-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dJZg2as8bQDXTiH98zYPlQa/hOh6uiR5Dpc5XVGYFVuAiz4v2PHm9MJDaLxc6//E Zw+blDhdtSzjtIRDOoSZhQ== 0000950130-95-001065.txt : 19950601 0000950130-95-001065.hdr.sgml : 19950601 ACCESSION NUMBER: 0000950130-95-001065 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950531 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDMAN SACHS TRUST CENTRAL INDEX KEY: 0000822977 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-17619 FILM NUMBER: 95543840 BUSINESS ADDRESS: STREET 1: 4900 SEARS TWR STREET 2: C/O GOLDMAN SACHS & CO CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129934400 MAIL ADDRESS: STREET 2: 85 BROARD STREET CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: GOLDMAN SACHS SHORT INTERMEDIATE GOVERNMENT FUND DATE OF NAME CHANGE: 19910711 FORMER COMPANY: FORMER CONFORMED NAME: SHORT INTERMEDIATE GOVERNMENT FUND DATE OF NAME CHANGE: 19900104 497 1 497 GOLDMAN SACHS GLOBAL INCOME FUND MANAGED BY INVESTMENT ADVISER GOLDMAN SACHS ASSET MANAGEMENT A SEPARATE OPERATING DIVISION OF GOLDMAN, SACHS & CO. NEW YORK, NEW YORK SUBADVISER GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL AN AFFILIATE OF GOLDMAN, SACHS & CO. LONDON, ENGLAND ----------- Goldman Sachs Global Income Fund (the "Fund") is one fund in a family of funds advised by Goldman Sachs Asset Management (the "Investment Adviser") or its affiliates, Goldman Sachs Funds Management, L.P. and Goldman Sachs Asset Management International (the ""Subadviser''). The Fund is organized as a separate non-diversified portfolio of Goldman Sachs Trust (the ""Trust''), an open-end management investment company. The Fund will pursue a global investment program emphasizing intermediate- duration fixed income securities. The Fund seeks to provide investors with a high total return, emphasizing current income and, to a lesser extent, providing opportunities for capital appreciation, through investment in a portfolio of high quality fixed income securities of U.S. and foreign issuers and through transactions in foreign currencies. High quality securities are defined as securities rated, at the time of investment, at least AA by Standard & Poor's (continued on next page) ----------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- GOLDMAN, SACHS & CO. ----------- The date of this Prospectus is March 1, 1995 Ratings Group or Aa by Moody's Investors Service, Inc. or, if unrated by such rating organizations, determined by the Investment Adviser or Subadviser to be of comparable credit quality. The Fund intends to invest at least 50% of its net assets in securities having the highest applicable credit quality rating, at the time of investment, or, if unrated by such rating organizations, determined to be of comparable credit quality. There can be no assurance that the Fund will achieve its investment objective. INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS AND INVESTMENTS IN FOREIGN CURRENCIES, AS WELL AS THE CURRENCY MANAGEMENT TECHNIQUES DESCRIBED BELOW, ENTAIL RISKS IN ADDITION TO THOSE THAT ARE CUSTOMARILY ASSOCIATED WITH INVESTING IN DOLLAR-DENOMINATED FIXED INCOME SECURITIES OF U.S. ISSUERS. THE FUND IS INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS ASSOCIATED WITH ITS INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE "RISKS, SPECIAL INVESTMENT METHODS AND INVESTMENT LIMITATIONS." It is expected that the Fund will employ certain currency and interest rate management techniques. These techniques will be used both to hedge the foreign currency and interest rate risks associated with the Fund's portfolio securities and, in the case of certain techniques, to seek to increase the total return of the Fund. See "Investment Objective and Policies." Goldman Sachs Asset Management, New York, New York, a separate operating division of Goldman, Sachs & Co., serves as the Fund's investment adviser and administrator. Goldman Sachs Asset Management International, London, England, an affiliate of Goldman, Sachs & Co., serves as the Fund's subadviser. Goldman, Sachs & Co. serves as the Fund's distributor and transfer agent. The Fund's custodian is State Street Bank and Trust Company. This Prospectus, which sets forth concisely the information about the Trust and the Fund that a prospective investor ought to know before investing, should be retained for future reference. A Statement of Additional Information (the "Additional Statement"), dated March 1, 1995, containing further information about the Trust and the Fund which may be of interest to investors, has been filed with the Securities and Exchange Commission, is incorporated herein by reference in its entirety, and may be obtained without charge from Goldman, Sachs & Co. by calling the telephone number, or writing to one of the addresses, listed below. GOLDMAN SACHS TRUST GOLDMAN SACHS ASSET MANAGEMENT 4900 SEARS TOWER INVESTMENT ADVISER AND ADMINISTRATOR CHICAGO, ILLINOIS 60606 ONE NEW YORK PLAZA NEW YORK, NEW YORK 10004 GOLDMAN, SACHS & CO. GOLDMAN SACHS ASSET MANAGEMENT DISTRIBUTOR INTERNATIONAL 85 BROAD STREET SUBADVISER NEW YORK, NEW YORK 10004 140 FLEET STREET LONDON, ENGLAND EC4A 2BJ GOLDMAN, SACHS & CO. TRANSFER AGENT 4900 SEARS TOWER CHICAGO, ILLINOIS 60606 TOLL FREE (IN U.S.)................... 800-526-7384 SUMMARY INTRODUCTION Goldman Sachs Global Income Fund (the "Fund") is one fund in a family of funds advised by Goldman Sachs Asset Management (the "Investment Adviser") or its affiliates, Goldman Sachs Funds Management, L.P. and Goldman Sachs Asset Management International (the "Subadviser"). The Fund is organized as a separate non-diversified portfolio of Goldman Sachs Trust (the "Trust"), an open-end management investment company. INVESTMENT OBJECTIVE AND POLICIES The investment objective of the Fund is to provide investors with a high total return, emphasizing current income and, to a lesser extent, providing opportunities for capital appreciation, through investment in a portfolio of high quality fixed income securities of U.S. and foreign issuers and through transactions in foreign currencies. High quality securities are defined as securities rated at least AA by Standard & Poor's Ratings Group or Aa by Moody's Investors Service, Inc. or, if unrated by such rating organizations, determined by the Investment Adviser or Subadviser to be of comparable credit quality. The Fund intends to invest at least 50% of its net assets in securities having the highest applicable credit quality rating, at the time of investment, or, if unrated by such rating organizations, determined by the Investment Adviser or Subadviser to be of comparable credit quality. A security will be deemed to have met this requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations. There can be no assurance that the Fund will achieve its investment objective. Under normal market conditions, the Fund will have at least 30% of its total assets, adjusted to reflect the Fund's net exposure after giving effect to currency transactions and positions, denominated in U.S. dollars. In addition, the Fund will normally maintain a dollar weighted average portfolio duration of not more than five years. Duration represents the weighted average maturity of expected cash flows on a debt obligation, discounted to present value. The longer the duration of a debt obligation, the more sensitive its value is to changes in interest rates. The Fund's Investment Adviser and Subadviser will use a proprietary model of Goldman, Sachs & Co. ("Goldman Sachs") to develop a portfolio that, in their view, produces the optimal expected return for a given level of risk. In managing the Fund's portfolio, the Investment Adviser and Subadviser will have access to the research of Goldman Sachs, and will also apply quantitative analysis to provide guidance concerning appropriate country and currency allocations. It is expected that the Fund will employ certain currency and interest rate management techniques. These techniques will be used both to hedge the foreign currency and interest rate risks associated with the Fund's portfolio securities and, in the case of certain techniques, to seek to increase the total return of the Fund. Such techniques include forward foreign currency exchange contracts, options on securities, indices and foreign currencies, futures contracts, options on futures contracts, interest rate and currency swaps and interest rate floors, caps and collars. 3 The Fund may enter into forward foreign currency exchange contracts, currency futures contracts and options on such contracts, currency options and currency swaps to seek to increase total return when the Fund's Investment Adviser or Subadviser anticipates that a foreign currency will appreciate or depreciate in value, but securities denominated in that currency do not present attractive investment opportunities or are not included in the Fund's portfolio. To the extent that the Fund is fully invested in foreign securities while also maintaining currency positions, it may be exposed to greater combined risk. The Fund's net currency positions may expose it to risks independent of its securities positions. See "Investment Objective and Policies" and "Risks, Special Investment Methods and Investment Limitations." The Fund is intended for investors who can accept the risks involved in investments in domestic and foreign fixed income securities and foreign currencies. The net asset value of the Fund's shares of beneficial interest ("shares") will change in response to changes in interest rates and currency exchange rates. Changes in interest rates and exchange rates for foreign currencies in which the Fund's investments are denominated may adversely affect the value of such investments and the value of the Fund's shares. In addition, while investments in securities issued by foreign governments and corporations offer potential benefits not available from investments solely in securities of domestic issuers, they also involve certain significant risks that are not typically associated with investing in obligations of U.S. issuers. See "Risks, Special Investment Methods and Investment Limitations." INVESTMENT ADVISER, SUBADVISER AND ADMINISTRATOR Goldman Sachs Asset Management, a separate operating division of Goldman Sachs, serves as the Fund's investment adviser pursuant to an Investment Advisory Agreement. For its advisory services, the Investment Adviser receives from the Fund a monthly fee equal on an annual basis to 0.25% of the Fund's average daily net assets. Goldman Sachs Asset Management International ("GSAM International"), an affiliate of Goldman Sachs, serves as subadviser to the Fund pursuant to a Subadvisory Agreement. The Subadviser receives from the Fund a monthly fee equal on an annual basis to 0.50% of the Fund's average daily net assets. The Subadviser's fee is in addition to the fee paid to the Investment Adviser. Goldman Sachs and GSAM International are each registered with the Securities and Exchange Commission ("SEC") as investment advisers. In performing their investment advisory and subadvisory services, the Investment Adviser and Subadviser, while remaining ultimately responsible for the management of the Fund, are able to draw upon the research and expertise of their affiliate offices for portfolio decisions and management with respect to certain portfolio securities. Goldman Sachs Asset Management also serves as the administrator of the Fund pursuant to an Administration Agreement, for which it receives from the Fund a monthly fee equal on an annual basis to 0.15% of the Fund's average daily net assets. See "Management--Investment Adviser, Subadviser and Administrator." The combined advisory and administration fees paid by the Fund are greater than those paid by most funds, but are believed by the Investment Adviser to be comparable to fees paid by other funds with a similar global investment strategy. 4 PURCHASE AND REDEMPTION OF SHARES Shares of the Fund may be bought through Goldman Sachs and certain investment dealers including members of the National Association of Securities Dealers, Inc. ("NASD") and certain other financial service firms that have sales agreements with Goldman Sachs ("Authorized Dealers"). The minimum initial investment in the Fund is $1,500, except in connection with the special investment programs described under "Purchase of Shares" and purchases by certain institutional investors, and except that this requirement may be waived at the discretion of the Trust's officers. Shares of the Fund may be purchased at the current net asset value per share plus any applicable sales charge. The sales charge is paid at the time of purchase of shares of the Fund. The maximum sales charge is currently 4.5% of the purchase price with reduced sales charges for purchases of shares of the Fund of $100,000 or more. The sales charge is waived for specified classes of investors described under "Purchase of Shares-- Offering Price" and in connection with exchanges of shares. The Fund and Goldman Sachs reserve the right to modify the minimum investment requirement, the manner in which shares are offered or the sales charge rates applicable to future purchases of shares. See "Purchase of Shares." The Fund will redeem its shares upon request of a shareholder on any Business Day, as defined below, at the net asset value next determined after receipt of such request in proper form. See "Redemption of Shares." DISTRIBUTOR AND TRANSFER AGENT Goldman Sachs serves as the distributor for the Fund in the sale of its shares. Under the Transfer Agency Agreement with the Fund, Goldman Sachs provides transfer agency services and responds to shareholder inquiries. See "Management--Distributor and Transfer Agent." DISTRIBUTION PLAN The Trust, on behalf of the Fund, has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act"). Under the Plan, the Fund will pay to Goldman Sachs a quarterly fee for distribution and personal and account maintenance services that is equal, on an annual basis, to 0.50% of the Fund's average daily net assets. Currently, Goldman Sachs has voluntarily agreed to limit the amount of such fee to 0.25% of the Fund's average daily net assets. Goldman Sachs has no current intention of modifying or discontinuing such limitation, but may do so in the future at its discretion. See "Distribution Plan." DIVIDEND POLICY The Fund intends that all or substantially all of the Fund's net investment income will be declared as a dividend and paid monthly. From time to time a portion of such dividends may constitute a return of capital. The Fund also intends that all or substantially all net realized long-term and short-term capital gains will be declared as a dividend and paid at least annually. Shareholders will receive dividends in additional shares of the Fund or may elect to receive cash, shares of certain designated mutual funds sponsored by Goldman Sachs whose shares are subject to an initial sales charge (the "Goldman Sachs Portfolios") or ILA Service Units of the Prime Obligations Portfolio or the Tax-Exempt Diversified Portfolio of Goldman Sachs Money Market Trust (the "ILA Portfolios"). For further information concerning dividends, see "Dividends." 5 RISK FACTORS The Fund is intended for long-term investors who can accept the risks involved in investing in domestic and foreign fixed income securities as well as the risks associated with transactions in foreign currencies. See "Shares of the Trust" and "Investment Objectives and Policies." It is expected that the Fund will employ investment techniques involving risks different from those associated with investing solely in dollar- denominated fixed income securities of U.S. issuers. Such techniques include transactions in options, futures contracts, options on futures, forward foreign currency exchange contracts, currency options and futures, currency and interest rate swaps and interest rate floors, caps and collars. See "Risks, Special Investment Methods and Investment Limitations." INVESTMENT IN FIXED INCOME SECURITIES--EFFECTS OF INTEREST AND EXCHANGE RATE FLUCTUATIONS. The net asset value of the shares of the Fund will change in response to fluctuations in interest rates and in currency exchange rates. Except to the extent that values are independently affected by currency exchange rate fluctuations, when interest rates decline, the value of fixed income securities in which the Fund will invest and, therefore, the Fund's net asset value generally can be expected to rise. Conversely, when interest rates rise, the value of fixed income securities in which the Fund will invest and, therefore, the Fund's net asset value generally can be expected to decline. The performance of investments in fixed income securities denominated in a foreign currency ("Non-Dollar Securities") will also depend on the strength of the foreign currency against the dollar and the interest rate environment in the country issuing the currency. Absent other events which could otherwise affect the value of Non-Dollar Securities (such as a change in the political climate or an issuer's credit quality), appreciation in the value of the foreign currency generally can be expected to increase the value of the Fund's Non- Dollar Securities in terms of U.S. dollars. A rise in foreign interest rates or a decline in the value of foreign currencies relative to the U.S. dollar generally can be expected to depress the value of the Fund's Non-Dollar Securities. FOREIGN CURRENCY TRANSACTIONS. The Fund may enter into forward foreign currency exchange contracts, currency futures contracts and options on such contracts, currency options and currency swaps to seek to increase total return when the Investment Adviser or the Subadviser anticipates that a foreign currency will appreciate or depreciate in value, but securities denominated in that currency do not present attractive investment opportunities or are not included in the Fund's portfolio. In addition, the Fund may enter into forward foreign currency exchange contracts, options on currency, futures contracts on currency, options on such futures, and currency swaps in order to hedge its positions against potential adverse changes in future foreign currency exchange rates and for risk management and other purposes incidental to the management of the Fund's portfolio. Forward contracts, over-the-counter options and swaps are subject to the risk that the other party to the contract will default on its obligations. Since a forward contract, over-the-counter option or swap is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive the Fund of unrealized profits, transaction costs and the hedging benefits of the contract or force the Fund to cover its purchase or sale commitments, if any, at the current market price. The Fund will not enter into such transactions unless the credit quality of the unsecured senior debt or the claims-paying ability of the other party thereto is considered to be investment grade by the Investment Adviser or the Subadviser. The Fund will incur expenses in connection with currency transactions. 6 STRUCTURED SECURITIES. The Fund may invest in structured notes, bonds or debentures, the value of the principal of and/or interest on which 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 change in interest rate or the value of the security at maturity may be a multiple of the change in the value of the Reference. Consequently, structured securities entail a greater degree of market risk than other types of debt obligations. Structured securities may also be more volatile, less liquid and more difficult to accurately price than less complex securities. INVESTMENT IN SECURITIES OF FOREIGN ISSUERS. Investing in the securities of foreign issuers involves considerations and potential risks not typically associated with investing in the securities of U.S. issuers. For example, foreign securities markets may be less liquid, more volatile and less subject to governmental regulation than U.S. securities markets. There also may be less publicly available information about foreign issuers than about domestic issuers. In addition, the value of securities of foreign issuers held in the Fund's portfolio will be affected by changes in currency exchange rates, which may be volatile, as well as political and economic developments related to the investment. NON-DIVERSIFICATION. Since the Fund is "non-diversified" under the Act, it is subject only to certain federal tax diversification requirements in addition to the policies adopted by the Investment Adviser and Subadviser. The Fund may, with respect to 50% of its total assets at the end of any tax quarter, invest up to 25% of its total assets in the securities of an issuer (except that this limitation does not apply to U.S. Government securities). With respect to the remaining 50% of its total assets, the Fund may not, at the end of any tax quarter, invest more than 5% of its total assets in the securities of any one issuer (except the U.S. Government) nor acquire more than 10% of the outstanding voting securities of any issuer. To the extent that the Fund is not diversified under the Act, it will be more susceptible to adverse developments affecting any single issuer of portfolio securities. CONCENTRATION. 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 the securities of U.S. issuers. However, not more than 25% of the Fund's total assets will be invested in securities of any one foreign government. For purposes of these percentage limitations, the term "securities" does not include foreign currencies, which means that the Fund could have more than 25% of its total assets denominated in any currency listed in Appendix A. Concentration of the Fund's investments in such issuers or currencies will subject the Fund, to a greater extent than if investment were more limited, to the risks of adverse securities markets, exchange rates and social, political or economic events which may occur in those countries. CONFLICTS OF INTEREST. The involvement of Goldman Sachs, its divisions and affiliates (including the Investment Adviser and the Subadviser), partners and officers, in the investment activities and business operations of the Fund may present certain conflicts of interest, as described under "Management-- Investment Adviser, Subadviser and Administrator." 7 FEES AND EXPENSES
GOLDMAN SACHS GLOBAL INCOME FUND ------------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Charge Imposed on Purchases.................... 4.5%* Maximum Sales Charge Imposed on Reinvested Dividends......... None Redemption Fees.............................................. None** Exchange Fees................................................ None** ANNUAL FUND OPERATING EXPENSES: (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) Management Fees (include advisory and subadvisory fees of 0.25% and 0.50%, respectively, and administration fees of 0.15%)...................................................... 0.90% Distribution and Service (Rule 12b-1) Fees (after expense limitation)................................................. 0.25%*** Other Expenses............................................... 0.13% ---- TOTAL FUND OPERATING EXPENSES (AFTER EXPENSE LIMITATION). 1.28%*** ====
1 YEAR 3 YEARS 5 YEARS 10 YEARS EXAMPLE: ------ ------- ------- -------- You would pay the following expenses on a hypo- thetical $1,000 investment (including the maxi- mum sales charge), assuming (1) a 5% annual re- turn and (2) redemption at the end of each time period......................................... $57 $84 $112 $193
- -------- * As a percentage of the offering price. No sales charge is imposed on purchases by certain classes of investors. See "Purchase of Shares." ** A transaction fee of $7.50 may be charged for redemption proceeds paid by wire. In addition to free reinvestments of dividends and distributions in shares of other Goldman Sachs Portfolios or units of the ILA Portfolios and free automatic exchanges pursuant to the Automatic Exchange Program, six free exchanges are permitted in each twelve month period. A fee of $12.50 may be charged for each subsequent exchange during such period. See "Purchase of Shares--Exchange Privilege." A contingent deferred sales charge may be imposed in connection with certain redemptions of shares sold without an initial sales charge to certain participant directed plans. See "Purchase of Shares--Participant Directed Plans." The transfer agency fee incurred by the Fund is based on a fixed per account charge plus transaction fees. See "Management--Distributor and Transfer Agent." *** During the fiscal year ended October 31, 1994, Goldman Sachs agreed to limit the amount of the distribution and service fees payable by the Fund to 0.25% of its average daily net assets. Goldman Sachs has no current intention of modifying or discontinuing such limitation, but may do so in the future at its discretion. If Goldman Sachs did not agree to limit the amount of the distribution and service fees payable by the Fund to 0.25% of its average daily net assets the Fund's distribution and service fees and total operating expenses would have been 0.50% and 1.53%, respectively, of such assets. See "Distribution Plan." Investors should be aware that, due to the distribution fees, a long-term shareholder in the Fund may pay over time more than the economic equivalent of the maximum front-end sales charge permitted under the rules of the NASD. The purpose of the foregoing table is to assist investors in understanding the various costs and expenses of the Fund that an investor in the Fund will bear directly or indirectly. The costs and expenses included in the table and hypothetical example above should not be considered as representative of past or future expenses. Actual fees and expenses may be greater or less than those indicated. Moreover, while the example assumes a 5% annual return, the Fund's actual performance will vary and may result in an actual return greater or less than 5%. See "Management--Investment Adviser, Subadviser and Administrator." 8 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD The following data with respect to a share of the Fund outstanding during the periods indicated has been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report incorporated by reference and attached to the Additional Statement, from the Fund's annual report to shareholders for the period ended October 31, 1994 (the "Annual Report"). This information should be read in conjunction with the financial statements and related notes incorporated by reference and attached to the Additional Statement. The Annual Report also contains performance information and is available upon request and without charge by calling the telephone number or writing to one of the addresses on the inside cover of this Prospectus.
FOR THE YEARS ENDED OCTOBER 31, FOR THE PERIOD ----------------------------------------- ENDED 1994 1993 1992 OCTOBER 31, 1991(a) ------------ ------------ ------------ ------------------- Net asset value, begin- ning of period $15.07 $14.69 $14.60 $14.55 - ---------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.84 0.85 1.14 0.25 Net realized and unrealized gain (loss) on investments, options and futures (1.37) 1.07 0.45 0.23 Net realized and unrealized loss on foreign currency related transactions (0.12) (0.42) (0.36) (0.19) - ---------------------------------------------------------------------------------------- Total income (loss) from investment operations (0.65) 1.50 1.23 0.29 - ---------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (0.22) (0.85) (1.14) (0.24) Net realized gain on investment, option and futures transactions (0.16) (0.27) -- -- Paid in capital (0.61) -- -- -- - ---------------------------------------------------------------------------------------- Total distributions to shareholders (0.99) (1.12) (1.14) (0.24) - ---------------------------------------------------------------------------------------- Net increase (decrease) in net asset value (1.64) 0.38 0.09 0.05 - ---------------------------------------------------------------------------------------- Net asset value, end of period $13.43 $15.07 $14.69 $14.60 - ---------------------------------------------------------------------------------------- Total return(b) (4.49)% 10.75% 8.77% 2.00%(c) Ratio of net expenses to average net assets 1.28 % 1.30% 1.37% 0.38%(c) Ratio of net investment income to average net assets 5.73 % 5.78% 7.85% 1.72%(c) Portfolio turnover rate 343.74 % 313.88% 270.75% 34.22%(c) Net assets at end of period $396,584,133 $675,661,804 $588,892,642 $388,744,486 Ratio information assuming no voluntary waiver of distribution fees: Ratio of expenses to average net assets 1.53 % 1.55% 1.62% 0.44%(c) Ratio of net investment income to average net assets 5.48 % 5.53% 7.60% 1.66%(c)
- ------------------------------------------------------------------------------- (a) For the period from August 2, 1991 (commencement of operations) to October 31, 1991. (b) Assumes investment at 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 charges. Total return would be reduced if a sales charge were taken into account. (c) Not annualized. 9 INVESTMENT OBJECTIVE AND POLICIES THE FUND SEEKS The Fund's investment objective is to provide investors A HIGH TOTAL with a high total return, emphasizing current income and, to RETURN, a lesser extent, providing opportunities for capital EMPHASIZING appreciation, through investment in a portfolio of high CURRENT INCOME quality fixed income securities of U.S. and foreign issuers AND, TO A and through transactions in foreign currencies. High quality LESSER EXTENT, securities are defined as securities which have ratings of PROVIDING at least AA by Standard & Poor's Ratings Group ("S&P") or Aa OPPORTUNITIES by Moody's Investors Service, Inc. ("Moody's") ("High FOR CAPITAL Quality Ratings") or, if unrated by such rating APPRECIATION. organizations, are determined by the Fund's Investment Adviser or Subadviser to be of comparable credit quality. A security will be deemed to have met this requirement if it receives the minimum required rating from at least one such rating organization, at the time of investment, even though it has been rated below the minimum rating by one or more other rating organizations. There can be no assurance that the Fund will be successful in achieving its investment objective. SELECTION OF PORTFOLIO INVESTMENTS THE FUND WILL Under normal circumstances, the Fund will seek to meet its INVEST investment objective by pursuing investment opportunities in PRIMARILY IN foreign and domestic fixed income securities markets and by FOREIGN AND engaging in currency transactions to enhance returns and for DOMESTIC FIXED the purpose of hedging its portfolio. In determining the INCOME countries and currencies in which the Fund will invest, the SECURITIES Fund's portfolio managers will form an opinion based MARKETS. 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 will apply the Black-Litterman Model (the "Model") to their views to develop a portfolio that produces, in the view of the Investment Adviser and Subadviser, 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 to maintain the level of portfolio risk within the guidelines established by the Investment Adviser. In selecting securities for the Fund's portfolio, the 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. The Fund will, under normal market conditions, have at least 30% of its total assets, adjusted to reflect the Fund's net exposure after giving effect to currency transactions and positions, denominated in U.S. dollars. It is expected that the Fund will use currency transactions both to enhance returns for a given level of risk and to hedge its exposure to foreign currencies. While the Fund will have both long and short currency positions, its net long and short foreign 10 currency exposure will not exceed the value of the Fund's total assets. The Fund may, for temporary defensive purposes, invest up to 100% of its total assets in dollar- denominated securities or securities of U.S. issuers. See "Risks, Special Investment Methods and Investment Limitations." PORTFOLIO DURATION THE FUND WILL The Fund will maintain a dollar weighted average portfolio MAINTAIN A duration of not more than five years. Duration represents DOLLAR WEIGHTED the weighted average maturity of expected cash flows on a AVERAGE debt obligation, discounted to present value. The longer the PORTFOLIO duration of a debt obligation, the more sensitive its value DURATION OF NOT is to changes in interest rates. Maturity measures only the MORE THAN FIVE time until final payment is due on a bond or other debt YEARS. security; it takes no account of the pattern of a security's cash flows over time. In computing the duration of its portfolio, the Fund will have to estimate the duration of debt obligations that are subject to prepayment or redemption by the issuer. The Fund may use various techniques to shorten or lengthen the dollar weighted average duration of its portfolio, including the acquisition of debt obligations at a premium or discount, transactions in options, futures contracts and options on futures and interest rate swaps. Subject to the policy of maintaining a dollar weighted average portfolio duration not exceeding five years, the Fund may invest in individual obligations deemed to have estimated remaining maturities of ten years or less. The Fund is not subject to any limitation with respect to the average maturity of its portfolio. CURRENCY AND INTEREST RATE TECHNIQUES THE FUND It is expected that the Fund will employ certain currency EMPLOYS and interest rate management techniques involving risks CURRENCY AND different from those associated with investing solely in INTEREST RATE dollar-denominated fixed income securities of U.S. issuers. MANAGEMENT Such management techniques include transactions in options TECHNIQUES (including yield curve options), futures, options on WHICH INVOLVE futures, forward foreign currency exchange contracts, RISK. currency options and futures, currency and interest rate swaps and interest rate floors, caps and collars. To the extent that the Fund is fully invested in foreign securities while also maintaining currency positions, it may be exposed to greater combined risk. The Fund's net currency positions may expose it to risks independent of its securities positions. See "Risks, Special Investment Methods and Investment Limitations." OTHER INVESTMENT POLICIES Since the Fund is "non-diversified" under the Act, the only statutory or regulatory diversification requirements to which it is subject arise under federal tax law. The Fund may, with respect to 50% of its total assets, invest up to 25% of its total assets in the securities of an issuer (except that this limitation does 11 not apply to U.S. Government securities). With respect to the remaining 50% of the Fund's total assets, (1) the Fund may not invest more than 5% of its total assets in the securities of any one issuer (other than the U.S. Government), and (2) the Fund may not acquire more than 10% of the outstanding voting securities of any issuer. These tests apply at the end of each quarter of its taxable year and are subject to certain conditions and limitations under the Internal Revenue Code of 1986, as amended (the "Code"). Since the Fund is not diversified under the Act, it may be more susceptible to adverse developments affecting any single issuer in which its investments are concentrated. Not more than 25% of the Fund's total assets will be invested in the securities of any one foreign government or any other issuer (except that this limitation does not apply to the U.S. Government). However, this 25% restriction does not prohibit the Fund from concentrating more than 25% of its total assets in the securities of issuers located in Canada, Germany, Japan and the United Kingdom as well as in the United States. In addition, for purposes of these percentage limitations, the term "securities" does not include foreign currencies, which means that the Fund could have more than 25% of its total assets denominated in any particular currency described in Appendix A. Except as otherwise stated under "Investment Restrictions," the Fund's investment objective and policies are not fundamental and may be changed without a vote of the shareholders. If there is a change in the Fund's investment objective, shareholders should consider whether the Fund remains an appropriate investment in light of their then current financial positions and needs. Market risks are inherent in all securities in varying degrees. Therefore, there can be no assurance that the Fund will be successful in meeting its investment objective. The Fund is intended for investors who can accept the risks involved in investments in domestic and foreign fixed income securities, in foreign currencies and in the currency and interest rate management techniques that are expected to be employed by the Fund. An investment in shares of the Fund does not constitute a complete investment program. Investors may wish to complement an investment in the Fund with other types of investments. FIXED INCOME SECURITIES THE FUND MAY The fixed income securities in which the Fund may invest INVEST IN FIXED include: (i) securities issued or guaranteed by the U.S. INCOME Government, its agencies or instrumentalities ("U.S. SECURITIES. Government securities") and custodial receipts therefor; (ii) securities issued or guaranteed by a foreign government or any of its political subdivisions, authorities, agencies or instrumentalities or by supranational entities (i.e., international organizations designated or supported by governmental entities to promote economic reconstruction or 12 development, such as the World Bank); (iii) corporate debt securities; (iv) certificates of deposit and bankers' acceptances issued or guaranteed by, or time deposits maintained at, banks (including U.S. or foreign branches of U.S. banks or U.S. or foreign branches of foreign banks) having total assets of more than $1 billion; (v) commercial paper rated A-1 or better by S&P, Prime-1 or better by Moody's, Fitch-1 or better by Fitch Investors Service, Inc., or Duff 1 or better by Duff & Phelps Inc. or, if not rated by such rating organizations, issued by U.S. or foreign companies having outstanding debt securities with a High Quality Rating and determined by the Investment Adviser or Subadviser to be of comparable credit quality to securities with a High Quality Rating; and (vi) mortgage and asset backed securities. Although the Fund may invest in securities satisfying the minimum credit quality criteria prescribed above, the Fund generally intends to invest at least 50% of its net assets in securities having the highest applicable credit quality rating, at the time of investment, and unrated securities determined by the Investment Adviser or Subadviser to be of comparable credit quality to securities with the highest applicable credit quality rating. If a security that at the time of purchase satisfies the Fund's minimum rating criteria is subsequently downgraded below such rating criteria, the Fund will not be required to dispose of such security. If a downgrading occurs, the Investment Adviser or Subadviser will consider what action, including the sale of such security, is in the best interest of the Fund. Currently, most of the foreign securities that meet the Fund's credit quality standards are securities issued by foreign governments. The debt securities in which the Fund will invest may have fixed, variable or floating interest rates. FOREIGN INVESTMENTS AND CURRENCIES The Fund will, under normal market conditions, have at least 30% of its total assets, adjusted to reflect the Fund's net exposure after giving effect to currency transactions and positions, denominated in U.S. dollars. The performance of investments in Non-Dollar Securities will depend on, among other things, the strength of the foreign currency against the dollar and the interest rate environment in the country issuing the foreign currency. Absent other events which could otherwise affect the value of Non-Dollar Securities (such as a change in the political climate or an issuer's credit quality), appreciation in the value of the foreign currency generally can be expected to increase the value of the Fund's Non-Dollar Securities in terms of U.S. dollars. A rise in foreign interest rates or decline in the value of foreign currencies relative to the U.S. dollar generally can be expected to depress the value of the Fund's Non-Dollar Securities in terms of U.S. dollars. The Investment Adviser and the Subadviser evaluate investments on the basis of fundamental economic criteria (e.g., relative inflation levels and trends, growth rate forecasts, balance of payments status and economic policies) as well as technical and political data. 13 Under normal circumstances, the Fund will invest in securities of issuers in at least three countries. No more than 25% of the Fund's total assets will be invested in securities of issuers located in any country other than Canada, Germany, Japan, the United Kingdom and the United States. Investing the Fund's assets in securities of issuers located outside the United States will subject the Fund to the risks of adverse social, political or economic events which may occur in such foreign countries. See "Risks, Special Investment Methods and Investment Limitations-- Foreign Currency Transactions" below. The Fund may, for temporary defensive purposes (such as when instability or unfavorable conditions exist in foreign countries), invest 100% of its total assets in dollar-denominated securities or securities of U.S. issuers. See "Risks, Special Investment Methods and Investment Limitations." INVESTMENT ADVISER, SUBADVISER AND ADMINISTRATOR THE FUND'S The Fund's investment adviser is Goldman Sachs Asset INVESTMENT Management, a separate operating division of Goldman Sachs. ADVISER AND The Fund's subadviser is GSAM International, an affiliate of ADMINISTRATOR Goldman Sachs. The management services provided by the IS GOLDMAN Investment Adviser and Subadviser are subject to the general SACHS ASSET supervision of the Trust's Board of Trustees. Goldman Sachs MANAGEMENT. THE Asset Management also serves as the administrator of the FUND'S Fund. SUBADVISER IS GSAM Goldman Sachs Asset Management and its affiliates serve a INTERNATIONAL. wide range of clients including private and public pension funds, endowments, foundations, banks, thrifts, insurance companies, corporations, and private investors and family groups. Founded in 1869, Goldman Sachs is among the oldest and largest investment banking firms in the United States. Goldman Sachs is a leader in virtually every field of investing and financing, participating in financial markets worldwide and serving individuals, institutions, corporations and governments. Goldman Sachs is headquartered in New York and has offices throughout the United States and in Beijing, Frankfurt, George Town, Hong Kong, London, Madrid, Milan, Montreal, Osaka, Paris, Seoul, Shanghai, Singapore, Sydney, Taipei, Tokyo, Toronto, Vancouver and Zurich. GSAM International was organized in 1990. As a company with unlimited liability under the laws of England, it is authorized to conduct investment advisory business in the United Kingdom as a member of the Investment Management Regulatory Organisation Limited, a United Kingdom self- regulatory organization. The Investment Adviser and Subadviser are able to draw on the research and expertise of Goldman Sachs in making investment decisions for the Fund. The day-to-day supervision of the Investment Adviser and Subadviser may be effected by partners, officers and directors of Goldman Sachs, Goldman Sachs 14 International ("GSI") and their affiliates who may be involved in the global bond trading activities of Goldman Sachs and its affiliates. However, neither Goldman Sachs, GSI nor any of their affiliates is expected or obligated to make available to the Fund any information concerning their proprietary trading activities or strategies, or the trading activities or strategies used for other accounts managed by them, and the Fund's investment results may differ from those achieved by other clients or proprietary accounts of Goldman Sachs or its affiliates. For a discussion of certain potential conflicts of interest involving Goldman Sachs and its affiliates, see "Management--Investment Adviser, Subadviser and Administrator." RISKS, SPECIAL INVESTMENT METHODS AND INVESTMENT LIMITATIONS FOREIGN TRANSACTIONS THE FUND WILL FOREIGN SECURITIES. Investments in securities of foreign INVEST IN issuers and Non-Dollar Securities offer potential benefits, SECURITIES OF but also involve certain significant risks that are not FOREIGN typically associated with investing in domestic securities. ISSUERS. Among the risks involved in investments in securities of foreign issuers and Non-Dollar Securities are fluctuations in currency exchange rates and the possible imposition of exchange control regulations (e.g., currency blockage) or other foreign or U.S. laws or restrictions applicable to such investments. A decline in the exchange rate would reduce the value of certain portfolio securities. In addition, if the exchange rate for the currency in which the Fund receives interest payments declines against the U.S. dollar before such interest is paid as dividends to shareholders, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends. As discussed below, the Fund may employ certain investment techniques to hedge its foreign currency exposure; however, such techniques also entail certain risks. There may be less publicly available information about a foreign issuer than about a domestic issuer. Foreign issuers are not generally subject to accounting, auditing and financial reporting standards comparable to those applicable to domestic issuers. Most foreign securities markets may have substantially less volume and are subject to less government supervision than U.S. securities markets, and securities of many foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. In addition, there is generally less government regulation of securities exchanges, securities dealers, and listed and unlisted companies in foreign countries than 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 15 unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when a portion of the assets of the Fund is uninvested and no return is earned thereon. The inability of the 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 security or, if the Fund has entered into a contract to sell the security, could result in possible liability to the purchaser. Costs associated with transactions in securities traded on foreign markets or of foreign issuers are generally higher than costs associated with transactions in U.S. securities on U.S. markets. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments or capital gains, limitations on the removal of funds or other assets of the Fund, political or social instability or diplomatic developments which could affect investments in those countries. Individual foreign economies may differ favorably or unfavorably from the United States economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. The securities markets, values of securities, yields and risks associated with securities markets in different countries may change independently of each other. THE FUND MAY CONCENTRATION IN CANADA, GERMANY, JAPAN AND THE UNITED INVEST A KINGDOM. The Fund may invest more than 25% of its total SUBSTANTIAL assets in the securities of corporate and governmental PORTION OF ITS issuers located in each of Canada, Germany, Japan and the ASSETS IN United Kingdom as well as the securities of U.S. issuers. ISSUERS LOCATED Concentration of the Fund's investments in such issuers or IN CANADA, currencies will subject the Fund, to a greater extent than GERMANY, JAPAN if investment was more limited, to the risks of adverse AND THE UNITED securities markets, exchange rates and social, political or KINGDOM AS WELL economic events which may occur in those countries. See AS THE Appendix A to this Prospectus for further information about SECURITIES OF the foregoing countries. In addition, for purposes of these U.S. ISSUERS. percentage limitations, the term "securities" does not include foreign currencies, which means that the Fund could have more than 25% of its total assets denominated in any particular currency described in Appendix A. THE FUND MAY FOREIGN CURRENCY TRANSACTIONS. Because investment in ENTER INTO foreign issuers will usually involve currencies of foreign FOREIGN countries, the value of the assets of the Fund as measured CURRENCY in U.S. dollars will be affected by changes in foreign TRANSACTIONS. currency exchange rates. Currencies in which the Fund's portfolio securities may be denominated include, but are not limited to, those listed in Appendix A as well as the U.S. dollar. 16 An issuer of fixed income securities purchased by the Fund may be domiciled in a country other than the country in whose currency the instrument is denominated. The Fund may also invest in debt securities denominated in the European Currency Unit ("ECU"), which is a "basket" consisting of specified amounts in the currencies of certain of the twelve member states of the European Community. The specific amounts of currencies comprising the ECU may be adjusted by the Council of Ministers of the European Community from time to time to reflect changes in relative values of the underlying currencies. In addition, the Fund may invest in securities denominated in other currency "baskets." Currency exchange rates may fluctuate significantly over short periods of time causing, together with other factors, the Fund's net asset value to fluctuate as well. Currency exchange rates 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 or failure to intervene by U.S. or foreign governments or central banks or by currency controls or political developments in the U.S. or abroad. To the extent that a substantial portion of the Fund's total assets, adjusted to reflect the Fund's net position after giving effect to currency transactions, is denominated in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries. In addition to investing in Non-Dollar Securities, the Fund may engage in a variety of foreign currency techniques. The Fund may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the Investment Adviser or Subadviser, it would be beneficial to convert such currency into U.S. dollars at a later date, based on anticipated changes in the relevant exchange rate. The Fund will incur costs in connection with conversions between various currencies. The Fund may purchase or sell forward foreign currency exchange contracts to seek to increase total return when the Investment Adviser or Subadviser anticipates that the foreign currency will appreciate or depreciate in value, but securities denominated in that currency do not in the Adviser's or Subadviser's view present attractive investment opportunities and are not held in the Fund's portfolio. In addition, the Fund may enter into forward foreign currency exchange contracts in order to protect against adverse changes in future foreign currency exchange rates. The Fund may engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value of securities denominated in a different currency if the Investment Adviser or Subadviser believes that there is a pattern of correlation between the two currencies. 17 The Fund may enter into contracts to purchase foreign currencies to protect against an anticipated rise in the U.S. dollar price of securities it intends to purchase. The Fund may enter into contracts to sell foreign currencies to protect against the decline in value of its Non-Dollar Securities due to a decline in the value of foreign currencies against the U.S. dollar. Contracts to sell foreign currency could limit any potential gain which might be realized by the Fund if the value of the underlying currency increased. If the Fund enters into a forward foreign currency exchange contract to sell foreign currency to increase total return or to buy foreign currency for any purpose, the Fund will be required to place cash or high grade liquid debt securities in a segregated account of the Fund in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the securities placed in the segregated account declines, additional cash or securities will be placed in the account so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. 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 the 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. The Fund will not enter into such transactions 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 or the Subadviser. THE FUND MAY OPTIONS ON CURRENCIES. The Fund may purchase and write put PURCHASE AND and call options on currencies for the purpose of protecting WRITE (SELL) against declines in the U.S. dollar value of foreign OPTIONS ON portfolio securities and against increases in the U.S. FOREIGN dollar cost of foreign securities to be acquired. The Fund CURRENCIES. may use options on currency to cross-hedge, which involves writing or purchasing options on one currency 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 currency will constitute only a partial hedge, up to the amount of the premium received. The Fund could be required to purchase or sell currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on currency may constitute an effective hedge against exchange rate fluctuations; however, in the event of exchange rate movements adverse to the Fund's position, the Fund may forfeit the entire amount of the premium plus related transaction costs. In addition, the Fund may purchase call or put options on currency to seek to increase total return when the Investment Adviser or Subadviser anticipates that the currency will appreciate or depreciate in value, but the securities denominated in that currency do not present attractive investment opportunities and are not 18 held in the Fund's portfolio. Options on currencies to be written or purchased by the Fund will be traded on U.S. and foreign exchanges or over-the-counter. See "Risks Associated with Options Transactions" below for a discussion of the liquidity risks associated with options transactions. INTEREST RATE SWAPS, CURRENCY SWAPS, AND INTEREST RATE CAPS, FLOORS AND COLLARS THE FUND MAY The Fund may enter into interest rate swaps and currency ENTER INTO swaps for both hedging and to seek to increase total return. INTEREST RATE The Fund may also enter into other types of interest rate SWAPS, CURRENCY swap arrangements such as caps, floors and collars. The Fund SWAPS, AND will typically use interest rate swaps to shorten the INTEREST RATE effective duration of its portfolio. Interest rate swaps CAPS, FLOORS involve the exchange by the Fund with another party of their AND COLLARS. respective commitments to pay or receive interest, such as an exchange of fixed rate payments for floating rate payments. Currency swaps involve the exchange of their respective rights to make or receive payments in specified currencies. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments 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. Since interest rate swaps, currency swaps, and interest rate caps, floors and collars are individually negotiated, the Fund expects to achieve an acceptable degree of correlation between its portfolio investments and its swap, cap, floor and collar positions entered into for hedging purposes. The Fund will enter into interest rate swaps only on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the Fund is contractually obligated to make. If the other party to an interest rate swap defaults, the Fund's risk of loss consists of the net amount of interest payments that the Fund is contractually entitled to receive, if any. In contrast, currency swaps usually involve the delivery of the entire principal value 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. The Fund will maintain in a segregated account with the Fund's custodian cash and liquid, high grade debt securities equal to the net amount, if any, of the excess of the Fund's obligations over its entitlements with respect to swap transactions. To the extent that the net amount of a swap is held in a segregated account consisting of cash and liquid, high grade debt securities, 19 the Fund, the Investment Adviser and the Subadviser believe that interest rate and currency swaps do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to the Fund's borrowing restriction. The Fund will not enter into interest rate or currency swap, or interest rate cap, floor or collar transactions unless the unsecured commercial paper, senior debt or claims paying ability of the other party is rated either AA or A-1 or better by S&P or Aa or P-1 or better by Moody's or, if unrated by such rating organizations, determined to be of comparable quality by the Investment Adviser or Subadviser. The use of interest rate swaps, currency swaps, and interest rate floors, caps 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 or Subadviser is incorrect in its forecasts of market values, interest rates and currency exchange rates, the investment performance of the Fund would be less favorable than it would have been if this investment technique were not used. The staff of the SEC currently takes the position that swaps, caps, floors and collars are illiquid and thus subject to the Fund's 15% limitation on illiquid securities. STRUCTURED SECURITIES The Fund may invest in structured notes, bonds or debentures, the value of the principal of and/or interest on which 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. The terms of the structured securities may provide that in certain circumstances no principal is due at maturity and, therefore, may result in the loss of the Fund's investment. 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, the change in interest rate or the value of the security at maturity may be a multiple of the change in the value of the Reference. Consequently, structured securities entail a greater degree of market risk than other types of debt obligations. Structured securities may also be more volatile, less liquid and more difficult to accurately price than less complex securities. INVERSE FLOATING RATE SECURITIES THE FUND MAY The Fund may invest in inverse floating rate securities. INVEST IN The interest rate on an inverse floater resets in the INVERSE opposite direction from the market rate of interest to which FLOATING RATE the inverse floater is indexed. An inverse floater may be SECURITIES. considered to be leveraged to the extent that its interest rate varies by a 20 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. U.S. GOVERNMENT SECURITIES U.S. Government securities are obligations issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities. Some U.S. 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 of America. Others, such as obligations issued or guaranteed by U.S. Government agencies, authorities or instrumentalities, are supported either by (a) the full faith and credit of the U.S. Government (such as securities of the Government National Mortgage Association), (b) the right of the issuer to borrow from the Treasury (such as securities of the Student Loan Marketing Association), (c) the discretionary authority of the U.S. Government to purchase the agency's obligations (such as securities of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the issuer. No assurance can be given that the U.S. Government will continue to provide financial support to U.S. Government agencies, authorities or instrumentalities in the future. Securities guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities are deemed to include (a) securities for which the payment of principal and interest is backed by a guaranty of the U.S. Government, its agencies, authorities or instrumentalities and (b) participations in loans made to foreign governments or their agencies that are so guaranteed. The secondary market for certain of these participations is limited. Such participations may therefore be regarded as illiquid. The Fund may also invest in separately traded principal and interest components of securities guaranteed or issued by the U.S. Government or its agencies or instrumentalities if such components are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS") or any similar program sponsored by the U.S. Government. CUSTODIAL RECEIPTS. The Fund may acquire custodial receipts in respect of securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities. Such custodial receipts evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies or instrumentalities. For certain securities law purposes, custodial receipts are not considered obligations of the U.S. Government. 21 MORTGAGE-BACKED AND ASSET-BACKED SECURITIES THE FUND MAY The Fund may invest in mortgage-backed securities, which INVEST IN represent direct or indirect participations in, or are MORTGAGE-BACKED collateralized by and payable from, mortgage loans secured AND ASSET- by real property. The Fund may also invest in asset-backed BACKED securities, which represent participations in, or are SECURITIES. secured by and payable from, assets such as motor vehicle installment sales contracts, installment loan contracts, leases of various types of real and personal property and receivables from revolving credit (credit card) agreements and other categories of receivables. Such securities are generally issued by trusts and special purpose corporations. Mortgage-backed and 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 mortgage-backed and asset-backed securities can be expected to accelerate, and thus impair the Fund's ability to reinvest the returns of principal at comparable yields. Conversely, in a rising interest rate environment, a declining prepayment rate will extend the average life of many mortgage-backed and asset-backed securities. This possibility is often referred to as extension risk. Extending the average life of a mortgage-backed or asset- backed security increases the risk of depreciation due to future increases in market interest rates. Accordingly, the market values of such securities will vary with changes in market interest rates generally and in yield differentials among various kinds of U.S. Government securities and other mortgage-backed and asset-backed securities. Asset-backed securities present certain risks that are not presented by mortgage-backed securities because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. There is the possibility that, in some cases, recoveries on repossessed collateral may not be available to support payments on these securities. OPTIONS ON SECURITIES AND SECURITIES INDICES THE FUND MAY The Fund may write (sell) covered call and put options on PURCHASE AND any securities in which it may invest. The Fund may also WRITE (SELL) write call and put options on any securities index composed OPTIONS ON of securities in which it may invest. The Fund may write and SECURITIES AND purchase options, referred to as "yield curve options," on SECURITIES the yield differential between two securities. In addition, INDICES. the Fund may purchase put and call options on any securities in which it may invest or options on any securities index composed of securities in which it may invest. The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of options to increase total return involves the risk of loss if the Investment Adviser or Subadviser is 22 incorrect in its expectations of fluctuations in securities prices or interest rates. The successful use of puts for hedging purposes depends in part on the ability of the Investment Adviser or Subadviser to predict future price fluctuations and the degree of correlation between the options and securities markets. If the Investment Adviser or Subadviser is incorrect in its determination of the correlation between the securities indices on which options are written or purchased and the securities in the Fund's investment portfolio or, with respect to yield curve options, of the direction or the extent of the movement of the yield differential, the investment performance of the Fund will be less favorable than it would have been in the absence of such option transactions. The writing of options could significantly increase the Fund's portfolio turnover rate and, therefore, associated brokerage commissions or spreads. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS THE FUND MAY To hedge against changes in interest rates, securities ENGAGE IN prices or currency exchange rates or to seek to increase FUTURES total return, the Fund may purchase and sell various kinds TRANSACTIONS. of futures contracts, and purchase and write call and put options on any of such futures contracts. The Fund may also enter into closing purchase and sale transactions with respect to any of such contracts and options. The futures contracts may be based on various securities (such as U.S. Government securities), securities indices, foreign currencies and other financial instruments and indices. The Fund will engage in futures and related options transactions only for bona fide hedging purposes as defined in regulations of the Commodity Futures Trading Commission or to seek to increase total return to the extent permitted by such regulations. The Fund may not purchase or sell futures contracts or purchase or sell related options to increase total return, except for closing purchase or sale transactions, if immediately thereafter the sum of the amount of margin deposits and premiums paid on the Fund's outstanding positions in futures and related options entered into for the purpose of seeking to increase total return would exceed 5% of the market value of the Fund's net assets. Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and, in the case of contracts and options obligating the Fund to purchase securities or currencies, require the Fund to segregate cash or liquid, high grade debt securities with a value equal to the amount of the Fund's obligations. While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. See "Investment Objectives and Policies--Futures Contracts and Options on Futures Contracts" in the Additional Statement. Thus, while the Fund may benefit from the use of futures and options on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in a poorer overall performance for the Fund than if it had not entered into any futures contracts or options transactions. The loss incurred by the Fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. 23 The use of futures may increase the volatility of the Fund's net asset value. The profitability of the Fund's trading in futures to increase total return will depend on the ability of the Investment Adviser and Subadviser to correctly analyze the futures markets. In addition, because 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 the Fund. Further, futures contracts and options on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and the Fund may be exposed to risk of loss. In addition, it is not possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in foreign currencies because the value of such securities is also likely to fluctuate as a result of independent factors not related to currency fluctuations. Therefore, perfect correlation between the Fund's futures positions and portfolio positions will be impossible to achieve. The Fund's transactions in foreign currency, forward foreign currency exchange contracts, options, futures contracts, and certain other derivative transactions may be limited by the requirements of the Code for qualification as a regulated investment company. RISKS OF DERIVATIVE TRANSACTIONS. The Fund's transactions in interest rate and currency swaps, interest rate caps, floors and collars, inverse floating rate securities, structured securities, options, futures, options on futures and currency forward contracts involve certain risks, including a possible lack of correlation between changes in the value of hedging instruments and the portfolio assets being hedged, the potential illiquidity of the markets for derivative instruments, the risks arising from the margin requirements and related leverage factors associated with such transactions. The use of these management techniques to seek to increase total return also involves the risk of loss if the Investment Adviser or Subadviser is incorrect in its expectation of fluctuations in currency exchange rates securities prices or interest rates. RESTRICTED AND ILLIQUID SECURITIES The Fund may purchase securities that are not registered or are offered in an exempt non-public offering ("restricted securities") under the Securities Act of 1933, as amended ("1933 Act"), including securities offered and sold to "qualified institutional buyers" in reliance on Rule 144A under the 1933 Act. However, the Fund will not invest more than 15% of its assets in illiquid investments, which includes repurchase agreements maturing in more than seven days, time deposits with a notice or demand period of more than seven days, interest rate and currency swaps, and interest rate caps, floors and collars, securities that are not readily marketable and restricted securities, 24 unless the Board of Trustees of the Trust determines, based upon a continuing review of the trading markets for the specific restricted security, that such restricted security eligible for sale under Rule 144A is liquid. The Board of Trustees may adopt guidelines and delegate to the Investment Adviser the daily function of determining and monitoring the liquidity of restricted securities. The Board of Trustees, however, will retain sufficient oversight and be ultimately responsible for the determinations. Since it is not possible to predict with assurance exactly how this market for restricted securities sold and offered under Rule 144A will develop, the Board of Trustees will carefully monitor the Fund's investments in these securities, focusing on such important factors, among others, as valuation, liquidity and availability of information. This investment practice could have the effect of increasing the level of illiquidity in the Fund to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted securities normally reflect a discount from the price at which such securities trade when they are not restricted, since the restriction makes them less liquid. The amount of the discount from the prevailing market price is expected to vary depending upon the type of security, the character of the issuer, the party who will bear the expenses of registering the restricted securities and prevailing supply and demand conditions. ZERO COUPON, DEFERRED INTEREST AND CAPITAL APPRECIATION BONDS THE FUND MAY The Fund may invest in zero coupon, deferred interest and INVEST IN ZERO capital appreciation bonds. Zero coupon, deferred interest COUPON, and capital appreciation bonds are debt obligations which DEFERRED are issued at a significant discount from face value that do INTEREST AND not entitle the holder to any payment of interest prior to CAPITAL maturity or a specified commencement or redemption date (or APPRECIATION cash payment date). The amount of the discount varies BONDS. 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 and capital appreciation bonds generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit quality. The Fund's investments in zero coupon, deferred interest and capital appreciation bonds or stripped securities may require the Fund to sell certain of its portfolio securities to generate sufficient cash to satisfy certain income distribution requirements. See "Taxation" in the Additional Statement. 25 OTHER INVESTMENT COMPANIES THE FUND MAY The Fund reserves the right to invest up to 10% of its INVEST IN total assets, calculated at the time of purchase, in the SECURITIES OF securities of other investment companies including business OTHER development companies and small business investment INVESTMENT companies. The Fund may not invest more than 5% of its total COMPANIES. assets in the securities of any one investment company or in more than 3% of the voting securities of any other investment company. Pursuant to an exemptive order obtained from the SEC, other investment companies in which the Fund may invest include money market funds for which the Investment Adviser, the Subadviser or any of their affiliates serves as investment adviser. The 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 advisory and administration fees paid by the Fund. However, to the extent that the Fund invests in a money market fund for which the Investment Adviser or any of its affiliates acts as adviser, the advisory and administration fees payable by the Fund to the Investment Adviser will be reduced by an amount equal to the Fund's proportionate share of the advisory and administration fees paid by such money market fund to the Investment Adviser or any of its affiliates. REPURCHASE AGREEMENTS THE FUND MAY The Fund may enter into repurchase agreements with dealers ENTER INTO in U.S. Government securities and member banks of the REPURCHASE Federal Reserve System which furnish collateral at least AGREEMENTS. equal in value or market price to the amount of their repurchase obligation. In a repurchase agreement, the Fund purchases a debt security from a seller which undertakes to repurchase the security at a specified resale price on an agreed future date (ordinarily a week or less). The resale price generally exceeds the purchase price by an amount which reflects an agreed-upon market interest rate for the term of the repurchase agreement. The primary risk is that, if the seller defaults, the Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund in connection with the related repurchase agreement are less than the repurchase price. Repurchase agreements maturing in more than seven days are considered by the Fund to be illiquid. In addition, the Fund, together with other registered investment 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. 26 WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES THE FUND MAY The Fund may purchase securities on a when-issued basis. PURCHASE WHEN- When-issued transactions arise when securities are purchased ISSUED by the Fund with payment and delivery taking place in the SECURITIES AND future in order to secure what is considered to be an ENTER INTO advantageous price and yield to the Fund at the time of FORWARD entering into the transaction. The Fund may also purchase COMMITMENT securities on a forward commitment basis. In a forward TRANSACTIONS. commitment transaction, the Fund contracts to purchase securities for a fixed price at a future date beyond customary settlement time. The Fund is required to hold and maintain in a segregated account until the settlement date cash or liquid, high grade debt obligations in an amount sufficient to meet the purchase price. Alternatively, the Fund may enter into offsetting contracts for the forward sale of other securities that it owns. 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 prior to the settlement date. Although the Fund would generally purchase securities on a when- issued or forward commitment basis with the intention of actually acquiring securities for its portfolio, the Fund may dispose of a when-issued security or forward commitment prior to settlement if the Investment Adviser or Subadviser deems it appropriate to do so. LENDING OF PORTFOLIO SECURITIES THE FUND MAY The Fund may also seek to increase its income by lending EARN ADDITIONAL portfolio securities. Under present regulatory policies, INCOME BY such loans may be made to institutions, such as certain LENDING ITS broker-dealers, and are required to be secured continuously PORTFOLIO by collateral in cash, cash equivalents, or U.S. Government SECURITIES. securities maintained on a current basis in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested in cash equivalents. If the Investment Adviser or Subadviser determines to make securities loans, the value of the securities loaned may not exceed 33 1/3% of the value of the total assets of the Fund. See "Investment Restrictions" in the Additional Statement. The Fund may experience loss or delay in the recovery of its securities if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund. INVESTMENT RESTRICTIONS CERTAIN OF THE The Fund is subject to certain investment restrictions FUND'S which, as described in more detail in the Additional INVESTMENT Statement, are fundamental policies that cannot be changed RESTRICTIONS without the approval of a majority of the outstanding shares CAN BE CHANGED of the Fund. Among other restrictions, the Fund may not ONLY BY invest more than 25% of its total assets in the securities SHAREHOLDER of issuers (including any one foreign government, but VOTE. excluding the U.S. Government) in any one industry. For purposes of this percentage limitation, the term "securities" does not include foreign currencies, which means that the Fund could have more than 25% of its total assets denominated in a particular currency. The Fund may not borrow 27 money, except from banks for temporary or short-term purposes, in connection with clearance of portfolio transactions, redemptions and failed settlements and to finance certain additional purchases of securities, provided that the Fund maintains asset coverage of at least 300% for all such borrowings. As a matter of non-fundamental policy, the Fund may not purchase securities while such borrowings exceed 5% of the value of the Fund's assets. PORTFOLIO TURNOVER THE FUND MAY The Fund may engage in active short-term trading to ENGAGE IN benefit from yield disparities among different issues of ACTIVE TRADING. securities or among the markets for fixed income securities of different countries, to seek short- term profits during periods of fluctuating interest rates, or for other reasons. Such trading will increase the Fund's portfolio turnover rate and may increase the incidence of short-term capital gains (distributions of which are taxable to shareholders as ordinary income). A high rate of portfolio turnover (100% or higher) involves correspondingly greater expenses which must be borne by the Fund and its shareholders and may under certain circumstances make it more difficult for the Fund to qualify as a regulated investment company under the Code. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of the Fund's portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. MANAGEMENT TRUSTEES AND OFFICERS THE TRUSTEES The Trust's Board of Trustees is responsible for deciding ARE RESPONSIBLE matters of general policy and reviewing the actions of the FOR THE OVERALL Investment Adviser, Subadviser, administrator, distributor MANAGEMENT AND and transfer agent. The officers of the Trust conduct and SUPERVISION OF supervise the Fund's daily business operations. The THE TRUST'S Additional Statement contains information as to the identity BUSINESS. of, and other information about, the Trustees and officers of the Trust. INVESTMENT ADVISER, SUBADVISER AND ADMINISTRATOR GOLDMAN SACHS INVESTMENT ADVISER AND SUBADVISER. Goldman Sachs Asset ASSET Management, One New York Plaza, New York, New York 10004, a MANAGEMENT AND separate operating division of Goldman Sachs, acts as the GSAM investment adviser and administrator of the Fund. GSAM INTERNATIONAL, International, 140 Fleet Street, London EC4A 2BJ England, an ACTING UNDER affiliate of Goldman Sachs, acts as subadviser of the Fund. THE SUPERVISION Goldman Sachs registered as an investment adviser in 1981. OF THE As of January 31, 1995, Goldman Sachs Asset Management, TRUSTEES, together with its affiliates, acted as investment adviser, MANAGE THE administrator or distributor for approximately $48.7 billion FUND'S in assets. GSAM International became a member of the INVESTMENTS. Investment 28 Management Regulatory Organisation Limited in 1990 and registered with the SEC as an investment adviser in 1991. Under its Investment Advisory Agreement with the Fund, Goldman Sachs Asset Management, with input from GSAM International and subject to the general supervision of the Trust's Board of Trustees, oversees the investment of the Fund's assets. Under its Subadvisory Agreement with the Fund, GSAM International, subject to the general supervision of the Trust's Board of Trustees and the Investment Adviser, provides day-to-day management of the Fund's portfolio. Goldman Sachs has agreed to permit the Fund to use the name "Goldman Sachs" or a derivative thereof as part of the Fund's name for as long as the Investment Advisory and Subadvisory Agreements are in effect. In performing their investment advisory and subadvisory services, the Investment Adviser and Subadviser, while remaining ultimately responsible for the management of the Fund, are able to draw upon the research and expertise of their affiliate offices for portfolio decisions and management with respect to certain portfolio securities. The Fund's portfolio manager is Stephen Fitzgerald. Mr. Fitzgerald joined GSAM International in 1992 and is a Vice President. Prior to 1992, he spent two years managing multi- currency fixed income and balanced portfolios at Invesco MIM Limited, where he was a senior member of the derivative products group. Prior to his employment at Invesco, Mr. Fitzgerald spent three years with Foreign and Colonial Management Limited in London managing fixed income and derivative funds and, prior to that, in the treasury department of NRMA Insurance Limited in Sydney. It is the responsibility of the Investment Adviser and Subadviser to make investment decisions for the Fund and to place purchase and sale orders for the Fund's portfolio transactions in U.S. and foreign securities and currency transactions. Such orders may be directed to any broker including, to the extent and in the manner permitted by applicable law, Goldman Sachs or its affiliates in foreign countries. THE FUND PAYS As compensation for the services rendered to the Fund by GOLDMAN SACHS Goldman Sachs Asset Management and GSAM International ASSET pursuant to the Investment Advisory and Subadvisory MANAGEMENT AND Agreements, respectively, and the assumption by Goldman GSAM Sachs Asset Management and GSAM International of the related INTERNATIONAL expenses, the Fund pays Goldman Sachs Asset Management and AN ADVISORY AND GSAM International a fee, computed daily and payable SUBADVISORY FEE monthly, at an annual rate equal to 0.25% and 0.50%, AT AN ANNUAL respectively, of the Fund's average daily net assets. The RATE EQUAL TO advisory fees (combined with the administration fee) paid by 0.25% AND the Fund are greater than those paid by most funds, but are 0.50%, believed by the Investment Adviser to be comparable to fees RESPECTIVELY, paid by other funds with a similar global investment OF AVERAGE strategy. For the fiscal year ended October 31, 1994, the DAILY NET Fund paid Goldman Sachs Asset Management and GSAM ASSETS. International fees for investment advisory services at the foregoing rates. Goldman Sachs Asset 29 Management and GSAM International have each agreed to reduce the fees payable to them (to the extent of such fees) by the amount the Fund's expenses would exceed the applicable expense limitations imposed by state securities administrators. See "Management--Expenses" in the Additional Statement. ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY GOLDMAN SACHS. The involvement of the Investment Adviser, the Subadviser and Goldman Sachs and their affiliates in the management of, or their interest in, other accounts and other activities of Goldman Sachs may present conflicts of interest with respect to the Fund or limit its investment activities. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Fund and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Fund. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Fund and it is not anticipated that the Investment Adviser or the Subadviser will have access to proprietary information for the purpose of managing the Fund. The results of the Fund's investment activities, therefore, may differ from those of Goldman Sachs and its affiliates and it is possible that the Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. From time to time, the Fund's activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. See "Activities of Goldman Sachs and its Affiliates and Other Accounts Managed by Goldman Sachs" in the Additional Statement for further information. THE FUND PAYS ADMINISTRATOR. As administrator, pursuant to an GOLDMAN SACHS Administration Agreement with the Fund, Goldman Sachs Asset ASSET Management provides personnel for supervisory, MANAGEMENT AN administrative, and clerical functions; oversees the ADMINISTRATION performance of administrative and professional services to FEE AT AN the Fund by others; provides office facilities; and ANNUAL RATE prepares, but does not pay for, reports to shareholders, the EQUAL TO 0.15% SEC and other regulatory authorities. As compensation for OF AVERAGE the services rendered to the Fund by Goldman Sachs Asset DAILY NET Management pursuant to the Administration Agreement, the ASSETS. Fund pays Goldman Sachs Asset Management a fee, computed daily and payable monthly, at an annual rate equal to 0.15% of the Fund's average daily net assets. Goldman Sachs Asset Management has agreed to reduce its fees payable (to the extent of its fees) by the amount (if any) that the Fund's expenses would exceed the applicable expense limitations imposed by state securities administrators. See "Management--Expenses" in the Additional Statement. For the fiscal year 30 ended October 31, 1994, the Fund paid Goldman Sachs Asset Management a fee for administrative services at the foregoing rate. Goldman Sachs may from time to time, at its own expense, provide compensation to certain Authorized Dealers for performing administrative services for their customers. These services include maintaining account records, processing orders to purchase, redeem and exchange Fund shares and responding to certain customer inquiries. The amount of such compensation may be up to .1875% annually of the average daily net assets of the Fund attributable to shares held by customers of such Authorized Dealers. In addition, Goldman Sachs may from time to time, as its own expense, provide compensation to certain Authorized Dealers who perform administrative services with respect to depository institutions whose customers purchase shares of the Fund. These services include responding to certain inquiries from and providing written materials to depository institutions about the Fund; furnishing advice about and assisting depository institutions in obtaining from state regulatory agencies any rulings, exemptions or other authorizations that may be required to conduct a mutual fund sales program; acting as liaison between depository institutions and national regulatory organizations; assisting with the preparation of sales material; and providing general assistance and advice in establishing and maintaining mutual fund sales programs on the premises of depository institutions. The amount of such compensation may be up to .08% annually of the average daily net assets of the Fund attributable to shares purchased through, and held by the customers of, such depository institutions. Such compensation does not represent an additional expense to the Fund or its shareholders, since it will be paid from the assets of Goldman Sachs or its affiliates. DISTRIBUTOR AND TRANSFER AGENT Goldman Sachs, 85 Broad Street, New York, New York, serves as the exclusive distributor of the Fund's shares. Shares may also be sold by Authorized Dealers. Authorized Dealers include investment dealers that are members of the NASD and certain other financial service firms. To become an Authorized Dealer, a dealer or financial service firm must enter into a sales agreement with Goldman Sachs. The minimum investment requirements, services, programs and purchase and redemption options for shares purchased through a particular Authorized Dealer may be different from those available to investors purchasing through other Authorized Dealers. Goldman Sachs, 4900 Sears Tower, Chicago, Illinois, also serves as the Fund's transfer agent (the "Transfer Agent") and as such performs various shareholder servicing functions. As compensation for the services rendered to the Fund by Goldman Sachs as transfer agent and the assumption by Goldman Sachs of the expenses related thereto, Goldman Sachs is entitled to receive a fee with respect to the Fund equal to $12,000 per year plus $3.50 per account, together with out-of-pocket and transaction-related expenses 31 (including those out-of-pocket expenses payable to servicing agents). Shareholders with inquiries regarding the Fund should contact Goldman Sachs (as Transfer Agent) at the address or the telephone number set forth on the inside front cover page of this Prospectus. REPORTS TO SHAREHOLDERS THE FUND WILL Shareholders will receive an annual report containing FURNISH audited financial statements and a semi-annual report. Each SHAREHOLDERS shareholder will also be provided with a printed WITH SEMI- confirmation for each transaction in the shareholder's ANNUAL AND account and an individual quarterly account statement. A ANNUAL REPORTS year-to-date statement for any account will be provided upon AND QUARTERLY request made to Goldman Sachs. The Fund does not generally STATEMENTS. provide sub-accounting services. PURCHASE OF SHARES Shares of the Fund may be purchased in any amount (subject to the minimum investment requirement) through any Authorized Dealer (including Goldman Sachs) on any Business Day (as defined under "Additional Information") at the net asset value next determined after receipt of an order, plus the applicable sales charge. The sales charge will vary with the size of the purchase as shown in the table below and under certain other conditions as described below. The Fund receives the net asset value per share, while the sales charge is divided between Goldman Sachs and the Authorized Dealer. If, by the close of regular trading on the New York Stock Exchange (currently 3:00 p.m. Chicago time, 4:00 p.m. New York time), a purchase order is received by Goldman Sachs or an Authorized Dealer, the price per share will be based on the net asset value computed on the day the purchase order is received. Purchased shares will be issued as of the time of such computation on that day. See "Net Asset Value." PURCHASE PROCEDURES HOW TO PURCHASE Purchases of shares may be made by check (except that a SHARES. check drawn on a foreign bank will not be accepted), Federal Reserve draft, Federal Funds wire, ACH transfer or bank wire. Checks or Federal Reserve drafts should be made payable as follows: (i) to an investor's Authorized Dealer, if purchased through such Authorized Dealer, or (ii) to "Goldman Sachs Trust--Goldman Sachs Global Income Fund," and should be directed to Goldman Sachs Trust--Goldman Sachs Global Income Fund, c/o National Financial Data Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City, MO 64141-6711. Federal Funds wires, ACH transfers and bank wires should be sent to State Street Bank and Trust Company ("State Street"). Payment by check, Federal Reserve draft, Federal Funds wire, ACH transfer or bank wire must be received within five business days of receipt of the purchase order by the Fund, Goldman Sachs 32 or an Authorized Dealer. An investor's Authorized Dealer is responsible for forwarding payment promptly to the Fund. In order to make an initial investment in the Fund, an investor must establish an account with the Fund by furnishing necessary information to the Fund, Goldman Sachs or any Authorized Dealer. An Account Information Form, a copy of which is attached to this Prospectus, should be used to establish such an account. The Fund reserves the right to refuse to open an account for, or to close the account of, any investor who fails to (1) provide a social security number or other taxpayer identification number, or (2) certify that such number is correct (if required to do so under applicable law) in establishing an account. Subsequent purchases of shares may be made in the manner set forth in the preceding paragraph. AN INITIAL The minimum initial investment in the Fund is $1,500, INVESTMENT MUST except in connection with the special investment programs BE AT LEAST described below, purchases by certain institutional $1,500. investors as described below, and in conjunction with various monthly accumulation plans established with certain Authorized Dealers. The minimum initial investment in the Fund is currently $50,000 for unitholders or shareholders of Goldman Sachs Money Market Trust, GS Core Fixed Income Fund, GS Short-Term Government Agency Fund, GS Adjustable Rate Government Agency Fund, GS Short Duration Tax-Free Fund or GS Government Agency Portfolio (for Financial Institutions) that are banks, trust companies or other types of depository institutions. These requirements may be waived at the discretion of the Trust's officers. Except in connection with certain investment programs, a minimum of $50 is required for subsequent investments. The Fund reserves the right to redeem shares of any shareholder whose account balance is less than $50 as a result of earlier redemptions. Such redemptions will not be implemented if the value of a shareholder's account falls below the minimum account balance solely as a result of market conditions. The Fund will give sixty (60) days' prior written notice to shareholders whose shares are being redeemed to allow them to purchase sufficient additional shares of the Fund to avoid such redemption. In addition, the Fund and Goldman Sachs reserve the right to modify the minimum investment, the manner in which shares are offered and the sales charge rates applicable to future purchases of shares. 33 OFFERING PRICE THE SALES The offering price is the next determined net asset value CHARGE MAY VARY per share plus a sales charge, if any, paid at the time of DEPENDING ON purchase of shares of the Fund as shown in the following THE DOLLAR table or as set forth under "Participant-Directed Plans": AMOUNT INVESTED IN THE FUND.
SALES CHARGE AS MAXIMUM AMOUNT OF PURCHASE SALES CHARGE AS PERCENTAGE DEALER ALLOWANCE (INCLUDING SALES CHARGE, PERCENTAGE OF OF NET AMOUNT AS PERCENTAGE IF ANY) OFFERING PRICE INVESTED OF 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 up to (but less than) $3 million.. 1.25 1.27 1.15 $3 million or more...... 0.00 0.00 *
-------- * Goldman Sachs may pay a commission equal to 0.50% of the amount of shares purchased to Authorized Dealers who initiate or are responsible for purchases of $3 million or more of shares of the Fund, provided such shares remain in the Fund for at least twelve months. The entire amount of the sales charge will be reallowed to Authorized Dealers during the period January 3, 1995 through April 17, 1995 if shares of the Fund are purchased through any Individual Retirement Account (IRA), including self- directed IRAs. In addition to concessions allowed to Authorized Dealers, Goldman Sachs may, from time to time, assist Authorized Dealers by, among other things, providing sales literature to and holding informational programs for the benefit of Authorized Dealers' registered representatives. Authorized Dealers may limit the participation of registered representatives in such informational programs by means of sales incentive programs which may require the sale of minimum dollar amounts of shares of the Goldman Sachs Portfolios. Goldman Sachs may also provide additional promotional incentives to Authorized Dealers in connection with sales of shares of the Goldman Sachs Portfolios. These incentives may include payment for travel expenses, including lodging, incurred in connection with trips taken by qualified registered representatives and members of their families within or without the United States. Incentive payments will be provided for out of the sales charge and distribution fees or out of Goldman Sachs' other resources. Other than sales charges and distribution fees, the Fund and its shareholders do not bear distribution expenses. An Authorized Dealer receiving such incentives may be deemed to be an underwriter under the 1933 Act. In some instances, such incentives may 34 be made available only to certain Authorized Dealers whose representatives have sold or are expected to sell significant amounts of shares. Shares of the Fund may be sold at net asset value without payment of any initial sales charge to (a) Goldman Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of the above individuals; (b) qualified retirement plans of Goldman Sachs; (c) trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor; (d) any employee or registered representative of any Authorized Dealer or their respective spouses and minor children; (e) institutional investors, including insurance companies, broker-dealers, discretionary accounts of investment advisers with at least $100 million under management for the last twelve months and business entities that have either gross assets of at least $100 million or publicly traded securities outstanding; (f) unitholders or shareholders of Goldman Sachs Money Market Trust, GS Core Fixed Income Fund, GS Short-Term Government Agency Fund, GS Adjustable Rate Government Agency Fund, GS Short Duration Tax-Free Fund or GS Government Agency Portfolio (for Financial Institutions) that are banks, trust companies or other types of depository institutions; (g) any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of the Fund; (h) pension and profit sharing plans, pension funds or other benefit plans sponsored by state and municipal governments and by certain business entities, and Taft-Hartley plans, provided any such plan has a minimum of $25 million under management; (i) qualified non-profit organizations, foundations and endowments that have gross assets of at least $100 million; and (j) shareholders whose purchase is attributable to redemption proceeds (subject to appropriate documentation) from a registered open-end management investment company not distributed or managed by Goldman Sachs or its affiliates, if such redemption has occurred no more than 60 days prior to the purchase of shares of the Fund and the shareholder either (i) paid an initial sales charge or (ii) was at some time subject to a deferred sales charge with respect to the redemption proceeds. In order to take advantage of these exemptions, a purchaser must certify its eligibility for an exemption to Goldman Sachs on its Account Information Form and must certify on such Form that it will notify Goldman Sachs if, at the time of additional purchase, it is no longer eligible for an exemption. Goldman Sachs reserves the right to request additional certification or information from a purchaser in order to verify that such purchaser is eligible for an exemption. Goldman Sachs reserves the right to limit the participation in the Fund of its partners and employees. In addition, under certain circumstances, dividends and distributions from any Goldman Sachs Portfolio may be reinvested in shares of the Fund at net asset value, as described under "Cross-Reinvestment of Dividends and Distributions." 35 PARTICIPANT-DIRECTED PLANS Participant-directed qualified retirement plans, including 401(k), 403(b), 457 and tax-sheltered annuity plans, may purchase shares of the Fund at the next determined net asset value per share plus a sales charge paid, except as set forth below, at the time of purchase of shares of the Fund, as shown in the following table.
SALES CHARGE MAXIMUM DEALER AMOUNT OF PURCHASE SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS (INCLUDING SALES PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF 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 or more........ 0.00* 0.00* **
-------- * No sales charge is payable by participant-directed plans at the time of purchase on investments of $500,000 or more, but for such investments a contingent deferred sales charge, as described below, may be imposed in the event of certain redemptions within one year of purchase. ** Goldman Sachs may pay a one-time commission equal to a percentage of the amount of shares purchased to Authorized Dealers who initiate or are responsible for purchases by participant-directed plans of $500,000 or more of shares of the Fund, at the rates shown in the following table:
MAXIMUM DEALER COMMISSION AS PERCENTAGE OF AMOUNT AMOUNT OF PURCHASE OF PURCHASE ------------------ -------------- $500,000 up to (but less than) $2 million..... 1.00% $2 million up to (but less than) $3 million... 0.80 $3 million up to (but less than) $50 million.. 0.50 $50 million up to (but less than) $100 million 0.25 $100 million or more.......................... 0.15
Participant-directed plans are defined as qualified employee benefit plans not affiliated with Goldman Sachs which allow their participants to select among one or more investment options, including the Fund. In order to take advantage of the reduced sales charge rate described herein, the sponsor of a participant-directed plan must submit an investment authorization form to Goldman Sachs (the "Authorization Form") which establishes the Fund as an eligible investment for the plan. 36 CUMULATIVE QUANTITY DISCOUNTS. For purposes of determining the amount of purchase and the sales charge rate applicable to purchases by participant-directed plans, shares of the Fund and any other Goldman Sachs Portfolio will be combined with shares purchased or held for all participants in the same participant-directed plan. Participant-directed plans may qualify for cumulative quantity discounts by using the right of accumulation and statement of intention in the man- ner described in this Prospectus. If a plan does not pur- chase the entire amount of shares contemplated by a state- ment of intention, Goldman Sachs may elect not to pursue the recovery of any additional sales charge due if the amount of the sales charge or the investment shortfall is considered de minimis by Goldman Sachs. CONTINGENT DEFERRED SALES CHARGE. Purchases by participant-directed plans of $500,000 or more of Fund shares will be made at net asset value with no initial sales charge. However, if, within 12 months after the effective date of the applicable Authorization Form, the plan sponsor notifies Goldman Sachs that it is terminating the eligibility of the Fund as an investment for its plan, a contingent deferred sales charge ("CDSC") will be imposed on all redemptions resulting from such termination. Any CDSCs will be paid to the Fund's principal distributor, Goldman Sachs. The amount of the CDSC will be equal to 1% of the current market value or the original purchase cost of the redeemed shares, whichever is less. No CDSC will be imposed on increases in account value above the initial purchase price, including any dividends that have been reinvested in additional Fund shares. In determining whether a CDSC applies to a redemption, the calculation will be made in a manner that results in the lowest possible CDSC. EXCHANGES. No CDSC is imposed upon exchanges between the Fund and another Goldman Sachs Portfolio or an ILA Portfolio. However, shares acquired in an exchange will be subject to the CDSC to the same extent as if there had been no exchange. (As stated above, no CDSC will be imposed unless the plan sponsor terminates the eligibility of the Fund as an investment for the plan within the first twelve months). For purposes of determining whether the CDSC is applied, the length of time a plan has owned shares acquired by exchange will be measured from the date the plan acquired the original shares and will not be affected by any subsequent exchange. OTHER PURCHASE INFORMATION Information concerning purchases of shares through an Authorized Dealer should be obtained directly from the Authorized Dealer. In the case of purchases made through the investor's Authorized Dealer, it is the responsibility of such Authorized Dealer to promptly forward payment to the Fund for shares being purchased. Authorized Dealers who receive a portion of the sales charge applicable to the purchase of shares of the Fund will not be permitted to impose any other fees in connection with the purchase of such shares. 37 If shares of the Fund are held in a "street name" account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to the beneficial owner's account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Fund will have no record of the beneficial owner's transactions, a beneficial owner should contact the 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. The Fund and Goldman Sachs each reserves the right to reject any specific purchase order (including exchanges) or to restrict purchases or exchanges by a particular purchaser (or group of related purchasers). The Fund or Goldman Sachs may reject or restrict purchases or exchanges of shares by a particular purchaser or group, for example, when a pattern of frequent purchases and sales of shares of the Fund is evident, or if the purchase and sale or exchange orders are, or a subsequent abrupt redemption might be, of a size that would disrupt management of the Fund. REINVESTMENT OF REDEMPTION PROCEEDS A shareholder whose shares are redeemed may reinvest at net asset value any portion or all of his redemption proceeds (plus that amount necessary to acquire a fractional share to round off his purchase to the nearest full share) in shares of the Fund or any other Goldman Sachs Portfolio. Shareholders should obtain and read the applicable prospectuses of such other funds and consider their objectives, policies and applicable fees carefully before investing in any of such funds. This reinvestment privilege is subject to the condition that the shares redeemed have been held for at least thirty (30) days before the redemption and that the reinvestment is effected within ninety (90) days after such redemption. Shares are sold to a reinvesting shareholder at the net asset value next determined following timely receipt by Goldman Sachs or an Authorized Dealer of a written purchase order indicating that the shares are eligible for reinvestment at net asset value. A reinvesting shareholder may realize a gain or loss for federal tax purposes as a result of such redemption. If the redemption occurs within ninety (90) days after the original purchase of the shares, any sales charge paid on the original purchase cannot be taken into account by a shareholder reinvesting at net asset value pursuant to the reinvestment privilege for purposes of determining gain or loss realized on the redemption, but instead will be added to the tax basis of the shares received in the reinvestment. To the extent that any loss is realized and shares of the Fund are purchased within thirty (30) days before or after the redemption, some or all of the loss generally 38 may not be allowed as a deduction depending upon the number of shares purchased. Shareholders should consult their own tax advisers concerning the tax consequences of a reinvestment. Upon receipt of a written request, the reinvestment privilege may be exercised once annually by a shareholder, except that there is no such limit as to the availability of this privilege in connection with transactions the sole purpose of which is to reinvest the proceeds at net asset value in a tax-sheltered retirement plan. RIGHT OF ACCUMULATION INVESTORS MAY A shareholder qualifies for cumulative quantity discounts QUALIFY FOR A if the current purchase price of the new investment plus the REDUCED SALES shareholder's current holdings of existing shares (acquired CHARGE. by purchase or exchange) of the Fund and shares of any other Goldman Sachs Portfolio total the requisite amount for receiving a discount. For example, if a shareholder owns shares with a current market value of $75,000 and purchases additional shares with a purchase price of $25,000, the sales charge for the $25,000 purchase would be 3.0% (the rate applicable to a single purchase of $100,000). Shares purchased without the imposition of a sales charge may not be aggregated with shares purchased subject to a sales charge. Shares of the Fund and any other Goldman Sachs Portfolio purchased (i) by an individual, his spouse and his minor children, and (ii) by a trustee, 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 Fund and any other Goldman Sachs Portfolio purchased by an existing client of the Private Client Services Division of Goldman Sachs will be combined with shares held by any other account over which such client or the client's spouse exercises investment or voting power. In addition, shares of the Fund and shares of any other Goldman Sachs Portfolio purchased by partners, directors, officers or employees of the same business organization or by groups of individuals represented by and investing on the recommendation of the same accounting firm or other similar organization (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 or firm's agreement to cooperate in the offering of the Fund's shares to eligible persons; and (ii) notification to the Fund at the time of purchase that the investor is eligible for this right of accumulation. STATEMENT OF INTENTION If a shareholder anticipates purchasing at least $100,000 of shares of the Fund alone or in combination with shares of any other Goldman Sachs Portfolio within a 13-month period, the shareholder may purchase shares of the Fund at a reduced sales charge by submitting a Statement of Intention (the 39 "Statement"). See Appendix B of the Prospectus. 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 shares on which a sales charge has previously been paid as an "accumulation credit" toward the completion of the Statement, but a price readjustment will be made only on shares purchased within ninety (90) days 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. AUTOMATIC INVESTMENT PLAN THE FUND OFFERS Systematic cash investments may be made through a SHAREHOLDERS shareholder's bank via the Automated Clearing House Network MANY CONVENIENT or a shareholder's checking account via bank draft each FEATURES AND month. Required forms are available from Goldman Sachs or BENEFITS, any Authorized Dealer. A minimum investment of $50 is INCLUDING required for Automatic Investment Plans. DOLLAR COST AVERAGING. CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS A shareholder in the Fund may elect to cross-reinvest dividends and capital gain distributions paid by the Fund at net asset value without a sales charge in shares of any other Goldman Sachs Portfolio or in units of the ILA Portfolios. In addition, shareholders of any other Goldman Sachs Portfolio may elect to cross-reinvest dividends and capital gain distributions paid by such Goldman Sachs Portfolio at net asset value without a sales charge in shares of the Fund. Such cross-reinvestments are subject to the following conditions: (i) the value of the shareholder's account(s) in the paying fund must equal or exceed $10,000 and (ii) the value of the account in the acquired fund must equal or exceed the acquired fund's minimum initial investment requirement or, the shareholder must elect to have dividends and capital gain distributions paid on the paying and acquired fund shares automatically reinvested in additional acquired fund shares, until the value of acquired fund shares in the shareholder's account equals or exceeds the acquired fund's minimum initial investment requirement. A Fund shareholder should obtain and read the prospectus relating to any other Goldman Sachs Portfolio or ILA Portfolio and its shares or units and consider its investment objective, policies and applicable fees before electing cross-reinvestment into that fund. The election to cross-reinvest dividends and capital gain distributions will not affect the tax treatment of such dividends and distributions, which will be treated as received by the shareholder and then used to purchase shares of the acquired fund. 40 Such reinvestment of dividends and distributions in shares of other Goldman Sachs Portfolios or in units of ILA Portfolios is available only in states where such reinvestment may legally be made. TAX-SHELTERED RETIREMENT PLANS The Fund will offer shares for purchase by retirement plans including Individual Retirement Account Plans for individuals and their non-employed spouses and defined contribution plans such as 401(k) Salary Reduction Plans. See "Participant-Directed Plans." Detailed information concerning these plans and copies of the plans will be available from the Transfer Agent. This information should be read carefully, and consultation with an attorney or tax adviser may be advisable. The information sets forth the service fee charged for retirement plans and describes the federal income tax consequences of establishing a plan. Under all plans, dividends and distributions will be automatically reinvested in additional shares of the Fund or, if so directed by the shareholder, in cash, in shares of another Goldman Sachs Portfolio or in units of the ILA Portfolios. An initial investment minimum of $250 applies to purchases in connection with tax- sheltered retirement plans. AUTOMATIC EXCHANGE PROGRAM Shareholders of the Fund may elect on the Account Information Form to automatically exchange a specified dollar amount of Fund shares at net asset value without an additional sales charge for shares of any other Goldman Sachs Portfolio. Shareholders of any other Goldman Sachs Portfolio may similarly elect to automatically exchange a specified dollar amount of shares of such Goldman Sachs Portfolio at net asset value without an additional sales charge for shares of the Fund. These automatic exchanges are made monthly on the fifteenth day of each month or the first Business Day thereafter and are subject to the following conditions. The minimum dollar amount for automatic exchanges must be at least $50 per month. At the time the election is made (i) the value of the shareholder's account in the fund from which the exchange is made must equal or exceed $10,000 and (ii) the value of the account in the acquired fund must equal or exceed the acquired fund's minimum initial investment requirement or, if the shareholder has elected the automatic exchange privilege and the value of the acquired fund does not equal the acquired fund's minimum, such election must continue until the minimum initial investment requirement is met. The names, addresses and social security or other taxpayer identification numbers for the shareholder accounts with the exchanged and acquired funds must be identical. A Fund shareholder should obtain and read the prospectus relating to any other Goldman Sachs Portfolio and its shares and consider its investment objective, policies and applicable fees and expenses before electing an automatic exchange into that Goldman Sachs Portfolio. EXCHANGE PRIVILEGE Shares of the Fund may be exchanged at net asset value without an additional sales charge for: (i) shares of any Goldman Sachs Portfolio; and 41 (ii) units of the ILA Portfolios. A shareholder needs to obtain and read the prospectus relating to a fund and its shares or units and consider its investment objective, policies and applicable fees before making an exchange into that fund. The shares or units of these other funds acquired by an exchange may later be exchanged for shares of the Fund at the next determined net asset value without a sales charge if the dollar amount in the Fund resulting from such exchanges is below the shareholder's all-time highest dollar amount on which it has previously paid a sales charge. Shares or units of these other funds purchased through dividends and/or capital gains reinvestment may be exchanged for shares of the Fund without a sales charge. In addition to free automatic exchanges pursuant to the Automatic Exchange Program, six free exchanges are permitted in each twelve-month period. A fee of $12.50 may be charged for each subsequent exchange during such period. The exchange privilege may be modified or withdrawn at any time upon sixty (60) days' notice to shareholders and is subject to certain limitations (see "Purchase of Shares"). An exchange may be made by either writing to Goldman Sachs, Attention: Goldman Sachs Trust--Goldman Sachs Global Income Fund, Shareholder Services, c/o NFDS, P.O. Box 419711, Kansas City, MO 64141-6711 or, if previously elected in the Fund's Account Information Form, by telephone at 800- 526-7384 (8:00 a.m. to 3:00 p.m. Chicago time). Certain procedures are employed to prevent unauthorized or fraudulent exchange requests as set forth under "Redemption of Shares." Under the telephone exchange privilege, shares may be exchanged among accounts with different names, addresses and social security or other taxpayer identification numbers only if the exchange request is in writing and is received in accordance with the procedures set forth under "Redemption of Shares." In times of drastic economic or market changes the telephone exchange privilege may be difficult to implement. For federal income tax purposes, an exchange is treated as a sale of the shares surrendered in the exchange, on which an investor may realize a gain or loss, followed by a purchase of shares or units received in the exchange. If such sale occurs within ninety (90) days after the purchase of such shares, to the extent a sales charge that would otherwise apply to the shares or units received in the exchange is not imposed, the sales charge paid on such purchase cannot be taken into account by the exchanging shareholder for purposes of determining gain or loss realized on such sale for federal income tax purposes, but instead will be added to the tax basis of the shares or units received in the exchange. Shareholders should consult their own tax advisers concerning the tax consequences of an exchange. All exchanges which represent an initial investment in a fund must satisfy the minimum investment requirements of the fund into which the shares are being exchanged. Exchanges are available only in states where exchanges may legally be made. 42 DISTRIBUTION PLAN THE FUND WILL The Trust, on behalf of the Fund, has adopted a FINANCE Distribution Plan (the "Plan") pursuant to Rule 12b-1 under DISTRIBUTION the Act. Under the Plan, the Fund will pay to Goldman Sachs AND SHAREHOLDER a quarterly fee for distribution and personal and account SERVICE maintenance services equal, on an annual basis, to 0.50% of ACTIVITIES the Fund's average daily net assets, of which up to 0.25% THROUGH may be for personal and account maintenance services. QUARTERLY Currently, Goldman Sachs has voluntarily agreed to limit the PAYMENTS TO amount of such fee to 0.25% of the Fund's average daily net GOLDMAN SACHS assets. Goldman Sachs has no current intention of modifying EQUAL ON AN or discontinuing such limitation, but may do so in the ANNUAL BASIS TO future at its discretion. For the fiscal year ended October 0.25% OF THE 31, 1994, the Fund paid Goldman Sachs a fee for distribution FUND'S AVERAGE services at the rate of 0.25% of the Fund's average daily DAILY NET net assets. ASSETS. Goldman Sachs may use the fee for its expenses of distribution of shares of the Fund. In addition, Goldman Sachs may pay up to the entire amount of such fee to Authorized Dealers for providing services in connection with the sale of Fund shares. The types of expenses for which Goldman Sachs and Authorized Dealers may be compensated for distribution services under the Plan include compensation paid to and expenses incurred by their respective officers, employees and sales representatives, allocable overhead, telephone and travel expenses, the printing of prospectuses for prospective shareholders, preparation and distribution of sales literature, advertising of any type and all other expenses incurred in connection with activities primarily intended to result in the sale of Fund shares. The portion of the fee for personal and account maintenance services may be used to make payments to Goldman Sachs, Authorized Dealers and their officers, 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 by or on behalf of the Fund. If the fee received by Goldman Sachs exceeds its expenses, Goldman Sachs may realize a profit from these arrangements. The Plan will be reviewed and is subject to approval annually by the Board of Trustees. The aggregate compensation that may be received under the Plan for distribution services and pursuant to a sales charge may not exceed the limitations imposed by the NASD's Rules of Fair Practice. REDEMPTION OF SHARES THE REDEMPTION The Fund will redeem its shares upon request of a PRICE WILL BE shareholder on any Business Day at the net asset value next BASED ON THE determined after the receipt of such request in proper form. NET ASSET VALUE See "Net Asset Value." Redemption proceeds will normally be NEXT COMPUTED mailed by check to shareholders within seven (7) days of AFTER RECEIPT receipt of a properly executed request. If shares to be OF A REDEMPTION redeemed were recently purchased by check, the Fund may REQUEST. delay transmittal of redemption proceeds until such time as it has assured itself that good funds have been collected for the purchase of such shares. This may take up to fifteen (15) days. 43 Redemption requests may be made by writing to or calling the Transfer Agent at the address or telephone number set forth on the inside front cover page of this Prospectus or by contacting an Authorized Dealer. THERE ARE A shareholder may request redemptions by telephone if the SEVERAL WAYS optional telephone redemption privilege is elected on the SHAREHOLDERS Account Information Form accompanying this Prospectus. It MAY ACCESS may be difficult to implement redemptions by telephone in THEIR ACCOUNTS. times of drastic economic or market changes. In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs and NFDS each employ reasonable procedures specified by the Trust to confirm that such instructions are genuine. Consequently, proceeds of telephone redemption requests will only be sent to the shareholder's address of record or authorized bank account designated in the Account Information Form and exchanges of shares will only be made to an identical account. Telephone requests may also be recorded. The Trust may implement other procedures from time to time. If reasonable procedures are not implemented, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. In all other cases, neither the Fund, the Trust nor Goldman Sachs will be responsible for the authenticity of instructions received by telephone. Proceeds of telephone redemptions will be mailed to the shareholder's address of record or wired to the authorized bank account indicated on the Account Information Form, unless the shareholder provides written instructions (accompanied by a signature guarantee) indicating another address. Written requests for redemptions must be signed by each shareholder with its signature guaranteed by a bank, a securities broker or dealer, a credit union having authority to issue signature guarantees, a savings and loan association, a building and loan association, a cooperative bank, a federal savings bank or association, a national securities exchange, a registered securities association or a clearing agency, provided that such institution satisfies the standards established by the Transfer Agent. The Fund will also arrange for the proceeds of redemptions effected by any means to be wired as Federal Funds to the bank account designated in the shareholder's Account Information Form. Redemption proceeds will normally be wired on the next Business Day in Federal Funds (for a total one- day delay) following receipt of a properly executed wire transfer redemption request. Wiring of redemption proceeds may be delayed one additional Business Day if the Federal Reserve Bank is closed on the day redemption proceeds would ordinarily be wired. A transaction fee of $7.50 may be charged for payments of redemption proceeds by wire. In order to change the bank designated on the Account Information Form to receive redemption proceeds, a written request must be received by the Transfer Agent. This request must be signature guaranteed as set forth above. Further documentation may be required for executors, trustees or corporations. Once wire transfer instructions have been given by Goldman Sachs or an Authorized Dealer, 44 neither the Fund, the Trust, Goldman Sachs nor an Authorized Dealer assumes any further responsibility for the performance of intermediaries or the shareholder's bank in the transfer process. If a problem with such performance arises, the shareholder should deal directly with such intermediaries or bank. Additional documentation regarding a redemption by any means may be required to effect a redemption when deemed appropriate by the Transfer Agent. The request for such redemption will not be considered to have been received in proper form until such additional documentation has been received. Except with respect to shareholders whose account balances are less than $50, or who have not provided a social security number or other taxpayer identification number and certification (if required) that such number is correct, shares are not redeemable at the option of the Fund unless the Board of Trustees of the Trust determines in its sole discretion that failure to so redeem may have material adverse consequences to the shareholders of the Fund. The Fund, however, assumes no responsibility to compel redemptions. SYSTEMATIC WITHDRAWAL PLAN A systematic withdrawal plan (the "Systematic Withdrawal Plan") is available to shareholders of the Fund whose shares are worth at least $10,000. The Systematic Withdrawal Plan provides for monthly payments to the participating shareholder of any amount not less than $50. Dividends and capital gain distributions on shares held under the Systematic Withdrawal Plan are reinvested in additional full and fractional shares of the Fund at net asset value. The Transfer Agent acts as agent for the shareholder in redeeming sufficient full and fractional shares to 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. Furthermore, each withdrawal constitutes a redemption of shares, and any gain or loss realized must be reported for federal and state income tax purposes. A shareholder should consult his or her own tax adviser with regard to the tax consequences of participating in the Systematic Withdrawal Plan. For further information or to request a Systematic Withdrawal Plan, please write or call the Transfer Agent. 45 DIVIDENDS SHAREHOLDERS Each dividend and capital gains distribution, if any, MAY CHOOSE declared by the Fund on its outstanding shares will, at the WHETHER TO election of each shareholder, be paid (i) in cash, (ii) in RECEIVE additional shares of the Fund or (iii) in shares of any of DISTRIBUTIONS the Goldman Sachs Portfolios or units of the ILA Portfolios (INCLUDING as described under "Cross-Reinvestment of Dividends and CAPITAL GAINS) Distributions." This election should initially be made on a IN CASH OR TO shareholder's Account Information Form and may be changed REINVEST upon written notice to Goldman Sachs at any time prior to DISTRIBUTIONS the record date for a particular dividend or distribution. IN SHARES OF If no election is made, all dividends and capital gains THE FUND, IN distributions will be reinvested in the Fund. If cash SHARES OF ANY dividends are elected with respect to the Fund's net OF THE GOLDMAN investment income dividends then cash dividends must also be SACHS elected with respect to the short-term capital gains PORTFOLIOS OR component, if any, of the Fund's annual dividend. IN UNITS OF THE Reinvestments of dividends from net investment income in ILA PORTFOLIOS. additional shares of the Fund will be made on the last Business Day of each month. Reinvestments of dividends from net investment income in additional shares of another Goldman Sachs Portfolio or in units of the ILA Portfolios will be made on the payment date. Cash dividends will be paid on or about the last calendar day of the month. Capital gains distributions will be reinvested or paid in cash, in accordance with the shareholder's prior election, on the payment date. The election to reinvest dividends and distributions paid by the Fund in additional shares or units of the Fund or any other Goldman Sachs Portfolio or ILA Portfolio will not affect the tax treatment of such dividends and distributions, which will be treated as received by the shareholder and then used to purchase shares or units of the Fund, another Goldman Sachs Portfolio or an ILA Portfolio. The Fund intends that all or substantially all of the Fund's net investment income will be declared as a dividend and paid monthly, and all or substantially all net realized long-term and short-term capital gains will be declared as a dividend and paid at least annually. Net loss, if any, from certain foreign currency transactions or instruments that is otherwise taken into account in calculating net investment income or net realized capital gains for accounting purposes may not be taken into account in determining the amount of dividends to be declared and paid, with the result that a portion of the Fund's dividends may be treated as a return of capital, nontaxable to the extent of a shareholder's tax basis in his shares. In determining amounts of capital gains to be distributed, capital losses, including any available capital loss carryovers from prior years, will be offset against capital gains realized during the current year. At the time of an investor's purchase of shares of the Fund a portion of the net asset value per share may be represented by undistributed income of the Fund or realized or unrealized appreciation of the Fund's portfolio 46 securities. Therefore, subsequent distributions (or portions thereof) of taxable income or realized appreciation on such shares may be taxable to the investor even if the net asset value of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price. NET ASSET VALUE NET ASSET VALUE The net asset value per share of the Fund is calculated by IS COMPUTED the Fund's custodian as of the close of regular trading on DAILY AS OF THE the New York Stock Exchange (normally 3:00 p.m. Chicago CLOSE OF time, 4:00 p.m. New York time), on each Business Day (as REGULAR TRADING such term is defined under "Additional Information"). Net ON THE NEW YORK asset value per share is calculated by adding the value of STOCK EXCHANGE. all securities and other assets of the Fund, subtracting the liabilities of the Fund, and dividing the remainder by the number of outstanding shares. Investments in debt obligations are valued at fair value, based on yield equivalents, a pricing matrix or other sources, under valuation procedures established by the Trust's Board of Trustees. Other portfolio securities for which accurate market quotations are readily available are valued on the basis of quotations, which may be furnished by a pricing service or provided by dealers in such securities. Portfolio securities for which accurate market quotations are not readily available are valued in accordance with the Trust's valuation procedures. Debt obligations with a remaining maturity of 60 days or less are valued at amortized cost. The Board of Trustees has determined that the amortized cost of such securities approximates fair market value. PERFORMANCE INFORMATION From time to time the Fund may publish average annual total return and yield in advertisements and communications to shareholders or prospective investors. Average annual total return is determined by computing the average annual percentage change in value of $1,000 invested at the maximum public offering price for specified periods ending with the most recent calendar quarter, assuming reinvestment of all dividends and distributions at net asset value. The total return calculation assumes a complete redemption of the investment at the end of the relevant period. The 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, the Fund may furnish total return calculations based on investments at various sales charge levels or at net asset value. Any performance data which is based on the Fund's net asset value per share would be reduced if a sales charge were taken into account. In addition to the above, the Fund may from time to time advertise its performance relative to certain performance rankings and indices. 47 Yield is computed by dividing net investment income earned during a recent thirty-day period by the product of the average daily number of shares outstanding and entitled to receive dividends during the period and the maximum offering price per share on the last day of the relevant period. The results are compounded on a bond equivalent (semi-annual) basis and then annualized. Net investment income per share is equal to the dividends and interest earned during the 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. Quotations of distribution rates are calculated by annualizing the most recent distribution of net investment income for a monthly, quarterly or other relevant period and dividing this amount by the net asset value per share or maximum public offering price on the last day of the period for which the distribution rates are being calculated. The investment results of the Fund will fluctuate over time and any presentation of investment results for any prior period should not be considered a representation of what an investment may earn or what the Fund's performance may be in any future period. In addition to information provided in shareholder reports, the Fund may, in its discretion, from time to time make a list of its holdings available to investors upon request. SHARES OF THE TRUST THE FUND IS A The Fund is a series of Goldman Sachs Trust, which was SERIES OF AN organized under the laws of The Commonwealth of OPEN-END Massachusetts on September 24, 1987 as a Massachusetts INVESTMENT business trust under an Agreement and Declaration of Trust, COMPANY. as amended (the "Trust Agreement"). Under the Trust Agreement, the Trustees are authorized to issue an unlimited number of shares of beneficial interest, $.001 par value per share. The Trustees of the Trust are responsible for the overall management and supervision of its affairs. The Trustees of the Trust have authority under the Trust Agreement to create and classify shares of beneficial interest in separate series, without further action by shareholders. As of the date of this Prospectus, the Trustees have authorized shares of the Fund and ten other series. Additional series may be added in the future. The Trustees also have authority to classify and reclassify any series or portfolio of shares into one or more classes. When issued, shares are fully paid and non-assessable. In the event of liquidation, shareholders are entitled to share pro rata in the net assets of the Fund available for distribution to such shareholders. All shares entitle their holders to one vote per share, are freely transferable and have no preemptive, subscription or conversion rights. 48 Under Massachusetts law, there is a remote possibility that shareholders of a business trust could, under certain circumstances, be held personally liable as partners for the obligations of such trust. The Trust Agreement contains provisions intended to limit such liability and to provide indemnification out of Trust property of any shareholder charged or held personally liable for obligations or liabilities of the Trust solely by reason of being or having been a shareholder of the Trust and not because of such shareholder's acts or omissions or for some other reason. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations. Unless otherwise required by the Act, ordinarily it will not be necessary for the Trust to hold annual meetings of shareholders. As a result, shareholders may not consider each year the election of Trustees or the appointment of independent accountants. Shareholders may remove a Trustee by the affirmative vote of at least two-thirds of the Trust's outstanding shares and the Trustees must promptly call a meeting for such purpose when requested to do so in writing by the record holders of not less than 10% of the outstanding shares. Shareholders may, under certain circumstances, communicate with other shareholders in connection with requesting a special meeting of shareholders. The Board of Trustees, however, will call a special meeting for the purpose of electing Trustees if, at any time, less than a majority of Trustees holding office at the time were elected by shareholders. In the interest of economy and convenience, the Trust does not issue certificates representing the Fund's 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 Fund are reflected in account statements from the Transfer Agent. TAXATION FEDERAL TAXES THE FUND IS NOT The Fund is treated as a separate entity for tax purposes, EXPECTED TO has qualified and elected to be treated as a regulated HAVE ANY investment company under Subchapter M of the Internal FEDERAL TAX Revenue Code of 1986, as amended (the "Code") and intends to LIABILITY. continue to qualify for such treatment. To qualify for treatment as a regulated investment company, the Fund must satisfy certain requirements relating to the sources of its income, diversification of its assets and distribution of its income to shareholders. As a regulated investment company, the Fund will not be subject to federal income or excise tax on any net investment income and net realized capital gains that are distributed to its shareholders in accordance with certain timing requirements of the Code. 49 Dividends paid by the Fund from net investment income, the excess of net short-term capital gain over net long-term capital loss, original issue discount or certain market discount income, or certain net foreign exchange gains will be taxable to shareholders as ordinary income. Dividends paid by the Fund from the excess of net long-term capital gain over net short-term capital loss will be taxable as long-term capital gains regardless of how long the shareholders have held their shares. These tax consequences will apply regardless of whether distributions are received in cash or reinvested in shares. Certain distributions paid by the Fund in January of a given year may be taxable to shareholders as if received the prior December 31. Shareholders will be informed annually about the amount and character of distributions received from the Fund for federal income tax purposes. Investors should consider the tax implications of buying shares immediately prior to a distribution. Investors who purchase shares shortly before the record date for a distribution will pay a per share price that includes the value of the anticipated distribution and will be taxed on the distribution even though the distribution represents a return of a portion of the purchase price. Redemptions and exchanges of shares are taxable events on which a shareholder may recognize a gain or loss. Individuals and certain other classes of shareholders may be subject to 31% backup withholding of federal income tax on distributions, redemptions and exchanges if they fail to furnish the Fund with their correct taxpayer identification number and certain certifications or if they are otherwise subject to backup withholding. Individuals, corporations and other shareholders that are not U.S. persons under the Code are subject to different tax rules and may be subject to nonresident alien withholding at the rate of 30% (or a lower rate provided by an applicable tax treaty) on amounts treated as ordinary dividends from the Fund. The Fund may be subject to foreign withholding or other foreign taxes on income (possibly including, in some cases, capital gains) earned on foreign securities. If more than 50% of the value of its total assets is comprised of stock or securities of foreign corporations at the end of its taxable year and the Fund so elects, shareholders will include in their gross incomes (in addition to dividends they receive) their pro rata shares of qualified foreign taxes paid by the Fund and may be entitled to take federal income tax credits or deductions with respect to such taxes. If the Fund cannot or does not so elect, it may deduct such taxes in computing its taxable income, if any. OTHER TAXES In addition to federal taxes, a shareholder may be subject to state, local or foreign taxes on payments received from the Fund. A state income (and 50 possibly local income and/or intangible property) tax exemption is generally available to the extent the Fund's distributions are derived from interest on (or, in the case of intangibles taxes, the value of its assets is attributable to) certain U.S. Government obligations, provided in some states that certain thresholds for holdings of such obligations and/or reporting requirements are satisfied. For a further discussion of certain tax consequences of investing in shares of the Fund, see "Taxation" in the Additional Statement. Shareholders are urged to consult their own tax advisers regarding specific questions as to federal, state and local taxes as well as to any foreign taxes. ADDITIONAL INFORMATION The term "a vote of the majority of the outstanding shares" of the Fund means the vote of the lesser of (i) 67% or more of the shares present at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (ii) more than 50% of the outstanding shares of the Fund. As used in this Prospectus, the term "Business Day" means any day the New York Stock Exchange is open for trading, which is Monday through Friday except for holidays. The New York Stock Exchange is closed on the following holidays: New Year's Day (observed), Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. 51 APPENDIX A COUNTRY SUMMARIES As stated in the Prospectus, the Fund may invest in securities issued by foreign issuers and denominated in foreign currencies and engage in certain foreign currency transactions. The following summaries are designed to provide a brief general discussion of the economic and certain other conditions of each of these countries. The summaries are presented in alphabetical order. Because the Fund may invest more than 25% of its total assets in securities of issuers located, in addition to the United States, in each of Canada, Germany, Japan and the United Kingdom additional information is provided in their respective summaries. In addition, more than 25% of the Fund's total assets, adjusted to reflect currency transactions and positions, may be denominated in any currency described in this Appendix. The information in these summaries has been derived from sources that the Fund believes to be reliable, but has not been independently verified. In some cases the data are seasonally adjusted. Except as otherwise noted below, currency exchange rate is a period average. Although the countries for which summaries are provided below generally have developed and industrialized economies, they are subject to periods of economic or political instability. For example, efforts by the member countries of the European Community to eliminate internal barriers to the free movement of goods, persons, services and capital have encountered opposition arising from the conflicting economic, political and cultural interests and traditions of the member countries and their citizens. The reunification of the former German Democratic Republic (East Germany) with the Federal Democratic Republic of German (West Germany) has caused considerable economic and social dislocations. The efforts of the German central bank to control domestic inflation associated with reunification costs by raising interest rates has adversely affected the economies of other European countries whose currencies are linked to the German deutschemark. Such events can materially affect securities markets and have also disrupted the relationship of such currencies with each other and with the U.S. dollar. In Japan, a deflation in the market values of Japanese real estate and equity securities and the resulting instability in the Japanese banking system, have had adverse effects on the economies of both Japan and its regular trading partners. Future political and economic developments can be expected to produce continuing effects on securities and currency markets. AUSTRALIA. The currency is the Australian dollar (November 1994: AUD 1.3265 = $1 U.S.). Gross Domestic Product was AUD 418.1 billion ($284.3 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of AUD 15.9 billion ($10.8 billion), which was 3.8% of GDP. The annual rate of inflation was 1.8% in 1993. The average rate of inflation over the three years ended in 1993 was 2.0%. Australia is a major power in the Southeast Pacific with close ties to Japan and Southeast Asia. Iron, steel, textiles, electrical equipment, chemicals, autos, aircraft, ships, machinery, cattle and wool are chief industries. AUSTRIA. The currency is the Austrian schilling (November 1994: ATS 10.850 = $1 U.S.). Gross Domestic Product was ATS 2,109.7 billion ($181.4 billion) in 1993. The 1993 current account balance in foreign trade was a deficit of ATS 10.2 billion ($0.9 billion), which was 0.4% of GDP. The annual rate of inflation in 1993 was 3.6%. The average rate of inflation over the three years ended 1993 was 3.6%. Steel, machinery, autos, electrical and optical equipment, glassware, sport goods, paper, textiles, chemicals and cement are the chief industries. Austria produces most of its food as well as an array of industrial products. A-1 BELGIUM. The currency is the Belgian franc (November 1994: BEF 31.713 = $1 U.S.). Gross Domestic Product was BEF 7,032 billion ($203.3 billion) in 1993. The current account balance in foreign trade in 1993 was a surplus of BEF 435.5 billion ($12.6 billion), which was 6.2% of GDP. The annual rate of inflation was 2.8% in 1992. The average rate of inflation over the three years ended 1993 was 2.8%. Steel, glassware, diamond cutting, textiles and chemicals are important industries. CANADA. The currency is the Canadian dollar (November 1994: CAD 1.365 = $1 U.S.). Gross Domestic Product was CAD 711.7 billion ($551.7 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of CAD 30.8 billion ($23.9 billion), which was 4.3% of the GDP. The annual rate of inflation in 1993 was 1.8%. The average rate of inflation for the three years ended 1993 was 3.0%. Canadian Bond Markets. As of year end 1992, the Canadian Bond market had 640.3 billion Canadian dollars outstanding. The market has two major domestic sectors. The largest of these is the provincial government market which has 261 billion Canadian dollars outstanding. The Federal debt market has 214 billion Canadian dollars outstanding. In 1992 total government debt outstanding was 67% of GDP. DENMARK. The currency is the Danish krone (November 1994: DKK 6.023 = $1 U.S.). Gross Domestic Product was DKK 881.8 billion ($136.0 billion) in 1993. The current account balance in 1993 was a surplus of DKK 36.0 billion ($5.5 billion), which was 4.1% GDP. The annual rate of inflation was 1.3% in 1993. The average rate of inflation over the three years ended 1993 was 1.9%. Machinery, textiles, furniture, electronics and dairy are the chief industries. FINLAND. The currency is the Finnish markka (November 1994: FIM 4.717 = $1 U.S.). Gross Domestic Product was FIM 478.7 billion ($83.8 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of FIM 5.6 billion ($1.0 billion), which was 1.2% of GDP. The annual rate of inflation was 2.1% in 1993. The average rate of inflation over the three years ended 1993 was 2.9%. Machinery, metal, ship building, textiles and clothing are the chief industries. FRANCE. The currency is the French franc (November 1994: FRF 5.295 = $1 U.S.). Gross Domestic Product was FRF 7,093.5 billion ($1,252.6 billion) in 1993. The current account balance in foreign trade in 1993 was a surplus of FRF 57.8 billion ($10.2 billion), which was 0.8% of GDP. The annual rate of inflation was 2.1% in 1993. The average rate of inflation over the three years ended 1993 was 2.6%. Steel, chemicals, autos, textiles, wine, perfume, aircraft and electronic equipment are the chief industries. GERMANY. The currency is the German deutschemark (November 1994: GDM 1.5387 = $1 U.S.). Gross National Product was GDM 2,820.0 billion ($1,705.7 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of GDM 33.1 billion ($20.0 billion), which was 1.2% of the GDP. The annual rate of inflation in 1993 was 4.1%. The average rate of inflation for the three years ended 1993 was 3.9%. German Bond Markets. The German public bond market has three primary sectors: the federal government market; the bank bond market; and the corporate bond market which includes domestically issued and Eurodeutschemark issues. As of June 1993 the total amount of public debt outstanding was GDM 2,742 billion of which GDM 594 billion represents federal debt. The bank A-2 bond market is large, with approximately GDM 1,230 billion outstanding. The GDM Eurobond market is the primary market for both domestic corporate borrowers and supranational, sovereign, and foreign corporate borrowers. There is approximately GDM 316 billion outstanding in International GDM bonds. There are currently three exchanges listing futures on deutschemark financial instruments. GREECE. The currency is the Greek drachma (November 1994: GDR 237.11 = $1 U.S.). Gross Domestic Product was GDR 16,760 billion ($73.1 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of GDR 171.2 billion ($0.7 billion), which was 1.0% of the GDP. The annual rate of inflation in 1992 was 14.4%. The average rate of inflation for the three years ended 1993 was 16.6%. Agriculture, tourism, textiles and shipping are the chief industries. IRELAND. The currency is the Irish pound (November 1994: IRP 0.6388 = $1 U.S.). Gross Domestic Product was IRP 32.3 billion ($47.4 billion) in 1993. The trade balance in 1993 was a surplus of IRP 2.6 billion ($3.8 billion), which was 8.0% of the GDP. The annual rate of inflation in 1993 was 1.4%. The average rate of inflation for the three years ended 1993 was 2.6%. Agriculture, paper, machinery and textiles are the chief industries. ITALY. The currency is the Italian lira (November 1994: ITL 1,584.94 = $1 U.S.). Gross Domestic Product was ITL 1,507.2 trillion ($1,222.6 billion) in 1992. The current account balance in foreign trade in 1992 was a surplus of ITL 17,588 billion ($11.2 billion). The annual rate of inflation was 4.5% in 1993. The average rate of inflation over the three years ended 1993 was 5.3%. Steel, machinery, autos, textiles, shoes, machine tools and chemicals are the chief industries. JAPAN. The currency is the Japanese yen (November 1994: Yen 97.96 = $1 U.S.). Gross Domestic Product was Yen 468.8 trillion ($4,216 billion) in 1993. The current account balance in foreign trade in 1992 was a surplus of Yen 14,622 billion ($131.5 billion), which was 3.1% of the GDP. The annual rate of inflation in 1993 was 1.3%. The average rate of inflation for the three years ended 1993 was 2.1%. Japanese Bond Markets. The Japanese government bond market is the second largest government bond market behind the United States. Over the last few years both the government and private bond markets have been substantially reformed and deregulated. While many of the market's new characteristics have corollaries in other markets there are many more unique characteristics that must be understood in order to effectively trade Japanese bonds. The Japanese government bond market is divided into four sectors distinguished by the maturity of the bonds being issued. As of March 1993, the total amount of Japanese government bonds outstanding was 114,000 billion yen. There is a very pronounced liquidity tiering in the secondary market for government bonds, with the long-term sector of the market accounting for almost 95% of all trades. The Euroyen market, established in 1977, allows highly rated supranational, sovereign and corporate entities to issue yen-denominated debt outside Japan. LUXEMBOURG. The currency is the Luxembourg franc which is identical in value to the Belgian franc (November 1994: LUF 31.713 = $1 U.S.). Gross Domestic Product was LUF 339.2 billion ($10.6 A-3 billion) in 1992. The annual rate of inflation was 3.6% in 1993. The average rate of inflation over the three years ended 1993 was 3.3%. Steel, chemicals, beer, tires, tobacco, metal products and cement are the chief industries. NETHERLANDS. The currency is the Dutch guilder (November 1994: NLG 1.726 = $1 U.S.). Gross Domestic Product was NLG 573.9 billion ($309.0 billion) in 1993. The current account balance in foreign trade in 1993 was a surplus of NLG 18.6 billion ($10.0 billion), which was 3.2% of GDP. The annual rate of inflation was 2.6% in 1993. The average rate of inflation over the three years ended 1993 was 3.0%. Metals, machinery, chemicals, oil refinery, diamond cutting, electronics and tourism are the chief industries. NEW ZEALAND. The currency is the New Zealand dollar (December 1993: NZD 1.849 = $1 U.S.). Gross Domestic Product was NZD $80.9 billion (U.S. $43.7 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of NZD $1.7 billion (U.S. $0.9 billion), which was 2.1% of GDP. The annual rate of inflation was 1.3% in 1993. The average rate of inflation over the three years ended 1993 was 1.6%. Food processing, fishing, textiles (especially wool-related), forest products and machinery are the chief industries. NORWAY. The currency is the Norwegian kronor (November 1994: NOK 6.727 = $1 U.S.). Gross Domestic Product was NOK 733.7 billion ($103.4 billion) in 1993. The current account balance in foreign trade during 1993 was a surplus of NOK 17.4 billion ($2.5 billion), which was 2.4% of GDP. The annual rate of inflation was 2.3% in 1993. The average rate of inflation over the three years ended 1993 was 2.7%. Engineering, metals, chemicals food processing, fishing, paper, shipbuilding and oil and gas are the chief industries. PORTUGAL. The currency is the Portuguese escudo (November 1994: PES 157.30 = $1 U.S.). Gross Domestic Product was PES 11,343.0 billion ($84.0 billion) in 1992. The current account balance in foreign trade in 1993 was a surplus of PES 152.3 billion ($0.9 billion). The annual rate of inflation in 1993 was 6.7%. The average rate of inflation for the three years ended 1993 was 9.0%. Fishing, agriculture, tourism and engineering are the chief industries. SPAIN. The currency is the Spanish peseta (November 1994: ESP 128.483 = $1 U.S.). Gross Domestic Product was ESP 60,880 billion ($478.4 billion) in 1993. The current account balance in foreign trade in 1992 was a deficit of ESP 769.4 billion ($6.3 billion), which was 1.3% of GDP. The annual rate of inflation was 4.6% in 1992. The average rate of inflation over the three years ended 1993 was 5.5%. Machinery, steel textiles, shoes, autos and processed foods are the chief industries. SWEDEN. The currency is the Swedish krona (November 1994: SEK 7.351 = $1 U.S.). Gross Domestic Product was SEK 1,449.5 billion ($186.2 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of SEK 14.3 billion ($1.8 billion), which was 1.0% of GDP. The annual rate of inflation was 4.6% in 1993. The average rate of inflation over the three years ended 1993 was 5.4%. Steel, machinery, instruments, autos, shipbuilding, shipping and paper are the chief industries. SWITZERLAND. The currency is the Swiss franc (November 1994: CHF 1.295 = $1 U.S.). Gross Domestic Product was CHF 343.0 billion ($232.1 billion) in 1993. The current account balance in foreign trade in 1993 was a surplus of CHF 24.7 billion ($16.7 billion), which was 7.2% of GDP. The annual rate of inflation was 3.3% in 1993. The average rate of inflation over the three years ended 1993 A-4 was 4.4%. Machinery, machine tools, steel, instruments, watches, textiles, foodstuffs (cheese, chocolate), chemicals, drugs, banking and tourism are the chief industries. UNITED KINGDOM. The currency is the British pound sterling (November 1994: BPS 0.629 = $1 U.S.). Gross Domestic Product was BPS 630.0 billion ($946.3 billion) in 1993. The current account balance in foreign trade in 1993 was a deficit of BPS 10.9 billion ($16.4 billion), which was 1.7% of the GDP. The annual rate of inflation in 1993 was 1.6%. The average rate of inflation for the three years ended 1993 was 3.7%. British Bond Markets. The British public bond market has five primary sectors: the government bond market; the short-term debt market; the derivative bond market; the mortgage bond market; and the Eurosterling bond market. The derivative bond market includes the London International Financial Futures Exchange. The Eurosterling bond market allows highly rated supranational, sovereign and corporate entities to issue sterling-denominated debt outside the United Kingdom. As of 1993, the total amount of UK government debt outstanding was 152 billion pounds, 60% of total national debt. A-5 SHORT-TERM INTEREST RATES*
FEDERAL UNITED REPUBLIC CANADA JAPAN KINGDOM USA OF GERMANY ------ ----- ------- ----- ---------- December, 1983............................ 9.81 6.44 9.44 10.06 6.38 December, 1984............................ 10.13 6.25 10.06 8.75 5.63 December, 1985............................ 9.25 6.69 11.94 8.00 4.88 December, 1986............................ 8.38 4.63 11.25 6.38 5.00 December, 1987............................ 8.50 4.38 8.94 7.44 3.50 December, 1988............................ 10.88 4.69 13.19 9.31 5.44 December, 1989............................ 12.12 6.81 15.19 8.38 8.38 January, 1990............................. 12.44 7.06 15.09 8.38 8.25 February, 1990............................ 13.38 7.44 15.19 8.38 8.56 March, 1990............................... 13.25 7.50 15.25 8.50 8.06 April, 1990............................... 13.50 7.38 15.38 8.69 8.38 May, 1990................................. 13.62 7.38 15.19 8.38 8.25 June, 1990................................ 13.44 7.69 14.97 8.38 8.25 July, 1990................................ 13.12 7.81 15.03 7.94 8.31 August, 1990.............................. 12.62 8.25 15.06 8.06 8.50 September, 1990........................... 12.19 8.50 14.97 8.31 8.69 October, 1990............................. 12.25 8.31 13.81 8.06 8.69 November, 1990............................ 12.06 8.44 13.69 8.38 9.31 December, 1990............................ 11.38 8.44 14.06 7.56 9.31 January, 1991............................. 10.69 8.25 13.94 7.06 9.25 February, 1991............................ 9.81 8.12 12.69 6.88 9.12 March, 1991............................... 9.62 7.88 12.41 6.38 9.31 April, 1991............................... 9.12 8.06 11.69 6.06 9.12 May, 1991................................. 8.69 7.75 11.38 6.06 9.06 June, 1991................................ 8.56 8.00 11.31 6.19 9.19 July, 1991................................ 8.75 7.44 11.12 6.06 9.38 August, 1991.............................. 8.44 7.25 10.88 5.69 9.25 September, 1991........................... 8.25 6.53 10.38 5.62 9.38 October, 1991............................. 7.75 6.25 10.50 5.25 9.50 November, 1991............................ 7.38 6.12 10.69 5.00 9.50 December, 1991............................ 7.00 5.69 11.00 4.25 9.62 January, 1992............................. 6.94 5.19 10.69 4.19 9.62 February, 1992............................ 7.19 5.19 10.19 4.19 9.56 March, 1992............................... 7.19 4.75 10.81 4.25 9.75 April, 1992............................... 6.63 4.69 10.50 4.00 9.75 May, 1992................................. 6.06 4.69 10.00 4.00 9.69 June, 1992................................ 5.50 4.44 10.06 3.88 9.75 July, 1992................................ 5.19 4.00 10.31 3.38 9.75 August, 1992.............................. 4.75 3.88 10.69 3.44 9.81
(continued on following page) - -------- * Rates quoted are daily end-of-period offer rates on 3-month Eurocurrency deposits. A-6 SHORT-TERM INTEREST RATES*--(CONTINUED)
FEDERAL UNITED REPUBLIC CANADA JAPAN KINGDOM USA OF GERMANY ------ ----- ------- ---- ---------- September, 1992............................ 7.88 3.88 9.00 3.06 9.06 October, 1992.............................. 6.13 3.69 7.56 3.50 9.00 November, 1992............................. 8.19 3.75 7.44 3.94 8.88 December, 1992............................. 6.88 3.75 7.06 3.38 8.69 January, 1993.............................. 6.38 3.50 6.32 3.25 8.50 February, 1993............................. 5.88 3.25 6.13 3.13 8.25 March, 1993................................ 5.13 3.25 5.94 3.19 7.88 April, 1993................................ 5.19 3.19 6.13 3.13 7.63 May, 1993.................................. 4.94 3.25 5.88 3.31 7.56 June, 1993................................. 4.56 3.25 6.00 3.25 7.50 July, 1993................................. 4.13 3.19 5.88 3.25 6.81 August, 1993............................... 4.81 2.69 5.94 3.19 6.63 September, 1993............................ 4.81 2.50 6.00 3.31 6.69 October, 1993.............................. 4.50 2.31 5.69 3.38 6.44 November, 1993............................. 4.13 2.13 5.38 3.44 6.19 December, 1993............................. 3.88 2.00 5.38 3.31 5.88 January, 1994.............................. 3.69 2.19 5.44 3.19 5.81 February, 1994............................. 3.88 2.38 5.19 3.75 5.94 March, 1994................................ 5.81 2.31 5.44 3.94 5.69 April, 1994................................ 6.06 2.31 5.25 4.31 5.38 May, 1994.................................. 6.19 2.19 5.25 4.63 5.13 June, 1994................................. 6.38 2.19 5.19 4.88 5.00 July, 1994................................. 5.75 2.25 N/A 4.88 5.06 August, 1994............................... 5.44 2.25 5.37 4.94 4.84 September, 1994............................ 5.13 2.25 5.75 5.31 5.03 October, 1994.............................. 5.31 2.28 5.84 5.57 5.13 November, 1994............................. 5.81 2.25 6.03 6.09 5.12 December, 1994............................. 6.88 2.25 6.56 6.38 5.06
- -------- * Rates quoted are daily end-of-period offer rates on 3-month Eurocurrency deposits. A-7 MARKET EXCHANGE RATES**
WEST BRITISH CANADIAN GERMAN POUND JAPANESE DOLLAR MARK STERLING YEN CAD/US$ DM/US$ POUND/US$ YEN/US$ -------- ------ --------- -------- 1978......................................... 1.1842 1.8205 0.4895 194.5526 1979......................................... 1.1688 1.7247 0.4527 239.2347 1980......................................... 1.1946 1.9743 0.4182 203.3554 1981......................................... 1.1857 2.2366 0.5248 219.6355 1982......................................... 1.2290 2.3742 0.6180 234.6318 1983......................................... 1.2446 2.7278 0.6899 231.7251 1984......................................... 1.3213 3.1565 0.8628 251.1752 1985......................................... 1.3977 2.4495 0.6922 200.3501 1986......................................... 1.3807 1.9390 0.6748 158.7500 1987......................................... 1.2997 1.5750 0.5323 121.3500 1988......................................... 1.1920 1.7755 0.5537 125.0500 1989......................................... 1.1580 1.6915 0.6215 143.6499 January, 1990................................ 1.1895 1.6832 0.5947 144.3250 February, 1990............................... 1.1905 1.6913 0.5931 148.7000 March, 1990.................................. 1.1720 1.6924 0.6079 157.4700 April, 1990.................................. 1.1645 1.6813 0.6119 159.1000 May, 1990.................................... 1.1760 1.6913 0.5945 152.2500 June, 1990................................... 1.1687 1.6713 0.5732 152.2500 July, 1990................................... 1.1532 1.5954 0.5392 146.5500 August, 1990................................. 1.1525 1.5680 0.5299 143.4000 September, 1990.............................. 1.1540 1.5640 0.5339 138.2300 October, 1990................................ 1.1663 1.5195 0.5133 129.2500 November, 1990............................... 1.1665 1.5035 0.5159 133.0500 December, 1990............................... 1.1605 1.4970 0.5181 135.7500 January, 1991................................ 1.1620 1.4833 0.5092 131.7000 February, 1991............................... 1.1505 1.5187 0.5215 132.4000 March, 1991.................................. 1.1586 1.7075 0.5762 141.3500 April, 1991.................................. 1.1502 1.7325 0.5850 137.1000 May, 1991.................................... 1.1444 1.7273 0.5845 138.0000 June, 1991................................... 1.1415 1.8123 0.6167 138.0500 July, 1991................................... 1.1530 1.7465 0.5936 137.7500 August, 1991................................. 1.1419 1.7455 0.5935 136.8000 September, 1991.............................. 1.1316 1.6618 0.5706 132.9500 October, 1991................................ 1.1225 1.6755 0.5752 131.2500 November, 1991............................... 1.1340 1.6325 0.5680 130.0500 December, 1991............................... 1.1563 1.5185 0.5349 124.9000 January, 1992................................ 1.1749 1.6125 0.5610 125.2000 February, 1992............................... 1.1830 1.6390 0.5696 129.4200 March, 1992.................................. 1.1892 1.6435 0.5760 132.7500
(continued on following page) - -------- ** All rates are end of period values. A-8 MARKET EXCHANGE RATES**--(CONTINUED)
WEST BRITISH CANADIAN GERMAN POUND JAPANESE DOLLAR MARK STERLING YEN CAD/US$ DM/US$ POUND/US$ YEN/US$ -------- ------ --------- -------- April, 1992.................................. 1.1923 1.6490 0.5629 133.2500 May, 1992.................................... 1.2027 1.6075 0.5466 127.6500 June, 1992................................... 1.1990 1.5241 0.5253 125.7700 July, 1992................................... 1.1823 1.4748 0.5191 127.1000 August, 1992................................. 1.1950 1.4020 0.5029 122.9500 September, 1992.............................. 1.2470 1.4145 0.5626 120.0000 October, 1992................................ 1.2407 1.5410 0.6423 123.3700 November, 1992............................... 1.2873 1.5917 0.6596 124.6800 December, 1992............................... 1.2714 1.6190 0.6603 124.8200 January, 1993................................ 1.2674 1.6109 0.6729 124.7300 February, 1993............................... 1.2491 1.6457 0.7015 118.2500 March, 1993.................................. 1.2593 1.6070 0.6603 114.8800 April, 1993.................................. 1.2711 1.5855 0.6353 111.0500 May, 1993.................................... 1.2713 1.5902 0.6398 107.0800 June, 1993................................... 1.2822 1.7085 0.6706 107.3000 July, 1993................................... 1.2861 1.7420 0.6745 105.1000 August, 1993................................. 1.3195 1.6763 0.6700 104.7500 September, 1993.............................. 1.3340 1.6345 0.6684 106.3000 October, 1993................................ 1.3207 1.6880 0.6757 108.6000 November, 1993............................... 1.3355 1.7165 0.6730 109.0800 December, 1993............................... 1.3254 1.7387 0.6768 111.8500 January, 1994................................ 1.3297 1.7345 0.6636 108.4900 February, 1994............................... 1.3500 1.7045 0.6732 104.5000 March, 1994.................................. 1.3836 1.6742 0.6739 102.7500 April, 1994.................................. 1.3823 1.6540 0.6585 101.7000 May, 1994.................................... 1.3833 1.6465 0.6617 104.7800 June, 1994................................... 1.3835 1.5881 0.6475 98.4400 July, 1994................................... 1.3866 1.5840 0.6477 100.1500 August, 1994................................. 1.3670 1.5816 0.6519 100.0500 September, 1994.............................. 1.3436 1.5503 0.6339 99.1500 October, 1994................................ 1.3533 1.5033 0.6115 96.9550 November, 1994............................... 1.3760 1.5692 0.6392 98.9750 December, 1994............................... 1.4019 1.5495 0.6391 99.5800
- -------- ** All rates are end of period values. A-9 APPENDIX B STATEMENT OF INTENTION (APPLICABLE ONLY TO SHARES PURCHASED SUBJECT TO A SALES CHARGE) If a shareholder anticipates purchasing $100,000 or more of shares of the Fund alone or in combination with shares of another fund described in this Prospectus within a 13-month period, the shareholder may obtain shares of the Fund at the same reduced sales charge as though the total quantity were invested in one lump sum by filing this Statement of Intention incorporated by reference in the Account Information Form. Instructions for issuance of shares in the name of a person who does not sign the Account Information Form must be accompanied by a written statement stating that the shares were paid for by a person who signed the Account Information Form. To insure that the reduced price will be received on future purchases, the investor or his Authorized Dealer must inform Goldman, Sachs & Co. that this Statement of Intention is in effect each time shares are purchased. Subject to the conditions mentioned below, each purchase will be made at a public offering price applicable to a single transaction of the dollar amount specified on the Account Information Form, as described in the Prospectus. The investor makes no commitment to purchase additional shares, but if his purchases within 13 months plus the value of shares credited toward completion do not total the sum specified, he will pay the increased amount of the sales charge prescribed in the Escrow Agreement. Income dividends and capital gain distributions taken in additional shares will apply toward the completion of this Statement of Intention. This Statement of Intention is not effective until accepted by Goldman, Sachs & Co. ESCROW AGREEMENT Out of the initial purchase (or subsequent purchases if necessary) 5% of the dollar amount specified on the Account Information Form shall be held in escrow by the Transfer Agent in the form of shares registered in the investor's name. All income dividends and capital gains distributions on escrowed shares will be paid to the investor or to his order. When the minimum investment so specified is completed (either prior to or by the end of the thirteenth month), the shareholder will be notified and the escrowed shares will be released. If the intended investment is not completed, the investor will be asked to remit to Goldman, Sachs & Co. any difference between the sales charge on the amount specified and on the amount actually attained. If the investor does not within 20 days after written request by Goldman, Sachs & Co. pay such difference in the sales charge, the Transfer Agent will redeem an appropriate number of the escrowed shares in order to realize such difference. Shares remaining after any such redemption will be released by the Transfer Agent. In signing the Account Information Form, the investor irrevocably constitutes and appoints the Transfer Agent his attorney to surrender for redemption any or all escrowed shares with full power of substitution in the premises. B-1 APPENDIX C GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM You are required by law to provide the Fund with your correct Social Security or other Taxpayer Identification Number (TIN), regardless of whether you file tax returns. Failure to do so may subject you to penalties. Failure to provide your correct TIN, to check the appropriate boxes in, and to sign your name in the Social Security Number or other Taxpayer Identification Number Certification section (the "Certification Section") of the Account Information Form could result in withholding of 31% by the Fund for the federal backup withholding tax on distributions, redemptions, exchanges and other payments relating to your account. The Fund reserves the right to refuse to open an account for, or to close the account of, any investor who fails to (1) provide a TIN, or (2) certify that such TIN is correct (if required to do so under applicable law) in establishing an account. Any tax withheld may be credited against taxes owed on your federal income tax return. Special rules apply for certain entities. For example, for an account established under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor should be furnished. If you do not have a TIN, you should apply for one immediately by contacting your local office of the Social Security Administration or the Internal Revenue Service (IRS). If you do not have a TIN but have applied for or intend to apply for one, you should check the first box in the Certification Section. In this event, you should provide your TIN and required certifications within 60 days. Backup withholding could apply to payments relating to your account prior to the Fund's receipt of your TIN and required certifications. If you have been notified by the IRS that you are subject to backup withholding because you failed to report all your interest and/or dividend income on your tax return and you have not been notified by the IRS that such withholding should cease, you must cross out item (2) in the Certification Section. If you are an exempt recipient, you should furnish your TIN and check the second box in the Certification Section. Exempt recipients include: corporations, tax-exempt pension plans and IRA's, governmental agencies, financial institutions, registered securities and commodities dealers and others. If you are a nonresident alien or foreign entity, check the third box in the Certification Section and provide a completed Form W-8 to the Fund in order to avoid backup withholding on certain payments. Other payments to you may be subject to nonresident alien withholding of up to 30%. For further information regarding backup and nonresident alien withholding, see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your tax adviser. C-1 ACCOUNT INFORMATION FORM THE GOLDMAN SACHS PORTFOLIOS This Account Information Form Should be Forwarded Promptly to Goldman, Sachs & Co. or any Authorized Dealer - ------------------------------------------------------------------------------- SEND TO: The Goldman Sachs Portfolios c/o NFDS P.O. Box 419711 Kansas City, MO 64141-6711 For additional information call 1-800-526-7384 Date: __________ - ------------------------------------------------------------------------------- INITIAL INVESTMENT-- [_] Asia Growth Fund [_] Global Income Fund $1,500 MINIMUM [_] Balanced Fund [_] Government Income Fund [_] Capital Growth Fund [_] Municipal Income Fund [_] Growth & Income Fund [_] Other Fund_____________ [_] International Equity GOLDMAN SACHS MONEY MARKET Fund TRUST* [_] Select Equity Fund [_] ILA/Prime Obligations [_] Small Cap Equity Fund Portfolio Service Units [_] Adjustable Rate Mortgage [_] ILA/Tax-Exempt Diversi- Fund fied Portfolio Service Units *$10,000 minimum or balance of existing account - ------------------------------------------------------------------------------- 1. ACCOUNT Please Print REGISTRATION INDIVIDUAL ---------------------------------------- -------------- First Name Initial Last SS# or Tax ID# JOINT TENANTS The account will be registered as "Joint Tenants with Right of Survivorship" unless otherwise specified. ---------------------------------------- -------------- First Name Initial Last SS# or Tax ID# ---------------------------------------- -------------- First Name Initial Last SS# or Tax ID# GIFT TO MINORS -------------------------------------------------------- Custodian's Name (Only one can be named) ---------------------------------------- -------------- Minor's Name (Only one) SS# Under the _________ (State of Residence) Uniform Gift to Minors Act CORPORATION, TRUST, OR OTHER ENTITY ---------------------------------------- -------------- Name of Corporation, Trust or other Tax ID# Non-Person Entity -------------------------------------------------------- Attention: -------------------------------------------------------- Date of Trust Instrument: Name of Beneficiary (If to be included in the registration) -------------------------------------------------------- Name(s) of Trustee(s) (If to be included in the registration) - ------------------------------------------------------------------------------- 2. MAILING ADDRESS ( ) ------------------------------------ ------------------ Street Daytime Phone -------------------------------------------------------- City State Zip Code - -------------------------------------------------------------------------------- 3. TO PURCHASE SHARES Check appropriate box(es). [_] A check for $_______ is enclosed. Check(s) should be payable to the Fund(s) selected. [_] An order # ______ for ______ shares or $_________ was placed on _____________________. [_] I certify that I am an entity exempt from the sales charge according to the section in the Fund Prospectus "Purchase of Shares" and I am, therefore, entitled to purchase shares of the Fund at net asset value. By checking this box, the undersigned agrees that I will notify Goldman, Sachs & Co. at or prior to purchase if I am no longer in one of the categories of eligible investors. Reason for exemption _____________________________. - -------------------------------------------------------------------------------- 4. DIVIDEND AND Choose how you wish to receive dividends. If no boxes DISTRIBUTION are checked, Option A will be assigned. OPTIONS A. [_] All income and capital gains dividends reinvested in the account. B. [_] All income and short-term capital gains dividends in cash and long-term capital gains reinvested in the account. (COMPLETE CASH DIVIDENDS SECTION BELOW.) C. [_] All income and capital gains dividends paid in cash. (COMPLETE CASH DIVIDENDS SECTION BELOW.) D. [_] All dividends and capital gains reinvested in another Goldman Sachs Portfolio account: (See prospectus regarding limitations on this privilege.) Fund Name _________________ Account Number ____________ Please send cash dividends to (if no special payee, cash dividends will be sent to the account registration address): [_] Account registration address. [_] Check to special payee as follows: [_] Deposit to bank (attach voided check) Name of Payee ________________ Account No. (if applicable) ____________ Street Address _________________________________________ City _____________________________ State ____ Zip ______ - -------------------------------------------------------------------------------- 5. RIGHT OF See "Purchase of Shares" ACCUMULATION Cumulative quantity discounts are applicable if a shareholder's current value of existing shares of the Fund alone or in combination with shares of any other fund described in the Prospectus, on which a sales charge was paid, total the requisite amount for receiving a discount as described in the accompanying Prospectus. Below are listed all the accounts (account name, Fund and number) which should be aggregated for a right of accumulation. Name _____________ Name _____________ Name _____________ Fund _____________ Fund _____________ Fund _____________ Acct No. _________ Acct No. _________ Acct No. _________ - -------------------------------------------------------------------------------- 6. STATEMENT OF See "Purchase of Shares" INTENTION Although not obligated to do so, it is the undersigned's intention to invest, over a 13-month period from this date, in shares of the Fund alone or in combination with shares of any other fund, on which a sales charge was paid, described in the Prospectus which qualify for a quantity discount as described in the accompanying Prospectus, in an amount that will equal or exceed: [_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000 [_] $3,000,000 I agree to the Statement of Intention and Escrow Agreement set forth in the Appendices to the accompanying Prospectus and incorporated by reference herein. - -------------------------------------------------------------------------------- 7. AUTOMATIC INVEST- See "Purchase of Shares" MENT PLAN (ATTACH VOIDED CHECK) Check One: [_] Monthly [_] Quarterly Beginning on or about the 5th [_] or the 15th [_] (check one) beginning with ___________(month) and every month/quarter thereafter, I/We authorize State Street Bank (the custodian for the Fund) to debit the amount requested below from my/our bank account for investment in the Fund. I/We understand that my/our participation in the Automatic Investment Plan (the "Plan") is subject to the terms and conditions of such plan as amended from time to time. -------------------------------------------------------- Bank Name Bank Account Number (if assigned) -------------------------------------------------------- Amount of each monthly investment Name of Fund (minimum $50) -------------------------------------------------------- Amount of each monthly investment Name of Fund (minimum $50) -------------------------------------------------------- Authorized Signature (as shown on bank records) -------------------------------------------------------- Authorized Signature (if joint bank account both sign) - -------------------------------------------------------------------------------- 8. TELEPHONE EXCHANGE [_] I/We authorize Goldman, Sachs & Co. to accept and act upon telephone instructions from myself or any other person for the exchange of shares of the Fund into any fund described in the accompanying Prospectus. I/We understand and agree that neither the Fund nor Goldman, Sachs & Co. will be liable for any loss, expense, or cost arising out of any telephone request effected hereunder. - -------------------------------------------------------------------------------- 9. TELEPHONE REDEMPTION (ATTACH VOIDED See "Redemption of Shares" CHECK) [_] Goldman, Sachs & Co. is hereby authorized to honor telephone, telegraphic, or other instructions, without signature guarantee, from any person for the redemption of shares for the above account, without an obligation on behalf of Goldman, Sachs & Co., to verify that such person is the shareholder of record or authorized to give redemption instructions, provided that the proceeds are transmitted to the following bank account only or are mailed to the account registration address. Absent its own gross negligence, neither the Fund nor Goldman, Sachs & Co. shall be liable for such redemption or for payments made to any unauthorized account. -------------------------------------------------------- Bank Name ABA Routing # -------------------------------------------------------- Street Address City State Zip -------------------------------------------------------- Account Name Account Number - -------------------------------------------------------------------------------- 10. AUTOMATIC The originating fund's balance must be at least $10,000 EXCHANGES and the receiving fund's minimum investment must be met prior to discontinuing this privilege if the minimum investment requirement for the receiving fund has not already been met. I hereby authorize automatic exchanges of $______ (exact dollars--$50 minimum) into my identically registered account: Exchange from ____________________________ (Name of Fund) to ____________________________ (Name of Fund) Account No. (if known) ___________________ Please make exchanges on the 15th (or next business day) beginning the month of _________________________. - -------------------------------------------------------------------------------- 11. CHECKWRITING PRIVILEGE See "Check Redemption Privilege" [_] Check the box if you would like an application for checkwriting sent to you. The checkwriting privilege is available to holders of ILA/Prime Obligations Portfolio Service Units or ILA/Tax-Exempt Diversified Portfolio Service Units ONLY. - -------------------------------------------------------------------------------- 12. SOCIAL SECURITY . By the execution of this Account Information Form, the NUMBER OR OTHER undersigned represents and warrants that it has full TAXPAYER right, power and authority to make the investment IDENTIFICATION applied for pursuant to this Form and is acting for NUMBER itself or in some fiduciary capacity in making such CERTIFICATION AND investment. SIGNATURE AUTHORIZATION THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED A CURRENT PROSPECTUS FOR THE FUND AND HAS REVIEWED THE SAME. The undersigned understands that a lesser degree of flexibility concerning the timing of a redemption of its investment in Goldman Sachs Adjustable Rate Mortgage Fund, Goldman Sachs Global Income Fund, Goldman Sachs Municipal Income Fund, Goldman Sachs Government Income Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs Select Equity Fund, Goldman Sachs Small Cap Equity Fund, Goldman Sachs International Equity Fund, Goldman Sachs Growth and Income Fund, Goldman Sachs Asia Growth Fund and Goldman Sachs Balanced Fund, as well as all other non-money market funds, increases the likelihood that the shareholder will be required to redeem shares under unfavorable market conditions. If shares are redeemed at a disadvantageous time, the value of the Fund's shares upon redemption may be less than the price at which the Fund's shares were purchased. Since none of the Funds listed in this paragraph is a money market fund or maintains a constant net asset value per share, the undersigned may experience a loss of principal on its investments in any such Fund during any particular period. . Fill in boxes below Taxpayer Identification No.: ____________________________ (For joint tenants, first listed individual should provide his/her number and sign below.) Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certification Instruction: You must cross out item (2) above if you have been notified by the IRS that you are currently subject to federal backup withholding because of underreporting interest or dividends on your federal tax return. (Also see the "Guidelines for Certification of Taxpayer Identification Number on Account Information Form" contained in the Appendices to the accompanying Prospectus). NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. By checking only the appropriate box and signing below, I certify under penalties of perjury that: [_] I do not have a taxpayer identification number, but I have applied for or intend to apply for one. I understand that the required 31% withholding may apply before I provide such number and certifications, which should be provided within 60 days. or [_] I am an exempt recipient. or [_] I am neither a citizen nor a resident of the United States for the purpose of the Internal Revenue Code. I am a resident of __________________ . All recipients, including exempt recipients, must report their taxpayer identification numbers and provide the certifications requested to prevent backup withholding. Sign Here: --------------------------------------------------------- Signature Name (print) and Title (if any) Date: - ------------------------------------------------------------------------------- 13. SYSTEMATIC See "Redemption of Shares" WITHDRAWAL PLAN Minimum account balance must be $10,000. Withdrawal minimum is $50. Check One: [_] Monthly [_] Quarterly Please make payments via (check one) [_] check [_] ACH (Bank must be ACH affiliated. Attach voided check). Payments made via check are withdrawn from your account on or about the 25th of each month/quarter. (I understand that I may change the date of redemption, via ACH, or the amount at any time in writing to the Fund at the address stated above.) Complete this section if withdrawal payments are to be made via ACH (funds are automatically credited to the designated bank account.) BANK INFORMATION: Please withdraw $___________ from my account on the ___________ of the month. Bank Account Registration: _____________________________ Routing #: _____________ Bank Account #: ______________ Bank Name/Branch Name: _________________________________ Bank Street Address: ___________________________________ Bank Telephone Number: _________________________________ Complete this section ONLY if check is to be made payable to person(s) other than the registered owner, and you must have this application SIGNATURE GUARANTEED. -------------------------------------------------------- Name of check recipient Address City State Zip SIGNATURE GUARANTEE(S) This request must be signed by each shareholder with his or her signature guaranteed by a commercial bank, trust company or member firm of a national securities exchange. -------------------------------------------------------- Shareholder Signature -------------------------------------------------------- Signature Guaranteed By -------------------------------------------------------- Authorized Signature - ------------------------------------------------------------------------------- 14. FOR DEALER ONLY Investment dealer's signature is required for Systematic Withdrawal Plan or Statement of Intention. If a Systematic Withdrawal Plan is being opened, we believe that the amount to be withdrawn is reasonable in light of the investor's circumstances and we recommend establishment of the account. -------------------------------------------------------- Name of Dealer Firm Home Office Location -------------------------------------------------------- City State Zip -------------------------------------------------------- Branch Office Location Branch Number/Branch Phone -------------------------------------------------------- Authorized Signature State Zip -------------------------------------------------------- Reg. Rep. Number Reg. Rep.'s Name - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UN- LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST OR THE FUND SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ---------------- TABLE OF CONTENTS
PAGE ---- Summary.................................................................... 3 Financial Highlights....................................................... 9 Investment Objective and Policies.......................................... 10 Investment Adviser, Subadviser and Administrator........................... 14 Risks, Special Investment Methods and Investment Limitations............... 15 Investment Restrictions.................................................... 27 Portfolio Turnover......................................................... 28 Management................................................................. 28 Reports to Shareholders.................................................... 32 Purchase of Shares......................................................... 32 Distribution Plan.......................................................... 43 Redemption of Shares....................................................... 43 Dividends.................................................................. 46 Net Asset Value............................................................ 47 Performance Information.................................................... 47 Shares of the Trust........................................................ 48 Taxation................................................................... 49 Additional Information..................................................... 51 Appendix A................................................................. A-1 Appendix B................................................................. B-1 Appendix C................................................................. C-1 Account Information Form
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GOLDMAN SACHS GLOBAL INCOME FUND MANAGED BY INVESTMENT ADVISER GOLDMAN SACHS ASSET MANAGEMENT, A SEPARATE OPERATING DIVISION OF GOLDMAN, SACHS & CO. SUBADVISER GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL AN AFFILIATE OF GOLDMAN, SACHS & CO. ------------- PROSPECTUS ------------- GOLDMAN, SACHS & CO. GI1/40K/0395 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GOLDMAN SACHS GLOBAL INCOME FUND SUPPLEMENT DATED JUNE 1, 1995 TO PROSPECTUS DATED MARCH 1, 1995 The class of shares of the Fund offered by the accompanying Prospectus has been designated as the Class A Shares of the Fund. Effective August 1, 1995, certain changes will be made to the Fund's operating expenses. Specifically, the Investment Adviser and Subadviser voluntarily have agreed to limit their advisory and subadvisory fees to 0.10% an 0.30%, respectively, of the Fund's average daily net assets. In addition, the Investment Adviser and Subadviser voluntarily have agreed to limit certain "Other Expenses" of the Fund (excluding transfer agency fees estimated to be 0.04% of average daily net assets, advisory, administration, distribution and authorized dealer service fees, taxes, interest and brokerage and litigation, indemnification and other extraordinary expenses) to 0.06% of the Fund's average daily net assets. The investment Adviser and Subadviser have no current intention of modifying or discontinuing any of such limitations but may do so in the future at their discretion. THE FOLLOWING REPLACES THE FEES AND EXPENSES TABLE IN THE ACCOMPANYING PROSPECTUS EFFECTIVE AUGUST 1, 1995: FEES AND EXPENSES
GOLDMAN SACHS GLOBAL INCOME FUND ------------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Charge Imposed on Purchases...................... 4.5%* Maximum Sales Charge Imposed on Reinvested Dividends........... None Redemption Fees................................................ None** Exchange Fees.................................................. None** ANNUAL FUND OPERATING EXPENSES: (AS PERCENTAGE OF AVERAGE DAILY NET ASSETS) Management Fees (including, after limitation, advisory and subadvisory fees of 0.10% and 0.30%, respectively, and admin- istration fees of 0.15%)...................................... 0.55%*** Distribution (Rule 12b-1) Fees................................. 0.25% Other Expenses: Authorized Dealer Service Fees............................... 0.25% Other Expenses (after limitation)............................ 0.10% ---- TOTAL FUND OPERATING EXPENSES (AFTER FEE AND EXPENSE LIMITA- 1.15%*** TION)......................................................... ====
Example: You would pay the following expenses on a hypothetical $1,000 investment (including the maximum sales charge), assuming (1) a 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $56 $80 $105 $178
- -------- * As a percentage of the offering price. No sales charge is imposed on purchases by certain classes of investors. See "Purchase of Shares." ** A transaction fee of $7.50 may be charged for redemption proceeds paid by wire. In addition to free reinvestments of dividends and distributions in shares of other Goldman Sachs Portfolios or units of the ILA Portfolios and free automatic exchanges pursuant to the Automatic Exchange Program, six free exchanges are permitted in each twelve month period. A fee of $12.50 may be charged for each subsequent exchange during such period. See "Purchase of Shares--Exchange Privilege." A contingent deferred sales charge may be imposed in connection with certain redemptions of Class A Shares sold without an initial sales charge to certain participant-directed plans. See "Purchase of Shares--Participant-Directed Plans." The transfer agency fee incurred with respect to the Class A Shares of the Fund is based on a fixed per account charge plus transaction fees. See "Management-- Distribution and Transfer Agent." *** Based upon estimated amounts for the current fiscal year. The Investment Adviser and Subadviser voluntarily have agreed to limit their advisory and subadvisory fees to the amounts shown in the table and to limit certain "Other Expenses" of the Fund (excluding transfer agency fees estimated to be 0.04% of average daily net assets, advisory, administration, distribution and authorized dealer service fees, taxes, interest and brokerage and litigation, indemnification and other extraordinary expenses) to 0.06% per annum of the Fund's average daily net assets. The Investment Adviser and Subadviser have no current intention of modifying or discontinuing such expense limitations but may do so in the future in their discretion. Without such limitations, the Fund's "Management Fees", "Other Expenses" and "Total Operating Expense" would be 0.90%, 0.23% and 1.63%, respectively. See "Management--Investment Adviser, Subadviser and Administrator." During the fiscal year ended October 31, 1994, the Authorized Dealer Service Plan was not in existence and the Distribution (Rule 12b-1) Fees were contractually set at 0.50%. During that period, Goldman Sachs agreed to limit the amount of the fees under such Distribution Plan to 0.25% and did not waive any management fees. The annual "Management Fees," "Distribution Fees," "Other Expenses" and "Total Operating Expenses" respectively, incurred by the Fund during the fiscal year ended October 31, 1994 (expressed as a percentage of average daily net assets after fee adjustment) were 0.90%, 0.25%, 0.13% and 1.28%, respectively. Investors should be aware that, due to the distribution fees, a long-term Class A shareholder in the Fund may pay over time more than the economic equivalent of the maximum front-end sales charge permitted under the rules of NASD. The information with respect to the Fund set forth in the foregoing table and hypothetical example relates only to the Class A Shares of the Fund (the class offered by this Prospectus). The Fund also offers Institutional Shares and Administration Shares which are subject to different fees and expenses (which affects performance), have different minimum investment requirements and are entitled to different services. Information regarding Institutional and Administration Shares may be obtained from your sales representative or from Goldman Sachs by calling the number on the inside cover page of this prospectus. The purpose of the foregoing table is to assist investors in understanding the various costs and expenses of the Fund that an investor in Class A Shares will bear directly or indirectly. The cost and expenses included in the table and hypothetical example above are based upon estimated fees and expenses for the current fiscal year. The information on costs and expenses included in the table are hypothetical examples and should not be considered as representative of past or future expenses. Actual fees and expenses may be greater or less than those indicated. Moreover, while the example assumes a 2 5% annual return, the Fund's actual performance will vary and may result in an actual return greater or less than 5%. See "Management--Investment Adviser, Subadviser and Administrator." THE FUND'S INVESTMENT POLICIES HAVE BEEN AMENDED AS SET FORTH BELOW (CHANGES IN POLICY ARE SET FORTH IN ITALICS): The Fund's investment objective is to provide investors with a high total return, emphasizing current income and, to a lesser extent, providing opportunities for capital appreciation primarily through investment in a portfolio of high quality fixed income securities of U.S. and foreign issuers and through transactions in foreign currencies. High quality securities are defined as securities which have ratings of at least AA by Standard & Poor's Rating Group ("S&P") or Aa by Moody's Investors Service, Inc. ("Moody's") ("High Quality Ratings") or, if unrated by such rating organizations, are determined by the Fund's Investment Adviser or Subadviser to be of comparable credit quality. The Fund may also invest in obligations of a sovereign issuer rated at least A by Moody's or S&P, or if not rated by such rating organizations determined by the Investment Adviser or Subadviser to be of comparable credit quality, if the obligations are denominated in the issuer's own currency. The Fund will maintain a dollar weighted average duration of not more than 7.5 years. The Fund is not subject to any limitation with respect to the average maturity of its portfolio or the individual securities in which the Fund may invest. DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS Effective June 1, 1995, the Fund's Distribution Plan has been amended and the Fund has adopted an Authorized Dealer Service Plan. Under the amended Distribution Plan, Goldman Sachs will continue to provide the distribution services described in the accompanying Prospectus; however, personal and account administration services will no longer be provided under the Distribution Plan. Goldman Sachs is entitled to be compensated under the amended Distribution Plan at a rate of up to 0.25% annually of the Fund's average daily net assets rather than the previous fee of up to 0.50% annually of average daily net assets. Pursuant to the Authorized Dealer Service Plan, Goldman Sachs and Authorized Dealers will be compensated for providing personal and account maintenance services at an annual rate equal to 0.25% of the Fund's average daily net assets. The fee for personal and account maintenance services paid pursuant to the Authorized Dealer Service Plan may be used to make payments to Goldman Sachs, Authorized Dealers and their officers, sales representatives and employees for responding to inquiries of, and furnishing advice to, shareholders regarding their shares or their accounts or similar services not otherwise provided on behalf of the Funds. The aggregate services provided and the aggregate fees payable under the amended Distribution Plan and the Authorized Dealer Service Plan are the same as the services previously provided and the fees previously payable under the Distribution Plan (however, Goldman Sachs previously limited the amount of distribution expenses, which limitation is not being continued). PURCHASE AND REDEMPTION PROCEDURE Effective June 7, 1995, purchases and redemptions of Shares of the Fund must be settled within three Business Days of the receipt by a Fund of a complete purchase order or properly executed redemption request. Except for the requirement that the Fund receive payment for any Shares within three Business Days (previously five Business Days) of receipt of a purchase order, the purchase procedures 3 described in the accompanying Prospectus have not changed. Redemption proceeds to be paid by check will normally be mailed within three Business Days after receipt of a properly executed redemption request. Redemption proceeds paid by wire will normally be wired on the next Business Day following receipt of a properly executed redemption request but may be paid up to three Business Days after receipt of a properly executed redemption request. Under the section entitled "Purchase of Shares--Offering Price," the following replaces the fourth paragraph: Shares of the Fund may be sold at net asset value without payment of any initial sales charge to (a) Goldman, Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of the above individuals; (b) qualified retirement plans of Goldman Sachs; (c) trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor; (d) any employee or registered representative of any Authorized Dealer or their respective spouses and children; (e) banks, trust companies or other types of depository institutions investing for their own account or investing for accounts for which they have investment discretion; (f) banks, trust companies or other types of depository institutions investing for accounts for which they do not have investment discretion, provided they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards; (g) any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of the Fund; (h) pension and profit sharing plans, pension funds and other company- sponsored benefit plans having either 200 eligible employees or at least $500,000 under management with GSAM and its affiliates; (i) qualified non-profit organizations, foundations and endowments that have at least $1,000,000 under management with GSAM and its affiliates; (j) shareholders whose purchase is attributable to redemption proceeds (subject to appropriate documentation) from a registered open-end management investment company not distributed or managed by Goldman Sachs or its affiliates, if such redemption has occurred no more than 60 days prior to the purchase of shares of the Fund and the shareholder either (i) paid an initial sale charge or (ii) was at some time subject to a deferred sales charge with respect to the redemption proceeds; (k) "wrap" accounts for the benefit of clients of broker-dealers, financial institutions or financial planners, provided that they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards; (l) registered investment advisers who have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards. Purchasers must certify eligibility for an exemption on the Account Information Form and notify Goldman Sachs if, the shareholder is no longer eligible for an exemption. Exemptions will be granted subject to confirmation of a purchaser's entitlement. Goldman Sachs reserves the right to limit the participation in the Fund of its partners and employees. In addition, under certain circumstances, dividends or distributions from any of the Goldman Sachs Portfolios may be reinvested in shares of the Fund at net asset value, as described under "Cross-Reinvestment of Dividends and Distributions." 4 -----END PRIVACY-ENHANCED MESSAGE-----