GOLDMAN SACHS TRUST, 497, 1995-05-31

GOLDMAN SACHS TRUST
497, 1995-05-31

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<PAGE>

GS SHORT-TERM GOVERNMENT AGENCY FUND
GS ADJUSTABLE RATE GOVERNMENT AGENCY FUND
GS SHORT DURATION TAX-FREE FUND
GS CORE FIXED INCOME FUND

ADMINISTRATION SHARES
---------------------

SUPPLEMENT DATED JUNE 1, 1995 TO
PROSPECTUSES DATED MARCH 1, 1995

As used in the accompanying Prospectus, the term "Business Day" means any
day the New York Stock Exchange is open for trading, which is Monday through
Friday except for holidays. The New York Stock Exchange is closed on the
following holidays: New Year's Day (observed), Presidents' Day (observed), Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

Effective June 7, 1995, purchases and redemptions of Administration Shares
of the Funds must be settled within three Business Days of the receipt by a
Fund of a complete purchase order or properly executed redemption request.
Except for the requirement that the Fund receive payment for any Administration
Shares within three Business Days of receipt of a purchase order and as set
forth below, the purchase procedures described in the accompanying Prospectus
have not changed. Redemption proceeds to be paid by check will normally be
mailed within three Business Days after receipt of a properly executed
redemption request. Redemption proceeds paid by wire will normally be wired on
the next Business Day following receipt of a properly executed redemption
request but may be paid up to three Business Days after receipt of a properly
executed redemption request.

"Purchase of Administration Shares--Other Purchase Information" in the
accompanying Prospectus is revised as follows:

PURCHASE BY FEDERAL FUNDS WIRE OR ACH TRANSFER. If a purchase order is
received from a Service Organization by Goldman Sachs by 3:00 p.m. Chicago time
and payment is made by wire transfer or ACH transfer, shares will be issued and
dividends will begin to accrue on the purchased shares on the later of (i) the
Business Day after receipt by Goldman Sachs of a purchase order or (ii) the day
of receipt of a Federal Funds wire or an ACH transfer by Northern.

PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT. If a Service Organization's
check or Federal Reserve draft is received by Goldman Sachs by 3:00 p.m.
Chicago time, shares will be issued and dividends will begin to accrue on the
purchased shares on the Business Day after the date payment is received by
Goldman Sachs.
<PAGE>

GS SHORT-TERM GOVERNMENT AGENCY FUND
GS ADJUSTABLE RATE GOVERNMENT AGENCY FUND
GS SHORT DURATION TAX-FREE FUND
GS CORE FIXED INCOME FUND

INSTITUTIONAL SHARES

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

SUPPLEMENT DATED JUNE 1, 1995 TO
PROSPECTUSES DATED MARCH 1, 1995

Effective June 7, 1995, purchases and redemptions of Institutional Shares of
the Funds must be settled within three Business Days of the receipt by a Fund
of a complete purchase order or properly executed redemption request. Except
for the requirement that the Fund receive payment for any Institutional Shares
within three Business Days of receipt of a purchase order and as set forth
below, the purchase procedures described in the accompanying Prospectus have
not changed. Redemption proceeds to be paid by check will normally be mailed
within three Business Days after receipt of a properly executed redemption
request. Redemption proceeds paid by wire will normally be wired on the next
Business Day following receipt of a properly executed redemption request but
may be paid up to three Business Days after receipt of a properly executed
redemption request.

"Purchase of Institutional Shares--Other Purchase Information" in the
accompanying Prospectus is revised as follows:

PURCHASE BY FEDERAL FUNDS WIRE OR ACH TRANSFER. If a purchase order is
received by Goldman Sachs by 3:00 p.m. Chicago time and payment is made by wire
transfer or ACH transfer, shares will be issued and dividends will begin to
accrue on the purchased shares on the later of (i) the Business Day after
receipt by Goldman Sachs of a purchase order or (ii) the day of receipt of
Federal Funds wire or an ACH transfer by Northern.

PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT. If a purchase check or Federal
Reserve draft is received by Goldman Sachs by 3:00 p.m. Chicago time, shares
will be issued and dividends will begin to accrue on the purchase shares on the
Business Day after the date payment is received.
<PAGE>

GS SHORT-TERM GOVERNMENT AGENCY FUND
GS ADJUSTABLE RATE GOVERNMENT AGENCY FUND
GS SHORT DURATION TAX-FREE FUND
GS CORE FIXED INCOME FUND

SERVICE SHARES
---------------------

SUPPLEMENT DATED JUNE 1, 1995 TO
PROSPECTUSES DATED MARCH 1, 1995

Effective June 7, 1995, purchases and redemptions of Service Shares of the
Funds must be settled within three Business Days of the receipt by a fund of a
complete purchase order or properly executed redemption request. Except for the
requirement that the Fund receive payment for any Service Shares within three
Business Days of receipt of a purchase order and as set forth below, the
purchase procedures described in the accompanying Prospectus have not changed.
Redemption proceeds to be paid by check will normally be mailed within three
Business Days after receipt of a properly executed redemption request.
Redemption proceeds paid by wire will normally be wired on the next Business
Day following receipt of a properly executed redemption request but may be paid
up to three Business Days after receipt of a properly executed redemption
request.

"Purchase of Service Shares--Other Purchase Information" in the accompanying
Prospectus is revised as follows:

PURCHASE BY FEDERAL FUNDS WIRE OR ACH TRANSFER. If a purchase order is
received from a Service Organization by Goldman Sachs by 3:00 p.m. Chicago time
and payment is made by wire transfer or ACH transfer, Share will be issued and
dividends will begin to accrue on the purchased shares on the later of (i) the
Business Day after receipt by Goldman Sachs of a purchase order or (ii) the day
of receipt of a Federal Funds wire or an ACH transfer by Northern.

PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT. If a Service Organization's
check or Federal Reserve draft is received by Goldman Sachs by 3:00 p.m.
Chicago time, Shares will be issued and dividends will begin to accrue on the
purchased shares on the Business Day after the date payment is received by
Goldman Sachs.
<PAGE>

GS ADJUSTABLE RATE
GOVERNMENT AGENCY FUND
INSTITUTIONAL SHARES

MANAGED BY
----------
GOLDMAN SACHS FUNDS MANAGEMENT, L.P.
AN AFFILIATE OF
GOLDMAN, SACHS & CO.

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

GS Adjustable Rate Government Agency Fund (the "Fund") is one fund in a
family of funds advised by Goldman Sachs Funds Management, L.P. (the
"Investment Adviser") or its affiliates, Goldman Sachs Asset Management and
Goldman Sachs Asset Management International. The Fund is organized as a
separate diversified portfolio of Goldman Sachs Trust (the "Trust"), an open-
end, management investment company.

The Fund seeks to provide investors with a high level of current income,
consistent with low volatility of principal. The Fund will seek to achieve its
objective through investment in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Under normal circumstances, at
least 65% of the Fund's total assets will consist of adjustable rate mortgage
pass-through securities and other mortgage securities with periodic interest
rate resets, which are issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Fund may also invest in other mortgage-
backed securities and other obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, as well as repurchase
agreements collateralized by U.S. Government securities. Under normal
circumstances, substantially all of the Fund's assets will be invested in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

The Fund seeks to minimize fluctuation in the value of its portfolio
securities and therefore its net asset value. It believes that it can achieve
this objective by investing primarily in guaranteed adjustable rate mortgage-
backed securities, maintaining a maximum duration equal to that of a two-year
U.S. Treasury security and a target duration in a range approximately equal to
that of a 6-month to one-year U.S. Treasury security (computed using the method
described herein) and utilizing certain active management techniques to hedge
interest rate risks and to enhance its return. These techniques include the use
of futures contracts (including options on futures), mortgage and interest rate
swaps and interest rate floors, caps and collars. The Fund's investment in
mortgage-backed securities and the use of active management techniques may
entail certain risks. See "Risk Factors."
(continued on next page)

INSTITUTIONAL SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN INSTITUTIONAL
SHARES OF THE FUND INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

The date of this Prospectus is March 1, 1995.
<PAGE>

The Fund seeks to provide investors with a higher level of current income
than they could receive from a money market fund. Although the Fund's net asset
value will fluctuate more than that of a portfolio of money market securities,
the Fund will attempt to minimize the effect of interest rate fluctuations on
the Fund's net asset value. See "Risk Factors."

Goldman Sachs Funds Management, L.P., New York, New York, an affiliate of
Goldman, Sachs & Co., serves as the Fund's investment adviser. Goldman, Sachs &
Co. serves as the Fund's distributor and transfer agent. The Trust's custodian
is State Street Bank and Trust Company.

This Prospectus, which sets forth concisely the information about the Trust
and the Fund that a prospective investor ought to know before investing in
Institutional Shares, should be retained for future reference. A Statement of
Additional Information (the "Additional Statement"), dated March 1, 1995,
containing further information about the Trust and the Fund which may be of
interest to investors, has been filed with the Securities and Exchange
Commission, is incorporated herein by reference in its entirety, and may be
obtained without charge from Goldman, Sachs & Co. by calling the telephone
number, or writing to one of the addresses, listed below.

GOLDMAN SACHS TRUST GOLDMAN SACHS FUNDS MANAGEMENT, L.P.
4900 SEARS TOWER INVESTMENT ADVISER
CHICAGO, ILLINOIS 60606 ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004

GOLDMAN, SACHS & CO. GOLDMAN, SACHS & CO.
DISTRIBUTOR TRANSFER AGENT
85 BROAD STREET 4900 SEARS TOWER
NEW YORK, NEW YORK 10004 CHICAGO, ILLINOIS 60606

TOLL FREE (IN U.S.)................... 800-621-2550

2
<PAGE>

SUMMARY

INTRODUCTION

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to provide investors with a high
level of current income, consistent with low volatility of principal. The Fund
seeks to achieve its objective by investing primarily in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Under
normal circumstances, at least 65% of the Fund's total assets will consist of
adjustable rate mortgage pass-through securities and other mortgage securities
with periodic interest rate resets, which are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Fund may also invest in
other mortgage-backed securities and other obligations issued or guaranteed by
the U.S. Government, its agencies and instrumentalities, as well as repurchase
agreements collateralized by U.S. Government securities. Under normal
circumstances, substantially all of the Fund's assets will be invested in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

The Fund may employ certain active management techniques to hedge the
interest rate risks associated with the Fund's portfolio securities, to enhance
its return and to minimize fluctuation in its net asset value. These include,
but are not limited to, the use of futures contracts (including options on
futures), mortgage and interest rate swaps and interest rate floors, caps and
collars. The Fund may also utilize portfolio securities lending, mortgage
dollar rolls and repurchase agreements in an attempt to enhance the return
achieved by the Fund. See "Investment Objective and Policies" and "Other
Investments and Practices." There can be no assurance that the Fund will
achieve its investment objective.

The Fund may, for temporary defensive purposes, hold or invest more than 35%
of its total assets in cash, U.S. Treasury securities or high quality money
market instruments, including commercial paper, bankers' acceptances,
repurchase agreements or other debt obligations with a remaining maturity of
one year or less.

INVESTMENT ADVISER

Pursuant to an Investment Advisory Agreement, Goldman Sachs Funds Management,
L.P., an affiliate of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the
Fund's investment adviser. The Fund's portfolio is managed by the Investment
Adviser's mortgage-backed securities team, which, as of January 31, 1995, was
responsible for managing approximately $5.2 billion in assets. In this
capacity, the Investment Adviser provides investment advisory and
administrative services and receives from the Fund a monthly fee equal on an
annual basis to 0.40% of the Fund's average daily net assets. Goldman Sachs
Funds Management, L.P. is registered with the Securities and Exchange
Commission (the "SEC") as an investment adviser. See "Investment Adviser" and
"Management--Investment Adviser."

3
<PAGE>

PURCHASE AND REDEMPTION OF INSTITUTIONAL SHARES

DISTRIBUTOR AND TRANSFER AGENT

Goldman Sachs serves as the distributor to and transfer agent for the Fund.
Under the Distribution Agreement with the Fund, Goldman Sachs acts as exclusive
agent for the Fund in the sale of shares. Under the Transfer Agency Agreement
with the Fund, Goldman Sachs provides transfer agency services and responds to
shareholder inquiries. See "Management--Distributor and Transfer Agent."

RISK FACTORS

GENERAL. While the Fund seeks to provide investors with a high level of
current income, consistent with low volatility of principal, the Fund's current
income and net asset value per share will fluctuate. The inherent volatility
risk of the Fund is such that, during any particular period, if shares of the
Fund are redeemed, an investor could suffer a loss of principal.

INVESTMENT IN MORTGAGE-BACKED SECURITIES GENERALLY. The Fund's investments in
mortgage pass-through securities and other securities representing an interest
in or collateralized by adjustable rate and fixed rate mortgage loans
("Mortgage-Backed Securities") entail certain risks. These risks include the
failure of an issuer or guarantor to meet its obligations, adverse interest
rate changes, adverse economic, real estate or unemployment trends, failures in
connection with processing of transactions and the effects of prepayments on
mortgage cash flows. The Fund's policy of investing primarily in securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
however, is designed to minimize credit and performance related risks otherwise
associated with Mortgage-Backed Securities.

YIELD CHARACTERISTICS. The yield characteristics of the Mortgage-Backed
Securities in which the Fund will invest differ from those of traditional fixed
income securities. The major differences typically include more frequent
interest and principal payments (usually monthly) on Mortgage-Backed
Securities, the adjustability of interest rates, and the possibility that
prepayments of principal may be made at any time.

4
<PAGE>

interest rate environment. Under certain interest rate and prepayment rate
scenarios, the Fund may fail to recoup fully its investment in some of the
Mortgage-Backed Securities it holds notwithstanding a direct or indirect
governmental or agency guarantee. The Fund's investments in Mortgage-Backed
Securities are subject to more rapid repayment than their stated maturity dates
would indicate as a result of the pass-through of prepayments of principal on
the underlying loans. Such repayment may increase the volatility of an
investment in Mortgage-Backed Securities relative to similarly rated debt
securities and, therefore, may increase the volatility of the Fund's net asset
value. The Fund intends to use hedging techniques to control these risks. See
"Investment Objective and Policies" and "Other Investments and Practices." When
the Fund reinvests amounts representing scheduled payments and unscheduled
prepayments of principal, it may receive a rate of interest that is lower than
the rate on its existing portfolio of adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types
of U.S. Government securities as a means of "locking in" interest rates.

MARKET RISKS. The securities in the Fund's portfolio will tend to decrease
in value when interest rates rise and increase in value when interest rates
fall. Because the Fund's investments are interest rate sensitive, the Fund's
performance will depend in large part upon the ability of the Fund to respond
to fluctuations in market interest rates and to utilize appropriate strategies
to maximize returns to the Fund, while attempting to minimize the associated
risks to its invested capital. Operating results will also depend upon the
availability of opportunities for the investment of the Fund's assets,
including purchases and sales of suitable securities.

The market value of the Fund's adjustable rate Mortgage-Backed Securities may
be adversely affected if interest rates increase faster than the rates of
interest payable on such securities or by the adjustable rate mortgage loans
underlying such securities. Furthermore, adjustable rate Mortgage-Backed
Securities or the mortgage loans underlying such securities may contain
provisions limiting the amount by which rates may be adjusted upward and
downward and may limit the amount by which monthly payments may be increased or
decreased to accommodate upward and downward adjustments in interest rates.
These provisions may increase the sensitivity of such Mortgage-Backed
Securities to changes in value resulting from interest rate fluctuations.

Certain adjustable rate mortgage loans may provide for periodic adjustments
of scheduled payments in order to fully amortize the mortgage loan by its
stated maturity. Other adjustable rate mortgage loans may permit such stated
maturity to be extended or shortened in accordance with the portion of each
payment that is applied to interest in accordance with the periodic interest
rate adjustments.

Although having less risk of decline in value during periods of rising
interest rates, adjustable rate Mortgage-Backed Securities have less potential
for capital appreciation than fixed rate Mortgage-Backed Securities, because
their coupon rates will decline in response to market interest rate declines.
The market value of fixed rate Mortgage-Backed Securities may be adversely
affected as a result of increases in interest rates and, because of the risk of
unscheduled principal prepayments, may benefit less than other fixed rate
securities of similar maturity from declining interest rates. Finally, a higher
than anticipated rate of unscheduled principal prepayments on Mortgage-Backed
Securities purchased at a premium or a lower than anticipated rate of
unscheduled principal payments on Mortgage-Backed Securities purchased at a
discount may result in a lower yield than was anticipated at the time the
securities were purchased.

5
<PAGE>

OTHER INVESTMENTS AND PRACTICES. The Fund may invest in other instruments,
including obligations of the United States, and notes, bonds and discount notes
of U.S. Government agencies or instrumentalities. The Fund may engage in
certain other investment practices that also involve special risks. These
include, but are not limited to, the use of futures contracts (including
options on futures), mortgage and interest rate swaps and interest rate floors,
caps and collars, making forward commitments, lending portfolio securities and
entering into mortgage dollar rolls and repurchase agreements. See "Other
Investments and Practices."

CONFLICTS OF INTEREST. The involvement of Goldman Sachs, its divisions and
affiliates (including the Investment Adviser), partners and officers, in the
investment activities and business operations of the Fund may present certain
conflicts of interest, as described under "Management--Investment Adviser."

DIVIDEND POLICY

The Fund intends to declare a daily dividend determined with the objective of
distributing the majority of net investment income while enhancing the
stability of principal. Such dividends will accrue to shareholders of record as
of 3:00 p.m. Chicago time, and will be paid monthly. Over the course of the
fiscal year, dividends accrued and paid will constitute all or substantially
all of the Fund's net investment income. From time to time a portion of such
dividends may constitute a return of capital. The Fund also intends that net
realized capital gains, if any, after offset by any available capital loss
carryforwards from prior taxable years, will be declared as a dividend at least
annually. Shareholders will receive dividends in additional Institutional
Shares of the Fund or may elect to receive cash as described under "Dividends."

FEES AND EXPENSES
(INSTITUTIONAL SHARES)*
<TABLE>
<CAPTION>
GS ADJUSTABLE RATE
GOVERNMENT AGENCY FUND
----------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases.............. None
Maximum Sales Load Imposed on Reinvested Dividends... None
Redemption Fees...................................... None
Exchange Fees........................................ None
ANNUAL FUND OPERATING EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees...................................... 0.40%
Distribution (Rule 12b-1) Fees....................... None
Other Expenses (after expense limitation)............ 0.05%**
----
TOTAL FUND OPERATING EXPENSES
(AFTER EXPENSE LIMITATION)...................... 0.45%**
====
</TABLE>

EXAMPLE:
- --------
You would pay the following expenses on a hypothetical $1,000 investment, as-
suming (1) a 5% annual return and (2) redemption at the end of each time peri-
od:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$5 $14 $25 $57
</TABLE>

6
<PAGE>

- --------
* The information set forth in the foregoing table and hypothetical example is
based on estimated amounts for the current year and relates only to
Institutional Shares of the Fund. See "Shares of the Trust." Administration
Shares, Service Shares and Class A Shares of the Fund are subject to
different fees and expenses. Administration Shares are sold at net asset
value per share and are subject to an administration fee of up to 0.25% of
average daily net assets. Service Shares are sold at net asset value per
share and are subject to a service fee of up to 0.50% of average daily net
assets. Class A Shares are sold at net asset value per share plus a sales
charge of up to 1.5% and are subject to a distribution and service fee which
is currently limited to 0.25% of average daily net assets. All other
expenses related to Administration Shares, Service Shares and Class A Shares
are the same as for Institutional Shares.
** The Investment Adviser voluntarily agreed to reduce or limit certain "Other
Expenses" of the Fund (excluding advisory, distribution and service fees,
payments to Service Organizations (as defined below), taxes, interest and
brokerage and litigation, indemnification and other extraordinary expenses)
to the extent such expenses exceeded 0.05% per annum of the Fund's average
net assets. If the Investment Adviser had not agreed to reduce or otherwise
limit certain "Other Expenses" of the Fund, the Fund's other expenses and
total operating expenses attributable to Institutional Shares of the Fund
would have been 0.09% and 0.49%, respectively. The foregoing table and
example also reflect current operating expenses that will be applicable on an
ongoing basis. See "Management--Investment Adviser." Annual operating
expenses incurred by the Fund during the fiscal year ended October 31, 1994
(expressed as a percentage of average daily net assets after fee adjustments)
were as follows: Management Fees and Other Expenses of 0.40% and 0.06%,
respectively for total operating expenses of 0.46%.

7
<PAGE>

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The following data with respect to Institutional Shares and Administration
Shares of the Fund outstanding during the periods indicated has been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report incorporated by reference and attached to the Additional Statement from
the Fund's annual report to shareholders for the fiscal year ended October 31,
1994 (the "Annual Report"). This information should be read in conjunction with
the financial statements and related notes incorporated by reference and
attached to the Additional Statement. The Annual Report also contains
performance information and is available upon request and without charge by
writing to any of the addresses on the inside cover of this Prospectus.

<TABLE>
<CAPTION>
DISTRIBUTIONS
INCOME FROM INVESTMENT OPERATIONS TO SHAREHOLDERS
----------------------------------------- --------------------
NET
NET ASSET REALIZED AND TOTAL FROM NET ASSET RATIO OF NET
VALUE AT NET UNREALIZED INCOME FROM NET IN EXCESS VALUE AT EXPENSES TO
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT OF NET END TOTAL AVERAGE NET
OF PERIOD INCOME ON INVESTMENTS (a) OPERATIONS INCOME INCOME OF PERIOD RETURN (b) ASSETS
--------- ---------- ------------------ ----------- ---------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1994-
Institutional
Shares.......... $10.00 $0.4341 $(0.2455) $0.1886 ($0.4486) -- $9.74 1.88% 0.46%
1994-
Administration
Shares.......... 10.00 0.4211 (0.2572) 0.1639 (0.4239) -- 9.74 1.63 0.71
1993-
Institutional
Shares.......... 10.04 0.4397 (0.0376) 0.4021 (0.4397) (0.0024) 10.00 4.13 0.45
1993-
Administration
Shares (d)...... 10.02 0.2146 (0.0173) 0.1973 (0.2146) (0.0027) 10.00 2.01(f) 0.70(e)
1992-
Institutional
Shares.......... 10.03 0.5599 (0.0029) 0.5570 (0.5470) -- 10.04 6.12 0.42
FOR THE PERIOD JULY 17, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31,
1991-Institu-
tional Shares... 10.00 0.1531 0.0322 0.1853 (0.1553) -- 10.03 2.14(f) 0.20(e)
<CAPTION>
RATIOS
ASSUMING NO
WAIVER OF
ADVISORY FEES
OR EXPENSE
LIMITATION
------------------------
RATIO OF NET NET RATIO OF NET
INVESTMENT ASSETS AT RATIO OF INVESTMENT
INCOME TO PORTFOLIO END EXPENSES TO INCOME TO
AVERAGE NET TURNOVER OF PERIOD AVERAGE NET AVERAGE NET
ASSETS RATE(c) (IN 000'S) ASSETS ASSETS
------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1994-
Institutional
Shares.......... 4.38% 37.81% $ 942,523 0.49% 4.35%
1994-
Administration
Shares.......... 4.27 37.81 6,960 0.74 4.24
1993-
Institutional
Shares.......... 4.36 103.74 2,760,871 0.48 4.33
1993-
Administration
Shares (d)...... 3.81(e) 103.74 5,326 0.73(e) 3.78(e)
1992-
Institutional
Shares.......... 5.61 286.40 2,145,064 0.55 5.48
FOR THE PERIOD JULY 17, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31,
1991-Institu-
tional Shares... 7.31(e) 145.67(e) 239,642 1.02(e) 6.49(e)
</TABLE>
- ----
(a) Includes balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) Includes the effect of mortgage dollar roll transactions.
(d) Administration share activity commenced on April 15, 1993.
(e) Annualized.
(f) Not annualized.

8
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide investors with a high level of
current income, consistent with low volatility of principal. The Fund seeks to
achieve its objective through investment in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. Under normal
circumstances, at least 65% of the Fund's total assets will consist of
adjustable rate mortgage pass-through securities and other mortgage securities
with periodic interest rate resets, which are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The primary issuers or
guarantors of such securities currently include the Government National
Mortgage Association ("Ginnie Mae"), the Federal National Mortgage Association
("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"),
although the Fund may invest in securities issued or guaranteed by other
agencies or instrumentalities in the future. The Fund may invest up to 35% of
its total assets in other Mortgage-Backed Securities and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
as well as repurchase agreements collateralized by U.S. Government securities.
The Fund may, for temporary defensive purposes, hold or invest more than 35% of
its total assets in cash, U.S. Treasury securities or high quality money market
instruments, including commercial paper, bankers' acceptances, repurchase
agreements or other debt obligations with a remaining maturity of one year or
less. Under normal circumstances, substantially all of the Fund's assets will
be invested in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

The Fund may also employ certain active management techniques to hedge the
interest rate risks associated with the Fund's portfolio securities, to
minimize fluctuation in its net asset value and to enhance its return. These
techniques include, but are not limited to, futures contracts (including
options on futures), mortgage and interest rate swaps and interest rate floors,
caps and collars. The Fund may also employ other investment techniques to
enhance returns, such as loans of portfolio securities, mortgage dollar rolls
and repurchase agreements.

The Fund will maintain a maximum duration approximately equal to that of a
two-year U.S. Treasury security. Under normal interest rate conditions, the
Fund's actual duration is expected to be in a range approximately equal to that
of a 6-month to one-year U.S. Treasury security. The Fund's duration is a
measure of the price sensitivity of the portfolio, including expected cash flow
and mortgage prepayments under a wide range of interest rate scenarios.
Maturity measures only the time until final payment is due on a bond or other
debt security; it takes no account of the pattern of a security's cash flows
over time, including how cash flow is affected by prepayments and by changes in
interest rates. In computing the duration of its portfolio, the Fund will have
to estimate the duration of obligations that are subject to prepayment or
redemption by the issuer taking into account the influence of interest rates on
prepayments and coupon flows. This method of computing duration is known as
option-adjusted duration. The Fund may use various techniques to shorten or
lengthen the option-adjusted duration of its portfolio, including the use of
futures contracts (including options on futures), the acquisition of debt
obligations at a premium or discount, mortgage and interest rate swaps and
interest rate floors, caps and collars.

When interest rates decline, the value of a portfolio invested in fixed rate
debt securities can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested in fixed rate debt securities can be expected
to decline. In contrast, since interest rates on adjustable rate mortgage loans
are reset periodically, yields of portfolio securities representing interests
in such loans will gradually align themselves to reflect changes in market
interest rates, causing the value of such securities to fluctuate less
dramatically in response to interest rate fluctuations than would fixed rate
debt securities. The

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Investment Adviser expects the Fund's net asset value to be relatively stable
during normal market conditions. This is because the Fund's portfolio will
consist primarily of guaranteed adjustable rate Mortgage-Backed Securities and
because the Fund will maintain a maximum option-adjusted duration approximately
equal to that of a two-year U.S. Treasury security and will utilize certain
interest rate hedging techniques. However, a sudden and extreme increase in
prevailing interest rates may cause a decline in the Fund's net asset value.
Conversely, a sudden and extreme decline in interest rates could result in an
increase in the Fund's net asset value.

Except as otherwise stated under "Investment Restrictions," the Fund's
investment objective and policies are not fundamental and may be changed
without a vote of shareholders. If there is a change in the Fund's investment
objective, shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial positions and needs. There
can be no assurance that the Fund will be successful in achieving its
investment objective. An investment in shares of the Fund does not constitute a
complete investment program. Investors may wish to complement an investment in
the Fund with other types of investments.

INVESTMENT ADVISER

The Fund's investment adviser is Goldman Sachs Funds Management, L.P., an
affiliate of Goldman Sachs. The management services provided by the Investment
Adviser are subject to the general supervision of the Trust's Board of
Trustees. The Investment Adviser and its affiliates serve a wide range of
clients including private and public pension funds, endowments, foundations,
banks, thrifts, insurance companies, corporations, and private investors and
family groups.

Founded in 1869, Goldman Sachs is among the oldest and largest investment
banking firms in the United States. Goldman Sachs is a leader in virtually
every field of investing and financing, participating in financial markets
worldwide and serving individuals, institutions, corporations and governments.
Goldman Sachs is headquartered in New York and has offices throughout the
United States and in Beijing, Frankfurt, George Town, Hong Kong, London,
Madrid, Milan, Montreal, Osaka, Paris, Seoul, Shanghai, Singapore, Sydney,
Taipei, Tokyo, Toronto, Vancouver and Zurich.

The Investment Adviser is able to draw on the research and market expertise
of Goldman Sachs, whose investment research effort is one of the largest in the
industry. The in-depth information and analyses generated by Goldman Sachs'
research analysts, economists and portfolio strategists are available to the
Investment Adviser.

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ADJUSTABLE AND FIXED RATE MORTGAGE LOANS AND
MORTGAGE-BACKED SECURITIES IN WHICH THE FUND WILL INVEST

THE NATURE OF ADJUSTABLE AND FIXED RATE MORTGAGE LOANS

The following is a general description of the adjustable and fixed rate
mortgage loans which may be expected to underlie the Mortgage-Backed Securities
in which the Fund will invest. Since a wide variety of mortgage loans are
available to borrowers, the actual mortgage loans underlying any particular
issue of Mortgage-Backed Securities may differ materially from those described
below. In addition, the Fund will be permitted to invest in Mortgage-Backed
Securities that become available in the future to the extent such investments
are consistent with its investment objective and policies.

ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"). ARMs included in a mortgage pool
will generally provide for a fixed initial mortgage interest rate for a
specified period of time. Thereafter, the interest rates (the "Mortgage
Interest Rates") may be subject to periodic adjustment based on changes in the
applicable index rate (the "Index Rate"). The adjusted rate would be equal to
the Index Rate plus a gross margin, which is a fixed percentage spread over the
Index Rate established for each ARM at the time of its origination.

Adjustable interest rates can cause payment increases that some mortgagors
may find difficult to make. However, certain ARMs may provide that the Mortgage
Interest Rate may not be adjusted to a rate above an applicable lifetime
maximum rate or below an applicable lifetime minimum rate for such ARM. Certain
ARMs may also be subject to limitations on the maximum amount by which the
Mortgage Interest Rate may adjust for any single adjustment period (the
"Maximum Adjustment"). Other ARMs ("Negatively Amortizing ARMs") may provide
instead or as well for limitations on changes in the monthly payment on such
ARMs. Limitations on monthly payments can result in monthly payments which are
greater or less than the amount necessary to amortize a Negatively Amortizing
ARM by its maturity at the Mortgage Interest Rate in effect in any particular
month. In the event that a monthly payment is not sufficient to pay the
interest accruing on a Negatively Amortizing ARM, any such excess interest is
added to the principal balance of the loan, causing negative amortization, and
will be repaid through future monthly payments. It may take borrowers under
Negatively Amortizing ARMs longer periods of time to achieve equity and may
increase the likelihood of default by such borrowers. In the event that a
monthly payment exceeds the sum of the interest accrued at the applicable
Mortgage Interest Rate and the principal payment which would have been
necessary to amortize the outstanding principal balance over the remaining term
of the loan, the excess (or "accelerated amortization") further reduces the
principal balance of the ARM. Negatively Amortizing ARMs do not provide for the
extension of their original maturity to accommodate changes in their Mortgage
Interest Rate. As a result, unless there is a periodic recalculation of the
payment amount (which there generally is), the final payment may be
substantially larger than the other payments. These limitations on periodic
increases in interest rates and on changes in monthly payments protect
borrowers from unlimited interest rate and payment increases.

There are two main categories of indices which provide the basis for rate
adjustments on ARMs: those based on U.S. Treasury securities and those derived
from a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year, three-year and
five-year constant maturity Treasury rates, the three-month Treasury Bill rate,
the 180-day Treasury Bill rate, rates on longer-term Treasury securities, the
11th District Federal Home Loan Bank Cost of Funds, the National Median Cost of
Funds, the one-month, three-month, six-month or one year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury rate,
closely mirror changes in market

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interest rate levels. Others, such as the 11th District Federal Home Loan Bank
Cost of Funds index, tend to lag behind changes in market rate levels and tend
to be somewhat less volatile. The degree of volatility in the market value of
the Fund's portfolio and therefore in the net asset value of the Fund's shares
will be a function of the length of the interest rate reset periods and the
degree of volatility in the applicable indices.

FIXED RATE MORTGAGE LOANS. Generally, fixed rate mortgage loans included in a
mortgage pool (the "Fixed Rate Mortgage Loans") will bear simple interest at
fixed annual rates and have original terms to maturity ranging from 5 to 40
years. Fixed Rate Mortgage Loans generally provide for monthly payments of
principal and interest in substantially equal installments for the term of the
mortgage note in sufficient amounts to fully amortize principal by maturity,
although certain fixed rate mortgage loans provide for a large final "balloon"
payment upon maturity.

REGULATION OF MORTGAGE LOANS. Mortgage loans are subject to a variety of
state and federal laws and regulations designed to protect mortgagors, which
may impair the ability of the mortgage lender to enforce its rights under the
mortgage documents. These laws and regulations include legal restraints on
foreclosures, homeowner rights of redemption after foreclosure, federal and
state bankruptcy and debtor relief laws, restrictions on enforcement of
mortgage loan "due on sale" clauses and state usury laws. Even though the Fund
may invest in Mortgage-Backed Securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, these regulations may adversely
affect the Fund's investments by delaying the Fund's receipt of payments
derived from principal of or interest on mortgage loans affected by such laws
and regulations.

MORTGAGE-BACKED SECURITIES

CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities are
securities that directly or indirectly represent participations in, or are
collateralized by and payable from, mortgage loans secured by real property.
The investment characteristics of adjustable and fixed rate Mortgage-Backed
Securities differ from those of traditional fixed income securities. The major
differences include the payment of interest and principal on Mortgage-Backed
Securities on a more frequent (usually monthly) schedule, and the possibility
that principal may be prepaid at any time due to prepayments on the underlying
mortgage loans or other assets. These differences can result in significantly
greater price and yield volatility than is the case with traditional fixed
income securities. As a result, if the Fund purchases Mortgage-Backed
Securities at a premium, a faster than expected prepayment rate will reduce
both the market value and the yield to maturity from those which were
anticipated. A prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and market value. Conversely,
if the Fund purchases Mortgage-Backed Securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity and market value. The Investment Adviser will seek to
manage these potential risks and benefits by investing in a variety of
Mortgage-Backed Securities and by using certain hedging techniques. See "Other
Investments and Practices."

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predicted. Generally, however, prepayments on adjustable rate mortgage loans
and fixed rate mortgage loans will increase during a period of falling mortgage
interest rates and decrease during a period of rising mortgage interest rates.
Accordingly, the amounts of prepayments available for reinvestment by the Fund
are likely to be greater during a period of declining mortgage interest rates.
If general interest rates also decline, such prepayments are likely to be
reinvested at lower interest rates than the Fund was earning on the Mortgage-
Backed Securities that were prepaid.

GUARANTEED MORTGAGE-BACKED SECURITIES IN WHICH THE FUND INVESTS

All of the Fund's investments in Mortgage-Backed Securities will be issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities,
including but not limited to, Ginnie Mae, Fannie Mae and Freddie Mac. Ginnie
Mae securities are backed by the full faith and credit of the U.S. Government,
which means that the U.S. Government guarantees that the interest and principal
will be paid when due. Fannie Mae securities and Freddie Mac securities are not
backed by the full faith and credit of the U.S. Government; however, the
ability of these agencies to borrow from the U.S. Treasury makes their
securities high quality securities with minimal credit risks. There are several
types of guaranteed Mortgage-Backed Securities currently available, including
guaranteed mortgage pass-through certificates and multiple-class securities,
which include guaranteed Real Estate Mortgage Investment Conduit ("REMIC")
pass-through certificates and stripped Mortgage-Backed Securities. The Fund
will be permitted to invest in other types of Mortgage-Backed Securities that
may be available in the future to the extent investment in such securities is
consistent with its investment policies and objective, which require the Fund
to invest primarily in guaranteed adjustable rate Mortgage-Backed Securities.

1. GUARANTEED MORTGAGE PASS-THROUGH SECURITIES

GINNIE MAE CERTIFICATES. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States. Ginnie Mae is authorized to guarantee the
timely payment of the principal of and interest on certificates that are based
on and backed by a pool of mortgage loans insured by the Federal Housing
Administration ("FHA Loans"), or guaranteed by the Veterans Administration ("VA
Loans"), or by pools of other eligible mortgage loans. In order to meet its
obligations under any guaranty, Ginnie Mae is authorized to borrow from the
United States Treasury in an unlimited amount.

FANNIE MAE CERTIFICATES. Fannie Mae is a stockholder-owned corporation
chartered under an act of the United States Congress. Each Fannie Mae
Certificate is issued and guaranteed by Fannie Mae and represents an undivided
interest in a pool of mortgage loans (a "Pool") formed by Fannie Mae. Each Pool
consists of residential mortgage loans ("Mortgage Loans") either previously
owned by Fannie Mae or purchased by it in connection with the formation of the
Pool. The Mortgage Loans may be either conventional Mortgage Loans (i.e., not
insured or guaranteed by any U.S. Government agency) or Mortgage Loans that are
either insured by the Federal Housing Administration ("FHA") or guaranteed by
the Veterans Administration ("VA"). However, the mortgage loans in Fannie Mae
Pools are primarily conventional Mortgage Loans. The lenders originating and
servicing the Mortgage Loans are subject to certain eligibility requirements
established by Fannie Mae.

Fannie Mae has certain contractual responsibilities. With respect to each
Pool, Fannie Mae is obligated to distribute scheduled monthly installments of
principal and interest after Fannie Mae's servicing and guaranty fee, whether
or not received, to Certificate holders. Fannie Mae also is obligated

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<PAGE>

to distribute to holders of Certificates an amount equal to the full principal
balance of any foreclosed Mortgage Loan, whether or not such principal balance
is actually recovered. The obligations of Fannie Mae under its guaranty of the
Fannie Mae Certificates are obligations solely of Fannie Mae.

FREDDIE MAC CERTIFICATES. Freddie Mac is a publicly-held U.S. Government
sponsored enterprise. The principal activity of Freddie Mac currently is the
purchase of first lien, conventional, residential mortgage loans and
participation interests in such mortgage loans and their resale in the form of
mortgage securities, primarily Freddie Mac Certificates. A Freddie Mac
Certificate represents a pro rata interest in a group of mortgage loans or
participations in mortgage loans (a "Freddie Mac Certificate group") purchased
by Freddie Mac.

Freddie Mac guarantees to each registered holder of a Freddie Mac Certificate
the timely payment of interest at the rate provided for by such Freddie Mac
Certificate (whether or not received on the underlying loans). Freddie Mac also
guarantees to each registered Certificate-holder ultimate collection of all
principal of the related mortgage loans, without any offset or deduction, but
does not, generally, guarantee the timely payment of scheduled principal. The
obligations of Freddie Mac under its guaranty of Freddie Mac Certificates are
obligations solely of Freddie Mac.

CONVENTIONAL MORTGAGE LOANS. The conventional mortgage loans underlying the
Freddie Mac and Fannie Mae Certificates will consist of adjustable rate or
fixed rate mortgage loans with original terms to maturity of between five and
thirty years. Substantially all of these mortgage loans are secured by first
liens on one- to four-family residential properties or multi-family projects.
Each mortgage loan must meet the applicable standards set forth in the law
creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate group may include
whole loans, participation interests in whole loans and undivided interests in
whole loans and participations comprising another Freddie Mac Certificate
group.

2. MULTIPLE CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS

The Fund may also invest in multiple class securities issued by U.S.
Government agencies and instrumentalities such as Fannie Mae or Freddie Mac,
including guaranteed collateralized mortgage obligations ("CMOs") and REMIC
pass-through or participation certificates. A REMIC is a CMO that qualifies for
special tax treatment under the Internal Revenue Code of 1986, as amended (the
"Code"), and invests in certain mortgages principally secured by interests in
real property and other permitted investments.

CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae and Freddie Mac are types of multiple class pass-through
securities. Investors may purchase beneficial interests in REMICs, which are
known as "regular" interests or "residual" interests. The Fund does not intend
to purchase residual interests in REMICs. The REMIC Certificates represent
beneficial ownership interests in a REMIC trust, generally consisting of
mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage
pass-through certificates (the "Mortgage Assets"). The obligations of Fannie
Mae or Freddie Mac under their respective guaranty of the REMIC Certificates
are obligations solely of Fannie Mae or Freddie Mac, respectively.

Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are otherwise available.

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<PAGE>

For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment
of interest, and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified level payment,
residential mortgages or participations therein purchased by Freddie Mac and
placed in a PC pool. With respect to principal payments on PCs, Freddie Mac
generally guarantees ultimate collection of all principal of the related
mortgage loans without offset or deduction. Freddie Mac also guarantees timely
payment of principal on certain PCs.

CMOs and REMIC Certificates are issued in multiple classes. Each class of
CMOs or REMIC Certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final scheduled distribution date. Principal prepayments on the
Mortgage Loans or the Mortgage Assets underlying the CMOs or REMIC Certificates
may cause some or all of the classes of CMOs or REMIC Certificates to be
retired substantially earlier than their final distribution dates. Generally,
interest is paid or accrues on all classes of CMOs or REMIC Certificates on a
monthly basis.

The principal of and interest on the Mortgage Assets may be allocated among
the several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets
generally are applied to the classes of CMOs or REMIC Certificates in the order
of their respective final distribution dates. Thus no payment of principal will
be made on any class of sequential pay CMOs or REMIC Certificates until all
other classes having an earlier final distribution date have been paid in full.

Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.

A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments
of the Mortgage Assets are then required to be applied to one or more other
classes of the Certificates. The scheduled principal payments for the PAC
Certificates generally have the highest priority on each payment date after
interest due has been paid to all classes entitled to receive interest
currently. Shortfalls, if any, are added to the amount payable on the next
payment date. The PAC Certificate payment schedule is taken into account in
calculating the final distribution date of each class of PAC. In order to
create PAC tranches, one or more tranches generally must be created that absorb
most of the volatility in the underlying mortgage assets. These tranches tend
to have market prices and yields that are much more volatile than the PAC
classes.

3. STRIPPED MORTGAGE-BACKED SECURITIES

The Fund may invest in stripped mortgage-backed securities ("SMBS"), which
are derivative multiclass mortgage securities. The Fund may only invest in SMBS
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

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<PAGE>

SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions from a pool of Mortgage
Assets. A common type of SMBS will have one class receiving all of the interest
from the Mortgage Assets, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying Mortgage
Assets experience greater than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities. Although
the market for such securities is increasingly liquid, certain SMBS may not be
readily marketable and will be considered illiquid for purposes of the Fund's
limitation on investments in illiquid securities. The market value of the class
consisting entirely of principal payments generally is unusually volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest from Mortgage Assets are generally higher
than prevailing market yields on other Mortgage-Backed Securities because their
cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped. The Investment Adviser will seek
to manage these risks (and potential benefits) by investing in a variety of
such securities and by using certain hedging techniques. See "Other Investments
and Practices."

YIELD, MARKET VALUE AND RISK CONSIDERATIONS OF
MORTGAGE-BACKED SECURITIES

The Fund may invest in certain Mortgage-Backed Securities, such as interest-
only and principal-only SMBS, that are extremely sensitive to changes in
prepayments and interest rates. Even though such securities have been issued or
guaranteed by an agency or instrumentality of the U.S. Government, under
certain interest rate or prepayment rate scenarios, the Fund may fail to fully
recover its investment in such securities.

The investment characteristics of Mortgage-Backed Securities differ from
those of traditional fixed income securities. The major differences typically
include more frequent interest and principal payments, usually monthly, and the
possibility that unscheduled prepayments of principal may be made at any time.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. As with fixed rate mortgage loans, adjustable rate
mortgage loans may be subject to a greater prepayment rate in a declining
interest rate environment. The yields to maturity of the Mortgage-Backed
Securities in which the Fund invests will be affected by the actual rate of
payment (including prepayments) of principal of the underlying mortgage loans.
The mortgage loans underlying such securities generally may be prepaid at any
time without penalty. In a fluctuating interest rate environment, a predominant
factor affecting the prepayment rate on a pool of mortgage loans is the
difference between the interest rates on the mortgage loans and prevailing
mortgage loan interest rates (giving consideration to the cost of any
refinancing). In general, if interest rates on new mortgage loans fall
sufficiently below the interest rates existing on fixed rate mortgage loans
underlying mortgage pass-through securities, the rate of prepayment would be
expected to increase. Conversely, if mortgage loan interest rates rise above
the interest rates on the fixed rate mortgage loans underlying the mortgage
pass-through securities, the rate of prepayment may be expected to decrease.

The rate of principal prepayments with respect to ARMs has fluctuated in
recent years. As is the case with fixed rate mortgage loans, ARMs may be
subject to a greater rate of principal prepayments in a declining interest rate
environment. For example, if prevailing interest rates fall significantly, ARMs
could

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<PAGE>

be subject to higher prepayment rates than if prevailing interest rates remain
constant because the availability of fixed rate mortgage loans at competitive
interest rates may encourage mortgagors to refinance their ARMs to "lock-in" a
lower fixed interest rate. Conversely, if prevailing interest rates rise
significantly, ARMs may prepay at lower rates than if prevailing rates remain
at or below those in effect at the time such ARMs were originated due, for
example, to the unavailability of lower rate alternatives. As with fixed rate
mortgages, there can be no certainty as to the rate of prepayments on the ARMs
in either stable or changing interest rate environments. In addition, there can
be no certainty as to whether increases in the principal balances of the ARMs
due to the addition of deferred interest may result in a default rate higher
than that on ARMs that do not provide for negative amortization. Other factors
affecting prepayment of ARMs include changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the mortgage properties and
servicing decisions.

The Fund's reinvestment of principal payments and prepayments received on a
mortgage pass-through security may be made at rates higher or lower than the
rate payable on such security, thus affecting the return realized by the Fund.
In addition, the receipt of interest payments monthly rather than semi-annually
by the Fund has a compounding effect that may increase the yield to the Fund
relative to debt obligations that pay interest semi-annually. Due to these
factors, Mortgage-Backed Securities may also be less effective than U.S.
Treasury securities of similar maturity at maintaining yields during periods of
changing interest rates. Prepayments may have a disproportionate effect on
certain Mortgage-Backed Securities such as SMBS and certain other multiple
class pass-through securities. The Fund may purchase Mortgage-Backed Securities
at a premium or at a discount.

RISKS ASSOCIATED WITH DERIVATIVE MORTGAGE-BACKED SECURITIES. Derivative
Mortgage-Backed Securities are subject to different combinations of interest
rate and/or prepayment risks. In addition, particular derivative securities may
be leveraged such that their exposure (i.e., price sensitivity) to interest
rate and/or prepayment risk is magnified. The Investment Adviser may use
derivative Mortgage-Backed Securities and other derivative securities
consistent with the Fund's investment objective for a variety of purposes
including adjusting the average duration or interest rate sensitivity of the
Fund's portfolio or attempting to enhance the Fund's total return. The
Investment Adviser manages the risks and benefits of derivative Mortgage-Backed
Securities and other derivative securities by prudent analysis, selection and
monitoring of such securities included in the Fund's portfolio.

The risk of faster than anticipated prepayments generally adversely affects
interest-only securities (IOs), super floaters and premium priced Mortgage-
Backed Securities. The risk of slower than anticipated prepayments generally
adversely affects principal-only securities (POs), floating rate securities
subject to interest rate caps, support tranches and discount priced Mortgage-
Backed Securities.

RISKS ASSOCIATED WITH OTHER DERIVATIVE FLOATING RATE SECURITIES. Other types
of floating rate derivative securities present more complex types of interest
rate risks. For example, range floaters are subject to the risk that the coupon
will be reduced to below market rates if a designated interest rate floats
outside of a specified interest rate band or collar. Dual index or yield curve
floaters are subject to lower prices in the event of an unfavorable change in
the spread between two designated interest rates.

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<PAGE>

OTHER INVESTMENTS AND PRACTICES

INVERSE FLOATING RATE SECURITIES. The Fund may invest in leveraged inverse
floating rate debt instruments ("inverse floaters"). The interest rate on an
inverse floater resets in the opposite direction from the market rate of
interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values. Accordingly, the
duration of an inverse floater may exceed its stated final maturity. Certain
inverse floaters may be deemed to be illiquid securities for purposes of the
Fund's 15% limitation on investments in such securities.

OTHER INVESTMENTS. The Fund may also invest in other instruments including
obligations of the United States, notes, bonds, and discount notes of other
U.S. Government agencies or instrumentalities, including but not limited to:
Federal National Mortgage Association, Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, Federal Home Loan Banks,
Bank for Cooperatives, Farm Credit Banks, Tennessee Valley Authority, Federal
Financing Bank, Small Business Administration and Federal Agricultural Mortgage
Corporation.

INTEREST RATE SWAPS, MORTGAGE SWAPS, CAPS, FLOORS AND COLLARS. The Fund may
enter into interest rate swaps and mortgage swaps for hedging purposes and to
increase total return. The Fund may also enter into other types of interest
rate swap arrangements such as caps, floors and collars. Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. Mortgage swaps are similar to interest rate
swaps in that they represent commitments to pay and receive interest. The
notional principal amount, however, is tied to a reference pool or pools of
mortgages. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payment of interest on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payment of interest on a notional principal amount
from the party selling such interest rate floor. An interest rate collar is the
combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates. Since interest rate swaps, mortgage
swaps, caps, floors and collars are individually negotiated, the Fund expects
to achieve an acceptable degree of correlation between its portfolio
investments and its swap, cap, floor and collar positions entered into for
hedging purposes.

The Fund will enter into interest rate swaps and mortgage swaps only on a net
basis, which means that the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps and mortgage swaps do not involve the delivery of
securities, other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate swaps and mortgage swaps is limited to the net
amount of payments that the Fund is contractually obligated to make. If the
other party to an interest rate swap or mortgage swap defaults, the Fund's risk
of loss consists of the net amount of payments that the Fund is contractually
entitled to receive, if any. To the extent the net amount of an interest rate
swap or mortgage swap is held in a segregated account, consisting of cash and
liquid, high grade debt securities, the Fund and the Investment Adviser believe
that swaps do not constitute senior securities under the Investment Company Act
of 1940, as amended (the "Act") and, accordingly, will not treat them as being
subject to the Fund's borrowing restriction.

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The Fund will not enter into any interest rate swap, mortgage swap, or
interest rate cap, floor or collar transactions unless the unsecured commercial
paper, senior debt or claims paying ability of the other party is rated either
AA or A-1 or better by Standard & Poor's Ratings Group ("S&P") or Aa or P-1 or
better by Moody's Investors Service, Inc. ("Moody's"), or, if unrated by such
rating organizations, determined to be of comparable quality by the Investment
Adviser.

The use of interest rate swaps and mortgage swaps, as well as interest rate
floors, caps and collars, is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Investment Adviser is incorrect in
its forecasts of market values and interest rates, the investment performance
of the Fund would be less favorable than it would have been if these investment
techniques were not used. The staff of the SEC considers interest rate swaps
and mortgage swaps, as well as interest rate caps, floors and collars, to be
illiquid securities for purposes of the Fund's 15% limitation on illiquid
investments.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To hedge against changes
in interest rates or securities prices or to seek to increase total return, the
Fund may purchase and sell various kinds of futures contracts, and purchase and
write call and put options on any of such futures contracts. The Fund will
engage in futures and related options transactions only for bona fide hedging
purposes as defined in regulations of the Commodity Futures Trading Commission
or to seek to increase total return to the extent permitted by such
regulations.

The Fund may not purchase or sell futures contracts or purchase or sell
related options to increase total return, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial margin
deposits and premiums paid on the Fund's outstanding positions in futures and
related options entered into for the purpose of seeking to increase total
return would exceed 5% of the market value of the Fund's net assets.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities, require the Fund to segregate cash
and liquid, high-grade debt securities with a value equal to the amount of the
Fund's obligations.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Objectives and Policies--Futures Contracts and Options on Futures
Contracts" in the Additional Statement. Thus, while the Fund may benefit from
the use of futures and options on futures, unanticipated changes in interest
rates or securities prices may result in a poorer overall performance for the
Fund than if it had not entered into any futures contracts or options
transactions. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.

The use of futures may increase the volatility of the Fund's net asset value.
The profitability of the Fund's trading in futures to increase total return
will depend on the Investment Adviser's ability to correctly analyze the
futures markets. In addition, because of the low margin deposits normally
required in futures trading, a relatively small price movement in a futures
contract may result in substantial losses to the Fund. Further, futures trading
may be illiquid, and exchanges may limit fluctuations in futures contract
prices during a single day.

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<PAGE>

In the event of an imperfect correlation between a futures position and a
portfolio position which is intended to be protected, the desired protection
may not be obtained and the Fund may be exposed to risk of loss. Perfect
correlation between the Fund's futures positions and portfolio positions will
be impossible to achieve. The Fund's transactions in options and futures
contracts may be limited by the requirements of the Code, for qualification as
a regulated investment company.

RISKS OF DERIVATIVE TRANSACTIONS. The Fund's transactions in interest rate
and mortgage swaps, interest rate caps, floors and collars, futures and options
on futures involve certain risks, including a possible lack of correlation
between changes in the value of hedging instruments and the portfolio assets
being hedged, the potential illiquidity of the markets for derivative
instruments, the risks arising from the margin requirements and related
leverage factors associated with such transactions. The use of these management
techniques to seek to increase total return also involves the risk of loss if
the Investment Adviser is incorrect in its expectation of fluctuations in
securities prices or interest rates.

LENDING OF PORTFOLIO SECURITIES. The Fund may also seek to increase its
income by lending portfolio securities. Under present regulatory policies, such
loans may be made to institutions, such as certain broker-dealers, and are
required to be secured continuously by collateral in cash, cash equivalents or
U.S. Government securities maintained on a current basis in an amount at least
equal to the market value of the securities loaned. Cash collateral may be
invested in cash equivalents. If the Investment Adviser determines to make
securities loans, the value of the securities loaned may not exceed 33 1/3% of
the value of the total assets of the Fund. See "Investment Restrictions" in the
Additional Statement. The Fund may experience a loss or delay in the recovery
of its securities if the institution with which it has engaged in a portfolio
loan transaction breaches its agreement with the Fund.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund may purchase
securities on a when-issued basis. When-issued transactions arise when
securities are purchased by the Fund with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous price
and yield to the Fund at the time of entering into the transaction. The Fund
may also purchase securities on a forward commitment basis. In a forward
commitment transaction, the Fund contracts to purchase securities for a fixed
price at a future date beyond customary settlement time. The Fund is required
to hold and maintain in a segregated account until the settlement date cash or
liquid, high-grade debt obligations in an amount sufficient to meet the
purchase price. Alternatively, the Fund may enter into offsetting contracts for
the forward sale of other securities that it owns. The purchase of securities
on a when-issued or forward commitment basis involves a risk of loss if the
value of the security to be purchased declines prior to the settlement date.
Although the Fund would generally purchase securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities
for its portfolio, the Fund may dispose of a when-issued security or forward
commitment prior to settlement if the Investment Adviser deems it appropriate
to do so.

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<PAGE>

of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the Fund compared
with what such performance would have been without the use of mortgage dollar
rolls. All cash proceeds will be invested in instruments that are permissible
investments for the Fund. The Fund will hold and maintain in a segregated
account until the settlement date cash or liquid, high-grade debt securities in
an amount equal to the forward purchase price.

For financial reporting and tax purposes, the Fund treats mortgage dollar
rolls as two separate transactions; one involving the purchase of a security
and a separate transaction involving a sale. The Fund does not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing.

Mortgage dollar rolls involve certain risks including the following: if the
broker-dealer to whom the Fund sells the security becomes insolvent, the Fund's
right to purchase or repurchase the mortgage-related securities subject to the
mortgage dollar roll may be restricted and the instrument which the Fund is
required to repurchase may be worth less than an instrument which the Fund
originally held. Successful use of mortgage dollar rolls will depend upon the
Investment Adviser's ability to manage its interest rate and mortgage
prepayments exposure. For these reasons, there is no assurance that mortgage
dollar rolls can be successfully employed.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
dealers in U.S. Government securities and member banks of the Federal Reserve
System which furnish collateral at least equal in value or market price to the
amount of their repurchase obligation. In a repurchase agreement, the Fund
purchases a debt security from a seller which undertakes to repurchase the
security at a specified resale price on an agreed future date (ordinarily a
week or less). The resale price generally exceeds the purchase price by an
amount which reflects an agreed-upon market interest rate for the term of the
repurchase agreement. The primary risk is that, if the seller defaults, the
Fund might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the Fund in connection with
the related repurchase agreement are less than the repurchase price. Repurchase
agreements maturing in more than seven days are considered by the Fund to be
illiquid. In addition, the Fund, together with other registered investment
companies having advisory agreements with the Investment Adviser or any of its
affiliates, may transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which will be invested in one or more repurchase
agreements.

ILLIQUID SECURITIES. The Fund will not invest more than 15% of its net assets
in securities which are illiquid, including securities that are not readily
marketable, repurchase agreements maturing in more than seven days, interest
rate and mortgage swaps, interest rate caps, floors and collars, certain SMBS
and securities that are restricted as to resale. However, a restricted security
is not considered to be illiquid if the Trustees of the Trust determine, based
upon the Investment Adviser's continuing review of the trading markets for the
specific restricted security, under guidelines adopted by the Trustees of the
Trust and subject to the Trustees' oversight and ultimate responsibility, that
such restricted security eligible for resale under Rule 144A under the
Securities Act of 1933 is liquid. In addition, a repurchase agreement which by
its terms can be liquidated before its nominal fixed term on seven days or less
notice is regarded as a liquid instrument. Subject to the 15% limitation on
illiquid securities investments, the Fund may acquire U.S. Government
securities in a private placement.

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<PAGE>

Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will develop, the
Board of Trustees will carefully monitor the Fund's investments in these
securities, focusing on such important factors, among others, as valuation,
credit quality, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity in the
Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing these restricted securities.

OTHER INVESTMENT COMPANIES. The Fund reserves the right to invest up to 10%
of its total assets, calculated at the time of purchase, in the securities of
other investment companies, including business development companies and small
business investment companies. The Fund may not invest more than 5% of its
total assets in the securities of any one investment company or acquire more
than 3% of the voting securities of any other investment company. Pursuant to
an exemptive order obtained from the SEC, other investment companies in which
the Fund may invest include money market funds for which the Investment Adviser
or any of its affiliates serves as investment adviser. The Fund will indirectly
bear its proportionate share of any management fees and other expenses paid by
investment companies in which it invests in addition to the advisory fees paid
by the Fund. However, to the extent that the Fund invests in a money market
fund for which the Investment Adviser or any of its affiliates acts as adviser,
the advisory fees payable by the Fund to the Investment Adviser will be reduced
by an amount equal to the Fund's proportionate share of the advisory fees paid
by such money market fund to the Investment Adviser or any of its affiliates.

INVESTMENT RESTRICTIONS

PORTFOLIO TURNOVER

It is anticipated that the portfolio turnover rate of the Fund will vary from
year to year. The portfolio turnover rate is computed by dividing the lesser of
the amount of securities purchased or securities sold (excluding all securities
whose maturities at acquisition are one year or less) by the average monthly
value of such securities owned during the year. A 100% turnover rate would
occur, for example, if all of the securities held by the Fund were sold and
replaced within one year. The Investment Adviser will not consider the
portfolio turnover rate a limiting factor in making investment decisions for
the Fund consistent with the Fund's investment objective and portfolio
management policies. A higher rate of portfolio turnover results in increased
transaction costs to the Fund. The portfolio turnover rate includes the effect
of entering into mortgage dollar rolls.

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<PAGE>

MANAGEMENT

TRUSTEES AND OFFICERS

The Trust's Board of Trustees is responsible for deciding matters of general
policy and reviewing the actions of the Investment Adviser, distributor and
transfer agent. The officers of the Trust conduct and supervise the Fund's
daily business operations. The Additional Statement contains information as to
the identity of, and other information about, the Trustees and officers of the
Trust.

INVESTMENT ADVISER

Goldman Sachs Funds Management, L.P., One New York Plaza, New York, New York
10004, a Delaware limited partnership which is an affiliate of Goldman Sachs,
acts as the investment adviser of the Fund. Goldman Sachs Funds Management,
L.P. was registered as an investment adviser in 1990. As of January 31, 1995,
the Investment Adviser, together with its affiliates, acted as investment
adviser, administrator or distributor for approximately $48.7 billion in
assets.

Under its Investment Advisory Agreement with the Fund, Goldman Sachs Funds
Management, L.P., subject to the general supervision of the Board of Trustees,
manages the Fund's portfolio and provides for the administration of all of the
Fund's other affairs. It is the responsibility of the Investment Adviser to
make investment decisions for the Fund and to place purchase and sale orders
for the Fund's portfolio transactions. Such orders may be directed to any
broker including, to the extent and in the manner permitted by applicable law,
Goldman Sachs or its affiliates. Goldman Sachs has agreed to permit the Fund to
use the name "Goldman Sachs" or a derivative thereof as part of the Fund's name
for as long as the Investment Advisory Agreement is in effect.

The Fund's portfolio managers are Jonathan A. Beinner and Theodore T. Sotir.
Mr. Beinner specializes in investing in a particular type of security the Fund
may hold. Mr. Sotir helps with overall portfolio strategy and is a member of
the Investment Adviser's risk control team. Mr. Beinner joined the Investment
Adviser in 1990 and is currently a Vice President, after working in the trading
and arbitrage group of Franklin Savings Association. Mr. Sotir joined the
Investment Adviser in 1993 and is currently a Vice President, after working as
a portfolio manager at Fidelity Management Trust Company. Prior to joining
Fidelity, Mr. Sotir worked for Goldman Sachs in the mortgage securities
department for six years.

As compensation for the services rendered to the Fund by the Investment
Adviser pursuant to the Investment Advisory Agreement, and the assumption by
the Investment Adviser of the expenses related thereto, the Fund pays the
Investment Adviser a fee, computed daily and payable monthly, at an annual rate
equal to 0.40% of the Fund's average daily net assets. For the fiscal year
ended October 31, 1994, the Fund paid an advisory fee to the Investment Adviser
equal to 0.40% of the Fund's average daily net assets.

The Investment Adviser has voluntarily agreed to reduce or otherwise limit
certain expenses of the Fund (excluding advisory, distribution and service
fees, payments to Service Organizations (as defined below), taxes, interest and
brokerage and litigation, indemnification and other extraordinary expenses) to

23
<PAGE>

the extent such expenses exceed 0.05% annually of the Fund's average net
assets. Such reductions or limits, if any, are calculated monthly on a
cumulative basis and may be discontinued or modified by the Investment Adviser
at its discretion at any time. The Investment Adviser has also agreed to reduce
its fees payable (to the extent of such fees) by the amount the Fund's expenses
would, absent the fee reduction, exceed the applicable expense limitations
imposed by state securities administrators. See "Management--Expenses" in the
Additional Statement.

ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS. The involvement of the Investment Adviser, Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts and
other activities of Goldman Sachs may present conflicts of interest with
respect to the Fund or limit its investment activities. Goldman Sachs and its
affiliates engage in proprietary trading and advise accounts and funds which
have investment objectives similar to those of the Fund and/or which engage in
and compete for transactions in the same types of securities and instruments as
the Fund. Goldman Sachs and its affiliates will not have any obligation to make
available any information regarding their proprietary activities or strategies,
or the activities or strategies used for other accounts managed by them, for
the benefit of the management of the Fund and it is not anticipated that the
Investment Adviser will have access to proprietary information for the purpose
of managing the Fund. The results of the Fund's investment activities,
therefore, may differ from those of Goldman Sachs and its affiliates and it is
possible that the Fund could sustain losses during periods in which Goldman
Sachs and its affiliates and other accounts achieve significant profits on
their trading for proprietary or other accounts. From time to time, the Fund's
activities may be limited because of regulatory restrictions applicable to
Goldman Sachs and its affiliates, and/or their internal policies designed to
comply with such restrictions. See "Activities of Goldman Sachs and its
Affiliates and Other Accounts Managed by Goldman Sachs" in the Additional
Statement for further information.

DISTRIBUTOR AND TRANSFER AGENT

Goldman Sachs, 85 Broad Street, New York, New York, serves as the exclusive
distributor of the Fund's shares. Goldman Sachs, 4900 Sears Tower, Chicago,
Illinois, also serves as the Fund's transfer agent (the "Transfer Agent").
Shareholders of record with inquiries regarding the Fund should contact Goldman
Sachs (as Transfer Agent) at the address or the telephone number set forth on
the inside front cover page of this Prospectus.

NET ASSET VALUE

The net asset value per share is calculated by the Fund's custodian as of the
close of regular trading on the New York Stock Exchange (normally 3:00 p.m.
Chicago time, 4:00 p.m. New York time), immediately after determination of the
income to be declared as a dividend on each Business Day (as such term is
defined under "Additional Information"). Net asset value per share of each
class is calculated by determining the net assets attributable to each class
and dividing by the number of outstanding shares of that class.

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<PAGE>

Investments in Mortgage-Backed Securities and other debt obligations are
valued at fair value, based on yield equivalents, a pricing matrix or other
sources, under valuation procedures established by the Trust's Board of
Trustees. Other portfolio securities for which accurate market quotations are
readily available are valued on the basis of quotations furnished by pricing
services or provided by dealers in such securities. Portfolio securities for
which accurate market quotations are not readily available are valued in
accordance with the Trust's valuation procedures. Debt obligations with a
remaining maturity of 60 days or less are valued at amortized cost. The Board
of Trustees has determined that the amortized cost of such securities
approximates fair market value.

PERFORMANCE INFORMATION

From time to time the Fund may publish yield and average annual total return
in advertisements and communications to shareholders or prospective investors.

Yield is computed by dividing net investment income earned during a recent
thirty-day period by the product of the average daily number of shares
outstanding and entitled to receive dividends during the period and the net
asset value per share on the last day of the relevant period. The results are
compounded on a bond equivalent (semi-annual) basis and then annualized. Net
investment income per share is equal to the dividends and interest earned
during the period, reduced by accrued expenses for the period. The calculation
of net investment income for these purposes may differ from the net investment
income determined for accounting purposes.

Average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (i.e., net asset value) for specified periods ending with the most recent
calendar quarter, assuming reinvestment of all dividends and distributions at
net asset value. The total return calculation assumes a complete redemption of
the investment at the end of the relevant period. The Fund may also from time
to time advertise total return on a cumulative, average, year-by-year or other
basis for various specified periods by means of quotations, charts, graphs or
schedules. In addition to the above, the Fund may from time to time advertise
its performance relative to certain performance rankings and indices.

Quotations of distribution rates are calculated by annualizing the most
recent distribution of net investment income for a monthly, quarterly or other
relevant period and dividing this amount by the ending net asset value for the
period for which the distribution rates are being calculated.

The investment results of the Fund will fluctuate over time and any
presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the Fund's
performance may be in any future period. In addition to information provided in
shareholder reports, the Fund may, in its discretion, from time to time make a
list of its holdings available to investors upon request.

Yield, total return and distribution rate will be calculated separately for
each class of shares in existence. Because each class of shares may be subject
to different expenses, the yield, total return and distribution rate
calculations with respect to each class of shares of the Fund for the same
period will differ. Due to the fees payable under the Distribution Plan,
Service Plan and the Administration Plan, the investment performance, for any
period, of the Institutional Shares will always be higher than that of the

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<PAGE>

Class A Shares, Service Shares and the Administration Shares. The investment
performance of the Administration Shares will always be higher than that of the
Service Shares. The investment performance of the Class A Shares will be
affected by the payment of a sales charge. Without giving effect to sales
charges, the investment performance of Class A Shares will be identical to the
Administration Shares as long as Goldman Sachs continues to limit its fee under
the Distribution Plan to 0.25% of the average daily net assets attributable to
Class A Shares. See "Shares of the Trust" below.

SHARES OF THE TRUST

The Fund is a series of Goldman Sachs Trust, which was organized under the
laws of The Commonwealth of Massachusetts on September 24, 1987 as a
Massachusetts business trust under an Agreement and Declaration of Trust, as
amended (the "Trust Agreement"). Under the Trust Agreement the Trustees are
authorized to issue an unlimited number of shares of beneficial interest, $.001
par value per share. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Trustees of the Trust have
authority under the Trust Agreement to create and classify shares of beneficial
interest in separate series, without further action by shareholders. As of the
date of this Prospectus, the Trustees have authorized shares of the Fund and
ten other series. Additional series may be added in the future. The Trustees
also have authority to classify or reclassify any series or portfolio of shares
into one or more classes. Pursuant thereto, the Trustees have authorized the
issuance of four classes of shares of the Fund. These classes are:
Institutional Shares, Administration Shares, Service Shares and Class A Shares.
As of October 31, 1994, no Service Shares or Class A Shares of the Fund were
outstanding.

Each Institutional Share, Administration Share, Service Share and Class A
Share of the Fund represents an equal proportionate interest in the assets
belonging to the Fund. All Fund expenses are based on a percentage of the
Fund's aggregate average net assets, except that the respective fees under
Administration, Service and Distribution Plans relating to a particular class
will be borne exclusively by that class. It is contemplated that most
Administration Shares and Service Shares will be held in accounts of which the
record owner is a bank or other institution acting, directly or through an
agent, as nominee for its customers who are the beneficial owners of the shares
or another organization designated by such bank or institution. Administration
Shares and Service Shares will each be marketed only to such institutional
investors, at net asset value with no sales load. Institutional Shares may be
purchased for accounts in the name of an investor or institution that is not
compensated by the Fund for services provided to the institution's customers.
Administration Shares may be purchased for accounts held in the name of an
institution that provides certain account administration services to its
customers, including maintenance of account records and processing orders to
purchase, redeem or exchange Administration Shares. Administration Shares bear
the cost of account administration fees at the annual rate of up to 0.25% of
the average daily net assets of such Administration Shares. Service Shares may
be purchased for accounts held in the name of an institution that provides
certain account administration and shareholder liaison services to its
customers, including maintenance of account records and processing orders to
purchase, redeem or exchange Service Shares, responding to customer inquiries
and assisting customers with investment procedures. Service Shares bear the
cost of service fees at the annual rate of up to 0.50% of the average daily net
assets of such Service Shares. (Institutions that provide services to holders
of Administration or Service Shares are referred to in this Prospectus as
"Service Organizations"). Class A Shares of a Fund may be bought at net asset
value plus a sales charge of up to

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<PAGE>

1.5% of the purchase price through Goldman Sachs and certain investment
dealers, including members of the National Association of Securities Dealers,
Inc. ("NASD") and certain other financial service firms that have entered into
a sales agreement with Goldman Sachs ("Authorized Dealers"). The minimum
investment requirements, services, programs and purchase and redemption options
for shares purchased through a particular Authorized Dealer may be different
from those available to investors purchasing through other Authorized Dealers.
Class A Shares bear the cost of distribution and service fees at the annual
rate of up to 0.50% of the average daily net asset of such Class A Shares.
Goldman Sachs has agreed to limit the amount of the distribution and service
fees payable by the Fund to 0.25% of its average daily net assets attributable
to Class A Shares. Goldman Sachs has no current intention of modifying or
discontinuing such limitation, but may do so in the future at its discretion.

It is possible that an institution or its affiliate may offer different
classes of shares (i.e., Institutional, Administration, Service and Class A
Shares) to its customers and thus receive different compensation with respect
to different classes of shares of the Fund. Administration Shares, Service
Shares and Class A Shares may each have certain exclusive voting rights on
matters relating to their respective plans. Shares of each class may be
exchanged only for shares of the same class in another fund and certain money
market funds sponsored by Goldman Sachs. The Fund may amend such policy in the
future. Dividends paid by the Fund, if any, with respect to each class of
shares will be calculated in the same manner, at the same time on the same day
and will be in the same amount, except for differences caused by the fact that
the respective fees under Administration, Service and Distribution Plans
relating to a particular class will be borne exclusively by that class.
Similarly, the net asset value per share will vary depending on the class of
shares purchased.

Certain aspects of the shares may be altered, after advance notice to
shareholders, if it is deemed necessary in order to satisfy certain tax
regulatory requirements.

When issued, shares are fully paid and non-assessable. In the event of
liquidation, shareholders are entitled to share pro rata in the net assets of
the Fund available for distribution to such shareholders. All shares entitle
their holders to one vote per share, are freely transferable and have no
preemptive, subscription or conversion rights.

Under Massachusetts law, there is a remote possibility that shareholders of a
business trust could, under certain circumstances, be held personally liable as
partners for the obligations of such trust. The Trust Agreement contains
provisions intended to limit such liability and to provide indemnification out
of Trust property of any shareholder charged or held personally liable for
obligations or liabilities of the Trust solely by reason of being or having
been a shareholder of the Trust and not because of such shareholder's acts or
omissions or for some other reason. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations.

27
<PAGE>

for such purpose when requested to do so in writing by the record holders of
not less than 10% of the outstanding shares of the Trust. Shareholders may,
under certain circumstances, communicate with other shareholders in connection
with requesting a special meeting of shareholders. The Board of Trustees,
however, will call a special meeting for the purpose of electing Trustees if,
at any time, less than a majority of Trustees holding office at the time were
elected by shareholders.

In the interest of economy and convenience, the Trust does not issue share
certificates. Instead, the Transfer Agent maintains a record of each
shareholder's ownership. Each shareholder receives confirmation of purchase and
redemption orders from the Transfer Agent. Shares and any dividends and
distributions paid by the Fund are reflected in account statements from the
Transfer Agent.

TAXATION

FEDERAL TAXES

The Fund is treated as a separate entity for tax purposes. The Fund has
qualified and elected to be treated as a regulated investment company under
Subchapter M of the Code and intends to continue to qualify for such treatment.
To qualify for treatment as a regulated investment company, the Fund must
satisfy certain requirements relating to the sources of its income,
diversification of its assets and distribution of its income to shareholders.
As a regulated investment company, the Fund will not be subject to federal
income or excise tax on any net investment income and net realized capital
gains that are distributed to its shareholders in accordance with certain
timing requirements of the Code.

Dividends paid by the Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and original issue
discount or certain market discount income will be taxable to shareholders as
ordinary income. Dividends paid by the Fund from the excess of net long-term
capital gain over net short-term capital loss will be taxable as long-term
capital gains regardless of how long the shareholders have held their shares.
These tax consequences will apply regardless of whether distributions are
received in cash or reinvested in shares. Certain distributions paid by the
Fund in January of a given year may be taxable to shareholders as if received
the prior December 31. Shareholders will be informed annually about the amount
and character of distributions received from the Fund for federal income tax
purposes.

Investors should consider the tax implications of buying shares immediately
prior to a distribution. Investors who purchase shares shortly before the
record date for a distribution will pay a per share price that includes the
value of the anticipated distribution and will be taxed on the distribution
when received even though the distribution represents a return of a portion of
the purchase price.

Redemptions and exchanges of shares are taxable events on which a shareholder
may recognize a gain or loss.

Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on distributions, redemptions and
exchanges if they fail to furnish the Fund with their correct taxpayer
identification number and certain certifications or if they are otherwise
subject to backup withholding. Individuals, corporations and other shareholders
that are not U.S. persons under the Code are subject to different tax rules and
may be subject to nonresident alien withholding at the rate of 30% (or a lower
rate provided by an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund.

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<PAGE>

OTHER TAXES

In addition to federal taxes, a shareholder may be subject to state, local or
foreign taxes on payments received from the Fund. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in the
case of intangibles taxes, the value of its assets is attributable to) certain
U.S. Government obligations, provided in some states that certain thresholds
for holdings of such obligations and/or reporting requirements are satisfied.

Shareholders should consult their own tax advisers with respect to the
federal, state, local and foreign tax consequences of investing in the Fund in
their particular circumstances. See the Additional Statement for a further
discussion of certain tax consequences of investing in shares of the Fund.

ADDITIONAL INFORMATION

The term "majority of the outstanding shares" of the Fund means the vote of
the lesser of (i) 67% or more of the shares present at the meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Fund.

As used in this Prospectus, the term "Business Day" refers to those days when
the Investment Adviser, The Northern Trust Company, State Street Bank and Trust
Company and the Federal Reserve Bank of New York are open for business, which
is Monday through Friday except for holidays. Such holidays currently are: New
Year's Day (observed), Martin Luther King Day, Presidents' Day (observed), Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Columbus Day,
Thanksgiving and Christmas. On those days when one or more of such
organizations close early as a result of such day being a partial holiday or
otherwise, the right is reserved to advance the time on that day by which
purchase and redemption requests must be received.

29
<PAGE>

DIVIDENDS

The Fund intends to declare a daily dividend determined with the objective of
distributing the majority of net investment income while enhancing the
stability of principal. Such dividend will accrue to shareholders of record as
of 3:00 p.m. Chicago time, and will be paid monthly. Over the course of the
fiscal year, dividends accrued and paid will constitute all or substantially
all of the Fund's net investment income. From time to time a portion of such
dividends may constitute a return of capital. The Fund also intends that all
net realized long-term and short-term capital gains will be declared as a
dividend at least annually. In determining amounts of capital gains to be
distributed, capital losses including any available capital loss carryovers
from prior years will be offset against capital gains.

The Fund's net investment income is determined on a daily basis. On days on
which net asset value is calculated, such determination is made immediately
prior to the calculation of the Fund's net asset value as of 3:00 p.m. Chicago
time. On days on which net asset value is not calculated, such determination is
made as of 3:00 p.m. Chicago time.

Payment of dividends from net investment income will be made on the last
calendar day of each month in additional shares of the Fund at the net asset
value on such day, unless cash distributions are elected, in which case payment
will be made on the first Business Day of the succeeding month. Payment of
dividends with respect to capital gains, if any, when declared will be made in
additional shares of the Fund at the net asset value on the payment date,
unless cash distributions are elected. This election to receive dividends in
cash is initially made on the Account Information Form and may be changed upon
written notice to the Transfer Agent at any time prior to the record date for a
particular dividend or distribution. If cash dividends are elected with respect
to the Fund's monthly net investment income dividends then cash dividends must
also be elected with respect to the non-long term capital gains component, if
any, of the Fund's annual dividend.

At the time of an investor's purchase of shares of the Fund a portion of the
net asset value per share may be represented by undistributed income of the
Fund or unrealized appreciation of the Fund's portfolio securities. Therefore,
subsequent distributions (or portions thereof) on such shares may be taxable to
the investor even if the net asset value of the shares is, as a result of the
distributions, reduced below the cost of such shares and the distributions (or
portions thereof) represent a return of a portion of the purchase price.

REPORTS TO SHAREHOLDERS

Institutional Shareholders will receive an annual report containing audited
financial statements and a semi-annual report. Each Institutional Shareholder
will also be provided with a printed confirmation for each transaction in the
shareholder's account and an individual monthly statement. A year-to-date
statement for any account will be provided upon request made to Goldman Sachs.

SUB-ACCOUNTING SERVICE

The Fund has designed special procedures to assist banks and other
institutional investors desiring to establish multiple accounts (master
accounts and their sub-accounts). Sub-accounts may be established with
registration by name and/or number. Institutions will not normally be charged
for this service unless otherwise agreed upon. Upon request, master accounts
will be provided with a monthly summary report which sets forth in order by
account number (or name) the share balance at month end and the income, if any,
together with the total share balance and income, if any, for the master
account.

30
<PAGE>

PURCHASE OF INSTITUTIONAL SHARES

Institutional Shares of the Fund may be purchased through Goldman Sachs at
the net asset value per share next determined after receipt of an order without
the imposition of a sales load. If, by 3:00 p.m. Chicago time (4:00 p.m. New
York time), an order, a check or a Federal Reserve draft is received by Goldman
Sachs, the price per share will be the net asset value per share computed on
the day the purchase order or such form of payment is received. See "Net Asset
Value."

PURCHASE PROCEDURES

Purchases of Institutional Shares may be made by placing an order with
Goldman Sachs at 800-621-2550 and either wiring Federal Funds to The Northern
Trust Company ("Northern") as subcustodian for State Street Bank and Trust
Company ("State Street") on the next Business Day or initiating an ACH transfer
to ensure receipt by Northern on the next Business Day. Purchases may also be
made by check (except that a check drawn on a foreign bank will not be
accepted) or Federal Reserve draft made payable to "Goldman Sachs Trust--GS
Adjustable Rate Government Agency Fund" and should be directed to Goldman Sachs
Trust--GS Adjustable Rate Government Agency Fund, c/o GSAM Shareholder
Services, 4900 Sears Tower, Chicago, Illinois 60606. Payment of the proceeds of
redemption of shares purchased by check may be delayed for a period of time as
described under "Redemption of Institutional Shares."

In order to make an initial investment in the Fund, an investor must
establish an account with the Fund by furnishing necessary information to the
Fund or Goldman Sachs. An Account Information Form, a copy of which is attached
to this Prospectus, should be used to establish such an account. Subsequent
purchases of Institutional Shares may be made in the manner set forth in the
preceding paragraph.

The minimum initial investment is $50,000 in Institutional Shares of the Fund
alone or in combination with Institutional Shares of any other mutual fund
sponsored by Goldman Sachs and designated as an eligible fund for this purpose
and the relevant class of any portfolio of Goldman Sachs Money Market Trust.
The minimum investment requirement may be waived for current and former
officers, partners, directors or employees of Goldman Sachs or any of its
affiliates or for other investors at the discretion of the Trust's officers. No
minimum amount is required for subsequent investments. The Fund reserves the
right to redeem the Institutional Shares of any Institutional Shareholder whose
account balance is less than $100 as a result of earlier redemptions. Such
redemptions will not be implemented if the value of an Institutional
Shareholder's account falls below the minimum account balance solely as a
result of market conditions. The Trust will give sixty (60) days' prior written
notice to Institutional Shareholders whose Institutional Shares are being
redeemed to allow them to purchase sufficient additional Institutional Shares
of the Fund to avoid such redemption.

OTHER PURCHASE INFORMATION

PURCHASE BY FEDERAL FUNDS WIRE OR ACH TRANSFER. If a purchase order is
received by Goldman Sachs by 3:00 p.m. Chicago time, the purchased shares will
be issued and dividends will begin on such shares on the next Business Day,
provided that a Federal Funds wire or an ACH transfer is received by Northern
on such day.

PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT. If a purchase check or Federal
Reserve draft is received by Goldman Sachs by 3:00 p.m. Chicago time, the
purchased shares will be issued and

31
<PAGE>

dividends will begin on such shares on the next Business Day after the check or
Federal Reserve draft is received by Goldman Sachs.

Banks, trust companies or other institutions through which investors acquire
Institutional Shares may impose charges in connection with transactions in
Institutional Shares. Such institutions should be consulted for information
regarding such charges.

The Fund and Goldman Sachs each reserves the right to reject any specific
purchase order (including exchanges) or to restrict purchases or exchanges by a
particular purchaser (or group of related purchasers). The Fund or Goldman
Sachs may reject or restrict purchases or exchanges of Institutional Shares by
a particular purchaser or group, for example, when a pattern of frequent
purchases and sales or exchanges of Institutional Shares of the Fund is
evident, or if the purchase and sale or exchange orders are, or a subsequent
abrupt redemption might be, of a size that would disrupt management of the
Fund.

EXCHANGE PRIVILEGE

Institutional Shares of the Fund may be exchanged for (i) Institutional
Shares of any other mutual fund sponsored by Goldman Sachs and designated as an
eligible fund for this purpose and (ii) the relevant class of any portfolio of
Goldman Sachs Money Market Trust at the net asset value next determined either
by writing to Goldman Sachs, Attention: Goldman Sachs Trust--GS Adjustable Rate
Government Agency Fund, c/o GSAM Shareholder Services, 4900 Sears Tower,
Chicago, Illinois 60606 or, if previously elected in the Fund's Account
Information Form, by telephone at 800-621-2550 (7:00 a.m. to 3:00 p.m. Chicago
time). A shareholder should obtain and read the prospectus relating to any
other fund and its shares or units and consider its investment objective,
policies and applicable fees before making an exchange. Under the telephone
exchange privilege, Institutional Shares may be exchanged among accounts with
different names, addresses and social security or other taxpayer identification
numbers only if the exchange request is in writing and is received in
accordance with the procedures set forth under "Redemption of Institutional
Shares."

In times of drastic economic or market changes the telephone exchange
privilege may be difficult to implement. In an effort to prevent unauthorized
or fraudulent exchanges by telephone, Goldman Sachs employs reasonable
procedures as set forth under "Redemption of Institutional Shares" to confirm
that such instructions are genuine. For federal income tax purposes, an
exchange is treated as a sale of the Institutional Shares surrendered in the
exchange, on which an investor may realize a gain or loss, followed by a
purchase of Institutional Shares or the relevant class of any portfolio of
Goldman Sachs Money Market Trust received in the exchange. Shareholders should
consult their own tax advisers concerning the tax consequences of an exchange.

All exchanges which represent an initial investment in a fund must satisfy
the minimum investment requirements of the fund into which the Institutional
Shares are being exchanged, except that this requirement may be waived at the
discretion of the officers of such fund. Exchanges are only available in states
where exchanges may legally be made. The exchange privilege may be modified or
withdrawn at any time on sixty (60) days' written notice to Institutional
Shareholders and is subject to certain limitations. See "Purchase of
Institutional Shares."

32
<PAGE>

REDEMPTION OF INSTITUTIONAL SHARES

The Fund will redeem its Institutional Shares upon request of an
Institutional Shareholder on any Business Day at the net asset value next
determined after the receipt by the Transfer Agent of such request in proper
form. See "Net Asset Value." If Institutional Shares to be redeemed were
recently purchased by check, the Fund may delay transmittal of redemption
proceeds until such time as it has assured itself that good funds have been
collected for the purchase of such Institutional Shares. This may take up to
fifteen (15) days. Redemption requests may be made by writing to or calling the
Transfer Agent at the address or telephone number set forth on the inside front
cover page of this Prospectus. An Institutional Shareholder may request
redemptions by telephone if the optional telephone redemption privilege is
elected on the Account Information Form accompanying this Prospectus. It may be
difficult to implement redemptions by telephone in times of drastic economic or
market changes.

In an effort to prevent unauthorized or fraudulent redemption or exchange
requests by telephone, Goldman Sachs employs reasonable procedures specified by
the Trust to confirm that such instructions are genuine. Among other things,
any redemption request that requires money to go to an account or address other
than that designated on the Account Information Form must be in writing and
signed by an authorized person designated on the Account Information Form. Any
such written request is also confirmed by telephone with both the requesting
party and the designated bank account to verify instructions. Exchanges among
accounts with different names, addresses and social security or other taxpayer
identification numbers must be in writing and signed by an authorized person
designated on the Account Information Form. Other procedures may be implemented
from time to time. If reasonable procedures are not implemented, the Trust may
be liable for any loss due to unauthorized or fraudulent transactions. In all
other cases, neither the Fund, the Trust nor Goldman Sachs will be responsible
for the authenticity of redemption or exchange instructions received by
telephone.

Written requests for redemptions must be signed by each Institutional
Shareholder, whose signature has been guaranteed by a bank, securities broker
or dealer, a credit union having authority to issue signature guarantees, a
savings and loan association, a building and loan association, a cooperative
bank, a federal savings bank or association, a national securities exchange, a
registered securities association or a clearing agency, provided that such
institution satisfies the standards established by the Transfer Agent. If
Goldman Sachs receives a redemption request by 3:00 p.m. Chicago time, the
Institutional Shares to be redeemed earn dividends with respect to the day the
request is received.

The Fund will arrange for the proceeds of redemptions effected by any means
to be wired as Federal Funds to the bank account designated in the
Institutional Shareholder's Account Information Form. Redemption proceeds will
normally be wired on the next Business Day in Federal Funds (for a total one-
day delay), but may be paid up to seven (7) days after receipt of a properly
executed redemption request. Wiring of redemption proceeds may be delayed one
additional Business Day if the Federal Reserve Bank is closed on the day
redemption proceeds would ordinarily be wired. In order to change the bank
designated on the Account Information Form to receive redemption proceeds, a
written request must be received by the Transfer Agent. This request must be
signature guaranteed as set forth above. Further documentation may be required
for executors, trustees or corporations. Once wire transfer instructions have
been given by Goldman Sachs, neither the Fund, the Trust nor Goldman Sachs
assumes any further responsibility for the performance of intermediaries of the
Institutional Shareholder's bank in the transfer process. If a problem with
such performance arises, the Institutional Shareholder should deal directly
with such intermediaries or bank.

33
<PAGE>

Additional documentation regarding a redemption by any means may be required
to effect a redemption when deemed appropriate by Goldman Sachs. The request
for such redemption will not be considered to have been received in proper form
until such additional documentation has been received.

Except with respect to Institutional Shareholders whose account balances are
less than $100, Institutional Shares are not redeemable at the option of the
Fund unless the Board of Trustees of the Trust determines in its sole
discretion that failure to so redeem may have material adverse consequences to
the shareholders of the Fund. The Fund, however, assumes no responsibility to
compel redemptions.

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

34
<PAGE>

APPENDIX A

GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM

You are required by law to provide the Fund with your correct Taxpayer
Identification Number (TIN), regardless of whether you file tax returns.
Failure to do so may subject you to penalties. Failure to provide your correct
TIN and to sign your name in the Certification section of the Account
Information Form could result in withholding of 31% by the Fund for the Federal
backup withholding tax on distributions, redemptions, exchanges and other
payments relating to your account.

Any tax withheld may be credited against taxes owed on your federal income
tax return.

If you do not have a TIN, you should apply for one immediately by contacting
your local office of the Social Security Administration or the Internal Revenue
Service (IRS). Backup withholding could apply to payments relating to your
account while you are awaiting receipt of a TIN.

Special rules apply for certain entities. For example, for an account
established under a Uniform Gifts or Transfers to Minors Act, the TIN of the
minor should be furnished.

If you have been notified by the IRS that you are subject to backup
withholding because you failed to report your interest and/or dividend income
on your tax return and you have not been notified by the IRS that such
withholding should cease, you must cross out item (2) in the Certification
section of the Account Information Form.

If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section. Exempt recipients include:
corporations, tax-exempt pension plans and IRA's, governmental agencies,
financial institutions, registered securities and commodities dealers and
others.

If you are a nonresident alien or foreign entity, you must provide a
completed Form W-8 to the Fund in order to avoid withholding on certain
payments. Other payments to you may be subject to nonresident alien withholding
of up to 30%.

For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.

A-1
<PAGE>

THIS ACCOUNT INFORMATION FORM SHOULD BE FORWARDED PROMPTLY TO GOLDMAN, SACHS &
CO.
NO REDEMPTION CAN BE MADE PRIOR TO ITS RECEIPT
GOLDMAN, SACHS & CO.--INSTITUTIONAL FUNDS
ACCOUNT INFORMATION FORM
SEND TO: GOLDMAN, SACHS & CO. INSTITUTIONAL FUNDS MASTER NO. _________________
4900 SEARS TOWER FUND USE ONLY
CHICAGO, ILLINOIS 60606
1-800-621-2550 DATE: _______________________

INITIAL INVESTMENT:

( ) GOLDMAN SACHS MONEY MARKET TRUST ( ) GS--ADJUSTABLE RATE GOVERNMENT AGENCY
Fill in Portfolio(s): FUND
( ) OTHER FUND (Please write name of ( ) GS--CORE FIXED INCOME FUND
Fund in the space provided ( ) GS--SHORT DURATION TAX-FREE FUND
below): ( ) GS--SHORT-TERM GOVERNMENT AGENCY FUND
------------------------------- ( ) GS--GOVERNMENT AGENCY PORTFOLIO (FOR
FINANCIAL INSTITUTIONS)
- --------------------------------------------------------------------------------
A. ACCOUNT RECORD

--------------------------------- ---------------------------------
NAME OF ACCOUNT TELEPHONE NUMBER

---------------------------------
STREET OR P.O. BOX
U.S. CITIZEN OR
--------------------------------- RESIDENT? YES [_] NO [_]
CITY STATE ZIP IF NO IS CHECKED, FILL IN
COUNTRY OF TAX RESIDENCE:
--------------------------------- -----------------------------
ATTENTION
- --------------------------------------------------------------------------------
B. DIVIDENDS AND DISTRIBUTIONS--CHECK APPROPRIATE BOX (SEE "DIVIDENDS")
1. DIVIDENDS (INCLUDING NET SHORT TERM
CAPITAL GAINS)-- [_] CASH [_] UNITS/SHARES

2. NET LONG-TERM CAPITAL GAINS
DISTRIBUTIONS-- [_] CASH [_] UNITS/SHARES
3. DIVIDENDS AND CAPITAL GAINS REINVESTED [_] UNITS/SHARES
IN ANOTHER GOLDMAN SACHS PORTFOLIO ACCOUNT:
(SEE PROSPECTUS REGARDING LIMITATIONS ON THIS PRIVILEGE.)

FUND NAME_________________________ ACCOUNT NUMBER__________________________
(IF NO BOX IS CHECKED, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS WILL BE
REINVESTED.)
- --------------------------------------------------------------------------------
C. SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
TAXPAYER IDENTIFICATION NUMBER: _____________________________________________
UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) THE NUMBER SHOWN ON THIS FORM
IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR I AM WAITING FOR A NUMBER TO
BE ISSUED TO ME), AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE I AM
EXEMPT FROM BACKUP WITHHOLDING OR I HAVE NOT BEEN NOTIFIED BY THE INTERNAL
REVENUE SERVICE (IRS) THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF
A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR THE IRS HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. SEE THE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER" ON ACCOUNT INFORMATION FORM,
CONTAINED IN THE APPENDIX TO THE ACCOMPANYING PROSPECTUS.

SIGNATURE DATE NAME (PRINT) AND TITLE (IF ANY)
SIGN
HERE ------------------------------- ----------------------------------

------------------------------- ----------------------------------
- --------------------------------------------------------------------------------
D. OPTIONAL TELEPHONE EXCHANGE (SEE "EXCHANGE PRIVILEGE")
[_] GOLDMAN, SACHS & CO. IS HEREBY AUTHORIZED TO ACCEPT AND ACT UPON
TELEPHONE INSTRUCTIONS FROM THE UNDERSIGNED OR ANY OTHER PERSON FOR THE
EXCHANGE OF SHARES/UNITS OF THE FUND INTO ANY FUND DESCRIBED IN THE
ACCOMPANYING PROSPECTUS. THE UNDERSIGNED UNDERSTANDS AND AGREES THAT NEITHER
THE APPLICABLE FUND NOR GOLDMAN, SACHS & CO. WILL BE LIABLE FOR ANY LOSS,
EXPENSE, OR COST ARISING OUT OF ANY TELEPHONE REQUEST EFFECTED HEREUNDER.
<PAGE>

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

E. OPTIONAL REDEMPTION PLANS--CHECK APPROPRIATE BOX (SEE "REDEMPTION OF
UNITS/SHARES")
[_] 1. I AUTHORIZE GOLDMAN, SACHS & CO. TO HONOR TELEPHONE, TELEGRAPHIC, OR
OTHER INSTRUCTIONS WITHOUT SIGNATURE GUARANTEE, FROM ANY PERSON FOR THE
REDEMPTION OF SHARES FOR THE ABOVE ACCOUNT PROVIDED THAT THE PROCEEDS ARE
TRANSMITTED TO THE FOLLOWING BANK ACCOUNT(S) ONLY. I UNDERSTAND ANY CHANGES
TO THE FOLLOWING INFORMATION MUST BE MADE IN WRITING TO GOLDMAN, SACHS & CO.,
MUST CONTAIN THE APPROPRIATE NUMBER OF SIGNATURES LISTED BELOW AND ALL
SIGNATURES MUST BE SIGNATURE GUARANTEED. ABSENT ITS OWN GROSS NEGLIGENCE,
NEITHER THE APPLICABLE FUND NOR GOLDMAN, SACHS & CO. SHALL BE LIABLE FOR SUCH
REDEMPTIONS OR FOR PAYMENTS MADE TO ANY UNAUTHORIZED ACCOUNT.
OR
[_] 2. I HAVE FURNISHED GOLDMAN, SACHS & CO. WITH A SIGNATURE GUARANTEE (SEE
SECTION G). I AUTHORIZE GOLDMAN, SACHS & CO. TO HONOR TELEPHONE, TELEGRAPHIC,
OR OTHER INSTRUCTIONS, FROM ANY PERSON FOR THE REDEMPTION OF SHARES FOR THE
ABOVE ACCOUNT PROVIDED THAT THE PROCEEDS ARE TRANSMITTED TO THE FOLLOWING
BANK ACCOUNT(S) ONLY. ANY CHANGES TO THE FOLLOWING INFORMATION MUST BE MADE
IN WRITING TO GOLDMAN, SACHS & CO. (BUT WITHOUT SIGNATURE GUARANTEE) AND
CONTAIN THE APPROPRIATE NUMBER OF SIGNATURES LISTED BELOW. ABSENT ITS OWN
GROSS NEGLIGENCE, NEITHER THE APPLICABLE FUND NOR GOLDMAN, SACHS & CO. SHALL
BE LIABLE FOR SUCH REDEMPTIONS OR FOR PAYMENTS MADE TO ANY UNAUTHORIZED
ACCOUNT.

PLEASE COMPLETE THE FOLLOWING BANK ACCOUNT INFORMATION AND PLACE A LINE THROUGH
THE UNUSED PORTION. ADDITIONAL INSTRUCTIONS MAY BE ADDED ON SEPARATE PAGES, IF
NECESSARY.

- --------------------------------------------------------------------------------
BANK NAME BANK ROUTING NO.

- --------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP

- --------------------------------------------------------------------------------
ACCOUNT NAME ACCOUNT NO.