GOLDMAN SACHS MONEY MARKET TRUST, DEFS14A, 1997-02-14

GOLDMAN SACHS MONEY MARKET TRUST
DEFS14A, 1997-02-14

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<PAGE>

GOLDMAN SACHS MONEY MARKET TRUST

INSTITUTIONAL LIQUID ASSETS PORTFOLIOS

February 13, 1997

Dear Unitholder:

You are cordially invited to attend a Special Meeting of Unitholders of Goldman
Sachs Money Market Trust, to be held on Tuesday, April 1, 1997 at 9:00 a.m.,
Chicago time, at the offices of Goldman, Sachs & Co. located at 4900 Sears
Tower, Chicago, Illinois 60606.

At this important meeting, you will be asked to consider and take action on the
election of Trustees and the ratification of the selection of independent public
accountants, Arthur Andersen LLP. In addition, you will be asked to approve
changes to the investment restrictions and policies of the Portfolios and the
reorganization of the Portfolios. We believe that the proposals are important
and will allow us to improve the Portfolios' operations, simplify disclosure
and, hopefully, attract more investment dollars. You should carefully read the
Proxy Statement that discusses each proposal in detail. The formal Notice of
Special Meeting of Unitholders and the Proxy Statement setting forth in detail
the matters to come before the meeting are attached hereto, and a form of Proxy
is enclosed for your use.

First, the conversion of the Portfolios into series of a newly formed Delaware
business trust will be proposed. As discussed in the accompanying Proxy
Statement, such conversions will not result in any change to the assets, fees or
policies of the Portfolios; however, the Trustees believe that organizing the
Portfolios as series of a Delaware business trust offers certain advantages.
These advantages include a clear limitation on unitholder liability, greater
flexibility for the Trustees to take actions without the cost and delay of a
unitholders meeting and the potential for cost savings.

Second, you will be asked to authorize each Portfolio to invest substantially
all of its assets in another open-end investment company with the same
investment objectives and policies as the Portfolio. Again, the Trustees believe
that the ability to adopt such a structure, commonly referred to as a
master-feeder structure, offers the potential for greater efficiencies and
flexibility. While the Portfolios have no immediate plan to adopt such a
structure, considering this proposal now will eliminate the need for and expense
of further unitholder action.

Finally, the Trustees propose amending and restating the Portfolios' investment
restrictions. Certain of the Portfolios' investment restrictions were
<PAGE>

required by state laws that no longer are applicable to the Portfolios or are
more restrictive than required by federal law. The amended restrictions will
expand the range of investment opportunities and techniques available to the
Portfolios without changing the Portfolios' investment objectives or risk
profile. Also, by adopting a uniform set of restrictions, compliance and
disclosure relating to these restrictions can be simplified.

THE TRUSTEES HAVE UNANIMOUSLY RECOMMENDED THAT UNITHOLDERS APPROVE EACH ITEM TO
BE ACTED UPON AT THE MEETING.

The continuing interest of the unitholders in the affairs of the Portfolios is
gratefully acknowledged. Whether or not you expect to attend the meeting, it is
important that your units be represented. Therefore, I urge you to vote FOR the
nominees for election as Trustees and each of the other proposals contained in
the Proxy Statement.

Sincerely,

/s/ Douglas C. Grip
Douglas C. Grip
President

<PAGE>

GOLDMAN SACHS MONEY MARKET TRUST (THE "TRUST")

INSTITUTIONAL LIQUID ASSETS PORTFOLIOS

PRIME OBLIGATIONS PORTFOLIO
GOVERNMENT PORTFOLIO
TREASURY OBLIGATIONS PORTFOLIO
MONEY MARKET PORTFOLIO
FEDERAL PORTFOLIO
TREASURY INSTRUMENTS PORTFOLIO
TAX-EXEMPT DIVERSIFIED PORTFOLIO
TAX-EXEMPT NEW YORK PORTFOLIO
TAX-EXEMPT CALIFORNIA PORTFOLIO

4900 SEARS TOWER CHICAGO, ILLINOIS 60606

NOTICE OF SPECIAL MEETING OF UNITHOLDERS TO BE HELD APRIL 1, 1997

A Special Meeting of Unitholders of each Portfolio (the "Meeting") referred to
above (the "Portfolios") will be held on April 1, 1997, at 9:00 a.m. (Chicago
time) at the offices of Goldman, Sachs & Co. located at 4900 Sears Tower,
Chicago, Illinois 60606, for the following purposes:

(1) WITH RESPECT TO THE TRUST, to elect nine Trustees;

(2) WITH RESPECT TO THE TRUST, to ratify or reject the selection of Arthur
Andersen LLP as independent accountants of the Trust for the fiscal year
ending December 31, 1997;

(3) WITH RESPECT TO EACH PORTFOLIO, to approve an Agreement and Plan of
Reorganization pursuant to which each Portfolio will be reorganized as a
series of the Goldman Sachs Trust, a Delaware business trust;

(4) WITH RESPECT TO EACH PORTFOLIO, (a) to approve an amendment to each
Portfolio's fundamental investment restrictions to permit each Portfolio to
invest substantially all of its assets in another open-end investment
company and (b) to amend the Trust's Declaration of Trust to permit such an
investment without unitholder approval;

(5) WITH RESPECT TO EACH PORTFOLIO, to amend certain of the Portfolios'
investment restrictions;
<PAGE>

(6) WITH RESPECT TO THE TAX-EXEMPT DIVERSIFIED, TAX-EXEMPT NEW YORK AND
TAX-EXEMPT CALIFORNIA PORTFOLIOS, to amend a fundamental policy; and

(7) To transact such other business as may properly come before the Meeting and
any adjournment or adjournments thereof.

YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSALS
RELATING TO YOUR PORTFOLIO(S).

Unitholders of record of each Portfolio at the close of business on January 31,
1997 will be entitled to vote at the Meeting or at any adjournment or
adjournments thereof. The proxy statement and proxy card are being first mailed
to unitholders on or about February 13, 1997.

It is important that you return your signed and dated Proxy Card promptly,
regardless of the size of your holdings, so that a quorum may be assured.

By Order of the Board of Trustees of Goldman Sachs Money Market
Trust

Michael J. Richman, Secretary

February 13, 1997

PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD FOR THE UNITS HELD BY YOU AND
RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED SO THAT YOUR VOTE CAN BE
RECORDED. NO POSTAGE IS REQUIRED IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
YOUR PROMPT RETURN OF YOUR PROXY OR PROXIES MAY SAVE THE TRUST THE NECESSITY AND
EXPENSE OF FURTHER SOLICITATIONS. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR
UNITS IN PERSON.
<PAGE>

GOLDMAN SACHS MONEY MARKET TRUST (THE "TRUST")

INSTITUTIONAL LIQUID ASSETS PORTFOLIOS

4900 SEARS TOWER CHICAGO, ILLINOIS 60606

PROXY STATEMENT

GENERAL

This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees (the "Trustees") of Goldman
Sachs Money Market Trust (the "Trust") to be used at a Special Meeting of
unitholders of the series of the Trust listed above (the "Portfolios") to be
held at the offices of Goldman, Sachs & Co. ("Goldman Sachs"), 4900 Sears Tower,
Chicago, Illinois 60606, on Tuesday, April 1, 1997, at 9:00 a.m. (Chicago time)
for the purposes set forth in the accompanying Notice of Meeting. Such meeting
and any adjournment thereof is referred to as the "Meeting."

The Trustees have fixed the close of business on January 31, 1997 as the record
date (the "Record Date") for determining the Unitholders of each Portfolio
entitled to notice of and to vote at the Meeting. Unitholders of record of each
Portfolio on the Record Date are entitled to one vote per unit at the Meeting or
any adjournment of the Meeting relating to their Portfolio.

Appendix A hereto sets forth the number of Units of beneficial interest of each
Portfolio outstanding as of January 31, 1997. Appendix B hereto sets forth the
persons who owned beneficially or of record more than 5% of any Portfolio as of
January 31, 1997.
<PAGE>

Proxies will be solicited by mail and may also be solicited in person or by
telephone by officers of Goldman Sachs or Goldman Sachs Asset Management
("GSAM") and by the Trustees. In addition, the Trust's transfer agent, Goldman
Sachs, will solicit proxies in person and/or by telephone. The Portfolios will
pay their pro-rata share of the out-of-pocket costs associated with such
solicitation which are currently estimated to be $200,000 in aggregate for the
Goldman Sachs Group of Funds. The transfer agent may engage an independent proxy
solicitation firm to assist it in soliciting proxies.

The following table summarizes the proposals to be voted on at the Meeting and
indicates those Unitholders who are being solicited with respect to each
proposal. In connection with each of the matters set forth in the attached
Notice of Meeting, a Portfolio's classes of Units will vote together as a single
class.

<PAGE>

SUMMARY OF VOTING ON PROPOSALS

PROPOSAL UNITHOLDERS SOLICITED
-------- ---------------------

1. Election of nine Trustees. The Trust with all of its series
(including series of the Trust being
solicited pursuant to a separate proxy
statement) voting as a single class.
2. Ratification of the selection of The Trust with all of its series
Arthur Andersen LLP as independent (including series of the Trust being
accountants for the fiscal year solicited pursuant to a separate proxy
ending December 31, 1997. statement) voting as a single class.
3. Approval of an Agreement and Plan Each Portfolio voting separately.
of Reorganization pursuant to which
each Portfolio will be reorganized
as a series of Goldman Sachs Trust,
a Delaware business trust.
4. (a) Approval of an amendment to (a) Each Portfolio voting separately as
each Portfolio's investment to the investment restrictions; and (b)
restrictions to permit the all of the series of the Trust (including
Portfolio to invest substantially series of the Trust being solicited
all of its assets in another pursuant to a separate proxy statement)
open-end investment company; and voting as a single class, as to the
(b) approval of a corresponding amendment to the Declaration of Trust.
amendment to the Trust's
Declaration of Trust.

5. (a)-(i) Approval of amended and Each Portfolio voting separately.
restated investment restrictions.
6. Approval of amendment of a Tax-Exempt Diversified, Tax-Exempt New
fundamental policy. York and Tax-Exempt California Portfolios
only, each voting separately.

THE TRUST WILL FURNISH, WITHOUT CHARGE, COPIES OF ANY PORTFOLIO'S DECEMBER 31,
1996 ANNUAL UNITHOLDERS REPORT AND COPIES OF THE JUNE 30, 1996 SEMI-ANNUAL
UNITHOLDERS REPORT TO ANY UNITHOLDER UPON REQUEST ADDRESSED TO GOLDMAN, SACHS &
CO., 4900 SEARS TOWER, CHICAGO, ILLINOIS 60606 OR BY TELEPHONE AT 800-621-2550.

This Proxy Statement and the form of Proxy are being first mailed to
Unitholders on or about February 13, 1997.

<PAGE>

- -----------------------------------------------------
PROPOSAL 1: ELECTION OF TRUSTEES
- -----------------------------------------------------

At a meeting on January 28, 1997, the Trustees, including the Trustees who are
not "interested persons" (as defined by the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Portfolios (the "Independent Trustees") voted
to approve, and to recommend to the Unitholders that they approve, a proposal to
elect nine (9) Trustees (the "Nominees") to the Board of Trustees of Goldman
Sachs Money Market Trust. Information concerning the Nominees and other relevant
factors is discussed below.

Using the enclosed form of proxy, a Unitholder may authorize the proxies to
vote his or her Units for the Nominees or may withhold from the proxies
authority to vote his or her Units for one or more of the Nominees. If no
contrary instructions are given, the proxies will vote FOR the Nominees. Each of
the Nominees has consented to his or her nomination and has agreed to serve if
elected. If, for any reason, any Nominee should not be available for election or
able to serve as a Trustee, the proxies will exercise their voting power in
favor of such substitute Nominee, if any, as the Trustees may designate. The
Trust has no reason to believe that it will be necessary to designate a
substitute Nominee.

<PAGE>

INFORMATION CONCERNING NOMINEES

The following table sets forth certain information about each Nominee,
including each Nominee's principal occupation or employment during the past five
years.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING THE LAST FIRST BECAME
POSITIONS WITH TRUST FIVE YEARS TRUSTEE
-------------------- --------------------------- ------------
<S> <C> <C>
Ashok N. Bakhru (53). Executive Vice 1991
Chairman and Trustee President-Finance &
Administration & Chief
Financial Officer, Coty, Inc.
(since April 1996); President,
ABN Associates (since June
1994); Senior Vice President of
Scott Paper Company (until June
1994); Director of
Arkwright-Mutual Insurance
Company; Trustee of
International House of
Philadelphia; Member of Cornell
University Council; and Trustee
of the Walnut Street Theater.
Mr. Bakhru has been a Director
of Goldman Sachs Equity
Portfolios, Inc. since March
1990 and a Trustee of Goldman
Sachs Trust since November
1991.
David B. Ford (51)*. . Managing Director, Goldman 1994
Trustee Sachs (since 1996); General
Partner, Goldman Sachs
(1986-1996); Co-Head of GSAM
(since December 1994). Mr. Ford
has been a Director of Goldman
Sachs Equity Portfolios, Inc.
and a Trustee of Goldman Sachs
Trust since 1994.

Douglas Grip (35)* . . Vice President, Goldman Sachs To be elected
Trustee and President (since May 1996); President, in 1997
MFS Retirement Services Inc. of
Massachusetts Financial
Services (prior thereto). Mr.
Grip has been a Director of
Goldman Sachs Equity
Portfolios, Inc. and a Trustee
of Goldman Sachs Trust since
1996.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING THE LAST FIRST BECAME
POSITIONS WITH TRUST FIVE YEARS TRUSTEE
-------------------- --------------------------- ------------
<S> <C> <C>
John P. McNulty (44)* Managing Director, Goldman To be elected in 1997
Trustee Sachs (since 1996); General
Partner of Goldman Sachs (1990
to 1994 and 1995-1996); Co-Head
of GSAM (since November 1995);
Limited Partner of Goldman
Sachs (1994 to November 1995).

Mary P. McPherson (60) President of Bryn Mawr College To be elected in 1997
Trustee (since 1978); Director of
Josiah Macy, Jr., Foundation
(since 1977); Director of the
Philadelphia Contributionship
(since 1985); Director of
Amherst College (since 1986);
Director of Dayton Hudson
Corporation (since 1988);
Director of the Spencer
Foundation (since 1993); and
member of PNC Advisory Board
(since 1993).

Alan A. Shuch (48)* . Limited Partner, Goldman Sachs 1990
Trustee (since 1994); Director and Vice
President of Goldman Sachs
Funds Management, Inc. (April
1990 to November 1994);
President and Chief Operating
Officer, GSAM (September 1988
to November 1994). Mr. Shuch
has been a Director of Goldman
Sachs Equity Portfolios, Inc.
and a Trustee of Goldman Sachs
Trust since November 1991.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING THE LAST FIRST BECAME
POSITIONS WITH TRUST FIVE YEARS TRUSTEE
-------------------- --------------------------- ------------
<S> <C> <C>
Jackson W. Smart (66). . . Chairman, Executive Committee, 1984
Trustee First Commonwealth, Inc. (a
managed dental care company, since
January 1996); Chairman and Chief
Executive Officer, MSP
Communications, Inc. (a company
engaged in radio broadcasting;
since November 1988); Director,
Federal Express Corporation (since
1976), Evanston Hospital
Corporation (since 1980) and First
Commonwealth, Inc. (since 1988)
and North American Private Equity
Group (a venture capital fund).
Mr. Smart has been a Director of
Goldman Sachs Equity Portfolios,
Inc. since November 1991 and a
Trustee of Goldman Sachs Trust
since December 1987.

William H. Springer (67) Vice Chairman and Chief Financial 1989
Trustee and Administrative Officer
(February 1987 to June 1991) of
Ameritech (a telecommunications
holding company); Director,
Walgreen Co. (a retail drug store
business); and Baker, Fentress &
Co. (a closed-end, management
investment company). Mr. Springer
has been Trustee and Chairman of
The Benchmark Funds since April
1984, a Director of Goldman Sachs
Equity Portfolios, Inc. and a
Trustee of Goldman Sachs Trust
since November 1991.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT DURING THE LAST FIRST BECAME
POSITIONS WITH TRUST FIVE YEARS TRUSTEE
-------------------- --------------------------- ------------
<S> <C> <C>
Richard P. Strubel (57) Managing Director, Tandem 1987
Trustee Partners, Inc. (since 1990);
President and Chief Executive
Officer, Microdot, Inc. (a
diversified manufacturer of
fastening systems and
connectors; January 1984 to
October 1994). Mr. Strubel has
been a Director of Goldman
Sachs Equity Portfolios, Inc.
since November 1991, a
Trustee of The Benchmark Funds
since 1982 and of Goldman Sachs
Trust since 1987.

</TABLE>

- ---------

* Messrs. Ford, McNulty, Shuch and Grip are deemed to be "interested persons" of
the Trust for purposes of the 1940 Act because Messrs. Ford and McNulty are
Managing Directors of Goldman Sachs, Mr. Shuch is a limited partner of Goldman
Sachs and Mr. Grip is a Vice President of Goldman Sachs.

INFORMATION CONCERNING MEETINGS OF TRUSTEES AND COMMITTEES

The number of Units of beneficial interest of each Portfolio by class
beneficially owned by each of the Nominees, directly or indirectly, as of
January 31, 1997, is set forth in Appendix C hereto.

Five meetings of the Trustees were held during the fiscal year ended December
31, 1996. No Trustee attended fewer than seventy-five percent of all meetings of
the Board of Trustees and of any committee of which he was a member held while
he was a Trustee during such year.

The Trust has an Audit Committee comprised of all the Independent Trustees. The
Audit Committee of the Trust held two meetings during the fiscal year ended
December 31, 1996. The functions performed by the Audit Committee are to
recommend annually to the entire Board of Trustees a firm of independent
certified public accountants to audit the books and records of the Trust for the
ensuing year; to monitor that firm's performance; and to review with the firm
the scope and results of each audit and determine the need, if any, to extend
audit procedures.

The Trust has a Nominating Committee comprised of all the Independent Trustees.
The Nominating Committee met on January 28, 1997 and held no

<PAGE>

meetings during the fiscal year ended December 31, 1996. Included among the
functions of the Nominating Committee is the selection and nomination for
appointment and election of candidates to serve as Trustees who are not
"interested persons," as defined in the 1940 Act. The Committee also coordinates
with Trustees who are interested persons in the selection and election of the
Trust's officers. The Nominating Committee does not consider recommendations for
Trustee from Unitholders.

REMUNERATION OF TRUSTEES

Since April 24, 1996, each of the Independent Trustees has been compensated at
the rate of $4,500 for each regular board meeting and $500 for each audit
committee meeting, plus an annual fee of $46,500 ($69,750 for the Chairman) and
reimbursement for each Trustee's out-of-pocket expenses. Because the Trustees
also serve as trustees of other funds within the Goldman Sachs Group of Funds,
the Trust bears only its pro rata share of the foregoing meeting fees and
Trustee compensation.

The following table sets forth certain information about the compensation of
each Trustee for the fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
PENSION OR AGGREGATE
RETIREMENT COMPENSATION
BENEFITS FROM THE
AGGREGATE ACCRUED GOLDMAN SACHS
COMPENSATION AS PART OF GROUP OF
FROM THE PORTFOLIO FUNDS
NAME OF TRUSTEE PORTFOLIOS EXPENSES --------------
- --------------- ------------ -----------
<S> <C> <C> <C>
Paul Nagel*. . . . $18,150 $0 $62,450
Ashok N. Bakhru. . $22,729 $0 $69,299
Marcia Beck**. . . $ 0 $0 $ 0
David B. Ford. . . $ 0 $0 $ 0
Alan A. Shuch. . . $ 0 $0 $ 0
Jackson W. Smart. $18,893 $0 $58,954
William H. Springer $18,893 $0 $58,954
Richard P. Strubel $18,893 $0 $58,954
</TABLE>

- ---------

* Mr. Nagel retired as Chairman and Trustee of the Trust on June 30, 1996.

** Ms. Beck resigned as President and Trustee of the Trust on May 1, 1996.

OFFICERS

<PAGE>

Trustees and until his or her successor is chosen and qualified or until his or
her death, resignation, removal or disqualification. Each of the other officers
holds office at the pleasure of the Trustees.

<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL OCCUPATION(S)
AND AGE DURING PAST FIVE YEARS
-------------- -----------------------
<S> <C>
Douglas Grip (35) . . Vice President, Goldman Sachs (since May 1996);
President President, MFS Retirement Services Inc. of
Massachusetts Financial Services (prior thereto).
Nancy L. Mucker (47) . Vice President, Goldman Sachs; Manager, Shareholder
Vice President Servicing of GSAM (since November 1989).

John W. Mosior (58) . Vice President, Goldman Sachs; Manager, Shareholder
Vice President Servicing of GSAM (since
November 1989).
Pauline Taylor (50) . Vice President, Goldman Sachs; Director, Shareholder
Vice President Servicing of GSAM (since June 1992).
Scott M. Gilman (37) Director, Mutual Fund Administration of GSAM (since
Treasurer April 1994); Assistant Treasurer of Goldman Sachs
Funds Management, Inc. (since March 1993); Vice
President, Goldman Sachs (since March 1990).
John M. Perlowski (32) Vice President, Goldman Sachs (since July 1995);
Assistant Treasurer Director, Investors Bank & Trust Company (November
1993 to July 1995); Audit Manager of Arthur Andersen
LLP (prior thereto).
Michael J. Richman (36) Associate General Counsel of GSAM (since February
Secretary 1994); Assistant General Counsel and Vice President
of Goldman Sachs; Counsel to the Funds Group of GSAM
(since June 1992); Partner of Hale and Dorr
(September 1991 to June 1992).
Howard B. Surloff (31) Assistant General Counsel and Vice President of
Assistant Secretary Goldman Sachs (since November 1993 and May 1994,
respectively); Counsel to the Funds Group, GSAM
(since November 1993); Associate of Shereff,
Friedman, Hoffman & Goodman (prior thereto).

Kaysie Uniacke (35) Vice President and Senior Portfolio Manager, GSAM
Assistant Secretary (since 1988).
Elizabeth Anderson (27) Portfolio Manager, GSAM (since April 1996); Junior
Assistant Secretary Portfolio Manager, GSAM (1995-1996); Funds Trading
Assistant, GSAM (1993-1995); Compliance Analyst,
Prudential Insurance (1991-1993).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL OCCUPATION(S)
AND AGE DURING PAST FIVE YEARS
-------------- -----------------------
<S> <C>
Steven Hartstein (33) Legal Products Analyst, Goldman Sachs (since June
Assistant Secretary 1993); Funds Compliance Officer, Citibank Global
Asset Management (August 1991 to June 1993)
Deborah Farrell (24) Administrative Assistant, Goldman Sachs (since
Assistant Secretary January 1994). Formerly at Cleary, Gottlieb, Steen
and Hamilton.
</TABLE>

Each officer holds comparable positions with certain other investment companies
for which Goldman Sachs or an affiliate acts as the investment adviser or
distributor. As a result of the responsibilities assumed by Goldman Sachs and
the Trust's administrator, custodian and distributor, the Trust itself requires
no employees. The Trust's officers do not receive any compensation from the
Trust for serving as such.

THE TRUSTEES RECOMMEND THAT THE UNITHOLDERS VOTE IN FAVOR OF EACH NOMINEE
LISTED ABOVE.

REQUIRED VOTE

Because your Portfolio is a series of the Trust, your vote will be counted
together with the votes of Unitholders of the other series of the Trust
(including series not included in this Proxy Statement), voting as a single
class in the election of Trustees. Election of each Nominee of the Trust
requires a plurality of votes of the Unitholders of the entire Trust present at
the Meeting.

- -----------------------------------------------------
PROPOSAL 2: RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------

As directed by the Trustees and required by the 1940 Act, the ratification or
rejection of the selection of the independent accountants for the Trust's fiscal
year ending December 31, 1997 is to be voted upon at the Meeting. It is intended
that the persons named in the accompanying Proxy will vote for Arthur Andersen
LLP, unless contrary instructions are given. If the selection of the Trust's
independent accountants is not ratified by the Unitholders at the Meeting, the
Board will reconsider such selection.

The Trust's financial statements for the fiscal year ended December 31, 1996
were audited by Arthur Andersen LLP. In connection with its audit, Arthur
Andersen LLP reviews the Trust's annual reports to Unitholders and its filings
with the Securities and Exchange Commission ("SEC"). In addition to audit
services, Arthur Andersen LLP prepares the Trust's federal and state

<PAGE>

tax returns, and provides consultation and assistance on accounting, internal
control and related matters.

At a meeting held on October 22, 1996, the Trustees unanimously selected Arthur
Andersen LLP as the Trust's independent accountants for its fiscal year ending
December 31, 1997. In addition, at meetings held on April 26, 1996 and October
22, 1996, the Audit Committee met with representatives of Arthur Andersen LLP to
review the services of the independent accountants. The Audit Committee, in
turn, reported on these matters at the meeting of the Trustees held the same
day. A representative of Arthur Andersen LLP is expected to be available at the
Meeting by telephone should any matter arise requiring consultation with the
accountants, and the accountants have been given the opportunity to make a
statement if they so desire.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS VOTE "FOR" THE RATIFICATION
OF ARTHUR ANDERSEN LLP AS THE TRUST'S INDEPENDENT ACCOUNTANTS.

REQUIRED VOTE

Because your Portfolio is a series of the Trust, your vote will be counted
together with the votes of Unitholders of the other series of the Trust, voting
as a single class on the ratification of independent accountants. Ratification
of the independent accountants of the Trust requires the approval of a majority
of the units of the Trust present at the Meeting. If this proposal is not
approved by a Portfolio, the Trustees will consider what further action, if any,
will be taken.

- -----------------------------------------------------
PROPOSAL 3: APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION PURSUANT TO
WHICH EACH PORTFOLIO WILL BE REORGANIZED INTO A SERIES OF A DELAWARE
BUSINESS TRUST
- -----------------------------------------------------

GENERAL

The Trustees have unanimously approved, subject to Unitholder approval, a
proposal for the Trust (which is referred to in this Proposal 3 as the
"Massachusetts Trust") on behalf of each Portfolio to enter into an Agreement
and Plan of Reorganization, Conversion and Termination (the "Plan of
Reorganization") with a newly established Delaware business trust named Goldman
Sachs Trust (the "Delaware Trust"). The Plan of Reorganization will be in the
form attached to this Proxy Statement as Appendix D. The Plan of Reorganization
provides for the conversion (the "Conversion") of each Portfolio from a separate
series of the Massachusetts Trust into a corresponding separate series of the
Delaware Trust. Each series

<PAGE>

of the Massachusetts Trust is referred to in this Proposal as a "current
Portfolio." It is also contemplated that the series of Goldman Sachs Trust
("GST") and Goldman Sachs Equity Portfolios, Inc. ("GSEP"), open-end investment
companies for which Goldman Sachs or one of its affiliates acts as investment
adviser, administrator and distributor, will be reorganized into other separate
series of the Delaware Trust. Consequently, if the Conversions are approved by
shareholders of each of the Massachusetts Trust, GSEP and GST, all funds
currently in the Goldman Sachs Group of Funds will be series of the Delaware
Trust.

The Trustees believe that a Delaware business trust as a form of organization
offers certain advantages for mutual funds over a Massachusetts business trust.
These advantages include granting the Trustees greater power to take certain
actions without Unitholder approval and greater flexibility in methods of voting
and organization. A Delaware business trust also offers the advantages of a
clearer limitation upon the liability of Unitholders and Trustees. The Trustees
also believe that the proposed Declaration of Trust of the Delaware Trust (the
"Delaware Trust Instrument") is clearer and more modern than the Massachusetts
Trust's organizational documents. While these same improvements could be
achieved by amending the Massachusetts Trust's Declaration of Trust (the
"Massachusetts Declaration of Trust"), the Trustees have concluded that, given
the other advantages of a Delaware business trust, it is preferable to enter
into the Plan of Reorganization than to amend the current organizational
documents. For a summary comparison of the Massachusetts Declaration of Trust
and the proposed Delaware Trust Instrument, see "Description of Certain
Provisions of the Delaware Trust Instrument" and "Certain Comparative
Information About Massachusetts Business Trusts and Delaware Business Trusts"
below.

The Conversions will entail organizing the Delaware Trust, which will initially
have 34 series, including nine series corresponding to the current Portfolios.
Each series of the Delaware Trust that corresponds to a current Portfolio is
referred to in this Proposal as a "successor Portfolio." To effect the
Conversion, each current Portfolio will transfer all of its assets and
liabilities to the corresponding successor Portfolio. As consideration for the
transfer of such assets and liabilities (together, "net assets"), each successor
Portfolio will issue shares of beneficial interest ("successor Portfolio units")
to the current Portfolio whose net assets it has acquired and such current
Portfolio will distribute such successor Portfolio units pro rata to the current
Portfolio unitholders in exchange for their units. Upon completion of the
Conversion, each unitholder will be the owner of full and fractional successor
Portfolio units equal in number and aggregate net asset value and of the same
class as his or her units of the corresponding current Portfolio as of the date
of the Conversion. Following the Conversion, each successor Portfolio will

<PAGE>

carry on the business of the corresponding current Portfolio. The successor
Portfolio will have the same investment adviser, other service providers, fee
and expense structure and investment objectives, policies and restrictions as
the corresponding current Portfolio. Any change in the composition of the Board
of Trustees and investment restrictions approved at the Meeting with respect to
a current Portfolio will also apply to the corresponding successor Portfolio.
There may be deemed a momentary technical inconsistency with certain of the
policies and restrictions of a Portfolio (such as restrictions on investments in
any one issuer and investments in other investment companies) during the
Conversion. Approval of the Plans of Reorganization will also constitute
approval to terminate the current Portfolios and the Massachusetts Trust.

REASONS FOR THE PROPOSED CONVERSION

The Massachusetts Trust is organized as a Massachusetts business trust. As
discussed above, the Trustees unanimously recommend conversion of each Portfolio
into a corresponding separate series of the Delaware Trust. The Trustees believe
that organizing the Portfolios as series of the Delaware Trust offers certain
advantages over maintaining them as series of the Massachusetts Trust.

The principal advantage of a Delaware business trust is a clearer limitation of
liability of unitholders and Trustees for the obligations of the trust. The
Delaware Business Trust Act (the "Delaware Act") expressly limits the liability
of Delaware business trust unitholders for the debts or obligations of the
business trust to the same extent as for stockholders of for-profit Delaware
corporations. Similarly, the Delaware Act provides that a series of a Delaware
business trust will not be liable for the debts or obligations of any other
series of the business trust. Under Massachusetts law, there are no comparable
statutory provisions. Although the possibility of incurring these types of
liability may be remote under Massachusetts law, the above provisions of the
Delaware Act provide greater protection against unitholder liability and the
liability of one business trust series for the debts or obligations of another
series. However, it is possible that, under certain circumstances, courts in
some states may not enforce limited liability for Delaware business trust
unitholders. With respect to Trustee liability, Delaware law more clearly
protects a Trustee from liability for the obligations of the business trust than
does Massachusetts law. This may help the Portfolios attract and retain
qualified Trustees in the future.

Second, the Trustees believe that the Delaware business trust form of
organization will enable the successor Portfolios to adopt new methods of
operation and employ new technologies that are expected to reduce costs of
operation when, and if, implemented. For example, Delaware law authorizes

<PAGE>

electronic or telephonic communications between unitholders and a Delaware
business trust. The Trustees hope to take advantage of this provision in the
future to improve unitholder voting procedures and reduce associated costs.

Third, the Conversion offers the potential for future cost savings, although no
immediate cost savings are expected to result from the Conversion. These cost
savings may result from either the differences between the Massachusetts Trust
and the Delaware Trust or from the combination of all of the funds in the
Goldman Sachs Group of Funds into a single legal entity. For example, since the
Trustees of a Delaware business trust can take more actions without unitholder
approval than is currently permitted under the Massachusetts Declaration of
Trust, the Delaware Trust may be required to hold fewer unitholder meetings,
potentially further reducing costs. Although neither a Delaware business trust
nor a Massachusetts business trust is required to hold annual unitholder
meetings, Delaware law affords to the Trustees greater latitude to adapt the
Delaware Trust to future contingencies without the necessity of holding a
special unitholder meeting. Under the Delaware Trust Instrument, the Trustees
have the power to amend the Delaware Trust Instrument; to dissolve the business
trust; to incorporate the Delaware Trust; to merge or consolidate with another
entity; to sell, lease, exchange, transfer, pledge or otherwise dispose of all
or any part of the Delaware Trust's assets; to cause any series to become a
separate trust; and to change the Delaware Trust's domicile--all without
unitholder vote.

Any exercise of authority by the Trustees will be subject to applicable state
and federal law. The flexibility of a Delaware business trust as a form of
organization should help to assure that the Delaware Trust always operates under
the most advantageous structure and is able to take advantage of opportunities
to reduce the expense and frequency of future unitholder meetings.

Finally, Delaware law expressly provides that separate boards of trustees may
be authorized for each series of a Delaware business trust. Whether separate
boards of trustees can be authorized for series of a Massachusetts business
trust is unclear under Massachusetts law. As always, the establishment of any
board of trustees of a registered investment company must comply with applicable
securities laws, including the provision of the 1940 Act regarding the election
of trustees by unitholders.

BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION

<PAGE>

(ii) will not result in dilution of the interests of the unitholders of any
Portfolio. In addition, the Trustees unanimously voted to recommend to the
unitholders of each Portfolio that they approve the Plan of Reorganization and
the transactions contemplated thereunder. In taking such action and making such
recommendation, the Trustees took into consideration the fact that the
Conversion may provide operational efficiencies and additional managerial
flexibility to the Trustees. The Trustees believe that the Conversion will be
beneficial to present unitholders of the Portfolios as well as to potential
investors.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS OF EACH PORTFOLIO APPROVE A
PLAN OF REORGANIZATION PROVIDING FOR THE CONVERSION OF EACH PORTFOLIO FROM A
SERIES OF THE MASSACHUSETTS BUSINESS TRUST TO A SERIES OF A DELAWARE BUSINESS
TRUST.

VOTE REQUIRED TO APPROVE PLAN OF REORGANIZATION

Approval of the Plan of Reorganization as to each Portfolio requires the
affirmative vote of a majority of the units of that Portfolio outstanding and
entitled to vote. For this purposes, a majority of the outstanding units of a
Portfolio means the vote of the lesser of (a) 67% or more of the units of the
Portfolio present at the Meeting, if the holders of more than 50% of the units
of the Portfolio are present or represented by proxy, or (b) more than 50% of
the outstanding units of the Portfolio, (a "1940 Act Majority"). Units of all
classes of a Portfolio will be voted together as one class. The Trustees have
determined that the Conversion will not proceed as described above with respect
to the Massachusetts Trust, unless approved by all of the Portfolios included in
the Massachusetts Trust. In the event that unitholders of one or more of the
Portfolios do not vote in favor of the Conversion, the Trustees will determine
what further action, if any, to take, including the possibility of resubmitting
the proposal at a later time to the Unitholders of the one or more of the
Portfolios which have not voted in favor of the Conversion.

A vote FOR the Conversion will authorize each current Portfolio, as the sole
shareholder of its corresponding successor Portfolio (i) to elect as Trustees of
the Delaware Trust (if Proposal 1 is approved), Messrs. Bakhru, Ford, Grip,
McNulty, Shuch, Smart, Springer and Strubel and Ms. McPherson (see Proposal 1);
(ii) to ratify the selection of Arthur Andersen LLP as the Delaware Trust's
independent accountants (see Proposal 2); (iii) to approve an investment
advisory agreement for each successor Portfolio; (iv) to approve fundamental
investment restrictions for the successor Portfolios, which if Proposal 4 and/or
5 are approved, would be the same as those contained in such proposals and (v)
to approve distribution, authorized dealer service, administration and service
plans, as applicable, for each of the

<PAGE>

Portfolios. If the Conversion is approved but any of the other proposals is not
approved by a Portfolio's unitholders, the Portfolio as sole unitholder of the
successor Portfolio, will vote to approve the existing form of advisory
contracts or fundamental restrictions, as the case may be.

SUMMARY OF THE PLAN OF REORGANIZATION

The following discussion summarizes certain terms of the Plan of
Reorganization. This summary of the Plan of Reorganization is qualified in its
entirety by the provisions of the form of Plan of Reorganization, which is
attached to this Proxy Statement as Appendix D.

In order to accomplish the Conversion, a Delaware business trust will be
formed. On the closing date of the Conversion (the "Closing Date"), each current
Portfolio will transfer all of its assets to its corresponding successor
Portfolio in exchange for the assumption by the successor Portfolio of all the
liabilities of that current Portfolio and the issuance to that current Portfolio
of units of beneficial interest of that successor Portfolio ("successor
Portfolio units") equal to the value (as determined by using the procedures in
the current prospectuses) on the date of the exchange of that current
Portfolio's net assets. Immediately thereafter, each current Portfolio will
liquidate and distribute successor Portfolio units to each current Portfolio
unitholder's account pro rata in proportion to such current Portfolio
unitholder's beneficial interest in his or her current Portfolio ("current
Portfolio units") in exchange for his or her current Portfolio units. In these
exchanges, a successor Portfolio will issue the appropriate number of successor
Portfolio units of each class of units that currently is outstanding, so that
the current Portfolio will distribute, and holders of a particular class of
current Portfolio units will receive, successor Portfolio shares of the same
class. As soon as practicable after this distribution of successor Portfolio
units, each current Portfolio will be wound up and terminated. A confirmation
will be mailed to each current Portfolio unitholder of the number of successor
Portfolio units registered to the unitholder's account. Certificates evidencing
full or fractional successor Portfolio units will not be mailed to unitholders.
UPON COMPLETION OF THE CONVERSION, EACH CURRENT PORTFOLIO UNITHOLDER WILL BE THE
OWNER OF FULL AND FRACTIONAL SUCCESSOR PORTFOLIO UNITS EQUIVALENT IN NUMBER,
CLASS AND AGGREGATE NET ASSET VALUE TO HIS OR HER CURRENT PORTFOLIO UNITS
IMMEDIATELY BEFORE THE CONVERSION.

<PAGE>

instrument signed by a majority of the other Trustees; and (iv) any Trustee may
be removed at any special meeting of the unitholders by a vote of two-thirds of
the outstanding units of the Delaware Trust. If a vacancy occurs for any reason,
the remaining Trustees may fill such vacancy by appointing another Trustee so
long as, immediately after such appointment, at least two-thirds of the Trustees
have been elected by unitholders. If, at any time, less than a majority of the
Trustees holding office has been elected by unitholders, the Trustees then in
office will promptly call a unitholders' meeting for the purpose of electing
Trustees. Otherwise, there normally will be no meeting of unitholders for the
purpose of electing Trustees.

Assuming the Plan of Reorganization is approved, it is currently contemplated
that the Conversion will become effective at the close of business on April 30,
1997 or as soon thereafter as possible.

If, at any time before the Closing Date of the Conversion, the Trustees
determine that it would not be in the best interest of the Massachusetts Trust
or the unitholders to proceed with the Conversion, the Conversion will not go
forward, notwithstanding the approval of the Conversions by the unitholders at
the Meeting. The Massachusetts Trust and the Delaware Trust may at any time
waive compliance with any of the covenants and conditions contained in, or may
amend, the Plan of Reorganization; provided that such waiver or amendment does
not materially adversely affect the interests of current Portfolio Unitholders.

EXPENSES OF THE CONVERSIONS

Each Portfolio will bear its own expenses associated with the transactions
contemplated by the Plan of Reorganization, including expenses associated with
solicitation of proxies. In the event that the Conversion is completed, such
expenses will be assumed by each successor Portfolio. It is currently estimated
that the aggregate expenses of the Conversion will be approximately $350,000,
which will be allocated among the Portfolios, the other series of the
Massachusetts Trust and the series of GST and GSEP.

TAX CONSEQUENCES OF THE CONVERSION

It is a condition to the consummation of the Conversion that the Massachusetts
Trust and the Delaware Trust receive on or before the Closing Date an opinion
from Hale and Dorr LLP, counsel to the Massachusetts Trust and the Delaware
Trust, substantially to effect that, among other things, for federal income tax
purposes, each Conversion will constitute a reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, and that no gain or
loss will be recognized for federal income tax purposes by each current
Portfolio, each successor Portfolio, and the unitholders of each

<PAGE>

current Portfolio upon (1) the transfer of a current Portfolio's assets to the
corresponding successor Portfolio in exchange solely for such successor
Portfolio's units and the assumption by such successor Portfolio of that current
Portfolio's liabilities or (2) the distribution in liquidation by the current
Portfolio of such successor Portfolio units to the current Portfolio unitholders
in exchange for their current Portfolio units. The opinion will further provide,
among other things, that (i) the tax basis of the successor Portfolio units to
be received by each current Portfolio unitholder will be the same as that of his
or her current Portfolio units surrendered in exchange therefor and (ii) each
current Portfolio unitholder's tax holding period for his or her successor
Portfolio units will include such unitholder's tax holding period for the
current Portfolio units surrendered in exchange therefor, provided that such
current Portfolio units were held as capital assets on the date of the exchange.

CONTINUATION OF UNITHOLDER ACCOUNTS AND PLANS

The Delaware Trust's transfer agent will establish accounts for all current
Portfolio unitholders containing the appropriate number and class of successor
Portfolio units to be received by that unitholder under the Plan of
Reorganization. Such accounts will be identical in all material respects to the
accounts currently maintained by the Portfolios for each unitholder. No action
by a unitholder will be necessary in order to continue any automatic exchange
plans, rights of accumulation, letters of intent, automatic investment plans or
retirement plans currently maintained by a current Portfolio unitholder.

TRANSFER AGENT AND CUSTODIAN

Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, currently
serves as transfer agent for the Massachusetts Trust and will serve in the same
capacity for the Delaware Trust.

State Street Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts
02105, currently acts as custodian for the Massachusetts Trust and will serve in
the same capacity for the Delaware Trust.

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP, One International Place, Boston, Massachusetts 02110, are
presently the independent public accountants for the Massachusetts Trust, and
will continue to be the independent public accountants for the Portfolios,
subject to required approvals (see also Proposal 2).

<PAGE>

DISTRIBUTION, AUTHORIZED DEALER SERVICE, SERVICE AND ADMINISTRATION PLANS

The Delaware Trust will adopt service plans with respect to the service units,
administration plans with respect to the administration units and distribution
and authorized dealer service plans with respect to class b units, if any, of
each successor Portfolio. The content of each plan will be identical, in all
material respects, including fees, to the Portfolios' existing plans. Pursuant
to the new plans, the Delaware Trust on behalf of each successor Portfolio will
assume the corresponding current Portfolio's obligations under agreements with
Service Organizations and authorized dealers.

DESCRIPTION OF CERTAIN PROVISIONS OF THE DELAWARE TRUST INSTRUMENT

The following is a summary of certain provisions of the Delaware Trust
Instrument.

SERIES AND CLASSES. As discussed above, the Delaware Trust Instrument permits
the Delaware Trust to issue series of its units which represent interests in
separate portfolios of investments, including the successor Portfolios. The
Delaware Trust is also authorized to issue multiple classes of such series. The
Massachusetts Declaration of Trust permits the issuance of separate series and
classes of units. No series is entitled to share in the assets of any other
series or is liable for the expenses or liabilities of any other series. The
Trustees are authorized to divide each series of units into separate classes,
which represent a pro rata interest in the same series and are entitled to the
same rights, except as provided by the Trustees. The successor Portfolios would
initially have the same classes of units, which would be entitled to the same
rights, as the classes of the current Portfolios. The Trustees of the Delaware
Trust are able to authorize the issuance of additional series or classes of
units without prior unitholder approval.

LIMITATIONS ON DERIVATIVE ACTIONS. In addition to the provisions of Delaware
law, the Delaware Trust Instrument provides that a unitholder of the Delaware
Trust may bring a derivative action on behalf of the Delaware Trust only if the
following conditions are met: (a) unitholders eligible to bring such derivative
action under Delaware law who hold at least 10% of the outstanding units of the
Delaware Trust, or 10% of the outstanding units of the series or class to which
such action relates, must join in the request for the Trustees to commence such
action; and (b) the Trustees must be afforded a reasonable amount of time to
consider such unitholder request and to investigate the basis of such claim. The
Trustees will be entitled to retain counsel or other advisers in considering the
merits of the request and may require an undertaking by the unitholders making
such request to reimburse

<PAGE>

the Delaware Trust for the expense of any such advisers in the event that the
Trustees determine not to bring such action. No similar provisions are
applicable to the Massachusetts Trust.

UNITHOLDER MEETINGS AND VOTING RIGHTS. The Delaware Trust is not required to
hold annual meetings of unitholders and does not intend to hold such meetings.
In the event that a meeting of unitholders is held, each unit of the Delaware
Trust will be entitled, as determined by the Trustees, either to one vote for
each unit or to one vote for each dollar of net asset value represented by such
units on all matters presented to unitholders including the election of Trustees
(this method of voting being referred to as "dollar based voting"). However, to
the extent required by the 1940 Act or otherwise determined by the Trustees,
series and classes of the Delaware Trust will vote separately from each other.
Unitholders of the Delaware Trust do not have cumulative voting rights in the
election of Trustees. Meetings of unitholders of the Delaware Trust, or any
series or class thereof, may be called by the Trustees, certain officers or, in
accordance with a position taken by the staff of the Securities and Exchange
Commission, upon the written request of holders of 10% or more of the units
entitled to vote at such meeting. The unitholders of the Delaware Trust will
have voting rights only with respect to the limited number of matters specified
in the Delaware Trust Instrument and such other matters as the Trustees may
determine or as may be required by law.

The voting provisions of the Delaware Trust Instrument differ from those of the
Massachusetts Declaration of Trust in several important respects. The
Massachusetts Trust is not authorized to use dollar based voting. Instead, each
unitholder has one vote for each share held, regardless of its net asset value
per unit. This can have the effect of providing series with a lower net asset
value per unit, such as money market funds, with a voting interest that is
disproportionate to their economic interest. Also, a greater number of matters
require approval by unitholders of the Trust. The Massachusetts Declaration of
Trust, in addition to the matters requiring unitholder approval of unitholders
of the Delaware Trust, requires unitholder approval of the reorganization or
termination of the Massachusetts Trust or any of its series, certain legal
proceedings and certain amendments to the Declaration of Trust.

<PAGE>

reasonable belief that such person's actions were in the best interest of the
Delaware Trust. The Massachusetts Trust provides a similar degree of
indemnification of Trustees.

The Delaware Trust Instrument provides that, if any unitholder or former
shareholder of any series is held personally liable solely by reason of being or
having been a unitholder and not because of the unitholder's acts or omissions
or for some other reason, the unitholder or former unitholder (or heirs,
executors, administrators, legal representatives or general successors) will be
entitled, out of the assets belonging to the applicable series, to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Delaware Trust, acting on behalf of any affected series, must,
upon request by such unitholder, assume the defense of any claim made against
such unitholder for any act or obligation of the series and satisfy any judgment
thereon from the assets of the series.

TERMINATION. The Delaware Trust Instrument permits the termination of the
Delaware Trust or of any series or class of the Delaware Trust (i) by a majority
of the affected unitholders at a meeting of unitholders of the Delaware Trust,
series or class; or (ii) by a majority of the Trustees without unitholder
approval if the Trustees determine that such action is in the best interest of
the Delaware Trust or its unitholders. The factors and events that the Trustees
may take into account in making such determination include (i) the inability of
the Delaware Trust or any series or class to maintain its assets at an
appropriate size; (ii) changes in laws or regulations governing the
Massachusetts Trust, series or class or affecting assets of the type in which it
invests; or (iii) economic developments or trends having a significant adverse
impact on their business or operations. The Massachusetts Declaration of Trust
permits the Trustees to terminate the Massachusetts Trust only with unitholder
approval.

MERGER, CONSOLIDATION, SALE OF ASSETS, ETC. The Delaware Trust Instrument
authorizes the Trustees without unitholder approval to cause the Delaware Trust,
or any series thereof, to merge or consolidate with any corporation,
association, trust or other organization or sell or exchange all or
substantially all of the property belonging to the Delaware Trust, or any series
thereof. In addition, the Trustees, without unitholder approval, may adopt a
master feeder structure by investing all or a portion of the assets of a series
of the Delaware Trust in the securities of another open-end investment company
(see Proposal 4). The reorganization, including conversion to a master feeder
structure (unless Proposal 4 is adopted), of the Massachusetts Trust would
require unitholder approval.

<PAGE>

AMENDMENTS. The Delaware Trust Instrument permits the Trustees to amend the
Delaware Trust Instrument without a unitholder vote. However, unitholders of the
Delaware Trust have the right to vote on any amendment (i) that would affect the
voting rights of unitholders; (ii) that is required by law to be approved by
unitholders; (iii) that would amend the voting provisions of the Delaware Trust
Instrument; or (iv) that the Trustees determine to submit to unitholders.
Amendments to the Massachusetts Declaration of Trust, with certain limited
exceptions, require approval of unitholders.

SERIES OF TRUSTEES. The Trustees may appoint separate Trustees with respect to
one or more series or classes of the Delaware Trust's units (the "Series
Trustees"). Series Trustees may, but are not required to, serve as Trustees of
the Trust or any other series or class of the Delaware Trust. The Series
Trustees have, to the exclusion of any other Trustee of the Delaware Trust, all
the powers and authorities of Trustees under the Delaware Trust Instrument with
respect to such series or class, but have no power or authority with respect to
any other series or class. The Massachusetts Declaration of Trust does not
permit the election of separate Trustees for a series or class. The Trustees are
not considering the appointment of Series Trustees for the Delaware Trust.

CERTAIN COMPARATIVE INFORMATION ABOUT MASSACHUSETTS BUSINESS TRUSTS AND DELAWARE
BUSINESS TRUSTS

UNITHOLDER LIABILITY

Generally, Delaware business trust unitholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware Act
entitles a unitholder of a Delaware business trust to the same limitation of
liability as is available to unitholders of private for-profit corporations.
However, no similar statutory or other authority limiting business trust
unitholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a unitholder is subject to the jurisdiction of
courts in such other states, those courts may not apply Delaware law and may
subject the Delaware Trust unitholders to liability. To offset this risk, the
Delaware Trust Instrument (i) contains an express disclaimer of unitholder
liability for acts or obligations of the Delaware Trust and provides for the
giving of notice of such disclaimer in each agreement, obligation and instrument
entered into or executed by the Delaware Trust or its Trustees and (ii) provides
for indemnification out of the property of the Delaware Trust of any unitholder
held personally liable for the obligations of the Delaware Trust. Thus, the risk
of a Delaware business trust unitholder incurring

<PAGE>

financial loss beyond his or her investment because of unitholder liability is
limited to circumstances in which all of the following factors are present: (1)
a court refuses to apply Delaware law; (2) the liability arises under tort law
or, if not, no contractual limitation of liability was in effect; and (3) the
Delaware Trust itself is unable to meet its obligations. In the light of
Delaware law, the nature of the Delaware Trust's business and the nature of its
assets, the risk of personal liability to a Delaware Trust unitholder is
extremely remote.

Unlike Delaware, in Massachusetts there is no statute relating to business
trusts that entitles unitholders of a Massachusetts business trust to the same
limitation of liability as is extended to unitholders of a Massachusetts
corporation. Unitholders of a Massachusetts business trust may, therefore, under
certain circumstances, be held personally liable under Massachusetts law for the
obligations of the Massachusetts business trust. The Massachusetts Declaration
of Trust, like the Delaware Trust Instrument, contains an express disclaimer of
unitholder liability and provides for the giving of that notice of such
disclaimer in each agreement entered into or executed by the Massachusetts
business trust or its Trustees. The Massachusetts Declaration of Trust also
provides for indemnification out of the trust property. Thus, GSAM believes the
risk of unitholder liability is remote for unitholders of the Massachusetts
Trust (although not as remote as it would be for unitholders of the Delaware
Trust.)

LIABILITY OF TRUSTEES

The Delaware Trust Instrument provides that the Trustees will not be liable to
any person other than the Delaware Trust or a unitholder and that a Trustee will
not be liable for any act as a Trustee. However, nothing in the Delaware Trust
Instrument protects a Trustee against any liability to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. The Massachusetts Declaration of Trust provides that its Trustees
will not be liable for errors of judgment or mistakes of fact or law, subject to
substantially the same provisions concerning bad faith, gross negligence and
reckless disregard as those described above.

<PAGE>

- -----------------------------------------------------
PROPOSAL 4: APPROVAL OF AN INVESTMENT POLICY PERMITTING EACH PORTFOLIO TO INVEST
ALL ITS ASSETS IN A SINGLE OPEN-END MUTUAL FUND; AND APPROVAL OF A
CORRESPONDING AMENDMENT TO THE MASSACHUSETTS DECLARATION OF TRUST
- -----------------------------------------------------

GENERAL

The Trustees have approved, subject to unitholder approval, the adoption of a
new fundamental investment policy that would permit each Portfolio to pool its
assets with other funds, in a single portfolio (the "Pooled Portfolio"). The
Delaware Trust Instrument permits investment of all of a Portfolio's assets in a
Pooled Portfolio, but if the proposal to adopt a new fundamental investment
policy is not adopted, the Portfolios would not be able to take advantage of
such flexibility. If the proposal is approved, each Portfolio will be authorized
to invest substantially all of its assets in a corresponding Pooled Portfolio
that would invest in the same type of securities (and have substantially the
same objective, restrictions and policies) as the Portfolio. The primary purpose
of pooling would be to achieve operational efficiencies. Approval of the
fundamental investment policy would also constitute approval of an amendment to
the Massachusetts Declaration of Trust that would permit investment in a Pooled
Portfolio without further unitholder approval.

BACKGROUND. Several mutual funds have developed so-called master-feeder
structures under which they invest all their assets in a single pooled
investment. For example, funds offering different types of unitholder services
might pool their investments. This structure allows several funds with different
features, but the same investment objective, restrictions and policies, to
combine their investments instead of managing them separately. A Portfolio would
combine its investments with those of other funds by investing all of its assets
in the same Pooled Portfolio, which would be organized and registered as an
open-end management investment company (a mutual fund).

PURPOSE OF THE PROPOSAL. GSAM regularly reviews various options for structuring
mutual funds to take maximum advantage of potential efficiencies. The Portfolios
currently take advantage of the ability to issue multiple classes of Units,
which offer many of the same advantages as investing in a Pooled Portfolio.
While neither the Trustees nor GSAM have determined that any Portfolio should
invest in a Pooled Portfolio, the Trustees believe that it could be in the best
interests of the Portfolios to adopt such a

<PAGE>

structure to allow for investing by one or more of the Portfolios in a Pooled
Portfolio at a future date without the cost of again obtaining unitholder
approval.

At present, some of the Portfolios' fundamental investment restrictions and
policies prevent a Portfolio from investing all of its assets in another
investment company, and require a vote of unitholders of the Portfolio before
such a master-feeder structure could be adopted. Similarly, the Massachusetts
Declaration of Trust requires unitholder approval of any transaction involving
the sale of substantially all of the assets of a Portfolio to a Pooled
Portfolio. To avoid the costs associated with a subsequent unitholder meeting,
the Trustees recommend that unitholders of each Portfolio vote to permit the
assets of such Portfolio to be invested in a Pooled Portfolio, without an
additional vote of Portfolio unitholders, if the Trustees determine the adoption
of a master-feeder structure to be in the best interest of the Portfolio and its
unitholders. If unitholders approve this Proposal, any fundamental and non-
fundamental restrictions and policies of the Portfolios that currently prohibit
investment in units of a single investment company would be appropriately
modified to permit investment in Pooled Portfolios. These policies include, for
example, the Portfolio's restrictions on investments in: the securities of any
one issuer; the securities of any issuer if more than 10% of such issuer's
voting securities are held by a Portfolio; companies for purposes of control;
and issuers in any one industry; as well as the restriction concerning acting as
an underwriter.

A Portfolio's methods of operation and Unitholder services would not be
materially affected by its investment in Pooled Portfolios, except that the
assets of the Portfolio would be managed as part of a larger pool. If a
Portfolio invested all of its assets in a Pooled Portfolio, it is currently
anticipated that the Portfolio would hold only a single investment security and
the Pooled Portfolio would directly invest in individual investment securities.
The investment advisory and administrative services provided to a Portfolio by
GSAM or its affiliates would continue to be provided at the same or lower
aggregate cost, but the investment advisory services would be provided to and
paid for by the Pooled Portfolio rather than the Portfolio. The Pooled Portfolio
would be managed by GSAM or an affiliate. The Trustees would retain the right to
withdraw the Portfolio's investment from the respective Pooled Portfolio at any
time. The Portfolio would then resume investing directly in securities as it
does currently.

AT PRESENT, THE TRUSTEES ARE NOT CONSIDERING ANY PROPOSAL TO ADOPT A
MASTER-FEEDER STRUCTURE. The Trustees will authorize investing a Portfolio's
assets in a Pooled Portfolio only if they determine that pooling is in the best
interests of a Portfolio and its unitholders and if they determine that the

<PAGE>

investment will not have material adverse tax or other consequences to the
Portfolio or the Unitholders. In determining whether a Portfolio should invest
in a Pooled Portfolio, the Trustees will consider, among other things, the
opportunity to reduce costs and to achieve operational efficiencies. The
Trustees will not authorize investment in a Pooled Portfolio if doing so would
increase costs to unitholders; unless, of course, they perceive a corresponding
increase in benefits to unitholders. There is no assurance that cost reductions
or increased efficiencies will be achieved.

GSAM or its affiliates may benefit from the use of a Pooled Portfolio if
overall assets are increased, since GSAM's fees under the existing advisory
agreements are based on assets under management. Also, GSAM's or its affiliates'
expenses of providing investment and other services to a Portfolio may be
reduced. If a Portfolio's investment in a Pooled Portfolio were to reduce the
expenses of GSAM or its affiliates (as the case may be) materially, the Trustees
would consider whether a reduction of the management fee paid to GSAM or its
affiliates (as the case may be) would be appropriate.

PROPOSED FUNDAMENTAL POLICY

In order to permit one or more of the Portfolios to invest in a Pooled
Portfolio at a future date, the Trustees recommend that the unitholders of each
Portfolio adopt the following fundamental policy:

Each Portfolio may, notwithstanding any other fundamental investment
restriction or policy, invest some or all of its assets in a single open-end
investment company or series thereof with substantially the same investment
objectives, restrictions and policies as the Portfolio.

PROPOSED AMENDMENT TO THE MASSACHUSETTS DECLARATION OF TRUST

In order to permit the Trust to invest in a Pooled Portfolio at a future date,
the Trustees recommend that the unitholders adopt the following amendment to the
Massachusetts Declaration of Trust:

Notwithstanding anything else herein, the Trustees may, without unitholder
approval unless such approval is required by applicable law, invest all or a
portion of the Trust Property of any Series, or dispose of all or a portion of
the Trust Property of any Series, and invest the proceeds of such disposition
in interests issued by one or more other investment companies registered under
the 1940 Act. Any such other investment company may (but need not) be a trust
(formed under the laws of any state or jurisdiction) (or subtrust thereof)
which is classified as a partnership for federal income tax purposes.
Notwithstanding anything else herein, the

<PAGE>

Trustees may, without Unitholder approval unless such approval is required by
applicable law, cause a Series that is organized in the master/feeder fund
structure to withdraw or redeem its Trust Property from the master fund and
cause such series to invest its Trust Property directly in securities and other
financial instruments or in another master fund.

BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION

At a meeting held on January 28, 1997, after considering the matters discussed
above and other matters deemed to be relevant, the Trustees, including the
Independent Trustees, unanimously adopted, and voted to recommend to the
unitholders that they adopt, (a) the proposed new fundamental investment policy
and (b) the amendment to the Massachusetts Declaration of Trust that would
permit any Portfolio, subject to future review by the Trustees, as described
above, to invest all of its assets in an open-end investment company with
substantially the same investment objectives, restrictions and policies as the
Portfolio. In taking such action and making such recommendations, the Trustees
took into consideration that the proposed modifications may provide operational
efficiencies and facilitate the introduction of new Goldman Sachs mutual funds
and thereby increase the investment options available to unitholders. The
Trustees believe that the ability to use a master-feeder structure may be
beneficial to present unitholders of the Portfolios as well as potential
investors.

Except as described in this Proxy Statement, approval of this Proposal 4 will
not change any of the Trustees, officers, investment programs and services or
operations that are described in the Portfolios' current Prospectuses and this
Proxy Statement.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE UNITHOLDERS OF EACH PORTFOLIO ADOPT
A NEW FUNDAMENTAL INVESTMENT POLICY TO PERMIT THE PORTFOLIO TO INVEST ALL OF ITS
ASSETS IN A SINGLE OPEN-END INVESTMENT COMPANY AND APPROVE A CORRESPONDING
AMENDMENT TO THE MASSACHUSETTS DECLARATION OF TRUST.

REQUIRED VOTE

Approval of the proposal to adopt the new fundamental investment policy
requires the vote of a 1940 Act Majority of the Units (described in Proposal 3)
of each Portfolio voting separately. Approval of the amendment to the
Massachusetts Declaration of Trust requires the vote of a majority of the units
of the Trust voting together as a single class. If the proposal is not approved

<PAGE>

by one or more of the Portfolios, the Trustees will consider what further
action, if any, will be taken.

- -----------------------------------------------------
PROPOSAL 5 (A)-(I): PROPOSED AMENDMENT AND RESTATEMENT OF THE PORTFOLIOS'
INVESTMENT RESTRICTIONS
- -----------------------------------------------------

GENERAL

The Trustees recommend to unitholders of each Portfolio that they approve
proposals to amend and restate each Portfolio's investment restrictions. These
investment restrictions are fundamental policies that may be changed by a
Portfolio only with the approval of a 1940 Act Majority of the outstanding units
of that Portfolio. The restated investment restrictions, assuming that each of
the proposed amendments is adopted, are set forth in Appendix E to this Proxy
Statement.

One reason for the proposals is to adopt insofar as possible a uniform
statement of investment restrictions for the mutual funds advised by Goldman
Sachs or an affiliate thereof, as well as for funds that may be created in the
future. Such uniformity would facilitate comparison of different Portfolios'
investment restrictions as well as administration of the restrictions. The
proposals would also result in a clearer and simpler statement of these
restrictions.

Another reason for restating the Portfolios' investment restrictions is to
delete policies adopted in response to state "Blue Sky" laws and regulations
restricting certain types of investment company practices and investments. The
states no longer have the power to enforce these restrictions, and the
elimination of the restrictions may expand the range of investment opportunities
and techniques available in connection with the management of the Portfolios.

The final reason for restating the Portfolios' investment restrictions is to
recharacterize certain previously adopted fundamental policies as non-
fundamental. Certain of the investment restrictions are being liberalized to the
extent permitted under the 1940 Act. This recharacterization and liberalization
will grant the Trustees the ability to change these non-fundamental policies as
needed, without seeking approval from unitholders.

The following is a summary of the proposed changes to each of the investment
restrictions. The restrictions are summarized individually below

<PAGE>

and will be voted upon separately. In order to fully achieve the benefits set
forth above, the Trustees recommend that Unitholders approve each of the
proposals.

- -----------------------------------------------------
PROPOSAL 5(A): INVESTMENT POLICY ON ISSUER DIVERSIFICATION
- -----------------------------------------------------

To be diversified under the 1940 Act, a Portfolio must not, with respect to 75%
of its total assets, invest more than 5% of its total assets in the securities
of any one issuer or acquire more than 10% of the outstanding voting securities
of any one issuer. These restrictions apply only at the time of investment. A
Portfolio may invest up to 25% of its total assets without regard to these
restrictions. In addition, these restrictions do not apply to holdings of or
investments in cash, cash items, U.S. Government securities or securities of
other investment companies. The proposal simplifies the contents of the current
restrictions without changing their substance. As proposed, the restriction
would require diversification only to the extent required under the 1940 Act.
Additional diversification requirements are required for the Portfolios to be
treated as money market funds and as regulated investment companies for federal
tax purposes. These requirements are not required to be reflected in the
proposed investment restrictions and will not be affected by the proposal. The
Trustees propose that each Portfolio adopt the following investment restriction
in lieu of its current fundamental policy:

The Portfolio may not make any investment inconsistent with the Portfolio's
classification as a diversified company under the Investment Company Act of
1940, as amended (the "Act"). This restriction does not, however, apply to any
Portfolio classified as a non-diversified company under the Act.

- -----------------------------------------------------
PROPOSAL 5(B): INVESTMENT POLICIES ON BORROWING, MARGIN PURCHASES AND PLEDGING
ASSETS
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without unitholder approval, on borrowing. The 1940 Act prohibits an
open-end investment company from issuing any senior security (including debt),
except that an open-end investment company may borrow from banks in an amount
not exceeding 33 1/3% of its total assets. The Trustees recommend that the
Portfolios adopt a borrowing policy that permits borrowing to the maximum extent
permitted by the 1940 Act. Adoption of a more liberal policy does not mean,
however, that the Portfolios intend to borrow and incur the extra costs and
risks of leveraging the Portfolios.

<PAGE>

Each Portfolio also has a fundamental investment policy limiting the purchase
of securities on margin. Margin purchases involve the purchase of securities
with money borrowed from a broker. "Margin" is the cash or eligible securities
that the borrower places with its broker as collateral for this loan. Each
Portfolio's current fundamental policy prohibits the Portfolio from purchasing
securities on margin, except for initial and variation margin payments made in
connection with the purchase and sale of futures contracts and options on
futures contracts. Mutual funds are also permitted to obtain such short-term
credits as may be necessary for the clearance of transactions. With these
exceptions, mutual funds are prohibited from entering into most types of margin
purchases.

As restated, the Portfolios' restriction on borrowing and margin purchases
would provide as follows:

The Portfolio may not borrow money, except that (a) the Portfolio may borrow
from banks (as defined in the Act) or through reverse repurchase agreements in
amounts up to 33 1/3% of its total assets (including the amount borrowed), (b)
the Portfolio may, to the extent permitted by applicable law, borrow up to an
additional 5% of its total assets for temporary purposes, (c) the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities, and (d) the Portfolio may purchase
securities on margin to the extent permitted by applicable law.

The Portfolios' fundamental policy on pledging their assets was a requirement
imposed by state securities laws that no longer applies to the Portfolios.
Consequently, it is proposed that such restriction be eliminated.

- -----------------------------------------------------
PROPOSAL 5(C): INVESTMENT POLICY ON UNDERWRITING
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without unitholder approval, on underwriting securities issued by
others. The proposed restatement of the Portfolios' policies, which does not
represent a material change in investment policy, would prohibit the Portfolios
from underwriting the securities of others (which is not part of the normal
activities of a mutual fund). As restated, each Portfolio's investment
restriction would provide as follows:

The Portfolio may not underwrite securities issued by others, except to the
extent that the sale of portfolio securities by the Portfolio may be deemed to
be an underwriting.

<PAGE>

- -----------------------------------------------------
PROPOSAL 5(D): INVESTMENT POLICY ON REAL ESTATE AND OIL AND GAS
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without unitholder approval, on acquiring interests in real estate.
The existing restriction on investment in oil and gas interests was imposed by
state law and is no longer required. While no Portfolio intends to invest in
such interests, it is proposed that the restriction on oil and gas interests be
eliminated. The proposed real estate policy does not represent a material change
in investment policy for any Portfolio, except that it permits each Portfolio to
invest in securities issued by real estate investment trusts. Despite this
change to the restriction, no Portfolio currently intends to invest in such
securities. As restated, each Portfolio's investment restriction would provide
as follows:

The Portfolio may not purchase, hold or deal in real estate, although the
Portfolio may purchase and sell securities that are secured by real estate or
interests therein, securities of real estate investment trusts and
mortgage-related securities and may hold and sell real estate acquired by the
Portfolio as a result of the ownership of securities.

- -----------------------------------------------------
PROPOSAL 5(E): INVESTMENT POLICY ON COMMODITIES
- -----------------------------------------------------

The 1940 Act requires that the Portfolios have a fundamental investment policy
regarding investments in commodities. As money market funds, the Portfolios do
not invest in commodities or commodity contracts. The Portfolios do not intend
in the future to invest in physical commodities but wish to have the flexibility
to invest in financial futures to the extent that such instruments are
consistent with the Portfolios' treatment as money market funds. Any financial
futures contract or related option is considered to be a commodity contract.
Other types of financial instruments such as forward commitments and swaps might
also be deemed to be commodity contracts. The proposal would also permit the
Portfolios' investment restrictions with respect to commodities to be consistent
with those of the other funds in the Goldman Sachs Group of Funds.

As amended, each Portfolio's investment restriction with respect to commodities
would be as follows:

The Portfolio may not invest in commodities or commodity contracts, except
that the Portfolio may invest in currency and financial instruments and
contracts that are commodities or commodity contracts.

<PAGE>

- -----------------------------------------------------
PROPOSAL 5(F): INVESTMENT POLICY ON SENIOR SECURITIES
- -----------------------------------------------------

The 1940 Act restricts the ability of an open-end investment company to issue
"senior securities" as defined in the 1940 Act and requires that an investment
company adopt a fundamental policy with respect to the issuance of such
securities. The proposed amendment would clarify that the Portfolios are
permitted to issue senior securities to the extent permitted by applicable law.
As discussed above, under the 1940 Act an open-end fund is not permitted to
issue senior securities except for borrowing from banks. In addition to
permitting the borrowing contemplated above, the amendment clarifies that the
Portfolios do not consider certain investment practices to be senior securities
if such practices are conducted in a manner consistent with current law and the
interpretive positions of the SEC. As amended, the investment restriction of
each Portfolio would provide as follows:

The Portfolio may not issue senior securities to the extent such issuance
would violate applicable law.

- -----------------------------------------------------
PROPOSAL 5(G): INVESTMENT POLICY CONCERNING SHORT SALES OF SECURITIES
- -----------------------------------------------------

Each Portfolio has a fundamental investment restriction prohibiting the
Portfolio from making short sales or maintaining a short position. Under the
1940 Act, restrictions on short sales are not required to be fundamental.
Therefore, the Trustees are recommending that unitholders vote to eliminate the
Portfolios' prohibition on short sales and the maintenance of short positions as
a fundamental restriction.

In a short sale, an investor sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. If this proposal is
approved by unitholders, the Trustees intend to adopt a non- fundamental
investment restriction that is substantively identical to the Portfolios'
current fundamental restriction on short sales and the maintenance of short
positions. By making the restriction non-fundamental, the Trustees will be able
to change the restriction in the future (if they determine that a change is
appropriate) without obtaining unitholder approval. This will give the
Portfolios greater flexibility to adapt to market changes, including changes in
the investment products available to the Portfolios.

<PAGE>

- -----------------------------------------------------
PROPOSAL 5(H): INVESTMENT POLICY ON OPTIONS
- -----------------------------------------------------

To comply with state securities laws in effect at the time of its organization,
each Portfolio adopted a fundamental restriction limiting the Portfolio's
ability to invest in or write put and call options. This restriction is no
longer required, is obsolete and is inconsistent with the investment
restrictions of all of the other funds in the Goldman Sachs Group of Funds.
While the elimination of this investment restriction will not have any immediate
impact upon the Portfolios' investments, it will permit the Trustees in the
future to allow the Portfolios to engage in such activities without unitholder
approval in the event that options become an appropriate investment for the
Portfolios.

- -----------------------------------------------------
PROPOSAL 5(I): INVESTMENTS TO EXERCISE CONTROL
- -----------------------------------------------------

The Portfolios have a fundamental policy not to invest in companies for the
purpose of exercising control or management. Although the Portfolios have no
intention of investing for such purpose, this restriction is not required by the
1940 Act and is no longer required by state law. Consequently, the Trustees
recommend that it be eliminated.

TRUSTEES' RECOMMENDATION

The Trustees believe that each proposed amendment to the Portfolios' investment
restrictions will more clearly reflect current regulatory practice, will provide
a more complete range of investment opportunities and will clarify and simplify
the restrictions.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS OF EACH PORTFOLIO VOTE
"FOR" THE ADOPTION OF EACH OF THE PROPOSED AMENDED INVESTMENT RESTRICTIONS.

REQUIRED VOTE

Approval of each proposed amendment to a Portfolio's fundamental investment
restrictions requires the affirmative vote of a 1940 Act Majority of that
Portfolio's outstanding units. If a proposed amendment is not approved with
respect to a Portfolio, the current investment restrictions will continue in
effect unchanged for that Portfolio.

<PAGE>

- -----------------------------------------------------
PROPOSAL 6: PROPOSED AMENDMENT OF FUNDAMENTAL POLICY OF TAX-EXEMPT PORTFOLIOS
- -----------------------------------------------------

As a matter of fundamental policy, Tax-Exempt Diversified, Tax-Exempt
California and Tax-Exempt New York Portfolios (the "Tax-Exempt Portfolios") are
required to derive at least 80% of their respective annual gross incomes from
Municipal Instruments except in extraordinary circumstances. Municipal
Instruments are defined as obligations issued by or on behalf of States,
territories and possessions of the United States and its political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of counsel, if any, excluded from gross
income for federal income tax purposes. The Trustees recommend that the
unitholders of the Tax-Exempt Portfolios approve the amendment of this
fundamental policy to provide that the Tax-Exempt Portfolios will invest at
least 80% of their respective net assets in Municipal Instruments.

GSAM believes that this revision will simplify calculations of the Tax- Exempt
Portfolios' holdings and would enable GSAM to compute a Portfolio's tax-exempt
holdings on a daily basis. A policy based upon a percentage of the Tax-Exempt
Portfolios' assets will be easier to monitor and control than a policy based
upon a percentage of income since the Portfolios' Income can vary due to a
variety of factors. UNITHOLDERS SHOULD NOTE THAT THE PROPOSED AMENDMENT TO THE
TAX-EXEMPT PORTFOLIOS' FUNDAMENTAL POLICY DOES NOT INVOLVE ANY CHANGE IN THE
INVESTMENT OBJECTIVE OF THE TAX-EXEMPT PORTFOLIOS OR IN THEIR STATUS AS
TAX-EXEMPT MONEY MARKET PORTFOLIOS.

The Board of Trustees of the Trust recommends to unitholders that they approve
the proposal to amend the Tax-Exempt Portfolios' fundamental policy. The
Tax-Exempt Portfolios' revised fundamental policy would provide as follows:

As a matter of fundamental policy, at least 80% of each of the Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolio's net
assets will ordinarily be invested in Municipal Instruments. Each Tax-Exempt
Portfolio may temporarily invest in taxable money market instruments when GSAM
believes that the market conditions dictate a defensive posture.

<PAGE>

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT UNITHOLDERS OF THE TAX-EXEMPT
DIVERSIFIED, TAX-EXEMPT CALIFORNIA AND TAX-EXEMPT NEW YORK PORTFOLIOS VOTE "FOR"
THE APPROVAL OF THIS PROPOSED AMENDMENT.

REQUIRED VOTE

Approval of the proposed amendment to each Tax-Exempt Portfolio's fundamental
policy requires the affirmative vote of a 1940 Act Majority of each Tax-Exempt
Portfolio's outstanding units. If the proposed amendment is not approved with
respect to a Portfolio, the current fundamental policy will continue in effect
unchanged for that Portfolio.

ADDITIONAL INFORMATION

OTHER BUSINESS

As of the date of this Proxy Statement, the Trustees are not aware of any
matters to be presented for action at the Meeting other than those described
above. Should other business properly be brought before the Meeting, it is
intended that the accompanying Proxy will be voted thereon in accordance with
the judgment of the persons named as proxies.

PROXIES AND VOTING AT THE MEETING

The enclosed Proxy is revocable by a unitholder at any time before it is
exercised by written notice to the Trust (addressed to the Secretary at the
Trust's principal executive offices), by executing a superseding proxy or by
attending the Meeting and voting in person. All valid proxies received prior to
the Meeting (including any adjournment thereof) will be voted at the Meeting.
Matters on which a choice has been provided will be voted as indicated on the
proxy and, if no instruction is given, the persons named as proxies will vote
the units represented thereby in favor of the matters set forth in each proposal
and will use their best judgment in connection with the transaction of such
other business as may properly come before the Meeting.

In the event that at the time any session of the Meeting is called to order a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of any
of Proposals 1 through 6 have not been received, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies with respect to such proposal. Any such

<PAGE>

adjournment will require the affirmative vote of a majority of the units of the
Trust (or the affected Portfolio) present in person or by proxy at the session
of the Meeting to be adjourned. The persons named as proxies will vote those
proxies which they are entitled to vote in favor of any such proposal in favor
of such an adjournment, and will vote those proxies required to be voted against
any such proposal against any such adjournment. A unitholder vote may be taken
on one or more of the proposals in this Proxy Statement prior to such
adjournment if sufficient votes for their approval have been received and it is
otherwise appropriate.

A majority of the units entitled to vote shall be a quorum for the transaction
of business at the Meeting, but any lesser number shall be sufficient for
adjournments. Abstentions will be treated as units that are present and entitled
to vote with respect to each proposal, but will not be counted as a vote in
favor of a proposal. Accordingly, an abstention from voting on a proposal has
the same effect as a vote against the proposal. If a broker or nominee holding
Units in "street name" indicates on the proxy that it does not have
discretionary authority to vote as to a particular proposal, those units will
not be considered as present and entitled to vote with respect to the Proposal.
Accordingly, a "broker non-vote" has no effect on the voting in determining
whether a proposal has been adopted pursuant to subsection (i) of the 1940 Act
Majority definition. In addition, a "broker non-vote" has no effect on the
voting in determining whether a Nominee has been elected a Trustee pursuant to
Proposal 1. However, in determining whether a proposal has been adopted pursuant
to subsection (ii) of the 1940 Act Majority definition, a "broker non-vote" will
have the same effect as a vote against the Proposal because units represented by
a "broker non-vote" are considered outstanding units.

MANNER AND COST OF PROXY SOLICITATION

Each Portfolio will bear its allocable portion of proxy solicitation expenses,
including the cost of preparing, assembling and mailing materials used in
connection with the solicitation of proxies. The Portfolios will reimburse
brokers, nominees and similar record holders for their reasonable expenses
incurred in connection with forwarding proxy materials to beneficial holders. In
addition to the solicitation by use of the mails, certain officers and employees
of Goldman Sachs, none of whom will receive compensation for their services
other than their regular salaries, may solicit the return of proxies personally
or by telephone or fax.

In addition to the solicitation of proxies by mail or in person, the Trust may
also arrange to have votes recorded by telephone by officers and employees

<PAGE>

of the Trust, personnel of GSAM and the transfer agent or agents hired by the
transfer agent for such purpose. The telephone voting procedure is designed to
authenticate a unitholder's identity, to allow a shareholder to authorize the
voting of shares in accordance with the Unitholder's instructions and to confirm
that the voting instructions have been properly recorded. A unitholder will be
called on a recorded line at the telephone number shown in the transfer agent's
records for the account and could be asked the Unitholder's Social Security
number or other identifying information. The Unitholder will then be given an
opportunity to authorize proxies to vote his shares at the Meeting in accordance
with the Unitholder's instructions. To ensure that the Unitholder's instructions
have been recorded correctly, the unitholder will also receive a confirmation of
the voting instructions in the mail. A special number will be available in case
the voting information contained in the confirmation is incorrect. If the
unitholder decides after voting by telephone to attend the Meeting, the
unitholder can revoke the proxy at that time and vote the units at the Meeting.
If you have any questions regarding the enclosed proxy or need assistance in
voting your units, please contact our proxy solicitor, D.F. King & Co. at (800)
628-8509.

UNITHOLDER PROPOSALS

Neither the Massachusetts Trust nor the Delaware Trust is required, nor does
either intend, to hold annual meetings of unitholders each year. Instead,
meetings will be held only when and if required. Any unitholders desiring to
present a proposal for consideration at the next meeting for unitholders of
their respective Portfolio must submit the proposal in writing, so that it is
received by the appropriate Portfolio within a reasonable time before any
meeting.

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.

February 13, 1997

<PAGE>

APPENDIX A

As of January 31, 1997, each Portfolio had the following number of units
outstanding:

<TABLE>
<CAPTION>
PORTFOLIO OUTSTANDING UNITS
--------- -----------------
<S> <C>
ILA PRIME OBLIGATIONs. . . . . . . 1,296,482,964.57
ILA GoVERNMENT . . . . . . . . . . 812,364,944.23
ILA TrEASURY OBLIGATIONS . . . . . 761,473,818.84
ILA MoNEY MARKET . . . . . . . . . 1,084,475,557.95
ILA FeDERAL . . . . . . . . . . . 3,476,521,273.04
ILA TrEASURY INSTRUMENTS . . . . . 1,011,199,431.23
ILA TaX-EXEMPT DIVERSIFIED . . . . 1,574,959,459.09
ILA TaX-EXEMPT NEW YORK . . . . . 119,257,524.16
ILA TaX-EXEMPT CALIFORNIA . . . . 442,961,922.70
</TABLE>

A-1
<PAGE>

APPENDIX B

As of January 31, 1997, the following persons or entities owned beneficially or
of record more than 5% of the outstanding units, as applicable, of each
Portfolio:

<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
OF OUTSTANDING SHARES
---------------------------
AMOUNT PERCENTAGE
SHAREHOLDER NAMES AND ADDRESSES OF SHARES OF SHARES
------------------------------- -------------- -------------
<S> <C> <C>
ILA PRIME OBLIGATIONS PORTFOLIO
Harris Trust & Savings Bank . . . . 106,988,990.33 8.44
200 W. Monroe St. Fl. 12
Chicago, IL 60606
VF Corporation . . . . . . . . . . 105,250,000.00 8.30
1047 North Park Road
Wyomissing, PA 19610
ILA GOVERNMENT PORTFOLIO
American Exploration Co. . . . . . 77,454,000.00 10.39
1331 Lamar St, Ste 900
Houston, TX 77010-3027
Comerica Bank . . . . . . . . . . . 56,307,623.44 7.55
Calhoun & Co.
P.O. Box 55-519
Detroit, MI 48255
Morgan Stanley - Harris Assoc. . . 45,577,373.40 6.12
c/o Harris Associates, L.P.
2 No. LaSalle St. - Ste 500
Chicago, IL 60602
State Street Bank & Trust Co. . . . 54,269,476.46 7.28
P.O. Box 1992
Boston, MA 02105
United Missouri Bank of Kansas City 47,133,523.94 6.32
P.O. Box 419692
Kansas City, MO 64141
Wells Fargo Bank . . . . . . . . . 50,890,372.94 6.83
26610 Agoura Rd
Calabasas, CA 91302
</TABLE>

B-1
<PAGE>

<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
OF OUTSTANDING SHARES
---------------------------
AMOUNT PERCENTAGE
SHAREHOLDER NAMES AND ADDRESSES OF SHARES OF SHARES
------------------------------- -------------- -------------
<S> <C> <C>
ILA TREASURY INSTRUMENTS PORTFOLIO
Bank of New York . . . . . . . . . 249,933,491.25 24.72
Hare & Co.
1 Wall St.
New York, NY 10286
Harris Trust & Savings Bank . . . . 81,794,719.00 8.09
200 W. Monroe St.
Chicago, IL 60606
Morgan Stanley - Harris Assoc. . . 59,612,766.56 5.90
c/o Harris Associates, L.P.
2 No. LaSalle St.Ste. 500
Chicago, IL 60602
William Harris Investors, Inc. . . 56,736,964.60 5.61
2 N. LaSalle St., Ste 400
Chicago, IL 60602
ILA - TREASURY OBLIGATIONS PORTFOLIO
Bank of New York . . . . . . . . . 50,598,583.35 6.65
Hare & Co.
1 Wall St.
New York, NY 10286
Bankers Trust Company . . . . . . . 54,994,106.30 7.22
Hubb & Co.
P.O. Box 897
Des Moines, IA 50304
First National Bank of Omaha . . . 97,135,076.91 12.76
P.O. Box 3128
Omaha, NE 68103
Firstar Bank Madison, N.A. . . . . 67,662,547.03 8.89
Firmad & Co.
P.O. Box 7900
Madison, WI 53707
National City Bank Kentucky . . . . 47,115,943.48 6.19
4100 W. 150th ST.
3rd Floor N Annex
Cleveland, OH 44315
</TABLE>

B-2
<PAGE>

<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
OF OUTSTANDING SHARES
---------------------------
AMOUNT PERCENTAGE
SHAREHOLDER NAMES AND ADDRESSES OF SHARES OF SHARES
------------------------------- -------------- -------------
<S> <C> <C>
ILA MONEY MARKET PORTFOLIO
Bank of New York . . . . . . . . . . 216,946,872.37 20.01
48 Wall St.
New York, NY 10286
ILA FEDERAL PORTFOLIO
Bank of New York . . . . . . . . . . 278,341,965.37 8.01
48 Wall St.
New York, NY 10286
The Baupost Group, Inc. . . . . . . 215,907,837.96 6.21
P.O. Box 389125
Cambridge, MA 02238
ILA - TAX-EXEMPT NEW YORK PORTFOLIO
Bank of New York . . . . . . . . . . 32,254,895.39 27.05
48 Wall St.
New York, NY 10286
Shames Trust Accounts . . . . . . . 11,203,832.88 9.40
Beatrice Shames, Tstee
57 Holly Pl.
Briarcliff, NY 10510
Stephen Apkon & Lisa Hertz Apkon . . 12,435,783.16 10.43
33 Ashland Ave.
Pleasantville, NY 10570
ILA- TAX-EXEMPT CALIFORNIA PORTFOLIO
Chong-Moon Lee & Reiko-Takahashi Lee 27,911,129.61 6.30
26541 Taaffe Rd.
Los Altos, CA 94022
</TABLE>

B-3
<PAGE>

APPENDIX C

The information as to beneficial ownership set forth in the chart below is
based on statements furnished to the Portfolios by the Trustees. Each has all
voting and investment powers with respect to the units indicated. All of the
information is as of January 31, 1997.

None of the Trustees beneficially owned individually, nor did the Trustees
beneficially own as a group, in excess of one percent of the outstanding units
of any of the Portfolios as of January 31, 1997 and has been rounded to the
nearest whole unit.

<TABLE>
<CAPTION>
PORTFOLIO BAKHRU SMART SPRINGER STRUBEL FORD GRIP MCNULTY MCPHERSON SHUCH
- --------- -------- ------ -------- ------- ----- ---- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prime
Obligations
Portfolio . 2,354,006
Treasury
Obligations
Portfolio .
Government
Portfolio .
Money Market
Portfolio .
Treasury
Instruments
Portfolio .
Federal
Portfolio .
Tax-Exempt
Diversified
Portfolio .
California
Portfolio .
New York
Portfolio .
</TABLE>

C-1
<PAGE>

APPENDIX D

AGREEMENT AND PLAN OF REORGANIZATION, CONVERSION AND TERMINATION

THIS AGREEMENT AND PLAN OF REORGANIZATION, CONVERSION AND TERMINATION is made
as of the 28th day of January, 1997, by and between Goldman Sachs Money Market
Trust, a Massachusetts business trust (the "Registrant"), on behalf of each of
its series (each a "Fund" and collectively the "Funds"), and Goldman Sachs Trust
(the "Trust"), a Delaware business trust.

This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1) of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and is intended to effect the reorganization (a
"Reorganization") of each Fund as a new series of the Trust (each a "Successor
Fund" and collectively the "Successor Funds"). Each Reorganization will include
the transfer of all of the assets of a Fund to a corresponding Successor Fund of
the Trust solely in exchange for (1) the assumption by the Successor Fund of all
liabilities of the Fund and (2) the issuance by the Trust to the Fund of units
of beneficial interest of the Successor Fund. The aggregate number of shares of
each class of the Successor Fund (the "Successor Fund Shares") issued to the
Fund will be equal to the number of shares of beneficial interest ("Shares") of
the corresponding Fund class outstanding immediately before the Reorganization.
These transactions will be immediately followed by a pro rata distribution by
each Fund of the Successor Fund Shares it receives in the exchange described
above to the holders of corresponding Fund Shares in exchange for those Fund
Shares, in liquidation of each Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.

In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows.

1. TRANSFER OF ASSETS OF THE FUNDS IN EXCHANGE FOR ASSUMPTION OF LIABILITIES AND
ISSUANCE OF SUCCESSOR FUND SHARES

1.1 Subject to the terms and conditions set forth herein and on the basis of
the representations and warranties contained herein, each Fund agrees to
transfer all of its assets (as described in paragraph 1.2) and to assign and
transfer all of its liabilities to a corresponding Successor Fund organized
solely for the purpose of acquiring all of the assets and assuming all of the
liabilities of that Fund. The Trust, on behalf of each Successor Fund, agrees

D-1
<PAGE>

that in exchange for all of the assets of the corresponding Fund (1) the
Successor Fund shall assume all of the liabilities of such Fund, whether
contingent or otherwise, then existing and (2) the Trust shall issue Successor
Fund Shares to the Fund. The number of Successor Fund Shares of each class to be
issued by the Trust on behalf of each Successor Fund will be identical to the
number of Shares of the corresponding class and Fund outstanding on the Closing
Date provided for in paragraph 3.1. Such transactions shall take place at the
Closing provided for in paragraph 3.1.

1.2 The assets of each Fund to be acquired by the corresponding Successor Fund
shall include, without limitation, all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), any claims or rights
of action or rights to register shares under applicable securities laws, any
books or records of the Fund and other property owned by the Fund and any
deferred or prepaid expenses shown as assets on the books of the Fund on the
Closing Date provided for in paragraph 3.1.

1.3 Immediately after delivery to each Fund of corresponding Successor Fund
Shares, a duly authorized officer of Registrant shall cause each Fund, as the
sole shareholder of the corresponding Successor Fund, to (i) elect the Trustees
of the Trust; (ii) ratify the selection of the Trust's independent accountants;
(iii) approve an investment advisory agreement and, if applicable, a subadvisory
agreement for the Successor Fund in substantially the same form as the
investment advisory agreement and, if applicable, a subadvisory agreement in
effect with respect to the Fund immediately prior to the closing of the
reorganization, including any changes thereto approved by the shareholders of
the Fund at the meeting of Shareholders to be held on April 1, 1997; (iv)
approve distribution and authorized dealer service plans for the Class A Shares,
if any, of the Successor Fund in substantially the same form as the distribution
and authorized dealer service plans currently in effect with respect to the
Class A Shares of the Fund, (v) approve distribution and authorized dealer
service plans for the Class B Shares, if any, of the Successor Fund in
substantially the same form as the distribution and authorized dealer service
plans currently in effect with respect to the Class B Shares of the Fund, (vi)
approve a preferred administration plan for the preferred administration shares,
if any, of the Successor Fund in substantially the same form as the preferred
administration plan currently in effect with respect to the Preferred
Administration Shares of the Fund, (vii) approve an administration plan with
respect to the Administration Shares, if any, of the Successor Fund in
substantially the same form as the administration plan currently in effect for
Administration Shares of the Fund; (viii) approve a service plan with respect to
the Service Shares, if any, of the Successor Fund in substantially the same form
as the service plan currently in effect for

D-2
<PAGE>

Service Shares of the Fund; and (ix) adopt investment objectives, investment
policies and investment restrictions which are substantially identical to those
of the Fund immediately prior to the closing of the reorganization, including
any changes thereto approved by the shareholders of the Fund at the meeting of
shareholders to be held on April 1, 1997.

1.4 As provided in paragraph 3.4, on the Closing Date each Fund will distribute
in liquidation the Successor Fund Shares of each class to each shareholder of
record, determined as of the close of business on the Closing Date, of the
corresponding class of the Fund pro rata in proportion to such shareholder's
beneficial interest in that class and in exchange for that shareholder's Shares.
Such distribution will be accomplished by the transfer of the Successor Fund
Shares then credited to the account of each Fund on the share records of the
Trust to open accounts on those records in the names of such Fund Shareholders
and representing the respective pro rata number of each class of the Successor
Fund Shares received from the Successor Funds which is due to such Fund
Shareholders. Fractional Successor Fund Shares shall be rounded to the third
place after the decimal point.

1.5 Ownership of the Successor Fund Shares by each Successor Fund Shareholder
shall be recorded separately on the books of Goldman, Sachs & Co. ("Goldman
Sachs"), as the Trust's transfer agent.

1.6 Any transfer taxes payable upon the issuance of Successor Fund Shares in a
name other than the registered holder of the Fund Shares on the books of any
Fund shall be paid by the person to whom such Successor Fund Shares are to be
distributed as a condition of such transfer. Any deferred sales charge payable
with respect to any class of a Fund's shares will not be required to be paid as
a result of the exchange described in paragraph 1.4 but will continue to be
payable on the same basis with respect to the Shares of the Successor Fund.

1.7 Fund Shareholders holding certificates representing their ownership of any
class of Shares of a Fund shall surrender such certificates or deliver an
affidavit with respect to lost certificates, in such form and accompanied by
such surety bonds as Registrant may require (collectively, an "Affidavit"), to
Registrant prior to the Closing Date. Any Fund Share certificate which remains
outstanding on the Closing Date shall be deemed to be cancelled, shall no longer
evidence ownership of any Shares of the Fund and shall instead evidence
ownership of corresponding Successor Fund Shares. Unless and until any such
certificate shall be so surrendered or an Affidavit relating thereto shall be
delivered, dividends and other distributions payable by the applicable Successor
Fund subsequent to the Closing Date with respect to

D-3
<PAGE>

Successor Fund Shares shall be paid to the holder of such certificate(s), but
such shareholders may not redeem or transfer Successor Fund Shares received in
the Reorganization. The Trust will not issue share certificates in the
Reorganization.

1.8 The legal existence of each Fund and the Registrant shall be terminated as
promptly as reasonably practicable after the Closing Date.

2. VALUATION

2.1 The value of each Fund's net assets to be acquired by the Trust on behalf
of the Successor Funds hereunder shall be the net asset value computed as of the
valuation time provided in the Fund's prospectus(es) on the Closing Date using
the valuation procedures set forth in the Fund's current prospectus(es) and
statement of additional information.

2.2 The value of full and fractional Successor Fund Shares of each class to be
issued in exchange for each Fund's net assets shall be equal to the value of the
net assets of the corresponding class of such Fund on the Closing Date, and the
number of such Successor Fund Shares of each class shall equal the number of
full and fractional Fund Shares outstanding on the Closing Date.

2.3 All computations of value shall be made by State Street Bank and Trust
Company (the "Custodian"), as custodian for the Funds and the Trust.

3. CLOSING AND CLOSING DATE

3.1 The transfer of each Fund's assets in exchange for the assumption by the
corresponding Successor Fund of the Fund's liabilities and the issuance of
Successor Fund Shares to the Fund, as described above, together with related
acts necessary to consummate such acts (the "Closing"), shall occur at the
offices of Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606 on
April 30, 1997 ("Closing Date"), or at such other place or date on or prior to
December 31, 1997 as the parties may agree in writing. All acts taking place at
the Closing shall be deemed to take place simultaneously as of the last daily
determination of the net asset value of the Funds or at such other time and or
place as the parties may agree.

3.2 In the event that on the Closing Date (a) the New York Stock Exchange is
closed to trading or trading thereon is restricted or (b) trading or reporting
of trading on said Exchange or in any market in which portfolio securities of a
Fund are traded is disrupted so that accurate appraisal of the value of the
total net assets of that Fund is impracticable, the Closing with

D-4
<PAGE>

respect to that Fund shall be postponed until the first business day upon which
trading shall have been fully resumed and reporting shall have been restored.

3.3 Registrant shall deliver at the Closing a certificate or separate
certificates of an authorized officer stating that it has notified the
Custodian, as custodian for the Funds and the Trust, of the Funds'
reorganizations as series of the Trust.

3.4 Goldman Sachs, as transfer agent for the Funds, shall deliver at the
Closing a certificate evidencing the conversion on its books and records of each
Fund Shareholder account to a corresponding Successor Fund Shareholder account.
The Trust shall issue and deliver to each Fund a confirmation evidencing the
crediting of Successor Fund Shares to the appropriate shareholder accounts on
the Closing Date or provide other evidence satisfactory to the Fund that such
Successor Fund Shares have been credited to the Fund's account on the books of
the Trust. At the Closing each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts or other documents as
such other party or its counsel may reasonably request.

3.5 Portfolio securities that are not held in book-entry form in the name of
the Custodian as record holder for a Fund shall be presented by such Fund to the
Custodian for examination no later than five business days preceding the Closing
Date. Portfolio securities which are not held in book-entry form shall be
delivered by the Fund to the Custodian for the account of its respective
Successor Fund on the Closing Date, duly endorsed in proper form for transfer,
in such condition as to constitute good delivery thereof in accordance with the
custom of brokers, and shall be accompanied by all necessary federal and state
stock transfer stamps or a check for the appropriate purchase price thereof.
Portfolio securities held of record by the Custodian in book-entry form on
behalf of each Fund shall be delivered to the Successor Fund by the Custodian by
recording the transfer of beneficial ownership thereof on its records. The cash
delivered shall be in the form of currency or by the Custodian crediting the
Successor Fund's account maintained with the Custodian with immediately
available funds.

4. REPRESENTATIONS AND WARRANTIES

4.1 Registrant represents and warrants, on behalf of itself and each Fund, as
follows:

4.1.A. Registrant is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and

D-5
<PAGE>

has the power to own all of its properties and assets and, subject to approval
by the shareholders of the Funds, to perform its obligations under this
Agreement. Registrant is not required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to qualify would
not subject it or the Funds to any material liability or disability. Registrant
has all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on the business of Registrant and the Funds
as now being conducted. The Funds are duly established and designated series of
Registrant;

4.1.B. Registrant is a registered investment company classified as a management
company of the open-end type, and its registration with the Securities and
Exchange Commission (the "Commission") as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), is in full force
and effect;

4.1.C. Registrant is not, and the execution, delivery and performance of this
Agreement will not result, in violation of any provision of its Declaration of
Trust or Bylaws, or any agreement, indenture, instrument, contract, lease or
other undertaking to which Registrant is a party or by which Registrant is
bound;

4.1.D. At the date hereof and at the Closing Date all federal, state and other
tax returns and reports, including information returns and payee statements, of
the Funds required by law to have been filed or furnished by such dates shall
have been filed or furnished and all federal, state and other taxes, interest
and penalties shall have been paid so far as due or provision shall have been
made for the payment thereof and no such return is currently under audit and no
assessment has been asserted with respect to any of such returns or reports;

4.1.E. Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code, has qualified as such for each taxable year
since its inception, and will qualify as such as of the Closing Date;

4.1.F. All issued and outstanding shares of Registrant and each Fund are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable by Registrant. Registrant does not have outstanding any
options, warrants or other rights to subscribe for or purchase any shares of
beneficial interest of Registrant or any Fund, nor is there outstanding any
security convertible into any of such shares;

D-6
<PAGE>

4.1.G. The information to be furnished by Registrant for use in applications
for orders, registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby shall
be accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto;

4.1.H. At the Closing Date, Registrant, on behalf of the Funds, will have good
and marketable title to the assets to be transferred to the Trust, on behalf of
the Successor Funds, pursuant to paragraph 1.1, and will have full right, power
and authority to sell, assign, transfer and deliver such assets hereunder. Upon
delivery and in payment for such assets, the Trust on behalf of the Successor
Funds will acquire good and marketable title thereto subject to no restrictions
on the full transfer thereof, including such restrictions as might arise under
the Securities Act of 1933, as amended (the "1933 Act");

4.1.I. The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary action on the part of
Registrant. This Agreement constitutes a valid and binding obligation of
Registrant and each Fund enforceable in accordance with its terms, subject to
the approval of each Fund's shareholders;

4.1.J. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Registrant, on behalf
of the Funds, of the transactions contemplated herein, except such as shall have
been obtained prior to the Closing Date.

4.2 The Trust represents and warrants, on behalf of itself and each Successor
Fund, as follows:

4.2.A. The Trust is a business trust duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power to own
all of its properties and assets and to perform its obligations under this
Agreement. The Trust is not required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to qualify would
not subject it or the Successor Funds to any material liability or disability.
The Trust has all necessary federal, state and local authorizations to own all
of its properties and assets and to carry on the business of the Trust and the
Successor Funds as now being conducted. The Successor Funds are duly established
and designated series of the Trust;

4.2.B. The Trust is not, and the execution, delivery and performance of this
Agreement will not result, in violation of any provision of the

D-7
<PAGE>

Declaration of Trust or Bylaws of the Trust or any agreement, indenture,
instrument, contract, lease or other undertaking to which the Trust is a party
or by which the Trust is bound;

4.2.C. The Trust will cause each Successor Fund to qualify as a regulated
investment company under Subsection M of the Code for the taxable year in which
the Closing occurs and to continue to qualify as such for each taxable year;

4.2.D. Prior to the Closing Date, there shall be no issued and outstanding
Successor Fund Shares or any other securities of the Successor Funds. Successor
Fund Shares issued in connection with the transactions contemplated herein will
be duly and validly issued and outstanding and fully paid and non-assessable by
the Trust;

4.2.E. The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action on the part of the Trust, and this Agreement
constitutes a valid and binding obligation of the Trust and each Successor Fund
enforceable against the Trust and each Successor Fund in accordance with its
terms;

4.2.F. The information to be furnished by the Trust with respect to the
Successor Funds for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete and shall
comply in all material respects with federal securities and other laws and
regulations applicable thereto;

4.2.G. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Trust or the
Successor Funds of the transactions contemplated herein, except such as shall
have been obtained prior to the Closing Date.

5. COVENANTS OF REGISTRANT AND THE TRUST

5.1 Registrant covenants that the Successor Fund Shares are not being acquired
for the purpose of making any distribution thereof, other than in accordance
with the terms of this Agreement.

5.2 Registrant covenants that it will assist the Trust in obtaining such
information as the Trust reasonably requests concerning the beneficial ownership
of Fund Shares.

D-8
<PAGE>

5.3 Registrant will, on behalf of the Funds, from time to time as and when
requested by the Trust on behalf of the Successor Funds, execute and deliver, or
cause to be executed and delivered, all such assignments and other instruments,
and will take or cause to be taken such further action, as the Trust may deem
necessary or desirable in order to vest in, and confirm to, the Trust on behalf
of the Successor Funds, title to, and possession of, all the assets of each Fund
to be sold, assigned, transferred and delivered to its corresponding Successor
Fund hereunder and otherwise to carry out the intent and purpose of this
Agreement.

5.4 The Trust will, on behalf of the Successor Funds, from time to time as and
when requested by Registrant on behalf of the Funds, execute and deliver or
cause to be executed and delivered all such assignments and other instruments,
and will take or cause to be taken such further action, as Registrant may deem
necessary or desirable in order to vest in, and confirm to, Registrant, on
behalf of the Funds, title to, and possession of, the Successor Fund Shares
issued, sold, assigned, transferred and delivered hereunder and otherwise to
carry out the intent and purpose of this Agreement.

5.5 The Trust, on behalf of the Successor Funds, shall use all reasonable
efforts to obtain the approvals and authorizations required by the 1933 Act, the
1940 Act and such state securities laws as it may deem appropriate in order to
operate after the Closing Date;

5.6 Subject to the provisions of this Agreement, the Trust and Registrant each
will take, or cause to be taken, all action and will do or cause to be done all
things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.

5.7 As promptly as practicable, but in any event within 60 days after the
closing date, Registrant shall furnish to the Trust, in such form as is
reasonably satisfactory to the Trust, a statement of the earnings and profits of
each Funds for federal income tax purposes, and of any capital loss carryovers
and other items that will be carried over to each Successor Fund as a result of
Section 381 of the Code. Such statement shall be certified by the President or
Treasurer of Registrant.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT AND THE FUNDS

D-9
<PAGE>

by the Trust and the Successor Funds hereunder on or before the Closing Date
and, in addition thereto, to the following further conditions:

6.1 All representations and warranties of the Trust and each Successor Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with the same force and
effect as if made on and as of the Closing Date; and

6.2 The Trust shall have delivered on the Closing Date to Registrant a
certificate executed in the Trust's name by its President or Vice President, in
form and substance satisfactory to Registrant, dated as of the Closing Date, to
the effect that the representations and warranties of the Trust and each
Successor Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as Registrant shall reasonably
request.

Each of the foregoing conditions precedent may be waived by Registrant.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE SUCCESSOR FUNDS

The obligations of the Trust and each Successor Fund to consummate the
transactions provided for herein shall be subject to the performance by
Registrant, on behalf of the Funds, of all the obligations to be performed by
Registrant and the Funds hereunder on or before the Closing Date and, in
addition thereto, to the following further conditions:

7.1 All representations and warranties of Registrant and each Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date;

7.2 Registrant shall have delivered to the Trust on the Closing Date a
statement of the assets and liabilities of each Fund, prepared in accordance
with generally accepted accounting principles consistently applied, together
with a certificate of the Treasurer or Assistant Treasurer of Registrant as to
each Fund's portfolio securities and each Fund's federal income tax basis and
holding period for each such portfolio security as of the Closing Date; and

7.3 Registrant shall have delivered to the Trust on the Closing Date a
certificate executed in Registrant's name by its President or Vice President, in

D-10
<PAGE>

form and substance satisfactory to the Trust, dated as of the Closing Date, to
the effect that the representations and warranties of Registrant and each Fund
made in this Agreement are true and correct at and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Trust shall reasonably request.

Each of the foregoing conditions precedent may be waived by the Trust.

8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT, THE FUNDS, THE
TRUST AND THE SUCCESSOR FUNDS

The obligations of Registrant, the Funds, the Trust and the Successor Funds are
each subject to the further conditions that on or before the Closing Date:

8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of each Fund's Shareholders in accordance with
applicable law;

8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with the
transactions contemplated hereby;

8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state securities authorities) deemed necessary by the Trust or
Registrant to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Trust, the Funds, Registrant or the
Successor Funds, provided that either party hereto may waive any of such
conditions for itself or its respective series;

8.4 Registrant and the Trust shall have received on or before the Closing Date
an opinion of Hale and Dorr LLP satisfactory to Registrant and the Trust,
substantially to the effect that for federal income tax purposes:

8.4.A. The acquisition of all of the assets of each Fund by its corresponding
Successor Fund solely in exchange for the issuance of Successor Fund Shares to
the Fund and the assumption by the Successor Fund of all of the liabilities of
the Fund, followed by the distribution in liquidation by the Fund of such
Successor Fund Shares to the Fund Shareholders in exchange for their

D-11
<PAGE>

Fund Shares and the termination of the Fund, will constitute a reorganization
within the meaning of Section 368(a)(1) of the Code, and the Fund and the
Successor Fund will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code;

8.4.B. No gain or loss will be recognized by any Fund upon (i) the transfer of
all of its assets to its corresponding Successor Fund solely in exchange for the
issuance of Successor Fund Shares to the Fund and the assumption by the
Successor Fund of the Fund's liabilities and (ii) the distribution by the Fund
of such Successor Fund Shares to the Fund Shareholders;

8.4.C. No gain or loss will be recognized by any Successor Fund upon its
receipt of all of the corresponding Fund's assets solely in exchange for the
issuance of the Successor Fund Shares to the Fund and the assumption by the
Successor Fund of all of the liabilities of the Fund;

8.4.D. The tax basis of the assets acquired by a Successor Fund from its
corresponding Fund will be, in each instance, the same as the tax basis of those
assets in the Fund's hands immediately prior to the transfer;

8.4.E. The tax holding period of the assets of each Fund in the hands of its
corresponding Successor Fund will, in each instance, include the Fund's tax
holding period for those assets;

8.4.F. Each Fund's Shareholders will not recognize gain or loss upon the
exchange of all of their shares of the Fund solely for Successor Fund Shares as
part of the transaction;

8.4.G. The tax basis of the Successor Fund Shares received by Fund Shareholders
in the transaction will be, for each shareholder, the same as the tax basis of
the Fund Shares surrendered in exchange therefor; and

8.4.H. The tax holding period of the Successor Fund Shares received by Fund
Shareholders will include, for each shareholder, the tax holding period for the
Fund Shares surrendered in exchange therefor, provided that such Fund Shares
were held as capital assets on the date of the exchange.

Registrant and the Trust each agree to make and provide representations with
respect to the Funds and the Successor Funds, respectively, which are reasonably
necessary to enable Hale and Dorr LLP to deliver an opinion substantially as set
forth in this paragraph 8.4, which opinion may address such

D-12
<PAGE>

other federal income tax consequences, if any, that Hale and Dorr LLP believes
to be material to the Reorganization.

Each of the foregoing conditions precedent to the obligations of a party,
except for the receipt of the opinion of Hale and Dorr LLP set forth in
paragraph 8.4, may be waived by that party.

9. BROKERAGE FEES AND EXPENSES

9.1 The Trust, on behalf of the Successor Funds, and Registrant, on behalf of
the Funds, each represent and warrant to the other than there are no broker's or
finder's fees payable in connection with the transactions contemplated hereby.

9.2 Each Fund and each Successor Fund shall be liable for any expenses incurred
by them in connection with entering into and carrying out the provisions of this
Agreement whether or not the transactions contemplated hereby are consummated.

10. ENTIRE AGREEMENT

The Trust, on behalf of the Successor Funds, and Registrant, on behalf of the
Funds, agree that neither party has made any representation, warranty or
covenant not set forth herein and that this Agreement constitutes the entire
agreement between the parties. The representations, warranties and covenants
contained herein or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder.

11. TERMINATION

11.1 This Agreement may be terminated by the mutual agreement of the Trust and
Registrant. In addition, either the Trust or Registrant may at its option
terminate this Agreement at or prior to the Closing Date because:

11.1.A. There exists a material breach by the other party of any
representations, warranties or agreements contained herein to be performed at or
prior to the Closing Date; or

11.1.B. A condition expressed precedent to the obligations of the terminating
party has not been met and it reasonably appears that it will not or cannot be
met.

D-13
<PAGE>

11.1.C. A majority of the members of the Board of Trustees of the Registrant
determine that it is not in the best interest of the Funds or their shareholders
to proceed with the transactions contemplated by this Agreement.

11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust or Registrant, or their respective Trustees or
officers, to the other party or its Trustees or officers.

12. AMENDMENT

This Agreement may be amended, modified or supplemented in such manner as may
be mutually agreed upon in writing by the parties; provided, however, that
following the approval of this Agreement by any Fund's Shareholders, no such
amendment may have the effect of changing the provisions for determining the
number of Successor Fund Shares to be paid to that Fund's Shareholders under
this Agreement to the detriment of such Fund Shareholders without their further
approval.

13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT

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

13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.

13.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

13.4 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation other than the parties hereto and their respective
successors and assigns any rights or remedies under or by reason of this
Agreement.

13.5 All persons dealing with the Trust, the Funds, Registrant or the Successor
Funds must look solely to the property of the Trust, the Funds,

D-14
<PAGE>

Registrant or the Successor Funds, respectively, for the enforcement of any
claims against the Trust, the Funds, Registrant or the Successor Funds, as
neither the Trustees, officers, agents nor shareholders of the Trust or
Registrant assume any personal liability for obligations entered into on behalf
of the Trust or Registrant, respectively. No series of Registrant or the Trust
shall be responsible for any obligations assumed by or on behalf of any other
series of Registrant or the Trust under this Agreement.

14. NOTICES

Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to Registrant or the Trust, each at 4900
Sears Tower, Chicago, Illinois 60606, Attention: Secretary.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officer.

GOLDMAN SACHS TRUST, on behalf of the following series:

By: _____________________

Its: ____________________

GOLDMAN SACHS MONEY MARKET TRUST on behalf of the following series:

By: _____________________

Its: ____________________

D-15
<PAGE>

APPENDIX E

GOLDMAN SACHS MONEY MARKET TRUST

AMENDED AND RESTATED INVESTMENT RESTRICTIONS

The Trust may not on behalf of any Portfolio:

(1) make any investment inconsistent with the Portfolio's classification as a
diversified company under the Investment Company Act of 1940, as amended (the
"Act"). This restriction does not, however, apply to any Portfolio classified
as a non-diversified company under the Act.

(2) purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no limitation
with respect to, and each Portfolio reserves freedom of action, when otherwise
consistent with its investment policies, to concentrate its investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, obligations (other than commercial paper) issued or
guaranteed by U.S. banks and U.S. branches of U.S. or foreign banks and
repurchase agreements and securities loans collateralized by such U.S.
Government obligations or such bank obligations. For the purposes of this
restriction, state and municipal governments and their agencies, authorities
and instrumentalities are not deemed to be industries; telephone companies are
considered to be a separate industry from water, gas or electric utilities;
personal credit finance companies and business credit finance companies are
deemed to be separate industries; and wholly owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents.
Notwithstanding the foregoing, the ILA Money Market Portfolio will invest more
than 25% of the value of its total assets in bank obligations (whether foreign
or domestic) except that if adverse economic conditions prevail in the banking
industry the ILA Money Market Portfolio may, for defensive purposes,
temporarily invest less than 25% of the value of its total assets in bank
obligations.

(3) borrow money, except (a) that the Portfolio may borrow from banks (as
defined in the Act) or through reverse repurchase agreements in amounts up to
33 1/3% of its total assets (including the amount borrowed), (b) the Portfolio
may, to the extent permitted by applicable law, borrow up to an additional 5%
of its total assets for temporary purposes, (c) the Portfolio may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and (d) the Portfolio may purchase securities on
margin to the extent permitted by applicable law.

E-1
<PAGE>

(4) make loans, except (a) through the purchase of debt obligations in
accordance with each Portfolio investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.

(5) underwrite securities issued by others, except to the extent that the sale
of portfolio securities by the Portfolio may be deemed to be an underwriting.

(6) purchase, hold or deal in real estate, although the Portfolio may purchase
and sell securities that are secured by real estate or interests therein,
securities of real estate investment trusts and mortgage-related securities
and may hold and sell real estate acquired by the Portfolio as a result of the
ownership of securities.

(7) invest in commodities or commodity contracts, except that the Portfolio may
invest in currency and financial instruments and contracts that are
commodities or commodity contracts.

(8) issue senior securities to the extent such issuance would violate applicable
law.

E-2
<PAGE>

GOLDMAN SACHS MONEY MARKET TRUST

FINANCIAL SQUARE FUNDS

February 13, 1997

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders of
Goldman Sachs Money Market Trust, to be held on Tuesday, April 1, 1997 at 9:00
a.m., Chicago time, at the offices of Goldman, Sachs & Co. located at 4900 Sears
Tower, Chicago, Illinois 60606.

At this important meeting, you will be asked to consider and take action on the
election of Trustees and the ratification of the selection of independent public
accountants, Arthur Andersen LLP. In addition, you will be asked to approve
changes to the investment restrictions and policies of the Funds, the
reorganization of the Funds and the management agreements. We believe that the
proposals are important and will allow us to improve the Funds' operations,
simplify disclosure and, hopefully, attract more investment dollars. You should
carefully read the Proxy Statement that discusses each proposal in detail. The
formal Notice of Special Meeting of Shareholders and the Proxy Statement setting
forth in detail the matters to come before the meeting are attached hereto, and
a form of Proxy is enclosed for your use.

First, the conversion of the Funds into series of a newly formed Delaware
business trust will be proposed. As discussed in the accompanying Proxy
Statement, such conversions will not result in any change to the assets, fees or
policies of the Funds; however, the Trustees believe that organizing the Funds
as series of a Delaware business trust offers certain advantages. These
advantages include a clear limitation on shareholder liability, greater
flexibility for the Trustees to take actions without the cost and delay of a
shareholders meeting and the potential for cost savings.

Second, you will be asked to authorize each Fund to invest substantially all of
its assets in another open-end investment company with the same investment
objectives and policies as the Fund. Again, the Trustees believe that the
ability to adopt such a structure, commonly referred to as a master-feeder
structure, offers the potential for greater efficiencies and flexibility. While
the Funds have no immediate plan to adopt such a structure, considering this
proposal now will eliminate the need for and expense of further shareholder
action.

Third, the Trustees propose amending and restating the Funds' investment
restrictions. Certain of the Funds' investment restrictions were required by
<PAGE>

state laws that no longer are applicable to the Funds or are more restrictive
than required by federal law. The amended restrictions will expand the range of
investment opportunities and techniques available to the Funds without changing
the Funds' investment objectives or risk profile. Also, by adopting a uniform
set of restrictions, compliance and disclosure relating to these restrictions
can be simplified.

Finally, amended and restated management agreements for the Funds will be
proposed. These revised agreements combine the advisory and administration
services into a single contract but WILL NOT RESULT IN ANY INCREASE IN FEES OR
REDUCTION IN SERVICES TO THE FUNDS. Consolidating these services in one
agreement will simplify the fee structure of the Funds. Such simplification
assists shareholders and potential investors in understanding and comparing the
expenses of the Funds.

THE TRUSTEES HAVE UNANIMOUSLY RECOMMENDED THAT SHAREHOLDERS APPROVE EACH ITEM
TO BE ACTED UPON AT THE MEETING.

The continuing interest of the shareholders in the affairs of the Funds is
gratefully acknowledged. Whether or not you expect to attend the meeting, it is
important that your shares be represented. Therefore, I urge you to vote FOR the
nominees for election as Trustees and each of the other proposals contained in
the Proxy Statement.

Sincerely,

/s/ Douglas C. Grip
DOUGLAS C. GRIP
President

<PAGE>

GOLDMAN SACHS MONEY MARKET TRUST (THE "TRUST")
FINANCIAL SQUARE PRIME OBLIGATIONS FUND
FINANCIAL SQUARE GOVERNMENT FUND
FINANCIAL SQUARE TREASURY OBLIGATIONS FUND
FINANCIAL SQUARE MONEY MARKET FUND

FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND

4900 SEARS TOWER
CHICAGO, ILLINOIS 60606

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 1, 1997

A Special Meeting of Shareholders of each Fund (the "Meeting") referred to
above (the "Funds") will be held on April 1, 1997, at 9:00 a.m. (Chicago time)
at the offices of Goldman, Sachs & Co. located at 4900 Sears Tower, Chicago,
Illinois 60606, for the following purposes:

(1) WITH RESPECT TO THE TRUST, to elect nine Trustees;

(2) WITH RESPECT TO THE TRUST, to ratify or reject the selection of Arthur
Andersen LLP as independent accountants of the Trust for the fiscal year ending
December 31, 1997;

(3) WITH RESPECT TO EACH FUND, to approve an Agreement and Plan of
Reorganization pursuant to which each Fund will be reorganized as a series of
Goldman Sachs Trust, a Delaware business trust;

(4) WITH RESPECT TO EACH FUND, (a) to approve an amendment to the Fund's
fundamental investment restrictions to permit each Fund to invest substantially
all of its assets in another open-end investment company; and (b) to amend the
Trust's Declaration of Trust to permit such an investment without shareholder
approval;

(5) WITH RESPECT TO EACH FUND, to amend the Fund's investment restrictions;

(6) WITH RESPECT TO EACH FUND, to approve an amended and restated management
agreement; and

(7) To transact such other business as may properly come before the Meeting
and any adjournment or adjournments thereof.

YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSALS
RELATING TO YOUR FUND(S).
<PAGE>

GOLDMAN SACHS MONEY MARKET TRUST (THE "TRUST")
FINANCIAL SQUARE PRIME OBLIGATIONS FUND
FINANCIAL SQUARE GOVERNMENT FUND
FINANCIAL SQUARE TREASURY OBLIGATIONS FUND
FINANCIAL SQUARE MONEY MARKET FUND
FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND

4900 SEARS TOWER
CHICAGO, ILLINOIS 60606

PROXY STATEMENT

GENERAL

This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Trustees (the "Trustees") of Goldman
Sachs Money Market Trust (the "Trust") to be used at a Special Meeting of
shareholders of the series of the Trust listed above (the "Funds") to be held at
the offices of Goldman, Sachs & Co. ("Goldman Sachs"), 4900 Sears Tower,
Chicago, Illinois 60606, on Tuesday, April 1, 1997, at 9:00 a.m. (Chicago time)
for the purposes set forth in the accompanying Notice of Meeting. Such meeting
and any adjournment thereof is referred to as the "Meeting."

The Trustees have fixed the close of business on January 31, 1997 as the record
date (the "Record Date") for determining the shareholders of each Fund entitled
to notice of and to vote at the Meeting. Shareholders of record of each Fund on
the Record Date are entitled to one vote per share at the Meeting or any
adjournment of the Meeting relating to their Fund.

Appendix A hereto sets forth the number of shares of beneficial interest of
each Fund outstanding as of January 31, 1997. Appendix B hereto sets forth the
persons who owned beneficially or of record more than 5% of any Fund as of
January 31, 1997.

Proxies will be solicited by mail and may also be solicited in person or by
telephone by officers of Goldman Sachs or Goldman Sachs Asset Management
("GSAM") and by the Trustees. In addition, the Trust's transfer agent, Goldman
Sachs, will solicit proxies in person and/or by telephone. The Funds will pay
their pro-rata share of the out-of-pocket costs associated with such
solicitation which are currently estimated to be $200,000 in aggregate for the
Goldman Sachs Group of Funds. The transfer agent may engage an indepen dent
proxy solicitation firm to assist it in soliciting proxies.
<PAGE>

The following table summarizes the proposals to be voted on at the Meeting and
indicates those shareholders who are being solicited with respect to each
proposal. In connection with each of the matters set forth in the attached
Notice of Meeting, a Fund's classes of shares will vote together as a single
class.

SUMMARY OF VOTING ON PROPOSALS

PROPOSAL SHAREHOLDERS SOLICITED
-------- ----------------------
1. Election of nine Trustees. The Trust with all of its series
(including series of the Trust being
solicited pursuant to a separate proxy
statement) voting as a single class.
2. Ratification of the selection of The Trust with all of its series
Arthur Andersen LLP as independent (including series of the Trust being
accountants for the fiscal year solicited pursuant to a separate proxy
ending December 31, 1997. statement) voting as a single class.
3. Approval of an Agreement and Plan Each Fund voting separately.
of Reorganization pursuant to which
each Fund will be reorganized as a
series of Goldman Sachs Trust, a
Delaware business trust.

4. (a) Approval of an amendment to (a) Each Fund voting separately as to
each Fund's investment restrictions the investment restrictions; and (b)
to permit the Fund to invest all of the series of the Trust
substantially all of its assets in (including series of the Trust being
another open-end investment company solicited pursuant to a separate proxy
and (b) approval of a corresponding statement) voting as a single class, as
amendment to the Trust's Declaration to the amendment to the Declaration of
of Trust. Trust.

5. (a)-(k) Approval of amended and Each Fund voting separately.
restated investment restrictions.
6. Approval of an amended and restated Each Fund voting separately.
management agreement.

THE TRUST WILL FURNISH, WITHOUT CHARGE, COPIES OF ANY FUND'S DECEMBER 31, 1996
ANNUAL SHAREHOLDERS REPORT AND COPIES OF THE JUNE 30, 1996 SEMI-ANNUAL
SHAREHOLDERS REPORT TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO GOLDMAN, SACHS
& CO., 4900 SEARS TOWER, CHICAGO, ILLINOIS 60606 OR BY TELEPHONE AT
800-621-2550.

This Proxy Statement and the form of Proxy are being first mailed to
shareholders on or about February 13, 1997.

<PAGE>

- -----------------------------------------------------
PROPOSAL 1: ELECTION OF TRUSTEES
- -----------------------------------------------------

At a meeting on January 28, 1997, the Trustees, including the Trustees who are
not "interested persons" (as defined by the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Funds (the "Independent Trustees") voted to
approve, and to recommend to the shareholders that they approve, a proposal to
elect nine (9) Trustees (the "Nominees") to the Board of Trustees of Goldman
Sachs Money Market Trust. Information concerning the Nominees and other relevant
factors is discussed below.

Using the enclosed form of proxy, a shareholder may authorize the proxies to
vote his or her shares for the Nominees or may withhold from the proxies
authority to vote his or her shares for one or more of the Nominees. If no
contrary instructions are given, the proxies will vote FOR the Nominees. Each of
the Nominees has consented to his or her nomination and has agreed to serve if
elected. If, for any reason, any Nominee should not be available for election or
able to serve as a Trustee, the proxies will exercise their voting power in
favor of such substitute Nominee, if any, as the Trustees may designate. The
Trust has no reason to believe that it will be necessary to designate a
substitute Nominee.

<PAGE>

INFORMATION CONCERNING NOMINEES

The following table sets forth certain information about each Nominee,
including each Nominee's principal occupation or employment during the past five
years.

<TABLE>
<CAPTION>
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION OR EMPLOYMENT BECAME
POSITIONS WITH TRUST DURING THE LAST FIVE YEARS TRUSTEE
- -------------------- ---------------------------------- -------
<S> <C> <C>
Ashok N. Bakhru (53) Executive Vice President-Finance & 1991
Chairman and Trustee Administration & Chief Financial
Officer, Coty, Inc. (since April 1996);
President, ABN Associates (since June
1994); Senior Vice President of Scott
Paper Company (until June 1994);
Director of Arkwright-Mutual Insurance
Company; Trustee of International House
of Philadelphia; Member of Cornell
University Council; and Trustee of the
Walnut Street Theater. Mr. Bakhru has
been a Director of Goldman Sachs Equity
Portfolios, Inc. since March 1990 and a
Trustee of Goldman Sachs Trust since
November 1991.

David B. Ford (51)* Managing Director, Goldman Sachs (since 1994
Trustee 1996); General Partner, Goldman Sachs
(1986-1996); Co-Head of GSAM (since
December 1994). Mr. Ford has been a
Director of Goldman Sachs Equity
Portfolios, Inc. and a Trustee of
Goldman Sachs Trust since 1994.

Douglas Grip (35)* Vice President, Goldman Sachs (since May To be
Trustee and President 1996); President, MFS Retirement elected
Services Inc. of Massachusetts Financial in 1997
Services (prior thereto). Mr. Grip has
been a Director of Goldman Sachs Equity
Portfolios, Inc. and a Trustee of
Goldman Sachs Trust since 1996.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION OR EMPLOYMENT BECAME
POSITIONS WITH TRUST DURING THE LAST FIVE YEARS TRUSTEE
-------------------- ---------------------------------- -------
<S> <C> <C>
John P. McNulty (44)* Managing Director, Goldman Sachs To be
Trustee (since 1996); General Partner of elected
Goldman Sachs (1990 to 1994 and in 1997
1995-1996); Co-Head of GSAM (since
November 1995); Limited Partner of
Goldman Sachs (1994 to November 1995).

Mary P. McPherson (60) President of Bryn Mawr College (since To be
Trustee 1978); Director of Josiah Macy, Jr, elected
Foundation (since 1977); Director of in 1997
the Philadelphia Contributionship
(since 1985); Director of Amherst
College (since 1986); Director of
Dayton Hudson Corporation (since
1988); Director of the Spencer
Foundation (since 1993); and member of
PNC Advisory Board (since 1993).

Alan A. Shuch (48)* Limited Partner, Goldman Sachs (since 1990
Trustee 1994); Director and Vice President of
Goldman Sachs Funds Management, Inc.
(April 1990 to November 1994);
President and Chief Operating Officer,
GSAM (September 1988 to November
1994). Mr. Shuch has been a Director
of Goldman Sachs Equity Portfolios,
Inc. and a Trustee of Goldman Sachs
Trust since November 1991.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION OR EMPLOYMENT BECAME
POSITIONS WITH TRUST DURING THE LAST FIVE YEARS TRUSTEE
-------------------- ---------------------------------- -------
<S> <C> <C>
Jackson W. Smart (66) Chairman, Executive Committee, First 1984
Trustee Commonwealth, Inc. ( a managed dental
care company, since January 1996);
Chairman and Chief Executive Officer,
MSP Communications, Inc. (a company
engaged in radio broadcasting; since
November 1988); Director, Federal
Express Corporation (since 1976),
Evanston Hospital Corporation (since
1980) and First Commonwealth, Inc.
(since 1988) and North American Private
Equity Group (a venture capital fund).
Mr. Smart has been a Director of Goldman
Sachs Equity Portfolios, Inc. since
November 1991 and a Trustee of Goldman
Sachs Trust since December 1987.

William H. Springer (67) Vice Chairman and Chief Financial and 1989
Trustee Administrative Officer (February 1987 to
June 1991) of Ameritech (a
telecommunications holding company);
Director, Walgreen Co. (a retail drug
store business); and Baker, Fentress &
Co. (a closed-end, management investment
company). Mr. Springer has been Trustee
and Chairman of The Benchmark Funds
since April 1984, a Director of Goldman
Sachs Equity Portfolios, Inc. and a
Trustee of Goldman Sachs Trust since
November 1991.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION OR EMPLOYMENT BECAME
POSITIONS WITH TRUST DURING THE LAST FIVE YEARS TRUSTEE
-------------------- ---------------------------------- -------
<S> <C> <C>
Richard P. Strubel (57) Managing Director, Tandem Partners, 1987
Trustee Inc. (since 1990), President and
Chief Executive Officer, Microdot,
Inc. (a diversified manufacturer of
fastening systems and connectors;
January 1984 to October 1994). Mr.
Strubel has been a Director of
Goldman Sachs Equity Portfolios,
Inc. since November 1991, a Trustee
of The Benchmark Funds since 1982
and of Goldman Sachs Trust since
December 1987.
</TABLE>

* Messrs. Ford, McNulty, Shuch and Grip are deemed to be "interested persons" of
the Trust for purposes of the 1940 Act because Messrs. Ford and, McNulty are
Managing Directors of Goldman Sachs, Mr. Shuch is a limited partner of Goldman
Sachs and Mr. Grip is a Vice President of Goldman Sachs.

<PAGE>

INFORMATION CONCERNING MEETINGS OF TRUSTEES AND COMMITTEES

The number of shares of beneficial interest of each Fund by class beneficially
owned by each of the Nominees, directly or indirectly, as of January 31, 1997,
is set forth in Appendix C hereto.

The Trust has a Nominating Committee comprised of all the Independent Trustees.
The Nominating Committee met on January 28, 1997 and held no meetings during the
fiscal year ended December 31, 1996. Included among the functions of the
Nominating Committee is the selection and nomination for appointment and
election of candidates to serve as Trustees who are not "interested persons," as
defined in the 1940 Act. The Committee also coordinates with Trustees who are
interested persons in the selection and election of the Trust's officers. The
Nominating Committee does not consider recommendations for Trustee from
shareholders.

REMUNERATION OF TRUSTEES

<PAGE>

The following table sets forth certain information about the compensation of
each Trustee for the fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
PENSION OR AGGREGATE
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ACCRUED FROM THE
FROM AS PART OF GOLDMAN SACHS
NAME OF TRUSTEE THE FUNDS FUND EXPENSES GROUP OF FUNDS
- --------------- ------------- ----------------- ----------------
<S> <C> <C> <C>
Paul Nagel* . . . . $28,050 $0 $62,450
Ashok N. Bakhru . . $35,126 $0 $69,299
Marcia Beck** . . . $ 0 $0 $ 0
David B. Ford . . . $ 0 $0 $ 0
Alan A. Shuch . . . $ 0 $0 $ 0
Jackson W. Smart . $29,198 $0 $58,954
William H. Springer $29,198 $0 $58,954
Richard P. Strubel $29,198 $0 $58,954
</TABLE>

- -----------
* Mr. Nagel retired as Chairman and Trustee of the Trust on June 30, 1996.

** Ms. Beck resigned as President and Trustee of the Trust on May 1, 1996.

OFFICERS

The following table sets forth information with respect to the executive
officers of the Trust. Each officer is elected by the Trustees. Each of the
President, Treasurer and Secretary serves until the next annual meeting of the
Trustees and until his or her successor is chosen and qualified or until his or
her death, resignation, removal or disqualification. Each of the other officers
holds office at the pleasure of the Trustees.

<TABLE>
<CAPTION>
NAME, POSITION AND AGE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ---------------------- ----------------------------------------------
<S> <C>
Douglas Grip (35) Vice President, Goldman Sachs (since May 1996);
President President, MFS Retirement Services Inc. of
Massachusetts Financial Services (prior thereto).

Nancy L. Mucker (47) Vice President, Goldman Sachs; Manager,
Vice President Shareholder Servicing of GSAM (since November
1989).
John W. Mosior (58) Vice President, Goldman Sachs; Manager,
Vice President Shareholder Servicing of GSAM (since November
1989).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME, POSITION AND AGE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ---------------------- ----------------------------------------------
<S> <C>
Pauline Taylor (50) Vice President, Goldman Sachs; Director,
Vice President Shareholder Servicing of GSAM (since June 1992).

Scott M. Gilman (37) Director, Mutual Fund Administration of GSAM
Treasurer (since April 1994); Assistant Treasurer of
Goldman Sachs Funds Management, Inc. (since
March 1993); Vice President, Goldman Sachs
(since March 1990).
John M. Perlowski (32) Vice President, Goldman Sachs (since July 1995);
Assistant Treasurer Director, Investors Bank & Trust Company
(November 1993 to July 1995); Audit Manager of
Arthur Andersen LLP (prior thereto).

Michael J. Richman (36) Associate General Counsel of GSAM (since
Secretary February 1994); Assistant General Counsel and
Vice President of Goldman Sachs; Counsel to the
Funds Group of GSAM (since June 1992); Partner
of Hale and Dorr (September 1991 to June 1992) .

Howard B. Surloff (31) Assistant General Counsel and Vice President of
Assistant Secretary Goldman Sachs (since November 1993 and May 1994,
respectively); Counsel to the Funds Group, GSAM
(since November 1993); Associate of Shereff,
Friedman, Hoffman & Goodman (prior thereto).

Kaysie Uniacke (35) Vice President and Senior Portfolio Manager,
Assistant Secretary GSAM (since 1988).
Elizabeth Anderson (27) Portfolio Manager, GSAM (since April 1996);
Assistant Secretary Junior Portfolio Manager, GSAM (1995-1996);
Funds Trading Assistant, GSAM (1993-1995);
Compliance Analyst, Prudential Insurance
(1991-1993).
Steven Hartstein (33) Legal Products Analyst, Goldman Sachs (since
Assistant Secretary June 1993); Funds Compliance Officer, Citibank
Global Asset Management (August 1991 to June
1993).
Deborah Farrell (24) Administrative Assistant, Goldman Sachs (since
Assistant Secretary January 1994). Formerly at Cleary, Gottlieb,
Steen and Hamilton.
</TABLE>

<PAGE>

THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE IN FAVOR OF EACH NOMINEE
LISTED ABOVE.

REQUIRED VOTE

Because your Fund is a series of the Trust, your vote will be counted together
with the votes of shareholders of the other series of the Trust (including
series not included in this Proxy Statement), voting as a single class in the
election of Trustees. Election of each Nominee of the Trust requires a plurality
of votes of the shareholders of the entire Trust present at the Meeting.

- -----------------------------------------------------
PROPOSAL 2: RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------

As directed by the Trustees and required by the 1940 Act, the ratification or
rejection of the selection of the independent accountants for the Trust's fiscal
year ending December 31, 1997 will be voted upon at the Meeting. It is intended
that the persons named in the accompanying Proxy will vote for Arthur Andersen
LLP, unless contrary instructions are given. If the selection of the Trust's
independent accountants is not ratified by the shareholders at the Meeting, the
Board will reconsider such selection.

The Trust's financial statements for the fiscal year ended December 31, 1996
were audited by Arthur Andersen LLP. In connection with its audit, Arthur
Andersen LLP reviews the Trust's annual reports to shareholders and its filings
with the Securities and Exchange Commission ("SEC"). In addition to audit
services, Arthur Andersen LLP prepares the Trust's federal and state tax returns
and provides consultation and assistance on accounting, internal control and
related matters.

<PAGE>

1996 and October 22, 1996, the Audit Committee met with representatives of
Arthur Andersen LLP to review the services of the independent accountants. The
Audit Committee, in turn, reported on these matters at the meeting of the
Trustees held the same day. A representative of Arthur Andersen LLP is expected
to be available at the Meeting by telephone should any matter arise requiring
consultation with the accountants, and the accountants have been given the
opportunity to make a statement if they so desire.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF ARTHUR ANDERSEN LLP AS THE TRUST'S INDEPENDENT ACCOUNTANTS.

REQUIRED VOTE

Because your Fund is a series of the Trust, your vote will be counted together
with the votes of shareholders of the other series of the Trust, voting as a
single class on the ratification of independent accountants. Ratification of the
independent accountants of the Trust requires the approval of a majority of the
shares of the Trust present at the Meeting. If this proposal is not approved by
a Fund, the Trustees will consider what further action, if any, will be taken.

- -----------------------------------------------------
PROPOSAL 3: APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION PURSUANT TO
WHICH EACH FUND WILL BE REORGANIZED INTO A SERIES OF A DELAWARE
BUSINESS TRUST
- -----------------------------------------------------

GENERAL

The Trustees have unanimously approved, subject to shareholder approval, a
proposal for the Trust (which is referred to in this Proposal 3 as the
"Massachusetts Trust") on behalf of each Fund to enter into an Agreement and
Plan of Reorganization, Conversion and Termination (the "Plan of
Reorganization") with a newly established Delaware business trust named Goldman
Sachs Trust (the "Delaware Trust"). The Plan of Reorganization will be in the
form attached to this Proxy Statement as Appendix D. The Plan of Reorganization
provides for the conversion (the "Conversion") of each Fund from a separate
series of the Massachusetts Trust into a corresponding separate series of the
Delaware Trust. Each series of the Massachusetts Trust is referred to in this
Proposal as a "current Fund." It is also contemplated that the series of Goldman
Sachs Equity Portfolios, Inc. ("GSEP") and Goldman Sachs Trust ("GST"), open-end
investment companies for which Goldman

<PAGE>

Sachs or one of its affiliates acts as investment adviser, administrator and
distributor, will be reorganized into other separate series of the Delaware
Trust. Consequently, if the Conversions are approved by shareholders of each of
the Massachusetts Trust, GSEP and GST, all funds currently in the Goldman Sachs
Group of Funds will be series of the Delaware Trust.

The Trustees believe that a Delaware business trust as a form of organization
offers certain advantages for mutual funds over a Massachusetts business trust.
These advantages include granting the Trustees greater power to take certain
actions without shareholder approval and greater flexibility in methods of
voting and organization. A Delaware business trust also offers the advantages of
a clearer limitation upon the liability of shareholders and Trustees. The
Trustees also believe that the proposed Declaration of Trust of the Delaware
Trust (the "Delaware Trust Instrument") is clearer and more modern than the
Massachusetts Trust's organizational documents. While these same improvements
could be achieved by amending the Massachusetts Trust's Declaration of Trust
(the "Massachusetts Declaration of Trust"), the Trustees have concluded that,
given the other advantages of a Delaware business trust, it is preferable to
enter into the Plan of Reorganization than to amend the current organizational
documents. For a summary comparison of the Massachusetts Declaration of Trust
and the proposed Delaware Trust Instrument, see "Description of Certain
Provisions of the Delaware Trust Instrument" and "Certain Comparative
Information About Massachusetts Business Trusts and Delaware Business Trusts"
below.

The Conversions will entail organizing the Delaware Trust, which will initially
have 34 series, including five series corresponding to the current Funds. Each
series of the Delaware Trust that corresponds to a current Fund is referred to
in this Proposal as a "successor Fund." To effect the Conversion, each current
Fund will transfer all of its assets and liabilities to the corresponding
successor Fund. As consideration for the transfer of such assets and liabilities
(together, "net assets"), each successor Fund will issue shares of beneficial
interest ("successor Fund shares") to the current Fund whose net assets it has
acquired and such current Fund will distribute such successor Fund shares pro
rata to the current Fund shareholders in exchange for their shares. Upon
completion of the Conversion, each shareholder will be the owner of full and
fractional successor Fund shares equal in number and aggregate net asset value
and of the same class as his or her shares of the corresponding current Fund as
of the date of the Conversion. Following the Conversion, each successor Fund
will carry on the business of the corresponding current Fund. The successor Fund
will have the same investment adviser, other service providers, fee and expense
structure and investment objectives, policies and restrictions as the
corresponding current Fund. Any change in the

<PAGE>

composition of the Board of Trustees, investment restrictions and management
agreements approved at the Meeting with respect to a current Fund will also
apply to the corresponding successor Fund. There may be deemed a momentary
technical inconsistency with certain of the policies and restrictions of a Fund
(such as restrictions on investments in any one issuer and investments in other
investment companies) during the Conversion. Approval of the Plans of
Reorganization will also constitute approval to terminate the current Funds and
the Massachusetts Trust.

REASONS FOR THE PROPOSED CONVERSION

The Massachusetts Trust is organized as a Massachusetts business trust. As
discussed above, the Trustees unanimously recommend conversion of each Fund into
a corresponding separate series of the Delaware Trust. The Trustees believe that
organizing the Funds as series of the Delaware Trust offers certain advantages
over maintaining them as series of the Massachusetts Trust.

The principal advantage of a Delaware business trust is a clearer limitation of
liability of shareholders and Trustees for the obligations of the trust. The
Delaware Business Trust Act (the "Delaware Act") expressly limits the liability
of Delaware business trust shareholders for the debts or obligations of the
business trust to the same extent as for stockholders of for-profit Delaware
corporations. Similarly, the Delaware Act provides that a series of a Delaware
business trust will not be liable for the debts or obligations of any other
series of the business trust. Under Massachusetts law, there are no comparable
statutory provisions. Although the possibility of incurring these types of
liability may be remote under Massachusetts law, the above provisions of the
Delaware Act provide greater protection against shareholder liability and the
liability of one business trust series for the debts or obligations of another
series. However, it is possible that, under certain circumstances, courts in
some states may not enforce limited liability for Delaware business trust
shareholders. With respect to Trustee liability, Delaware law more clearly
protects a Trustee from liability for the obligations of the business trust than
does Massachusetts law. This may help the Funds attract and retain qualified
Trustees in the future.

Second, the Trustees believe that the Delaware business trust form of
organization will enable the successor Funds to adopt new methods of operation
and employ new technologies that are expected to reduce costs of operation when,
and if, implemented. For example, Delaware law authorizes electronic or
telephonic communications between shareholders and a Delaware business trust.
The Trustees hope to take advantage of this provision in the future to improve
shareholder voting procedures and reduce associated costs.

Third, the Conversion offers the potential for future cost savings, although no
immediate cost savings are expected to result from the Conversion. These

<PAGE>

cost savings may result from either the differences between the Massachusetts
Trust and the Delaware Trust or from the combination of all of the Funds in the
Goldman Sachs Group of Funds into a single legal entity. For example, since the
Trustees of a Delaware business trust can take more actions without shareholder
approval than is currently permitted under the Massachusetts Declaration of
Trust, the Delaware Trust may be required to hold fewer shareholder meetings,
potentially further reducing costs. Although neither a Delaware business trust
nor a Massachusetts business trust is required to hold annual shareholder
meetings, Delaware law affords to the Trustees greater latitude to adapt the
Delaware Trust to future contingencies without the necessity of holding a
special shareholder meeting. Under the Delaware Trust Instrument, the Trustees
have the power to amend the Delaware Trust Instrument; to dissolve the business
trust; to incorporate the Delaware Trust; to merge or consolidate with another
entity; to sell, lease, exchange, transfer, pledge or otherwise dispose of all
or any part of the Delaware Trust's assets; to cause any series to become a
separate trust; and to change the Delaware Trust's domicile -- all without a
shareholder vote.

BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION

At a meeting held on January 28, 1997, after considering the matters discussed
above, the Trustees, including the Independent Trustees, unanimously approved
the adoption of the Plan of Reorganization and determined that the Conversion
(i) is in the best interest of the Funds and (ii) will not result in dilution of
the interests of the shareholders of any Fund. In addition, the Trustees
unanimously voted to recommend to the shareholders of each Fund that they
approve the Plan of Reorganization and the transactions contemplated thereunder.
In taking such action and making such recommendation, the Trustees took into
consideration the fact that the Conversion may provide

<PAGE>

operational efficiencies and additional managerial flexibility to the Trustees.
The Trustees believe that the Conversion will be beneficial to present
shareholders of the Funds as well as to potential investors.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND APPROVE A
PLAN OF REORGANIZATION PROVIDING FOR THE CONVERSION OF EACH FUND FROM A SERIES
OF A MASSACHUSETTS BUSINESS TRUST TO A SERIES OF A DELAWARE BUSINESS TRUST.

VOTE REQUIRED TO APPROVE PLANS OF REORGANIZATION

Approval of the Plan of Reorganization as to each Fund requires the affirmative
vote of a majority of the shares of that Fund outstanding and entitled to vote.
For this purpose, a majority of the outstanding shares of a Fund means the vote
of the lesser of (a) 67% or more of the shares present at the Meeting, if the
holders of more than 50% of the shares of the Fund, as the case may be, are
present or represented by proxy, or (b) more than 50% of the outstanding shares
of the Fund (a "1940 Act Majority"). Shares of all classes of a Fund will be
voted together as one class. The Trustees have determined that the Conversion
will not proceed as described above with respect to the Massachusetts Trust,
unless approved by all of the Funds included in the Massachusetts Trust. In the
event that shareholders of one or more of the Funds do not vote in favor of the
Conversion, the Trustees will determine what further action, if any, to take,
including the possibility of resubmitting the proposal at a later time to the
shareholders of the one or more of the Funds which have not voted in favor of
the Conversion.

A vote FOR the Conversion will authorize each current Fund, as the sole
shareholder of its corresponding successor Fund (i) to elect as Trustees of the
Delaware Trust (if Proposal 1 is approved) Messrs. Bakhru, Ford, Grip, McNulty,
Shuch, Smart, Springer, and Strubel and Ms. McPherson (see Proposal 1); (ii) to
ratify the selection of Arthur Andersen LLP as the Delaware Trust's independent
accountants (see Proposal 2); (iii) to approve a management agreement for each
successor Fund (see Proposal 6); (iv) to approve fundamental investment
restrictions for the successor Funds, which, if Proposal 4 and/or 5 are
approved, would be the same as those contained in such proposals and (v) to
approve administration, preferred administration and service plans, as
applicable, for each of the Funds. If the Conversion is approved but any of the
other proposals is not approved by a Fund's shareholders, the Fund as sole
shareholder of the successor Fund will vote to approve the existing forms of
advisory agreements or fundamental restrictions, as the case may be.

<PAGE>

SUMMARY OF THE PLAN OF REORGANIZATION

In order to accomplish the Conversion, a Delaware business trust will be
formed. On the closing date of the Conversion (the "Closing Date"), each current
Fund will transfer all of its assets to its corresponding successor Fund in
exchange for the assumption by the successor Fund of all the liabilities of that
current Fund and the issuance to that current Fund of shares of beneficial
interest of that successor Fund ("successor Fund shares") equal to the value (as
determined by using the procedures in the current prospectuses) on the date of
the exchange of that current Fund's net assets. Immediately thereafter, each
current Fund will liquidate and distribute successor Fund shares to each current
Fund shareholder's account pro rata in proportion to such current Fund
shareholder's beneficial interest in his or her current Fund ("current Fund
shares") in exchange for his or her current Fund shares. In these exchanges, a
successor Fund will issue the appropriate number of successor Fund shares of
each class of shares that is currently outstanding, so that the current Fund
will distribute, and holders of a particular class of current Fund shares will
receive, successor Fund shares of the same class. As soon as practicable after
this distribution of successor Fund shares, each current Fund will be wound up
and terminated. A confirmation will be mailed to each current Fund shareholder
of the number of successor Fund shares registered to the shareholder's account.
Certificates evidencing full or fractional successor Fund shares will not be
mailed to shareholders. UPON COMPLETION OF THE CONVERSION, EACH CURRENT FUND
SHAREHOLDER WILL BE THE OWNER OF FULL AND FRACTIONAL SUCCESSOR FUND SHARES
EQUIVALENT IN NUMBER, CLASS AND AGGREGATE NET ASSET VALUE TO HIS OR HER CURRENT
FUND SHARES IMMEDIATELY BEFORE THE CONVERSION.

The Trustees of the Delaware Trust will hold office indefinitely except that
(i) any Trustee may resign; (ii) any Trustee may be removed by written
instrument signed by a majority of the other Trustees; (iii) any Trustee who has
died, become physically or mentally incapacitated by reason of disease or
otherwise, or is otherwise unable to serve, may be retired by a written
instrument signed by a majority of the other Trustees; and (iv) any Trustee may
be removed at any special meeting of the shareholders by a vote of two-thirds of
the outstanding shares of the Delaware Trust. If a vacancy occurs for any rea
son, the remaining Trustees may fill such vacancy by appointing another Trustee
so long as, immediately after such appointment, at least two-thirds of

<PAGE>

the Trustees have been elected by shareholders. If, at any time, less than a
majority of the Trustees holding office has been elected by shareholders, the
Trustees then in office will promptly call a shareholders' meeting for the
purpose of electing Trustees. Otherwise, there normally will be no meeting of
shareholders for the purpose of electing Trustees.

Assuming the Plan of Reorganization is approved, it is currently contemplated
that the Conversion will become effective at the close of business on April 30,
1997 or as soon thereafter as possible.

If, at any time before the Closing Date of the Conversion, the Trustees
determine that it would not be in the best interest of the Massachusetts Trust
or its shareholders to proceed with the Conversion, the Conversion will not go
forward, notwithstanding the approval of the Conversions by the shareholders at
the Meeting. The Massachusetts Trust and the Delaware Trust may at any time
waive compliance with any of the covenants and conditions contained in, or may
amend, the Plans of Reorganization; provided that such waiver or amendment does
not materially adversely affect the interests of current Fund shareholders.

EXPENSES OF THE CONVERSIONS

Each Fund will bear its own expenses associated with the transactions
contemplated by the Plan of Reorganization, including expenses associated with
solicitation of proxies. In the event that the Conversion is completed, such
expenses will be assumed by each successor Fund. It is currently estimated that
the aggregate expenses of the Conversion will be approximately $350,000, which
will be allocated among the Funds, the other series of the Massachusetts Trust
and the series of GST and GSEP.

TAX CONSEQUENCES OF THE CONVERSION

It is a condition to the consummation of the Conversion that the Massachusetts
Trust and the Delaware Trust receive on or before the Closing Date an opinion
from Hale and Dorr LLP, counsel to the Massachusetts Trust and the Delaware
Trust, substantially to effect that, among other things, for federal income tax
purposes, each Conversion will constitute a reorganization under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, and that no gain or
loss will be recognized for federal income tax purposes by each current Fund,
each successor Fund and the shareholders of each current Fund upon (1) the
transfer of a current Fund's assets to the corresponding successor Fund in
exchange solely for such successor Fund's shares and the assumption by such
successor Fund of that current Fund's liabilities or (2) the

<PAGE>

distribution in liquidation by the current Fund of such successor Fund shares to
the current Fund shareholders in exchange for their current Fund shares. The
opinion will further provide, among other things, that (i) the tax basis of the
successor Fund shares to be received by each current Fund shareholder will be
the same as that of his or her current Fund shares surrendered in exchange
therefor and (ii) each current Fund shareholder's tax holding period for his or
her successor Fund shares will include such shareholder's tax holding period for
the current Fund shares surrendered in exchange therefor, provided that such
current Fund shares were held as capital assets on the date of the exchange.

CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS

The Delaware Trust's transfer agent will establish accounts for all current
Fund shareholders containing the appropriate number and class of successor Fund
shares to be received by that shareholder under the Plan of Reorganization. Such
accounts will be identical in all material respects to the accounts currently
maintained by the Funds for each shareholder. No action by a shareholder will be
necessary in order to continue any automatic exchange plans, rights of
accumulation, letters of intent, automatic investment plans or retirement plans
currently maintained by a current Fund shareholder.

TRANSFER AGENT AND CUSTODIAN

Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, currently
serves as transfer agent for the Massachusetts Trust and will serve in the same
capacity for the Delaware Trust.

State Street Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts
02105, currently acts as the custodian for the Massachusetts Trust and will
serve in the same capacity for the Delaware Trust.

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP, One International Place, Boston, Massachusetts 02110, are
presently the independent public accountants for the Massachusetts Trust, and
will continue to be the independent public accountants for the Funds, subject to
required approvals (see also Proposal 2).

SERVICE, PREFERRED ADMINISTRATION AND ADMINISTRATION PLANS

The Delaware Trust will adopt service plans with respect to the service shares,
administration plans with respect to the administration shares and

<PAGE>

preferred administration plans with respect to preferred shares of each
successor Fund. The content of each plan will be identical, in all material
respects, including fees, to the Funds' existing plans. Pursuant to the new
plans, the Delaware Trust on behalf of each successor Fund will assume the
corresponding current Fund's obligations under agreements with Service
Organizations.

DESCRIPTION OF CERTAIN PROVISIONS OF THE DELAWARE TRUST INSTRUMENT

The following is a summary of certain provisions of the Delaware Trust
Instrument.

SERIES AND CLASSES. As discussed above, the Delaware Trust Instrument permits
the Delaware Trust to issue series of its shares which represent interests in
separate portfolios of investments, including the successor Funds. The Delaware
Trust is authorized to issue multiple classes of such series. The Massachusetts
Declaration of Trust permits the issuance of separate series and classes of
shares. No series is entitled to share in the assets of any other series or is
liable for the expenses or liabilities of any other series. The Trustees are
authorized to divide each series of shares into separate classes, which
represent a pro rata interest in the same series and are entitled to the same
rights, except as provided by the Trustees. The successor Funds would initially
have the same classes of shares, which would be entitled to the same rights, as
the classes of the current Funds. The Trustees of the Delaware Trust are able to
authorize the issuance of additional series or classes of shares without prior
shareholder approval.

LIMITATIONS ON DERIVATIVE ACTIONS. In addition to the provisions of Delaware
law, the Delaware Trust Instrument provides that a shareholder of the Delaware
Trust may bring a derivative action on behalf of the Delaware Trust only if the
following conditions are met: (a) shareholders eligible to bring such derivative
action under Delaware law who hold at least 10% of the outstanding shares of the
Delaware Trust, or 10% of the outstanding shares of the series or class to which
such action relates, must join in the request for the Trustees to commence such
action; and (b) the Trustees must be afforded a reasonable amount of time to
consider such shareholder request and to investigate the basis of such claim.
The Trustees will be entitled to retain counsel or other advisers in considering
the merits of the request and may require an undertaking by the shareholders
making such request to reimburse the Delaware Trust for the expense of any such
advisers in the event that the Trustees determine not to bring such action. No
similar provisions are applicable to the Massachusetts Trust.

SHAREHOLDER MEETINGS AND VOTING RIGHTS. The Delaware Trust is not required to
hold annual meetings of shareholders and does not intend to hold such meetings.
In the event that a meeting of shareholders is held, each share of the Delaware
Trust will be entitled, as determined by the Trustees, either to one vote for
each share or to one vote for each dollar of net asset value repre-

<PAGE>

sented by such shares on all matters presented to shareholders including the
election of Trustees (this method of voting being referred to as "dollar based
voting"). However, to the extent required by the 1940 Act or otherwise
determined by the Trustees, series and classes of the Delaware Trust will vote
separately from each other. Shareholders of the Delaware Trust do not have
cumulative voting rights in the election of Trustees. Meetings of shareholders
of the Delaware Trust, or any series or class thereof, may be called by the
Trustees, certain officers or, in accordance with a position taken by the staff
of the Securities and Exchange Commission, upon the written request of holders
of 10% or more of the shares entitled to vote at such meeting. The shareholders
of the Delaware Trust will have voting rights only with respect to the limited
number of matters specified in the Delaware Trust Instrument and such other
matters as the Trustees may determine or as may be required by law.

The voting provisions of the Delaware Trust Instrument differ from those of the
Massachusetts Declaration of Trust in several important respects. The
Massachusetts Trust is not authorized to use dollar based voting. Instead, each
shareholder has one vote for each share held, regardless of its net asset value
per share. This can have the effect of providing series with a lower net asset
value per share, such as money market funds with a voting interest that is
disproportionate to their economic interest. Also, a greater number of matters
require approval by the shareholders of the Massachusetts Trust. The
Massachusetts Declaration of Trust, in addition to the matters requiring
approval of shareholders of the Delaware Trust, requires shareholder approval of
the reorganization or termination of the Massachusetts Trust or any of its
series, certain legal proceedings and certain amendments to the Declaration of
Trust.

INDEMNIFICATION. The Delaware Trust Instrument provides for indemnification of
Trustees, officers and agents of the Delaware Trust unless the recipient is
adjudicated (i) to be liable by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office or (ii) not to have acted in good faith in the reasonable belief
that such person's actions were in the best interest of the Delaware Trust. The
Massachusetts Trust provides a similar degree of indemnification of Trustees.

The Delaware Trust Instrument provides that, if any shareholder or former
shareholder of any series is held personally liable solely by reason of being or
having been a shareholder and not because of the shareholder's acts or omissions
or for some other reason, the shareholder or former shareholder (or heirs,
executors, administrators, legal representatives or general successors)

<PAGE>

will be entitled, out of the assets belonging to the applicable series, to be
held harmless from and indemnified against all loss and expense arising from
such liability. The Delaware Trust, acting on behalf of any affected series,
must, upon request by such shareholder, assume the defense of any claim made
against such shareholder for any act or obligation of the series and satisfy any
judgment thereon from the assets of the series.

TERMINATION. The Delaware Trust Instrument permits the termination of the
Delaware Trust or of any series or class of the Delaware Trust (i) by a majority
of the affected shareholders at a meeting of shareholders of the Delaware Trust,
series or class; or (ii) by a majority of the Trustees without shareholder
approval if the Trustees determine that such action is in the best interest of
the Delaware Trust or its shareholders. The factors and events that the Trustees
may take into account in making such determination include (i) the inability of
the Delaware Trust or any series or class to maintain its assets at an
appropriate size; (ii) changes in laws or regulations governing the Delaware
Trust, series or class or affecting assets of the type in which it invests; or
(iii) economic developments or trends having a significant adverse impact on
their business or operations. The Massachusetts Declaration of Trust permits the
Trustees to terminate the Massachusetts Trust only with shareholder approval.

MERGER, CONSOLIDATION, SALE OF ASSETS, ETC. The Delaware Trust Instrument
authorizes the Trustees without shareholder approval to cause the Delaware
Trust, or any series thereof, to merge or consolidate with any corporation,
association, trust or other organization or sell or exchange all or
substantially all of the property belonging to the Delaware Trust, or any series
thereof. In addition, the Trustees, without shareholder approval, may adopt a
master feeder structure by investing all or a portion of the assets of a series
of the Delaware Trust in the securities of another open-end investment company
(see Proposal 4). The reorganization, including conversion to a master-feeder
structure (unless Proposal 4 is adopted), of the Massachusetts Trust would
require shareholder approval.

AMENDMENTS. The Delaware Trust Instrument permits the Trustees to amend the
Delaware Trust Instrument without a shareholder vote. However, shareholders of
the Delaware Trust have the right to vote on any amendment (i) that would affect
the voting rights of shareholders; (ii) that is required by law to be approved
by shareholders; (iii) that would amend the voting provisions of the Delaware
Trust Instrument; or (iv) that the Trustees determine to submit to shareholders.
Amendments to the Massachusetts Declaration of Trust, with certain limited
exceptions, require approval of shareholders.

<PAGE>

SERIES OF TRUSTEES. The Trustees may appoint separate Trustees with respect to
one or more series or classes of the Delaware Trust's shares (the "Series
Trustees"). Series Trustees may, but are not required to, serve as Trustees of
the Trust or any other series or class of the Delaware Trust. The Series
Trustees have, to the exclusion of any other Trustee of the Delaware Trust, all
the powers and authorities of Trustees under the Delaware Trust Instrument with
respect to such series or class, but have no power or authority with respect to
any other series or class. The Massachusetts Declaration of Trust does not
permit the election of separate Trustees for a series or class. The Trustees are
not considering the appointment of Series Trustees for the Delaware Trust.

CERTAIN COMPARATIVE INFORMATION ABOUT MASSACHUSETTS BUSINESS TRUSTS AND DELAWARE
BUSINESS TRUSTS

SHAREHOLDER LIABILITY

Generally, Delaware business trust shareholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware Act
entitles a shareholder of a Delaware business trust to the same limitation of
liability as is available to shareholders of private for-profit corporations.
However, no similar statutory or other authority limiting business trust
shareholder liability exists in many other states. As a result, to the extent
that a Delaware business trust or a shareholder is subject to the jurisdiction
of courts in such other states, those courts may not apply Delaware law and may
subject the Delaware Trust shareholders to liability. To offset this risk, the
Delaware Trust Instrument (i) contains an express disclaimer of shareholder
liability for acts or obligations of the Delaware Trust and provides for the
giving of notice of such disclaimer in each agreement, obligation and instrument
entered into or executed by the Delaware Trust or its Trustees and (ii) provides
for indemnification out of the property of the Delaware Trust of any shareholder
held personally liable for the obligations of the Delaware Trust. Thus, the risk
of a Delaware business trust shareholder incurring financial loss beyond his or
her investment because of shareholder liability is limited to circumstances in
which all of the following factors are present: (1) a court refuses to apply
Delaware law; (2) the liability arises under tort law or, if not, no contractual
limitation of liability was in effect; and (3) the Delaware Trust itself is
unable to meet its obligations. In the light of Delaware law, the nature of the
Delaware Trust's business and the nature of its assets, the risk of personal
liability to a Delaware Trust shareholder is extremely remote.

Unlike Delaware, in Massachusetts there is no statute relating to business
trusts that entitles shareholders of a Massachusetts business trust to the same
limitation of liability as is extended to shareholders of a Massachusetts corpo-

<PAGE>

ration. Shareholders of a Massachusetts business trust may, therefore, under
certain circumstances, be held personally liable under Massachusetts law for the
obligations of the Massachusetts business trust. The Massachusetts Declaration
of Trust, like the Delaware Trust Instrument, contains an express disclaimer of
shareholder liability and provides for the giving of notice of such disclaimer
in each agreement entered into or executed by the Massachusetts business trust
or its Trustees. The Massachusetts Declaration of Trust also provides for
indemnification out of the trust property. Thus, GSAM believes the risk of
shareholder liability is remote for shareholders of the Massachusetts Trust
(although not as remote as it would be for shareholders of the Delaware Trust).

LIABILITY OF TRUSTEES

The Delaware Trust Instrument provides that the Trustees will not be liable to
any person other than the Delaware Trust or a shareholder and that a Trustee
will not be liable for any act as a Trustee. However, nothing in the Delaware
Trust Instrument protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. The Massachusetts Declaration of Trust provides that its Trustees
will not be liable for errors of judgment or mistakes of fact or law, subject to
substantially the same provisions concerning bad faith, gross negligence and
reckless disregard as those described above.

- -----------------------------------------------------
PROPOSAL 4: APPROVAL OF AN INVESTMENT POLICY PERMITTING EACH FUND TO INVEST ALL
ITS ASSETS IN A SINGLE OPEN-END MUTUAL FUND; AND APPROVAL OF A
CORRESPONDING AMENDMENT TO THE MASSACHUSETTS DECLARATION OF TRUST
- -----------------------------------------------------

GENERAL

The Trustees have approved, subject to shareholder approval, the adoption of a
new fundamental investment policy that would permit each Fund to pool its assets
with other funds, in a single portfolio (the "Pooled Fund"). The Delaware Trust
Instrument permits investment of all of a Fund's assets in a Pooled Fund, but if
the proposal to adopt a new fundamental investment policy is not adopted, the
Funds would not be able to take advantage of such flexibility. If the proposal
is approved, each Fund will be authorized to invest substantially all of its
assets in a corresponding Pooled Fund that would invest in the same type of
securities (and have substantially the same objective, restrictions and
policies) as the Fund. The primary purpose of pooling would be to achieve
operational efficiencies. Approval of the fundamental

<PAGE>

investment policy would also constitute approval of an amendment to the
Massachusetts Declaration of Trust that would permit investment in a Pooled Fund
without further shareholder approval.

BACKGROUND. Several mutual funds have developed so-called master-feeder
structures under which they invest all their assets in a single pooled
investment. For example, funds offering different types of shareholder services
might pool their investments. This structure allows several funds with different
features, but the same investment objective, restrictions and policies, to
combine their investments instead of managing them separately. A Fund would
combine its investments with those of other funds by investing all of its assets
in the same Pooled Fund, which would be organized and registered as an open-end
management investment company (a mutual fund).

PURPOSE OF THE PROPOSAL. GSAM regularly reviews various options for structuring
mutual funds to take maximum advantage of potential efficiencies. The Funds
currently take advantage of the ability to issue multiple classes of shares,
which offer many of the same advantages as investing in a Pooled Fund. While
neither the Trustees nor GSAM have determined that any Fund should invest in a
Pooled Fund, the Trustees believe that it could be in the best interests of the
Funds to adopt such a structure to allow for investing by one or more of the
Funds in a Pooled Fund at a future date without the cost of again obtaining
shareholder approval.

At present, some of the Funds' fundamental investment restrictions and policies
prevent a Fund from investing all of its assets in another investment company,
and require a vote of shareholders of the Fund before such a master-feeder
structure could be adopted. Similarly, the Massachusetts Declaration of Trust
requires shareholder approval of any transaction involving the sale of
substantially all of the assets of a Fund to the Pooled Fund. To avoid the costs
associated with a subsequent shareholder meeting, the Trustees recommend that
shareholders of each Fund vote to permit the assets of such Fund to be invested
in a Pooled Fund, without an additional vote of Fund shareholders, if the
Trustees determine the adoption of a master-feeder structure to be in the best
interest of the Fund and its shareholders. If shareholders approve this
Proposal, any fundamental and non-fundamental restrictions and policies of the
Funds that currently prohibit investment in shares of a single investment
company would be appropriately modified to permit investment in Pooled Funds.
These policies include, for example, a Fund's restrictions on investments in:
the securities of any one issuer; the securities of any issuer if more than 10%
of such issuer's voting securities are held by a Fund; companies for purposes of
control; and issuers in any one industry; as well as the
restriction concerning acting as an underwriter.

<PAGE>

A Fund's methods of operation and shareholder services would not be materially
affected by its investment in a Pooled Fund, except that the assets of the Fund
would be managed as part of a larger pool. If a Fund invested all of its assets
in a Pooled Fund, it is currently anticipated that the Fund would hold only a
single investment security and the Pooled Fund would directly invest in
individual investment securities. The investment advisory and administrative
services provided to a Fund by GSAM or its affiliates would continue to be
provided at the same or lower aggregate cost, but the investment advisory
services would be provided to and paid for by the Pooled Fund rather than the
Fund. The Pooled Fund would be managed by GSAM or an affiliate. The Trustees
would retain the right to withdraw the Fund's investment from the respective
Pooled Fund at any time. The Fund would then resume investing directly in
securities as it does currently.

AT PRESENT, THE TRUSTEES ARE NOT CONSIDERING ANY PROPOSAL TO ADOPT A
MASTER-FEEDER STRUCTURE. The Trustees will authorize investing a Fund's assets
in a Pooled Fund only if they determine that pooling is in the best interests of
a Fund and its shareholders and if they determine that the investment will not
have material adverse tax or other consequences to the Fund or the shareholders.
In determining whether a Fund should invest in a Pooled Fund, the Trustees will
consider, among other things, the opportunity to reduce costs and to achieve
operational efficiencies. The Trustees will not authorize investment in a Pooled
Fund if doing so would increase costs to shareholders; unless, of course, they
perceive a corresponding increase in benefits to shareholders. There is no
assurance that cost reductions or increased efficiencies will be achieved.

GSAM or its affiliates may benefit from the use of a Pooled Fund if overall
assets are increased, since GSAM's fees under the existing management agreements
are based on assets under management. Also, GSAM's or its affiliates' expenses
of providing investment advisory and other services to a Fund may be reduced. If
a Fund's investment in a Pooled Fund were to reduce the expenses of GSAM or its
affiliates (as the case may be) materially, the Trustees would consider whether
a reduction of the management fee paid to GSAM or its affiliates (as the case
may be) would be appropriate.

PROPOSED FUNDAMENTAL POLICY

In order to permit one or more of the Funds to invest in a Pooled Fund at a
future date, the Trustees recommend that the shareholders of each Fund adopt the
following fundamental policy:

<PAGE>

Each Fund may, notwithstanding any other fundamental investment restriction or
policy, invest some or all of its assets in a single open-end investment
company or series thereof with substantially the same investment objectives,
restrictions and policies as the Fund.

PROPOSED AMENDMENT TO THE MASSACHUSETTS DECLARATION OF TRUST

In order to permit the Trust to invest in a Pooled Fund at a future date, the
Trustees recommend that the shareholders adopt the following amendment to the
Massachusetts Declaration of Trust:

Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by applicable law, invest all or a
portion of the Trust Property of any Series, or dispose of all or a portion of
the Trust Property of any Series, and invest the proceeds of such disposition
in interests issued by one or more other investment companies registered under
the 1940 Act. Any such other investment company may (but need not) be a trust
(formed under the laws of any state or jurisdiction) (or subtrust thereof)
which is classified as a partnership for federal income tax purposes.
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by applicable law, cause a Series
that is organized in the master/feeder fund structure to withdraw or redeem its
Trust Property from the master fund and cause such series to invest its Trust
Property directly in securities and other financial instruments or in another
master fund.

BOARD OF TRUSTEES' EVALUATION AND RECOMMENDATION

At a meeting held on January 28, 1997, after considering the matters discussed
above and other matters deemed to be relevant, the Trustees, including the
Independent Trustees, unanimously adopted, and voted to recommend to the
shareholders that they adopt, (a) the proposed new fundamental investment policy
and (b) the amendment to the Massachusetts Declaration of Trust that would
permit any Fund, subject to future review by the Trustees, as described above,
to invest all of its assets in an open-end investment company with substantially
the same investment objectives, restrictions and policies as the Fund. In taking
such action and making such recommendations, the Trustees took into
consideration that the proposed modifications may provide operational
efficiencies and facilitate the introduction of new Goldman Sachs mutual funds
and thereby increase the investment options available to shareholders. The
Trustees believe that the ability to use a master-feeder structure may be
beneficial to present shareholders of the Funds as well as potential investors.

<PAGE>

Except as described in this Proxy Statement, approval of this Proposal 4 will
not change any of the Trustees, officers, investment programs and services or
operations that are described in the Funds' current Prospectuses and this Proxy
Statement.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND ADOPT A
NEW FUNDAMENTAL INVESTMENT POLICY TO PERMIT THE FUND TO INVEST ALL OF ITS ASSETS
IN A SINGLE OPEN-END INVESTMENT COMPANY AND APPROVE A CORRESPONDING AMENDMENT TO
THE MASSACHUSETTS DECLARATION OF TRUST.

REQUIRED VOTE

Approval of the proposal to adopt the new fundamental investment policy
requires the vote of a 1940 Act Majority of the shares (described in Proposal 3)
of each Fund voting separately. Approval of the amendment to the Massachusetts
Declaration of Trust requires the vote of a majority of the shares of the Trust
voting together as a single class. If the proposal is not approved by one or
more of the Funds, the Trustees will consider what further action, if any, will
be taken.

- -----------------------------------------------------
PROPOSALS 5(A) - (K): PROPOSED AMENDMENT AND RESTATEMENT OF THE FUNDS'
INVESTMENT RESTRICTIONS
- -----------------------------------------------------

GENERAL

The Trustees recommend to shareholders of each Fund that they approve proposals
to amend and restate each Fund's investment restrictions. These investment
restrictions are fundamental policies that may be changed by a Fund only with
the approval of a 1940 Act Majority of the outstanding shares of that Fund. The
restated investment restrictions, assuming that each of the proposed amendments
is adopted, are set forth in Appendix E to this Proxy Statement.

<PAGE>

restrictions as well as administration of the restrictions. The proposals would
also result in a clearer and simpler statement of these restrictions.

Another reason for restating the Funds' investment restrictions is to delete
the policies adopted in response to state "Blue Sky" laws and regulations
restricting certain types of investment company practices and investments. The
states no longer have the power to enforce these restrictions, and the
elimination of the restrictions may expand the range of investment opportunities
and techniques available in connection with the management of the Funds'
portfolios.

The final reason for restating the Funds' investment restrictions is to
recharacterize certain previously adopted fundamental policies as
non-fundamental. Certain of the investment restrictions are being liberalized to
the extent permitted under the 1940 Act. This recharacterization and
liberalization will grant the Trustees the ability to change these
non-fundamental policies as needed, without seeking approval from shareholders.

The following is a summary of the proposed changes to each of the investment
restrictions. The restrictions are summarized individually below, and will be
voted upon separately. In order to fully achieve the benefits set forth above,
the Trustees recommend that shareholders approve each of the proposals.

- -----------------------------------------------------
PROPOSAL 5(A): INVESTMENT POLICY ON ISSUER DIVERSIFICATION
- -----------------------------------------------------

To be diversified under the 1940 Act, a Fund must not, with respect to 75% of
its total assets, invest more than 5% of its total assets in the securities of
any one issuer or acquire more than 10% of the outstanding voting securities of
any one issuer. These restrictions apply only at the time of investment. A Fund
may invest up to 25% of its total assets without regard to these restrictions.
In addition, these restrictions do not apply to holdings of or investments in
cash, cash items, U.S. Government securities or securities of other investment
companies. The proposal simplifies the contents of the current restrictions
without changing their substance. As proposed, the restriction would require
diversification only to the extent required under the 1940 Act. Additional
diversification requirements are required for the Funds to be treated as money
market funds and as regulated investment companies for federal tax purposes.
These requirements are not required to be reflected in the proposed investment
restrictions and will not be affected by the proposal. The Trustees propose that
each Fund adopt the following investment restriction in lieu of its current
fundamental policy:

The Fund may not make any investment inconsistent with the Fund's
classification as a diversified company under the Investment Company Act of
1940, as amended (the "Act"). This restriction does not, however, apply to any
Fund classified as a non-diversified company under the Act.

<PAGE>

- -----------------------------------------------------
PROPOSAL 5(B): INVESTMENT POLICY ON INDUSTRY CONCENTRATION
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without shareholder approval, stating whether or not more than 25% of
the investment company's assets may be invested (concentrated) in the securities
of issuers in any one industry. Except for Financial Square Money Market Fund
and Financial Square Money Market Plus Fund (which, as a matter of fundamental
policy, concentrate their investments in bank obligations), each of the Funds
has adopted a fundamental policy prohibiting it from investing 25% or more of
its total assets in the securities of issuers in any one industry. The foregoing
limitation does not apply to U.S. Government securities and obligations issued
by banks. The proposal also would clarify that the Financial Square Money Market
and Financial Square Money Market Plus Funds' concentration policy applies to
obligations guaranteed by banks and not merely to obligations issued by banks.
The proposal clarifies the content of the current policies without changing
their substance. The Trustees propose that each Fund adopt the following
investment policy in lieu of its current fundamental policy:

The Fund may not purchase securities if such purchase would cause more than
25% or more in the aggregate of the market value of the total assets of the
Fund to be invested in the securities of one or more issuers having their
principal business activities in the same industry. However, there is no
limitation with respect to, and each Fund (other than Financial Square Money
Market Fund and Financial Square Money Market Plus Fund) reserves freedom of
action, when otherwise consistent with its investment policies, to concentrate
its investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, obligations (other than commercial paper) issued
by U.S. banks and U.S. branches of U.S. or foreign banks and repurchase
agreements and securities loans collateralized by such U.S. Government
obligations or such bank obligations. Each of Financial Square Money Market
Fund and Financial Square Money Market Plus Fund may concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements and securities loans
collateralized by such obligations and will invest more than 25% of its total
assets in obligations issued or guaranteed by banks (whether foreign or
domestic) and repurchase agreements and securities loans collateralized by such
obligations. However, if adverse economic conditions prevail in the banking
industry, each of Financial Square Money Market Fund and Financial Square Money
Market Plus Fund may, for defensive purposes, temporarily invest less than 25%
of the value of its total assets in bank obligations. For

<PAGE>

purposes of this restriction, state and municipal governments and their
agencies, authorities and instrumentalities are not deemed to be industries;
telephone companies are considered to be a separate industry from water, gas or
electric utilities; personal credit finance companies and business credit
finance companies are deemed to be separate industries; and wholly owned
finance companies are considered to be in the industry of their parents if
their activities are primarily related to financing the activities of their
parents.

- -----------------------------------------------------
PROPOSAL 5(C): INVESTMENT POLICIES ON BORROWING, MARGIN PURCHASES AND PLEDGING
ASSETS
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without shareholder approval, on borrowing. The 1940 Act prohibits an
open-end investment company from issuing any senior security (including debt),
except that an open-end investment company may borrow from banks in an amount
not exceeding33 1/3% of its total assets. The Trustees recommend that the Funds
adopt a borrowing policy that permits borrowing to the maximum extent permitted
by the 1940 Act. Adoption of a more liberal policy does not mean, however, that
the Funds intend to borrow and incur the extra costs and risks of leveraging the
Funds.

Each Fund also has a fundamental investment policy limiting the purchase of
securities on margin. Margin purchases involve the purchase of securities with
money borrowed from a broker. "Margin" is the cash or eligible securities that
the borrower places with its broker as collateral for this loan. Each Fund's
current fundamental policy prohibits the Fund from purchasing securities on
margin, except for initial and variation margin payments made in connection with
the purchase and sale of futures contracts and options on futures contracts.
Mutual funds are also permitted to obtain such short-term credits as may be
necessary for the clearance of transactions. With these exceptions, mutual funds
are prohibited from entering into most types of margin purchases.

As restated, the Funds' restriction on borrowing and margin purchases would
provide as follows:

The Fund may not borrow money, except that (a) the Fund may borrow from banks
(as defined in the Act) or through reverse repurchase agreements in amounts up
to33 1/3% of its total assets (including the amount borrowed), (b) the Fund
may, to the extent permitted by applicable law, borrow up to an additional 5%
of its total assets for temporary purposes, (c) the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of portfolio securities and (d) the Fund may purchase securities on margin to
the extent permitted by applicable

<PAGE>

law. The Funds' fundamental policy on pledging their assets was a requirement
imposed by state securities laws that no longer applies to the Funds.
Consequently, it is proposed that such restriction be eliminated.

- -----------------------------------------------------
PROPOSAL 5(D): INVESTMENT POLICY ON LOANS
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without shareholder approval, on loans. The proposal clarifies the
contents of the Funds' current policies on loans without changing their
substance. The Trustees propose that each Fund adopt the following investment
policy in lieu of its current fundamental policy:

The Fund may not make loans, except through (a) the purchase of debt
obligations in accordance with the Fund's investment objective and policies,
(b) repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities as permitted by applicable law.

- -----------------------------------------------------
PROPOSAL 5(E): INVESTMENT POLICY ON UNDERWRITING
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without shareholder approval, on underwriting securities issued by
others. The proposed restatement of the Funds' policy, which does not represent
a material change in investment policy, would prohibit the Funds from
underwriting the securities of others (which is not a part of the normal
activities of a mutual fund). As restated, each Fund's investment restriction
would provide as follows:

The Fund may not underwrite securities issued by others, except to the extent
that the sale of portfolio securities by the Fund may be deemed to be an
underwriting.

- -----------------------------------------------------
PROPOSAL 5(F): INVESTMENT POLICY ON REAL ESTATE AND OIL AND GAS
- -----------------------------------------------------

The 1940 Act requires that each investment company adopt a policy, which cannot
be changed without shareholder approval, on acquiring interests in real estate.
The existing restriction on investment in oil and gas interests was imposed by
state law and is no longer required. While no Fund intends to invest in such
interests, it is proposed that the restriction on oil and gas interests be
eliminated. The proposed real estate policy does not represent a material change
in investment policy for any Fund except that it permits each Fund to invest in
securities issued by real estate investment trusts. Despite this

<PAGE>

change to the restriction, no Fund currently intends to invest in such
securities. As restated, each Fund's investment restriction would provide as
follows:

The Fund may not purchase, hold or deal in real estate, although the Fund may
purchase and sell securities that are secured by real estate or interests
therein, securities of real estate investment trusts and mortgage-related
securities and may hold and sell real estate acquired by the Fund as a result
of the ownership of securities.

- -----------------------------------------------------
PROPOSAL 5(G): INVESTMENT POLICY ON COMMODITIES
- -----------------------------------------------------

The 1940 Act requires that the Funds have a fundamental investment policy
regarding investments in commodities. As money market funds, the Funds do not
invest in commodities or commodity contracts. The Funds do not intend in the
future to invest in physical commodities but wish to have the flexibility to
invest in financial futures to the extent that such instruments are consistent
with the Funds' treatment as money market funds. Any financial futures contract
or related option is considered to be a commodity contract. Other types of
financial instruments such as forward commitments and swaps might also be deemed
to be commodity contract. The proposal would also permit the Funds' investment
restrictions with respect to commodities to be consistent with those of the
other funds in the Goldman Sachs Group of Funds.

As amended, the Funds' investment restriction with respect to commodities would
be as follows:

The Fund may not invest in commodities or commodity contracts, except that the
Fund may invest in currency and financial instruments and contracts that are
commodities or commodity contracts.

- -----------------------------------------------------
PROPOSAL 5(H): INVESTMENT POLICY ON SENIOR SECURITIES
- -----------------------------------------------------

The 1940 Act restricts the ability of an open-end investment company to issue
"senior securities" as defined in the 1940 Act and requires that an investment
company adopt a fundamental policy with respect to the issuance of such
securities. The proposed amendment would clarify that the Funds are permitted to
issue senior securities to the extent permitted by applicable law. As discussed
above, under the 1940 Act an open-end fund is not permitted to issue senior
securities except for borrowings from banks. In addition to permitting the
borrowing contemplated above, the amendment clarifies that the Funds do not
consider certain investment practices to be senior securities if such practices
are conducted in a manner consistent with current law and the

<PAGE>

interpretive positions of the SEC. As amended, the investment restriction of
each Fund would provide as follows:

The Fund may not issue senior securities to the extent such issuance would
violate applicable law.

- -----------------------------------------------------
PROPOSAL 5(I): INVESTMENT POLICY CONCERNING SHORT SALES OF SECURITIES
- -----------------------------------------------------

Each Fund has a fundamental investment restriction prohibiting the Fund from
making short sales or maintaining a short position. Under the 1940 Act,
restrictions on short sales are not required to be fundamental. Therefore, the
Trustees are recommending that shareholders vote to eliminate the Funds'
prohibition on short sales and the maintenance of short positions as a
fundamental restriction.

In a short sale, an investor sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. If this proposal is
approved by shareholders, the Trustees intend to adopt a non-fundamental
investment restriction that is substantively identical to the Funds' current
fundamental restriction on short sales and the maintenance of short positions.
By making the restriction non-fundamental, the Trustees will be able to change
the restriction in the future (if they determine that a change is appropriate)
without obtaining shareholder approval. This will give the Funds greater
flexibility to adapt to market changes, including changes in the investment
products available to the Funds.

- -----------------------------------------------------
PROPOSAL 5(J): INVESTMENT POLICY ON OPTIONS
- -----------------------------------------------------

To comply with state securities laws in effect at the time of its organization,
each Fund adopted a fundamental restriction limiting the Fund's ability to
invest in or write put and call options. This restriction is no longer required,
is obsolete and is inconsistent with the investment restrictions of all of the
other funds in the Goldman Sachs Group of Funds. While the elimination of this
investment restriction will not have any immediate impact upon the Funds'
investments, it will permit the Trustees in the future to allow the Funds to
engage in such activities without shareholder approval in the event that options
become an appropriate investment for the Funds.

- -----------------------------------------------------
PROPOSAL 5(K): INVESTMENTS TO EXERCISE CONTROL
- -----------------------------------------------------

The Funds have a fundamental policy not to invest in companies for the purpose
of exercising control or management. Although the Funds have no intention of
investing for such purpose, this restriction is not required by the 1940 Act and
is no longer required by state law. Consequently, the Trustees recommend that it
be eliminated.

<PAGE>

TRUSTEES' RECOMMENDATION

The Trustees believe that each proposed amendment to the Funds' investment
restrictions will more clearly reflect current regulatory practice, will provide
a more complete range of investment opportunities and will clarify and simplify
the restrictions.

THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF EACH FUND VOTE "FOR"
THE ADOPTION OF EACH OF THE PROPOSED AMENDED INVESTMENT RESTRICTIONS.

REQUIRED VOTE

Approval of each proposed amendment to a Fund's fundamental investment
restrictions requires the affirmative vote of a 1940 Act Majority of that Fund's
outstanding shares. If a proposed amendment is not approved with respect to a
Fund, the current investment restriction will continue in effect unchanged for
that Fund.

- -----------------------------------------------------
PROPOSAL 6: APPROVAL OF AMENDED AND RESTATED MANAGEMENT AGREEMENTS FOR THE FUNDS

- -----------------------------------------------------

GENERAL

At the meeting of the Trustees held on January 28, 1997, the Trustees,
including the Independent Trustees, voted to approve, and to recommend that the
shareholders of each of the Funds approve, the adoption of amended and restated
investment advisory agreements (the "Management Agreements"), each in the form
attached to this Proxy Statement as Appendix F.

The terms of the Management Agreements are substantially identical to those of
the Funds' existing investment advisory agreements (the "Existing Advisory
Agreements"), except that each Management Agreement provides for: (1) the
affected Fund's investment adviser to provide the Fund with administrative
services and (2) an increase in the Fund's investment advisory fee rate. This
increase is equal to the fee rate currently payable by the Fund pursuant to a
separate administration agreement between it and Goldman Sachs Asset Management
("GSAM") (each an "Administration Agreement"). If shareholders approve this
proposal, the Administration Agreements will be terminated. CONSEQUENTLY, THE
OVERALL SERVICES PROVIDED AND FEES PAID UNDER THE MANAGEMENT AGREE MENTS WILL BE
IDENTICAL TO THE SERVICES PROVIDED AND

<PAGE>

FEES PAID CURRENTLY UNDER THE EXISTING ADVISORY AGREEMENTS AND ADMINISTRATION
AGREEMENTS. The Funds will continue under the Management Agreements to be
managed by GSAM.

Replacing each Fund's Existing Advisory Agreement and Administration Agreement
with a Management Agreement that covers both advisory and administrative
services will bring the Funds' contractual arrangements into conformity with
those of the other funds in the Goldman Sachs Group of Funds. The Trustees
expect such conformity to benefit the Funds by facilitating legal compliance by
the Funds and GSAM and eliminating the possibility that differences in wording
will cause contractual provisions to be interpreted differently even though they
were intended to have the same meaning. The Trustees also expect that combining
advisory and administrative fees will improve investors' ability to compare the
Funds' expenses with those of other mutual funds that do not pay separate
advisory and administration fees. The Trustees have determined that adopting the
Management Agreements for these purposes is appropriate and beneficial to the
Funds.

Set forth below is a description of material similarities and differences
between (1) the Management Agreements and (2) the Existing Advisory Agreements
and the Administration Agreements, as well as certain additional information.
The description of the Management Agreements is qualified in its entirety by
reference to Appendix F.

MATERIAL SIMILARITIES AND DIFFERENCES BETWEEN THE MANAGEMENT AGREEMENTS AND THE
EXISTING ADVISORY AND ADMINISTRATION AGREEMENTS

SERVICES PROVIDED

Under the Existing Advisory Agreements and the Management Agreements, GSAM
determines what securities are purchased, held and sold by the Funds, subject to
their respective investment objectives, policies and restrictions and to such
policies and instructions as the Funds' Trustees may establish. This involves
providing the Funds with investment research, advice and supervision. GSAM also
is responsible for maintaining books and records with respect to the securities
transactions and for providing the Trustees with periodic and special reports.

Under the Management Agreements, GSAM will also: (i) supervise all non-advisory
operations of each Fund; (ii) provide the Fund with personnel to

<PAGE>

perform such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of the Fund; (iii) arrange for at
the Fund's expense (a) the preparation for the Fund of all required tax returns,
(b) the preparation and submission of reports to existing shareholders and (c)
the periodic updating of the Fund's prospectus and statement of additional
information and the preparation of reports in each case to be filed with the SEC
and other regulatory authorities; (iv) maintain all of the Fund's records; and
(v) provide the Fund with office space and all necessary office equipment and
services.

Each Fund currently receives the administrative services described in the
preceding paragraph from GSAM pursuant to the Fund's Administration Agreement
with GSAM. If shareholders approve this proposal, each Fund will receive these
services pursuant to its Management Agreement with GSAM.

FEES AND EXPENSES

The fee rate payable by each Fund under its Management Agreement is identical
to the aggregate advisory and administration fee rate payable by each Fund under
its Existing Advisory Agreement and Administration Agreement. THUS, SHAREHOLDER
APPROVAL OF THIS PROPOSAL WILL NOT RESULT IN ANY INCREASE IN A FUND'S EXPENSES.
Set forth below are the advisory and administration fees, expressed in dollars
and as a percentage of the Fund's average daily net assets, to which GSAM, as
investment adviser, and GSAM, as administrator, was entitled for the Fund's most
recently completed fiscal year (unaudited):

<TABLE>
<CAPTION>
ADVISORY ADMINISTRATION TOTAL MANAGEMENT
FUND FEE FEE FEES
- ---- ----------------- ---------------- ------------------
DOLLAR % DOLLAR % DOLLAR %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Treasury Obligations
Fund*. . . . . . . . $1,818,606 .075% + $3,152,251 .13% = $ 4,970,857 .205%
Prime Obligations
Fund*. . . . . . . . 3,751,896 .075 + 6,503,286 .13 = 10,255,182 .205
Government Fund* . . 961,772 .075 + 1,667,071 .13 = 2,628,843 .205
Money Market Fund* . 2,295,370 .075 + 3,978,642 .13 = 6,274,012 .205
Tax-Free Money Market
Fund*. . . . . . . . 420,502 .075 + 728,870 .13 = 1,149,372 .205
</TABLE>

- -----------
* Due to voluntary fee reductions by GSAM, each Fund currently is paying
advisory fees at rates lower than the fee rates to which GSAM was entitled for
the Funds' fiscal year ended December 31, 1996. These voluntary fee reductions
may be modified or terminated at any time, but will not be af fected by
shareholder approval of this proposal.

<PAGE>

The Management Agreements require each Fund to pay the percentage of its
average daily net assets shown under the column "Total Advisory and Management
Fees" to GSAM for both advisory and administrative services. See Appendix G for
a list of other mutual funds that are advised by GSAM (including their advisory
fees) and have investment objectives similar to those of the Funds.

Under the Existing Advisory Agreements and the Administration Agreements, GSAM
pays all costs that it incurs in connection with the performance of advisory and
administrative services under the respective agreements, except for the costs of
preparing the Funds' tax returns, preparing and transmitting reports to Fund
shareholders, periodically updating the Funds' prospectuses and statements of
additional information and preparing reports to be filed with the SEC and other
regulatory authorities (collectively, the "Additional Expenses"). Similarly,
under the Administration Agreement, GSAM also pays all transfer agency fees and
costs incurred by the Funds. If the Management Agreements are approved, transfer
agency services would be provided by Goldman Sachs (currently anticipated to be
at no additional cost) under a separate transfer agency agreement. Under the
Management Agreements, GSAM will pay all costs that it incurs in connection with
the performance of advisory and administrative services, except for the
Additional Expenses. Under the Existing Agreements and the Management
Agreements, the Funds will pay all of their own expenses.

Goldman Sachs serves as each Fund's principal underwriter pursuant to separate
distribution agreements. These agreements will not be affected by shareholder
approval of this proposal. The Funds did not pay any brokerage commissions to
affiliates of GSAM during the year ended December 31, 1996.

STANDARD OF LIABILITY

The contractual liability standard that currently applies to GSAM's performance
of advisory and administrative services to the Funds will not change if the
Management Agreements are approved by shareholders. Under both the Existing
Advisory Agreements and Administration Agreements and the Management Agreements,
GSAM will not be liable for any error of judgment or mistake of law or for any
loss suffered by the Fund, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of GSAM in the performance of its duties
or from reckless disregard by GSAM of its duties and obligations under the
agreement.

<PAGE>

ADDITIONAL INFORMATION RELATING TO THE EXISTING ADVISORY AGREEMENTS

The Board of Trustees, including the Independent Trustees, most recently
approved all the Funds' Existing Advisory Agreements at a meeting held on April
25, 1996. The date of each Fund's Existing Advisory Agreement and the date on
which each such agreement was most recently approved by the affected Fund's
shareholder(s) are set forth below.

<TABLE>
<CAPTION>
DATE AGREEMENT LAST
DATE OF APPROVED BY
FUND AGREEMENT SHAREHOLDERS
- ---- ---------- -------------------
<S> <C> <C>
Treasury Obligations Fund 2/8/90* 12/31/94
Prime Obligations Fund . . 2/8/90* 12/31/94
Government Fund . . . . . 2/8/90* 12/31/94
Money Market Fund . . . . 2/8/90* 12/31/94
Tax-Free Money Market Fund 2/8/90* 12/31/94
</TABLE>

- -----------
* The Existing Advisory Agreements for the Funds were amended on December 23,
1994.

Each Fund's Existing Advisory Agreement was approved by its initial shareholder
on the applicable date shown above in order to comply with the 1940 Act's
requirement that investment advisory agreements be approved by shareholders.

TRUSTEES' RECOMMENDATIONS

The Trustees believe that the replacement of the Funds' Existing Advisory
Agreements and Administration Agreements with the Management Agreements is
reasonable, fair and in the best interests of each Fund's shareholders.

THE TRUSTEES RECOMMEND THAT SHAREHOLDERS OF EACH FUND VOTE "FOR" THE PROPOSAL
TO ADOPT THE APPLICABLE MANAGEMENT AGREEMENT.

REQUIRED VOTE

The Funds will vote separately on Proposal 6. Adoption of the proposal as to
any Fund requires the affirmative vote of a 1940 Act Majority of the shares of
such Fund. If the proposed Management Agreement is not approved with respect to
a Fund, the Fund will continue to operate under the Existing Advisory and
Administration Agreements.

<PAGE>

THE INVESTMENT ADVISER

Goldman Sachs Asset Management is a separate operating division of Goldman
Sachs and has its principal business address at One New York Plaza, New York,
New York 10004. Goldman Sachs is a worldwide investment banking firm and has its
principal business address at 85 Broad Street, New York, New York 10004. The
principal executive officers of Goldman Sachs are Jon S. Corzine and Henry M.
Paulson. The principal occupation of Messrs. Corzine and Paulson is the
management of Goldman Sachs. The general partners of Goldman Sachs are The
Goldman Sachs Group, L.P. (a Delaware Limited Partnership) ("GSGLP") and The
Goldman, Sachs & Co. L.L.C. (a Delaware limited liability company) ("GSCLLC").
The principal business address of the executive officers and general partners is
85 Broad Street, New York, New York 10004. The Goldman Sachs Corporation ("GSC")
is the parent company of both GSGLP and GSCLLC. GSGLP is also a parent of
GSCLLC. GSC is the sole general partner of GSGLP.

ADDITIONAL INFORMATION

OTHER BUSINESS

PROXIES AND VOTING AT THE MEETING

The enclosed Proxy is revocable by a shareholder at any time before it is
exercised by written notice to the Trust (addressed to the Secretary at the
Trust's principal executive offices), by executing a superseding proxy or by
attending the Meeting and voting in person. All valid proxies received prior to
the Meeting (including any adjournment thereof) will be voted at the Meeting.
Matters on which a choice has been provided will be voted as indicated on the
Proxy and, if no instruction is given, the persons named as proxies will vote
the shares represented thereby in favor of the matters set forth in each
proposal and will use their best judgment in connection with the transaction of
such other business as may properly come before the Meeting.

<PAGE>

later date. In the event that a quorum is present but sufficient votes in favor
of any of Proposals 1 through 6 have not been received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies with respect to such proposal. Any such adjournment will
require the affirmative vote of a majority of the shares of the Trust (or the
affected Fund) present in person or by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of any such proposal in favor of such an adjournment,
and will vote those proxies required to be voted against any such proposal
against any such adjournment. A shareholder vote may be taken on one or more of
the proposals in this Proxy Statement prior to such adjournment if sufficient
votes for their approval have been received and it is otherwise appropriate.

A majority of the shares entitled to vote shall be a quorum for the transaction
of business at the Meeting, but any lesser number shall be sufficient for
adjournments. Abstentions will be treated as shares that are present and
entitled to vote with respect to each proposal, but will not be counted as a
vote in favor of a proposal. Accordingly, an abstention from voting on a
proposal has the same effect as a vote against the proposal. If a broker or
nominee holding shares in "street name" indicates on the proxy that it does not
have discretionary authority to vote as to a particular proposal, those shares
will not be considered as present and entitled to vote with respect to the
proposal. Accordingly, a "broker non-vote" has no effect on the voting in
determining whether a proposal has been adopted pursuant to subsection (i) of
the 1940 Act Majority definition. In addition, a "broker non-vote" has no effect
on the voting in determining whether a Nominee has been elected a Trustee
pursuant to Proposal 1. However, in determining whether a proposal has been
adopted pursuant to subsection (ii) of the 1940 Act Majority definition, a
"broker non-vote" will have the same effect as a vote against the proposal
because shares represented by a "broker non-vote" are considered outstanding
shares.

MANNER AND COST OF PROXY SOLICITATION

Each Fund will bear its allocable portion of proxy solicitation expenses,
including the cost of preparing, assembling and mailing materials used in
connection with the solicitation of proxies. The Funds will reimburse brokers,
nominees and similar record holders for their reasonable expenses incurred in
connection with forwarding proxy materials to beneficial holders. In addition to
the solicitation by use of the mails, certain officers and employees of Goldman
Sachs, none of whom will receive compensation for their services other than
their regular salaries, may solicit the return of proxies personally or by
telephone or fax.

<PAGE>

In addition to the solicitation of proxies by mail or in person, the Trust may
also arrange to have votes recorded by telephone by officers and employees of
the Trust, personnel of GSAM and the transfer agent or agents hired by the
transfer agent for such purpose. The telephone voting procedure is designed to
authenticate a shareholder's identity, to allow a shareholder to authorize the
voting of shares in accordance with the shareholder's instructions and to
confirm that the voting instructions have been properly recorded. A shareholder
will be called on a recorded line at the telephone number shown in the transfer
agent's records for the account and could be asked for the shareholder's Social
Security number or other identifying information. The shareholder will then be
given an opportunity to authorize proxies to vote his shares at the Meeting in
accordance with the shareholder's instructions. To ensure that the shareholder's
instructions have been recorded correctly, the shareholder will also receive a
confirmation of the voting instructions in the mail. A special telephone number
will be available in case the voting information contained in the confirmation
is incorrect. If the shareholder decides after voting by telephone to attend the
Meeting, the shareholder can revoke the proxy at that time and vote the shares
at the Meeting. If you have any questions regarding the enclosed proxy or need
assistance in voting your shares, please contact our proxy solicitor, D.F. King
& Co. at (800) 628-8509.

SHAREHOLDER PROPOSALS

Neither the Trust nor the Delaware Trust is required, nor does either intend
to, hold annual meetings of shareholders each year. Instead, meetings will be
held only when and if required. Any shareholders desiring to present a proposal
for consideration at the next meeting of shareholders of their respective Fund
must submit the proposal in writing, so that it is received by the appropriate
Fund within a reasonable time before any meeting.

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.

February 13, 1997

<PAGE>

APPENDIX A

As of January 31, 1997, each Fund had the following number of shares
outstanding:

<TABLE>
<CAPTION>
FUND OUTSTANDING SHARES
- ---- --------------------
<S> <C>
FS Prime Obligations Fund . . . . 5,290,630,389.67
FS Government Fund . . . . . . . . 1,694,221,423.22
FS Treasury Obligations Fund . . . 3,038,233,537.70
FS Money Market Fund . . . . . . . 3,664,279,184.33
FS Tax-Free Money Market Fund . 631,860,855.98
</TABLE>

A-1
<PAGE>

APPENDIX B

As of January 31, 1997, the following persons or entities owned beneficially or
of record more than 5% of the outstanding shares, as applicable, of each Fund:

FS TAX-FREE MONEY MARKET FUND

<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
OF OUTSTANDING SHARES
--------------------------
AMOUNT PERCENTAGE
SHAREHOLDER NAMES AND ADDRESSES OF SHARES OF SHARES
------------------------------- -------------- ------------
<S> <C> <C>
Associated Bank . . . . . . . . 33,069,653.00 5.23
Hard & Co.
PO Box 1007
Neenah, WI 54957-1007
Hilliard Lyons Trust . . . . . . 33,996,391.75 5.38
PO Box 32760
Louisville, KY 40232-2760
Mercantile Bank of St. Louis, NA 60,838,227.61 9.63
Mandell & Company
PO Box 387 MPO
St. Louis, MO 63101
Summit Bank . . . . . . . . . 51,941,678.25 8.22
Trust Operations, 7th floor
PO Box 821
Hackensack, NJ 07602-0821
Commerce Bank of Kansas City, NA 118,775,525.00 18.80
PO Box 248
Kansas City, MO 64141-0001
</TABLE>

B-1
<PAGE>

FS MONEY MARKET FUND

<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
OF OUTSTANDING SHARES
--------------------------
AMOUNT PERCENTAGE
SHAREHOLDER NAMES AND ADDRESSES OF SHARES OF SHARES
- ------------------------------- -------------- ------------
<S> <C> <C>
US West, Inc. . . . . . . . . 215,400,000.00 5.88
7800 E Orchard Rd Ste 290
Englewood, CO 80111-2533
Wal-Mart Stores, Inc. . . . . 200,000,000.00 5.46
702 SW 8th Street
Bentonville, AR 72716
Citicorp Trust NA . . . . . . 254,033,000.00 6.93
400 Royal Palm Way floor 3
Palm Beach, FL 33480-4140
Chicago Trust Company . . . . 294,109,013.32 8.03
171 N Clark St #5CA
Chicago, IL 60601-3203
</TABLE>

FS PRIME OBLIGATIONS FUND

<TABLE>
<CAPTION>
<S> <C> <C>
Citicorp Trust NA . . . . . . . 357,635,994.00 6.76
400 Royal Palm Way Floor 3
Palm Beach, FL 33480-4140
Commerce Bank of Kansas City, NA 468,527,013.03 8.86
PO Box 248
Kansas City, MO 64141-0001
MFS Communications Co. Inc.. . . 334,659,194.04 6.33
11808 Miracle Hills Dr
Omaha, NE 68154-4403
University of Texas Systems. . . 525,401,206.93 9.93
201 W 7th St
Austin, TX 78701-2902
</TABLE>

B-2
<PAGE>

FS TREASURY OBLIGATIONS FUND

FS GOVERNMENT FUND

<TABLE>
<CAPTION>
<S> <C> <C>
Chicago Trust Company . . 398,290,572.55 23.51
171 N Clark St #5CA
Chicago, IL 60601-3203
Texas State Treasury . . 204,900,000.00 12.09
PO Box 12608
Austin, TX 78711-2608
</TABLE>

B-3
<PAGE>

APPENDIX C

The information as to beneficial ownership set forth in the chart below is
based on statements furnished to the Funds by the Trustees. Each has all voting
and investment powers with respect to the shares indicated. All of the
information is as of January 31, 1997 and has been rounded to the nearest whole
share.

None of the Trustees beneficially owned individually nor did the Trustees
beneficially own as a group more than of one percent of the outstanding shares
of any of the Funds as of January 31, 1997.

<TABLE>
<CAPTION>
FUND BAKHRU SMART SPRINGER STRUBEL GRIP SHUCH FORD MCPHERSON MCNULTY
- ---- ------ ----- -------- ------- ---- ------- ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FS Prime Obligations
Fund. . . . . . . .

FS Treasury
Obligations Fund .

FS Government
Fund . . . . . . .

FS Money Market
Fund . . . . . . . 522,803

FS Tax-Free Money
Market Fund . . . .
</TABLE>

C-1
<PAGE>

APPENDIX D

AGREEMENT AND PLAN OF REORGANIZATION, CONVERSION AND TERMINATION

This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1) of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and is intended to effect the reorganization (a
"Reorganization") of each Fund as a new series of the Trust (each a "Successor
Fund" and collectively the "Successor Funds"). Each Reorganization will include
the transfer of all of the assets of a Fund to a corresponding Successor Fund of
the Trust solely in exchange for (1) the assumption by the Successor Fund of all
liabilities of the Fund and (2) the issuance by the Trust to the Fund of shares
of beneficial interest of the Successor Fund. The aggregate number of shares of
each class of the Successor Fund (the "Successor Fund Shares") issued to the
Fund will be equal to the number of shares of beneficial interest ("Shares") of
the corresponding Fund class outstanding immediately before the Reorganization.
These transactions will be immediately followed by a pro rata distribution by
each Fund of the Successor Fund Shares it receives in the exchange described
above to the holders of corresponding Fund Shares in exchange for those Fund
Shares, in liquidation of each Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.

In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows.

1. TRANSFER OF ASSETS OF THE FUNDS IN EXCHANGE FOR ASSUMPTION OF LIABILITIES AND
ISSUANCE OF SUCCESSOR FUND SHARES

D-1
<PAGE>

Successor Fund shall assume all of the liabilities of such Fund, whether
contingent or otherwise, then existing and (2) the Trust shall issue Successor
Fund Shares to the Fund. The number of Successor Fund Shares of each class to be
issued by the Trust on behalf of each Successor Fund will be identical to the
number of Shares of the corresponding class and Fund outstanding on the Closing
Date provided for in paragraph 3.1. Such transactions shall take place at the
Closing provided for in paragraph 3.1.

1.3 Immediately after delivery to each Fund of corresponding Successor Fund
Shares, a duly authorized officer of Registrant shall cause each Fund, as the
sole shareholder of the corresponding Successor Fund, to (i) elect the Trustees
of the Trust; (ii) ratify the selection of the Trust's independent accountants;
(iii) approve an investment advisory agreement and, if applicable, a subadvisory
agreement for the Successor Fund in substantially the same form as the
investment advisory agreement and, if applicable, a subadvisory agreement in
effect with respect to the Fund immediately prior to the closing of the
reorganization, including any changes thereto approved by the shareholders of
the Fund at the meeting of Shareholders to be held on April 1, 1997; (iv)
approve distribution and authorized dealer service plans for the Class A Shares,
if any, of the Successor Fund in substantially the same form as the distribution
and authorized dealer service plans currently in effect with respect to the
Class A Shares of the Fund; (v) approve distribution and authorized dealer
service plans for the Class B Shares, if any, of the Successor Fund in
substantially the same form as the distribution and authorized dealer service
plans currently in effect with respect to the Class B Shares of the Fund; (vi)
approve a preferred administration plan for the preferred administration shares,
if any, of the Successor Fund in substantially the same form as the preferred
administration plan currently in effect with respect to the Preferred
Administration Shares of the Fund; (vii) approve an administration plan with
respect to the Administration Shares, if any, of the Successor Fund in
substantially the same form as the administration plan currently in effect for
Administration Shares of the Fund; (viii) approve a service plan with respect to
the Service Shares, if any, of the Successor Fund in substantially the same form
as the service plan currently in effect for Service Shares of the Fund; and (ix)
adopt investment objectives, investment policies and

D-2
<PAGE>

investment restrictions which are substantially identical to those of the Fund
immediately prior to the closing of the reorganization, including any changes
thereto approved by the shareholders of the Fund at the meeting of shareholders
to be held on April 1, 1997. On or prior to the Closing Date, the Trust shall,
on its own behalf or on behalf of the applicable Successor Fund, either enter
into transfer agency, subtransfer agency, custodian and subcustodian agreements,
agreement with broker-dealers and Service Organizations and any other agreement
pursuant to which services are rendered to the Registrant with substantially the
same terms as the agreements to which the Registrant is a party as of the
Closing Date or assume the Registrant's obligations under such agreements. The
Trust shall also adopt, on its own behalf or on behalf of the applicable
Successor Fund, on or prior to the Closing Date, all policies and procedures, in
effect with respect to the Registrant or any of the Funds as of the Closing
Date.

1.5 Ownership of the Successor Fund Shares by each Successor Fund Shareholder
shall be recorded separately on the books of Goldman, Sachs & Co. ("Goldman
Sachs"), as the Trust's transfer agent.

1.7 Fund Shareholders holding certificates representing their ownership of any
class of Shares of a Fund shall surrender such certificates or deliver an

D-3
<PAGE>

affidavit with respect to lost certificates, in such form and accompanied by
such surety bonds as Registrant may require (collectively, an "Affidavit"), to
Registrant prior to the Closing Date. Any Fund Share certificate which remains
outstanding on the Closing Date shall be deemed to be cancelled, shall no longer
evidence ownership of any Shares of the Fund and shall instead evidence
ownership of corresponding Successor Fund Shares. Unless and until any such
certificate shall be so surrendered or an Affidavit relating thereto shall be
delivered, dividends and other distributions payable by the applicable Successor
Fund subsequent to the Closing Date with respect to Successor Fund Shares shall
be paid to the holder of such certificate(s), but such shareholders may not
redeem or transfer Successor Fund Shares received in the Reorganization. The
Trust will not issue share certificates in the Reorganization.

1.8 The legal existence of each Fund and the Registrant shall be terminated as
promptly as reasonably practicable after the Closing Date.

2. VALUATION

2.3 All computations of value shall be made by State Street Bank and Trust
Company (the "Custodian"), as custodian for the Funds and the Trust, or the
Fund's investment advisor, in each case as required by the valuation procedures
adopted by the Registrant.

3. CLOSING AND CLOSING DATE

D-4
<PAGE>

to December 31, 1997 as the parties may agree in writing. All acts taking place
at the Closing shall be deemed to take place simultaneously as of the last daily
determination of the net asset value of the Funds or at such other time and or
place as the parties may agree.

D-5
<PAGE>

4. REPRESENTATIONS AND WARRANTIES

4.1 Registrant represents and warrants, on behalf of itself and each Fund, as
follows:

4.1.A. Registrant is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has the
power to own all of its properties and assets and, subject to approval by the
shareholders of the Funds, to perform its obligations under this Agreement.
Registrant is not required to qualify to do business in any jurisdiction in
which it is not so qualified or where failure to qualify would not subject it
or the Funds to any material liability or disability. Registrant has all
necessary federal, state and local authorizations to own all of its properties
and assets and to carry on the business of Registrant and the Funds as now
being conducted. The Funds are duly established and designated series of
Registrant;

4.1.B. Registrant is a registered investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect;

4.1.E. Each Fund has elected to be treated as a regulated in vestment company
under Subchapter M of the Code, has qualified as such for each taxable year
since its inception, and will qualify as such as of the Closing Date;

D-6
<PAGE>

outstanding any options, warrants or other rights to subscribe for or purchase
any shares of beneficial interest of Registrant or any Fund, nor is there
outstanding any security convertible into any of such shares;

4.1.I. The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of Registrant. This Agreement constitutes a valid and binding obligation
of Registrant and each Fund enforceable in accordance with its terms, subject
to the approval of each Fund's shareholders;

4.1.J. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Registrant, on
behalf of the Funds, of the transactions contemplated herein, except such as
shall have been obtained prior to the Closing Date.

4.2 The Trust represents and warrants, on behalf of itself and each
Successor Fund, as follows:

D-7
<PAGE>

4.2.B. The Trust is not, and the execution, delivery and performance of this
Agreement will not result, in violation of any provision of the Declaration of
Trust or Bylaws of the Trust or any agreement, indenture, instrument, contract,
lease or other undertaking to which the Trust is a party or by which the Trust
is bound;

5. COVENANTS OF REGISTRANT AND THE TRUST

5.1 Registrant covenants that the Successor Fund Shares are not being acquired
for the purpose of making any distribution thereof, other than in accordance
with the terms of this Agreement.

5.2 Registrant covenants that it will assist the Trust in obtaining such
information as the Trust reasonably requests concerning the beneficial ownership
of Fund Shares.

5.3 Registrant will, on behalf of the Funds, from time to time as and when
requested by the Trust on behalf of the Successor Funds, execute and deliver,

D-8
<PAGE>

or cause to be executed and delivered, all such assignments and other
instruments, and will take or cause to be taken such further action, as the
Trust may deem necessary or desirable in order to vest in, and confirm to, the
Trust on behalf of the Successor Funds, title to, and possession of, all the
assets of each Fund to be sold, assigned, transferred and delivered to its
corresponding Successor Fund hereunder and otherwise to carry out the intent and
purpose of this Agreement.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT AND THE FUNDS

The obligations of Registrant and each Fund to consummate the transactions
provided for herein shall be subject to the performance by the Trust, on behalf
of the Successor Funds, of all the obligations to be performed by the Trust and
the Successor Funds hereunder on or before the Closing Date and, in addition
thereto, to the following further conditions:

6.1 All representations and warranties of the Trust and each Successor Fund
contained in this Agreement shall be true and correct in all material

D-9
<PAGE>

respects as of the date hereof and except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date; and

Each of the foregoing conditions precedent may be waived by Registrant.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE SUCCESSOR FUNDS

7.3 Registrant shall have delivered to the Trust on the Closing Date a
certificate executed in Registrant's name by its President or Vice President, in
form and substance satisfactory to the Trust, dated as of the Closing Date, to
the effect that the representations and warranties of Registrant and each Fund
made in this Agreement are true and correct at and as of the Closing Date,

D-10
<PAGE>

except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Trust shall reasonably request.

Each of the foregoing conditions precedent may be waived by the Trust.

8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF REGISTRANT, THE FUNDS, THE
TRUST AND THE SUCCESSOR FUNDS

The obligations of Registrant, the Funds, the Trust and the Successor Funds are
each subject to the further conditions that on or before the Closing Date:

8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of each Fund's Shareholders in accordance with
applicable law;

8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state securities authorities) deemed necessary by the Trust or
Registrant to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the assets or properties of the Trust, the
Funds, Registrant or the Successor Funds, provided that either party hereto may
waive any of such conditions for itself or its respective series;

D-11
<PAGE>

Code, and the Fund and the Successor Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;

8.4.B. No gain or loss will be recognized by any Fund upon (i) the transfer of
all of its assets to its corresponding Successor Fund solely in exchange for
the issuance of Successor Fund Shares to the Fund and the assumption by the
Successor Fund of the Fund's liabilities and (ii) the distribution by the Fund
of such Successor Fund Shares to the Fund Shareholders;

8.4.D. The tax basis of the assets acquired by a Successor Fund from its
corresponding Fund will be, in each instance, the same as the tax basis of
those assets in the Fund's hands immediately prior to the transfer;

8.4.E. The tax holding period of the assets of each Fund in the hands of its
corresponding Successor Fund will, in each instance, include the Fund's tax
holding period for those assets;

8.4.F. Each Fund's Shareholders will not recognize gain or loss upon the
exchange of all of their shares of the Fund solely for Successor Fund Shares as
part of the transaction;

8.4.G. The tax basis of the Successor Fund Shares received by Fund
Shareholders in the transaction will be, for each shareholder, the same as the
tax basis of the Fund Shares surrendered in exchange therefor; and

D-12
<PAGE>

Each of the foregoing conditions precedent to the obligations of a party,
except for the receipt of the opinion of Hale and Dorr LLP set forth in
paragraph 8.4, may be waived by that party.

9. BROKERAGE FEES AND EXPENSES

9.1 The Trust, on behalf of the Successor Funds, and Registrant, on behalf of
the Funds, each represent and warrant to the other that there are no broker's or
finder's fees payable in connection with the transactions contemplated hereby.

10. ENTIRE AGREEMENT

11. TERMINATION

11.1.A. There exists a material breach by the other party of any
representations, warranties or agreements contained herein to be performed at
or prior to the Closing Date; or

11.1.B. A condition expressed precedent to the obligations of the terminating
party has not been met and it reasonably appears that it will not or cannot be
met .

11.1.C. A majority of the members of the Board of Trustees of the Registrant
determine that it is not in the best interest of the Funds or their
shareholders to proceed with the transactions contemplated by this Agreement.

D-13
<PAGE>

12. AMENDMENT

13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT

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

13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.

13.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

13.5 All persons dealing with the Trust, the Funds, Registrant or the Successor
Funds must look solely to the property of the Trust, the Funds, Registrant or
the Successor Funds, respectively, for the enforcement of any claims against the
Trust, the Funds, Registrant or the Successor Funds, as neither the Trustees,
officers, agents nor shareholders of the Trust or Registrant assume any personal
liability for obligations entered into on behalf of the Trust or Registrant,
respectively. No series of Registrant or the Trust shall be responsible for any
obligations assumed by or on behalf of any other series of Regis trant or the
Trust under this Agreement.

D-14
<PAGE>

14. NOTICES

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officer.

GOLDMAN SACHS TRUST, on behalf of the following series:

By: _____________________________

Its: _____________________________

GOLDMAN SACHS MONEY MARKET TRUST on behalf of the following series:

By: ____________________________

Its: ____________________________

D-15
<PAGE>

APPENDIX E

FINANCIAL SQUARE FUNDS
AMENDED AND RESTATED INVESTMENT RESTRICTIONS

The Trust may not on behalf of any Fund:

(1) make any investment inconsistent with the Fund's classification as a
diversified company under the Investment Company Act of 1940, as amended (the
"Act"). This restriction does not, however, apply to any Fund classified as a
non-diversified company under the Act.

(2) purchase securities if such purchase would cause more than 25% or more in
the aggregate of the market value of the total assets of the Fund to be
invested in the securities of one or more issuers having their principal
business activities in the same industry. However, there is no limitation with
respect to, and each Fund (other than Financial Square Money Market Fund and
Financial Square Money Market Plus Fund) reserves freedom of action, when
otherwise consistent with its investment policies, to concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, obligations (other than commercial paper) issued
by U.S. banks and U.S. branches of U.S. or foreign banks and repurchase
agreements and securities loans collateralized by such U.S. Government
obligations or such bank obligations. Each of Financial Square Money Market
Fund and Financial Square Money Market Plus Fund may concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies and instrumentalities and repurchase agreements and securities loans
collateralized by such obligations and will invest more than 25% of the value
of its total assets in obligations issued or guaranteed by banks (whether
foreign or domestic) and repurchase agreements and securities loans
collateralized by such obligations. However, if adverse economic conditions
prevail in the banking industry each of Financial Square Money Market Fund and
Financial Square Money Market Plus Fund may, for defensive purposes,
temporarily invest less than 25% of the value of its total assets in such
obligations. For the purposes of this restriction, state and municipal
governments and their agencies, authorities and instrumentalities are not
deemed to be industries; telephone companies are considered to be a separate
industry from water, gas or electric utilities; personal credit finance
companies and business credit finance companies are deemed to be separate
industries; and wholly owned finance companies are considered to be in the
industry of their parents if their activities are primarily related to
financing the activities of their parents.

(3) borrow money, except that (a) the Fund may borrow from banks (as defined
in the Act) or through reverse repurchase agreements in amounts

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<PAGE>

up to33 1/3% of its total assets (including the amount borrowed), (b) the Fund
may, to the extent permitted by applicable law, borrow up to an additional 5%
of its total assets for temporary purposes, (c) the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and (d) the Fund may purchase securities on margin to
the extent permitted by applicable law.

(4) make loans, except through (a) the purchase of debt obligations in
accordance with each Fund's investment objective and policies, (b) repurchase
agreements with banks, brokers, dealers and other financial institutions, and
(c) loans of securities as permitted by applicable law.

(5) underwrite securities issued by others, except to the extent that the sale
of portfolio securities by a Fund may be deemed to be an underwriting.

(6) purchase, hold or deal in real estate, although a Fund may purchase and
sell securities that are secured by real estate or interests therein,
securities of real estate investment trusts and mortgage-related securities and
may hold and sell real estate acquired by a Fund as a result of the ownership
of securities.

(7) invest in commodities or commodity contracts, except that a Fund may
invest in currency and financial instruments and contracts that are commodities
or commodity contracts.

(8) issue senior securities to the extent such issuance would violate
applicable law.

Each Fund may, notwithstanding any other fundamental investment restriction or
policy, invest some or all of its assets in of a single open-end investment
company or a series thereof with substantially the same invest ment objectives,
restrictions and policies as the Fund.

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<PAGE>

APPENDIX F

FORM OF MANAGEMENT AGREEMENT

[GOLDMAN SACHS TRUST]
[GOLDMAN SACHS MONEY MARKET TRUST]

4900 SEARS TOWER
CHICAGO, ILLINOIS 60606

April 30, 1997

Goldman Sachs Asset Management
One New York Plaza,
New York, New York 10004

Dear Sirs:

[Goldman Sachs Trust] [Goldman Sachs Money Market Trust] (the "Registrant") has
been organized as a [business trust under the laws of the State of Delaware]
[business trust under the laws of the Commonwealth of Massachusetts] to engage
in the business of an investment company. The shares of the Registrant
("Shares") may be divided into multiple series ("Series"), including the Series
listed on Annex A (including any Series added to Annex A in the future, each a
"Fund"). Each Series will represent the interests in a separate portfolio of
securities and other assets. Each Series may be terminated, and additional
Series established, from time to time by action of the Board of Trustees. The
Registrant on behalf of each Fund has selected you to act as the investment
adviser and administrator of the Funds and to provide certain services, as more
fully set forth below, and you are willing to act as such investment adviser and
administrator and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Registrant agrees with you as follows:

1. Name of Registrant. The Registrant may use any name including or derived
from the name "Goldman Sachs" in connection with a Fund only for so long as
this Agreement or any extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which shall have
succeeded to your business as investment adviser or administrator. Upon the
termination of this Agreement, the Registrant (to the extent that it lawfully
can) will cause the Funds to cease to use such a name or any other name
indicating that it is advised by or otherwise

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<PAGE>

connected with you or any organization which shall have so succeeded to your
business.

2. Sub-Advisers. You may engage one or more investment advisers which are
either registered as such or specifically exempt from registration under the
Investment Advisers Act of 1940, as amended, to act as sub-advisers to provide
with respect to the Fund certain services set forth in Paragraphs 3 and 6
hereof, all as shall be set forth in a written contract to which the
Registrant, on behalf of the Fund, and you shall be parties, which contract
shall be subject to approval by the vote of a majority of the Trustees who are
not interested persons of you, the sub-adviser, or of the Registrant, cast in
person at a meeting called for the purpose of voting on such approval and by
the vote of a majority of the outstanding voting securities of the Fund and
otherwise consistent with the terms of the Investment Company Act of 1940 Act,
as amended (the "1940 Act").

3. Management Services.

(a) You will regularly provide each Fund with investment research, advice and
supervision and will furnish continuously an investment program for each Fund
consistent with the investment objectives and policies of the Fund. You will
determine from time to time what securities shall be purchased for a Fund, what
securities shall be held or sold by a Fund, and what portion of a Fund's assets
shall be held uninvested as cash, subject always to the provisions of the
Registrant's Declaration of Trust and By-Laws and of the 1940 Act, and to the
investment objectives, policies and restrictions of the Fund, as each of the
same shall be from time to time in effect, and subject, further, to such
policies and instructions as the Board of Trustees of the Registrant may from
time to time establish.

(b) Subject to the general supervision of the Board of Trustees of the
Registrant, you will provide certain administrative services to each Fund. You
will, to the extent such services are not required to be performed by others
pursuant to the custodian agreement (or the transfer agency agreement to the
extent that a person other than you is serving thereunder as the Registrant's
transfer agent), (i) provide supervision of all aspects of each Fund's
operations not referred to in paragraph (a) above; (ii) provide each Fund with
personnel to perform such executive, administrative and clerical services as
are reasonably necessary to provide effective administration of the Fund; (iii)
arrange for, at the Registrant's expense, (a) the preparation for each Fund of
all required tax returns, (b) the preparation and submission of financials
reports to existing shareholders and (c) the periodic updating of the Fund's
prospectuses and statements of additional information and the preparation of
reports filed with the Securities and Exchange Commission and other regulatory
authorities; (iv) maintain all of the Funds' records and (v) provide the Funds
with adequate office space and

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<PAGE>

all necessary office equipment and services including telephone service, heat,
utilities, stationery supplies and similar items.

(c) You will also provide to the Registrant's Board of Trustees such periodic
and special reports as the Board may reasonably request. You shall for all
purposes herein be deemed to be an independent contractor and shall, except as
otherwise expressly provided or authorized, have no authority to act for or
represent the Registrant or the Funds in any way or otherwise be deemed an
agent of the Registrant or the Funds.

(d) You will maintain all books and records with respect to the Funds'
securities transactions required by sub-paragraphs (b)(5), (6), (9) and (10)
and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those records
being maintained by the Fund's custodian or transfer agent) and preserve such
records for the periods prescribed therefor by Rule 31a-2 of the 1940 Act. You
will also provide to the Registrant's Board of Trustees such periodic and
special reports as the Board may reasonably request.

(e) You will notify the Registrant of any change in your membership within a
reasonable time after such change.

(f) Your services hereunder are not deemed exclusive and you shall be free to
render similar services to others.

4. Allocation of Charges and Expenses. You will pay all costs incurred by you
in connection with the performance of your duties under paragraph 3. You will
pay the compensation and expenses of all personnel of yours and will make
available, without expense to the Funds, the services of such of your partners,
officers and employees as may duly be elected officers or Trustees of the
Registrant, subject to their individual consent to serve and to any limitations
imposed by law. You will not be required to pay any expenses of any Fund other
than those specifically allocated to you in this paragraph 4. In particular,
but without limiting the generality of the foregoing, you will not be required
to pay: (i) organization expenses of the Funds; (ii) fees and expenses incurred
by the Funds in connection with membership in investment company organizations;
(iii) brokers' commissions; (iv) payment for portfolio pricing services to a
pricing agent, if any; (v) legal, auditing or accounting expenses (including an
allocable portion of the cost of your employees rendering legal and accounting
services to the Fund); (vi) taxes or governmental fees; (vii) the fees and
expenses of the transfer agent of the Registrant; (viii) the cost of preparing
stock certificates or any other expenses, including clerical expenses of issue,
redemption or repurchase of Shares of the Fund; (ix) the expenses of and fees
for registering or qualifying Shares for sale and of maintaining the
registration of the Funds

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<PAGE>

and registering the Registrant as a broker or a dealer; (x) the fees and
expenses of Trustees of the Registrant who are not affiliated with you; (xi)
the cost of preparing and distributing reports and notices to shareholders, the
Securities and Exchange Commission and other regulatory authorities; (xii) the
fees or disbursements of custodians of each Fund's assets, including expenses
incurred in the performance of any obligations enumerated by the Declaration of
Trust or By-Laws of the Registrant insofar as they govern agreements with any
such custodian; or (xiii) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business. You shall not be required to pay expenses of activities which are
primarily intended to result in sales of Shares of the Funds.

5. Compensation of the Manager.

(a) For all services to be rendered and payments made as provided in
paragraphs 3 and 4 hereof, the Registrant on behalf of each Fund will pay you
each month a fee at an annual rate equal to the percentage of the average daily
net assets of the Fund set forth with respect to such Fund on Annex A. The
"average daily net assets" of a Fund shall be determined on the basis set forth
in the Fund's prospectus(es) or otherwise consistent with the 1940 Act and the
regulations promulgated thereunder.

(b) In addition to the foregoing, you may from time to time agree not to
impose all or a portion of your fee otherwise payable hereunder (in advance of
the time such fee or portion thereof would otherwise accrue) and/or undertake
to pay or reimburse a Fund for all or a portion of its expenses not otherwise
required to be borne or reimbursed by you. Any such fee reduction or
undertaking may be discontinued or modified by you at any time.

6. Avoidance of Inconsistent Position. In connection with purchases or sales
of portfolio securities for the account of the Funds, neither you nor any of
your partners, officers or employees will act as a principal, except as
otherwise permitted by the 1940 Act. You or your agent shall arrange for the
placing of all orders for the purchase and sale of portfolio securities for
each Fund's account with brokers or dealers (including Goldman, Sachs & Co.)
selected by you. In the selection of such brokers or dealers (including
Goldman, Sachs & Co.) and the placing of such orders, you are directed at all
times to seek for the Funds the most favorable execution and net price
available. It is also understood that it is desirable for the Funds that you
have access to supplemental investment and market research and security and
economic analyses provided by brokers who may execute brokerage transactions at
a higher cost to a Fund than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and

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<PAGE>

efficient execution. Therefore, you are authorized to place orders for the
purchase and sale of securities for the Funds with such brokers, subject to
review by the Registrant's Board of Trustees from time to time with respect to
the extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to you in connection with your
services to other clients. If any occasion should arise in which you give any
advice to your clients concerning the Shares of the Funds, you will act solely
as investment counsel for such clients and not in any way on behalf of any
Fund. You may, on occasions when you deem the purchase or sale of a security to
be in the best interests of a Fund as well as your other customers (including
any other Series or any other investment company or advisory account for which
you or any of your affiliates acts as an investment adviser), aggregate, to the
extent permitted by applicable laws and regulations, the securities to be sold
or purchased in order to obtain the best net price and the most favorable
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by you in the
manner you consider to be the most equitable and consistent with your fiduciary
obligations to the Fund and to such other customers. In addition, you are
authorized to take into account the sale of shares of the Registrant in
allocating purchase and sale orders for portfolio securities to brokers or
dealers (including brokers and dealers that are affiliated with you), provided
that you believe that the quality of the transaction and the commission is
comparable to what they would be with other qualified firms.

7. Limitation of Liability of Manager and Fund. You shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Registrant
or the Funds shall be deemed, when acting within the scope of his employment by
the Funds, to be acting in such employment solely for the Funds and not as your
employee or agent. The Fund shall not be liable for any claims against any
other Series of the Registrant.

8. Duration and Termination of this Agreement. This Agreement shall remain in
force as to each Fund until June 30, 1998 and shall continue for periods of one
year thereafter, but only so long as such continuance is specifically approved
at least annually (a) by the vote of a majority of the Trustees who are not
interested persons (as defined in the 1940 Act) of the Registrant and have no
financial interest in this Agreement, cast in person

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<PAGE>

at a meeting called for the purpose of voting on such approval and (b) by a
vote of a majority of the Board of Trustees of the Registrant or of a majority
of the outstanding voting securities of such Fund. The aforesaid requirement
that continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder. This Agreement may, on 60 days written notice to the
other party, be terminated in its entirety or as to a particular Fund at any
time without the payment of any penalty, by the Board of Trustees of the
Registrant, by vote of a majority of the outstanding voting securities of a
Fund, or by you. This Agreement shall automatically terminate in the event of
its assignment. In interpreting the provisions of this Agreement, the
definitions contained in Section 2(a) of the 1940 Act (particularly the
definitions of "interested person," "assignment" and "majority of the
outstanding voting securities"), as from time to time amended, shall be
applied, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission by any rule, regulation or order.

9. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective as to a Fund until approved by vote of the holders of a majority of
the outstanding voting securities of such Fund and by a majority of the Board
of Trustees of the Registrant, including a majority of the Trustees who are not
interested persons (as defined in the 1940 Act) of the Registrant and have no
financial interest in this Agreement, cast in person at a meeting called for
the purpose of voting on such amendment. Notwithstanding the foregoing, this
Agreement may be amended at any time to add a new Fund to Annex A provided such
amendment is approved by a majority of the Board of Trustees of the Registrant,
including a majority of the Trustees who are not interested persons (as defined
in the 1940 Act) of the Registrant and have no financial interest in this
Agreement. This paragraph does not apply to any agreement described in
paragraph 5(b) hereof, which shall be effective during the period you specify
in a prospectus, sticker, or other document made available to current or
prospective shareholders.

10. Governing Law. This Agreement Shall be Governed by and Construed in
Accordance with the Laws of the State of New York.

11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts,

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<PAGE>

each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

The name Goldman Sachs [Money Market] Trust is the designation of the Trustees
for the time being under [an Amended and Restated Agreement and Declaration of
Trust], [under a Declaration of Trust dated January 29, 1997] as amended from
time to time, and all persons dealing with the Trust or a Funds must look solely
to the property of the Trust or such Fund for the enforcement of any claims as
none of Trustees, officers, agents or shareholders assume any personal liability
for obligations entered into on behalf of the Trust. No Fund shall be liable for
any claims against any other Series.

If you are in agreement with the foregoing, please sign the form of acceptance
on the Registrant counterpart of this letter and return such counterpart to the
Registrant, whereupon this letter shall become a binding contract.

Yours very truly,

[GOLDMAN SACHS MONEY MARKET TRUST]
[GOLDMAN SACHS TRUST]

Attest:_________________________ By:_________________
Michael J. Richman Douglas C. Grip
Secretary of the Registrant President of the Registrant

The foregoing Agreement is hereby accepted as of the date thereof.

GOLDMAN SACHS ASSET MANAGEMENT,
A DIVISION OF GOLDMAN, SACHS & CO.

Attest:________________________ By:_________________
Michael J. Richman David B. Ford
Counsel to the Funds Group Managing Director

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APPENDIX G

OTHER MUTUAL FUNDS ADVISED BY GOLDMAN SACHS ASSET MANAGEMENT

Goldman Sachs Asset Management ("GSAM") provides investment advisory services
to the following mutual funds with investment objectives similar to those of one
or more of the Funds covered by this Proxy Statement.

<TABLE>
<CAPTION>
FUND NET ASSET SIZE MANAGEMENT FEE
NAME OF FUND (AS OF 12/31/96) RATE
- ------------ ------------------- ----------------
<S> <C> <C>
Prime Obligations Portfolio* . $1,263,578,096 .35%
Money Market Portfolio* . . . . 989,199,907 .35
Government Portfolio* . . . . . 824,933,951 .35
Treasury Obligations Portfolio* 807,066,550 .35
Treasury Instruments Portfolio* 1,230,605,683 .35
Federal Portfolio* . . . . . . 3,290,630,275 .35
Tax-Exempt Diversified
Portfolio* . . . . . . . . . . 1,602,460,813 .35
</TABLE>

- -----------

* The management fee rates shown do not reflect the fact that GSAM has
voluntarily agreed not to impose all or a portion of its advisory fee and/or to
reduce or otherwise limit the annual total operating expenses of these funds.

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