvement District Revenue Special Assessment Unit of Development No. 3 Series 2006
	12,500,000		5.500			05/01/37		12,775,250
Westchester Community Development District No. 1 Special Assessment for Community Infrastructure Series 2003
	4,355,000		6.000			05/01/23		4,639,643
	24,250,000		6.125			05/01/35		25,848,317
Westside Community Development District Special Assessment Series 2005
	5,000,000		5.650			05/01/37		5,172,000
Winter Garden Village at Fowler Groves Community Development District Special Assessment Series 2006
	2,000,000		5.650			05/01/37		2,078,500
World Commerce Community Development District Special Assessment Series 2004 A-1
	1,000,000		6.250			05/01/22		1,069,430
	500,000		6.500			05/01/36		536,915
World Commerce Community Development District Special Assessment Series 2004 A-2
	2,965,000		6.125			05/01/35		3,143,967

 The accompanying notes are an integral part of these financial statements.

72

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Florida – (continued)
Wyndam Park Community Development District Special Assessment Series 2003
$	2,500,000		6.375	%		05/01/34	$	2,651,850
Wynnfield Lakes Community Development District Special Assessment Series 2005 A
	11,550,000		5.600			05/01/36		11,803,176
Zephyr Ridge Community Development District Capital Improvement Revenue Special Assessment Series 2006 B
	2,000,000		5.250			05/01/13		2,034,980
								2,334,802,360
Georgia – 0.4%
Atlanta Tax Allocation for Eastside Project Series 2005 A (AMT)
	1,230,000		5.625			01/01/16		1,275,817
Atlanta Tax Allocation for Eastside Project Series 2005 B
	1,085,000		5.400			01/01/20		1,125,568
	2,250,000		5.600			01/01/30		2,347,830
Atlanta Tax Allocation RB for Atlantic Station Project Series 2001
	10,000,000		7.750			12/01/14		11,134,000
Chatham County Hospital Authority RB for Hospital Improvement Memorial Health University Series 2004 A (A-/A3)
	3,675,000		5.500			01/01/34		3,909,171
Dekalb County Development Authority RB for Dekalb Senior Center Project Series 2004
	5,845,000		4.850			06/01/09		5,872,881
Fulton County Residential Care Facilities RB for Canterbury Court Project Series 2004 A
	1,750,000		6.125			02/15/34		1,847,247
Georgia State GO Bonds Series 2005 A (MBIA) (AAA/Aaa)
	5,780,000		2.000			09/01/24		4,136,284
								31,648,798
Guam – 0.1%
Guam Education Financing Foundation COPS for Public School Facilities Project Series 2006 A (A-)
	780,000		5.000			10/01/12		818,158
	1,000,000		5.000			10/01/15		1,065,810
	1,000,000		5.000			10/01/17		1,060,110
	2,825,000		5.000			10/01/23		2,957,549
Guam Government GO Bonds Series 1993 A (B)
	5,000,000		5.375			11/15/13		5,032,700
								10,934,327
Hawaii – 0.3%
Hawaii Airport System RB (AMT) (FGIC) (AAA/Aaa)(e)
	10,000,000		5.750			07/01/15		10,847,500
Hawaii Department of Transport Special Facilities RB for Continental Airlines Inc. Series 1997 (AMT) (B/Caa1)
	9,265,000		5.625			11/15/27		9,057,093
Hawaii Department of Transport Special Facilities RB Refunding for Continental Airlines Inc. Series 2000 (AMT) (B/Caa1)
	2,000,000		7.000			06/01/20		2,106,720
Hawaii Improvement District RB No. 17 Special Assessment Kaloko Subdivision Series 2001
	2,540,000		7.375			08/01/11		2,596,947
								24,608,260
Idaho – 0.1%
Madison County Hospital Revenue COPS Series 2006 (BBB-)
	1,300,000		5.250			09/01/20		1,369,186
	1,000,000		5.250			09/01/26		1,048,360
	3,335,000		5.250			09/01/37		3,466,799
								5,884,345
Illinois – 1.7%
Chicago Illinois Special Assessment for Lake Shore East Series 2003
	4,000,000		6.750			12/01/32		4,346,000
Chicago Illinois Tax Increment for Central Loop Redevelopment Series 2000 A
	6,550,000		6.500			12/01/07		6,715,191
Chicago Illinois Tax Increment Junior Lien for Central Loop Redevelopment Project Series 2000 A (ACA)(a)
	2,000,000		6.500			12/01/08		2,097,040
Chicago Illinois Tax Increment RB for Central Loop Redevelopment Series 2000 A (ACA)(a)
	250,000		6.500			12/01/06		250,453
Chicago Single Family Mortgage RB for Collateral Series 2001 A (FHLMC/FNMA/GNMA) (AMT) (AAA/Aaa)
	2,035,000		6.250			10/01/32		2,056,897
Du Page County Special Service Area No. 31 Special Tax for Monarch Landing Project Series 2006
	250,000		5.400			03/01/16		259,608
	1,450,000		5.625			03/01/36		1,520,891
Illinois Development Finance Authority PCRB for Amerencips Series 2000 A (BB+/Baa3)(c)
	6,050,000		5.500			02/28/14		6,118,425
Illinois Educational Facilities Authority Student Housing RB for Educational Advancement Fund University Center Project Series 2002 (Aaa)(a)
	8,000,000		6.250			05/01/12		9,088,400
Illinois Educational Facilities Authority Student Housing RB for Educational Advancement Fund University Center Project Series 2002 (Baa3)
	7,840,000		6.250			05/01/34		7,942,782
Illinois Finance Authority RB for Friendship Village Schaumburg Series 2005 A (BB+)
	2,500,000		5.000			02/15/15		2,525,100
	5,000,000		5.375			02/15/25		5,079,050
	4,000,000		5.625			02/15/37		4,092,080
Illinois Finance Authority RB for Midwest Regional Medical Center Series 2006
	22,740,000		6.750			10/01/46		22,846,196
Illinois Finance Authority RB Refunding for Proctor Hospital Series 2006 (BBB-/Baa3)
	5,600,000		5.125			01/01/25		5,709,704
Illinois Finance Authority Solid Waste Disposal RB for Waste Management Inc. Project Series 2005 A (AMT) (BBB)
	4,600,000		5.050			08/01/29		4,757,826

The accompanying notes are an integral part of these financial statements. 

73

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Illinois – (continued)
Illinois Finance Authority Student Housing RB for MJH Educational Assistance IV-SR Series 2004 A (Baa2)
$	6,905,000		5.000	%		06/01/24	$	7,080,318
	5,760,000		5.125			06/01/35		5,893,286
Illinois Finance Authority Student Housing RB for MJH Educational Assistance IV-Subseries 2004 B (Baa3)
	2,075,000		5.000			06/01/24		2,114,342
	4,000,000		5.375			06/01/35		4,091,080
Illinois Health Facilities Authority RB for Loyola University Health Systems Series 2001 A (Baa1)
	2,000,000		6.000			07/01/21		2,144,700
Lincolnshire Special Service Area No. 1 Special Tax for Sedgebrook Project Series 2004
	1,805,000		6.250			03/01/34		1,916,134
Ottawa Illinois Health Care Facilities RB for Ottawa Community Hospital Series 2004 (Radian) (AA)
	1,900,000		5.125			08/15/19		2,006,495
	1,100,000		5.000			08/15/21		1,143,032
Plano Special Service Area No. 5 Special Tax for Lakewood Springs Club Unit 6 Series 2006
	4,750,000		6.000			03/01/36		4,867,372
Volo Village Special Service Area No. 4 Special Tax for Symphony Meadows Project Series 2006-2
	4,420,000		5.000			03/01/16		4,469,106
Volo Village Special Service Area No. 6 Special Tax for Lancaster Falls Project Series 2006
	4,200,000		5.750			03/01/36		4,241,454
								125,372,962
Indiana – 1.0%
Delaware County Hospital Authority RB for Cardinal Health Systems Obligation Group Series 2006 (Baa2)
	3,760,000		5.250			08/01/36		3,925,891
Indiana Health & Educational Facilities Finance Authority Hospital RB for Clarian Health Obligations Series 2006 A (A+/A2)
	10,000,000		5.000			02/15/36		10,398,400
	42,120,000		5.000			02/15/39		43,733,196
Indiana Health & Educational Facilities Finance Authority Hospital RB for Schneck Memorial Hospital Project Series 2006 A (A-)
	1,000,000		5.250			02/15/30		1,064,920
	2,550,000		5.250			02/15/36		2,715,546
Indiana Health Facility Financing Authority Hospital RB for Community Foundation Northwest Industry Series 2001 A (BBB-)
	1,500,000		6.375			08/01/31		1,607,925
Indianapolis Airport Authority RB for Special Facilities Federal Express Corp. Project Series 2004 (AMT) (BBB/Baa2)
	7,360,000		5.100			01/15/17		7,835,309
Indianapolis Airport Authority RB for Special Facilities United Air Lines Project Series 1995 A (AMT)(b)
	10,000,000		6.500			11/15/31		600,000
Jasper County Industrial Economic Development RB for Georgia Pacific Corp. Project Series 2000 (AMT) (B2)
	2,500,000		6.700			04/01/29		2,622,300
								74,503,487
Iowa – 0.3%
Coralville COPS Series 2006 D (A2)
	2,250,000		5.250			06/01/26		2,385,450
Iowa Finance Authority Health Facilities RB Refunding for Development of Care Initiatives Project Series 2006 A (BBB-)
	4,250,000		5.500			07/01/25		4,430,158
Tobacco Settlement Authority of Iowa RB for Asset Backed Bonds Series 2005 C (BBB/Baa3)
	6,500,000		5.500			06/01/42		6,803,810
	9,530,000		5.625			06/01/46		9,990,013
								23,609,431
Kansas – 0.5%
Lawrence Hospital RB for Lawrence Memorial Hospital Series 2006 (A3)
	1,500,000		5.125			07/01/36		1,576,305
Olathe Senior Living Facilities RB Refunding for Aberdeen Village Inc. Series 2005 A
	4,250,000		5.600			05/15/28		4,312,347
Salina Hospital RB Refunding & Improvement for Salina Regional Health Series 2006 (A1)
	1,000,000		4.500			10/01/26		1,007,720
	1,000,000		4.625			10/01/31		1,012,530
	825,000		5.000			10/01/36		857,612
Wyandotte County/Kansas City University Government Special Obligation RB Refunding for Sales Tax 2nd Lien Area B Series 2005 (BBB-)
	8,060,000		4.750			12/01/16		8,373,212
	20,600,000		5.000			12/01/20		21,508,666
								38,648,392
Kentucky – 0.5%
Kentucky Economic Development Finance Authority RB for Appalachian Regional Health Care Series 1997 (BB-)
	500,000		5.700			10/01/10		509,260
Kentucky Economic Development Finance Authority RB for Norton Healthcare Inc. Series 2000 B (MBIA) (AAA/Aaa)(d)
	1,720,000		0.000			10/01/22		829,023
Kentucky Economic Development Finance Authority System RB Prerefunded for Norton Healthcare Series 2000 C (MBIA) (AAA/Aaa)(a)
	2,250,000		6.000			10/01/13		2,595,308
	4,500,000		6.000			10/01/18		5,154,930
Louisville & Jefferson County Metropolitan Government Health Systems RB for Norton Healthcare Inc. Series 2006 (A-)
	28,510,000		5.000			10/01/30		29,477,344
								38,565,865
Louisiana – 0.9%
De Soto Parish Environmental Improvement RB Refunding for International Paper Co. Project Series 2004 A (AMT) (BBB/Baa3)
	6,260,000		5.000			11/01/18		6,421,696
Hodge Utility RB Series 2003 (AMT) (CCC+)
	6,750,000		7.450			03/01/24		8,425,485

 The accompanying notes are an integral part of these financial statements.

74

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Louisiana – (continued)
Tobacco Settlement Financing Corp. RB Series 2001 B (BBB/Baa3)
$	17,225,000		5.500	%		05/15/30	$	18,064,374
	28,575,000		5.875			05/15/39		30,355,223
								63,266,778
Maryland – 1.2%
Baltimore Maryland Convention Center Hotel RB SubSeries 2006 B (BB/Ba1)
	600,000		5.000			09/01/16		615,834
	15,155,000		5.875			09/01/39		16,179,478
Baltimore Maryland Special Obligation RB for Clipper Mill Project Series 2004
	4,627,000		6.250			09/01/33		4,925,719
Baltimore Maryland Special Obligation RB for Harborview Lot No. 2 Series 2003
	3,000,000		6.500			07/01/31		3,230,760
Baltimore Maryland Special Obligation RB for Strathdale Manor Project Series 2003
	3,750,000		7.000			07/01/33		4,100,700
Maryland Health & Higher Educational Facilities Authority RB for Edenwald Series 2006 A
	1,000,000		5.400			01/01/31		1,037,110
	1,100,000		5.400			01/01/37		1,130,052
Maryland State Department of Transportation RB (AAA/Aa2)(e)
	23,300,000		5.000			05/01/14		25,410,048
Maryland State Economic Development Corp. Solid Waste Disposal RB for Waste Management, Inc. Project Series 2006 (AMT) (BBB)(c)
	2,000,000		4.600			04/01/16		2,024,320
Maryland State Health & Higher Educational Facilities Authority RB for Medstar Health Series 2004 (BBB+/Baa1)
	1,000,000		5.750			08/15/16		1,102,630
	4,500,000		5.375			08/15/24		4,813,740
	10,750,000		5.500			08/15/33		11,448,535
Prince Georges County Special Obligation Bonds for National Harbor Project Series 2004 RMKT 9/21/05
	1,890,000		4.700			07/01/15		1,942,126
	4,750,000		5.200			07/01/34		4,874,545
Prince Georges County Special Tax District for Victoria Falls Project Series 2005
	1,500,000		5.250			07/01/35		1,523,550
Westminster Maryland Economic Development RB for Carroll Lutheran Village Series 2004 A
	4,000,000		6.250			05/01/34		4,220,000
								88,579,147
Massachusetts – 0.7%
Massachusetts Development Finance Agency RB for Eastern Nazarene College Series 1999 (BB+)
	2,235,000		5.625			04/01/19		2,301,826
	2,000,000		5.625			04/01/29		2,051,800
Massachusetts GO Bonds Series C (FSA) (AAA/Aaa)(e)
	10,000,000		5.380			12/01/14		10,723,100
Massachusetts Health and Educational Facilities Authority RB for Civic Investments Series 2002 A
	2,900,000		9.000			12/15/15		3,597,682
Massachusetts Health and Educational Facilities Authority RB for Civic Investments Series 2002 B
	2,000,000		9.200			12/15/31		2,479,180
Massachusetts Health and Educational Facilities Authority RB for Saint Memorial Medical Center Series 1993 A (Ba1)
	5,400,000		6.000			10/01/23		5,438,556
Massachusetts State Development Finance Agency RB for Hampshire College Series 2004 (BBB/Baa2)
	1,000,000		5.625			10/01/24		1,072,080
	1,000,000		5.700			10/01/34		1,068,790
Massachusetts State Health & Educational Facilities Authority RB for Milton Hospital Series 2005 D (BBB-)
	7,530,000		5.500			07/01/40		7,847,992
Massachusetts State Health and Educational Facilities Authority RB for UMass Memorial Issue Series 2005 D (BBB/Baa2)
	13,700,000		5.000			07/01/33		13,969,205
								50,550,211
Michigan – 0.9%
Flint Hospital Building Authority RB Refunding for Hurley Medical Center Series 1998 A (Ba1)
	1,460,000		5.375			07/01/20		1,468,307
Flint Michigan Hospital Building Authority RB for Hurley Medical Center Refunding Series 2003 (Ba1)
	3,205,000		5.500			07/01/08		3,227,723
Flint Michigan Hospital Building Authority RB for Hurley Medical Center Series 1998 B (Ba1)
	2,250,000		5.375			07/01/28		2,242,688
Michigan State Hospital Finance Authority RB for Chelsea Community Hospital Obligation Series 2005 (BBB)
	415,000		5.000			05/15/25		425,715
	400,000		5.000			05/15/30		409,480
	1,000,000		5.000			05/15/37		1,021,580
Michigan State Hospital Finance Authority RB for Marquette General Hospital Obligation Group Series 2005 A (Baa1)
	1,530,000		5.000			05/15/26		1,569,505
	2,000,000		5.000			05/15/34		2,047,400
Michigan State Hospital Finance Authority RB Refunding for Henry Ford Health Systems Series 2006 A (A/A1)
	9,375,000		5.000			11/15/38		9,780,750
Michigan State Strategic Fund Solidwaste Disposal RB Refunding for Waste Management Inc. Project Series 2002 (AMT) (BBB)
	10,000,000		4.625			12/01/12		10,150,500
Midland County Economic Development RB for Obligation-Midland Series 2000 B (B/B3)
	5,000,000		6.750			07/23/09		5,125,050
Midland County Economic Development RB for Sub-Ltd. Obligation Series 2000 A (AMT) (B/B3)
	11,150,000		6.875			07/23/09		11,429,084
Monroe County Hospital Finance Authority RB Refunding for Mercy Hospital Corp. Obligation Series 2006 (BBB-/Baa3)
	3,500,000		5.500			06/01/35		3,685,710
Monroe County Hospital Finance Authority RB Refunding for Mercy Memorial Hospital Corp. Obligation Series 2006 (BBB-/Baa3)
	1,750,000		5.375			06/01/26		1,839,950

The accompanying notes are an integral part of these financial statements. 

75

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Michigan – (continued)
Wayne Charter County Special Airport Facilities RB for Northwest Airlines Inc. Series 1995(b)
$	3,250,000		6.750	%		12/01/15	$	2,352,513
Wayne Charter County Special Airport Facilities RB for Northwest Airlines Inc. Series 1999 (AMT)(b)
	8,235,000		6.000			12/01/29		5,980,422
								62,756,377
Minnesota – 0.8%
Aitkin Health Care Facilities RB Refunding for Riverwood Health Care Center Series 2006
	700,000		5.500			02/01/24		721,756
	1,380,000		5.600			02/01/32		1,421,648
Becker PCRB for Northern States Power Series 2000 A (A-/A2)
	10,000,000		8.500			04/01/30		12,493,800
Duluth Economic Development Authority Health Care Facilities RB for St. Luke’s Hospital Series 2002 (BB)
	7,500,000		7.250			06/15/32		8,218,350
Inver Grove Heights Nursing Home RB Refunding for Presbyterian Homes Care Series 2006
	525,000		5.500			10/01/33		532,067
	1,000,000		5.500			10/01/41		1,008,820
Minneapolis Tax Increment RB for Grant Park Project Series 2006
	795,000		5.000			02/01/16		806,432
	420,000		5.200			02/01/22		424,528
St. Paul Housing and Redevelopment Authority Hospital RB for Healtheast Project Series 2005 (BB+/Baa3)
	11,500,000		6.000			11/15/30		12,660,925
	10,000,000		6.000			11/15/35		10,969,100
St. Paul Port Authority Lease RB for Healtheast Midway Campus Series 2003 A (BB)
	2,700,000		5.750			05/01/25		2,830,464
	1,400,000		5.875			05/01/30		1,463,854
St. Paul Port Authority Lease RB for Healtheast Midway Campus Series 2003 B
	2,700,000		6.000			05/01/30		2,846,124
								56,397,868
Mississippi – 0.3%
Adams County Environmental Improvement RB for International Paper Co. Project Series 1999 A (AMT) (BBB/Baa3)
	1,000,000		6.250			09/01/23		1,066,300
Mississippi Business Finance Corp. PCRB for Systems Energy Resources Inc. Project Series 1998 (BBB-/Ba1)
	7,400,000		5.875			04/01/22		7,430,340
Mississippi Hospital Equipment & Facilities Authority RB Refunding & Improvement for South Central Hospital Series 2006 (BBB+)
	3,000,000		5.250			12/01/21		3,200,640
	1,825,000		5.250			12/01/26		1,937,895
Warren County RB Gulf Opportunity Zone for International Paper Co. Series 2006 A (BBB/Baa3)
	11,250,000		4.800			08/01/30		11,344,162
								24,979,337
Missouri – 0.4%
Grindstone Plaza Transportation Development District Sales Tax RB Series 2006 A
	260,000		5.250			10/01/21		260,933
	385,000		5.400			10/01/26		388,142
	355,000		5.500			10/01/31		359,512
	500,000		5.550			10/01/36		506,340
Kansas City IDA Health Facilities RB for First Mortgage Bishop Spencer Series 2004 A
	2,150,000		5.500			01/01/09		2,159,524
	1,000,000		6.250			01/01/24		1,040,850
	2,500,000		6.500			01/01/35		2,630,925
Kansas City IDA RB for Air Cargo Series 2002 (AMT) (Baa3)
	1,290,000		6.250			01/01/30		1,377,114
Missouri State Development Finance Board Infrastructure Facilities RB for Branson Landing Project Series 2005 A (BBB+/Baa1)
	3,230,000		4.750			06/01/25		3,282,229
	15,960,000		5.000			06/01/35		16,339,529
St. Louis IDA MF Hsg. for Vaughn Elderly Apartments Project Series 2004 (AMT)(c)
	2,610,000		4.000			12/20/06		2,609,974
Strother Interchange Transportation Development District Lees Summit RB Series 2006
	675,000		5.000			05/01/24		683,559
								31,638,631
Montana(c) – 0.1%
Forsyth Montana PCRB Refunding Portland General Series 1998-A RMKT 5/1/03 (BBB+/Baa1)
	10,500,000		5.200			05/01/09		10,761,450
Nevada – 1.5%
Clark County Improvement District No. 142-Local Improvement Special Assessment Series 2003
	1,460,000		5.800			08/01/15		1,510,604
	4,995,000		6.100			08/01/18		5,172,222
	3,990,000		6.375			08/01/23		4,134,119
Clark County Industrial Development RB for Nevada Power Co. Project Series 1995 A (AMT)(B)
	10,380,000		5.600			10/01/30		10,389,134
Clark County Industrial Development RB for Nevada Power Co. Project Series 1995 B (AMT)(B)
	13,665,000		5.900			10/01/30		13,715,834
Clark County Industrial Development RB for Nevada Power Co. Project Series 1995 C(B)
	710,000		5.500			10/01/30		710,696
Clark County Industrial Development RB for Southwest Gas Corp. Project Series 2003 C (BBB-/Baa3)(c)
	4,835,000		5.450			03/01/13		5,062,245
Clark County School District GO Bonds Series D (MBIA) (AAA/Aaa)(e)
	17,900,000		5.500			06/15/12		19,586,180
Director of the State of Nevada Department of Business & Industry RB for Las Vegas Monorail Project 2000 2nd Tier
	1,000,000		7.375			01/01/30		1,027,730

 The accompanying notes are an integral part of these financial statements.

76

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal			Interest			Maturity
Amount			Rate			Date		Value
Municipal Debt Obligations – (continued)
Nevada – (continued)
Director of the State of Nevada Department of Business & Industry RB for Las Vegas Monorail Project Series 2000 2nd Tier
$	3,000,000			7.250	%		01/01/23	$	3,073,620
	10,000,000			7.375			01/01/40		10,256,300
Henderson Local Improvement Districts No. T-14 Special Assessment Series 2003
	1,780,000			5.550			03/01/17		1,837,334
Henderson Local Improvement Districts No. T-16 Special Assessment Series 2005
	620,000			4.500			03/01/08		623,937
	1,060,000			4.900			03/01/17		1,078,826
	1,555,000			5.000			03/01/20		1,582,306
	820,000			5.100			03/01/22		839,877
	3,600,000			5.125			03/01/25		3,679,488
Henderson Local Improvement Districts No. T-17 Special Assessment Series 2005
	1,400,000			5.000			09/01/25		1,425,326
Las Vegas Local Improvement Bonds Special Assessment District No. 808 Summerlin Area Series
	2001
	1,130,000			5.700			06/01/08		1,160,792
	1,965,000			6.750			06/01/21		2,026,799
Las Vegas Local Improvement Bonds Special Assessment for Special Improvement District No. 607 Series 2004
	1,335,000			5.900			06/01/17		1,375,477
	1,375,000			5.900			06/01/18		1,453,210
	500,000			6.000			06/01/19		515,165
	5,000,000			6.250			06/01/24		5,151,400
Washoe County Water Facilities RB for Sierra Pacific Power Co. Series 2001 (AMT) (BB+/Ba1)
	(c	)
	8,000,000			5.000			07/01/09		8,108,400
									105,497,021
New Hampshire – 0.2%
New Hampshire Health & Education Facilities Authority RB for The Memorial Hospital Series 2006 (Baa3)
	1,050,000			5.250			06/01/26		1,080,996
	1,100,000			5.250			06/01/36		1,122,132
New Hampshire Health & Educational Facilities Authority RB for Speare Memorial Hospital Series 2004 (BBB-)
	1,000,000			5.500			07/01/25		1,027,270
	1,400,000			5.875			07/01/34		1,451,716
New Hampshire Health and Education Facilities Authority RB for Catholic Medical Center Series 2006 (BBB+/Baa1)
	1,400,000			5.000			07/01/32		1,457,610
New Hampshire Health and Education Facilities Authority RB for Catholic Medical Center Series 2006 (BBB+/Baa1)
	1,610,000			5.000			07/01/36		1,669,860
New Hampshire State Business Finance Authority RB for Waste Management Inc. Project Series 2002 (AMT) (BBB)
	3,750,000			5.200			05/01/27		3,918,450
									11,728,034
New Jersey – 3.9%
New Jersey Economic Development Authority RB for First Mortgage Lions Gate Project Series 2005 A
	825,000			5.000			01/01/15		832,252
	710,000			5.750			01/01/25		739,145
	1,230,000			5.875			01/01/37		1,279,557
New Jersey Economic Development Authority RB for First Mortgage of The Presbyterian Home Series 2001 A
	1,500,000			6.250			11/01/20		1,585,170
New Jersey Economic Development Authority Retirement RB for Seabrook Village Inc. Series 2000 A
	2,500,000			8.000			11/15/15		2,794,775
New Jersey Economic Development Authority Special Facilities RB for Continental Airlines Inc Project Series 1998 (AMT) (CCC+/Caa1)
	7,480,000			5.500			04/01/28		7,039,129
New Jersey Economic Development Authority Special Facilities RB for Continental Airlines Inc. Project Series 1999 (AMT) (B/Caa1)
	7,000,000			6.625			09/15/12		7,528,360
	24,520,000			6.250			09/15/19		25,394,138
	4,060,000			6.400			09/15/23		4,220,735
	35,135,000			6.250			09/15/29		36,387,563
New Jersey Health Care Facilities Financing Authority RB for Children’s Specialized Hospital Series 2005 A (Baa3)
	1,825,000			5.500			07/01/30		1,920,557
New Jersey Health Care Facilities Financing Authority RB for Palisades Medical Center of New York Healthcare Series 2002 (BBB-/Baa3)
	820,000			6.500			07/01/21		900,245
	500,000			6.625			07/01/31		546,515
New Jersey Health Care Facilities Financing Authority RB for South Jersey Hospital Series 2002 (Baa1)(a)
	2,000,000			6.000			07/01/12		2,140,080
New Jersey Health Care Facilities Financing Authority RB for South Jersey Hospital Series 2006 (Baa1)
	2,800,000			5.000			07/01/36		2,910,768
	9,375,000			5.000			07/01/46		9,693,844
New Jersey Health Care Facilities Financing Authority RB for St. Peters University Hospital Series 2000 A (BBB/Baa1)
	1,500,000			6.875			07/01/30		1,667,550
New Jersey State Educational Facilities Authority RB for Fairleigh Dickinson Series 2004 C (BBB-)
	1,000,000			5.500			07/01/23		1,076,410
New Jersey Tobacco Settlement Financing Corp. RB for Public Improvement Series 2002 (BBB/Baa3)
	53,480,000			5.750			06/01/32		57,193,116
Tobacco Settlement Financing Corp. RB for New Jersey Asset Backed Bonds Series 2002 (BBB/Baa3)
	21,055,000			6.000			06/01/37		22,775,404
	40,105,000			6.125			06/01/42		43,628,224
Tobacco Settlement Financing Corp. RB Series 2003 (BBB/Baa3)
	7,630,000			6.750			06/01/39		8,723,532
	5,130,000			7.000			06/01/41		5,938,283
	32,345,000			6.250			06/01/43		35,864,136
									282,779,488

The accompanying notes are an integral part of these financial statements. 

77

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
New Mexico – 0.5%
Farmington PCRB for Public Service Co. San Juan Series 1996 B (BBB/Baa2)
$	2,500,000		6.300	%		12/01/16	$	2,554,825
Farmington PCRB for San Juan Project Series 2003 A (BBB/Baa2)
	31,000,000		4.875			04/01/33		31,749,270
Farmington PCRB for Tucson Electric Power Co. San Juan Series 1997 A (B+/Baa3)
	3,000,000		6.950			10/01/20		3,130,050
Mariposa East Public Improvement District GO Series 2006
	500,000		5.500			09/01/16		517,320
	1,000,000		6.000			09/01/32		1,045,040
								38,996,505
New York – 3.7%
Long Island Power Authority Electric Systems RB General Series 2006 C (A-/A3)
	18,760,000		5.000			09/01/35		19,833,260
Metropolitan Transportation Authority RB Series A (AMBAC) (AAA/Aaa)(e)
	10,000,000		5.500			11/15/15		11,062,000
Monroe County Industrial Development Agency Civic Facilities RB for Highland Hospital of Rochester Series 2005 (BBB+/Baa1)
	1,000,000		5.000			08/01/22		1,039,410
Nassau County IDA Civic Facility RB for North Shore Health System Project Series 2001 A (A3)
	400,000		6.250			11/01/21		431,372
Nassau County IDA Civic Facility RB for North Shore Health System Project Series 2001 B (A3)
	1,000,000		5.875			11/01/11		1,047,550
Nassau County IDA Civic Facility RB for North Shore Health System Project Series 2001 C (A3)
	615,000		5.625			11/01/10		632,583
Nassau County IDA Civic Facility RB for North Shore Health System Project Series 2001 D (A3)
	600,000		5.625			11/01/09		627,258
New York City GO Bonds Series 2005 J (AA-/A1)
	16,710,000		5.000			03/01/25		17,652,277
New York City GO Bonds Series 2006 A (AA-/A1)
	26,160,000		5.000			08/01/21		28,055,815
New York City IDA Civic Facility RB for Polytechnic University Project Series 2000 (BB+/Ba3)
	150,000		5.200			11/01/07		151,257
	2,000,000		6.000			11/01/20		2,129,840
New York City IDA Civic Facility RB for Staten Island University Hospital Series 2000 (B2)
	1,005,000		6.375			07/01/31		1,051,642
New York City IDA RB for Queens Baseball Stadium-Pilot Series 2006 (AMBAC) (AAA/Aaa)
	21,285,000		5.000			01/01/36		22,716,842
New York City IDA Special Facilities RB for Continental Airlines Inc. Series 2003 (AMT) (CCC+)
	1,740,000		7.250			11/01/08		1,765,073
	4,055,000		8.000			11/01/12		4,395,579
New York City Industrial Development Agency Civic Facilities RB for Staten Island University Hospital Project Series 2002 C (B2)
	1,480,000		6.450			07/01/32		1,563,457
New York City Industrial Development Agency Special Facilities RB for American Airlines, Inc. Project Series 1990 (AMT) (CCC+/Caa2)
	14,010,000		5.400			07/01/20		13,360,917
New York City Industrial Development Agency Special Facilities RB for American Airlines, Inc. Project Series 1994 (AMT) (CCC+/Caa2)
	4,000,000		6.900			08/01/24		4,031,240
New York City Industrial RB for Liberty 7 World Trade Center Project Series 2005 B
	2,000,000		6.750			03/01/15		2,159,300
New York City Industrial RB for Liberty 7 World Trade Center Series 2005 A
	5,000,000		6.250			03/01/15		5,337,700
New York City Transitional Finance Authority RB Refunding Future Tax Secured Series A (AAA/Aa1)(e)
	16,000,000		5.500			11/01/11		17,309,920
New York Convention Center Operating Corp. COPS for Yale Building Acquisition Project Series 2003(a)
	4,000,000		5.250			06/01/07		4,078,800
New York GO Bonds Series 2003 D (AA-/A1)
	6,000,000		5.250			10/15/18		6,496,440
New York GO Bonds Series 2005 M (AA-/A1)
	7,980,000		5.000			04/01/25		8,433,982
New York State Dormitory Authority Non State Supported Debt RB for NYU Hospital Center Series 2006 A (BB/Ba2)
	5,000,000		5.000			07/01/20		5,122,150
	9,100,000		5.000			07/01/26		9,286,732
New York State Dormitory Authority RB for New York Methodist Hospital Series 2004 (A3)
	1,000,000		5.250			07/01/24		1,069,470
New York State Dormitory Authority RB for North Shore Long Island Jewish Group Series 2003 (A3)
	6,620,000		5.000			05/01/18		6,929,816
New York State Environmental Facilities Corp. PCRB for Water Finance Authority Project Series E (MBIA) (AAA/Aaa)(e)
	21,850,000		6.000			06/15/11		24,130,654
New York State Urban Development Corp. RB for Correctional & Youth Facilities Services Series A (AA-)(c)(e)
	14,500,000		5.250			01/01/09		14,961,970
Niagara County Industrial Development Agency RB for Solid Waste Disposal Refunding Series 2001 A (AMT) (BB+/Baa3)(c)
	5,000,000		5.450			11/15/12		5,351,250
Saratoga County IDA Civic Facility RB for Saratoga Hospital Project Series 2004 A (BBB+)
	750,000		5.000			12/01/08		765,990
	1,205,000		5.000			12/01/12		1,261,466
	300,000		5.000			12/01/14		315,867
Suffolk County Industrial Development Agency Continuing Care Retirement RB Refunding for Jeffersons Ferry Project Series 2006 (BBB-)
	2,000,000		5.000			11/01/28		2,055,280

 The accompanying notes are an integral part of these financial statements.

78

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal			Interest			Maturity
Amount			Rate			Date		Value
Municipal Debt Obligations – (continued)
New York – (continued)
Tobacco Settlement Financing Corp. RB for New York Asset Backed Bonds Series A/1 (AA-/A1)
$	15,910,000			5.500	%		06/01/18	$	17,290,829
Westchester County Healthcare Corp. RB for Senior Lien Series 2000 A (BB/Ba2)
	4,000,000			5.875			11/01/25		4,148,720
									268,053,708
North Carolina – 1.1%
Charlotte Special Facilities RB for Charlotte/Douglas International US Airways Airport Series 1998 (AMT)
	6,760,000			5.600			07/01/27		6,797,112
Charlotte Special Facilities RB for Douglas International Airport US Airways Series 2000 (AMT)
	3,000,000			7.750			02/01/28		3,233,040
Gaston County Industrial Facilities & Pollution Control Financing Authority RB for National Gypsum Co. Project Series 2005 (AMT)
	20,500,000			5.750			08/01/35		21,847,055
North Carolina Eastern Municipal Power Agency Power System RB Series 2003 C (BBB/Baa2)
	6,495,000			5.375			01/01/16		6,952,443
	4,850,000			5.375			01/01/17		5,177,957
North Carolina Eastern Municipal Power Agency Power System RB Series 2003 D (BBB/Baa2)
	3,400,000			5.125			01/01/23		3,535,286
North Carolina Medical Care Commission Health Care Facilities RB Refunding for First Mortgage Salemtowne Series 2006
	1,850,000			5.000			10/01/23		1,865,466
	1,100,000			5.100			10/01/30		1,111,638
North Carolina Medical Care Community Health Care Facilities RB 1st Mortgage for Presbyterian Homes Series 2006
	1,650,000			5.600			10/01/36		1,725,059
North Carolina Medical Care Community Hospital RB for Maria Parham Medical Center Series 2003 (Radian) (AA)
	2,505,000			5.500			10/01/13		2,707,855
North Carolina Medical Care Community Retirement Facilities RB 1st Mortgage for Givens Estates Project Series 2003 A
	3,000,000			6.500			07/01/32		3,230,760
North Carolina Medical Care Community Retirement Facilities RB Refunding 1st Mortgage for United Church Project Series 2005 A
	2,750,000			5.250			09/01/21		2,803,322
North Carolina Medical Care Community Retirement Facilities RB Refunding 1st Mortgage for United Church Project Series 2005 B(c)
	1,500,000			4.300			09/01/08		1,501,755
North Carolina Medical Care Community Retirement Facilities RB Refunding 1st Mortgage for United Methodist Church Series 2005 C
	1,000,000			5.250			10/01/24		1,028,310
	1,600,000			5.500			10/01/32		1,661,632
North Carolina Municipal Power Agency No. 1 Catawba Electric RB Series 1998 A (MBIA) (AAA/Aaa)
	1,000,000			5.500			01/01/14		1,112,940
North Carolina Municipal Power Agency No. 1 Catawba Electric RB Series 1999 B (BBB+/A3)
	1,750,000			6.375			01/01/13		1,901,183
	5,000,000			6.500			01/01/20		5,452,000
North Carolina Municipal Power Agency No. 1 Catawba Electric RB Series 2003 A (BBB+/A3)
	2,550,000			5.500			01/01/13		2,759,788
									76,404,601
North Dakota – 0.1%
Ward County Health Care Facilities RB for Trinity Obligated Group Series 2006 (BBB+)
	2,100,000			5.125			07/01/25		2,203,467
	1,500,000			5.125			07/01/29		1,565,535
									3,769,002
Ohio – 0.8%
Cleveland Airport Special RB for Continental Airlines Inc. Series 1998 (AMT) (B-/Caa1)
	28,025,000			5.375			09/15/27		27,796,596
Cleveland Airport Special RB for Continental Airlines Inc. Series 1999 (AMT) (B-/Caa1)
	3,925,000			5.500			12/01/08		3,939,405
	20,550,000			5.700			12/01/19		20,886,815
Coshocton County Environmental RB Refunding for Smurfit Stone Container Series 2005 (CCC+)
	(f	)
	3,000,000			5.125			08/01/13		3,015,210
Cuyahoga County Port Authority RB for Columbia National Series 2005 D (AMT) (BBB+)
	820,000			5.000			05/15/20		837,318
Pinnacle Community Infrastructure Financing Authority RB for Ohio Facilities Series 2004 A
	2,500,000			6.250			12/01/36		2,661,150
									59,136,494
Oklahoma – 1.5%
Norman Oklahoma Regional Hospital Authority RB Series 2005 (BBB-)
	3,250,000			5.375			09/01/36		3,386,695
Tulsa Municipal Airport Trust RB for American Airlines Series 2000 B (AMT) (B/Caa2)(c)
	26,100,000			6.000			12/01/08		26,633,484
Tulsa Municipal Airport Trust RB for American Airlines Series 2001 A (AMT) (B/Caa2)(c)
	14,110,000			5.375			12/01/06		14,113,669
Tulsa Municipal Airport Trust RB for American Airlines Series 2001 B (AMT) (B/Caa2)(c)
	27,675,000			5.650			12/01/08		28,051,933
Tulsa Municipal Airport Trust RB VRDN Refunding Series 2000 A RMKT 12/1/04 (AMT) (B/Caa2)
	(c	)
	25,500,000			7.750			12/01/14		29,642,730
Weatherford Hospital Authority RB Series 2006
	2,200,000			6.000			05/01/25		2,301,068
	1,365,000			6.000			05/01/31		1,407,697
									105,537,276

The accompanying notes are an integral part of these financial statements. 

79

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Oregon – 0.3%
Gilliam County Solid Waste Disposal RB for Waste Management Project Series 2002 (AMT) (BBB)
$	18,000,000		5.250	%		07/01/29	$	19,291,680
Oregon State Economic Development RB for Georgia Pacific Corp. Series 1995 CLVII (AMT) (B/B2)
	195,000		6.350			08/01/25		195,786
Portland Multifamily RB for Pacific Tower Series 2001 C (AMT)
	2,605,000		7.000			12/01/34		2,642,616
								22,130,082
Pennsylvania – 3.9%
Allegheny County Airport RB for Pittsburgh International Airport Series 1997 A-1 (MBIA) (AMT) (AAA/Aaa)
	2,000,000		5.750			01/01/09		2,077,960
Allegheny County Hospital Development Authority RB for Health Systems Series 2000 B (B+/Ba3)
	210,000		9.250			11/15/15		250,700
	16,460,000		9.250			11/15/22		19,650,113
	14,540,000		9.250			11/15/30		17,357,997
Allegheny County Hospital Development Authority RB for Ohio Valley General Hospital Project Series 2005 A (Baa2)
	2,300,000		5.000			04/01/25		2,347,380
	4,130,000		5.125			04/01/35		4,253,528
Allegheny County IDA RB Refunding for Environmental Improvement Series 2005 (BB/Ba1)
	12,570,000		5.500			11/01/16		13,343,558
Allegheny County Redevelopment Authority for Pittsburgh Mills Project Series 2004
	3,030,000		5.100			07/01/14		3,124,021
	2,000,000		5.600			07/01/23		2,126,940
Allentown Area Hospital Authority RB for Sacred Heart Hospital Series 2005 (BB+/Ba3)
	7,265,000		6.000			11/15/16		7,317,599
Bucks County IDA Retirement Community RB for Ann’s Choice, Inc. Facilities Series 2005 A
	3,000,000		6.250			01/01/35		3,186,510
Chester County Health & Education RB for Jenners Pond Inc. Project Series 2002(a)
	3,000,000		7.625			07/01/12		3,377,250
Chester Economic Development Authority RB GTD Series 2004
	8,640,000		7.000			03/01/19		9,599,731
Cumberland County Municipal Authority Retirement Community RB Unrefunded Balance Wesley Series 2002 A(a)
	1,390,000		7.250			01/01/13		1,670,627
Delaware County IDA RB Refunding for Residential Recovery Facilities Series 1997 A (BB+/Ba2)
	32,100,000		6.100			07/01/13		33,490,572
Fulton County IDA RB for Medical Center Project Series 2006
	1,500,000		5.875			07/01/31		1,553,790
	2,000,000		5.900			07/01/40		2,067,820
Lehigh County General Purpose Authority RB for Saint Lukes Bethlehem Hospital Series 2003 (BBB/Baa1)
	11,500,000		5.375			08/15/33		12,129,970
Montgomery County Higher Education & Health Authority RB for Catholic Health Systems East Series 2004 C (A/A1)
	1,550,000		5.375			11/15/34		1,668,699
Montgomery County IDA RB for Whitemarsh Continued Care Project Series 2005
	1,720,000		5.125			02/01/12		1,736,443
	1,775,000		5.300			02/01/13		1,808,228
	2,000,000		6.125			02/01/28		2,128,620
Montgomery County IDA RB for Whitemarsh Continuing Care Series 2005
	5,805,000		6.250			02/01/35		6,170,367
New Morgan IDA Solid Waste Disposal RB for New Morgan Landfill Co. Inc. Project Series 1994 (AMT) (BB-/B3)
	8,115,000		6.500			04/01/19		8,153,140
Pennsylvania Economic Development Financing Authority Exempt Facilities RB for Amtrak Project Series 2001 A (AMT) (BBB/A3)
	11,500,000		6.375			11/01/41		12,550,985
Pennsylvania Economic Development Financing Authority Exempt Facilities RB for Reliant Energy Series 2002 A (AMT) (B2)
	26,550,000		6.750			12/01/36		28,570,720
Pennsylvania Economic Development Financing Authority Exempt Facilities RB for Reliant Energy Series 2002 B Converted 12/22/04 (AMT) (B2)
	36,500,000		6.750			12/01/36		39,278,015
Pennsylvania Economic Development Financing Authority Exempt Facilities RB for Reliant Energy Series 2003 A (AMT) (B2)
	2,000,000		6.750			12/01/36		2,152,220
Pennsylvania Economic Development Financing Authority Exempt Facilities RB for Reliant Energy Seward Series 2001 A (AMT) (B2)
	18,500,000		6.750			12/01/36		19,908,035
Pennsylvania State Public School Building Authority RB for Montgomery County Community College Project Series 2005 (AMBAC) (Aaa)
	1,410,000		5.000			05/01/24		1,506,515
	675,000		5.000			05/01/25		721,204
Philadelphia Gas Works RB Eighteenth Series 2004 (CIFG) (AAA/Aaa)
	3,195,000		5.000			08/01/14		3,436,638
	3,350,000		5.000			08/01/15		3,591,770
Scranton Lackawanna Health & Welfare Authority RB for Moses Taylor Hospital Project Series 1997 (B-)
	500,000		6.150			07/01/14		505,930
	4,825,000		6.200			07/01/17		4,872,671
	6,840,000		6.250			07/01/20		6,894,173
St. Mary Hospital Authority RB Refunding for Catholic Health East Series 2004 B (A/A1)
	2,275,000		5.375			11/15/34		2,433,226
								287,013,665
Puerto Rico – 3.4%
Children’s Trust Fund RB for Tobacco Settlement Series 2000 (AAA)(a)
	5,310,000		5.750			07/01/10		5,533,498
Puerto Rico Commonwealth GO Bonds Public Improvement Series 2006 A (BBB/Baa3)
	1,755,000		5.250			07/01/26		1,897,102
	23,260,000		5.250			07/01/30		25,009,617

 The accompanying notes are an integral part of these financial statements.

80

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Puerto Rico – (continued)
Puerto Rico Commonwealth GO Bonds Refunding Public Improvement Series 2006 B (BBB/Baa3)
$	31,530,000		5.000	%		07/01/35	$	32,953,579
Puerto Rico Commonwealth GO Bonds Refunding Public Improvement Series C (MBIA) (AAA/Aaa)(c)(e)
	15,000,000		5.000			07/01/08		15,342,300
Puerto Rico Commonwealth GO for Public Improvement Series 2004 A (BBB/Baa3)
	4,000,000		5.250			07/01/20		4,302,320
Puerto Rico Commonwealth Government Development Bank RB Senior Notes Series 2006 B (BBB/Baa3)
	7,950,000		5.000			12/01/09		8,222,049
Puerto Rico Commonwealth Highway & Transportation Authority RB Series 2005 K (BBB+/Baa3)
	5,840,000		5.000			07/01/35		6,081,192
Puerto Rico Commonwealth Highway & Transportation Authority RB Transportation Series 2005 K (BBB+/Baa3)
	7,250,000		5.000			07/01/45		7,549,425
Puerto Rico Commonwealth Infrastructure Financing Authority RB Series 2005 B (BBB/Baa3)
	9,820,000		5.000			07/01/41		10,225,566
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Series 2006 B (BBB+/Baa3)
	17,690,000		5.000			07/01/31		18,588,121
	18,750,000		5.000			07/01/37		19,656,750
	22,250,000		5.000			07/01/46		23,236,788
Puerto Rico Industrial Medical & Environmental PCRB Financing Authority Special Facilities for American Airlines Series 1985 A (CCC+/Caa2)
	5,400,000		6.450			12/01/25		5,468,958
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities RB for Ana G Mendez University System Project Series 2006 (BBB-)
	6,285,000		5.000			03/01/36		6,468,711
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities RB for Ana G. Mendez University Systems Project Series 2006 (BBB-)
	1,490,000		5.000			03/01/21		1,563,517
Puerto Rico Public Buildings Authority RB Guaranteed Government Facilities Series 2004 I (BBB/Baa3)
	20,000,000		5.250			07/01/33		21,268,000
Puerto Rico Public Finance Corp. RB Commonwealth Appropriations Series 2004 A (LOC-Government Bank for Puerto Rico) (BBB-/Ba1)(c)
	19,000,000		5.750			02/01/12		20,623,170
Puerto Rico Public Finance Corp. RB for Commonwealth Appropriation Series A (MBIA) (AAA/Aaa)(e)
	9,675,000		5.500			08/01/16		10,522,433
								244,513,096
Rhode Island – 0.7%
Rhode Island Health & Educational Building Corp. Higher Education Facilities RB for Roger Williams University Series 2006 B (Radian) (AA)
	5,460,000		5.000			11/15/36		5,727,867
Rhode Island Industrial Facilities Corp. Solid Waste Disposal RB for Waste Management, Inc. Series 2004 A (AMT) (BBB)(c)
	3,000,000		4.625			04/01/16		3,042,210
Rhode Island State Health & Educational Building Corp. RB for Hospital Financing Series 2003 A (Baa2)(a)
	2,840,000		6.000			09/15/08		2,961,836
Tobacco Settlement Financing Corp. RB for Rhode Island Asset Backed Bonds Series 2002 A (BBB/Baa3)
	6,195,000		6.000			06/01/23		6,590,613
	7,500,000		6.125			06/01/32		8,043,525
	20,340,000		6.250			06/01/42		21,731,663
								48,097,714
South Carolina – 1.7%
Connector 2000 Association, Inc. Toll Road RB for Capital Appreciation Series 1998 B (B-)(d)
	15,000,000		0.000			01/01/33		1,984,500
Greenville County Airport RB for Donaldson Industrial Air Park Project Series 2001 (AMT) (Baa3)
	4,040,000		6.125			10/01/17		4,249,999
Greenville County School District Installment RB Refunding for Building Equity Sooner Series 2005 (AAA/Aa1)
	17,140,000		4.625			12/01/20		18,113,552
Lancaster County Assessment RB for Edgewater Improvement Direct Series 2003 A
	5,186,000		6.875			11/01/35		5,278,207
Lancaster County Assessment RB for Edgewater Improvement Direct Series 2003 B
	4,723,000		6.125			11/01/14		4,787,138
Lancaster County Special Assessment Revenue for Edenmoor Improvement District Series 2006 A
	5,000,000		5.750			12/01/37		5,137,550
South Carolina Jobs Economic Development Authority RB for Palmetto Health Alliance Series 2000 A (BBB+/Baa1)
	10,000,000		6.250			08/01/31		10,983,100
South Carolina Tobacco Settlement Revenue Management Authority RB Series 2001 B (BBB/Baa3)
	19,510,000		6.000			05/15/22		20,742,057
	35,695,000		6.375			05/15/28		38,490,990
York County Industrial RB Exempt Facility Hoechst Celanese Series 1994 (AMT) (B/B3)
	11,430,000		5.700			01/01/24		11,436,515
								121,203,608
Tennessee – 1.0%
Chattanooga Health Educational & Housing Facilities Board RB for CDFI Phase I LLC Project Series 2005 A (BBB-)
	5,000,000		5.000			10/01/25		5,066,350
	13,500,000		5.125			10/01/35		13,755,150
Elizabethton Health and Educational Facilities Board Hospital RB for First Mortgage Series B(e)
	12,000,000		8.000			07/01/33		14,159,520
Johnson City Health & Educational Facilities Board Hospital RB for First Mortgage Mountain States Health Series 2006 A (BBB+/Baa2)
	9,225,000		5.500			07/01/36		9,918,259

The accompanying notes are an integral part of these financial statements. 

81

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Tennessee – (continued)
Johnson City Health and Educational Board Retirement Facilities RB for Appalachian Christian Village Project Series 2004 A
$	1,000,000		6.250	%		02/15/32	$	1,045,150
Shelby County Health Educational & Housing Facilities Board Hospital RB for Methodist Healthcare Prerefunded Series 2002 (AAA)(a)
	935,000		6.000			09/01/12		1,051,445
Shelby County Health Educational & Housing Facilities Board Hospital RB for Methodist Healthcare Prerefunded Series 2002 (AAA)(a)(f)
	1,565,000		6.000			09/01/12		1,759,905
Shelby County Health Educational & Housing Facilities Board RB for Trezevant Manor Project Series 2006 A
	2,000,000		5.625			09/01/26		2,042,600
Shelby County Health Educational & Housing Facilities Board RB PA 1277 A (RITES) (AA)(c)(e)
	9,190,000		6.815			10/01/08		9,974,091
Shelby County Health Educational & Housing Facilities Board RB PA 1277 B (RITES) (AA)(e)
	1,310,000		6.815			09/01/08		1,416,948
Sullivan County Health Educational & Housing Facilities Board Hospital RB for Wellmont Health System Project Series 2006 C (BBB+)
	9,875,000		5.250			09/01/36		10,329,546
								70,518,964
Texas – 7.7%
Alliance Airport Authority Inc. Special Facilities RB for American Airlines Inc. Project Series 1991 (AMT) (CCC+/Caa2)
	15,845,000		7.000			12/01/11		16,101,214
Alliance Airport Authority Special Facilities RB for Fedex Corp. Project Series 2006 (AMT) (BBB/Baa2)
	70,245,000		4.850			04/01/21		71,571,226
Bexar County Health Facilities Development Corp. RB for Army Retirement Residence Project Series 2002 (BBB-)
	1,200,000		6.125			07/01/22		1,281,312
	1,000,000		6.300			07/01/32		1,069,720
Brazos River Authority PCRB for TXU Electric Co. Project Series 1999 A (AMT) (BBB-/Baa2)
	14,375,000		7.700			04/01/33		16,738,825
Brazos River Authority PCRB for TXU Electric Co. Project Series 1999 C (AMT) (BBB-/Baa2)
	6,800,000		7.700			03/01/32		7,922,272
Brazos River Authority PCRB for TXU Electric Co. Project Series 2001 C (AMT) (BBB-/Baa2)(c)
	21,940,000		5.750			11/01/11		23,287,116
Brazos River Authority PCRB for TXU Energy Co. LLC Project Series 2003 C (AMT) (BBB-)
	9,275,000		6.750			10/01/38		10,377,055
Brazos River Authority PCRB for TXU Energy Co. LLC Project Series 2003 D (BBB-)(c)
	3,025,000		5.400			10/01/14		3,215,484
Brazos River Authority RB for Reliant Energy Inc. Project Series 1999 A (BBB-/Ba1)
	6,250,000		5.375			04/01/19		6,430,938
Brazos River Authority RB for Reliant Energy Inc. Project Series 1999 B (BBB-)
	10,000,000		7.750			12/01/18		10,732,200
Dallas County Flood Control District GO Bonds Series 2002(f)
	6,000,000		7.250			04/01/32		6,424,980
Dallas Fort Worth International Airport Facility Improvement Corp. RB for American Airlines Inc. Series 1995 (CCC+/Caa2)
	42,000,000		6.000			11/01/14		42,035,700
Dallas Fort Worth International Airport Facility Improvement Corp. RB for American Airlines Inc. Series 1995 (AMT) (CCC+/Caa2)
	43,395,000		6.375			05/01/35		44,545,401
Dallas Fort Worth International Airport Facility Improvement Corp. RB Refunding for American Airlines Inc. Series 2000 C (AMT) (CCC+/Caa2)(c)
	51,885,000		6.150			11/01/07		52,481,677
Dallas Fort Worth International Airport RB Series 2003 A (AMBAC) (AMT) (AAA/Aaa)
	1,725,000		5.000			11/01/32		1,784,633
Dallas-Fort Worth International Airport Facilities Improvement Corp. RB RMKT Refunding Series 2000 Subseries A-1 (AMT) (CCC+/Caa2)(c)
	5,620,000		8.500			05/01/08		5,903,979
Dallas-Fort Worth International Airport Facilities Improvement Corp. RB RMKT Refunding Series 2000 Subseries A-2 (AMT) (CCC+/Caa2)(c)
	5,020,000		9.000			05/01/15		6,091,770
Dallas-Fort Worth International Airport Facilities Improvement Corp. RB RMKT Refunding Series 2000 Subseries A-3 (AMT) (CCC+/Caa2)
	25,545,000		9.125			05/01/29		31,271,934
Georgetown Health Facilities Development Corp. RB for Georgetown Hospital Healthcare System Series 1999(a)
	3,000,000		6.250			08/15/09		3,258,720
Gulf Coast Waste Disposal Authority Texas Waste Disposal RB for Valero Energy Corp. Project Series 2001 (AMT) (BBB/Baa3)
	1,500,000		6.650			04/01/32		1,635,600
Harris County Health Facilities Development Corp. Hospital RB for Memorial Hermann Healthcare System Series 2004 A (A+/A2)
	2,595,000		5.000			12/01/20		2,735,883
	435,000		5.000			12/01/21		458,007
	1,000,000		5.125			12/01/22		1,058,560
	1,000,000		5.125			12/01/23		1,055,760
Houston Airport System Special Facilities RB for Continental Airlines Series 1998 B (AMT) (B-/Caa1)
	1,000,000		5.700			07/15/29		982,390
Houston Airport System Special Facilities RB for Continental Airlines Series 1998 C (AMT) (B-/Caa1)
	4,730,000		5.700			07/15/29		4,617,568
Houston Airport System Special Facilities RB for Continental Airlines Series 2001 E (AMT) (B-/Caa1)
	3,400,000		6.750			07/01/21		3,640,890
	33,060,000		6.750			07/01/29		35,345,768

 The accompanying notes are an integral part of these financial statements.

82

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal			Interest			Maturity
Amount			Rate			Date		Value
Municipal Debt Obligations – (continued)
Texas – (continued)
Houston Health Facilities Development Corp. Retirement Facility RB for Buckingham Senior Living Community Series 2004 A
$	1,500,000			7.125	%		02/15/34	$	1,670,925
Houston Texas GO Bonds for Public Improvements (MBIA) (AAA/Aaa)(e)
	25,835,000			5.000			03/01/10		26,990,961
Los Fresnos Consolidated Independent School District GO Bonds Series 2006 (PSF-GTD) (AAA/Aaa)
	10,365,000			5.000			08/15/39		10,947,306
	5,760,000			5.000			08/15/43		6,027,322
Matagorda County Navigation District No. 1 RB for Reliant Energy Project Series 1999 B (AMT) (BBB-/Ba1)
	11,000,000			5.950			05/01/30		11,402,270
Mesquite Texas Health Facilities Development Corp. RB for Christian Care Retirement Facilities (BBB-)
	1,500,000			5.000			02/15/15		1,550,685
	2,025,000			5.500			02/15/25		2,128,052
	3,250,000			5.625			02/15/35		3,431,090
Metropolitan Health Facilities Development Corp. RB for Wilson N. Jones Memorial Hospital Project Series 2001 (B1)
	4,200,000			7.200			01/01/21		4,386,312
	5,000,000			7.250			01/01/31		5,217,800
Port Corpus Christi Authority RB for Celanese Project Series 2002 B (AMT) (B/B3)
	8,500,000			6.700			11/01/30		9,311,835
Port Corpus Christi Industrial Development Corp. RB Refunding for Valero Convertible 3/17/98 Series 1997 B (BBB/Baa3)
	2,500,000			5.400			04/01/18		2,598,250
Port Corpus Christi Industrial Development Corp. RB Refunding for Valero Convertible 3/17/98 Series 1997 C (BBB/Baa3)
	1,000,000			5.400			04/01/18		1,039,300
Red River Authority PCRB for Celanese Project Series 2002 B (AMT) (B/B3)
	4,500,000			6.700			11/01/30		4,929,795
Red River Authority PCRB for Hoechst Celanese Corp. Project Series 1994 (B/B3)
	3,000,000			5.200			05/01/07		3,011,730
Sabine River Authority PCRB for TXU Energy Co. LLC Project Series 2003 B (BBB-/Baa2)
	3,000,000			6.150			08/01/22		3,297,840
Sabine River Authority PCRB VRDN for TXU Electric Co. Project Series 2001 A (BBB-/Baa2)(c)
	19,040,000			5.500			11/01/11		20,030,461
Tom Green County Health Facilities Development Corp. Hospital RB for Shannon Health Systems Project Series 2001 (Baa3)
	2,000,000			6.750			05/15/21		2,165,300
Tomball Hospital Authority RB Refunding Series 2005 (Baa3)
	8,650,000			5.000			07/01/20		8,786,064
	9,250,000			5.000			07/01/23		9,345,645
Travis County Health Facilities Development Corp. Retirement Facilities RB for Querencia Barton Creek Project Series 2005
	1,600,000			5.650			11/15/35		1,616,272
Weslaco Health Facilities RB for Knapp Medical Center Project Series 2002 (BBB+)
	4,395,000			6.000			06/01/17		4,743,787
									558,685,584
U. S. Virgin Islands – 0.2%
Virgin Islands Public Finance Authority RB for Senior Lien Matching Fund Loan Note Series
	2004 A (BBB	)
	2,225,000			5.000			10/01/10		2,312,087
	1,045,000			5.000			10/01/12		1,101,179
	1,000,000			5.000			10/01/14		1,065,120
	1,250,000			5.250			10/01/16		1,347,988
	1,000,000			5.250			10/01/18		1,070,710
	1,000,000			5.250			10/01/19		1,067,240
	1,720,000			5.250			10/01/20		1,832,092
	1,000,000			5.250			10/01/21		1,063,100
	500,000			5.250			10/01/22		530,515
	500,000			5.250			10/01/23		529,830
									11,919,861
Utah – 0.2%
Carbon County Solid Waste Disposal RB Refunding for Sunnyside Cogeneration Series 1999 A
	3,000,000			7.100			08/15/23		3,286,650
Tooele County Hazardous Waste Treatment RB for Union Pacific Project Series 1992 A (AMT)
	(BBB/Baa2	)
	9,850,000			5.700			11/01/26		10,298,274
									13,584,924
Vermont – 0.1%
Vermont Economic Development Authority Mortgage RB for Wake Robin Corp. Project Series 2006 A
	1,500,000			5.250			05/01/26		1,534,575
Vermont Economic Development Authority Mortgage RB Wake Robin Corp. Project Series 2006 A
	2,390,000			5.375			05/01/36		2,449,105
									3,983,680
Virginia – 0.5%
Bedford County IDA RB for Nekoosa Packaging Corp. Project Series 1998 (AMT) (B2)
	320,000			5.600			12/01/25		324,320
Celebrate North Community Development Authority Special Assessment Project Series 2003 B
	5,000,000			6.750			03/01/34		5,401,750
Chesapeake IDA PCRB for Virginia Electric & Power Project Series 1985 (BBB/Baa1)
	3,250,000			5.250			02/01/08		3,262,935
Goochland County IDA RB for Nekoosa Packaging Corp. Series 1998 (AMT) (B2)
	560,000			5.650			12/01/25		568,551
Henrico County IDA RB for Solid Waste Browning Series 1997 A (AMT) (BB-/B3)
	3,750,000			5.875			03/01/17		3,756,975

The accompanying notes are an integral part of these financial statements. 

83

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Virginia – (continued)
James City County Economic Development Authority Residential Care Facilities RB for Williamsburg Landing Series 2005 A
$	750,000		5.350	%		09/01/26	$	778,020
	750,000		5.500			09/01/34		780,007
Loudoun County IDA Hospital RB for Loudoun Hospital Center Series 2002 A (BBB+)(a)
	1,000,000		6.100			06/01/12		1,130,230
Loudoun County IDA Residential Care Facility RB for Falcons Landing Series 2004 A
	2,750,000		6.000			08/01/24		2,890,415
Norfolk Redevelopment & Housing Authority RB for First Mortgage Retirement Community Series 2004 A
	500,000		6.000			01/01/25		518,565
	1,100,000		6.125			01/01/35		1,140,260
Pocahontas Parkway Association Toll Road RB Senior Series 1998 A (AAA)(a)
	10,505,000		5.500			08/15/08		11,062,080
Suffolk Industrial Development Authority Retirement Facilities RB Refunding First Mortgage for Lake Prince Center Series 2006
	725,000		5.150			09/01/24		739,979
Suffolk Industrial Development Authority Retirement Facilities RB Refunding First Mortgage for Lake Prince Center Series 2006
	1,000,000		5.300			09/01/31		1,021,040
Virginia Beach Development Authority Residential Care Facilities Mortgage RB Refunding for Westminster-Canterbury Series 2005
	2,000,000		5.000			11/01/22		2,023,940
	1,000,000		5.250			11/01/26		1,030,060
	1,000,000		5.375			11/01/32		1,032,380
Winchester IDA Residential Care Facilities RB for Westminster Canterbury Series 2005 A
	1,000,000		5.200			01/01/27		1,021,470
	1,000,000		5.300			01/01/35		1,022,040
								39,505,017
Washington – 0.3%
Skagit County Public Hospital District No. 1 RB for Skagit Valley Hospital Series 2005 (Baa2)
	600,000		5.500			12/01/15		646,968
	1,175,000		5.375			12/01/22		1,235,407
	1,500,000		5.500			12/01/30		1,580,625
Tobacco Settlement Authority RB for Asset Backed Bonds Series 2002 (BBB/Baa3)
	9,610,000		6.500			06/01/26		10,652,589
Washington State Health Care Facilities Authority RB for Group Health Corp. Series 2006 (Radian) (AA)
	7,150,000		5.000			12/01/36		7,472,250
								21,587,839
West Virginia – 0.5%
Berkeley County Public Sewer RB Series 2006 A
	1,880,000		5.000			10/01/22		1,863,625
Monongalia County Building Community Hospital RB for Monongalia General Hospital Series 2005A (A-)
	10,000,000		5.250			07/01/20		10,569,200
	10,000,000		5.250			07/01/25		10,503,100
	10,000,000		5.250			07/01/35		10,459,400
								33,395,325
Wisconsin – 0.7%
Badger Tobacco Asset Securitization Corp. RB Asset Backed Bonds Series 2002 (BBB/Baa3)
	5,085,000		6.125			06/01/27		5,458,697
	16,250,000		6.375			06/01/32		17,650,425
Wisconsin Health & Educational Facilities Authority RB for Aurora Health Care Series 1999 B (BBB+)
	1,500,000		5.625			02/15/20		1,559,940
Wisconsin Health & Educational Facilities Authority RB for Beaver Dam Community Hospitals Inc. Series 2004 A
	2,500,000		6.750			08/15/34		2,754,075
Wisconsin Health & Educational Facilities Authority RB for Fort Healthcare Inc. Project Series 2004 (BBB+)
	3,000,000		5.750			05/01/29		3,181,500
	2,750,000		6.100			05/01/34		2,998,078
Wisconsin Health & Educational Facilities Authority RB for Vernon Memorial Healthcare, Inc. Project Series 2005 (BBB-)
	3,000,000		5.100			03/01/25		3,067,170
	2,800,000		5.250			03/01/35		2,881,592
Wisconsin Health & Educational Facilities Authority RB Refunding for Illinois Housing, Inc. Series 2006
	2,385,000		5.800			08/01/29		2,444,768
Wisconsin Health & Educational Facilities Authority RB Refunding for Illinois Senior Housing, Inc. Series 2006
	1,275,000		5.650			08/01/21		1,302,591
Wisconsin State Health & Educational Facilities Authority RB for Upland Hills Health, Inc. Series 2006 A (BBB)
	5,825,000		5.125			05/15/29		6,081,649
Wisconsin State Health & Educational Facilities Authority RB for Upland Hills Health, Inc. Series 2006 B (BBB)
	1,400,000		5.000			05/15/36		1,430,870
								50,811,355
Wyoming – 0.2%
Sweetwater County Solid Waste Disposal RB Refunding for FMC Corp. Project Series 2005 (AMT) (BBB-/Baa3)
	11,750,000		5.600			12/01/35		12,548,060
TOTAL STATE-SPECIFIC MUNICIPAL DEBT OBLIGATIONS
(Cost $6,859,630,952)							$	7,239,761,430
Other Municipals – 2.0%
Charter Mac Equity Issuer Trust Series 2004 A-4-1 AMT (A3)(c)(f)
$	9,000,000		5.750	%		04/30/15	$	9,727,290
GMAC Municipal Mortgage Trust AMT (A3)(c)(f)
	7,500,000		4.800			04/30/15		7,662,600
GMAC Municipal Mortgage Trust AMT (Baa1)(c)(f)
	5,000,000		5.500			04/30/25		5,088,150

 The accompanying notes are an integral part of these financial statements.

84

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Other Municipals – (continued)
GMAC Municipal Mortgage Trust AMT (Baa2e)(c)(f)
$	9,500,000		5.700	%		04/30/25	$	9,698,550
GMAC Municipal Mortgage Trust Series A (A3)(c)(f)
	6,475,000		4.150			10/31/09		6,451,561
GMAC Municipal Mortgage Trust Series A-1 (A3e)(c)(f)
	9,625,000		4.900			10/31/14		9,952,924
GMAC Municipal Mortgage Trust Series A-2 (A3e)(c)(f)
	16,650,000		5.300			10/31/19		17,629,852
GMAC Municipal Mortgage Trust Series B (Baa1)(c)(f)
	17,150,000		5.600			10/31/19		18,225,991
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series A-2 (A3)(c)(f)
	6,000,000		4.900			09/30/14		6,109,980
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series A-3 (A3)(c)(f)
	4,000,000		4.950			09/30/12		4,059,160
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series A-4 (A3e)(c)(f)
	8,000,000		5.125			09/30/15		8,215,520
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series B (Baa1)(c)
	4,000,000		7.750			11/01/10		4,436,560
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series B-2 (Baa1)(c)(f)
	4,000,000		5.200			09/30/14		4,152,080
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series B-3 (Baa1e)(c)(f)
	6,000,000		5.300			09/30/15		6,210,720
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series C (Baa2)(c)(f)
	5,000,000		4.700			09/30/09		4,993,100
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series C-1 (Baa2)(c)(f)
	3,000,000		5.400			09/30/14		3,071,550
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series C-2 (Baa2)(c)(f)
	3,000,000		5.800			09/30/19		3,068,310
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series C-3 (Baa2e) (c)(f)
	3,000,000		5.500			09/30/15		3,111,000
Municipal Mortgage & Equity LLC Tax-Exempt Special Purpose Entity Series D (Baa3e)(c)(f)
	6,000,000		5.900			09/30/20		6,342,900
Tax Exempt Municipal Infrastructure Improvement Trust Certificates RB Series 2005 A Class A (A1)
	8,729,000		4.050			05/04/10		8,678,459
TOTAL OTHER MUNICIPALS
(Cost $142,454,676)							$	146,886,257

Shares		Description	Value
Common Stock – 0.0%
Airlines – 0.0%
	38,106	UAL Corp.(g)
(Cost $1,471,389)			$	1,369,530
TOTAL INVESTMENTS – 101.6%
(Cost $7,003,557,017)			$	7,388,017,217
LIABILITIES IN EXCESS OF OTHER ASSETS – (1.6)%				(116,622,075	)
NET ASSETS – 100.0%			$	7,271,395,142

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Prerefunded security. Maturity date disclosed is prerefunding date.
(b)	Security is currently in default.
(c)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the next interest reset dates.
(d)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(e)	Security represents fixed rate bond exchanged in conjunction with floating rate notes issued (see Note 2).
(f)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $148,720,883, which represents approximately 2.0% of net assets as of October 31, 2006.
(g)	Non-income producing security.

Security ratings disclosed, if any, are issued by Standard & Poor’s/Moody’s Investors Service/Fitch and are unaudited. A brief description of the ratings is available in the Fund’s Statement of Additional Information.

The accompanying notes are an integral part of these financial statements. 

85

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Schedule of Investments (continued)

October 31, 2006

Investment Abbreviations:
ACA	—	Insured by American Capital Access
AMBAC	—	Insured by American Municipal Bond Assurance Corp.
AMBAC-TCRS	—	Insured by American Municipal Bond Assurance Corp. – Transferable Custodial Receipts
AMT	—	Alternative Minimum Tax
BANS	—	Bond Anticipation Notes
CIFG	—	CIFC Assurance North America, Inc.
COPS	—	Certificates of Participation
CRA	—	Community Reinvestment Act
FGIC	—	Insured by Financial Guaranty Insurance Co.
FGIC-TCRS	—	Insured by Financial Guaranty Insurance Co. – Transferable Custodial Receipts
FHA	—	Insured by Federal Housing Administration
FHLMC	—	Insured by Federal Home Loan Mortgage Corp.
FNMA	—	Insured by Federal National Mortgage Association
FSA	—	Insured by Financial Security Assurance Co.
GNMA	—	Insured by Government National Mortgage Association
GO	—	General Obligation
GTD	—	Guaranteed
IDA	—	Industrial Development Authority
LOC	—	Letter of Credit
MBIA	—	Insured by Municipal Bond Investors Assurance
MF Hsg.	—	Multi-Family Housing
PCRB	—	Pollution Control Revenue Bond
PSF-GTD	—	Guaranteed by Permanent School Fund
Radian	—	Insured by Radian Asset Assurance
Radian-IBC	—	Insured by Radian Asset Assurance – International Bancshares Corporation
RANS	—	Revenue Anticipation Notes
RB	—	Revenue Bond
RMKT	—	Remarketed
SPA	—	Stand-by Purchase Agreement
VRDN	—	Variable Rate Demand Notes

ADDITIONAL INVESTMENT INFORMATION

INTEREST RATE SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:

				Rates Exchanged
	Notional			Payments	Payments
Swap	Amount		Termination	received by	made by		Unrealized
Counterparty	(000s)		Date	the Fund	the Fund		Loss
Citibank N.A. (a)	$	200,000	12/07/2026	BMA Municipal Swap Index		4.121%	$	(6,361,902	)
JP Morgan(a)		200,000	12/07/2026	BMA Municipal Swap Index		4.138%		(6,782,506	)
TOTAL							$	(13,144,408	)

(a)   Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows is December 7, 2006.

BMA — Bond Market Association

 The accompanying notes are an integral part of these financial statements.

86

GOLDMAN SACHS TENNESSEE MUNICIPAL FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on June 5, 2006 (the date the Predecessor Fund was reorganized as a new portfolio of the Goldman Sachs Trust) in the Institutional Shares of the Goldman Sachs Tennessee Municipal Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Aggregate Municipal Bond Index, is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of fund shares. Performance of Class A and Class C Shares will vary from the Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect portfolio performance. These factors include, but are not limited to, fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

Tennessee Municipal Fund’s Lifetime Performance

Performance of a $10,000 Investment, with distributions reinvested, from June 5, 2006 to October 31, 2006.

Cumulative Total Return through October 31, 2006	Since Inception*
Class A (commenced June 5, 2006)
Excluding sales charges		2.87%
Including sales charges		-1.75%
Class C (commenced June 5, 2006)
Excluding contingent deferred sales charges		2.56%
Including contingent deferred sales charges		1.55%
Institutional Class (commenced June 5, 2006)		3.02%

* Not Annualized.

87

GOLDMAN SACHS TENNESSEE MUNICIPAL FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – 99.5%
Puerto Rico – 6.5%
Puerto Rico Commonwealth GO Bonds Public Improvement Series 2006 A (BBB/Baa3)
$	325,000		5.250	%		07/01/30	$	349,447
Puerto Rico Commonwealth GO Bonds Public Improvement Refunding Series 2006 B (BBB/Baa3)
	450,000		5.000			07/01/35		470,317
Puerto Rico Commonwealth Highway & Transportation Authority RB Series 2003 G (BBB+/Baa3)
	1,000,000		5.000			07/01/42		1,033,090
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Series 2006 B (BBB+/Baa3)
	1,000,000		5.000			07/01/46		1,044,350
Puerto Rico Electric Power Authority RB Series 2005 RR (FGIC) (AAA/Aaa)
	3,000,000		5.000			07/01/35		3,192,750
								6,089,954
Tennessee – 93.0%
Blount County GO Bonds Refunding Series 2005 (FGIC) (AAA/Aaa)
	1,500,000		5.000			04/01/17		1,628,505
Blount County Hospital RB Improvement Series 1998 B (Baa1)
	2,125,000		5.250			07/01/09		2,170,602
Blount County Public Building Authority GO Bonds for Local Public Government Improvement Series 2004 B-5-A (FGIC) (Aaa)
	1,125,000		5.000			06/01/20		1,202,434
Chattanooga Health Educational & Housing Facilities Board RB for CDFI Phase I LLC Project Refunding Series 2005 A (BBB-)
	1,000,000		5.125			10/01/35		1,018,900
Chattanooga Health Educational & Housing Facilities Board RB Refunding CDFI Phase 1 LLC Project Refunding Series 2005 A (BBB-)
	915,000		5.000			10/01/15		942,569
Clarksville Natural Gas Acquisition Corp. RB Series 2006 (AA-/Aa3)
	1,000,000		5.000			12/15/21		1,093,510
Dickson County GO Bonds Refunding Series 2003 (FGIC) (Aaa)
	1,535,000		5.000			06/01/16		1,644,967
Dickson County Water Authority RB Series 2002 (FGIC) (Aaa)
	1,000,000		5.000			12/01/17		1,067,780
Franklin Special School District GO Bonds Refunding Series 1997 B (Aa2)
	2,500,000		5.100			06/01/12		2,686,600
Franklin Water & Sewer Revenue & Tax GO Bonds Refunding Series 2005 (Aaa)
	2,115,000		5.000			04/01/17		2,335,320
Greene County GO Bonds Refunding Series 2005 A (MBIA) (Aaa)
	1,100,000		5.000			06/01/18		1,199,583
Greene County GO Bonds Refunding Series 2005 B (MBIA) (Aaa)
	1,435,000		5.000			06/01/23		1,544,648
Hallsdale Powell Utility District RB for Knox County Water & Sewer Improvement Series 2004 B (FGIC) (AAA/Aaa)
	1,260,000		5.000			04/01/34		1,319,699
Hallsdale Powell Utility District RB for Knox County Water & Sewer Improvement Series 2006 (FGIC) (AAA/Aaa)
	1,000,000		5.000			04/01/26		1,079,130
Hamilton County GO Bonds Series 2000 (Aa1)
	3,535,000		5.300			11/01/15		3,688,136
Johnson City Electric RB Series 1997 (MBIA) (AAA/Aaa)
	1,500,000		5.100			05/01/12		1,526,250
Johnson City GO Bonds RB Refunding for School Sales Tax Series 1997 (FGIC) (AAA/Aaa)
	2,250,000		5.550			05/01/14		2,271,195
Johnson City Health & Educational Facilities Board Hospital RB First Mortgage for Mountain States Health Series 2006 A (BBB+/Baa2)
	1,000,000		5.500			07/01/36		1,075,150
Johnson City Health & Educational Facilities Board Hospital RB Refunding & Improvement for Medical Center Hospital Series 1998 ETM-Calls Defeased (MBIA) (AAA/Aaa)
	2,000,000		5.125			07/01/09		2,075,620
Knox County Health Educational & Housing Facilities Board Hospital Facilities RB Refunding & Improvement for Covenant Health Series 2002 B(A)
	3,400,000		4.200			01/01/12		3,428,764
Knox County Health Educational & Housing Facilities Board Hospital Facilities RB Refunding & Improvement for East Tennessee Hospital Series 2003 B (BBB+/Baa1)
	3,810,000		5.000			07/01/16		3,976,306
Knox County Health Educational & Housing Facilities Board Hospital Facilities RB Refunding & Improvement for Baptist Health Systems Series 1996 (CONNIE LEE) (AAA/Baa3)
	1,000,000		5.500			04/15/11		1,021,260
Knox County Health Educational & Housing Facilities Board Hospital Facilities RB Refunding & Improvement for Covenant Health Series 2002 A (FSA) (AAA/Aaa)
	2,000,000		5.500			01/01/18		2,164,540
Knox County Health Educational & Housing Facilities Board Hospital Facilities RB Refunding for Fort Sanders Alliance Series 1993 (MBIA) (AAA/Aaa)
	1,000,000		5.750			01/01/14		1,125,200
Knoxville Waste Water Systems RB Refunding Systems Series 2005 B (AA/Aa3)
	1,350,000		5.000			04/01/15		1,472,756
La Follette Electric Systems RB Refunding & Improvement Series 1997 PreRefunded (AMBAC) (Aaa)(a)
	1,000,000		5.250			03/01/07		1,005,730
Lawrenceburg Public Building Authority GO Bonds Water and Sewer for Public Works Series 2001 B (FSA) (AAA/Aaa)
	1,330,000		5.500			07/01/15		1,430,974
Lincoln County GO Bonds Refunding Series 2001 (FGIC) (Aaa)
	1,315,000		5.250			04/01/14		1,449,603

 The accompanying notes are an integral part of these financial statements.

88

GOLDMAN SACHS TENNESSEE MUNICIPAL FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Municipal Debt Obligations – (continued)
Tennessee – (continued)
Madison County GO Bonds Refunding for School & Public Improvement Series 2004 A (FSA) (Aaa)
$	1,500,000		5.000	%		04/01/18	$	1,632,645
Madison Suburban Utility District Waterworks RB Refunding Series 1995 (MBIA) (AAA/Aaa)
	500,000		5.600			02/01/10		512,215
Memphis Sanitation Sewer Systems RB Refunding Series 2006 (FSA) (AAA/Aaa)
	1,000,000		5.000			05/01/18		1,105,020
	1,295,000		5.000			05/01/20		1,437,605
Metropolitan Government Nashville & Davidson County Electric RB Series 1998 A (AA/Aa3)
	1,000,000		5.125			05/15/15		1,043,310
Metropolitan Government Nashville & Davidson County Electric RB Series 2004 A (AMBAC) (AAA/Aaa)
	1,000,000		5.000			05/15/18		1,073,220
Metropolitan Government Nashville & Davidson County Sports Authority RB Refunding for Public Improvement Series 2004 (FSA) (AAA/Aaa)
	2,140,000		5.000			07/01/19		2,294,487
Metropolitan Government Nashville & Davidson County GO Bonds Refunding Series 1993 C (AA/Aa2)
	1,500,000		5.000			02/01/17		1,621,875
Metropolitan Government Nashville & Davidson County Water & Sewer RB Refunding Series 1993 (FGIC) (AAA/Aaa)
	1,500,000		5.200			01/01/13		1,629,765
Rutherford County GO Bonds Refunding for Public Improvement Series 2001 (AA/Aa2)
	4,000,000		5.000			04/01/14		4,228,080
Rutherford County Construction Utility District Waterworks RB Refunding & Improvement Series 1997 A (FGIC) (Aaa)
	500,000		5.100			02/01/11		509,385
Rutherford County GO Bonds School & Improvement Series 2006 (AA/Aa2)
	2,000,000		5.000			06/01/26		2,138,060
Sullivan County Health Educational & Housing Facilities Board Hospital RB for Wellmont Health System Project Series 2006 C (BBB+)
	1,000,000		5.250			09/01/36		1,046,030
Tennessee Housing Development Agency Mortgage Finance RB Series 2003 A (AA/Aa2)
	2,000,000		4.900			07/01/16		2,106,640
Tennessee Housing Development Agency RB for Homeownership Program AMT Series 2006-2 (Government of Agency) (AA/Aa2)
	2,000,000		5.150			01/01/37		2,063,240
Tennessee Housing Development Agency RB Homeownership Program Series 1996 Issue 2B (Government of Agency) (AA/Aa2)
	400,000		5.800			01/01/11		408,024
Tennessee State School Board Authority RB Higher Educational Facilities Series 2002 A (FSA) (AAA/Aaa)
	1,000,000		5.000			05/01/18		1,060,300
Tennessee State School Board Authority RB Refunding for Higher Educational Facilities ETM Calls Apply Series 1996 D (Government of Authority) (AA-/Aa3)
	500,000		5.500			05/01/11		511,165
Tipton County GO Bonds Refunding Series 1997 (AMBAC) (Aaa)
	500,000		5.250			04/01/12		503,595
Warren County GO Bonds Refunding Series 2001 (MBIA) (Aaa)
	1,845,000		5.000			06/01/12		1,976,346
Washington County GO Bonds Refunding for Schools & Public Improvement Series 2004 (AMBAC) (Aaa)
	1,420,000		5.000			04/01/18		1,544,818
Williamson County GO Bonds Public Improvement Series 2001 (Aa1)
	2,500,000		5.000			04/01/12		2,675,700
Williamson County GO Bonds Refunding Series 2001 (Aa1)
	2,500,000		5.000			03/01/13		2,642,075
	2,000,000		5.000			03/01/14		2,116,940
								86,526,271
TOTAL MUNICIPAL DEBT OBLIGATIONS – 99.5%
(Cost $90,110,794)							$	92,616,225
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.5%								438,956
NET ASSETS – 100.0%							$	93,055,181

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

 (a)   Prerefunded security. Maturity date disclosed is prerefunding date.

Security ratings disclosed, if any, are issued by Standard & Poor’s/Moody’s Investors Service/Fitch and are unaudited. A brief description of the ratings is available in the Fund’s Statement of Additional Information.

The portfolio had the following insurance concentration of 10% or greater of net assets at October 31, 2006: FGIC 18.3%

Investment Abbreviations:
AMBAC	—	Insured by American Municipal Bond Assurance Corp.
AMT	—	Alternative Minimum Tax
CDFI	—	Campus Development Foundation, Inc.
CONNIE LEE	—	College Construction Loan Insurance Association
ETM	—	Escrow to Maturity
FGIC	—	Insured by Financial Guaranty Insurance Co.
FSA	—	Insured by Financial Security Assurance Co.
GO	—	General Obligation
MBIA	—	Insured by Municipal Bond Investors Assurance
RB	—	Revenue Bond

The accompanying notes are an integral part of these financial statements. 

89

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statements of Assets and Liabilities

October 31, 2006

					California
					Intermediate
		Short Duration			AMT-Free
		Tax-Free Fund			Municipal Fund
Assets:
Investment in securities, at value (identified cost $318,479,052, $46,273,749, $20,909,273, $455,300,938, $7,003,557,017 and $90,110,794, respectively)		$	319,348,428		$	46,862,287
Cash(a)			—			63,024
Receivables:
	Interest, net of allowances		4,856,413			585,957
	Fund shares sold		1,104,728			66,425
	Investment securities sold		7,591,023			—
	Reimbursement from adviser		15,213			25,219
Other assets			1,133			—
Total assets			332,916,938			47,602,912
Liabilities:
Due to custodian			4,021,196			—
Payables:
	Payable for floating rate notes issued		—			—
	Investment securities purchased		—			1,427,219
	Swap contracts, at value		406,950			—
	Fund shares repurchased		774,728			100,413
	Income distribution		176,758			25,950
	Interest expense and fees		—			—
	Amounts owed to affiliates		154,394			30,589
Accrued expenses & other liabilities			142,752			119,616
Total liabilities			5,676,778			1,703,787
Net Assets:
Paid-in capital			339,325,241			45,351,466
Accumulated undistributed (distributions in excess of) net investment income			(101,618	)		(26,122	)
Accumulated net realized gain (loss) on investment and swaps transactions			(12,445,889	)		(14,757	)
Net unrealized gain on investments and swaps			462,426			588,538
NET ASSETS		$	327,240,160		$	45,899,125
Net assets:
	Class A	$	118,459,486		$	40,135,479
	Class B		1,884,069			—
	Class C		6,297,064			335,585
	Institutional		200,543,294			5,428,061
	Service		56,247			—
Shares outstanding:
	Class A		11,618,267			3,976,966
	Class B		184,918			—
	Class C		617,570			33,239
	Institutional		19,678,492			537,586
	Service		5,521			—
Total shares outstanding, $0.001 par value (unlimited number of shares authorized)			32,104,768			4,547,791
Net asset value, offering and redemption price per share:(b)
	Class A		$10.20			$10.09
	Class B		10.19			—
	Class C		10.20			10.10
	Institutional		10.19			10.10
	Service		10.19			—

(a)

Includes restricted cash of $6,046,608 on deposit with the swap counterparty as collateral for the High Yield Municipal Fund.

(b)

Maximum public offering price per share for Class A Shares of Short Duration Tax-Free (NAV per share multiplied by 1.0204) and for Class A Shares of California Intermediate AMT-Free, New York Intermediate AMT-Free, Municipal Income, High Yield Municipal and Tennessee Municipal Funds (NAV per share multiplied by 1.0471) is $10.41, $10.57, $10.52, $16.54, $12.11 and $10.62, respectively. At redemption, Class B and Class C Shares may be subject to a contingent deferred sales charge, assessed on the amount equal to the lesser of the current net asset value or the original purchase price of the shares.

 The accompanying notes are an integral part of these financial statements.

90

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

New York
Intermediate
AMT-Free			Municipal			High Yield		Tennessee
Municipal Fund			Income Fund			Municipal Fund		Municipal Fund
$	21,102,605		$	480,172,803		$	7,388,017,217	$	92,616,225
	114,480			1,880,701			12,826,317		219,945
	314,770			7,988,363			150,822,977		1,246,391
	577,387			4,681,860			32,029,909		477
	—			1,154,864			17,332,599		1,039,966
	37,635			25,516			—		91,743
	—			993			12,494		—
	22,146,877			495,905,100			7,601,041,513		95,214,747
	—			—			—		—
	—			11,075,000			230,250,000		—
	554,466			4,846,894			65,406,635		1,034,070
	—			440,863			13,144,408		—
	10,000			1,875,199			6,770,050		626,405
	14,394			544,569			6,020,213		259,188
	—			150,425			3,080,066		—
	12,643			328,758			4,676,199		42,439
	122,474			156,704			298,800		197,464
	713,977			19,418,412			329,646,371		2,159,566
	21,254,171			456,967,637			6,869,671,768		90,864,896
	(14,394	)		(234,317	)		6,781,194		(186,174	)
	(209	)		(4,677,634	)		23,626,388		(128,972	)
	193,332			24,431,002			371,315,792		2,505,431
$	21,432,900		$	476,486,688		$	7,271,395,142	$	93,055,181
$	13,267,631		$	302,270,811		$	3,569,962,546	$	11,350,462
	—			11,697,512			57,901,894		—
	10,373			9,776,823			160,180,541		10,304
	8,154,896			152,070,274			3,483,350,161		81,694,415
	—			671,268			—		—
	1,320,698			19,125,274			308,504,365		1,119,695
	—			739,954			5,003,539		—
	1,032			618,326			13,842,744		1,016
	811,539			9,622,583			300,962,442		8,059,165
	—			42,221			—		—
	2,133,269			30,148,358			628,313,090		9,179,876
	$10.05		$	15.80		$	11.57	$	10.14
	—			15.81			11.57		—
	10.05			15.81			11.57		10.14
	10.05			15.80			11.57		10.14
	—			15.90			—		—

The accompanying notes are an integral part of these financial statements. 

91

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statements of Operations

For the Year Ended October 31, 2006

					California			New York
					Intermediate			Intermediate
		Short Duration			AMT-Free			AMT-Free			Municipal			High Yield
		Tax-Free Fund			Municipal Fund(a)			Municipal Fund(a)			Income Fund			Municipal Fund
Investment income:
Interest, net of allowances		$	13,890,197		$	1,357,823		$	441,078		$	21,112,948		$	339,719,621
Total income			13,890,197			1,357,823			441,078			21,112,948			339,719,621
Expenses:
Management fees			1,538,367			155,545			53,350			2,300,768			31,211,098
Distribution and Service fees(b)			392,642			73,028			13,749			866,735			8,762,890
Transfer Agent fees(b)			307,631			48,396			11,305			505,500			5,973,612
Interest expense and fees			—			—			—			398,515			8,892,601
Custody and accounting fees			150,672			38,600			36,816			182,702			704,067
Registration fees			64,988			60,219			61,481			96,127			156,819
Professional fees			79,013			59,248			66,448			79,013			81,707
Printing fees			43,081			22,475			22,314			43,284			141,984
Offering expense			—			79,270			72,485			—			—
Trustee fees			16,227			16,227			16,227			16,227			16,227
Service share fees			276			—			—			2,707			—
Other			32,285			21,152			19,605			32,380			153,397
Total expenses			2,625,182			574,160			373,780			4,523,958			56,094,402
Less — expense reductions			(590,487	)		(299,344	)		(299,099	)		(683,270	)		(1,891,015	)
Net Expenses			2,034,695			274,816			74,681			3,840,688			54,203,387
NET INVESTMENT INCOME			11,855,502			1,083,007			366,397			17,272,260			285,516,234
Realized and unrealized gain (loss) on investment and swap transactions:
Net realized gain (loss) from:
	Investment transactions		(4,926,513	)		(14,432	)		(84	)		1,277,349			48,614,672
	Swap contracts		198,517			—			—			260,271			4,671,874
Net change in unrealized gain (loss) on:
	Investments		5,554,350			588,538			193,332			6,144,644			214,073,673
	Swap contracts		(759,007	)		—			—			(1,042,187	)		(23,009,182	)
Net realized and unrealized gain on investment and swap transactions			67,347			574,106			193,248			6,640,077			244,351,037
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	11,922,849		$	1,657,113		$	559,645		$	23,912,337		$	529,867,271

(a)	California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds commenced operations on November 1, 2005.
(b)	Class specific Distribution and Service and Transfer Agent fees were as follows:

	Distribution and Service Fees						Transfer Agent Fees
Fund	Class A		Class B		Class C		Class A		Class B		Class C		Institutional		Service
Short Duration Tax-Free	$	296,326	$	22,079	$	74,237	$	189,648	$	3,533	$	11,878	$	102,550	$	22
California Intermediate AMT-Free Municipal		71,690		—		1,338		45,882		—		214		2,300		—
New York Intermediate AMT-Free Municipal		13,649		—		100		8,735		—		15		2,555		—
Municipal Income		650,453		128,818		87,464		416,290		20,611		13,994		54,388		217
High Yield Municipal		7,072,928		523,724		1,166,238		4,526,674		83,796		186,598		1,176,544		—

 The accompanying notes are an integral part of these financial statements.

92

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statements of Operations

	Tennessee Municipal Fund
	For the Period from			For the Year
	July 1, 2006 to			Ended
	October 31, 2006(a)			June 30, 2006
Investment income:
Interest	$	1,401,066		$	4,814,283
Total income		1,401,066			4,814,283
Expenses:
Management fees		142,597			542,273
Administration fees		—			204,417
Transfer Agent fees(b)		17,398			82,578
Distribution and Service fees(b)		9,866			48,965
Professional fees		57,771			43,583
Printing fees		71,414			7,852
Shareholder Servicing fees(b)		—			28,632
Custody and accounting fees		14,414			45,930
Registration fees		3,851			11,203
Trustee fees		4,057			8,349
Other		11,988			15,001
Total expenses		333,356			1,038,783
Less — expense reductions		(150,133	)		(264,746	)
Net expenses		183,223			774,037
NET INVESTMENT INCOME		1,217,843			4,040,246
Realized and unrealized gain (loss) on investment transactions:
Net realized gain (loss) from investment transactions		(128,972	)		395,802
Net change in unrealized gain (loss) on investments		2,293,237			(4,713,166	)
Net realized and unrealized gain (loss) on investment transactions		2,164,265			(4,317,364	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	3,382,108		$	(277,118	)

(a)	The Tennessee Municipal Fund changed its fiscal year end from June 30 to October 31.
(b)	Class specific Distribution and Service, Transfer Agent and Shareholder Servicing fees were as follows:

Distribution and Service Fees
Class A	$ 9,832	$ 2,233
Class B — Predecessor Fund	—	17,691
Class C — Predecessor Fund	—	29,034
Class C	34	7
Transfer Agent Fees
Class A	6,292	7,564
Class B — Predecessor Fund	—	1,920
Class C — Predecessor Fund	—	2,683
Institutional	11,101	70,410
Class C	5	1
Shareholder Servicing Fees
Class A	—	18,954
Class C — Predecessor Fund	—	9,678

The accompanying notes are an integral part of these financial statements. 

93

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statements of Changes in Net Assets

								California Intermediate
		For the			For the			For the
								AMT-Free Municipal
		Year Ended Year Ended						Year Ended
		Short Duration Tax-Free Fund						Fund
		October 31, 2006 October 31, 2005						October 31, 2006(a)
From operations:
Net investment income		$	11,855,502		$	14,006,228		$	1,083,007
Net realized gain (loss) from investment and swap transactions			(4,727,996	)		(3,111,978	)		(14,432	)
Net change in unrealized gain (loss) on investments and swaps			4,795,343			(7,235,690	)		588,538
Net increase in net assets resulting from operations			11,922,849			3,658,560			1,657,113
Distributions to shareholders:
From net investment income
	Class A Shares		(3,595,036	)		(4,148,187	)		(985,745	)
	Class B Shares		(53,844	)		(64,159	)		—
	Class C Shares		(169,842	)		(213,391	)		(3,579	)
	Institutional Shares		(8,742,156	)		(9,692,673	)		(212,917	)
	Service Shares		(1,612	)		(1,251	)		—
Total distributions to shareholders			(12,562,490	)		(14,119,661	)		(1,202,241	)
From share transactions:
Proceeds from sales of shares			151,468,318			178,419,279			68,788,152
Proceeds received in connection with merger			—			—			—
Reinvestment of dividends and distributions			10,138,168			11,564,706			779,013
Cost of shares repurchased			(301,513,407	)		(332,407,892	)		(24,122,912	)(b)
Net increase (decrease) in net assets resulting from share transactions			(139,906,921	)		(142,423,907	)		45,444,253
NET INCREASE (DECREASE)			(140,546,562	)		(152,885,008	)		45,899,125
Net assets:
Beginning of year			467,786,722			620,671,730			—
End of year		$	327,240,160		$	467,786,722		$	45,899,125
Accumulated undistributed (distributions in excess of) net investment income		$	(101,618	)	$	(117,994	)	$	(26,122	)

(a)	California Intermediate AMT-Free Municipal and New York Intermediate AMT-Free Municipal Funds commenced operations on November 1, 2005.
(b)	Net of $10,116, $413 and $43,136 in redemption fees remitted to the California Intermediate AMT-Free Municipal, New York Intermediate AMT-Free Municipal and Municipal Income Funds, respectively.
(c)	Net of $20,934 in redemption fees remitted to the Municipal Income Fund.

94

The accompanying notes are an integral part of these financial statements.

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

New York Intermediate AMT-
Free Municipal Fund			Municipal Income Fund						High Yield Municipal Fund
For the			For the			For the			For the			For the
Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2006(a)			October 31, 2006			October 31, 2005			October 31, 2006			October 31, 2005
$	366,397		$	17,272,260		$	14,891,853		$	285,516,234		$	198,273,384
	(84	)		1,537,620			466,007			53,286,546			9,607,511
	193,332			5,102,457			(3,025,420	)		191,064,491			50,687,703
	559,645			23,912,337			12,332,440			529,867,271			258,568,598
	(174,662	)		(10,682,877	)		(9,136,905	)		(130,090,493	)		(89,601,188	)
	—			(433,826	)		(472,770	)		(2,024,010	)		(2,010,115	)
	(248	)		(293,853	)		(229,418	)		(4,475,183	)		(2,901,299	)
	(227,272	)		(6,088,971	)		(5,327,223	)		(146,542,046	)		(105,930,956	)
	—			(21,433	)		(13,073	)		—			—
	(402,182	)		(17,520,960	)		(15,179,389	)		(283,131,732	)		(200,443,558	)
	22,144,410			226,750,766			314,381,656			3,360,851,644			2,422,682,360
	—			—			59,489,535			—			—
	308,945			11,138,564			9,483,272			219,539,252			155,081,432
	(1,177,918	)(b)		(158,200,016	)(b)		(250,122,559	)(c)		(1,497,415,212	)		(823,023,189	)
	21,275,437			79,689,314			133,231,904			2,082,975,684			1,754,740,603
	21,432,900			86,080,691			130,384,955			2,329,711,223			1,812,865,643
	—			390,405,997			260,021,042			4,941,683,919			3,128,818,276
$	21,432,900		$	476,486,688		$	390,405,997		$	7,271,395,142		$	4,941,683,919
$	(14,394	)	$	(234,317	)	$	(193,802	)	$	6,781,194		$	2,670,374

95

The accompanying notes are an integral part of these financial statements.

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statements of Changes in Net Assets

		Tennessee Municipal Fund
		For the Period			For the			For the
		from July 1, 2006 to			Year Ended			Year Ended
		October 31, 2006*			June 30, 2006			June 30, 2005
From operations:
Net investment income		$	1,217,843		$	4,040,246		$	5,426,046
Net realized gain (loss) from investment transactions			(128,972	)		395,802			1,653,247
Net change in unrealized gain (loss) on investments			2,293,237			(4,713,166	)		312,730
Net increase (decrease) in net assets from operations			3,382,108			(277,118	)		7,392,023
Distributions to shareholders:
From net investment income
	Class A Shares		(138,717	)		(298,501	)		(322,303	)
	Class B Shares — Predecessor Fund		—			(77,592	)		(101,555	)
	Class C Shares — Predecessor Fund		—			(126,321	)		(166,899	)
	Class C Shares		(96	)		(20	)		—
	Institutional Shares		(1,079,984	)		(3,565,489	)		(4,835,024	)
From net realized gains:
	Class A Shares		—			(155,180	)		(29,363	)
	Class B Shares — Predecessor Fund		—			(53,364	)		(11,661	)
	Class C Shares — Predecessor Fund		—			(82,720	)		(17,574	)
	Institutional Shares		—			(1,866,904	)		(452,402	)
Total distributions to shareholders			(1,218,797	)		(6,226,091	)		(5,936,781	)
From share transactions:
Proceeds from sales of shares			3,830,448			12,077,262			15,404,133
Reinvestment of dividends and distributions			159,034			867,306			737,619
Cost of shares repurchased			(7,844,114	)		(35,902,630	)		(55,849,790	)
Net decrease in net assets resulting from share transactions			(3,854,632	)		(22,958,062	)		(39,708,038	)
NET DECREASE			(1,691,321	)		(29,461,271	)		(38,252,796	)
Net assets:
Beginning of period			94,746,502			124,207,773			162,460,569
End of period		$	93,055,181		$	94,746,502		$	124,207,773
Accumulated undistributed (distributions in excess) of net investment income		$	(186,174	)	$	(185,220	)	$	31,743

*  The Tennessee Municipal Fund changed its fiscal year end from June 30 to October 31.

96

The accompanying notes are an integral part of these financial statements.

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements

October 31, 2006

1. ORGANIZATION

Goldman Sachs Trust (the “Trust”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended, (the “Act”) as an open-end management investment company. The Trust includes the Goldman Sachs Short Duration Tax-Free Fund (“Short Duration Tax-Free”), the Goldman Sachs California Intermediate AMT-Free Municipal Fund (“California Municipal”), the Goldman Sachs New York Intermediate AMT-Free Municipal Fund (“New York Municipal”), the Goldman Sachs Municipal Income Fund (“Municipal Income”), the Goldman Sachs High Yield Municipal Fund (“High Yield Municipal”) and the Goldman Sachs Tennessee Municipal Fund (“Tennessee Municipal”), (collectively, the “Funds” or individually a “Fund”). California Municipal and New York Municipal commenced operations on November 1, 2005. Short Duration Tax-Free and Municipal Income are diversified portfolios offering five classes of shares — Class A, Class B, Class C, Institutional and Service. California Municipal, New York Municipal and Tennessee Municipal are non-diversified portfolios offering three classes of shares — Class A, Class C and Institutional. High Yield Municipal is a non-diversified portfolio offering four classes of shares — Class A, Class B, Class C and Institutional. Class A shares of the Short Duration Tax-Free Fund is sold with a front-end sales charge of up to 2.00%. All the other Funds are sold with a front-end sales charge of 4.5%. Class B shares of Short Duration Tax-Free, Municipal Income and High Yield Municipal are sold with contingent deferred sales charges that decline from 2.00% to zero, 5.00% to zero, and 5.00% to zero, respectively, depending upon the period of time that shares are held. Class C shares of the Funds are sold with a contingent deferred sales charge of 1.00% during the first 12 months. Institutional and Service Class shares of the Funds are not subject to a sales charge. Goldman, Sachs & Co. (“Goldman Sachs”) as distributor of the Funds receives such sales loads of which a certain portion may be retained.

     On June 5, 2006, pursuant to an Agreement and Plan of Reorganization (the “Reorganization Agreement”) previously approved by the Trust’s Board of Trustees, all of the assets, subject to liabilities, of First Funds Tennessee Tax-Free Portfolio (the “Predecessor Fund”), were transferred to Tennessee Municipal in exchange for shares of beneficial interest of the Fund’s Class A and Institutional shares of equal value on the close of business on June 2, 2006. Holders of Class A, Class B and Class C shares of the Predecessor Fund received Class A shares of Tennessee Municipal and holders of Class I shares of Predecessor Fund received Institutional shares of Tennessee Municipal, in each case in an amount equal to the aggregate net asset value of their investment in the Predecessor Fund. On the date of the exchange, Tennessee Municipal created Class C shares. The exchange was a tax-free event to shareholders. The Predecessor Fund was the accounting survivor in the reorganization and as such, the prior years financial statements and financial highlights reflect the financial information of the Predecessor Fund through June 4, 2006. Refer to the Other Matters footnote for details of the reorganization.

     Prior to October 31, 2006, Tennessee Municipal changed its fiscal year end from June 30 to October 31. Accordingly, the most recently presented Statement of Operations, Statement of Changes in Net Assets and Financial Highlights reflect the period from July 1, 2006 to October 31, 2006.

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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Portfolio securities for which market quotations are readily available are valued at market value on the basis of quotations furnished by a pricing service or provided by dealers in such securities. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Portfolio securities for which market quotations are not readily available or are deemed not to reflect market value by the investment advisor are valued at fair value based on yield equivalents, pricing matrices or other sources, under valuation procedures established by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis. Interest income is recorded on

97

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

the basis of interest accrued, premium amortized and discount accreted. Market discounts, original issue discount and market premiums on debt securities are accreted/amortized to interest income over the life of the security with a corresponding adjustment in the cost basis of that security. Net investment income (other than class specific expenses) and unrealized and realized gains or losses of the Funds are allocated daily to each class of shares of the respective Fund based upon the relative proportion of net assets of each class.

     Pursuant to applicable law and procedures adopted by the Trust’s Board of Trustees, securities transactions in portfolio securities (including futures transactions) may be effected from time to time through Goldman Sachs or an affiliate. In order for Goldman Sachs or an affiliate, acting as an agent, to effect securities or futures transactions for a Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the commissions, fees or other remunerations received by other brokers in connection with comparable transactions involving similar securities or other futures contracts.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Funds on a straight-line and/or “pro-rata” basis depending upon the nature of the expense.

     Class A, Class B and Class C shareholders of the Funds bear all expenses and fees relating to their respective Distribution and Service Plans. Service Shares bear all expenses and fees related to their Service and Shareholder Administration Plans. Each class of shares of the Funds separately bears its respective class-specific Transfer Agency fees.

D. Federal Taxes and Distributions to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable and tax-exempt income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. Net capital losses are carried forward to future years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gain distributions.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules, which may differ from generally accepted accounting principles. Therefore, the source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or as a tax return of capital.

E. Offering Costs — Offering costs paid in connection with the offering of shares of the California Municipal and New York Municipal Funds are amortized on a straight-line basis over 12 months from the date of commencement of operations.

F. Segregation Transactions — As set forth in the prospectuses, the Funds may enter into certain derivative transactions to seek to increase total return. Interest rate swaps, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Funds may be required to segregate liquid assets with a current value equal to or greater than the market value of the corresponding transactions.

G. Swap Contracts — The Funds may enter into swap transactions for hedging purposes or to seek to increase total return. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net payment to be received by the Funds, and/or the termination value at the end of the contract. Therefore, the Funds consider the creditworthiness of each counterparty to a contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. Entering into these agreements involves, to varying degrees, market, liquidity, elements of credit, legal and documentation risk in excess of amounts recognized in the Statement of Assets and Liabilities.

     An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices, rates or indices for a specified amount of an underlying

98

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.

     Swaps are marked to market daily using either pricing vendor quotations, counterparty prices or model prices and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Periodic payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gain or losses are also realized upon early termination of the swap agreements.

H. Floating Rate Notes Issued in Conjunction with Securities Held — The Funds may enter into transactions in which they transfer fixed rate bonds to trusts in exchange for cash and residual interests in the trusts’ assets and cash flows, which are in the form of inverse floating rate securities. The inverse floating rate securities issued in connection with the trusts give the Funds the right (1) to cause the holders of the floating rate notes to be tendered at par and (2) to transfer the fixed rate bond from the trusts to the Funds, thereby collapsing the trusts. The Funds account for these transactions as secured borrowings, with the fixed rate bonds remaining in the Funds’ investment assets, and the related floating rate notes reflected as Fund liabilities under the caption “floating rate notes issued” in the Statement of Assets and Liabilities. The notes issued by the trusts have interest rates that generally reset weekly, and the floating rate note holders have the option to tender their notes to the trusts for redemption at par at each reset date. Expenses of the trusts, including interest paid to holders of the floating rate notes, are reflected as interest expense and fees of the Funds and are included in the Statement of Operations. The following relates to the Funds at October 31, 2006:

	Floating Rate				Collateral for Floating
Fund	Notes Outstanding		Range of Interest Rates		Rate Notes Outstanding
Municipal Income	$	11,075,000	3.58%	to 3.61%	$	18,096,000
High Yield Municipal	$	230,250,000	3.56%	to 3.61%	$	370,874,511

     For the year ended October 31, 2006, the Municipal Income and High Yield Municipal Funds had average daily liabilities from the participation in inverse floater programs of $11,075,000 and $247,353,000, respectively, and recorded interest expense at an average rate of 3.60% and 3.60%, respectively.

3. AGREEMENTS

A. Investment Management Agreements — Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs, serves as an investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Funds. Under this Agreement, GSAM manages the Funds, subject to the general supervision of the Trust’s Board of Trustees.

99

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

3. AGREEMENTS (continued)

     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Funds’ business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of each Fund’s average daily net assets.

     GSAM entered into a fee reduction commitment for Short Duration Tax-Free, Municipal Income and High Yield Municipal which was implemented on a voluntary basis prior to February 28, 2006 and on a contractual basis as of February 28, 2006 to achieve the rates listed below. The rates listed below for California Municipal and New York Municipal have been contractual for the year ended October 31, 2006. The rates listed below for Tennessee Municipal have been contractual for the period from June 5, 2006 to October 31, 2006.

     For the year ended October 31, 2006, the Funds’ Management fees as an annual percentage rate of average daily net assets were as follows:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Short Duration Tax-Free		0.40	%	First $1 Billion
		0.36		Next $1 Billion
		0.34		Over $2 Billion
California Municipal		0.45		First $1 Billion
		0.41		Next $1 Billion
		0.39		Over $2 Billion
New York Municipal		0.45		First $1 Billion
		0.41		Next $1 Billion
		0.39		Over $2 Billion
Municipal Income		0.55		First $1 Billion
		0.50		Next $1 Billion
		0.48		Over $2 Billion
High Yield Municipal		0.55		First $2 Billion
		0.50		Over $2 Billion
Tennessee Municipal		0.45		First $1 Billion
		0.41		Next $1 Billion
		0.39		Over $2 Billion

     Prior to February 28, 2006, the Short Duration Tax-Free, Municipal Income and High Yield Municipal Funds’ contractual Management fees as an annual percentage rate of average daily net assets were 0.40%, 0.55% and 0.55%, respectively. For the year ended October 31, 2006, GSAM has voluntarily agreed to waive a portion of its Management fee for Short Duration Tax-Free and Municipal Income equal to 0.05% of their respective average daily net assets. GSAM may discontinue or modify these waivers in the future at its discretion.

B. Tennessee Municipal (prior to June 5, 2006) — Prior to the reorganization of Tennessee Municipal on June 5, 2006, First Tennessee Bank National Association (“First Tennessee”) served as investment adviser to the Predecessor Fund. For managing its investment and business affairs, the Predecessor Fund was obligated to pay First Tennessee a management fee at the annual percentage rates as follows:

Management Fee Annual Rate	Average Daily Net Assets
0.50%	First $	250 Million
0.45	Over $	250 Million

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GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

3. AGREEMENTS (continued)

     For the period ended June 4, 2006 (prior to the reorganization), First Tennessee contractually agreed to waive its management fee for the Predecessor Fund to 0.30% of the Predecessor Fund’s average daily net assets.

     Under an investment advisory and management agreement, First Tennessee was authorized, at its own expense, to hire a sub-adviser to provide investment advise to it and the Predecessor Fund. Martin & Company, Inc. (“Martin”) served as sub-adviser to the Predecessor Fund pursuant to the authority granted to it under its sub-advisory agreement with First Tennessee. Martin is an affiliate of First Tennessee and is a wholly-owned subsidiary of First Horizon National Corporation. First Tennessee was obligated to pay Martin a sub-advisory fee at the annual percentage rates as follows:

Sub-advisory Fee Annual Rate	Average Daily Net Assets
0.30%	First $	250 Million
0.27	Over $	250 Million

     Prior to the reorganization, ALPS Mutual Funds Services, Inc. (“ALPS”) and ALPS Distributors, Inc. (“ADI”) served as administrator and distributor, respectively, for the Predecessor Fund under separate administration and general distribution agreements. ALPS’ duties included providing office space and various legal and accounting services in connection with the regulatory requirements applicable to the Predecessor Fund. ALPS was entitled to receive administration fees from the Predecessor Fund at the annual percentage rate of 0.115% of average daily net assets.

     Prior to the reorganization, First Tennessee served as the co-administrator for the Predecessor Fund. As the co-administrator, First Tennessee assisted in the Predecessor Fund’s operations, including but not limited to, providing non-investment related research and statistical data and various operational and administrative services. First Tennessee was entitled to receive co-administration fees from the Predecessor Fund at the annual percentage rate of 0.085% of average daily net assets.

     Prior to the reorganization, the Trustees of the First Funds Trust had adopted distribution plans pursuant to Rule 12b-1 under the Act on behalf of Classes B and C of the First Funds Trust. Each plan provided for payments to ADI at the annual rates up to the amounts listed below. The Trustees of the First Funds Trust had also adopted shareholder servicing plans on behalf of classes A and C of the Predecessor Fund, under which brokers/dealers, advisers or other financial institutions were paid at annual percentage rates up to the amounts shown in the table.

	Class A			Class B			Class C
	Shareholder									Shareholder
Fund	Servicing Fee			12b-1 Fee			12b-1 Fee			Serving Fee
Predecessor Fund		0.25	%		0.70	%		0.75	%		0.25	%

     In addition, the Predecessor Fund had adopted a 12b-1 Plan, which provided that various service providers, such as the Predecessor Fund’s administrator, investment adviser, sub-adviser, or co-adviser, may make payments for distribution related expenses out of their own resources, including past profits or payments received from the Predecessor Fund for other purposes such as management fees, and that the Predecessor Fund’s distributor may, from time-to-time, use its own resources for distribution related services, in addition to the fees paid under the Distribution Plan.

     For the period ended June 4, 2006 (prior to the reorganization), the 12b-1 fee charged by Class C of the Predecessor Fund was waived to 0.50% of average net assets. Additionally, the shareholder servicing fee charged by the Class C of the Predecessor Fund was waived in its entirety.

C. Distribution and Service Agreements — The Trust, on behalf of each Fund, has adopted Distribution and Service Plans (the “Plans”). Under the Plans, Goldman Sachs and/or authorized dealers are entitled to a monthly fee for distribution services equal to, on an annual basis, 0.25%, 0.75% and 0.75% of the Funds’ average daily net assets attributable to Class A, Class B and Class C Shares, respectively. Additionally, Goldman Sachs and/or authorized dealers are entitled to receive,

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GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

3. AGREEMENTS (continued)

under the Plans, a separate fee for personal and account maintenance services equal to, on an annual basis, 0.25% of each Fund’s average daily net assets attributable to Class B and Class C Shares.

     For the year ended October 31, 2006, Goldman Sachs has voluntarily agreed to waive a portion of the Distribution and Service fees equal to 0.15% of the average daily net assets attributable to the Class B Shares of Short Duration Tax-Free. Goldman Sachs may discontinue or modify this waiver in the future at its discretion.

     Goldman Sachs serves as Distributor of the shares of the Funds pursuant to a Distribution Agreement. Goldman Sachs may retain a portion of the Class A sales load and Class B and Class C contingent deferred sales charges. During the period ended October 31, 2006, Goldman Sachs advised the Funds that it retained the following approximate amounts:

			Contingent Deferred
	Sales Load		Sales Charge
Fund	Class A		Class B		Class C
Short Duration Tax-Free	$	1,600	$	—	$	—
California Municipal		3,300		—		—
New York Municipal		400		—		—
Municipal Income		110,800		—		—
High Yield Municipal		785,700		—		—
Tennessee Municipal		1,700		—		100

D. Other Agreements — California Municipal, New York Municipal, Municipal Income and Tennessee Municipal will charge a 2% redemption fee on the redemption of shares (including by exchange) held for 30 calendar days or less. For this purpose, the Funds use a first-in first-out (“FIFO”) method so that shares held longest will be treated as being redeemed first and shares held shortest will be treated as being redeemed last. Redemption fees are reimbursed to the Funds as a reduction in share redemptions and are reflected on the Statement of Changes in Net Assets. Redemption fees are credited to Paid-in capital and are allocated to each share class of the Funds on a pro rata basis.

     Goldman Sachs also serves as the Transfer Agent of the Funds for a fee. The fees charged for such Transfer Agency services are calculated daily and payable monthly at an annual percentage rate of average daily net assets as follows: 0.16% of Class A, Class B and Class C Shares and 0.04% for Institutional and Service Shares.

     The Trust, on behalf of the Short Duration Tax-Free, Municipal Income and High Yield Municipal Funds, has adopted a Service Plan and Shareholder Administration Plan for Service Shares. These plans allow for Service Shares to compensate service organizations for providing varying levels of personal and account administration and shareholder administration services to their customers who are beneficial owners of such shares. The Service Plan and Shareholder Administration Plan provide for compensation to the service organizations in an amount equal to, on an annualized basis, 0.25% and 0.25%, respectively, of the average daily net assets of the Service Shares.

     GSAM has voluntarily agreed to limit certain “Other Expenses” of the Funds (excluding Management fees, Distribution and Service fees, Transfer Agency fees and expenses, taxes, Service Share fees, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any.

     For the year ended October 31, 2006, the Other Expense limitations for Short Duration Tax-Free, California Municipal, New York Municipal, Municipal Income and High Yield Municipal as an annual percentage rate of average daily net assets were 0.004%, 0.044%, 0.044%, 0.004% and 0.004%, respectively.

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GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

3. AGREEMENTS (continued)

     For the period ended October 31, 2006, the Other Expense limitation for Tennessee Municipal as an annual percentage rate of average daily net assets was 0.044%.

     For the year ended October 31, 2006, GSAM and Goldman Sachs have voluntarily agreed to waive certain fees and reimburse other expenses. In addition, the Funds have entered into certain offset arrangements with the custodian and transfer agent resulting in a reduction of the Funds’ expenses. These expense reductions were as follows (in thousands):

	Fee Waivers						Expense Credits
			Class B		Other
			Distribution		Expense		Custody				Total Expense
Fund	Management		and Service		Reimbursement		Fee		Transfer Agent Fee		Reductions
Short Duration Tax-Free	$	192	$	3	$	371	$	14	$	10	$	590
California Municipal		—		—		282		16		1		299
New York Municipal		—		—		290		8		1		299
Municipal Income		209		—		433		24		17		683
High Yield Municipal		513		—		1,017		199		162		1,891

     For the Tennessee Municipal Fund, GSAM voluntarily reimbursed approximately $150,000 and $41,000 of “Other Expenses” for the periods ended October 31, 2006 and June 30, 2006, respectively.

     For the period ended June 4, 2006 (prior to the reorganization), fees waived for the Predecessor Fund were as follows (in thousands):

			Class C		Class C
	Management				Shareholder
Fund	Fee		12b1-Fee		Servicing Fee		Total
Predecessor Fund	$	204	$	10	$	10	$	224

     As of October 31, 2006, the amounts owed to affiliates of the Trust were as follows (in thousands):

	Management		Distribution and		Transfer		Over
Fund	Fees		Service Fees		Agent Fees		Reimbursement		Total
Short Duration Tax-Free	$	98	$	32	$	24	$	—	$	154
California Municipal		17		8		6		—		31
New York Municipal		8		3		2		—		13
Municipal Income		199		81		49		—		329
High Yield Municipal		3,106		926		620		24		4,676
Tennessee Municipal		36		2		4		—		42

103

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long-term securities for the period ended October 31, 2006, were as follows (in thousands):

Fund	Purchases		Sales and Maturities
Short Duration Tax-Free	$	209,754	$	356,114
California Municipal		59,005		15,496
New York Municipal		21,614		1,190
Municipal Income		155,956		81,848
High Yield Municipal		4,016,800		1,978,545
Tennessee Municipal		14,266		20,125

5. LINE OF CREDIT FACILITY

The Funds participate in a $400,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Funds must own securities having a market value in excess of 300% of each Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. The committed facility also requires a fee to be paid by the Funds based on the amount of the commitment that has not been utilized. During the year ended October 31, 2006, the Funds did not have any borrowings under this facility.

6. PORTFOLIO CONCENTRATIONS

As a result of certain of the Funds’ ability to invest a large percentage of their assets in obligations of issuers within certain states, they are subject to possible concentration risks associated with economic, political or legal developments or industrial or regional matters specifically affecting such states.

7. TAX INFORMATION

The tax character of distributions paid during the fiscal year ended October 31, 2006 was as follows:

	Short Duration		California		New York		Municipal		High Yield		Tennessee
	Tax-Free		Municipal		Municipal		Income		Municipal		Municipal
Distributions paid from:
Ordinary income	$	560,661	$	80,748	$	19,377	$	63,385	$	2,470,605	$	686
Tax-exempt income		12,001,829		1,121,493		382,805		17,457,575		280,661,127		1,218,111
Total distributions	$	12,562,490	$	1,202,241	$	402,182	$	17,520,960	$	283,131,732	$	1,218,797

104

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

7. TAX INFORMATION (continued)

The tax character of distributions paid during the fiscal year ended October 31, 2005 was as follows:

	Short Duration		Municipal		High Yield
	Tax-Free		Income		Municipal
Distributions paid from:
Ordinary income	$	—	$	28,276	$	3,790,145
Tax-exempt income		14,119,661		15,151,113		196,653,413
Total distributions	$	14,119,661	$	15,179,389	$	200,443,558

The tax character of distributions paid during the fiscal years ended June 30, 2006 and June 30, 2005 from the Tennessee Municipal and the Predecessor Fund, respectively, were as follows:

	Tennessee		Predecessor
	Municipal		Fund
Distributions paid from:
Ordinary income	$	3,164	$	7,596
Tax-exempt income		4,254,045		5,418,185
Long-term capital gain		1,968,882		511,000
Total distributions	$	6,226,091	$	5,936,781

     As of October 31, 2006 the components of accumulated earnings (losses) on a tax basis were as follows:

		Short Duration			California			New York			Municipal			High Yield			Tennessee
		Tax-Free			Municipal			Municipal			Income			Municipal			Municipal
Undistributed tax-exempt income — net		$	—		$	—		$	—		$	—		$	1,819,155		$	69,965
Undistributed long-term capital gains			—			—			—			—			24,080,462			—
Total undistributed earnings		$	—		$	—		$	—		$	—		$	25,899,617		$	69,965
Capital loss carryforward:1
	Expiring 2007		(183,057	)		—			—			—			—			—
	Expiring 2008		(1,858,014	)		—			—			(2,931,941	)		—			—
	Expiring 2011		—			—			—			(872,080	)		—			—
	Expiring 2012		(2,563,121	)		—			—			(873,613	)		—			—
	Expiring 2013		(3,111,685	)		—			—			—			—			—
	Expiring 2014		(4,730,013	)		(14,645	)		(209	)		—			—			(128,972	)
Total capital loss carryforward		$	(12,445,890	)	$	(14,645	)	$	(209	)	$	(4,677,634	)	$	—		$	(128,972	)
Timing differences (dividends payable)			(176,758	)		(25,950	)		(14,394	)		(544,569	)		(6,020,213	)		(259,188	)
Unrealized gains — net			537,567			588,254			193,332			24,741,254			381,843,970			2,508,480
Total accumulated earnings (losses) — net		$	(12,085,081	)	$	547,659		$	178,729		$	19,519,051			401,723,374		$	2,190,285

¹  Expiration occurs on October 31 of the year indicated. Municipal Income and High Yield Municipal utilized $1,531,377 and $27,325,269 of capital losses, respectively in the current fiscal year.

105

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

7. TAX INFORMATION (continued)

     At October 31, 2006, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:

	Short Duration			California			New York			Municipal			High Yield			Tennessee
	Tax-Free			Municipal			Municipal			Income			Municipal			Municipal
Tax Cost	$	318,403,911		$	46,274,033		$	20,909,273		$	443,915,682		$	6,762,778,839		$	90,107,745
Gross unrealized gain		1,543,562			634,824			221,179			25,493,934			409,734,661			2,511,227
Gross unrealized loss		(599,045	)		(46,570	)		(27,847	)		(311,813	)		(14,746,283	)		(2,747	)
Net unrealized security gain	$	944,517		$	588,254		$	193,332		$	25,182,121		$	394,988,378		$	2,508,480
Net unrealized loss on other investments		(406,950	)		—			—			(440,863	)		(13,144,408	)		—
Net unrealized gain	$	537,567		$	588,254		$	193,332		$	24,741,258		$	381,843,970		$	2,508,480

     The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, accretion of market discount, amortization of premium and the tax treatment of partnership investments for book accounting purposes.

     In order to present certain components of the Funds’ capital accounts on a tax basis, certain reclassifications have been recorded to the Funds’ accounts. These reclassifications have no impact on the net asset value of the Funds. These reclassifications resulted primarily from the difference in tax treatment of certain bonds, swap adjustments and taxable over-distributions.

							Accumulated
				Accumulated			Undistributed
				Net Realized			(Distributions in excess of)
Fund	Paid-in-Capital			Gain (Loss)			Net Investment Income
Short Duration Tax-Free	$	(721,347	)	$	(2,017	)	$	723,364
California Municipal		(92,787	)		(325	)		93,112
New York Municipal		(21,266	)		(125	)		21,391
Municipal Income		(201,942	)		(6,243	)		208,185
High Yield Municipal		155,897			(1,882,215	)		1,726,318

106

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

8. OTHER MATTERS

Mergers and Reorganizations — At a meeting held on November 4, 2004, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization providing for the tax-free acquisition of the Expedition Tax-Free Investment Grade Bond Fund by Municipal Income. The acquisition was completed on February 28, 2005 as of the close of business on February 25, 2005.

     Pursuant to the Agreement, the assets and liabilities of the Expedition Tax-Free Investment Grade Bond Fund (“Acquired Fund”) Institutional Class, Class A and Class B were transferred into Municipal Income (“Survivor Fund”) Institutional Class, Class A and Class B, respectively, in a tax free exchange as follows:

	Exchanged Shares				Acquired Fund’s
	of Survivor		Value of		Shares Outstanding
Survivor/Acquired Fund	Issued		Exchanged Shares		as of February 25, 2005
Goldman Sachs Municipal Income Class A/Expedition Tax-Free Investment Grade Bond Class A		22,516	$	354,853		33,157
Goldman Sachs Municipal Income Class B/Expedition Tax-Free Investment Grade Bond Class B		13,804		217,561		20,322
Goldman Sachs Municipal Income Institutional Class/Expedition Tax-Free Investment Grade Bond Institutional Class		3,740,766		58,917,121		5,500,562

     The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.

	Survivor Fund’s		Acquired Fund’s
	Aggregate Net		Aggregate Net				Survivor Fund’s
	Assets		Assets		Acquired Fund’s		Aggregate Net
	Before		Before		Unrealized		Assets Immediately
Survivor/Acquired Fund	Acquisition		Acquisition		Appreciation		After Acquisition
Goldman Sachs Municipal Income/Expedition Tax-Free Investment Grade Bond	$	380,232,783	$	59,489,535	$	3,814,099	$	439,722,318

     At a meeting held on December 14, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Reorganization Agreement”) providing for the tax-free acquisition of the Predecessor Fund by Tennessee Municipal. The acquisition was completed on June 5, 2006 as of the close of business on June 2, 2006.

107

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

8. OTHER MATTERS (continued)

     Pursuant to the Reorganization Agreement, the assets and liabilities of the Predecessor Fund’s Institutional Class, Class A, Class B and Class C were transferred into Tennessee Municipal Fund’s (“Survivor Fund”) Class A and Institutional Class, respectively, in a tax free exchange as follows:

	Exchanged Shares				Predecessor Fund’s
	of Survivor		Value of		Shares Outstanding
Survivor/Acquired Fund	Issued		Exchanged Shares		as of June 2, 2006
Goldman Sachs Tennessee Municipal Class A/First Funds Tennessee Tax-Free Portfolio Class A		745,171	$	7,451,728		755,622
Goldman Sachs Tennessee Municipal Class A/First Funds Tennessee Tax-Free Portfolio Class B		242,584		2,425,841		246,420
Goldman Sachs Tennessee Municipal Class A/First Funds Tennessee Tax-Free Portfolio Class C		339,048		3,390,499		344,183
Goldman Sachs Tennessee Municipal Institutional Class/First Funds Tennessee Tax-Free Portfolio Class I		8,598,695		85,987,052		8,736,646

     The following chart shows the Tennessee Municipal Fund’s and Predecessor Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Predecessor Fund’s unrealized appreciation.

	Tennessee
	Municipal		Predecessor Fund’s
	Aggregate Net		Aggregate Net				Tennessee Municipal
	Assets		Assets		Predecessor Fund’s		Aggregate Net
	Before		Before		Unrealized		Assets Immediately
The Fund/Predecessor Fund	Reorganization		Reorganization		Appreciation		After Reorganization
Goldman Sachs Tennessee Municipal/First Funds Tennessee Tax-Free Portfolio	$	—	$	99,255,120	$	—	$	99,255,120

Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds (including certain of these Funds) and the Trustees and Officers of the Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Certain of these Funds, along with certain other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the ”Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, the plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals in similar litigation. Based on currently available information,

108

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

8. OTHER MATTERS (continued)

GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuit will have a material adverse financial impact on the Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

New Accounting Pronouncements — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing a Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, the Adviser is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.

     On September 15, 2006, FASB released Statement Financial Accounting Standard No. 157 “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations of an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Adviser does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required.

9. RESTATEMENT OF PRIOR YEAR INFORMATION

     Subsequent to the issuance of its October 31, 2005 financial statements, the Funds determined that the criteria for sale accounting in Statement of Financial Accounting Standards No. 140 had not been met for certain transfers of municipal bonds during the fiscal years ended October 31, 2005, 2004, 2003 and 2002, and that the transfers should have been accounted for as secured borrowings rather than as sales. Accordingly, the Municipal Income and High Yield Municipal Funds have restated the ratios of net expenses to average net assets, the ratios of total expenses to average net assets and the portfolio turnover rates in the Financial Highlights presented herein for the years ended October 31, 2005, 2004, 2003 and 2002 to give effect to recording the transfers of the municipal bonds as secured borrowings, including recording interest on the transferred bonds as interest income and interest on the secured borrowings as interest expense in the Statements of Operations. Also see note 2H.

     While the Statements of Assets and Liabilities as of October 31, 2005, 2004, 2003 and 2002 (not presented herein) have not been reissued to give effect to the restatement, the principal effects of the restatement would be to increase investments and liabilities for floating notes issued by corresponding amounts at each year-end, with no effect on previously reported net assets or total return. The Statements of Operations for the years ended October 31, 2005, 2004, 2003 and 2002 (not presented herein) have not been reissued to give effect to the restatement, but the principal effects of the restatement would be to increase interest income and total interest expense and fees by corresponding amounts each year, with no effect on the previously reported net investment income or net increase in net assets resulting from operations.

109

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

10. SUMMARY OF SHARE TRANSACTIONS

Share activity is as follows:

	Short Duration Tax-Free
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		9,342,444		$	94,960,657			9,460,762		$	97,337,331
Shares issued in connection with merger		—			—			—			—
Reinvestment of dividends and distributions		296,799			3,016,663			336,460			3,456,711
Shares converted from Class B(a)		4,889			49,548			2,479			25,438
Shares repurchased		(12,485,868	)		(126,937,722	)		(13,479,149	)		(138,499,236	)
		(2,841,736	)		(28,910,854	)		(3,679,448	)		(37,679,756	)
Class B Shares
Shares sold		1,113			11,306			11,465			118,530
Shares issued in connection with merger		—			—			—			—
Reinvestment of dividends and distributions		3,558			36,121			4,176			42,868
Shares converted to Class A(a)		(4,891	)		(49,548	)		(2,481	)		(25,438	)
Shares repurchased		(71,263	)		(724,106	)		(201,643	)		(2,073,419	)
		(71,483	)		(726,227	)		(188,483	)		(1,937,459	)
Class C Shares
Shares sold		69,749			708,961			125,695			1,295,839
Reinvestment of dividends and distributions		8,522			86,611			11,746			120,694
Shares repurchased		(386,577	)		(3,929,059	)		(971,195	)		(9,996,909	)
		(308,306	)		(3,133,487	)		(833,754	)		(8,580,376	)
Institutional Shares
Shares sold		5,491,125			55,787,394			7,764,067			79,667,579
Shares issued in connection with merger		—			—			—			—
Reinvestment of dividends and distributions		689,052			6,997,162			773,703			7,943,180
Shares repurchased		(16,751,335	)		(169,922,377	)		(17,689,673	)		(181,838,311	)
		(10,571,158	)		(107,137,821	)		(9,151,903	)		(94,227,552	)
Service Shares
Shares sold		—			—			—			—
Reinvestment of dividends and distributions		159			1,611			122			1,253
Shares repurchased		(14	)		(143	)		(2	)		(17	)
		145			1,468			120			1,236
NET INCREASE (DECREASE)		(13,792,538	)	$	(139,906,921	)		(13,853,468	)	$	(142,423,907	)

(a)	Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.
(b)	Commencement date of operations was November 1, 2005 for all shares of classes.

110

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

California Intermediate AMT-Free						New York Intermediate
Municipal						AMT-Free Municipal						Municipal Income
For the Year Ended						For the Year Ended						For the Year Ended						For the Year Ended
October 31, 2006(b)						October 31, 2006(b)						October 31, 2006						October 31, 2005
Shares			Dollars			Shares			Dollars			Shares			Dollars			Shares			Dollars
	5,503,512		$	55,012,040			1,414,277		$	14,086,682			9,285,981		$	144,944,810			12,169,621		$	191,257,618
	—			—			—			—			—			—			22,516			354,853
	67,542			675,711			9,737			97,365			596,318			9,315,180			500,799			7,873,953
	—			—			—			—			21,778			337,537			17,426			273,549
	(1,594,088	)		(15,958,289	)		(103,316	)		(1,027,908	)		(6,182,028	)		(96,427,542	)		(8,739,244	)		(136,957,291	)
	3,976,966			39,729,462			1,320,698			13,156,139			3,722,409			58,169,985			3,971,118			62,802,682
	—			—			—			—			150,248			2,347,744			139,704			2,198,044
	—			—			—			—			—			—			13,804			217,561
	—			—			—			—			19,369			302,561			21,238			333,886
	—			—			—			—			(21,778	)		(337,537	)		(17,426	)		(273,549	)
	—			—			—			—			(291,854	)		(4,555,679	)		(173,761	)		(2,732,543	)
	—			—			—			—			(144,015	)		(2,242,911	)		(16,441	)		(256,601	)
	33,553			335,255			1,007			10,075			214,423			3,350,113			227,183			3,575,890
	163			1,634			25			247			14,472			226,111			10,409			163,741
	(477	)		(4,781	)		—			—			(115,386	)		(1,804,352	)		(105,023	)		(1,651,312	)
	33,239			332,108			1,032			10,322			113,509			1,771,872			132,569			2,088,319
	1,343,110			13,440,857			805,359			8,047,653			4,846,011			75,660,332			7,497,869			117,349,953
	—			—			—			—			—			—			3,740,766			58,917,121
	10,168			101,668			21,151			211,333			82,796			1,294,092			70,694			1,111,096
	(815,692	)		(8,159,842	)		(14,971	)		(150,010	)		(3,537,720	)		(55,308,092	)		(6,937,929	)		(108,760,950	)
	537,586			5,382,683			811,539			8,108,976			1,391,087			21,646,332			4,371,400			68,617,220
	—			—			—			—			28,700			447,767			9			151
	—			—			—			—			39			620			38			596
	—			—			—			—			(6,621	)		(104,351	)		(1,285	)		(20,463	)
	—			—			—			—			22,118			344,036			(1,238	)		(19,716	)
	4,547,791		$	45,444,253			2,133,269		$	21,275,437			5,105,108		$	79,689,314			8,457,408		$	133,231,904

111

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

10. SUMMARY OF SHARE TRANSACTIONS (continued)

	High Yield Municipal
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		156,128,388		$	1,768,571,244			103,014,985		$	1,144,128,341
Reinvestment of dividends and distributions		8,763,651			99,361,542			5,926,748			65,979,887
Shares converted from Class B(a)		6,357			73,994			6,022			67,289
Shares repurchased		(60,291,265	)		(681,628,363	)		(43,879,461	)		(487,691,984	)
		104,607,131			1,186,378,417			65,068,294			722,483,533
Class B Shares
Shares sold		966,930			10,983,773			538,020			5,959,362
Reinvestment of dividends and distributions		117,151			1,327,356			110,349			1,227,492
Shares converted from Class A(a)		(6,533	)		(73,994	)		(6,022	)		(67,289	)
Shares repurchased		(512,502	)		(5,793,915	)		(631,798	)		(7,020,979	)
		565,046			6,443,220			10,549			98,586
Class C Shares
Shares sold		7,106,596			80,720,654			2,832,934			31,482,755
Reinvestment of dividends and distributions		239,417			2,715,334			155,556			1,731,277
Shares repurchased		(1,379,034	)		(15,592,128	)		(734,229	)		(8,170,264	)
		5,966,979			67,843,860			2,254,261			25,043,768
Institutional Shares
Shares sold		132,533,384			1,500,575,973			111,740,477			1,241,111,902
Reinvestment of dividends and distributions		10,244,565			116,135,020			7,730,710			86,142,776
Shares repurchased		(70,489,809	)		(794,400,806	)		(28,823,876	)		(320,139,962	)
		72,288,140			822,310,187			90,647,311			1,007,114,716
NET INCREASE		183,427,296		$	2,082,975,684			157,980,418		$	1,754,740,603

(a)	Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.
(b)	Commencement date of operations was November 1, 2005 for all shares of classes.

112

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

	Tennessee Municipal
	For the Period
	from July 1, 2006 to						For the Year Ended						For the Year Ended
	October 31, 2006(a)						June 30, 2006						June 30, 2005
	Shares			Dollars			Shares			Dollars			Shares			Dollars
Institutional Shares/Class I Predecessor Fund
Shares sold		292,763		$	2,939,069			1,090,335		$	10,907,289			1,411,796		$	14,654,193
Impact on shares converted during reorganization		—			—			(137,951	)		—			—			—
Reinvestment of dividends and distributions		6,098			61,422			33,108			331,007			27,469			284,962
Shares repurchased		(613,742	)		(6,161,325	)		(3,027,007	)		(30,436,262	)		(4,990,435	)		(51,715,380	)
		(314,881	)		(3,160,834	)		(2,041,515	)		(19,197,966	)		(3,551,170	)		(36,776,225	)
Class A Shares
Shares sold		88,667			891,379			83,132			835,342			68,371			710,955
Impact on shares converted during reorganization		—			—			571,182			—			—			—
Reinvestment of dividends and distributions		9,681			97,516			28,951			290,072			21,786			226,369
Shares repurchased		(167,655	)		(1,682,789	)		(340,203	)		(3,405,495	)		(210,628	)		(2,195,399	)
		(69,307	)		(693,894	)		343,062			(2,280,081	)		(120,471	)		(1,258,075	)
Class B Shares - Predecessor Fund
Shares sold		—			—			10,616			108,841			2,677			28,000
Impact on shares converted during reorganization		—			—			(246,420	)		—			—			—
Reinvestment of dividends and distributions		—			—			7,755			77,574			6,257			64,889
Shares repurchased		—			—			(55,365	)		(557,002	)		(101,384	)		(1,049,453	)
		—			—			(283,414	)		(370,587	)		(92,450	)		(956,564	)
Class C Shares - Predecessor Fund
Shares sold		—			—			21,311			215,730			1,000			10,985
Impact on shares converted during reorganization		—			—			(344,183	)		—			—			—
Reinvestment of dividends and distributions		—			—			16,822			168,633			15,556			161,399
Shares repurchased		—			—			(149,740	)		(1,503,861	)		(85,903	)		(889,558	)
								(455,790	)		(1,119,498	)		(69,287	)		(717,174	)
Class C Shares(b)
Shares sold		—			—			1,006			10,060			—			—
Reinvestment of dividends and distributions		9			96			2			20			—			—
Shares repurchased		—			—			(1	)		(10	)		—			—
		9			96			1,007			10,070			—			—
NET DECREASE		(384,179	)	$	(3,854,632	)		(2,436,650	)	$	(22,958,062	)		(3,833,378	)	$	(39,708,038	)

(a)	The Tennessee Municipal Fund changed its fiscal year end from June 30 to October 31.
(b)	Commenced operation on June 5, 2006.

113

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from									Distributions
			investment operations									to shareholders
	Net asset
	value,		Net			Net realized			Total from			From net
	beginning		investment			and unrealized			investment			investment
Year - Share Class	of year		income(a)			gain (loss)			operations			income
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	10.20	$	0.29		$	0.02		$	0.31		$	(0.31	)
2006 - B		10.19		0.23			0.02			0.25			(0.25	)
2006 - C		10.20		0.21			0.02			0.23			(0.23	)
2006 - Institutional		10.19		0.33			0.02			0.35			(0.35	)
2006 - Service		10.19		0.28			0.02			0.30			(0.30	)
2005 - A		10.39		0.24			(0.18	)		0.06			(0.25	)
2005 - B		10.38		0.18			(0.18	)		(0.00	)		(0.19	)
2005 - C		10.39		0.16			(0.18	)		(0.02	)		(0.17	)
2005 - Institutional		10.39		0.28			(0.19	)		0.09			(0.29	)
2005 - Service		10.38		0.23			(0.18	)		0.05			(0.24	)
2004 - A		10.45		0.19			(0.06	)		0.13			(0.19	)
2004 - B		10.44		0.12			(0.05	)		0.07			(0.13	)
2004 - C		10.45		0.11			(0.06	)		0.05			(0.11	)
2004 - Institutional		10.44		0.23			(0.05	)		0.18			(0.23	)
2004 - Service		10.44		0.17			(0.05	)		0.12			(0.18	)
2003 - A		10.36		0.17			0.10			0.27			(0.18	)
2003 - B		10.35		0.11			0.10			0.21			(0.12	)
2003 - C		10.36		0.10			0.09			0.19			(0.10	)
2003 - Institutional		10.36		0.21			0.09			0.30			(0.22	)
2003 - Service		10.34		0.15			0.12			0.27			(0.17	)
2002 - A		10.26		0.26	(c)		0.12	(c)		0.38			(0.28	)
2002 - B		10.25		0.21	(c)		0.10	(c)		0.31			(0.21	)
2002 - C		10.26		0.18	(c)		0.12	(c)		0.30			(0.20	)
2002 - Institutional		10.25		0.31	(c)		0.12	(c)		0.43			(0.32	)
2002 - Service		10.24		0.26	(c)		0.10	(c)		0.36			(0.26	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.
(c)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premium and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was an impact of less than $0.01 per share to net investment income and net realized and unrealized gains and losses, and an impact to the ratio of net investment income to average net assets with and without expense reductions by less than 0.01%.

 The accompanying notes are an integral part of these financial statements.

114

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end of		net expenses			income			total expenses			income			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	10.20		3.09	%	$	118,460		0.76	%		2.85	%		0.91	%		2.70	%		55	%
	10.19		2.48			1,884		1.36			2.25			1.66			1.95			55
	10.20		2.33			6,297		1.51			2.10			1.66			1.95			55
	10.19		3.48			200,543		0.39			3.23			0.54			3.07			55
	10.19		2.96			56		0.89			2.74			1.04			2.58			55
	10.20		0.56			147,425		0.78			2.37			0.91			2.24			46
	10.19		(0.04	)		2,612		1.38			1.77			1.66			1.49			46
	10.20		(0.19	)		9,440		1.53			1.61			1.66			1.48			46
	10.19		0.86			308,255		0.39			2.77			0.52			2.64			46
	10.19		0.45			55		0.89			2.27			1.02			2.14			46
	10.39		1.25			188,487		0.79			1.80			0.90			1.69			37
	10.38		0.64			4,619		1.39			1.20			1.65			0.94			37
	10.39		0.49			18,283		1.54			1.04			1.65			0.93			37
	10.39		1.75			409,228		0.39			2.20			0.50			2.09			37
	10.38		1.15			55		0.89			1.70			1.00			1.59			37
	10.45		2.62			204,838		0.80			1.66			0.92			1.54			43
	10.44		2.01			6,536		1.40			1.09			1.67			0.82			43
	10.45		1.86			30,057		1.55			0.94			1.67			0.82			43
	10.44		2.93			438,884		0.40			1.99			0.52			1.87			43
	10.44		2.62			74		0.90			1.45			1.02			1.33			43
	10.36		3.72			118,906		0.79			2.57	(c)		1.02			2.34	(c)		31
	10.35		3.10			5,111		1.39			2.01	(c)		1.77			1.63	(c)		31
	10.36		2.94			27,937		1.54			1.80	(c)		1.77			1.57	(c)		31
	10.36		4.23			103,273		0.39			3.00	(c)		0.62			2.77	(c)		31
	10.34		3.62			72		0.89			2.53	(c)		1.12			2.30	(c)		31

115

GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND

Financial Highlights

Selected Data for a Share Outstanding for the Year

			Income from						Distributions
			investment operations						to shareholders
	Net asset
	value,		Net		Net realized		Total from		From net
	beginning		investment		and unrealized		investment		investment
Year - Share Class	of year		income(a)		gain		operations		income
FOR THE YEAR ENDED OCTOBER 31,
2006 - A (commenced November 1, 2005)	$	10.00	$	0.31	$	0.12	$	0.43	$	(0.34	)
2006 - C (commenced November 1, 2005)		10.00		0.23		0.13		0.36		(0.26	)
2006 - Institutional (commenced November 1, 2005)		10.00		0.34		0.13		0.47		(0.37	)

(a)

Calculated based on the average shares outstanding methodology.

(b)

Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.

 The accompanying notes are an integral part of these financial statements.

116

GOLDMAN SACHS CALIFORNIA INTERMEDIATE AMT-FREE MUNICIPAL FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end of		net expenses			income			total expenses			income			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	10.09		4.34	%	$	40,135		0.86	%		3.09	%		1.64	%		2.31	%		45	%
$	10.10		3.66			336		1.60			2.33			2.29			1.64			45
$	10.10		4.84			5,428		0.49			3.37			1.77			2.09			45

117

GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND

Financial Highlights

Selected Data for a Share Outstanding for the Year

			Income from						Distributions
			investment operations						to shareholders
	Net asset
	value,		Net		Net realized		Total from		From net
	beginning		investment		and unrealized		investment		investment
Year - Share Class	of year		income(a)		gain		operations		income
FOR THE YEAR ENDED OCTOBER 31,
2006 - A (commenced November 1, 2005)	$	10.00	$	0.28	$	0.09	$	0.37	$	(0.32	)
2006 - C (commenced November 1, 2005)		10.00		0.21		0.08		0.29		(0.24	)
2006 - Institutional (commenced November 1, 2005)		10.00		0.32		0.08		0.40		(0.35	)

(a)

Calculated based on the average shares outstanding methodology.

(b)

Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.

 The accompanying notes are an integral part of these financial statements.

118

GOLDMAN SACHS NEW YORK INTERMEDIATE AMT-FREE MUNICIPAL FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end of		net expenses			income			total expenses			income			Portfolio
value, end		Total			year		to average			to average			to average			to average			turnover
of year		return(b)			(in 000s)		net assets			net assets			net assets			net assets			rate
$	10.05		3.74	%	$	13,268		0.83	%		2.90	%		2.81	%		0.92	%		10	%
$	10.05		2.98			10		1.55			2.15			4.75			(1.04	)		10
$	10.05		4.12			8,155		0.46			3.26			3.45			0.27			10

119

GOLDMAN SACHS MUNICIPAL INCOME FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from								Distributions
			investment operations								to shareholders
	Net asset
	value,		Net			Net realized			Total from		From net
	beginning		investment			and unrealized			investment		investment
Year - Share Class	of year		income(a)			gain (loss)			operations		income
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	15.59	$	0.63		$	0.22		$	0.85	$	(0.64	)
2006 - B		15.59		0.52			0.22			0.74		(0.52	)
2006 - C		15.60		0.52			0.21			0.73		(0.52	)
2006 - Institutional		15.59		0.69			0.22			0.91		(0.70	)
2006 - Service		15.68		0.61			0.23			0.84		(0.62	)
2005 - A		15.68		0.63			(0.08	)		0.55		(0.64	)
2005 - B		15.68		0.51			(0.08	)		0.43		(0.52	)
2005 - C		15.68		0.52			(0.08	)		0.44		(0.52	)
2005 - Institutional		15.67		0.70			(0.08	)		0.62		(0.70	)
2005 - Service		15.76		0.61			(0.07	)		0.54		(0.62	)
2004 - A		15.41		0.65			0.27			0.92		(0.65	)
2004 - B		15.41		0.54			0.26			0.80		(0.53	)
2004 - C		15.41		0.54			0.26			0.80		(0.53	)
2004 - Institutional		15.40		0.72			0.26			0.98		(0.71	)
2004 - Service		15.49		0.65			0.25			0.90		(0.63	)
2003 - A		15.29		0.64			0.13			0.77		(0.65	)
2003 - B		15.29		0.53			0.12			0.65		(0.53	)
2003 - C		15.30		0.53			0.11			0.64		(0.53	)
2003 - Institutional		15.29		0.71			0.11			0.82		(0.71	)
2003 - Service		15.37		0.63			0.12			0.75		(0.63	)
2002 - A		15.32		0.65	(c)		(0.01	)(c)		0.64		(0.67	)
2002 - B		15.32		0.54	(c)		(0.01	)(c)		0.53		(0.56	)
2002 - C		15.33		0.54	(c)		(0.01	)(c)		0.53		(0.56	)
2002 - Institutional		15.32		0.71	(c)		(0.01	)(c)		0.70		(0.73	)
2002 - Service		15.39		0.64	(c)		—	(c)(d)		0.64		(0.66	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.
(c)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Grade for Investment Companies and began amortizing all premium and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was an impact of less than $0.01 per share to net investment income and net realized and unrealized gains and losses, and an impact to the ratio of net investment income to average net assets with and without expense reductions by less than 0.01%.
(d)	Less than $0.005 per share.
(e)	Ratios have been restated for the years ended October 31, 2005, 2004, 2003 and 2002 (see Note 9).
(f)	Rates have been restated for the years ended October 31, 2005, 2004, 2003 and 2002, which were previously reported as 38%, 32%, 54% and 39%, respectively (see Note 9).

 The accompanying notes are an integral part of these financial statements.

120

GOLDMAN SACHS MUNICIPAL INCOME FUND

																Ratios assuming no
																expense reductions
							Ratio of			Ratio of						Ratio of			Ratio of
							net expenses			net expenses			Ratio of			total expenses			total expenses			Ratio of
					Net assets		to average			to average			net investment			to average			to average			net investment
Net asset					at end of		net assets			net assets			income			net assets			net assets			income			Portfolio
value, end		Total			year		excluding interest			including interest			to average			excluding interest			including interest			to average			turnover
of year		return(b)			(in 000s)		expense and fees			expense and fees(e)			net assets			expense and fees			expense and fees(e)			net assets			rate(f)
$	15.80		5.59	%	$	302,271		0.90	%		1.00	%		4.05	%		1.07	%		1.16	%		3.88	%		19	%
	15.81		4.87			11,698		1.65			1.75			3.31			1.82			1.92			3.14			19
	15.81		4.80			9,777		1.65			1.75			3.30			1.82			1.91			3.14			19
	15.80		5.98			152,070		0.53			0.63			4.42			0.70			0.79			4.26			19
	15.90		5.51			671		1.03			1.13			3.90			1.20			1.29			3.74			19
	15.59		3.55			240,123		0.93			1.00			3.99			1.09			1.16			3.83			37
	15.59		2.78			13,783		1.68			1.75			3.25			1.84			1.91			3.09			37
	15.60		2.85			7,873		1.68			1.75			3.24			1.84			1.91			3.08			37
	15.59		4.02			128,311		0.54			0.61			4.37			0.70			0.77			4.21			37
	15.68		3.49			315		1.04			1.11			3.88			1.20			1.27			3.72			37
	15.68		6.09			179,223		0.94			1.02			4.21			1.12			1.20			4.03			27
	15.68		5.30			14,117		1.69			1.77			3.46			1.87			1.95			3.28			27
	15.68		5.30			5,838		1.69			1.77			3.46			1.87			1.95			3.28			27
	15.67		6.52			60,506		0.54			0.62			4.61			0.72			0.80			4.43			27
	15.76		5.95			337		1.04			1.12			4.11			1.22			1.30			3.93			27
	15.41		5.10			160,856		0.95			1.00			4.17			1.13			1.18			3.99			52
	15.41		4.32			15,143		1.70			1.75			3.44			1.88			1.93			3.26			52
	15.41		4.25			4,615		1.70			1.75			3.45			1.88			1.93			3.27			52
	15.40		5.45			57,696		0.55			0.60			4.58			0.73			0.78			4.40			52
	15.49		4.97			283		1.05			1.10			4.11			1.23			1.28			3.93			52
	15.29		4.30			119,161		0.94			1.00			4.27	(c)		1.11			1.17			4.10	(c)		35
	15.29		3.52			16,903		1.69			1.75			3.53	(c)		1.86			1.92			3.36	(c)		35
	15.30		3.52			6,155		1.69			1.75			3.54	(c)		1.86			1.92			3.37	(c)		35
	15.29		4.71			76,733		0.54			0.60			4.69	(c)		0.71			0.77			4.52	(c)		35
	15.37		4.24			270		1.04			1.10			4.21	(c)		1.21			1.27			4.04	(c)		35

121

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from								Distributions to
			investment operations								shareholders
	Net asset
	value,		Net			Net realized			Total from		From net			From net
	beginning		investment			and unrealized			investment		investment			realized			Total
Year - Share Class	of year		income(a)			gain (loss)			operations		income			gains			distributions
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	11.11	$	0.52		$	0.46		$	0.98	$	(0.52	)	$	—		$	(0.52	)
2006 - B		11.11		0.44			0.46			0.90		(0.44	)		—			(0.44	)
2006 - C		11.11		0.44			0.46			0.90		(0.44	)		—			(0.44	)
2006 - Institutional		11.11		0.57			0.46			1.03		(0.57	)		—			(0.57	)
2005 - A		10.90		0.54			0.21			0.75		(0.54	)		—			(0.54	)
2005 - B		10.90		0.45			0.22			0.67		(0.46	)		—			(0.46	)
2005 - C		10.90		0.45			0.22			0.67		(0.46	)		—			(0.46	)
2005 - Institutional		10.91		0.59			0.19			0.78		(0.58	)		—			(0.58	)
2004 - A		10.66		0.54			0.23			0.77		(0.53	)		—			(0.53	)
2004 - B		10.66		0.46			0.23			0.69		(0.45	)		—			(0.45	)
2004 - C		10.66		0.46			0.23			0.69		(0.45	)		—			(0.45	)
2004 - Institutional		10.66		0.59			0.23			0.82		(0.57	)		—			(0.57	)
2003 - A		10.34		0.54			0.33			0.87		(0.55	)		—			(0.55	)
2003 - B		10.34		0.47			0.32			0.79		(0.47	)		—			(0.47	)
2003 - C		10.34		0.47			0.32			0.79		(0.47	)		—			(0.47	)
2003 - Institutional		10.34		0.59			0.32			0.91		(0.59	)		—			(0.59	)
2002 - A		10.57		0.57	(c)		(0.19	)(c)		0.38		(0.58	)		(0.03	)		(0.61	)
2002 - B		10.57		0.49	(c)		(0.19	)(c)		0.30		(0.50	)		(0.03	)		(0.53	)
2002 - C		10.57		0.49	(c)		(0.19	)(c)		0.30		(0.50	)		(0.03	)		(0.53	)
2002 - Institutional		10.57		0.61	(c)		(0.19	)(c)		0.42		(0.62	)		(0.03	)		(0.65	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on capital gains and other taxable distributions or the redemption of Fund shares.
(c)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was an impact of less than $0.01 per share to net investment income and net realized and unrealized gains and losses, and a decrease to the ratio of net investment income to average net assets with and without expense reductions by 0.04%.
(d)	Ratios have been restated for the years ended October 31, 2005, 2004, 2003 and 2002 (see Note 9).
(e)	Rates have been restated for the years ended October 31, 2005, 2004, 2003 and 2002, which were previously reported as 28%, 41%, 54% and 52%, respectively (see Note 9).

 The accompanying notes are an integral part of these financial statements.

122

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND

																Ratios assuming no
																expense reductions
							Ratio of			Ratio of						Ratio of total			Ratio of
							net expenses			net expenses			Ratio of			expenses to			total expenses			Ratio of
					Net assets		to average			to average			net investment			average net			to average			net investment
Net asset					at end of		net assets			net assets			income			assets excluding			net assets			income			Portfolio
value, end		Total			year		excluding interest			including interest			to average			interest expense			including interest			to average			turnover
of year		return(b)			(in 000s)		expense and fees			expense and fees(d)			net assets			and fees			expense and fees(d)			net assets			rate(e)
$	11.57		9.05	%	$	3,569,963		0.92	%		1.07	%		4.64	%		0.96	%		1.11	%		4.61	%		32	%
	11.57		8.24			57,902		1.67			1.82			3.90			1.71			1.86			3.87			32
	11.57		8.24			160,180		1.67			1.82			3.88			1.70			1.85			3.85			32
	11.57		9.45			3,483,350		0.56			0.71			5.02			0.59			0.74			4.99			32
	11.11		6.99			2,264,580		0.97			1.13			4.78			0.99			1.15			4.76			26
	11.11		6.20			49,299		1.72			1.88			4.05			1.75			1.91			4.02			26
	11.11		6.20			87,466		1.72			1.88			4.03			1.74			1.90			4.01			26
	11.11		7.31			2,540,339		0.58			0.74			5.16			0.60			0.76			5.14			26
	10.90		7.40			1,513,843		0.99			1.10			5.03			1.01			1.12			5.01			31
	10.90		6.60			48,286		1.74			1.85			4.29			1.76			1.87			4.27			31
	10.90		6.60			61,299		1.74			1.85			4.28			1.76			1.87			4.26			31
	10.91		7.93			1,505,390		0.59			0.70			5.44			0.61			0.72			5.42			31
	10.66		8.59			895,711		1.00			1.12			5.21			1.03			1.15			5.18			40
	10.66		7.78			45,620		1.75			1.87			4.50			1.78			1.90			4.47			40
	10.66		7.78			40,624		1.75			1.87			4.48			1.78			1.90			4.45			40
	10.66		9.02			934,382		0.60			0.72			5.64			0.63			0.75			5.61			40
	10.34		3.66			585,882		0.99			1.19			5.41	(c)		1.04			1.24			5.36	(c)		44
	10.34		2.88			40,428		1.74			1.94			4.70	(c)		1.79			1.99			4.65	(c)		44
	10.34		2.88			30,696		1.74			1.94			4.68	(c)		1.79			1.99			4.63	(c)		44
	10.34		4.07			470,905		0.59			0.79			5.84	(c)		0.64			0.84			5.79	(c)		44

123

GOLDMAN SACHS TENNESSEE MUNICIPAL FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Period

			Income (loss) from									Distributions
			investment operations									to shareholders
	Net asset
	value at		Net			Net realized			Total from			From net			From net
	beginning		investment			and unrealized			investment			investment			realized			Total
Year - Share Class	of period*		income			gain (loss)			operations			income			gains			distributions
FOR THE PERIOD FROM JULY 1, 2006 TO OCTOBER 31, 2006,
2006 - A (for the period ended October 31, 2006)	$	9.91	$	0.12	(a)	$	0.23		$	0.35		$	(0.12	)	$	—		$	(0.12	)
2006 - C - (for the period ended October 31, 2006)		9.91		0.09	(a)		0.23			0.32			(0.09	)		—			(0.09	)
2006 - Institutional (for the period ended October 31, 2006)		9.91		0.13	(a)		0.23			0.36			(0.13	)		—			(0.13	)
FOR THE PERIODS ENDED JUNE 30,
2006 - A (for the year ended June 30, 2006)		10.51		0.36	(a)		(0.40	)		(0.04	)		(0.36	)		(0.20	)		(0.56	)
2006 - B - Predecessor Fund (for the period from   July 1, 2005 - June 4, 2006 - see notes 1 and 8)		10.51		0.29	(a)		(0.48	)		(0.19	)		(0.28	)		(0.20	)		(0.48	)
2006 - C - Predecessor Fund (for the period from   July 1, 2005 - June 4, 2006 - see notes 1 and 8)		10.52		0.31	(a)		(0.45	)		(0.14	)		(0.32	)		(0.20	)		(0.52	)
2006 - C - (for the period from June 5, 2006 -   June 30, 2006 - see notes 1 and 8)		10.00		0.02	(a)		(0.09	)		(0.07	)		(0.02	)		—			(0.02	)
2006 - Institutional (for the year ended June 30, 2006)		10.51		0.39	(a)		(0.41	)		(0.02	)		(0.38	)		(0.20	)		(0.58	)
FOR THE YEARS ENDING JUNE 30,
2005 - A		10.42		0.37			0.12			0.49			(0.37	)		(0.03	)		(0.40	)
2005 - B		10.42		0.31			0.12			0.43			(0.31	)		(0.03	)		(0.34	)
2005 - C		10.43		0.33			0.12			0.45			(0.33	)		(0.03	)		(0.36	)
2005 - Institutional		10.42		0.40			0.12			0.52			(0.40	)		(0.03	)		(0.43	)
2004 - A		10.90		0.39			(0.43	)		(0.04	)		(0.39	)		(0.05	)		(0.44	)
2004 - B		10.90		0.34			(0.43	)		(0.09	)		(0.34	)		(0.05	)		(0.39	)
2004 - C		10.90		0.36			(0.42	)		(0.06	)		(0.36	)		(0.05	)		(0.41	)
2004 - Institutional		10.90		0.41			(0.43	)		(0.02	)		(0.41	)		(0.05	)		(0.46	)
2003 - A		10.64		0.40			0.29			0.69			(0.40	)		(0.03	)		(0.43	)
2003 - B		10.64		0.35			0.29			0.64			(0.35	)		(0.03	)		(0.38	)
2003 - C		10.64		0.38			0.29			0.67			(0.38	)		(0.03	)		(0.41	)
2003 - Institutional		10.64		0.43			0.29			0.72			(0.43	)		(0.03	)		(0.46	)
2002 - A		10.46		0.41			0.20			0.61			(0.41	)		(0.02	)		(0.43	)
2002 - B		10.45		0.36			0.20			0.56			(0.35	)		(0.02	)		(0.37	)
2002 - C		10.45		0.39			0.21			0.60			(0.39	)		(0.02	)		(0.41	)
2002 - Institutional		10.45		0.44			0.21			0.65			(0.44	)		(0.02	)		(0.46	)

*  The Fund changed its fiscal year end from June 30 to October 31.

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value. Returns for periods less than one full year are not annualized. The Goldman Sachs Tennessee Municipal Fund first began operations as the First Funds Tennessee Tax-Free Portfolio (the “Predecessor Fund”). On June 5, 2006, the Predecessor Fund was reorganized as a new fund of the Goldman Sachs Trust. Performance prior to June 5, 2006 is that of the Predecessor Fund. Total return information of the Predecessor Fund is provided in the above table because the Predecessor is considered the accounting survivor of the reorganization. As part of the reorganization, the Predecessor Fund changed its investment advisor to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor Fund reorganized into had investment policies which were not identical to the Predecessor Fund.
(c)	Annualized.
(d)	Not Annualized.
(e)	Ratio includes the affect of the operating expenses of the Predecessor Fund prior to Reorganization.

 The accompanying notes are an integral part of these financial statements.

124

GOLDMAN SACHS TENNESSEE MUNICIPAL FUND

													Ratios assuming no
													expense reductions
										Ratio of
					Net assets		Ratio of			net investment			Ratio of			Ratio of net
Net asset					at end of		net expenses			income to			total expenses			investment income			Portfolio
value, end		Total			period		to average			average			to average			to average net			turnover
of period*		return(b)			(in 000s)		net assets			net assets			net assets			assets			rate
$	10.14		3.54	%	$	11,351		0.90	%(c)		3.48	%(c)		1.36	%(c)		3.02	%(c)		15	%
	10.14		3.28			10		1.65	(c)		2.80	(c)		2.12	(c)		2.35	(c)		15
	10.14		3.66			81,694		0.53	(c)		3.87	(c)		1.00	(c)		3.40	(c)		15
	9.91		(0.39	)		11,779		0.91	(e)		3.51	(e)		1.15	(e)		—			22
	9.84		(0.13	)		2,425		1.27	(d)(e)		2.83	(d)(e)		1.45	(d)(e)		—			n/a
	9.86		0.02			3,389		1.08	(d)(e)		3.01	(d)(e)		1.73	(d)(e)		—			n/a
	9.91		(0.70	)		10		1.63	(c)		2.85	(c)		2.22	(c)		—			22
	9.91		(0.12	)		82,958		0.66	(e)		3.76	(e)		0.88	(e)		—			22
	10.51		4.78			8,771		0.94			3.47			1.14			—			11
	10.51		4.31			2,933		1.39			3.02			1.59			—			11
	10.52		4.52			4,721		1.19			3.22			1.89			—			11
	10.51		5.05			107,783		0.69			3.72			0.89			—			11
	10.42		(0.45	)		9,935		0.90			3.58			1.10			—			9
	10.42		(0.91	)		3,856		1.35			3.12			1.55			—			9
	10.43		(0.71	)		5,391		1.15			3.32			1.85			—			9
	10.42		(0.22	)		143,278		0.65			3.83			0.85			—			9
	10.90		6.62			11,661		0.87			3.68			1.07			—			19
	10.90		6.15			4,673		1.32			3.23			1.52			—			19
	10.90		6.37			7,608		1.12			3.43			1.82			—			19
	10.90		6.89			163,440		0.63			3.93			0.83			—			19
	10.64		5.98			9,252		0.88			3.90			1.08			—			8
	10.64		5.46			1,090		1.37			3.41			1.57			—			8
	10.64		5.81			6,989		1.14			3.65			1.84			—			8
	10.64		6.34			164,437		0.64			4.14			0.84			—			8

125

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees
Goldman Sachs Trust

We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York AMT-Free Municipal Fund, Goldman Sachs Municipal Income Fund, Goldman Sachs High Yield Municipal Fund and Goldman Sachs Tennessee Municipal Fund (six of the funds comprising the Goldman Sachs Trust) (the “Funds”), as of October 31, 2006, and the related statements of operations, statements of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. With regards to Goldman Sachs Tennessee Municipal Fund, the statement of changes in net assets for the year ended June 30, 2005 and the financial highlights for each of the years presented through June 30, 2005 were audited by other auditors whose report, dated August 16, 2005, expressed an unqualified opinion on such statement and financial highlights.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Short Duration Tax-Free Fund, Goldman Sachs California Intermediate AMT-Free Municipal Fund, Goldman Sachs New York AMT-Free Municipal Fund, Goldman Sachs Municipal Income Fund, Goldman Sachs High Yield Municipal Fund and Goldman Sachs Tennessee Municipal Fund at October 31, 2006, and the results of their operations the changes in their net assets, and the financial highlights for each of the periods indicated therein, in the conformity with U.S. generally accepted accounting principles.

As discussed in Note 9 to the Financial Statements, for Goldman Sachs Municipal Income Fund and Goldman Sachs High Yield Municipal Income Fund referred to above, the ratios of net expenses to average net assets, the ratios of total expenses to average net assets, and the portfolio turnover rates for the years ended October 31, 2005, 2004, 2003, and 2002 have been restated.

New York, New York

January 16, 2007

126

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Fund Expenses (Unaudited) — Six Month Period Ended October 31, 2006

          As a shareholder of Class A, Class B, Class C, Institutional or Service Shares of the Funds you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments (with respect to Class A Shares), or contingent deferred sales charges (loads) on redemptions (with respect to Class B and Class C Shares), and redemption fees (with respect to Municipal Income Fund only); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Class A, Class B and Class C Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in Class A, Class B, Class C, Institutional and Service Shares of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

          The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2006 (July 1, 2006 for Tennessee Municipal) through October 31, 2006.

Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

          Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Short Duration Tax-Free Fund							California Intermediate AMT-Free Municipal Fund							New York Intermediate AMT-Free Municipal Fund							Tennessee Municipal Fund#
						Expenses							Expenses							Expenses							Expenses
	Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the
	Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			4 months ended
Share Class	5/1/06		10/31/06			10/31/06*		5/1/06		10/31/06			10/31/06*		5/1/06		10/31/06			10/31/06*		7/1/06		10/31/06			10/31/06*
Class A
Actual	$	1,000	$	1,023.00		$	3.85	$	1,000	$	1,034.00		$	4.38	$	1,000	$	1,027.50		$	4.29	$	1,000	$	1,035.40		$	3.09
Hypothetical 5% return		1,000		1,021.40	+		3.84		1,000		1,020.90	+		4.35		1,000		1,020.98	+		4.27		1,000		1,013.82	+		3.05
Class B
Actual		1,000		1,009.90			6.90		N/A		N/A			N/A		N/A		N/A			N/A		N/A		N/A			N/A
Hypothetical 5% return		1,000		1,018.37	+		6.90		N/A		N/A			N/A		N/A		N/A			N/A		N/A		N/A			N/A
Class C
Actual		1,000		1,019.10			7.66		1,000		1,030.00			8.20		1,000		1,023.60			8.13		1,000		1,032.80			5.65
Hypothetical 5% return		1,000		1,017.61	+		7.66		1,000		1,017.13	+		8.15		1,000		1,017.17	+		8.10		1,000		1,011.29	+		5.59
Institutional
Actual		1,000		1,024.90			1.97		1,000		1,035.90			2.50		1,000		1,029.40			2.45		1,000		1,036.60			1.82
Hypothetical 5% return		1,000		1,023.26	+		1.97		1,000		1,022.74	+		2.49		1,000		1,022.79	+		2.44		1,000		1,015.06	+		1.80
Service
Actual		1,000		1,022.30			4.54		N/A		N/A			N/A		N/A		N/A			N/A		N/A		N/A			N/A
Hypothetical 5% return		1,000		1,020.72	+		4.53		N/A		N/A			N/A		N/A		N/A			N/A		N/A		N/A			N/A

127

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Fund Expenses (Unaudited) — Six Month Period Ended October 31, 2006 (continued)

	Municipal Income Fund							High Yield Municipal Fund
						Expenses							Expenses
	Beginning		Ending			Paid for the		Beginning		Ending			Paid for the
	Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended
Share Class	5/1/06		10/31/06			10/31/06*		5/1/06		10/31/06			10/31/06*
Class A
Actual (including interest expense and fees)†	$	1,000	$	1,039.70		$	5.09	$	1,000	$	1,051.00		$	5.48
Actual (excluding interest expense and fees)		1,000		1,039.70			4.62		1,000		1,051.00			4.76
Hypothetical 5% return (including interest expense and fees)†		1,000		1,020.21	+		5.04		1,000		1,019.86	+		5.40
Class B
Actual (including interest expense and fees)†		1,000		1,036.50			8.93		1,000		1,047.10			9.34
Actual (excluding interest expense and fees)		1,000		1,036.50			8.46		1,000		1,047.10			8.62
Hypothetical 5% return (including interest expense and fees)†		1,000		1,016.43	+		8.84		1,000		1,016.08	+		9.20
Class C
Actual (including interest expense and fees)†		1,000		1,036.50			8.93		1,000		1,047.10			9.34
Actual (excluding interest expense and fees)		1,000		1,036.50			8.47		1,000		1,047.10			8.62
Hypothetical 5% return (including interest expense and fees)†		1,000		1,016.43	+		8.84		1,000		1,016.08	+		9.20
Institutional
Actual (including interest expense and fees)†		1,000		1,041.70			3.19		1,000		1,053.00			3.57
Actual (excluding interest expense and fees)		1,000		1,041.70			2.72		1,000		1,053.00			2.85
Hypothetical 5% return (including interest expense and fees)†		1,000		1,022.08	+		3.16		1,000		1,021.73	+		3.52
Service
Actual (including interest expense and fees)†		1,000		1,039.60			5.81		N/A		N/A			N/A
Actual (excluding interest expense and fees)		1,000		1,039.60			5.31		N/A		N/A			N/A
Hypothetical 5% return (including interest expense and fees)†		1,000		1,019.51	+		5.75		N/A		N/A			N/A

*   Expenses for each share class are calculated using the Fund’s expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 10/31/06 (for the four months ended 10/31/06 for Tennessee Municipal). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized expense ratios for the period were as follows:

Fund	Class A			Class B			Class C			Institutional			Service
Short Duration Tax-Free		0.75	%		1.36	%		1.51	%		0.39	%		0.89	%
California Intermediate AMT-Free Municipal		0.85			N/A			1.60			0.49			N/A
New York Intermediate AMT-Free Municipal		0.84			N/A			1.59			0.48			N/A
Municipal Income (including interest expense and fees)		0.99			1.74			1.74			0.62			1.13
Municipal Income (excluding interest expense and fees)		0.90			1.65			1.65			0.53			1.03
High Yield Municipal (including interest expense and fees)		1.06			1.81			1.81			0.69			N/A
High Yield Municipal (excluding interest expense and fees)		0.92			1.67			1.67			0.55			N/A
Tennessee Municipal		0.90			N/A			1.65			0.53			N/A

+	Hypothetical expenses are based on each Fund’s actual annualized expense ratios (including interest expense and fees, if any) and an assumed rate of return of 5% per year before expenses.
#	Commenced operations on June 5, 2006.

† Includes interest expense and fees incurred in connection with secured borrowings. See Note 2.

128

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited)

     The Trustees oversee the management of Goldman Sachs Trust (the “Trust”), and review the investment performance and expenses of the investment funds covered by this Report (the “Funds”) at regularly scheduled meetings held during the Funds’ fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreements (the “Management Agreements”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Funds. The Management Agreements were most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreements or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).

     In addition, the Tennessee Municipal Fund is a newly-organized investment portfolio of the Trust that commenced investment operations on June 5, 2006. The Tennessee Municipal Fund is the accounting successor to the Tennessee Tax-Free Portfolio of First Funds, which was reorganized into the Tennessee Municipal Fund. In connection with the Tennessee Municipal Fund’s organization, the Trust’s Management Agreement with the Investment Adviser for the Tennessee Municipal Fund was approved by the Trustees, including all of the Independent Trustees, at a meeting held on November 2, 2005 (the “November Meeting”). The Management Agreement was subsequently re-approved by the Trustees, including all of the Independent Trustees, at the Annual Contract Meeting for the period ending June 30, 2007. (The November Meeting and the Annual Contract Meeting are sometimes referred to as the “Meetings.”)

     At the November Meeting, the Trustees reviewed the Management Agreement as it applied to the Tennessee Municipal Fund, including information regarding the terms of the Management Agreement; the nature, extent and quality of the Investment Adviser’s services; the fees and expenses to be paid by the Tennessee Municipal Fund; the Investment Adviser’s anticipated costs; the Investment Adviser’s potential economies of scale; the Investment Adviser’s proposal to voluntarily reimburse certain expenses of the Tennessee Municipal Fund that exceeded a specified level; other benefits to be derived by the Investment Adviser and its affiliates from their relationship with the Tennessee Municipal Fund; and a comparison of the Tennessee Municipal Fund’s fees and expenses with those paid by other similar mutual funds.

     In connection with the November Meeting, the Trustees received written materials and oral presentations, and were advised by their independent legal counsel regarding their responsibilities under applicable law. In evaluating the Management Agreement at the November Meeting, the Trustees relied upon their knowledge of the Investment Adviser resulting from their meetings and other interactions throughout the year.

     In connection with their approval of the Management Agreement for the Tennessee Municipal Fund at the November Meeting, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and the other non-advisory services that would be provided by the Investment Adviser and its affiliates for the Tennessee Municipal Fund. These services included services as the Tennessee Municipal Fund’s transfer agent and distributor. In addition, affiliates of the Investment Adviser would receive compensation in connection with the execution of Fund’s portfolio securities transactions and sales loads on the sale of certain classes of shares offered by the Tennessee Municipal Fund. The Trustees concluded that the Investment Adviser was able to provide quality services to the Tennessee Municipal Fund. In this regard, the Trustees noted that, although the Tennessee Municipal Fund was new and had not been managed previously by the Investment Adviser, the Investment Adviser did have past experience in managing other municipal fixed income portfolios for the Trust. The Trustees believed that the investment returns of these other portfolios had been within a competitive range.

     The Board of Trustees also considered the contractual fee rates payable by the Tennessee Municipal Fund under the Management Agreement. In this regard, information on the fees paid by the Tennessee Municipal Fund and the Tennessee Municipal Fund’s projected total operating expense ratios were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. The comparisons of the Funds’ fee rates and total operating expense ratios were compiled by a third-party provider of mutual fund data (the “Outside Data Provider”). More particularly, the analyses compared the Tennessee Municipal Fund’s management fee and projected expenses to a relevant peer group and category median. The Trustees believed that this information was useful in evaluating the reasonableness of the management fees payable by the Tennessee Municipal Fund.

129

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     In addition, in connection with the approval of the Management Agreement at the November Meeting, the Board approved the breakpoints in the contractual management fee rate at the following annual percentages of the average daily net assets of the Tennessee Municipal Fund:

	Tennessee Municipal Fund
Up to $1 billion		0.45	%
Next $1 billion		0.41
Over $2 billion		0.39

     In approving these fee breakpoints, the Trustees considered information regarding the Investment Adviser’s potential economies of scale, and whether the Tennessee Municipal Fund and its shareholders would participate in the benefits of these economies. In this regard, the Trustees considered the Tennessee Municipal Fund’s projected assets, the Investment Adviser’s anticipated expenses and the fee comparisons that had been provided. The Trustees noted again that the Tennessee Municipal Fund was new and that the costs of the Investment Adviser in providing its services, and the related profitability information, would be reviewed periodically by the Trustees. The Trustees agreed that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels. The Trustees also noted the Investment Adviser’s voluntary undertaking to limit the Tennessee Municipal Fund’s total expense ratios (excluding certain expenses) to specified levels.

     At the November Meeting, the Trustees also considered the other benefits that would be derived by the Investment Adviser and its affiliates from the Tennessee Municipal Fund as stated above, including the fees received by them for transfer agency, distribution and brokerage services that may be received by the Investment Adviser in connection with the placement of brokerage transactions for the Tennessee Municipal Fund.

     After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded at the November Meeting that the management fee payable by the Tennessee Municipal Fund was reasonable in light of the services to be provided by the Investment Adviser and the Tennessee Municipal Fund’s reasonably foreseeable asset levels, and that the Management Agreement should be approved.

     As mentioned above, all of the Funds’ Management Agreements were re-approved by the Trustees at the Annual Contract Meeting. To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Funds’ investment performance, expenses and other matters at other regularly scheduled meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreements including: (a) the Funds’ investment performance; (b) the Funds’ management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Funds that exceed specified levels; (d) the Investment Adviser’s potential economies of scale and the breakpoints implemented in 2005 for the fees payable by the Funds under the Management Agreements; (e) the relative expense levels of the Funds; (f) information on the advisory fees charged by the Investment Adviser to institutional accounts; (g) the Investment Adviser’s profitability with respect to the Trust and the Funds; (h) the quality of the non-advisory services provided to the Funds; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of the Trustees’ contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Funds.

     At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management teams; (d) the groups within the Investment Adviser that support the portfolio management teams, including the legal and compliance departments, the credit department, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Funds for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreements; (i) the administrative services provided under the Management Agreements,

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GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

including the nature and extent of the Investment Adviser’s oversight of the Funds’ other service providers including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various types of potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Funds’ investment performance, fees and expenses, including the Funds’ expense trends over time and the breakpoints in the contractual fee rates under the Management Agreements that were approved in 2005.

     In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the payment of Rule 12b-1 distribution and service fees by the Funds. Information was also provided to the Trustees relating to the Funds’ portfolio turnover rates, revenue sharing by the Investment Adviser, portfolio manager compensation and the alignment of the interests of the Funds and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser or its affiliates present.

     The presentations made at the Contract Review Committee meetings and at the Annual Contract Meeting encompassed the Funds and other mutual fund portfolios for which the Board of Trustees has responsibility. While the Management Agreements for all of the Funds were approved at the same Annual Contract Meeting, the Trustees considered the applicable Management Agreements as it applied to each Fund separately.

     In evaluating the Management Agreements at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Funds. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreements, including: (a) information on the investment performance of the Funds in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Funds invest; (c) compliance reports; and (d) expenses borne by the Funds. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that were provided to investors who had invested in the Funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and the broad range of other investment choices that are available to those investors.

     In connection with their approval of the Management Agreements, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Funds by the Investment Adviser and its affiliates. These services include services as the Funds’ transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Funds’ portfolio securities transactions and sales loads on the sale of certain classes of shares offered by the Funds. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Funds and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Funds and the Investment Adviser, including education and training initiatives.

     The Trustees also considered the investment performance of the Funds and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Funds to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Funds’ investment performance relative to their respective performance benchmarks. For Funds that had been in existence for the respective periods, this information on the Funds’ investment performance was provided for one, three, five and ten (where applicable) year periods. In addition, the Trustees considered the investment performance trends of the Funds over time, and reviewed the investment performance of the Funds in light of their respective investment objectives, policies and credit and duration parameters, as well as in light of periodic analyses of their respective quality and risk profiles. In addition, the Trustees considered whether the Funds had operated within their investment policies, and their record of compliance with their investment limitations. The Trustees believed that the Funds were providing investment performance within a competitive range for long-term investors and that the Funds that had commenced operations during the prior year or more recently (California Intermediate AMT-Free Municipal Fund, New York Intermediate AMT-Free Municipal Fund and Tennessee Municipal Fund) were providing acceptable performance in light of their respective investment policies.

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GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     The Board of Trustees also considered the contractual fee rates payable by the Funds under the Management Agreements. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Funds, which included both advisory and administrative services that were directed to the needs and operations of the Funds as registered mutual funds. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Funds and the Funds’ total operating expense ratios (before and after voluntary fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Funds’ fee rates and total operating expense ratios were prepared by the Outside Data Provider.

     More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Funds. The analyses provided a comparison of the Funds’ management fees to relevant peer groups and category universes; an expense analysis which compared each Fund’s expenses to a peer group and a category universe; and a five-year history comparing each Fund’s expenses to a category average. The analyses also compared the Funds’ transfer agency fees, custody and accounting fees and other expenses to peer groups and medians. In addition, the Trustees noted the Investment Adviser’s voluntary undertaking to limit the Funds’ total expense ratios (excluding certain expenses) to specified levels.

     The Board of Trustees also considered the breakpoints in the contractual fee rates under the Management Agreements for each of the Funds (other than the Tennessee Municipal Fund) that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the respective Funds:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Short Duration Tax-Free Fund		0.40	%	First $	1 Billion
		0.36	%	Next $	1 Billion
		0.34	%	Over $	2 Billion
California Intermediate AMT-Free Municipal Fund		0.45	%	First $	1 Billion
		0.41	%	Next $	1 Billion
		0.39	%	Over $	2 Billion
New York Intermediate AMT-Free Municipal Fund		0.45	%	First $	1 Billion
		0.41	%	Next $	1 Billion
		0.39	%	Over $	2 Billion
Municipal Income Fund		0.55	%	First $	1 Billion
		0.50	%	Next $	1 Billion
		0.48	%	Over $	2 Billion
High Yield Municipal Fund		0.55	%	First $	2 Billion
		0.50	%	Over $	2 Billion

     In addition, in connection with the re-approval of the Management Agreement for the Tennessee Municipal Fund, the Board considered the breakpoints in the contractual fee rate at the following annual percentages of the average daily net assets of the Tennessee Municipal Fund:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Tennessee Municipal Fund		0.45	%	First $	1 Billion
		0.41	%	Next $	1 Billion
		0.39	%	Over $	2 Billion

     In approving these fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Funds and their shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Funds (projected assets in the case of the Tennessee Municipal Fund); the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment

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GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.

     The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Funds as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services. The Trustees noted the reduction of the transfer agency fees on Class A, Class B and Class C Shares of the Funds in 2005. In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Funds. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.

     After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Funds were reasonable in light of the services provided by the Investment Adviser, its costs and the Funds’ current and reasonably anticipated asset levels, and that the Management Agreements should be approved and continued.

133

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Trustees and Officers (Unaudited)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Ashok N. Bakhru Age: 64	Chairman of the Board of Trustees	Since 1991	President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003). Chairman of the Board of Trustees — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
John P. Coblentz, Jr. Age: 65	Trustee	Since 2003	Partner, Deloitte & Touche LLP (June 1975-May 2003). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Patrick T. Harker Age: 48	Trustee	Since 2000	Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Mary P. McPherson Age: 71	Trustee	Since 1997	Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Wilma J. Smelcer Age: 57	Trustee	Since 2001	Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Lawson Products Inc. (distributor of industrial products).

134

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Trustees and Officers (Unaudited) (continued)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Richard P. Strubel Age: 67	Trustee	Since 1987	Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Gildan Activewear Inc. (clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
*Alan A. Shuch Age: 57	Trustee	Since 1990	Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
*Kaysie P. Uniacke Age: 45	Trustee   &	Since 2001	Managing Director, Goldman Sachs (1997-Present).	77	None
	President	Since 2002	Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College

*	These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1	Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno.
2	The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997.
3	Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
4	The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of October 31, 2006, the Trust consisted of 65 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios.
5	This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

135

GOLDMAN SACHS MUNICIPAL FIXED INCOME FUNDS

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*

		Term of
		Office and
	Position(s) Held	Length of
Name, Age And Address	With the Trust	Time Served1	Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45	President & Trustee	Since 2002 Since 2001	Managing Director, Goldman Sachs (1997-Present). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College
James A. Fitzpatrick 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 46	Vice President	Since 1997	Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara 32 Old Slip New York, NY 10005 Age: 44	Vice President	Since 2001	Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski 32 Old Slip New York, NY 10005 Age: 42	Treasurer	Since 1997	Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37	Secretary	Since 2006	Managing Director, Goldman Sachs (December 2006-Present); Associate General Counsel, Goldman Sachs (2002-Present); Vice President, Goldman Sachs (1999-2006); Assistant General Counsel, Goldman Sachs (1999-2002). Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).

1	Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*	Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

Goldman Sachs Trust — Municipal Fixed Income Funds Tax Information (Unaudited)

       During the year ended October 31, 2006, 95.54%, 93.28%, 95.18%, 99.64%, 99.13% and 99.94% of the distributions from net investment income paid by the Goldman Sachs Short Duration Tax-Free Fund, the Goldman Sachs California Intermediate AMT-Free Municipal Fund, the Goldman Sachs New York Intermediate AMT-Free Municipal Fund, the Goldman Sachs Municipal Income Fund, the Goldman Sachs High Yield Municipal Fund and the Goldman Sachs Tennessee Municipal Fund, respectively, were exempt-interest dividends and as such, are not subject to U.S. Federal income tax.

136

FUNDS PROFILE

Goldman Sachs Funds

Goldman Sachsis a premier financial services firm, known since 1869 for creating thoughtful and customized investment solutions in complex global markets.

Today, The Investment Management Divisionof Goldman Sachs serves a diverse set of clients worldwide, including private institutions, public entities and individuals. With portfolio management teams located around the world — and $610.2 billion in assets under management as of September 30, 2006  — our investment professionals bring firsthand knowledge of local markets to every investment decision, making us one of the few truly global asset managers.

 GOLDMAN SACHS FUNDS

In building a globally diversified portfolio, you can select from more than 50 Goldman Sachs Funds and gain access to investment opportunities across borders, investment styles, asset classes and security capitalizations.

Money Market Funds¹

Fixed Income Funds
▪  Enhanced Income Fund
▪  Ultra-Short Duration Government Fund
▪  Short Duration Government Fund
▪  Short Duration Tax-Free Fund
▪  California Intermediate AMT-Free Municipal Fund
▪  New York Intermediate AMT-Free Municipal Fund
▪  Tennessee Municipal Fund
▪  Municipal Income Fund
▪  U.S. Mortgages Fund
▪  Government Income Fund
▪  Core Fixed Income Fund
▪  Core Plus Fixed Income Fund
▪  Investment Grade Credit Fund
▪  Global Income Fund
▪  High Yield Municipal Fund
▪  High Yield Fund
▪  Emerging Markets Debt Fund Domestic Equity Funds
▪  Balanced Fund
▪  Growth and Income Fund
▪  Structured Large Cap Value²

▪  Large Cap Value
▪  Structured U.S. Equity Fund²

▪  Structured U.S. Equity Flex Fund
▪  Structured Large Cap Growth Fund²
▪  Capital Growth Fund
▪  Strategic Growth Fund
▪  Concentrated Growth Fund
▪  Mid Cap Value Fund
▪  Growth Opportunities Fund
▪  Small/Mid Cap Growth Fund
▪  Structured Small Cap Equity Fund²
▪  Small Cap Value Fund International Equity Funds
▪  Structured International Equity Fund²
▪  Structured International Equity Flex Fund
▪  Concentrated International Equity Fund²
▪  Japanese Equity Fund
▪  International Small Cap Fund²
▪  Asia Equity Fund²
▪  Emerging Markets Equity Fund
▪  BRIC Fund (Brazil, Russia, India, China)

Asset Allocation Funds³

Specialty Funds³
▪  U.S. Equity Dividend and Premium Fund
▪  Structured Tax-Managed Equity Fund²
▪  Real Estate Securities Fund
▪  International Real Estate Securities Fund
▪  Tollkeeper Fund^SM

1	An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.
2	Effective December 30, 2005, the Asia Growth Fund was renamed the Asia Equity Fund and the International Growth Opportunities Fund was renamed the International Small Cap Fund. Also effective December 30, 2005, the CORE International Equity, CORE Small Cap Equity, CORE Large Cap Growth, CORE Large Cap Value and CORE U.S. Equity Funds were renamed, respectively, the Structured International Equity, Structured Small Cap Equity, Structured Large Cap Growth, Structured Large Cap Value Funds and Structured U.S. Equity. Effective January 6, 2006, the CORE Tax-Managed Equity Fund was renamed the Structured Tax-Managed Equity Fund. Effective December 26, 2006, the International Equity Fund was renamed the Concentrated International Equity Fund.
3	Individual Funds within the Asset Allocation and Specialty categories will have various placement on the risk/return spectrum and may have greater or lesser risk than that indicated by the placement of the general Asset Allocation or Specialty category.
	The Goldman Sachs Tollkeeper FundSM is a registered service mark of Goldman, Sachs & Co.

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32ND FLOOR, NEW YORK, NEW YORK 10005

TRUSTEES
Ashok N. Bakhru, Chairman
John P. Coblentz, Jr.
Patrick T. Harker
Mary Patterson McPherson
Alan A. Shuch
Wilma J. Smelcer
Richard P. Strubel
Kaysie P. Uniacke OFFICERS
Kaysie P. Uniacke, President
James A. Fitzpatrick, Vice President
James A. McNamara, Vice President
John M. Perlowski, Treasurer
Peter V. Bonanno, Secretary

GOLDMAN, SACHS & CO.
Distributor and Transfer Agent GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser

Visit our Web site at www.goldmansachsfunds.com to obtain the most recent month-end returns.

The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how a Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (I) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (II) on the Securities and Exchange Commission Web site at http://www.sec.gov.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. When available, the Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders).

Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Funds’ entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.

Copyright 2006 Goldman, Sachs & Co. All rights reserved. 
06-1997 MFIAR / 34.4K / 12-06

EX-99.17.R

Goldman Sachs Funds

SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS Annual Report October 31, 2006 

Current income potential from portfolios that invest in a variety of fixed income securities.

Goldman Sachs Single/Multi-Sector
Taxable Fixed Income Funds

n	GOLDMAN SACHS GOVERNMENT INCOME FUND
n	GOLDMAN SACHS U.S. MORTGAGES FUND
n	GOLDMAN SACHS CORE FIXED INCOME FUND
n	GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

The Goldman Sachs Government Income Fund’s net asset value and yield are not guaranteed by the U.S. government or by its agencies, instrumentalities or sponsored enterprises. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.

The Goldman Sachs U.S. Mortgages Fund’s investment in mortgage-backed securities (MBS) is subject to prepayment risk, the risk that in a declining interest rate environment the Fund’s underlying mortgages may be prepaid, causing the Fund to have to reinvest at lower interest rates. This risk may result in greater share price volatility than a fixed income fund not invested in MBS. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.

NOT FDIC-INSURED May Lose Value No Bank Guarantee

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

The Goldman Sachs Core Fixed Income Fund’s investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.

The Goldman Sachs Investment Grade Credit Fund’s investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.

1

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

What Distinguishes Goldman Sachs’
Fixed Income Investment Process?

At Goldman Sachs Asset Management (“GSAM”), the goal of our fixed income investment process is to provide consistent, strong performance by actively managing our portfolios within a research-intensive, risk-managed framework.

A key element of our fixed income investment philosophy is to evaluate the broadest global
opportunity set to capture relative value across sectors and instruments. Our globally
integrated investment process involves managing dynamically along the risk/return spectrum,
as we continue to develop value-added strategies through:



n  Assess relative value among sectors (such as mortgages and corporates) and sub-sectors

n  Leverage the vast resources of Goldman Sachs in selecting securities for each portfolio


n  Team approach to decision making

n  Manage risk by avoiding significant sector and interest rate bets

n  Careful management of yield curve strategies — while closely managing portfolio duration

Fixed Income portfolios that:
n  Include domestic and global investment options, income opportunities,
and access to areas of specialization

n  Capitalize on GSAM’s industry-renowned credit research capabilities

n  Use a risk-managed framework to seek total return, recognizing the importance of investors’ capital accumulation goals as well as their need for income

2

PORTFOLIO RESULTS

Government Income Fund

Dear Shareholder:

This report provides an overview on the performance of the Goldman Sachs Government Income Fund during the
one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 4.40%, 3.62%, 3.63%, 4.86% and 4.27%, respectively. These returns compare to the 5.12% cumulative total return of the Fund’s benchmark, the Lehman Brothers Government/ Mortgage Index, over the same time period.

A combination of top-down and bottom-up strategies impacted the Fund’s performance relative to its benchmark. We maintained a defensive posture over the period, positioning the Fund to have a shorter duration versus its benchmark in anticipation of higher interest rates. This strategy contributed to returns as interest rates rose over the period. With regards to our cross-sector strategies, we continued to underweight the Fund’s mortgage exposure relative to the benchmark based on negative fundamentals in the mortgage market. Our mortgage underweight detracted from relative performance as the mortgage sector outperformed over the period. However, our security selection within mortgages helped to somewhat offset the negative impact from our mortgage underweight. In particular, selection of securities with less exposure to volatility, such as high quality floating rate adjustable rate mortgages (“ARMs”), contributed to relative performance. The Fund’s holdings of Treasury Inflation Protected Securities (“TIPS”) and select asset-backed auto securities also modestly detracted from the Fund’s performance relative to its benchmark. Offsetting this was the positive impact from our continued emphasis on short-dated agency securities.

  Market Review

A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields rose across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence and strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices, which lessened inflationary concerns and prompted the Fed to pause its tightening policy. During the reporting period, the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Investment grade sectors continued to post strong outperformance relative to Treasuries over the reporting period, with the mortgage sector generating the best results. Credit spreads also tightened, supported by strong fundamentals and continued corporate profit growth.

3

PORTFOLIO RESULTS

  Investment Objective

The Fund seeks a high level of current income, consistent with safety of principal.

  Investment Strategies

The Fund seeks to meet its objective by investing at least 80% of its net assets in U.S. government securities and in repurchase agreements collateralized by these securities, and in other securities of the highest credit quality. The Fund uses derivatives, including, but not limited to, Treasury futures, Eurodollar futures and swaps, primarily, as a tool to manage interest rate exposure, volatility, term structure, convexity (the rate of change in the portfolio’s duration as yields change), and sector exposure. The Fund may also use derivatives to express our interest rate outlook.

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

Over the period, the Fund’s investment strategy continued to focus on sectors and securities that we believed would generate a competitive total rate of return relative to the benchmark. As relative valuations changed over the period, we tactically adjusted the Fund’s exposures to take advantage of emerging opportunities. For example, we reduced the Fund’s Government exposure in favor of mortgage-backed securities that we felt offered more compelling relative values. We also took advantage of opportunities to add value in security-specific trades. In particular, we have been finding value in AAA rated ARMs and commercial mortgage-backed securities (“CMBS”). At the end of the reporting period, the Fund’s largest sector weight was in mortgage-backed securities. During the period, we maintained a short duration position relative to the Index based on the belief that interest rates would move higher.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income Investment Management Team

November 20, 2006

4

FUND BASICS

Government Income Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return		Lehman Govt./		30-Day
October 31, 2006	(based on NAV)1		Mortgage Index2		Standardized Yield3
Class A		4.40%		5.12%		3.98%
Class B		3.62		5.12		3.42
Class C		3.63		5.12		3.42
Institutional		4.86		5.12		4.54
Service		4.27		5.12		4.04

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers Government/ Mortgage Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year		Five Years		Ten Years		Since Inception		Inception Date
Class A		-1.38%		3.20%		5.36%		5.61%	2/10/93
Class B		-2.65		2.96		5.05		5.12	5/1/96
Class C		1.45		3.38		N/A		4.75	8/15/97
Institutional		3.70		4.58		N/A		5.94	8/15/97
Service		3.12		4.05		5.725		5.875	2/10/93

4

The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years), and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

5

Performance data for Service Shares prior to 8/15/97 (commencement of operations) is that of Class A Shares (excluding the impact of front-end sales charges applicable to Class A Shares since Service Shares are not subject to any sales charges). Performance of Class A Shares in the Fund reflects the expenses applicable to the Fund’s Class A Shares. The fees applicable to Service Shares are different from those applicable to Class A Shares which impact performance ratings and rankings for a class of shares.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

5

FUND BASICS

SECTOR ALLOCATION⁶

Percentage of Net Assets

6	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
7	“Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company.

6

PORTFOLIO RESULTS

U.S. Mortgages Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs U.S. Mortgages Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, Institutional and Separate Account Institutional Shares generated cumulative total returns, without sales charges, of 5.21%, 5.56% and 5.73%, respectively. These returns compare to the 5.65% cumulative total return of the Fund’s benchmark, the Lehman Brothers Securitized Index, over the same time period.

Over the period, we continued to target an underweight position in mortgages relative to the benchmark based on historically tight spread levels and low implied volatility. As mortgages outperformed the market during the reporting period, this underweight position detracted from performance. In contrast, our out-of-Index selection of high quality, floating rate adjustable-rate mortgages (“ARMs”), contributed positively to returns. A preference for high quality, floating rate asset-backed securities also enhanced results. The Fund’s performance relative to the benchmark was positively impacted by our short duration bias, as yields generally rose across the curve.

  Market Review

Mortgages posted strong returns over the reporting period, outperforming both equal duration Treasuries and swaps. Spreads finished slightly tighter. Over the period, mortgage volatility rates declined. Fundamentals remain unattractive and implied volatility continues to remain near cyclical lows.

  Investment Objective

The Fund seeks a high level of total return consisting of income and capital appreciation.

  Investment Strategies

In seeking to meet the Fund’s investment objective, we invest at least 80% of its net assets in fixed income securities, including U.S. government and collateralized securities. Collateralized securities may include fixed rate pass-throughs, collateralized mortgage obligations (“CMOs”), ARMs, mortgage derivatives and asset-backed securities (“ABS”). To the extent we find them effective instruments to manage the duration of the portfolio, the Fund may employ the use of derivatives, including futures, swaps and Eurodollar futures contracts.

7

PORTFOLIO RESULTS

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

The Fund maintained a short duration position relative to its benchmark during the reporting period. Given its underweight position in mortgage pass-throughs, the Fund invested in other collateralized sectors, such as ARMs and CMOs. The Fund added to its government security allocation as a tactical substitute for pass-through exposure. The Fund continues to underweight exposure to fixed rate mortgage-backed security pass-throughs on the back of negative fundamentals. At the end of the reporting period, all of the Fund’s asset-backed security exposure was concentrated in short-term, high quality securities, which we consider to be cash equivalents.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Fixed Income Investment Management Team

November 20, 2006

8

FUND BASICS

U.S. Mortgages Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return			Lehman Brothers			30-Day
October 31, 2006	(based on NAV)1			Securitized Index2			Standardized Yield3
Class A		5.21	%		5.65	%		4.16	%
Institutional		5.56			5.65			4.75
Separate Account Institutional		5.73			5.65			4.79

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers Securitized Index is an unmanaged composite of asset-backed securities, collateralized mortgage-backed securities and fixed rate mortgage-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year			Since Inception			Inception Date
Class A		-0.68	%		2.23	%	11/3/03
Institutional		4.38			4.30		11/3/03
Separate Account Institutional		4.44			4.32		11/3/03

⁴  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares. Because Institutional and Separate Account Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

9

FUND BASICS

SECTOR ALLOCATION⁵

Percentage of Net Assets

5	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
6	“Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company.

10

PORTFOLIO RESULTS

Core Fixed Income Fund

Dear Shareholder,

This report provides an overview on the performance of the Goldman Sachs Core Fixed Income Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 4.21%, 3.42%, 3.52%, 4.69% and 4.06%, respectively. These returns compare to the 5.19% cumulative total return of the Fund’s benchmark, the Lehman Brothers Aggregate Bond Index, over the same time period.

Within our top down currency strategy, our overall positioning relative to the benchmark in the Great Britain pound and New Zealand dollar significantly detracted from performance over the reporting period. Overall our cross-sector strategy also had a negative impact on returns versus the benchmark. In particular, underweight exposures to the corporate and mortgage sectors detracted from performance as the sectors outperformed Treasuries over the period. However, our swap spread exposure enhanced results. Elsewhere, our security selection within mortgages helped performance relative to the benchmark, particularly within mortgage passthroughs, adjustable rate mortgages and mortgage derivatives. Within investment grade corporates, our selection of insurance sector credits, benefited returns versus the benchmark. The Fund’s performance relative to the benchmark was positively impacted by our overall short duration positioning as interest rates rose at the short region of the curve over the period.

  Market Review

A number of continuing themes characterized the 12 month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields rose across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence and strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices, which lessened inflationary concerns and prompted the Fed to pause its tightening policy. Within currencies, the Great Britain pound appreciated against the U.S. dollar over the 12-month period. Credit spreads also continued to tighten over the reporting period, as the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Emerging market debt and credit spreads also continued to tighten over the reporting period.

  Investment Objective

The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index.

11

PORTFOLIO RESULTS

  Investment Strategies

In seeking to meet the Fund’s investment objective, we invest at least 80% of its net assets in fixed income securities, including U.S. government, corporate securities, mortgage-backed securities, asset-backed securities and investment grade emerging market debt securities. In addition, to the extent we find them effective instruments to manage the overall duration of the portfolio, the Fund may employ the use of derivatives, including futures, swaps and Eurodollar futures contracts.

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

During the period, the Fund continued to hold a short duration position relative to the benchmark based on our belief that rates will trend higher. The Fund increased its underweight in the mortgage sector based on historically tight spread levels and low implied volatility. However, we continued to take advantage of opportunities to add value in security-specific trades. In particular, we favored bonds with less exposure to implied volatility and housing turnover. These included seasoned 15-year mortgage-backed securities, super-senior AAA adjustable-rate mortgage floaters, and super-senior AAA collateralized mortgage-backed securities. The Fund held an underweight to the corporate sector as profit growth has been slowing and companies have been starting to re-lever their balance sheets. Finally, the Fund’s market value exposure to government securities decreased based on our constructive view of other high quality sectors at the shorter end of the curve, such as agencies.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs U.S. Fixed Income Investment Management Team

November 20, 2006

12

FUND BASICS

Core Fixed Income Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return			Lehman Aggregate			30-Day
October 31, 2006	(based on NAV)1			Bond Index2			Standardized Yield3
Class A		4.21	%		5.19	%		4.30	%
Class B		3.42			5.19			3.76
Class C		3.52			5.19			3.76
Institutional		4.69			5.19			4.87
Service		4.06			5.19			4.38

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers Aggregate Bond Index represents an unmanaged diversified portfolio of fixed income securities, including U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed and asset-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year			Five Years			Ten Years			Since Inception			Inception Date
Class A		-1.55	%		3.78	%		N/A			5.51	%	5/1/97
Class B		-2.81			3.55			N/A			5.25		5/1/97
Class C		1.28			3.97			N/A			4.99		8/15/97
Institutional		3.35			5.14			6.47	%		6.31		1/5/94
Service		2.94			4.64			5.95			5.89		3/13/96

⁴  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

13

FUND BASICS

SECTOR ALLOCATION⁵

Percentage of Net Assets

5	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
6	“Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company.

14

PORTFOLIO RESULTS

Investment Grade Credit Fund

Dear Shareholder:

This report provides an overview on the performance of the Goldman Sachs Investment Grade Credit Fund during the one-year reporting period that ended October 31, 2006.

  Performance Review

Over the one-year period that ended October 31, 2006, the Fund’s Class A, Institutional and Separate Account Institutional Shares generated cumulative total returns, without sales charges, of 4.84%, 5.35%, and 5.30%, respectively. These returns compare to the 5.36% cumulative total return of the Fund’s benchmark, the Lehman Brothers U.S. Credit Index, over the same time period.

The Fund’s overweight to lower quality credits and underweight to higher quality credits were the primary positive contributors to returns for the 12-month reporting period. Investor risk appetite was strong due to solid corporate earnings and a perceived end to the Federal Reserve Board’s (the “Fed’s”) tightening campaign. Security selection and an overweight to property & casualty bonds also enhanced results, as the industry outperformed the Lehman Brothers U.S. Credit Index for the period. The primary detractor from the Fund’s performance was an underweight to corporate credit relative to that of the benchmark. An underweight to emerging market corporates also detracted from returns, as their spreads tightened to almost record levels during the period.

  Market Review

The Lehman Brothers U.S. Credit Index returned 5.36% over the trailing twelve-month period ended October 31, 2006, outperforming equal duration Treasuries. Lower quality credits outperformed higher quality credits, with A and BBB rated securities returning 5.36% and 5.59%, respectively. Despite a marked slowdown in the U.S. housing market and an increase in equity shareholder-friendly activity, risk appetite was strong during most of the period. This was due to strong corporate earnings, benign inflation, and the perceived end to the Fed’s raising short-term interest rates. Airlines (+10.3%), consumer services (+9.0%), and tobacco (+8.5%) were the top performing industries, while gaming (-2.5%) was the only industry to post a negative return in the Index for the period.

  Investment Objective

The Fund seeks a high level total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers U.S. Credit Index.

15

PORTFOLIO RESULTS

  Investment Strategies

In seeking to meet the Fund’s investment objective, we invest at least 80% of its net assets in investment grade fixed income securities, primarily corporate securities. The Fund may also invest in U.S. government securities, mortgage-backed securities, asset-backed securities, emerging market securities and non-U.S. dollar securities. In addition, to the extent we find them effective instruments to manage the overall duration of the portfolio, the Fund may employ the use of derivatives, including futures, swaps and Eurodollar futures contracts. The Fund also makes use of currency forwards for the purpose of hedging all non-U.S. dollar exposure back to the base U.S. dollar currency.

We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, or changing interest rates. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views.

  Portfolio Composition

From a credit quality perspective, the Fund held a down-in-quality bias, reflected through its overweight to BBB-rated bonds versus the benchmark. The Fund continued to hold this position on the belief that lower quality credits still have the potential to benefit from balance sheet deleveraging and, in turn, remain less susceptible to equity shareholder-friendly activities (such as stock repurchases and one-time dividend payouts, which adversely impact bond prices). However, we have recently trimmed this position, as valuations are beginning to appear rich. In terms of sector positioning, the Fund had overweights in the insurance and media-cable securities, while holding underweights in consumer products, brokerage, banks, retail, and technology.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Fixed Income Investment Management Team

November 20, 2006

16

FUND BASICS

Investment Grade Credit Fund

as of October 31, 2006

PERFORMANCE REVIEW

November 1, 2005–	Fund Total Return			Lehman Brothers			30-Day
October 31, 2006	(based on NAV)1			U.S. Credit Index2			Standardized Yield3
Class A		4.84	%		5.36	%		4.96	%
Institutional		5.35			5.36			5.58
Separate Account Institutional		5.30			5.36			5.64

1	The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges.
2	The Lehman Brothers U.S. Credit Index is an unmanaged index which is unbundled into pure corporates (industrial, utility, and finance, including both U.S. and Non-U.S.  corporations) and non-corporates (sovereign, supranational, foreign agencies, and foreign local governments). The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
3	The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is then annualized. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS⁴

For the period ended 9/30/06	One Year			Since Inception			Inception Date
Class A		-1.44	%		2.34	%	11/3/03
Institutional		3.57			4.46		11/3/03
Separate Account Institutional		3.62			4.47		11/3/03

⁴  The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares. Because Institutional and Separate Account Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns.

The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

17

FUND BASICS

SECTOR ALLOCATION⁵

Percentage of Net Assets

5	The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities.
6	Please refer to the table below for Top Ten Industry Allocations in the corporate sector.

TOP TEN INDUSTRY ALLOCATIONS

Percentage of Net Assets	as of 10/31/06			as of 10/31/05
Banks		21.0	%		23.1	%
Insurance		14.0			10.8
REIT		13.1			7.9
Financial		8.6			7.3
Electric		8.5			5.3
Communications		6.7			12.7
Media		4.2			—
Natural Gas		3.3			4.1
Energy		2.5			1.9
Technology		1.8			0.9

18

GOLDMAN SACHS GOVERNMENT INCOME FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in Class A Shares (with the maximum sales charge of 4.5%) of the Goldman Sachs Government Income Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Government/Mortgage Index (“Lehman Gov’t/MBS Index”) is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class B, Class C, Institutional and Service Shares will vary from Class A Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.

Government Income Fund’s 10 Year Performance

Performance of a $10,000 Investment, Distributions Reinvested November 1, 1996 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Ten Years		Five Years		One Year
Class A (commenced February 10, 1993)
Excluding sales charges		5.97%		5.69%		3.80%		4.40%
Including sales charges		5.61%		5.20%		2.85%		-0.32%
Class B (commenced May 1, 1996)
Excluding contingent deferred sales charges		5.12%		4.89%		3.02%		3.62%
Including contingent deferred sales charges		5.12%		4.89%		2.61%		-1.53%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		4.75%		n/a		3.03%		3.63%
Including contingent deferred sales charges		4.75%		n/a		3.03%		2.59%
Institutional Class (commenced August 15, 1997)		5.95%		n/a		4.22%		4.86%
Service Class (commenced August 15, 1997)		5.41%		n/a		3.69%		4.27%

19

GOLDMAN SACHS GOVERNMENT INCOME FUND

Schedule of Investments

October 31, 2006

Principal		Interest		Maturity
Amount		Rate		Date		Value
Mortgage-Backed Obligations – 59.2%
Adjustable Rate FHLMC(a) – 2.1%
$	8,229,530		3.496%		09/01/33	$	7,908,438
	5,702,418		4.583		08/01/35		5,574,518
							13,482,956
Adjustable Rate FNMA(a) – 4.4%
	17,160,167		5.370		11/25/28		17,171,291
	242,634		4.486		03/01/33		243,873
	4,283,408		3.851		10/01/33		4,249,605
	6,476,914		4.330		01/01/35		6,308,326
							27,973,095
Adjustable Rate GNMA(a) – 2.3%
	251,798		5.375		06/20/23		253,107
	121,495		4.750		07/20/23		122,392
	125,254		4.750		08/20/23		126,182
	317,859		4.750		09/20/23		320,213
	93,097		5.375		03/20/24		93,648
	860,732		5.375		04/20/24		864,721
	112,847		5.375		05/20/24		113,426
	855,164		5.375		06/20/24		860,650
	459,159		4.750		07/20/24		463,471
	657,685		4.750		08/20/24		664,293
	219,949		4.750		09/20/24		222,025
	240,159		5.125		11/20/24		242,364
	210,139		5.125		12/20/24		211,998
	175,871		5.375		01/20/25		177,328
	92,347		5.375		02/20/25		93,117
	307,073		5.375		05/20/25		309,404
	197,888		4.750		07/20/25		200,051
	136,715		5.375		02/20/26		137,604
	5,755		4.750		07/20/26		5,810
	360,737		5.375		01/20/27		363,818
	126,373		5.375		02/20/27		127,222
	1,039,761		5.375		04/20/27		1,046,180
	114,205		5.375		05/20/27		114,806
	131,934		5.375		06/20/27		132,618
	35,583		5.125		11/20/27		35,839
	153,783		5.125		12/20/27		154,883
	309,731		5.375		01/20/28		311,976
	116,123		5.250		02/20/28		116,400
	116,048		5.375		03/20/28		116,850
	853,776		4.500		07/20/29		855,645
	318,126		4.500		08/20/29		318,824
	137,355		4.500		09/20/29		137,710
	373,869		5.125		10/20/29		377,169
	467,053		5.125		11/20/29		471,355
	128,195		5.125		12/20/29		129,337
	178,577		5.250		01/20/30		179,241
	89,016		5.250		02/20/30		89,346
	317,139		5.250		03/20/30		318,299
	578,142		5.375		04/20/30		582,543
	1,473,227		5.375		05/20/30		1,485,152
	131,968		5.375		06/20/30		132,803
	1,102,617		4.500		07/20/30		1,108,990
	149,600		4.500		09/20/30		150,478
	328,440		4.875		10/20/30		328,896
							14,668,184
Adjustable Rate Non-Agency(a) – 7.3%
Bear Stearns Adjustable Rate Mortgage Trust Series 2003-5, Class 1A1
	116,362		5.969		08/25/33		117,928
Countrywide Alternative Loan Trust Series 2005-59, Class 1A1
	4,881,808		5.660		11/20/35		4,897,938
Countrywide Home Loans Series 2003-37, Class 1A1
	148,854		5.875		08/25/33		148,610
Countrywide Securities Corp. Series 2006-OA19, Class A1
	6,500,000		5.525		12/25/46		6,500,000
CS First Boston Mortgage Securities Corp. Series 2003-AR9, Class 2A2
	505,224		5.100		03/25/33		502,917
Harborview Mortgage Loan Trust Series 2005-10, Class 2A1A
	1,547,678		5.630		11/19/35		1,552,407
Harborview Mortgage Loan Trust Series 2005-16, Class 2A1A
	1,860,976		5.560		01/19/36		1,866,055
Impac CMB Trust Series 2004-8, Class 1A
	1,299,583		5.680		10/25/34		1,307,083
Master Adjustable Rate Mortgages Trust Series 2004-9, Class 2A1
	457,573		5.700		11/25/34		459,938
MLCC Mortgage Investors, Inc. Series 2004-E, Class A2B
	3,115,908		5.780		11/25/29		3,117,854
Sequoia Mortgage Trust Series 2004-09, Class A2
	1,975,951		5.799		10/20/34		1,981,681
Structured Adjustable Rate Mortgage Loan Series 2004-1, Class 3A3
	240,556		4.655		02/25/34		244,594
Structured Adjustable Rate Mortgage Loan Series 2004-5, Class 1A
	2,189,423		4.47		05/25/34		2,189,461
Structured Asset Securities Corp. Series 2003-24A, Class 1A3
	1,182,147		5.000		07/25/33		1,185,824
Structured Asset Securities Corp. Series 2003-34A, Class 3A3
	1,832,474		4.700		11/25/33		1,825,952
Washington Mutual Series 2005-AR11, Class A1A
	4,454,170		5.640		08/25/45		4,467,390
Washington Mutual Series 2006-AR13, Class 1A
	4,370,814		5.544		10/25/46		4,369,278
Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1
	5,923,106		4.977		10/25/35		5,929,933
Wells Fargo Mortgage Backed Securities Trust Series 2006-AR10, Class 5A3
	3,809,179		5.606		07/25/36		3,800,145
							46,464,988

 The accompanying notes are an integral part of these financial statements.

20

GOLDMAN SACHS GOVERNMENT INCOME FUND

Principal		Interest		Maturity
Amount		Rate		Date		Value
Mortgage-Backed Obligations – (continued)
CMBS – 3.4%
Interest Only(a)(b) – 0.4%
Bear Stearns Commercial Mortgage Securities, Inc. Series 2003-T10, Class X2(c)
$	19,672,041		1.42%		03/13/40	$	781,094
CS First Boston Mortgage Securities Corp. Series 2003-C3, Class ASP(c)
	12,736,999		1.765		05/15/38		564,906
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2004-C1, Class X2(c)
	21,988,469		1.17		01/15/38		680,616
Prudential Commercial Mortgage Trust Series 2003-PWR1, Class X2(c)
	23,010,567		1.66		02/11/36		1,057,055
							3,083,671
Sequential Fixed Rate – 3.0%
CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A3
	561,654		6.550		01/17/35		566,773
First Union National Bank Commercial Mortgage Trust Series 2000-C2, Class A2
	9,500,000		7.202		10/15/32		10,104,993
GMAC Commercial Mortgage Securities, Inc. Series 2002-C1, Class A2
	8,000,000		6.278		11/15/39		8,356,382
							19,028,148
TOTAL CMBS							22,111,819
CMO – 6.4%
Interest Only(b) – 0.1%
Countrywide Home Loan Trust Series 2003-42, Class 2X1(a)
	961,853		0.368		10/25/33		4,701
CS First Boston Mortgage Securities Corp. Series 2003-11, Class 1A2
	155,952		5.500		06/25/33		9,912
CS First Boston Mortgage Securities Corp. Series 2003-AR18, Class 2X(a)
	293,502		0.782		07/25/33		1,931
CS First Boston Mortgage Securities Corp. Series 2003-AR20, Class 2X(a)
	331,681		0.605		08/25/33		2,120
FNMA Series 151, Class 2
	29,444		9.500		07/25/22		7,876
FNMA Series 2004-47, Class EI(a)
	3,805,708		0.000		06/25/34		153,774
FNMA Series 2004-62, Class DI(a)
	1,675,304		0.000		07/25/33		68,578
FNMA Series 2004-71, Class DI(a)
	2,828,514		0.000		04/25/34		73,841
Master Adjustable Rate Mortgages Trust Series 2003-2, Class 3AX(a)
	105,047		0.679		08/25/33		890
Master Adjustable Rate Mortgages Trust Series 2003-2, Class 4AX(a)
	37,305		1.158		07/25/33		660
Washington Mutual Series 2003-AR04, Class X1(a)
	2,406,096		1.181		01/25/08		26,923
Washington Mutual Series 2003-AR07, Class X(a)
	1,361,986		0.940		06/25/08		14,424
Washington Mutual Series 2003-AR12, Class X(a)
	5,991,240		0.488		02/25/34		41,955
							407,585
Inverse Floaters(a) – 0.1%
GNMA Series 2001-48, Class SA
	98,564		9.198		10/16/31		111,828
GNMA Series 2001-51, Class SA
	78,557		9.447		10/16/31		90,571
GNMA Series 2001-51, Class SB
	98,581		9.198		10/16/31		111,124
GNMA Series 2001-59, Class SA
	84,624		9.035		11/16/24		96,033
GNMA Series 2002-13, Class SB
	336,391		12.740		02/16/32		420,300
							829,856
PAC – 0.3%
FHLMC Series 2590, Class NV
	2,000,000		5.000		03/15/18		1,973,820
Principal Only(d) – 1.2%
FHLMC Series 235, Class PO
	4,778,298		0.000		02/01/36		3,544,864
FNMA REMIC Trust Series G-35, Class N
	24,871		0.000		10/25/21		20,136
FNMA Series 363, Class 1
	5,144,881		0.000		11/01/35		3,854,501
							7,419,501
Regular Floater CMO(a) – 0.0%
FHLMC Series 1760, Class ZB
	284,527		4.110		05/15/24		276,506
Sequential Fixed Rate – 4.7%
Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4
	10,000,000		5.354		09/10/47		9,967,196
Citigroup/Deutsche Bank Commercial Mortgage Trust(a)
	10,000,000		5.226		07/15/44		10,007,509
FHLMC Series 2329, Class ZA
	5,512,564		6.500		06/15/31		5,684,368
FNMA REMIC Trust Series 1993-78, Class H
	34,802		6.500		06/25/08		34,905
FNMA REMIC Trust Series 1994-42, Class ZQ
	3,241,601		7.000		04/25/24		3,359,960
FNMA Series 2001-53, Class GH
	801,083		8.000		09/25/16		845,327
							29,899,265
TOTAL CMO							40,806,533

The accompanying notes are an integral part of these financial statements. 

21

GOLDMAN SACHS GOVERNMENT INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest		Maturity
Amount		Rate		Date			Value
Mortgage-Backed Obligations – (continued)
FHLMC – 13.0%
$	1,967,808		5.500%		12/01/08		$	1,963,960
	156,164		7.000		06/01/09			157,929
	1,335,342		6.500		12/01/13			1,362,409
	35,195		6.500		02/01/14			35,908
	5,032,578		7.500		11/01/14			5,247,888
	22,294		7.000		02/01/15			22,881
	2,362,233		5.500		07/01/15			2,372,355
	232,488		8.000		07/01/15			244,985
	35,246		7.000		01/01/16			36,153
	88,269		7.000		02/01/16			90,540
	672,913		4.500		05/01/18			651,540
	574,287		5.500		05/01/18			575,892
	158,999		4.500		06/01/18			153,960
	3,099,820		5.500		06/01/18			3,108,487
	647,166		4.500		09/01/18			626,655
	470,504		4.500		10/01/18			455,582
	484,979		4.500		11/01/18			469,593
	12,187,542		4.500		12/01/18			11,801,285
	2,475,156		5.000		12/01/18			2,442,130
	176,528		4.500		01/01/19			170,933
	350,732		4.500		03/01/19			339,580
	14,342,903		4.000		06/01/19			13,582,048
	8,796,067		4.500		06/01/19			8,517,296
	707,572		5.000		06/01/19			697,355
	7,097,215		5.000		11/01/19			7,002,511
	974,329		4.500		02/01/20			943,450
	30,769		6.500		08/01/22			31,437
	1,836,691		4.500		10/01/23			1,754,526
	7,134,567		5.500		11/01/23			7,125,840
	22,961		7.500		03/01/27			23,762
	1,188,731		6.500		07/01/28			1,211,671
	6,405,077		6.500		12/01/29			6,573,738
	19,358		8.000		07/01/30			20,247
	58,551		7.500		12/01/30			60,591
	6,163		7.500		01/01/31			6,377
	491,003		7.000		04/01/31			508,536
	295,530		6.500		07/01/31			303,312
	1,985,869		6.000		05/01/33			2,003,965
								82,697,307
FNMA – 20.3%
	5,005,721		6.255		12/01/08			5,065,818
	775,740		5.500		05/01/09			762,265
	593,730		4.500		03/01/13			581,899
	266,076		4.500		05/01/13			260,668
	347,085		4.000		06/01/13			335,812
	557,518		4.500		06/01/13			546,071
	463,946		4.000		07/01/13			448,762
	578,823		4.500		07/01/13			566,814
	641,395		4.000		08/01/13			620,426
	273,230		4.500		08/01/13			267,505
	943,590		4.000		09/01/13			912,525
	1,140,067		4.500		09/01/13			1,115,970
	1,909,758		4.000		10/01/13			1,846,390
	933,294		4.000		04/01/14			900,592
	4,499,828		5.500		09/01/14			4,519,017
	144,503		7.000		03/01/15			147,584
	46,026		8.000		01/01/16			48,294
	759,971		5.000		11/01/17			750,369
	25,299,851		5.000		12/01/17			24,980,229
	4,607,194		5.000		01/01/18			4,548,989
	5,795,184		5.000		02/01/18			5,721,830
	5,099,173		5.000		03/01/18			5,033,502
	684,167		4.500		04/01/18			663,319
	1,851,419		5.000		04/01/18			1,827,575
	3,113,190		4.500		05/01/18			3,018,325
	674,598		5.000		05/01/18			665,911
	5,721,833		4.500		06/01/18			5,547,480
	3,050,756		5.000		06/01/18			3,011,510
	445,628		4.500		07/01/18			432,050
	146,811		5.000		07/01/18			144,921
	12,224,762		4.000		08/01/18			11,611,784
	531,560		4.500		08/01/18			515,362
	126,679		5.000		08/01/18			125,048
	890,326		4.500		09/01/18			863,196
	1,762,087		5.000		09/01/18			1,739,946
	9,070,226		5.000		10/01/18			8,956,254
	4,303,468		5.000		11/01/18			4,248,045
	31,503		4.500		12/01/18			30,543
	1,794,910		5.500		12/01/18			1,801,736
	3,442,630		5.000		04/01/19			3,398,294
	1,126,876		4.500		06/01/19			1,091,473
	3,709,167		5.000		06/01/19			3,661,399
	6,438,166		4.500		10/01/23			6,118,829
	57,064		6.500		10/01/28			58,637
	59,987		6.500		11/01/28			61,637
	25,129		7.500		07/01/29			25,968
	1,858		7.500		08/01/29			1,920
	12,266		7.500		10/01/29			12,675
	69		7.500		01/01/30			71
	3,787		7.500		02/01/30			3,913
	777,212		7.000		07/01/31			799,205
	14,789		6.500		01/01/34			15,155
	5,000,000		7.000		TBA-15yr	(e)		5,140,625
	4,000,000		7.500		TBA-15yr	(e)		4,146,248
								129,720,385
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $379,463,341)							$	377,925,267
Agency Debentures – 18.4%
FFCB
$	6,838,000		4.100%		07/21/08		$	6,745,325
	10,000,000		4.200		02/23/09			9,854,180
	11,000,000		4.450		06/11/09			10,892,200
	7,000,000		7.375		02/09/10			7,539,112
	9,000,000		4.750		11/06/12			8,925,318

 The accompanying notes are an integral part of these financial statements.

22

GOLDMAN SACHS GOVERNMENT INCOME FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Agency Debentures – (continued)
FHLB
$	1,000,000		5.680	%(f)		12/03/07	$	1,005,963
	15,560,000		4.100			06/13/08		15,363,197
	3,900,000		3.500			02/13/09		3,781,017
	1,500,000		7.625			05/14/10		1,631,130
	8,400,000		4.500			09/14/12		8,215,648
FHLMC
	10,390,000		4.250			06/23/08		10,279,409
	11,000,000		4.480			09/19/08		10,906,265
FNMA
	5,000,000		6.625			09/15/09		5,233,724
	1,200,000		6.000			05/15/11		1,254,101
New Valley Generation II
	3,416,362		5.572			05/01/20		3,444,368
Small Business Administration
	574,939		6.700			12/01/16		592,681
	433,271		7.150			03/01/17		450,725
	329,548		7.500			04/01/17		345,040
	195,788		7.300			05/01/17		203,984
	140,645		6.800			08/01/17		145,564
	358,500		6.300			05/01/18		368,207
	356,024		6.300			06/01/18		365,773
Tennessee Valley Authority
	6,000,000		4.875	(f)		12/15/16		5,993,947
	4,000,000		5.375			04/01/56		4,123,760
TOTAL AGENCY DEBENTURES
(Cost $119,153,443)							$	117,660,638
Asset-Backed Securities – 2.2%
Home Equity(a) – 2.1%
Carrington Mortgage Loan Trust Series 2005-OPT2, Class A1B
$	1,442,444		5.470%			05/25/35	$	1,442,669
Citigroup Mortgage Loan Trust, Inc. Series 2004-OPT1, Class A2
	1,439,086		5.680			10/25/34		1,439,148
Countrywide Home Equity Loan Trust Series 2004-I, Class A
	1,508,844		5.610			02/15/34		1,513,323
Countrywide Home Equity Loan Trust Series 2004-Q, Class 2A
	1,631,291		5.620			12/15/33		1,635,695
Countrywide Home Equity Loan Trust Series 2005-B, Class 2A
	1,759,147		5.500			05/15/35		1,760,796
Master Asset Backed Securities Trust Series 2005-WMC1, Class A4
	4,563,430		5.510			03/25/35		4,565,269
Popular Asset Backed Securities Mortgage Pass-Through Trust Series 2004-5, Class AV2
	1,019,791		5.660			12/25/34		1,020,907
Securitized Asset Backed Receivables LLC Trust Series 2004-OP2, Class A2
	304,878		5.670			08/25/34		305,216
								13,683,023
Manufactured Housing – 0.1%
Mid-State Trust Series 4, Class A
	292,402		8.330			04/01/30		301,735
TOTAL ASSET-BACKED SECURITIES
(Cost $13,973,576)							$	13,984,758
U.S. Treasury Obligations – 2.7%
United States Treasury Inflation Protected Securities
$	1,887,187		1.875%			07/15/13	$	1,827,475
	3,089,632		2.000			01/15/14		3,011,304
	2,812,290		2.000			07/15/14		2,739,345
	5,031,408		1.875			07/15/15		4,845,497
	308,178		2.000			01/15/16		299,390
	4,644,068		2.500			07/15/16		4,710,826
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $17,533,818)							$	17,433,837
Insured Revenue Bonds – 1.2%
New Jersey Economic Development Authority Series A (MBIA)
$	2,000,000		7.425%			02/15/29	$	2,490,080
Sales Tax Asset Receivable Taxable Series B (FSA)
	5,500,000		3.600			10/15/08		5,349,575
TOTAL INSURED REVENUE BONDS
(Cost $7,500,000)								7,839,655
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 83.7%
(Cost $537,624,178)							$	534,844,155

The accompanying notes are an integral part of these financial statements. 

23

GOLDMAN SACHS GOVERNMENT INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Repurchase Agreement(g) – 17.6%
Joint Repurchase Agreement Account II
$	112,200,000		5.316	%		11/01/06	$	112,200,000
Maturity Value: $112,216,568
(Cost $112,200,000)
TOTAL INVESTMENTS – 101.3%
(Cost $649,824,178)								647,044,155
LIABILITIES IN EXCESS OF OTHER
ASSETS – (1.3)%								(8,393,301	)
NET ASSETS – 100.0%							$	638,650,854

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(b)	Represents security with notional principal amount. The actual effective yield of this security is different than the stated interest rate.
(c)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $3,083,671, which represents approximately 0.5% of net assets as of October 31, 2006.
(d)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(e)	TBA (To Be Announced) securities are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. Total market value of TBA securities amounts to $9,286,873 which represents approximately 1.5% of net assets as of October 31, 2006.
(f)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the final maturity dates.
(g)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55.

Investment Abbreviations:
CMBS	—	Commercial Mortgage Backed Securities
CMO	—	Collateralized Mortgage Obligations
FFCB	—	Federal Farm Credit Bank
FHLB	—	Federal Home Loan Bank
FHLMC	—	Federal Home Loan Mortgage Corp.
FNMA	—	Federal National Mortgage Association
FSA	—	Insured by Financial Security Assurance Co.
GNMA	—	Government National Mortgage Association
MBIA	—	Insured by Municipal Bond Investors Assurance
PAC	—	Planned Amortization Class
REMIC	—	Real Estate Mortgage Investment Conduit

 The accompanying notes are an integral part of these financial statements.

24

GOLDMAN SACHS GOVERNMENT INCOME FUND

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At October 31, 2006, the following futures contacts were open:

	Number of
	Contracts			Settlement		Market			Unrealized
Type	Long (Short)			Month		Value			Gain (Loss)
Eurodollars		78			December 2006	$	18,453,825		$	(220,677	)
U.S. Treasury Bonds		731			December 2006		82,351,719			1,544,619
2 Year U.S. Treasury Notes		(88	)		December 2006		(17,987,750	)		30,092
5 Year U.S. Treasury Notes		(555	)		December 2006		(58,587,188	)		(118,046	)
10 Year U.S. Treasury Notes		(724	)		December 2006		(78,350,375	)		(752,735	)
TOTAL						$	(54,119,769	)	$	483,253

INTEREST RATE SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:

					Rates Exchanged
	Notional				Payments		Payments		Upfront
Swap	Amount		Termination		received by		made by		Payments made		Unrealized
Counterparty	(000s)		Date		the Fund		the Fund		by the Fund		Gain (Loss)
Bank of America Securities LLC	$	20,000		12/27/06		3.427%	3 month LIBOR		$	—	$	68,376
Bank of America Securities LLC		30,000		04/07/08		4.339	3 month LIBOR			—		(370,458	)
Bank of America Securities LLC		35,000		09/02/10		4.309	3 month LIBOR			—		(929,881	)
Bank of America Securities LLC		25,000		10/06/10		4.702	3 month LIBOR			—		(296,180	)
Deutsche Bank Securities(a)		20,000		12/20/11		5.600	3 month LIBOR			393,569		103,529
Bank of America Securities LLC (a)		31,000		12/20/11		5.600	3 month LIBOR			572,997		199,263
Deutsche Bank Securities(a)		54,600		12/20/13		5.650	3 month LIBOR			1,271,549		553,772
J.P. Morgan Securities, Inc.(a)		28,000		12/20/13		5.650	3 month LIBOR			527,100		408,688
Bank of America Securities LLC		30,000		12/09/14		4.641	3 month LIBOR			—		(600,069	)
Bank of America Securities LLC		9,000		05/26/15		4.532	3 month LIBOR			—		(272,423	)
J.P. Morgan Securities, Inc.		30,000		03/07/16		3 month LIBOR		5.183%		—		(121,653	)
J.P. Morgan Securities, Inc.(a)		22,000		12/20/16		5.700	3 month LIBOR			571,560		390,850
Bank of America Securities LLC		43,000		11/04/19		3 month LIBOR		4.865		—		845,011
Bank of America Securities LLC		20,000		11/12/19		3 month LIBOR		5.068		—		(14,427	)
Bank of America Securities LLC		13,200		04/09/35		5.265	3 month LIBOR			—		9,249
TOTAL									$	3,336,775	$	(26,353	)

(a) Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to October 31, 2006.

LIBOR — London Interbank Offered Rate

The accompanying notes are an integral part of these financial statements. 

25

GOLDMAN SACHS U.S. MORTGAGES FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 3, 2003 (commencement of operations) in the Separate Account Institutional Shares of the Goldman Sachs U.S. Mortgages Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Securitized Index (the “Lehman Securitized Index”) is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A and Institutional Shares will vary from Separate Account Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/ industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.

U.S. Mortgages Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested November, 3, 2003 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		One Year
Class A (commenced November 3, 2003)
Excluding sales charges		3.92%		5.21%
Including sales charges		0.50%		2.34%
Institutional Class (commenced November 3, 2003)		4.36%		5.56%
Separate Account Institutional (commenced November 3, 2003)		4.42%		5.73%

26

GOLDMAN SACHS U.S. MORTGAGES FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – 104.2%
Adjustable Rate FHLMC(a) – 0.2%
$	984,932		4.263	%		04/01/33	$	971,621
Adjustable Rate FNMA(a) – 3.9%
	40,431		5.134			07/01/22		40,764
	57,669		5.427			07/01/27		57,962
	108,870		5.427			11/01/27		109,422
	18,135		5.427			01/01/31		18,276
	22,800		5.427			06/01/32		23,114
	42,598		5.134			08/01/32		42,848
	4,156,888		4.482			05/01/33		4,101,509
	115,143		5.134			05/01/33		115,660
	802,181		4.847			06/01/33		803,057
	2,570,045		3.851			10/01/33		2,549,763
	943,572		4.389			12/01/33		934,127
	1,721,267		4.602			08/01/34		1,694,526
	6,017,852		4.572			02/01/35		5,918,202
	51,093		5.427			11/01/35		51,461
	233,325		5.427			12/01/37		235,030
	101,182		5.427			01/01/38		101,925
	78,920		5.427			11/01/40		79,506
								16,877,152
Adjustable Rate GNMA(a) – 1.7%
	108,731		5.375			06/20/23		109,296
	53,998		4.750			07/20/23		54,396
	55,669		4.750			08/20/23		56,081
	141,271		4.750			09/20/23		142,317
	40,201		5.375			03/20/24		40,439
	371,679		5.375			04/20/24		373,403
	48,730		5.375			05/20/24		48,980
	369,276		5.375			06/20/24		371,644
	204,071		4.750			07/20/24		205,987
	292,305		4.750			08/20/24		295,242
	97,755		4.750			09/20/24		98,678
	103,705		5.125			11/20/24		104,657
	90,742		5.125			12/20/24		91,545
	75,944		5.375			01/20/25		76,573
	39,877		5.375			02/20/25		40,209
	132,600		5.375			05/20/25		133,606
	87,950		4.750			07/20/25		88,912
	59,036		5.375			02/20/26		59,420
	2,558		4.750			07/20/26		2,582
	155,772		5.375			01/20/27		157,103
	54,570		5.375			02/20/27		54,937
	448,987		5.375			04/20/27		451,759
	49,316		5.375			05/20/27		49,575
	56,972		5.375			06/20/27		57,267
	15,015		5.125			11/20/27		15,122
	66,406		5.125			12/20/27		66,881
	133,748		5.375			01/20/28		134,717
	51,610		5.250			02/20/28		51,733
	50,112		5.375			03/20/28		50,458
	379,456		4.500			07/20/29		380,287
	141,389		4.500			08/20/29		141,700
	61,047		4.500			09/20/29		61,204
	161,443		5.125			10/20/29		162,869
	201,682		5.125			11/20/29		203,540
	55,357		5.125			12/20/29		55,850
	79,367		5.250			01/20/30		79,663
	39,563		5.250			02/20/30		39,709
	140,951		5.250			03/20/30		141,466
	249,653		5.375			04/20/30		251,552
	636,167		5.375			05/20/30		641,317
	56,986		5.375			06/20/30		57,347
	490,052		4.500			07/20/30		492,884
	66,489		4.500			09/20/30		66,879
	141,826		4.875			10/20/30		142,023
	671,049		4.500			12/20/34		668,698
								7,070,507
Adjustable Rate Non-Agency(a) – 18.5%
American Home Mortgage Investment Trust Series 2004-3, Class 1A
	166,911		5.690			10/25/34		167,272
Bear Stearns Alt-A Trust Series 2004-3, Class A1
	230,880		5.640			04/25/34		231,043
Bear Stearns Mortgage Funding Trust Series 2006-AR2, Class 1A1
	4,494,111		5.520			09/25/36		4,494,111
Countrywide Alternative Loan Trust Series 2005-38, Class A3
	3,266,021		5.670			09/25/35		3,278,566
Countrywide Alternative Loan Trust Series 2005-51, Class 1A1
	2,310,424		5.640			11/20/35		2,320,973
Countrywide Alternative Loan Trust Series 2005-59, Class 1A1
	2,219,004		5.660			11/20/35		2,226,336
Countrywide Securities Corp. Series 2006-OA19, Class A1
	4,250,000		5.525			12/25/46		4,250,000
Harborside Mortgage Loan Trust Capital Series 2006-12, Class 2A2A
	5,000,000		5.500			12/19/45		5,000,000
Harborview Mortgage Loan Trust Series 2005-15, Class 2A11
	2,071,192		5.590			10/20/45		2,077,280
Harborview Mortgage Loan Trust Series 2005-16, Class 2A1A
	1,240,651		5.560			01/19/36		1,244,037
Impac CMB Trust Series 2004-6, Class 1A2
	878,335		5.710			10/25/34		879,887
Impac CMB Trust Series 2004-8, Class 1A
	487,344		5.680			10/25/34		490,156
Impac CMB Trust Series 2005-6, Class 1A1
	3,624,215		5.570			10/25/35		3,626,820
Impac Secured Assets Corp. Series 2004-3, Class 1A4
	387,409		5.720			11/25/34		388,418
Impac Secured Assets Corp. Series 2005-2, Class A1W
	4,170,415		5.570			03/25/36		4,175,546
Lehman XS Trust Series 2005-5N, Class 3A1A
	2,732,411		5.620			11/25/35		2,734,745
Lehman XS Trust Series 2006-2N, Class 1A1
	3,455,355		5.580			02/25/46		3,462,019
Mortgage IT Trust Series 2005-5, Class A1
	1,726,502		5.590			12/25/35		1,728,223
Sequoia Mortgage Trust Series 2004-09, Class A2
	1,215,970		5.799			10/20/34		1,219,496

The accompanying notes are an integral part of these financial statements. 

27

GOLDMAN SACHS U.S. MORTGAGES FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
Adjustable Rate Non-Agency(a) – (continued)
Structured Adjustable Rate Mortgage Loan Series 2004-6, Class 3A2
$	1,529,398		4.725	%		06/25/34	$	1,519,250
Structured Adjustable Rate Mortgage Loan Series 2004-19, Class 2A2
	385,836		6.827			01/25/35		390,911
Structured Asset Mortgage Investments, Inc. Series 2006-AR8, Class AR8
	3,500,000		5.520			03/25/36		3,500,000
Structured Asset Securities Corp. Series 2003-34A, Class 3A3
	91,624		4.700			11/25/33		91,298
Structured Asset Securities Corp. Series 2003-37A, Class 3A7
	343,877		4.520			12/25/33		341,479
UBS Warburg LLC Series 2006-0A2, Class 4A1
	2,879,287		5.640			11/25/46		2,877,938
Washington Mutual Series 2005-AR11, Class A1A
	2,545,240		5.640			08/25/45		2,552,794
Washington Mutual Series 2005-AR13, Class A1A1
	3,527,141		5.610			10/25/45		3,546,704
Washington Mutual Series 2006-AR13, Class 1A
	2,921,017		5.544			10/25/46		2,919,990
Washington Mutual Series 2006-AR17, Class 1A
	2,000,000		5.504			11/25/46		2,000,000
Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1
	2,961,553		4.977			10/25/35		2,964,967
Wells Fargo Mortgage Backed Securities Trust Series 2006-AR2, Class 2A3
	6,488,742		5.092			03/25/36		6,450,992
WMALT Mortgage Pass-Through Certificates Series 2006-AR7, Class A1A
	2,841,328		5.584			09/25/46		2,845,212
WMALT Mortgage Pass-Through Certificates Series 2006-AR9, Class 2A
	4,000,000		5.504			11/25/46		4,000,000
								79,996,463
CMBS – 9.8%
Interest Only(a)(b)(c) – 0.2%
Bear Stearns Commercial Mortgage Securities, Inc. Series 2003-T10, Class X2
	5,559,490		1.246			03/13/40		220,744
JP Morgan Chase Commercial Mortgage Securities Corp. Series 2004-C1, Class X2
	5,774,749		0.993			01/15/38		178,748
Prudential Commercial Mortgage Trust Series 2003-PWR1, Class X2
	6,078,263		1.481			02/11/36		279,222
								678,714
Sequential Fixed Rate – 9.6%
Banc of America Commercial Mortgage, Inc. Series 2005-5, Class A4
	4,000,000		5.115			10/10/45		3,951,388
Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4
	5,000,000		5.182			09/10/47		4,983,598
Banc of America Commercial Mortgage, Inc. Series 2006-4 Class A4
	2,000,000		5.634			07/10/46		2,049,548
Bear Stearns Commercial Mortgage Securities, Inc. Series 2005-PW10, Class A4
	5,000,000		5.405			12/11/40		5,040,281
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-C02, Class A4
	3,500,000		5.362			01/15/46		3,531,692
CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A3
	313,590		6.550			01/17/35		316,448
GE Capital Commercial Mortgage Corp. Series 2005-C4, Class A4
	5,000,000		5.333			11/10/45		5,037,887
LB-UBS Commercial Mortgage Trust Series 2002-C1, Class A2
	313,797		5.969			03/15/26		314,520
LB-UBS Commercial Mortgage Trust Series 2005-C5, Class A4
	2,000,000		4.954			09/15/30		1,957,071
LB-UBS Commercial Mortgage Trust Series 2005-C7, Class A4
	2,000,000		5.197			11/15/30		1,989,874
LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4
	3,500,000		5.156			02/15/31		3,458,165
Morgan Stanley Capital I Series 2006-T21, Class A4
	5,000,000		5.162			10/12/52		4,955,370
Wachovia Bank Commercial Mortgage Trust Series 2005-C21, Class A4
	4,000,000		5.196			10/15/44		3,992,846
								41,578,688
TOTAL CMBS								42,257,402
CMO – 4.6%
Interest Only(b) – 0.1%
ABN AMRO Mortgage Corp. Series 2003-5, Class A2
	64,516		5.500			04/25/33		6,446
ABN AMRO Mortgage Corp. Series 2003-8, Class A2
	423,512		5.500			06/25/33		45,823
Countrywide Home Loan Trust Series 2003-42, Class 2X1(a)
	627,295		0.368			10/25/33		3,066
CS First Boston Mortgage Securities Corp. Series 2002-AR31, Class 5X(a)
	317,037		0.000			11/25/32		190
CS First Boston Mortgage Securities Corp. Series 2003-08, Class 3A2
	9,142		5.500			04/25/33		498
CS First Boston Mortgage Securities Corp. Series 2003-10, Class 3A13
	7,838		5.750			05/25/33		307

 The accompanying notes are an integral part of these financial statements.

28

GOLDMAN SACHS U.S. MORTGAGES FUND

Principal		Interest			Maturity
Amount		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
Interest Only(b) – (continued)
CS First Boston Mortgage Securities Corp. Series 2003-11, Class 1A2
$	31,190		5.500	%		06/25/33	$	1,982
CS First Boston Mortgage Securities Corp. Series 2003-19, Class 1A2
	489,606		5.250			07/25/33		51,847
FHLMC Series 2575, Class IB
	281,178		5.500			08/15/30		27,902
FNMA Series 2004-47, Class EI(a)
	1,709,811		0.000			06/25/34		69,087
FNMA Series 2004-62, Class DI(a)
	744,580		0.000			07/25/33		30,479
FNMA Series E, Class E2
	1,298		506.000			09/01/10		10,002
Master Adjustable Rate Mortgages Trust Series 2003-2, Class 3AX(a)
	70,031		0.679			08/25/33		594
Master Adjustable Rate Mortgages Trust Series 2003-2, Class 4AX(a)
	18,653		1.158			07/25/33		330
Washington Mutual Series 2003-AR04, Class X1(a)
	401,016		1.181			01/25/08		4,487
Washington Mutual Series 2003-AR12, Class X(a)
	1,012,034		0.488			02/25/34		7,087
Washington Mutual Series 2003-S3, Class 1A41
	341,172		5.500			06/25/33		35,032
								295,159
Inverse Floaters(a) – 0.0%
FHLMC Series 1544, Class M
	11,092		11.206			07/15/08		11,409
FNMA Series 1993-072, Class SA
	2,481		9.123			05/25/08		2,548
FNMA Series 1993-093, Class SA
	5,271		11.994			05/25/08		5,495
FNMA Series 1993-095, Class SE
	6,553		12.303			06/25/08		6,867
FNMA Series 1993-135, Class S
	15,195		6.500			07/25/08		15,557
GNMA Series 2001-48, Class SA
	32,855		9.165			10/16/31		37,276
GNMA Series 2001-51, Class SB
	32,860		9.197			10/16/31		37,041
GNMA Series 2001-59, Class SA
	48,580		9.035			11/16/24		55,130
								171,323
PAC – 1.1%
FNMA Series 1993-63, Class PK
	26,515		6.500			05/25/08		26,579
FNMA Series 2003-88, Class TH
	5,000,000		4.500			09/25/18		4,760,476
								4,787,055
Principal Only(d) – 0.8%
FHLMC Series 235, Class PO
	2,198,017		0.000			02/01/36		1,630,638
FNMA Series 363, Class 1
	2,296,822		0.000			11/01/35		1,720,759
								3,351,397
Sequential Fixed Rate – 2.6%
CS First Boston Mortgage Securities Corp. Series 2002-5, Class PPA1
	211,614		6.500			03/25/32		210,726
FHLMC Series 1703, Class GC
	2,500,000		6.500			04/15/09		2,510,885
FHLMC Series 1823, Class A
	1,282,867		6.500			08/15/23		1,290,491
FHLMC Series 2042, Class N
	967,761		6.500			03/15/28		989,660
FHLMC Series 2458, Class OD
	128,878		6.000			04/15/16		129,001
FHLMC Series 2590, Class NV
	1,000,000		5.000			03/15/18		986,910
FNMA REMIC Trust Series 1993-101, Class PJ
	305,403		7.000			06/25/08		306,812
FNMA REMIC Trust Series 2002-24, Class AE
	434,262		6.000			04/25/16		432,993
FNMA Series 1993-76, Class PJ
	75,779		6.000			06/25/08		75,771
FNMA Series 1994-42, Class K
	3,000,000		6.500			04/25/24		3,042,282
FNMA Series 1994-75, Class J
	20,859		7.000			10/25/23		20,795
FNMA Series 2000-16, Class ZG
	1,311,994		8.500			06/25/30		1,403,150
								11,399,476
TOTAL CMO								20,004,410
FHLMC – 27.2%
	307,624		5.000			12/01/12		305,919
	28,896		7.000			04/01/15		29,537
	26,532		7.000			02/01/16		27,215
	132,573		6.000			03/01/16		134,078
	448,608		4.500			05/01/18		434,359
	106,000		4.500			06/01/18		102,640
	18,508		4.500			08/01/18		17,922
	431,444		4.500			09/01/18		417,770
	313,669		4.500			10/01/18		303,721
	807,183		4.500			11/01/18		781,592
	9,689,795		4.500			12/01/18		9,382,699
	8,213,490		5.000			12/01/18		8,103,898
	523,299		4.500			01/01/19		506,714
	819,179		5.000			01/01/19		808,248
	21,170		4.500			02/01/19		20,497
	1,002,166		5.000			02/01/19		988,022
	2,269,605		4.500			03/01/19		2,195,034
	776,138		4.000			04/01/19		735,374
	44,884		4.500			04/01/19		43,403

The accompanying notes are an integral part of these financial statements. 

29

GOLDMAN SACHS U.S. MORTGAGES FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date			Value
Mortgage-Backed Obligations – (continued)
FHLMC – (continued)
$	121,555		5.000	%		04/01/19		$	119,800
	4,870,370		4.500			06/01/19			4,716,015
	707,572		5.000			06/01/19			697,355
	42,377		4.500			11/01/19			40,979
	2,013,631		4.500			02/01/20			1,949,813
	25,091,307		4.500			08/01/20			24,272,008
	5,700,113		5.500			05/01/21			5,703,795
	3,672,772		4.500			08/01/23			3,508,468
	3,567,284		5.500			11/01/23			3,562,920
	62,412		7.500			03/01/27			64,589
	3,071,818		6.500			01/01/29			3,156,753
	1,087,330		6.500			04/01/29			1,116,661
	542,803		6.500			12/01/29			557,096
	491,003		7.000			04/01/31			508,536
	3,600,300		7.000			09/01/31			3,729,455
	1,705,745		7.000			04/01/32			1,756,482
	3,075,660		7.000			05/01/32			3,167,146
	1,077,080		6.000			05/01/33			1,086,894
	495,867		6.500			08/01/33			507,847
	25,000,000		5.500			TBA-15yr	(e)		25,007,800
	7,000,000		6.000			TBA-15yr	(e)		7,098,434
									117,667,488
FNMA – 38.3%
	115,695		4.000			06/01/13			111,937
	154,649		4.000			07/01/13			149,587
	213,799		4.000			08/01/13			206,809
	403,370		4.000			09/01/13			390,091
	835,663		4.000			10/01/13			807,934
	622,196		4.000			04/01/14			600,395
	9,551		5.500			04/01/16			9,591
	10,675		5.500			08/01/16			10,720
	122,238		5.500			11/01/16			122,762
	103,871		5.500			12/01/16			104,317
	145,938		5.500			01/01/17			146,564
	16,846,282		5.000			10/01/17			16,633,457
	4,243,606		5.000			11/01/17			4,189,995
	13,166,436		5.000			12/01/17			13,000,099
	289,565		4.500			01/01/18			280,721
	5,927,228		5.000			01/01/18			5,852,347
	3,896,540		5.000			02/01/18			3,846,895
	7,358		6.000			02/01/18			7,434
	566,878		4.500			03/01/18			549,604
	10,570,418		5.000			03/01/18			10,434,763
	785,969		4.500			04/01/18			762,020
	6,078,091		5.000			04/01/18			5,999,814
	2,880,677		4.500			05/01/18			2,792,900
	5,652,626		5.000			05/01/18			5,580,778
	92,263		6.000			05/01/18			93,205
	3,623,086		4.500			06/01/18			3,512,686
	7,075,756		5.000			06/01/18			6,985,190
	617,427		4.500			07/01/18			598,615
	877,381		5.000			07/01/18			866,089
	653,582		4.000			08/01/18			620,810
	1,429,594		4.500			08/01/18			1,386,032
	425,106		5.000			08/01/18			419,632
	141,587		5.000			09/01/18			139,763
	2,177,787		4.500			10/01/18			2,111,428
	1,369,888		5.000			10/01/18			1,352,246
	9,056,557		5.000			11/01/18			8,940,101
	491,285		6.000			11/01/18			496,300
	852,817		7.000			11/01/18			877,209
	694,067		4.000			12/01/18			659,265
	63,007		4.500			12/01/18			61,087
	5,987,994		5.000			12/01/18			5,910,877
	1,794,910		5.500			12/01/18			1,801,736
	896,571		6.000			12/01/18			905,725
	287,590		5.000			01/01/19			283,886
	733,141		6.000			01/01/19			740,626
	254,865		4.500			02/01/19			246,820
	413,683		5.000			02/01/19			408,191
	2,373,483		4.500			04/01/19			2,298,565
	5,661,431		5.000			04/01/19			5,588,520
	257,814		6.000			04/01/19			261,198
	327,273		4.000			05/01/19			310,469
	696,678		4.500			05/01/19			674,687
	52,657		6.000			05/01/19			53,562
	788,603		4.500			06/01/19			764,043
	111,427		5.500			07/01/19			111,672
	284,693		5.500			08/01/19			285,319
	133,808		5.500			09/01/19			134,102
	1,613,170		4.000			10/01/19			1,530,341
	289,974		5.500			10/01/19			290,610
	86,653		5.500			11/01/19			86,843
	32,335		5.000			12/01/19			32,406
	30,303		5.500			12/01/19			30,369
	183,426		7.000			09/01/21			190,070
	565,212		7.000			06/01/22			585,346
	259,609		7.000			07/01/22			268,857
	526,975		5.500			08/01/23			525,850
	12,876,332		4.500			10/01/23			12,237,658
	81,559		6.500			01/01/29			83,727
	138,909		6.500			04/01/29			142,522
	117,071		6.500			05/01/29			120,116
	1,077,188		6.500			06/01/29			1,105,206
	605,182		6.500			07/01/29			620,924
	68,871		6.500			09/01/29			70,662
	158,064		7.000			08/01/31			162,570
	8,987		6.500			08/01/32			9,204
	341,847		6.500			11/01/32			350,092
	281,552		6.000			01/01/33			284,002
	5,467		6.000			02/01/33			5,515
	155,282		6.000			06/01/33			156,535
	51,911		6.000			07/01/33			52,330
	137,886		6.000			09/01/33			138,998
	37,742		6.000			10/01/33			38,046
	967,110		5.500			02/01/34			957,200
	280,719		5.500			07/01/34			277,842
	79,471		6.000			11/01/34			80,039
	2,228,348		6.000			12/01/34			2,244,259
	3,000,000		5.500			TBA-15yr	(e)		3,002,814

 The accompanying notes are an integral part of these financial statements.

30

GOLDMAN SACHS U.S. MORTGAGES FUND

Principal		Interest			Maturity
Amount		Rate			Date			Value
Mortgage-Backed Obligations – (continued)
FNMA – (continued)
$	13,000,000		7.000	%		TBA-15yr	(e)	$	13,365,625
	4,000,000		7.500			TBA-15yr	(e)		4,146,248
									165,684,016
GNMA – 0.0%
	1,089		6.000			12/15/23			1,104
	35,280		6.000			03/15/26			35,865
	41,969		6.000			04/15/26			42,664
									79,633
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $451,941,574)								$	450,608,692
Agency Debenture – 0.6%
Tennessee Valley Authority
$	2,800,000		5.375	%		04/01/56		$	2,886,632
(Cost $2,791,639)
Asset-Backed Securities(a) – 3.4%
Home Equity – 3.4%
Carrington Mortgage Loan Trust Series 2005-OPT2, Class A1B
$	961,629		5.470	%		05/25/35		$	961,779
ContiMortgage Home Equity Loan Trust Series 1999-1, Class A7
	66,561		6.970			12/25/13			66,437
Countrywide Home Equity Loan Trust Series 2002-E, Class A
	112,691		5.580			10/15/28			113,048
Countrywide Home Equity Loan Trust Series 2003-A, Class A
	1,488,605		5.670			03/15/29			1,492,191
Countrywide Home Equity Loan Trust Series 2003-D, Class A
	456,653		5.580			06/15/29			457,640
Countrywide Home Equity Loan Trust Series 2004-G, Class 2A
	261,453		5.540			12/15/29			262,026
Countrywide Home Equity Loan Trust Series 2004-I, Class A
	1,508,843		5.610			02/15/34			1,513,321
Countrywide Home Equity Loan Trust Series 2004-J, Class 2A
	185,427		5.610			12/15/33			185,833
Countrywide Home Equity Loan Trust Series 2004-O, Class 1A
	605,635		5.600			02/15/34			606,916
Countrywide Home Equity Loan Trust Series 2004-Q, Class 2A
	543,764		5.620			12/15/33			545,232
Countrywide Home Equity Loan Trust Series 2004-S, Class 1A
	276,033		5.560			02/15/30			276,395
Countrywide Home Equity Loan Trust Series 2005-A, Class 2A
	998,091		5.560			04/15/35			1,000,274
Master Asset Backed Securities Trust Series 2005-WMC1, Class A4
	2,281,715		5.510			03/25/35			2,282,635
Morgan Stanley ABS Capital I Series 2004-HE1, Class A4
	1,129,867		5.690			01/25/34			1,132,304
Ownit Mortgage Loan Asset-Backed Certificates Series 2005-4, Class A2A1
	2,650,842		5.440			08/25/36			2,651,256
Popular ABS Mortgage Pass-Through Trust Series 2004-5, Class AV2
	268,366		5.660			12/25/34			268,660
Residential Asset Mortgage Products, Inc. Series 2004-RZ1, Class AII
	414,592		5.560			03/25/34			415,091
Residential Funding Mortgage Securities, Inc. Series 2004-HS2, Class AII
	464,217		5.550			06/25/29			464,829
									14,695,867
TOTAL ASSET-BACKED SECURITIES
(Cost $14,678,190)								$	14,695,867
U.S. Treasury Obligations – 3.1%
United States Treasury Bonds
$	1,000,000		4.500	%		02/15/36		$	965,156
United States Treasury Inflation Protected Securities
	1,332,132		1.875			07/15/13			1,289,982
	1,434,472		2.000			01/15/14			1,398,105
	2,055,135		2.000			07/15/14			2,001,829
	3,039,809		1.875			07/15/15			2,927,488
	1,027,260		2.000			01/15/16			997,967
	2,120,118		2.500			07/15/16			2,150,595
United States Treasury Notes
	1,400,000		5.125			05/15/16			1,455,343
United States Treasury Principal-Only STRIPS(d)
	200,000		0.000			11/15/21			96,714
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $13,283,336)								$	13,283,179
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT — 111.3%
(Cost $482,694,739)								$	481,474,370

The accompanying notes are an integral part of these financial statements. 

31

GOLDMAN SACHS U.S. MORTGAGES FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount		Rate			Date		Value
Repurchase Agreement(f) – 3.4%
Joint Repurchase Agreement Account II
$	14,600,000		5.316	%		11/01/06	$	14,600,000
Maturity Value: $14,602,156
(Cost $14,600,000)
TOTAL INVESTMENTS – 114.7%
(Cost $497,294,739)							$	496,074,370
LIABILITIES IN EXCESS OF OTHER ASSETS – (14.7)%								(63,669,132	)
NET ASSETS – 100.0%							$	432,405,238

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

(a)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(b)	Represents security with notional principal amount. The actual effective yield of this security is different than the stated interest rate due to the amortization of related premiums or accretion of discounts.
(c)	Securities are exempt from registration under rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounted to $678,714, which represents approximately 0.2% of net assets as of October 31, 2006.
(d)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(e)	TBA (To Be Announced) securities are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. Total market value of TBA securities amounts to $52,620,921 which represents approximately 12.2% of net assets as of October 31, 2006.
(f)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55.

Investment Abbreviations:
CMBS	—	Commercial Mortgage Backed Securities
CMO	—	Collateralized Mortgage Obligations
FHLMC	—	Federal Home Loan Mortgage Corp.
FNMA	—	Federal National Mortgage Association
GNMA	—	Government National Mortgage Association
PAC	—	Planned Amortization Class
REMIC	—	Real Estate Mortgage Investment Conduit
STRIPS	—	Separate Trading of Registered Interest and Principal of Securities

 The accompanying notes are an integral part of these financial statements.

32

GOLDMAN SACHS U.S. MORTGAGES FUND

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:

	Number of
	Contracts			Settlement	Market			Unrealized
Type	Long (Short)			Month	Value			Gain (Loss)
Eurodollars		43		December 2006	$	10,173,263		$	1,668
Eurodollars		25		March 2007		5,923,750			2,490
Eurodollars		45		June 2007		10,681,875			8,297
Eurodollars		35		September 2007		8,323,437			11,481
Eurodollars		35		December 2007		8,333,938			16,293
Eurodollars		36		March 2008		8,575,650			18,778
Eurodollars		22		June 2008		5,239,575			10,925
U.S. Treasury Bonds		41		December 2006		4,618,906			13,895
2 Year U.S. Treasury Notes		(97	)	December 2006		(19,827,406	)		(3,159	)
5 Year U.S. Treasury Notes		(303	)	December 2006		(31,985,438	)		(123,889	)
10 Year U.S. Treasury Notes		(297	)	December 2006		(32,140,969	)		(297,709	)
TOTAL					$	(22,083,419	)	$	(340,930	)

SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:

INTEREST RATE SWAP CONTRACTS

				Rates Exchanged
						Upfront
	Notional			Payments	Payments	Payments
Swap	Amount		Termination	received by	made by	made by the		Unrealized
Counterparty	(000s)		Date	the Fund	the Fund	Fund		Gain (Loss)
Banc of America Securities LLC	$	12,000	09/02/10	4.309%	3 month LIBOR	$	—	$	(315,766	)
Banc of America Securities LLC		15,000	10/06/10	4.703	3 month LIBOR		—		(178,961	)
Banc of America Securities LLC(a)		16,500	12/20/11	5.600	3 month LIBOR		304,982		106,059
Banc of America Securities LLC		11,000	05/23/12	4.374	3 month LIBOR		—		(257,305	)
Deutsche Bank Securities(a)		30,900	12/20/13	5.650	3 month LIBOR		687,137		345,809
J.P. Morgan Securities, Inc.		10,000	03/07/16	3 month LIBOR	5.183%		—		(41,489	)
TOTAL						$	992,119	$	(341,653	)

(a) Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to October 31, 2006.

LIBOR — London Interbank Offered Rate

The accompanying notes are an integral part of these financial statements. 

33

GOLDMAN SACHS U.S. MORTGAGES FUND

Schedule of Investments (continued)

October 31, 2006

ADDITIONAL INVESTMENT INFORMATION (continued)

TOTAL RETURN INDEX SWAP CONTRACTS

						Rates Exchanged
	Notional					Payments	Payments
Swap	Amount		Termination		Reference	received by	made by	Unrealized
Counterparty	(000s)		Date		Underlying	the Fund	the Fund	Gain
Banc of America Securities LLC	$	7,500		1/31/07	Banc of America Securities LLC CMBS AAA 10 Yr Index	Any positive monthly duration adjusted return on the underlying index	Any negative monthly duration adjusted return on the underlying index	$	4,067
Banc of America Securities LLC		5,500		1/31/07	Banc of America Securities LLC CMBS AAA 10 Yr Index	Any positive monthly duration adjusted return on the underlying index	Any negative monthly duration adjusted return on the underlying index		3,829
TOTAL								$	7,896

 The accompanying notes are an integral part of these financial statements.

34

GOLDMAN SACHS CORE FIXED INCOME FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in the Institutional Shares of the Goldman Sachs Core Fixed Income Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Aggregate Bond Index (“Lehman Aggregate Bond Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C, and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.

Core Fixed Income Fund’s 10 Year Performance

Performance of a $10,000 Investment, Distributions Reinvested November 1, 1996 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		Ten Years		Five Years		One Year
Class A (commenced May 1, 1997)
Excluding sales charges		6.02%		n/a		4.42%		4.21%
Including sales charges		5.50%		n/a		3.47%		-0.52%
Class B (commenced May 1, 1997)
Excluding contingent deferred sales charges		5.24%		n/a		3.62%		3.42%
Including contingent deferred sales charges		5.24%		n/a		3.21%		-1.75%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		4.99%		n/a		3.64%		3.52%
Including contingent deferred sales charges		4.99%		n/a		3.64%		2.49%
Institutional Class (commenced January 5, 1994)		6.31%		6.30%		4.83%		4.69%
Service Class (commenced March 13, 1996)		5.89%		5.77%		4.31%		4.06%

35

GOLDMAN SACHS CORE FIXED INCOME FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – 15.7%
Automotive – 0.1%
General Motors Acceptance Corp.
$	2,900,000		6.875	%		09/15/11	$	2,922,649
Banks – 3.1%
ANZ Capital Trust I(a)
	3,500,000		5.360			12/29/49		3,411,397
Associates Corp. NA
	2,000,000		8.550			07/15/09		2,167,968
Astoria Financial Corp.
	4,600,000		5.750			10/15/12		4,632,855
Citigroup, Inc.
	2,000,000		7.250			10/15/11		2,166,578
Commonwealth Bank of Australia(a)(b)
	2,875,000		6.024			03/29/49		2,882,242
Fleet Boston Financial Corp.
	450,000		7.375			12/01/09		478,197
Greater Bay Bancorp Series D
	2,900,000		5.125			04/15/10		2,870,951
GreenPoint Financial Corp.
	2,400,000		3.200			06/06/08		2,324,384
HBOS Capital Funding LP(a)(b)
	4,325,000		6.071			06/27/49		4,407,495
J.P. Morgan Chase & Co.
	4,065,000		5.250			05/30/07		4,062,760
KeyBank NA
	5,500,000		5.000			07/17/07		5,477,010
Mizuho JGB Investment LLC(a)(b)
	1,600,000		9.870			06/30/49		1,709,237
MUFG Capital Finance 1 Ltd.(b)
	5,250,000		6.346			07/25/49		5,301,943
National Australia Bank Ltd.
	2,000,000		8.600			05/19/10		2,218,674
Popular North America, Inc.
	4,125,000		5.200			12/12/07		4,109,152
Regions Bank
	2,530,000		2.900			12/15/06		2,522,671
Regions Financial Corp.
	4,500,000		7.000			03/01/11		4,803,649
Resona Bank Ltd.(a)
	3,500,000		5.850	(b)		04/15/49		3,428,407
	EUR2,675,000		4.125			09/27/49		3,322,696
Sovereign Bank
$	1,000,000		4.000			02/01/08		983,325
	375,000		5.125			03/15/13		368,211
	2,550,000		4.375	(b)		08/01/13		2,499,382
Union Planters Corp.
	150,000		7.750			03/01/11		164,249
Wachovia Bank NA
	5,000,000		7.875			02/15/10		5,408,910
Wells Fargo Bank NA
	1,000,000		6.450			02/01/11		1,049,087
								72,771,430
Brokerage – 0.6%
Bear Stearns Co., Inc.
	6,330,000		5.700			01/15/07		6,332,025
Lehman Brothers Holdings, Inc.
	4,500,000		6.625			01/18/12		4,775,079
Morgan Stanley
	3,000,000		5.050			01/21/11		2,983,626
								14,090,730
Captive Financial – 0.1%
Nelnet, Inc.
	2,580,000		5.125			06/01/10		2,526,146
Diversified Manufacturing(a) – 0.1%
Tyco International Group Participation Certificate
	3,525,000		4.436			06/15/07		3,500,579
Electric – 1.2%
Calenergy, Inc.
	1,500,000		7.630			10/15/07		1,531,155
	2,210,000		7.520			09/15/08		2,298,196
CenterPoint Energy, Inc. Series B
	550,000		7.250			09/01/10		582,020
FirstEnergy Corp. Series C
	4,050,000		7.375			11/15/31		4,726,104
MidAmerican Energy Holdings Co.
	6,125,000		6.125			04/01/36		6,298,564
Nisource Finance Corp.(b)
	5,000,000		5.968			11/23/09		4,999,545
Progress Energy, Inc.
	50,000		5.625			01/15/16		50,127
	3,000,000		7.750			03/01/31		3,653,658
TXU Corp. Series O
	5,250,000		4.800			11/15/09		5,131,067
								29,270,436
Entertainment – 0.1%
Time Warner Entertainment Co.
	2,175,000		8.375			03/15/23		2,529,003
Environmental – 0.1%
Waste Management, Inc.
	2,000,000		7.375			08/01/10		2,137,366
Gaming – 0.3%
Caesars Entertainment, Inc.
	1,745,000		7.500			09/01/09		1,810,124
Harrahs Operating Co., Inc.
	2,475,000		5.500			07/01/10		2,397,748
MGM Mirage, Inc.
	850,000		8.500			09/15/10		898,875
Park Place Entertainment Corp.
	950,000		8.500			11/15/06		950,774
								6,057,521
Integrated – 0.5%
Hess Corp.
	5,500,000		7.125			03/15/33		6,125,113
Kerr-McGee Corp.
	4,575,000		6.950			07/01/24		4,960,252
								11,085,365

 The accompanying notes are an integral part of these financial statements.

36

GOLDMAN SACHS CORE FIXED INCOME FUND

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – (continued)
Life Insurance – 0.5%
Americo Life, Inc.(a)
$	1,600,000		7.875	%		05/01/13	$	1,613,440
AmerUs Group Co.
	4,025,000		5.950			08/15/15		4,125,815
Hartford Life, Inc.
	200,000		7.100			06/15/07		202,018
Phoenix Life Insurance Co.(a)
	3,200,000		7.150			12/15/34		3,457,965
Principal Financial Group Australia(a)
	2,750,000		8.200			08/15/09		2,962,168
Reinsurance Group of America, Inc.
	550,000		6.750			12/15/11		577,966
								12,939,372
Media – Cable – 1.1%
Comcast Cable Communications Holdings, Inc.
	7,395,000		8.375			03/15/13		8,446,581
	2,050,000		9.455			11/15/22		2,662,537
Cox Communications, Inc.
	7,211,000		4.625			01/15/10		7,042,457
Cox Enterprises, Inc.(a)
	2,825,000		4.375			05/01/08		2,773,667
Rogers Cable, Inc.
	1,575,000		5.500			03/15/14		1,480,500
Viacom, Inc.
	1,975,000		5.750			04/30/11		1,977,459
	1,400,000		6.875			04/30/36		1,409,715
								25,792,916
Media – Non Cable – 0.4%
Clear Channel Communications, Inc.
	5,325,000		8.000			11/01/08		5,551,741
News America, Inc.
	2,750,000		6.400			12/15/35		2,757,433
								8,309,174
Noncaptive – Financial – 1.2%
GATX Financial Corp.
	5,775,000		5.125			04/15/10		5,711,481
General Electric Capital Corp.
	3,000,000		7.375			01/19/10		3,201,935
HSBC Finance Corp.
	8,375,000		5.700			06/01/11		8,545,816
	1,000,000		6.375			10/15/11		1,049,537
PHH Corp.
	7,950,000		6.000			03/01/08		7,967,562
	1,900,000		7.125			03/01/13		1,940,852
								28,417,183
Pipelines – 0.8%
CenterPoint Energy Resources Corp. Series B
	4,075,000		5.950			01/15/14		4,108,240
Energy Transfer Partners
	5,850,000		5.650			08/01/12		5,859,377
	2,775,000		5.950			02/01/15		2,800,961
Enterprise Products Operating LP
	3,525,000		5.600			10/15/14		3,478,562
Enterprise Products Partners LP
	2,450,000		5.000			03/01/15		2,315,598
Panhandle Eastern Pipeline
	1,350,000		4.800			08/15/08		1,338,091
								19,900,829
Property/Casualty Insurance – 1.8%
ACE Ltd.
	6,575,000		6.000			04/01/07		6,586,381
AON Capital Trust A
	1,852,000		8.205			01/01/27		2,153,022
Arch Capital Group Ltd.
	3,200,000		7.350			05/01/34		3,506,794
Aspen Insurance Holdings Ltd.
	1,525,000		6.000			08/15/14		1,492,589
CNA Financial Corp.
	1,375,000		6.750			11/15/06		1,375,470
	98,000		6.600			12/15/08		100,360
	500,000		5.850			12/15/14		503,040
Endurance Specialty Holdings Ltd.
	2,975,000		6.150			10/15/15		2,963,296
	750,000		7.000			07/15/34		778,353
Hartford Financial Services Group, Inc.
	2,000,000		7.900			06/15/10		2,178,317
Liberty Mutual Group(a)
	3,700,000		7.000			03/15/34		3,828,314
	550,000		6.500			03/15/35		542,931
	3,430,000		7.500			08/15/36		3,815,066
QBE Insurance Group Ltd.(a)(b)
	3,150,000		5.647			07/01/23		3,071,206
Royal & Sun Alliance Insurance Group PLC
	1,225,000		8.500			07/29/49		2,700,111
SAFECO Corp.
	5,000,000		6.875			07/15/07		5,051,435
Zurich Capital Trust I(a)
	2,500,000		8.376			06/01/37		2,626,948
								43,273,633
REIT – 0.6%
Brandywine Operating Partnership LP
	3,740,000		4.500			11/01/09		3,632,946
EOP Operating LP
	1,500,000		7.750			11/15/07		1,534,995
iStar Financial, Inc.
	2,200,000		5.650			09/15/11		2,204,814
iStar Financial, Inc. Series B
	3,275,000		5.700			03/01/14		3,261,815
Liberty Property LP
	1,100,000		7.250			03/15/11		1,168,263
Simon Property Group LP
	1,625,000		7.000			06/15/08		1,667,003
								13,469,836

The accompanying notes are an integral part of these financial statements. 

37

GOLDMAN SACHS CORE FIXED INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – (continued)
Technology – 0.2%
First Data Corp.
$	4,075,000		5.625	%		11/01/11	$	4,164,679
Tobacco – 0.2%
Altria Group, Inc.
	475,000		7.000			11/04/13		520,187
	2,745,000		7.750			01/15/27		3,367,670
								3,887,857
Wireless Telecommunications – 0.7%
America Movil SA de CV
	1,800,000		5.500			03/01/14		1,758,168
AT&T Wireless Services, Inc.
	5,775,000		7.875			03/01/11		6,337,179
Intelsat
	3,850,000		5.250			11/01/08		3,724,875
Telecom Italia Capital SA
	2,475,000		4.875			10/01/10		2,411,952
Verizon Wireless Capital LLC
	3,000,000		5.375			12/15/06		2,999,358
								17,231,532
Wirelines Telecommunications – 2.0%
Ameritech Capital Funding
	775,000		6.250			05/18/09		786,655
BellSouth Corp.
	7,000,000		6.000			10/15/11		7,189,840
Deutsche Telekom International Finance BV
	2,800,000		5.375			03/23/11		2,795,178
	4,075,000		8.250			06/15/30		5,056,520
Embarq Corp.
	1,500,000		7.995			06/01/36		1,595,102
France Telecom SA
	5,750,000		7.750			03/01/11		6,316,231
Qwest Capital Funding, Inc.
	500,000		7.900			08/15/10		516,250
SBC Communications, Inc.
	2,725,000		4.125			09/15/09		2,644,183
Sprint Capital Corp.
	300,000		6.000			01/15/07		300,149
	3,050,000		6.875			11/15/28		3,128,889
Telecom Italia Capital
	3,050,000		4.000			01/15/10		2,905,027
	2,625,000		4.950			09/30/14		2,434,871
Telecomunicaciones de Puerto Rico, Inc.
	2,650,000		6.800			05/15/09		2,713,279
Telefonica Europe BV
	2,575,000		7.750			09/15/10		2,786,369
TPSA Finance BV(a)
	2,200,000		7.750			12/10/08		2,297,836
TPSA Finance BV
	3,100,000		7.625			01/30/11		3,341,663
								46,808,042
TOTAL CORPORATE BONDS
(Cost $367,240,784)							$	371,086,278
Mortgage-Backed Obligations – 49.4%
Adjustable Rate FNMA(b) – 0.4%
$	80,878		4.486	%		03/01/33		81,291
	10,280,179		3.851			10/01/33		10,199,051
								10,280,342
Adjustable Rate Non-Agency(b) – 25.2%
Bear Stearns Adjustable Rate Mortgage Trust Series 2003-5, Class 1A1
	232,723		5.979			08/25/33		235,856
Bear Stearns Alternative-A Trust Series 2005-8, Class 11A1
	3,868,524		5.590			10/25/35		3,882,685
Bear Stearns Mortgage Funding Trust Series 2006-AR2, Class 1A1
	22,882,018		5.520			09/25/36		22,882,018
Countrywide Alternative Loan Trust Series 2005-51, Class 1A1
	8,579,656		5.640			11/20/35		8,618,830
Countrywide Alternative Loan Trust Series 2005-51, Class 2A1
	12,119,976		5.620			11/20/35		12,172,279
Countrywide Alternative Loan Trust Series 2005-51, Class 4A1
	10,243,254		5.640			11/20/35		10,290,278
Countrywide Alternative Loan Trust Series 2005-59, Class 1A1
	10,651,217		5.660			11/20/35		10,686,411
Countrywide Alternative Loan Trust Series 2005-59, Class 1A2A
	8,876,014		5.710			11/20/35		8,902,293
Countrywide Alternative Loan Trust Series 2005-62, Class 1A1
	15,409,419		5.620			12/25/35		15,474,835
Countrywide Home Loan Mortgage Pass Through Trust Series 2006-3, Class 1A1
	8,041,706		5.560			03/25/36		8,052,174
Countrywide Home Loans Series 2003-37, Class 1A1
	148,854		5.875			08/25/33		148,610
Countrywide Securities Corp. Series 2006-OA19, Class A1
	23,500,000		5.525			12/25/46		23,500,000
CS First Boston Mortgage Securities Corp. Series 2003-AR9, Class 2A2
	190,862		5.100			03/25/33		189,991
Downey Savings & Loan Association Mortgage Loan Trust Series 2005-AR6, Class 2A1A
	12,027,364		5.610			10/19/45		12,072,785
Harborside Mortgage Loan Trust Series 2006-12, Class 2A2A
	28,000,000		5.500			12/19/45		28,000,000
Harborview Mortgage Loan Trust Series 2005-10, Class 2A1A
	16,250,622		5.630			11/19/35		16,300,277
Harborview Mortgage Loan Trust Series 2005-16, Class 2A1A
	3,721,952		5.560			01/19/36		3,732,111
Harborview Mortgage Loan Trust Series 2005-16, Class 3A1A
	20,179,514		5.570			01/19/36		20,173,593
Impac CMB Trust Series 2004-8, Class 1A
	2,761,614		5.680			10/25/34		2,777,551
Impac CMB Trust Series 2005-6, Class 1A1
	13,772,017		5.570			10/25/35		13,781,915
Impac Secured Assets Corp. Series 2005-2, Class A1W
	13,345,329		5.570			03/25/36		13,361,747
Indymac Index Mortgage Loan Trust Series 2006-AR2, Class 1A1A
	11,953,992		5.540			04/25/46		11,963,711

 The accompanying notes are an integral part of these financial statements.

38

GOLDMAN SACHS CORE FIXED INCOME FUND

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
Adjustable Rate Non-Agency(b) – (continued)
Indymac Index Mortgage Loan Trust Series 2006-AR4 Class A1A
$	14,044,558		5.540	%		05/25/46	$	14,052,172
Lehman XS Trust Series 2005-5N, Class 3A1A
	14,052,398		5.620			11/25/35		14,064,400
Lehman XS Trust Series 2005-9N, Class 1A1
	14,461,015		5.590			02/25/36		14,474,572
Luminent Mortgage Trust Series 2006-2, Class A1A
	14,297,019		5.520			02/25/46		14,302,112
Luminent Mortgage Trust Series 2006-2, Class A1B
	2,859,404		5.600			02/25/46		2,862,363
Master Adjustable Rate Mortgages Trust Series 2004-9, Class 2A1
	762,621		5.700			11/25/34		766,563
MLCC Mortgage Investors, Inc. Series 2004-E, Class A2B
	6,543,407		5.780			11/25/29		6,547,493
Mortgage IT Trust Series 2005-AR1, Class 1A1
	13,622,184		5.580			11/25/35		13,666,056
Sequoia Mortgage Trust Series 2003-4, Class 1A2
	3,906,931		5.913			07/20/33		3,911,650
Structured Asset Mortgage Investments, Inc. Series 2006-AR1, Class 3A1
	18,780,416		5.550			02/25/36		18,801,039
Structured Asset Mortgage Investments, Inc. Series 2006-AR2, Class A1
	12,378,766		5.550			02/25/36		12,392,227
Structured Asset Securities Corp. Series 2003-37A, Class 3A7
	5,158,162		4.520			12/25/33		5,122,190
Thornburg Mortgage Securities Trust Series 2006-5, Class A1
	29,519,526		5.450			08/25/36		29,454,208
UBS Warburg LLC Series 2006-0A2, Class 4A1
	17,275,725		5.503			11/25/46		17,267,627
Washington Mutual Series 2002-AR19, Class A7
	926,911		4.679			02/25/33		915,365
Washington Mutual Series 2005-AR8, Class 2A1A
	17,805,153		5.610			07/25/45		17,872,164
Washington Mutual Series 2005-AR11, Class A1A
	10,180,960		5.640			08/25/45		10,211,176
Washington Mutual Series 2005-AR13, Class A1A1
	17,635,704		5.610			10/25/45		17,733,519
Washington Mutual Series 2005-AR15, Class A1A1
	19,388,223		5.580			11/25/45		19,453,391
Washington Mutual Series 2005-AR17, Series A1A1
	14,445,066		5.590			12/25/45		14,408,809
Washington Mutual Series 2006-AR13, Class 1A
	17,526,099		5.544			10/25/46		17,519,938
Washington Mutual, Inc. Series 2006-AR11, Class 3A1A
	4,942,505		5.584			09/25/46		4,946,173
Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1
	14,807,765		4.977			10/25/35		14,824,832
Wells Fargo Mortgage Backed Securities Trust Series 2006-AR2, Class 2A3
	27,808,893		5.092			03/25/36		27,647,109
WMALT Mortgage Pass-Through Certificates Series 2006-AR7, Class A1A
	12,312,420		5.483			09/25/46		12,329,254
WMALT Mortgage Pass-Through Certificates Series 2006-AR9, Class 2A
	24,000,000		5.504			11/25/46		24,000,000
								596,746,352
CMBS – 8.9%
Interest Only(a)(b)(c) – 0.1%
Bear Stearns Commercial Mortgage Securities, Inc. Series 2001-TOP2, Class X2
	38,000,000		1.288			02/15/35		623,671
CS First Boston Mortgage Securities Corp. Series 2002-CKS4, Class ASP
	26,177,440		1.592			11/15/36		1,022,483
								1,646,154
Sequential Fixed Rate – 8.8%
Asset Securitization Corp. Series 1997-D4, Class A1D
	578,455		7.490			04/14/29		581,262
Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4
	20,000,000		5.182			09/10/47		19,934,392
Banc of America Commercial Mortgage, Inc. Series 2006-4 Class A4
	12,000,000		5.634			07/10/46		12,297,287
Bear Stearns Commercial Mortgage Securities Series 2006-PW12, Class A4
	12,500,000		5.711			09/11/38		12,950,467
Citigroup Commercial Mortgage Trust Series 2006-C4, Class A3
	13,000,000		5.720			03/15/49		13,467,649
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-C02, Class A4
	15,000,000		5.362			01/15/46		15,135,822
Commercial Mortgage Acceptance Corp. Series 1997-ML1, Class A3
	2,800,000		6.570			12/15/30		2,814,607
Commercial Mortgage Pass Through Certificates Series 2006-C7, Class A4
	24,000,000		5.769			06/10/46		24,922,730
CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A3
	9,360,907		6.550			01/17/35		9,446,219
First Union National Bank Commercial Mortgage Trust Series 2000-C2, Class A2
	17,000,000		7.202			10/15/32		18,082,618
GMAC Commercial Mortgage Securities, Inc. Series 2002-C1, Class A2
	15,000,000		6.278			11/15/39		15,668,217
LB-UBS Commercial Mortgage Trust Series 2005-C5, Class A4
	9,000,000		4.954			09/15/30		8,806,822

The accompanying notes are an integral part of these financial statements. 

39

GOLDMAN SACHS CORE FIXED INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
Sequential Fixed Rate – (continued)
LB-UBS Commercial Mortgage Trust Series 2005-C7, Class A4
$	10,175,000		5.197	%		11/15/30	$	10,123,483
LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4
	12,000,000		5.156			02/15/31		11,856,564
Merrill Lynch Mortgage Investors, Inc. Series 1998-C2, Class A2
	1,231,678		6.390			02/15/30		1,238,418
Merrill Lynch Mortgage Investors, Inc. Series 1999-C1, Class A2
	4,133,319		7.560			11/15/31		4,335,752
Morgan Stanley Capital I Series 2006-T21, Class A4
	19,000,000		5.162			10/12/52		18,830,408
Washington Mutual Series 2006-AR17, Class 1A
	9,000,000		5.504			11/25/46		9,000,000
								209,492,717
TOTAL CMBS								211,138,871
CMO – 0.6%
Interest Only(c) – 0.1%
ABN AMRO Mortgage Corp. Series 2003-5, Class A2
	2,419,335		5.500			04/25/33		241,717
Countrywide Home Loan Trust Series 2003-42, Class 2X1(b)
	3,136,476		0.364			10/25/33		15,328
CS First Boston Mortgage Securities Corp. Series 2002-AR31, Class 5X(b)
	1,428,402		0.000			11/25/32		857
CS First Boston Mortgage Securities Corp. Series 2003-08, Class 3A2
	475,374		5.500			04/25/33		25,903
CS First Boston Mortgage Securities Corp. Series 2003-10, Class 3A13
	368,365		5.750			05/25/33		14,423
CS First Boston Mortgage Securities Corp. Series 2003-11, Class 1A2
	322,300		5.500			06/25/33		20,484
CS First Boston Mortgage Securities Corp. Series 2003-AR18, Class 2X(b)
	3,375,278		0.782			07/25/33		22,210
CS First Boston Mortgage Securities Corp. Series 2003-AR20, Class 2X(b)
	3,814,326		0.605			08/25/33		24,375
FNMA Series 1992-24, Class N
	94		789.000			03/25/07		184
FNMA Series 2004-47, Class EI(b)
	7,004,709		0.000			06/25/34		283,033
FNMA Series 2004-62, Class DI(b)
	3,102,415		0.000			07/25/33		126,996
FNMA Series 2004-71, Class DI(b)
	6,364,157		0.000			04/25/34		166,143
Washington Mutual Series 2003-AR04, Class X1(b)
	5,213,208		1.181			01/25/08		58,333
Washington Mutual Series 2003-AR05, Class X1(b)
	14,753,636		0.756			02/25/08		125,543
Washington Mutual Series 2003-AR06, Class X2
	11,481,200		0.371			05/25/08		48,591
Washington Mutual Series 2003-AR07, Class X(b)
	18,557,053		0.940			06/25/08		196,532
Washington Mutual Series 2003-AR12, Class X(b)
	12,589,701		0.484			02/25/34		88,162
Wells Fargo Mortgage Backed Securities Trust Series 2003-G, ClassAI0(b)
	13,192,041		0.760			06/25/33		352,226
								1,811,040
Inverse Floaters(b) – 0.2%
FHLMC Series 1544, Class M
	44,368		11.206			07/15/08		45,634
FNMA Series 1993-072, Class SA
	17,370		9.123			05/25/08		17,836
FNMA Series 1993-093, Class SA
	24,598		11.994			05/25/08		25,644
FNMA Series 1993-095, Class SE
	29,490		12.304			06/25/08		30,902
FNMA Series 1993-135, Class S
	60,779		6.500			07/25/08		62,228
FNMA Series 1993-175, Class SA
	208,973		11.895			09/25/08		219,606
GNMA Series 2001-48, Class SA
	229,983		9.198			10/16/31		260,933
GNMA Series 2001-51, Class SA
	445,156		9.447			10/16/31		513,234
GNMA Series 2001-51, Class SB
	460,045		9.198			10/16/31		518,578
GNMA Series 2001-59, Class SA
	81,205		9.035			11/16/24		92,153
GNMA Series 2002-11, Class SA
	231,889		12.740			02/16/32		291,323
GNMA Series 2002-13, Class SB
	540,552		12.740			02/16/32		675,387
Morgan Stanley Mortgage Trust Series 40, Class 16
	825,544		8.949			01/20/22		829,078
								3,582,536
PAC – 0.0%
FNMA Series 1999-51, Class LG
	260,717		6.500			12/25/28		260,564
Regular Floater(b) – 0.0%
FNMA REMIC Trust Series 1993-175, Class FA
	451,383		4.060			09/25/08		445,440
Sequential Fixed Rate – 0.3%
FHLMC Series 2367, Class BC
	798,949		6.000			04/15/16		798,149
FNMA REMIC Trust Series 1993-78, Class H
	440,829		6.500			06/25/08		442,134
FNMA Series 1999-1, Class PG
	419,833		6.500			04/25/28		418,378

 The accompanying notes are an integral part of these financial statements.

40

GOLDMAN SACHS CORE FIXED INCOME FUND

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Mortgage-Backed Obligations – (continued)
Sequential Fixed Rate – (continued)
FNMA Series 2001-M2, Class C
$	5,390,822		6.300	%		09/25/15	$	5,532,221
								7,190,882
TOTAL CMO								13,290,462
FHLB – 0.1%
	1,269,571		7.040			08/01/15		1,405,487
FHLMC – 4.2%
	307,624		5.000			12/01/12		305,919
	31,793		5.500			07/01/13		31,948
	206,753		5.500			12/01/13		207,766
	2,630,624		6.500			12/01/13		2,683,946
	77,600		5.500			02/01/14		77,980
	29,064		5.500			06/01/14		29,188
	71,152		5.500			09/01/14		71,457
	4,270		7.000			10/01/14		4,365
	1,431,625		6.000			12/01/14		1,438,261
	39,883		7.000			05/01/15		40,769
	116,244		8.000			07/01/15		122,492
	14,995		7.000			02/01/16		15,381
	36,508		7.000			03/01/16		37,447
	920,941		7.500			05/01/16		960,436
	3,337		7.000			10/01/17		3,468
	2,712,191		4.500			05/01/18		2,626,047
	642,321		4.500			06/01/18		621,964
	2,639,004		4.500			09/01/18		2,555,368
	1,907,283		4.500			10/01/18		1,846,794
	1,746,747		5.000			10/01/18		1,723,439
	2,450,002		4.500			11/01/18		2,372,296
	2,027,363		4.500			12/01/18		1,963,110
	5,753,406		5.000			12/01/18		5,676,648
	713,466		4.500			01/01/19		690,854
	1,900,635		4.500			03/01/19		1,839,636
	44,941,106		4.000			06/01/19		42,557,092
	8,796,067		4.500			06/01/19		8,517,296
	707,572		5.000			06/01/19		697,355
	3,897,313		4.500			02/01/20		3,773,797
	1,980,535		5.500			05/01/23		1,970,672
	1,219,650		5.500			06/01/23		1,213,576
	1,198,962		5.500			07/01/23		1,192,990
	3,673,384		4.500			10/01/23		3,509,053
	598,378		5.500			10/01/25		596,435
	830,783		5.500			11/01/25		828,086
	83,586		7.000			06/01/26		86,565
	63,263		7.500			03/01/27		65,470
	18,178		6.500			06/01/29		18,651
	2,551,175		6.500			12/01/29		2,618,353
	68,591		7.500			12/01/30		70,982
	59,294		7.500			01/01/31		61,360
	86,875		6.500			03/01/32		88,974
	20,738		6.500			04/01/32		21,239
	220,271		6.500			07/01/32		225,593
	1,544,475		6.500			08/01/33		1,581,788
	559,423		6.500			10/01/33		571,892
								98,214,198
FNMA – 9.4%
	1,378		9.000			09/15/08		1,409
	385,815		8.500			10/01/15		411,007
	15,724		7.000			01/01/16		16,060
	757,630		6.000			12/01/16		770,406
	9,027,578		5.000			10/01/17		8,913,529
	60,225,431		5.000			12/01/17		59,464,581
	1,729,759		5.000			01/01/18		1,707,907
	5,904,194		5.000			02/01/18		5,828,264
	1,240,941		4.500			04/01/18		1,203,128
	1,781,531		5.000			04/01/18		1,758,587
	10,507,014		4.500			05/01/18		10,186,855
	1,281,235		5.000			05/01/18		1,264,735
	14,268,178		4.500			06/01/18		13,833,408
	951,153		5.000			06/01/18		938,903
	6,867,767		4.000			07/01/18		6,523,402
	2,294,832		4.500			07/01/18		2,224,905
	3,431,988		4.000			08/01/18		3,259,900
	1,594,679		4.500			08/01/18		1,546,087
	91,931		6.000			08/01/18		92,870
	28,726,158		4.000			09/01/18		27,285,761
	2,955,559		4.500			10/01/18		2,865,499
	3,012,917		5.000			11/01/18		2,974,115
	94,510		4.500			12/01/18		91,630
	2,692,365		5.500			12/01/18		2,702,604
	339,820		4.500			02/01/19		329,094
	2,839,584		4.500			04/01/19		2,749,953
	3,213,774		5.000			04/01/19		3,172,385
	1,194,113		4.500			05/01/19		1,156,420
	210,534		5.000			05/01/19		207,644
	1,102,085		4.500			06/01/19		1,067,796
	372,550		5.000			06/01/19		367,752
	126,504		4.500			09/01/19		122,511
	138,648		4.500			10/01/19		134,272
	539,333		4.500			11/01/19		522,307
	472,937		5.000			11/01/19		466,446
	197,800		4.500			12/01/19		191,556
	891,669		5.000			12/01/19		880,186
	11,844,589		4.500			09/01/23		11,322,610
	1,923,403		4.500			10/01/23		1,828,001
	2,800,430		6.460			12/01/28		2,970,401
	12,050		7.500			03/01/29		12,452
	11,237		7.500			08/01/29		11,612
	4,273		7.500			11/01/29		4,415
	56,027		6.500			12/01/30		57,379
	86,933		7.500			12/01/30		89,627
	153,453		8.000			01/01/31		160,445
	105,759		8.000			02/01/31		111,266
	852,286		7.000			03/01/31		879,231
	17,101		6.500			09/01/33		17,470
	981,824		8.000			11/01/36		1,021,251

The accompanying notes are an integral part of these financial statements. 

41

GOLDMAN SACHS CORE FIXED INCOME FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date			Value
Mortgage-Backed Obligations – (continued)
FNMA – (continued)
$	19,000,000		7.000	%		TBA-15yr	(d)	$	19,534,375
	16,000,000		7.500			TBA-15yr	(d)		16,584,992
									221,839,401
Principal Only(e) – 0.6%
FHLMC Series 235, Class PO
	9,078,767		0.000			02/01/36			6,735,242
FNMA Series 363, Class 1
	9,187,288		0.000			11/01/35			6,883,038
									13,618,280
TOTAL MORTGAGE-BACKED OBLIGATIONS
(Cost $1,163,444,174)								$	1,166,533,393
Agency Debentures – 18.0%
FFCB
$	2,500,000		3.250	%		06/15/07		$	2,469,670
	2,000,000		3.625			01/04/08			1,967,062
	3,000,000		3.150			07/21/08			2,912,643
	9,000,000		4.830			12/22/14			8,915,931
FHLB
	5,000,000		4.125			11/15/06			4,997,425
	13,000,000		4.875			11/15/06			12,996,997
	37,000,000		5.270	(b)		12/13/06			37,000,666
	100,000,000		4.800			05/02/08			99,814,100
	1,500,000		5.800			09/02/08			1,522,218
	5,000,000		5.375	(f)		05/15/09			5,057,566
	10,000,000		6.715			06/29/09			10,480,760
	10,000,000		6.500			08/14/09			10,417,316
	2,500,000		4.000			02/15/11			2,416,300
	9,595,000		4.250			11/15/11			9,327,146
	17,360,000		4.500			09/14/12			16,979,005
FHLMC
	5,000,000		6.700			01/05/07			5,010,870
	2,500,000		3.050			01/19/07			2,487,438
	1,950,000		3.500			09/15/07			1,923,133
	10,540,000		3.650			01/23/08			10,364,730
	40,000,000		4.480			09/19/08			39,659,144
	1,810,000		5.125			07/15/12			1,829,818
	9,000,000		5.000			01/30/14			8,941,711
FNMA
	15,000,000		3.550			01/12/07			14,945,625
	19,000,000		6.160			12/18/07			19,216,619
	2,850,000		5.750			02/15/08			2,875,524
	50,000,000		4.200			03/24/08			49,414,450
	1,000,000		5.250			01/15/09			1,008,160
	5,000,000		6.250			02/01/11			5,234,872
	19,560,000		5.300			02/22/11			19,495,878
	11,000,000		5.625			02/28/12			10,958,796
	4,500,000		5.250			08/01/12			4,541,454
Small Business Administration
	890,061		6.300			06/01/18			914,432
TOTAL AGENCY DEBENTURES
(Cost $427,578,616)								$	426,097,459
Asset-Backed Securities – 4.7%
Credit Card – 0.1%
MBNA Master Credit Card Trust II Series 1999-J, Class A
$	3,000,000		7.000	%		02/15/12		$	3,166,680
Home Equity(b) – 4.2%
Amortizing Residential Collateral Trust Series 2002-BC1M, Class A
	1,326,370		5.600			01/01/32			1,324,297
ContiMortgage Home Equity Loan Trust Series 1999-1, Class A7
	19,968		6.970			12/25/13			19,931
Countrywide Asset-Backed Certificates Series 2004-BC5, Class A2
	1,008,621		5.590			10/25/34			1,008,810
Countrywide Home Equity Loan Trust Series 2002-E, Class A
	2,817,283		5.580			10/15/28			2,826,200
Countrywide Home Equity Loan Trust Series 2003-A, Class A
	8,931,627		5.670			03/15/29			8,953,148
Countrywide Home Equity Loan Trust Series 2004-G, Class 2A
	1,960,895		5.540			12/15/29			1,965,196
Countrywide Home Equity Loan Trust Series 2004-S, Class 1A
	6,348,916		5.560			02/15/30			6,357,254
Countrywide Home Equity Loan Trust Series 2005-I, Class 2A
	12,523,449		5.550			02/15/36			12,503,881
Countrywide Home Equity Loan Trust Series 2006-H, Class 2A1B
	40,000,000		5.489			11/15/36			39,975,000
First Franklin Mortgage Loan Asset Backed Certificates Series 2004-FF11, Class 2A2
	6,843,043		5.600			01/25/35			6,850,529
Impac CMB Trust Series 2004-10, Class 2A
	6,913,736		5.640			03/25/35			6,935,904
Morgan Stanley ABS Capital I Series 2004-HE1, Class A4
	8,393,298		5.690			01/25/34			8,411,400
Popular ABS Mortgage Pass-Through Trust Series 2004-5, Class AV2
	2,039,582		5.660			12/25/34			2,041,814
									99,173,364
Manufactured Housing – 0.1%
Mid-State Trust Series 4, Class A
	1,963,425		8.330			04/01/30			2,026,098
Utilities – 0.3%
Massachusetts RRB Special Purpose Trust Series 1999-1, Class A5
	6,150,000		7.030			03/15/12			6,424,659
TOTAL ASSET-BACKED SECURITIES
(Cost $110,947,162)								$	110,790,801

 The accompanying notes are an integral part of these financial statements.

42

GOLDMAN SACHS CORE FIXED INCOME FUND

Principal		Interest			Maturity
Amount*		Rate			Date		Value
U.S. Treasury Obligations – 6.6%
United States Treasury Bonds
$	31,100,000		4.500	%		02/15/36	$	30,016,352
United States Treasury Inflation Protected Securities
	6,882,682		1.875			07/15/13		6,664,907
	6,730,984		2.000			01/15/14		6,560,340
	10,924,665		2.000			07/15/14		10,641,301
	15,618,329		1.875			07/15/15		15,041,232
	4,828,122		2.000			01/15/16		4,690,443
	20,595,432		2.500			07/15/16		20,891,491
United States Treasury Notes
	2,000,000		5.625			05/15/08		2,025,600
	1,000,000		6.500			02/15/10		1,057,290
United States Treasury Principal-Only STRIPS(e)
	560,000		0.000			05/15/18		325,802
	10,200,000		0.000			05/15/20		5,336,640
	1,800,000		0.000			08/15/20		928,355
	56,700,000		0.000			11/15/21		27,466,615
	6,250,000		0.000			11/15/22		2,886,250
	25,800,000		0.000			02/15/25		10,672,944
	27,700,000		0.000			11/15/26		10,582,342
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $155,360,003)							$	155,787,904
Emerging Markets Debt – 0.3%
VTB Capital (Vneshtorgbank)(a)
$	7,980,000		5.970	%		08/01/08	$	7,980,000
(Cost $7,980,000)
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 94.7%
(Cost $2,232,550,739)							$	2,238,275,835
Repurchase Agreement(g) – 9.3%
Joint Repurchase Agreement Account II
$	220,000,000		5.316	%		11/01/06	$	220,000,000
Maturity Value: $220,032,463
(Cost $220,000,000)
TOTAL INVESTMENTS – 104.0%
(Cost $2,452,550,739)							$	2,458,275,835
LIABILITIES IN EXCESS OF OTHER ASSETS – (4.0)%								(93,920,315	)
NET ASSETS – 100.0%							$	2,364,355,520

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

 *    The principal amount of each security is stated in the currency in which the bond is denominated. All amounts shown are in U.S. dollars unless otherwise noted. See below.

Currency Description
EUR	=	Euro Currency

(a)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $59,277,748, which represents approximately 2.5% of net assets as of October 31, 2006.
(b)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(c)	Represents security with nominal principal amount. The actual effective yield of this security is different than the stated interest rate due to the amortization of related premiums or accretion of discounts.
(d)	TBA (To Be Announced) securities are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. Total market value of TBA securities amounts to $36,119,367 which represents approximately 1.5% of net assets as of October 31, 2006.
(e)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(f)	A portion of this security is segregated as collateral for initial margin requirement on futures transactions.
(g)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55.

Investment Abbreviations:
CMBS	—	Commercial Mortgage Backed Securities
CMO	—	Collateralized Mortgage Obligations
FFCB	—	Federal Farm Credit Bank
FHLB	—	Federal Home Loan Bank
FHLMC	—	Federal Home Loan Mortgage Corp.
FNMA	—	Federal National Mortgage Association
GNMA	—	Government National Mortgage Association
PAC	—	Planned Amortization Class
REIT	—	Real Estate Investment Trust
REMIC	—	Real Estate Mortgage Investment Conduit
STRIPS	—	Separate Trading of Registered Interest and Principal of Securities

The accompanying notes are an integral part of these financial statements. 

43

GOLDMAN SACHS CORE FIXED INCOME FUND

Schedule of Investments (continued)

October 31, 2006

ADDITIONAL INVESTMENT INFORMATION

FORWARD FOREIGN CURRENCY CONTRACTS — At October 31, 2006, the Fund had outstanding forward foreign currency exchange contracts, both to purchase and sell foreign currencies:

Open Forward Foreign Currency	Expiration		Value on		Current		Unrealized
Purchase Contracts	Date		Settlement Date		Value		Gain (Loss)
Australian Dollar		12/20/06	$	51,179,702	$	51,927,482	$	747,780
British Pound		12/20/06		63,532,090		64,271,560		739,470
Canadian Dollar		12/20/06		8,234,000		8,170,760		(63,240	)
Euro		12/20/06		37,317,000		37,659,327		342,327
Japanese Yen		12/20/06		14,954,000		15,054,289		100,289
New Zealand Dollar		12/20/06		22,395,000		22,879,338		484,338
Norwegian Krone		12/20/06		7,450,000		7,640,079		190,079
		12/20/06		7,821,158		7,781,363		(39,795	)
Swedish Krona		12/20/06		22,845,237		23,010,005		164,768
TOTAL OPEN FORWARD FOREIGN CURRENCY PURCHASE CONTRACTS			$	235,728,187	$	238,394,203	$	2,666,016

Open Forward Foreign Currency	Expiration		Value on		Current		Unrealized
Sale Contracts	Date		Settlement Date		Value		Gain (Loss)
Australian Dollar		12/20/06	$	30,532,361	$	31,670,863	$	(1,138,502	)
British Pound		11/16/06		2,698,374		2,719,707		(21,333	)
		12/20/06		22,276,000		22,754,332		(478,332	)
Canadian Dollar		12/20/06		16,076,491		15,924,739		151,752
Euro		11/29/06		4,137,670		4,169,341		(31,671	)
		12/20/06		56,002,398		56,430,525		(428,127	)
Japanese Yen		12/20/06		20,168,027		20,163,471		4,556
		12/20/06		40,000,839		40,025,994		(25,155	)
New Zealand Dollar		12/20/06		34,269,464		35,652,173		(1,382,709	)
Norwegian Krone		12/20/06		14,945,000		14,999,630		(54,630	)
Swedish Krona		12/20/06		15,600,000		15,760,335		(160,335	)
Swiss Franc		12/20/06		23,640,144		23,544,581		95,563
		12/20/06		7,450,000		7,591,912		(141,912	)
TOTAL OPEN FORWARD FOREIGN CURRENCY SALE CONTRACTS			$	287,796,768	$	291,407,603	$	(3,610,835	)

 The accompanying notes are an integral part of these financial statements.

44

GOLDMAN SACHS CORE FIXED INCOME FUND

ADDITIONAL INVESTMENT INFORMATION (continued)

FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:

	Number of
	Contracts			Settlement	Market			Unrealized
Type	Long (Short)			Month	Value			Gain (Loss)
Eurodollars		869		December 2006	$	205,594,537		$	1,707
Eurodollars		457		March 2007		108,286,150			84,946
Eurodollars		397		June 2007		94,237,875			(125,647	)
Eurodollars		314		September 2007		74,673,125			39,832
Eurodollars		151		December 2007		35,954,987			70,274
Eurodollars		158		March 2008		37,637,575			82,413
Eurodollars		92		June 2008		21,910,950			45,687
U.S. Treasury Bonds		327		December 2006		36,838,594			772,237
2 Year U.S. Treasury Notes		(1,202	)	December 2006		(245,696,312	)		306,283
5 Year U.S. Treasury Notes		(1,699	)	December 2006		(179,350,687	)		(799,074	)
10 Year U.S. Treasury Notes		(1,277	)	December 2006		(138,195,344	)		(1,264,517	)
TOTAL					$	51,891,450		$	(785,859	)

The accompanying notes are an integral part of these financial statements. 

45

GOLDMAN SACHS CORE FIXED INCOME FUND

Schedule of Investments (continued)

October 31, 2006

ADDITIONAL INVESTMENT INFORMATION (continued)

SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:

INTEREST RATE SWAP CONTRACTS

					Rates Exchanged
							Upfront
	Notional				Payments	Payments	Payments
	Amount		Termination		received by	made by	made by		Unrealized
Swap Counterparty	(000s)		Date		the Fund	the Fund	the Fund		Gain (Loss)
Banc of America Securities LLC	$	60,000		12/27/06	3.427%	3 month LIBOR	$	—	$	207,261
Banc of America Securities LLC		100,000		10/14/08	3.514%	3 month LIBOR		—		(2,993,118	)
Banc of America Securities LLC(a)		127,100		12/21/09	5.600%	3 month LIBOR		1,647,015		443,192
Banc of America Securities LLC		80,000		09/02/10	4.309%	3 month LIBOR		—		(2,125,442	)
Banc of America Securities LLC		65,000		10/06/10	4.702%	3 month LIBOR		—		(770,070	)
Deutsche Bank Securities, Inc.(a)		112,800		12/20/11	5.600%	3 month LIBOR		2,219,729		583,906
Banc of America Securities LLC(a)		60,000		12/20/11	5.600%	3 month LIBOR		1,109,027		385,670
Banc of America Securities LLC		65,000		04/19/12	4.547%	3 month LIBOR		—		(1,573,393	)
J.P. Morgan Securities, Inc.(a)		100,000		12/20/13	5.650%	3 month LIBOR		1,882,500		1,459,601
Deutsche Bank Securities, Inc.(a)		90,000		12/20/13	5.650%	3 month LIBOR		1,665,000		1,342,891
Banc of America Securities LLC		11,000		05/26/15	4.532%	3 month LIBOR		—		(332,961	)
Banc of America Securities LLC		25,000		10/19/15	4.965%	3 month LIBOR		—		(283,252	)
Bear Stearns & Co., Inc.		85,000		06/19/06	5.666%	3 month LIBOR		—		4,661,276
J.P. Morgan Securities, Inc.(a)		69,800		12/20/16	5.700%	3 month LIBOR		2,194,421		859,778
Banc of America Securities LLC		80,000		03/23/20	3 month LIBOR	5.108%		—		664,835
Banc of America Securities LLC		9,000		03/30/35	5.320%	3 month LIBOR		—		79,977
Banc of America Securities LLC		10,000		04/09/35	5.265%	3 month LIBOR		—		7,007
TOTAL							$	10,717,692	$	2,617,158

(a)  Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to October 31, 2006.

LIBOR — London Interbank Offered Rate

 The accompanying notes are an integral part of these financial statements.

46

GOLDMAN SACHS CORE FIXED INCOME FUND

ADDITIONAL INVESTMENT INFORMATION (continued)

CREDIT DEFAULT SWAP CONTRACTS

										Upfront
			Notional		Rate					Payments
			Amount		Paid by			Termination		(received)			Unrealized
Referenced Obligation	Swap Counterparty		(000s)		Fund			Date		by the Fund			Loss
Protection Purchased:
First Data Corp. 5.625% 11/01/11		J.P. Morgan Chase Securities, Inc.	$	2,800		0.500	%		03/21/11	$	—		$	(20,829	)
First Data Corp. 5.625% 11/01/11		J.P. Morgan Chase Securities, Inc.		1,525		0.250			06/20/11		—			(6,737	)
PHH Corp. 7.125% 03/01/13		Bear Stearns & Co., Inc.		2,600		1.150			06/20/13		—			(28,094	)
Core Investment Grade Bond Trust		Deutsche Bank Securities, Inc.		231,900		0.650			12/20/16		(611,670	)		(1,012,842	)
TOTAL										$	(611,670	)	$	(1,068,502	)

TOTAL RETURN INDEX SWAP CONTRACTS

						Rates Exchanged
	Notional					Payments	Payments
Swap	Amount		Termination		Reference	received by	made by	Unrealized
Counterparty	(000s)		Date		Underlying	the Fund	the Fund	Gain
Citibank, N.A.	$	25,000		03/31/07	Banc of America Securities LLC CMBS AAA 10 Yr Index	Any positive monthly duration adjusted return on the underlying index	Any negative monthly duration adjusted return on the underlying index	$	12,420
Banc of America Securities LLC		25,000		09/28/07	Banc of America Securities LLC CMBS AAA 10 Yr Index	Any positive monthly duration adjusted return on the underlying index	Any negative monthly duration adjusted return on the underlying index		6,425
TOTAL								$	18,845

The accompanying notes are an integral part of these financial statements. 

47

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Performance Summary

October 31, 2006 (Unaudited)

The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 3, 2003 (commencement of operations) in the Separate Account Institutional Shares of the Goldman Sachs Investment Grade Credit Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers U.S. Credit Index (“Lehman U.S. Credit Index”) is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A and Institutional Shares will vary from Separate Account Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/ industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.

Investment Grade Credit Fund’s Lifetime Performance

Performance of a $10,000 Investment, Distributions Reinvested November 3, 2003 to October 31, 2006.

Average Annual Total Return through October 31, 2006	Since Inception		One Year
Class A (commenced November 3, 2003)
Excluding sales charges		4.08%		4.84%
Including sales charges		2.50%		0.11%
Institutional Class (commenced November 3, 2003)		4.57%		5.35%
Separate Account Institutional (commenced November 3, 2003)		4.59%		5.30%

48

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Schedule of Investments

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – 92.0%
Automotive – 1.8%
DaimlerChrysler NA
$	400,000		8.500	%		01/18/31	$	480,661
DaimlerChrysler NA Holding Corp.(a)
	380,000		5.870			09/10/07		380,949
Ford Motor Credit Co.
	1,700,000		5.700			01/15/10		1,577,220
General Motors Acceptance Corp.
	1,275,000		6.875			09/15/11		1,284,957
								3,723,787
Banks – 21.0%
ANZ Capital Trust I(b)
	325,000		4.484			01/15/49		315,999
	800,000		5.360			12/29/49		779,748
Astoria Financial Corp.
	225,000		5.750			10/15/12		226,607
Banca Popolare di Bergamo Capital Trust(a)
	EUR475,000		8.364			02/15/49		692,947
Bank United Corp.
$	250,000		8.875			05/01/07		254,156
Citigroup, Inc.
	589,000		7.250			10/15/11		638,057
Commonwealth Bank of Australia(a)(b)
	1,325,000		6.024			03/29/49		1,328,338
Credit Suisse (USA), Inc.
	1,000,000		5.250			03/02/11		1,002,476
Credit Suisse First Boston London(a)(b)
	1,625,000		7.900			05/29/49		1,644,885
Danske Bank A/S(a)(b)
	300,000		7.400			06/15/10		303,829
Firstar Capital Trust I
	2,500,000		8.320			12/15/26		2,611,027
ForeningSparbanken AB (Swedbank)(a)(b)
	500,000		7.500			05/01/49		500,000
Greater Bay Bancorp Series D
	2,700,000		5.125			04/15/10		2,672,954
GreenPoint Financial Corp.
	600,000		3.200			06/06/08		581,096
HBOS PLC(a)(b)
	1,750,000		5.375			12/29/49		1,727,625
HSBC Capital Funding LP(a)(b)
	1,050,000		4.610			06/27/49		981,790
HSBC USA, Inc.
	250,000		6.625			03/01/09		258,053
Huntington National Bank
	1,000,000		8.000			04/01/10		1,084,961
J.P. Morgan Chase & Co.
	550,000		6.625			03/15/12		584,521
Key Bank N.A.(c)
	1,000,000		6.500			10/15/27		1,021,510
Lehman Brothers Holdings E-Capital Trust I(a)
	675,000		6.173			08/19/65		679,561
Manufacturers & Traders Trust Co.(a)
	1,495,000		5.585			12/28/20		1,484,414
Mizuho JGB Investment LLC(a)(b)
	1,275,000		9.870			06/30/49		1,362,048
MUFG Capital Finance 1 Ltd.(a)
	2,400,000		6.346			07/25/16		2,423,746
Nordbanken AB(a)(b)
	2,380,000		8.950			11/12/09		2,604,655
North Fork Bancorp.(a)
	1,350,000		5.000			08/15/12		1,345,833
PNC Funding Corp.
	600,000		7.500			11/01/09		638,069
Popular North America, Inc.
	1,775,000		5.200			12/12/07		1,768,180
	1,795,000		4.250			04/01/08		1,767,049
RBS Capital Trust II(a)
	1,000,000		5.512			09/30/49		984,730
Resona Bank Ltd.(a)(b)
	EUR925,000		4.125			09/27/49		1,148,970
	1,475,000		5.850			09/29/49		1,444,829
Resona Preferred Global Securities Ltd.(a)(b)
$	2,000,000		7.191			07/30/49		2,097,040
Royal Bank of Scotland Group PLC
	400,000		9.118			03/31/49		445,465
Sovereign Bank
	1,000,000		4.000			02/01/08		983,325
	300,000		5.125			03/15/13		294,568
	455,000		4.375	(a)		08/01/13		445,968
Tokai Preferred Capital Co. LLC(a)(b)
	650,000		9.980			12/29/49		694,962
Unicredito Italiano Capital Trust(a)(b)
	500,000		9.200			10/05/49		565,038
Wachovia Capital Trust III(a)
	1,825,000		5.800			08/29/49		1,841,073
Washington Mutual Bank
	500,000		5.950			05/20/13		511,207
								44,741,309
Brokerage – 1.0%
Morgan Stanley
	2,200,000		5.050			01/21/11		2,187,992
Captive Financial – 0.8%
Nelnet, Inc.
	1,760,000		5.125			06/01/10		1,723,262
Consumer Cyclical Services – 0.6%
Sabre Holdings Corp.
	1,300,000		6.350			03/15/16		1,292,639
Diversified Manufacturing – 1.7%
Tyco International Group Participation Certificate(b)
	2,350,000		4.436			06/15/07		2,333,719
Tyco International Group SA
	1,300,000		6.750			02/15/11		1,375,329
								3,709,048
Electric – 8.5%
Arizona Public Service Co.
	2,000,000		6.875			08/01/36		2,128,156

The accompanying notes are an integral part of these financial statements. 

49

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – (continued)
Electric – (continued)
Calenergy, Inc.
$	1,575,000		7.630	%		10/15/07	$	1,607,713
	280,000		7.520			09/15/08		291,174
Centerpoint Energy, Inc.
	2,100,000		5.875			06/01/08		2,111,731
Centerpoint Energy, Inc. Series B
	350,000		7.250			09/01/10		370,376
FirstEnergy Corp. Series C
	1,745,000		7.375			11/15/31		2,036,309
MidAmerican Energy Holdings Co.
	2,100,000		6.125			04/01/36		2,159,508
Nisource Finance Corp.(a)
	500,000		5.968			11/23/09		499,955
Ohio Edison Co.
	1,500,000		6.875			07/15/36		1,667,292
Progress Energy, Inc.
	2,175,000		5.625			01/15/16		2,180,524
	1,000,000		7.000			10/30/31		1,125,810
Southwestern Public Service Cos.
	375,000		6.000			10/01/36		376,015
Tampa Electric Co.
	275,000		6.550			05/15/36		296,604
TXU Corp. Series O
	1,225,000		4.800			11/15/09		1,197,249
								18,048,416
Energy – 2.5%
Canadian Natural Resources Ltd.
	925,000		6.500			02/15/37		951,418
Hess Corp.
	1,950,000		7.125			03/15/33		2,171,631
Kerr-McGee Corp.
	800,000		6.950			07/01/24		867,367
XTO Energy, Inc.
	1,200,000		6.250			04/15/13		1,243,423
								5,233,839
Entertainment – 0.9%
Time Warner Entertainment Co.
	1,290,000		8.375			03/15/23		1,499,960
Time Warner Entertainment Co. LP
	325,000		7.250			09/01/08		333,863
								1,833,823
Food & Drug Retailing – 0.1%
Fred Meyer, Inc.
	250,000		7.450			03/01/08		256,492
Gaming – 1.1%
Harrahs Operating Co., Inc.
	2,425,000		5.500			07/01/10		2,329,123
Life Insurance – 7.6%
Americo Life, Inc.(b)
	550,000		7.875			05/01/13		554,620
AmerUs Group Co.
	1,575,000		5.950			08/15/15		1,614,449
AXA Financial, Inc.
	805,000		7.750			08/01/10		870,141
Lincoln National Corp.
	1,000,000		6.200			12/15/11		1,037,898
	1,600,000		7.000	(a)		05/17/66		1,684,254
Phoenix Life Insurance Co.(b)
	2,275,000		7.150			12/15/34		2,458,397
PRICOA Global Funding I(b)
	600,000		4.200			01/15/10		581,152
Reinsurance Group of America, Inc.
	625,000		6.750			12/15/11		656,779
	2,250,000		6.750	(a)		12/15/65		2,234,078
Royal & Sun Alliance Insurance Group PLC
	GBP225,000		8.500			07/29/49		495,939
SL Finance PLC
	EUR650,000		6.375			07/12/22		910,414
The MONY Group, Inc.
$	1,000,000		8.350			03/15/10		1,091,780
ZFS Finance USA Trust I(a)(b)
	1,875,000		6.150			12/15/65		1,885,787
								16,075,688
Media – Cable – 3.4%
Comcast Cable Communications Holdings, Inc.
	575,000		6.875			06/15/09		597,440
	1,350,000		9.455			11/15/22		1,753,378
Cox Communications, Inc.
	850,000		4.625			01/15/10		830,133
Cox Enterprises, Inc.(b)
	3,275,000		4.375			05/01/08		3,215,490
Viacom, Inc.
	850,000		5.750			04/30/11		851,058
								7,247,499
Media – Non-Cable – 0.8%
Clear Channel Communications, Inc.
	1,700,000		8.000			11/01/08		1,772,386
Noncaptive – Financial – 7.7%
American General Finance Corp.(c)
	1,825,000		8.450			10/15/09		1,981,466
Capital One Bank
	325,000		5.000			06/15/09		322,866
Capital One Financial Corp.
	1,775,000		5.700			09/15/11		1,799,573
GATX Financial Corp.
	3,400,000		5.125			04/15/10		3,362,603
MGIC Investment Corp.
	1,300,000		5.625			09/15/11		1,305,811
Nelnet, Inc.(a)
	625,000		7.400			09/29/36		632,443
PHH Corp.
	3,088,000		6.000			03/01/08		3,094,821
	750,000		7.125			03/01/13		766,126

 The accompanying notes are an integral part of these financial statements.

50

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – (continued)
Noncaptive – Financial – (continued)
Waddell & Reed Financial, Inc.
$	3,250,000		5.600	%		01/15/11	$	3,226,555
								16,492,264
Pipelines – 3.3%
Energy Transfer Partners
	1,375,000		5.650			08/01/12		1,377,204
	2,000,000		5.950			02/01/15		2,018,710
Enterprise Products Partners LP
	1,805,000		4.950			06/01/10		1,774,939
	275,000		5.000			03/01/15		259,914
ONEOK Partners LP
	1,375,000		5.900			04/01/12		1,394,715
Panhandle Eastern Pipeline
	150,000		4.800			08/15/08		148,677
								6,974,159
Property/Casualty Insurance – 6.4%
Ace Capital Trust II
	250,000		9.700			04/01/30		341,000
AON Capital Trust A
	1,000,000		8.205			01/01/27		1,162,539
Arch Capital Group Ltd.
	1,245,000		7.350			05/01/34		1,364,362
Aspen Insurance Holdings Ltd.
	1,025,000		6.000			08/15/14		1,003,216
CNA Financial Corp.
	520,000		6.750			11/15/06		520,178
	350,000		6.600			12/15/08		358,427
	1,000,000		5.850			12/15/14		1,006,080
Endurance Specialty Holdings Ltd.
	500,000		6.150			10/15/15		498,033
	775,000		7.000			07/15/34		804,298
Liberty Mutual Group(b)
	2,040,000		7.000			03/15/34		2,110,746
Marsh & McLennan Cos., Inc.
	1,000,000		5.150			09/15/10		958,848
	1,000,000		5.750			09/15/15		963,638
QBE Insurance Group Ltd.(a)(b)
	855,000		5.647			07/01/23		833,613
Symetra Financial Corp.(b)
	1,600,000		6.125			04/01/16		1,622,154
Zurich Capital Trust I(b)
	125,000		8.376			06/01/37		131,347
								13,678,479
REIT – 13.1%
Arden Realty LP
	1,160,000		5.200			09/01/11		1,162,192
BRE Properties Inc.
	3,525,000		7.450			01/15/11		3,792,005
Camden Property Trust
	1,650,000		4.375			01/15/10		1,608,219
Colonial Realty LP
	1,750,000		6.050			09/01/16		1,770,212
EOP Operating LP
	1,692,000		7.750			11/15/07		1,731,475
Health Care Property Investors, Inc.
	1,825,000		5.950			09/15/11		1,845,966
Heritage Property Investment Trust
	885,000		4.500			10/15/09		864,206
iStar Financial, Inc. Series B
	3,200,000		5.700			03/01/14		3,187,117
Liberty Property LP
	225,000		7.750			04/15/09		236,057
Pan Pacific Retail Properties, Inc.
	1,350,000		5.950			06/01/14		1,373,699
Post Apartment Homes LP
	1,500,000		7.700			12/20/10		1,615,518
	3,000,000		6.300			06/01/13		3,091,164
ProLogis
	2,250,000		5.500			04/01/12		2,251,676
Shurgard Storage Centers, Inc.
	2,050,000		7.750			02/22/11		2,217,331
Simon Property Group LP
	200,000		7.000	(c)		06/15/08		205,170
	1,000,000		5.600			09/01/11		1,011,107
								27,963,114
Software – 1.1%
Oracle Corp. and Ozark Holdings, Inc.
	2,400,000		5.000			01/15/11		2,383,697
Technology – 0.7%
First Data Corp.
	1,375,000		5.625			11/01/11		1,405,260
Tobacco – 1.2%
Altria Group, Inc.
	275,000		7.000			11/04/13		301,161
	893,000		7.750			01/15/27		1,095,566
Imperial Tobacco Overseas BV
	1,200,000		7.125			04/01/09		1,244,343
								2,641,070
Wireless Telecommunications – 1.6%
America Movil SA de CV
	800,000		5.500			03/01/14		781,408
AT&T Wireless Services, Inc.
	950,000		7.875			03/01/11		1,041,553
	900,000		8.750			03/01/31		1,178,054
Intelsat
	350,000		5.250			11/01/08		338,625
								3,339,640
Wirelines Telecommunications – 5.1%
Ameritech Capital Funding
	575,000		6.250			05/18/09		583,647
Bellsouth Telecommunications, Inc.
	426,000		6.125			09/23/08		431,306

The accompanying notes are an integral part of these financial statements. 

51

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Schedule of Investments (continued)

October 31, 2006

Principal		Interest			Maturity
Amount*		Rate			Date		Value
Corporate Bonds – (continued)
Wirelines Telecommunications – (continued)
Deutsche Telekom International Finance BV
$	550,000		5.375	%		03/23/11	$	549,053
	1,650,000		8.250			06/15/30		2,047,425
Embarq Corp.
	500,000		7.995			06/01/36		531,700
France Telecom SA
	EUR175,000		8.125			01/28/33		306,842
GTE Corp.
$	1,260,000		7.510			04/01/09		1,319,430
Sprint Capital Corp.
	850,000		6.875			11/15/28		871,986
Telecom Italia Capital
	700,000		4.000			01/15/10		666,728
	1,700,000		4.950			09/30/14		1,576,869
TPSA Finance BV
	350,000		7.750	(b)		12/10/08		365,565
	1,500,000		7.625			01/30/11		1,616,933
								10,867,484
TOTAL CORPORATE BONDS
(Cost $196,719,956)							$	195,920,470
Emerging Markets Debt – 0.4%
Korea Development Bank
$	150,000		5.750	%		09/10/13	$	153,170
VTB Capital (Vneshtorgbank)(a)(b)
	700,000		5.970			08/01/08		700,000
TOTAL EMERGING MARKETS DEBT
(Cost $852,500)							$	853,170
U.S. Treasury Obligations – 0.7%
United States Treasury Bonds
$	900,000		4.500	%		02/15/36	$	865,055
United States Treasury Principal-Only STRIPS(d)
	1,500,000		0.000			11/15/26		573,051
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,390,703)							$	1,438,106
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT — 93.1%
(Cost $198,963,159)							$	198,211,746
Repurchase Agreement(e) – 3.9%
Joint Repurchase Agreement Account II
$	8,300,000		5.316	%		11/01/06	$	8,300,000
Maturity Value: $8,301,226
(Cost $8,300,000)
TOTAL INVESTMENTS — 97.0%
(Cost $207,263,159)							$	206,511,746
OTHER ASSETS IN EXCESS OF LIABILITIES — 3.0%								6,346,826
NET ASSETS — 100.0%							$	212,858,572

The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.

 *    The principal amount of each security is stated in the currency in which the bond is denominated. All amounts shown are in U.S. dollars unless otherwise noted. See below.

Currency Description
EUR	=	Euro Currency
GBP	=	British Pounds

(a)	Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006.
(b)	Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $34,292,346, which represents approximately 16.1% of net assets as of October 31, 2006.
(c)	Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the final maturity dates.
(d)	Security issued with a zero coupon. Income is recognized through the accretion of discount.
(e)	Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55.

Investment Abbreviations:
REIT	—	Real Estate Investment Trust
STRIPS	—	Separate Trading of Registered Interest and Principal of Securities

 The accompanying notes are an integral part of these financial statements.

52

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

ADDITIONAL INVESTMENT INFORMATION

FORWARD FOREIGN CURRENCY CONTRACTS — At October 31, 2006, the Fund had outstanding forward foreign currency exchange contracts, to sell foreign currencies:

Open Forward Foreign Currency	Expiration		Value on		Current		Unrealized
Sale Contract	Date		Settlement Date		Value		Loss
British Pound		11/16/06	$	496,924	$	500,853	$	(3,929	)
Euro		11/29/06		3,051,060		3,074,414		(23,354	)
TOTAL OPEN FORWARD FOREIGN CURRENCY SALE CONTRACT			$	3,547,984	$	3,575,267	$	(27,283	)

FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:

	Number of
	Contracts			Settlement	Market			Unrealized
Type	Long (Short)			Month	Value			Gain (Loss)
Eurodollars		(12	)	March 2007	$	(2,843,400	)	$	27,859
Eurodollars		8		June 2007		1,899,000			1,473
Eurodollars		6		September 2007		1,426,875			1,967
Eurodollars		6		December 2007		1,428,675			2,792
Eurodollars		7		March 2008		1,667,488			3,664
Eurodollars		4		June 2008		952,650			1,986
U.S. Treasury Bonds		21		December 2006		2,365,781			16,368
2 Year U.S. Treasury Notes		(69	)	December 2006		(14,104,031	)		(15,642	)
5 Year U.S. Treasury Notes		(173	)	December 2006		(18,262,313	)		(123,619	)
10 Year U.S. Treasury Notes		102		December 2006		11,038,313			57,261
TOTAL					$	(14,430,962	)	$	(25,891	)

SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:

INTEREST RATE SWAP CONTRACTS

					Rates Exchanged
	Notional				Payments			Payments
Swap	Amount		Termination		received by			made by	Unrealized
Counterparty	(000s)		Date		the Fund			the Fund	Gain (Loss)
Banc of America Securities LLC	$	8,000		09/02/10		4.309	%	3 month LIBOR	$	(212,544	)
Banc of America Securities LLC		5,000		05/23/12		4.374		3 month LIBOR		(118,944	)
Banc of America Securities LLC		7,000		10/19/15		4.965		3 month LIBOR		(79,310	)
Banc of America Securities LLC		4,000		03/19/35		5.288		3 month LIBOR		15,618
Banc of America Securities LLC		2,800		04/09/35		5.266		3 month LIBOR		1,962
TOTAL									$	(393,218	)

LIBOR — London Interbank Offered Rate

The accompanying notes are an integral part of these financial statements. 

53

GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Schedule of Investments (continued)

October 31, 2006

ADDITIONAL INVESTMENT INFORMATION (continued)

CREDIT DEFAULT SWAP CONTRACTS

									Upfront
		Notional		Rate					Payments
		Amount		Paid by			Termination		(received)			Unrealized
Referenced Obligation	Swap Counterparty	(000s)		Fund			Date		by the Fund			Loss
Protection Purchased
First Data Corp. 5.625%, 11/1/2011	J.P. Morgan Securities, Inc.	$	1,300		0.500	%		03/21/11	$	—		$	(9,662	)
First Data Corp. 5.625%, 11/1/2011	J.P. Morgan Securities, Inc.		210		0.250			06/20/11		—			(928	)
Autozone, Inc. 5.875%, 10/15/2012	Bear Stearns & Co., Inc.		2,000		0.680			06/20/11		—			(23,777	)
Bear Stearns Co., Inc. 7.625%, 12/7/2009	J.P. Morgan Securities, Inc.		4,000		0.300			06/20/13		—			(14,806	)
Centex Corp. 5.250%, 6/15/2015	Bear Stearns & Co., Inc.		2,000		0.845			06/20/13		—			(22,822	)
Lowe’s Co., Inc. 8.250%, 6/1/2010	Banc of America Securities LLC		5,000		0.180			06/20/13		—			(1,498	)
Core Investment Grade Bond Trust	Deutsche Bank Securities, Inc.		33,500		0.650			12/20/16		(98,576	)		(134,442	)
TOTAL									$	(98,576	)	$	(207,935	)

 The accompanying notes are an integral part of these financial statements.

54

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

ADDITIONAL INVESTMENT INFORMATION (continued)

JOINT REPURCHASE AGREEMENT ACCOUNT II — At October 31, 2006, the Funds had undivided interests in the Joint Repurchase Agreement Account II, as follows:

Fund	Principal Amount
Government Income	$	112,200,000
U.S. Mortgages		14,600,000
Core Fixed Income		220,000,000
Investment Grade Credit		8,300,000

	Principal		Interest			Maturity	Maturity
Repurchase Agreements	Amount		Rate			Date	Value
ABN Amro, Inc.	$	500,000,000		5.32	%	11/01/06	$	500,073,889
Banc of America Securities LLC		2,750,000,000		5.31		11/01/06		2,750,405,625
Barclays Capital PLC		200,000,000		5.31		11/01/06		200,029,500
Barclays Capital PLC		2,000,000,000		5.32		11/01/06		2,000,295,557
Bear Stearns		500,000,000		5.32		11/01/06		500,073,889
Credit Suisse Securities (USA) LLC		750,000,000		5.32		11/01/06		750,110,834
Greenwich Capital Markets		300,000,000		5.32		11/01/06		300,044,334
Merrill Lynch		500,000,000		5.31		11/01/06		500,073,750
Wachovia Bank		250,000,000		5.31		11/01/06		250,036,875
UBS Securities LLC		2,700,200,000		5.32		11/01/06		2,700,399,027
TOTAL	$	10,450,200,000					$	10,451,543,280

At October 31, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 5.75%, due 12/14/06 to 09/22/15; Federal Home Loan Mortgage Association, 2.35% to 9.50%, due 11/17/06 to 09/01/36; Federal National Mortgage Association, 0.00% to 11.00%, due 11/1/06 to 11/01/36; Government National Mortgage Association, 4.50% to 9.00%, due 10/15/09 to 10/15/36 and U.S. Treasury Notes, 4.25% to 4.88% due 03/31/11 to 01/15/14. The aggregate market value of the collateral, including accrued interest, was $10,679,289,697.

The accompanying notes are an integral part of these financial statements. 

55

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statements of Assets and Liabilities

October 31, 2006

		Government			U.S. Mortgages			Core Fixed			Investment Grade
		Income Fund			Fund			Income Fund			Credit Fund
Assets:
Investments in securities, at value (identified cost $537,624,178, $482,694,739, $2,232,550,739 and $198,963,159, respectively)		$	534,844,155		$	481,474,370		$	2,238,275,835		$	198,211,746
Repurchase agreement, at value			112,200,000			14,600,000			220,000,000			8,300,000
Cash(a)			10,894,581			3,746,965			38,894,865			3,054,450
Foreign currencies, at value (identified cost $687 for Core Fixed Income Fund)			—			—			696			—
Receivables:
	Investment securities sold		14,066,740			36,788,069			51,691,509			3,730,997
	Swap contracts, at value (includes upfront payments made of $3,336,775, $992,119, $10,717,692 and $0, respectively)		5,915,513			1,451,883			21,431,931			17,580
	Interest, at value		3,348,872			1,649,853			16,498,984			3,242,651
	Fund shares sold		844,590			—			6,087,540			—
	Reimbursement from investment adviser		51,652			14,789			—			17,091
	Due from broker		25,438			—			—			—
	Forward foreign currency exchange contracts, at value		—			—			3,020,922			—
Other assets, at value			2,606			1,959			5,530			556
Total assets			682,194,147			539,727,888			2,595,907,812			216,575,071
Liabilities:
Payables:
	Investment securities purchased		37,823,650			105,726,458			204,517,514			2,537,750
	Swap contracts, at value (includes upfront payments received $0, $0, $611,670 and $98,576, respectively)		2,605,091			793,521			9,758,408			717,309
	Fund shares repurchased		2,071,622			56			8,132,099			34
	Income distribution		326,685			301,430			2,812,936			204,021
	Forward foreign currency exchange contracts, at value		—			—			3,965,741			27,283
	Amounts owed to affiliates		482,326			127,174			1,107,084			62,354
	Due to broker		—			184,381			865,292			7,675
Accrued expenses			233,219			189,630			393,218			160,073
Total liabilities			43,543,293			107,322,650			231,552,292			3,716,499
Net Assets:
Paid-in capital			651,009,122			435,025,598			2,383,745,773			218,129,321
Accumulated undistributed (distributions in excess of) net investment income			2,438,600			889,846			(3,125,486	)		277,965
Accumulated net realized loss on investments, futures, swaps and foreign currency related transactions			(12,474,096	)		(1,615,491	)		(21,835,885	)		(4,145,521	)
Net unrealized appreciation (depreciation) on investments, futures, swaps and translation of assets and liabilities denominated in foreign currencies			(2,322,772	)		(1,894,715	)		5,571,118			(1,403,193	)
NET ASSETS		$	638,650,854		$	432,405,238		$	2,364,355,520		$	212,858,572
Net Assets:
	Class A	$	432,761,594		$	6,972,976		$	714,876,529		$	3,420,358
	Class B		18,712,710			—			22,971,472			—
	Class C		16,931,338			—			20,937,147			—
	Institutional		146,783,760			117,497,444			1,558,970,671			3,316,684
	Service		23,461,452			—			46,599,701			—
	Separate Account Institutional Shares		—			307,934,818			—			206,121,530
Shares Outstanding:
	Class A		29,555,889			704,293			72,780,585			343,719
	Class B		1,277,939			—			2,329,026			—
	Class C		1,156,993			—			2,121,786			—
	Institutional		10,035,821			11,852,914			158,124,682			332,724
	Service		1,605,403			—			4,724,351			—
	Separate Account Institutional Shares		—			31,085,655			—			20,691,618
Total shares outstanding, $0.001 par value (unlimited number of shares authorized)			43,632,045			43,642,862			240,080,430			21,368,061
Net asset value, offering and redemption price per share:(b)
	Class A		$14.64		$	9.90		$	9.82		$	9.95
	Class B		14.64			—			9.86			—
	Class C		14.63			—			9.87			—
	Institutional		14.63			9.91			9.86			9.97
	Service		14.61			—			9.86			—
	Separate Account Institutional Shares		—			9.91			—			9.96

(a)

Includes restricted cash of $3,000,000, $450,000 and $275,000, relating to initial margin requirements and collateral on futures transactions for Government Income, U.S. Mortgages and Investment Grade Credit, respectively, and includes restricted cash of $6,519,266, $2,863,549, $33,559,856 and $2,699,840 relating to swap contracts for Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit, respectively.

(b)

Maximum public offering price per share for Class A shares of Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit (NAV per share multiplied by 1.0471) is $15.33, $10.37, $10.28, and $10.42, respectively. At redemption, Class B and Class C shares may be subject to a contingent deferred sales charge, assessed on the amount equal to the lesser of the current net asset value or the original purchase price of the shares.

 The accompanying notes are an integral part of these financial statements.

56

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statements of Operations

For the Year Ended October 31, 2006

		Government			U.S. Mortgages			Core Fixed			Investment Grade
		Income Fund			Fund			Income Fund			Credit Fund
Investment income:
Interest(a)		$	39,267,344		$	23,877,664		$	111,009,476		$	11,993,578
Total income			39,267,344			23,877,664			111,009,476			11,993,578
Expenses:
Management fees			4,481,364			1,917,539			8,316,527			854,824
Distribution and Service fees(b)			2,036,968			19,601			2,226,502			9,551
Transfer Agent fees(b)			1,169,147			201,163			1,771,193			90,067
Custody and accounting fees			315,453			311,423			474,492			118,412
Printing fees			103,089			81,586			200,539			63,015
Registration fees			146,339			43,728			125,688			40,583
Professional fees			77,345			77,345			117,651			80,039
Service share fees			95,515			49,742			197,790			3,665
Trustee fees			16,201			16,201			16,201			16,201
Other			120,745			34,572			142,820			23,050
Total expenses			8,562,166			2,752,900			13,589,403			1,299,407
Less — expense reductions			(813,458	)		(1,010,624	)		(212,151	)		(527,076	)
Net expenses			7,748,708			1,742,276			13,377,252			772,331
NET INVESTMENT INCOME			31,518,636			22,135,388			97,632,224			11,221,247
Realized and unrealized gain (loss) on investment, futures, swaps and foreign currency related transactions:
Net realized gain (loss) from:
	Investment transactions		(7,881,384	)		(37,744	)		(8,333,961	)		(2,672,331	)
	Futures transactions		(4,241,535	)		(146,131	)		(6,593,357	)		578,868
	Swap contracts		(2,001,989	)		(158,362	)		(8,178,308	)		(1,693,487	)
	Foreign currency related transactions		—			—			(7,245,498	)		(183,354	)
Net change in unrealized gain (loss) on:
	Investments		6,699,801			4,348,418			26,190,788			3,714,878
	Futures		303,462			(167,971	)		(850,613	)		(225,191	)
	Swap contracts		4,337,671			926,943			13,975,767			4,912
	Translation of assets and liabilities denominated in foreign currencies		—			—			(2,168,739	)		(25,150	)
Net realized and unrealized gain (loss) on investment, futures, swaps and foreign currency related transactions			(2,783,974	)		4,765,153			6,796,079			(500,855	)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	28,734,662		$	26,900,541		$	104,428,303		$	10,720,392

(a)	Net of $1,269 in foreign withholding tax for the Investment Grade Credit Fund.
(b)	Class specific Distribution and Service and Transfer Agent fees were as follows:

	Distribution and Service Fees						Transfer Agent Fees												Service Share Fees
																	Separate				Separate
																	Account				Account
Fund	Class A		Class B		Class C		Class A		Class B		Class C		Institutional		Service		Institutional		Service		Institutional
Government Income	$	1,646,136	$	213,883	$	176,949	$	1,053,527	$	34,221	$	28,312	$	45,446	$	7,641		—		—		—
U.S. Mortgages		19,601		—		—		12,546		—		—		36,657		—	$	151,960	$	45,822	$	3,920
Core Fixed Income		1,757,491		253,996		215,015		1,124,795		40,639		34,403		555,533		15,823		—		—		—
Investment Grade Credit		9,551		—		—		6,113		—		—		1,404		—		82,550		1,755		1,910

The accompanying notes are an integral part of these financial statements. 

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statements of Changes in Net Assets

		Government Income Fund
		For the			For the
		Year Ended			Year Ended
		October 31, 2006			October 31, 2005
From operations:
Net investment income		$	31,518,636		$	20,216,131
Net realized gain (loss) on investment, futures, swaps and foreign currency related transactions			(14,124,908	)		4,302,059
Net change in unrealized gain (loss) on investments, futures, swaps and translation of assets and liabilities denominated in foreign currencies			11,340,934			(19,757,697	)
Net increase (decrease) in net assets from operations			28,734,662			4,760,493
Distributions to shareholders:
From net investment income
	Class A Shares		(24,629,669	)		(15,966,212	)
	Class B Shares		(650,709	)		(533,992	)
	Class C Shares		(542,468	)		(370,892	)
	Institutional Shares		(4,808,529	)		(1,564,131	)
	Service Shares		(711,718	)		(322,759	)
	Separate Account Institutional Shares		—			—
From net realized gains
	Class A Shares		(160,181	)		(5,845,096	)
	Class B Shares		(5,062	)		(362,623	)
	Class C Shares		(3,803	)		(237,517	)
	Institutional Shares		(12,822	)		(745,239	)
	Service Shares		(3,776	)		(116,638	)
	Separate Account Institutional Shares		—			—
From capital
	Class A Shares		—			—
	Class B Shares		—			—
	Class C Shares		—			—
	Institutional Shares		—			—
	Service Shares		—			—
Total distributions to shareholders			(31,528,737	)		(26,065,099	)
From share transactions:
Net proceeds from sales of shares			490,086,040			452,723,542
Proceeds received in connection with merger			—			—
Reinvestment of dividends and distributions			28,194,885			24,158,646
Cost of shares repurchased			(727,312,932	)		(232,780,488	)
Net increase (decrease) in net assets resulting from share transactions			(209,032,007	)		244,101,700
TOTAL INCREASE (DECREASE)			(211,826,082	)		222,797,094
Net assets:
Beginning of year			850,476,936			627,679,842
End of year		$	638,650,854		$	850,476,936
Accumulated undistributed (distributions in excess of) net investment income		$	2,438,600		$	5,254,578

 The accompanying notes are an integral part of these financial statements.

58

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

U.S. Mortgages Fund						Core Fixed Income Fund						Investment Grade Credit Fund
For the			For the			For the			For the			For the			For the
Year Ended			Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2006			October 31, 2005			October 31, 2006			October 31, 2005			October 31, 2006			October 31, 2005
$	22,135,388		$	11,749,541		$	97,632,224		$	56,281,074		$	11,221,247		$	6,144,224
	(342,237	)		1,244,830			(30,351,124	)		24,313,407			(3,970,304	)		(506,457	)
	5,107,390			(7,922,884	)		37,147,203			(58,064,406	)		3,469,449			(5,666,468	)
	26,900,541			5,071,487			104,428,303			22,530,075			10,720,392			(28,701	)
	(327,343	)		(315,229	)		(27,592,559	)		(22,356,546	)		(173,533	)		(140,714	)
	—			—			(809,299	)		(883,632	)		—			—
	—			—			(683,475	)		(672,754	)		—			—
	(4,165,860	)		(3,367,214	)		(59,364,208	)		(40,113,425	)		(173,199	)		(95,385	)
	—			—			(1,497,789	)		(1,048,118	)		—			—
	(17,156,726	)		(9,159,690	)		—			—			(10,283,179	)		(5,873,577	)
	—			(13,456	)		(4,057,820	)		(6,881,068	)		—			(8,899	)
	—			—			(173,446	)		(394,357	)		—			—
	—			—			(143,326	)		(302,043	)		—			—
	—			(2,109,001	)		(6,915,957	)		(10,458,548	)		—			(269,174	)
	—			(1,830,428	)		(198,051	)		(285,885	)		—			—
	—			—			—			—			—			(293	)
	—			—			(666,129	)		—			—			—
	—			—			(19,538	)		—			—			—
	—			—			(16,500	)		—			—			—
	—			—			(1,433,147	)		—			—			—
	—			—			(36,159	)		—			—			—
	(21,649,929	)		(16,795,018	)		(103,607,403	)		(83,396,376	)		(10,629,911	)		(6,388,042	)
	293,021,211			584,326,694			1,051,438,670			958,769,563			68,516,397			181,422,818
	—			—			230,276,588			73,493,151			—			—
	18,063,365			13,333,622			70,943,055			57,569,645			8,219,129			5,592,276
	(353,767,406	)		(338,784,172	)		(829,727,761	)		(648,011,975	)		(63,423,525	)		(53,666,553	)
	(42,682,830	)		258,876,144			522,930,552			441,820,384			13,312,001			133,348,541
	(37,432,218	)		247,152,613			523,751,452			380,954,083			13,402,482			126,931,798
	469,837,456			222,684,843			1,840,604,068			1,459,649,985			199,456,090			72,524,292
$	432,405,238		$	469,837,456		$	2,364,355,520		$	1,840,604,068		$	212,858,572		$	199,456,090
$	889,846		$	(75,909	)	$	(3,125,486	)	$	(695,234	)	$	277,965		$	119,287

The accompanying notes are an integral part of these financial statements. 

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements

October 31, 2006

1. ORGANIZATION

Goldman Sachs Trust (the “Trust”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes Goldman Sachs Government Income Fund (“Government Income”), Goldman Sachs U.S. Mortgages Fund (“U.S. Mortgages”), Goldman Sachs Core Fixed Income Fund (“Core Fixed Income”) and Goldman Sachs Investment Grade Credit Fund (“Investment Grade Credit”) (collectively, the “Funds” or individually a “Fund”). Each Fund is a diversified portfolio of the Trust. U.S. Mortgages and Investment Grade Credit offer three classes of shares — Class A, Institutional and Separate Account Institutional. Government Income and Core Fixed Income offer five classes of shares — Class A, Class B, Class C, Institutional and Service. Class A shares of the Funds charge a maximum initial sales charge of 4.50%. The contingent deferred sales charge for Class B shares is 5.00% maximum declining to zero after six years for Government Income and Core Fixed Income. The Class C shares of Government Income and Core Fixed Income have a contingent deferred sales charge of 1.00% during the first 12 months. Institutional, Service and Separate Account Institutional shares are not subject to a sales charge. Goldman, Sachs & Co. (“Goldman Sachs”) as distributor of the Funds receives such sales loads of which a certain portion may be retained.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Funds. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Portfolio securities for which market quotations are readily available are valued at market value on the basis of quotations furnished by a pricing service or provided by dealers in such securities. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Portfolio securities for which market quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued based on yield equivalents, pricing matrices or other sources, under valuation procedures established by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted. Net investment income (other than class specific expenses) and unrealized and realized gains or losses are allocated daily to each class of shares of the respective Funds based upon the relative proportion of net assets of each class.

     Certain mortgage security paydown gains and losses are recorded as interest income (loss) and are included in interest income in the accompanying Statements of Operations. Original issue discounts (OID) on debt securities are accreted to interest income over the life of the security with a corresponding increase in the cost basis of that security. Market discounts and market premiums on debt securities are accreted/amortized to interest income over the expected life of the security with a corresponding adjustment in the cost basis of that security.

     Pursuant to applicable law and procedures adopted by the Trust’s Board of Trustees, securities transactions in portfolio securities (including futures transactions) may be effected from time to time through Goldman Sachs or an affiliate. In order for Goldman Sachs or an affiliate, acting as agent, to effect securities or futures transactions for a Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the commissions, fees or other remuneration received by other brokers in connection with comparable transactions involving similar securities or futures contracts.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Funds on a straight-line or “pro-rata” basis depending upon the nature of the expense.

     Class A, Class B and Class C shareholders of the Funds bear all expenses and fees relating to their respective Distribution and Service Plans. Service Shares bear all expenses and fees relating to their Service and Shareholder

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Administration Plans. Each class of shares of the Funds separately bear its respective class-specific Transfer Agency fees. Class A and Institutional shareholders of U.S. Mortgages and Investment Grade Credit bear their respective class specific Account Services fees.

D. Federal Taxes and Distribution to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable and tax-exempt income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. Net capital losses are carried forward to future years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gain distributions.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules, which may differ from U.S. generally accepted accounting principles. Therefore, the source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gains, or as a tax return of capital.

E. Foreign Currency Translations — The books and records of the Funds are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valuations, foreign currency and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.

     Net realized and unrealized gain (loss) on foreign currency transactions will represent: (i) foreign exchange gains and losses from the sale and holdings of foreign currencies; (ii) gains and losses from the sale of investments (applicable to fixed income securities); (iii) currency gains and losses between trade date and settlement date on investment securities transactions and forward exchange contracts; and (iv) gains and losses from the difference between amounts of interest, dividends and foreign withholding taxes recorded and the amounts actually received. The effect of changes in foreign currency exchange rates on securities and derivative instruments are segregated in the Statements of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain (loss) on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized gain (loss) on foreign currency related transactions.

F. Forward Foreign Currency Exchange Contracts — Core Fixed Income and Investment Grade Credit may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific transactions or portfolio positions. Core Fixed Income and Investment Grade Credit may also purchase and sell forward contracts to seek to increase total return. All commitments are “marked-to-market” daily at the applicable translation rates and any resulting unrealized gains or losses are recorded in the Funds’ financial statements. Core Fixed Income and Investment Grade Credit record realized gains or losses at the time a forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

     The contractual amounts of forward foreign currency exchange contracts do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. At October 31, 2006, Core Fixed Income and Investment Grade Credit had segregated sufficient cash and/or securities to cover any commitments under these contracts.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

G. Forward Sales Contracts — The Funds may enter into forward security sales of mortgage-backed securities in which the Funds sell securities in the current month for delivery of securities defined by pool-stipulated characteristics on a specified future date. The value of the contract is recorded as an asset and a liability on the Funds’ records with the difference between its market value and expected cash proceeds recorded as an unrealized gain or loss. Gains or losses are realized upon delivery of the security sold.

H. Futures Contracts — The Funds may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Funds are required to segregate cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Funds, dependent on the fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Funds realize a gain or loss which is reported in the Statements of Operations.

     The use of futures contracts involve, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statements of Assets and Liabilities. Changes in the value of a futures contract may not directly correlate with changes in the value of the underlying securities. These risks may decrease the effectiveness of the Funds’ strategies and potentially result in a loss.

I. Mortgage Dollar Rolls — The Funds may enter into mortgage “dollar rolls” in which the Funds sell securities in the current month for delivery and simultaneously contract with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. For financial reporting and tax reporting purposes, the Funds treat mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate transaction involving a sale.

     During the settlement period between sale and repurchase, the Funds will not be entitled to accrued interest and/or receive principal payments on the securities sold. Dollar roll transactions involve the risk that the market value of the securities sold by the Funds may decline below the repurchase price of those securities. In the event the buyer of the securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Funds’ use of proceeds of the transaction may be restricted pending a determination by, or with respect to, the other party.

J. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase the securities at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Funds, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Funds may be delayed or limited and there may be a decline in the value of the collateral during the period while the Funds seek to assert their rights. The underlying securities for all repurchase agreements are held in safekeeping at the Funds’ custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and terms and conditions contained therein, the Funds, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“GSAM”), or its affiliates, may transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements.

K. Securities purchased on a when-issued or delayed-delivery basis — The Funds may purchase securities on a when-issued or delayed-delivery basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these

62

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. In addition to the normal credit and market risks, transactions with delayed settlement dates may expose the Funds to greater risk that such transactions may not be consummated.

L. Segregation Transactions — As set forth in the prospectus, the Funds may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, swap contracts, written options, mortgage dollar rolls, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Funds are required to segregate liquid assets with a current value equal to or greater than the market value of the corresponding transactions.

M. Swap Contracts — The Funds may enter into swap transactions for hedging purposes or to seek to increase total return. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net payment to be received by the Funds, and/or the termination value at the end of the contract. Therefore, the Funds consider the creditworthiness of each counterparty to a contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. Entering into these agreements involves, to varying degrees, market, liquidity, elements of credit, legal and documentation risk in excess of amounts recognized in the Statement of Assets and Liabilities. The Funds may invest in the following types of swaps;

     An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specific prices, rates or indices for a specified amount of an underlying notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.

     A total return swap is an agreement that gives the Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty.

     Credit default swap agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically a corporate issuer on its obligation. A Fund may use credit default swaps to provide a measure of protection against defaults of a corporate issuer or to take an active long or short position with respect to the likelihood of a particular issuer’s default. As a seller of protection, a Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. If the Fund enters into a buy contract and no credit event occurs, its exposure is limited to the periodic payments previously made to the counterparty. In addition, if the Fund enters into a sale contract and a credit event occurs, the value of the referenced obligation received by the Fund reduced by the period payments previously received may be less than the maximum payment it pays to the counterparty, resulting in a loss to the Fund.

     Swaps are marked to market daily using either pricing vendor quotations, counterparty prices or models prices and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. An upfront payment made and/or received by the Funds, is recorded as an asset and/or liability on the Statement of Assets and Liabilities and is only recorded as a realized gain or loss when either the contract’s term ends or, with respect to a Credit Default Swap, a credit event occurs. Periodic payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are also realized upon early termination of the swap agreements.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

N. Treasury Inflation-Protected Securities — The Funds may invest in Treasury Inflation-Protected Securities (“TIPS”), specially structured bonds in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index (“CPI”). The adjustments for interest income due to inflation are reflected in interest income on the Statements of Operations. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.

3. AGREEMENTS

GSAM, an affiliate of Goldman Sachs, serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Funds. Under the Agreement, GSAM manages the Funds, subject to the general supervision of the Trust’s Board of Trustees.

     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Funds’ business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”), computed daily and payable monthly, equal to an annual percentage rate of each Fund’s average daily net assets.

     For the period from February 28, 2006 through October 31, 2006, GSAM received a Management fee on a contractual basis at the following rates:

	Government						Core Fixed			Investment
Average Daily Net Assets	Income			U.S. Mortgages1			Income			Grade Credit1
Up to $1 billion		0.54	%		0.40	%		0.40	%		0.40	%
Next $1 billion		0.49			0.36			0.36			0.36
Over $2 billion		0.47			0.34			0.34			0.34

¹  GSAM has voluntarily agreed not to impose a portion of the Management fee on U.S. Mortgages and Investment Grade Credit Funds equal to 0.07% and 0.07%, respectively, of such Funds’ average daily net assets. As a result of fee waiver, the current Management fees of the U.S. Mortgages and Investment Credit Funds is 0.33% and 0.33%, respectively, of such Funds’ average daily net assets.

     Prior to February 28, 2006, the contractual Management fee for Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit as an annual percentage rate of average daily net assets was 0.54%, 0.40%, 0.40% and 0.40%, respectively. For the period prior to February 28, 2006, GSAM entered into a voluntary fee reduction commitment for the Funds, in order to achieve the rates in the above table.

     GSAM has also voluntarily agreed to limit certain “Other Expenses” (excluding Management fees, Distribution and Service fees, Transfer Agency fees and expenses, Service Share fees, Account Service fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended October 31, 2006, the Other Expense limitations for Government Income, U.S. Mortgages, Core Fixed Income, and Investment Grade Credit as an annual percentage rate of average daily net assets were 0.004%, 0.004%, 0.104% and 0.004%, respectively.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

3. AGREEMENTS (continued)

     The Trust, on behalf of each Fund, has adopted Distribution and Service Plans. Under the Plans, Goldman Sachs and/or authorized dealers are entitled to a monthly fee for distribution services equal to, on an annual basis, 0.25% of the average daily net assets of U.S. Mortgages and Investment Grade Credit attributable to Class A shares and 0.025%, 0.75% and 0.75% the average daily net assets of the Government Income and Core Fixed Income attributable to Class A, Class B and Class C shares, respectively. Additionally, Goldman Sachs and/or authorized dealers are entitled to receive, under the Plans, a separate fee for personal and account maintenance services equal to, on an annual basis, 0.25% of the average daily net assets of Government Income and Core Fixed Income attributable to Class B or Class C Shares.

     Goldman Sachs serves as Distributor of the shares of the Funds pursuant to a Distribution Agreement. Goldman Sachs may retain a portion of the Class A sales load and Class B and Class C contingent deferred sales charges. During the year ended October 31, 2006, Goldman Sachs advised the Funds that it retained the following approximate amounts:

			Contingent Deferred
	Sales Load		Sales Charge
Fund	Class A		Class B		Class C
Government Income	$	35,800	$	200	$	8,900
U.S. Mortgages		100		—		—
Core Fixed Income		137,800		—		100
Investment Grade Credit		900		—		—

     Goldman Sachs also serves as Transfer Agent of the Funds for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly at an annual rate as follows: 0.16% of the average daily net assets for Class A, Class B and Class C Shares and 0.04% of the average daily net assets for Separate Account Institutional (U.S. Mortgages and Investment Grade Credit only), Institutional and Service shares (Government Income and Core Fixed Income only). For the year ended October 31, 2006, Goldman Sachs has voluntarily agreed to waive a portion of the Transfer Agent fees equal to 0.02% of the average daily net assets attributable to Institutional and Separate Account Institutional Shares of U.S. Mortgages and Investment Grade Credit. Goldman Sachs may discontinue or modify this waiver in the future at its discretion.

     The Trust, on behalf of Government Income and Core Fixed Income, has adopted a Service Plan and a Shareholder Administration Plan for Service Shares. These plans allow for Service Shares to compensate service organizations for providing varying levels of personal and account administration and shareholder administration services to their customers who are beneficial owners of such shares. The Service Plan and Shareholder Administration Plan provide for compensation to the service organizations in an amount equal to, on an annualized basis, 0.25% and 0.25% respectively, of the average daily net assets of each share class. The Trust, on behalf of Class A and Institutional Class Shares of U.S. Mortgages and Investment Grade Credit Funds, has adopted Account Service Plans. Under these plans, Goldman Sachs and authorized dealers are entitled to receive a fee for account service and account maintenance equal to, on an annual basis, 0.05% of the average daily net assets of U.S. Mortgages and Investment Grade Credit Funds attributable to Class A and Institutional Class Shares.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

3. AGREEMENTS (continued)

     For the year ended October 31, 2006, GSAM and the Distributor have voluntarily agreed to waive certain fees and reimburse other expenses. In addition, the Funds have entered into certain offset arrangements with the custodian and transfer agent resulting in a reduction of the Funds’ expenses. For the year ended October 31, 2006, expense reductions were as follows (in thousands):

	Fee Waivers						Fee Credits
	Management		Transfer		Other Expense				Transfer		Total Expense
Fund	Fees		Agent Fees		Reimbursement		Custody Fee		Agent Fee		Reductions
Government Income	$	—	$	—	$	746	$	21	$	46	$	813
U.S. Mortgages		336		94		546		34		1		1,011
Core Fixed Income		117		—		—		48		47		212
Investment Grade Credit		149		42		333		3		—		527

     At October 31, 2006, the amounts owed to affiliates of the Trust were as follows (in thousands):

	Management		Distribution and		Transfer
Fund	Fees		Service Fees		Agent Fees		Total
Government Income	$	291	$	122	$	69	$	482
U.S. Mortgages		118		1		8		127
Core Fixed Income		754		193		160		1,107
Investment Grade Credit		58		1		3		62

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long-term securities for the year ended October 31, 2006 were as follows:

					Sales and		Sales and Maturities
	Purchases of		Purchases		Maturities of		(Excluding
	U.S. Government		(Excluding		U.S. Government		U.S. Government
	and Agency		U.S. Government and		and Agency		and Agency
Fund	Obligations		Agency Obligations)		Obligations		Obligations)
Government Income	$	5,856,214,906	$	153,036,227	$	6,013,828,136	$	132,440,229
U.S. Mortgages		9,331,554,238		155,752,252		9,366,360,741		67,312,909
Core Fixed Income		11,371,326,934		969,701,773		11,522,181,489		276,889,510
Investment Grade Credit		20,297,224		152,242,825		22,747,980		140,591,630

     For the year ended October 31, 2006, Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit paid commissions of approximately $69,500, $35,000, $154,300 and $17,700, respectively, in connection with futures contracts entered into with Goldman Sachs.

5. LINE OF CREDIT FACILITY

The Funds participate in a $400,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Funds must own securities having a market value in excess of 300% of each Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. The committed facility also requires a fee to be paid by the Funds based on the amount of the commitment that has not been utilized. For the year ended October 31, 2006, the Funds did not have any borrowings under this facility.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

6. TAX INFORMATION

The tax character of distributions paid during the fiscal year ended October 31, 2006 was as follows:

		Government		U.S.		Core Fixed		Investment Grade
		Income		Mortgages		Income		Credit
Distributions paid from:
Ordinary Income		$	31,528,737	$	21,649,929	$	96,989,608	$	10,629,911
Net long-term capital gains			—		—		4,446,322		—
	Total taxable distributions	$	31,528,737	$	21,649,929	$	101,435,930	$	10,629,911
	Tax return of capital		—		—	$	2,171,473		—

     The tax character of distributions paid during the fiscal year ended October 31, 2005 was as follows:

		Government		U.S.		Core Fixed		Investment Grade
		Income		Mortgages		Income		Credit
Distributions paid from:
Ordinary Income		$	19,974,907	$	15,374,235	$	70,913,539	$	6,245,239
Net long-term capital gains			6,090,192		1,420,783		12,482,837		142,803
	Total taxable distributions	$	26,065,099	$	16,795,018	$	83,396,376	$	6,388,042

     As of October 31, 2006, the components of accumulated earnings (losses) on a tax basis were as follows.

		Government			U.S.			Core Fixed			Investment Grade
		Income			Mortgages			Income			Credit
Undistributed ordinary income — net		$	1,392,480		$	1,241,148			—		$	373,244
Capital loss carryforward:(1)
	Expiring 2013		—			(936,118	)		—			(419,693	)
	Expiring 2014		(11,925,097	)		(978,868	)	$	(22,304,650	)		(3,690,267	)
Total capital loss carryforward		$	(11,925,097	)	$	(1,914,986	)	$	(22,304,650	)	$	(4,109,960	)
Timing differences (dividends payable, straddles)			(326,685	)		(311,786	)		(2,837,105	)		(251,423	)
Unrealized gains (losses) — net			(1,498,966	)		(1,634,736	)		5,751,502			(1,282,610	)
Total accumulated losses — net			(12,358,268	)		(2,620,360	)		(19,390,253	)		(5,270,749	)

(1)  Expiration occurs on October 31 of the year indicated.

     As of October 31, 2006, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:

	Government			U.S.			Core Fixed			Investment
	Income			Mortgages			Income			Grade Credit
Tax Cost	$	648,829,287		$	497,319,082		$	2,452,843,664		$	207,192,082
Gross unrealized gain		3,674,616			1,832,727			16,427,625			1,704,286
Gross unrealized loss		(5,459,748	)		(3,077,439	)		(10,995,454	)		(2,384,622	)
Net unrealized security gain (loss)	$	(1,785,132	)	$	(1,244,712	)	$	5,432,171		$	(680,336	)
Net unrealized gain (loss) on other investments	$	286,166		$	(390,024	)	$	319,331		$	(602,274	)
Net unrealized gain (loss)		(1,498,966	)		(1,634,736	)		5,751,502			(1,282,610	)

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

6. TAX INFORMATION (continued)

     The differences between book-basis and tax-basis unrealized gains (losses) is attributable to wash sales, differences related to the tax treatment of non-periodic swap payments, amortization of swaps, market discount accretion and premium amortization and mark-to-market gains (losses) on 1256 futures contracts.

     In order to present certain components of the Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Funds’ accounts. These reclassifications have no impact on the net asset value of the Funds. Reclassifications result primarily from the difference in the tax treatment of foreign currency, swap transactions, and tax treatment of certain bonds.

						Accumulated
			Accumulated			Undistributed
			Net Realized			Net Investment
Fund	Paid-in-Capital		Gain (Loss)			Income
Government Income	$	1,062,705	$	1,928,816		$	(2,991,521	)
U.S. Mortgages		—		(480,292	)		480,292
Core Fixed Income		1,103,311		9,011,835			(10,115,146	)
Investment Grade Credit		—		432,658			(432,658	)

7. OTHER MATTERS

As of October 31, 2006 the Goldman Sachs Growth and Income Strategy Portfolio was the beneficial owner of approximately 3% of the outstanding shares of the Core Fixed Income.

Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds (including these Funds) and the Trustees and Officers of the Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. These Funds, along with certain other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, the plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals in similar litigation.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuit will have a material adverse financial impact on the Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

7. OTHER MATTERS (continued)

Mergers and Reorganizations — At a meeting held on November 4, 2004, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Expedition Agreement”) providing for the tax-free acquisition of the Expedition Investment Grade Bond Fund by Core Fixed Income. The acquisition was completed on February 25, 2005.

     Pursuant to the Expedition Agreement, the assets and liabilities of the Expedition Investment Grade Bond Fund (“Acquired Fund”) Class A, Class B and Institutional Class were transferred into the Goldman Sachs Core Fixed Income (“Survivor Fund”) Class A, Class B and Institutional Class, respectively, in a tax-free exchange as follows:

	Exchanged Shares				Acquired Fund’s
	of Survivor		Value of		Shares Outstanding
Survivor Share Class/Acquired Fund Share Class	Issued		Exchanged Shares		as of February 25, 2005
Core Fixed Income Class A/Expedition Investment Grade Bond Fund Class A		443,072	$	4,452,854		430,741
Core Fixed Income Class B/Expedition Investment Grade Bond Fund Class B		168,369		1,698,846		163,996
Core Fixed Income Institutional Class/Expedition Investment Grade Bond Fund Institutional Class		6,680,820		67,342,702		6,509,242

     The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.

							Survivor Fund’s
	Survivor Fund’s		Acquired Fund’s				Aggregate
	Aggregate		Aggregate		Acquired		Net Assets
	Net Assets		Net Assets		Fund’s		Immediately
	Before		Before		Unrealized		After
Survivor/Acquired Fund	Acquisition		Acquisition		Appreciation		Acquisition
Core Fixed Income/Expedition Investment Grade Bond Fund	$	1,459,857,120	$	73,494,402	$	4,701,480	$	1,533,351,522

     At a meeting held on December 14, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “First Funds Agreement”) providing for the tax-free acquisition of the First Funds Intermediate Bond Portfolio by Core Fixed Income. On April 7, 2006, the Board of Trustees approved certain amendments to the First Funds Agreement. The acquisition was completed on June 5, 2006, as of the close of business June 2, 2006.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

7. OTHER MATTERS (continued)

     Pursuant to the First Funds Agreement, the assets and liabilities of the First Funds Intermediate Bond Portfolio (“Acquired Fund”) Institutional Class, Class A, Class B and Class C were transferred into the Core Fixed Income (“Survivor Fund”) Institutional Class and Class A, respectively, in a tax free exchange as follows:

					Acquired Fund’s
					Shares
	Exchanged Shares of		Value of Exchanged		Outstanding as of
Survivor Share Class/Acquired Fund Share Class	Survivor Issued		Shares		June 2, 2006
Core Fixed Income Institutional Class/First Funds Intermediate Bond Portfolio Institutional Class		23,256,054	$	225,816,117		22,869,788
Core Fixed Income Class A/First Fund Intermediate Bond Portfolio Class A		249,590		2,413,528		244,781
Core Fixed Income Class A/First Funds Intermediate Bond Portfolio Class B		32,136		310,758		31,472
Core Fixed Income Class A/First Funds Intermediate Bond Portfolio Class C		179,544		1,736,185		175,687

     The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized depreciation.

	Survivor Fund’s		Acquired Fund’s				Survivor Fund’s
	Aggregate Net		Aggregate Net		Acquired Fund’s		Aggregate Net
	Assets Before		Assets Before		Unrealized		Assets Immediately
Survivor/Acquired Fund	Acquisition		Acquisition		Depreciation		After Acquisition
Core Fixed Income/First Funds Intermediate Bond Portfolio	$	2,168,716,107	$	230,276,588	$	5,005,096	$	2,398,992,695

New Accounting Pronouncements — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, the adviser is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.

     On September 15, 2006, FASB released Statement Financial Accounting Standard No. 157 “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adviser does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

8. SUMMARY OF SHARE TRANSACTIONS

Share activity is as follows:

	Government Income Fund
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		19,006,196		$	276,486,239			25,751,238		$	380,364,618
Shares converted from Class B(a)		71,331			1,040,729			31,509			463,949
Reinvestment of dividends and distributions		1,574,240			22,857,034			1,408,483			20,800,018
Shares repurchased		(41,202,955	)		(593,696,503	)		(10,066,631	)		(148,602,957	)
		(20,551,188	)		(293,312,501	)		17,124,599			253,025,628
Class B Shares
Shares sold		131,172			1,901,404			138,121			2,040,240
Reinvestment of dividends and distributions		33,925			492,693			44,355			655,380
Shares converted to Class A(a)		(71,326	)		(1,040,729	)		(31,509	)		(463,949	)
Shares repurchased		(523,718	)		(7,594,308	)		(627,907	)		(9,275,437	)
		(429,947	)		(6,240,940	)		(476,940	)		(7,043,766	)
Class C Shares
Shares sold		273,958			3,976,041			362,664			5,356,965
Reinvestment of dividends and distributions		28,527			414,100			33,061			488,032
Shares repurchased		(429,252	)		(6,230,332	)		(497,938	)		(7,351,325	)
		(126,767	)		(1,840,191	)		(102,213	)		(1,506,328	)
Institutional Shares
Shares sold		13,235,776			192,106,435			3,678,638			53,949,896
Reinvestment of dividends and distributions		285,861			4,144,669			129,590			1,911,519
Shares repurchased		(7,659,473	)		(111,004,132	)		(4,293,634	)		(63,362,003	)
		5,862,164			85,246,972			(485,406	)		(7,500,588	)
Service Shares
Shares sold		1,077,215			15,615,921			745,365			11,011,823
Reinvestment of dividends and distributions		19,752			286,389			20,599			303,697
Shares repurchased		(605,504	)		(8,787,657	)		(284,114	)		(4,188,766	)
		491,463			7,114,653			481,850			7,126,754
NET INCREASE (DECREASE)		(14,754,275	)	$	(209,032,007	)		16,541,890		$	244,101,700

(a)   Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

8. SUMMARY OF SHARE TRANSACTIONS (continued)

	U.S. Mortgages Fund
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		74,629		$	736,840			5,019,581		$	50,101,170
Reinvestment of dividends and distributions		32,146			315,209			24,573			244,529
Shares repurchased		(208,971	)		(2,050,018	)		(4,299,105	)		(42,967,447	)
		(102,196	)		(997,969	)		745,049			7,378,252
Institutional Shares
Shares sold		4,996,084			49,157,500			4,946,142			49,304,140
Reinvestment of dividends and distributions		365,157			3,584,728			295,772			2,952,261
Shares repurchased		(1,103,686	)		(10,910,941	)		(9,444,926	)		(93,957,727	)
		4,257,555			41,831,287			(4,203,012	)		(41,701,326	)
Separate Account Institutional Shares
Shares sold		24,833,736			243,126,871			48,765,071			484,921,384
Reinvestment of dividends and distributions		1,443,931			14,163,428			1,017,500			10,136,832
Shares repurchased		(34,651,048	)		(340,806,447	)		(20,254,960	)		(201,858,998	)
		(8,373,381	)		(83,516,148	)		29,527,611			293,199,218
NET INCREASE (DECREASE)		(4,218,022	)	$	(42,682,830	)		26,069,648		$	258,876,144

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Notes to Financial Statements (continued)

October 31, 2006

8. SUMMARY OF SHARE TRANSACTIONS (continued)

	Core Fixed Income Fund
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		33,915,411		$	330,454,717			35,960,982		$	361,963,182
Shares issued in connection with merger		461,270			4,460,471			443,072			4,452,854
Shares converted from Class B(a)		94,032			918,118			46,202			464,412
Reinvestment of dividends and distributions		2,859,107			27,907,378			2,464,922			24,786,186
Shares repurchased		(31,237,706	)		(304,040,411	)		(23,268,765	)		(233,859,094	)
		6,092,114			59,700,273			15,646,413			157,807,540
Class B Shares
Shares sold		413,768			4,040,182			415,966			4,202,378
Shares issued in connection with merger		—			—			168,245			1,697,595
Reinvestment of dividends and distributions		80,189			786,518			95,011			959,791
Shares converted to Class A(a)		(93,649	)		(918,118	)		(46,019	)		(464,412	)
Shares repurchased		(1,008,157	)		(9,859,452	)		(811,301	)		(8,186,679	)
		(607,849	)		(5,950,870	)		(178,098	)		(1,791,327	)
Class C Shares
Shares sold		861,312			8,439,976			941,827			9,522,000
Reinvestment of dividends and distributions		75,872			744,534			86,409			872,871
Shares repurchased		(1,179,491	)		(11,563,276	)		(1,028,149	)		(10,392,335	)
		(242,307	)		(2,378,766	)		87			2,536
Institutional Shares
Shares sold		70,215,331			684,433,513			55,776,185			561,484,946
Shares issued in connection with merger		23,256,054			225,816,117			6,680,820			67,342,702
Reinvestment of dividends and distributions		4,149,150			40,632,934			2,981,398			30,085,346
Shares repurchased		(50,393,455	)		(494,390,692	)		(38,187,685	)		(385,523,566	)
		47,227,080			456,491,872			27,250,718			273,389,428
Service Shares
Shares sold		2,448,389			24,070,282			2,143,270			21,597,057
Reinvestment of dividends and distributions		88,895			871,691			85,720			865,451
Shares repurchased		(1,010,620	)		(9,873,930	)		(997,254	)		(10,050,301	)
		1,526,664			15,068,043			1,231,736			12,412,207
NET INCREASE (DECREASE)		53,995,702		$	522,930,552			43,950,856		$	441,820,384

(a)   Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund.

74

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

8. SUMMARY OF SHARE TRANSACTIONS (continued)

	Investment Grade Credit Fund
	For the Year Ended						For the Year Ended
	October 31, 2006						October 31, 2005
	Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		122,758		$	1,221,812			320,645		$	3,263,617
Reinvestment of dividends and distributions		13,743			135,325			11,900			121,009
Shares repurchased		(157,724	)		(1,542,363	)		(178,972	)		(1,810,430	)
		(21,223	)		(185,226	)		153,573			1,574,196
Institutional Shares
Shares sold		22,238			219,000			470,899			4,733,479
Reinvestment of dividends and distributions		16,932			166,973			9,313			94,718
Shares repurchased		(72,211	)		(705,458	)		(121,782	)		(1,237,372	)
		(33,041	)		(319,485	)		358,430			3,590,825
Separate Account Institutional Shares
Shares sold		6,781,618			67,075,585			16,984,506			173,425,722
Reinvestment of dividends and distributions		803,525			7,916,831			528,785			5,376,549
Shares repurchased		(6,233,643	)		(61,175,704	)		(4,986,999	)		(50,618,751	)
		1,351,500			13,816,712			12,526,292			128,183,520
NET INCREASE		1,297,236		$	13,312,001			13,038,295		$	133,348,541

75

GOLDMAN SACHS GOVERNMENT INCOME FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from
			investment operations								Distributions to shareholders
	Net asset
	value,		Net			Net realized			Total from		From net			From net
	beginning		investment			and unrealized			investment		investment			realized			Total
Year - Share Class	of year		income(a)			gain (loss)			operations		income			gains			distributions
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	14.57	$	0.55		$	0.08		$	0.63	$	(0.56	)	$	—	(e)	$	(0.56	)
2006 - B		14.57		0.44			0.08			0.52		(0.45	)		—	(e)		(0.45	)
2006 - C		14.56		0.44			0.08			0.52		(0.45	)		—	(e)		(0.45	)
2006 - Institutional		14.55		0.60			0.09			0.69		(0.61	)		—	(e)		(0.61	)
2006 - Service		14.54		0.53			0.08			0.61		(0.54	)		—	(e)		(0.54	)
2005 - A		15.00		0.43			(0.30	)		0.13		(0.39	)		(0.17	)		(0.56	)
2005 - B		15.00		0.30			(0.28	)		0.02		(0.28	)		(0.17	)		(0.45	)
2005 - C		14.99		0.31			(0.29	)		0.02		(0.28	)		(0.17	)		(0.45	)
2005 - Institutional		14.98		0.46			(0.27	)		0.19		(0.45	)		(0.17	)		(0.62	)
2005 - Service		14.98		0.41			(0.31	)		0.10		(0.37	)		(0.17	)		(0.54	)
2004 - A		14.88		0.39			0.33			0.72		(0.47	)		(0.13	)		(0.60	)
2004 - B		14.88		0.28			0.32			0.60		(0.35	)		(0.13	)		(0.48	)
2004 - C		14.87		0.28			0.32			0.60		(0.35	)		(0.13	)		(0.48	)
2004 - Institutional		14.85		0.46			0.33			0.79		(0.53	)		(0.13	)		(0.66	)
2004 - Service		14.85		0.37			0.34			0.71		(0.45	)		(0.13	)		(0.58	)
2003 - A		14.95		0.41			0.05			0.46		(0.51	)		(0.02	)		(0.53	)
2003 - B		14.95		0.31			0.04			0.35		(0.40	)		(0.02	)		(0.42	)
2003 - C		14.94		0.31			0.04			0.35		(0.40	)		(0.02	)		(0.42	)
2003 - Institutional		14.93		0.47			0.04			0.51		(0.57	)		(0.02	)		(0.59	)
2003 - Service		14.92		0.41			0.04			0.45		(0.50	)		(0.02	)		(0.52	)
2002 - A		14.96		0.63	(d)		0.19	(d)		0.82		(0.67	)		(0.16	)		(0.83	)
2002 - B		14.96		0.52	(d)		0.19	(d)		0.71		(0.56	)		(0.16	)		(0.72	)
2002 - C		14.95		0.51	(d)		0.20	(d)		0.71		(0.56	)		(0.16	)		(0.72	)
2002 - Institutional		14.94		0.69	(d)		0.19	(d)		0.88		(0.73	)		(0.16	)		(0.89	)
2002 - Service		14.93		0.62	(d)		0.19	(d)		0.81		(0.66	)		(0.16	)		(0.82	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	The portfolio turnover rate excluding the effect of mortgage dollar rolls is 690% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions.
(d)	As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was to decrease net investment income per share by $0.06, increase net realized and unrealized gains and losses per share by $0.06, and decrease the ratio of net investment income to average net assets with and without expense reductions by 0.44%.
(e)	Amount is less than $0.005 per share.

 The accompanying notes are an integral part of these financial statements.

76

GOLDMAN SACHS GOVERNMENT INCOME FUND

													Ratios assuming no
													expense reductions
										Ratio of			Ratio of			Ratio of
					Net assets		Ratio of			net investment			total			net investment
Net asset					at end of		net expenses			income to			expenses			income to			Portfolio
value, end		Total			year		to average			average net			to average			average net			turnover
of year		return(b)			(in 000s)		net assets			assets			net assets			assets			rate(c)
$	14.64		4.40	%	$	432,762		0.95	%		3.77	%		1.04	%		3.68	%		766	%
	14.64		3.62			18,713		1.70			3.03			1.79			2.94			766
	14.63		3.63			16,931		1.70			3.04			1.79			2.95			766
	14.63		4.86			146,784		0.58			4.18			0.67			4.09			766
	14.61		4.27			23,461		1.08			3.67			1.17			3.58			766
	14.57		0.80			729,958		0.97			2.83			1.07			2.73			256
	14.57		0.04			24,882		1.72			2.08			1.83			1.97			256
	14.56		0.11			18,692		1.72			2.08			1.83			1.97			256
	14.55		1.26			60,747		0.58			3.20			0.69			3.08			256
	14.54		0.69			16,198		1.08			2.74			1.18			2.64			256
	15.00		4.99			494,883		0.98			2.60			1.17			2.41			609
	15.00		4.21			32,782		1.73			1.93			1.92			1.74			609
	14.99		4.14			20,778		1.73			1.91			1.92			1.72			609
	14.98		5.35			69,770		0.58			3.12			0.77			2.93			609
	14.98		4.90			9,467		1.08			2.55			1.27			2.36			609
	14.88		3.11			358,058		0.99			2.78			1.18			2.59			520
	14.88		2.34			44,120		1.74			2.06			1.93			1.87			520
	14.87		2.34			23,720		1.74			2.05			1.93			1.86			520
	14.85		3.60			151,111		0.59			3.16			0.78			2.97			520
	14.85		3.01			10,491		1.09			2.72			1.28			2.53			520
	14.95		5.77			248,719		0.98			4.26	(d)		1.24			4.00	(d)		226
	14.95		4.99			51,124		1.73			3.54	(d)		1.99			3.28	(d)		226
	14.94		4.99			24,095		1.73			3.49	(d)		1.99			3.23	(d)		226
	14.93		6.13			82,523		0.58			4.74	(d)		0.84			4.48	(d)		226
	14.92		5.68			10,762		1.08			4.25	(d)		1.34			3.99	(d)		226

77

GOLDMAN SACHS U.S. MORTGAGES FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income from							Distributions
			investment operations							to shareholders
	Net asset
	value,		Net		Net realized			Total from		From net			From net
	beginning		investment		and unrealized			investment		investment			realized			Total
Year - Share Class	of period		income(a)		gain (loss)			operations		income			gains			distributions
FOR THE YEAR ENDED OCTOBER 31,
2006 - A	$	9.82	$	0.41	$	0.08		$	0.49	$	(0.41	)	$	—		$	(0.41	)
2006 - Institutional		9.82		0.45		0.08			0.53		(0.44	)		—			(0.44	)
2006 - Separate Account Institutional		9.82		0.45		0.09			0.54		(0.45	)		—			(0.45	)
2005 - A		10.22		0.28		(0.17	)		0.11		(0.33	)		(0.18	)		(0.51	)
2005 - Institutional		10.22		0.33		(0.18	)		0.15		(0.37	)		(0.18	)		(0.55	)
2005 - Separate Account Institutional		10.21		0.36		(0.20	)		0.16		(0.37	)		(0.18	)		(0.55	)
FOR THE PERIOD ENDED OCTOBER 31,
2004 - A (commenced November 3, 2003)		10.00		0.22		0.33			0.55		(0.33	)		—			(0.33	)
2004 - Institutional (commenced November 3, 2003)		10.00		0.29		0.31			0.60		(0.38	)		—			(0.38	)
2004 - Separate Account Institutional (commenced November 3, 2003)		10.00		0.31		0.28			0.59		(0.38	)		—			(0.38	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Total returns for the periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	The portfolio turnover rate excluding the effect of mortgage dollar rolls is 1442% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions.
(d)	Annualized.

 The accompanying notes are an integral part of these financial statements.

78

GOLDMAN SACHS U.S. MORTGAGES FUND

													Ratios assuming no
													expense reductions
										Ratio of			Ratio of			Ratio of
					Net assets		Ratio of			net investment			total			net investment
Net asset					at end of		net expenses			income to			expenses			income to			Portfolio
value, end		Total			period		to average			average net			to average			average net			turnover
of period		return(b)			(in 000s)		net assets			assets			net assets			assets			rate(c)
$	9.90		5.21	%	$	6,973		0.79	%		4.24	%		0.98	%		4.05	%		1665	%
	9.91		5.56			117,497		0.40			4.64			0.61			4.43			1665
	9.91		5.73			307,935		0.35			4.62			0.56			4.41			1665
	9.82		1.00			7,916		0.81			2.88			0.98			2.71			2006
	9.82		1.49			74,616		0.40			3.43			0.58			3.24			2006
	9.82		1.54			387,306		0.35			3.42			0.53			3.24			2006
	10.22		5.60			628		0.82	(d)		1.95	(d)		1.08	(d)		1.69	(d)		1953
	10.22		6.07			120,628		0.40	(d)		2.86	(d)		0.68	(d)		2.58	(d)		1953
	10.21		6.03			101,429		0.35	(d)		2.98	(d)		0.63	(d)		2.70	(d)		1953

79

GOLDMAN SACHS CORE FIXED INCOME FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income (loss) from
			investment operations							Distributions to shareholders
	Net asset
	value,		Net		Net realized			Total from		From net			From net
	beginning		investment		and unrealized			investment		investment			realized			From			Total
Year - Share Class	of year		income(a)		gain (loss)			operations		income			gains			capital			distributions
FOR THE YEARS ENDED OCTOBER 31,
2006 - A	$	9.87	$	0.41	$	(0.01	)	$	0.40	$	(0.38	)	$	(0.06	)	$	(0.01	)	$	(0.45	)
2006 - B		9.91		0.34		(0.01	)		0.33		(0.31	)		(0.06	)		(0.01	)		(0.38	)
2006 - C		9.91		0.34		—			0.34		(0.31	)		(0.06	)		(0.01	)		(0.38	)
2006 - Institutional		9.90		0.45		—			0.45		(0.42	)		(0.06	)		(0.01	)		(0.49	)
2006 - Service		9.91		0.40		(0.01	)		0.39		(0.37	)		(0.06	)		(0.01	)		(0.44	)
2005 - A		10.25		0.32		(0.20	)		0.12		(0.37	)		(0.13	)		—			(0.50	)
2005 - B		10.29		0.24		(0.20	)		0.04		(0.29	)		(0.13	)		—			(0.42	)
2005 - C		10.29		0.24		(0.20	)		0.04		(0.29	)		(0.13	)		—			(0.42	)
2005 - Institutional		10.28		0.36		(0.21	)		0.15		(0.40	)		(0.13	)		—			(0.53	)
2005 - Service		10.29		0.31		(0.21	)		0.10		(0.35	)		(0.13	)		—			(0.48	)
2004 - A		10.31		0.30		0.32			0.62		(0.33	)		(0.35	)		—			(0.68	)
2004 - B		10.35		0.23		0.31			0.54		(0.25	)		(0.35	)		—			(0.60	)
2004 - C		10.35		0.23		0.31			0.54		(0.25	)		(0.35	)		—			(0.60	)
2004 - Institutional		10.35		0.34		0.31			0.65		(0.37	)		(0.35	)		—			(0.72	)
2004 - Service		10.35		0.29		0.32			0.61		(0.32	)		(0.35	)		—			(0.67	)
2003 - A		10.07		0.40		0.28			0.68		(0.40	)		(0.04	)		—			(0.44	)
2003 - B		10.10		0.33		0.28			0.61		(0.32	)		(0.04	)		—			(0.36	)
2003 - C		10.10		0.33		0.28			0.61		(0.32	)		(0.04	)		—			(0.36	)
2003 - Institutional		10.09		0.45		0.29			0.74		(0.44	)		(0.04	)		—			(0.48	)
2003 - Service		10.09		0.40		0.29			0.69		(0.39	)		(0.04	)		—			(0.43	)
2002 - A		10.25		0.50		(0.13	)		0.37		(0.52	)		(0.03	)		—			(0.55	)
2002 - B		10.29		0.43		(0.15	)		0.28		(0.44	)		(0.03	)		—			(0.47	)
2002 - C		10.29		0.43		(0.15	)		0.28		(0.44	)		(0.03	)		—			(0.47	)
2002 - Institutional		10.28		0.55		(0.15	)		0.40		(0.56	)		(0.03	)		—			(0.59	)
2002 - Service		10.28		0.51		(0.16	)		0.35		(0.51	)		(0.03	)		—			(0.54	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	The portfolio turnover rate excluding the effect of mortgage dollar rolls is 516% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions.

 The accompanying notes are an integral part of these financial statements.

80

GOLDMAN SACHS CORE FIXED INCOME FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end of		net expenses			income to			total expenses			income to			Portfolio
value, end		Total			year		to average			average net			to average			average net			turnover
of year		return(b)			(in 000s)		net assets			assets			net assets			assets			rate(c)
$	9.82		4.21	%	$	714,877		0.83	%		4.25	%		0.84	%		4.24	%		562	%
	9.86		3.42			22,971		1.58			3.49			1.59			3.48			562
	9.87		3.52			20,937		1.58			3.49			1.59			3.48			562
	9.86		4.69			1,558,971		0.46			4.65			0.47			4.64			562
	9.86		4.06			46,600		0.96			4.13			0.97			4.12			562
	9.87		1.14			658,114		0.86			3.14			0.87			3.13			283
	9.91		0.38			29,096		1.61			2.40			1.62			2.39			283
	9.91		0.38			23,432		1.61			2.40			1.62			2.39			283
	9.90		1.53			1,098,280		0.47			3.54			0.48			3.53			283
	9.91		1.02			31,682		0.97			3.03			0.98			3.02			283
	10.25		6.24			523,045		0.90			2.96			0.90			2.96			549
	10.29		5.43			32,040		1.65			2.21			1.65			2.21			549
	10.29		5.42			24,323		1.65			2.21			1.65			2.21			549
	10.28		6.55			860,021		0.50			3.36			0.50			3.36			549
	10.29		6.22			20,221		1.00			2.86			1.00			2.86			549
	10.31		7.03			445,178		0.89			3.91			0.89			3.91			489
	10.35		6.31			37,120		1.64			3.21			1.64			3.21			489
	10.35		6.21			25,409		1.64			3.16			1.64			3.16			489
	10.35		7.54			695,181		0.49			4.39			0.49			4.39			489
	10.35		6.90			21,827		0.99			3.89			0.99			3.89			489
	10.07		3.59			315,441		0.90			5.03			0.90			5.03			437
	10.10		2.70			36,131		1.65			4.33			1.65			4.33			437
	10.10		2.80			20,176		1.65			4.32			1.65			4.32			437
	10.09		3.99			733,996		0.50			5.51			0.50			5.51			437
	10.09		3.47			29,761		1.00			5.05			1.00			5.05			437

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GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year

			Income from							Distributions
			investment operations							to shareholders
	Net asset
	value,		Net		Net realized			Total from		From net			From net
	beginning		investment		and unrealized			investment		investment			realized			Total
Year - Share Class	of year		income(a)		gain (loss)			operations		income			gains			distributions
FOR THE YEAR ENDED OCTOBER 31,
2006 - A	$	9.93	$	0.47	$	—		$	0.47	$	(0.45	)	$	—		$	(0.45	)
2006 - Institutional		9.95		0.51		—			0.51		(0.49	)		—			(0.49	)
2006 - Separate Account Institutional		9.94		0.52		(0.01	)		0.51		(0.49	)		—			(0.49	)
2005 - A		10.31		0.40		(0.35	)		0.05		(0.39	)		(0.04	)		(0.43	)
2005 - Institutional		10.32		0.52		(0.42	)		0.10		(0.43	)		(0.04	)		(0.47	)
2005 - Separate Account Institutional		10.31		0.46		(0.35	)		0.11		(0.44	)		(0.04	)		(0.48	)
FOR THE PERIOD ENDED OCTOBER 31,
2004 - A (commenced November 3, 2003)		10.00		0.38		0.31			0.69		(0.38	)		—			(0.38	)
2004 - Institutional (commenced November 3, 2003)		10.00		0.44		0.30			0.74		(0.42	)		—			(0.42	)
2004 - Separate Account Institutional (commenced November 3, 2003)		10.00		0.43		0.31			0.74		(0.43	)		—			(0.43	)

(a)	Calculated based on the average shares outstanding methodology.
(b)	Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Total returns for periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares.
(c)	Annualized.

 The accompanying notes are an integral part of these financial statements.

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GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND

													Ratios assuming no
													expense reductions
										Ratio of						Ratio of
					Net assets		Ratio of			net investment			Ratio of			net investment
Net asset					at end of		net expenses			income to			total expenses			income to			Portfolio
value, end		Total			period		to average			average net			to average			average net			turnover
of period		return(b)			(in 000s)		net assets			assets			net assets			assets			rate
$	9.95		4.84	%	$	3,420		0.79	%		4.82	%		1.04	%		4.57	%		74	%
	9.97		5.35			3,317		0.40			5.21			0.65			4.96			74
	9.96		5.30			206,122		0.35			5.26			0.60			5.01			74
	9.93		0.50			3,622		0.81			3.88			1.07			3.62			88
	9.95		0.89			3,638		0.40			4.40			0.66			4.14			88
	9.94		1.04			192,196		0.35			4.34			0.62			4.07			88
	10.31		7.00			2,179		0.82	(c)		3.66	(c)		1.85	(c)		2.63	(c)		78
	10.32		7.57			76		0.40	(c)		4.28	(c)		1.45	(c)		3.23	(c)		78
	10.31		7.52			70,269		0.35	(c)		4.26	(c)		1.40	(c)		3.21	(c)		78

83

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees
Goldman Sachs Trust

We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund and Goldman Sachs Investment Grade Credit Fund (four of the funds comprising the Goldman Sachs Trust) (the “Funds”), as of October 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund and Goldman Sachs Investment Grade Credit Fund at October 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

New York, New York

December 21, 2006

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Fund Expenses (Unaudited) — Six Month Period Ended October 31, 2006

          As a shareholder of Class A, Class B, Class C, Institutional, Service or Separate Account Institutional Shares of the Funds you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments (with respect to Class A Shares), contingent deferred sales charges (loads) on redemptions (with respect to Class B and Class C Shares), and redemption fees (if any); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Class A, Class B and Class C Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in Class A, Class B, Class C, Institutional, Service and Separate Account Institutional Shares of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

          The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2006 through October 31, 2006.

Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.

Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

          Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Government Income Fund							U.S. Mortgages Fund							Core Fixed Income Fund							Investment Grade Credit Fund
						Expenses							Expenses							Expenses							Expenses
	Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the		Beginning		Ending			Paid for the
	Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended		Account Value		Account Value			6 months ended
Share Class	05/01/06		10/31/06			10/31/06*		05/01/06		10/31/06			10/31/06*		05/01/06		10/31/06			10/31/06*		05/01/06		10/31/06			10/31/06*
Class A
Actual	$	1,000.00	$	1,037.20		$	4.88	$	1,000.00	$	1,038.30		$	4.06	$	1,000.00	$	1,037.10		$	4.21	$	1,000.00	$	1,049.00		$	4.10
Hypothetical 5% return		1,000.00		1,020.41	+		4.84		1,000.00		1,021.23	+		4.02		1,000.00		1,021.07	+		4.18		1,000.00		1,021.20	+		4.05
Class B
Actual		1,000.00		1,033.30			8.70		N/A		N/A			N/A		1,000.00		1,033.10			8.05		N/A		N/A			N/A
Hypothetical 5% return		1,000.00		1,016.64	+		8.63		N/A		N/A			N/A		1,000.00		1,017.28	+		7.99		N/A		N/A			N/A
Class C
Actual		1,000.00		1,032.60			8.70		N/A		N/A			N/A		1,000.00		1,034.10			8.05		N/A		N/A			N/A
Hypothetical 5% return		1,000.00		1,016.65	+		8.63		N/A		N/A			N/A		1,000.00		1,017.29	+		7.99		N/A		N/A			N/A
Institutional
Actual		1,000.00		1,039.20			2.98		1,000.00		1,040.10			2.05		1,000.00		1,040.00			2.31		1,000.00		1,051.00			2.08
Hypothetical 5% return		1,000.00		1,022.28	+		2.95		1,000.00		1,023.20	+		2.03		1,000.00		1,022.94	+		2.29		1,000.00		1,023.17	+		2.06
Separate Account Institutional
Actual		N/A		N/A			N/A		1,000.00		1,041.40			1.79		N/A		N/A			N/A		1,000.00		1,051.30			1.83
Hypothetical 5% return		N/A		N/A			N/A		1,000.00		1,023.45	+		1.77		N/A		N/A			N/A		1,000.00		1,023.42	+		1.80
Service
Actual		1,000.00		1,035.90			5.52		N/A		N/A			N/A		1,000.00		1,036.30			4.88		N/A		N/A			N/A
Hypothetical 5% return		1,000.00		1,019.78	+		5.48		N/A		N/A			N/A		1,000.00		1,020.41	+		4.84		N/A		N/A			N/A

*   Expenses for each share class are calculated using the Funds’ annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 10/31/06. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized expense ratios for the period were as follows:

																Separate Account
Fund	Class A			Class B			Class C			Institutional			Service			Institutional
Government Income		0.95	%		1.70	%		1.70	%		0.58	%		1.08	%		N/A
U.S. Mortgages		0.79			N/A			N/A			0.40			N/A			0.35	%
Core Fixed Income		0.82			1.57			1.57			0.45			0.95			N/A
Investment Grade Credit		0.79			N/A			N/A			0.40			N/A			0.35

+  Hypothetical expenses are based on each Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited)

     The Trustees oversee the management of Goldman Sachs Trust (the “Trust”), and review the investment performance and expenses of the investment funds covered by this Report (the “Funds”) at regularly scheduled meetings held during the Funds’ fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreements (the “Management Agreements”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Funds.

     The Management Agreements were most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreements or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).

     To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Funds’ investment performance, expenses and other matters at other regularly scheduled meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreements including: (a) the Funds’ investment performance; (b) the Funds’ management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Funds that exceed specified levels; (d) the Investment Adviser’s potential economies of scale and the breakpoints implemented in 2005 for the fees payable by the Funds under the Management Agreements; (e) the relative expense levels of the Funds; (f) information on the advisory fees charged by the Investment Adviser to institutional accounts; (g) the Investment Adviser’s profitability with respect to the Trust and the Funds; (h) the quality of the non-advisory services provided to the Funds; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of the Trustees’ contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Funds.

     At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management teams; (d) the groups within the Investment Adviser that support the portfolio management teams, including the legal and compliance departments, the credit department, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Funds for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreements; (i) the administrative services provided under the Management Agreements, including the nature and extent of the Investment Adviser’s oversight of the Funds’ other service providers including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various types of potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Funds’ investment performance, fees and expenses, including the Funds’ expense trends over time and the breakpoints in the contractual fee rates under the Management Agreements that were approved in 2005.

     In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the payment of Rule 12b-1 distribution and service fees by the Funds. Information was also provided to the Trustees relating to the Funds’ portfolio turnover rates, revenue sharing by the Investment Adviser, portfolio manager compensation and the alignment of the interests of the Funds and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser or its affiliates present.

86

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     The presentations made at the Contract Review Committee meetings and at the Annual Contract Meeting encompassed the Funds and other mutual fund portfolios for which the Board of Trustees has responsibility. While the Management Agreements for all of the Funds were approved at the same Annual Contract Meeting, the Trustees considered the applicable Management Agreement as it applied to each Fund separately.

     In evaluating the Management Agreements at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Funds. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreements, including: (a) information on the investment performance of the Funds in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Funds invest; (c) compliance reports; and (d) expenses borne by the Funds. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that were provided to investors who had invested in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and the broad range of other investment choices that are available to those investors.

     In connection with their approval of the Management Agreements, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Funds by the Investment Adviser and its affiliates. These services include services as the Funds’ transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Funds’ portfolio securities transactions and sales loads on the sale of certain classes of shares offered by the Funds. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Funds and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Funds and the Investment Adviser, including education and training initiatives.

     The Trustees also considered the investment performance of the Funds and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Funds to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Funds’ investment performance relative to their respective performance benchmarks. For Funds that had been in existence for the respective periods, this information on the Funds’ investment performance was provided for one, three, five and ten (where applicable) year periods. In addition, the Trustees considered the investment performance trends of the Funds over time, and reviewed the investment performance of the Funds in light of their respective investment objectives, policies and credit and duration parameters, as well as in light of periodic analyses of their respective quality and risk profiles. In addition, the Trustees considered whether the Funds had operated within their investment policies, and their record of compliance with their investment limitations. The Trustees believed that the Funds were providing investment performance within a competitive range for long-term investors.

     The Board of Trustees also considered the contractual fee rates payable by the Funds under the Management Agreements. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Funds, which included both advisory and administrative services that were directed to the needs and operations of the Funds as registered mutual funds. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Funds and the Funds’ total operating expense ratios (before and after voluntary fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Funds’ fee rates and total operating expense ratios were prepared by the Outside Data Provider.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Funds. The analyses provided a comparison of the Funds’ management fees to relevant peer groups and category universes; an expense analysis which compared each Fund’s expenses to a peer group and a category universe; and a five-year history comparing each Fund’s expenses to a category average. The analyses also compared the Funds’ transfer agency fees, custody and accounting fees and other expenses to peer groups and medians. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition, the Trustees noted the Investment Adviser’s voluntary undertaking to limit the Funds’ total expense ratios (excluding certain expenses) to specified levels.

     The Board of Trustees also considered the breakpoints in the contractual fee rates under the Management Agreements for each of the Funds that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the respective Funds:

	Management Fee			Average Daily
Fund	Annual Rate			Net Assets
Government Income Fund		0.54	%	First $	1  Billion
		0.49		Next $	1  Billion
		0.47		Over $	2  Billion
U.S. Mortgages Fund		0.40		First $	1  Billion
		0.36		Next $	1  Billion
		0.34		Over $	2  Billion
Core Fixed Income Fund		0.40		First $	1  Billion
		0.36		Next $	1  Billion
		0.34		Over $	2  Billion
Investment Grade Credit Fund		0.40		First $	1  Billion
		0.36		Next $	1  Billion
		0.34		Over $	2  Billion

     In approving these fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Funds and their shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Funds; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)

     The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Funds as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services. The Trustees noted the reduction of the transfer agency fees on Class A, Class B and Class C Shares of the Funds in 2005. In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Funds. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.

     After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Funds were reasonable in light of the services provided by the Investment Adviser, its costs and the Funds’ current and reasonably anticipated asset levels, and that the Management Agreements should be approved and continued.

Goldman Sachs Single/Multi-Sector Taxable Fixed Income Funds — Tax Information (Unaudited)

       Pursuant to Section 852 of the Internal Revenue Code, the Core Fixed Income Fund designates $4,446,322 as capital gain dividends paid during the year ended October 31, 2006.

       Pursuant to Section 871(k) of the Internal Revenue Code, the Government Income and Core Fixed Income Funds designate $182,487 and $7,042,948, respectively, as short-term capital gain dividends paid during the year ended October 31, 2006.

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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Trustees and Officers (Unaudited)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Ashok N. Bakhru Age: 64	Chairman of the Board of Trustees	Since 1991	President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003). Chairman of the Board of Trustees — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
John P. Coblentz, Jr. Age: 65	Trustee	Since 2003	Partner, Deloitte & Touche LLP (June 1975-May 2003). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Patrick T. Harker Age: 48	Trustee	Since 2000	Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-2000); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Mary P. McPherson Age: 71	Trustee	Since 1997	Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
Wilma J. Smelcer Age: 57	Trustee	Since 2001	Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Lawson Products Inc. (distributor of industrial products).

90

GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS

Trustees and Officers (Unaudited) (continued)

Independent Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
Richard P. Strubel Age: 67	Trustee	Since 1987	Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	Gildan Activewear Inc. (clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (58 Portfolios).

Interested Trustees

				Number of
		Term of		Portfolios in
	Position(s)	Office and		Fund Complex	Other
Name,	Held with	Length of	Principal Occupation(s)	Overseen by	Directorships
Address and Age1	the Trust2	Time Served3	During Past 5 Years	Trustee4	Held by Trustee5
*Alan A. Shuch Age: 57	Trustee	Since 1990	Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).	77	None
*Kaysie P. Uniacke Age: 45	Trustee   &	Since 2001	Managing Director, Goldman Sachs (1997-Present).	77	None
	President	Since 2002	Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College

*	These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1	Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno.
2	The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997.
3	Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
4	The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of October 31, 2006, the Trust consisted of 65 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios.
5	This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

91

GOLDMAN SACHS SINGLE/MULTI SECTOR TAXABLE FIXED INCOME FUNDS

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*

		Term of
		Office and
	Position(s) Held	Length of
Name, Age And Address	With the Trust	Time Served1	Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45	President & Trustee	Since 2002 Since 2001	Managing Director, Goldman Sachs (1997-Present). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College.
James A. Fitzpatrick 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 46	Vice President	Since 1997	Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara 32 Old Slip New York, NY 10005 Age: 44	Vice President	Since 2001	Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004).
John M. Perlowski 32 Old Slip New York, NY 10005 Age: 42	Treasurer	Since 1997	Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37	Secretary	Since 2006	Managing Director, Goldman Sachs (December 2006-Present); Associate General Counsel, Goldman Sachs (2002-Present); Vice President Goldman Sachs (1999-2006); Assistant General Counsel, Goldman Sachs (1999-2002). Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies).

1	Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*	Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

92

FUNDS PROFILE

Goldman Sachs Funds

Goldman Sachsis a premier financial services firm, known since 1869 for creating thoughtful and customized investment solutions in complex global markets.

Today, The Investment Management Divisionof Goldman Sachs serves a diverse set of clients worldwide, including private institutions, public entities and individuals. With portfolio management teams located around the world — and $610.2 billion in assets under management as of September 30, 2006 — our investment professionals bring firsthand knowledge of local markets to every investment decision, making us one of the few truly global asset managers.

GOLDMAN SACHS FUNDS

In building a globally diversified portfolio, you can select from more than 50 Goldman Sachs Funds and gain access to investment opportunities across borders, investment styles, asset classes and security capitalizations.

Money Market Funds¹
Fixed Income Funds
▪  Enhanced Income Fund
▪  Ultra-Short Duration
Government Fund
▪  Short Duration Government Fund
▪  Short Duration Tax-Free Fund
▪  California Intermediate AMT-Free Municipal Fund
▪  New York Intermediate AMT-Free Municipal Fund
▪  Tennessee Municipal Fund
▪  Municipal Income Fund
▪  U.S. Mortgages Fund
▪  Government Income Fund
▪  Core Fixed Income Fund
▪  Core Plus Fixed Income Fund
▪  Investment Grade Credit Fund
▪  Global Income Fund
▪  High Yield Municipal Fund
▪  High Yield Fund
▪  Emerging Markets Debt Fund Domestic Equity Funds
▪  Balanced Fund
▪  Growth and Income Fund
▪  Structured Large Cap Value²
▪  Large Cap Value
▪  Structured U.S. Equity Fund²
▪  Structured U.S. Equity Flex Fund
▪  Structured Large Cap Growth Fund²
▪  Capital Growth Fund
▪  Strategic Growth Fund
▪  Concentrated Growth Fund
▪  Mid Cap Value Fund
▪  Growth Opportunities Fund
▪  Small/Mid Cap Growth Fund
▪  Structured Small Cap Equity Fund²
▪  Small Cap Value Fund International Equity Funds
▪  Structured International Equity Fund²
▪  Structured International Equity
Flex Fund
▪  Concentrated International
Equity Fund²
▪  Japanese Equity Fund
▪  International Small Cap Fund²
▪  Asia Equity Fund²
▪  Emerging Markets Equity Fund
▪  BRIC Fund (Brazil, Russia, India, China)
Asset Allocation Funds³
Specialty Funds³
▪  U.S. Equity Dividend and
Premium Fund
▪  Structured Tax-Managed Equity Fund²
▪  Real Estate Securities Fund
▪  International Real Estate
Securities Fund
▪  Tollkeeper Fund^SM

1	An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.
2	Effective December 30, 2005, the Asia Growth Fund was renamed the Asia Equity Fund and the International Growth Opportunities Fund was renamed the International Small Cap Fund. Also effective December 30, 2005, the CORE International Equity, CORE Small Cap Equity, CORE Large Cap Growth, CORE Large Cap Value and CORE U.S. Equity Funds were renamed, respectively, the Structured International Equity, Structured Small Cap Equity, Structured Large Cap Growth, Structured Large Cap Value Funds and Structured U.S. Equity. Effective January 6, 2006, the CORE Tax-Managed Equity Fund was renamed the Structured Tax-Managed Equity Fund. Effective December 26, 2006, the International Equity Fund was renamed the Concentrated International Equity Fund.
3	Individual Funds within the Asset Allocation and Specialty categories will have various placement on the risk/return spectrum and may have greater or lesser risk than that indicated by the placement of the general Asset Allocation or Specialty category.

The Goldman Sachs Tollkeeper Fund^SM is a registered service mark of Goldman, Sachs & Co.

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32ND FLOOR, NEW YORK, NEW YORK 10005

TRUSTEES
Ashok N. Bakhru, Chairman
John P. Coblentz, Jr.
Patrick T. Harker
Mary Patterson McPherson
Alan A. Shuch
Wilma J. Smelcer
Richard P. Strubel
Kaysie P. Uniacke OFFICERS
Kaysie P. Uniacke, President
James A. Fitzpatrick, Vice President
James A. McNamara, Vice President
John M. Perlowski, Treasurer
Peter V. Bonanno, Secretary

GOLDMAN, SACHS & CO.
Distributor and Transfer Agent GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser

Visit our Web site at www.goldmansachsfunds.com to obtain the most recent month-end returns.

The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how a Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended January 31, 2005 and every first and third fiscal quarter thereafter, the Funds’ Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. When available, the Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders).

Foreign and emerging markets investments may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Core Fixed Income and Investment Grade Credit Funds may be unable to sell certain of their portfolio securities without a substantial drop in price, if at all. The Core Fixed Income and Investment Grade Credit Funds may also engage in foreign currency transactions for hedging purposes including cross hedging or for speculative purposes. Forward foreign currency exchange contracts are subject to the risk that the counterparty to the contract will default on its obligations.

Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Funds’ entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.

Copyright 2006 Goldman, Sachs & Co. All rights reserved. 
06-1991 SMSTFIAR / 43.1K / 12-06

EX-99.17.S

Exhibit 17(s)

Large Cap Growth Fund

Income Fund

Tax-Exempt Income Fund

Money Market Fund

Class A Shares

Prospectus and Privacy Policy
dated August 1, 2006

The Signal Funds

Notice of Privacy Policy & Practices

The Signal Funds recognize and respect the privacy expectations of our customers¹. We provide this notice to you so that you will know what kinds of information we collect about our customers and the circumstances in which that information may be disclosed to third parties who are not affiliated with The Signal Funds.

Collection of Customer Information

We collect nonpublic personal information about our customers from the following sources:

• Account Applications and other forms, which may include a customer’s name, address, social security number, and information about a customer’s investment goals and risk tolerance;

• Account History, including information about the transactions and balances in a customer’s accounts; and

• Correspondence, written, telephonic or electronic between a customer and The Signal Funds or service providers to The Signal Funds.

Disclosure of Customer Information

We may disclose all of the information described above to certain third parties who are not affiliated with The Signal Funds under one or more of these circumstances:

• As Authorized – if you request or authorize the disclosure of the information.

• As Permitted by Law – for example, sharing information with companies who maintain or service customer accounts for The Signal Funds is permitted and is essential for us to provide shareholders with necessary or useful services with respect to their accounts.

• Under Joint Agreements – we may also share information with companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements.

Security of Customer Information

We require service providers to The Signal Funds:

• to maintain policies and procedures designed to assure only appropriate access to, and use of information about customers of The Signal Funds; and

• to maintain physical, electronic and procedural safeguards that comply with federal standards to guard nonpublic personal information of customers of The Signal Funds.

We will adhere to the policies and practices described in this notice regardless of whether you are a current or former shareholder of The Signal Funds.

¹ For purposes of this notice, the terms “customer” or “customers” includes both shareholders of The Signal Funds and individuals who provide nonpublic personal information to The Signal Funds, but do not invest in The Signal Funds shares.

This is not part of the Prospectus.

Questions?
Call 1-888-426-9709 or your
investment representative.

Large Cap Growth Fund

Income Fund

Tax-Exempt Income Fund

Money Market Fund

Class A Shares

Prospectus dated August 1, 2006

These securities have not been approved or
disapproved by the Securities and Exchange
Commission nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of
this prospectus. Any representation to the contrary is
a criminal offense.

The Signal Funds				Table of Contents
		Risk/Return Summary and Fund Expenses
Carefully review this important section for a summary of each Fund’s investments, risks and fees.			3	Signal Large Cap Growth Fund
			6	Signal Income Fund
			9	Signal Tax-Exempt Income Fund
			12	Signal Money Market Fund
		Investment Objectives and Strategies
This section contains details on each Fund’s investment strategies and risks.			14	Signal Large Cap Growth Fund
			15	Signal Income Fund
			16	Signal Tax-Exempt Income Fund
			17	Signal Money Market Fund
			18	Investment Risks
		Shareholder Information
Consult this section to obtain details on how shares are valued, how to purchase, sell and exchange shares, related charges and payments of dividends.			19	Pricing of Fund Shares
			19	Purchasing and Adding to Your Shares
			22	Selling Your Shares
			24	Distribution Arrangements/Sales Charges
			26	Exchanging Your Shares
			28	Dividends, Distributions and Taxes
		Fund Management
Review this section for details on the people and organizations who oversee the Funds and their investments.			29	The Investment Advisor
			30	Portfolio Managers
			31	The Distributor and Administrator
		Financial Highlights
Review this section for details on the selected financial statements of the Funds.			32	Large Cap Growth Fund
			33	Income Fund
			34	Tax-Exempt Income Fund

2

Risk/Return Summary and Fund Expenses

Large Cap Growth Fund

	Risk/Return Summary of the Signal Large Cap Growth Fund
Investment Objectives	The Large Cap Growth Fund seeks capital appreciation.
Principal Investment Strategies	The Fund invests primarily in a diversified portfolio of equity securities of large capitalization companies. For these purposes, the Advisor deems issuers with market capitalizations in excess of $5 billion to be large capitalization companies. The Advisor seeks investments in issuers that demonstrate superior sales and earnings growth rates, improving profitability, or above-average growth relative to their current market valuations.
Principal Investment Risks	Because the value of the Fund’s investments will fluctuate with market conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund’s holdings may underperform its other holdings. Investments in the Fund are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.
Who May	Consider investing in the Fund if you are:
Want to Invest?	•  investing for a long-term goal such as retirement (five year or longer investment horizon) •  looking to add a growth component to your portfolio •  willing to accept higher risks of investing in the stock market in exchange for potentially higher long term returns This Fund will not be appropriate for someone:
	•  seeking monthly income •  pursuing a short-term goal or investing emergency reserves •  seeking safety of principal

3

Risk/Return Summary and Fund Expenses

Large Cap Growth Fund

The bar chart and table on this page show how the Large Cap Growth Fund has performed. The bar chart illustrates the risks of investing in the Fund by showing the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance (before and after taxes) over time since its inception on July 15, 2002 to that of the Standard & Poor’s 500^® Stock Index (“S&P 500 Index”)³. The bar chart does not reflect the impact of any applicable sales charges, which would reduce returns.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund will perform in the future.

Average Annual Total Returns

(for the periods ending
December 31, 2005)⁴

Best quarter:	Q4 2003	+ 9.47%
Worst quarter:	Q1 2003	–3.61%

				Since
				Inception
	Past			on
	Year			7/15/02
Large Cap Growth Fund
Class A Shares Return Before Taxes (includes maximum sales charge of 4.75%)		2.59	%		8.16	%
Class A Shares Return After Taxes on Distributions (includes maximum sales charge of 4.75%)2		1.74	%		6.92	%
Class A Shares Return After Taxes on Distributions and Sale of Fund Shares (includes maximum sales charge of 4.75%)2		2.84	%		6.50	%
S&P 500® Index3		4.91	%		11.12	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.

1	Both the chart and table assume reinvestment of dividends and distributions.
2	After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
3	A widely recognized, unmanaged index of common stocks generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees and expenses associated with a mutual fund or the impact of taxes.
4	For the period January 1, 2006 through June 30, 2006, the aggregate (non-annualized) total return of the Fund was –0.43%.

4

Risk/Return Summary and Fund Expenses

Large Cap Growth Fund

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Large Cap Growth Fund.

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases		4.75	%1
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees		0.55	%2
Distribution and Service (12b-1) Fees		0.25	%
Other Expenses		0.53	%
Total Fund Operating Expenses		1.33	%3

1	Lower sales charges are available depending upon the amount invested. For investments of $1 million or more, a contingent deferred sales charge (“CDSC”) is applicable to redemptions within 18 months of purchase. See “Distribution Arrangements.”
2	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to 0.55% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.75% of the Fund’s average daily net assets.
3	Without the Advisor’s contractual agreement to waive a portion of its investment management fees, the “Total Fund Operating Expenses” for the Class A Shares would have been 1.53%.

Expense Example

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

	1		3		5		10
	Year		Years		Years		Years
Large Cap Growth Fund	$	604		$917	$	1,252	$	2,196

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

5

Risk/Return Summary and Fund Expenses

Income Fund

	Risk/Return Summary of the Signal Income Fund
Investment Objectives	The Income Fund seeks current income consistent with the preservation of capital.
Principal Investment Strategies	The Fund normally invests at least 65% of its total assets in debt securities of all types, including investment grade corporate bonds and U.S. Government bonds.
Principal Investment Risks	Because the value of the Fund’s investments will fluctuate with market conditions and interest rates, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund’s holdings may underperform its other holdings. Investments in the Fund are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.
Who May	Consider investing in the Fund if you are:
Want to Invest?	•  looking to add a monthly income component to your portfolio •  seeking higher potential returns than provided by money market funds
	•  willing to accept the risks of price and dividend fluctuations
	This Fund will not be appropriate for someone:
	•  investing emergency reserves
	•  seeking safety of principal

6

Risk/Return Summary and Fund Expenses

Income Fund

The bar chart and table on this page show how the Income Fund has performed. The bar chart illustrates the risks of investing in the Fund by showing the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance (before and after taxes) over time since its inception on July 15, 2002 to that of the Lehman Brothers Intermediate Government/Credit Index³. The bar chart does not reflect the impact of any applicable sales charges, which would reduce returns.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund will perform in the future.

Average Annual Total Returns

(for the periods ending December 31, 2005)⁴

Best quarter:	Q2 2005	+2.48%
Worst quarter:	Q2 2004	–2.47%

		Since
		Inception
	Past	on
	Year	7/15/02
Income Fund
Class A Shares Return Before Taxes (includes maximum sales charge of 3.25%)	–1.94%		1.97	%
Class A Shares Return After Taxes on Distributions (includes maximum sales charge of 3.25%)2	–3.22%		0.62	%
Class A Shares Return After Taxes on Distributions and Sale of Fund Shares (includes maximum sales charge of 3.25%)2	–1.27%		0.90	%
Lehman Brothers Intermediate Government/Credit Index3	1.58%		4.08	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.

1	Both the chart and table assume reinvestment of dividends and distributions.
2	After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
3	A widely recognized, unmanaged index generally representative of the bond market as a whole. The index does not reflect the deduction of fees and expenses associated with a mutual fund or the impact of taxes.
4	For the period January 1, 2006 through June 30, 2006, the aggregate (non-annualized) total return of the Fund was –0.33%.

7

Risk/Return Summary and Fund Expenses

Income Fund

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Income Fund.

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases		3.25	%1
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees		0.25	%2
Distribution and Service (12b-1) Fees		0.25	%
Other Expenses		0.40	%
Total Fund Operating Expenses		0.90	%3

1	Lower sales charges are available depending upon the amount invested. For investments of $1 million or more, a contingent deferred sales charge (“CDSC”) is applicable to redemptions within 18 months of purchase. See “Distribution Arrangements.”
2	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to 0.25% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.50% of the Fund’s average daily net assets.
3	Without the Advisor’s contractual agreement to waive a portion of its investment management fees, the “Total Fund Operating Expenses” for the Class A Shares would have been 1.15%.

Expense Example

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

	1		3		5		10
	Year		Years		Years		Years
Income Fund		$414		$655		$914	$	1,656

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

8

Risk/Return Summary and Fund Expenses

Tax-Exempt Income Fund

	Risk/Return Summary of the Signal Tax-Exempt Income Fund
Investment Objectives	The Tax-Exempt Income Fund seeks current income exempt from federal income tax.
Principal Investment Strategies	The Fund invests primarily in municipal obligations, the interest on which is exempt from federal income tax.
Principal Investment Risks	Because the value of the Fund’s investments will fluctuate with market conditions and interest rates, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund’s holdings may underperform its other holdings. Investments in the Fund are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.
Who May	Consider investing in the Fund if you are:
Want to Invest?	•  looking to add a monthly tax-exempt income component to your portfolio
	•  willing to accept risks of price and dividend fluctuations
	This Fund will not be appropriate for someone:
	•  investing emergency reserves
	•  seeking safety of principal

9

Risk/Return Summary and Fund Expenses

Tax-Exempt Income Fund

The bar chart and table on this page show how the Tax-Exempt Income Fund has performed. The bar chart illustrates the risks of investing in the Fund by showing the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance (before and after taxes) over time since its inception on July 15, 2002 to that of its primary benchmark index, the Merrill Lynch 1-10 Year Municipal Index³. The bar chart does not reflect the impact of any applicable sales charges, which would reduce returns.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund
will perform in the future.

Average Annual Total Returns

(for the periods ending December 31, 2005)⁴

Best quarter:	Q3 2004	+3.15%
Worst quarter:	Q2 2004	–2.05%

				Since
				Inception
	Past			on
	Year			7/15/02
Tax-Exempt Income Fund
Class A Shares Return Before Taxes (includes maximum sales charge of 3.25%)		–1.97	%		2.43	%
Class A Shares Return After Taxes on Distributions (includes maximum sales charge of 3.25%)2		–2.01	%		2.30	%
Class A Shares Return After Taxes on Distributions and Sale of Fund Shares (includes maximum sales charge of 3.25%)2		–0.18	%		2.51	%
Merrill Lynch 1-10 Year Municipal Index3		1.64	%		3.75	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.

1	Both the chart and table assume reinvestment of dividends and distributions.
2	After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
3	A widely recognized, unmanaged index generally representative of municipal securities having maturities of between one and ten years. The index does not reflect the deduction of fees and expenses associated with a mutual fund or the impact of taxes.
4	For the period January 1, 2006 through June 30, 2006, the aggregate (non-annualized) total return of the Fund was –0.61%.

10

Risk/Return Summary and Fund Expenses

Tax-Exempt Income Fund

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Tax-Exempt Income Fund.

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases		3.25	%1
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees		0.10	%2
Distribution and Service (12b-1) Fees		0.25	%
Other Expenses		0.76	%
Total Fund Operating Expenses		1.11	%3

1	Lower sales charges are available depending upon the amount invested. For investments of $1 million or more, a contingent deferred sales charge (“CDSC”) is applicable to redemptions within 18 months of purchase. See “Distribution Arrangements.”
2	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to 0.10% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.50% of the Fund’s average daily net assets.
3	Without the Advisor’s contractual agreement to waive a portion of its investment management fees, the “Total Fund Operating Expenses” for the Class A Shares would have been 1.51%.

Expense Example

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

	1		3		5		10
	Year		Years		Years		Years
Tax-Exempt Income Fund	$	434	$	749	$	1,085	$	2,035

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

11

Risk/Return Summary and Fund Expenses

Money Market Fund

	Risk/Return Summary of the Signal Money Market Fund
Investment Objectives	The Money Market Fund seeks current income consistent with the preservation of capital. The Fund seeks to maintain a stable net asset value of $1.00 per share.
Principal Investment Strategies	The Fund invests in high quality money market instruments which have remaining maturities of 397 calendar days or less and the weighted average maturity of the Fund’s investments must be 90 days or less.
Principal Investment Risks	The yield paid by the Fund will vary with changes in interest rates. The value of your investment may decline if an issuer fails to pay interest or repay principal on its obligation or if the other party to a repurchase agreement fails to fulfill its obligations under the agreement.
	An investment in the Fund is not a deposit of, or guaranteed or endorsed by Old National Trust Company or any of its affiliates and is not issued or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Who May	Consider investing in the Fund if you:
Want to Invest?	•  are seeking current income and the preservation of capital •  have a low risk tolerance
	•  are investing for a short-term purpose and are willing to accept lower potential returns in exchange for a high degree of safety
	This Fund will not be appropriate for someone:
	•  investing for a long-term goal or for retirement
	•  seeking a high total return
Fund Performance	Class A Shares of the Money Market Fund are not currently being offered, and therefore, fund performance information is not yet presented.

12

Risk/Return Summary and Fund Expenses

Money Market Fund

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Money Market Fund.

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases	None
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees		0.05	%1
Distribution and Service (12b-1) Fees		0.25	%
Other Expenses		0.46	%
Total Fund Operating Expenses		0.76	%2

1	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to an amount not to exceed 0.05% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.10% of the Fund’s average daily net assets.
2	Without the Advisor’s contractual agreement to waive a portion of its investment management fees, the “Total Fund Operating Expenses” for the Class A Shares would have been 0.81%.

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

Expense Example

	1		3		5		10
	Year		Years		Years		Years
Money Market Fund		$78		$254		$445		$997

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

13

Investment Objectives and Strategies

Signal Large Cap Growth Fund

Investment Objective

The investment objective of the Large Cap Growth Fund is to seek capital appreciation.

Policies and Strategies

The Advisor pursues the Fund’s investment objective by investing in a diversified portfolio of equity securities of large capitalization companies. For these purposes, the Advisor deems issuers with market capitalizations in excess of $5 billion to be large capitalization companies. The Advisor seeks investments in issuers that demonstrate superior sales and earnings growth rates, improving profitability, or above-average growth relative to their current market valuations.

Consistent with the Large Cap Growth Fund’s investment objective, the Fund:

• invests substantially all, but in no event less than 80%, of its net assets in U.S. domestic equity securities of large capitalization companies

• invests in the following types of equity securities: common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, warrants and any rights to purchase common stocks

• may engage in short sales against the box

• may invest in fixed income securities consisting of corporate notes, bonds and debentures that are rated investment grade at the time of purchase

• may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

• may invest up to 20% of its total assets in the securities of foreign issuers and may acquire sponsored and unsponsored American Depositary Receipts and European Depositary Receipts

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

• may purchase securities on a when-issued or delayed basis in which a security’s price and yield are fixed on a specific date but payment and delivery are scheduled for a future date beyond the standard settlement period

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in money market instruments and repurchase agreements.

14

Investment Objectives and Strategies

Signal Income Fund

Investment Objective

The investment objective of the Income Fund is to seek current income consistent with the preservation of capital.

Policies and Strategies

The Fund invests primarily in debt securities of all types, including investment grade bonds and U.S. Government bonds.

Consistent with the Income Fund’s investment objective, the Fund:

• invests substantially all, but in no event less than 65%, of its total assets in debt securities

• invests in fixed income securities consisting of bonds, fixed income preferred stocks, debentures, notes, zero-coupon securities, mortgage-related and other asset-backed securities, state municipal or industrial revenue bonds, obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government, debt securities convertible into, or exchangeable for, common stocks, foreign debt securities, guaranteed investment contracts, income participation loans, first mortgage loans and participation certificates in pools of mortgages issued or guaranteed by agencies or instrumentalities of the U.S. Government

• invests only in debt securities which are rated at the time of purchase within the four highest rating categories assigned by one or more nationally recognized statistical rating organizations (NRSROs) or, if unrated, which the Advisor deems to be of comparable quality.

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

• may purchase securities on a when-issued or delayed-delivery basis in which a security’s price and yield are fixed on a specific date but payment and delivery are scheduled for a future date beyond the standard settlement period

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in money market instruments and repurchase agreements.

15

Investment Objectives and Strategies

Signal Tax-Exempt Income Fund

Investment Objective

The primary investment objective of the Tax-Exempt Income Fund is to seek current income exempt from federal income tax.

Policies and Strategies

The Fund invests primarily in municipal obligations, the interest on which is exempt from federal income tax.

Consistent with the Tax-Exempt Income Fund’s investment objective, the Fund:

• invests substantially all, but in no event less than 80%, of its net assets in tax-exempt securities

• invests only in debt securities which are rated at the time of purchase within the four highest rating categories assigned by one or more nationally recognized statistical rating organizations (NRSROs) or, if unrated, which the Advisor deems to be of comparable quality

• may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

• may invest in the securities of foreign issuers and may acquire sponsored and unsponsored American Depositary Receipts

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in money market instruments and repurchase agreements.

16

Investment Objectives and Strategies

Signal Money Market Fund

Investment Objective

The investment objective of the Money Market Fund is to seek current income consistent with the preservation of capital. The Fund seeks to maintain a stable net asset value of $1.00 per share.

Policies and Strategies

The Fund invests in high quality money market instruments which have remaining maturities of 397 calendar days or less and the weighted average maturity of the Fund’s investments must be 90 days or less.

Consistent with the Money Market Fund’s investment objective, the Fund:

• may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

• may invest in short-term corporate obligations, such as commercial paper, notes and bonds

• may invest in negotiable certificates of deposit, time deposits and bankers’ acceptances issued by U.S. banks and U.S. branches of foreign banks

• may invest in other debt obligations such as master demand notes, short-term funding agreements, variable and floating rate securities and private placement investments

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional income

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in investments that are not part of its principal investment strategy including cash (which will not earn any income).

17

Investment Objectives and Strategies

Investment Risks

Risk Factors: All Funds

An investment in the Funds is subject to investment risks, including the possible loss of the principal amount invested.

Generally, the Funds will be subject to the following risks:

Equity Risk: The value of the equity securities held by the Large Cap Growth Fund, and thus of the Fund’s shares, can fluctuate-at times dramatically. The prices of equity securities are affected by various factors, including market conditions, political and other events, and developments affecting the particular issuer or its industry or geographic sector. The fact that the Advisor follows a specific discipline can provide no assurance against a decline in the value of the Fund’s shares.

Market Risk: Market risk refers to the risk related to investments in securities in general and the daily fluctuations in the securities markets. The Funds’ performance will change daily based on many factors, including fluctuation in interest rates, the quality of the instruments in each Fund’s investment portfolio, national and international economic conditions and general market conditions.

Foreign Securities Risk: Investments in securities of non-U.S. issuers have special risks. These risks include international economic and political developments, foreign government actions including restrictions on payments to non-domestic persons such as the Fund, less regulation, less information, currency fluctuations and interruptions in currency flow. Investments in foreign securities also entail higher costs. The Fund’s investments in foreign securities may be in the form of sponsored or unsponsored depositary receipts, such as American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”). Ownership of unsponsored depositary receipts may not entitle the Fund to financial and other reports from the issuer of the underlying security, and certain costs related to the receipts that would otherwise be borne by the issuer of a sponsored depositary receipt may be passed through, in whole or in part, to holders of the receipts.

Interest Rate Risk: Interest rate risk refers to the risk that the value of the Funds’ fixed income securities can change in response to changes in prevailing interest rates causing volatility and possible loss of value as rates increase.

Credit Risk: Credit risk refers to the risk related to the credit quality of the issuer of a security held in a Fund’s portfolio. The Funds could lose money if the issuer of a security is unable to meet its financial obligations.

Investments in the Funds are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.

18

Shareholder Information

Pricing of Fund Shares

How NAV is calculated

The NAV is calculated by adding the total value of a Fund’s investments and other assets, subtracting its liabilities and then dividing that figure by the number of outstanding shares of the Fund:

NAV =

Total Assets – Liabilities

Number of Shares

Outstanding

You may find each Fund’s NAV daily in certain newspapers.

Purchasing and Adding to Your Shares

You may purchase the Funds through the Distributor or through investment representatives, who may charge fees and may require higher minimum investments or impose other limitations on buying and selling shares. If you purchase shares through an investment representative, that party is responsible for transmitting orders by close of business and may have an earlier cut-off time for purchase and sale requests. Consult your investment representative for specific information.

Per share net asset value (NAV) for each of the Variable NAV Funds is determined and their shares are priced at the close of regular trading on the New York Stock Exchange, normally at 4:00 p.m. Eastern time on days the Exchange and the Federal Reserve Bank of Chicago are open for business and at 2:00 p.m. Eastern time in the case of the Money Market Fund.

Your order for purchase, sale or exchange of shares is priced at the next NAV calculated after your order is accepted by the Fund plus any applicable sales charge as noted in the section on “Distribution Arrangements/Sales Charges.” This is what is known as the offering price.

Each Variable NAV Fund’s securities are generally valued at current market prices. If market quotations are not available, prices will be based on fair value as determined in accordance with procedures established by, and under the supervision of, the Funds’ Trustees. The Money Market Fund values its securities using amortized cost. This method involves valuing an instrument at its cost and thereafter applying 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.

	Minimum		Minimum
	Initial		Subsequent
Account Type	Investment		Investment
Regular (non-retirement)	$	1,000	$	25
Retirement	$	1,000	$	25
Automatic Investment Plan Regular	$	25	$	25
Automatic Investment Plan Retirement	$	250	$	25

All purchases must be in U.S. dollars. A fee will be charged for any checks that do not clear. Third-party checks, starter checks, traveler’s checks, money orders, cash and credit card convenience checks are not accepted.

A Fund may waive its minimum purchase requirement and it may reject a purchase order if it considers it in the best interest of the Fund and its shareholders.

19

Shareholder Information

Purchasing and Adding to Your Shares
continued

Instructions for Opening or Adding to an Account
By Regular Mail

Initial Investment:

1.	Carefully read and complete the application. Establishing your account privileges now saves you the inconvenience of having to add them later.
2.	Make check or certified check payable to “[name of Fund].”
3.	Mail to: The Signal Funds, P.O. Box 182094, Columbus, OH 43218-2094

Subsequent:

1.	Use the investment slip attached to your account statement. Or, if unavailable,
2.	Include the following information on a piece of paper:

• Fund name

• Amount invested

• Account name

• Account number

	Include your account number on your check.
3.	Mail to: The Signal Funds, P.O. Box 182094, Columbus, OH 43218-2094

By Overnight Service

See instructions 1-2 above for subsequent investments.

4.	Send to: The Signal Funds,
	Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219.

By Wire Transfer

Note: Your bank may charge a wire transfer fee.

Please call 1-888-426-9709 for instructions on opening an account or purchasing additional shares by wire transfer.

20

Shareholder Information

Purchasing and Adding to Your Shares
continued

You can add to your account by using the convenient options described below. The Funds reserve the right to change or eliminate these privileges at any time with 60 days notice.

Automatic Investment Plan

You can make automatic investments in the Funds from your bank account. Automatic investments can be as little as $25, once you’ve invested the $25 minimum required to open the account.

To invest regularly from your bank account:

n	Complete the Automatic Investment Plan portion on your Account Application.
	Make sure you note:

• Your bank name, address and ABA number

• Your checking or savings account number

• The amount you wish to invest automatically (minimum $25)

• How often you want to invest (monthly or quarterly)

• Attach a voided personal check or savings deposit slip.

Dividends and Distributions

All dividends and distributions will be automatically reinvested unless you request otherwise. Capital gains are distributed at least annually.

Distributions are made on a per share basis regardless of how long you’ve owned your shares.

Therefore, if you invest shortly before the distribution date, some of your investment will be returned to you in the form of a distribution and may be subject to income tax.

21

Shareholder Information

Selling Your Shares

Instructions for Selling Shares

You may sell your shares at any time. Your sales price will be the next NAV after your sell order is received by the Fund, its transfer agent, or your investment representative. Normally you will receive your proceeds within a week after your request is received. See section on ‘‘General Policies on Selling Shares’’ below.

Withdrawing Money from Your Fund Investment

As a mutual fund shareholder, you are technically selling shares when you request a withdrawal in cash. This is also known as redeeming shares or a redemption of shares.
 

By telephone (unless you have declined telephone sales privileges)

1. Call 1-888-426-9709 with instructions as to how you wish to receive your funds (check, wire, electronic transfer).

By mail

1. Call 1-888-426-9709 to request redemption forms or write a letter of instruction indicating:

• your Fund and account number

• amount you wish to redeem

• address where your check should be sent

• account owner signature

2. Mail to: The Signal Funds, P.O. Box 182094 Columbus, OH 43218-2094

By overnight service

See instruction 1 above under ‘‘By mail.’’

2. Send to: The Signal Funds, Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219

Wire transfer

You must indicate this option on your application.

The Fund may charge a wire transfer fee.

Note: Your financial institution may also charge a separate fee.

Call 1-888-426-9709 to request a wire transfer.

If you call by 4 p.m. Eastern time, your payment will normally be wired to your bank on the next business day.

Check Writing (Money Market Fund)

You may write checks in amounts of $100 or more on your account in the Money Market Fund. To obtain checks, complete the signature card section of the Account Application or contact the Funds to obtain a signature card. Dividends and distributions will continue to be paid up to the day the check is presented for payment. You may not close your Money Market Fund account by writing a check.

Automatic Withdrawal Plan

You can receive automatic payments from your account on a monthly or quarterly basis. The minimum withdrawal is $100. To activate this feature:

• Make sure you’ve checked the appropriate box and completed the Automatic Withdrawal section of the Account Application. Or call 1-888-426-9709.

• Include a voided personal check.

• Your account must have a value of $5,000 or more to start withdrawals.

• If the value of your account falls below $500, you may be asked to add sufficient funds to bring the account back to $500, or the Fund may close your account and mail the proceeds to you.

22

Shareholder Information

General Policies on Selling Shares

Redemptions In Writing Required

You must request redemptions in writing in the following situations:

1.	Redemptions from Individual Retirement Accounts (“IRAs”).
2.	Redemption requests requiring a signature guarantee. Signature guarantees are required in the following situations:

• Your account address has changed within the last 15 business days

• The check is not being mailed to the address on your account

• The check is not being made payable to the owner(s) of the account

• The redemption proceeds are being transferred to another Fund account with a different registration

• The redemption proceeds are being wired to bank instructions currently not on your account

A signature guarantee can be obtained from a financial institution, such as a bank, broker-dealer, or credit union, which are members of the STAMP (Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion Program) or SEMP (Stock Exchanges Medallion Program), but not from a notary public. Members are subject to dollar limitations which must be considered when requesting their guarantee. The Transfer Agent may reject any signature guarantee if it believes the transaction would otherwise be improper.

Verifying Telephone Redemptions

The Funds make every effort to insure that telephone redemptions are only made by authorized shareholders. All telephone calls are recorded for your protection and you will be asked for information to verify your identity. Given these precautions, unless you have specifically indicated on your application that you do not want the telephone redemption feature, you may be responsible for any fraudulent telephone orders. If appropriate precautions have not been taken, the Transfer Agent may be liable for losses due to unauthorized transactions.

Redemptions Within 10 Days of Shares Purchased by Check

When you have made your investment by check, you cannot redeem any portion of it until the Transfer Agent is satisfied that the check has cleared (which may require up to 10 business days). You can avoid this delay by purchasing shares with a federal funds wire.

Refusal of Redemption Request

Payment for shares may be delayed under extraordinary circumstances or as permitted by the SEC in order to protect remaining shareholders.

Redemption in Kind

The Funds reserve the right to make payment in securities rather than cash, known as “redemption in kind.” This could occur under extraordinary circumstances, such as a very large redemption that could affect a Fund’s operations (for example, more than 1% of the Fund’s net assets). If a Fund deems it advisable for the benefit of all shareholders, redemption in kind will consist of securities equal in market value to your shares. When you convert these securities to cash, you will pay brokerage charges.

23

Shareholder Information

General Policies on Selling Shares
continued

Closing of Small Accounts

If your account falls below $500, the Fund may ask you to increase your balance. If it is still below $500 after 60 days, the Fund may close your account and send you the proceeds at the current NAV.

Undeliverable Distribution Checks

For any shareholder who chooses to receive distributions in cash: If distribution checks are returned and marked as “undeliverable” or remain uncashed for six months, your account may be changed automatically so that all future distributions are reinvested in your account.

Distribution Arrangements/Sales Charges

This section describes the sales charges and fees you will pay as an investor in the Funds and ways to qualify for reduced sales charges.

Calculation of Sales Charges

Class A Shares

Class A shares are sold at their public offering price. This price includes the initial sales charge. Therefore, part of the money you invest will be used to pay the sales charge. The remainder is invested in Fund shares. The sales charge decreases with larger purchases. There is no sales charge on reinvested dividends and distributions.

The current sales charge rates for the Large Cap Growth Fund, Income Fund and Tax-Exempt Income Fund are as follows:

							Income Fund and Tax-Exempt
	Large Cap Growth Fund						Income Fund
	Sales Charge			Sales Charge			Sales Charge			Sales Charge
Your	as a % of			as a % of			as a % of			as a % of
Investment	Offering Price			Your Investment			Offering Price			Your Investment
Less than $25,000		4.75	%		4.99	%		3.25	%		3.36	%
$25,000 but less than $100,000		4.50	%		4.71	%		3.00	%		3.09	%
$100,000 but less than $250,000		3.50	%		3.63	%		2.75	%		2.83	%
$250,000 but less than $500,000		2.50	%		2.56	%		2.25	%		2.30	%
$500,000 but less than $1,000,000		1.00	%		1.01	%		2.00	%		2.04	%
$1,000,000 and above1	None			None			None			None

¹ There is no initial sales charge on purchases of $1 million or more. However, a contingent deferred sales charge (‘‘CDSC’’) of up to 1.00% of the purchase price will be charged to the shareholder if shares are redeemed in the first 18 months after purchase of the Large Cap Growth Fund or up to 0.75% if redeemed in the first 18 months after purchase of the Income Fund or the Tax-Exempt Income Fund.

24

Shareholder Information

Distribution Arrangements/Sales Charges
continued

Sales Charge Reductions

Reduced sales charges for Class A shares are available to shareholders with investments of $25,000 or more. In addition, you may qualify for reduced sales charges under the following circumstances.

Letter of Intent – You inform the Fund in writing that you intend to purchase enough shares over a 13-month period to qualify for a reduced sales charge. Shares purchased under the non-binding Letter of Intent will be held in escrow until the total investment has been completed. In the event the Letter of Intent is not completed, sufficient escrowed shares will be redeemed to pay any applicable front-end sales charges.

Rights of Accumulation – When the value of shares you already own plus the amount you intend to invest reaches the amount needed to qualify for reduced sales charges, your added investment will qualify for the reduced sales charge.

Sales Charge Waivers

The sales charge will not apply to purchases of Class A shares by:

(1)	BISYS or any of its affiliates;
(2)	Trustees or officers of the Funds;
(3)	directors or officers of BISYS or the Adviser, or affiliates or bona fide full-time employees of any of the foregoing who have acted as such for not less than 90 days (including members of their immediate families and their retirement plans or accounts);
(4)	retirement accounts or plans (or monies from retirement accounts or plans) for which there is a written service agreement between the Group or Distributor and the plan sponsors, so long as such shares are purchased through the Funds;
(5)	any person purchasing shares within approved asset allocation or ‘‘wrap fee’’ programs sponsored by a financial services organization; or
(6)	accounts for which the Adviser or any of its affiliates act in a fiduciary, advisory, agency or similar capacity.

The sales charge also does not apply to shares sold to representatives of selling brokers and members of their immediate families.

The Distributor and the Adviser, at their expense, may provide compensation to dealers in connection with sales of Shares of the Funds.

25

Shareholder Information

Distribution Arrangements/Sales Charges
continued

Reinstatement Privilege

If you have sold Class A shares and decide to reinvest in a Fund within a 120 day period, you will not be charged the applicable sales load on amounts up to the value of the shares you sold. You must provide a written reinstatement request and payment within 120 days of the date your instructions to sell were processed.

Distribution and Service (12b-1) Fees

12b-1 fees compensate dealers and investment representatives for services and expenses relating to the sale and distribution of a Fund’s shares and/or for providing shareholder services. 12b-1 fees are paid from Fund assets on an ongoing basis, and will increase the cost of your investment. Class A shares pay a 12b-1 fee of up to .25% of the average daily net assets of a Fund. The Distributor may use up to .25% of the 12b-1 fee for shareholder servicing and for distribution. Long-term shareholders may pay indirectly more than the equivalent of the maximum permitted front-end sales charge due to the recurring nature of 12b-1 distribution and service fees.

Exchanging Your Shares

You can exchange your shares in one Fund for shares of another Signal Fund in the same class. No transaction fees are charged for exchanges, however, if you exchange Class A Shares between Funds with different sales charges you will pay the difference in the sales charge.

You must meet the minimum investment requirements for the Fund into which you are exchanging. Exchanges from one Fund to another are taxable.

Instructions for Exchanging Shares

Exchanges may be made by sending a written request to The Signal Funds, 3435 Stelzer Road, Columbus OH 43219, or by calling 1-888-426-9709. Please provide the following information:

• Your name and telephone number

• The exact name on your account and account number

• Taxpayer identification number (usually your Social Security number)

• Dollar value or number of shares to be exchanged

• The name of the Fund from which the exchange is to be made

• The name of the Fund into which the exchange is being made

See “Selling Your Shares” for important information about telephone transactions.

26

Shareholder Information

Exchanging Your Shares
continued

Notes on exchanges

• The registration and tax identification numbers of the two accounts must be identical.

• The Exchange Privilege (including automatic exchanges) may be changed or eliminated at any time upon a 60-day notice to shareholders.

Frequent Trading Policy

Frequent trading into and out of a Fund can have adverse consequences for that Fund and for long-term shareholders in the Fund. The Funds believe that frequent or excessive short-term trading activity by shareholders of a Fund may be detrimental to long-term shareholders because those activities may, among other things: (a) dilute the value of shares held by long-term shareholders; (b) cause the Funds to maintain larger cash positions than would otherwise be necessary; (c) increase brokerage commissions and related costs and expenses, and (d) incur additional tax liability. The Funds therefore discourage frequent purchase and redemptions by shareholders and they do not make any effort to accommodate this practice. To protect against such activity, the Board of Trustees has adopted policies and procedures that are intended to permit the Funds to curtail frequent or excessive short-term trading by shareholders. At the present time the Funds do not impose limits on the frequency of purchases and redemptions, nor do they limit the number of exchanges into any of the Funds. The Funds reserve the right, however, to impose certain limitations at any time with respect to trading in shares of the Funds, including suspending or terminating trading privileges in Fund shares, for any investor whom the Funds believe has a history of abusive trading or whose trading, in the judgment of the Funds, has been or may be disruptive to the Funds. The Funds’ ability to detect and prevent any abusive or excessive short-term trading may be limited to the extent such trading involves Fund shares held through omnibus accounts of a financial intermediary.

Signal Individual Retirement Account (‘‘IRA’’)

A Signal IRA enables individuals, even if they participate in an employer-sponsored retirement plan, to establish their own retirement programs. A Signal IRA contribution may be tax-deductible and earnings are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA contributions is restricted or eliminated for individuals who participate in certain employer pension plans and whose annual income exceeds certain limits. Existing IRAs and future contributions up to the IRA maximums, whether deductible or not, still earn income on a tax-deferred basis.

The Signal Funds offer traditional, Roth, Coverdell, SIMPLE and SEP IRAs.

All Signal IRA distribution requests must be made in writing to The Signal Funds. Any additional deposits to a Signal IRA must distinguish the type and year of the contribution.

For more information on a Signal IRA call the Funds at 1-888-426-9709. Shareholders are advised to consult a tax advisor regarding IRA contribution and withdrawal requirements and restrictions.

27

Shareholder Information

Dividends, Distributions and Taxes

Any income a Fund receives in the form of interest and dividends is paid out, less expenses, to its shareholders. Income dividends on the Funds (other than the Large Cap Growth Fund) are usually paid monthly. Dividends on the Large Cap Growth Fund are paid quarterly. Capital gains for all Funds are distributed at least annually.

Dividends and distributions are treated in the same manner for federal income tax purposes whether you receive them in cash or in additional shares.

An exchange of shares is considered a sale, and any related gains may be subject to applicable taxes.

Dividends are taxable as ordinary income. Taxation on capital gains will vary with the length of time the Fund has held the security – not how long the shareholder has been in the Fund.

Dividends are taxable in the year they are paid or credited to your account. However, dividends declared in October, November or December to shareholders of record in such a month and paid by January 31st are taxable on December 31st of the year they are declared.

Currently effective tax legislation generally provides for a maximum tax rate for individual taxpayers of 15% on long-term gains and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers. The following are guidelines for how certain distributions by the Funds are generally taxed to individual taxpayers:

• Distributions of earnings from qualifying dividends and qualifying long-term capital gains will be taxed at a maximum rate of 15%.

• Note that distributions of earnings from dividends paid by certain “qualified foreign corporations” can also qualify for the lower tax rates on qualifying dividends.

• A shareholder will also have to satisfy a greater than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate.

• Distributions of earnings from non-qualifying dividends, interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer.

You will be notified in January each year about the federal tax status of distributions made by the Fund. Depending on your residence for tax purposes, distributions also may be subject to state and local taxes, including withholding taxes.

Foreign shareholders may be subject to special withholding requirements. There is a penalty on certain pre-retirement distributions from retirement accounts. Consult your tax advisor about the federal, state and local tax consequences in your particular circumstances.

The Funds are required to withhold 28% of taxable dividends, capital gains distributions and redemptions paid to shareholders who have not provided the Funds with their certified taxpayer identification number in compliance with IRS rules. To avoid this, make sure you provide your correct Tax Identification Number (Social Security Number for most investors) on your account application.

28

Fund Management

The Investment Advisor

Signal Capital Management, Inc. (the “Advisor”), One Main Street, Evansville, Indiana 47708, is the investment advisor for each Fund. The Advisor is a wholly owned subsidiary of Old National Trust Company. Old National Trust Company is a subsidiary corporation of Old National Bancorp, the largest multi-bank holding company headquartered in Indiana. Old National Trust Company has provided trust services for over 85 years and with its affiliates manages over $2.7 billion in client assets.

The Advisor has retained Mercantile Capital Advisors, Inc. (“Mercantile”), Two Hopkins Plaza, Baltimore, Maryland 21201, to serve as sub-investment advisor to the Money Market Fund. Mercantile and its predecessors have been in the business of managing the investments of fiduciary and other accounts since 1864.

The Advisor makes the day-to-day investment decisions for the Large Cap Growth Fund, Income Fund, and the Tax-Exempt Income Fund and oversees Mercantile’s investments for the Money Market Fund. In addition, the Advisor continuously reviews, supervises and administers each Fund’s investment programs. For these advisory services, the Funds paid the following fees during the fiscal year ended March 31, 2006 after the imposition of certain contractual fee waivers by the Advisor of its advisory fees:

	As a
	Percentage of
	Average Net Assets*
Large Cap Growth Fund		0.55	%
Income Fund		0.25	%
Tax-Exempt Income Fund		0.07	%
Money Market Fund		0.05	%

* Without the imposition of these contractual fee waivers by the Advisor, total advisory fees for the Funds on an annual basis are 0.75% for the Large Cap Growth Fund, 0.50% for the Income Fund and the Tax-Exempt Income Fund and 0.10% for the Money Market Fund.

The Advisor is also entitled to receive 0.05% of each Fund’s average daily net assets (0.10% in the case of the Money Market Fund) in connection with certain administrative services that are provided to the Funds.

Information regarding the factors considered by the Board of Trustees of the Funds in connection with their most recent renewal of the Investment Advisory Agreement with respect to the Funds is provided in the Funds’ Annual Report to Shareholders for the fiscal year ended March 31, 2006.

29

Fund Management

Portfolio Managers

The Advisor uses a team approach to investment management. The individual members of the team who are primarily responsible for the day-to-day management of the Large Cap Growth Fund are:

Stephen A. Keck, CFA

Senior Vice President and Chief Investment Strategist of Signal Capital Management, Inc., Purdue University, B.S. (1979); Michigan State University, M.B.A. (1980) Signal Capital Management, Inc. (2002-present); Old National Trust Company (1981-2002)

Mark W. Cremonie, CFA, CMT

Vice President and Senior Investment Officer of Signal Capital Management, Inc., Indiana University, B.S. (1978); Indiana University, M.B.A. (1980); Signal Capital Management, Inc. (2002-present); Old National Trust Company (1997-2002); National City Trust (1994-1997); Foxhall Investment Management (1993-1994); CSI Asset Management (1988-1992); William O’Neil and Co. (1987-1988); Capital Supervisors, Inc. (1983-1987); Indiana National Bank (1981-1983)

The individual members of the team who are primarily responsible for the day-to-day management of the Income Fund and the Tax-Exempt Income Fund are:

Charlotte Weems, CFA	Vice President and Investment Officer of Signal Capital Management, Inc., Ball State University, B.S. (1998); Signal Capital Management, Inc. (2002-present); Old National Trust Company (2000-2002); AccuTech Systems Corp (1999-2000); American National Trust and Investment Management (1997-1999)
John Claybon, CFA	Vice President and Senior Investment Officer of Signal Capital Management, Inc., University of Southern Indiana, B.A. (1987); Signal Capital Management, Inc. (2002-present); Old National Trust Company (1999-2002); Old National Bancorp (1993-1999).
David Franklin	Investment Officer of Signal Capital Management, Inc., University of Evansville B.S. (2002); Signal Capital Management, Inc. (2002-present).

The Statement of Additional Information has more detailed information about the Advisor and the other service providers as well as additional information about the portfolio managers’ compensation arrangements, other accounts managed, as applicable, and ownership of securities of the Funds that they manage.

30

Fund Management

The Distributor and Administrator

BISYS Fund Services, Limited Partnership is each Fund’s distributor and BISYS Fund Services Ohio, Inc. is each Fund’s administrator. Their address is 3435 Stelzer Road, Columbus, OH 43219.

Capital Structure. The Coventry Group was organized as a Massachusetts business trust on January 8, 1992 and overall responsibility for the management of the Funds is vested in the Board of Trustees. Shareholders are entitled to one vote for each full share held and a proportionate fractional vote for any fractional shares held and will vote in the aggregate and not by series except as otherwise expressly required by law.

The Funds offer two classes of shares, Class A and Class I Shares, each of which have different expenses that affect performance. For further information, telephone 1-888-426-9709.

Disclosure of Fund Portfolio Holdings

A complete list of each Fund’s portfolio holdings is publicly available on a quarterly basis through filings made with the SEC on Forms N-CSR and N-Q. A description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio securities is provided in the Statement of Additional Information (SAI).

31

Financial Highlights

Large Cap Growth Fund

The financial highlights tables on the following pages are intended to help you understand each Fund’s financial performance since its inception. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information presented in the financial highlights tables for the fiscal year ended March 31, 2006 was audited by Ernst & Young LLP, independent registered public accountants, whose report, along with each Fund’s financial statements, is included in the Funds’ annual report, which is available upon request. The information for all periods prior to April 1, 2005 was audited by the Funds’ prior auditors.

	Class A
	For the Year			For the Year			For the Year			For the Period
	Ended			Ended			Ended			Ended March 31,
	March 31, 2006			March 31, 2005			March 31, 2004			2003(d)
Net asset value, beginning of period	$	11.35		$	11.29		$	9.05		$	10.00
Investment activities:
Net investment income (loss)		(0.07	)		(0.01	)		(0.01	)		—	(e)
Net realized and unrealized gains (losses) on investments		1.49			1.00			2.58			(0.95	)
Total from Investment Activities		1.42			0.99			2.57			(0.95	)
Distributions:
Net investment income		—	(e)		—			—	(e)		—	(e)
Net realized gains on investments		(0.69	)		(0.93	)		(0.33	)		—
Total Distributions and Dividends		(0.69	)		(0.93	)		(0.33	)		—
Net Asset Value, End of Period	$	12.08		$	11.35		$	11.29		$	9.05
Total Return (excludes sales charge)		12.65	%		8.74	%		28.60	%		(9.40)	%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	756		$	566		$	466		$	224
Ratio of expenses to average net assets		1.34	%		1.43	%		1.44	%		1.45	%(b)
Ratio of net investment income to average net assets		(0.60	)%		(0.15	)%		(0.16	)%		0.11	%(b)
Ratio of expenses to average net assets*		1.54	%		1.63	%		1.64	%		1.67	%(b)
Portfolio Turnover(c)		36.43	%		39.77	%		39.64	%		34.11	%(a)

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.
(e)	Amount is less than $0.005.

32

Financial Highlights

Income Fund

	Class A
	For the Year			For the Year			For the Year			For the Period
	Ended			Ended			Ended			Ended
	March 31, 2006			March 31, 2005			March 31, 2004			March 31, 2003(d)
Net asset value, beginning of period	$	9.77		$	10.19		$	10.21		$	10.00
Investment activities:
Net investment income		0.37			0.35			0.34			0.31
Net realized and unrealized gains (losses) on investments		(0.20	)		(0.42	)		(0.02	)		0.25
Total from Investment Activities		0.17			(0.07	)		0.32			0.56
Distributions:
Net investment income		(0.37	)		(0.35	)		(0.34	)		(0.31	)
Net realized gains on investments		—			—			—	(e)		(0.04	)
Total Distributions and Dividends		(0.37	)		(0.35	)		(0.34	)		(0.35	)
Net Asset Value, End of Period	$	9.57		$	9.77		$	10.19		$	10.21
Total Return (excludes sales charge)		1.76	%		(0.64	)%		3.17	%		5.65	%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	319		$	321		$	263		$	218
Ratio of expenses to average net assets		0.90	%		0.95	%		0.98	%		1.07	%(b)
Ratio of net investment income to average net assets		3.81	%		3.56	%		3.31	%		3.54	%(b)
Ratio of expenses to average net assets*		1.15	%		1.20	%		1.23	%		1.32	%(b)
Portfolio Turnover(c)		24.47	%		14.91	%		43.76	%		7.47	%(a)

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.
(e)	Amount is less than $0.005.

33

Financial Highlights

Tax-Exempt Income Fund

	Class A
	For the Year			For the Year			For the Year			For the Period
	Ended			Ended			Ended			Ended
	March 31, 2006			March 31, 2005			March 31, 2004			March 31, 2003(d)
Net asset value, beginning of period	$	9.89		$	10.22		$	10.18		$	10.00
Investment activities:
Net investment income		0.31			0.32			0.33			0.27
Net realized and unrealized gains (losses) on investments		(0.13	)		(0.25	)		0.08			0.21
Total from Investment Activities		0.18			0.07			0.41			0.48
Distributions:
Net investment income		(0.31	)		(0.32	)		(0.33	)		(0.27	)
Net realized gains on investments		(0.02	)		(0.08	)		(0.04	)		(0.03	)
Total Distributions and Dividends		(0.33	)		(0.40	)		(0.37	)		(0.30	)
Net Asset Value, End of Period	$	9.74		$	9.89		$	10.22		$	10.18
Total Return (excludes sales charge)		1.82	%		0.73	%		4.14	%		4.85	%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	144		$	136		$	137		$	57
Ratio of expenses to average net assets		1.08	%		1.12	%		1.09	%		1.09	%(b)
Ratio of net investment income to average net assets		3.11	%		3.21	%		3.25	%		3.36	%(b)
Ratio of expenses to average net assets*		1.51	%		1.62	%		1.58	%		1.52	%(b)
Portfolio Turnover(c)		11.64	%		18.11	%		9.11	%		8.54	%(a)

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.

34

Return completed form to:
The Signal Funds
P.O. Box 182094
Columbus, Ohio 43218-2094
For assistance call: 1-888-426-9709 Account
Application

Class A Shares

1      Account Registration and Information    (Do not use this form for an IRA or to establish a retirement plan.)
Type of Registration (check one)

o Individual	o Tenants in Common	o Corporation*	o Custodian for Minor (UGMA)
o Joint Tenants with Right of Survivorship	o Partnership*	o Trust*	o Other (Specify)*

* Please attach a copy of the appropriate bylaws, corporate resolutions, authorized traders or trust documents establishing authority to open this account. In addition, provide a copy of the IRS Issuance Letter for your Employee or Tax Identification number. If such agreements or resolutions are not in existence, please contact the Fund at 1-888-426-9709 to request the appropriate form.

Important Information About Procedures For Opening a New Account. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you:When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.We may also ask to see your driver’s license or other identifying documents.

Individual–(First Name/Initial/Last Name)
Joint Owner–If any (First Name/Initial/Last Name)
Social Security or Taxpayer ID Number (Required by law)	Date of Birth
Social Security Number of Joint Owner	Date of Birth

Name of Custodian (only one)

as Custodian for
Name of Minor (only one)	Minor’s State     of Residence

Minor’s Social Security Number     Minor’s Date
    of Birth

Name of Organization

Name of Trustee

Tax ID Number Date of Trust

Residential/Business,
Number and Street (required) Apt. # City State Zip

Daytime Telephone Number ( ) Evening Phone Number ( )

Citizenship Employment (Required by National Association of Securities Dealers, Inc.)

o U.S. Citizen            o Non-Resident Alien (Attach a W-8 form. Dividends are subject to tax withholding.)            o Resident Alien
o Yes, I am an associated person of a NASD member.

Note: For non-resident aliens, in addition to submitting an IRS FormW8, the following is required: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard. Please indicate form of identification:
o Alien ID Card            o Passport            o Other

Alternate Identification Number: Issuing body: Country of Origin:

 
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association of Securities Dealers, Inc.?
o No  o Yes

Employer’s Name (account owner) Occupation

Employer’s Address City State Zip

Employer’s Name (joint owner) Occupation

Employer’s Address City State Zip

2     Fund Selection  Indicate the Fund(s) in which you are investing $1000 minimum initial investment per Fund; see prospectus for exceptions. If no fund is selected you will automatically be invested in the Money Market Fund.

Class A			Select one of the following payment methods:
Shares
o	Large Cap Growth Fund	$	o	By Check: Make check payable to The Signal Funds
o	Income Fund	$	o	By Wire: Complete this form and call 1-888-426-9709 for wire instructions and to place an order.
o	Tax-Exempt Income Fund	$
o	Money Market Fund	$	Check box if establishing a letter of intent o and complete Section 11.
	TOTAL INVESTMENT	$

3     Telephone Redemption and Exchange     (If left blank, you will automatically receive telephone privileges.)

                I elect the telephone privileges as described in the prospectus                                                         o Yes                                                                                                     o No

4     Distribution Selection  (Your dividends and capital gains will be automatically reinvested into your account unless you indicate otherwise.)

Dividends	Capital Gains
o reinvested	o reinvested
o sent to me by check to the address indicated in Section 1.	o sent to me by check to the address indicated in Section 1.
o automatically deposited to my bank account as indicated in Section 8.	o automatically deposited to my bank account as indicated in Section 8.

5      Automatic Investment Plan    (From your checking account. Attach a voided check along with your initial purchase.)

The minimum initial purchase is reduced to $25 per fund when you use this service. Subsequent minimum purchase is $25 for each fund.

FUND NAME	ACCOUNT NUMBER (or New Account)		AMOUNT ($25 min.)
		$
		$
		$
		$

Please select how often you would like to have the amount(s) shown above withdrawn from your Bank Account.
o Once each month on the 5th
o Once each month on the 20th
o Once each quarter on the 5th beginning in                                           (Mar./June/Sept./Dec.)
      (Voided check must be attached.)

** PLEASE COMPLETE SECTION 8
BY MAKING THE ABOVE SELECTION, I AUTHORIZE THE SIGNAL MUTUAL FUNDS’ TRANSFER AGENT AND BISYS FUND SERVICES, TO CHARGE THE AFOREMENTIONED ACCOUNT AND INVEST THE MONIES INTO THE SIGNAL MUTUAL FUNDS LISTED ON THE ABOVE STATED DATE(S). I will be responsible for assuring the monies are available in the bank account I choose to have charged for these transactions. Please allow fifteen business days after receipt to add, change or discontinue the Auto Invest Plan feature. To add or change bank account information in Section 8, the request must be in writing and accompanied by a signature guarantee.

6      Automatic Withdrawal Plan    (From your Signal Funds account. Attach a voided check along with your initial purchase.)

You must have a minimum account balance of $5,000. Please indicate the Signal Fund(s) for the Auto Withdrawal.

FUND NAME ACCOUNT NUMBER (or New Account) AMOUNT ($100 min./$100,00 max.)

Please select how often you would like to have the amount(s) shown above withdrawn from your Signal Fund(s).
o Once each month on the 5th
o Once each month on the 20th
o Once each quarter on the 5th beginning in                                           (Mar./June/Sept./Dec.)
o Check if proceeds should be mailed by check to the address of record in Section 1.
o Check if proceeds should be deposited to the bank account listed in Section 8 on the Account Application.
      (Voided check must be attached.)

BY MAKING THE ABOVE SELECTION, I AUTHORIZE THE SIGNAL FUNDS’ TRANSFER AGENT TO REDEEM SHARES FROM MY SIGNAL FUND(S) ACCOUNT ON THE STATED DATE(S). A $500 BALANCE IN THE SPECIFIED FUND MUST BE MAINTAINED FOR THE FEATURE TO BE AVAILABLE. I ALSO UNDERSTAND THAT BY REDEEMING SHARES WITH A FLUCTUATING VALUE, I MAY BE CREATING A TAXABLE EVENT. To change Auto Withdrawal amounts, dates, or to discontinue the feature the request must be made in writing to the SIGNAL Funds. To add or change bank account information in Section 8, the request must be in writing and accompanied by a signature guarantee. Please allow 15 business days after receipt to add, change or discontinue this feature.

7      Automatic Exchange    (From one Signal Fund to another Signal Fund of the same class.)

You may make regular, automatic withdrawals from a Signal Fund to benefit from dollar-cost-averaging by automatically making purchases into another Signal Mutual Fund. You must meet the minimum investment requirements for the Fund into which you are exchanging.

Please select how often you would like to have the amount(s) shown below withdrawn from your Signal Fund and invested into the selected Fund(s).
o Once each month on the 20th
o Once each quarter on the 20th beginning in                      (Mar./June/Sept./Dec.)

FROM:	Fund Name	Account Number (or New)	Amount ($25.00 min.)
TO:	Fund Name	Account Number (or New)	Amount ($25.00 min.)
TO:	Fund Name	Account Number (or New)	Amount ($25.00 min.)

BY MAKING THE ABOVE SELECTION, I AUTHORIZE THE SIGNAL FUNDS’ TRANSFER AGENT TO REDEEM FROM THE AFOREMENTIONED SIGNAL FUND AND PURCHASE THE MONIES INTO THE SIGNAL MUTUAL FUNDS CHOSEN ON THE ABOVE STATED DATE(S). Please allow fifteen business days after written receipt of the request to add, change or discontinue the Auto Exchange feature. Please complete an appropriate Letter of Intent (if applicable).

8     Bank Address and Electronic Funds Transfer Information

Attach a Voided Check for Verification. (Check as many boxes, as apply)		Your Account is a:
o	Check if telephone and written redemption proceeds are to be sent electronically as indicated below unless otherwise specified at the time of the request.	o o	Checking Account Savings Account
o	Check if cash dividends are to be sent electronically (complete Section 4).
o	Check if instructions apply to the Auto Invest Plan (complete Section 5).
o	Check if instructions apply to the Auto Withdrawal Plan (complete Section 6).

Name(s) on Bank Account

Bank Name Branch Office (if applicable) Bank Telephone Number

Bank ABA (Routing) Number (if unknown, call your bank) Bank Account Number

Bank Street Address (DO NOT use, P.O. Box) City State Zip

To add or change bank account information, the request must be in writing and accompanied by a signature guarantee.

9      Checkwriting    (Signal Money Market Fund only.) Please see the current prospectus for details. ($100 minimum per check).

Please be sure to complete the following signature card section. Your monthly statement will show your checks as redemptions.

Checkwriting Signature Card

For Office Only
Acct. No.                     

Name of Registered Owners of Shares (Please Print or Type)

Address City State Zip

All registered owner(s) of shares owned above should sign below. By signing this card the signatory(s) agree(s) to all terms and conditions set forth herein, including the terms and conditions listed in the Checkwriting Terms and Conditions on the back of this card.

SIGNATURES

Only one signature is required to sign checks

10      Sales Charge Waivers    (See current prospectus under “Sales Charge Waivers” for qualified purchase types.)

Qualified Purchase Category and Explanation

11     Letter of Intent

I understand that through accumulated investments I can reduce my sales charges as outlined in the prospectus. I plan to invest over a 13-month period in shares of one or more of the funds in the Signal Funds (except the Money Market Fund) an aggregate amount of at least:

o $25,000                      o $50,000                      o $100,000                      o $250,000                      o $500,000                      o $1,000,000

If the amount indicated is not invested within 13 months, reduced sales charges do not apply.

12      Right of Accumulation    (See the prospectus for qualifications.)

o I own shares of more than one fund in the Signal Funds, which may entitle me to a reduced sales charge. My shareholder account numbers are:

Fund Name Fund Name Fund Name

Account # Account # Account #

13      Your Signature    (All registered shareholders must sign.)

I have received and read the current prospectus(es) and privacy notice of the fund(s) selected, and this Account Registration Form, and agree to be bound by their terms. Certification - Under penalties of perjury,
I certify that:

1)	The number shown on this application is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and;
2)	I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service(IRS) that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding (does not apply to real estate transactions, mortgage interest paid, the acquisition or abandonment of secured property, contributions to an Individual Retirement Account (IRA), and payments other than interest and dividends), and;
3)	I am a U.S. Person (including a U.S. Resident alien). CERTIFICATION INSTRUCTIONS - YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU ARE SUBJECT TO BACKUP WITHHOLDING. The Internal Revenue Service does not require your consent to any provision of this document other than the certification required to avoid backup withholding.

THIS ACCOUNT IS GOVERNED BY A PRE-DISPUTE ARBITRATION AGREEMENT. I ACKNOWLEDGE RECEIPT OF THE PRE-DISPUTE ARBITRATION AGREEMENT.

BY SIGNING BELOW, I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS GOVERNING THIS ACCOUNT AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS ARE CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME, AND I ACKNOWLEDGE THAT I HAVE READ AND UNDERSTAND THE DISCLOSURE WITH RESPECT TO NON-DEPOSIT INVESTMENT PRODUCTS AT THE INTRODUCTION TO THIS AGREEMENT.

X	X
Date	Date
X	X
Date	Date

Terms and Conditions

The registered owner(s) whose signature(s) appear(s) on the reverse side (the “Signatory,” whether one or more), intending to be legally bound, hereby agrees with the other registered owners and with the Fund and The Huntington National Bank, Ohio (the “Bank”) as follows:

1.

REDEMPTION AUTHORIZATION: The Bank is appointed agent for the Signatory to request redemption of shares of The Signal Money Market Fund (the “Fund”) registered in the name of the Signatory upon receipt of, and in the amount of, items drawn in accordance with these Terms and Conditions by the Signatory upon the Signatory’s Fund account. The Bank is expressly authorized to process items as redemption instructions hereunder without requiring signature guarantee, and shall not be liable to the Fund, the Signatory or any third party for any loss, liability or expense resulting from the absence of any such guarantee. The Bank shall also not be liable to the Fund, the Signatory or any third party for, and the Signatory indemnifies and holds the Bank harmless from, and loss, liability or expense arising from or related to any act of the Fund in redeeming or not redeeming any shares or following or not following any instruction contained in an item.

2.

ITEM PROCESSING: Signatory agrees that the Bank’s duties upon receipt of items from the Signatory are only those of a collecting agent to present the items to the Fund for payment through redemption of shares owned by the Signatory. In addition, the Signatory agrees that:

(a)	No item shall be issued or honored, or any redemption effected, in an amount less than $100.
(b)	No item shall be issued or honored, or any redemption effected, for any amount not represented by fully paid shares or represented by shares for which payment has not been made in full and any checks or other instruments given in payment have not been finally paid and collected through normal banking channels.
(c)	Items shall be subject to any further limitations set forth in Prospectus issued by the Fund including without limitation any additions, amendments and supplements of these Terms and Conditions from time to time in effect.

3. DUAL OWNERSHIP: If more than one person is indicated as a registered owner of shares of the Fund, as by joint ownership, ownership in common, or tenants by the entireties, then

(a) each registered owner must sign this signature card, (b) only one registered owner need sign each item issued hereunder.

4.	FORM OF ITEMS: The items shall be in a form provided or approved in advance by the Fund or the Bank.
5.	TERMINATION: Either the Bank or the Fund may at any time terminate the special redemption privileges, related share redemption services and the Bank’s agency for the Signatory without prior notice by the Bank or the Fund to the Signatory.
6.	HEIRS AND ASSIGNS: The signatory may not assign its rights and duties pursuant to these Terms and Conditions without the prior consent of the Fund and Bank. These Terms and Conditions shall bind the respective heirs, executors, administrators and permitted assigns of the Signatory.

14      Client Agreement    After reading this section, please sign in Section 13.

To: BISYS Fund Services, L.P. (the “Distributor”), and BISYS Fund Services, Inc. (the “Transfer Agent”) and Signal Capital Management, Inc. (the “Investment Advisor”).

I (We) have full right, power, authority and legal capacity; and am (are) of legal age in my (our) state of residence to purchase shares of the investment portfolios (“Funds”) of the Signal Funds (the “Fund Company”). I (we) affirm that I (we) have received and read the current prospectus(es) of the Fund(s) selected and agree to be bound by its terms.

a. The meaning of words in this Agreement: The words “I,” “me” and “my” refer to the person(s) who signed this Agreement. The words “you” and “your” refer to the Distributor and the Transfer Agent.

b. Representations. I understand that you provide no investment, tax, or legal advice, and I have relied on my independent judgment with respect to the suitability or potential value of any security or order.

c. Debit Authorization and Settlement. If I authorize, and if the Transfer Agent approves, the use of my bank account designated in Section 8 of this Account Registration Form (the “designated account”) as the settlement account in connection with this account, I understand and agree that the Transfer Agent may debit the designated account for payment of securities purchased by me either by way of this Account Registration Form and order, by signing up for the Automatic Investment Plan, or for subsequent purchases in any Funds as I may direct. If I have instructed that a purchase be settled through a debit of my account, I certify that I have the power and authority to debit the account. I agree to have sufficient collected funds available in the designated account to cover the amounts due on purchase of securities at the time of placing my order. If I have designated another method of payment, I agree to deliver sufficient collected funds to cover the amount due by 9:00 a.m. (Eastern Time) on the settlement date. I understand that if sufficient collected funds are not available, my purchase will be rejected and I will be liable for any resulting loss.

If the Transfer Agent executes a transaction but fails to receive sufficient payment for such shares, the Transfer Agent may, without prior notice, redeem any Fund shares. I agree to reimburse the Fund company or BISYS Fund Services, Inc. on demand for any costs, losses or liabilities incurred by such party in collection of the debit balance.

I understand and agree that the Transfer Agent may credit the designated account with dividend distributions, Automatic Withdrawal Plan, and other distributions that are payable to me (us) by the Fund Company.

I further understand that the Automatic Withdrawal Plan and the Automatic Investment Plan may be terminated or modified at any time without notice.

d. Force Majeure. You shall not be liable for any loss or delay caused directly or indirectly by war, natural disaster, government restrictions, exchange or market rulings or other conditions beyond your control.

e. Recording Conversations. I understand and agree that, for our mutual protection, telephone conversations may be recorded without further notice.

f. Applicable Laws and Regulations. All transactions shall be subject to rules, regulations, customs and usages of the exchange, market or clearinghouse where executed, all applicable federal and state laws and regulations, and the policies and procedures as determined by the Fund Company set forth in its then current prospectus(es).

g. Governing Laws. The Agreement shall be governed by the laws of the State of Ohio as applicable.

h. Reliance on Representations. I understand that you shall rely on the information that I have set forth in this Agreement. I agree that all changes to this information shall be promptly provided to the Transfer Agent in writing. The Transfer Agent is entitled to rely on this information until I change it by subsequent written notice.

i. Delivery and Receipt. Any orders for transactions in the Funds under this Agreement will NOT be effective until received and approved by the Distributor and the Transfer Agent at their offices in Columbus, Ohio. The

Distributor and the Transfer Agent shall not be responsible for any losses or lost profit opportunity I may experience due to any delays in the execution of purchase and redemption orders as a result of delayed receipt of such orders.

j. Instructions. Neither the Distributor, the Transfer Agent, nor the Fund Company shall be liable for any loss, damages, expense or cost arising out of any telephone redemption effected in accordance with the Fund Company’s telephone redemption procedures, upon instructions reasonably believed to be genuine. The Fund Company and its agents will employ procedures designed to provide reasonable assurance that instructions by telephone are genuine. These procedures include recording all phone conversations, sending confirmations to shareholders within 72 hours of the telephone transaction, verification of account name and account number or tax identification number and sending redemption proceeds only to the address of record or to a previously authorized bank account.

k. Arbitration. This paragraph contains what is sometimes referred to as a predispute arbitration clause. In this regard, I am aware of the following:
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different from court proceedings.
(iv) The arbitrators’ award is not required to include factual findings or legal reasoning and any party’s right to appeal or to seek modification of rulings by the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
(vi) All agreements shall include a statement that “No person shall bring a putative or certified class action to arbitration, nor seek to enforce any predispute arbitration agreement against any person who has initiated in court a putative class action; or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied, or (ii) the class is decertified, or (iii) the person against whom the arbitration agreement would be enforced is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein.”
It is agreed that any controversy between me and the Fund Company and/or any of its service providers (including the Investment Advisor) arising out of this Agreement or my business with you, shall be settled by arbitration conducted in accordance with the rules of the National Association of Securities Dealers, Inc. or the American Arbitration Association, as I may elect. Failure to notify you of such election in writing within five (5) days after receipt from you of a request for arbitration shall be deemed to be authorization to make such election on my behalf. Judgment upon the award of the arbitrators may be entered by any court having jurisdiction.

l. Indemnification. As additional consideration for the services of the Distributor, the Transfer Agent and the Investment Advisor, with regard to this Account, I agree to indemnify and hold each of them, the Fund Company, and their officers, directors, employees and agents harmless from and against any and all losses, liabilities, demands, claims, actions, expenses and attorney’s fees arising out of or in connection with this Agreement, which are not caused by their negligence or willful misconduct. The provisions of this Section shall survive termination of this Agreement; the provisions of this Section shall be binding on my successors and assigns.

m. I understand that, if disbursements out of this account are to anyone other than the applicant or the applicant’s joint tenant, a signature guarantee will be required.

n. With respect to Section 5, Section 6, and Section 7 I understand that if the 5th or 20th should fall on a non-business day, the transaction will be effective on the next business day.

o. I understand that mutual fund shares are not deposits of any bank, are not insured by the FDIC, are not obligations of any bank or the U.S. Government and are not endorsed or guaranteed in any way by any bank.

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For more information about the Funds, the following documents are available free upon request:

Annual/Semi-Annual Reports:
The Funds’ annual and semi-annual reports to shareholders contain additional information on each Fund’s investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund’s performance during its last fiscal year.

Statement of Additional Information (SAI):
The SAI provides more detailed information about the Funds, including their operations and investment policies. It is incorporated by reference and is legally considered a part of this prospectus.

The Funds do not currently maintain a separate Internet website containing copies of their reports or the SAI, however, you can receive free copies of reports and the SAI, or request other information and discuss your questions about the Funds by contacting a broker that sells the Funds. Or contact the Funds at:

The Signal Funds
P.O. Box 182094
Columbus, Ohio 43218-2094
Telephone: 1-888-426-9709
 

You can review each Fund’s reports and the SAI at the Public Reference Room of the Securities and Exchange Commission. You can get text-only copies:

• For a duplicating fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-6009 or calling 1-202-942-8090, or by electronic request by e-mailing the SEC at the following address: publicinfo@sec.gov.

• Free from the EDGAR Database on the Commission’s Website at http://www.sec.gov.

Investment Company Act file no. 811-6526. SIGPUA 08/06

EX-99.17.T

Exhibit 17(t)

Large Cap Growth Fund

Income Fund

Tax-Exempt Income Fund

Money Market Fund

Class I Shares

Prospectus and Privacy Policy
dated August 1, 2006

The Signal Funds

Notice of Privacy Policy & Practices

The Signal Funds recognize and respect the privacy expectations of our customers¹. We provide this notice to you so that you will know what kinds of information we collect about our customers and the circumstances in which that information may be disclosed to third parties who are not affiliated with The Signal Funds.

Collection of Customer Information

We collect nonpublic personal information about our customers from the following sources:

• Account Applications and other forms, which may include a customer’s name, address, social security number, and information about a customer’s investment goals and risk tolerance;

• Account History, including information about the transactions and balances in a customer’s accounts; and

• Correspondence, written, telephonic or electronic between a customer and The Signal Funds or service providers to The Signal Funds.

Disclosure of Customer Information

We may disclose all of the information described above to certain third parties who are not affiliated with The Signal Funds under one or more of these circumstances:

• As Authorized – if you request or authorize the disclosure of the information.

• As Permitted by Law – for example, sharing information with companies who maintain or service customer accounts for The Signal Funds is permitted and is essential for us to provide shareholders with necessary or useful services with respect to their accounts.

• Under Joint Agreements – we may also share information with companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements.

Security of Customer Information

We require service providers to The Signal Funds:

• to maintain policies and procedures designed to assure only appropriate access to, and use of information about customers of The Signal Funds; and

• to maintain physical, electronic and procedural safeguards that comply with federal standards to guard nonpublic personal information of customers of The Signal Funds.

We will adhere to the policies and practices described in this notice regardless of whether you are a current or former shareholder of The Signal Funds.

¹ For purposes of this notice, the terms “customer” or “customers” includes both shareholders of The Signal Funds and individuals who provide nonpublic personal information to The Signal Funds, but do not invest in The Signal Funds shares.

This is not part of the Prospectus.

Questions?
Call 1-888-426-9709 or your
investment representative.

Large Cap Growth Fund

Income Fund

Tax-Exempt Income Fund

Money Market Fund

Class I Shares

Prospectus dated August 1, 2006

These securities have not been approved or
disapproved by the Securities and Exchange
Commission nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of
this prospectus. Any representation to the contrary is
a criminal offense.

The Signal Funds				Table of Contents
		Risk/Return Summary and Fund Expenses
Carefully review this important section for a summary of each Fund’s investments, risks and fees.			3	Signal Large Cap Growth Fund
			6	Signal Income Fund
			9	Signal Tax-Exempt Income Fund
			12	Signal Money Market Fund
		Investment Objectives and Strategies
This section contains details on each Fund’s investment strategies and risks.			15	Signal Large Cap Growth Fund
			16	Signal Income Fund
			17	Signal Tax-Exempt Income Fund
			18	Signal Money Market Fund
			19	Investment Risks
		Shareholder Information
Consult this section to obtain details on how shares are valued, how to purchase, sell and exchange shares, related charges and payments of dividends.			20	Pricing of Fund Shares
			21	Purchasing and Adding to Your Shares
			23	Selling Your Shares
			25	Distribution Arrangements
			25	Exchanging Your Shares
			27	Dividends, Distributions and Taxes
		Fund Management
Review this section for details on the people and organizations who oversee the Funds and their investments.			28	The Investment Advisor
			29	Portfolio Managers
			30	The Distributor and Administrator
		Financial Highlights
Review this section for details on the selected financial statements of the Funds.			31	Large Cap Growth Fund
			32	Income Fund
			33	Tax-Exempt Income Fund
			34	Money Market Fund

2

  Risk/Return Summary and Fund Expenses

Large Cap Growth Fund

	Risk/Return Summary of the Signal Large Cap Growth Fund
Investment Objectives	The Large Cap Growth Fund seeks capital appreciation.
Principal Investment Strategies	The Fund invests primarily in a diversified portfolio of equity securities of large capitalization companies. For these purposes, the Advisor deems issuers with market capitalizations in excess of $5 billion to be large capitalization companies. The Advisor seeks investments in issuers that demonstrate superior sales and earnings growth rates, improving profitability, or above-average growth relative to their current market valuations.
Principal Investment Risks	Because the value of the Fund’s investments will fluctuate with market conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund’s holdings may underperform its other holdings. Investments in the Fund are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.
Who May	Consider investing in the Fund if you are:
Want to Invest?	•	investing for a long-term goal such as retirement (five year or longer investment horizon)
	•	looking to add a growth component to your portfolio
	•	willing to accept higher risks of investing in the stock market in exchange for potentially higher long term returns
	This Fund will not be appropriate for someone:
	•	seeking monthly income
	•	pursuing a short-term goal or investing emergency reserves
	•	seeking safety of principal

3

Risk/Return Summary and Fund Expenses

Large Cap Growth Fund

The bar chart and table on this page show how the Large Cap Growth Fund has performed. The bar chart illustrates the risks of investing in the Fund by showing the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance (before and after taxes) over time since its inception on July 15, 2002 to that of the Standard & Poor’s 500^® Stock Index (“S&P 500 Index”)³.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund will perform in the future.

Average Annual Total Returns

(for the periods ending

December 31, 2005)⁴
 

Best quarter:	Q4 2003 +9.56%
Worst quarter:	Q1 2003 –3.66%

				Since
				Inception
	Past			on
	Year			7/15/02
Large Cap Growth Fund
Before Taxes		8.06	%		10.03	%
After Taxes on Distributions2		7.15	%		8.74	%
After Taxes on Distributions and Sale of Fund Shares2		6.47	%		8.10	%
S&P 500® Index3		4.91	%		11.12	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.
1	Both the chart and table assume reinvestment of dividends and distributions.
2	After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
3	A widely recognized, unmanaged index of common stocks generally representative of the U.S. stock market as a whole. The index does not reflect the deduction of fees and expenses associated with a mutual fund or the impact of taxes.
4	For the period January 1, 2006 through June 30, 2006, the aggregate (non-annualized) total return of the Fund was –0.41%.

4

Risk/Return Summary and Fund Expenses

Large Cap Growth Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Large Cap Growth Fund.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases	None
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees	0.55%1
Distribution and Service (12b-1) Fees	None
Other Expenses		0.53	%
Total Fund Operating Expenses	1.08%2

1.	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to 0.55% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.75%.
2.	Without the Advisor’s contractual agreement to waive a portion of its investment management fee, the “Total Fund Operating Expenses” for the Fund would have been 1.28%.

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

Expense Example

	1		3		5		10
	Year		Years		Years		Years
Large Cap Growth Fund		$110		$386		$683		$1,528

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

5

Risk/Return Summary and Fund Expenses

Income Fund

	Risk/Return Summary of the Signal Income Fund
Investment Objectives	The Income Fund seeks current income consistent with the preservation of capital.
Principal Investment Strategies	The Fund normally invests at least 65% of its total assets in debt securities of all types, including investment grade corporate bonds and U.S. Government bonds.
Principal Investment Risks	Because the value of the Fund’s investments will fluctuate with market conditions and interest rates, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund’s holdings may underperform its other holdings. Investments in the Fund are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.
Who May	Consider investing in the Fund if you are:
Want to Invest?	•	looking to add a monthly income component to your portfolio
	•	seeking higher potential returns than provided by money market funds
	•	willing to accept the risks of price and dividend fluctuations
	This Fund will not be appropriate for someone:
	•	investing emergency reserves
	•	seeking safety of principal

6

Risk/Return Summary and Fund Expenses

Income Fund

The bar chart and table on this page show how the Income Fund has performed. The bar chart illustrates the risks of investing in the Fund by showing the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance (before and after taxes) over time since its inception on July 15, 2002 to that of the Lehman Brothers Intermediate Government/Credit Index³.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund will perform in the future.

Average Annual Total Returns

(for the periods ending

December 31, 2005)⁴

Best quarter:	Q2 2005 +2.54%
Worst quarter:	Q2 2004 –2.41%

				Since
				Inception
	Past			on
	Year			7/15/02
Income Fund
Before Taxes		1.57	%		3.11	%
After Taxes on Distributions2		0.16	%		1.69	%
After Taxes on Distributions and Sale of Fund Shares2		1.01	%		1.83	%
Lehman Brothers Intermediate Government/Credit Index3		1.58	%		4.08	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.
1	Both the chart and table assume reinvestment of dividends and distributions.
2	After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
3	A widely recognized, unmanaged index generally representative of the bond market as a whole. The index does not reflect the deduction of fees and expenses associated with a mutual fund or the impact of taxes.
4	For the period January 1, 2006 through June 30, 2006, the aggregate (non-annualized) total return of the Fund was -0.21%.

7

Risk/Return Summary and Fund Expenses

Income Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Income Fund.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases	None
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees	0.25%1
Distribution and Service (12b-1) Fees	None
Other Expenses		0.40	%
Total Fund Operating Expenses	0.65%2

1.	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to 0.25% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.50%.
2.	Without the Advisor’s contractual agreement to waive a portion of its investment management fee, the “Total Fund Operating Expenses” for the Fund would have been 0.90%.

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

Expense Example

	1	3	5	10
	Year	Years	Years	Years
Income Fund	$66	$262	$474	$1,085

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

8

Risk/Return Summary and Fund Expenses

Tax-Exempt Income Fund

	Risk/Return Summary of the Signal Tax-Exempt Income Fund
Investment Objectives	The Tax-Exempt Income Fund seeks current income exempt from federal income tax.
Principal Investment Strategies	The Fund invests primarily in municipal obligations, the interest on which is exempt from federal income tax.
Principal Investment Risks	Because the value of the Fund’s investments will fluctuate with market conditions and interest rates, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund’s holdings may underperform its other holdings. Investments in the Fund are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.
Who May	Consider investing in the Fund if you are:
Want to Invest?	•	looking to add a monthly tax-exempt income component to your portfolio
	•	willing to accept risks of price and dividend fluctuations
	This Fund will not be appropriate for someone:
	•	investing emergency reserves
	•	seeking safety of principal

9

Risk/Return Summary and Fund Expenses

Tax-Exempt Income Fund

The bar chart and table on this page show how the Tax-Exempt Income Fund has performed. The bar chart illustrates the risks of investing in the Fund by showing the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance (before and after taxes) over time since its inception on July 15, 2002 to that of its primary benchmark index, the Merrill Lynch 1-10 Year Municipal Index³.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund will perform in the future.

Average Annual Total Returns

(for the periods ending

December 31, 2005)⁴

Best quarter:	Q3 2004 +3.21%
Worst quarter:	Q2 2004 –1.99%

				Since
				Inception
	Past			on
	Year			7/15/02
Tax-Exempt Income Fund
Before Taxes		1.61	%		3.60	%
After Taxes on Distributions2		1.56	%		3.47	%
After Taxes on Distributions and Sale of Fund Shares2		2.27	%		3.54	%
Merrill Lynch 1-10 Year Municipal Index3		1.64	%		3.75	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.
1	Both the chart and table assume reinvestment of dividends and distributions.
2	After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
3	A widely recognized, unmanaged index generally representative of municipal securities having maturities of between one and ten years. The index does not reflect the deduction of fees and expenses associated with a mutual fund or the impact of taxes.
4	For the period January 1, 2006 through June 30, 2006, the aggregate (non-annualized) total return of the Fund was -0.49%.

10

Risk/Return Summary and Fund Expenses

Tax-Exempt Income Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Tax-Exempt Income Fund.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases	None
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees	0.10%1
Distribution and Service (12b-1) Fees	None
Other Expenses		0.76%
Total Fund Operating Expenses	0.86%2

1.	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to 0.10% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.50%.
2.	Without the Advisor’s contractual agreement to waive a portion of its investment management fee, the “Total Fund Operating Expenses” for the Fund would have been 1.26%.

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

Expense Example

	1		3		5		10
	Year		Years		Years		Years
Tax-Exempt Income Fund		$88		$360		$653		$1,487

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

11

Risk/Return Summary and Fund Expenses

Money Market Fund

	Risk/Return Summary of the Signal Money Market Fund
Investment Objectives	The Money Market Fund seeks current income consistent with the preservation of capital. The Fund seeks to maintain a stable net asset value of $1.00 per share.
Principal Investment Strategies	The Fund invests in high quality money market instruments which have remaining maturities of 397 calendar days or less and the weighted average maturity of the Fund’s investments must be 90 days or less.
Principal Investment Risks	The yield paid by the Fund will vary with changes in interest rates. The value of your investment may decline if an issuer fails to pay interest or repay principal on its obligation or if the other party to a repurchase agreement fails to fulfill its obligations under the agreement.
	An investment in the Fund is not a deposit of, or guaranteed or endorsed by Old National Trust Company or any of its affiliates and is not issued or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Who May	Consider investing in the Fund if you:
Want to Invest?	•	are seeking current income and the preservation of capital
	•	have a low risk tolerance
	•	are investing for a short-term purpose and are willing to accept lower potential returns in exchange for a high degree of safety
	This Fund will not be appropriate for someone:
	•	investing for a long-term goal or for retirement
	•	seeking a high total return

12

Risk/Return Summary and Fund Expenses

Money Market Fund

The bar chart and table on this page show how the Money Market Fund has performed. The bar chart shows the Fund’s year-by-year total annual returns and how the annual performance has varied. The table below it compares the Fund’s performance over time since its inception on July 15, 2002.

Performance Bar Chart and Table¹
Year-by-Year Total Returns as of 12/31

Past performance does not indicate how the Fund will perform in the future.

Average Annual Total Returns

(for the periods ending

December 31, 2005)²

Best quarter:	Q4 2005 +0.87%
Worst quarter:	Q3 2003 +0.12%

				Since
				Inception
	Past			on
	Year			7/15/02
Money Market Fund		2.76	%		1.37	%

The table assumes that shareholders redeem all their fund shares at the end of the period indicated.
1	Both the chart and table assume reinvestment of dividends and distributions.
2	As of June 30, 2006, the 7-day average yield and 7-day effective yield for the Fund was 4.64% and 4.75%, respectively.

13

Risk/Return Summary and Fund Expenses

Money Market Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Money Market Fund.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases	None
Maximum deferred sales charge (load)	None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees	0.05%1
Distribution and Service (12b-1) Fees	None
Other Expenses	0.46%
Total Fund Operating Expenses	0.51%2

1.	The Advisor has entered into a contractual agreement with the Fund to limit the Advisor’s investment management fee for the Fund’s current fiscal year to an amount not to exceed 0.05% of the Fund’s average daily net assets. Without this fee waiver by the Advisor, the investment management fee for the Fund would have been 0.10%.
2.	Without the Advisor’s contractual agreement to waive a portion of its investment management fee, the “Total Fund Operating Expenses” for the Fund would have been 0.56%.

Use this table to compare fees and expenses with those of other Funds. It illustrates the amount of fees and expenses you would pay, assuming the following:

Expense Example

	1	3		5		10
	Year	Years		Years		Years
Money Market Fund	$52		$174		$308		$697

• $10,000 investment

• 5% annual return

• redemption at the end of each period

• no changes in the Fund’s operating expenses

• reinvestment of dividends and distributions

Because this example is hypothetical and for comparison purposes only, your actual costs will be different.

14

Investment Objectives and Strategies

Signal Large Cap Growth Fund

Investment Objective

The investment objective of the Large Cap Growth Fund is to seek capital appreciation.

Policies and Strategies

The Advisor pursues the Fund’s investment objective by investing in a diversified portfolio of equity securities of large capitalization companies. For these purposes, the Advisor deems issuers with market capitalizations in excess of $5 billion to be large capitalization companies. The Advisor seeks investments in issuers that demonstrate superior sales and earnings growth rates, improving profitability, or above-average growth relative to their current market valuations.

Consistent with the Large Cap Growth Fund’s investment objective, the Fund:

• invests substantially all, but in no event less than 80%, of its net assets in U.S. domestic equity securities of large capitalization companies

• invests in the following types of equity securities: common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, warrants and any rights to purchase common stocks

• may engage in short sales against the box

• may invest in fixed income securities consisting of corporate notes, bonds and debentures that are rated investment grade at the time of purchase

• may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

• may invest up to 20% of its total assets in the securities of foreign issuers and may acquire sponsored and unsponsored American Depositary Receipts and European Depositary Receipts

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

• may purchase securities on a when-issued or delayed basis in which a security’s price and yield are fixed on a specific date buy payment and delivery are scheduled for a future date beyond the standard settlement period

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in money market instruments and repurchase agreements.

15

Investment Objectives and Strategies

Signal Income Fund

Investment Objective

The investment objective of the Income Fund is to seek current income consistent with the preservation of capital.

Policies and Strategies

The Fund invests primarily in debt securities of all types, including investment grade bonds and U.S. Government bonds.

Consistent with the Income Fund’s investment objective, the Fund:

• invests substantially all, but in no event less than 65%, of its total assets in debt securities

• invests in fixed income securities consisting of bonds, fixed income preferred stocks, debentures, notes, zero-coupon securities, mortgage-related and other asset-backed securities, state municipal or industrial revenue bonds, obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government, debt securities convertible into, or exchangeable for, common stocks, foreign debt securities, guaranteed investment contracts, income participation loans, first mortgage loans and participation certificates in pools of mortgages issued or guaranteed by agencies or instrumentalities of the U.S. Government

• invests only in debt securities which are rated at the time of purchase within the four highest rating categories assigned by one or more nationally recognized statistical rating organizations (NRSROs) or, if unrated, which the Advisor deems to be of comparable quality.

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

• may purchase securities on a when-issued or delayed-delivery basis in which a security’s price and yield are fixed on a specific date but payment and delivery are scheduled for a future date beyond the standard settlement period

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in money market instruments and repurchase agreements.

16

Investment Objectives and Strategies

Signal Tax-Exempt Income Fund

Investment Objective

The primary investment objective of the Tax-Exempt Income Fund is to seek current income exempt from federal income tax.

Policies and Strategies

The Fund invests primarily in municipal obligations, the interest on which is exempt from federal income tax.

Consistent with the Tax-Exempt Income Fund’s investment objective, the Fund:

• invests substantially all, but in no event less than 80%, of its net assets in tax-exempt securities

• invests only in debt securities which are rated at the time of purchase within the four highest rating categories assigned by one or more nationally recognized statistical rating organizations (NRSROs) or, if unrated, which the Advisor deems to be of comparable quality

• may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

• may invest in the securities of foreign issuers and may acquire sponsored and unsponsored American Depositary Receipts

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks, and other financial institutions for the purpose of realizing additional income

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in money market instruments and repurchase agreements.

17

Investment Objectives and Strategies

Signal Money Market Fund

Investment Objective

The investment objective of the Money Market Fund is to seek current income consistent with the preservation of capital. The Fund seeks to maintain a stable net asset value of $1.00 per share.

Policies and Strategies

The Fund invests in high quality money market instruments which have remaining maturities of 397 calendar days or less and the weighted average maturity of the Fund’s investments must be 90 days or less.

Consistent with the Money Market Fund’s investment objective, the Fund:

• may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government

• may invest in short-term corporate obligations, such as commercial paper, notes and bonds

• may invest in negotiable certificates of deposit, time deposits and bankers’ acceptances issued by U.S. banks and U.S. branches of foreign banks

• may invest in other debt obligations such as master demand notes, short-term funding agreements, variable and floating rate securities and private placement investments

• may engage in options transactions

• may engage in futures transactions as well as invest in options on futures contracts solely for hedging purposes

• may lend securities to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional income

• may engage in repurchase transactions pursuant to which the Fund purchases a security and simultaneously commits to resell that security to the seller (either a bank or a securities dealer) at an agreed upon price on an agreed upon date (usually within seven days of purchase)

• may invest in other investment companies

In the event that the Advisor determines that current market conditions are not suitable for the Fund’s typical investments, the Advisor may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund’s assets in investments that are not part of its principal investment strategy, including cash (which will not earn any income).

18

Investment Objectives and Strategies

Investment Risks

Risk Factors: All Funds

An investment in the Funds is subject to investment risks, including the possible loss of the principal amount invested.

Generally, the Funds will be subject to the following risks:

Equity Risk: The value of the equity securities held by the Large Cap Growth Fund, and thus of the Fund’s shares, can fluctuate–at times dramatically. The prices of equity securities are affected by various factors, including market conditions, political and other events, and developments affecting the particular issuer or its industry or geographic sector. The fact that the Advisor follows a specific discipline can provide no assurance against a decline in the value of the Fund’s shares.

Market Risk: Market risk refers to the risk related to investments in securities in general and the daily fluctuations in the securities markets. The Funds’ performance will change daily based on many factors, including fluctuation in interest rates, the quality of the instruments in each Fund’s investment portfolio, national and international economic conditions and general market conditions.

Foreign Securities Risk: Investments in securities of non-U.S. issuers have special risks. These risks include international economic and political developments, foreign government actions including restrictions on payments to non-domestic persons such as the Fund, less regulation, less information, currency fluctuations and interruptions in currency flow. Investments in foreign securities also entail higher costs. The Fund’s investments in foreign securities may be in the form of sponsored or unsponsored depositary receipts, such as American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”). Ownership of unsponsored depositary receipts may not entitle the Fund to financial and other reports from the issuer of the underlying security, and certain costs related to the receipts that would otherwise be borne by the issuer of a sponsored depositary receipt may be passed through, in whole or in part, to holders of the receipts.

Interest Rate Risk: Interest rate risk refers to the risk that the value of the Funds’ fixed income securities can change in response to changes in prevailing interest rates causing volatility and possible loss of value as rates increase.

Credit Risk: Credit risk refers to the risk related to the credit quality of the issuer of a security held in a Fund’s portfolio. The Funds could lose money if the issuer of a security is unable to meet its financial obligations.

Investments in the Funds are not deposits of Old National Trust Company or any of its affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.

19

Shareholder Information

Pricing of Fund Shares

How NAV is calculated

The NAV is calculated by adding the total value of a Fund’s investments and other assets, subtracting its liabilities and then dividing that figure by the number of outstanding shares of the Fund:

NAV =

Total Assets – Liabilities

Number of Shares
Outstanding

You may find each Fund’s NAV daily in certain newspapers.

Per share net asset value (NAV) for each of the Variable NAV Funds is determined and their shares are priced at the close of regular trading on the New York Stock Exchange, normally at 4:00 p.m. Eastern time on days the Exchange and the Federal Reserve Bank of Chicago are open for business and at 2:00 p.m. Eastern time in the case of the Money Market Fund.

Your order for purchase, sale or exchange of shares is priced at the next NAV calculated after your order is accepted by the Fund. This is what is known as the offering price.

Each Variable NAV Fund’s securities are generally valued at current market prices. If market quotations are not available, prices will be based on fair value as determined in accordance with procedures established by, and under the supervision of, the Funds’ Trustees. The Money Market Fund values its securities using amortized cost. This method involves valuing an instrument at its cost and thereafter applying 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.

Purchasing and Adding to Your Shares

You may purchase the Funds through the Distributor or through investment representatives, who may charge fees and may require higher minimum investments or impose other limitations on buying and selling shares. If you purchase shares through an investment representative, that party is responsible for transmitting orders by close of business and may have an earlier cut-off time for purchase and sale requests. Consult your investment representative for specific information.

	Minimum		Minimum
	Initial		Subsequent
Account Type	Investment		Investment
Regular (non-retirement)		$1,000		$25
Retirement		$1,000		$25
Automatic Investment Plan Regular		$     25		$25
Automatic Investment Plan Retirement		$   250		$25

All purchases must be in U.S. dollars. A fee will be charged for any checks that do not clear. Third-party checks, starter checks, traveler’s checks, money orders, credit card convenience checks and cash are not accepted.

A Fund may waive its minimum purchase requirement and it may reject a purchase order if it considers it in the best interest of the Fund and its shareholders.

20

Shareholder Information

Purchasing and Adding to Your Shares
continued

Instructions for Opening or Adding to an Account
By Regular Mail

Initial Investment:

1.	Carefully read and complete the application. Establishing your account privileges now saves you the inconvenience of having to add them later.
2.	Make check or certified check payable to “[name of Fund].”
3.	Mail to: The Signal Funds, P.O. Box 182094, Columbus, OH 43218-2094

Subsequent:

1.	Use the investment slip attached to your account statement. Or, if unavailable,
2.	Include the following information on a piece of paper:

• Fund name

• Amount invested

• Account name

• Account number

     Include your account number on your check.

3. Mail to: The Signal Funds, P.O. Box 182094, Columbus, OH 43218-2094

By Overnight Service

See instructions 1-2 above for subsequent investments.

4.	Send to: The Signal Funds,
	Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219.

By Wire Transfer

Note: Your bank may charge a wire transfer fee.

Please call 1-888-426-9709 for instructions on opening an account or purchasing additional shares by wire transfer.

21

Shareholder Information

Purchasing and Adding to Your Shares
continued

You can add to your account by using the convenient options described below. The Funds reserve the right to change or eliminate these privileges at any time with 60 days notice.

Automatic Investment Plan

You can make automatic investments in the Funds from your bank account. Automatic investments can be as little as $25, once you’ve invested the $25 minimum required to open the account.

To invest regularly from your bank account:

n Complete the Automatic Investment Plan portion on your Account Application.
Make sure you note:

• Your bank name, address and ABA number

• Your checking or savings account number

• The amount you wish to invest automatically (minimum $25)

• How often you want to invest (monthly or quarterly)

• Attach a voided personal check or savings deposit slip.

Dividends and Distributions

All dividends and distributions will be automatically reinvested unless you request otherwise. Capital gains are distributed at least annually.

Distributions are made on a per share basis regardless of how long you’ve owned your shares. Therefore, if you invest shortly before the distribution date, some of your investment will be returned to you in the form of a distribution and may be subject to income tax.

22

Shareholder Information

Selling Your Shares

Instructions for Selling Shares

You may sell your shares at any time. Your sales price will be the next NAV after your sell order is received by the Fund, its transfer agent, or your investment representative. Normally you will receive your proceeds within a week after your request is received. See section on “General Policies on Selling Shares” below.

Withdrawing Money from Your Fund Investment

As a mutual fund shareholder, you are technically selling shares when you request a withdrawal in cash. This is also known as redeeming shares or a redemption of shares.

By telephone (unless you have declined telephone sales privileges)

1. Call 1-888-426-9709 with instructions as to how you wish to receive your funds (check, wire, electronic transfer).

By mail

1. Call 1-888-426-9709 to request redemption forms or write a letter of instruction indicating:

• your Fund and account number

• amount you wish to redeem

• address where your check should be sent

• account owner signature

2. Mail to: The Signal Funds, P.O. Box 182094 Columbus, OH 43218-2094

By overnight service
See instruction 1 above under ‘‘By mail.’’

2. Send to: The Signal Funds, Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219

Wire transfer

You must indicate this option on your application.

The Fund may charge a wire transfer fee.

Note: Your financial institution may also charge a separate fee.

Call 1-888-426-9709 to request a wire transfer.

If you call by 4 p.m. Eastern time, your payment will normally be wired to your bank on the next business day.

Automatic Withdrawal Plan

You can receive automatic payments from your account on a monthly or quarterly basis. The minimum withdrawal is $100. To activate this feature:

• Make sure you’ve checked the appropriate box and completed the Automatic Withdrawal section of the Account Application. Or call 1-888-426-9709.

• Include a voided personal check.

• Your account must have a value of $5,000 or more to start withdrawals.

• If the value of your account falls below $500, you may be asked to add sufficient funds to bring the account back to $500, or the Fund may close your account and mail the proceeds to you.

23

Shareholder Information

General Policies on Selling Shares

Redemptions In Writing Required

You must request redemptions in writing in the following situations:

1.	Redemptions from Individual Retirement Accounts (“IRAs”).
2.	Redemption requests requiring a signature guarantee. Signature guarantees are required in the following situations:

• Your account address has changed within the last 15 business days

• The check is not being mailed to the address on your account

• The check is not being made payable to the owner(s) of the account

• The redemption proceeds are being transferred to another Fund account with a different registration

• The redemption proceeds are being wired to bank instructions currently not on your account

A signature guarantee can be obtained from a financial institution, such as a bank, broker-dealer, or credit union, which are members of the STAMP (Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion Program) or SEMP (Stock Exchanges Medallion Program), but not from a notary public. Members are subject to dollar limitations which must be considered when requesting their guarantee. The Transfer Agent may reject any signature guarantee if it believes the transaction would otherwise be improper.

Verifying Telephone Redemptions

The Funds make every effort to insure that telephone redemptions are only made by authorized shareholders. All telephone calls are recorded for your protection and you will be asked for information to verify your identity. Given these precautions, unless you have specifically indicated on your application that you do not want the telephone redemption feature, you may be responsible for any fraudulent telephone orders. If appropriate precautions have not been taken, the Transfer Agent may be liable for losses due to unauthorized transactions.

Redemptions Within 10 Days of Shares Purchased by Check

When you have made your investment by check, you cannot redeem any portion of it until the Transfer Agent is satisfied that the check has cleared (which may require up to 10 business days). You can avoid this delay by purchasing shares with a federal funds wire.

Refusal of Redemption Request

Payment for shares may be delayed under extraordinary circumstances or as permitted by the SEC in order to protect remaining shareholders.

Redemption in Kind

The Funds reserve the right to make payment in securities rather than cash, known as “redemption in kind.” This could occur under extraordinary circumstances, such as a very large redemption that could affect a Fund’s operations (for example, more than 1% of the Fund’s net assets). If a Fund deems it advisable for the benefit of all shareholders, redemption in kind will consist of securities equal in market value to your shares. When you convert these securities to cash, you will pay brokerage charges.

24

Shareholder Information

General Policies on Selling Shares
continued

Closing of Small Accounts

If your account falls below $500, the Fund may ask you to increase your balance. If it is still below $500 after 60 days, the Fund may close your account and send you the proceeds at the current NAV.

Undeliverable Distribution Checks

For any shareholder who chooses to receive distributions in cash: If distribution checks are returned and marked as “undeliverable” or remain uncashed for six months, your account may be changed automatically so that all future distributions are reinvested in your account.

Distribution Arrangements

The Funds are not subject to Rule 12b-1 distribution or service fees. However, the Advisor, at its expense, may provide compensation to dealers in connection with sales of shares of a Fund.

Exchanging Your Shares

You can exchange your shares in one Fund for shares of another Signal Fund. No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you are exchanging. Exchanges from one Fund to another are taxable.

Instructions for Exchanging Shares

Exchanges may be made by sending a written request to The Signal Funds, 3435 Stelzer Road, Columbus OH 43219, or by calling
1-888-426-9709. Please provide the following information:

• Your name and telephone number

• The exact name on your account and account number

• Taxpayer identification number (usually your Social Security number)

• Dollar value or number of shares to be exchanged

• The name of the Fund from which the exchange is to be made

• The name of the Fund into which the exchange is being made

See “Selling Your Shares” for important information about telephone transactions.

25

Shareholder Information

Exchanging Your Shares

continued

Notes on exchanges

• The registration and tax identification numbers of the two accounts must be identical.

• The Exchange Privilege (including automatic exchanges) may be changed or eliminated at any time upon a 60-day notice to shareholders.

Frequent Trading Policy

Frequent trading into and out of a Fund can have adverse consequences for that Fund and for long-term shareholders in the Fund. The Funds believe that frequent or excessive short-term trading activity by shareholders of a Fund may be detrimental to long-term shareholders because those activities may, among other things: (a) dilute the value of shares held by long-term shareholders; (b) cause the Funds to maintain larger cash positions than would otherwise be necessary; (c) increase brokerage commissions and related costs and expenses, and (d) incur additional tax liability. The Funds therefore discourage frequent purchase and redemptions by shareholders and they do not make any effort to accommodate this practice. To protect against such activity, the Board of Trustees has adopted policies and procedures that are intended to permit the Funds to curtail frequent or excessive short-term trading by shareholders. At the present time the Funds do not impose limits on the frequency of purchases and redemptions, nor do they limit the number of exchanges into any of the Funds. The Funds reserve the right, however, to impose certain limitations at any time with respect to trading in shares of the Funds, including suspending or terminating trading privileges in Fund shares, for any investor whom the Funds believe has a history of abusive trading or whose trading, in the judgment of the Funds, has been or may be disruptive to the Funds. The Funds’ ability to detect and prevent any abusive or excessive short-term trading may be limited to the extent such trading involves Fund shares held through omnibus accounts of a financial intermediary.

Signal Individual Retirement Account (‘‘IRA’’)

A Signal IRA enables individuals, even if they participate in an employer-sponsored retirement plan, to establish their own retirement programs. A Signal IRA contribution may be tax-deductible and earnings are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA contributions is restricted or eliminated for individuals who participate in certain employer pension plans and whose annual income exceeds certain limits. Existing IRAs and future contributions up to the IRA maximums, whether deductible or not, still earn income on a tax-deferred basis.

The Signal Funds offer traditional, Roth, Coverdell, SIMPLE and SEP IRAs.

All Signal IRA distribution requests must be made in writing to The Signal Funds. Any additional deposits to a Signal IRA must distinguish the type and year of the contribution.

For more information on a Signal IRA call the Funds at 1-888-426-9709. Shareholders are advised to consult a tax advisor regarding IRA contribution and withdrawal requirements and restrictions.

26

Shareholder Information

Dividends, Distributions and Taxes

Any income a Fund receives in the form of interest and dividends is paid out, less expenses, to its shareholders. Income dividends on the Funds (other than the Large Cap Growth Fund) are usually paid monthly. Dividends on the Large Cap Growth Fund are paid quarterly. Capital gains for all Funds are distributed at least annually.

Dividends and distributions are treated in the same manner for federal income tax purposes whether you receive them in cash or in additional shares.

An exchange of shares is considered a sale, and any related gains may be subject to applicable taxes.

Dividends are taxable as ordinary income. Taxation on capital gains will vary with the length of time the Fund has held the security — not how long the shareholder has been in the Fund.

Dividends are taxable in the year they are paid or credited to your account. However, dividends declared in October, November or December to shareholders of record in such a month and paid by January 31st are taxable on December 31st of the year they are declared.

Currently effective tax legislation generally provides for a maximum tax rate for individual taxpayers of 15% on long-term gains and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers. The following are guidelines for how certain distributions by the Funds are generally taxed to individual taxpayers:

• Distributions of earnings from qualifying dividends and qualifying long-term capital gains will be taxed at a maximum rate of 15%.

• Note that distributions of earnings from dividends paid by certain “qualified foreign corporations” can also qualify for the lower tax rates on qualifying dividends.

• A shareholder will also have to satisfy a greater than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate.

• Distributions of earnings from non-qualifying dividends, interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer.

You will be notified in January each year about the federal tax status of distributions made by the Fund. Depending on your residence for tax purposes, distributions also may be subject to state and local taxes, including withholding taxes.

Foreign shareholders may be subject to special withholding requirements. There is a penalty on certain pre-retirement distributions from retirement accounts. Consult your tax advisor about the federal, state and local tax consequences in your particular circumstances.

The Funds are required to withhold 28% of taxable dividends, capital gains distributions and redemptions paid to shareholders who have not provided the Funds with their certified taxpayer identification number in compliance with IRS rules. To avoid this, make sure you provide your correct Tax Identification Number (Social Security Number for most investors) on your account application.

27

Fund Management

The Investment Advisor

Signal Capital Management, Inc. (the “Advisor”), One Main Street, Evansville, Indiana 47708, is the investment advisor for each Fund. The Advisor is a wholly owned subsidiary of Old National Trust Company. Old National Trust Company is a subsidiary corporation of Old National Bancorp, the largest multi-bank holding company headquartered in Indiana. Old National Trust Company has provided trust services for over 85 years and with its affiliates manages over $2.7 billion in client assets.

The Advisor has retained Mercantile Capital Advisors, Inc. (“Mercantile”), Two Hopkins Plaza, Baltimore, Maryland 21201 to serve as sub-investment advisor to the Money Market Fund. Mercantile and its predecessors have been in the business of managing the investments of fiduciary and other accounts since 1864.

The Advisor makes the day-to-day investment decisions for the Large Cap Growth Fund, Income Fund, and the Tax-Exempt Income Fund and oversees Mercantile’s investments for the Money Market Fund. In addition, the Advisor continuously reviews, supervises and administers each Fund’s investment programs. For these advisory services, the Funds paid the following fees during the fiscal year ended March 31, 2006 after the imposition of certain contractual fee waivers by the Advisor of its advisory fees:

	As a
	Percentage of
	Average Net Assets*
Large Cap Growth Fund		0.55	%
Income Fund		0.25	%
Tax-Exempt Income Fund		0.07	%
Money Market Fund		0.05	%

* Without the imposition of these contractual fee waivers by the Advisor, total advisory fees for the Funds on an annual basis are 0.75% for the Large Cap Growth Fund, 0.50% for the Income Fund and the Tax-Exempt Income Fund and 0.10% for the Money Market Fund.

The Advisor is also entitled to receive 0.05% of each Fund’s average daily net assets (0.10% in the case of the Money Market Fund) in connection with certain administrative services that are provided to the Funds.

Information regarding the factors considered by the Board of Trustees of the Funds in connection with their most recent renewal of the Investment Advisory Agreement with respect to the Funds is provided in the Funds’ Annual Report to Shareholders for the fiscal year ended March 31, 2006.

28

Fund Management

Portfolio Managers

The Advisor uses a team approach to investment management. The individual members of the team who are primarily responsible for the day-to-day management of the Large Cap Growth Fund are:

Stephen A. Keck, CFA

Senior Vice President and Chief Investment Strategist of Signal Capital Management, Inc., Purdue University, B.S. (1979); Michigan State University, M.B.A. (1980) Signal Capital Management, Inc. (2002-present); Old National Trust Company (1981-2002)

Mark W. Cremonie, CFA, CMT

Vice President and Senior Investment Officer of Signal Capital Management, Inc., Indiana University, B.S. (1978); Indiana University, M.B.A. (1980); Signal Capital Management, Inc. (2002-present); Old National Trust Company (1997-2002); National City Trust (1994-1997); Foxhall Investment Management (1993-1994); CSI Asset Management (1988-1992); William O’Neil and Co. (1987-1988); Capital Supervisors, Inc. (1983-1987); Indiana National Bank (1981-1983)

The individual members of the team who are primarily responsible for the day-to-day management of the Income Fund and the Tax-Exempt Income Fund are:

Charlotte Weems, CFA	Vice President and Investment Officer of Signal Capital Management, Inc., Ball State University, B.S. (1998); Signal Capital Management, Inc. (2002-present); Old National Trust Company (2000-2002); AccuTech Systems Corp (1999-2000); American National Trust and Investment Management (1997-1999)
John Claybon, CFA	Vice President and Senior Investment Officer of Signal Capital Management, Inc., University of Southern Indiana, B.A. (1987); Signal Capital Management, Inc. (2002-present); Old National Trust Company (1999-2002); Old National Bancorp (1993-1999).
David Franklin	Investment Officer of Signal Capital Management, Inc., University of Evansville B.S. (2002); Signal Capital Management, Inc. (2002-present).

The Statement of Additional Information has more detailed information about the Advisor and the other service providers as well as additional information about the portfolio managers’ compensation arrangements, other accounts managed, as applicable, and ownership of securities of the Funds that they manage.

29

Fund Management

The Distributor and Administrator

BISYS Fund Services, Limited Partnership is each Fund’s distributor and BISYS Fund Services Ohio, Inc. is each Fund’s administrator. Their address is 3435 Stelzer Road, Columbus, OH 43219.

Capital Structure. The Coventry Group was organized as a Massachusetts business trust on January 8, 1992 and overall responsibility for the management of the Funds is vested in the Board of Trustees. Shareholders are entitled to one vote for each full share held and a proportionate fractional vote for any fractional shares held and will vote in the aggregate and not by series except as otherwise expressly required by law.

The Funds offer two classes of shares, Class A and Class I Shares, each of which have different expenses that affect performance. For further information, telephone 1-888-426-9709.

Disclosure of Fund Portfolio Holdings

A complete list of each Fund’s portfolio holdings is publicly available on a quarterly basis through filings made with the SEC on Forms N-CSR and N-Q. A description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio securities is provided in the Statement of Additional Information (SAI).

30

Financial Highlights

Large Cap Growth Fund

The financial highlights table below is intended to help you understand each Fund’s financial performance since its inception. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned on an investment in the Fund (assuming reinvestment of all dividends and distributions). The information presented in the financial highlights tables for the fiscal year ended March 31, 2006 was audited by Ernst & Young LLP, independent registered public accountants, whose report, along with each Fund’s financial statements, is included in the Funds’ annual report, which is available upon request. The information for all periods prior to April 1, 2005 was audited by the Funds’ prior auditors.

	Year Ended			Year Ended			Year Ended			Period Ended
	March 31, 2006			March 31, 2005			March 31, 2004			March 31, 2003(d)
Net asset value, beginning of period	$	11.42		$	11.33		$	9.06		$	10.00
Investment activities:
Net investment income		0.01			0.01			0.01			0.02
Net realized and unrealized gains (losses) on investments		1.45			1.02			2.60			(0.94	)
Total from Investment Activities		1.46			1.03			2.61			(0.92	)
Distributions:
Net investment income		(0.01	)		(0.01	)		(0.01	)		(0.02	)
Net realized gains on investments		(0.69	)		(0.93	)		(0.33	)		—
Total Distributions and Dividends		(0.70	)		(0.94	)		(0.34	)		(0.02	)
Net Asset Value, End of Period	$	12.18		$	11.42		$	11.33		$	9.06
Total Return		12.95	%		9.08	%		29.00	%		(9.20	)%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	38,240		$	38,377		$	33,600		$	31,260
Ratio of expenses to average net assets		1.08	%		1.18	%		1.19	%		1.21	%(b)
Ratio of net investment income to average net assets		0.09	%		0.10	%		0.09	%		0.32	%(b)
Ratio of expenses to average net assets*		1.28	%		1.38	%		1.39	%		1.43	%(b)
Portfolio Turnover(c)		36.43	%		39.77	%		39.64	%		34.11	%(a)

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.

31

Financial Highlights

Income Fund

	Year Ended			Year Ended			Year Ended			Period Ended
	March 31, 2006			March 31, 2005			March 31, 2004			March 31, 2003(d)
Net asset value, beginning of period	$	9.77		$	10.19		$	10.21		$	10.00
Investment activities:
Net investment income		0.40			0.38			0.36			0.29
Net realized and unrealized gains (losses) on investments		(0.20	)		(0.42	)		(0.02	)		0.25
Total from Investment Activities		0.20			(0.04	)		0.34			0.54
Distributions:
Net investment income		(0.40	)		(0.38	)		(0.36	)		(0.29	)
Net realized gains on investments		—			—			—	(e)		(0.04	)
Total Distributions and Dividends		(0.40	)		(0.38	)		(0.36	)		(0.33	)
Net Asset Value, End of Period	$	9.57		$	9.77		$	10.19		$	10.21
Total Return		2.01	%		(0.39	)%		3.43	%		5.47	%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	97,809		$	97,675		$	61,481		$	59,724
Ratio of expenses to average net assets		0.65	%		0.69	%		0.73	%		0.82	%(b)
Ratio of net investment income to average net assets		4.06	%		3.82	%		3.56	%		3.88	%(b)
Ratio of expenses to average net assets*		0.90	%		0.94	%		0.98	%		1.07	%(b)
Portfolio Turnover(c)		24.47	%		14.91	%		43.76	%		7.47	%(a)

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.
(e)	Amount is less than $0.005.

32

Financial Highlights

Tax-Exempt Income Fund

	Year Ended			Year Ended			Year Ended			Period Ended
	March 31, 2006			March 31, 2005			March 31, 2004			March 31, 2003(d)
Net asset value, beginning of period	$	9.89		$	10.22		$	10.18		$	10.00
Investment activities:
Net investment income		0.33			0.35			0.36			0.26
Net realized and unrealized gains (losses) on investments		(0.13	)		(0.25	)		0.08			0.21
Total from Investment Activities		0.20			0.10			0.44			0.47
Distributions:
Net investment income		(0.33	)		(0.35	)		(0.36	)		(0.26	)
Net realized gains on investments		(0.02	)		(0.08	)		(0.04	)		(0.03	)
Total Distributions and Dividends		(0.35	)		(0.43	)		(0.40	)		(0.29	)
Net Asset Value, End of Period	$	9.74		$	9.89		$	10.22		$	10.18
Total Return		2.07	%		0.98	%		4.41	%		4.75	%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	21,350		$	21,728		$	18,660		$	19,154
Ratio of expenses to average net assets		0.82	%		0.87	%		0.83	%		0.86	%(b)
Ratio of net investment income to average net assets		3.36	%		3.46	%		3.52	%		3.58	%(b)
Ratio of expenses to average net assets*		1.26	%		1.37	%		1.33	%		1.27	%(b)
Portfolio Turnover(c)		11.64	%		18.11	%		9.11	%		8.54	%(a)

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.

33

Financial Highlights

Money Market Fund

	Year Ended			Year Ended			Year Ended			Period Ended
	March 31, 2006			March 31, 2005			March 31, 2004			March 31, 2003(d)
Net asset value, beginning of period	$	1.000		$	1.000		$	1.000		$	1.000
Investment activities:
Net investment income		0.032			0.012			0.006			0.007
Net realized and unrealized gains (losses) on investments		—	(e)		—			—			—
Total from Investment Activities		0.032			0.012			0.006			0.007
Distributions:
Net investment income		(0.032	)		(0.012	)		(0.006	)		(0.007	)
Net realized gains on investments		—			—			—			—
Total Distributions and Dividends		(0.032	)		(0.012	)		(0.006	)		(0.007	)
Net Asset Value, End of Period	$	1.000		$	1.000		$	1.000		$	1.000
Total Return		3.24	%		1.23	%		0.57	%		0.72	%(a)
Ratios/supplementary data:
Net Assets, End of Period (000’s)	$	101,607		$	93,311		$	70,829		$	110,327
Ratio of expenses to average net assets		0.51	%		0.51	%		0.54	%		0.53	%(b)
Ratio of net investment income to average net assets		3.18	%		1.30	%		0.57	%		1.02	%(b)
Ratio of expenses to average net assets*		0.56	%		0.56	%		0.59	%		0.58	%(b)
Portfolio Turnover(c)		n/a			n/a			n/a			n/a

*	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.
(a)	Not annualized.
(b)	Annualized.
(c)	Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.
(d)	For the period July 15, 2002 (commencement of operations) through March 31, 2003.
(e)	Amount is less than $0.005.

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For more information about the Funds, the following documents are available free upon request:

Annual/Semi-Annual Reports:

The Funds’ annual and semi-annual reports to shareholders contain additional information on each Fund’s investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund’s performance during its last fiscal year.

Statement of Additional Information (SAI):

The SAI provides more detailed information about the Funds, including their operations and investment policies. It is incorporated by reference and is legally considered a part of this prospectus.

The Funds do not currently maintain a separate Internet website containing copies of their reports or the SAI, however, you can receive free copies of reports and the SAI, or request other information and discuss your questions about the Funds by contacting a broker that sells the Funds. Or contact the Funds at:

The Signal Funds
P.O. Box 182094
Columbus, Ohio 43218-2094
Telephone: 1-888-426-9709
 

You can review each Fund’s reports and the SAI at the Public Reference Room of the Securities and Exchange Commission. You can get text-only copies:

• For a duplicating fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-6009 or calling 1-202-942-8090, or by electronic request by e-mailing the SEC at the following address: publicinfo@sec.gov.

• Free from the EDGAR Database on the Commission’s Website at http://www.sec.gov.

Investment Company Act file no. 811-6526. SIGPUI 08/06

EX-99.17.U

Exhibit 17(u)

THE SIGNAL FUNDS

SIGNAL LARGE CAP GROWTH FUND

SIGNAL TAX-EXEMPT INCOME FUND

SIGNAL INCOME FUND

SIGNAL MONEY MARKET FUND

EACH AN INVESTMENT PORTFOLIO OF
THE COVENTRY GROUP

STATEMENT OF ADDITIONAL INFORMATION

August 1, 2006

This Statement of Additional Information is not a prospectus but should be read in conjunction with the prospectuses for the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund dated the same date as the date hereof (the “Prospectuses”), hereinafter referred to collectively as the “Funds” and singly, a “Fund”. The Funds are separate investment portfolios of The Coventry Group (the “Group”), an open-end management investment company. This Statement of Additional Information is incorporated in its entirety into the Prospectuses. Copies of the Prospectuses may be obtained by writing The Signal Funds, at 3435 Stelzer Road, Columbus, Ohio 43219, or by telephoning toll free 1-888-426-9709.

TABLE OF CONTENTS

INVESTMENT OBJECTIVES AND POLICIES	3
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS	3
INVESTMENT RESTRICTIONS	11
PORTFOLIO TURNOVER	13
NET ASSET VALUE	13
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION	15
MANAGEMENT OF THE GROUP	16
BOARD COMMITTEES	18
OWNERSHIP OF SECURITIES	18
INTERESTED TRUSTEES	18
INDEPENDENT TRUSTEES	18
INVESTMENT ADVISOR	20
CODE OF ETHICS	23
PORTFOLIO TRANSACTIONS	23
ADMINISTRATOR	25
DISTRIBUTOR	27
CUSTODIAN	28
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES	29
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	29
LEGAL COUNSEL	29
ADDITIONAL INFORMATION	30
DESCRIPTION OF SHARES	30
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES	31
ADDITIONAL TAX INFORMATION	31
PERFORMANCE CALCULATIONS	36
PERFORMANCE COMPARISONS	40
PRINCIPAL SHAREHOLDERS	40
PROXY VOTING	41
MISCELLANEOUS	42
FINANCIAL STATEMENTS	43

STATEMENT OF ADDITIONAL INFORMATION

THE COVENTRY GROUP

          The Coventry Group (the “Group”) is an open-end, diversified management investment company which currently offers its shares in separate series. This Statement of Additional Information deals with five of such portfolios, Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund. Much of the information contained in this Statement of Additional Information expands upon subjects discussed in the Prospectuses. Capitalized terms not defined herein are defined in the Prospectuses. No investment in Shares of a Fund should be made without first reading the Prospectuses.

INVESTMENT OBJECTIVES AND POLICIES

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

          The following policies supplement the investment objectives and policies of each Fund as set forth in the Prospectuses.

          Bank Obligations. Each of the Funds may invest in bank obligations such as bankers’ acceptances, certificates of deposit, and demand and time deposits.

          Bankers’ acceptances are negotiable drafts or bills of exchange typically 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. Bankers’ acceptances invested in by the Funds will be those guaranteed by domestic and foreign banks having, at the time of investment, capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of their most recently published financial statements).

          Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return. Certificates of deposit and demand and time deposits will be those of domestic banks and savings and loan associations, if (a) at the time of investment the depository institution has capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of its most recently published financial statements), or (b) the principal amount of the instrument is insured in full by the Federal Deposit Insurance Corporation.

          Commercial Paper. Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper normally have maturities of less than nine months and fixed rates of return.

          The Funds may purchase commercial paper consisting of issues rated at the time of purchase by one or more appropriate nationally recognized statistical rating organizations (“NRSRO”) (e.g., Standard & Poor’s Corporation and Moody’s Investors Service, Inc.) in one of

3

the two highest rating categories for short-term debt obligations. The Funds may also invest in commercial paper that is not rated but that is determined by the Advisor or the applicable Sub-Advisor, as the case may be, to be of comparable quality to instruments that are so rated by an NRSRO that is neither controlling, controlled by, or under common control with the issuer of, or any issuer, guarantor, or provider of credit support for, the instruments.

          Variable Amount Master Demand Notes. Variable amount master demand notes are unsecured demand notes that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate according to the terms of the instrument. Because master demand notes are direct lending arrangements between a Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, a Fund may demand payment of principal and accrued interest at any time within 30 days. While such notes are not typically rated by credit rating agencies, issuers of variable amount master demand notes (which are normally manufacturing, retail, financial and other business concerns), must satisfy, for purchase by a Fund, the same criteria as set forth above for commercial paper for each Fund. The Advisor will consider the earning power, cash flow, and other liquidity ratios of the issuers of such notes and will continuously monitor their financial status and ability to meet payment on demand. In determining average weighted portfolio maturity, a variable amount master demand note will be deemed to have a maturity equal to the longer of the period of time remaining until the next interest rate adjustment or the period of time remaining until the principal amount can be recovered from the issuer through demand.

          Foreign Investment. Investments in securities issued by foreign issuers, including American Depositary Receipts (“ADRs”) and European Depositary Receipts (“EDRs”), may subject the Funds to investment risks that differ in some respects from those related to investment in obligations of U.S. domestic issuers or in U.S. securities markets. Such risks include future adverse political and economic developments, possible seizure, nationalization, or expropriation of foreign investments, less stringent disclosure requirements, the possible establishment of exchange controls or taxation at the source, or the adoption of other foreign governmental restrictions. A Fund will acquire such securities only when the Advisor or the applicable Sub-Advisor, as the case may be, believes the risks associated with such investments are minimal.

          U.S. Government Obligations. Each fund may invest in obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities. Obligations of certain agencies and instrumentalities of the U.S. Government are supported by the full faith and credit of the U.S. Treasury; others are supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; and still others are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so by law.

          Variable and Floating Rate Securities. The Funds may acquire variable and floating rate securities, subject to each Fund’s investment objectives, policies and restrictions. A variable rate

4

security is one whose terms provide for the adjustment of its interest rate on set dates and which, upon such adjustment, can reasonably be expected to have a market value that approximates its par value. A floating rate security is one whose terms provide for the adjustment of its interest rate whenever a specified interest rate changes and which, at any time, can reasonably be expected to have a market value that approximates its par value. Such securities are frequently not rated by credit rating agencies; however, unrated variable and floating rate securities purchased by a Fund will be determined by the Advisor to be of comparable quality at the time of purchase to rated instruments eligible for purchase under such Fund’s investment policies. In making such determinations, the Advisor will consider the earning power, cash flow and other liquidity ratios of the issuers of such notes (such issuers include financial, merchandising, bank holding and other companies) and will continuously monitor their financial condition. Although there may be no active secondary market with respect to a particular variable or floating rate security purchased by a Fund, the Fund may resell the security at any time to a third party. The absence of an active secondary market, however, could make it difficult for a Fund to dispose of a variable or floating rate security in the event the issuer of the security defaulted on its payment obligations and the Fund could, as a result or for other reasons, suffer a loss to the extent of the default. To the extent that there exists no readily available market for such security and the Fund is not entitled to receive the principal amount of a note within seven days, such a security will be treated as an illiquid security for purposes of calculation of such Fund’s limitation on investments in illiquid securities, as set forth in the Fund’s investment restrictions. Variable or floating rate securities may be secured by bank letters of credit.

          Restricted Securities. Securities in which the Funds may invest include securities issued by corporations without registration under the Securities Act of 1933, as amended (the “1933 Act”), such as securities issued in reliance on the so-called “private placement” exemption from registration which is afforded by Section 4(2) of the 1933 Act (“Section 4(2) securities”). Section 4(2) securities are restricted as to disposition under the Federal securities laws, and generally are sold to institutional investors such as the Funds who agree that they are purchasing the securities for investment and not with a view to public distribution. Any resale must also generally be made in an exempt transaction. Section 4(2) securities are normally resold to other institutional investors through or with the assistance of the issuer or investment dealers who make a market in such Section 4(2) securities, thus providing liquidity. Any such restricted securities will be considered to be illiquid for purposes of a Fund’s limitations on investments in illiquid securities unless, pursuant to procedures adopted by the Board of Trustees of the Group, the Advisor or Sub-Advisor, as the case may be, has determined such securities to be liquid because such securities are eligible for resale under Rule 144A under the 1933 Act and are readily saleable.

          Options Trading. Each Fund may purchase and write (sell) put and call options. A put option gives the purchaser the right to sell the underlying security at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price of the security. A call option gives the purchaser of the option the right to buy, and a writer has the obligation to sell, the underlying security at the stated exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium paid to the writer is

5

consideration for undertaking the obligations under the option contract. Put and call options purchased by the Funds will be valued at the last sale price, or in the absence of such a price, at the mean between bid and asked price.

          When a Fund writes a call option, an amount equal to the net premium (the premium less the commission) received by the Fund is included in the liability section of the Fund’s statement of assets and liabilities as a deferred credit. The amount of the deferred credit will be subsequently marked-to-market to reflect the current value of the option written. The current value of the traded option is the last sale price or, in the absence of a sale, the mean between bid and asked price. If an option expires on the stipulated expiration date or if the Fund enters into a closing purchase transaction, it will realize a gain (or a loss if the cost of a closing purchase transaction exceeds the net premium received when the option is sold) and the deferred credit related to such option will be eliminated. If a call option is exercised, the Fund may deliver the underlying security in the open market. In either event, the proceeds of the sale will be increased by the net premium originally received and the Fund will realize a gain or loss.

          Each Fund may also purchase or sell (write) index options. Index options (or options on securities indices) are similar in many respects to options on securities except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option.

          Futures Contracts. Each of the Funds may enter into futures contracts. This investment technique is designed primarily to hedge against anticipated future changes in market conditions which otherwise might adversely affect the value of securities which a Fund holds or intends to purchase. For example, when interest rates are expected to rise or market values of portfolio securities are expected to fall, a Fund can seek through the sale of futures contracts to offset a decline in the value of its portfolio securities. When interest rates are expected to fall or market values are expected to rise, a Fund, through the purchase of such contracts, can attempt to secure better rates or prices for the Fund than might later be available in the market when it effects anticipated purchases.

          The acquisition of put and call options on futures contracts will, respectively, give a Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period.

          Futures transactions involve brokerage costs and require a Fund to segregate liquid assets, such as cash, U.S. Government securities or other liquid securities, to cover its performance under such contracts. A Fund may lose the expected benefit of futures transactions if interest rates, securities prices or foreign exchange rates move in an unanticipated manner. Such unanticipated changes may also result in poorer overall performance than if the Fund had not entered into any futures transactions. In addition, the value of a Fund’s futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities, limiting the Fund’s ability to hedge effectively against interest rate and/or market risk and giving

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rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions.

          A Fund will not enter into any futures contracts and related options for purposes other than bona fide hedging transactions within the meaning of Commodity Futures Trading Commission (“CFTC”) regulations if such non-hedging positions would exceed the limitations established in CFTC regulations. Currently, non-hedging transactions are subject to either of two alternative limitations. Under one alternative, the aggregate initial margin and premiums required to establish non-hedging positions in futures contracts and options may not exceed 5% of the fair market value of a Fund’s net assets (after taking into account unrealized profits and unrealized losses on any such contracts). Under the other alternative, which has been established by the CFTC on a temporary basis, the aggregate net notional value of non-hedging futures contracts and related options may not exceed the liquidation value of a Fund’s portfolio (after taking into account unrealized profits and unrealized losses on any such contracts). A Fund will not engage in transactions in financial futures contracts or options thereon for speculation, but only to attempt to hedge against changes in market conditions affecting the values of securities which such Fund holds or intends to purchase.

          When-Issued Securities. The Funds may purchase securities on a “when-issued” basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). When a Fund agrees to purchase securities on a “when-issued” basis, the Fund’s custodian will set aside cash or liquid portfolio securities equal to the amount of the commitment in a separate account.

          Normally, the Fund’s custodian will set aside portfolio securities to satisfy the purchase commitment, and in such a case, the Fund may be required subsequently to place additional assets in the separate account in order to assure that the value of the account remains equal to the amount of the Fund’s commitment. It may be expected that a Fund’s net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, such Fund’s liquidity and the ability of the Advisor to manage it might be affected in the event its commitments to purchase “when-issued” securities ever exceeded 25% of the value of its total assets. Under normal market conditions, however, a Fund’s commitment to purchase “when-issued” or “delayed-delivery” securities will not exceed 25% of the value of its total assets.

          When a Fund engages in “when-issued” transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in the Fund’s incurring a loss or missing the opportunity to obtain a price considered to be advantageous. A Fund will engage in “when-issued” delivery transactions only for the purpose of acquiring portfolio securities consistent with such Fund’s investment objectives and policies and not for investment leverage.

          Mortgage-related Securities. The Funds may, consistent with their investment objective and policies, invest in mortgage-related securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities or issued by non-governmental entities. Mortgage-related securities, for purposes of the Prospectus and this Statement of Additional Information, represent

7

pools of mortgage loans assembled for sale to investors by various governmental agencies such as the Government National Mortgage Association and government-related organizations such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as by non-governmental issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured. If a Fund purchases a mortgage-related security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying mortgage collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. However, though the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages underlying the securities are prone to prepayment, thereby shortening the average life of the security and shortening the period of time over which income at the higher rate is received. Conversely, when interest rates are rising, the rate of prepayment tends to decrease, thereby lengthening the average life of the security and lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-related security’s average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security’s return to a Fund. In addition, regular payments received in respect of mortgage-related securities include both interest and principal. No assurance can be given as to the return a Fund will receive when these amounts are reinvested.

          A Fund may also invest in mortgage-related securities which are collateralized mortgage obligations structured on pools of mortgage pass-through certificates or mortgage loans. Mortgage-related securities will be purchased only if rated in the three highest bond rating categories assigned by one or more appropriate NRSROs, or, if unrated, which the Advisor deems to be of comparable quality.

          There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities issued by the Government National Mortgage Association (“GNMA”) include GNMA Mortgage Pass-Through Certificates (also known as “Ginnie Maes”) which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by the Federal National Mortgage Association (“FNMA”) include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as “Fannie Maes”) which are solely the obligations of the FNMA and are not backed by or entitled to the full faith and credit of the United States. FNMA is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of the principal and interest by FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation (“FHLMC”) include FHLMC

8

Mortgage Participation Certificates (also known as “Freddie Macs” or “PCs”). FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.

          Municipal Securities. Municipal Securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to other public institutions and facilities. Private activity bonds that are issued by or on behalf of public authorities to finance various privately-operated facilities are included within the term Municipal Securities if the interest paid thereon is exempt from federal individual income taxes and is not treated as a preference item for purposes of the federal alternative minimum tax.

          Other types of Municipal Securities include short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper, Project Notes, Construction Loan Notes and other forms of short-term tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements or other revenues.

          Project Notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its Project Notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide that, if required, the federal government will lend the issuer an amount equal to the principal of and interest on the Project Notes.

          The two principal classifications of Municipal Securities consist of “general obligation” and “revenue” issues. The Funds may also acquire “moral obligations” issues, which are normally issued by special purpose authorities. There are, of course, variations in the quality of Municipal Securities, both within a particular classification and between classifications, and the yields on Municipal Securities depend upon a variety of factors, including general money market conditions, the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of NRSROs represent their opinions as to the quality of Municipal Securities. It should be emphasized, however, that ratings are general and are not absolute standards of quality, and securities with the same maturity, interest rate and rating may have different yields, while securities of the same maturity and interest rate with different ratings may have the same yield.

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          Subsequent to purchase, an issue of municipal Securities may cease to be rated or its rating may be reduced below the minimum rating required for purchase by a Fund. The Advisor will consider such an event in determining whether the Fund should continue to hold the obligation.

          An issuer’s obligations for Municipal Securities 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 the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its Municipal Securities may be materially adversely affected by litigation or other conditions.

          Repurchase Agreements. Securities held by each of the Funds may be subject to repurchase agreements. Under the terms of a repurchase agreement, a Fund would acquire securities from banks and registered broker-dealers which the Advisor or the applicable Sub-Advisor, as the case may be, deems creditworthy under guidelines approved by the Group’s Board of Trustees, subject to the seller’s agreement to repurchase such securities at a mutually agreed-upon date and price. The repurchase price would generally equal the price paid by the Fund plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller under a repurchase agreement will be required to maintain continually the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest). This requirement will be continually monitored by the Advisor. If the seller were to default on its repurchase obligation or become insolvent, the Fund holding such obligation would suffer a loss to the extent that the proceeds from a sale of the underlying portfolio securities were less than the repurchase price under the agreement, or to the extent that the disposition of such securities by the Fund were delayed pending court action. Additionally, there is no controlling legal precedent confirming that a Fund would be entitled, as against a claim by such seller or its receiver or trustee in bankruptcy, to retain the underlying securities, although the Board of Trustees of the Group believes that, under the regular procedures normally in effect for custody of a Fund’s securities subject to repurchase agreements and under federal laws, a court of competent jurisdiction would rule in favor of the Group if presented with the question. Securities subject to repurchase agreements will be held by that Fund’s custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by a Fund under the 1940 Act.

          Reverse Repurchase Agreements. Each of the Funds may borrow funds by entering into reverse repurchase agreements in accordance with that Fund’s investment restrictions. Pursuant to such agreements, a Fund would sell portfolio securities to financial institutions such as banks and broker-dealers, and agree to repurchase the securities at a mutually agreed-upon date and price. Each Fund intends to enter into reverse repurchase agreements only to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. At the time a Fund

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enters into a reverse repurchase agreement, it will place in a segregated custodial account assets such as U.S. Government securities or other liquid securities consistent with the Fund’s investment restrictions having a value equal to the repurchase price (including accrued interest), and will subsequently continually monitor the account to ensure that such equivalent value is maintained at all times. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the price at which a Fund is obligated to repurchase the securities. Reverse repurchase agreements are considered to be borrowings by a Fund under the 1940 Act.

          Securities of Other Investment Companies. Each Fund may invest in securities issued by other investment companies. Each Fund currently intends to limit its investments so that, as determined immediately after a securities purchase is made: (a) not more than 5% of the value of its total assets will be invested in the securities of any one investment company; (b) not more than 10% of the value of its total assets will be invested in the aggregate in securities of investment companies as a group; and (c) not more than 3% of the outstanding voting stock of any one investment company will be owned by such Fund, except as such securities may be acquired as part of a merger, consolidation or acquisition of assets and further, except as may be permitted by Section 12 (d) of the 1940 Act or except as may be permitted by the Securities and Exchange Commission. As a shareholder of another investment company, a Fund would bear, along with other shareholders, its pro rata portion of that company’s expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that such Fund bears directly in connection with its own operations.

INVESTMENT RESTRICTIONS

          Each Fund’s investment objective is a non-fundamental policy and may be changed without a vote of the holders of a majority of such Fund’s outstanding Shares. The following investment restrictions may be changed with respect to a particular Fund only by a vote of the majority of the outstanding Shares of that Fund (as defined under “ADDITIONAL INFORMATION — Vote of a Majority of the Outstanding Shares”).

          Each of the Funds may not:

          1.          Purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements secured by such obligations, if, immediately after such purchase, more than 5% of such Fund’s total assets would be invested in such issuer or such Fund would hold more than 10% of the outstanding voting securities of such issuer, except that up to 25% of a Fund’s total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities or repurchase agreements secured by such obligations.

          2.          Purchase any securities which would cause more than 25% of such Fund’s total assets at the time of purchase to be invested in securities of one or more issuers conducting their

11

principal business activities in the same industry; provided that (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements secured by such obligations; (b) wholly owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of their parents; and (c) utilities will be divided according to their services. For example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry.

          3.          Borrow money or issue senior securities except as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder;

          4.          Make loans, except that each Fund may purchase or hold debt instruments and lend portfolio securities in accordance with its investment objective and policies, make time deposits with financial institutions, and enter into repurchase agreements;

          5.          Purchase securities on margin, except for use of short-term credit necessary for clearance of purchases of portfolio securities and except as may be necessary to make margin payments in connection with derivative securities transactions;

          6.          Underwrite the securities issued by other persons, except to the extent that the Fund may be deemed to be an underwriter under certain securities laws in the disposition of “restricted securities;”

          7.          Purchase or sell real estate (although investments in marketable securities of companies engaged in such activities and securities secured by real estate or interests therein are not prohibited by this restriction); and

          8.          Purchase or sell commodities or commodities contracts, except to the extent disclosed in the current Prospectus of the Fund.

          If any percentage restriction or requirement described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in asset value will not constitute a violation of such restriction or requirement. However, should a change in net asset value or other external events cause a Fund’s investments in illiquid securities, repurchase agreements with maturities in excess of seven days and other instruments in such Fund which are not readily marketable to exceed the limit set forth in such Fund’s Prospectus for its investment in illiquid securities, the Fund will act to cause the aggregate amount of such securities to come within such limit as soon as reasonably practicable. In such an event, however, such Fund would not be required to liquidate any portfolio securities where the Fund would suffer a loss on the sale of such securities.

          The following fundamental investment restriction is applicable to the Tax-Exempt Income Fund only:

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The Tax-Exempt Income Fund must invest, under normal circumstances, at least 80% of the value of its assets in investments the income from which is exempt from federal income tax.

PORTFOLIO TURNOVER

          The portfolio turnover rate for each of the Funds is calculated by dividing the lesser of a Fund’s purchases or sales of portfolio securities for the year by the monthly average value of the portfolio securities. The calculation excludes all securities whose remaining maturities at the time of acquisition were one year or less.

          The portfolio turnover rate may vary greatly from year to year as well as within a particular year, and may also be affected by cash requirements for redemptions of Shares. High portfolio turnover rates will generally result in higher transaction costs, including brokerage commissions, to a Fund and may result in additional tax consequences to a Fund’s Shareholders. Portfolio turnover will not be a limiting factor in making investment decisions.

NET ASSET VALUE

          As indicated in the Prospectuses, the net asset value of each Fund is determined and the Shares of each Fund are priced as of the Valuation Time on each Business Day of that Fund. A “Business Day” of a Fund is a day on which the New York Stock Exchange is open for trading, the Federal Reserve Bank of Chicago is open for business and any other day (other than a day on which no Shares of that Fund are tendered for redemption and no order to purchase any Shares of that Fund is received) during which there is sufficient trading in portfolio instruments that such Fund’s net asset value per share might be materially affected. The New York Stock Exchange will not open in observance of the following holidays: New Year’s Day, Martin Luther King, Jr.’s Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. The Funds do not expect to determine the net asset value of their shares on any day when the Exchange is not open for trading, even if there is sufficient trading in portfolio securities on such days to materially affect the net asset value per share.

          Portfolio securities for which market quotations are readily available are valued based upon their current available bid prices in the principal market (closing sales prices if the principal market is an exchange) in which such securities are normally traded. Unlisted securities for which market quotations are readily available will be valued at the current quoted bid prices. Other securities and assets for which quotations are not readily available, including restricted securities and securities purchased in private transactions, are valued at their fair value in the Advisor’s best judgment under procedures established by, and under the supervision of, the Group’s Board of Trustees.

          Among the factors that will be considered, if they apply, in valuing portfolio securities held by a Fund are the existence of restrictions upon the sale of the security by the Fund, the absence of a market for the security, the extent of any discount in acquiring the security, the estimated time during which the security will not be freely marketable, the expenses of registering or otherwise qualifying the security for public sale, underwriting commissions if

13

underwriting would be required to effect a sale, the current yields on comparable securities for debt obligations traded independently of any equity equivalent, changes in the financial condition and prospects of the issuer, and any other factors affecting fair value. In making valuations, opinions of counsel may be relied upon as to whether or not securities are restricted securities and as to the legal requirements for public sale.

          The Group may use a pricing service to value certain portfolio securities where the prices provided are believed to reflect the fair market value of such securities. A pricing service would normally consider such factors as yield, risk, quality, maturity, type of issue, trading characteristics, special circumstances and other factors it deems relevant in determining valuations of normal institutional trading units of debt securities and would not rely exclusively on quoted prices. Certain instruments, for which pricing services used for the Funds do not provide prices, may be valued by the Group using methodologies similar to those used by pricing services, where such methodologies are believed to reflect fair value of the subject security. The methods used by the pricing service and the Group and the valuations so established will be reviewed by the Group under the general supervision of the Group’s Board of Trustees. Several pricing services are available, one or more of which may be used by the Advisor from time to time.

Valuation of the Money Market Fund

          The Money Market Fund has elected to use the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an instrument at its cost initially and thereafter assuming 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. This method may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if it sold the instrument. The value of securities in the Money Market Fund can be expected to vary inversely with changes in prevailing interest rates.

          Pursuant to Rule 2a-7, the Money Market Fund will maintain a dollar-weighted average portfolio maturity appropriate to the Fund’s objective of maintaining a stable net asset value per share, provided that the Funds will not purchase securities with a remaining maturity of more than 397 days (thirteen months) (securities subject to repurchase agreements may bear longer maturities) nor maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The Group’s Board of Trustees has established procedures reasonably designed, taking into account current market conditions and the investment objective of the Fund, to stabilize the net asset value per share of the Fund for purposes of sales and redemptions at $1.00. These procedures include review by the Trustees, at such intervals as they deem appropriate, to determine the extent, if any, to which the net asset value per Share of the Fund calculated by using available market quotations deviates from $1.00 per Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires that the Board of Trustees promptly consider what action, if any, should be initiated. If the Trustees believe that the extent of any deviation from the Fund’s $1.00 amortized cost price per Share may result in material dilution or other

14

unfair results to new or existing investors, they will take such steps as they consider appropriate to eliminate or reduce, to the extent reasonably practicable, any such dilution or unfair results. These steps may include selling portfolio instruments prior to maturity, shortening the average portfolio maturity, withholding or reducing dividends, reducing the number of the Fund’s outstanding Shares without monetary consideration, or utilizing a net asset value per share determined by using available market quotations.

Valuation of the Variable NAV Funds

          Investments in securities for which market quotations are readily available are valued based upon their current available prices in the principal market in which such securities are normally traded. Unlisted securities for which market quotations are readily available are valued at such market value. Securities and other assets for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Trustees of the Group. Short-term securities (i.e., with maturities of 60 days or less) are valued at either amortized cost or original cost plus accrued interest, which approximates current value.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

          Shares of each of the Funds are sold on a continuous basis by BISYS, and BISYS has agreed to use appropriate efforts to solicit all purchase orders. In addition to purchasing Shares directly from BISYS Fund Services Limited Partnership (“BISYS”), Shares may be purchased through procedures established by BISYS in connection with the requirements of accounts at the Advisor or the Advisor’s affiliated entities (collectively, “Entities”). Customers purchasing Shares of the Funds may include officers, directors, or employees of the Advisor or the Entities.

          The Group may suspend the right of redemption or postpone the date of payment for Shares during any period when (a) trading on the New York Stock Exchange (the “NYSE”) is restricted by applicable rules and regulations of the Commission, (b) the NYSE is closed for other than customary weekend and holiday closings, (c) the Commission has by order permitted such suspension, or (d) an emergency exists as a result of which (i) disposal by the Group of securities owned by it is not reasonably practical, or (ii) it is not reasonably practical for the Group to determine the fair value of its net assets.

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MANAGEMENT OF THE GROUP

Trustees and Officers

          Overall responsibility for management of the Group rests with its Board of Trustees. The Trustees elect the officers of the Group to supervise actively its day-to-day operations.

          The names of the Trustees and officers of the Group, their addresses, ages and principal occupations during the past five years are provided in the tables below. Trustees that are deemed “interested persons,” as defined in the 1940 Act, are listed as “Interested Trustees” in the table. Trustees who are not interested persons are referred to as Independent Trustees.

          INTERESTED TRUSTEES*

		TERM OF
		OFFICE**
		AND	PRINCIPAL	NUMBER OF FUNDS		OTHER
	POSITION(S)	LENGTH OF	OCCUPATION(S)	IN FUND COMPLEX		DIRECTORSHIPS
NAME, ADDRESS	HELD WITH	TIME	DURING PAST	OVERSEEN BY		HELD BY
AND AGE	THE FUNDS	SERVED	FIVE YEARS	TRUSTEE***		TRUSTEE
Walter B. Grimm 3435 Stelzer Road Columbus, Ohio 43219 Age: 61	Trustee	Since 1996.	Retired. From June 1992 to December 2005, employee of BISYS Fund Services.		22	American Performance Funds; Legacy Funds Group; Performance Funds Trust; The Coventry Funds Trust

* Mr. Grimm is considered to be an “interested person” of the Group as defined in the 1940 Act due to his previous employment with BISYS Fund Services, the Funds’ distributor and administrator. Mr. Grimm ceased to be an employee of BISYS Fund Services effective after December 31, 2005.

          INDEPENDENT TRUSTEES

				NUMBER OF
		TERM OF	PRINCIPAL	FUNDS IN FUND		OTHER
	POSITION(S)	OFFICE** AND	OCCUPATION(S)	COMPLEX***		DIRECTORSHIPS
NAME, ADDRESS	HELD WITH	LENGTH OF	DURING PAST	OVERSEEN BY		HELD BY
AND AGE	THE FUNDS	TIME SERVED	FIVE YEARS	TRUSTEE		TRUSTEE
Diane E. Armstrong 3435 Stelzer Road Columbus, Ohio 43219 Age: 42	Trustee	Since 2004.	From August 2003 to present, Principal of King, Dodson Armstrong Financial Advisors, Inc.; from April 2000 to August 2003, Director of Financial Planning, Hamilton Capital Management.		22	The Coventry Funds Trust
Maurice G. Stark 3435 Stelzer Road Columbus, Ohio 43219 Age: 70	Trustee	Since 1992.	Retired.		22	The Coventry Funds Trust

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				NUMBER OF
		TERM OF	PRINCIPAL	FUNDS IN FUND		OTHER
	POSITION(S)	OFFICE** AND	OCCUPATION(S)	COMPLEX***		DIRECTORSHIPS
NAME, ADDRESS	HELD WITH	LENGTH OF	DURING PAST	OVERSEEN BY		HELD BY
AND AGE	THE FUNDS	TIME SERVED	FIVE YEARS	TRUSTEE		TRUSTEE
Michael M. Van Buskirk 3435 Stelzer Road Columbus, Ohio 43219 Age: 59	Trustee and Chairman of the Board	Since 1992.	From June 1991 to present, employee of and current Chief Executive Officer of The Ohio Bankers Association (trade association).		22	The Coventry Funds Trust
James H. Woodward 3435 Stelzer Road Columbus, Ohio 43219 Age: 66	Trustee	Since 2006.	Retired. From July 1989 to June 2005, Chancellor, University of North Carolina at Charlotte.		22	The Coventry Funds Trust

**	Trustees hold their position until their resignation or removal.
***	The “Fund Complex” consists of the Group and The Coventry Funds Trust.

          OFFICERS WHO ARE NOT TRUSTEES

		TERM OF OFFICE*
	POSITION(S) HELD	AND LENGTH OF	PRINCIPAL OCCUPATION(S) DURING
NAME, ADDRESS AND AGE	WITH THE FUNDS	TIME SERVED	PAST FIVE YEARS
R. Jeffrey Young 3435 Stelzer Road Columbus, Ohio 43219 Age: 41	President	Since 2003.	From October 1993 to present, employee of BISYS Fund Services
Aaron J. Masek 3435 Stelzer Road Columbus, Ohio 43219 Age: 32	Treasurer	Since 2006.	From March 1997 to present, employee of BISYS Fund Services.
Timothy Bresnahan 3435 Stelzer Road Columbus, Ohio 43219 Age: 37	Secretary	Since 2005.	From February 2005 to present, employee of BISYS Fund Services; from March 2004 to February 2005, associate of the law firm of Greenberg Traurig, P.A.; from October 2003 to March 2004, employee of Deutsche Bank Asset Management, Inc.; from September 2001 to February 2003, associate of the law firm of Goodwin Procter, LLP
Alaina V. Metz 3435 Stelzer Road Columbus, Ohio 43219 Age: 38	Assistant Secretary	Since 1995.	From June 1995 to present, employee of BISYS Fund Services.
George L. Stevens 3435 Stelzer Road Columbus, Ohio 43219 Age: 55	Chief Compliance Officer	Since 2004.	From September 1996 to present, employee of BISYS Fund Services.

* Officers hold their positions until a successor has been duly elected and qualified.

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BOARD COMMITTEES

          The Board has an Audit Committee, Nominating Committee and Valuation Committee. The Audit Committee oversees the Group’s accounting and financial reporting policies and practices and oversees the quality and objectivity of the Group’s financial statements and the independent audit thereof. The members of the Audit Committee, which met twice during the last fiscal year, include all of the Board’s independent trustees: Maurice G. Stark, Michael M. Van Buskirk, Diane E. Armstrong and James H. Woodward. The Nominating Committee, also comprised of all of the independent trustees, evaluates the qualifications of candidates and makes nominations for independent trustee membership on the Board. The Nominating Committee does not consider nominees recommended by shareholders. During the last fiscal year, the Nominating Committee held one meeting. The purpose of the Valuation Committee, which is comprised of at least two Trustees at all times, one of whom must be an Independent Trustee, is to oversee the implementation of the Group’s valuation procedures and to make fair value determinations on behalf of the Board as specified in the valuation procedures. The Valuation Committee meets quarterly.

OWNERSHIP OF SECURITIES

          As of the date of this Statement of Additional Information, the Group’s Trustees and officers, as a group, owned less than 1% of each Fund’s outstanding Shares. For the year ended December 31, 2005, the dollar range of equity securities owned beneficially by each Trustee in the Funds and in any registered investment companies overseen by the Trustee within the same family of investment companies as the Funds is as follows:

INTERESTED TRUSTEES

		AGGREGATE DOLLAR RANGE OF
		EQUITY SECURITIES IN ALL
		REGISTERED INVESTMENT
	DOLLAR RANGE OF	COMPANIES OVERSEEN BY
	EQUITY SECURITIES	TRUSTEE IN FAMILY OF
NAME OF TRUSTEE	IN THE FUNDS	INVESTMENT COMPANIES
Walter B. Grimm	$0	$0

INDEPENDENT TRUSTEES

		AGGREGATE DOLLAR RANGE OF
		EQUITY SECURITIES IN ALL
		REGISTERED INVESTMENT
	DOLLAR RANGE OF	COMPANIES OVERSEEN BY
	EQUITY SECURITIES	TRUSTEE IN FAMILY OF
NAME OF TRUSTEE	IN THE FUNDS	INVESTMENT COMPANIES
Diane E. Armstrong	$0	$0
Maurice G. Stark	$0	$10,000 — $50,000

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		AGGREGATE DOLLAR RANGE OF
		EQUITY SECURITIES IN ALL
		REGISTERED INVESTMENT
	DOLLAR RANGE OF	COMPANIES OVERSEEN BY
	EQUITY SECURITIES	TRUSTEE IN FAMILY OF
NAME OF TRUSTEE	IN THE FUNDS	INVESTMENT COMPANIES
Michael M. Van Buskirk	$0	$50,000 — $100,000
James H. Woodward	$0	$0

          The Officers of the Group (other than the Chief Compliance Officer) receive no compensation directly from the Group for performing the duties of their offices. BISYS Fund Services may receive fees pursuant to the Distribution and Shareholder Services Plan. BISYS Fund Services Ohio, Inc. (“BISYS”) receives fees from the Funds for acting as administrator and transfer agent and for providing certain fund accounting services. Messrs. Young, Masek, Bresnahan and Stevens and Ms. Metz are employees of BISYS.

          Trustees of the Group not affiliated with BISYS or BISYS Fund Services receive from the Group, effective as of April 1, 2006, the following fees: a quarterly retainer fee of $2,000 per quarter; a regular meeting fee of $3,000 per meeting; a special in-person meeting fee of $1,000; a telephonic meeting fee of $500; an Audit Committee fee of $1,000 per meeting; and a $500 per meeting fee for all other committee meetings. Trustees are also reimbursed for all out-of-pocket expenses relating to attendance at such meetings. Trustees who are affiliated with BISYS or BISYS Fund Services do not receive compensation from the Group.

          For the fiscal year ended March 31, 2006 the Trustees received the following compensation from the Group and from certain other investment companies (if applicable) that have the same investment advisor as the Funds or an investment advisor that is an affiliated person of the Group’s investment advisor:

				TOTAL
		PENSION OR		COMPENSATION
		RETIREMENT		FROM THE
		BENEFITS	ESTIMATED	FUND AND FUND
	AGGREGATE	ACCRUED AS	ANNUAL	COMPLEX PAID
	COMPENSATION	PART OF FUNDS	BENEFITS UPON	TO THE
NAME OF TRUSTEE	FROM THE FUNDS	EXPENSES	RETIREMENT	TRUSTEES
Diane E. Armstrong	$4,747	$0	$0	$16,000
Walter B. Grimm*	$1,187	$0	$0	$4,172
Maurice G. Stark	$4,747	$0	$0	$16,000
Michael M. Van Buskirk	$4,462	$0	$0	$15,000
James H. Woodward**	$1,351	$0	$0	$4,750
R. Jeffrey Young***	$0	$0	$0	$0

*	Mr. Grimm ceased to be employed by BISYS Fund Services effective after December 31, 2005.
**	Mr. Woodward was elected as a Trustee effective as of February 21, 2006.
***	Mr. Young resigned as a Trustee effective as of December 8, 2005.

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INVESTMENT ADVISOR

          Investment advisory services are provided to the Funds by Signal Capital Management, Inc. (the “Advisor”), pursuant to an Investment Advisory Agreement dated as of July 1, 2002. The Advisor is a wholly owned subsidiary of Old National Trust Company, which is a subsidiary corporation of Old National Bancorp, the largest multi-bank holding company headquartered in Indiana.

          Under the terms of the Investment Advisory Agreement, the Advisor has agreed to provide, either directly or through one or more sub-advisors, investment advisory services as described in the Prospectuses of the Funds. For the services provided and expenses assumed pursuant to the Investment Advisory Agreement, each Fund pays the Advisor a fee, computed daily and paid monthly, at the following annual rates: (1) for the Large Cap Growth Fund, seventy-five one-hundredths of one percent (0.75%) of such Fund’s average daily net assets; (2) for both the Income Fund and the Tax-Exempt Income Fund, fifty one-hundredths of one percent (0.50%) of each such Fund’s average daily net assets; and (3) for the Money Market Fund, ten one-hundredths of one percent (0.10%) of the Money Marker Fund’s average daily net assets. The Advisor may from time to time voluntarily reduce all or a portion of its advisory fee with respect to a Fund.

          Investment advisory fees earned by the Advisor for services to the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund for the fiscal year ended March 31, 2004 totaled $259,999, $97,649, $318,542 and $85,029, respectively. Investment advisory fees earned by the Advisor for services to the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund for the fiscal year ended March 31, 2005 totaled $256,873, $93,161, $392,724 and $83,764, respectively. Investment advisory fees earned by the Advisor for services to the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund for the fiscal year ended March 31, 2006 totaled $318,586, $111,073 $490,711 and $95,651, respectively.

          For the fiscal year ended March 31, 2004, the Advisor waived advisory fees in the amounts of $69,332, $96,072, $159,274 and $42,511 for the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund, respectively. For the fiscal year ended March 31, 2005, the Advisor waived advisory fees in the amounts of $68,501, $93,161, $196,360 and $41,885 for the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund, respectively. For the fiscal year ended March 31, 2006, the Advisor waived advisory fees in the amounts of $84,957, $96,258 $245,356 and $47,827 for the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund, respectively.

          Unless sooner terminated, the Investment Advisory Agreement will continue in effect until February 28, 2007, and year to year thereafter for successive annual periods if, as to each Fund, such continuance is approved at least annually by the Group’s Board of Trustees or by

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vote of a majority of the outstanding Shares of the relevant Fund and a majority of the Trustees who are not parties to the Investment Advisory Agreement or interested persons (as defined in the 1940 Act) of any party to the Investment Advisory Agreement by votes cast in person at a meeting called for such purpose. The Investment Advisory Agreement is terminable as to a Fund at any time on 60 days’ written notice without penalty by the Trustees, by vote of a majority of the outstanding Shares of that Fund, or by the Advisor. The Investment Advisory Agreement also terminates automatically in the event of any assignment, as defined in the 1940 Act.

          The Investment Advisory Agreement provides that the Advisor shall not be liable for any error of judgment or mistake of law or for any loss suffered by a Fund in connection with the performance of the Investment Advisory Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the Advisor in the performance of its duties, or from reckless disregard by the Advisor of its duties and obligations thereunder.

          Mercantile Capital Advisors, Inc. (the “Sub-Advisor”) provides sub-investment advisory services to the Money Market Fund pursuant to a Sub-Advisory Agreement dated as of July 1, 2002 (the “Sub-Advisory Agreement”). The terms and conditions of the Sub-Advisory Agreement are substantially identical to those of the Investment Advisory Agreement. For the services provided to the Money Market Fund pursuant to the Sub-Advisory Agreement, the Advisor pays the Sub-Advisor a fee computed daily and paid monthly, at the annual rate of five one-hundredths of one percent (0.05%) of the Fund’s first $100 million in net assets and four one-hundredths of one percent (0.04%) of the Fund’s net assets in excess of $100 million.

          For the fiscal year ended March 31, 2004, the Advisor paid the Sub-Advisor $42,518 for its services to the Signal Money Market Fund. For the fiscal year ended March 31, 2005, the Advisor paid the Sub-Advisor $41,879 for its services to the Signal Money Market Fund. For the fiscal year ended March 31, 2006, the Advisor paid the Sub-Advisor $47,824 for its services to the Signal Money Market Fund.

          The Advisor is also party to a Sub-Administration Agreement with respect to the Funds pursuant to which the Advisor is entitled to receive up to 0.05% of each Fund’s average daily net assets (0.10% in the case of the Money Market Fund) in connection with certain administrative services that are provided to the Funds by the Advisor. For the period from July 1, 2005 (effective date of the Sub-Administration Agreement) through March 31, 2006, the Advisor earned sub-administration fees in the amounts of $15,945, $8,234, $36,258 and $69,816 for the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund, respectively.

          The Advisor has licensed the name “Signal Funds” to the Funds on a royalty-free basis, and the Advisor has reserved to itself the right to grant the non-exclusive right to use the name “Signal Funds” to any other person. At such time as the Investment Advisory Agreement is no longer in effect, the Advisor may require the Funds to cease using the name “Signal Funds.”

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PORTFOLIO MANAGER INFORMATION

Stephen Keck and Mark Cremonie serve as co-Portfolio Managers for the Large Cap Growth Fund and Charlotte Weems, John Claybon and David Franklin serve as co-Portfolio Managers for the Income Fund and the Tax-Exempt Income Fund. The following table lists the number and types of other accounts managed by each individual and assets under management in those accounts as of March 31, 2006:

	Other		Other				Total
	Registered	Assets	Pooled	Assets		Assets	Assets
	Investment	Managed	Investment	Managed		Managed	Managed
Portfolio	Company	($	Vehicle	($	Other	($	($
Manager	Accounts	millions)	Accounts	millions)	Accounts	millions)	millions)
Stephen Keck	0	n/a	0	n/a	0	n/a	$0
Mark Cremonie	0	n/a	0	n/a	0	n/a	$0
Charlotte Weems	0	n/a	0	n/a	0	n/a	$0
John Claybon	0	n/a	0	n/a	0	n/a	$0
David Franklin	0	n/a	0	n/a	0	n/a	$0

Portfolio managers at the Adviser may manage accounts for multiple clients. Portfolio managers at the Adviser make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that portfolio. The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Even where multiple accounts are managed by the same portfolio manager within the same investment discipline, however, the Adviser may take action with respect to one account that may differ from the timing or nature of action taken, with respect to another account. Accordingly, the performance of each account managed by a portfolio manager will vary.

The compensation of the portfolio managers varies with the general success of the Adviser as a firm and its affiliates. Each portfolio manager’s compensation consists of a fixed annual salary, plus additional remuneration based on the overall performance of the Adviser and its affiliates for the given time period. The portfolio managers’ compensation is not linked to any specific factors, such as a Fund’s performance or asset level.

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The Adviser has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which it believes address the potential conflicts associated with managing multiple accounts for multiple clients.

The dollar range of equity securities beneficially owned by the Funds’ portfolio managers in the Funds they manage as of March 31, 2006 is as follows:

		Dollar Range of Equity Securities Beneficially
Portfolio Manager	Fund	Owned
Stephen Keck	Large Cap Growth Fund	$0
Mark Cremonie	Large Cap Growth Fund	$0
Charlotte Weems	Income Fund	$0
Charlotte Weems	Tax-Exempt Income Fund	$0
John Claybon	Income Fund	$0
John Claybon	Tax-Exempt Income Fund	$0
David Franklin	Income Fund	$0
David Franklin	Tax-Exempt Income Fund	$0

CODE OF ETHICS

          The Group, the Advisor, the Sub-Advisor and the Distributor have each adopted a Code of Ethics, pursuant to Rule 17j-1 under the Investment Company Act of 1940, applicable to securities trading practices of their respective personnel. Each Code permits covered personnel to trade in securities in which a Fund may invest, subject to certain restrictions and reporting requirements.

PORTFOLIO TRANSACTIONS

          Pursuant to the Investment Advisory Agreement with respect to each Fund, the Advisor determines, subject to the general supervision of the Board of Trustees of the Group and in accordance with each such Fund’s investment objective and restrictions, which securities are to be purchased and sold by a Fund, and which brokers are to be eligible to execute such Fund’s portfolio transactions.

          Purchases and sales of portfolio securities with respect to the Income Funds usually are principal transactions in which portfolio securities are normally purchased directly from the issuer or from an underwriter or market maker for the securities. Purchases from underwriters of portfolio securities generally include a commission or concession paid by the issuer to the

23

underwriter, and purchases from dealers serving as market makers may include the spread between the bid and asked price.

          Transactions on stock exchanges involve the payment of negotiated brokerage commissions. Transactions in the over-the-counter market are generally principal transactions with dealers. With respect to the over-the-counter market, the Group, where possible, will deal directly with dealers who make a market in the securities involved except in those circumstances where better price and execution are available elsewhere.

          Allocation of transactions, including their frequency, to various brokers and dealers is determined by the Advisor in its best judgment and in a manner deemed fair and reasonable to Shareholders. The primary consideration is prompt execution of orders in an effective manner at the most favorable price. Subject to this consideration, brokers and dealers who provide supplemental investment research to the Advisor may receive orders for transactions on behalf of the Funds. The Advisor is authorized to pay a broker-dealer who provides such brokerage and research services a commission for executing each such Fund’s brokerage transactions which is in excess of the amount of commission another broker would have charged for effecting that transaction if, but only if, the Advisor determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker viewed in terms of that particular transaction or in terms of all of the accounts over which it exercises investment discretion. Any such research and other statistical and factual information provided by brokers to a Fund or to the Advisor is considered to be in addition to and not in lieu of services required to be performed by the Advisor under its agreement regarding management of the Fund. The cost, value and specific application of such information are indeterminable and hence are not practicably allocable among the Funds and other clients of the Advisor who may indirectly benefit from the availability of such information. Similarly, the Funds may indirectly benefit from information made available as a result of transactions effected for such other clients.

          Under the Investment Advisory Agreement the Advisor is permitted to pay higher brokerage commissions for brokerage and research services in accordance with Section 28 (e) of the Securities Exchange Act of 1934. In the event the Advisor does follow such a practice, it will do so on a basis which is fair and equitable to the Group and the Funds.

          While the Advisor generally seeks competitive commissions, the Group may not necessarily pay the lowest commission available on each brokerage transaction, for reasons discussed above.

          Except as otherwise disclosed to the Shareholders of the Funds and as permitted by applicable laws, rules and regulations, the Group will not, on behalf of the Funds, execute portfolio transactions through, acquire portfolio securities issued by, make savings deposits in, or enter into repurchase or reverse repurchase agreements with the Advisor, BISYS, or their affiliates, and will not give preference to the Advisor’s correspondents with respect to such transactions, securities, savings deposits, repurchase agreements, and reverse repurchase agreements.

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          Investment decisions for each Fund are made independently from those for the other Funds, other funds of the Group or any other investment company or account managed by the Advisor. Any such other fund, investment company or account may also invest in the same securities as the Group on behalf of the Funds. When a purchase or sale of the same security is made at substantially the same time on behalf of a Fund and another fund of the Group, investment company or account, the transaction will be averaged as to price and available investments will be allocated as to amount in a manner which the Advisor believes to be equitable to the Fund and such other fund, investment company or account. In some instances, this investment procedure may adversely affect the price paid or received by a Fund or the size of the position obtained by a Fund. To the extent permitted by law, the Advisor may aggregate the securities to be sold or purchased for a Fund with those to be sold or purchased for the other Funds or for other investment companies or accounts in order to obtain best execution. As provided by the Investment Advisory Agreement, in making investment recommendations for the Funds, the Advisor will not inquire or take into consideration whether an issuer of securities proposed for purchase or sale by the Group is a customer of the Advisor, any of its parents or subsidiaries or affiliates and, in dealing with its customers, the Advisor, its parent, subsidiaries, and affiliates will not inquire or take into consideration whether securities of such customers are held by the Funds or any other fund of the Group.

          For the fiscal year ended March 31, 2004, the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund paid brokerage commissions of $37,976, $0, $0 and $0 respectively, none of which commissions were paid to any affiliate of the Funds or the Advisors. For the fiscal year ended March 31, 2005, the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund paid brokerage commissions of $26,145, $0, $0, and $0, respectively, none of which commissions were paid to any affiliate of the Funds or the Advisors. For the fiscal year ended March 31, 2006, the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund paid brokerage commissions of $39,217, $0, $0 and $0, respectively, none of which commissions were paid to any affiliate of the Funds or the Advisors.

ADMINISTRATOR

          BISYS Ohio serves as administrator (the “Administrator”) to the Funds pursuant to a Management and Administration Agreement dated as of July 1, 2002, as amended effective as of July 1, 2005 (the “Administration Agreement”). The Administrator assists in supervising all operations of each Fund (other than those performed by the Advisor under the Investment Advisory Agreement, by The Huntington National Bank under the Custody Agreement and by BISYS Ohio under the Transfer Agency Agreement and Fund Accounting Agreement). The Administrator is a broker-dealer registered with the Commission, and is a member of the National Association of Securities Dealers, Inc. The Administrator provides financial services to institutional clients.

25

          Under the Administration Agreement, the Administrator has agreed to maintain office facilities; furnish statistical and research data, clerical, certain bookkeeping services and stationery and office supplies; prepare the periodic reports to the Commission on Form N-SAR or any replacement forms therefor; compile data for, assist the Group or its designee in the preparation of, and file all of the Funds’ federal and state tax returns and required tax filings other than those required to be made by the Funds’ custodian and Transfer Agent; prepare compliance filings pursuant to state securities laws with the advice of the Group’s counsel; assist to the extent requested by the Group with the Group’s preparation of its Annual and Semi-Annual Reports to Shareholders and its Registration Statement (on Form N-1A or any replacement therefor); compile data for, prepare and file timely Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act; keep and maintain the financial accounts and records of each Fund, including calculation of daily expense accruals; and generally assist in all aspects of the Funds’ operations other than those performed by the Advisor under the Investment Advisory Agreement, by The Huntington National Bank under the Custody Agreement and by BISYS Ohio, Inc. under the Transfer Agency and Fund Accounting Agreements. Under the Administration Agreement, the Administrator may delegate all or any part of its responsibilities thereunder.

          Effective as of July 1, 2005, the Administrator receives a fee from each Fund for its services as Administrator and expenses assumed pursuant to the Administration Agreement that is calculated daily and paid periodically at an annual rate equal to fourteen one-hundredths of one percent (0.14%) of each Fund’s average daily net assets.

          For the fiscal year ended March 31, 2004, the Administrator earned administrative fees from the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund of $69,332, $39,059, $127,416 and $212,585, respectively. For the fiscal year ended March 31, 2005, the Administrator earned administrative fees from the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund of $68,501, $37,265, $157,091 and $209,414, respectively. For the fiscal year ended March 31, 2006, the Administrator earned administrative fees from the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund of $65,781, $34,525, $152,670 and $162,242, respectively.

          Unless sooner terminated as provided therein, the Administration Agreement’s term is renewed automatically for successive one-year terms, unless written notice not to renew is given by the non-renewing party to the other party. The Administration Agreement is terminable with respect to a particular Fund only upon mutual agreement of the parties to the Administration Agreement and for cause (as defined in the Administration Agreement) by the party alleging cause, on not less than 60 days’ notice by the Group’s Board of Trustees or by the Administrator.

          The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or any loss suffered by any Fund in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful

26

misfeasance, bad faith, or negligence in the performance of its duties, or from the reckless disregard by the Administrator of its obligations and duties thereunder.

DISTRIBUTOR

          BISYS serves as agent for each of the Funds in the distribution of its Shares pursuant to a Distribution Agreement dated as of June 14, 2005 (the “Distribution Agreement”). Unless otherwise terminated, the Distribution Agreement will continue in effect for successive annual periods if, as to each Fund, such continuance is approved at least annually by (i) by the Group’s Board of Trustees or by the vote of a majority of the outstanding shares of that Fund, and (ii) by the vote of a majority of the Trustees of the Group who are not parties to the Distribution Agreement or interested persons (as defined in the 1940 Act) of any party to the Distribution Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated in the event of any assignment, as defined in the 1940 Act.

          In its capacity as Distributor, BISYS enters into selling agreements with intermediaries that solicit orders for the sale of Shares, advertises and pays the costs of advertising, office space and the personnel involved in such activities. BISYS receives annual compensation of $18,750 under the Distribution Agreement with the Group. BISYS has entered into a Distribution Services Agreement with the Adviser in connection with BISYS’ services as distributor of the Funds pursuant to which the Adviser undertakes to BISYS amounts owed to BISYS under the terms of the Distribution Agreement to the extent that the Funds are not otherwise authorized to make such payments.

          The Group has adopted a Service and Distribution Plan for Class A Shares (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act under which the Class A Shares of each Fund are authorized to pay the Distributor for payments it makes to banks, other institutions and broker-dealers, and for expenses the Distributor and any of its affiliates or subsidiaries incur (with all of the foregoing organizations being referred to as “Service Organizations”) for providing administration, distribution or shareholder service assistance to the Funds. Payments to such Service Organizations may be made pursuant to agreements entered into with BISYS Fund Services. The Plan authorizes each Fund to make payments to the Distributor in an amount not to exceed, on an annual basis, 0.25% of the average daily net assets of Class A Shares of each such Fund.

          As required by Rule 12b-1, the Plan was approved by the initial Shareholders of each of the Funds and by the Board of Trustees, including a majority of the Trustees who are not interested persons of any of the Funds and who have no direct or indirect financial interest in the operation of the Plan (the “Independent Trustees”). The Plan may be terminated as to a Fund by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding Shares of that Fund. Any change in the Plan that would materially increase the distribution cost to a Fund requires Shareholder approval. The Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. The Plan may be amended by vote of the Trustees including a majority of the Independent Trustees, cast in person at a meeting called

27

for that purpose. For so long as the Plan is in effect, selection and nomination of those Trustees who are not interested persons of the Group shall be committed to the discretion of such disinterested persons. All agreements with any person relating to the implementation of the Plan may be terminated at any time on 60 days’ written notice without payment of any penalty, by vote of a majority of the Independent Trustees or by a vote of the majority of the outstanding Shares of the Fund. The Plan will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the Independent Trustees, and (ii) by a vote of a majority of the entire Board of Trustees cast in person at a meeting called for that purpose. The Board of Trustees has a duty to request and evaluate such information as may be reasonably necessary for them to make an informed determination of whether the Plan should be implemented or continued. In addition the Trustees in approving the Plan must determine that there is a reasonable likelihood that the Plan will benefit each Fund and its Shareholders.

          The Board of Trustees of the Group believes that the Plan is in the best interests of each Fund since it encourages Fund growth and maintenance of Fund assets. As a Fund grows in size, certain expenses, and therefore total expenses per Share, may be reduced and overall performance per Share may be improved.

          BISYS may enter into, from time to time, Rule 12b-1 Agreements with selected dealers pursuant to which such dealers will provide certain services in connection with the distribution of a Fund’s Shares including, but not limited to, those discussed above.

          For the fiscal year ended March 31, 2004, the Distributor received distribution fees with respect to Class A shares of the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund in the amount of $948, $247, $621 and $0, respectively, all of which were paid as compensation to dealers. For the fiscal year ended March 31, 2005, the Distributor received distribution fees with respect to Class A shares of the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund in the amount of $1,214, $341, $648 and $0, respectively, all of which were paid as compensation to dealers. For the fiscal year ended March 31, 2006, the Distributor received distribution fees with respect to Class A shares of the Signal Large Cap Growth Fund, Signal Tax-Exempt Income Fund, Signal Income Fund and Signal Money Market Fund in the amount of $1,754 $392, $891 and $0, respectively, all of which were paid as compensation to dealers.

CUSTODIAN

          The Huntington National Bank, 41 South High Street, Columbus, Ohio 43215 (the “Custodian”), has been selected to serve as the Funds’ custodian pursuant to the Custody Agreement dated as of July 1, 2002. The Custodian’s responsibilities include safeguarding and controlling the Funds’ cash and securities, handling the receipt and delivery of securities, and collecting interest and dividends on the Funds’ investments.

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TRANSFER AGENCY AND FUND ACCOUNTING SERVICES

          BISYS Ohio serves as transfer agent and dividend disbursing agent (the “Transfer Agent”) for all of the Funds pursuant to the Transfer Agency Agreement dated as of July 1, 2002, as amended effective as of July 1, 2005. Pursuant to such Agreement, the Transfer Agent, among other things, performs the following services in connection with each Fund’s shareholders of record: maintenance of shareholder records for each of the Fund’s shareholders of record; processing shareholder purchase and redemption orders; processing transfers and exchanges of shares of the Funds on the shareholder files and records; processing dividend payments and reinvestments; and assistance in the mailing of shareholder reports and proxy solicitation materials. For such services the Transfer Agent receives a fee based on the number of shareholders of record.

          In addition, BISYS Ohio provides certain fund accounting services to the Funds pursuant to a Fund Accounting Agreement dated as of July 1, 2002, and amended effective as of July 1, 2005. BISYS Ohio receives a fee from each Fund for such services equal to the greater of (a) a fee computed at an annual rate of three one-hundredths of one percent (.03%) of that Fund’s average daily net assets, or (b) $50,000 minus the fee paid by such Fund under its Management and Administration Agreement with BISYS of the same date. Under such Agreement, BISYS Ohio maintains the accounting books and records for each Fund, including journals containing an itemized daily record of all purchases and sales of portfolio securities, all receipts and disbursements of cash and all other debits and credits, general and auxiliary ledgers reflecting all asset, liability, reserve, capital, income and expense accounts, including interest accrued and interest received, and other required separate ledger accounts; maintains a monthly trial balance of all ledger accounts; performs certain accounting services for the Fund, including calculation of the net asset value per share, calculation of the dividend and capital gain distributions, if any, and of yield, reconciliation of cash movements with the Fund’s custodian, affirmation to the Fund’s custodian of all portfolio trades and cash settlements, verification and reconciliation with the Fund’s custodian of all daily trade activity; provides certain reports; obtains dealer quotations, prices from a pricing service or matrix prices on all portfolio securities in order to mark the portfolio to the market; and prepares an interim balance sheet, statement of income and expense, and statement of changes in net assets for each Fund.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

          The independent registered public accounting firm of Ernst & Young LLP performs an annual audit of the Funds’ financial statements and provides other related services. Reports of their activities are provided to the Group’s Board of Trustees.

LEGAL COUNSEL

          Dechert LLP, 1775 I Street, N.W., Washington, D.C. 20006, is counsel to the Group.

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ADDITIONAL INFORMATION

DESCRIPTION OF SHARES

          The Group is a Massachusetts business trust organized on January 8, 1992. The Group’s Declaration of Trust is on file with the Secretary of State of Massachusetts. The Declaration of Trust authorizes the Board of Trustees to issue an unlimited number of shares, which are shares of beneficial interest, with a par value of $0.01 per share. The Group consists of several funds organized as separate series of shares. The Group’s Declaration of Trust authorizes the Board of Trustees to divide or redivide any unissued shares of the Group into one or more additional series by setting or changing in any one or more respects their respective preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption.

          Shares have no subscription or preemptive rights and only such conversion or exchange rights as the Board of Trustees may grant in its discretion. When issued for payment as described in the Prospectus and this Statement of Additional Information, the Shares will be fully paid and non-assessable. In the event of a liquidation or dissolution of the Group, shareholders of a fund are entitled to receive the assets available for distribution belonging to that fund, and a proportionate distribution, based upon the relative asset values of the respective funds, of any general assets not belonging to any particular fund which are available for distribution.

          Rule 18f-2 under the 1940 Act provides that any matter required to be submitted to the holders of the outstanding voting securities of an investment company such as the Group shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding shares of each fund affected by the matter. For purposes of determining whether the approval of a majority of the outstanding shares of a fund will be required in connection with a matter, a fund will be deemed to be affected by a matter unless it is clear that the interests of each fund in the matter are identical, or that the matter does not affect any interest of the fund. Under Rule 18f-2, the approval of an investment advisory agreement or any change in investment policy would be effectively acted upon with respect to a fund only if approved by a majority of the outstanding shares of such fund. However, Rule 18f-2 also provides that the approval of principal underwriting contracts and the election of Trustees may be effectively acted upon by shareholders of the Group voting without regard to series.

          Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Group. However, the Declaration of Trust disclaims liability of the Shareholders, Trustees or officers of the Group for acts or obligations of the Group, which are binding only on the assets and property of the Group, and requires that notice of the disclaimer be given in each contract or obligation entered into or executed by the Group or the Trustees. The Declaration of Trust provides for indemnification out of Group property for all loss and expense of any shareholder held personally liable for the obligations of the Group. The risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Group itself would be unable to meet its obligations, and thus should be considered remote.

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VOTE OF A MAJORITY OF THE OUTSTANDING SHARES

          As used in the Prospectus and this Statement of Additional Information, a “vote of a majority of the outstanding Shares” of a Fund means the affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more of the votes of Shareholders of that Fund present at a meeting at which the holders of more than 50% of the votes attributable to Shareholders of record of that Fund are represented in person or by proxy, or (b) the holders of more than 50% of the outstanding votes of Shareholders of that Fund.

ADDITIONAL TAX INFORMATION

          Set forth below is a discussion of certain U.S. federal income tax issues concerning the Funds and the purchase, ownership, and disposition of Fund shares. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to Shareholders in light of their particular circumstances. This discussion is based upon present provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, which change may be retroactive. Prospective investors should consult their own tax advisors with regard to the federal tax consequences of the purchase, ownership, or disposition of Fund shares, as well as the tax consequences arising under the laws of any state, foreign country, or other taxing jurisdiction.

          Each of the Funds is treated as a separate entity for federal income tax purposes and intends each year to qualify and elect to be treated as a “regulated investment company” under the Code, for so long as such qualification is in the best interest of that Fund’s shareholders. To qualify as a regulated investment company, each Fund must, among other things: diversify its investments within certain prescribed limits; derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies; and, distribute to its Shareholders at least 90% of its investment company taxable income for the year. In general, a Fund’s investment company taxable income will be its taxable income subject to certain adjustments and excluding the excess of any net mid-term or net long-term capital gain for the taxable year over the net short-term capital loss, if any, for such year.

          A non-deductible 4% excise tax is imposed on regulated investment companies that do not distribute in each calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the one-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. If distributions during a calendar year were less than the required amount, a Fund would be subject to a non-deductible excise tax equal to 4% of the deficiency.

          Although each Fund expects to qualify as a “regulated investment company” and thus to be relieved of all or substantially all of its federal income tax liability, depending upon the extent

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of its activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located, or in which it is otherwise deemed to be conducting business, a Fund may be subject to the tax laws of such states or localities. In addition, if for any taxable year a Fund does not qualify for the special tax treatment afforded regulated investment companies, all of its taxable income will be subject to federal tax at regular corporate rates (without any deduction for distributions to its Shareholders). In such event, dividend distributions would be taxable to Shareholders to the extent of earnings and profits, and would be eligible for the dividends received deduction for corporations.

          It is expected that each Fund will distribute annually to Shareholders all or substantially all of the Fund’s net ordinary income and net realized capital gains and that such distributed net ordinary income and distributed net realized capital gains will be taxable income to Shareholders for federal income tax purposes, even if paid in additional Shares of the Fund and not in cash.

          The excess of net long-term capital gains over short-term capital losses realized and distributed by a Fund and designated as capital gain dividends, whether paid in cash or reinvested in Fund shares, will be taxable to Shareholders. Currently effective tax legislation generally provides for a maximum tax rate for individual taxpayers of 15% on long-term capital gains and on certain qualifying dividend income. The rate reductions do not apply to corporate taxpayers. Each Fund will be able to separately designate distributions of any qualifying long-term capital gains or qualifying dividends earned by the Fund that would be eligible for the lower maximum rate. A shareholder would also have to satisfy a 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower rate. Distributions resulting from a Fund’s investments in bonds and other debt instruments will not generally qualify for the lower rates. Note that distributions of earnings from dividends paid by “qualified foreign corporations” can also qualify for the lower tax rates on qualifying dividends. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established securities market in the U.S., and corporations eligible for the benefits of a comprehensive income tax treaty with the United States which satisfy certain other requirements. Foreign personal holding companies, foreign investment companies, and passive foreign investment company are not treated as “qualified foreign corporations.” Foreign tax credits associated with dividends from “qualified foreign corporations” will be limited to reflect the reduced U.S. tax on those dividends.

          The capital loss carryforwards will be available to offset future net capital gains, if any, to the extent provided by the Treasury regulations. To the extent that this carryforward is used to offset future capital gains, it is probable that these gains so offset will not be distributed to shareholders.

          Capital gains of corporations are subject to tax at the same rates applicable to ordinary income. Capital losses may be used only to offset capital gains and excess net capital loss may be carried back three years and forward five years.

          Certain corporations are entitled to a 70% dividends received deduction for distributions from certain domestic corporations. Each Fund will designate the portion of any distributions

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which qualify for the 70% dividends received deduction. The amount so designated may not exceed the amount received by the Fund for its taxable year that qualifies for the dividends received deduction. Because all of the Income Fund’s net investment income is expected to be derived from earned interest, it is anticipated that no distributions from that Fund will qualify for the 70% dividends received deduction.

          Foreign taxes may be imposed on a Fund by foreign countries with respect to its income from foreign securities, if any. It is expected that, because less than 50% in value of each Fund’s total assets at the end of its fiscal year will be invested in stocks or securities of foreign corporations, none of the Funds will be entitled under the Code to pass through to its Shareholders their pro rata share of the foreign taxes paid by the Fund. Any such taxes will be taken as a deduction by such Fund.

          Each Fund may be required by federal law to withhold and remit to the U.S. Treasury 28% of taxable dividends, if any, and capital gain distributions to any Shareholder, and the proceeds of redemption or the values of any exchanges of Shares of a Fund by the Shareholder, if such Shareholder (1) fails to furnish the Group with a correct taxpayer identification number, (2) under-reports dividend or interest income, or (3) fails to certify to the Group that he or she is not subject to such withholding. An individual’s taxpayer identification number is his or her Social Security number.

          Information as to the Federal income tax status of all distributions will be mailed annually to each Shareholder.

          Market Discount. If a Fund purchases a debt security at a price lower than the stated redemption price of such debt security, the excess of the stated redemption price over the purchase price is “market discount”. If the amount of market discount is more than a de minimis amount, a portion of such market discount must be included as ordinary income (not capital gain) by the Fund in each taxable year in which the Fund owns an interest in such debt security and receives a principal payment on it. In particular, the Fund will be required to allocate that principal payment first to the portion of the market discount on the debt security that has accrued but has not previously been includable in income. In general, the amount of market discount that must be included for each period is equal to the lesser of (i) the amount of market discount accruing during such period (plus any accrued market discount for prior periods not previously taken into account) or (ii) the amount of the principal payment with respect to such period. Generally, market discount accrues on a daily basis for each day the debt security is held by a Fund at a constant rate over the time remaining to the debt security’s maturity or, at the election of the Fund, at a constant yield to maturity which takes into account the semi-annual compounding of interest. Gain realized on the disposition of a market discount obligation must be recognized as ordinary interest income (not capital gain) to the extent of the “accrued market discount.”

          Original Issue Discount. Certain debt securities acquired by a Fund may be treated as debt securities that were originally issued at a discount. Very generally, original issue discount is defined as the difference between the price at which a security was issued and its stated

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redemption price at maturity. Although no cash income on account of such discount is actually received by the Fund, original issue discount that accrues on a debt security in a given year generally is treated for federal income tax purposes as interest and, therefore, such income would be subject to the distribution requirements applicable to regulated investment companies. Some debt securities may be purchased by the Fund at a discount that exceeds the original issue discount on such debt securities, if any. This additional discount represents market discount for federal income tax purposes (see above).

          Options, Futures and Forward Contracts. Any regulated futures contracts and certain options (namely, non-equity options and dealer equity options) in which a Fund may invest may be “section 1256 contracts.” Gains (or losses) on these contracts generally are considered to be 60% long-term and 40% short-term capital gains or losses. Also, section 1256 contracts held by the Fund at the end of each taxable year (and on certain other dates prescribed in the Code) are “marked to market” with the result that unrealized gains or losses are treated as though they were realized.

          Transactions in options, futures and forward contracts undertaken by a Fund may result in “straddles” for federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by the Fund, and losses realized by the Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. In addition, certain carrying charges (including interest expense) associated with positions in a straddle may be required to be capitalized rather than deducted currently. Certain elections that a Fund may make with respect to its straddle positions may also affect the amount, character and timing of the recognition of gains or losses from the affected positions.

          Because only a few regulations implementing the straddle rules have been promulgated, the consequences of such transactions to a Fund are not entirely clear. The straddle rules may increase the amount of short-term capital gain realized by the Fund, which is taxed as ordinary income when distributed to Shareholders. Because application of the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount which must be distributed to Shareholders as ordinary income or long-term capital gain may be increased or decreased substantially as compared to a fund that did not engage in such transactions.

          Constructive Sales. Certain Code provisions may affect the timing and character of gain if a Fund engages in transactions that reduce or eliminate its risk of loss with respect to appreciated financial positions. If a Fund enters into certain transactions in property while holding substantially identical property, the Fund would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the Fund’s holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the Fund’s holding period and the application of various loss deferral provisions of the Code.

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          Section 988 Gains or Losses. Gains or losses attributable to fluctuations in exchange rates which occur between the time a Fund accrues income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of the foreign currency between the acquisition and disposition of the position also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as “section 988” gains or losses, increase or decrease the amount of the Fund’s investment company taxable income available to be distributed to its Shareholders as ordinary income. If section 988 losses exceed other investment company taxable income during a taxable year, the Fund would not be able to make any ordinary dividend distributions, or distributions made before the losses were realized would be recharacterized as a return of capital to Shareholders, rather than as an ordinary dividend, reducing each Shareholder’s basis in his or her Fund shares.

          Passive Foreign Investment Companies. A Fund may invest in shares of foreign corporations that may be classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign corporation is classified as a PFIC if at least one-half of its assets constitute investment-type assets, or 75% or more of its gross income is investment-type income. If a Fund receives a so-called “excess distribution” with respect to PFIC stock, the Fund itself may be subject to a tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the Fund to Shareholders. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Fund held the PFIC shares. The Fund will itself be subject to tax on the portion, if any, of an excess distribution that is so allocated to prior Fund taxable years and an interest factor will be added to the tax, as if the tax had been payable in such prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC shares are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of the PFIC rules, certain excess distributions might have been classified as capital gain.

          A Fund may be eligible to elect alternative tax treatment with respect to PFIC shares. Under an election that currently is available in some circumstances, a Fund would be required to include in its gross income its share of the earnings of a PFIC on a current basis, regardless of whether distributions were received from the PFIC in a given year. If this election were made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. In addition, another election would involve marking to market the Fund’s PFIC shares at the end of each taxable year, with the result that unrealized gains would be treated as though they were realized and reported as ordinary income. Any mark-to-market losses and any loss from an actual disposition of PFIC shares would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior years.

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PERFORMANCE CALCULATIONS

          Yields and Total Returns for the Money Market Funds

          The yield of a Money Market Fund for a seven-day period (the “base period”) will be computed by determining the net change in value (calculated as set forth below) of a hypothetical account having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the base period to obtain the base period return, and multiplying the base period return by 365/7 with the resulting yield figure carried to the nearest hundredth of one percent. Net changes in value of a hypothetical account will include the value of additional Shares purchased with dividends from the original Share and dividends declared on both the original Share and any such additional Shares, but will not include realized gains or losses or unrealized appreciation or depreciation on portfolio investments. Yield may also be calculated on a compound basis (the “effective yield”) which assumes that net income is reinvested in Fund Shares at the same rate as net income is earned for the base period.

          The yield and effective yield of a Money Market Fund will vary in response to fluctuations in interest rates and in the expenses of the Fund. For comparative purposes the current and effective yields should be compared to current and effective yields offered by competing financial institutions for the same base period and calculated by the methods described below.

          The Money Market Funds may wish to publish total return figures in sales literature and other advertising materials. For a discussion of the manner in which such total return figures are calculated, see the yield and total return calculation information below.

          Yield and Total Return Calculations for Non-Money Market Funds

          Yield Calculations. Yields of each of the Funds except the Money Market Funds will be computed by dividing the net investment income per share (as described below) earned by the Fund during a 30-day (or one month) period by the maximum offering price per share on the last day of the period and annualizing the result on a semi-annual basis by adding one to the quotient, raising the sum to the power of six, subtracting one from the result and then doubling the difference. A Fund’s net investment income per share earned during the period is based on the average daily number of Shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. This calculation can be expressed as follows:

a - b               

Yield = 2 (------- + 1) to the 6th power - 1

cd               

Where: a = dividends and interest earned during the period.

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b	=	expenses accrued for the period (net of reimbursements).
c	=	the average daily number of Shares outstanding during the period that were entitled to receive dividends.
d	=	maximum offering price per Share on the last day of the period.

          For the purpose of determining net investment income earned during the period (variable “a” in the formula), dividend income on equity securities held by a Fund is recognized by accruing 1/360 of the stated dividend rate of the security each day that the security is in that Fund. Interest earned on any debt obligations held by a Fund is calculated by computing the yield to maturity of each obligation held by that Fund based on the market value of the obligation (including actual accrued interest) at the close of business on the last Business Day of each month, or, with respect to obligations purchased during the month, the purchase price (plus actual accrued interest) and dividing the result by 360 and multiplying the quotient by the market value of the obligation (including actual accrued interest) in order to determine the interest income on the obligation for each day of the subsequent month that the obligation is held by that Fund. For purposes of this calculation, it is assumed that each month contains 30 days. The maturity of an obligation with a call provision is the next call date on which the obligation reasonably may be expected to be called or, if none, the maturity date. With respect to debt obligations purchased at a discount or premium, the formula generally calls for amortization of the discount or premium. The amortization schedule will be adjusted monthly to reflect changes in the market values of such debt obligations.

          Undeclared earned income will be subtracted from the net asset value per share (variable “d” in the formula). Undeclared earned income is the net investment income which, at the end of the base period, has not been declared as a dividend, but is reasonably expected to be and is declared as a dividend shortly thereafter.

          During any given 30-day period, the Advisor or Administrator may voluntarily waive all or a portion of its fees with respect to a Fund. Such waiver would cause the yield of that Fund to be higher than it would otherwise be in the absence of such a waiver.

          Total Return Calculations. Average annual total return is a measure of the change in value of an investment in a Fund over the period covered, which assumes any dividends or capital gains distributions are reinvested in the Fund immediately rather than paid to the investor in cash. Aggregate total return is calculated similarly to average annual total return except that the return figure is aggregated over the relevant period instead of annualized.

          The Funds compute their average annual total returns by determining the average annual compounded rates of return during specified periods that equate the initial amount invested to the ending redeemable value of such investment. This is done by dividing the ending redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a power

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equal to one divided by the number of years (or fractional portion thereof) covered by the computation and subtracting one from the result. This calculation can be expressed as follows:

	ERV
Average Annual Total Return = ( --- )	1/n - 1
	P

Where:	ERV	=	ending redeemable value at the end of the period covered by the computation of a hypothetical $1,000 payment made at the beginning of the period.
	p	=	hypothetical initial payment of $1,000.
	n	=	period covered by the computation, expressed in terms of years.

          The Funds compute their aggregate total returns by determining the aggregate compounded rates of return during specified periods that likewise equate the initial amount invested to the ending redeemable value of such investment. The formula for calculating aggregate total return is as follows:

	ERV
Aggregate Total Return = ( --- )	1/n - 1
	P

Where:	ERV	=	ending redeemable value at the end of the period covered by the computation of a hypothetical $1,000 payment made at the beginning of the period.
	p	=	hypothetical initial payment of $1,000.

          The calculations of average annual total return and aggregate total return assume the reinvestment of all dividends and capital gain distributions on the reinvestment dates during the period. The ending redeemable value (variable “ERV” in each formula) is determined by assuming complete redemption of the hypothetical investment and the deduction of all nonrecurring charges at the end of the period covered by the computations.

          The Funds compute their average annual total return after taxes on distributions by determining the average annual compounded rates of return during specified periods that equate the initial amount invested to the ending redeemable value of such investment after taxes on fund distributions but not after taxes on redemptions. This is done by dividing the ending redeemable value after taxes on fund distributions of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a power equal to one divided by the number of years (or fractional portion

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thereof) covered by the computation and subtracting one from the result. This calculation can be expressed as follows:

		ATVD
Average Annual Total Return After Taxes	=	[------ to the 1/nth power -1]
(after taxes on distributions)		P

Where:	P	=	a hypothetical initial payment of $1,000.
	n	=	number of years.
	ATVD	=	ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of such periods after taxes on fund distributions but not after taxes on redemption.

          The Funds compute their average annual total return after taxes on distributions and redemptions by determining the average annual compounded rates of return during specified periods that equate the initial amount invested to the ending redeemable value of such investment after taxes on fund distributions and redemptions. This is done by dividing the ending redeemable value after taxes on fund distributions and redemptions of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a power equal to one divided by the number of years (or fractional portion thereof) covered by the computation and subtracting one from the result. This calculation can be expressed as follows:

		ATVDR
Average Annual Total Return After Taxes	=	[(------) to the 1/nth power -1]
(after taxes on distributions and redemptions)		P

Where:	P	=	a hypothetical initial payment of $1,000.
	n	=	number of years.
	ATVDR	=	ending value of a hypothetical $1,000 payment made at the beginning of the 1, 5, or 10-year periods at the end of such periods, after taxes on fund distributions and redemption.

          After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

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PERFORMANCE COMPARISONS

          Investors may analyze the performance of the Funds by comparing them to the performance of other mutual funds or mutual fund portfolios with comparable investment objectives and policies through various mutual fund or market indices such as those prepared by Dow Jones & Co., Inc. and Standard & Poor’s Corporation and to data prepared by Lipper Analytical Services, Inc., a widely recognized independent service which monitors the performance of mutual funds. Comparisons may also be made to indices or data published in Money Magazine, Forbes, Barron’s, The Wall Street Journal, Morningstar, Inc., Ibbotson Associates, CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today and local periodicals. In addition to performance information, general information about these Funds that appears in a publication such as those mentioned above may be included in advertisements, sales literature and reports to shareholders. The Funds may also include in advertisements and reports to shareholders information discussing the performance of the Advisor in comparison to other investment advisors and to other banking institutions.

          From time to time, the Group may include the following types of information in advertisements, supplemental sales literature and reports to Shareholders: (1) discussions of general economic or financial principles (such as the effects of inflation, the power of compounding and the benefits of dollar cost averaging); (2) discussions of general economic trends; (3) presentations of statistical data to supplement such discussions; (4) descriptions of past or anticipated portfolio holdings for one or more of the Funds within the Group; (5) descriptions of investment strategies for one or more of such Funds; (6) descriptions or comparisons of various investment products, which may or may not include the Funds; (7) comparisons of investment products (including the Funds) with relevant market or industry indices or other appropriate benchmarks; (8) discussions of fund rankings or ratings by recognized rating organizations; and (9) testimonials describing the experience of persons that have invested in one or more of the Funds. The Group may also include calculations, such as hypothetical compounding examples, which describe hypothetical investment results in such communications. Such performance examples will be based on an express set of assumptions and are not indicative of the performance of any Fund.

          Current yields or total return will fluctuate from time to time and are not necessarily representative of future results. Accordingly, a Fund’s yield or total return may not provide for comparison with bank deposits or other investments that pay a fixed return for a stated period of time. Yield and total return are functions of a Fund’s quality, composition and maturity, as well as expenses allocated to such Fund. Fees imposed upon Customer accounts by the Advisor or its affiliated or correspondent banks for cash management services will reduce a Fund’s effective yield and total return to Customers.

PRINCIPAL SHAREHOLDERS

          As of July 5, 2006, no persons or entities owned beneficially or of record 5% or more of the Signal Large Cap Growth Fund’s outstanding shares, except: (i) with respect to Class A Shares - Pershing LLC, One Pershing Plaza, Jersey City, New Jersey 07399 which owned of

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record 94.07%; and (ii) with respect to Class I Shares - OL Trust & Co., P.O. Box 966, Evansville, Indiana, 47706-0966 which owned of record 98.44%.

          As of July 5, 2006, no persons or entities owned beneficially or of record 5% or more of the Signal Tax-Exempt Income Fund’s outstanding shares, except: (i) with respect to Class A Shares - Pershing LLC, One Pershing Plaza, Jersey City, New Jersey 07399 which owned of record 100.00%; and (ii) with respect to Class I Shares - OL Trust & Co., P.O. Box 966, Evansville, Indiana 47706-0966, which owned of record 99.34%.

          As of July 5, 2006, no persons or entities owned beneficially or of record 5% or more of the Signal Income Fund’s outstanding shares, except: (i) with respect to Class A Shares - Pershing LLC, One Pershing Plaza, Jersey City, New Jersey 07399, which owned of record 100.00%; and (ii) with respect to Class I Shares - OL Trust & Co., P.O. Box 966, Evansville, Indiana 47706-0966, which owned of record 99.67%.

          As of July 5, 2006, no persons or entities owned beneficially or of record 5% or more of the Signal Money Market Fund’s outstanding shares, except: (i) with respect to Class I Shares - OL Trust & Co., P.O. Box 966, Evansville, Indiana, which owned of record 99.99%.

PROXY VOTING

          The Board of Trustees of the Group has adopted a proxy voting policy and procedure (the “Group Policy”), pursuant to which the Trustees have delegated proxy voting responsibility to the Advisor and adopted the Advisor’s proxy voting policies and procedures (the “Policy”) which are described below. The Trustees will review each Fund’s proxy voting records from time to time and will annually consider approving the Policy for the upcoming year. In the event that a conflict of interest arises between the Fund’s Shareholders and the Advisor or any of its affiliates or any affiliate of the Fund, the Advisor will generally refrain from voting the proxies related to the companies giving rise to such conflict until it consults with the Board of Trustees. A Committee of the Board with responsibility for proxy oversight will instruct the Advisor on the appropriate course of action.

          The Policy is designed to promote accountability of a company’s management to its shareholders and to align the interests of management with those shareholders. The Advisor generally reviews each matter on a case-by-case basis in order to make a determination of how to vote in a manner that best serves the interests of Fund shareholders. The Advisor may abstain from voting from time to time where it determines that the costs associated with voting a proxy outweigh the benefits derived from exercising the right to vote. In addition, the Advisor will monitor situations that may result in a conflict of interest between a Fund’s shareholders and the Advisor or any of its affiliate or any affiliate of a Fund by maintaining a list of significant existing and prospective corporate clients. Information on how the Funds voted proxies relating to portfolio securities during the 12 month periods ended June 30^th each year is available (1) without charge, upon request, by calling 1-888-426-9709, and (2) on the Funds’ Form N-PX on the Securities and Exchange Commission’s website at http://www.sec.gov.

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DISCLOSURE OF FUND PORTFOLIO HOLDINGS

          The Board of Trustees has adopted policies and procedures for the public and nonpublic disclosure of the Funds’ portfolio securities. A complete list of the Funds’ portfolio holdings is made publicly available on a quarterly basis through filings made with the SEC on Forms N-CSR and N-Q. As a general matter, in order to protect the confidentiality of the Funds’ portfolio holdings, no information concerning the portfolio holdings of the Funds may be disclosed to any unaffiliated third party except: (1) to service providers that require such information in the course of performing their duties (such as the Funds’ custodian, fund accountants, investment adviser, administrator, independent registered public accounting firm, attorneys, officers and trustees and each of their respective affiliates and advisors) and are subject to a duty of confidentiality; (2) in marketing materials, provided that the information regarding the portfolio holdings contained therein is at least fifteen days old; or (3) pursuant to certain enumerated exceptions that serve a legitimate business purpose. These exceptions include: (1) disclosure of portfolio holdings only after such information has been publicly disclosed, and (2) to third-party vendors, such as Morningstar Investment Services, Inc. and Lipper Analytical Services that (a) agree to not distribute the portfolio holdings or results of the analysis to third parties, other departments or persons who are likely to use the information for purposes of purchasing or selling the Funds before the portfolio holdings or results of the analysis become publicly available; and (b) sign a written confidentiality agreement, or where the Board of Trustees has determined that the polices of the recipient are adequate to protect the information that is disclosed. The confidentiality agreement must provide, among other things, that the recipient of the portfolio holdings information agrees to limit access to the portfolio information to its employees (and agents) who, on a need to know basis, are (1) authorized to have access to the portfolio holdings information and (2) subject to confidentiality obligations, including duties not to trade on non-public information, no less restrictive than the confidentiality obligations contained in the confidentiality agreement. Such disclosures must be authorized by the President or Chief Compliance Officer of the Advisor and shall be reported periodically to the Board.

          Neither the Funds nor the Advisor may enter into any arrangement providing for the disclosure of non-public portfolio holding information for the receipt of compensation or benefit of any kind. Any exceptions to the policies and procedures may only be made by the consent of a majority of the Board of Trustees upon a determination that such disclosure serves a legitimate business purpose and is in the best interests of the Funds. Any amendments to these policies and procedures must be approved and adopted by the Board of Trustees. The Board may, on a case-by-case basis, impose additional restrictions on the dissemination of portfolio holdings information beyond those found in the policies and procedures, as necessary.

MISCELLANEOUS

          Individual Trustees are generally elected by the Shareholders and, subject to removal by the vote of two-thirds of the Board of Trustees, serve for a term lasting until the next meeting of shareholders at which Trustees are elected. Such meetings are not required to be held at any specific intervals. Generally, shareholders owning not less than 20% of the outstanding shares of the Group entitled to vote may cause the Trustees to call a special meeting. However, the Group

42

has represented to the Commission that the Trustees will call a special meeting for the purpose of considering the removal of one or more Trustees upon written request therefor from shareholders owning not less than 10% of the outstanding votes of the Group entitled to vote. At such a meeting, a quorum of shareholders (constituting a majority of votes attributable to all outstanding shares of the Group), by majority vote, has the power to remove one or more Trustees.

          The Group is registered with the Commission as a management investment company. Such registration does not involve supervision by the Commission of the management or policies of the Group.

          The Prospectuses and this Statement of Additional Information omit certain of the information contained in the Registration Statement filed with the Commission. Copies of such information may be obtained from the Commission upon payment of the prescribed fee.

          The Prospectuses and this Statement of Additional Information are not an offering of the securities herein described in any state in which such offering may not lawfully be made. No salesperson, dealer, or other person is authorized to give any information or make any representation other than those contained in the Prospectus and this Statement of Additional Information.

FINANCIAL STATEMENTS

          The financial statements of the Funds appearing in the Annual Report to Shareholders for the year ended March 31, 2006 have been audited by Ernst & Young LLP, the Funds’ independent registered public accounting firm, as set forth in their report thereon. Such financial statements are incorporated herein by reference.

43

EX-99.17.V

Investment Advisor
Signal Capital Management, Inc.
One Main Street
Evansville, Indiana 47708

Administrator,
Transfer Agent and Distributor
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219

Custodian
Huntington National Bank
7 Easton Oval
Columbus, Ohio 43219

Counsel
Dechert LLP
1775 I Street, NW
Washington, DC 20006

Independent Registered Public Accounting Firm
Ernst & Young LLP
1100 Huntington Center
41 South High Street
Columbus, Ohio 43215

This report is for the information of the shareholders of the Signal Funds. Its use in connection with any offering of the Funds’ shares is authorized only in case of concurrent or prior delivery of the Funds’ current prospectus.

Federal law requires the Funds, and each of its investment advisers, to adopt procedures for voting proxies (“Proxy Voting Guidelines”) and to provide a summary of those Proxy Voting Guidelines used to vote the securities held by the Funds. The Funds’ proxy voting policies and procedures are available without charge (i) upon request, by calling 800-468-0347, or (ii) on the U.S. Securities and Exchange Commission’s web site at www.sec.gov.

Statement Regarding Availability of Quarterly Portfolio Schedule.

The Signal Funds file complete schedules of portfolio holdings for each Fund with the Securities and Exchange Commission (the ‘‘Commission’’) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Funds’ Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330; and the Funds make the information on Form N-Q available upon request without charge.

Statement Regarding Availability of Proxy Voting Record.

Information regarding how the Fund voted proxies relating to portfolio securities held during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800-468-0347, and on the Commission’s website at http://www.sec.gov.

Annual Report
March 31, 2006

Investment Advisor

Shares of the Funds are not deposits or obligations of, or guaranteed or endorsed by, Old National Bancorp., and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Shares of the Funds involve investment risk, including possible loss of principal. Past performance is not indicative of future results.

SIGNAL FUNDS
Letter to Shareholders

Dear Shareholders:

We are pleased to present the annual report for the Signal Funds. The report covers the twelve month period from April 1, 2005 to March 31, 2006 which represents the Funds’ 2006 fiscal year.

Economic growth was surprisingly good considering the headwinds of significantly higher oil prices and the Fed funds rate that ended the year 200 basis points higher (2.00%). If that wasn’t enough to deal with, investors were dealt another blow—quite literally—in the form of two strong hurricanes that battered the Gulf Coast in late August and September. As we turned the calendar from 2005 to 2006, economic growth went from too slow to (what is likely to turn out to be) too fast. It is during this six month period that things began to heat up both in terms of higher stock prices and higher intermediate term yields.

The Equity Market
On the surface it might appear that the market experienced a good but uneventful year. The return of almost 12% is roughly in line with the market’s long run average. But, the advance was marked by periods of great doubt about the economy’s ability to continue to grow in light of ever higher short term interest rates as orchestrated by the Fed. These doubts hit the market hard in the first month of the Fund’s fiscal year (April). On a price basis, the S&P 500¹ lost 2%. Fortunately, April’s lows turned out to be the lows for the year. All was not clear as the market encountered another downdraft six months later. The October sell-off wiped out the gains that had been achieved in the previous six months. Investors were trying to determine the impact of Hurricanes Katrina and Rita. Most believed higher inflation would result if not from increased government spending then from oil prices that spiked up near $70 a barrel. The final five months through March 2006 proved to be the strongest for the market. The almost 8% advance was kicked off by the realization that despite the headwinds discussed above, stocks were still reasonably valued, profit margins were at record highs, and earnings were likely to finish the year with a double digit increase over 2004.

Just as was the case last year, the top performing sector was again the Energy Sector gaining just over 21%. If not for the lagging performance of the major integrated oils, the sector’s performance would have been much stronger. The drillers, oil and gas service, exploration and production, and refining stocks all experienced performance that ranged from 37% to 65%. Surprisingly the second best performing sector was the Financial Sector with a 17% gain. Here again, industry selection was important. The environment of higher short term rates

coupled with thin net interest margins kept investors away from most banking stocks. The best performing industries were concentrated in the stocks of real estate investment trusts, investment management, and investment banking companies. Gains in these industries ranged from 21% to 37%. Good growth in assets under management and strong merger and acquisition activity propelled results higher for these groups.

The Fixed Income Market
The “conundrum” persisted throughout most of last year. The “conundrum” was the lack of upward movement in longer term rates in response to the Fed’s policy of raising the Fed funds rate. The result was a yield curve that became flatter as the year wore on. Steadily rising short term rates eventually led to a partial yield curve inversion—a situation in which shorter term rates are greater than longer term rates. It was only in the last two months of the year that longer term interest rates began to react to the Fed’s tightening. Through the end of January, the ten year Treasury Note yield was just four basis points (0.04%) higher than it was in March of last year. Further increases in the Fed funds target rate to 4.75% in March led to an upward and parallel shift in the entire yield curve. The upward shift in the yield curve pushed the yield on the ten year Treasury Note to 4.85% by the end of March—or 37 basis points (0.37%) higher than it was a year ago. Because the shift was parallel, the yield curve remains very flat. Longer term rates, 4.85%, are still very close to short term rates, 4.75%. If you subscribe to the theory that the shape of the yield curve is determined by the expectations of bond investors, you would conclude that investors believe future interest rates will be about the same as current interest rates. The explanation behind this is most likely driven by confidence in the Fed’s ability to keep inflation under control. In fact, core inflation is lower now than it was a year ago. Investors have incorporated decelerating inflation into their pricing of fixed income securities. Evidence of this can be found by comparing the ten year Treasury Note yield to the yield of the ten year Treasury Inflation Protected Security. The difference, which is a measure of investors’ inflation expectations, has declined from just over 2.7% a year ago to about 2.5% now.

Sincerely,

The Signal Capital Management, Inc. Team

¹The Standard & Poor’s 500 Index (the “S&P 500”) tracks the performance of 500 select common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. Investor cannot invest directly in an index.

1

SIGNAL FUNDS
Large Cap Growth Fund

Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. Common stocks, and Funds investing in common stocks, generally provide greater return potential when compared with other types of investments.

The Large Cap Growth Fund enjoyed another year of good performance. For the twelve months ended March 2006, the Fund (Class I) returned 12.95% against its benchmark, the S&P 500 which was up 11.72%.

The Fund’s managers maintained over-weighted positions in the Consumer Staples, Energy, Industrials, and Materials Sectors. The Fund’s managers believed the Consumer Staples Sector would benefit from the defensive nature of many of the stocks in this sector. However, despite the concerns over slower economic growth, investors were not attracted to this sector. As a consequence, it underperformed the market and the Fund’s holdings underperformed the sector. The Consumer Staples Sector held the Fund’s worst performing stock, Avon Products. The Fund managers eliminated the holding but not before incurring a 27% loss. The company reported disappointing earnings and lowered its guidance for the remainder of the year. The stock lost 15%, prompting its sale. Subsequently, the stock has not managed to recover its losses. The Energy Sector was (like last year) the top performing sector. Although the Fund’s Energy Sector over-weighting was only moderate, the Fund did benefit from an underweight in the integrated oils which was the weakest industry in the sector. The Fund’s top performing stock in this sector was Noble Energy, an oil and gas exploration and production concern with a total return of nearly 30%. The Fund’s Industrial Sector performance exceeded its sector benchmark on the strength of strong moves in Expeditors International (+62%) and Jacobs Engineering (+67%). Expeditors’ services include forwarding of air and ocean freight and has a strong base of operations along the west coast of the U.S. The company has developed an extensive operation in Asia and it is the growth in Asia that is driving earnings and the stock higher. Jacobs provides construction services to a wide variety of industries. It is benefiting from the up-turn in the capital spending and construction cycle. Florida Rock, a company that provides construction aggregates and concrete products, was the big driver of the out-performance in the Materials Sector with a 45% gain.^†

Total Return as of March 31, 2006

	Aggregate						Annualized
										Since
										Inception
	1 Month			3 Month			1 Year			(7/15/02)
Class I		0.50	%		3.57	%		12.95	%		10.37	%
Class A
Without Sales Charge		0.42	%		3.51	%		12.65	%		10.04	%
With Sales Charge*		-4.35	%		-1.39	%		7.27	%		8.61	%
S&P 500 Index		1.24	%		4.21	%		11.72	%		11.70	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please contact us at 888-426-9709.

*Class A Shares reflect the maximum sales charge of 4.75%.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

Fund Statistics as of March 31, 2006 subject to change

		Signal Large Cap
	S&P 500	Growth Fund
Avg. Market Cap	$89 Billion	$56 Billion
Long Term Growth Rate	8%	14%
Beta1	1.00	0.91
2005 P/E Ratio1	15.9	16.8

¹ Price/Earnings (P/E) Ratio is the price of a stock divided by its historical earnings per share. Beta is a measure of the volatility of a stock relative to the overall market. A beta of less than one indicates lower historical risk than the market; a beta of more than one indicates higher historical risk than the market.

The Lipper rankings for March 31, 2006 are based on the total number of large cap funds in the Lipper Large Cap Funds category. For the one year ended March 31, 2006, the Large Cap Growth Fund ranked 17 and 11 (for the Class A and I Shares, respectively) out of 657 funds in the Large Cap Growth category. The Lipper rankings are based on total return. Lipper Analytical Services, Inc. is an independent organization that compiles performance data on investment companies.

The Fund carried an underweight in the Financials, Technology, and Telecommunications Sectors. Most of the underweight in the Financial Sector was in the Banking Industry. The Fund’s holdings in the Financial Sector out-performed its benchmark due to its exposure to the Asset Management and Investment Banking Industries.

The performance of the Fund’s Technology Sector holdings exceeded its benchmark with help from SAP AG (+36%) and Harris (+46%). SAP benefited from increased sales of its business software across its client base. Harris is a provider of high-tech communications equipment. More than half of its sales go to military customers. Defense spending is increasingly oriented toward

more sophisticated weapons programs that require many of the communications solutions provided by Harris. The Technology Sector’s performance was held back by the performance of Dell. The company’s earnings began to slow in the second half of the year leading to a 24% loss when the stock was eliminated from the Fund. The Fund had no exposure to the Telecommunications Sector other than a small holding that was disposed of early in the year. This was the second best performing sector.^†

^† The composition of the Fund’s holding is subject to change.

2

SIGNAL FUNDS
Large Cap Growth Fund

Security Allocation as of March 31, 2006
(Subject to change)

Large Cap Growth Fund

	Percentage of
	Total Portfolio
	Investments
Security Allocation	(unaudited)
Financials		21.5	%
Information Technology		16.8	%
Industrials		12.4	%
Consumer Staples		12.1	%
Health Care		10.3	%
Energy		9.8	%
Consumer Discretionary		6.8	%
Materials		3.6	%
Utilities		3.1	%
Technology		0.3	%
Investment Companies		3.3	%
		100.0	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares.

The chart above represents a comparison of a hypothetical investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and represents the reinvestment of dividends and capital gains in the Fund.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

The performance of the Large Cap Growth Fund is measured against the Standard & Poor’s 500 Index (the “S&P 500”) which tracks the performance of 500 select common stocks, most of which are listed on the New York Stock Exchange, and is a measure of the U.S. stock market as a whole. The index is unmanaged and does not reflect the deduction of fees associated with a mutual fund, such as investment management fees. The Fund’s performance does reflect the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

3

SIGNAL FUNDS
Income Fund

Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return.

Investments in fixed income securities are subject to interest rate risks. The principal value of a bond falls when interest rates rise and rise when interest rates fall. During periods of rising interest rates, the value of a bond investment is at greater risk than during periods of stable or falling rates.

The bond market posted modest returns over the past year driven primarily by increasing rates and a flattening yield curve. This situation was precipitated by the actions of the Federal Open Market Committee (“FOMC”) which continued with an ongoing tightening phase that began in 2004. Over the past twelve months ended March 31, 2006, the two-year treasury yield increased 104 basis points (“bp”) (1.04%) to 4.82%, the five-year treasury yield increased by 64bp (0.64%) to 4.81%, and the ten-year treasury yield increased by 40bp (0.40%) to 4.85%. The yield curve, at times, has exhibited points of slight inversion but currently remains nearly flat with little difference between short-term and long-term rates. The FOMC has increased the overnight fed funds target 15 times in the past 17 months, from 1.00% to the current 4.75% level.

For the three- and twelve-month periods ended March 31, 2006, the Lehman Brothers Intermediate Government Credit Bond Index (LBIG/C) posted returns of -0.38% and 2.08%, respectively. The Fund outperformed over the 3-month period but remained slightly behind for the twelve-month period returning -0.32% and 2.01%, respectively. The Fund’s slight

Total Return as of March 31, 2006

	Aggregate						Annualized
										Since
										Inception
	1 Month			3 Month			1 Year			(7/15/02)
Class I		-0.46	%		-0.32	%		2.01	%		2.81	%
Class A
Without Sales Charge		-0.48	%		-0.38	%		1.76	%		2.65	%
With Sales Charge*		-3.68	%		-3.66	%		-1.56	%		1.73	%
Lehman Brothers Intermediate Government/Credit Bond Index		-0.44	%		-0.38	%		2.08	%		3.74	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please contact us at 888-426-9709.

*Class A Shares reflect the maximum sales charge of 3.25%.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

Fund Statistics as of March 31, 2006 subject to change

	LBIG/C			Signal Income Fund
Average Mod. Duration (yrs.)		3.63			3.46
Average Maturity (yrs.)		5.14			4.37
Average Coupon		4.96	%		4.89	%
30 Day Effective Yield
Class I		N/A			4.45	%
Class A		N/A			4.19	%
Average Credit Rating (as rated by Standard & Poor’s)		N/A			AA

twelve-month underperformance resulted from an underweight in long-duration bonds and an overweight in short- and intermediate-duration bonds relative to the LBIG/C during a period when short rates rose more than long rates. As rates have risen, we have begun to push the duration, or interest rate sensitivity, of the portfolio longer, more closely aligning this measure with the Fund’s benchmark. In addition, the effective duration on the

Fund has extended with the rise in interest rates as call features on many of the bonds have moved out of the money.^†

^† The composition of the Fund’s holding is subject to change.

4

SIGNAL FUNDS
Income Fund

Security Allocation as of March 31, 2006
(Subject to change)

Income Fund

	Percentage of
	Total
	Portfolio
	Investments
Security Allocation	(unaudited)
U.S. Government Agencies		50.3	%
Corporate Bonds		31.3	%
U.S. Treasury Notes		16.6	%
Preferred Stock		1.1	%
Investment Companies		0.7	%
Total		100.0	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares.

The chart above represents a comparison of a hypothetical investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and represents the reinvestment of dividends and capital gains in the Fund.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

The performance of the Signal Income Fund is measured against the Lehman Brothers Intermediate Government/Credit Bond Index (the “LBIG/C” ) which is composed of investment grade corporate debt issues as well as debt issues of U.S. government agencies and the U.S. Treasury. The debt issues all maintain maturities within a range of one to ten years. The index is unmanaged and does not reflect the deduction of fees associated with a mutual fund, such as investment management fees. The Fund’s performance does reflect the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

5

SIGNAL FUNDS
Tax-Exempt Income Fund

Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return.

Investments in fixed income securities are subject to interest rate risks. The principal value of a bond falls when interest rates rise and rise when interest rates fall. During periods of rising interest rates, the value of a bond investment is at greater risk than during periods of stable or falling rates.

A portion of income may be subject to some state and or local taxes and for certain investors a portion may be subject to the federal alternative minimum tax.

In the twelve months ended March 31, 2006, the taxable yield curve substantially flattened and shifted upward as the federal Funds target increased to 4.75% from 2.75%. The municipal curve maintained its upward slope, but flattened as rates increased in the one to fifteen year maturity range and declined slightly in the maturities beyond that. This is one reason that tax-exempt bonds remained attractive versus comparable taxable obligations, particularly for those in higher tax brackets. Intermediate Funds, both taxable and tax-exempt, experienced losses in March due to rising rates, but ended the year with slightly positive returns.

The Fund maintains its appeal for investors seeking current income exempt from federal taxes. As of August 1, 2005, the Fund changed its stated benchmark to the Merrill Lynch 1-10 Year Municipal Index. This benchmark is more appropriate in its composition than the Lehman Brothers 7 Year Municipal Index. Since the change, we have adjusted the Fund’s composition and duration to match that of the new index, and there has been a transition period in which the Funds performance fell between the two benchmarks. The duration on the Fund lengthened last quarter as the likelihood of future calls occurring for the underlying bonds

Total Return as of March 31, 2006

	Aggregate						Annualized
										Since
										Inception
	1 Month			3 Month			1 Year			(7/15/02)
Class I		-0.73	%		-0.29	%		2.07	%		3.28	%
Class A
Without Sales Charge		-0.75	%		-0.35	%		1.82	%		3.09	%
With Sales Charge*		-3.97	%		-3.58	%		-1.47	%		2.17	%
Merrill Lynch 1-10 Year Municipal Bond Index		-0.43	%		0.02	%		2.46	%		3.57	%
Lehman Brothers 7-Year Municipal Bond Index		-0.69	%		-0.12	%		2.63	%		3.79	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please contact us at 888-426-9709.

*Class A Shares reflect the maximum sales charge of 3.25%.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

Fund Statistics as of March 31, 2006 subject to change

							Signal Tax-
	ML 1-10 Year			LB 7-Year			Exempt
	Muni Bond			Muni Bond			Income Fund
Average Mod. Duration (yrs.)		4.10			4.07			4.31
Average Maturity (yrs.)		5.03			5.04			5.88
Average Coupon		5.32	%		5.37	%		4.44	%
30 Day Effective Yield
Class I		N/A			N/A			3.46	%
Class A		N/A			N/A			3.20	%
Average Credit Rating (as rated by Standard & Poor’s)		N/A			N/A			AA+

declined. This caused underperformance in the last quarter, and decreased the annual return. This duration gap should tighten as the bonds within the Fund move closer to maturity.^†

^† The composition of the Fund’s holding is subject to change.

6

SIGNAL FUNDS
Tax-Exempt Income Fund

State Allocation as of March 31, 2006
(Subject to change)

Tax-Exempt Income Fund

	Percentage of
	Total Portfolio
	Investments
State Allocation	(unaudited)
Alabama		1.0	%
California		1.2	%
Illinois		3.4	%
Indiana		63.2	%
Kansas		1.1	%
Kentucky		2.0	%
Michigan		4.8	%
Missouri		2.3	%
Nevada		1.2	%
North Carolina		1.4	%
North Dakota		1.3	%
Ohio		1.2	%
Pennsylvania		0.7	%
Texas		4.1	%
Utah		2.3	%
Washington		4.2	%
Wisconsin		4.4	%
Investment Companies		0.2	%
Total		100.0	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares.

The chart above represents a comparison of a hypothetical investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and represents the reinvestment of dividends and capital gains in the Fund.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

Effective August 1, 2005 the Fund changed its standardized benchmark from the Lehman Brothers 7-Year Municipal Bond Index to the Merrill Lynch 1-10 Year Municipal Bond Index to provide a more appropriate market comparison for the Fund’s performance. The Merrill Lynch 1-10 Year Municipal Bond Index is generally representative of municipal bonds with intermediate maturities of no less than one year and no more than ten years. The Lehman Brothers 7-Year Municipal Bond Index is generally representative of investment grade fixed rate debt obligations issued by state and local government entities, with maturities of no more than seven years. The indices are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment management fees. The Fund’s performance does reflect the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

7

SIGNAL FUNDS
Money Market Fund

Investment Concerns
An investment in the Fund is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

Throughout the entire fiscal year, the Federal Open Market Committee (“FOMC”) continued along a familiar path, gradually increasing the Fed Funds rate in 25 basis point (“bp”) (0.25%) increments. A total of eight consecutive increases brought the Fed Funds rate from 2.75% to 4.75% by the end of the fiscal year. The FOMC maintained language that said, “policy accommodation can be removed at a pace that is likely to be measured” into the last quarter of 2005, then they slightly modified their official statement with their December 13 post meeting release. They eliminated the familiar statement and instead remarked that “some further measured policy firming is likely to be needed.” Market participants interpreted this language change to be an indication that the central bank would be finished raising rates in the somewhat near future. However, strong economic data continued to foster the expectation of additional 25 bp (0.25%) increases in the Fed Funds rate into the first half of 2006.

For most of the fiscal year, increasing energy prices plagued the economy and put pressure on inflation. However, longer-term inflation expectations remained contained. Despite disappointing payroll numbers at the beginning of June 2005, economic activity continued to gain momentum into the third quarter of 2005, with strength in the housing market and vehicle sales reaching record highs due to new sales incentives. For

Total Return as of March 31, 2006

	Aggregate						Annualized
										Since
										Inception
	1 Month			3 Month			1 Year			(7/15/02)
Class I		0.35	%		0.98	%		3.24	%		1.55	%

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please contact us at 888-426-9709.

The total return set forth reflects certain expenses that were reduced. In such instances, and without this activity, total return would have been lower.

Fund Statistics as of March 31, 2006 subject to change

	30-Day
	Effective Yield			7-Day Yield
Class I		4.17	%		4.16	%

The yield quotation more closely reflects the current earnings of the Fund than the total return quotations.

the first time since the FOMC began raising rates in June of 2004, there was some uncertainty surrounding the Fed’s decision at the September 20 meeting. Hurricane Katrina, ravaging the Gulf Coast in late summer and sending gasoline prices soaring to record highs, led investors to speculate that the central bank might pause in their plan to raise short-term rates. Despite higher energy costs and inflation pressures, the FOMC believed the hurricane tragedy produced a ‘near term disruption’, but it was not a long-term threat to economic growth. Economic activity remained solid into the final quarter of the fiscal year. Unseasonably warm weather and falling energy prices helped to support consumer spending, employment was strong, and the markets suffered no ill effects of the changeover from Greenspan to Bernanke as chairman of the FOMC.

Security Allocation as of March 31, 2006
(Subject to change)

Money Market Fund:

Security Allocation	Percentage of
Commercial Paper		29.1	%
Asset Backed		25.0	%
Certificates of Deposit		15.4	%
U.S. Government Agencies		13.3	%
Repurchase Agreements		10.4	%
Investment Companies		6.8	%
Total		100.0	%

As short-term interest rates continued to increase during the fiscal year, yields on money market instruments adjusted accordingly. There was a near 100 bp (1.00%) spread between 1-month and 1-year LIBOR¹ at the start of the fiscal

continued

8

SIGNAL FUNDS
Money Market Fund

year, and that differential flattened to a low of 27 bps (0.27%) in September following the Gulf Coast hurricanes. The LIBOR curve ultimately ended the fiscal year 50 bps (0.50%) flatter than it began in response to the Fed’s continuous 25 bp (0.25%) tightening moves. Investors concentrated cash flows within three months, emphasizing one month maturities as a flatter money market curve provided little incentive to invest beyond one month or the next FOMC meeting. Demand for floating rate notes also remained strong due to the expectation of future short-term rate increases. The discount agency note curve remained the flattest, and as a result, discount agency notes were a less attractive investment than discount commercial paper. Money market yields continued to grind higher, and the movement of 1-year LIBOR above 5% encouraged some extension buying towards the end of the fiscal year. Throughout the fiscal year, the average weighted days to maturity of

the Signal Money Market Fund remained in the lower part of its maturity range, increasing from 25 days a year ago to end the fiscal year at 30 days.^†

†	The composition of the Fund’s holding is subject to change.
1	LIBOR is the interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers’ Association. The LIBOR is derived from a filtered average of the world’s most creditworthy banks’ interbank deposit rates for larger loans with maturities between overnight and one full year.

9

SIGNAL FUNDS
Large Cap Growth Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Common Stocks — 96.6%
		Aerospace/Defense — 1.2%
	7,800	United Technologies Corp.		452,166
		Air Freight & Logistics — 1.6%
	7,000	Expeditors International of Washington, Inc.		604,730
		Applications Software — 0.5%
	5,600	Citrix Systems, Inc. *		212,240
		Banking — 4.2%
	10,000	Bank of America Corp.		455,400
	14,200	Zions Bancorp		1,174,766
				1,630,166
		Business Services — 2.4%
	11,000	Jacobs Engineering Group, Inc. *		954,140
		Communications Equipment — 3.4%
	37,600	Cisco Systems, Inc. *		814,792
	10,600	Harris Corp.		501,274
				1,316,066
		Computers — Memory Devices — 1.7%
	48,000	EMC Corp. *		654,240
		Construction Materials — 2.3%
	16,000	Florida Rock Industries, Inc.		899,520
		Consumer Products — Miscellaneous — 0.8%
	4,000	Fortune Brands, Inc.		322,520
		Distiller & Vintners — 2.1%
	32,000	Constellation Brands, Inc. *		801,600
		Electronics — 2.9%
	10,800	Jabil Circuit, Inc. *		462,888
	8,000	L-3 Communications Holdings, Inc.		686,320
				1,149,208
		Exchange Traded Funds — 3.0%
	14,000	Financial Select Sector SPDR		455,700
	4,200	Mid-Cap 400 Trust Series SPDR		607,614
	4,600	Technology Select Sector SPDR		101,936
				1,165,250
		Finance — Investment Bankers and Brokers — 7.6%
	10,500	Franklin Resources, Inc.		989,520
	8,000	Goldman Sachs Group, Inc.		1,255,680
	6,000	Legg Mason, Inc.		751,980
				2,997,180
		Food Distributors — 1.7%
	21,000	Sysco Corp.		673,050
		General Merchandise — 1.0%
	7,700	Target Corp.		400,477
		Health Care Services — 1.9%
	15,000	Caremark Rx, Inc. *		737,700
		Healthcare — Equipment — 4.8%
	13,000	Medtronic, Inc.		659,750
	14,000	ResMed, Inc. *		615,720
	14,000	Stryker Corp.		620,760
				1,896,230
		Hotels & Motels — 1.4%
	12,000	Choice Hotels International, Inc.		549,360

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Industrial Conglomerates — 1.1%
	12,000	General Electric Co.		417,360
		Industrial Gases — 1.4%
	9,600	Praxair, Inc.		529,440
		Insurance — Life — 3.4%
	17,500	MetLife, Inc.		846,475
	11,000	Sun Life Financial Services		468,160
				1,314,635
		Insurance-Multi-Line — 3.5%
	9,000	American International Group, Inc.		594,810
	10,000	Wellpoint, Inc. *		774,300
				1,369,110
		Internet Service Providers — 0.7%
	6,600	Ebay, Inc. *		257,796
		Machinery — Industrial — 3.7%
	10,400	Danaher Corp.		660,920
	3,600	Illinois Tool Works, Inc.		346,716
	10,000	Ingersoll-Rand Co.-ADR		417,900
				1,425,536
		Oil & Gas — Integrated — 3.6%
	10,300	BP PLC-ADR		710,082
	11,300	Exxon Mobil Corp.		687,718
				1,397,800
		Oil & Gas Exploration Services — 6.1%
	6,100	Apache Corp.		399,611
	23,000	Noble Energy, Inc.		1,010,160
	26,000	Smith International, Inc.		1,012,960
				2,422,731
		Personal Products — 2.5%
	16,600	Procter & Gamble Co.		956,492
		Pharmaceuticals — 3.5%
	5,200	Barr Laboratories, Inc. *		327,496
	10,000	Johnson & Johnson		592,200
	11,000	Teva Pharmaceutical Industries, Ltd.		452,980
				1,372,676
		Prepackaged Software — 4.6%
	16,000	DST Systems, Inc. *		927,040
	20,700	Fiserv, Inc. *		880,785
				1,807,825
		Retail — Apparel/Shoe — 1.9%
	18,000	Chico’s Fas, Inc. *		731,520
		Retail — Computer/Electronics — 2.1%
	14,400	Best Buy Co., Inc.		805,392
		Retail — Drugs — 2.1%
	19,300	Walgreen Co.		832,409
		Retail — Home Improvement — 1.0%
	6,000	Lowe’s Cos., Inc.		386,640
		Soft Drinks — 2.4%
	15,900	PepsiCo, Inc.		918,861
		Systems Software — 2.9%
	21,600	Microsoft Corp.		587,736

continued

10

SIGNAL FUNDS
Large Cap Growth Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Systems Software (continued)
	10,000	SAP AG-ADR		543,200
				1,130,936
		Transportation Services — 2.5%
	11,800	Burlington Northern Santa Fe Corp.		983,294
		Utilities — Electric — 3.1%
	8,400	Entergy Corp.		579,096
	15,200	FPL Group, Inc.		610,128
				1,189,224
		Total Common Stocks
		(cost-$27,692,251)		37,665,520
		Investment Companies — 3.3%
	1,284,575	Huntington Money Market Fund-Trust Class		1,284,575
		Total Investment Companies
		(cost-$1,284,575)		1,284,575
		Total Investments - 99.9%
		(cost-$28,976,826)		38,950,095

Percentages indicated are based on net assets of $38,995,706.

* Non-income producing securities.

ADR – American Depositary Receipt

SPDR – Standard & Poor’s Depositary Receipt’s

See notes to financial statements.

11

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
		Corporate Bonds — 31.0%
		Aerospace/Defense — 0.7%
	750,000	General Dynamics Corp		4.50	%		8/15/10		725,732
		Banking — 7.7%
	500,000	Bank of America Corp		5.38			6/15/14		493,329
	500,000	Credit Suisse First Boston USA, Inc		4.63			1/15/08		494,066
	1,000,000	Credit Suisse First Boston USA, Inc		6.13			11/15/11		1,027,200
	105,000	First Union National Bank, BKNT		5.80			12/1/08		106,447
	300,000	MBNA Bank		5.38			1/15/08		300,481
	500,000	MBNA Bank		6.13			3/1/13		516,588
	500,000	National City Corp.		4.50			3/15/10		483,911
	500,000	U.S. Bancorp		5.10			7/15/07		497,932
	750,000	U.S. Bancorp		3.95			8/23/07		736,581
	455,000	U.S. Bancorp		5.70			12/15/08		459,654
	1,000,000	Washington Mutual Bank		5.50			1/15/13		988,351
	1,000,000	Washington Mutual Bank		5.65			8/15/14		982,473
	500,000	Wells Fargo Co		3.50			4/4/08		483,867
									7,570,880
		Beverages — 0.2%
	180,000	Coca-Cola Enterprises, Inc		5.38			8/15/06		180,125
		Brewery — 0.5%
	500,000	Anheuser Busch		4.70			4/15/12		482,674
		Computer Hardware — 0.6%
	500,000	Hewlett-Packard Co.		5.75			12/15/06		501,605
	100,000	International Business Machines Corp.		4.88			10/1/06		99,881
									601,486
		Department Stores — 0.8%
	750,000	Target Corp		5.88			3/1/12		768,239
		Electric & Electronic Equipment — 1.3%
	1,300,000	General Electric Co		5.00			2/1/13		1,264,511
		Financial Services — 11.4%
	125,000	Alliance Capital Management		5.63			8/15/06		125,190
	500,000	American General Finance Corp.		4.00			3/15/11		466,262
	100,000	Associates Corp., MTN		7.55			7/17/06		100,655
	500,000	Associates Corp.		6.88			11/15/08		519,230
	500,000	Bear Stearns Co., Inc		4.50			10/28/10		480,783
	500,000	Boeing Capital Corp.		5.80			1/15/13		509,160
	750,000	Countrywide Financial		4.25			12/19/07		735,907
	345,000	General Electric Capital Corp., MTN		6.13			2/22/11		355,453
	75,000	Goldman Sachs Group, Inc		6.88			1/15/11		79,171
	500,000	Goldman Sachs Group, Inc		5.70			9/1/12		502,446
	400,000	Goldman Sachs Group, Inc		5.15			1/15/14		385,654
	250,000	Household Finance Corp.		8.00			7/15/10		272,787
	500,000	Household Finance Corp.		4.75			7/15/13		470,439
	20,000	J.P. Morgan & Co., Inc.		5.75			10/15/08		20,140
	155,000	J.P. Morgan & Co., Inc., MTN		6.00			1/15/09		157,314
	500,000	J.P. Morgan Chase & Co		5.75			1/2/13		503,344
	500,000	J.P. Morgan Chase & Co		5.25			5/1/15		482,809
	395,000	J.P. Morgan Chase Bank		6.13			11/1/08		401,076
	500,000	Morgan Stanley		3.63			4/1/08		484,639
	400,000	Morgan Stanley		4.25			5/15/10		381,171
	1,450,000	Morgan Stanley		4.75			4/1/14		1,352,839
	1,000,000	Prudential Financial, Inc.		4.50			7/15/13		934,174
	500,000	SLM Corp		5.38			1/15/13		493,217

continued

12

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
	500,000	SLM Corp		5.38	%		5/15/14		487,792
	500,000	Verizon Global Funding Corp		4.00			1/15/08		488,120
									11,189,772
		Food Products & Services — 0.4%
	140,000	Campbell Soup Co		6.90			10/15/06		140,916
	300,000	Kraft Foods, Inc.		4.00			10/1/08		290,203
									431,119
		Insurance — 1.0%
	1,000,000	Everest Reinsurance Holding		5.40			10/15/14		961,857
		Insurance — Life — 0.5%
	513,000	Lincoln National Corp		6.50			3/15/08		524,101
		Investment Management and Advisory Services — 0.5%
	500,000	FMR Corp.*		4.75			3/1/13		479,824
		Medical — Drugs — 1.8%
	800,000	Bristol-Meyers Squibb Co.		5.75			10/1/11		808,792
	1,000,000	Wyeth		5.50			2/1/14		986,712
									1,795,504
		Printing & Publishing — 0.2%
	155,000	Tribune Co., MTN		5.50			10/6/08		153,859
		Real Estate Operation/Development — 0.3%
	350,000	EOP Operating Limited Partnership		4.75			3/15/14		322,324
		Restaurants — 1.1%
	800,000	Darden Restaurants		4.875			8/15/10		774,176
	280,000	McDonald’s Corp		6.00			4/15/11		286,070
									1,060,246
		Retail — 0.2%
	200,000	Sherwin-Williams Co.		6.85			2/1/07		202,105
		Utilities — Electric — 1.8%
	95,000	National Rural Utilities		6.00			5/15/06		95,085
	950,000	National Rural Utilities		3.25			10/1/07		922,120
	200,000	Tennessee Valley Authority, Series A		5.63			1/18/11		203,577
	500,000	Union Electric Co.		6.75			5/1/08		511,605
									1,732,387
		Total Corporate Bonds (cost - $31,286,349)							30,446,745
		U.S. Government Agencies — 49.9%
	350,000	Fannie Mae, MTN		6.89			4/25/06		350,373
	300,000	Fannie Mae		5.25			6/15/06		300,108
	400,000	Fannie Mae		7.13			3/15/07		407,255
	1,000,000	Fannie Mae		3.63			7/27/07		981,044
	1,500,000	Fannie Mae, Callable 5/5/06 @ 100		4.30			5/5/08		1,477,412
	1,000,000	Fannie Mae		4.00			9/2/08		973,885
	250,000	Fannie Mae		5.25			1/15/09		250,997
	500,000	Fannie Mae, Callable 11/30/07 @ 100		4.00			11/30/09		480,728
	200,000	Fannie Mae		4.25			7/28/10		192,498
	150,000	Fannie Mae		6.25			2/1/11		155,565
	1,000,000	Fannie Mae, Callable 6/9/06 @ 100		4.55			3/9/11		967,033
	750,000	Fannie Mae		5.38			11/15/11		756,911
	100,000	Fannie Mae		5.25			8/1/12		98,986
	750,000	Fannie Mae		6.00			12/14/12		747,489
	300,000	Fannie Mae, Callable 10/15/06 @ 100		5.00			4/15/13		291,073

continued

13

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
	500,000	Fannie Mae		4.63	%		10/15/14		481,561
	500,000	Fannie Mae, Callable 10/24/06 @ 100		5.31			11/3/14		487,449
	485,574	Fannie Mae		5.00			6/25/16		471,503
	800,000	Fannie Mae, Callable 4/26/10 @ 100		5.00			4/26/17		758,712
	505,962	Fannie Mae		4.50			6/25/33		482,959
	383,344	Fannie Mae		5.00			3/25/34		375,775
	500,000	Federal Farm Credit Bank, MTN		5.87			9/2/08		509,246
	750,000	Federal Farm Credit Bank		5.20			2/24/10		742,619
	420,000	Federal Farm Credit Bank		5.81			1/10/11		431,313
	750,000	Federal Farm Credit Bank, Callable 11/29/06 @ 100		4.65			11/29/11		725,658
	500,000	Federal Farm Credit Bank		4.60			1/17/12		486,250
	250,000	Federal Farm Credit Bank, Callable 4/25/06 @ 100		5.22			10/20/14		242,466
	500,000	Federal Farm Credit Bank		5.63			10/19/20		479,387
	2,000,000	Federal Farm Credit Farm		3.75			10/3/07		1,955,597
	285,000	Federal Home Loan Bank, Series TV06		4.88			11/15/06		284,531
	925,000	Federal Home Loan Bank, Series HS07		6.20			10/10/07		937,018
	800,000	Federal Home Loan Bank, Callable 5/6/06 @ 100		4.50			6/6/08		789,647
	500,000	Federal Home Loan Bank, Callable 5/31/06 @ 100		4.05			8/13/08		488,686
	1,065,000	Federal Home Loan Bank, Series 100		5.80			9/2/08		1,079,915
	325,000	Federal Home Loan Bank, Series 8D08		5.25			11/14/08		326,081
	875,000	Federal Home Loan Bank		5.49			12/22/08		879,593
	400,000	Federal Home Loan Bank, Callable 4/30/06 @ 100		4.28			10/30/09		387,916
	200,000	Federal Home Loan Bank, Series 5, Callable 9/30/06 @ 100		4.00			3/30/10		197,408
	1,250,000	Federal Home Loan Bank, Series 1, Callable 2/24/06 @100		4.75			3/30/10		1,224,253
	550,000	Federal Home Loan Bank		4.00			4/22/10		527,274
	1,500,000	Federal Home Loan Bank, Callable 05/09/06 @ 100		4.63			8/9/10		1,489,604
	750,000	Federal Home Loan Bank		5.20			10/28/10		740,630
	500,000	Federal Home Loan Bank, Callable 05/24/06 @ 100		5.00			2/24/11		496,774
	100,000	Federal Home Loan Bank, Series 1N11		6.00			5/13/11		103,948
	1,000,000	Federal Home Loan Bank, Callable 8/3/06 @ 100		5.00			8/3/11		978,268
	500,000	Federal Home Loan Bank		4.63			2/15/12		486,116
	1,000,000	Federal Home Loan Bank, Callable 2/16/07 @ 100		4.75			2/16/12		965,840
	500,000	Federal Home Loan Bank		5.00			2/21/12		487,896
	1,200,000	Federal Home Loan Bank, Callable 4/24/06 @ 100		5.25			5/3/12		1,177,194
	200,000	Federal Home Loan Bank, Callable 4/29/06 @ 100		4.50			10/29/13		195,426
	500,000	Federal Home Loan Bank		4.25			1/30/15		490,017
	1,000,000	Federal Home Loan Bank, Callable 4/20/06 @ 100		5.74			4/20/15		984,964
	500,000	Federal Home Loan Bank, Callable 6/26/06 @ 100		4.00			6/26/18		472,802
	500,000	Federal Home Loan Bank, Callable 4/24/06 @ 100		5.65			3/22/19		482,184
	500,000	Federal Home Loan Bank, Callable 11/4/09 @ 100		5.30			11/4/19		473,531
	500,000	Federal Home Loan Bank, Callable 12/27/06 @ 100		5.85			12/27/19		484,986
	200,000	Freddie Mac		3.25			3/14/08		193,243
	50,000	Freddie Mac		5.75			4/15/08		50,612
	750,000	Freddie Mac, Callable 6/1/06 @ 100		4.85			12/1/09		739,037
	344,471	Freddie Mac		3.75			4/15/11		342,458
	1,000,000	Freddie Mac		6.25			3/5/12		1,007,795
	750,000	Freddie Mac, Callable 11/5/07 @ 100		5.25			11/5/12		737,278
	1,500,000	Freddie Mac		4.80			7/30/13		1,429,654
	500,000	Freddie Mac		5.13			8/6/13		487,808
	1,500,000	Freddie Mac, Callable 1/30/07 @ 100		5.00			1/30/14		1,459,558
	1,500,000	Freddie Mac, Callable 07/14/06 @ 100		4.00			10/14/14		1,469,746
	500,000	Freddie Mac, Callable 10/27/06 @ 100		5.00			10/27/14		485,609
	750,000	Freddie Mac		5.00			11/13/14		726,788
	1,000,000	Freddie Mac, Callable 09/22/06 @ 100		5.40			9/22/15		975,278
	1,500,000	Freddie Mac		5.00			1/15/19		1,477,546
	385,228	Freddie Mac		4.75			3/15/22		375,107

continued

14

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
	1,458,800	Freddie Mac		5.00	%		8/15/27		1,431,305
	616,979	Freddie Mac, Series 2664		5.00			4/15/30		607,683
	294,392	Freddie Mac		5.50			10/15/31		293,092
		U.S. Government Agencies Total (cost - $50,069,727)							48,983,951
		U.S. Treasury Notes — 16.5%
	700,000	U.S. Treasury Notes		6.88			5/15/06		701,695
	1,150,000	U.S. Treasury Notes		6.50			10/15/06		1,159,568
	150,000	U.S. Treasury Notes		6.25			2/15/07		151,688
	500,000	U.S. Treasury Notes		3.75			3/31/07		494,571
	325,000	U.S. Treasury Notes		6.63			5/15/07		331,094
	400,000	U.S. Treasury Notes		6.13			8/15/07		406,562
	775,000	U.S. Treasury Notes		5.50			2/15/08		784,354
	1,000,000	U.S. Treasury Notes		4.63			2/29/08		995,977
	650,000	U.S. Treasury Notes		5.63			5/15/08		660,182
	350,000	U.S. Treasury Notes		3.38			11/15/08		337,613
	340,000	U.S. Treasury Notes		4.75			11/15/08		339,283
	1,500,000	U.S. Treasury Notes		4.50			2/15/09		1,486,992
	300,000	U.S. Treasury Notes		3.88			5/15/09		291,820
	3,000,000	U.S. Treasury Notes		3.63			1/15/10		2,876,015
	150,000	U.S. Treasury Notes		3.50			2/15/10		142,992
	500,000	U.S. Treasury Notes		4.00			3/15/10		485,254
	500,000	U.S. Treasury Notes		4.50			2/28/11		492,715
	500,000	U.S. Treasury Notes		5.00			8/15/11		504,395
	200,000	U.S. Treasury Notes		4.88			2/15/12		200,312
	500,000	U.S. Treasury Notes		4.38			8/15/12		487,012
	1,750,000	U.S. Treasury Notes		4.00			11/15/12		1,665,644
	200,000	U.S. Treasury Notes		4.75			5/15/14		198,250
	750,000	U.S. Treasury Notes		4.25			11/15/14		716,836
	250,000	U.S. Treasury Notes		1.63			1/15/15		245,016
		Total U.S. Treasury Notes (cost - $16,421,973)							16,155,840
		Preferred Stock — 1.0%
		Insurance agents, brokers, & service — 1.0%
	40,000	Metlife, Inc.							1,023,200
		Total Preferred Stock (cost - $1,018,979)
		Investment Companies — 0.7%
	640,706	Huntington Money Market Fund - Trust Class							640,706
		Total Investment Companies (cost - $640,706)							640,706
		Total Investments - 99.1% (cost - $99,437,734)							97,250,442

Percentages indicated are based on net assets of $98,127,963.

* Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the Investment Advisor based on procedures approved by the Board of Trustees.

BKNT – Bank Note
MTN – Medium Term Note

See notes to financial statements.

15

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
		Municipal Bonds — 99.3%
		Alabama — 1.0%
	210,000	Daphne Alabama, GO, Callable 2/1/13 @ 100, Insured by: AMBAC		4.00	%		8/1/14		208,961
		California — 1.2%
	250,000	La Mirada California Redevelopment Agency, Callable 8/15/14 @ 100, Insured by: FSA		4.25			8/15/19		248,225
		Illinois — 3.3%
	200,000	Du Page County Illinois High School District, Series A, GO, Callable 12/1/07 @ 100		5.05			12/1/14		203,932
	200,000	Illinois State, GO, Callable 9/1/06 @ 102, Insured by: FGIC		5.40			9/1/08		205,384
	300,000	Northlake Illinois, Series A, GO, Callable 12/1/08 @ 100, Insured by: AMBAC		5.00			6/1/14		309,534
									718,850
		Indiana — 62.8%
	200,000	Anderson Indiana School Building Corp., Insured by: FSA		4.00			7/15/15		197,700
	200,000	Blackford County Indiana School Building Corp., Callable 7/15/06 @ 101, Insured by: AMBAC		5.00			7/15/11		202,870
	260,000	Bloomington Indiana Municipal Facilities Corp., Callable 2/1/08 @ 101		4.80			8/1/12		265,486
	200,000	Carmel Indiana Redevelopment Authority, Insured by: MBIA		4.25			8/1/11		204,194
	380,000	Center Grove Indiana Building Corp., Insured by: FGIC		3.50			1/15/11		373,463
	150,000	Clarksville Indiana High School Building Corp., Callable 7/15/08 @ 101, Insured by: MBIA		5.00			7/15/14		155,460
	225,000	Cloverdale Indiana Multi-School Building Corp., Callable 1/15/08 @ 102, Insured by: MBIA		4.95			1/15/11		234,515
	200,000	Crown Point Indiana Multi-School Building Corp., Callable 7/15/09 @ 101, Insured by: MBIA		4.80			1/15/14		206,222
	250,000	Decatur Township Marion County Multi-School Building Corp., Insured by: MBIA		4.00			7/15/08		251,830
	295,000	Delaware County Indiana Edit Corp., Callable 12/1/07 @ 101, Insured by: MBIA		5.00			12/1/12		304,107
	400,000	Delaware County Indiana Hospital Authority, Callable 8/1/08 @ 102, Insured by: AMBAC		5.00			8/1/16		419,711
	125,000	Eagle Union Middle School Building Corp. Indiana, Callable 7/5/11 @ 100, Insured by: AMBAC		4.85			7/5/15		129,380
	400,000	East Allen Woodland School Building Corp. Indiana, Insured by: MBIA		3.25			7/15/10		389,251
	300,000	East Washington Indiana Multi School Building Corp., Insured by: MBIA		3.90			7/15/14		296,847
	300,000	Elkhart County Indiana Corrections Complex, Callable 6/1/14 @ 100, Insured by: MBIA		4.13			12/1/19		293,694
	85,000	Elkhart Indiana Community Schools, GO		4.95			7/15/06		85,314
	100,000	Fall Creek Indiana Regulatory Waste District, Callable 9/1/10 @ 100, Insured by: MBIA		4.70			3/1/13		103,042
	225,000	Fort Wayne Indiana South Side School Building Corp., Callable 7/15/06 @ 102, Insured by: FSA		4.75			1/15/12		229,759
	165,000	Fort Wayne Indiana Stormwater Managemet District Revenue, Insured by: MBIA		4.00			8/1/13		165,617
	260,000	Greencastle Indiana Multi-School Building Corp., Callable 7/10/12 @100, Insured by: FGIC		4.10			1/10/13		261,989
	300,000	Greencastle Indiana Waterworks Revenue, Callable 1/1/12 @ 100, Insured by: MBIA		4.25			7/1/13		304,413
	275,000	Indiana Bank Revenue, Insured by: MBIA		4.00			4/1/09		277,390
	290,000	Indiana Bank Revenue, Series A, Callable 2/1/09 @ 102, Insured by: FSA		4.60			2/1/13		297,418
	265,000	Indiana Bank Revenue, Series A, Callable 2/1/08 @ 101		4.80			2/1/13		272,036
	470,000	Indiana Health Facilities Financing Authority, Callable 8/15/07 @ 102, Insured by: RADIAN		5.50			2/15/10		491,074
	325,000	Indiana State Educatonal Facilities Authority, Callable 10/15/08 @ 101		4.95			10/15/12		334,523
	300,000	Indiana State Office Building Community Facilities, Series A, Callable 7/1/08 @ 101		4.70			7/1/11		307,587
	200,000	Indiana University Revenue, Series L, Callable 8/1/08 @ 101		5.00			8/1/12		207,788
	100,000	Johnson County Indiana, GO, Insured by: FSA		4.10			7/15/07		100,614
	265,000	LA Porte Indiana Multi School Building Corp., Insured by: FSA		4.00			1/15/10		267,488
	305,000	Lafayette Indiana Redevelopment Authority, Callable 2/1/13 @ 100		3.75			8/1/13		299,998
	75,000	Marion County Indiana Convention and Recreational Facilities Authority, Series A, Callable 6/1/08 @ 101		5.00			6/1/12		77,629
	275,000	Mithcell Indiana Multi-School Building Corp.		4.65			7/5/13		286,314

continued

16

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
	200,000	Monroe County Indiana Community School Corp., Callable 1/1/07 @ 102, Insured by: MBIA		5.25	%		7/1/12		206,344
	300,000	Montgomery County Indiana Jail Facility Building Corp., Callable 1/15/15 @ 100, Insured by: FSA		4.00			7/15/16		293,790
	150,000	Mt. Vernon of Hancock County Indiana Multi-School Building Corp., Series B, Callable 7/15/11 @ 100, Insured by: AMBAC		4.70			1/15/12		155,883
	200,000	Munster Indiana School Building Corp., Callable 7/5/08 @ 101, Insured by: FSA		4.60			7/5/10		205,578
	400,000	North Montgomery Indiana High School Building Corp., Callable 1/15/11 @ 100, Insured by: FGIC		5.05			7/15/15		416,839
	100,000	Northwest Allen County Indiana Middle School Building Corp., Callable 1/15/09 @ 101, Insured by: MBIA		4.75			1/15/12		103,834
	200,000	Northwest Allen County Indiana Middle School Building Corp., Callable 1/15/09 @ 101, Insured by: MBIA		4.90			1/15/14		208,454
	400,000	Perry Township Indiana Multi-School Building Corp., Callable 7/15/06 @ 101, Insured by: AMBAC		5.00			7/15/13		405,739
	240,000	Perry Township Indiana Multi-School Building Corp., Callable 7/15/10 @101, Insured by: FGIC		4.63			1/15/15		247,378
	300,000	Porter County Indiana Jail Building Corp., Callable 7/10/11 @ 100, Insured by: FSA		5.00			7/10/16		311,928
	275,000	Princeton Indiana Sewer Works Revenue, Callable 5/1/09 @ 101		4.50			5/1/13		271,876
	50,000	Purdue University Indiana Certificates Participation, Callable 7/1/08 @ 100		4.50			7/1/09		50,753
	250,000	Rochester Indiana Community School Building Corp., Callable 7/15/08 @ 102, Insured by: AMBAC		5.00			7/15/13		261,510
	200,000	South Bend Indiana Community School Building Corp., Callable 1/1/10 @ 101, Insured by: FSA		4.60			7/1/13		205,036
	225,000	South Bend Indiana Community School Building Corp., Callable 1/1/10 @ 101, Insured by: FSA		5.10			7/1/17		236,003
	400,000	Sunman-Dearbon Indiana High School Building Corp., Insured by: MBIA		4.00			7/15/12		402,855
	125,000	Terre Haute Indiana San District, GO, Callable 1/1/07 @ 102, Insured by: AMBAC		4.60			7/1/10		128,128
	300,000	Terre Haute Indiana San District, Callable 1/1/15 @ 100, Insured by: AMBAC		4.00			7/1/17		293,076
	200,000	Vinton-Tecumseh Indiana School Building Corp., Callable 1/5/08 @ 101, Insured by: SAW		5.00			7/5/13		205,750
	300,000	Warren Township Indiana School Building Corp., Callable 7/5/08 @ 101, Insured by: FSA		5.00			7/5/14		310,827
	275,000	Whitley County Indiana Middle School Building Corp., Callable 7/10/08 @ 101, Insured by: FSA		4.80			1/10/11		284,149
									13,500,453
		Kansas — 1.1%
	250,000	Kansas State Development Finance Authority Revenue		3.25			11/1/09		245,320
		Kentucky — 2.0%
	250,000	Jessamine County Kentucky School District, Insured by: AMBAC		4.00			1/1/14		250,318
	185,000	Kentucky Rural Water Financial Corp., Series C, Callable 2/01/12 @ 101, Insured by: MBIA		3.88			2/1/14		183,698
									434,016
		Michigan — 4.8%
	250,000	Green Oak Township Michigan — Sewer, GO, Callable 5/1/12 @ 100, Insured by: MBIA		4.00			5/1/17		246,693
	300,000	Macomb Township Michigan Building Authority, GO, Callable 4/1/11 @ 100, Insured by: AMBAC		4.75			4/1/16		313,950
	150,000	Michigan Higher Education Facilities Authority Revenue, Callable 12/1/12 @ 100		5.00			12/1/20		154,004
	320,000	Warren Michigan Downtown Development, GO, Insured by: MBIA		4.00			10/1/14		320,000
									1,034,647
		Missouri — 2.3%
	200,000	Creve Coeur Missouri, SO		3.50			1/1/13		193,082
	300,000	Jefferson County Missouri School District, GO, Callable 3/1/14 @ 100, Insured by:
		MBIA		4.35			3/1/16		305,823
									498,905

continued

17

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
		Nevada — 1.2%
	250,000	University of Nevada Community College, Series A, Callable 7/1/11 @ 100, Insured by: FGIC		4.45	%		7/1/12		256,088
		North Carolina — 1.4%
	300,000	Davie County NC		3.75			6/1/11		299,571
		North Dakota — 1.3%
	300,000	North Dakota State Building Authority Lease Revenue, Callable 12/1/13 @ 100		3.70			12/1/15		287,700
		Ohio — 1.2%
	250,000	Akron Ohio Package Facility Project, Series A, Insured by: AMBAC		3.50			12/1/10		247,870
		Pennsylvania — 0.7%
	150,000	Pennsylvania State Higher Educational Facilities Authority College & University Revenue, Callable 7/1/11 @ 100, Insured by: ASST GTY		5.38			7/1/23		157,052
		Texas — 4.1%
	350,000	Brownsville Texas, GO, Callable 2/15/14 @ 100, Insured by: AMBAC		4.00			2/15/17		342,139
	225,000	Keller Texas, Insured by: MBIA		3.75			2/15/11		224,793
	300,000	Travis County Texas, Series A, GO, Callable 3/1/08 @ 100		4.75			3/1/15		306,456
									873,388
		Utah — 2.3%
	200,000	South Davis Recreation District Utah, Callable 1/1/15 @ 100, Insured by: XLCA		4.38			1/1/20		199,682
	300,000	Utah State Building Ownership Authority Lease Revenue		3.25			5/15/09		293,901
									493,583
		Washington — 4.2%
	300,000	Seattle Washington Municipal Light and Power Revenue, Insured by: FSA		3.25			8/1/11		289,335
	300,000	Washington State, Series 2003A, GO, Callable 7/1/12 @ 100		5.00			7/1/14		313,872
	300,000	Washington State, Callable 4/1/14 @ 100, Insured by: MBIA		4.25			10/1/15		303,039
									906,246
		Wisconsin — 4.4%
	400,000	Chilton Wisconsin School District, Callable 4/1/12, Insured by: FGIC		4.00			4/1/13		400,207
	50,000	Elmbrook Wisconsin School District, GO, Callable 4/1/12 @ 100		4.13			4/1/15		49,500
	295,000	Green Bay Wisconsin Area Public School District, Insured by: FGIC, Series B		3.38			4/1/10		289,950
	200,000	Wisconsin State Clean Water Revenue, Series 1, Callable 6/1/08 @ 100		4.85			6/1/18		203,096
									942,753
		Total Municipal Bonds (cost - $21,179,173)							21,353,628
		Investment Companies — 0.2%
	40,571	Huntington Money Market Fund - Trust Class							40,571
		Total Investment Companies (cost - $40,571)							40,571
		Total Investments - 99.5% (cost - $21,219,743)							21,394,199

Percentages indicated are based on net assets of $21,493,599.

AMBAC – AMBAC Indemnity Corp.
ASST GTY – Asset Guaranty
FGIC – Financial Guaranty Insurance Co.
FSA – Financial Security Assurance, Inc.
GO – General Obligation
MBIA – Municipal Bond Insurance Assoc.
RADIAN – RADIAN Guaranty, Inc.
SAW – State Aid Withholding
SO – Special Obligation
XLCA – XL Capital Assurance, Inc.

See notes to financial statements.

18

SIGNAL FUNDS
Money Market Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
		Asset Backed Securities — 25.1%
		Finance Services — 22.6%
	2,000,000	Amsterdam Funding* (a)(b)		4.60	%		4/11/06		1,997,444
	2,250,000	Barton Capital*		4.65			5/3/06		2,240,700
	2,000,000	Fairway Finance Co., LLC* (a)(b)		4.45			4/10/06		1,997,715
	1,250,000	Grampian Funding, LLC.* (a)		4.53			4/26/06		1,246,072
	2,500,000	Kitty Hawk Funding* (a)		4.70			4/17/06		2,494,778
	2,750,000	Old Line Funding Corp.* (a)		4.65			4/17/06		2,744,353
	1,500,000	Park Avenue*		4.59			4/5/06		1,499,235
	2,250,000	Sheffield Receivable*		4.60			4/3/06		2,249,425
	2,250,000	Steamboat Funding* (a)(b)		4.82			4/7/06		2,248,193
	1,750,000	Thames Asset Global*		4.70			4/18/06		1,746,116
	500,000	Three Pillars Funding*		4.57			4/3/06		499,873
	1,500,000	Three Pillars Funding*		4.69			4/17/06		1,496,873
	3,000,000	Windmill Funding* (a)		4.73			4/25/06		2,990,541
		Total Asset Backed Securities (cost - $25,451,318)							25,451,318
		Certificates of Deposit — 15.4%
		Foreign Bank & Branches & Agencies- 12.4%
	1,000,000	Barclays Bank NY		4.37			6/21/06		999,996
	2,000,000	CIBC		4.63			4/11/06		2,000,000
	2,300,000	Credit Suisse (a)(b)		4.71			5/8/06		2,300,023
	1,000,000	Dexia Bank NY		4.59			4/13/06		998,470
	1,900,000	Royal Bank of Canada		4.71			5/19/06		1,900,031
	1,000,000	Societe Generale		4.51			4/13/06		1,000,013
	1,500,000	Societe Generale		4.75			4/28/06		1,494,662
	2,000,000	Toronto Dominion		4.59			5/1/06		2,000,000
									12,693,195
		National Banks, Commercial — 3.0%
	3,000,000	Wells Fargo Bank		4.75			4/27/06		3,000,000
		Total Certificates of Deposit (cost - $15,693,195)							15,693,195
		Commercial Paper — 29.2%
		Bank Holdings Companies — 6.9%
	3,000,000	Citigroup Funding*		4.56			4/10/06		2,996,580
	2,000,000	Greenwich Capital**		4.28			8/7/06		2,000,000
	2,000,000	Northern Trust*		4.72			5/5/06		1,991,084
									6,987,664
		Foreign Bank & Branches & Agencies — 12.5%
	2,000,000	Abbey National NA Corp.* (b)		4.58			4/21/06		1,994,911
	2,000,000	Barclays US Funding, LLC.*		4.54			4/6/06		1,998,739
	2,000,000	BNP Paribas*		4.61			4/20/06		1,995,134
	2,500,000	CBA DEL Finance*		4.65			5/3/06		2,489,666
	2,250,000	Dexia DEL LLC*		4.61			4/7/06		2,248,271
	2,000,000	HBOS Treasury Service*		4.63			5/2/06		1,992,035
									12,718,756
		Personal Credit Institutions — 5.9%
	3,250,000	General Electric Capital Corp.*		4.63			4/10/06		3,246,239
	2,750,000	Toyota Motor Credit Corp*		4.47			5/18/06		2,733,951
									5,980,190

continued

19

SIGNAL FUNDS
Money Market Fund

Schedule of Portfolio Investments
March 31, 2006

Shares or
Principal			Interest			Maturity
Amount ($)		Security Description	Rate			Date		Value ($)
		Security Brokers & Dealers — 3.9%
	2,000,000	Merrill Lynch*		4.71	%		4/4/06		1,999,215
	2,000,000	Morgan Stanley Dean Witter & Co.*		4.77			4/4/06		1,999,205
									3,998,420
		Total Commercial Paper (cost - $29,685,030)							29,685,030
		U.S. Government Agencies — 13.3%
	2,000,000	Federal Farm Credit Bank**		4.59			1/22/07		2,001,268
	1,000,000	Federal Home Loan Bank		3.60			5/19/06		1,000,000
	1,500,000	Federal Home Loan Bank		5.00			9/29/06		1,500,000
	1,000,000	Federal Home Loan Bank		4.38			10/26/06		1,000,000
	1,250,000	Federal Home Loan Bank**		4.37			2/22/07		1,250,000
	1,250,000	Federal Home Loan Bank**		4.11			3/2/07		1,250,000
	1,500,000	Federal Home Loan Bank**		4.50			5/4/07		1,496,432
	1,100,000	Federal Home Loan Mortgage Corp.		4.75			1/22/07		1,100,000
	900,000	Federal Home Loan Mortgage Corp.		4.80			2/20/07		900,000
	1,000,000	Federal National Mortgage Association		3.25			6/28/06		996,902
	1,000,000	Federal National Mortgage Association**		4.37			12/22/06		999,977
		Total U.S. Government Agencies (cost - $13,494,579)							13,494,579
		Investment Companies — 6.8%
	2,161,400	BlackRock Provident Institutional Temp Fund							2,161,400
	674,644	Goldman Sachs Financial Square Prime Obligations Fund							674,644
	376	Merrill Lynch Premier Institutional Fund							376
	4,063,461	Morgan Stanley Liquidity Prime Fund							4,063,461
		Total Investment Companies (cost - $6,899,881)							6,899,881
		Repurchase Agreements — 10.4%
		Security Brokers & Dealers — 10.4%
	3,600,000	Bank of America Corp. (Dated 03/31/06, due 4/3/06, proceeds at maturity $3,601,341, fully collateralized by U.S. Treasury Strip, 0.00%, 11/15/21, valued at $3,670,759)		4.47			4/3/06		3,600,000
	3,500,000	Morgan Stanley Dean Witter & Co. (Dated 03/31/06, due 4/3/06, proceeds at maturity $3,501,298, fully collateralized by U.S. Treasury Note, 7.25%, 2/15/08, valued at $3,577,522)		4.50			4/3/06		3,500,000
	3,500,000	Wachovia (Dated 03/31/06, due 4/3/06, proceeds at maturity $3,501,313, fully collateralized by U.S. Treasury Note, 3.38%, 5/15/16, valued at $3,576,538)		4.45			4/3/06		3,500,000
		Total Repurchase Agreements (cost - $10,600,000)							10,600,000
		Total Investments - 100.2% (cost - $101,824,003)***							101,824,003

Percentages indicated are based on net assets of $101,606,977.

*	Discount Note securities. The rate reflected on the Schedule of Portfolio Investment is the effective rate.
**	Variable rate securities having liquidity agreements. The interest rate, which will change periodically, is based upon an index of market rates. The rate reflect on the Schedule of Portfolio Investments is the rate in effect at March 31,2006.
***	Cost for federal income tax purposes is the same.
(a)	4-2 security exempt from registration under the Securities Act of 1933. The securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(b)	Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the Investment Advisor based on procedures approved by the Board of Trustees.

 
 
 
See notes to financial statements.

20

SIGNAL FUNDS

Statements of Assets and Liabilities
March 31, 2006

	Large Cap				Tax-Exempt
	Growth		Income		Income		Money Market
	Fund		Fund		Fund		Fund
Assets:
Investments, at value (Cost $28,976,826; $99,437,734; $21,219,743; and $91,224,003, respectively)		$38,950,095		$97,250,442		$21,394,199		$91,224,003
Repurchase agreements, at cost		—		—		—		10,600,000
Total Investments		38,950,095		97,250,442		21,394,199		101,824,003
Interest and dividends receivable		23,401		1,211,908		231,198		177,938
Receivable for capital shares issued		32,912		80,264		—		—
Receivable for investments sold		274,078		—		—		—
Prepaid expenses and other assets		1,525		2,022		1,388		462
Total Assets		39,282,011		98,544,636		21,626,785		102,002,403
Liabilities:
Distributions payable		—		294,326		61,387		348,888
Payable for investments purchased		216,460		—		—		—
Payable for capital shares redeemed		27,068		66,721		52,656		—
Accrued expenses and other payables:
Investment advisory fees		18,251		20,667		1,859		4,280
Administration fees		812		2,042		452		2,671
Distribution fees		165		71		32		—
Accounting fees		140		196		177		113
Transfer agent fees		5,987		5,919		4,596		5,110
Trustee fees		1,508		12		2		6
Chief Compliance Officer fees		464		938		211		1,227
Other liabilities		15,450		25,781		11,814		33,131
Total Liabilities		286,305		416,673		133,186		395,426
Composition of Net Assets:
Capital		26,160,147		100,644,711		21,317,697		101,607,095
Accumulated (distributions in excess of) net investment income		—		8,101		—		(2)
Accumulated net realized gains (losses) from investment transactions		2,862,290		(337,557)		1,446		(116)
Net unrealized appreciation (depreciation) on investment transactions		9,973,269		(2,187,292)		174,456		—
Net Assets		$38,995,706		$98,127,963		$21,493,599		$101,606,977
Class A Shares:
Net assets		$755,949		$318,636		$143,671		—
Shares outstanding		62,561		33,284		14,751		—
Net Asset Value and Redemption Price per share		$12.08		$9.57		$9.74		—
Maximum Sales Load		4.75%		3.25%		3.25%		—
Maximum Offering Price per share (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent)		$12.68		$9.89		$10.07		—
Class I Shares:
Net assets		$38,239,757		$97,809,327		$21,349,928		$101,606,977
Shares outstanding		3,139,812		10,216,204		2,191,734		101,611,668
Net Asset Value, Offering Price, and Redemption Price per share		$12.18		$9.57		$9.74		$1.00

 
 
 
See notes to financial statements.

21

SIGNAL FUNDS

Statements of Operations
For the year ended March 31, 2006

	Large Cap				Tax-Exempt
	Growth		Income		Income		Money Market
	Fund		Fund		Fund		Fund
Investment Income:
Interest	$	4,443	$	4,548,054	$	919,505	$	3,380,155
Dividends		493,715		74,578		9,927		147,245
Total Investment Income		498,158		4,622,632		929,432		3,527,400
Expenses:
Investment advisory		318,586		490,711		111,073		95,651
Administration		81,726		188,928		42,759		232,058
Distribution (Class A)		1,754		891		392		—
Distribution (Class B)		487		91		128		—
Fund accounting		52,466		72,396		63,927		42,753
Custodian		7,040		13,251		3,276		47,174
Transfer agent		43,234		40,222		29,972		33,169
Trustee		1,181		3,879		620		2,725
Chief Compliance Officer		2,366		5,743		1,286		6,322
Printing		12,255		27,892		6,747		30,668
Other		26,958		44,412		19,140		41,589
Total expenses before fee reductions		548,053		888,416		279,320		532,109
Expenses voluntarily reduced by Investment Advisor		(84,957)		(245,356)		(96,258)		(47,827)
Net Expenses		463,096		643,060		183,062		484,282
Net Investment Income		35,062		3,979,572		746,370		3,043,118
Realized/Unrealized Gains (Losses) on Investments:
Net realized gains (losses) from investment transactions		3,942,408		(232,518)		27,245		(97)
Change in unrealized appreciation/depreciation on investments		1,442,253		(1,672,828)		(327,308)		—
Net realized/unrealized gains (losses) on investments		5,384,661		(1,905,346)		(300,063)		(97)
Change in net assets resulting from operations	$	5,419,723	$	2,074,226	$	446,307	$	3,043,021

 
 
 
 
 
 
See notes to financial statements.

22

SIGNAL FUNDS

Statements of Changes in Net Assets

	Large Cap Growth Fund				Income Fund
	Year Ended		Year Ended		Year Ended		Year Ended
	March 31, 2006		March 31, 2005		March 31, 2006		March 31, 2005
Operations
Net investment income	$	35,062	$	32,689	$	3,979,572	$	3,003,433
Net realized gains (losses) on investment transactions		3,942,408		3,147,002		(232,518)		(8,007)
Change in unrealized appreciation/depreciation from investment transactions		1,442,253		(197,997)		(1,672,828)		(3,231,126)
Change in net assets from operations		5,419,723		2,981,694		2,074,226		(235,700)
Distributions to Shareholders:
Class A:
From net investment income		(46)		—		(13,601)		(9,269)
From net realized gain on investments		(40,847)		(38,031)		—		—
Class B:
From net investment income		—		—		(269)		(1,019)
From net realized gain on investments		—		(11,008)		—		—
Class I:
From net investment income		(42,737)		(32,688)		(3,976,073)		(3,000,432)
From net realized gain on investments		(2,414,054)		(2,727,939)		—		—
Change in net assets from shareholder distributions		(2,497,684)		(2,809,666)		(3,989,943)		(3,010,720)
Change in net assets from capital share transactions		(3,013,200)		4,715,936		2,021,021		39,486,168
Change in net assets		(91,161)		4,887,964		105,304		36,239,748
Net Assets:
Beginning of period		39,086,867		34,198,903		98,022,659		61,782,911
End of period*	$	38,995,706	$	39,086,867	$	98,127,963	$	98,022,659
Capital Transactions:
Class A Shares
Proceeds from shares issued	$	291,268	$	120,264	$	102,698	$	94,611
Dividends reinvested		40,720		37,917		13,923		8,768
Cost of shares redeemed		(213,464)		(59,709)		(109,706)		(34,433)
Change in net assets from Class A capital transactions	$	118,524	$	98,472	$	6,915	$	68,946
Class B Shares
Proceeds from shares issued	$	—	$	171	$	—	$	—
Dividends reinvested		—		11,008		96		487
Cost of shares redeemed		(123,670)		(576)		(28,549)		(10,341)
Change in net assets from Class B capital transactions		($123,670)	$	10,603		($28,453)		($9,854)
Class I Shares
Proceeds from shares issued	$	13,486,131	$	14,896,427	$	24,607,646	$	59,192,618
Dividends reinvested		1,040,335		1,508,406		762,599		691,949
Cost of shares redeemed		(17,534,520)		(11,797,972)		(23,327,686)		(20,457,491)
Change in net assets from Class I capital transactions		($3,008,054)	$	4,606,861	$	2,042,559	$	39,427,076
Share Transactions:
Class A Shares
Issued		27,039		10,481		10,297		9,574
Reinvested		3,445		3,341		1,427		882
Redeemed		(17,813)		(5,216)		(11,266)		(3,459)
Net change		12,671		8,606		458		6,997
Class B Shares
Issued		—		16		—		—
Reinvested		—		987		10		49
Redeemed		(12,869)		(53)		(2,792)		(1,041)
Net change		(12,869)		950		(2,782)		(992)
Class I Shares
Issued		1,158,732		1,296,219		2,521,979		5,957,031
Reinvested		87,364		132,197		78,175		69,545
Redeemed		(1,466,755)		(1,032,408)		(2,384,473)		(2,061,172)
Net change		(220,659)		396,008		215,681		3,965,404

* Includes undistributed net investment income of $0, $1, $8,101, and $1, respectively.

See notes to financial statements.

23

SIGNAL FUNDS

Statements of Changes in Net Assets

	Tax-Exempt Income Fund				Money Market Fund
	Year Ended		Year Ended		Year Ended		Year Ended
	March 31, 2006		March 31, 2005		March 31, 2006		March 31, 2005
Operations
Net investment income	$	746,370	$	644,471	$	3,043,118	$	1,093,095
Net realized gains (losses) from investment transactions		27,245		109,138		(97)		(19)
Change in unrealized appreciation/depreciation on investment transactions		(327,308)		(648,007)		—		—
Change in net assets from operations		446,307		105,602		3,043,021		1,093,076
Distributions to Shareholders:
Class A:
From net investment income		(4,872)		(4,381)		—		—
From net realized gain on investments		(382)		(1,087)		—		—
Class B:								—
From net investment income		(307)		(927)		—		—
From net realized gain on investments		—		(304)		—		—
Class I:
From net investment income		(741,191)		(639,163)		(3,043,273)		(1,098,084)
From net realized gain on investments		(48,546)		(143,921)		—		—
Change in net assets from shareholder distributions		(795,298)		(789,783)		(3,043,273)		(1,098,084)
Change in net assets from capital share transactions		(59,906)		3,751,995		8,296,145		22,486,867
Change in net assets		(408,897)		3,067,814		8,295,893		22,481,859
Net Assets:
Beginning of period		21,902,496		18,834,682		93,311,084		70,829,225
End of period*	$	21,493,599	$	21,902,496	$	101,606,977	$	93,311,084
Capital Transactions:
Class A Shares
Proceeds from shares issued	$	38,148	$	6,293	$	—	$	—
Dividends reinvested		5,123		4,833		—		—
Cost of shares redeemed		(32,568)		(6,897)		—		—
Change in net assets from Class A capital transactions	$	10,703	$	4,229	$	—	$	—
Class B Shares
Proceeds from shares issued	$	—	$	—	$	—	$	—
Dividends reinvested		386		1,231		—		—
Cost of shares redeemed		(39,247)		—		—		—
Change in net assets from Class B capital transactions		($38,861)	$	1,231	$	—	$	—
Class I Shares
Proceeds from shares issued	$	5,944,177	$	10,635,649	$	189,005,851	$	181,554,602
Dividends reinvested		44,839		112,519		137		25
Cost of shares redeemed		(6,020,764)		(7,001,633)		(180,709,843)		(159,067,760)
Change in net assets from Class I capital transactions		($31,748)	$	3,746,535	$	8,296,145	$	22,486,867
Share Transactions:
Class A Shares
Issued	$	3,741		623		—		—
Reinvested		518		481		—		—
Redeemed		(3,305)		(678)		—		—
Net change		954		426		—		—
Class B Shares
Issued		—		—		—		—
Reinvested		39		123		—		—
Redeemed		(3,851)		—		—		—
Net change		(3,812)		123		—		—
Class I Shares
Issued		599,454		1,057,937		189,005,851		181,554,601
Reinvested		4,561		11,184		137		25
Redeemed		(608,437)		(698,011)		(180,709,843)		(159,067,760)
Net change		(4,422)		371,110		8,296,145		22,486,866

* Includes accumulated (distributions in excess of) net investment income of $0, $0, $(2), and $153, respectively.

See notes to financial statements.

24

SIGNAL FUNDS

Financial Highlights
For a Share Outstanding Throughout Each Period

			Change in Net Assets
			Resulting from Operations:									Less Dividends from:														Ratios/Supplementary Data:
						Net Realized			Change in																			Ratio of						Ratio of
						and			Net Asset						Net											Net		Expenses			Ratio of Net			Expenses
	Net Asset		Net			Unrealized			Value						Realized			Total			Net Asset					Assets,		to			Investment			to
	Value,		Investment			Gains			Resulting			Net			Gains			Dividends			Value,					End of		Average			Income to			Average			Portfolio
	Beginning		Income			(Losses) on			from			Investment			(Losses) on			and			End of		Total			Period		Net			Average			Net			Turnover
Class A	of Period		(Loss)			Investments			Operations			Income			Investments			Distributions			Period		Return*			(000’s)		Assets			Net Assets			Assets**			(c)
Large Cap Growth Fund
Year Ended March 31, 2006		$11.35		($0.07	)		$1.49			$1.42			$ —	(e)		$(0.69	)		$(0.69	)		$12.08		12.65	%		$756		1.34	%		(0.60	%)		1.54	%		36.43	%
Year Ended March 31, 2005		11.29		(0.01	)		1.00			0.99			—			(0.93	)		(0.93	)		11.35		8.74	%		566		1.43	%		(0.15	%)		1.63	%		39.77	%
Year Ended March 31, 2004		9.05		(0.01	)		2.58			2.57			—	(e)		(0.33	)		(0.33	)		11.29		28.60	%		466		1.44	%		(0.16	%)		1.64	%		39.64	%
Period Ended March 31, 2003 (d)		10.00		—	(e)		(0.95	)		(0.95	)		—	(e)		—			—			9.05		(9.40	%)  (a)		224		1.45	%(b)		0.11	%(b)		1.67	%(b)		34.11	%  (a)
Income Fund
Year Ended March 31, 2006		$9.77		$0.37			$(0.20	)		$0.17			$(0.37	)		$ —			$(0.37	)		$9.57		1.76	%		$319		0.90	%		3.81	%		1.15	%		24.47	%
Year Ended March 31, 2005		10.19		0.35			(0.42	)		(0.07	)		(0.35	)		—			(0.35	)		9.77		(0.64	%)		321		0.95	%		3.56	%		1.20	%		14.91	%
Year Ended March 31, 2004		10.21		0.34			(0.02	)		0.32			(0.34	)		—	(e)		(0.34	)		10.19		3.17	%		263		0.98	%		3.31	%		1.23	%		43.76	%
Period Ended March 31, 2003 (d)		10.00		0.31			0.25			0.56			(0.31	)		(0.04	)		(0.35	)		10.21		5.65	%  (a)		218		1.07	%(b)		3.54	%(b)		1.32	%(b)		7.47	%  (a)
Tax-Exempt Income Fund
Year Ended March 31, 2006		$9.89		$0.31			$(0.13	)		$0.18			$(0.31	)		$(0.02	)		$(0.33	)		$9.74		1.82	%		$144		1.08	%		3.11	%		1.51	%		11.64	%
Year Ended March 31, 2005		10.22		0.32			(0.25	)		0.07			(0.32	)		(0.08	)		(0.40	)		9.89		0.73	%		136		1.12	%		3.21	%		1.62	%		18.11	%
Year Ended March 31, 2004		10.18		0.33			0.08			0.41			(0.33	)		(0.04	)		(0.37	)		10.22		4.14	%		137		1.09	%		3.25	%		1.58	%		9.11	%
Period Ended March 31, 2003 (d)		10.00		0.27			0.21			0.48			(0.27	)		(0.03	)		(0.30	)		10.18		4.85	%  (a)		57		1.09	%(b)		3.36	%(b)		1.52	%(b)		8.54	%  (a)
Class I
Large Cap Growth Fund
Year Ended March 31, 2006		$11.42		$0.01			$1.45			$1.46			$(0.01	)		$(0.69	)		$(0.70	)		$12.18		12.95	%		$38,240		1.08	%		0.09	%		1.28	%		36.43	%
Year Ended March 31, 2005		11.33		0.01			1.02			1.03			(0.01	)		(0.93	)		(0.94	)		11.42		9.08	%		38,377		1.18	%		0.10	%		1.38	%		39.77	%
Year Ended March 31, 2004		9.06		0.01			2.60			2.61			(0.01	)		(0.33	)		(0.34	)		11.33		29.00	%		33,600		1.19	%		0.09	%		1.39	%		39.64	%
Period Ended March 31, 2003 (d)		10.00		0.02			(0.94	)		(0.92	)		(0.02	)		—			(0.02	)		9.06		(9.20	%)  (a)		31,260		1.21	%(b)		0.32	%(b)		1.43	%(b)		34.11	%  (a)
Income Fund
Year Ended March 31, 2006		$9.77		$0.40			$(0.20	)		$0.20			$(0.40	)		$ —			$(0.40	)		$9.57		2.01	%		$97,809		0.65	%		4.06	%		0.90	%		24.47	%
Year Ended March 31, 2005		10.19		0.38			(0.42	)		(0.04	)		(0.38	)		—			(0.38	)		9.77		(0.39	%)		97,675		0.69	%		3.82	%		0.94	%		14.91	%
Year Ended March 31, 2004		10.21		0.36			(0.02	)		0.34			(0.36	)		—	(e)		(0.36	)		10.19		3.43	%		61,481		0.73	%		3.56	%		0.98	%		43.76	%
Period Ended March 31, 2003 (d)		10.00		0.29			0.25			0.54			(0.29	)		(0.04	)		(0.33	)		10.21		5.47	%  (a)		59,724		0.82	%(b)		3.88	%(b)		1.07	%(b)		7.47	%  (a)
Tax-Exempt Income Fund
Year Ended March 31, 2006		$9.89		$0.33			$(0.13	)		$0.20			$(0.33	)		$(0.02	)		$(0.35	)		$9.74		2.07	%		$21,350		0.82	%		3.36	%		1.26	%		11.64	%
Year Ended March 31, 2005		10.22		0.35			(0.25	)		0.10			(0.35	)		(0.08	)		(0.43	)		9.89		0.98	%		21,728		0.87	%		3.46	%		1.37	%		18.11	%
Year Ended March 31, 2004		10.18		0.36			0.08			0.44			(0.36	)		(0.04	)		(0.40	)		10.22		4.41	%		18,660		0.83	%		3.52	%		1.33	%		9.11	%
Period Ended March 31, 2003 (d)		10.00		0.26			0.21			0.47			(0.26	)		(0.03	)		(0.29	)		10.18		4.75	%  (a)		19,154		0.86	%(b)		3.58	%(b)		1.27	%(b)		8.54	%  (a)
Money Market Fund
Year Ended March 31, 2006		$1.00		$0.032			$ —	(e)		$0.032			$(0.032	)		$ —			$(0.032	)		$1.00		3.24	%		$101,607		0.51	%		3.18	%		0.56	%		N/A
Year Ended March 31, 2005		1.00		0.012			—			0.012			(0.012	)		—			(0.012	)		1.00		1.23	%		93,311		0.51	%		1.30	%		0.56	%		N/A
Year Ended March 31, 2004		1.00		0.006			—			0.006			(0.006	)		—			(0.006	)		1.00		0.57	%		70,829		0.54	%		0.57	%		0.59	%		N/A
Period Ended March 31, 2003 (d)		1.00		0.007			—			0.007			(0.007	)		—			(0.007	)		1.00		0.72	%  (a)		110,327		0.53	%(b)		1.02	%(b)		0.58	%(b)		N/A

  *  Excludes sales and redemption charges.

**  During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.

(a)  Not annualized.

(b)  Annualized.

(c)  Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares issued.

(d)  For the period July 15, 2002 through March 31, 2003.

(e)  Amount is less than $0.005.

 
 
See notes to financial statements.

25

SIGNAL FUNDS
Notes to Financial Statements — March 31, 2006

1. Organization:

The Coventry Group (the “Group”) was organized on January 8, 1992 as a Massachusetts business trust, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Group contains the following Signal Funds (individually a “Fund,” collectively the “Funds”):

Fund Legal Name	Short Name
Signal Large Cap Growth Fund	Large Cap Growth Fund
Signal Income Fund	Income Fund
Signal Tax-Exempt Income Fund	Tax-Exempt Income Fund
Signal Money Market Fund	Money Market Fund
Signal Tax-Exempt Money Market Fund	Tax-Exempt Money Market Fund

Financial statements for all other series of the Group are published separately.

The Funds are each authorized to issue Class A and Class I Shares. Currently all classes of the Tax-Exempt Money Market are not offered to any investors. On August 1, 2003, Class A and Class B of the Money Market Fund liquidated all of their assets and are not currently offered to any shareholders. On August 1, 2005, net assets of the Class B Shares of the Funds were exchanged in a tax-free conversion for Class A Shares. The following is a summary of the shares converted and net assets converted.

	Shares Converted		Net Assets Converted
Large Cap Growth Fund		12,479	$	150,626
Income Fund		2,527		24,754
Tax-Exempt Income Fund		3,741		37,129

Under the Group’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Group. In addition, in the normal course of business, the Group may enter into contracts with their vendors and others that provide for general indemnifications. Each Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.

2. Significant Accounting Policies:

The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. The preparation of financial statements requires management to make estimates and assumptions that may affect the reported amounts of income and expenses for the period. Actual results could differ from those estimates.

Securities Valuation:

The value of each equity security is based either on the last sale price on a national securities exchange, or in the absence of recorded sales, at the closing bid prices on such exchanges, or at the quoted bid price in the over-the-counter market. Equity securities traded on the NASDAQ stock market are valued at the NASDAQ official closing price.

Bonds and other fixed income securities (other than short-term obligations but including listed issues) are valued on the basis of valuations furnished by a pricing service, the use of which has been approved by the Group’s Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, and trading characteristics other than market data and without exclusive reliance upon quoted prices or exchanges or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. All short-term

continued

26

SIGNAL FUNDS
Notes to Financial Statements — March 31, 2006

debt portfolio securities with a remaining maturity of 60 days or less and securities held in the Money Market Fund are valued at amortized cost, which approximates market value. Under the amortized cost method, discount or premium, if any, is accreted or amortized, respectively, on a constant (straight-line) basis to the maturity of the security.

Securities or other assets for which market quotations are not readily available (e.g., an approved pricing service does not provide a price, a furnished price is in error, certain stale prices, or an event occurs that materially affects the furnished price) are valued at fair value as determined in good faith by or at the direction of the Group’s Board of Trustees.

Repurchase Agreements:

The Funds may enter into repurchase agreements with banks or broker-dealers that Signal Capital Management, Inc., (the “Advisor”), a wholly owned subsidiary of Old National Trust Company, deems creditworthy. The repurchase price generally equals the price paid by a Fund plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller, under a repurchase agreement, is required to maintain the collateral held pursuant to the agreement, with a market value equal to or greater than the repurchase price (including accrued interest). Collateral subject to repurchase agreements is held by the Funds’ custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. If the counterparty defaults and the fair value of the collateral declines, realization of the collateral by the Funds may be delayed or limited.

Security Transactions and Related Income:

Changes in holdings of portfolio securities shall be reflected no later than in the first calculation on the first business day following the trade date. However, for financial reporting purposes, portfolio security transactions are reported on trade date. Interest income is recognized on the accrual basis and includes, where applicable, the amortization of premium or discount. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds. Income and realized and unrealized gains and losses on investments are allocated to each class of shares based upon relative net assets or another appropriate basis.

Expenses:

Expenses directly attributable to a Fund are charged directly to the Fund. Expenses relating to the Group are allocated proportionately to each Fund within the Group according to the relative net assets of each Fund or on another reasonable basis. Each class of shares bears its respective pro-rata portion of the expenses, except that each class separately bears expenses related specifically to that class, such as distribution fees.

Dividends to Shareholders:

Dividends from net investment income, if any, are declared daily and paid monthly for all of the Funds, except the Large Cap Growth Fund. Dividends for the Large Cap Growth Fund are declared and distributed quarterly. Dividends from net realized gains, if any, are declared and distributed annually for all Funds.

The amounts of dividends from net investment income and distributions from net realized gains, if any, are determined in accordance with federal income tax regulations, which may differ from GAAP. These ‘’book/tax’’ differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. To the extent dividends exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital.

continued

27

SIGNAL FUNDS
Notes to Financial Statements — March 31, 2006

Federal Income Taxes:

Each Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code, and to make distributions from net investment income and from net realized capital gains sufficient to relieve it from all, or substantially all, federal income and excise taxes.

3. Related Party Transactions:

Investment Advisor:

The Funds and the Advisor are parties to an Investment Advisory Agreement under which the Advisor is entitled to receive an annual fee, computed daily and paid monthly, equal to the average daily net assets of each Fund, at the following annual percentage rates:

Name	Fee Rate*
Large Cap Growth Fund		0.75	%
Income Fund		0.50	%
Tax-Exempt Income Fund		0.50	%
Money Market Fund		0.10	%

* The Advisor voluntarily waived fees during the year. With these voluntary fee waivers by the Advisor, net advisory fees for the Funds on an annual basis are 0.55% for the Large Cap Growth Fund, 0.25% for the Income Fund, 0.50% for the Tax-Exempt Income Fund, and 0.05% for the Money Market Fund.

The Advisor may also, from time to time, voluntarily reduce all or a portion of its advisory fee with respect to a Fund.

Administration:

The Funds and BISYS Fund Services Ohio, Inc. (“BISYS Ohio” or the “Administrator”), a wholly owned subsidiary of The BISYS Group, Inc., are parties to an Administration Agreement under which the Administrator provides services for a fee that is computed daily and paid monthly at an annual rate of 0.14% of the average daily net assets of the Funds. From April 1, 2005 through June 30, 2005 the annual rate was 0.20% of the average daily net assets for the Large Cap Fund, Income Fund, Tax-Exempt Fund and 0.25% for the Money Market Fund, respectfully. Certain officers and Trustees of the Group are also employees of the Administrator and are paid no fees directly by the Funds for serving as officers of the Group, except to Chief Compliance Officer (the “CCO”). BISYS Ohio also provides fund accounting and transfer agency services to the Funds pursuant to certain fee arrangements. For transfer agency services, BISYS Ohio receives a fee based on the number of shareholders of record and reimbursement of certain expenses. For fund accounting, BISYS Ohio receives a fee from each Fund for such services equal to an annual rate of three one-hundredths of one percent (.03%) of that Funds’ average daily net assets, subject to certain minimums.

Under a Compliance Services Agreement between the Funds and BISYS Ohio (the “CCO Agreement”), BISYS Ohio makes an employee available to serve as the Funds’ CCO. Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Funds’ compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the Funds paid BISYS Ohio $15,717 for the year ended March 31, 2006, plus certain out of pocket expenses. BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio.

Pursuant to a Sub-Administration agreement, the Advisor provides certain administration services to the Funds. For their services, the Advisor is entitled to a fee payable by the Funds of 0.05% for the Large Cap Fund, Income Fund, and the Tax Exempt Fund, and 0.10% for the Money Market Fund.

continued

28

SIGNAL FUNDS
Notes to Financial Statements — March 31, 2006

Distribution:

The Funds and BISYS Fund Services Limited Partnership (the “Distributor”), a wholly owned subsidiary of The BISYS Group, Inc., are parties to a Distribution Agreement under which shares of the Funds are sold on a continuous basis. The Group has adopted a Service and Distribution Plan for Class A shares pursuant to Rule 12b-1 under the 1940 Act under which the Class A shares of each Fund are authorized to pay the Distributor for payments it makes to banks, other institutions and broker-dealers, and for expenses the Distributor and any of its affiliates incur for providing distribution or shareholder service assistance to the Funds. The calculated annual rate will not exceed 0.25% of the average daily net asset value of Class A shares.

For the year ended March 31, 2006, the Distributor received $9,776 from commissions earned on sales of Class A shares and redemption of Class B shares, none of which the Distributor re-allowed to affiliated broker-dealers of the Funds.

There is no initial sales charge on purchases of $1 million or more of the Class A Shares of the Funds. However, a contingent deferred sales charge (“CDSC”) will be charged to the shareholder if shares are redeemed in the first 18 months after purchase. The Funds collected no CDSC fees on Class A Shares during the year ended March 31, 2006.

4. Purchases and Sales of Securities:

Purchases and sales of investment securities, excluding short-term and U.S. government securities, for the year ended March 31, 2006, totaled:

	Purchases		Sales
Large Cap Growth Fund	$	14,916,695	$	20,552,168
Income Fund		24,028,043		23,511,487
Tax-Exempt Income Fund		2,535,376		2,618,019

29

SIGNAL FUNDS
Notes to Financial Statements — March 31, 2006

5. Federal Tax Information

At March 31, 2006, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows:

								Net Unrealized
			Tax Unrealized		Tax Unrealized			Appreciation
Fund	Tax Cost		Appreciation		(Depreciation)			(Depreciation)
Large Cap Growth Fund	$	28,979,421	$	10,033,326	$	(62,652	)	$	9,970,674
Income Fund		99,437,735		215,271		(2,402,563	)		(2,187,292	)
Tax-Exempt Income Fund		21,219,743		365,300		(190,844	)		174,456

The tax character of distributions paid during the fiscal year ended March 31, 2006 were as follows:

	Distributions paid from
			Net Long Term		Total Taxable		Tax Exempt		Total Distributions
Fund	Ordinary Income		Capital Gains		Distributions		Distributions		Paid1
Large Cap Growth Fund	$	58,614	$	2,454,901	$	2,513,515	$	—	$	2,513,515
Income Fund		4,028,378		—		4,028,378		—		4,028,378
Tax-Exempt Income Fund		6,909		48,928		55,837		743,148		798,985
Money Market Fund		2,873,806				2,873,806		—		2,873,806

The tax character of distributions paid during the fiscal year ended March 31, 2005 were as follows:

	Distributions paid from
			Net Long Term		Total Taxable		Tax Exempt		Total Distributions
Fund	Ordinary Income		Capital Gains		Distributions		Distributions		Paid1
Large Cap Growth Fund	$	119,024	$	2,674,811	$	2,793,835	$	—	$	2,793,835
Income Fund		2,866,596		—		2,866,596		—		2,866,596
Tax-Exempt Income Fund		3,235		145,312		148,547		632,982		781,529
Money Market Fund		955,267		—		955,267		—		955,267

As of March 31, 2006 the components of accumulated earnings/(deficit) on a tax basis were as follows:

																		Total
	Undistributed		Undistributed		Undistributed							Accumulated			Unrealized			Accumulated
	Tax Exempt		Ordinary		Long-Term		Accumulated		Distributions			Capital and			Appreciation			Earnings
Fund	Income		Income		Capital Gains		Earnings		Payable			Other Losses			(Depreciation)2			(Deficit)
Large Cap Growth Fund	$	—	$	139,486	$	2,725,399	$	2,864,885	$	—		$	—		$	9,970,674		$	12,835,559
Income Fund		—		302,427		—		302,427		(294,326	)		(337,557	)		(2,187,292	)		(2,516,748	)
Tax-Exempt Income Fund		61,387		—		1,446		62,833		(61,387	)		—			174,456			175,902
Money Market Fund		—		348,886		—		348,886		(348,888	)		(116	)		—			(118	)

1	Total distributions paid may differ from the amount reported in the Statement of Changes in Net Assets because for tax purposes distributions are recognized when actually paid.
2	The differences between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to: tax deferral of losses on wash sales.

As of March 31, 2006, the following Funds had net capital loss carryforwards, which are available to offset future realized gains.

	Amount		Expires
Income Fund	$	70,328		2012
		222,752		2014

	Amount		Expires
Money Market	$	46		2014

Under current tax law, capital losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The following Funds had deferred post October capital losses, which will be treated as arising on the first business day of the fiscal year ending March 31, 2007:

	Post-October Loss
Income Fund	$	44,477
Money Market		70

30

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and
Shareholders of The Signal Funds:

We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, of the Signal Funds (the “Funds”) (comprising the Signal Large Cap Growth Fund, Signal Income Fund, Signal Tax-Exempt Income Fund, and Signal Money Market Fund), as of March 31, 2006, and the related statements of operations, the statements of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes in net assets and financial highlights for the period ended March 31, 2005 and prior were audited by other auditors. Those auditors expressed an unqualified opinion on those statements of changes in net assets and financial highlights in their report dated May 20, 2005.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2006, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Signal Funds at March 31, 2006, the results of their operations, the changes in their net assets, and financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles.

Columbus, Ohio
May 15, 2006

31

SIGNAL FUNDS
Additional Information — March 31, 2006 (unaudited)

1. Other Federal Tax Information:

During the fiscal year ended March 31, 2006, the Funds declared long-term realized gain distributions in the following amounts:

	15% Capital Gains
Large Cap Growth Fund	$	2,454,901
Tax-Exempt Income Fund		48,928

For the fiscal year ended March 31, 2006, the following percentage of the total ordinary income distributions paid by the Funds qualify for the distributions received deduction available to corporate shareholders.

	Distributions Received Deduction
Large Cap Growth Fund		100	%

For the fiscal year ended March 31, 2006, distributions paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2005 Form 1099-DIV.

	Qualified Divided Income
Large Cap Growth Fund		100	%

2. Expense Comparison:

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases, (2) ongoing costs, including management fees; distribution fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2005 through March 31, 2006.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

		Beginning Account		Ending Account		Expense Paid		Expense Ratio
		Value		Value		During Period*		During Period
		10/1/05		3/31/06		10/1/05 - 3/31/06		10/1/05 - 3/31/06
Large Cap Growth Fund	Class A	$	1,000.00	$	1,054.00	$	6.86		1.34	%
	Class I		1,000.00		1,055.60		5.59		1.09	%
Income Fund	Class A		1,000.00		999,70		4.54		0.91	%
	Class I		1,000.00		1,000.90		3.29		0.66	%
Tax-Exempt Income Fund	Class A		1,000.00		1,000.40		5.54		1.11	%
	Class I		1,000.00		1,001.60		4.24		0.85	%
Money Market Fund	Class I		1,000.00		1,018.60		2.62		0.52	%

32

SIGNAL FUNDS
Additional Information — March 31, 2006 (unaudited)

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

		Beginning Account		Ending Account		Expense Paid		Expense Ratio
		Value		Value		During Period*		During Period
		10/1/05		3/31/06		10/1/05 - 3/31/06		10/1/05 - 3/31/06
Large Cap Growth Fund	Class A	$	1,000.00	$	1,018.05	$	6.74		1.34	%
	Class I		1,000.00		1,019.50		5.49		1.09	%
Income Fund	Class A		1,000.00		1,020.39		4.58		0.91	%
	Class I		1,000.00		1,021.64		3.33		0.66	%
Tax-Exempt Income Fund	Class A		1,000.00		1,019.40		5.59		1.11	%
	Class I		1,000.00		1,020.69		4.28		0.85	%
Money Market Fund	Class I		1,000.00		1,022.34		2.62		0.52	%

* Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by the number of days in the most recent half-year divided by the number of days in the fiscal year.

33

SIGNAL FUNDS
Additional Information — March 31, 2006 (unaudited)

Investment Advisor Contract Approval

The Annual Consideration by the Board of Trustees of the Continuation of the Investment Advisory Agreement Between the Funds and Signal Capital Management, Inc. (the “Adviser”)

In accordance with the Investment Company Act of 1940, the Board of Trustees of the Funds is required, on an annual basis, to consider the continuation of the Investment Advisory Agreement with the Adviser, and this must take place at an in-person meeting of the Board. The relevant provisions of the Investment Company Act of 1940 specifically provide that it is the duty of the Board to request and evaluate such information as the Board determines is necessary to allow them to properly consider the continuation of the Investment Advisory Agreement, and it is the duty of the Adviser to furnish the Trustees with such information that is responsive to their request. Accordingly, in determining whether to renew the Investment Advisory Agreement, the Board of Trustees requested, and the Adviser provided, information and data relevant to the Board’s consideration. This included materials that provided the Board with information regarding the investment performance of the Funds and information regarding the fees and expenses of the Funds, as compared to other similar mutual funds. As part of its deliberations, the Board also considered and relied upon the information about the Funds and the Adviser that had been provided to them throughout the year in connection with their regular Board meetings at which they engage in the ongoing oversight of the Funds and their operations.

The Board of Trustees most recently considered the continuation of the Investment Advisory Agreement at their in-person meeting held on February 23, 2006. At this meeting the Board engaged in a thorough review process in connection with determining whether or not to continue the Investment Advisory Agreement. The Board met during the meeting directly with representatives of the Adviser and reviewed various factors with them concerning the proposed continuation of the Investment Advisory Agreement. Among the factors the Board considered was the overall performance of the Funds relative to the performance of other similar mutual funds since the inception of each of the Funds. The Board took note of the fact that the performance results achieved by the Adviser for each of the Funds, on both a short-term basis and on a longer-term basis, was favorable on a comparative basis and that the Adviser produced these results in a manner consistent with the stated investment objectives and policies of each of the Funds. The Board also took note of the relationship between the Adviser and the Funds and the efforts that have been undertaken by the Adviser to foster the growth and development of the Funds since the inception of each of the Funds and their plans for the continued growth of each of the Funds. The Board compared expenses of each Fund to the expenses of its peers, noting that the expenses for each of the Funds compare favorably with industry averages for other funds of similar size and investment objective. They noted the range of investment advisory services provided by the Adviser to the Funds and the level and quality of these services. The Board also considered the services that the Adviser performs in its capacity as the sub-administrator for the Funds, the fees that it receives for providing these services, and the benefits to the Funds and their shareholders that result from the Adviser providing these sub-administration services. The Board members took note of the fact that the sub-administration fees provide additional revenue to the Adviser but that the Adviser provides valuable and useful services for the fees paid. The Board also reviewed financial information concerning the Adviser relating to the operation of the Funds, noting the overall profitability of the relationship with the Funds to the Adviser, which was found to be consistent with industry standards, and the financial soundness of the Adviser as demonstrated by the financial information provided was also noted. The Board further reviewed the Adviser’s brokerage practices, including soft dollar arrangements, and its best-execution procedures, and it was noted that these were reasonable and consistent with standard industry practice. The Board took note of the current portfolio managers for each of the Funds, their respective compensation arrangements and their overall management of each of the Funds. The Board also considered information regarding the fees that the Adviser charges other clients for investment advisory services that are similar to the advisory services provided to the Funds and noted that the fees were comparable based on the relevant circumstances of the types of accounts involved.

The Board then undertook a review of the proposed renewal of the Investment Advisory Agreement with respect to each Fund separately, noting the applicable investment objectives, strategies and fee arrangements for each Fund, and noting the Adviser’s investment expertise and the investment strategies utilized by the Adviser with respect to each of the Funds. In considering the investment advisory fees applicable to each of the Funds, the Board discussed with representatives of the Adviser their reasons for assessing the applicable fees in connection with each of the Funds, and the Board considered and discussed the fees charged by similar funds in each respective investment category. The Board also reviewed matters with respect to the proposed continuation of the Sub-Investment Advisory Agreement for the Signal Money Market Fund with Mercantile Capital Advisors, Inc., the sub-investment adviser to the Signal Money Market Fund. The Board took note of the favorable investment performance attained by Mercantile

34

SIGNAL FUNDS
Additional Information — March 31, 2006 (unaudited)

Capital Advisors, Inc. with respect to the Signal Money Market Fund and they took further note of their successful sub-investment management of that Fund.

In reaching their conclusion with respect to the continuation of the Investment Advisory Agreement for each of the Funds and the Sub-Investment Advisory Agreement for the Signal Money Market Fund, the Trustees did not identify any one single factor as being controlling, rather, the Board took note of a combination of factors that influenced their decision making process. The Board did, however, identify the overall favorable investment performance of the Funds, the commitment of the Adviser to the successful operation of the Funds, and the level of expenses of the Funds, as being important elements of their consideration. The Board members also took notice of the fact that the Adviser has waived a portion of its investment advisory fee with respect to each of the Funds since their inception in order to help reduce the operating expense ratio of each of the Funds and they took further notice of the Adviser’s undertaking to continue waiving a portion of its investment advisory fee for each of the Funds for the current fiscal year of the Funds. Based upon their review and consideration of these factors and other matters deemed relevant by the Board in reaching an informed business judgment, a majority of the Board of Trustees, including a majority of the Independent Trustees, concluded that the terms of the Investment Advisory Agreement are fair and reasonable and the Board voted to renew the Investment Advisory Agreement for an additional one-year period.

35

SIGNAL FUNDS
  March 31, 2006

Results of Special Meeting of Shareholders

A special meeting of the shareholders (the “Meeting”) of The Coventry Group (the “Group”) was held on February 21, 2006. The Funds are separate investment series of the Group. The Meeting was held for the purpose of electing Trustees of the Group. As of the record date for the Meeting, there were 153,785,122 shares of beneficial interest in the Group outstanding. Information regarding the results of the shareholder vote are set forth below. Each of the nominees was elected to the Board by the requisite shareholder vote.

Trustee Nominee	Affirmative Votes		% of Outstanding			Votes Withheld		% of Outstanding
James H. Woodward		93,503,623		60.83	%		4,475		.003	%
Michael M. Van Buskirk		93,503,623		60.83	%		4,475		.003	%
Maurice G. Stark		93,503,623		60.83	%		4,475		.003	%
Diane E. Armstrong		93,503,623		60.83	%		4,475		.003	%
Walter B. Grimm		93,193,133		60.63	%		314,965		.205	%

36

SIGNAL FUNDS
Trustees and Officers — March 31, 2006 (unaudited)

Trustees who are deemed “interested persons,” as defined in the Investment Company Act of 1940, are included in the table titled, “Interested Trustees.” Trustees who are not interested persons are referred to as Independent Trustees. The Fund’s Statement of Additional Information includes additional information about the Funds’ Trustees and is available, without charge and upon request, by calling 1-800-468-0347.

		Term of Office**		Number of Funds
Name, Address	Positions(s) Held	and Length of	Principal Occupation(s)	in Fund Complex		Other Directorships
Age	with the Funds	Time Served	During Past Five Years	Overseen by Trustee		Held by Trustee
INTERESTED TRUSTEES*
Walter B. Grimm 3435 Stelzer Road Columbus, Ohio 43219 Age: 60	Trustee	Since 1996	Retired. From June 1992 to 2005, employee of BISYS Fund Services.		15	American Performance Funds; Legacy Funds Group; Performance Funds Trust; The Coventry Funds Trust
INDEPENDENT TRUSTEES
Maurice G. Stark 3435 Stelzer Road Columbus, Ohio 43219 Age: 70	Trustee	Since 1992	Retired.		15	The Coventry Funds Trust
Michael M. Van Buskirk 3435 Stelzer Road Columbus, Ohio 43219 Age: 59	Trustee and Chairman of the Board of Trustees	Since 1992	From June 1991 to present, employee of and currently President of The Ohio Bankers’ League (trade association)		15	The Coventry Funds Trust
Diane Armstrong 3435 Stelzer Road Columbus, Ohio 43219 Age: 41	Trustee	Since 2004	From August 2003 to present, Principal of King Dodson Armstrong Financial Advisors, Inc.; from April 2000 to August 2003, Director of Financial Planning, Hamilton Capital Management.		15	The Coventry Funds Trust
Dr. James Woodward 3435 Stelzer Road Columbus, Ohio 43219 Age: 66	Trustee	Since 2006	Retired. From July 1989 to June 2005 , Chancellor, University of North Carolina at Charlotte.		15	The Coventry Funds Trust
OFFICERS WHO ARE NOT TRUSTEES
R. Jeffrey Young 3435 Stelzer Road Columbus, Ohio 43219 Age: 41	President	Since 1999	From October 1993 to present, employee of BISYS Fund Service.
Aaron Masek 3435 Stelzer Road Columbus, Ohio 43219 Age: 32	Treasurer	Since 2006	From March 1997 to present, employee of BISYS Fund Services.
Timothy Bresnahan 3435 Stelzer Road Columbus, Ohio 43219 Age: 37	Secretary	Since 2005	From February 2005 to present, employee of BISYS Fund Services; from March 2004 to February 2005, employee of the law firm of Greenberg Traurig; from October to March 2004, employee of Deutsche Bank Asset Management, Inc.; from September, 2001 to February, 2003, Associate of the law firm Goodwin Procter, L.L.P.
Alaina V. Metz 3435 Stelzer Road Columbus, Ohio 43219 Age: 37	Assistant Secretary	Since 1995	From June 1995 to present, employee of BISYS Fund Services.
George L. Stevens 3435 Stelzer Road Columbus, Ohio 43219 Age: 54	Chief Compliance Officer	Since 2004	From September 1996 to present, employee of BISYS Fund Services.

*	Mr. Grimm is considered to be an “interested person” of the Funds as defined in the Investment Company Act of 1940 due to his previous employment with BISYS Fund Services, the Funds’ distributor and administrator.
**	Trustees hold their position with the Funds until their resignation or removal. Officers hold their positions with the Funds until a successor has been duly elected and qualified.

37

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38

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39

EX-99.17.W

Exhibit 17(w)

Investment Advisor
Signal Capital Management, Inc.
One Main Street
Evansville, Indiana 47708

Administrator and Transfer Agent
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219

Distributor
BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219

Custodian
Huntington National Bank
7 Easton Oval
Columbus, Ohio 43219

Counsel
Dechert LLP
1775 I Street, NW
Washington, DC 20006

Independent Registered Public Accounting Firm
Ernst & Young LLP
1100 Huntington Center
41 South High Street
Columbus, Ohio 43215

This report is for the information of the shareholders of the Signal Funds. Its use in connection with any offering of the Funds’ shares is authorized only in case of concurrent or prior delivery of the Funds’ current prospectus.

Federal law requires the Funds, and each of its investment advisers, to adopt procedures for voting proxies (“Proxy Voting Guidelines”) and to provide a summary of those Proxy Voting Guidelines used to vote the securities held by the Funds. The Funds’ proxy voting policies and procedures are available without charge (i)  upon request, by calling 800-468-0347, or (ii)  on the U.S. Securities and Exchange Commission’s web site at www.sec.gov.

Statement Regarding Availability of Quarterly Portfolio Schedule.

The Signal Funds file complete schedules of portfolio holdings for each Fund with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Funds’ Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330; and the Funds make the information on Form N-Q available upon request without charge.

Statement Regarding Availability of Proxy Voting Record.

Information regarding how the Fund voted proxies relating to portfolio securities held during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800-468-0347, and on the Commission’s website at http://www.sec.gov.

Semi-Annual Report
September 30, 2006

Shares of the Funds are not deposits or obligations of, or guaranteed or endorsed by, Old National Bancorp., and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Shares of the Funds involve investment risk, including possible loss of principal. Past performance is not indicative of future results.

SIGNAL FUNDS
Large Cap Growth Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Common Stocks — 97.1%
		Aerospace/Defense — 1.3%
	7,800	United Technologies Corp		494,130
		Air Freight & Logistics — 1.7%
	14,000	Expeditors International of Washington, Inc		624,120
		Applications Software — 1.5%
	15,100	Citrix Systems, Inc.*		546,771
		Banking — 5.9%
	20,000	Bank of America Corp.		1,071,400
	14,200	Zions Bancorp		1,133,302
				2,204,702
		Business Services — 3.7%
	11,000	Jacobs Engineering Group, Inc.*		822,030
	22,000	Staples, Inc		535,260
				1,357,290
		Communications Equipment — 5.1%
	47,700	Cisco Systems, Inc.*		1,097,100
	18,300	Harris Corp		814,167
				1,911,267
		Distiller & Vintners — 1.2%
	16,000	Constellation Brands, Inc.*		460,480
		Educational Services — 1.3%
	11,500	Bright Horizons Family Solutions Inc.*		479,895
		Electronics — 1.7%
	8,000	L-3 Communications Holdings, Inc.		626,640
		Finance - Investment Bankers and Brokers — 8.2%
	7,000	Franklin Resources, Inc.		740,250
	6,500	Goldman Sachs Group, Inc		1,099,605
	20,000	UBS AG-ADR		1,186,200
				3,026,055
		General Merchandise — 2.0%
	13,200	Target Corp		729,300
		Healthcare - Equipment — 1.9%
	14,000	Stryker Corp.		694,260

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Healthcare Services — 2.8%
	15,000	Caremark Rx, Inc		850,050
	3,000	Covance, Inc.*		199,140
				1,049,190
		Household Products — 1.8%
	17,000	Church & Dwight Co., Inc.		664,870
		Industrial Conglomerates — 1.1%
	12,000	General Electric Co		423,600
		Industrial Gases — 2.1%
	13,100	Praxair, Inc.		774,996
		Insurance - - Life — 3.4%
	22,500	MetLife, Inc.		1,275,300
		Insurance-Multi-Line — 2.9%
	4,500	American International Group, Inc.		298,170
	10,000	Wellpoint, Inc.*		770,500
				1,068,670
		Machinery - - Industrial — 2.8%
	10,400	Danaher Corp.		714,168
	7,200	Illinois Tool Works, Inc		323,280
				1,037,448
		Manufacturing - Machinery — 1.1%
	10,000	Thermo Electron Corp.*		393,300
		Oil & Gas - Integrated — 3.8%
	7,000	BP PLC - ADR		459,060
	14,300	Exxon Mobil Corp.		959,530
				1,418,590
		Oil & Gas Exploration Services — 5.5%
	23,000	Noble Energy, Inc.		1,048,570
	26,000	Smith International, Inc		1,008,800
				2,057,370
		Personal Products — 2.8%
	16,600	Procter & Gamble Co.		1,028,868

continued

1

SIGNAL FUNDS
Large Cap Growth Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Pharmaceuticals — 4.4%
	5,200	Barr Laboratories, Inc.*		270,088
	10,000	Johnson & Johnson		649,400
	12,500	Novartis AG — ADR		730,500
				1,649,988
		Prepackaged Software — 5.3%
	16,000	DST Systems, Inc.*		986,720
	20,700	Fiserv, Inc.*		974,763
				1,961,483
		Real Estate Investment Trusts — 2.3%
	15,000	Prologis Trust		855,900
		Retail - Computer/Electronics — 2.1%
	14,400	Best Buy Co., Inc.		771,264
		Retail - Drugs — 2.3%
	19,300	Walgreen Co.		856,727
		Retail - Restaurants — 1.9%
	18,000	McDonald’s Corp.		704,160
		Soft Drinks — 2.8%
	15,900	PepsiCo, Inc		1,037,634
		Systems Software — 3.4%
	19,000	Microsoft Corp.		519,270
	15,000	SAP AG — ADR		742,500
				1,261,770
		Transportation Services — 2.3%
	11,800	Burlington Northern Santa Fe Corp		866,592
		Utilities - - Electric — 3.6%
	8,400	Entergy Corp.		657,132
	15,200	FPL Group, Inc		684,000
				1,341,132
		Wireless Equipment — 1.1%
	16,700	Motorola, Inc.		417,500

Shares or
Principal		Security
Amount ($)		Description	Value ($)
		Total Common Stocks (cost - $28,120,704)		36,071,262
		Investment Companies - 2.4%
	898,955	Huntington Money Market Fund - Trust Class		898,955
		Total Investment Companies (cost - $898,955)		898,955
		Total Investments - 99.5% (cost - $29,019,658)		36,970,217

Percentages indicated are based on net assets of $37,128,169.

* Non-income producing securities.

ADR – American Depositary Receipt

See notes to financial statements.

2

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date		Value ($)
		Corporate Bonds — 28.9%
		Aerospace/Defense — 0.8%
	750,000	General Dynamics Corp.	4.50%		8/15/10		733,266
		Banking — 6.5%
	500,000	Bank of America Corp.	5.38		6/15/14		502,152
	500,000	Credit Suisse First Boston USA, Inc.	4.63		1/15/08		496,356
	105,000	First Union National Bank, BKNT	5.80		12/1/08		106,541
	300,000	MBNA Bank	5.38		1/15/08		300,011
	500,000	MBNA Bank	6.13		3/1/13		521,515
	500,000	National City Corp.	4.50		3/15/10		487,903
	750,000	U.S. Bancorp	3.95		8/23/07		741,236
	1,000,000	Washington Mutual Bank	5.50		1/15/13		999,439
	1,000,000	Washington Mutual Bank	5.65		8/15/14		1,001,963
	500,000	Wells Fargo Co.	3.50		4/4/08		488,114
							5,645,230
		Brewery — 0.6%
	500,000	Anheuser Busch	4.70		4/15/12		489,068
		Computer Hardware — 0.7%
	500,000	Hewlett-Packard Co.	5.75		12/15/06		500,289
	100,000	International Business Machines Corp.	4.88		10/1/06		100,000
							600,289
		Department Stores — 0.8%
	750,000	Target Corp.	5.88		3/1/12		773,204
		Electric & Electronic Equipment — 1.5%
	1,300,000	General Electric Co.	5.00		2/1/13		1,285,311
		Financial Services — 10.6%
	500,000	American General Finance Corp.	4.00		3/15/11		473,904
	500,000	Associates Corp.	6.88		11/15/08		516,655
	500,000	Bear Stearns Co., Inc.	4.50		10/28/10		486,597
	500,000	Boeing Capital Corp.	5.80		1/15/13		516,060
	750,000	Countrywide Financial	4.25		12/19/07		740,852
	345,000	General Electric Capital Corp., MTN	6.13		2/22/11		357,944
	75,000	Goldman Sachs Group, Inc.	6.88		1/15/11		79,490
	500,000	Goldman Sachs Group, Inc.	5.70		9/1/12		508,504
	400,000	Goldman Sachs Group, Inc.	5.15		1/15/14		391,069
	250,000	Household Finance Corp.	8.00		7/15/10		273,118
	500,000	Household Finance Corp.	4.75		7/15/13		482,926
	20,000	J.P. Morgan & Co., Inc.	5.75		10/15/08		20,167
	155,000	J.P. Morgan & Co., Inc., MTN	6.00		1/15/09		157,285
	500,000	J.P. Morgan Chase & Co.	5.75		1/2/13		511,308
	500,000	J.P. Morgan Chase & Co.	5.25		5/1/15		491,522

continued

3

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
	395,000	J.P. Morgan Chase Bank	6.13	11/1/08	403,302
	500,000	Morgan Stanley	3.63	4/1/08	488,421
	400,000	Morgan Stanley	4.25	5/15/10	386,808
	1,000,000	Prudential Financial, Inc.	4.50	7/15/13	948,061
	500,000	SLM Corp.	5.38	1/15/13	498,688
	500,000	SLM Corp.	5.38	5/15/14	496,123
					9,228,804
		Food Products & Services — 0.5%
	140,000	Campbell Soup Co.	6.90	10/15/06	140,060
	300,000	Kraft Foods, Inc.	4.00	10/1/08	292,888
					432,948
		Insurance — 1.1%
	1,000,000	Everest Reinsurance Holding	5.40	10/15/14	975,075
		Insurance - Life — 0.6%
	513,000	Lincoln National Corp	6.50	3/15/08	521,229
		Investment Management and Advisory Services — 0.6%
	500,000	FMR Corp.*	4.75	3/1/13	485,811
		Medical - Drugs — 0.9%
	800,000	Bristol-Meyers Squibb Co.	5.75	10/1/11	814,906
		Real Estate Operation/Development — 0.4%
350,000		EOP Operating Limited Partnership	4.75	3/15/14	331,062
		Restaurants — 1.2%
	800,000	Darden Restaurants	4.88	8/15/10	783,231
	280,000	McDonald’s Corp.	6.00	4/15/11	288,601
					1,071,832
		Retail — 0.2%
	200,000	Sherwin-Williams Co.	6.85	2/1/07	200,664
		Utilities - Electric — 1.9%
	950,000	National Rural Utilities	3.25	10/1/07	931,699
	200,000	Tennessee Valley Authority, Series A	5.63	1/18/11	204,995
	500,000	Union Electric Co.	6.75	5/1/08	509,890
					1,646,584
		Total Corporate Bonds (cost - $25,674,372)			25,235,283

continued

4

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		U.S. Government Agencies — 60.5%
	400,000	Fannie Mae	7.13	3/15/07	403,188
	1,000,000	Fannie Mae	3.63	7/27/07	987,426
	1,500,000	Fannie Mae	4.30	5/5/08	1,484,154
	1,000,000	Fannie Mae	4.00	9/2/08	980,246
	250,000	Fannie Mae	5.25	1/15/09	251,581
	500,000	Fannie Mae, Callable 11/30/07 @ 100	4.00	11/30/09	486,427
	200,000	Fannie Mae	4.25	7/28/10	194,810
	150,000	Fannie Mae	6.25	2/1/11	156,831
	1,000,000	Fannie Mae	4.55	3/9/11	978,478
	750,000	Fannie Mae	5.38	11/15/11	766,081
	100,000	Fannie Mae	5.25	8/1/12	100,523
	750,000	Fannie Mae	6.00	12/14/12	749,816
	300,000	Fannie Mae	5.00	4/15/13	294,405
	500,000	Fannie Mae	4.63	10/15/14	489,000
	500,000	Fannie Mae	5.31	11/3/14	492,230
	467,789	Fannie Mae	5.00	6/25/16	459,543
	800,000	Fannie Mae, Callable 4/26/10 @ 100	5.00	4/26/17	774,592
	901,778	Fannie Mae	5.68	2/25/20	887,842
	456,323	Fannie Mae	4.50	6/25/33	436,561
	324,877	Fannie Mae	5.00	3/25/34	320,283
	2,000,000	Fed Farm Credit Bank	5.20	3/21/16	2,032,218
	500,000	Federal Farm Credit Bank, MTN	5.87	9/2/08	507,819
	750,000	Federal Farm Credit Bank	5.20	2/24/10	745,444
	420,000	Federal Farm Credit Bank	5.81	1/10/11	433,602
	750,000	Federal Farm Credit Bank, Callable 11/29/06 @ 100	4.65	11/29/11	733,180
	250,000	Federal Farm Credit Bank	5.22	10/20/14	245,292
	500,000	Federal Farm Credit Bank	5.63	10/19/20	490,982
	285,000	Federal Home Loan Bank, Series TV06	4.88	11/15/06	284,823
	800,000	Federal Home Loan Bank	4.50	6/6/08	792,393
	500,000	Federal Home Loan Bank	4.05	8/13/08	491,341
	1,065,000	Federal Home Loan Bank, Series 100	5.80	9/2/08	1,077,980
	325,000	Federal Home Loan Bank, Series 8D08	5.25	11/14/08	326,385
	875,000	Federal Home Loan Bank	5.49	12/22/08	881,350
	400,000	Federal Home Loan Bank	4.28	10/30/09	391,413
	200,000	Federal Home Loan Bank, Series 5	4.00	3/30/10	198,392
	1,250,000	Federal Home Loan Bank, Series 1	4.75	3/30/10	1,232,611
	550,000	Federal Home Loan Bank	4.00	4/22/10	533,120
	1,500,000	Federal Home Loan Bank	5.00	8/9/10	1,479,660
	750,000	Federal Home Loan Bank	5.20	10/28/10	744,339
	500,000	Federal Home Loan Bank	5.00	2/24/11	498,185
	100,000	Federal Home Loan Bank, Series 1N11	6.00	5/13/11	104,513
	1,000,000	Federal Home Loan Bank	5.00	8/3/11	986,382
	1,000,000	Federal Home Loan Bank, Callable 2/16/07 @ 100	4.75	2/16/12	976,861
	500,000	Federal Home Loan Bank	5.00	2/21/12	492,514
	1,200,000	Federal Home Loan Bank	5.25	5/3/12	1,186,717
	200,000	Federal Home Loan Bank	4.50	10/29/13	197,461

continued

5

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
	500,000	Federal Home Loan Bank	4.25	1/30/15	495,653
	1,000,000	Federal Home Loan Bank	5.74	4/20/15	992,586
	500,000	Federal Home Loan Bank	4.00	6/26/18	483,739
	500,000	Federal Home Loan Bank	5.65	3/22/19	490,440
	500,000	Federal Home Loan Bank, Callable 11/4/09 @ 100	5.30	11/4/19	484,560
	500,000	Federal Home Loan Bank, Callable 12/27/06 @ 100	5.85	12/27/19	492,478
	1,000,000	Federal Home Loan Mortgage Corp.	4.13	8/1/18	981,216
	200,000	Freddie Mac	3.25	3/14/08	195,106
	50,000	Freddie Mac	5.75	4/15/08	50,548
	750,000	Freddie Mac	4.85	12/1/09	742,667
	117,056	Freddie Mac	3.75	4/15/11	116,713
	1,000,000	Freddie Mac	6.25	3/5/12	1,003,782
	750,000	Freddie Mac, Callable 11/5/07 @ 100	5.25	11/5/12	742,734
	1,500,000	Freddie Mac	4.80	7/30/13	1,448,567
	500,000	Freddie Mac	5.13	8/6/13	491,995
	1,500,000	Freddie Mac, Callable 1/30/07 @ 100	5.00	1/30/14	1,485,422
	895,000	Freddie Mac	4.00	8/26/14	887,319
	1,500,000	Freddie Mac	4.00	10/14/14	1,478,823
	500,000	Freddie Mac, Callable 10/27/06 @ 100	5.00	10/27/14	495,012
	750,000	Freddie Mac	5.00	11/13/14	741,485
	1,000,000	Freddie Mac	5.40	9/22/15	983,555
	2,000,000	Freddie Mac, Callable	5.00	2/13/18	1,955,919
	500,000	Freddie Mac, Callable	4.50	7/15/18	479,951
	496,000	Freddie Mac, Callable	5.00	7/30/18	474,958
	1,500,000	Freddie Mac	5.00	1/15/19	1,488,656
	725,000	Freddie Mac	5.00	6/11/21	681,997
	356,907	Freddie Mac	4.75	3/15/22	350,045
	1,458,800	Freddie Mac	5.00	8/15/27	1,443,401
	558,291	Freddie Mac, Series 2664	5.00	4/15/30	552,610
	265,825	Freddie Mac	5.50	10/15/31	266,178
		Total U.S. Government Agencies (cost - $53,262,811)			52,737,109
		U.S. Treasury Securities — 9.7%
	1,500,000	U.S. Treasury Notes	4.50	2/15/09	1,494,668
	3,000,000	U.S. Treasury Notes	3.63	1/15/10	2,911,055
	150,000	U.S. Treasury Notes	3.50	2/15/10	144,850
	500,000	U.S. Treasury Notes	4.00	3/15/10	490,508
	500,000	U.S. Treasury Notes	4.50	2/28/11	498,125
	1,750,000	U.S. Treasury Notes	4.00	11/15/12	1,695,039
	200,000	U.S. Treasury Notes	4.75	5/15/14	201,695
	750,000	U.S. Treasury Notes	4.25	11/15/14	731,426
	250,000	U.S. Treasury Notes	1.63	1/15/15	253,428
		Total U.S. Treasury Securities (cost - $8,598,328)			8,420,794

continued

6

SIGNAL FUNDS
Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		Investment Companies — 0.1%
	134,140	Huntington Money Market Fund - Trust Class			134,140
		Total Investment Companies (cost - $134,140)			134,140
		Total Investments – 99.2% (cost - $87,669,651)			86,527,326

Percentages indicated are based on net assets of $87,216,032
*	144A security is restricted as to resale to institutional investors. These securities have been deemed liquid under guidelines established by the Board of Trustees.
BKNT – Bank Note
MTN – Medium Term Note

See notes to financial statements.

7

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		Municipal Bonds — 98.5%
		Alabama — 1.1%
	210,000	Daphne Alabama, GO, Callable 2/1/13 @ 100, Insured by: AMBAC	4.00%	8/1/14	213,041
		California — 1.3%
	250,000	La Mirada California Redevelopment Agency, Callable 8/15/14 @ 100, Insured by: FSA	4.25	8/15/19	253,498
		Florida — 1.9%
	380,000	Hillsborough County Florida Individual Development Authority	5.00	10/1/07	384,210
		Illinois — 2.6%
	20,000	Du Page County Illinois High School District	5.05	12/1/14	20,330
	180,000	Du Page County Illinois High School District	5.05	12/1/14	183,091
	300,000	Northlake Illinois, Series A, GO, Callable 12/1/08 @ 100, Insured by: AMBAC	5.00	6/1/14	308,571
					511,992
		Indiana — 56.6%
	200,000	Anderson Indiana School Building Corp., Insured by: FSA	4.00	7/15/15	203,102
	260,000	Bloomington Indiana Municipal Facilities Corp., Callable 2/1/08 @ 101	4.80	8/1/12	266,061
	200,000	Carmel Indiana Redevelopment Authority, Insured by: MBIA	4.25	8/1/11	205,524
	380,000	Center Grove Indiana Building Corp., Insured by: FGIC	3.50	1/15/11	378,190
	150,000	Clarksville Indiana High School Building Corp., Callable 7/15/08 @ 101, Insured by: MBIA	5.00	7/15/14	154,964
	225,000	Cloverdale Indiana Multi-School Building Corp., Callable 1/15/08 @ 102, Insured by: MBIA	4.95	1/15/11	233,372
	200,000	Crown Point Indiana Multi-School Building Corp., Callable 7/15/09 @ 101, Insured by: MBIA	4.80	1/15/14	207,558
	295,000	Delaware County Indiana Edit Corp., Callable 12/1/07 @ 101, Insured by: MBIA	5.00	12/1/12	302,528
	125,000	Eagle Union Middle School Building Corp. Indiana, Callable 7/5/11 @ 100, Insured by: AMBAC	4.85	7/5/15	130,706
	300,000	East Washington Indiana Multi School Building Corp., Insured by : MBIA	3.90	7/15/14	303,000
	295,000	Elkhart Indiana Community Schools, Callable 7/15/14	4.30	7/15/18	299,865
	100,000	Fall Creek Indiana Regulatory Waste District, Callable 9/1/10 @ 100, Insured by: MBIA	4.70	3/1/13	103,824
	165,000	Fort Wayne Indiana Stormwater Managemet District Revenue, Insured by : MBIA	4.00	8/1/13	167,955
	260,000	Greencastle Indiana Multi-School Building Corp., Callable 7/10/12 @100, Insured by: FGIC	4.10	1/10/13	265,343
	300,000	Greencastle Indiana Waterworks Revenue, Callable 1/1/12 @ 100, Insured by: MBIA	4.25	7/1/13	307,782
	275,000	Indiana Bank Revenue, Insured by: MBIA	4.00	4/1/09	277,926
	290,000	Indiana Bank Revenue, Series A, Callable 2/1/09 @ 102, Insured by: FSA	4.60	2/1/13	299,744
	200,000	Indiana Bank Revenue	4.80	2/1/13	204,872
	65,000	Indiana Bank Revenue	4.80	2/1/13	66,711
	70,000	Indiana Health Facilities Financing Authority, Callable 8/15/07 @ 102, Insured by: RADIAN	5.50	2/15/10	72,537
	325,000	Indiana State Educatonal Facilities Authority, Callable 10/15/08 @ 101	4.95	10/15/12	335,439
	300,000	Indiana State Office Building Community Facilities, Series A, Callable 7/1/08 @ 101	4.70	7/1/11	308,019

continued

8

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
	100,000	Johnson County Indiana, GO, Insured by: FSA	4.10	7/15/07	100,438
	265,000	La Porte Indiana Multi School Building Corp., Insured by: FSA	4.00	1/15/10	268,487
	305,000	Lafayette Indiana Redevelopment Authority, Callable 2/1/13 @ 100	3.75	8/1/13	304,988
	75,000	Marion County Indiana Convention and Recreational Facilities Authority, Series A, Callable 6/1/08 @ 101	5.00	6/1/12	77,428
	275,000	Mitchell Indiana Multi-School Building Corp.	4.65	7/5/13	290,133
	300,000	Montgomery County Indiana Jail Facility Building Corp., Callable 1/15/15 @ 100, Insured by: FSA	4.00	7/15/16	301,248
	150,000	Mt. Vernon of Hancock County Indiana Multi-School Building Corp., Series B, Callable 7/15/11 @ 100, Insured by: AMBAC	4.70	1/15/12	156,845
	200,000	Munster Indiana School Building Corp., Callable 7/5/08 @ 101, Insured by: FSA	4.60	7/5/10	205,512
	265,000	Nobelsville Indiana Redevelopment Authority	4.00	8/1/08	267,173
	400,000	North Montgomery Indiana High School Building Corp., Callable 1/15/11 @ 100, Insured by: FGIC	5.05	7/15/15	420,203
	100,000	Northwest Allen County Indiana Middle School Building Corp., Callable 1/15/09 @ 101, Insured by: MBIA	4.75	1/15/12	103,591
	200,000	Northwest Allen County Indiana Middle School Building Corp., Callable 1/15/09 @ 101, Insured by: MBIA	4.90	1/15/14	207,834
	240,000	Perry Township Indiana Multi-School Building Corp., Callable 7/15/10 @101, Insured by: FGIC	4.63	1/15/15	249,497
	300,000	Porter County Indiana Jail Building Corp., Callable 7/10/11 @ 100, Insured by: FSA	5.00	7/10/16	315,009
	275,000	Princeton Indiana Sewer Works Revenue, Callable 5/1/09 @ 101	4.50	5/1/13	275,894
	200,000	Purdue University Indiana, University Revenue	4.00	7/1/12	203,380
	50,000	Purdue University Indiana Certificates Participation, Callable 7/1/08 @ 100	4.50	7/1/09	50,709
	250,000	Rochester Indiana Community School Building Corp., Callable 7/15/08 @ 102, Insured by: AMBAC	5.00	7/15/13	260,840
	200,000	South Bend Indiana Community School Building Corp., Callable 1/1/10 @ 101, Insured by: FSA	4.60	7/1/13	206,598
	225,000	South Bend Indiana Community School Building Corp., Callable 1/1/10 @ 101, Insured by: FSA	5.10	7/1/17	236,594
	400,000	Sunman-Dearbon Indiana High School Building Corp., Insured by: MBIA	4.00	7/15/12	407,219
	125,000	Terre Haute Indiana San District, GO, Callable 1/1/07 @ 102, Insured by: AMBAC	4.60	7/1/10	127,663
	300,000	Terre Haute Indiana San District, Callable 1/1/15 @ 100, Insured by: AMBAC	4.00	7/1/17	301,032
	200,000	Vinton-Tecumseh Indiana School Building Corp., Callable 1/5/08 @ 101, Insured by: SAW	5.00	7/5/13	205,376
	300,000	Warren Township Indiana School Building Corp., Callable 7/5/08 @ 101, Insured by: FSA	5.00	7/5/14	309,822
	275,000	Whitley County Indiana Middle School Building Corp., Callable 7/10/08 @ 101, Insured by: FSA	4.80	1/10/11	283,550
					11,232,085

continued

9

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		Kansas — 1.2%
	250,000	Kansas State Development Finance Authority Revenue	3.25	11/1/09	248,118
		Kentucky — 2.2%
	250,000	Jessamine County Kentucky School District, Insured by: AMBAC	4.00	1/1/14	254,715
	185,000	Kentucky Rural Water Financial Corp., Series C, Callable 2/01/12 @ 101, Insured by: MBIA	3.88	2/1/14	187,054
					441,769
		Michigan — 5.3%
	250,000	Green Oak Township Michigan — Sewer, GO, Callable 5/1/12 @ 100, Insured by: MBIA	4.00	5/1/17	251,610
	300,000	Macomb Township Michigan Building Authority, GO, Callable 4/1/11 @ 100, Insured by: AMBAC	4.75	4/1/16	314,697
	150,000	Michigan Higher Education Facilities Authority Revenue, Callable 12/1/12 @ 100	5.00	12/1/20	155,867
	320,000	Warren Michigan Downtown Development, GO, Insured by: MBIA	4.00	10/1/14	325,923
					1,048,097
		Missouri — 2.6%
	200,000	Creve Coeur Missouri, SO	3.50	1/1/13	198,332
	300,000	Jefferson County Missouri School District, GO, Callable 3/1/14 @ 100, Insured by: MBIA	4.35	3/1/16	310,950
					509,282
		Nevada — 1.3%
	250,000	University of Nevada Community College, Series A, Callable 7/1/11 @ 100, Insured by: FGIC	4.45	7/1/12	257,745
		New York — 2.2%
	400,000	New York General Obligation Unlimited	5.00	8/1/18	431,200
		North Carolina — 1.5%
	300,000	Davie County NC	3.75	6/1/11	301,392
		North Dakota — 1.5%
	300,000	North Dakota State Building Authority Lease Revenue, Callable 12/1/13 @ 100	3.70	12/1/15	297,228
		Ohio — 1.3%
	250,000	Akron Ohio Package Facility Project, Series A, Insured by: AMBAC	3.50	12/1/10	249,705
		Pennsylvania — 0.8%
	150,000	Pennsylvania State Higher Educational Facilities Authority College & University Revenue, Callable 7/1/11 @ 100, Insured by: ASST GTY	5.38	7/1/23	157,892

continued

10

SIGNAL FUNDS
Tax-Exempt Income Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		Texas — 2.9%
	350,000	Brownsville Texas, GO, Callable 2/15/14 @ 100, Insured by: AMBAC	4.00	2/15/17	350,650
	225,000	Keller Texas, Insured by: MBIA	3.75	2/15/11	226,253
					576,903
		Utah — 2.5%
	200,000	South Davis Recreation District Utah, Callable 1/1/15 @ 100, Insured by: XLCA	4.38	1/1/20	203,102
	300,000	Utah State Building Ownership Authority Lease Revenue	3.25	5/15/09	296,178
					499,280
		Virginia — 1.4%
	285,000	Chesterfield County VA Certificates Participation	4.25	11/1/06	285,131
		Washington — 4.6%
	300,000	Seattle Washington Municipal Light and Power Revenue, Insured by: FSA	3.25	8/1/11	292,716
	300,000	Washington State, Series 2003A, GO, Callable 7/1/12 @ 100	5.00	7/1/14	319,512
	300,000	Washington State, Callable 4/1/14 @ 100, Insured by: MBIA	4.25	10/1/15	308,532
					920,760
		Wisconsin — 3.8%
	400,000	Chilton Wisconsin School District, Callable 4/1/12, Insured by: FGIC	4.00	4/1/13	404,919
	50,000	Elmbrook Wisconsin School District, GO, Callable 4/1/12 @ 100	4.13	4/1/15	50,477
	295,000	Green Bay Wisconsin Area Public School District, Insured by: FGIC, Series B	3.38	4/1/10	293,127
					748,523
		Total Municipal Bonds (cost - $19,260,103)			19,567,851
		Money Market — 1.0%
	200,948	Fidelity Institutional Tax-Exempt Portfolio			200,948
		Total Money Market (cost - $200,948)			200,948
		Total Investments – 99.5% (cost - $19,461,051)			19,768,799

Percentages indicated are based on net assets of $19,858,800.

AMBAC – AMBAC Indemnity Corp.
ASST GTY – Asset Guaranty
FGIC – Financial Guaranty Insurance Co.
FSA – Financial Security Assurance, Inc.
GO – General Obligation
MBIA – Municipal Bond Insurance Assoc.
RADIAN – RADIAN Guaranty, Inc.
SAW – State Aid Withholding
SO – Special Obligation
XLCA – XL Capital Assurance, Inc.

See notes to financial statements.

11

SIGNAL FUNDS
Money Market Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		Asset Backed Securities — 27.0%
		Finance Services — 27.0%
	1,000,000	Amsterdam Funding* (a)(b)	5.26%	10/5/06	999,416
	1,250,000	Barton Capital, LLC. *	5.26	11/6/06	1,243,425
	2,250,000	Fairway Finance Co., LLC. * (a)(b)	5.26	12/13/06	2,226,001
	1,200,000	Fountain Square *	5.25	10/12/06	1,198,075
	1,149,000	Fountain Square *	5.26	10/13/06	1,146,985
	1,500,000	Grampian Funding, LLC. * (a)	5.37	10/25/06	1,494,630
	500,000	Grampian Funding, LLC. * (a)	5.09	10/16/06	498,940
	2,500,000	Kitty Hawk Funding * (a)	5.26	10/18/06	2,493,790
	2,500,000	Old Line Funding Corp. * (a)	5.26	10/12/06	2,495,982
	2,000,000	Sheffield Receivables *	5.26	11/2/06	1,990,649
	2,300,000	Stratford Receivables * (b)	5.28	10/6/06	2,298,313
	2,250,000	Thames Asset Global *	5.27	11/14/06	2,235,508
	2,300,000	Three Pillars Funding *	5.26	10/16/06	2,294,959
	2,500,000	Windmill Funding, Corp. * (a) (b)	5.26	10/5/06	2,498,539
		Total Asset Backed Securities (cost - $25,115,212)			25,115,212
		Certificates of Deposit — 16.0%
		Foreign Bank & Branches & Agencies — 7.7%
	500,000	BNP Paribas	5.47	10/24/06	500,027
	2,250,000	CIBC	5.32	12/13/06	2,250,000
	2,500,000	Societe Generale	5.25	11/27/06	2,479,218
	2,000,000	Toronto Dominion	5.33	11/8/06	2,000,000
					7,229,245
		National Banks, Commercial — 2.9%
	2,700,000	Wells Fargo Bank	5.27	10/25/06	2,700,000
		Security Brokers & Dealers — 5.4%
	1,500,000	Credit Suisse (a)(b)	5.31	11/20/06	1,500,010
	3,500,000	UBS Finance *	5.29	10/31/06	3,499,989
					4,999,999
		Total Certificates of Deposit (cost - $14,929,244)			14,929,244
		Commercial Paper — 28.6%
		Bank Holdings Companies — 7.4%
	2,250,000	Bank of America Corp. *	5.25	10/27/06	2,241,469
	3,700,000	Citigroup Funding *	5.25	10/19/06	3,690,287
	1,000,000	Greenwich Capital**	5.15	10/23/06	996,853
					6,928,609
		Foreign Bank & Branches & Agencies — 17.4%
	2,000,000	ABN AMRO *	5.25	11/6/06	1,989,500
	2,500,000	Barclays US Funding, LLC. *	5.31	10/10/06	2,496,681
	2,250,000	CBA DEL Finance *	5.36	10/6/06	2,248,325
	1,500,000	Deutsche Bank *	5.25	10/20/06	1,495,844
	2,500,000	Dexia DEL, LLC. *	5.26	10/10/06	2,496,706
	1,500,000	Dexia DEL, LLC. *	5.26	10/16/06	1,496,713
	2,500,000	HBOS Treasury Services *	5.25	11/9/06	2,485,592
	1,500,000	Societe Generale *	5.25	1/8/07	1,478,344
					16,187,705

continued

12

SIGNAL FUNDS
Money Market Fund

Schedule of Portfolio Investments
September 30, 2006
(Unaudited)

Shares or
Principal			Interest	Maturity
Amount ($)		Security Description	Rate	Date	Value ($)
		Personal Credit Institutions — 3.8%
	3,500,000	General Electric Cap Corp. *	5.26	10/17/06	3,491,818
		Total Commercial Paper (cost - $26,608,132)			26,608,132
		U.S. Government Agencies — 12.9%
	2,000,000	Federal Farm Credit Bank**	5.05	1/22/07	2,000,483
	1,000,000	Federal Home Loan Bank	4.38	10/26/06	1,000,000
	500,000	Federal Home Loan Bank	5.44	8/16/07	500,000
	500,000	Federal Home Loan Bank	5.50	8/21/07	500,000
	1,250,000	Federal Home Loan Bank**	4.58	2/22/07	1,250,000
	1,250,000	Federal Home Loan Bank**	4.48	3/2/07	1,250,000
	1,500,000	Federal Home Loan Bank**	4.53	5/4/07	1,498,073
	1,000,000	Federal Home Loan Bank**	5.05	5/15/07	999,981
	1,100,000	Federal Home Loan Mortgage Corp.	4.75	1/22/07	1,100,000
	900,000	Federal Home Loan Mortgage Corp.	4.80	2/20/07	900,000
	1,000,000	Federal National Mortgage Association**	5.26	12/22/06	999,993
		Total U.S. Government Agencies (cost - $11,998,530)			11,998,530
		Investment Companies — 2.8%
	940,390	BlackRock Provident Institutional Temp Fund			940,390
	51,662	Goldman Sachs Financial Square Prime Obligations Fund			51,662
	376	Merrill Lynch Premiere Institutional Fund			376
	1,648,040	Morgan Stanley Liquidity Prime Fund			1,648,040
		Total Investment Companies (cost - $2,640,468)			2,640,468
		Repurchase Agreements — 12.9%
		Security Broker & Dealers — 12.9%
	4,000,000	Merrill Lynch (Dated 09/29/06, due 10/02/06, proceeds at maturity $4,001,667, fully collateralized by U.S.Treasury Note 3.0%, due 07/15/12, valued at $4,070,310)			4,000,000
	4,000,000	Morgan Stanley (Dated 09/29/06, due 10/02/06, proceeds at maturity $4,001,640, fully collateralized by U.S.Treasury Note 6.5%, due 02/15/10, valued at $4,032,990)			4,000,000
	4,000,000	Wachovia (Dated 09/29/06, due 10/02/06, proceeds at maturity $4,001,670, fully collateralized by U.S.Treasury Note 11.25%, due 02/15/15, valued at $4,003,601)			4,000,000
		Total Repurchase Agreements (cost - $12,000,000)			12,000,000
		Total Investments - 100.2% (cost - $93,291,586)***			93,291,586

Percentages indicated are based on net assets of $93,024,622.

*	Discount Note securities. The rate reflected on the Schedule of Portfolio Investment is the effective rate of the security.
**	Variable rate securities having liquidity agreements. The interest rate, which will change periodically, is based upon an index of market rates. The rate reflect on the Schedule of Portfolio Investments is the rate in effect at September 30, 2006.
***	Cost for federal income tax purposes is the same.
(a)	4-2 security exempt from registration under the Securities Act of 1933. The securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(b)	Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

See notes to financial statements.

13

SIGNAL FUNDS

Statements of Assets and Liabilities
September 30, 2006
(Unaudited)

	Large Cap						Tax-Exempt
	Growth			Income			Income		Money Market
	Fund			Fund			Fund		Fund
Assets:
Investments, at value (Cost $29,019,658; $87,669,651;
$19,461,051; and $81,291,586, respectively)		$36,970,217			$86,527,326			$19,768,799		$81,291,586
Repurchase agreements, at cost		—			—			—		12,000,000
Total Investments		36,970,217			86,527,326			19,768,799		93,291,586
Cash		—			—			—		17,474
Interest and dividends receivable		23,947			1,001,155			224,114		153,228
Receivable for capital shares issued		15,171			74,710			1,418		—
Receivable for investments sold		167,995			—			—		—
Prepaid expenses and other assets		5,285			3,742			1,428		3,915
Total Assets		37,182,615			87,606,933			19,995,759		93,466,203
Liabilities:
Distributions payable		9,907			337,301			52,953		400,032
Payable for capital shares redeemed		2,620			4,619			68,740		—
Accrued expenses and other payables:
Investment advisory fees		18,083			20,259			1,645		4,184
Administration fees		1,019			2,460			521		3,140
Distribution fees		143			56			31		—
Transfer agent fees		6,134			5,785			4,452		4,636
Trustee fees		802			547			185		1,003
Chief Compliance Officer fees		74			679			65		112
Other liabilities		15,664			19,195			8,367		28,474
Total Liabilities		54,446			390,901			136,959		441,581
Net Assets:		$37,128,169			$87,216,032			$19,858,800		$93,024,622
Composition of Net Assets:
Capital		25,081,401			88,803,757			19,522,609		93,024,753
Distributions in excess of net investment income		(668	)		18,595			—		(2	)
Accumulated net realized gains (losses) on investment transactions		4,096,877			(463,995	)		28,443		(129	)
Net unrealized appreciation (depreciation) on investment transactions		7,950,559			(1,142,325	)		307,748		—
Net Assets		$37,128,169			$87,216,032			$19,858,800		$93,024,622
Class A Shares:
Net assets		$675,794			$268,372			$136,960		—
Shares outstanding ($0.001 par value)		57,141			27,777			13,943		—
Net Asset Value and Redemption Price per share		$11.83			$9.66			$9.82		—
Maximum Sales Load		4.75%			3.25%			3.25%		—
Maximum Offering Price per share (100%/(100%—maximum sales charge) of net asset value adjusted to the nearest cent)		$12.42			$9.98			$10.15		—
Class I Shares:
Net assets		$36,452,375			$86,947,660			$19,721,840		$93,024,622
Shares outstanding ($0.001 par value)		3,055,629			8,998,416			2,007,688		93,029,325
Net Asset Value, Offering Price, and Redemption Price per share		$11.93			$9.66			$9.82		$1.00

See notes to financial statements.

14

SIGNAL FUNDS

Statements of Operations
For the period ended September 30, 2006
(Unaudited)

	Large Cap						Tax-Exempt
	Growth			Income			Income			Money Market
	Fund			Fund			Fund			Fund
Investment Income:
Interest		$4,563			$2,390,542			$418,388			$2,409,550
Dividends		231,967			58,333			6,007			150,439
Total Investment Income		236,530			2,448,875			424,395			2,559,989
Expenses:
Investment advisory		147,427			246,913			50,430			50,189
Administration		37,348			93,827			19,163			120,453
Distribution (Class A)		882			355			180			—
Fund accounting		28,197			37,524			33,845			21,221
Custodian		3,149			6,554			1,453			23,570
Transfer agent		21,255			19,481			14,803			15,880
Trustee		689			2,863			524			2,355
Chief Compliance Officer		1,438			3,380			757			3,733
Other		19,110			39,748			10,118			40,303
Total expenses before fee reductions		259,495			450,645			131,273			277,704
Expenses voluntarily reduced by Investment Advisor		(39,314	)		(123,456	)		(40,344	)		(25,095	)
Net Expenses		220,181			327,189			90,929			252,609
Net Investment Income		16,349			2,121,686			333,466			2,307,380
Realized/Unrealized Gains (Losses) on Investments:
Net realized gains (losses) on investment transactions		1,234,587			(126,438	)		26,997			(13	)
Change in unrealized appreciation/depreciation on investments		(2,022,710	)		1,044,967			133,292			—
Net realized/unrealized gains (losses) on investments		(788,123	)		918,529			160,289			(13	)
Change in net assets resulting from operations		$(771,774	)		$3,040,215			$493,755			$2,307,367

See notes to financial statements.

15

SIGNAL FUNDS

Statements of Changes in Net Assets

	Large Cap Growth Fund						Income Fund
	Period Ended			Year Ended			Period Ended			Year Ended
	September 30,			March 31,			September 30,			March 31,
	2006			2006			2006			2006
	(Unaudited)						(Unaudited)
Operations:
Net investment income		$16,349			$35,062			$2,121,686			$3,979,572
Net realized gains (losses) on investment transactions		1,234,587			3,942,408			(126,438	)		(232,518	)
Change in unrealized appreciation/depreciation on investment transactions		(2,022,710	)		1,442,253			1,044,967			(1,672,828	)
Change in net assets from operations		(771,774	)		5,419,723			3,040,215			2,074,226
Distributions to Shareholders:
Class A:
From net investment income		—			(46	)		(5,732	)		(13,601	)
From net realized gain on investment		—			(40,847	)		—			—
Class B:
From net investment income		—			—			—			(269	)
From net realized gain on investment		—			—			—			—
Class I:
From net investment income		(17,017	)		(42,737	)		(2,105,460	)		(3,976,073	)
From net realized gain on investment		—			(2,414,054	)		—			—
Change in net assets from shareholder distributions		(17,017	)		(2,497,684	)		(2,111,192	)		(3,989,943	)
Change in net assets from capital share transactions		(1,078,746	)		(3,013,200	)		(11,840,954	)		2,021,021
Change in net assets		(1,867,537	)		(91,161	)		(10,911,931	)		105,304
Net Assets:
Beginning of period		38,995,706			39,086,867			98,127,963			98,022,659
End of period*		$37,128,169			$38,995,706			$87,216,032			$98,127,963
Capital Transactions:
Class A Shares
Proceeds from shares issued		$17,071			$291,268			$—			$102,698
Dividends reinvested		—			40,720			5,639			13,923
Cost of shares redeemed		(80,707	)		(213,464	)		(58,103	)		(109,706	)
Change in net assets from Class A capital transactions		($63,636	)		$118,524			($52,464	)		$6,915
Class B Shares
Proceeds from shares issued		$—			$—			$—			$—
Dividends reinvested		—			—			—			96
Cost of shares redeemed		—			(123,670	)		—			(28,549	)
Change in net assets from Class B capital transactions		—			($123,670	)		—			($28,453	)
Class I Shares
Proceeds from shares issued		$6,298,844			$13,486,131			$8,738,980			$24,607,646
Dividends reinvested		2,508			1,040,335			369,022			762,599
Cost of shares redeemed		(7,316,462	)		(17,534,520	)		(20,896,492	)		(23,327,686	)
Change in net assets from Class I capital transactions		($1,015,110	)		($3,008,054	)		($11,788,490	)		$2,042,559
Share Transactions:
Class A Shares
Issued		1,423			27,039			—			10,297
Reinvested		—			3,445			590			1,427
Redeemed		(6,843	)		(17,813	)		(6,097	)		(11,266	)
Net change		(5,420	)		12,671			(5,507	)		458
Class B Shares
Issued		—			—			—			—
Reinvested		—			—			—			10
Redeemed		—			(12,869	)		—			(2,792	)
Net change		—			(12,869	)		—			(2,782	)
Class I Shares
Issued		528,195			1,158,732			916,236			2,521,979
Reinvested		212			87,364			38,611			78,175
Redeemed		(612,590	)		(1,466,755	)		(2,172,635	)		(2,384,473	)
Net change		(84,183	)		(220,659	)		(1,217,788	)		215,681

* Includes accumulated (distributions in excess of) net investment income of $(668), $0, $18,595, and $8,101, respectively.

See notes to financial statements.

16

SIGNAL FUNDS

Statements of Changes in Net Assets

	Tax-exempt Income Fund						Money Market Fund
	Period Ended			Year Ended			Period Ended			Year Ended
	September 30,			March 31,			September 30,			March 31,
	2006			2006			2006			2006
	(Unaudited)						(Unaudited)
Operations:
Net investment income		$333,466			$746,370			$2,307,380			$3,043,118
Net realized gains (losses) on investment transactions		26,997			27,245			(13	)		(97	)
Change in unrealized appreciation/depreciation on investment transactions		133,292			(327,308	)		—			—
Change in net assets from operations		493,755			446,307			2,307,367			3,043,021
Distributions to Shareholders:
Class A:
From net investment income		(2,208	)		(4,872	)		—			—
From net realized gain on investment		—			(382	)		—			—
Class B:
From net investment income		—			(307	)		—			—
From net realized gain on investment		—			—			—			—
Class I:
From net investment income		(331,258	)		(741,191	)		(2,307,380	)		(3,043,273	)
From net realized gain on investment		—			(48,546	)		—			—
Change in net assets from shareholder distributions		(333,466	)		(795,298	)		(2,307,380	)		(3,043,273	)
Change in net assets from capital share transactions		(1,795,088	)		(59,906	)		(8,582,342	)		8,296,145
Change in net assets		(1,634,799	)		(408,897	)		(8,582,355	)		8,295,893
Net Assets:
Beginning of period		21,493,599			21,902,496			101,606,977			93,311,084
End of period*		$19,858,800			$21,493,599			$93,024,622			$101,606,977
Capital Transactions:
Class A Shares
Proceeds from shares issued		$—			$38,148			$—			$—
Dividends reinvested		1,977			5,123			—			—
Cost of shares redeemed		(9,926	)		(32,568	)		—			—
Change in net assets from Class A capital transactions		($7,949	)		$10,703			$—			$—
Class B Shares
Proceeds from shares issued		$—			$—			$—			$—
Dividends reinvested		—			386			—			—
Cost of shares redeemed		—			(39,247	)		—			—
Change in net assets from Class B capital transactions		$—			($38,861	)		$—			$—
Class I Shares
Proceeds from shares issued		$1,508,951			$5,944,177			$67,010,450			$189,005,851
Dividends reinvested		6,941			44,839			138			137
Cost of shares redeemed		(3,303,031	)		(6,020,764	)		(75,592,930	)		(180,709,843	)
Change in net assets from Class I capital transactions		($1,787,139	)		($31,748	)		($8,582,342	)		$8,296,145
Share Transactions:
Class A Shares
Issued		$—			3,741			—			—
Reinvested		202			518			—			—
Redeemed		(1,010	)		(3,305	)		—			—
Net change		(808	)		954			—			—
Class B Shares
Issued		—			—			—			—
Reinvested		—			39			—			—
Redeemed		—			(3,851	)		—			—
Net change		—			(3,812	)		—			—
Class I Shares
Issued		155,188			599,454			67,010,450			189,005,851
Reinvested		713			4,561			138			137
Redeemed		(339,947	)		(608,437	)		(75,592,931	)		(180,709,843	)
Net change		(184,046	)		(4,422	)		(8,582,343	)		8,296,145

* Includes accumulated (distributions in excess of) net investment income of $0, $0, $(2), and $(2), respectively.

See notes to financial statements.

17

SIGNAL FUNDS
Financial Highlights
For a Share Outstanding Throughout Each Period

			Change in Net Assets Resulting
			from Operations:											Less Dividends from:																	Ratios/Supplementary Data:
							Net				Change																														Ratio of
							Realized and				in Net																				Net						Ratio of Net				Expenses
	Net Asset		Net				Unrealized\				Asset Value							Net Realized							Net Asset						Assets,		Ratio of				Investment				to
	Value,		Investment				Gains				Resulting			Net				Gains							Value,						End of		Expenses				Income to				Average				Portfolio
	Beginning		Income				(Losses) on				from			Investment				(Losses) on				Total			End of		Total				Period		to Average				Average Net				Net				Turnover
Class A	of Period		(loss)				Investments				Operations			Income				Investments				Dividends			Period		Return*				(000’s)		Net Assets				Assets				Assets**				(c)
Large Cap Growth Fund
Period ended Sept. 30, 2006 (Unaudited)	$	12.08	$	(0.01	)		$	(0.24	)		$	(0.25	)		$—				$—				$—		$	11.83		(2.07	%)	(a)		676		1.37	%	(b)		(0.17	%)	(b)		1.57	%	(b)		26.39	%
Year ended March 31, 2006		11.35		(0.07	)			1.49				1.42			—		(e)		(0.69	)			(0.69	)		12.08		12.65	%			756		1.34	%			(0.60	%)			1.54	%			36.43	%
Year ended March 31, 2005		11.29		(0.01	)			1.00				0.99			—				(0.93	)			(0.93	)		11.35		8.74	%			566		1.43	%			(0.15	%)			1.63	%			39.77	%
Year ended March 31, 2004		9.05		(0.01	)			2.58				2.57			—		(e)		(0.33	)			(0.33	)		11.29		28.60	%			466		1.44	%			(0.16	%)			1.64	%			39.64	%
Period ended March 31, 2003(d)		10.00		—		(e)		(0.95	)			(0.95	)		—		(e)		—				—			9.05		(9.40	%)	(a)		224		1.45	%	(b)		0.11	%	(b)		1.67	%	(b)		34.11	%
Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.57		0.19				0.09				0.28			(0.19	)			—				(0.19	)		9.66		2.99	%	(a)		268		0.91	%	(b)		4.06	%	(b)		1.16	%	(b)		6.84	%
Year ended March 31, 2006		9.77		0.37				(0.20	)			0.17			(0.37	)			—				(0.37	)		9.57		1.76	%			319		0.90	%			3.81	%			1.15	%			24.47	%
Year ended March 31, 2005		10.19		0.35				(0.42	)			(0.07	)		(0.35	)			—				(0.35	)		9.77		(0.64	%)			321		0.95	%			3.56	%			1.20	%			14.91	%
Year ended March 31, 2004		10.21		0.34				(0.02	)			0.32			(0.34	)			—		(e)		(0.34	)		10.19		3.17	%			263		0.98	%			3.31	%			1.23	%			43.76	%
Period ended March 31, 2003(d)		10.00		0.31				0.25				0.56			(0.31	)			(0.04	)			(0.35	)		10.21		5.65	%	(a)		218		1.07	%	(b)		3.54	%	(b)		1.32	%	(b)		7.47	%
Tax-Exempt Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.74		0.15				0.08				0.23			(0.15	)			—				(0.15	)		9.82		2.38	%	(a)		137		1.15	%	(b)		3.06	%	(b)		1.55	%	(b)		8.03	%
Year ended March 31, 2006		9.89		0.31				(0.13	)			0.18			(0.31	)			(0.02	)			(0.33	)		9.74		1.82	%			144		1.08	%			3.11	%			1.51	%			11.64	%
Year ended March 31, 2005		10.22		0.32				(0.25	)			0.07			(0.32	)			(0.08	)			(0.40	)		9.89		0.73	%			136		1.12	%			3.21	%			1.62	%			18.11	%
Year ended March 31, 2004		10.18		0.33				0.08				0.41			(0.33	)			(0.04	)			(0.37	)		10.22		4.14	%			137		1.09	%			3.25	%			1.58	%			9.11	%
Period ended March 31, 2003(d)		10.00		0.27				0.21				0.48			(0.27	)			(0.03	)			(0.30	)		10.18		4.85	%	(a)		57		1.09	%	(b)		3.36	%	(b)		1.52	%	(b)		8.54	%
Class I
Large Cap Growth Fund
Period ended Sept. 30, 2006 (unaudited)		12.18		0.01				(0.25	)			(0.24	)		(0.01	)			—				(0.01	)		11.93		(2.01	%)	(a)		36,452		1.12	%	(b)		0.09	%	(b)		1.32	%	(b)		26.39	%
Year ended March 31, 2006		11.42		0.01				1.45				1.46			(0.01	)			(0.69	)			(0.70	)		12.18		12.95	%			38,240		1.08	%			0.09	%			1.28	%			36.43	%
Year ended March 31, 2005		11.33		0.01				1.02				1.03			(0.01	)			(0.93	)			(0.94	)		11.42		9.08	%			38,377		1.18	%			0.10	%			1.38	%			39.77	%
Year ended March 31, 2004		9.06		0.01				2.60				2.61			(0.01	)			(0.33	)			(0.34	)		11.33		29.00	%			33,600		1.19	%			0.09	%			1.39	%			39.64	%
Period ended March 31, 2003(d)		10.00		0.02				(0.94	)			(0.92	)		(0.02	)			—				(0.02	)		9.06		(9.20	%)	(a)		31,260		1.21	%	(b)		0.32	%	(b)		1.43	%	(b)		34.11	%
Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.57		0.20				0.09				0.29			(0.20	)			—				(0.20	)		9.66		3.12	%	(a)		86,948		0.66	%	(b)		4.30	%	(b)		0.91	%	(b)		6.84	%
Year ended March 31, 2006		9.77		0.40				(0.20	)			0.20			(0.40	)			—				(0.40	)		9.57		2.01	%			97,809		0.65	%			4.06	%			0.90	%			24.47	%
Year ended March 31, 2005		10.19		0.38				(0.42	)			(0.04	)		(0.38	)			—				(0.38	)		9.77		(0.39	%)			97,675		0.69	%			3.82	%			0.94	%			14.91	%
Year ended March 31, 2004		10.21		0.36				(0.02	)			0.34			(0.36	)			—		(e)		(0.36	)		10.19		3.43	%			61,481		0.73	%			3.56	%			0.98	%			43.76	%
Period ended March 31, 2003(d)		10.00		0.29				0.25				0.54			(0.29	)			(0.04	)			(0.33	)		10.21		5.47	%	(a)		59,724		0.82	%	(b)		3.88	%	(b)		1.07	%	(b)		7.47	%
Tax-Exempt Income Fund
Period ended Sept. 30, 2006 (unaudited)		9.74		0.16				0.08				0.24			(0.16	)			—				(0.16	)		9.82		2.50	%	(a)		19,722		0.90	%	(b)		3.31	%	(b)		1.30	%	(b)		8.03	%
Year ended March 31, 2006		9.89		0.33				(0.13	)			0.20			(0.33	)			(0.02	)			(0.35	)		9.74		2.07	%			21,350		0.82	%			3.36	%			1.26	%			11.64	%
Year ended March 31, 2005		10.22		0.35				(0.25	)			0.10			(0.35	)			(0.08	)			(0.43	)		9.89		0.98	%			21,728		0.87	%			3.46	%			1.37	%			18.11	%
Year ended March 31, 2004		10.18		0.36				0.08				0.44			(0.36	)			(0.04	)			(0.40	)		10.22		4.41	%			18,660		0.83	%			3.52	%			1.33	%			9.11	%
Period ended March 31, 2003(d)		10.00		0.26				0.21				0.47			(0.26	)			(0.03	)			(0.29	)		10.18		4.75	%	(a)		19,154		0.86	%	(b)		3.58	%	(b)		1.27	%	(b)		8.54	%
Money Market Fund
Period ended Sept. 30, 2006 (unaudited)		1.000		0.023				—				0.023			(0.023	)			—				(0.023	)		1.000		2.33	%	(a)		93,025		0.50	%	(b)		4.60	%	(b)		0.55	%	(b)		N/A
Year ended March 31, 2006		1.000		0.032				—		(e)		0.032			(0.032	)			—				(0.032	)		1.000		3.24	%			101,607		0.51	%			3.18	%			0.56	%			N/A
Year ended March 31, 2005		1.000		0.012				—				0.012			(0.012	)			—				(0.012	)		1.000		1.23	%			93,311		0.51	%			1.30	%			0.56	%			N/A
Year ended March 31, 2004		1.000		0.006				—				0.006			(0.006	)			—				(0.006	)		1.000		0.57	%			70,829		0.54	%			0.57	%			0.59	%			N/A
Period ended March 31, 2003(d)		1.000		0.007				—				0.007			(0.007	)			—				(0.007	)		1.000		0.72	%	(a)		110,327		0.53	%	(b)		1.02	%	(b)		0.58	%	(b)		N/A

*	Excludes sales and redemption charges.	(c)	Portfolio turnover is calculated on the basis of the fund as a whole without distinguishing among the classes of shares issued.
**	During the period certain fees were reduced. If such fee reductions had not occurred, the ratios would have been as indicated.	(d)	For the period july 15, 2002 through March 31, 2003.
(a)	Not annualized.	(e)	Amount is less than $0.005.
(b)	Annualized.

See notes to financial statements.

18

SIGNAL FUNDS
Notes to Financial Statements – September 30, 2006 (Unaudited)

1. Organization:

The Coventry Group (the “Group”) was organized on January 8, 1992 as a Massachusetts business trust, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Group contains the following Signal Funds (individually a “Fund,” collectively the “Funds”):

Fund Legal Name	Short Name
Signal Large Cap Growth Fund	Large Cap Growth Fund
Signal Income Fund	Income Fund
Signal Tax-Exempt Income Fund	Tax-Exempt Income Fund
Signal Money Market Fund	Money Market Fund

Financial statements for all other series of the Group are published separately.

Under the Group’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Group. In addition, in the normal course of business, the Group may enter into contracts with their vendors and others that provide for general indemnifications. Each Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.

2. Significant Accounting Policies:

The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. The preparation of financial statements requires management to make estimates and assumptions that may affect the reported amounts of income and expenses for the period. Actual results could differ from those estimates.

Securities Valuation:

The value of each equity security is based either on the last sale price on a national securities exchange, or in the absence of recorded sales, at the closing bid prices on such exchanges, or at the quoted bid price in the over-the-counter market. Equity securities traded on the NASDAQ stock market are valued at the NASDAQ official closing price.

Bonds and other fixed income securities (other than short-term obligations but including listed issues) are valued on the basis of valuations furnished by a pricing service, the use of which has been approved by the Group’s Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, and trading characteristics other than market data and without exclusive reliance upon quoted prices or exchanges or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. All short-term debt portfolio securities with a remaining maturity of 60 days or less and securities held in the Money Market Fund are valued at amortized cost, which approximates market value. Under the amortized cost method, discount or premium, if any, is accreted or amortized, respectively, on a constant (straight-line) basis to the maturity of the security.

Securities or other assets for which market quotations are not readily available (e.g., an approved pricing service does not provide a price, a furnished price is in error, certain stale prices, or an event occurs that materially affects the furnished price) are valued at fair value as determined in good faith by or at the direction of the Group’s Board of Trustees.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of September 30, 2006, the Funds do not believe the adoption of SFAS No. 157 will impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.

continued

19

SIGNAL FUNDS
Notes to Financial Statements – September 30, 2006 (Unaudited)

Repurchase Agreements:

The Funds may enter into repurchase agreements with banks or broker-dealers that Signal Capital Management, Inc., (the “Advisor”), a wholly owned subsidiary of Old National Trust Company, deems creditworthy. The repurchase price generally equals the price paid by a Fund plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller, under a repurchase agreement, is required to maintain the collateral held pursuant to the agreement, with a market value equal to or greater than the repurchase price (including accrued interest). Collateral subject to repurchase agreements is held by the Funds’ custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. If the counterparty defaults and the fair value of the collateral declines, realization of the collateral by the Funds may be delayed or limited.

Security Transactions and Related Income:

Changes in holdings of portfolio securities shall be reflected no later than in the first calculation on the first business day following the trade date. However, for financial reporting purposes, portfolio security transactions are reported on trade date. Interest income is recognized on the accrual basis and includes, where applicable, the amortization of premium or discount. Dividend income is recorded on the ex-dividend date. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds. Income and realized and unrealized gains and losses on investments are allocated to each class of shares based upon relative net assets or other appropriate basis.

Expenses:

Expenses directly attributable to a Fund are charged directly to the Fund. Expenses relating to the Group are allocated proportionately to each Fund within the Group according to the relative net assets of each Fund or on another reasonable basis. Each class of shares bears its respective pro-rata portion of the expenses, except that each class separately bears expenses related specifically to that class, such as distribution fees.

Dividends to Shareholders:

Dividends from net investment income, if any, are declared daily and paid monthly for all of the Funds, except the Large Cap Growth Fund. Dividends for the Large Cap Growth Fund are declared and distributed quarterly. Dividends from net realized gains, if any, are declared and distributed annually for all Funds.

The amounts of dividends from net investment income and of distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These ''book/tax’’ differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. To the extent dividends exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital.

Federal Income Taxes:

Each Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code, and to make distributions from net investment income and from net realized capital gains sufficient to relieve it from all, or substantially all, federal income and excise taxes.

On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax return to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has not completed their analysis on whether the adoption of FIN 48 will have an impact to the financial statements.

continued

20

SIGNAL FUNDS
Notes to Financial Statements – September 30, 2006 (Unaudited)

3. Related Party Transactions:

Investment Advisor:

The Funds and the Advisor are parties to an Investment Advisory Agreement under which the Advisor is entitled to receive an annual fee, computed daily and paid monthly, equal to the average daily net assets of each Fund, at the following annual percentage rates:

Name	Fee Rate*
Large Cap Growth Fund		0.75	%
Income Fund		0.50
Tax-Exempt Income Fund		0.50
Money Market Fund		0.10

* The Advisor voluntarily waived fees during the year. With these voluntary fee waivers by the Advisor, net advisory fees for the Funds on an annual basis are 0.55% for the Large Cap Growth Fund, 0.25% for the Income Fund, 0.10% for the Tax-Exempt Income Fund, and 0.05% for the Money Market Fund.

The Advisor may from time to time voluntarily reduce all or a portion of its advisory fee with respect to a Fund.

Administration:

The Funds and BISYS Fund Services Ohio, Inc. (“BISYS Ohio” or the “Administrator”), a wholly owned subsidiary of The BISYS Group, Inc., are parties to an Administration Agreement under which the Administrator provides services for a fee that is computed daily and paid monthly at an annual rate of 0.14% of the average daily net assets of the Funds. Certain officers and trustees of the Group are also employees of the Administrator and are paid no fees directly by the Funds for serving as officers of the Group, except for the Chief Compliance Officer (the “CCO”). BISYS Ohio also provides fund accounting and transfer agency services to the Funds pursuant to certain fee arrangements. For transfer agency services, BISYS Ohio receives a fee based on the number of shareholders of record and reimbursement of certain expenses. For fund accounting, BISYS Ohio receives a fee from each Fund for such services equal to an annual rate of three one-hundredths of one percent (.03%) of that Funds’ average daily net assets, subject to certain minimums.

Under a Compliance Services Agreement between the Funds and BISYS Ohio (the “CCO Agreement”), BISYS Ohio makes an employee available to serve as the Funds’ CCO. Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Funds’ compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the Funds paid BISYS Ohio $13,075 for the six months ended September 30, 2006, plus certain out of pocket expenses. BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio.

Pursuant to a Sub-Administration agreement, the Advisor provides certain administration services to the Funds. For their services, the Advisor is entitled to a fee payable by the Administrator of 0.05% for the Large Cap Fund, Income Fund and the Tax-Exempt Fund, and 0.10% for the Money Market Fund.

Distribution:

The Funds and BISYS Fund Services Limited Partnership (the “Distributor”), a wholly owned subsidiary of The BISYS Group, Inc., are parties to a Distribution Agreement under which shares of the Funds are sold on a continuous basis. The Group has adopted a Service and Distribution Plan for Class A and Class B shares pursuant to Rule 12b-1 under the 1940 Act under which the Class A and Class B shares of each fund are authorized to pay the Distributor for payments it makes to banks, other institutions and broker-dealers, and for expenses the Distributor and any of its affiliates incur for providing distribution or shareholder service assistance to the Funds. The calculated annual rate will not exceed 0.25% of the average daily net asset value of Class A shares.

For the six months ended September 30, 2006, the Distributor received $699 from commissions earned on sales of Class A shares and redemption of Class B shares, none of which the Distributor re-allowed to affiliated broker-dealers of the Funds.

There is no initial sales charge on purchases of $1 million or more of the Class A Shares of the Funds. However, a contingent deferred sales charge (“CDSC”) will be charged to the shareholder if shares are redeemed in the first 18 months after purchase. The Funds collected no CDSC fees on Class A Shares during the six months ended September 30, 2006.

continued

21

SIGNAL FUNDS
Notes to Financial Statements – September 30, 2006 (Unaudited)

4. Purchases and Sales of Securities:

Purchases and sales of investment securities, excluding short-term and U.S. government securities, for the six months ended September 30, 2006, totaled:

Fund	Purchases	Sales
Large Cap Growth Fund	$9,957,331	$10,763,467
Income Fund	7,351,288	19,376,473
Tax-Exempt Income Fund	1,566,833	3,790,734

5. Federal Tax Information:

At September 30, 2006, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows:

								Net Unrealized
			Tax Unrealized		Tax Unrealized			Appreciation
Fund	Tax Cost		Appreciation		(Depreciation)			(Depreciation)
Large Cap Growth Fund		$29,022,253		$8,192,259		$(244,295	)		$7,947,964
Income Fund		87,669,651		301,697		(1,444,022	)		(1,142,325	)
Tax-Exempt Income Fund		19,461,051		368,888		(61,140	)		307,748

As of March 31, 2006, for Federal income tax purposes, the following Funds have capital loss carryforwards, which are available to offset future realized gains, if any, to the extent provided by the treasury regulations:

	Amount		Expires
Income Fund	$	70,328		2012
		222,752		2014

	Amount		Expires
Money Market	$	46		2014

Capital losses after October 31 (“post-October losses”) within the taxable year are deemed to arise on the first business day of the Funds
next taxable year. After October 31, 2005, the following Funds incurred and elected to defer net capital losses, for federal income tax purposes, were as follows:

	Post-October Loss
Income Fund	$44,477
Money Market	70

The tax character of distributions paid during the fiscal year ended March 31, 2006 were as follows:

	Distributions paid from
			Net Long Term		Total Taxable		Tax Exempt		Total Distributions
Fund	Ordinary Income		Capital Gains		Distributions		Distributions		Paid1
Large Cap Growth Fund		$58,614		$2,454,901		$2,513,515		$—		$2,513,515
Income Fund		4,028,378		—		4,028,378		—		4,028,378
Tax-Exempt Income Fund		6,909		48,928		55,837		743,148		798,985
Money Market Fund		2,873,806				2,873,806		—		2,873,806

¹Total distributions paid may differ from the amount reported in the Statement of Changes in Net Assets because for tax purposes distributions are recognized when actually paid.

The tax character year distributions paid and the tax basis of the current components of accumulated earnings (deficit) will be determined at the end of current tax year, March 31, 2007.

continued

22

SIGNAL FUNDS
Notes to Financial Statements – September 30, 2006 (Unaudited)

Expense Comparison:

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases, (2) ongoing costs, including management fees; distribution fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from April 1, 2006 through September 30, 2006.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

		Beginning	Ending Account	Expense Paid	Expense Ratio
		Account Value	Value	During Period*	During Period
		4/1/06	9/30/06	4/1/06 - 9/30/06	4/1/06 - 9/30/06
Large Cap Growth Fund	Class A	$1,000.00	$979.30	$6.80	1.37%
	Class I	1,000.00	979.90	5.56	1.12%
Income Fund	Class A	1,000.00	1,029.90	4.63	0.91%
	Class I	1,000.00	1,031.20	3.36	0.66%
Tax-Exempt Income Fund	Class A	1,000.00	1,023.80	5.83	1.15%
	Class I	1,000.00	1,025.00	4.57	0.90%
Money Market Fund	Class I	1,000.00	1,023.30	2.54	0.50%

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

		Beginning	Ending Account	Expense Paid	Expense Ratio
		Account Value	Value	During Period*	During Period
		4/1/06	9/30/06	4/1/06 - - 9/30/06	4/1/06 - 9/30/06
Large Cap Growth Fund	Class A	$1,000.00	$1,018.20	$6.93	1.37%
	Class I	1,000.00	1,019.45	5.67	1.12%
Income Fund	Class A	1,000.00	1,020.51	4.61	0.91%
	Class I	1,000.00	1,021.76	3.35	0.66%
Tax-Exempt Income Fund	Class A	1,000.00	1,019.30	5.82	1.15%
	Class I	1,000.00	1,020.56	4.56	0.90%
Money Market Fund	Class I	1,000.00	1,022.56	2.54	0.50%

* Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by the number of days in the most recent half-year divided by the number of days in the fiscal year.

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