GOLDMAN SACHS TRUST, 497, 1996-03-08

GOLDMAN SACHS TRUST
497, 1996-03-08

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<PAGE>

GOLDMAN SACHS TRUST
CLASS A AND B SHARES

GS ADJUSTABLE RATE FUND
GOLDMAN SACHS GOVERNMENT INCOME FUND
GOLDMAN SACHS MUNICIPAL INCOME FUND
GOLDMAN SACHS GLOBAL INCOME FUND
(COLLECTIVELY, THE "FUNDS")

SUPPLEMENT DATED MARCH 1, 1996 TO THE PROSPECTUS DATED MARCH 1, 1996

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

Class B shares of Goldman Sachs Government Income Fund, Goldman Sachs
Municipal Income Fund and Goldman Sachs Global Income Fund are not currently
available for investment. (GS Adjustable Rate Fund does not offer Class B
shares). It is expected that Class B shares of these Funds will first be
available for investment on or about May 1, 1996. Please contact your
Authorized Dealer or Goldman, Sachs & Co. for the latest information.

SUPFIP1AB/I5K/0396
<PAGE>

- --------------------------------------------------------------------------------
PROSPECTUS
March 1, 1996

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights........................ 1
Fees and Expenses...................... 5
Financial Highlights................... 8
Investment Objectives and Policies..... 10
Description of Securities.............. 13
Risk Factors........................... 19
Investment Techniques.................. 21
Investment Restrictions................ 24
Portfolio Turnover..................... 25
Management............................. 25
Reports to Shareholders................ 29
How to Invest.......................... 30
Shareholder Services Available to
Shareholders.......................... 35
Distribution and Authorized Dealer
Service Plans......................... 38
How to Sell Shares of the Funds........ 39
Dividends.............................. 41
Net Asset Value........................ 42
Performance Information................ 42
Shares of the Trust.................... 43
Taxation............................... 44
Additional Information................. 45
Appendix............................... 46
Account Application
</TABLE>

GOLDMAN SACHS TRUST
CLASS A AND B SHARES

GS ADJUSTABLE RATE GOVERNMENT FUND

Seeks a high level of current income,
consistent with low volatility of prin-
cipal. The Fund invests primarily in ad-
justable rate mortgage pass-through se-
curities and other mortgage securities
with periodic interest rate resets,
which are issued or guaranteed by the
U.S. Government, its agencies, instru-
mentalities or sponsored enterprises.

GOLDMAN SACHS GOVERNMENT INCOME FUND

Seeks a high level of current income,
consistent with safety of principal. The
Fund invests primarily in securities,
including mortgage-backed securities,
issued or guaranteed by the U.S. Govern-
ment, its agencies, instrumentalities or
sponsored enterprises.

GOLDMAN SACHS MUNICIPAL INCOME FUND

Seeks a high level of current income
that is exempt from regular federal in-
come tax, consistent with preservation
of capital. The Fund invests primarily
in municipal securities.

GOLDMAN SACHS GLOBAL INCOME FUND

Seeks a high total return, emphasizing
current income and, to a lesser extent,
providing opportunities for capital ap-
preciation. The Fund invests primarily
in a portfolio of high quality fixed in-
come securities of U.S. and foreign is-
suers and foreign currencies.

- ----------
(continued on next page)

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

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

(cover continued)

THE GLOBAL INCOME FUND INVESTS IN SECURITIES OF FOREIGN ISSUERS AND FOREIGN
CURRENCIES THAT ENTAIL CERTAIN RISKS NOT CUSTOMARILY ASSOCIATED WITH INVESTING
IN DOLLAR-DENOMINATED FIXED INCOME SECURITIES. THE GLOBAL INCOME FUND IS
INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS ASSOCIATED WITH ITS
INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE "DESCRIPTION OF
SECURITIES".

THE ADJUSTABLE RATE GOVERNMENT AND GOVERNMENT INCOME FUNDS' NET ASSET VALUE
AND YIELD ARE NOT GUARANTEED BY THE U.S. GOVERNMENT OR BY ITS AGENCIES,
INSTRUMENTALITIES OR SPONSORED ENTERPRISES.

Goldman Sachs Funds Management, L.P. ("GSFM"), New York, New York, an
affiliate of Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment
adviser to the Adjustable Rate Government Fund. Goldman Sachs Asset Management
("GSAM"), New York, New York, a separate operating division of Goldman Sachs,
serves as investment adviser and administrator to the Government Income,
Municipal Income and Global Income Funds. Goldman Sachs Asset Management
International ("GSAMI"), London, England, an affiliate of Goldman Sachs,
serves as subadviser to the Global Income Fund. GSAM, GSFM and GSAMI are each
referred to in this Prospectus as the "Investment Adviser". Goldman Sachs
serves as each Fund's distributor and transfer agent.

This Prospectus provides information about Goldman Sachs Trust (the "Trust")
and the Funds that a prospective investor should understand before investing.
This Prospectus should be retained for future reference. A Statement of
Additional Information (the "Additional Statement"), dated March 1, 1996,
containing further information about the Trust and the Funds 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 by calling the telephone number, or
writing to one of the addresses, listed on the back cover of this Prospectus.
<PAGE>

FUND HIGHLIGHTS

The following is intended to highlight certain information contained in
this Prospectus and is qualified in its entirety by the more detailed
information contained herein.

WHAT IS THE GOLDMAN SACHS TRUST?

Goldman Sachs Trust is an open-end management investment company that
offers its shares in several investment funds (mutual funds). Each Fund
pools the monies of investors by selling its shares to the public and
investing these monies in a portfolio of securities designed to achieve that
Fund's stated investment objective.

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS?

Each Fund has distinct investment objectives and policies. There can be no
assurance that a Fund's objectives will be achieved. For a complete
description of each Fund's investment objectives and policies, see
"Investment Objectives and Policies", "Description of Securities" and
"Investment Techniques".

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

<TABLE>
<CAPTION>
ADJUSTABLE RATE GOVERNMENT MUNICIPAL INCOME GLOBAL INCOME
GOVERNMENT FUND INCOME FUND FUND FUND
----------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT OBJECTIVES A high level of A high level of A high total
current income, current income, A high level of return,
consistent with consistent with current income emphasizing
low volatility of safety of that is exempt current income
principal. principal. from regular and, to a lesser
federal income extent,
tax, consistent providing
with opportunities
preservation of for capital
capital. appreciation.
-------------------------------------------------------------------------------------------------
DURATION Target = 6-month Target = Lehman Target = Lehman Target = J.P.
to Brothers Mutual Brothers 15-year Morgan Global
1-year U.S. Fund Municipal Bond Government Bond
Treasury Security Government/Mortgage Index plus or Index (hedged)
Index plus or minus minus 1 year plus or minus
1 year 2.5 years
Maximum = 2 years Maximum = 6 years Maximum = 12 Maximum = 7.5
years years
-------------------------------------------------------------------------------------------------
APPROXIMATE INTEREST 9-month note 5-year bond 15-year bond 6-year bond
RATE SENSITIVITY
-------------------------------------------------------------------------------------------------
INVESTMENT SECTOR At least 65% of At least 65% of At least 80% of Securities of
assets in assets in U.S. net assets in U.S. and foreign
securities issued Government Municipal governments and
or guaranteed by Securities, Securities. corporations.
the U.S. including mortgage-
Government, its backed U.S.
agencies, Government
instrumentalities Securities.
or sponsored
enterprises
("U.S. Government
Securities") that
are adjustable
rate mortgage
pass-through
securities and
other mortgage
securities with
periodic interest
rate resets.
</TABLE>

1
<PAGE>

<TABLE>
<CAPTION>
ADJUSTABLE RATE GOVERNMENT MUNICIPAL INCOME GLOBAL INCOME
GOVERNMENT FUND INCOME FUND FUND FUND
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
CREDIT QUALITY U.S. Government U.S. Government Minimum = Minimum = AA/Aa
Securities Securities and BBB/Baa Average or A if
non-U.S. = AA/Aa sovereign issuer
Government At least 50% =
Securities rated AAA/Aaa
AAA/Aaa
------------------------------------------------------------------------------------------
OTHER INVESTMENTS Fixed rate Non-government U.S. Government Mortgage and
mortgage pass- mortgage pass- Securities and asset backed
through through repurchase securities,
securities and securities, agreements foreign
repurchase asset-backed collateralized currencies and
agreements securities, by such repurchase
collateralized corporate fixed securities. agreements
by U.S. income collateralized
Government securities and by U.S.
Securities. repurchase Government
agreements Securities or
collateralized certain foreign
by U.S. government
Government securities.
Securities.
------------------------------------------------------------------------------------------
BENCHMARK 6-month and 1- Lehman Brothers Lehman Brothers
year U.S. Mutual Fund 15- year JP Morgan Global
Treasury Government/ Municipal Bond Government Bond
security Mortgage Index Index Index (hedged)
</TABLE>

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

WHAT ARE THE RISK FACTORS AND SPECIAL CHARACTERISTICS THAT I SHOULD CONSIDER
BEFORE INVESTING?

Each Fund's share price will fluctuate with market, economic and, with
respect to the Global Income Fund, foreign exchange conditions, so that an
investment in any of the Funds may be worth more or less when redeemed than
when purchased. None of the Funds should be relied upon as a complete
investment program. There can be no assurance that a Fund's investment
objectives will be achieved. See "Risk Factors".

Interest Rate Risk. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates
increase, the market value of fixed income securities tends to decline.
Volatility of a security's market value will differ depending upon the
security's duration, the issuer and the type of instrument.

Default Risk/Credit Risk. Investments in fixed income securities are
subject to the risk that the issuer could default on its obligations and a
Fund could sustain losses on such investments. A default could impact both
interest and principal payments.

Call Risk and Extension Risk. Fixed income securities may be subject to
both call risk and extension risk. Call risk (i.e., where the issuer
exercises its right to pay principal on an obligation earlier than
scheduled) causes cash flow to be returned earlier than expected. This
typically results when interest rates have declined and a Fund will suffer
from having to reinvest in lower yielding securities. Extension risk (i.e.,
where the issuer exercises its right to pay principal on an obligation later
than scheduled) causes cash flows to be returned later than expected. This
typically results when interest rates have increased and a Fund will suffer
from the inability to invest in higher yielding securities. The investment
characteristics of Mortgage-Backed Securities (including adjustable rate
mortgage securities) and Asset-Backed Securities differ from those of
traditional fixed income securities because they generally have both call
risk (also known as prepayment risk) and extension risk.

2
<PAGE>

Tax Risk of Municipal Securities. Due to Municipal Securities' tax-exempt
status, their yields and market values may be more adversely impacted by
changes in tax rates and policies than taxable fixed income securities.

Foreign Risks. Investments in securities of foreign issuers and currencies
involve risks that are different from those associated with investment in
domestic securities. The risks of foreign investments and currencies include
changes in relative currency exchange rates, political and economic
developments, the imposition of exchange controls, confiscation and other
governmental restrictions. In addition, the securities markets of foreign
countries are generally less liquid and subject to greater price volatility.

Other. A Fund's use of certain investment techniques, including
derivatives, forward contracts, options, futures, and swap transactions,
will subject a Fund to greater risk than funds that do not employ such
techniques.

Non-Diversification. Global Income Fund is a "non-diversified" fund as
defined under the Investment Company Act of 1940, as amended (the "Act") and
is therefore subject only to certain federal tax diversification
requirements (to which the other Funds are also subject), in addition to the
policies adopted by the Investment Adviser. To the extent that the Fund is
not diversified under the Act, it will be more susceptible to adverse
developments affecting any single issuer of portfolio securities. See
"Investment Restrictions".

WHO MANAGES THE FUNDS?

Goldman Sachs Funds Management, L.P. serves as the Investment Adviser to
the Adjustable Rate Government Fund. Goldman Sachs Asset Management serves
as Investment Adviser and administrator to the Global Income, Government
Income and Municipal Income Funds. Goldman Sachs Asset Management
International serves as subadviser to the Global Income Fund. As of January
31, 1996, the Investment Advisers, together with their affiliates, acted as
investment adviser, administrator or distributor for assets in excess of $57
billion.

WHO DISTRIBUTES THE FUNDS' SHARES?

Goldman Sachs acts as distributor of each Fund's shares.

WHAT IS THE MINIMUM INVESTMENT?

<TABLE>
<CAPTION>
MINIMUM
----------------------------
INITIAL PURCHASE ADDITIONAL
TYPE OF PURCHASE AMOUNT INVESTMENTS
---------------- ---------------- -----------
<S> <C> <C>
Regular Purchases.............................. $1,500 $50
Tax-Sheltered Retirement Plans................. $ 250 $50
Automatic Investment Plan...................... $ 50 $50
</TABLE>

For further information, see "How to Invest--How to Buy Shares of the Funds"
on page 30.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Funds through Goldman Sachs and certain
investment dealers, including members of the National Association of
Securities Dealers, Inc. (the "NASD") and certain other financial

3
<PAGE>

service firms that have sales agreements with Goldman Sachs ("Authorized
Dealers"). See "How to Invest" on page 30.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Funds (other than Adjustable Rate Government Fund which does not offer
Class B shares) offer two classes of shares through this Prospectus which
may be purchased at the next determined net asset value ("NAV") plus a sales
charge which, depending on the class of shares you choose for investment,
may be imposed either at the time of purchase (Class A shares) or on a
contingent deferred basis at the time of redemption (Class B shares). Except
with respect to the Adjustable Rate Government Fund, direct purchases of $1
million or more of Class A shares will be sold without an initial sales
charge and will be subject to a contingent deferred sales charge at the time
of certain redemptions.

<TABLE>
<CAPTION>
ADJUSTABLE RATE MAXIMUM FRONT MAXIMUM CONTINGENT
GOVERNMENT FUND END SALES CHARGE DEFERRED SALES CHARGE
--------------- ---------------- ---------------------
<S> <C> <C>
Class A................... 1.5% N/A
<CAPTION>
GOVERNMENT INCOME FUND
MUNICIPAL INCOME FUND
GLOBAL INCOME FUND
----------------------
<S> <C> <C>
Class A................... 4.5% (See above)
Class B................... N/A 5% declining to 0% after six years
</TABLE>

Over time, the deferred sales charge and distribution fees attributable to
Class B shares will exceed the initial sales charge and distribution fees
attributable to Class A shares. See "How to Invest--Alternative Purchase
Arrangements" on page 30.

HOW DO I SELL MY SHARES?

You may redeem shares upon request on any Business Day, as defined under
"Additional Information," at the net asset value next determined after
receipt of such request in proper form, subject to any applicable contingent
deferred sales charge. See "How to Sell Shares of the Funds".

HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?

<TABLE>
<CAPTION>
INVESTMENT INCOME
DIVIDENDS
------------------ CAPITAL GAINS
FUND DECLARED PAID DISTRIBUTIONS
---- ------------------ -------------
<S> <C> <C> <C>
Adjustable Rate Government................... Daily Monthly Annually
Government Income............................ Daily Monthly Annually
Municipal Income............................. Daily Monthly Annually
Global Income................................ Monthly Monthly Annually
</TABLE>

You may receive dividends in additional shares of the same class of the
Fund in which you have invested or you may elect to receive cash, shares of
the same class of other mutual funds sponsored by Goldman Sachs (the
"Goldman Sachs Portfolios") or ILA Service Units of the Prime Obligations
Portfolio or the Tax-Exempt Diversified Portfolio of Goldman Sachs Money
Market Trust, if you hold Class A Shares of a Fund, or ILA Class B Units of
the Prime Obligations Portfolio, if you hold Class B shares of a Fund (the
"ILA Portfolios"). For further information concerning dividends, see
"Dividends".

4
<PAGE>

FEES AND EXPENSES

<TABLE>
<CAPTION>
ADJUSTABLE RATE GOVERNMENT MUNICIPAL GLOBAL
GOVERNMENT INCOME INCOME INCOME
FUND FUND FUND FUND
--------------- ------------------ ------------------ ------------------
CLASS A CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
--------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on Purchases. 1.5%/1/ 4.5%/1/ none 4.5%/1/ none 4.5%/1/ none
Maximum Sales Charge
Imposed on Reinvested
Dividends............ none none none none none none none
Maximum Deferred Sales
Charge............... none/1/ none/1/ 5.0% none/1/ 5.0% none/1/ 5.0%
Redemption Fees/2/.... none none none none none none none
Exchange Fees/2/...... none none none none none none none
ANNUAL FUND OPERATING
EXPENSES:
(as a percentage of
average daily net
assets)
Management Fees
(including, after
applicable
limitations, advisory
and administration
fees)................ 0.40% 0.25%/4/ 0.25%/4/ 0.55% 0.55% 0.59%/6/ 0.59%/6/
Distribution (Rule
12b-1) Fees
(after applicable
limitations)......... 0.00%/3/ 0.00%/4/ 0.75% 0.00%/5/ 0.75% 0.21%/6/ 0.75%
Other Expenses:
Authorized Dealer
Service Fees........ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after
applicable
limitations)........ 0.05%/3/ 0.00%/4/ 0.00%/4/ 0.05%/5/ 0.05%/5/ 0.11%/6/ 0.11%/6/
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES (AFTER FEE
AND EXPENSE
LIMITATIONS)......... 0.70%/3/ 0.50%/4/ 1.25%/4/ 0.85%/5/ 1.60%/5/ 1.16%/6/ 1.70%/6/
==== ==== ==== ==== ==== ==== ====
</TABLE>

EXAMPLE

You would pay the following expenses on a hypothetical $1,000 investment
(including the maximum sales charge) assuming (i) a 5% annual return and (ii)
redemption at the end of each time period.

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Adjustable Rate Government Fund
Class A Shares.............................. $22 $37 $53 $101
Government Income Fund
Class A Shares............................... 50 60 72 105
Class B Shares
--Assuming complete redemption at end of pe-
riod....................................... 63 70 89 126
--Assuming no redemption.................... 13 40 69 126
Municipal Income Fund
Class A Shares............................... 53 71 90 145
Class B Shares
--Assuming complete redemption at end of pe-
riod....................................... 66 80 107 165
--Assuming no redemption.................... 16 50 87 165
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Global Income Fund
Class A Shares............................... $56 $80 $106 $180
Class B Shares
--Assuming complete redemption at end of pe-
riod....................................... 67 84 112 192
--Assuming no redemption.................... 17 54 92 192
</TABLE>

The hypothetical example assumes that a contingent deferred sales charge
will not apply to redemptions of Class A shares within the first 18 months.
Class B shares convert to Class A shares eight years after purchase;
therefore, Class A expenses are used in the hypothetical example after year
eight.
- --------

/1/ As a percentage of the offering price. No sales charge is imposed on
purchases of Class A shares by certain classes of investors. Except with
respect to direct purchases of the Adjustable Rate Government Fund, a
contingent deferred sales charge of 1.00% is imposed on certain redemptions
of Class A shares sold without an initial sales charge as part of an
investment of $1 million or more. See "How to Invest--Offering Price".

/2/ A transaction fee of $7.50 may be charged for redemption proceeds paid by
wire. In addition to free reinvestments of dividends and distributions in
shares of other Goldman Sachs Portfolios or units of the ILA Portfolios and
free automatic exchanges pursuant to the Automatic Exchange Program, six
free exchanges are permitted in each twelve month period. A fee of $12.50
may be charged for each subsequent exchange during such period. See "How to
Invest--Exchange Privilege".

/3/ Based upon estimated amounts for the current fiscal year. Goldman Sachs
voluntarily has agreed to waive the entire distribution fee attributable to
Class A shares of the Fund. The Investment Adviser has also voluntarily
agreed to reduce or limit certain "Other Expenses" of Adjustable Rate
Government Fund (excluding advisory, distribution and authorized dealer
service fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.05% of the Fund's average daily net assets. Goldman Sachs
and the Investment Adviser have no current intention of modifying or
discontinuing any of such limitations but may do so in the future at their
discretion. Without such limitations, Adjustable Rate Government Fund's
"Distribution Fees", "Other Expenses" and "Total Operating Expenses" would
be 0.25%, 0.11% and 1.01%, respectively. Annual operating expenses incurred
by the Class A shares of the Fund during the fiscal year ended October 31,
1995 (expressed as a percentage of average daily net assets after fee
adjustments) were "Management Fees", "Distribution Fees", "Other Expenses"
and "Total Operating Expenses" of 0.40%, 0.00%, 0.05% and 0.69%,
respectively.

/4/ Based upon estimated amounts for the current fiscal year. "Management Fees"
paid by Government Income Fund include advisory and administration fees of
0.25% and 0.00%, respectively. The Investment Adviser has voluntarily agreed
to limit its advisory and administration fees to such amounts. Without such
limitations, advisory and administration fees would be 0.50% and 0.15%,
respectively. Goldman Sachs voluntarily has agreed to waive the entire
distribution fee attributable to Class A shares of the Fund. The Investment
Adviser has also voluntarily agreed to reduce or limit all "Other Expenses"
of Government Income Fund (excluding advisory, administration, distribution
and authorized dealer service fees, taxes, interest and brokerage fees and
litigation, indemnification and other extraordinary expenses). Goldman Sachs
and the Investment Adviser have no current intention of modifying or
discontinuing any of such limitations but may do so in the future at their
discretion. Without such limitations, Government Income Fund's "Management
Fees", "Distribution Fees", "Other Expenses" and "Total Operating Expenses"
would be 0.65%, 0.25%, 1.54% and 2.44%, respectively, in the case of Class A
shares, and 0.65%, 0.75%, 1.54% and 2.94%, respectively, in the case of
Class B shares. Annual operating expenses incurred by the Class A shares of
the Fund during the fiscal year ended October 31, 1995 (expressed as a
percentage of average daily net assets after fee adjustments) were
"Management Fees", "Distribution Fees", "Other Expenses" and "Total
Operating Expenses" of 0.22%, 0.13%, 0.12% and 0.47%, respectively.

/5/ Based upon estimated amounts for the current fiscal year. "Management Fees"
paid by Municipal Income Fund include advisory and administration fees of
0.40% and 0.15%, respectively. Goldman Sachs voluntarily has agreed to waive
the entire distribution fee attributable to Class A shares of the Fund. The
Investment Adviser has also voluntarily agreed to reduce or limit certain
"Other Expenses" of Municipal Income Fund (excluding advisory,
administration, distribution and authorized dealer service fees, taxes,
interest and brokerage fees and litigation, indemnification and other
extraordinary expenses) to the extent such expenses exceed 0.05% of the
Fund's average daily net assets. Goldman Sachs and the Investment Adviser
have no current intention of modifying or discontinuing any of such
limitations but may do so in the future at their discretion. Without such
limitations, "Distribution Fees", "Other Expenses" and "Total Operating
Expenses" would be 0.25%, 0.75% and 1.55%, respectively, in the case of
Class A shares, and 0.75%, 0.75% and 2.05%, respectively, in the case of
Class B shares. Annual operating expenses incurred by the Class A shares of
the Fund during the fiscal year ended October 31, 1995 (expressed as a
percentage of average daily net assets after fee adjustments) were
"Management Fees", "Distribution Fees", "Other Expenses" and "Total
Operating Expenses" of 0.46%, 0.14%, 0.16%, and 0.76%, respectively.

6
<PAGE>

/6/ Based upon estimated amounts for the current fiscal year. "Management Fees"
paid by Global Income Fund include advisory, subadvisory and administration
fees of 0.12%, 0.32% and 0.15% respectively. The Investment Advisers have
voluntarily agreed to limit their advisory and subadvisory fees to such
amounts. Without such limitations, advisory and subadvisory fees would be
0.25% and 0.50%, respectively. Goldman Sachs voluntarily has agreed to limit
its distribution fee attributable to Class A shares of the Fund to 0.21%.
The Investment Advisers have also voluntarily agreed to reduce or limit
certain "Other Expenses" of the Global Income Fund (excluding transfer
agency fees (estimated to be 0.05% of average daily net assets), advisory,
subadvisory, administration, distribution and authorized dealer service
fees, taxes, interest and brokerage fees and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.06% of
the Fund's average daily net assets. Goldman Sachs and the Investment
Advisers have no current intention of modifying or discontinuing any of such
limitations but may do so in the future at their discretion. Without such
limitations, Global Income Fund's "Management Fees", "Distribution Fees",
"Other Expenses" and "Total Operating Expenses" would be 0.90%, 0.25%, 0.49%
and 1.64%, respectively, in the case of Class A shares, and 0.90%, 0.75% ,
0.49% and 2.14%, respectively, in the case of Class B shares. Annual
operating expenses incurred by the Class A shares of the Fund during the
fiscal year ended October 31, 1995 (expressed as a percentage of average
daily net assets after fee adjustments) were "Management Fees",
"Distribution Fees", "Other Expenses" and "Total Operating Expenses" of
0.82%, 0.20%, 0.27%, and 1.29%, respectively.

The information with respect to the Adjustable Rate Government Fund set
forth in the foregoing table and hypothetical example relates only to its
Class A shares (the Fund does not offer Class B shares). The Adjustable Rate
Government Fund and Global Income Fund, but not the other Funds, also offer
Institutional Shares and Service Shares and the Adjustable Rate Government
Fund, but not the other Funds, also offers Administration Shares.
Institutional, Administration and Service Shares are subject to different fees
and expenses (which affects performance), have different minimum investment
requirements and are entitled to different services than Class A shares and
Class B shares. Information regarding Institutional, Administration and
Service Shares may be obtained from your sales representative or from Goldman
Sachs by calling the number on the back cover of this Prospectus. Because of
the Distribution Plans, long-term Shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc.'s rules regarding investment
companies.

The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on fees and expenses included in the table and the
hypothetical example above are based on estimated fees and expenses for the
current fiscal year and should not be considered as representative of past or
future expenses. Actual fees and expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, a Fund's
actual performance will vary and may result in an actual return greater or
less than 5%. See "Management--Investment Advisers, Subadviser and
Administrator".

7
<PAGE>

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The following data with respect to a share (of the Class specified) of the
Funds outstanding during the period(s) indicated has been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
incorporated by reference into the Additional Statement from the Annual Report
to shareholders for the Funds for the year ended October 31, 1995 (the "Annual
Report"). This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Additional Statement. The Annual Report also contains performance information
and is available upon request and without charge by calling the telephone
number or writing to one of the addresses on the back cover of this
Prospectus.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------- -----------------------------------------------
NET REALIZED
AND NET REALIZED
UNREALIZED AND FROM NET IN EXCESS OF
GAIN (LOSS) UNREALIZED TOTAL REALIZED NET REALIZED
ON GAIN (LOSS) INCOME GAIN ON GAIN ON
NET ASSET INVESTMENT, ON FOREIGN (LOSS) INVESTMENT, IN EXCESS INVESTMENT,
VALUE AT NET OPTION AND CURRENCY FROM FROM NET OPTION AND OF NET OPTION AND
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT INVESTMENT FUTURES INVESTMENT FUTURES
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS INCOME TRANSACTIONS INCOME TRANSACTIONS
--------- ---------- ------------ ------------ ---------- ---------- ------------ ---------- ------------
ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $9.74 $0.5630(j) $0.0717 (j) $-- $0.6347(j) $(0.5759) $ -- $(0.0287) $ --
1995--Administration
Shares.......... 9.74 0.5366(j) 0.0737 (j) -- 0.6103(j) (0.5528) -- (0.0275) --
1995--Class
A Shares(h)..... 9.79 0.2721(j) (0.0090)(j) -- 0.2631(j) (0.2697) -- (0.0134) --
1994--Institutional
Shares.......... 10.00 0.4341(j) (0.2455)(j) -- 0.1886(j) (0.4486) -- -- --
1994--Administration
Shares.......... 10.00 0.4211(j) (0.2572)(j) -- 0.1639(j) (0.4239) -- -- --
1993--Institutional
Shares.......... 10.04 0.4397 (0.0376)(a) -- 0.4021 (0.4397) -- (0.0024) --
1993--Administration
Shares(i)....... 10.02 0.2146 (0.0173)(a) -- 0.1973 (0.2146) -- (0.0027) --
1992--Institutional
Shares.......... 10.03 0.5599 (0.0029)(a) -- 0.5570 (0.5470) -- -- --

<CAPTION>
FOR THE PERIOD JULY 17, 1991(e) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991--Institutional
Shares.......... 10.00 0.1531 0.0322(a) -- 0.1853 (0.1553) -- -- --

<CAPTION>
GOVERNMENT INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995............ 13.47 0.94 1.00 (a) -- 1.94 (0.94) -- -- --
1994............ 14.90 0.85 (1.28)(a) -- (0.43) (0.85) (0.12) (0.02) (0.01)
FOR THE PERIOD FEBRUARY 10, 1993(e) THROUGH OCTOBER 31,
1993............ 14.32 0.56 0.58(a) -- 1.14 (0.56) -- -- --

RATIO OF
NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS
FROM TOTAL (DECREASE) NET ASSET NET INCOME AT END
PAID DISTRIBUTIONS IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF
IN TO ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD
CAPITAL SHAREHOLDERS VALUE PERIOD RETURN(B) NET ASSETS NET ASSETS RATE(d) (IN 000'S)
------- ------------- ---------- --------- --------- ---------- ---------- -------- ----------
ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $-- $(0.6046) $0.0301 $9.77 6.75% 0.46% 5.77% 24.12% $657,358
1995--Administration
Shares.......... -- (0.5803) 0.0300 9.77 6.48 0.71 5.50 24.12 3,572
1995--Class
A Shares(h)..... -- (0.2831) (0.0200) 9.77 2.74 0.69(c) 5.87(c) 24.12 15,203
1994--Institutional
Shares.......... -- (0.4486) (0.2600) 9.74 1.88 0.46 4.38 37.81 942,523
1994--Administration
Shares.......... -- (0.4239) (0.2600) 9.74 1.63 0.71 4.27 37.81 6,960
1993--Institutional
Shares.......... -- (0.4421) (0.0400) 10.00 4.13 0.45 4.36 103.74 2,760,871
1993--Administration
Shares(i)....... -- (0.2173) (0.0200) 10.00 2.01(g) 0.70(c) 3.81(c) 103.74 5,326
1992--Institutional
Shares.......... -- (0.5470) 0.0100 10.04 6.12 0.42 5.61 286.40 2,145,064

<CAPTION>
FOR THE PERIOD JULY 17, 1991(e) THROUGH OCTOBER 31,
1991--Institutional
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares.......... -- (0.1553) 0.0300 10.03 2.14(g) 0.20(c) 7.31(c) 145.67(c) 239,642

<CAPTION>
GOVERNMENT INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995............ -- (0.94) 1.00 14.47 14.90 0.47 6.67 449.53 29,503
1994............ -- (1.00) (1.43) 13.47 (2.98) 0.11 6.06 654.90 14,452

<CAPTION>
FOR THE PERIOD FEBRUARY 10, 1993(e) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993............ -- (0.56) 0.58 14.90 8.03 0.00(c) 4.87(c) 725.41 12,860

ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-------------------
RATIO OF
NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
---------- ----------
<S> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1995--Institutional
Shares.......... 0.53% 5.70%
1995--Administration
Shares.......... 0.78 5.43
1995--Class
A Shares(h)..... 1.01(c) 5.55(c)
1994--Institutional
Shares.......... 0.49 4.35
1994--Administration
Shares.......... 0.74 4.24
1993--Institutional
Shares.......... 0.48 4.33
1993--Administration
Shares(i)....... 0.73(c) 3.78(c)
1992--Institutional
Shares.......... 0.55 5.48

<CAPTION>
FOR THE PERIOD JULY 17, 1991(e) through October 31,
<S> <C> <C>
1991--Institutional
Shares.......... 1.02(c) 6.49(c)

<CAPTION>
FOR THE PERIOD FEBRUARY 10, 1993(e) THROUGH OCTOBER 31,
<S> <C> <C>
1993............ 4.00(c) 0.87(c)
</TABLE>

8
<PAGE>

INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTION TO SHAREHOLDERS
---------------------------------------------------- ---------------------------------
NET REALIZED NET REALIZED
AND AND FROM NET
UNREALIZED UNREALIZED REALIZED
GAIN (LOSS) ON GAIN (LOSS) ON TOTAL GAIN ON
NET ASSET INVESTMENT, FOREIGN INCOME INVESTMENT IN EXCESS
VALUE AT NET OPTION AND CURRENCY (LOSS) FROM FROM NET OPTION AND OF NET
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT INVESTMENT FUTURES INVESTMENT
OF PERIOD INCOME TRANSACTIONS(a) TRANSACTIONS(a) OPERATIONS INCOME TRANSACTIONS INCOME
--------- ---------- --------------- --------------- ---------- ---------- ------------ ----------
GLOBAL INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Class
A shares........ $13.43 $0.89 $0.92 $0.15 $1.96 $(0.94) $ -- $--
1995--Institutional
shares(f)....... 14.09 0.22 0.34 0.06 0.62 (0.26) -- --
1994--Class
A shares........ 15.07 0.84 (1.37) (0.12) (0.65) (0.22) (0.16) --
1993--Class
A shares........ 14.69 0.85 1.07 (0.42) 1.50 (0.85) (0.27) --
1992--Class
A shares........ 14.60 1.14 0.45 (0.36) 1.23 (1.14) -- --
FOR THE PERIOD AUGUST
2, 1991(e) THROUGH
OCTOBER 31,
1991--Class
A shares........ 14.55 0.25 0.23 (0.19) 0.29 (0.24) -- --

<CAPTION>
MUNICIPAL INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995............ 13.08 0.67 1.09 -- 1.76 (0.67) -- --
1994............ 14.64 0.73 (1.51) -- (0.78) (0.73) (0.05) --

FOR THE PERIOD JULY
20, 1993(e) THROUGH
OCTOBER 31,
1993............ 14.32 0.22 0.32 -- 0.54 (0.22) -- --

DISTRIBUTION TO SHAREHOLDERS
---------------------------------
IN EXCESS OF
NET REALIZED NET
GAIN ON INCREASE RATIO OF
INVESTMENT, FROM TOTAL (DECREASE) NET ASSET NET
OPTION AND PAID DISTRIBUTIONS IN NET VALUE AT EXPENSES
FUTURES IN TO ASSET END OF TOTAL TO AVERAGE
TRANSACTIONS CAPITAL SHAREHOLDERS VALUE PERIOD RETURN(b) NET ASSETS
----------- ------- ------------- ---------- --------- --------- ----------
GLOBAL INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Class
A shares........ $-- $ -- $(0.94) $1.02 $14.45 15.08% 1.29%
1995--Institutional
shares(f)....... -- -- (0.26) 0.36 14.45 4.42 0.65(c)
1994--Class
A shares........ -- (0.61) (0.99) (1.64) 13.43 (4.49) 1.28
1993--Class
A shares........ -- -- (1.12) 0.38 15.07 10.75 1.30
1992--Class
A shares........ -- -- (1.14) 0.09 14.69 8.77 1.37

FOR THE PERIOD AUGUST
2, 1991(e) THROUGH
OCTOBER 31,
1991--Class
A shares........ -- -- (0.24) 0.05 14.60 2.00 0.38(g)

<CAPTION>
MUNICIPAL INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995............ -- -- (0.67) 1.09 14.17 13.79 0.76
1994............ -- -- (0.78) (1.56) 13.08 (5.51) 0.45

FOR THE PERIOD JULY
20, 1993(e) THROUGH
OCTOBER 31,
1993............ -- -- (0.22) 0.32 14.64 3.73 0.00(c)

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
----------------------
RATIO OF RATIO OF
NET NET NET
INVESTMENT ASSETS INVESTMENT
INCOME AT END RATIO OF INCOME
(LOSS) PORTFOLIO OF EXPENSES (LOSS)
TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
NET ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
---------- -------- ---------- ---------- ----------
GLOBAL INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Class
A shares........ 6.23% 265.86% $245,835 1.58% 5.94%
1995--Institutional
shares(f)....... 6.01(c) 265.86 31,619 1.08(c) 5.58(c)
1994--Class
A shares........ 5.73 343.74 396,584 1.53 5.48
1993--Class
A shares........ 5.78) 313.88 675,662 1.55 5.53
1992--Class
A shares........ 7.85 270.75 588,893 1.62 7.60

FOR THE PERIOD AUGUST
2, 1991(e) THROUGH
OCTOBER 31,
1991--Class
A shares........ 1.72(g) 34.22 388,744 0.44(g) 1.66(g)

<CAPTION>
MUNICIPAL INCOME FUND
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995............ 4.93 335.55 53,797 1.49 4.20
1994............ 5.28 357.54 47,373 1.55 4.18

FOR THE PERIOD JULY
20, 1993(e) THROUGH
OCTOBER 31,
1993............ 5.15(c) 99.99 30,166 2.42(c) 2.73(c)
</TABLE>

(a) Includes the 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, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. For the Retail classes total return would be reduced if a
sales charge were taken into account.
(c) Annualized.

(d) Includes effect of mortgage dollar roll transactions.
(e) Commencement of operations.
(f) Institutional shares commenced operations on August 1, 1995.
(g) Not annualized.

(h) Class A shares commenced operations on May 15, 1995.

(i) Administration share activity commenced operations on April 15, 1993.

(j) Calculated based on the average shares outstanding methodology.

9
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and principal investment policies of each Fund are
described below. Other investment practices and management techniques, which
involve certain risks are described under "Description of Securities", "Risk
Factors" and "Investment Techniques". There can be no assurance that a Fund's
investment objectives will be achieved.

A Fund's duration approximates its price sensitivity to changes in interest
rates. Maturity measures the time until final payment is due; it takes no
account of the pattern of a security's cash flows over time. In computing
portfolio duration, a Fund will estimate the duration of obligations that are
subject to prepayment or redemption by the issuer taking into account the
influence of interest rates on prepayments and coupon flows. This method of
computing duration is known as "option-adjusted" duration. A Fund will not be
limited as to its maximum weighted average portfolio maturity or the maximum
stated maturity with respect to individual securities unless otherwise noted.

A Fund will deem a security to have met its minimum credit rating
requirement if the security receives the minimum required long-term rating (or
the equivalent short-term credit rating) at the time of purchase from at least
one rating organization (including, but not limited to, Standard & Poor's
Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's")) even
though it has been rated below the minimum rating by one or more other rating
organizations, or if unrated by a rating organization, determined by the
Investment Adviser to be of comparable quality. If a security satisfies a
Fund's minimum rating criteria at the time of purchase and is subsequently
downgraded below such rating, the Fund will not be required to dispose of such
security. If a downgrade occurs, the Investment Adviser will consider what
action, including the sale of such security, is in the best interest of the
Fund and its shareholders.

The Investment Adviser will have access to the research of, and proprietary
technical models developed by Goldman Sachs and will apply quantitative and
qualitative analysis in determining the appropriate allocations among the
categories of issuers and types of securities.

ADJUSTABLE RATE GOVERNMENT FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high level of current income, consistent with low volatility of principal.

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be in a range approximately equal to that of a 6-month to 1-year
U.S. Treasury security. In addition, under normal interest rate conditions,
the Fund's maximum duration will not exceed 2 years. The approximate interest
rate sensitivity of the Fund is comparable to a 9-month note.

INVESTMENT SECTOR. The Fund invests, under normal circumstances, at least
65% of its total assets in U.S. Government Securities that are adjustable rate
mortgage pass-through securities and other U.S. Government Securities. The
remainder of the Fund's assets (up to 35%) may be invested in other U.S.
Government Securities, including mortgage pass-through securities, other
securities representing an interest in or collateralized by adjustable rate
and fixed rate mortgage loans ("Mortgage-Backed Securities") and repurchase
agreements collateralized by U.S. Government Securities. Substantially all of
the Fund's assets will be invested in U.S. Government Securities. 100% of the
Fund's portfolio will be invested in U.S. dollar-denominated securities.

10
<PAGE>

CREDIT QUALITY. The Fund invests in U.S. Government Securities and
repurchase agreements collateralized by such securities.

GOVERNMENT INCOME FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high level of current income, consistent with safety of principal.

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be equal to that of the Fund's benchmark, the Lehman Brothers
Mutual Fund Government/Mortgage Index, plus or minus 1 year (currently 4.3
years). In addition, under normal interest rate conditions, the Fund's maximum
duration will not exceed 6 years. The approximate interest rate sensitivity of
the Fund is comparable to a 5-year bond.

INVESTMENT SECTOR. The Fund invests, under normal circumstances, at least
65% of its total assets in U.S. Government Securities and in repurchase
agreements collateralized by such securities. The remainder of the Fund's
assets may be invested in non-government securities such as privately issued
Mortgage-Backed Securities, Asset-Backed Securities and corporate securities.
100% of the Fund's portfolio will be invested in U.S. dollar-denominated
securities.

CREDIT QUALITY. The Fund's non-U.S. Government Securities will be rated, at
the time of investment, AAA by S&P or Aaa by Moody's.

MUNICIPAL INCOME FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high level of current income that is exempt from regular federal income tax,
consistent with preservation of capital.

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be equal to that of the Fund's benchmark, the Lehman Brothers 15-
year Municipal Bond Index, plus or minus 1 year (currently 9.0 years). In
addition, under normal interest rate conditions, the Fund's maximum duration
will not exceed 12 years. The approximate interest rate sensitivity of the
Fund is comparable to a 15-year bond.

INVESTMENT SECTOR. The Fund invests, under normal circumstances, at least
80% of its net assets in fixed income securities issued by or on behalf of
states, territories and possessions of the United States (including the

11
<PAGE>

District of Columbia) and the political subdivisions, agencies and
instrumentalities thereof ("Municipal Securities") the interest on which is
exempt from regular federal income tax (i.e., excluded from gross income for
Federal income tax purposes). The Fund may invest up to 100% of its net assets
in private activity bonds, the interest from certain of which (including the
Fund's distributions of such interest) may be a preference item for purposes
of the federal alternative minimum tax and may increase liability for the
corporate environmental tax. 100% of the Fund's portfolio will be invested in
U.S. dollar-denominated securities.

CREDIT QUALITY. Under normal market conditions, the weighted average credit
quality of the Fund's portfolio will be equivalent to that of securities rated
AA by S&P or Aa by Moody's. All securities purchased by the Fund will be
rated, at the time of investment, at least BBB by S&P or Baa by Moody's. Fixed
income securities rated BBB or Baa are considered medium-grade obligations
with speculative characteristics, and adverse economic conditions or changing
circumstances may weaken their issuers' capability to pay interest and repay
principal. The credit rating assigned to Municipal Securities by these rating
organizations or by the Investment Adviser may reflect the existence of
guarantees, letters of credit or other credit enhancement features available
to the issuers or holders of such Municipal Securities.

While the Fund, under normal market conditions, invests substantially all of
its assets in Municipal Securities, the recognition of certain accrued market
discount income (if the Fund acquires Municipal Securities or other
obligations at a market discount), income from investments other than
Municipal Securities and any capital gains generated from the disposition of
investments, will result in taxable income. Shareholders may be subject to
state, local or foreign taxes on such income received from the Fund. See
"Description of Securities".

GLOBAL INCOME FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high total return, emphasizing current income and, to a lesser extent,
providing opportunities for capital appreciation.

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be equal to that of the Fund's benchmark, the J.P. Morgan Global
Government Bond Index (hedged), plus or minus 2.5 years (currently 5.0 years).
In addition, under normal interest rate conditions, the Fund's maximum
duration will not exceed 7.5 years. The approximate interest rate sensitivity
of the Fund is comparable to a 6-year bond.

INVESTMENT SECTOR. The Fund invests primarily in a portfolio of high quality
fixed income securities of U.S. and foreign issuers and enters into
transactions in foreign currencies. Under normal market conditions, the Fund
will (i) have at least 30% of its total assets, after considering the effect
of currency positions, denominated in U.S. dollars and (ii) invest in
securities of issuers in at least three countries. The Fund seeks to meet its
investment objective by pursuing investment opportunities in foreign and
domestic fixed income securities markets and by engaging in currency
transactions to seek to enhance returns and for the purpose of hedging its
portfolio.

12
<PAGE>

The fixed income securities in which the Fund may invest include: (i) U.S.
Government Securities and custodial receipts therefor; (ii) securities issued
or guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies, instrumentalities or by supranational entities (i.e.,
international organizations designated or supported by governmental entities
to promote economic reconstruction or development, such as the World Bank);
(iii) corporate debt securities; (iv) certificates of deposit and bankers'
acceptances issued or guaranteed by, or time deposits maintained at, U.S. and
foreign banks (and their branches wherever located) having total assets of
more than $1 billion; (v) commercial paper and (vi) Mortgage- and Asset-Backed
Securities.

CREDIT QUALITY. All securities purchased by the Fund will be rated, at the
time of investment, at least AA by S&P or Aa by Moody's. However, the Fund may
also invest in obligations of a sovereign issuer, denominated in the issuer's
own currency, rated at least A by S&P or Moody's. The Fund will invest at
least 50% of its net assets in securities rated, at the time of investment,
AAA by S&P or Aaa by Moody's.

OTHER. The Fund may employ certain active management techniques to manage
the duration and term structure of the Fund, to seek to hedge its exposure to
foreign currencies and to seek to enhance returns. These techniques include,
but are not limited to, the use of financial futures contracts, option
contracts (including options on futures), forward foreign currency exchange
contracts, currency options and futures, currency, mortgage and interest rate
swaps and interest rate floors, caps and collars. Currency and interest rate
management techniques involve risks different from those associated with
investing solely in U.S. dollar-denominated fixed income securities of U.S.
issuers. It is expected that the Fund will use currency transactions both to
seek to enhance returns for a given level of risk and to seek to hedge its
exposure to foreign currencies. While the Fund will have both long and short
currency positions, its net long and short foreign currency exposure will not
exceed the value of the Fund's total assets. To the extent that the Fund is
fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. The Fund's net currency
positions may expose it to risks independent of its securities positions. The
Fund may also employ other investment techniques to seek to enhance returns,
such as lending portfolio securities, mortgage dollar rolls, repurchase
agreements and other investment practices described under "Investment
Techniques".

The Fund may invest more than 25% of its total assets in the securities of
corporate and governmental issuers located in each of Canada, Germany, Japan,
and the United Kingdom as well as in the securities of U.S. issuers.
Concentration of the Fund's investments in such issuers will subject the Fund,
to a greater extent than if investment was more limited, to the risks of
adverse securities markets, exchange rates and social, political or economic
events which may occur in those countries. With respect to other countries,
not more than 25% of the Fund's total assets will be invested in the
securities of any other foreign country.

DESCRIPTION OF SECURITIES

U.S. GOVERNMENT SECURITIES

13
<PAGE>

("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac")), or
(d) only the credit of the issuer. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies,
instrumentalities or sponsored enterprises in the future.

U.S. Government Securities also include Treasury receipts, zero coupon bonds
and other stripped U.S. Government Securities, where the interest and
principal components of stripped U.S. Government Securities are traded
independently. The most widely recognized program is the Separate Trading of
Registered Interest and Principal of Securities Program.

CORPORATE DEBT OBLIGATIONS

The Government Income and Global Income Funds may invest in corporate debt
obligations. In addition to obligations of corporations, corporate debt
obligations include securities issued by banks and other financial
institutions. Corporate debt obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations.

MORTGAGE-BACKED SECURITIES

CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities
represent direct or indirect participations in, or are collateralized by and
payable from, mortgage loans secured by real property. Mortgagors can
generally prepay interest or principal on their mortgage whenever they choose.
Therefore, Mortgage-Backed Securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of
principal prepayments on the underlying loans. This can result in
significantly greater price and yield volatility than is the case with
traditional fixed income securities. During periods of declining interest
rates, prepayments can be expected to accelerate, and thus impair a Fund's
ability to reinvest the returns of principal at comparable yields. Conversely,
in a rising interest rate environment, a declining prepayment rate will extend
the average life of many Mortgage-Backed Securities and prevent the Fund from
taking advantage of such higher yields.

FIXED RATE MORTGAGE LOANS. Generally, fixed rate mortgage loans pay interest
at fixed annual rates and have original terms to maturity ranging from 5 to 40
years. Fixed rate mortgage loans typically 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.

ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"). The Adjustable Rate Government Fund
will primarily, and the Government Income and Global Income Funds may, invest
in ARMs, which are pass-through mortgage securities collateralized by
mortgages with adjustable rather than fixed coupon rates. ARMs generally
provide for a fixed initial mortgage interest rate for a set period.
Thereafter, the interest rates are subject to periodic adjustments based on
changes to a designated benchmark index.

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adjustment date, in any one year, or during the life of the security. In the
event of dramatic increases or decreases in prevailing market interest rates,
the value of a Fund's investments in ARMs may fluctuate more substantially
since these limits may prevent the security from fully adjusting its interest
rate to the prevailing market rates.

U.S. GOVERNMENT GUARANTEED MORTGAGE-BACKED SECURITIES. Certain Mortgage-
Backed Securities are issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises. Such issuers include,
but are not limited to, Ginnie Mae, Fannie Mae and Freddie Mac. See "U.S.
Government Securities".

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Government Income and
Global Income Funds may invest in Mortgage-Backed Securities issued or
sponsored by non-governmental entities. Privately issued Mortgage-Backed
Securities are generally backed by pools of conventional (i.e., non-government
guaranteed or insured) mortgage loans. Since such Mortgage-Backed Securities
normally are not guaranteed by an entity having the credit standing of Ginnie
Mae, Fannie Mae or Freddie Mac, in order to receive a high quality rating from
the rating organizations (i.e., S&P or Moody's), they normally are structured
with one or more types of "credit enhancement".

MULTIPLE CLASS MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS. The Adjustable Rate Government, Government Income, and Global
Income Funds may also invest in multiple class securities, including
collateralized mortgage obligations ("CMOs") and Real Estate Mortgage
Investment Conduit ("REMIC") pass-through or participation certificates. CMOs
provide an investor with a specified interest in the cash flow from a pool of
underlying mortgages or of other Mortgage-Backed Securities. CMOs are issued
in multiple classes, each with a specified fixed or floating interest rate and
a final scheduled distribution date. In most cases, payments of principal are
applied to the CMO classes in the order of their respective stated maturities,
so that no principal payments will be made on a CMO class until all other
classes having an earlier stated maturity date are paid in full. 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. The
Funds do not intend to purchase residual interests in REMICs.

STRIPPED MORTGAGE-BACKED SECURITIES. The Adjustable Rate Government,
Government Income and Global Income Funds may invest in stripped Mortgage-
Backed Securities ("SMBS"), which are derivative multiple class Mortgage-
Backed Securities. SMBS are usually structured with two different classes; one
that receives 100% of the interest payments and the other that receives 100%
of the principal payments from a pool of mortgage loans. If the underlying
mortgage loans experience different than anticipated prepayments of principal,
a Fund may fail to fully recoup its initial investment in these securities.
Although the market for SMBS is increasingly liquid, certain SMBS may not be
readily marketable and will be considered illiquid for purposes of a 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 loans are
generally higher than prevailing market yields on other Mortgage-Backed
Securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped.

ASSET-BACKED SECURITIES

The Government Income and Global Income Funds may invest in asset-backed
securities ("Asset-Backed Securities"). The principal and interest payments on
Asset-Backed Securities are collateralized by pools of assets

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<PAGE>

such as auto loans, credit card receivables, leases, installment contracts and
personal property. Such asset pools are securitized through the use of special
purpose trusts or corporations. Principal and interest payments may be credit
enhanced by a letter of credit, a pool insurance policy or a
senior/subordinated structure.

MUNICIPAL SECURITIES

GENERAL. Municipal Securities in which the Municipal Income Fund invests
consist of bonds, notes, commercial paper and other instruments (including
participation interests in such securities) issued by or on behalf of states,
territories and possessions of the United States (including the District of
Columbia) and their political subdivisions, agencies or instrumentalities, the
interest on which, in the opinion of bond counsel for the issuers or counsel
selected by the Investment Adviser, is exempt from regular federal income tax
(i.e., excluded from gross income for federal income tax purposes but not
necessarily exempt from federal alternative minimum tax or from state or local
taxes). Such securities may pay fixed, variable or floating rates of interest.
Municipal Securities are often issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for which Municipal
Securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses, and obtaining funds to lend to other
public institutions and facilities.

PRIVATE ACTIVITY BONDS. Municipal Securities also include "private activity
bonds" or industrial development bonds, which are issued by or on behalf of
public authorities to obtain funds for such projects as privately-operated
housing facilities, airport, mass transit or port facilities and sewage
disposal. In addition, proceeds of certain industrial development bonds are
used for constructing, equipping, repairing or improving privately operated
industrial or commercial facilities. The Municipal Income Fund's distributions
attributable to the interest income from private activity bonds may subject
certain investors to the federal alternative minimum tax.

MUNICIPAL LEASES AND CERTIFICATES OF PARTICIPATION. A municipal lease is an
obligation in the form of a lease or installment purchase which is issued by a
state or local government to acquire equipment and facilities. Certificates of
participation represent undivided interests in municipal leases, installment
purchase agreements or other instruments. The primary risk associated with
municipal lease obligations and certificates of participation is that the
governmental lessee will fail to appropriate funds to enable it to meet its
payment obligations under the lease. Although the obligations may be secured
by the leased equipment or facilities, the disposition of the property in the
event of non-appropriation or foreclosure might prove difficult, time
consuming and costly, and result in a delay in recovering or the failure to
fully recover the Fund's original investment. To the extent that a Fund
invests in unrated municipal leases or participates in such leases, the
Trustees will monitor on an ongoing basis the credit quality rating and risk
of cancellation of such unrated leases. Certain municipal lease obligations
and certificates of participation may be deemed illiquid for the purpose of
the Fund's limitation on investments in illiquid securities.

PRE-REFUNDED MUNICIPAL SECURITIES. The interest and principal payments on
pre-refunded Municipal Securities are typically paid from the cash flow
generated from an escrow fund consisting of U.S. Government Securities. These
payments have been "pre-refunded" using the escrow fund.

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<PAGE>

Fund to receive only the face or par value of the securities held by the Fund.
The insurance does not guarantee the market value of the Municipal Securities
or the net asset value of the Fund's shares.

AUCTION RATE SECURITIES. Auction rate Municipal Securities permit the holder
to sell the securities in an auction at par value at specified intervals. The
dividend or interest is typically reset by "Dutch" auction in which bids are
made by broker-dealers and other institutions for a certain amount of
securities at a specified minimum yield. The rate set by the auction is the
lowest interest or dividend rate that covers all securities offered for sale.
While this process is designed to permit auction rate securities to be traded
at par value, there is the risk that an auction will fail due to insufficient
demand for the securities. The Fund will take the time remaining until the
next scheduled auction date into account for purposes of determining the
securities' duration.

FOREIGN INVESTMENTS

FOREIGN SECURITIES. The Global Income Fund will invest in fixed income
securities of foreign issuers denominated in either U.S. dollars or a foreign
currency. This may offer potential benefits that are not available from
investing exclusively in U.S. dollar-denominated domestic issues. Foreign
countries may have economic policies or business cycles different from those
of the U.S. and markets for foreign fixed income securities do not necessarily
move in a manner parallel to U.S. markets.

Investing in the securities of foreign issuers involves risks that are not
typically associated with investing in U.S. dollar-denominated securities of
domestic issuers. Such investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and in exchange control regulations (e.g., currency blockage). A
decline in the exchange rate of the currency (i.e., weakening of the currency
against the U.S. dollar) in which a portfolio security is quoted or
denominated relative to the U.S. dollar would reduce the value of the
portfolio security. In addition, if the exchange rate for the currency in
which the Fund receives interest payments declines against the U.S. dollar
before such income is distributed as dividends to shareholders, the Fund may
have to sell portfolio securities to obtain sufficient cash to pay such
dividends. In addition, clearance and settlement procedures may be different
in foreign countries and, in certain markets, such procedures have on occasion
been unable to keep pace with the volume of securities transactions, making it
more difficult to conduct such transactions.

The Global Income Fund may invest in an issuer domiciled in one country yet
issuing the security in the currency of another country. The Fund may also
invest in debt securities denominated in the European Currency Unit ("ECU"),
which is a "basket" consisting of specified amounts in the currencies of
certain of the twelve member states of the European Community. The specific
amounts of currencies comprising the ECU may be adjusted by the Council of
Ministers of the European Community from time to time to reflect changes in
relative values of the underlying currencies. In addition, the Fund may invest
in securities denominated in other currency "baskets".

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<PAGE>

possibility of nationalization, expropriation or confiscatory taxation,
imposition of withholding taxes on dividend or interest payments, limitations
on the removal of funds or other assets of the Fund, political or social
instability or diplomatic developments which could affect investments in those
countries.

FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because the Global Income
Fund may have currency exposure independent of its securities positions, the
value of the assets of the Fund as measured in U.S. dollars will be affected
by changes in foreign currency exchange rates. The Fund may purchase or sell
forward foreign currency exchange contracts for hedging purposes and to seek
to protect against anticipated changes in future foreign currency exchange
rates. The Fund also may enter into such contracts to seek to increase total
return when the Investment Adviser anticipates that the foreign currency will
appreciate or depreciate in value, but securities denominated or quoted in
that currency do not present attractive investment opportunities and are not
held in the Fund's portfolio. When entered into to seek to increase total
return, forward foreign currency exchange contracts are considered
speculative. The Fund may also engage in cross-hedging by using forward
contracts in a currency different from that in which the hedged security is
denominated or quoted if the Investment Adviser determines that there is a
pattern of correlation between the two currencies. If the Fund enters into a
forward foreign currency exchange contract to buy foreign currency for any
purpose or sell foreign currency to seek to increase total return, the Fund
will be required to place and maintain cash or liquid, high grade debt
securities in a segregated account with the Fund's custodian in an amount
equal to the value of the Fund's total assets committed to the consummation of
the forward contract. The Fund will incur costs in connection with conversions
between various currencies. The Fund may hold foreign currency received in
connection with investments in foreign securities when, in the judgment of the
Investment Adviser, it would be beneficial to convert such currency into U.S.
dollars at a later date, based on anticipated changes in the relevant exchange
rate.

Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, the Fund's net asset value to
fluctuate. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries, actual or anticipated changes in interest
rates and other complex factors, as seen from an international perspective.
Currency exchange rates also can be affected unpredictably by the intervention
of U.S. or foreign governments or central banks, or the failure to intervene,
or by currency controls or political developments in the United States or
abroad. To the extent that a substantial portion of the Fund's total assets,
adjusted to reflect the Fund's net position after giving effect to currency
transactions, is denominated or quoted in the currencies of foreign countries,
the Fund will be more susceptible to the risk of adverse economic and
political developments within those countries.

The market in forward foreign currency exchange contracts, currency swaps
and other privately negotiated currency instruments authorized for use by the
Fund offers less protection against defaults by the other party to such
instruments than is available for currency instruments traded on an exchange.
Such contracts are subject to the risk that the counterparty to the contract
will default on its obligations. Since these contracts are not guaranteed by
an exchange or clearinghouse, a default on a contract would deprive the Fund
of unrealized profits, transaction costs or the benefits of a currency hedge
or force the Fund to cover its purchase or sale commitments, if any, at the
current market price. The Fund will not enter into forward foreign currency
exchange contracts unless the credit quality of the unsecured senior debt or
the claims-paying ability of the counterparty is considered to be investment
grade by the Investment Adviser.

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<PAGE>

STRUCTURED SECURITIES

The Global Income Fund may invest in structured securities. The value of the
principal of and/or interest on such securities is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indices or other financial indicators (the "Reference") or the relative change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon
changes in the applicable Reference. The terms of the structured securities
may provide that in certain circumstances no principal is due at maturity and,
therefore, result in the loss of the Fund's investment. Structured securities
may be positively or negatively indexed, so that appreciation of the Reference
may produce an increase or decrease in the interest rate or value of the
security at maturity. In addition, changes in the interest rates or the value
of the security at maturity may be a multiple of changes in the value of the
Reference. Consequently, structured securities may entail a greater degree of
market risk than other types of fixed income securities. Structured securities
may also be more volatile, less liquid and more difficult to accurately price
than less complex securities.

ZERO COUPON, DEFERRED INTEREST AND CAPITAL APPRECIATION BONDS

Each Fund may invest in zero coupon, deferred interest and capital
appreciation bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity. The
amount of the discount rate varies depending on factors including the time
remaining until maturity, prevailing interest rates, the security's liquidity
and the issuer's credit quality. These securities also may take the form of
debt securities that have been stripped of their interest payments. A portion
of the discount with respect to stripped tax-exempt securities or their
coupons may be taxable. The market prices of zero coupon, deferred interest
and capital appreciation bonds generally are more volatile than the market
prices of interest-bearing securities and are likely to respond to a greater
degree to changes in interest rates than interest-bearing securities having
similar maturities and credit quality. A Fund's investments in zero coupon,
deferred interest and capital appreciation bonds or stripped securities may
require the Fund to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements. See
"Taxation" in the Additional Statement.

RISK FACTORS

INTEREST RATE RISK. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates increase,
the market value of fixed income securities tends to decline. Volatility of a
security's market value will differ depending upon the security's duration,
the issuer and the type of instrument.

DEFAULT RISK/CREDIT RISK. Investments in fixed income securities are subject
to the risk that the issuer could default on its obligations and a Fund could
sustain losses on such investments. A default could impact both interest and
principal payments.

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<PAGE>

exercises its right to pay principal on an obligation later than scheduled)
causes cash flows to be returned later than expected. This typically results
when interest rates have increased and a Fund will suffer from the inability
to invest in higher yielding securities. Certain types of U.S. Government,
Asset-Backed, corporate, foreign, Mortgage-Backed and Municipal Securities
have this call and/or extension risk.

The investment characteristics of Mortgage-Backed Securities and Asset-
Backed Securities differ from those of traditional fixed income securities
because they generally have both call risk (also known as prepayment risk) and
extension risk. Homeowners have the option to prepay their mortgage.
Therefore, the duration of a security backed by home mortgages can either
shorten (call risk) or lengthen (extension risk). Investors are exposed to the
fluctuating principal and interest payments associated with such securities.
In general, if interest rates on new mortgage loans fall sufficiently below
the interest rates on existing outstanding mortgage loans, the rate of
prepayment would be expected to increase. Conversely, if mortgage loan
interest rates rise above the interest rates on existing outstanding mortgage
loans, the rate of prepayment would be expected to decrease.

ARMs also have the risk of prepayments, which will have a greater impact on
the Adjustable Rate Government Fund. The rate of principal prepayments with
respect to ARMs has fluctuated in recent years. As with fixed rate mortgage
loans, ARMs may be subject to a greater rate of principal repayments in a
declining interest rate environment. For example, if prevailing interest rates
fall significantly, ARMs could be subject to higher prepayment rates (than if
prevailing interest rates remain constant or increase) because the
availability of low fixed rate mortgages may encourage mortgagors to refinance
their ARMs to "lock-in" a fixed rate mortgage. Conversely, if prevailing
interest rates rise significantly, ARMs may prepay slower. As with fixed rate
mortgages, ARM prepayment rates vary in both stable and changing interest rate
environments. There are certain ARMs where the homeowner's payments do not
fully cover interest, so the principal balance increases over time. These
"negative amortizing" ARMs may be subject to greater default risk.

DERIVATIVE MORTGAGE-BACKED SECURITIES. Because derivative Mortgage-Backed
Securities (such as principal-only (POs), interest-only (IOs) or inverse
floating rate securities) are more exposed to mortgage prepayments, they
generally involve a greater amount of risk. Small changes in prepayments can
significantly impact the cash flow and the market value of these securities.
The risk of faster than anticipated prepayments generally adversely affects
IOs, super floaters and premium priced Mortgage-Backed Securities. The risk of
slower than anticipated prepayments generally adversely affects POs, floating
rate securities subject to interest rate caps, support tranches and discount
priced Mortgage-Backed Securities. In addition, particular derivative
securities may be leveraged such that their exposure (i.e., price sensitivity)
to interest rate and/or prepayment risk is magnified.

TAX RISK OF MUNICIPAL SECURITIES. Due to Municipal Securities' tax-exempt
status, their yields and market values may be more adversely impacted by
changes in tax rates and policies than taxable fixed income securities.
Because interest income from Municipal Securities is not subject to regular
federal income taxation, the attractiveness of Municipal Securities in
relation to other investment alternatives is affected by changes in federal
income tax rates applicable to, or the continuing federal income tax-exempt
status of, such interest income. Any proposed or actual changes in such rates
or exempt status, therefore, can significantly affect the demand for and
supply, liquidity and marketability of Municipal Securities, which could in
turn affect the Fund's ability to acquire and dispose of Municipal Securities
at desirable yield and price levels.

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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.

Asset-Backed Securities present certain credit risks that are not presented
by Mortgage-Backed Securities because Asset-Backed Securities generally do not
have the benefit of a security interest in collateral that is comparable to
mortgage assets. There is the possibility that, in some cases, recoveries on
repossessed collateral may not be available to support payments on these
securities.

FOREIGN RISKS. See "Foreign Securities" for a description of the risks of
investing in foreign securities and currencies.

INVESTMENT TECHNIQUES

MORTGAGE DOLLAR ROLLS. The Adjustable Rate Government, Government Income and
Global Income Funds may enter into mortgage "dollar rolls" in which a Fund
sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase substantially similar (same
type, coupon and maturity) securities on a specified future date. During the
roll period, a Fund loses the right to receive principal and interest paid on
the securities sold. However, a Fund may benefit from the interest earned on
the cash proceeds of the securities sold until the settlement date of the
forward purchase. Each 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. The benefits derived from the use
of mortgage dollar rolls depend upon the Investment Adviser's ability to
manage mortgage prepayments. There is no assurance that mortgage dollar rolls
can be successfully employed. For financial reporting and tax purposes, each
Fund treats mortgage dollar rolls as two separate transactions; one involving
the purchase of a security and a separate transaction involving a sale. The
Funds do not currently intend to enter into mortgage dollar rolls that are
accounted for as a financing.

OPTIONS ON SECURITIES AND SECURITIES INDICES. Each Fund may write (sell)
covered call and put options and purchase put and call options on any
securities in which it may invest or on any securities index composed of
securities in which it may invest. The writing and purchase of options is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. The use of options to seek to increase total return involves the
risk of loss if the Investment Adviser is incorrect in its expectation of
fluctuations in securities prices or interest rates. The successful use of
options for hedging purposes also depends in part on the ability of the
Investment Adviser to manage future price fluctuations and the degree of
correlation between the options and securities markets. If the Investment
Adviser is incorrect in its expectation of changes in securities prices or
determination of the correlation between the securities indices on which
options are written and purchased and the securities in a Fund's investment
portfolio, the investment performance of the Fund will be less favorable than
it would have been in the absence of such options transactions. The writing of
options could increase a Fund's portfolio turnover rate and, therefore,
associated brokerage commissions or spreads.

OPTIONS ON FOREIGN CURRENCIES. The Global Income Fund may, to the extent it
invests in foreign securities, purchase and sell (write) put and call options
on foreign currencies for the purpose of protecting against declines in the
U.S. dollar value of foreign portfolio securities and against increases in the
U.S. dollar cost of foreign securities to be acquired. In addition, the Fund
may use options on currency to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange rates
for a different

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<PAGE>

currency, if there is a pattern of correlation between the two currencies. As
with other kinds of option transactions, however, the writing of an option on
foreign currency will constitute only a partial hedge, up to the amount of the
premium received. If an option that a Fund has written is exercised, the Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may constitute an effective hedge against exchange rate fluctuations;
however, in the event of exchange rate movements adverse to the Fund's
position, the Fund may forfeit the entire amount of the premium plus related
transaction costs. In addition to purchasing put and call options for hedging
purposes, the Fund may purchase call or put options on currency to seek to
increase total return when the Investment Adviser anticipates that the
currency will appreciate or depreciate in value, but the securities quoted or
denominated in that currency do not present attractive investment
opportunities and are not held in the Fund's portfolio. When purchased or sold
to seek to increase total return, options on currencies are considered
speculative. Options on foreign currencies to be written or purchased by the
Fund will be traded on U.S. and foreign exchanges or over-the-counter.

FUTURES CONTACTS AND OPTIONS ON FUTURES CONTRACTS. To seek to increase total
return or to hedge against changes in interest rates or securities prices, or
in the case of the Global Income Fund, currency exchange rates, each Fund may
purchase and sell various kinds of futures contracts, and purchase and write
call and put options on any of such futures contracts. Each Fund may also
enter into closing purchase and sale transactions with respect to any such
contracts and options. The futures contracts may be based on various
securities (such as U.S. Government Securities), foreign currencies, in the
case of the Global Income Fund, securities indices and other financial
instruments and indices. A 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. A Fund may not purchase or sell
futures contracts or purchase or sell related options to seek 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. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require the
Fund to segregate and maintain cash or liquid, high grade debt securities with
a value equal to the amount of the Fund's obligations.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Techniques--Futures Contracts and Options on Futures Contracts" in
the Additional Statement. Thus, while a Fund may benefit from the use of
futures and options on futures, unanticipated changes in interest rates,
securities prices or currency exchange rates may result in a poorer overall
performance than if the Fund had not entered into any futures contracts or
options transactions. Because perfect correlation between a futures position
and portfolio position that is intended to be protected is impossible to
achieve, the desired protection may not be obtained and a Fund may be exposed
to risk of loss. The loss incurred by a Fund in entering into futures
contracts and in writing call options on futures is potentially unlimited and
may exceed the amount of the premium received. Futures markets are highly
volatile and the use of futures may increase the volatility of a Fund's net
asset value. The profitability of a Fund's trading in futures to seek to
increase total return depends upon the ability of the Investment Adviser 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 a Fund.
Further, futures contracts and options on futures may be illiquid, and
exchanges may limit fluctuations in futures contract prices during a single
day.

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<PAGE>

CURRENCY SWAPS. The Global Income Fund may enter into currency swaps for
hedging purposes or to seek to increase total return. Currency swaps involve
the exchange by the Fund with another party of their respective rights to make
or receive payments in specified currencies. Currency swaps usually involve
the delivery of a gross payment stream in one designated currency in exchange
for the gross payment stream in another designated currency. Therefore, the
entire payment stream under a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The Fund will not enter into swap transactions unless the unsecured commercial
paper, senior debt or claims paying ability of the other party thereto is
rated either AA or A-1 or better by S&P or Aa or P-1 or better by Moody's, or
if unrated by such rating organizations, determined to be of comparable
quality by the Investment Adviser. The use of currency swaps 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 currency exchange rates,
the investment performance of the Global Income Fund would be less favorable
than it would have been if this investment technique were not used. The staff
of the SEC currently take the position that swaps are illiquid and thus
subject to the Fund's limitation on investments in illiquid securities.

RISKS OF DERIVATIVE TRANSACTIONS. A Fund's transactions, if any, in options,
futures, options on futures, swap transactions, interest rate caps, floors and
collars, structured securities, inverse floating rate securities and currency
forward contracts involve certain risks, including a possible lack of
correlation between changes in the value of hedging instruments and the
portfolio assets being hedged, the potential illiquidity of the markets for
derivative instruments, the risks arising from the margin requirements and
related leverage factors associated with such transactions. The use of these
management techniques to seek to increase total return may be regarded as a
speculative practice and involves the risk of loss if the Investment Adviser
is incorrect in its expectation of fluctuations in securities prices, interest
rates or currency prices. A Fund's transactions in certain derivative
transactions may be limited by the requirements of the Code for qualification
as a regulated investment company.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. Each Fund may purchase when-
issued securities. When-issued transactions arise when securities are
purchased by a 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. Each Fund may also
purchase securities on a forward commitment basis; that is, make contracts to
purchase securities for a fixed price at a future date beyond the customary 3-
day settlement. A Fund is required to hold and maintain in a segregated
account with the Fund's custodian until 3 days prior to settlement date, cash
or liquid, high grade debt securities in an amount sufficient to meet the
purchase price. Alternatively, each 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 a Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, a Fund may dispose of when-issued securities or
forward commitments prior to settlement if the Investment Adviser deems it
appropriate to do so.

ILLIQUID AND RESTRICTED SECURITIES. A Fund may not invest more than 15% of
its net assets in illiquid investments, which includes securities (both
foreign and domestic) that are not readily marketable, swap transactions,
certain SMBS, certain municipal leases and participation interests, repurchase
agreements maturing in more than seven days, time deposits with a notice or
demand period of more than seven days, certain over-the-counter options, and
certain restricted securities, unless it is determined, based upon the
continuing review of the trading markets for a specific restricted security,
that such restricted security is eligible for sale under Rule 144A and,
therefore, is liquid. The Board of Trustees has adopted guidelines and
delegated to the Investment Adviser

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<PAGE>

the daily function of determining and monitoring the liquidity of restricted
securities. The Board of Trustees, however, retains oversight focusing on
factors such as valuation, liquidity and availability of information and is
ultimately responsible for each determination. Investing in restricted
securities eligible for resale pursuant to Rule 144A may decrease the
liquidity in a Fund to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities. The
purchase price and subsequent valuation of restricted and illiquid securities
normally reflect a discount, which may be significant, from the market price
of comparable securities for which a liquid market exists.

REPURCHASE AGREEMENTS. Each 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. The Global Income Fund may also enter
into repurchase agreements involving certain foreign government securities. If
the other party or "seller" defaults, a Fund might suffer a loss to the extent
that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the related repurchase
agreement are less than the repurchase price. In addition, in the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, a Fund could suffer losses, including loss of interest on or
principal of the security and costs associated with delay and enforcement of
the repurchase agreement. The Trustees of the Trust have reviewed and approved
certain counterparties whom they believe to be creditworthy and have
authorized the Funds to enter into repurchase agreements with such
counterparties. In addition, each Fund, together with other registered
investment companies having advisory agreements with the Investment Adviser,
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.

TEMPORARY INVESTMENTS. Each Fund may, for temporary defensive purposes
invest 100% of its total assets in (a) U. S. Government Securities or (b)
repurchase agreements collateralized by U.S. Government Securities. The
Municipal Income Fund may for temporary defensive purposes depart from its
stated investment objective and invest more than 20% of its net assets in
taxable investments which would subject such income to taxation.

MISCELLANEOUS TECHNIQUES

In addition to the techniques described above, each Fund may, with respect
to no more than 5% of its total assets, engage in the following techniques:
(i) portfolio securities lending, (ii) mortgage swaps (other than Municipal
Income Fund) and interest rate swaps, caps, floors and collars, (iii) inverse
floating rate securities, (iv) yield curve options, (v) investments in other
investment companies, (vi) custodial receipts and (vii) with respect to the
Municipal Income Fund, tender option bonds and standby commitments. For more
information see the Additional Statement.

INVESTMENT RESTRICTIONS

Each Fund is subject to certain investment restrictions that are described
in detail under "Investment Restrictions" in the Additional Statement.
Fundamental investment restrictions of a Fund can not be changed without
approval of a majority of the outstanding shares of that Fund. All investment
objectives and policies not specifically designated as fundamental are non-
fundamental and may be changed without shareholder approval. If there is a
change in a Fund's investment objectives, shareholders should consider whether
the Fund still remains an appropriate investment in light of their then
current financial positions and needs.

24
<PAGE>

Municipal Income Fund's policy to invest, under normal market conditions, at
least 80% of its net assets in Municipal Securities the interest on which is
exempt from regular federal income tax is fundamental and may not be changed
without shareholder approval. For more information on a Fund's investment
restrictions, an investor should obtain the Additional Statement.

NON-DIVERSIFICATION STATUS. Since the Global Income Fund is "non-
diversified" under the Act, it is subject only to certain federal tax
diversification requirements. Under federal tax laws, the Global Income Fund
may, with respect to 50% of its total assets, invest up to 25% of its total
assets in the securities of any issuer (except that this limitation does not
apply to U.S. Government Securities). With respect to the remaining 50% of the
Fund's total assets, (1) the Fund may not invest more than 5% of its total
assets in the securities of any one issuer (other than the U.S. Government),
and (2) the Fund may not acquire more than 10% of the outstanding voting
securities of any one issuer. These tests apply at the end of each quarter of
its taxable year and are subject to certain conditions and limitations under
the Code. Since the Global Income Fund is not diversified under the Act, it
will be more susceptible to adverse developments affecting any single issuer.
The Adjustable Rate Government, Government Income and Municipal Income Funds
are, in addition to these tax diversification requirements, also subject to
the diversification requirements arising out of their diversified status under
the Act.

PORTFOLIO TURNOVER

Each Fund may engage in active short-term trading to benefit from yield
disparities among different issues of securities or among the markets for
fixed income securities, or for other reasons. It is anticipated that the
portfolio turnover rate of each Fund will vary from year to year. The
portfolio turnover rate is computed by dividing the lesser of the dollar
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 a 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 a
Fund consistent with the Fund's investment objectives and portfolio management
policies. A high rate of portfolio turnover results in increased transaction
costs to a Fund. The portfolio turnover rate includes the effect of entering
into mortgage dollar rolls. See "Financial Highlights" for a statement of each
Fund's historical portfolio turnover rates.

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 Advisers, administrator,
distributor and transfer agent. The officers of the Trust conduct and
supervise each 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.

25
<PAGE>

INVESTMENT ADVISERS, SUBADVISER AND ADMINISTRATOR

INVESTMENT ADVISERS AND SUBADVISER. 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, serves as the investment adviser to
the Adjustable Rate Government Fund. Goldman Sachs Funds Management, L.P.
registered as an investment adviser in 1990. Goldman Sachs Asset Management,
One New York Plaza, New York, New York 10004, a separate operating division of
Goldman Sachs, serves as administrator and investment adviser to the Global
Income, Government Income and Municipal Income Funds. Goldman Sachs registered
as an investment adviser in 1981. Goldman Sachs Asset Management
International, 140 Fleet Street, London EC4A 2BJ, England, an affiliate of
Goldman Sachs, serves as the subadviser to the Global Income Fund. Goldman
Sachs Asset Management International became a member of the Investment
Management Regulatory Organization Limited in 1990 and registered as an
investment adviser in 1991. As of January 31, 1996, GSAM, GSFM and GSAMI,
together with their affiliates, acted as investment adviser, administrator or
distributor for assets in excess of $57 billion.

Under an Investment Advisory Agreement with each Fund, the applicable
Investment Adviser, and in the case of the Global Income Fund under a
Subadvisory Agreement, the subadviser, subject to the general supervision of
the Board of Trustees, provides day-to-day advice as to the Fund's portfolio
transactions. Goldman Sachs has agreed to permit the Trust to use the name
"Goldman Sachs" or a derivative thereof as part of each Fund's name for as
long as a Fund's Investment Advisory Agreement is in effect.

In performing its investment advisory services, each Investment Adviser,
while remaining ultimately responsible for the management of the Funds, is
able to draw upon the research and expertise of its affiliate offices for
portfolio decisions and management with respect to certain portfolio
securities.

ADJUSTABLE RATE GOVERNMENT FUND. The Fund's portfolio manager is Jonathan A.
Beinner. Mr. Beinner is a Vice President of Goldman Sachs and joined the
Investment Adviser in 1990 after working in the trading and arbitrage group of
Franklin Savings Association.

GOVERNMENT INCOME FUND. The Fund's portfolio managers are Jonathan A.
Beinner and Richard C. Lucy. See above for information about Mr. Beinner.
Messrs. Beinner and Lucy each specialize in investing in a particular type of
security the Fund may hold. Mr. Lucy is a Vice President of Goldman Sachs and
joined the Investment Adviser in 1992 after spending nine years managing fixed
income assets at Brown Brothers Harriman & Co.

MUNICIPAL INCOME FUND. The Fund's portfolio manager is Benjamin S. Thompson.
Mr. Thompson specializes in municipal securities, where his responsibilities
include developing investment strategy and structuring portfolios. Mr.
Thompson worked in the institutional sales and marketing group at GSAM until
he joined the fixed income team in 1993. Prior to joining GSAM in early 1992,
Mr. Thompson worked in the Structured Finance Group of the Chase Manhattan
Bank.

26
<PAGE>

employment at Invesco, Mr. Fitzgerald spent three years with Foreign and
Colonial Management Limited in London managing fixed income and derivative
funds, and, prior to that, in the treasury department of NRMA Insurance
Limited in Sydney. Mr. Wilson joined GSAMI in 1995 and is Executive Director
and Portfolio Manager for international fixed income. Prior to joining GSAMI,
he spent three years as an Assistant Director at Rothschild Asset Management
where he was responsible for managing global and international bond
portfolios, with specific focus on the U.S., Canadian, Australian and Japanese
economies. Prior to his employment at Rothschild, Mr. Wilson spent seven years
at the Reserve Bank of New Zealand, his most recent position as Trading
Manager of foreign reserves management. Mr. Wilson's employment at the Reserve
Bank at New Zealand also included a two year assignment to the foreign
investment unit at the Bank of England in London.

It is the responsibility of the Investment Adviser to make investment
decisions for a Fund and to place the purchase and sale orders for the Fund's
portfolio transactions in U.S. and foreign securities and currency markets.
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.

As compensation for its services rendered and assumption of certain expenses
pursuant to an Investment Advisory Agreement, GSFM is entitled to a fee from
the Adjustable Rate Government Fund, computed daily and payable monthly, at
the annual rate of 0.40% of average daily net assets. As compensation for its
services rendered and assumption of certain expenses pursuant to separate
Investment Advisory Agreements, GSAM is entitled to a fee from the Global
Income, Government Income and Municipal Income Funds, computed daily and
payable monthly, at the annual rates of 0.25%, 0.50% and 0.40%, respectively,
of average daily net assets; however, GSAM is currently only imposing its
advisory fee with respect to the Global Income and Government Income Funds at
the annual rates of 0.12% and 0.25%, respectively, of average daily net
assets. As compensation for its services rendered and assumption of certain
expenses pursuant to a Subadvisory Agreement, GSAMI is entitled to a fee from
the Global Income Fund, computed daily and payable monthly, at the annual rate
of 0.50% of average daily net assets; however, GSAMI is currently only
imposing its subadvisory fee with respect to the Global Income Fund at the
annual rate of 0.32% of average daily net assets. The Investment Advisers may
discontinue or modify such limitations in the future at their discretion,
although the Investment Advisers have no current intention to do so. For the
fiscal year ended October 31, 1995, the Adjustable Rate Government Fund paid
fees at the foregoing rate. At various times during the fiscal year ended
October 31, 1995, GSAM waived part of its investment advisory fee for the
Government Income and Municipal Income Funds and GSAM and GSAMI waived part of
their investment advisory and subadvisory fees, respectively, for the Global
Income Fund. The average rate for the period paid by the Government Income and
Municipal Income Funds to GSAM was 0.22% and 0.31%, respectively, and the
average rate for the period paid by the Global Income Fund to GSAM and GSAMI
was 0.22% and 0.45%, respectively. Without giving effect to fee limitations,
the aggregate management fees paid by the Global Income Fund are higher than
the fees paid by most funds but the Investment Adviser and subadviser believe
such fees are comparable to management fees paid by funds with similar
investment strategies.

27
<PAGE>

and brokerage fees and litigation, indemnification and other extraordinary
expenses and, in the case of the Global Income Fund, transfer agency fees) to
the extent such expenses exceed 0.05%, 0.00%, 0.05% and 0.06% per annum of
such Funds' average daily net assets, respectively. Such reductions or limits,
if any, are calculated monthly on a cumulative basis and may be discontinued
or modified by the applicable Investment Adviser in its discretion at any
time.

ADMINISTRATOR. As administrator, pursuant to an Administration Agreement
with each Fund (other than Adjustable Rate Government Fund), GSAM provides
personnel for supervisory, administrative, and clerical functions; oversees
the performance of administrative and professional services to each Fund by
others; provides office facilities; and prepares, but does not pay for,
reports to shareholders, the SEC and other regulatory authorities. As
compensation for the services rendered to the Funds, GSAM is entitled to a fee
from the Global Income, Government Income and Municipal Income Funds, computed
daily and payable monthly, at an annual rate equal to 0.15% of each such
Fund's average daily net assets; however, GSAM is currently not imposing its
administration fee with respect to the Government Income Fund. For the fiscal
year ended October 31, 1995, GSAM waived its administration fee for the
Government Income Fund. GSAM may discontinue or modify such limitation in the
future at its discretion, although it has no current intention to do so. For
the period ended October 31, 1995, the Municipal Income and Global Income
Funds paid GSAM a fee for administration services at the foregoing rate. GSAM
has agreed to reduce its fees payable by a Fund (to the extent of its fees) by
the amount (if any) that a Fund's expenses exceed the applicable expense
limitations imposed by state securities administrators. See "Management--
Expenses" in the Additional Statement.

Goldman Sachs may from time to time, at its own expense, provide
compensation to certain Authorized Dealers for performing administrative
services to their customers. These services include maintaining account
records, processing orders to purchase, redeem and exchange Fund shares and
responding to certain customer inquiries. The amount of such compensation may
be up to 0.1125% annually of the average daily net assets of Adjustable Rate
Government Fund, 0.125% annually of the average daily net assets of the
Government Income Fund, 0.10% annually of the average daily net assets of the
Municipal Income Fund and 0.1875% annually of the average daily net assets of
the Global Income Fund attributable to shares held by customers of such
Authorized Dealers. In addition, Goldman Sachs may from time to time, at its
own expense, provide compensation to certain Authorized Dealers who perform
administrative services with respect to depository institutions whose
customers purchase shares of a Fund. These services include responding to
certain inquiries from and providing written materials to depository
institutions about a Fund; furnishing advice about and assisting depository
institutions in obtaining from state regulatory agencies any rulings,
exemptions or other authorizations that may be required to conduct a mutual
fund sales program; acting as liaison between depository institutions and
national regulatory organizations; assisting with the preparation of sales
material; and providing general assistance and advice in establishing and
maintaining mutual fund sales programs on the premises of depository
institutions. The amount of such compensation may be up to 0.08% annually of
the average net assets of a Fund's shares attributable to purchases through,
and held by the customers of, such depository institutions. Such compensation
does not represent an additional expense to a Fund or its shareholders, since
it will be paid from the assets of Goldman Sachs or its affiliates.

28
<PAGE>

advise accounts and funds which have investment objectives similar to those of
the Funds and/or which engage in and compete for transactions in the same
types of securities, currencies and instruments as the Funds. Goldman Sachs
and its affiliates will not have any obligation to make available any
information regarding their proprietary activities or strategies, or the
activities or strategies used for other accounts managed by them, for the
benefit of the management of the Funds and in general it is not anticipated
that the Investment Advisers will have access to proprietary information for
the purpose of managing a Fund. The results of a Fund's investment activities,
therefore, may differ from those of Goldman Sachs and its affiliates and it is
possible that a Fund could sustain losses during periods in which Goldman
Sachs and its affiliates and other accounts and Funds achieve significant
profits on their trading for proprietary or other accounts. From time to time,
a Fund's activities may be limited because of regulatory restrictions
applicable to Goldman Sachs and its affiliates, and/or their internal policies
designed to comply with such restrictions. See "Management--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 10004, serves as the
exclusive distributor of each Fund's shares. Shares may also be sold by
Authorized Dealers. Authorized Dealers include investment dealers that are
members of the NASD and certain other financial service firms. To become an
Authorized Dealer, a dealer or financial service firm must enter into a sales
agreement with Goldman Sachs. The minimum investment requirements, services,
programs and purchase and redemption options for shares purchased through a
particular Authorized Dealer may be different from those available to
investors purchasing through other Authorized Dealers.

Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606 also serves as each
Fund's transfer agent (the "Transfer Agent") and as such performs various
shareholder servicing functions. As compensation for the services rendered to
each Fund by Goldman Sachs (as Transfer Agent) and the assumption by Goldman
Sachs of the expenses related thereto, Goldman Sachs is entitled to receive a
fee from each Fund (other than Adjustable Rate Government Fund), with respect
to Class A shares and Class B shares of $12,000 per year plus $7.50 per
account, together with out-of-pocket and transaction-related expenses
(including those out-of-pocket expenses payable to servicing agents). Goldman
Sachs is entitled to receive a fee from the Adjustable Rate Government Fund,
with respect to Class A shares, equal to its proportionate share of the total
transfer agency fees borne by the Fund. Such fees are equal to the fixed
charges set forth above applicable to Class A shares plus 0.04% of the average
daily net assets of the other classes of the Fund. Shareholders with inquiries
regarding any Fund should contact Goldman Sachs (as Transfer Agent) at the
address or the telephone number set forth on the back cover page of this
Prospectus.

REPORTS TO SHAREHOLDERS

Shareholders will receive an annual report containing audited financial
statements and a semi-annual report. Each shareholder will also be provided
with a printed confirmation for each transaction in the shareholder's account
and an individual quarterly account statement. A year-to-date statement for
any account will be provided upon request made to Goldman Sachs. The Funds do
not generally provide sub-accounting services.

29
<PAGE>

HOW TO INVEST

ALTERNATIVE PURCHASE ARRANGEMENTS

Each Fund continuously offers through this prospectus Class A and Class B
shares (except that the Adjustable Rate Government Fund does not currently
offer Class B shares), as described more fully in "How to Buy Shares of the
Funds". If you do not specify in your instructions to the Funds which class of
shares you wish to purchase, the Funds will assume that your instructions
apply to Class A shares.

CLASS A SHARES. If you invest less than $1 million in Class A shares, you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you initially invest $1 million or more in Class A
shares of a Fund, no sales charge will be imposed at the time of purchase, but
you will incur a deferred sales charge equal to 1.00% if you redeem your
shares within 18 months of purchase. Direct purchases (as opposed to
exchanges) of $1 million or more of Class A shares of the Adjustable Rate
Government Fund will not be subject to a deferred sales charge when redeemed.
Class A shares are subject to distribution fees of up to 0.25% (which
currently is being waived in the case of Adjustable Rate Government, Municipal
Income and Government Income Funds and limited to 0.21% for the Global Income
Fund) and authorized dealer service fees of up to 0.25%, respectively, of each
Fund's average daily net assets attributable to Class A shares.

CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") of up to 5% if
redeemed within six years of purchase. Class B shares are subject to
distribution and authorized dealer service fees of up to 0.75% and 0.25%,
respectively, of each Fund's average daily net assets attributable to Class B
shares. See "Distribution and Authorized Dealer Service Plans". Your entire
investment in Class B shares is available to work for you from the time you
make your initial investment, but the distribution fee paid by Class B shares
will cause your Class B shares (until conversion to Class A shares) to have a
higher expense ratio and to pay lower dividends, to the extent dividends are
paid, than Class A shares. Class B shares will automatically convert to Class
A shares, based on their relative net asset values, eight years after the
initial purchase.

FACTORS TO CONSIDER IN CHOOSING CLASS A OR CLASS B SHARES. The decision as
to which class to purchase depends on the amount you invest, the intended
length of the investment and your personal situation. For example, if you are
making an investment of $100,000 or more that qualifies for a reduced sales
charge, you should consider purchasing Class A shares. A brief description of
when the initial sales charge may be reduced or eliminated is set forth below
under "Right of Accumulation" and "Statement of Intention." If you prefer not
to pay an initial sales charge on an investment, you might consider purchasing
Class B shares.

HOW TO BUY SHARES OF THE FUNDS -- CLASS A AND CLASS B SHARES

You may purchase shares of the Funds through any Authorized Dealer
(including Goldman Sachs) or directly from a Fund, c/o National Financial Data
Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City, MO 64141-6711 on any
Business Day (as defined under "Additional Information") at the net asset
value next determined after receipt of an order, plus, in the case of Class A
shares, any applicable sales charge. If, by the close of regular trading on
the New York Stock Exchange (currently 4:00 p.m. New York time), a purchase
order is received by a Fund, Goldman Sachs or an Authorized Dealer, the price
per share will be based on the net asset value computed on the day the
purchase order is received. If a purchase order for shares of the Adjustable
Rate Government Fund is received by an Authorized Dealer by 4:00 p.m., New
York time and payment is made by (a) wire transfer or ACH transfer, shares
will be issued and dividends declared with respect to such shares will

30
<PAGE>

begin to accrue on the later of (i) the Business Day after receipt by the
Authorized Dealer of the purchase order or (ii) the date of receipt of payment
for the shares or (b) check, Federal Reserve draft or bank wire, shares will
be issued and dividends declared with respect to such shares will begin to
accrue on the Business Day after the date payment is received. Dividends with
respect to the Government Income and Municipal Income Funds declared with
respect to such shares will begin to accrue on the Business Day after receipt
of payment. Shares of the Global Income Fund will begin to be eligible for
dividends paid on or after the day the shares are purchased.

The minimum initial investment in each Fund is $1,500. An initial investment
minimum of $250 applies to purchases in connection with Individual Retirement
Account Plans. For purchases through the Automatic Investment Plan, the
minimum investment is $50. The minimum subsequent investment is $50. These
requirements may be waived at the discretion of the Trust's officers.

You may pay for purchases of shares by check (except that a check drawn on a
foreign bank will not be accepted), Federal Reserve draft, Federal Funds wire,
ACH transfer or bank wire. Purchases of shares by check or Federal Reserve
draft should be made payable as follows: (i) to an investor's Authorized
Dealer, if purchased through such Authorized Dealer, or (ii) to Goldman Sachs
Trust -- (Name of Fund and Class of shares) and sent to NFDS, P.O. Box 419711,
Kansas City, MO 64141-6711. Federal Funds wires, ACH transfers and bank wires
should be sent to State Street Bank and Trust Company ("State Street").
Payment must be received within three Business Days after receipt of the
purchase order. An investor's Authorized Dealer is responsible for forwarding
payment promptly to the Fund.

In order to make an initial investment in a Fund, an investor must establish
an account with the Fund by furnishing to the Fund, Goldman Sachs or the
investor's Authorized Dealer the information in the Account Application
attached to this Prospectus. The Fund may refuse to open an account for any
investor who fails to (1) provide a social security number or other taxpayer
identification number, or (2) certify that such number is correct (if required
to do so under applicable law).

The Funds reserve the right to redeem shares of any shareholder whose
account balance is less than $50 as a result of earlier redemptions. Such
redemptions will not be implemented if the value of a shareholder's account
falls below the minimum account balance solely as a result of market
conditions. A Fund will give sixty (60) days' prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the Fund to avoid such redemption. In
addition, the Funds and Goldman Sachs reserve the right to modify the minimum
investment, the manner in which shares are offered and the sales charge rates
applicable to future purchases of shares.

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<PAGE>

OFFERING PRICE -- CLASS A SHARES

The offering price of Class A shares of each Fund (other than Adjustable
Rate Government Fund) is the next determined net asset value per share plus a
sales charge, if any, paid to Goldman Sachs at the time of purchase of shares
as shown in the following table:

<TABLE>
<CAPTION>
SALES CHARGE MAXIMUM DEALER
SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS
AMOUNT OF PURCHASE PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF
(INCLUDING SALES CHARGE, IF ANY) OFFERING PRICE INVESTED OFFERING PRICE
-------------------------------- --------------- ------------- --------------
<S> <C> <C> <C>
Less Than $100,000................ 4.50% 4.71% 4.00%
$100,000 up to (but less than)
$250,000......................... 3.00 3.09 2.50
$250,000 up to (but less than)
$500,000......................... 2.50 2.56 2.00
$500,000 up to (but less than) $1
million.......................... 2.00 2.04 1.75
$1 million or more................ 0.00* 0.00* **
</TABLE>
- --------

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

** Goldman Sachs pays a one-time commission to Authorized Dealers who initiate
or are responsible for purchases of $1 million or more of shares of the
Funds equal to 1.00% of the amount under $3 million, 0.50% of the next $2
million, and 0.25% thereafter.

Purchases of $1 million or more of Class A shares will be made at net asset
value with no initial sales charge, but if the shares are redeemed within 18
months after the end of the calendar month in which the purchase was made (the
contingent deferred sales charge period), a CDSC of 1.00% will be imposed. Any
applicable CDSC will be assessed on an amount equal to the lesser of the
current market value or the original purchase cost of the redeemed Class A
shares. Accordingly, no CDSC will be imposed on increases in account value
above the initial purchase price, including any dividends which have been
reinvested in additional Class A shares. In determining whether a CDSC applies
to a redemption, the calculation will be determined in a manner that results
in the lowest possible rate being charged. Therefore, it will be assumed that
the redemption is first made from any Class A shares in your account that are
not subject to the CDSC. The CDSC is waived on redemptions in certain
circumstances. See "Waiver or Reduction of Contingent Deferred Sales Charges"
below.

The offering price of Class A shares of the Adjustable Rate Government Fund
is the next determined net asset value per share plus a sales charge, if any,
paid to Goldman Sachs at the time of purchase of shares as shown in the
following table:

<TABLE>
<CAPTION>
SALES CHARGE MAXIMUM DEALER
SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS
AMOUNT OF PURCHASE PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF
(INCLUDING SALES CHARGE, IF ANY) OFFERING PRICE INVESTED OFFERING PRICE
-------------------------------- --------------- ------------- --------------
<S> <C> <C> <C>
Less Than $500,000................ 1.50% 1.52% 1.25%
$500,000 up to (but less than) $1
million.......................... 1.00 1.01 0.75
$1 million or more................ 0.00 0.00 0.00
</TABLE>

The entire amount of the sales charge will be reallowed to Authorized
Dealers on sales of Class A shares of each Fund (other than the Municipal
Income Fund) during the period January 2, 1996 through April 15, 1996 if
shares of a Fund are purchased through any Individual Retirement Account
(IRA), including self-directed IRAs.

32
<PAGE>

Class A shares of the Funds may be sold at net asset value without payment
of any sales charge to (a) Goldman Sachs, its affiliates or their respective
officers, partners, directors or employees (including retired employees and
former partners), any partnership of which Goldman Sachs is a general partner,
any Trustee or officer of the Trust and designated family members of any of
the above individuals; (b) qualified retirement plans of Goldman Sachs; (c)
trustees or directors of investment companies for which Goldman Sachs or an
affiliate acts as sponsor; (d) any employee or registered representative of
any Authorized Dealer or their respective spouses and children; (e) banks,
trust companies or other types of depository institutions investing for their
own account or investing for accounts for which they have investment
discretion; (f) banks, trust companies or other types of depository
institutions investing for accounts for which they do not have investment
discretion, provided they have entered into an agreement with GSAM specifying
aggregate minimums and certain operating policies and standards; (g) any
state, county or city, or any instrumentality, department, authority or agency
thereof, which is prohibited by applicable investment laws from paying a sales
charge or commission in connection with the purchase of shares of a Fund; (h)
pension and profit sharing plans, pension funds and other company-sponsored
benefit plans having either 200 eligible employees or at least $1,000,000
under management with GSAM and its affiliates; (i) shareholders whose purchase
is attributable to redemption proceeds (subject to appropriate documentation)
from a registered open-end management investment company not distributed or
managed by Goldman Sachs or its affiliates, if such redemption has occurred no
more than 60 days prior to the purchase of shares of the Funds and the
shareholder either (a) paid an initial sales charge or (b) was at some time
subject to a deferred sales charge with respect to the redemption proceeds;
(j) "wrap" accounts for the benefit of clients of broker-dealers, financial
institutions or financial planners, provided that they have entered into an
agreement with GSAM specifying aggregate minimums and certain operating
policies and standards; (k) registered investment advisers who have entered
into an agreement with GSAM specifying aggregate minimums and certain
operating policies and standards; and (l) accounts over which GSAM or its
advisory affiliates have investment discretion. Purchasers must certify
eligibility for an exemption on the Account Application and notify Goldman
Sachs if the shareholder is no longer eligible for an exemption. Exemptions
will be granted subject to confirmation of a purchaser's entitlement.
Investors purchasing shares of the Funds at net asset value without payment of
any initial sales charge may be charged a fee if they effect transactions in
shares through a broker or agent. In addition, under certain circumstances,
dividends and distributions from any of the Goldman Sachs Portfolios may be
reinvested in shares of each Fund at net asset value, as described under
"Cross-Reinvestment of Dividends and Distributions and Automatic Exchange
Program".

REINVESTMENT OF REDEMPTION PROCEEDS -- CLASS A SHARES

A shareholder who redeems Class A shares of a Fund may reinvest at net asset
value any portion or all of his redemption proceeds (plus that amount
necessary to acquire a fractional share to round off his purchase to the
nearest full share) in Class A shares of a Fund or of any other Goldman Sachs
Portfolio. Shareholders should obtain and read the applicable prospectuses of
such other funds and consider their objectives, policies and applicable fees
before investing in any of such funds. This reinvestment privilege is subject
to the condition that the shares redeemed have been held for at least thirty
(30) days before the redemption and that the reinvestment is effected within
ninety (90) days after such redemption. If you paid a CDSC upon a redemption
and reinvest in Class A shares subject to the conditions set forth above, your
account will be credited with the amount of the CDSC attributable to such
shares previously charged, and the reinvested shares will continue to be
subject to a CDSC. The holding period of the Class A shares acquired through
reinvestment for purposes of computing the CDSC payable upon a subsequent
redemption, will include the holding period of the redeemed shares. Shares are
sold to a reinvesting shareholder at the net asset value next determined
following timely receipt by Goldman Sachs or an Authorized Dealer of a written
purchase order indicating that the shares are eligible for reinvestment at net
asset value.

33
<PAGE>

A reinvesting shareholder may realize a gain or loss for federal tax
purposes as a result of such redemption. If the redemption occurs within
ninety (90) days after the original purchase of the Class A shares, any sales
charge paid on the original purchase cannot be taken into account by a
shareholder reinvesting at net asset value pursuant to the reinvestment
privilege for purposes of determining gain or loss realized on the redemption,
but instead will be added to the tax basis of the Class A shares received in
the reinvestment. To the extent that any loss is realized and shares of the
same Fund are purchased within thirty (30) days before or after the
redemption, some or all of the loss may not be allowed as a deduction
depending upon the number of shares purchased. Shareholders should consult
their own tax advisers concerning the tax consequences of a reinvestment. Upon
receipt of a written request, the reinvestment privilege may be exercised once
annually by a shareholder, except that there is no such time limit as to the
availability of this privilege in connection with transactions the sole
purpose of which is to reinvest the proceeds at net asset value in a tax-
sheltered retirement plan.

RIGHT OF ACCUMULATION -- CLASS A SHARES

Class A purchasers may qualify for reduced sales charges when the current
market value of holdings (shares at current offering price), plus new
purchases, reaches $100,000 or more ($500,000 or more in the case of
Adjustable Rate Government Fund). Class A shares of the Goldman Sachs
Portfolios may be combined under the Right of Accumulation. See Additional
Statement for more information about the Right of Accumulation.

STATEMENT OF INTENTION -- CLASS A SHARES

Purchases of $100,000 ($500,000 in the case of the Adjustable Rate
Government Fund) or more made over a 13-month period are eligible for reduced
sales charges. Class A shares of the Goldman Sachs Portfolios may be combined
under the Statement of Intention. See the Additional Statement for more
information about the Statement of Intention.

OFFERING PRICE -- CLASS B SHARES

Investors may purchase Class B shares of the Government Income, Municipal
Income and Global Income Funds at the next determined net asset value without
the imposition of an initial sales charge. However, Class B shares redeemed
within six years of purchase will be subject to a CDSC at the rates shown in
the table that follows. At redemption, the charge will be assessed on the
amount equal to the lesser of the current market value or the original
purchase cost of the shares being redeemed. No CDSC will be imposed on
increases in account value above the initial purchase price, including shares
derived from the reinvestment of dividends or capital gains distributions.

34
<PAGE>

The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a month will be aggregated and deemed to have been made on
the first day of that month. In processing redemptions of Class B shares, the
Funds will first redeem shares not subject to any CDSC, and then shares held
longest during the eight-year period. As a result, a redeeming shareholder
will pay the lowest possible CDSC.

<TABLE>
<CAPTION>
CDSC AS A
PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CDSC
---------- ---------------
<S> <C>
First.................................................... 5.0%
Second................................................... 4.0%
Third.................................................... 3.0%
Fourth................................................... 3.0%
Fifth.................................................... 2.0%
Sixth.................................................... 1.0%
Seventh and thereafter................................... none
</TABLE>

Proceeds from the CDSC are payable to the Distributor and may be used in
whole or part to defray the Distributor's expenses related to providing
distribution-related services to the Funds in connection with the sale of
Class B shares, including the payment of compensation to Authorized Dealers. A
commission equal to 4.00% of the amount invested is paid to Authorized
Dealers.

Class B shares of a Fund will automatically convert into Class A shares of
the same Fund at the end of the calendar quarter that is eight years after the
purchase date, except as noted below. Class B shares of a Fund acquired by
exchange from Class B shares of another Fund will convert into Class A shares
of such Fund based on the date of the initial purchase. Class B shares
acquired through reinvestment of distributions will convert into Class A
shares based on the date of the initial purchase of the shares on which the
distribution was paid. The conversion of Class B shares to Class A shares is
subject to the continuing availability of a ruling from the Internal Revenue
Service, for which the Funds will apply, or an opinion of counsel that such
conversions will not constitute taxable events for Federal tax purposes. There
can be no assurance that such ruling or opinion will be available. The
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available and, therefore, Class B shares would continue to
be subject to higher expenses than Class A shares for an indeterminate period.

WAIVER OR REDUCTION OF CONTINGENT DEFERRED SALES CHARGE. The CDSC on Class B
shares and Class A shares that are subject to a CDSC may be waived or reduced
if the redemption results from the death or disability (as defined in Section
72 of the Code) of a shareholder if the redemption is made within one year of
such event. In addition, Class B shares subject to a Systematic Withdrawal
Plan may be redeemed without a CDSC. However, Goldman Sachs reserves the right
to limit such redemptions, on an annual basis, to 12% of the value of your
Class B shares.

SHAREHOLDER SERVICES AVAILABLE TO SHAREHOLDERS

AUTOMATIC INVESTMENT PLAN

Systematic cash investments may be made through a shareholder's bank via the
Automated Clearing House Network or a shareholder's checking account via bank
draft each month. Required forms are available from Goldman Sachs or any
Authorized Dealer.

35
<PAGE>

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS AND AUTOMATIC EXCHANGE
PROGRAM

A shareholder may elect to cross-reinvest dividends and capital gain
distributions paid by a Fund in shares of the same class or an equivalent
class of any other Goldman Sachs Portfolio or ILA Portfolio. See "Fund
Highlights". Shareholders may also elect to exchange automatically a specified
dollar amount of shares of a Fund for shares of the same class or an
equivalent class of any other Goldman Sachs Portfolio or ILA Portfolio. Shares
acquired through cross-reinvestment of dividends or the automatic exchange
program will be purchased at net asset value and will not be subject to any
initial or contingent deferred sales charge as a result of the cross-
reinvestment or exchange, but shares subject to a CDSC acquired under the
automatic exchange program may be subject to a CDSC at the time of redemption
from the Fund into which the exchange is made determined on the basis of the
date and value of the investors initial purchase of the fund from which the
exchange (or any prior exchange) is made. Automatic exchanges are made monthly
on the fifteenth day of each month or the first Business Day thereafter. The
minimum dollar amount for automatic exchanges must be at least $50 per month.
Cross-reinvestments and automatic exchanges are subject to the following
conditions: (i) the value of the shareholder's account(s) in the fund which is
paying the dividend or from which the automatic exchange is being made must
equal or exceed $10,000 and (ii) the value of the account in the acquired fund
must equal or exceed the acquired fund's minimum initial investment
requirement or the shareholder must elect to continue cross- reinvestment or
automatic exchanges until the value of acquired fund shares in the
shareholder's account equals or exceeds the acquired fund's minimum initial
investment requirement. A Fund shareholder may elect cross-reinvestment into
an identical account or an account registered in a different name or with a
different address, social security or other taxpayer identification number,
provided that the account in the acquired fund has been established,
appropriate signatures have been obtained and the minimum initial investment
requirement has been satisfied. A Fund shareholder should obtain and read the
prospectus of the Fund into which dividends are invested or automatic
exchanges are made.

TAX-SHELTERED RETIREMENT PLANS

The Funds (other than the Municipal Income Fund) offer their shares for
purchase by retirement plans, including IRA Plans for individuals and their
non-employed spouses and defined contribution plans such as 401(k) Salary
Reduction Plans. Detailed information concerning these plans and copies of the
plans may be obtained from the Transfer Agent. This information should be read
carefully, and consultation with an attorney or tax adviser may be advisable.
The information sets forth the service fee charged for retirement plans and
describes the federal income tax consequences of establishing a plan. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares of the same class of the Fund or, if so directed by the
shareholder, in cash or in shares of the same or an equivalent class of any
other Goldman Sachs Portfolio or ILA Portfolio.

EXCHANGE PRIVILEGE

Shares of a Fund may be exchanged at net asset value without the imposition
of an initial or contingent deferred sales charge at the time of exchange for
shares of the same class or an equivalent class of any other Fund, Goldman
Sachs Portfolio or ILA Portfolio. A shareholder needs to obtain and read the
prospectus of the fund into which the exchange is made. The shares or units of
these other funds acquired by an exchange may later be exchanged for shares of
the same (or an equivalent class) of the original Fund at the next determined
net asset value without the imposition of an initial or contingent deferred
sales charge if the dollar amount in the Fund resulting from such exchanges is
below the shareholder's all-time highest dollar amount on which it has
previously paid a sales charge. Shares or units of these other funds purchased
through dividends and/or capital

36
<PAGE>

gains reinvestment may be exchanged for shares of the Funds without a sales
charge. In addition to free automatic exchanges pursuant to the Automatic
Exchange Program, six free exchanges are permitted in each twelve-month
period. A fee of $12.50 may be charged for each subsequent exchange during
such period. The exchange privilege may be modified or withdrawn at any time
upon sixty (60) days' notice to shareholders and is subject to certain
limitations.

An exchange of shares subject to a CDSC will not be subject to the
applicable CDSC at the time of exchange. Shares subject to a CDSC acquired in
an exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
a shareholder had owned shares will be measured from the date the shareholder
acquired the original shares subject to a CDSC and will not be affected by any
subsequent exchange.

An exchange may be made by identifying the applicable Fund and class of
shares and either writing to Goldman Sachs, Attention: Goldman Sachs Trust,
Shareholder Services, c/o NFDS, P.O. Box 419711, Kansas City, MO 64141-6711
or, if previously elected in the Fund's Account Application, by telephone at
800-526-7384 (8:00 a.m. to 3:00 p.m. Chicago time). Certain procedures are
employed to prevent unauthorized or fraudulent exchange requests as set forth
under "How to Sell Shares of the Funds". Under the telephone exchange
privilege, shares may be exchanged among accounts with different names,
addresses and social security or other taxpayer identification numbers only if
the exchange request is in writing and is received in accordance with the
procedures set forth under "How to Sell Shares of the Funds". In times of
drastic economic or market changes the telephone exchange privilege may be
difficult to implement.

For federal income tax purposes, an exchange, including an automatic
exchange, is treated as a sale of the shares surrendered in the exchange, on
which an investor may realize a gain or loss, followed by a purchase of shares
or units received in the exchange. If such sale occurs within ninety (90) days
after the purchase of such shares, to the extent an initial sales charge that
would otherwise apply to the shares or units received in the exchange is not
imposed, the sales charge paid on such purchase of Class A shares cannot be
taken into account by the exchanging shareholder for purposes of determining
gain or loss realized on such sale for federal income tax purposes, but
instead will be added to the tax basis of the shares or units received in the
exchange. Shareholders should consult their own tax advisers concerning the
tax consequences of an exchange.

All exchanges which represent an initial investment in a Fund must satisfy
the minimum investment requirements of the Fund into which the shares are
being exchanged. Exchanges are available only in states where exchanges may
legally be made.

OTHER PURCHASE INFORMATION

If shares of a Fund are held in a "street name" account or were purchased
through an Authorized Dealer, shareholders should contact the Authorized
Dealer to purchase, redeem or exchange shares, to make changes in or give
instructions concerning the account or to obtain information about the
account. Authorized Dealers who receive a portion of the sales charge
applicable to the purchase of Class A or Class B shares, will not be permitted
to impose any other fees on the shareholders in connection with the purchase
of such shares.

The Funds 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 Funds or Goldman
Sachs may reject or restrict purchases or exchanges of shares by a particular
purchaser or group, for example, when a pattern of frequent purchases and
sales of shares of a Fund is evident, or if the

37
<PAGE>

purchase and sale or exchange orders are, or a subsequent abrupt redemption
might be, of a size that would disrupt management of a Fund. Goldman Sachs
reserves the right to limit the participation in the Fund of its partners and
employees.

In addition to concessions allowed to Authorized Dealers, Goldman Sachs may,
from time to time, assist Authorized Dealers by, among other things, providing
sales literature to and holding informational programs for the benefit of
Authorized Dealers' registered representatives. Authorized Dealers may limit
the participation of registered representatives in such informational programs
by means of sales incentive programs which may require the sale of minimum
dollar amounts of shares of the Goldman Sachs Portfolios. Goldman Sachs may
also provide additional promotional incentives to Authorized Dealers in
connection with sales of shares of the Goldman Sachs Portfolios. These
incentives may include payment for travel expenses, including lodging,
incurred in connection with trips taken by qualified registered
representatives and members of their families within or without the United
States. Incentive payments will be provided for out of the sales charge and
distribution fees or out of Goldman Sachs' other resources. Other than sales
charges and distribution fees, a Fund and its shareholders do not bear
distribution expenses. An Authorized Dealer receiving such incentives may be
deemed to be an underwriter under the 1933 Act. In some instances, such
incentives may be made available only to certain Authorized Dealers whose
representatives have sold or are expected to sell significant amounts of
shares.

DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS

DISTRIBUTION PLAN -- CLASS A SHARES

The Trust, on behalf of each Fund's Class A shares, has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Act (the "Class A
Distribution Plan"). Under the Class A Distribution Plan, Goldman Sachs is
entitled to a quarterly fee from each Fund for distribution services equal, on
an annual basis, to 0.25% of a Fund's average daily net assets attributable to
Class A shares of such Fund. Currently, Goldman Sachs has voluntarily agreed
to waive the entire amount of such fee for the Adjustable Rate Government,
Government Income and Municipal Income Funds and to limit the amount of such
fee to 0.21% of average daily net assets attributable to Class A shares of the
Global Income Fund. Goldman Sachs has no current intention of modifying or
discontinuing such waiver, but may do so in the future at its discretion. For
the period ended October 31, 1995, the Global Income Fund paid Goldman Sachs a
fee at the rate of 0.25% of the Fund's average daily net assets attributable
to Class A shares of such Fund.

Goldman Sachs may use the distribution fee for its expenses of distributing
Class A shares of the Funds. The types of expenses for which Goldman Sachs may
be compensated for distribution services under theClass A Distribution Plan
include compensation paid to and expenses incurred by Authorized Dealers,
Goldman Sachs and their respective officers, employees and sales
representatives, allocable overhead, telephone and travel expenses, the
printing of prospectuses for prospective shareholders, preparation and
distribution of sales literature, advertising of any type and all other
expenses incurred in connection with activities primarily intended to result
in the sale of Class A shares. If the fee received by Goldman Sachs pursuant
to the Class A Distribution Plan exceeds its expenses, Goldman Sachs may
realize a profit from these arrangements. The Class A Distribution Plan will
be reviewed and is subject to approval annually by the Board of Trustees of
the Trust. The aggregate compensation that may be received under the Class A
Distribution Plan for distribution services may not exceed the limitations
imposed by the NASD's Rules of Fair Practice.

38
<PAGE>

DISTRIBUTION PLAN -- CLASS B SHARES

The Trust, on behalf of each Fund's Class B shares (other than the
Adjustable Rate Government Fund which does not offer Class B shares), has
adopted a Distribution Plan pursuant to Rule 12b-1 under the Act (the "Class B
Distribution Plan"). Under the Class B Distribution Plan, Goldman Sachs is
entitled to a quarterly fee from each Fund for distribution services equal, on
an annual basis, to 0.75% of a Fund's average daily net assets attributable to
Class B shares of such Fund.

Goldman Sachs may use the distribution fee for its expenses of distributing
of Class B shares of the Funds. The types of expenses for which Goldman Sachs
may be compensated for distribution services under the Class B Distribution
Plan include compensation paid to and expenses incurred by Authorized Dealers,
Goldman Sachs and their respective officers, employees and sales
representatives, commissions paid to Authorized Dealers, allocable overhead,
telephone and travel expenses, the printing of prospectuses for prospective
shareholders, preparation and distribution of sales literature, advertising of
any type and all other expenses incurred in connection with activities
primarily intended to result in the sale of Class B shares. If the fee
received by Goldman Sachs pursuant to the Class B Distribution Plan exceeds
its expenses, Goldman Sachs may realize a profit from these arrangements. The
Class B Distribution Plan will be reviewed and is subject to approval annually
by the Board of Trustees of the Trust. The aggregate compensation that may be
received under the Class B Distribution Plan for distribution services may not
exceed the limitations imposed by the NASD's Rules of Fair Practice.

AUTHORIZED DEALER SERVICE PLANS

The Trust on behalf of each Fund's Class A and Class B shares has adopted
non-Rule 12b-1 Authorized Dealer Service Plans (each a "Service Plan")
pursuant to which Goldman Sachs and Authorized Dealers are compensated for
providing personal and account maintenance services. Each Fund pays a fee
under its Class A or Class B Service Plan equal on an annual basis to 0.25% of
its average daily net assets attributable to Class A or Class B shares. The
fee for personal and account maintenance services paid pursuant to a Service
Plan may be used to make payments to Goldman Sachs, Authorized Dealers and
their officers, sales representatives and employees for responding to
inquiries of, and furnishing assistance to, shareholders regarding ownership
of their shares or their accounts or similar services not otherwise provided
on behalf of the Funds. The Service Plans will be reviewed and are subject to
approval annually by the Board of Trustees. For the period ended October 31,
1995, each Fund paid Authorized Dealer Service Fees at the foregoing rate for
each Funds' Class A shares.

HOW TO SELL SHARES OF THE FUNDS

Each Fund will redeem its shares upon request of a shareholder on any
Business Day at the net asset value next determined after the receipt of such
request in proper form, subject to any applicable contingent deferred sales
charge. See "Net Asset Value". Redemption proceeds will be mailed by check to
a shareholder within three (3) Business Days of receipt of a properly executed
request. If shares to be redeemed were recently purchased by check, a 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 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 back cover page of this Prospectus or an Authorized Dealer.

39
<PAGE>

A shareholder may request redemptions by telephone if the optional telephone
redemption privilege is elected on the Account Application. 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 and exchange requests by telephone, Goldman Sachs and NFDS each
employ reasonable procedures specified by the Trust to confirm that such
instructions are genuine. Consequently, proceeds of telephone redemption
requests will be sent only to the shareholder's address of record or
authorized bank account designated in the Account Application and exchanges of
shares will be made only to an identical account. Telephone requests will also
be recorded. The Trust may implement other procedures from time to time. If
reasonable procedures are not implemented, the Trust may be liable for any
loss due to unauthorized or fraudulent transactions. In all other cases,
neither a Fund, the Trust nor Goldman Sachs will be responsible for the
authenticity of instructions received by telephone. Proceeds of telephone
redemptions will be mailed to the shareholder's address of record or wired to
the authorized bank account indicated on the Account Application, unless the
shareholder provides written instructions (accompanied by a signature
guarantee) indicating another address. Shares of the Adjustable Rate
Government Fund, Government Income Fund and Municipal Income Fund earn
dividends accrued through the day on which such shares are redeemed.

Written requests for redemptions must be signed by each shareholder with its
signature guaranteed by a bank, a securities broker or dealer, a credit union
having authority to issue signature guarantees, a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association, a national securities exchange, a registered
securities association or a clearing agency, provided that such institution
satisfies the standards established by the Transfer Agent.

The Funds will also arrange for the proceeds of redemptions effected by any
means to be wired as Federal Funds to the bank account designated in the
shareholder's Account Application. Redemption proceeds will normally be wired
on the next Business Day in Federal Funds (for a total one Business Day delay)
following receipt of a properly executed wire transfer redemption request.
Wiring of redemption proceeds may be delayed one additional Business Day if
the Federal Reserve Bank is closed on the day redemption proceeds would
ordinarily be wired. A transaction fee of $7.50 may be charged for payments of
redemption proceeds by wire. In order to change the bank designated on the
Account Application to receive redemption proceeds, a written request must be
received by the Transfer Agent. This request must be signature guaranteed as
set forth above. Further documentation may be required for executors, trustees
or corporations. Once wire transfer instructions have been given by Goldman
Sachs or an Authorized Dealer, neither a Fund, the Trust, Goldman Sachs nor
any Authorized Dealer assumes any further responsibility for the performance
of intermediaries or the shareholder's bank in the transfer process. If a
problem with such performance arises, the shareholder should deal directly
with such intermediaries or bank.

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

40
<PAGE>

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may draw on shareholdings systematically via check or ACH in
any amount specified by the shareholder over $50. Checks are only available on
or about the 25th of each month. Each systematic withdrawal is a sale for tax
purposes. A minimum balance of $5,000 in shares of a Fund is required. The
maintenance of a withdrawal plan concurrently with purchases of additional
Class A or Class B shares would be disadvantageous because of the sales charge
imposed on your purchases of Class A shares or the imposition of a CDSC on
your redemptions of Class A and Class B shares. The CDSC applicable to Class B
shares redeemed under a systematic withdrawal plan may be waived. See "How to
Invest--Waiver or Reduction of Contingent Deferred Sales Charge". See
Additional Statement for more information about the Systematic Withdrawal
Plan.

DIVIDENDS

Each dividend and capital gains distribution, if any, declared by a Fund on
its outstanding shares will, at the election of each shareholder, be paid (i)
in cash, (ii) in additional shares of the same class of the Fund or (iii) in
shares of the same or an equivalent class of any of the Goldman Sachs
Portfolios or units of the ILA Portfolios (the Prime Obligations Portfolio
only for Class B) as described under "Cross-Reinvestment of Dividends and
Distributions and Automatic Exchange Program". This election should initially
be made on a shareholder's Account Application and may be changed upon written
notice to Goldman Sachs at any time prior to the record date for a particular
dividend or distribution. If no election is made, all dividends and capital
gains distributions will be reinvested in the Fund. Capital gains
distributions will be reinvested or paid in cash, in accordance with the
shareholder's prior election, on the payment date.

The election to reinvest dividends and distributions paid by the Fund in
additional shares or units of the Fund or any other Goldman Sachs Portfolio or
ILA Portfolio will not affect the tax treatment of such dividends and
distributions, which will be treated as received by the shareholder and then
used to purchase shares or units of the Fund, another Goldman Sachs Portfolio
or an ILA Portfolio.

Each Fund intends that all or substantially all of its net investment income
and net realized long-term and short-term capital gains, after reduction by
available capital losses, including any capital losses carried forward from
prior years, will be declared as dividends for each taxable year. In the case
of Global Income Fund, net loss, if any, from certain foreign currency
transactions or instruments that is otherwise taken into account in
calculating net investment income or net realized capital gains for accounting
purposes may not be taken into account in determining the amount of monthly
dividends to be declared and paid, with the result that a portion of the
Fund's dividends may be treated as a return of capital, nontaxable to the
extent of a shareholder's tax basis in his shares. The Adjustable Rate
Government, Government Income and Municipal Income Funds will declare
dividends daily and pay dividends monthly. The Global Income Fund will declare
and pay dividends monthly. All of the Funds will pay dividends from net
realized long-term and short-term capital gains, reduced by available capital
losses, at least annually. From time to time a portion of any Fund's dividends
may constitute a return of capital.

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

41
<PAGE>

NET ASSET VALUE

The net asset value per share of each class of a Fund is calculated by the
Fund's custodian as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. New York time) on each Business Day (as such term
is defined under "Additional Information") immediately after the
determination, if any, of the income to be declared as a dividend (except in
the case of Global Income Fund). 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.

Each Fund's portfolio securities for which accurate market quotations are
readily available are valued on the basis of quotations, which may be
furnished by a pricing service or provided by dealers in such securities and
other portfolio securities 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. 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 each Fund may publish yield, distribution rate and average
annual total return and the Municipal Income Fund may publish its tax
equivalent yield in advertisements and communications to shareholders or
prospective investors. Average annual total return is determined by computing
the average annual percentage change in value of $1,000 invested at the
maximum public offering price for specified periods ending with the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The total return calculation assumes a
complete redemption of the investment at the end of the relevant period. Total
return calculations for Class A shares reflect the effect of paying the
maximum initial sales charge. Investment at a lower sales charge would result
in higher performance figures. Total return calculations for Class B shares
reflect deduction of the applicable CDSC imposed upon redemption of Class B
shares held for the applicable period. Each Fund may also from time to time
advertise total return on a cumulative, average, year-by-year or other basis
for various specified periods by means of quotations, charts, graphs or
schedules. In addition, each Fund may furnish total return calculations based
on investments at various sales charge levels or at net asset value. Any
performance data which is based on a Fund's net asset value per share would be
reduced if a sales charge were taken into account. In addition to the above,
each Fund may from time to time advertise its performance relative to certain
performance rankings and indices.

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

Tax equivalent yield represents the yield an investor would have to earn to
equal, after taxes, the Municipal Income Fund's tax-free yield. Tax equivalent
yield is calculated by dividing the Municipal Income Fund's tax-exempt yield
by one minus a stated federal and/or state tax rate.

42
<PAGE>

Quotations of distribution rates are calculated by annualizing the most
recent distribution of net investment income for a monthly, quarterly or other
relevant period and dividing this amount by the net asset value per share or
maximum public offering price on the last day of the period for which the
distribution rates are being calculated.

Each Fund's 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 for the same period
will differ. The investment performance of the Class A and Class B shares will
be affected by the payment of a sales charge and distribution fees. See
"Shares of the Trust" below.

The investment results of a 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 Funds may, in their discretion, from time to time,
make a list of their holdings available to investors upon request.

SHARES OF THE TRUST

Each Fund is a series of the 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 to create and classify shares of beneficial interest in
separate series, without further action by shareholders. Additional series may
be added in the future. The Trustees have authorization to classify or
reclassify any series or portfolio of shares into one or more classes. The
Adjustable Rate Government Fund offers Institutional Shares, Administration
Shares, Service Shares and Class A shares. The Government Income and Municipal
Income Funds offer Class A and Class B shares. The Global Income Fund offers
Institutional Shares, Service Shares, Class A shares and Class B shares.

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 applicable 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.

Unless otherwise required by the Act, ordinarily it will not be necessary
for the Trust to hold annual meetings of shareholders. As a result,
shareholders may not consider each year the election of Trustees or the
appointment of independent accountants. Shareholders may remove a Trustee by
the affirmative vote of at least two-thirds of the Trust's outstanding shares
and the Trustees must promptly call a meeting for such purpose when requested
to do so in writing by the record holders of not less than 10% of the
outstanding shares 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.

43
<PAGE>

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

Under Massachusetts law, there exists 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.

TAXATION

FEDERAL TAXES

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

The Municipal Income Fund intends to satisfy certain requirements of the
Code so that it may distribute the tax-exempt interest it receives as "exempt-
interest dividends," as defined in the Code. If such requirements are
satisfied, distributions of the Municipal Income Fund that are attributable to
interest on tax-exempt obligations and that the Fund properly designates as
exempt-interest dividends will be exempt from regular federal income tax,
although all or a portion of such a distribution may be subject to the federal
alternative minimum tax and the entire distribution may be includable in the
tax base for determining taxability of social security or railroad retirement
benefits. Persons who are "substantial users" (or related persons to such
substantial users) of facilities financed by industrial development or certain
private activity bonds should consult their own tax advisers before purchasing
shares of the Municipal Income Fund. Interest on indebtedness incurred or
continued to purchase or carry shares of the Municipal Income Fund is not
deductible to the extent attributable to the Municipal Income Fund's
distributions that are exempt-interest dividends.

Dividends paid by a Fund from taxable net investment income, certain net
realized foreign exchange gains, the excess of net short-term capital gain
over net long-term capital loss and original issue discount (except tax-exempt
original issue discount earned by the Municipal Income Fund) or market
discount income will be taxable to shareholders as ordinary income. Dividends
paid by a 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 a 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 Funds for federal income tax purposes.

44
<PAGE>

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 other than a daily dividend will pay a per
share price that includes the value of the anticipated distribution and will
be taxed on any taxable distribution even though the distribution represents a
return of a portion of the purchase price.

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

Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on taxable distributions, redemptions
and exchanges if they fail to furnish their correct taxpayer identification
number and certain certifications requested by the Internal Revenue Service 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 Funds.

The Global Income Fund may be subject to foreign withholding or other
foreign taxes on income or gain from certain foreign securities. If more than
50% of the value of its total assets is comprised of stock or securities of
foreign corporations at the end of its taxable year and the Global Income Fund
so elects, shareholders will include in their gross incomes (in addition to
dividends they receive) their pro rata shares of qualified foreign taxes paid
by the Global Income Fund and may be entitled to take federal income tax
credits or deductions with respect to such taxes. If the Fund cannot or does
not so elect, it may deduct these taxes in computing its taxable income, if
any.

OTHER TAXES

In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from the Funds. A state income (and
possibly local income and/or intangible property) tax exemption is generally
available to the extent (if any) a Fund's distributions are derived from
interest on (or, in the case of intangibles taxes, the value of its assets is
attributable to) certain U.S. Government obligations and/or tax-exempt
municipal obligations issued by or on behalf of the particular state or a
political subdivision thereof, provided in some states that certain thresholds
for holdings of such obligations and/or reporting requirements are satisfied.
For a further discussion of certain tax consequences of investing in shares of
the Funds, see "Taxation" in the Additional Statement. Shareholders are urged
to consult their own tax advisers regarding specific questions as to federal,
state and local taxes as well as to any foreign taxes.

ADDITIONAL INFORMATION

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

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

45
<PAGE>

APPENDIX

STATEMENT OF INTENTION
(APPLICABLE ONLY TO CLASS A SHARES PURCHASED SUBJECT TO A SALES CHARGE)

If a shareholder anticipates purchasing $100,000 ($500,000 in the case of
Adjustable Rate Government Fund) or more of Class A shares of a Fund alone or
in combination with Class A shares of another Fund or another Goldman Sachs
Portfolio within a 13-month period, the shareholder may obtain Class A shares
of the Fund at the same reduced sales charge as though the total quantity were
invested in one lump sum by filing this Statement of Intention incorporated by
reference in the Account Application. Income dividends and capital gain
distributions taken in additional shares will apply toward the completion of
this Statement of Intention.

To ensure that the reduced price will be received on future purchases, the
investor must inform Goldman, Sachs & Co. that this Statement of Intention is
in effect each time shares are purchased. Subject to the conditions mentioned
below, each purchase will be made at the public offering price applicable to a
single transaction of the dollar amount specified on the Account Application.
The investor makes no commitment to purchase additional shares, but if his
purchases within 13 months plus the value of shares credited toward completion
do not total the sum specified, he will pay the increased amount of the sales
charge prescribed in the Escrow Agreement.

ESCROW AGREEMENT

Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the Account Application shall be held in escrow by
the Transfer Agent in the form of shares registered in the investor's name.
All income dividends and capital gains distributions on escrowed shares will
be paid to the investor or to his order. When the minimum investment so
specified is completed (either prior to or by the end of the thirteenth
month), the shareholder will be notified and the escrowed shares will be
released. In signing the Account Application, the investor irrevocably
constitutes and appoints the Transfer Agent his attorney to surrender for
redemption any or all escrowed shares with full power of substitution in the
premises.

If the intended investment is not completed, the investor will be asked to
remit to Goldman, Sachs & Co. any difference between the sales charge on the
amount specified and on the amount actually attained. If the investor does not
within 20 days after written request by Goldman, Sachs & Co. pay such
difference in the sales charge, the Transfer Agent will redeem an appropriate
number of the escrowed shares in order to realize such difference. Shares
remaining after any such redemption will be released by the Transfer Agent.

46
<PAGE>

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

SEND TO: THE GOLDMAN SACHS PORTFOLIOS
ACCOUNT APPLICATION C/O NFDS
PLEASE PRINT OR TYPE ALL INFORMATION P.O. BOX 419711
ANY QUESTIONS? CALL GSAM AT: KANSAS CITY, MO 64141-6711
1-800-526-7384

I. FUND SELECTION (MINIMUM $1,500 PER FUND)

<TABLE>
<CAPTION>
CLASS A CLASS B
FUND NAME (AND CODE A/B) AMOUNT AMOUNT
- ------------------------ ------- -------
<S> <C> <C>
[_] Asia Growth Fund (880/980) $ $
[_] Balanced Fund (070/970) $ $
[_] Capital Growth Fund (807/907) $ $
[_] Growth & Income Fund (814/914) $ $
[_] International Equity Fund (815/915) $ $
[_] Select Equity Fund (817/917) $ $
[_] Small Cap Equity Fund (819/919) $ $
</TABLE>

<TABLE>
<CAPTION>
CLASS A CLASS B
FUND NAME (AND CODE A/B) AMOUNT AMOUNT
------------------------ ------- -------
<S> <C> <C>
[_] Adjustable Rate Government Fund (677) $ N/A
[_] Global Income Fund (818/918) $ $
[_] Government Income Fund (812/912) $ $
[_] Municipal Income Fund (816/916) $ $
[_] ILA-Prime Obligations Portfolio-C
(806/906)* $ $
[_] ILA-Tax-Exempt Diversified Portfolio-C
(820)* $ N/A
[_] Other: $ $
</TABLE>

* Minimum $10,000 or transfer balance of existing fund

A check in the amount of $ is enclosed. By signing this application I
acknowledge that Class B shares and certain purchases of $1 million or more of
Class A shares will be subject to a Contingent Deferred Sales Charge on
Redemption. If not otherwise indicated, purchases will default to Class A
shares.

If your order was placed through a broker, insert the order number here:
and the date of order here:
- ---------------- ------------
If you are exempt from sales charges, check here [_]. By checking this box I
certify that I am exempt from the sales charge in accordance with the terms of
the applicable Fund's prospectus and I agree to notify Goldman, Sachs & Co. at
or prior to purchase if I am no longer eligible for exemption. Reason for
Exemption:
---------------------------------------------------------------

II. ACCOUNT REGISTRATION (CHECK ONE) AND MAILING ADDRESS
[_] INDIVIDUAL

__________________________________ ___________________________
First Middle Last Social Security Number

- --------------------------------------------------------------------------------
[_] MULTIPLE OWNERS
(INCLUDING SPOUSES)
(as Joint Tenants
with Rights of
Survivorship)

__________________________________ ___________________________
First Middle Last Social Security Number

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

[_] GIFT/TRANSFER TO MINOR

_________________________________
Name of Custodian

_________________________________ ___________________________
Name of Minor Social Security Number of
Minor

Under the Uniform Gift/Transfer to Minors Act
---------------- ------
State of Minor's Residence Birthdate of Minor

- --------------------------------------------------------------------------------
[_] CORPORATION,
TRUST OR
OTHER ENTITY

_________________________________ ___________________________
Name of Corporation, Trust or Other Federal Tax I.D. Number
Entity

_________________________________ ___________________________
Date of Trust Instrument Name of Trustee (If to be
included in
account registration)
_________________________________
Name of Beneficiary (If to be included
in account registration)
- --------------------------------------------------------------------------------
MAILING
ADDRESS

__________________________________________________________________
Street Address or Post Office Box

__________________________________________________________________
City State Zip Code
___________________________ _______________________
Attention (if applicable) Daytime Telephone Number
<PAGE>

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

III. DIVIDEND AND DISTRIBUTION ALTERNATIVES (CHECK ONE)
[_] All dividends and distributions to be reinvested in my account. (This
option will apply if no box is checked.)

[_] All dividends and distributions to be sent by check to me at the address in
"Account Registration."

[_] All dividend distributions to be sent to me by check at the address in
"Account Registration", short-term and long-term capital gains distributions
to be reinvested in my account.

[_] All dividends and distributions to be invested in another Goldman Sachs
Portfolio.
If so, insert name of Fund here:__________________________________________.
Insert name of account registration here:_____ and account number here:____.

[_] All distributions to be sent by check to a special payee (i.e., someone
other than you):

Name: ________________________________________________________________________

Street Address: ______________________________________________________________

City: __________________ State: _____________ Zip Code: ___

[_] All dividends and distributions to be directly deposited to the following
bank account: (ATTACH CHECK MARKED "VOID"):

Bank Name: __________________________________ Account Number: _______________

ABA Routing #: ______________________________

Street Address: _____________________________ Name on Account: ______________

City: __________________ State: _____________ Zip Code: _____________________

IV. RIGHT OF ACCUMULATION (OPTIONAL) CLASS A SHARES ONLY

If you previously purchased Class A shares of the Goldman Sachs Portfolios on
which you paid a sales charge, and when combined with this purchase the total
is $50,000 or more (in the case of equity funds) or $100,000 or more (in the
case of fixed income funds), you may qualify for a reduced sales charge on
this purchase. Purchases by (a) spouses and children, (b) fiduciaries as to a
single trust account, (c) persons affiliated with the same business enterprise
and (d) clients of Goldman Sachs' PCS Division as to affiliated accounts, may
qualify to be aggregated. See the Statement of Additional Information or call
Goldman Sachs for additional details. List below accounts which should be
aggregated for a right of accumulation. Attach an additional page if
necessary.

Name ____________________________ Name ____________________________

Fund ____________________________ Fund ____________________________

Acct No. ________________________ Acct No. ________________________

V. STATEMENT OF INTENTION (OPTIONAL) CLASS A SHARES ONLY

Although not obligated to do so, I intend to invest, over a 13-month period
from this date, in Class A shares of the Fund alone or in combination with
Class A shares of any other fund, on which sales charge was paid, which qualify
for a quantity discount as described in the accompanying Prospectus, in an
amount that will equal or exceed the amount circled below. I agree to the
Statement of Intention and Escrow Agreement in the Appendix to the accompanying
Prospectus and incorporated by reference herein. Circle one:

$50,000 $100,000 $250,000 $500,000 $1,000,000

VI. AUTOMATIC INVESTMENT PLAN (OPTIONAL)
I authorize State Street Bank, the custodian for the Fund(s), to debit the
amount requested below from my bank account for investment in the Fund(s)
beginning in (month) and periodically thereafter. I understand that my
participation in the Automatic Investment Plan is subject to the terms and
conditions of such plan as amended from time to time.
Check One: [_] Monthly [_] Quarterly Check One: [_] 5th of the month
[_] 15th of the month (applicable unless 5th checked)

_________________________________________ $________________________________
Amount of each investment
Name of Fund/Class (minimum $50)

X X
_______________________________ ________________________________________
Authorized Signature (as shown on bank Authorized Signature (if joint bank
records) account both sign)

_________________________________________ _________________________________
Bank Name Account Number

_________________________________________
Bank Street Address City State Zip Code

_________________________________________ _________________________________
ABA Routing # Name on Account
<PAGE>

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

VII.TELEPHONE EXCHANGE (CHECK IF APPLICABLE)
[_]I authorize Goldman, Sachs & Co. to accept and act upon telephone
instructions from myself or any other person for the exchange of shares of the
Fund(s) into any fund described in the accompanying prospectus. I understand
and agree that neither the Fund(s) nor Goldman, Sachs & Co. will be liable for
any loss, expense, or cost arising out of any telephone request effected
hereunder.

VIII.TELEPHONE REDEMPTIONS (OPTIONAL) (ATTACH VOIDED CHECK)
[_] Goldman, Sachs & Co. is hereby authorized to honor telephone, telegraphic,
or other instructions, without signature guarantee, from any person for the
redemption of shares for the above account, without an obligation on behalf of
Goldman, Sachs & Co., to verify that such person is the shareholder of record
or authorized to give redemption instructions, provided that the proceeds are
transmitted to the following bank account only or are mailed to me at the
address in "Account Registration". Absent its own gross negligence neither the
Fund(s) nor Goldman, Sachs & Co. shall be liable for such redemption or for
payments made to any unauthorized account.

________________________________________________________________________________
Bank Name ABA Routing #

________________________________________________________________________________
Bank Street Address City State Zip Code

_______________________________ _______________________________
Name(s) on Account Account Number

IX. AUTOMATIC EXCHANGES (OPTIONAL)
The originating Fund's balance must be at least $10,000 and the receiving
Fund's minimum investment must have been met prior to discontinuance.

I hereby authorize automatic exchanges of $ ______ (exact
dollars--$50 minimum):

Exchange from (Name of Fund) ____________________________

to (Name of Fund) _____________________________________

Account Name ____________________________________________

Account No. (if known) __________________________________

Please make exchanges on the 15th of the month (or next
business day) beginning the month of_______ Year________.

X. SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL) (ATTACH VOIDED CHECK)

Frequency of withdrawals (check one): [_] Monthly [_] Quarterly Make
payments via (check one): [_] check [_] ACH (Attach voided check.)
Payments made via check are withdrawn from your account on or about the 25th of
the month.

Please withdraw $ from my account on the of each month beginning in
------- -------
.*

* See Prospectus for circumstances in which contingent deferred sales charge is
waived in connection with systematic withdrawal plans.

Complete the following section if withdrawal payments are to be made via ACH.

_______________________________ _______________________________
Bank Name ABA Routing #

________________________________________________________________________________
Bank Street Address City State Zip Code
_______________________________ _______________________________
Name(s) on Account Account Number

Complete the following section if checks are to be paid to someone other than
registered owner(s).

________________________________________________________________________________
Name of check recipient

________________________________________________________________________________
Street Address City State Zip Code
<PAGE>

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

XI. CHECKWRITING PRIVILEGE FOR ILA ACCOUNTS (OPTIONAL)
[_]I have invested in the ILA-Prime Obligations Portfolio Service Units and/or
the ILA-Tax-Exempt Diversified Portfolio Service Units and would like an
application for checkwriting sent to me.

XII. SIGNATURE AND CERTIFICATION--ALL REGISTERED OWNERS MUST SIGN

You are required by law to provide the Fund with your correct Social Security
or other Taxpayer Identification Number (TIN). Failure to do so and to complete
this section may subject you to penalties and result in backup withholding of
31% of Fund distributions or other payments. If you have been notified by the
IRS that you are subject to backup withholding because you failed to report all
of your interest and/or dividend income and have not received IRS notice that
such withholding should cease, you must cross out item (2) in this section. If
you do not have but are applying for a TIN, write "Applied For" in the space
provided for your TIN and provide your TIN and required certifications within
60 days. Backup withholding could apply to payments relating to your account
prior to the Fund's receipt of your TIN and required certifications. If you are
an exempt recipient, please furnish your TIN and write "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others. If you are a nonresident alien or foreign
entity, write "NRA" after your signature and provide a completed Form W-8 to
the Fund in order to avoid backup withholding on certain payments. I certify
under penalties of perjury that: (1) The number shown on this form is my
correct TIN (or I am waiting for a number to be issued to me), and (2) I am not
subject to backup withholding because (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to report all interest
or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.

By the execution of this Account Application, the undersigned represents and
warrants that it has full right, power and authority to make the investment
applied for pursuant to this Application and is acting for itself or in some
fiduciary capacity in making such investment. THE UNDERSIGNED UNDERSTANDS THAT
NON-MONEY MARKET FUNDS DO NOT MAINTAIN A CONSTANT NET ASSET VALUE AND FURTHER
THAT A CONSTANT NET ASSET VALUE IN MONEY MARKET FUNDS IS NOT GUARANTEED. AS A
RESULT THE UNDERSIGNED MAY EXPERIENCE A LOSS OF PRINCIPAL ON ITS INVESTMENTS.
The undersigned affirms that it has received a current Prospectus for the Funds
and has reviewed the same.

X ___________________________________ X _______________________________
Signature of Owner, Custodian Date Signature of Co-Owner Date
or Officer

FOR DEALER USE ONLY

Investment dealer's signature is required for Systematic Withdrawal Plan
("SWP") or Statement of Intention. If an SWP is being opened, we believe that
the amount to be withdrawn is reasonable in light of the investor's
circumstances and we recommend establishment of the account.

________________________________________________________________________________
Name of Dealer Firm Home Office Location

________________________________________________________________________________
City State
Zip Code

________________________________________________________________________________
Branch Office Location Branch Number/Branch Phone

________________________________________________________________________________
Authorized Signature State
Zip Code

________________________________________________________________________________
Reg. Rep. Name Reg. Rep's Number
<PAGE>

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

GOLDMAN SACHS ASSET
MANAGEMENT
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004

GOLDMAN SACHS FUNDS
MANAGEMENT, L.P.
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004

GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
140 FLEET STREET
LONDON, ENGLAND EC4A 2BJ

GOLDMAN, SACHS & CO.
DISTRIBUTOR
85 BROAD STREET
NEW YORK, NEW YORK 10004

GOLDMAN, SACHS & CO.
TRANSFER AGENT
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606

TOLL FREE (IN U.S.) . . . . . . . . 800-526-7384

FIP-1AB-GST/100K/0396
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE GOLDMAN SACHS

FIXED INCOME

PORTFOLIOS

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

PROSPECTUS
CLASS A AND CLASS B
SHARES

[LOGO] Goldman
Sachs
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

- --------------------------------------------------------------------------------
PROSPECTUS
March 1, 1996

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights........................ 1
Fees and Expenses...................... 5
Financial Highlights................... 7
Investment Objectives and Policies..... 10
Description of Securities.............. 13
Risk Factors........................... 19
Investment Techniques.................. 21
Investment Restrictions................ 24
Portfolio Turnover..................... 24
Management............................. 25
Dividends.............................. 27
Net Asset Value........................ 28
Performance Information................ 28
Shares of the Trust.................... 29
Taxation............................... 30
Additional Information................. 31
Administration Plan.................... 32
Reports to Shareholders................ 32
Purchase of Administration Shares...... 33
Exchange Privilege..................... 34
Redemption of Administration Shares.... 34
</TABLE>

GOLDMAN SACHS TRUST
ADMINISTRATION SHARES

GS ADJUSTABLE RATE GOVERNMENT FUND

GS SHORT DURATION GOVERNMENT FUND

Seeks a high level of current income and
secondarily, in seeking current income,
may also consider the potential for cap-
ital gain. The Fund invests primarily in
securities issued or guaranteed by the
U.S. Government, its agencies, instru-
mentalities or sponsored enterprises.

GS SHORT DURATION TAX-FREE FUND

Seeks a high level of current income,
consistent with relatively low volatil-
ity of principal, that is exempt from
regular federal income tax. The Fund in-
vests primarily in municipal securities.

GS CORE FIXED INCOME FUND

Seeks a total return consisting of capi-
tal appreciation and income that exceeds
the total return of the Lehman Brothers
Aggregate Bond Index. The Fund invests
primarily in fixed income securities,
including securities issued or
guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored
enterprises, corporate securities, mort-
gage-backed securities and asset-backed
securities.

(continued on next page)
----------

(cover continued)

THE CORE FIXED INCOME FUND INVESTS IN SECURITIES OF FOREIGN ISSUERS AND
FOREIGN CURRENCIES THAT ENTAIL CERTAIN RISKS NOT CUSTOMARILY ASSOCIATED WITH
INVESTING IN DOLLAR-DENOMINATED FIXED INCOME SECURITIES. THIS FUND IS INTENDED
FOR INVESTORS WHO CAN ACCEPT THE RISKS ASSOCIATED WITH ITS INVESTMENTS AND MAY
NOT BE SUITABLE FOR ALL INVESTORS. SEE "DESCRIPTION OF SECURITIES".

THE ADJUSTABLE RATE GOVERNMENT AND SHORT DURATION GOVERNMENT FUNDS' NET
ASSET VALUE AND YIELD ARE NOT GUARANTEED BY THE U.S. GOVERNMENT OR BY ITS
AGENCIES, INSTRUMENTALITIES OR SPONSORED ENTERPRISES.

Goldman Sachs Funds Management, L.P. ("GSFM"), New York, New York, an
affiliate of Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment
adviser to the Adjustable Rate Government and Short Duration Government Funds.
Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman Sachs, serves as investment adviser to the Short
Duration Tax-Free and Core Fixed Income Funds. GSAM and GSFM are each referred
to in this Prospectus as the "Investment Adviser". Goldman Sachs serves as
each Fund's distributor and transfer agent.

This Prospectus provides information about Goldman Sachs Trust (the "Trust")
and the Funds that a prospective investor should understand before investing.
This Prospectus should be retained for future reference. A Statement of
Additional Information (the "Additional Statement"), dated March 1, 1996,
containing further information about the Trust and the Funds 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 institutions ("Service Organizations") that hold,
directly or through an agent, Administration Shares for the benefit of their
customers or Goldman Sachs by calling the telephone number, or writing to one
of the addresses, listed on the back cover of this Prospectus.
<PAGE>

FUND HIGHLIGHTS

The following is intended to highlight certain information contained in
this Prospectus and is qualified in its entirety by the more detailed
information contained herein.

WHAT IS THE GOLDMAN SACHS TRUST?

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS?

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

<TABLE>
<CAPTION>
ADJUSTABLE RATE SHORT DURATION
GOVERNMENT GOVERNMENT SHORT DURATION CORE FIXED
FUND FUND TAX-FREE FUND INCOME FUND
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT A high level of A high level of A high level of Total return
OBJECTIVES current income, current income, current income, consisting of
consistent with and secondarily, consistent with capital
low volatility of in seeking low volatility appreciation and
principal. current income, of principal, income that
may also that is exempt exceeds the
consider the from regular total return of
potential for federal income the Lehman
capital gain. tax. Brothers
Aggregate Bond
Index.
---------------------------------------------------------------------------------------------
DURATION Target = 6-month Target = 2-year Target = Lehman Target = Lehman
to 1-year U.S. Treasury Brothers 3-year Brothers
U.S. Treasury Security Municipal Bond Aggregate Bond
Security plus or minus .5 Index plus or Index plus or
years minus .5 years minus
1 year
Maximum = 2 years Maximum = 3 Maximum = 4 Maximum = 6
years years years
---------------------------------------------------------------------------------------------
APPROXIMATE INTEREST 9-month note 2-year bond 3-year bond 5-year bond
RATE
SENSITIVITY
---------------------------------------------------------------------------------------------
INVESTMENT SECTOR At least 65% of At least 65% of At least 80% of At least 65% of
total assets in total assets in net assets in assets in fixed
securities issued U.S. Government Municipal income
or guaranteed by Securities and Securities. securities,
the U.S. repurchase including U.S.
Government, its agreements Government
agencies, collateralized Securities,
instrumentalities by such corporate,
or sponsored securities. mortgage-backed
enterprises and asset-backed
("U.S. Government securities.
Securities") that
are adjustable
rate mortgage
pass-through
securities and
other mortgage
securities with
periodic interest
rate resets.
</TABLE>

1
<PAGE>

<TABLE>
<CAPTION>
ADJUSTABLE RATE SHORT DURATION
GOVERNMENT GOVERNMENT SHORT DURATION CORE FIXED
FUND FUND TAX-FREE FUND INCOME FUND
----------------- ---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
CREDIT QUALITY U.S. Government U.S. Government Minimum = A Minimum = BBB/Baa
Securities Securities
Minimum for
foreign
securities = AA/Aa
--------------------------------------------------------------------------------------------
OTHER INVESTMENTS Fixed rate Mortgage pass- U.S. Government Foreign fixed
mortgage pass- through securi- Securities and income, municipal
through ties and other repurchase and convertible
securities and securities rep- agreements securities,
repurchase resenting an in- collateralized foreign currencies
agreements terest in or by such and repurchase
collateralized collateralized securities. agreements
by U.S. by mortgage collateralized by
Government loans. U.S. Government
Securities. Securities.
--------------------------------------------------------------------------------------------
BENCHMARK 6-month and 1- 2-Year U.S Lehman Brothers Lehman Brothers
year U.S. Treasury 3-Year Municipal Aggregate Bond
Treasury Security Bond Index Index
Security
- ---------------------------------------------------------------------------------------------
</TABLE>

WHAT ARE THE RISK FACTORS AND SPECIAL CHARACTERISTICS THAT I SHOULD CONSIDER
BEFORE INVESTING?

Each Fund's share price will fluctuate with market, economic and, with
respect to the Core Fixed Income Fund, foreign exchange conditions, so that
an investment in any of the Funds may be worth more or less when redeemed
than when purchased. None of the Funds should be relied upon as a complete
investment program. There can be no assurance that a Fund's investment
objectives will be achieved. See "Risk Factors".

2
<PAGE>

WHO MANAGES THE FUNDS?

Goldman Sachs Funds Management, L.P., serves as the Investment Adviser to
the Adjustable Rate Government and Short Duration Government Funds. Goldman
Sachs Asset Management serves as the Investment Adviser to the Short
Duration Tax-Free and Core Fixed Income Funds. As of January 31, 1996, the
Investment Advisers, together with their affiliates, acted as investment
adviser, administrator or distributor for assets in excess of $57 billion.

WHO DISTRIBUTES THE FUNDS' SHARES?

Goldman Sachs acts as distributor of each Fund's Shares.

WHAT IS THE MINIMUM INVESTMENT?

HOW DO I PURCHASE ADMINISTRATION SHARES?

It is expected that all purchasers of Administration Shares of a Fund will
be Service Organizations or their nominees. Customers of Service
Organizations may invest in Administration Shares only through their Service
Organizations. Administration Shares of a Fund are purchased by Service
Organizations through Goldman Sachs at the current net asset value without
any sales load. See "Purchase of Administration Shares".

ADMINISTRATION PLAN. The Trust, on behalf of the Funds, has adopted an
Administration Plan with respect to the Administration Shares which
authorizes a Fund to compensate Service Organizations for providing account
administration services to their customers who are the beneficial owners of
such Shares. The Trust, on behalf of the Funds, will enter into agreements
with each Service Organization which will provide for compensation to the
Service Organization in an amount up to 0.25% (on an annualized basis) of
the average daily net assets of the Administration Shares of the Funds
attributable to or held in the name of the Service Organization for its
customers. See "Administration Plan".

3
<PAGE>

HOW DO I SELL MY ADMINISTRATION SHARES?

You may redeem Administration Shares upon request on any Business Day, as
defined under "Additional Information", at the net asset value next
determined after receipt of such request in proper form. See "Redemption of
Administration Shares".

HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?

<TABLE>
<CAPTION>
INVESTMENT
INCOME
DIVIDENDS
---------------- CAPITAL GAINS
FUND DECLARED PAID DISTRIBUTION
---- -------- ------- -------------
<S> <C> <C> <C>
Adjustable Rate Government .................... Daily Monthly Annually
Short Duration Government ..................... Daily Monthly Annually
Short Duration Tax-Free ....................... Daily Monthly Annually
Core Fixed Income ............................. Daily Monthly Annually
</TABLE>

Recordholders of Administration Shares may receive dividends in additional
shares of the same class of the Fund in which you have invested or you may
elect to receive cash, shares of the same class of other mutual funds
sponsored by Goldman Sachs or the corresponding class of any portfolio of
Goldman Sachs Money Market Trust. For further information concerning
dividends, see "Dividends".

4
<PAGE>

FEES AND EXPENSES
(ADMINISTRATION SHARES)

<TABLE>
<CAPTION>
ADJUSTABLE SHORT SHORT
RATE DURATION DURATION
GOVERNMENT GOVERNMENT TAX- CORE FIXED
FUND FUND FREE FUND INCOME FUND
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge Imposed
on Purchases................. none none none none
Maximum Sales Charge Imposed
on Reinvested Dividends...... none none none none
Redemption Fees............... none none none none
Exchange Fees................. none none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average
daily net assets)
Management Fees (after fee
adjustments)................. 0.40%/1/ 0.40%/2/ 0.40%/3/ 0.40%/4/
Administration Fees/5/........ 0.25% 0.25% 0.25% 0.25%
Other Expenses (after
applicable limitations)...... 0.05%/1/ 0.05%/2/ 0.05%/3/ 0.05%/4/
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES
(AFTER FEE AND EXPENSE
LIMITATIONS)................. 0.70%/1/ 0.70%/2/ 0.70%/3/ 0.70%/4/
==== ==== ==== ====
</TABLE>

EXAMPLE

You would pay the following expenses on a hypothetical $1,000 investment
assuming (i) a 5% annual return and (ii) redemption at the end of each time
period.

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Adjustable Rate Government...................... $ 7 $22 $39 $87
Short Duration Government....................... $ 7 $22 $39 $87
Short Duration Tax-Free......................... $ 7 $22 $39 $87
Core Fixed Income............................... $ 7 $22 $39 $87
</TABLE>
- --------

/1Based/upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed to reduce or limit certain "Other Expenses"
of Adjustable Rate Government Fund (excluding advisory fees, fees under
administration plans, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.05% of the Fund's average daily net assets. The Investment
Adviser has no current intention of modifying or discontinuing any of such
limitations but may do so in the future at its discretion. Without such
limitations, "Other Expenses" and "Total Operating Expenses" attributable to
Administration Shares would be 0.13% and 0.78%, respectively. Annual
operating expenses incurred by Administration Shares of the Fund during the
fiscal year ended October 31, 1995 (expressed as a percentage of average
daily net assets after fee adjustments) were "Management Fees", "Other
Expenses" and "Total Operating Expenses" of 0.40%, 0.06% and 0.71%,
respectively.

/2Based/upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed that a portion of its advisory fee (0.10% on
an annual basis) would not be imposed on Short Duration Government Fund. The
Investment Adviser also has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Fund (excluding advisory fees, fees under
administration plans, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.05% of the Fund's average daily net assets. The Investment
Adviser has no current intention of modifying or discontinuing any of such
limitations but may do so in the future at its discretion. Without such
limitations, "Management Fees", "Other Expenses" and "Total Operating
Expenses" attributable to Administration Shares would be 0.50%, 0.22% and
0.97%, respectively. Annual operating expenses incurred by Administration
Shares of the Fund during the fiscal year ended October 31, 1995 (expressed
as a percentage of average daily net

5
<PAGE>

assets after fee adjustments) were "Management Fees", "Other Expenses" and
"Total Operating Expenses" of 0.40%, 0.05% and 0.70%, respectively.

/3Based/upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed to reduce or limit certain "Other Expenses"
of Short Duration Tax-Free Fund (excluding advisory fees, fees under
administration plans, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.05% of the Fund's average daily net assets. The Investment
Adviser has no current intention of modifying or discontinuing any of such
limitations but may do so in the future at its discretion. Without such
limitations, "Other Expenses" and "Total Operating Expenses" attributable to
Administration Shares would be 0.37% and 1.02%, respectively. Annual
operating expenses incurred by Administration Shares of the Fund during the
fiscal year ended October 31, 1995 (expressed as a percentage of average
daily net assets after fee adjustments) were "Management Fees", "Other
Expenses" and "Total Operating Expenses" of 0.40%, 0.05% and 0.70%,
respectively.

/4Based/upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed to reduce or limit certain "Other Expenses"
of Core Fixed Income Fund (excluding advisory fees, fees under
administration plans, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.05% of the Fund's average daily net assets. The Investment
Adviser has no current intention of modifying or discontinuing any of such
limitations but may do so in the future at its discretion. Without such
limitations, "Other Expenses" and "Total Operating Expenses" attributable to
Administration Shares would be 0.56% and 1.21%, respectively. Annual
operating expenses which would have been incurred by Administration Shares
of the Fund had Administration Shares been outstanding, during the fiscal
year ended October 31, 1995 (expressed as a percentage of average daily net
assets after fee adjustments) were "Management Fees", "Other Expenses" and
"Total Operating Expenses" of 0.40%, 0.05% and 0.70%, respectively.

/5Service/Organizations (other than broker-dealers) may charge other fees to
their customers who are beneficial owners of Administration Shares in
connection with their customer accounts. See "Administration Plans".

The information set forth in the foregoing table and hypothetical example
relates only to Administration Shares of the Funds. Short Duration Government
Fund, Short Duration Tax-Free Fund and Core Fixed Income Fund also offer
Institutional Shares and Service Shares; Adjustable Rate Government Fund also
offers Institutional Shares, Service Shares and Class A Shares. The other
classes of the Funds are subject to different fees and expenses (which affects
performance), have different minimum investment requirements and are entitled
to different services. Information regarding any other class of the Funds may
be obtained from your sales representative or from Goldman Sachs by calling
the number on the back cover page of this Prospectus.

The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses of a Fund that an investor will bear directly
or indirectly. The information on fees and expenses included in the table and
the hypothetical example above are based on estimated fees and expenses for
the current fiscal year and should not be considered as representative of past
or future expenses. Actual fees and expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, a Fund's
actual performance will vary and may result in an actual return greater or
less than 5%. See "Management--Investment Advisers".

6
<PAGE>

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

INCOME (LOSS) FROM INVESTMENT OPERATIONS
---------------------------------------------------
NET REALIZED
AND NET
UNREALIZED REALIZED AND
GAIN (LOSS) UNREALIZED TOTAL
ON GAIN (LOSS) INCOME
NET ASSET INVESTMENT, ON FOREIGN (LOSS)
VALUE AT NET OPTION AND CURRENCY FROM
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS
---------- ------------ ---------- ------------- ----------

ADJUSTABLE RATE GOVERNMENT FUND
-------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Institutional
Shares.......... $ 9.74 $0.5630(c) $0.0717 (c) $-- $0.6347(c)
1995--Administration
Shares.......... 9.74 0.5366(c) 0.0737 (c) -- 0.6103(c)
1995--Class A
Shares (d)...... 9.79 0.2721(c) (0.0090)(c) -- 0.2631(c)
1994--Institutional
Shares.......... 10.00 0.4341(c) (0.2455)(c) -- 0.1886(c)
1994--Administration
Shares.......... 10.00 0.4211(c) (0.2572)(c) -- 0.1639(c)
1993--Institutional
Shares.......... 10.04 0.4397 (0.0376)(a) -- 0.4021
1993--Administration
Shares(f)....... 10.02 0.2146 (0.0173)(a) -- 0.1973
1992--Institutional
Shares.......... 10.03 0.5599 (0.0029)(a) -- 0.5570

FOR THE PERIOD JULY 17,
1991(g) THROUGH OCTOBER
31,
1991--Institutional
Shares.......... 10.00 0.1531 0.0322 (a) -- 0.1853

<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------
IN EXCESS
FROM NET OF NET
REALIZED REALIZED
GAIN ON GAIN ON
INVESTMENT, IN EXCESS INVESTMENT, FROM TOTAL
FROM NET OPTION AND OF NET OPTION AND PAID DISTRIBUTIONS
INVESTMENT FUTURES INVESTMENT FUTURES IN TO
INCOME TRANSACTIONS INCOME TRANSACTIONS CAPITAL SHAREHOLDERS
---------- ------------ ---------- ------------ ------- -------------
ADJUSTABLE RATE GOVERNMENT FUND
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Institutional
Shares.......... $(0.5759) $-- $(0.0287) $-- $-- $(0.6046)
1995--Administration
Shares.......... (0.5528) -- (0.0275) -- -- (0.5803)
1995--Class A
Shares (d)...... (0.2697) -- (0.0134) -- -- (0.2831)
1994--Institutional
Shares.......... (0.4486) -- -- -- -- (0.4486)
1994--Administration
Shares.......... (0.4239) -- -- -- -- (0.4239)
1993--Institutional
Shares.......... (0.4397) -- (0.0024) -- -- (0.4421)
1993--Administration
Shares(f)....... (0.2146) -- (0.0027) -- -- (0.2173)
1992--Institutional
Shares.......... (0.5470) -- -- -- -- (0.5470)

FOR THE PERIOD JULY 17,
1991(g) THROUGH OCTOBER
31,
1991--Institutional
Shares.......... (0.1553) -- -- -- -- (0.1553)

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-----------------------------
RATIO OF RATIO OF
NET NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS INVESTMENT
(DECREASE) NET ASSET NET INCOME AT END RATIO OF INCOME
IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF EXPENSES (LOSS)
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(b) NET ASSETS NET ASSETS RATE(j) (IN 000'S) NET ASSETS NET ASSETS
----------- ------- ------- ---------- ---------- -------- ----------- ---------- ----------
ADJUSTABLE RATE GOVERNMENT FUND
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Institutional
Shares.......... $0.0301 $ 9.77 6.75% 0.46% 5.77% 24.12% $ 657,358 0.53% 5.70%
1995--Administration
Shares.......... 0.0300 9.77 6.48 0.71 5.50 24.12 3,572 0.78 5.43
1995--Class A
Shares (d)...... (0.0200) 9.77 2.74 0.69(e) 5.87(e) 24.12 15,203 1.01(e) 5.55(e)
1994--Institutional
Shares.......... (0.2600) 9.74 1.88 0.46 4.38 37.81 942,523 0.49 4.35
1994--Administration
Shares.......... (0.2600) 9.74 1.63 0.71 4.27 37.81 6,960 0.74 4.24
1993--Institutional
Shares.......... (0.0400) 10.00 4.13 0.45 4.36 103.74 2,760,871 0.48 4.33
1993--Administration
Shares(f)....... (0.0200) 10.00 2.01(k) 0.70(e) 3.81(e) 103.74 5,326 0.73(e) 3.78(e)
1992--Institutional
Shares.......... 0.0100 10.04 6.12 0.42 5.61 286.40 2,145,064 0.55 5.48

FOR THE PERIOD JULY 17,
1991(g) THROUGH OCTOBER
31,
1991--Institutional
Shares.......... 0.0300 10.03 2.14(k) 0.20(e) 7.31(e) 145.67(e) 239,642 1.02(e) 6.49(e)
</TABLE>
7

<PAGE>

INCOME (LOSS) FROM INVESTMENT OPERATIONS
---------------------------------------------------
NET REALIZED
AND NET REALIZED
UNREALIZED AND
GAIN (LOSS) UNREALIZED
ON GAIN (LOSS) TOTAL
NET ASSET INVESTMENT, ON FOREIGN INCOME
VALUE AT NET OPTION AND CURRENCY (LOSS) FROM
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OEPRATIONS
------------ --------- ------------- ------------ ------------
SHORT DURATION GOVERNMENT FUND
------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--
Institutional
Shares.......... $ 9.64 $0.6652(c) $ 0.1666 (c) $-- $0.8318(c)
1995--Administration
Shares.......... 9.64 0.2384(c) (0.0433)(c) -- 0.1951(c)
1994--
Institutional
Shares.......... 10.14 0.5628(c) (0.4592)(c) -- 0.1036(c)
1994--Administration
Shares.......... 10.14 0.5329(c) (0.4539)(c) -- 0.0790(c)
1993--
Institutional
Shares.......... 10.16 0.5627 (0.0135)(a) -- 0.5492
1993--Administration
Shares(f)....... 10.23 0.2725 (0.0900)(a) -- 0.1825
1992--
Institutional
Shares.......... 10.22 0.6703 (0.0600)(a) -- 0.6103
1991--
Institutional
Shares.......... 10.00 0.8020 0.2200 (a) -- 1.0220
1990--
Institutional
Shares.......... 10.07 0.8300 (0.0700)(a) -- 0.7600
1989--
Institutional
Shares.......... 10.10 0.8800 -- -- 0.8800

FOR THE PERIOD AUGUST
15, 1988(g) THROUGH
OCTOBER 31,
1988--
Institutional
Shares.......... 10.00 0.1800 0.1000(a) -- 0.2800

<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
---------------------------------------------
IN EXCESS
FROM NET OF NET
REALIZED REALIZED
GAIN ON GAIN ON
INVESTMENT, IN EXCESS INVESTMENT, FROM TOTAL
FROM NET OPTION AND OF NET OPTION AND PAID DISTRIBUTIONS
INVESTMENT FUTURES INVESTMENT FUTURES IN TO
INCOME TRANSACTIONS INCOME TRANSACTIONS CAPITAL SHAREHOLDERS
---------- ------------ ---------- ------------ --------- -------------
SHORT DURATION GOVERNMENT FUND
------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--
Institutional
Shares.......... $(0.6518) $ -- $ -- $-- $ -- $(0.6518)
1995--Administration
Shares.......... (0.2051) -- -- -- -- (0.2051)
1994--
Institutional
Shares.......... (0.5598) (0.0438) -- -- -- (0.6036)
1994--Administration
Shares.......... (0.5352) (0.0438) -- -- -- (0.5790)
1993--
Institutional
Shares.......... (0.5627) -- (0.0065) -- -- (0.5692)
1993--Administration
Shares(f)....... (0.2725) -- -- -- -- (0.2725)
1992--
Institutional
Shares.......... (0.6703) -- -- -- -- (0.6703)
1991--
Institutional
Shares.......... (0.8020) -- -- -- -- (0.8020)
1990--
Institutional
Shares.......... (0.8300) -- -- -- -- (0.8300)
1989--
Institutional
Shares.......... (0.8800) -- -- -- (0.0300) (0.9100)

FOR THE PERIOD AUGUST
15, 1988(g) THROUGH
OCTOBER 31,
1988--
Institutional
Shares.......... (0.1800) -- -- -- -- (0.1800)

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-------------------------

RATIO OF RATIO OF
NET NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS INVESTMENT
(DECREASE) NET ASSET NET INCOME AT END RATIO OF INCOME
IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF EXPENSES (LOSS)
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(b) NET ASSETS NET ASSETS RATE(j) (IN 000'S) NET ASSETS NET ASSETS
---------- ----------- --------- ---------- ---------- ----------- ---------- ---------- ----------
SHORT DURATION GOVERNMENT FUND
------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--
Institutional
Shares.......... $ 0.1800 $ 9.82 8.97% 0.45% 6.87% 292.56% $103,760 0.72% 6.60%
1995--Administration
Shares.......... (0.0100) 9.63(h) 2.10 0.70(e) 7.91(e) 292.56 -- 0.90(e) 7.71(e)
1994--
Institutional
Shares.......... (0.5000) 9.64 0.99 0.45 5.69 289.79 193,095 0.59 5.55
1994--Administration
Shares.......... (0.5000) 9.64 0.73 0.70 5.38 289.79 730 0.84 5.24
1993--
Institutional
Shares.......... (0.0200) 10.14 5.55 0.45 5.46 411.66 359,708 0.64 5.31
1993--Administration
Shares(f)....... (0.0900) 10.14 1.74 0.70(e) 4.84(e) 411.66 16,490 0.80(e) 4.74(e)
1992--
Institutional
Shares.......... (0.0600) 10.16 6.24 0.45 6.60 216.07 277,927 0.69 6.36
1991--
Institutional
Shares.......... 0.2200 10.22 10.93 0.45 8.25 155.44 158,848 0.79 7.91
1990--
Institutional
Shares.......... (0.0700) 10.00 8.23 0.45 8.62 173.21 68,995 0.95 8.12
1989--
Institutional
Shares.......... (0.0300) 10.07 9.08 0.46 8.71 137.37 31,015 1.39 7.78

FOR THE PERIOD AUGUST
15, 1988(g) THROUGH
OCTOBER 31,
1988--
Institutional
Shares.......... 0.1000 10.10 3.30 0.55(e) 8.55(e) 167.00(e) 39,052 1.42(e) 7.68(e)

</TABLE>

8
<PAGE>

INCOME (LOSS) FROM INVESTMENT OPERATIONS
---------------------------------------------------
NET REALIZED
AND NET REALIZED
UNREALIZED AND
GAIN (LOSS) UNREALIZED TOTAL
ON GAIN (LOSS) INCOME
NET ASSET INVESTMENT, ON FOREIGN (LOSS)
VALUE AT NET OPTION AND CURRENCY FROM
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS
--------- ---------- ------------ ------------ ----------

SHORT DURATION TAX-FREE FUND
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Institutional
Shares.......... $ 9.79 $0.4235(c) $0.1500 (c) $-- $0.5735 (c)
1995--Administration
Shares.......... 9.79 0.3989(c) 0.1500 (c) -- 0.5489 (c)
1995--Service
Shares.......... 9.79 0.3744(c) 0.1600 (c) -- 0.5344 (c)
1994--Institutional
Shares.......... 10.23 0.3787(c) (0.3575)(c) -- 0.0212 (c)
1994--Administration
Shares.......... 10.23 0.3537(c) (0.3575)(c) -- (0.0038)(c)
1994--Service
Shares(i)....... 9.86 0.0475(c) (0.0700)(c) -- (0.0225)(c)
1993--Institutional
Shares.......... 9.93 0.3834 0.3000 (a) -- 0.6834
1993--Administration
Shares(i)....... 10.16 0.1555 0.0720 (a) -- 0.2275

FOR THE PERIOD OCTOBER
1, 1992(g) THROUGH
OCTOBER 31,
1992--Institutional
Shares.......... 10.00 0.0341 (0.0700)(a) -- (0.0359)

<CAPTION>
CORE FIXED INCOME FUND
-------------------------------------
FOR THE YEAR ENDED
OCTOBER 31,
1995--Institutional
Shares.......... 9.24 0.6423 0.7610 -- 1.4033
FOR THE PERIOD JANUARY
5, 1994(g) THROUGH
OCTOBER 31,
1994--Institutional
Shares.......... 10.00 0.4648 (0.7617) -- (0.2969)

FROM NET IN EXCESS OF
REALIZED NET REALIZED NET
GAIN ON GAIN ON INCREASE
INVESTMENT, IN EXCESS INVESTMENT, FROM TOTAL (DECREASE) NET ASSET
FROM NET OPTION AND OF NET OPTION AND PAID DISTRIBUTIONS IN NET VALUE AT
INVESTMENT FUTURES INVESTMENT FUTURES IN TO ASSET END OF
INCOME TRANSACTIONS INCOME TRANSACTIONS CAPITAL SHAREHOLDERS VALUE PERIOD
---------- ------------ ---------- ------------ ------- ------------- ---------- ---------

SHORT DURATION TAX-FREE FUND
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Institutional
Shares.......... $(0.4235) $ -- $-- $-- $-- $(0.4235) $0.1500 $9.94
1995--Administration
Shares.......... (0.3989) -- -- -- -- (0.3989) 0.1500 9.94
1995--Service
Shares.......... (0.3744) -- -- -- -- (0.3744) 0.1600 9.95
1994--Institutional
Shares.......... (0.3787) (0.0825) -- -- -- (0.4612) (0.4400) 9.79
1994--Administration
Shares.......... (0.3537) (0.0825) -- -- -- (0.4362) (0.4400) 9.79
1994--Service
Shares(i)....... (0.0475) -- -- -- -- (0.0475) (0.0700) 9.79
1993--Institutional
Shares.......... (0.3834) -- -- -- -- (0.3834) 0.3000 10.23
1993--Administration
Shares(i)....... (0.1555) -- -- -- -- (0.1555) 0.0720 10.23

FOR THE PERIOD OCTOBER
1, 1992(g) THROUGH
OCTOBER 31,
1992--Institutional
Shares.......... (0.0341) -- -- -- -- (0.0341) (0.0700) 9.93

<CAPTION>
CORE FIXED INCOME FUND
-------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
OCTOBER 31,
1995--Institutional
Shares.......... (0.6433) -- -- -- -- (0.6433) 0.7600 10.00

FOR THE PERIOD JANUARY
5, 1994(g) THROUGH
OCTOBER 31,
1994--Institutional
Shares.......... (0.4648) -- -- -- -- (0.4648) (0.7617) 9.24

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
------------------------------

RATIO OF RATIO OF
NET NET NET
INVESTMENT ASSETS INVESTMENT
RATIO OF INCOME AT END RATIO OF INCOME
EXPENSES (LOSS) PORTFOLIO OF EXPENSES (LOSS)
TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
RETURN(b) NET ASSETS NET ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
------------ ---------- ---------- ----------- ---------- ---------- ----------

SHORT DURATION TAX-FREE FUND
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
OCTOBER 31,
1995--Institutional
Shares.......... 5.98% 0.45% 4.31% 259.52% $58,389 0.77% 3.99%
1995--Administration
Shares.......... 5.76 0.70 4.14 259.52 46 1.02 3.82
1995--Service
Shares.......... 5.59 0.95 3.87 259.52 454 1.27 3.55
1994--Institutional
Shares.......... 0.17 0.45 3.74 354.00 83,704 0.61 3.58
1994--Administration
Shares.......... (0.11) 0.70 3.51 354.00 3,866 0.86 3.35
1994--Service
Shares(i)....... (0.32)(k) 0.95(e) 4.30(e) 354.00 44 1.11(e) 4.14(e)
1993--Institutional
Shares.......... 7.03 0.41 3.70 404.60 115,803 1.06 3.05
1993--Administration
Shares(i)....... 2.28 (k) 0.70(e) 3.32(e) 404.60 911 1.07(e) 2.95(e)

FOR THE PERIOD OCTOBER
1, 1992(g) THROUGH
OCTOBER 31,
1992--Institutional
Shares.......... (0.34)(k) 0.05(e) 4.58(e) 31.19(k) 14,601 2.68(e) 1.95(e)

<CAPTION>
CORE FIXED INCOME FUND
-------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

FOR THE YEAR ENDED
OCTOBER 31,
1995--Institutional
Shares.......... 15.72 0.45 6.56 383.26(j) 55,502 0.96 6.05

FOR THE PERIOD JANUARY
5, 1994(g) THROUGH
OCTOBER 31,
1994--Institutional
Shares.......... (3.00) 0.45(e) 6.48(e) 288.25(j) 24,508 1.46(e) 5.47(e)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Includes the 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, a complete redemption of
the investment at the net asset value at the end of the period. For Class
A shares only, total return would be reduced if a sales charge were taken
into account.

(d) Class A shares commenced operations on May 15, 1995.

(e) Annualized.

(f) Administration share activity commenced on April 15, 1993.

(g) Commencement of operations.

(h) Short Duration Government Administration shares were redeemed in full on
February 23, 1995. Amount shown represents net asset value on February 23,
1995.

(i) Administration and service share activity commenced on May 20, 1993 and
September 20, 1994, respectively.

(j) Includes the effect of mortgage dollar roll transactions.

(k) Not annualized.

9
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The Investment Adviser will have access to the research of, and proprietary
technical models developed by, Goldman Sachs and will apply quantitative and
qualitative analysis in determining the appropriate allocations among the
categories of issuers and types of securities.

ADJUSTABLE RATE GOVERNMENT FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high level of current income, consistent with low volatility of principal.

10
<PAGE>

CREDIT QUALITY. The Fund invests in U.S. Government Securities and
repurchase agreements collateralized by such securities.

SHORT DURATION GOVERNMENT FUND

OBJECTIVE. The Fund's investment objective is to provide a high level of
current income. Secondarily, the Fund may, in seeking current income, also
consider the potential for capital gain.

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be equal to that of the Fund's benchmark, the 2-year U.S. Treasury
security, plus or minus .5 years (currently 1.8 years). In addition, under
normal interest rate conditions, the Fund's maximum duration will not exceed 3
years. The approximate interest rate sensitivity of the Fund is comparable to
a 2-year bond.

INVESTMENT SECTOR. The Fund invests, under normal market conditions, at
least 65% of its total assets in U.S. Government Securities and in repurchase
agreements collateralized by such securities. Substantially all of the Fund's
assets will be invested in U.S. Government Securities. 100% of the Fund's
portfolio will be invested in U.S. dollar-denominated securities.

CREDIT QUALITY. The Fund invests in U.S. Government Securities and
repurchase agreements collateralized by such securities.

SHORT DURATION TAX-FREE FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high level of current income, consistent with relatively low volatility of
principal, that is exempt from regular federal income tax.

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be equal to that of the Fund's benchmark, the Lehman Brothers 3-
year Municipal Bond Index, plus or minus .5 years (currently 2.8 years). In
addition, under normal interest rate conditions, the Fund's maximum duration
will not exceed 4 years. The approximate interest rate sensitivity of the Fund
is comparable to a 3-year bond.

11
<PAGE>

INVESTMENT SECTOR. The Fund invests, under normal conditions, at least 80%
of its net assets in fixed income securities issued by or on behalf of states,
territories and possessions of the United States (including the District of
Columbia) and the political subdivisions, agencies and instrumentalities
thereof ("Municipal Securities"), the interest on which is exempt from regular
federal income tax (i.e., excluded from gross income for federal income tax
purposes) and is not a tax preference item under the federal alternative
minimum tax. Under normal circumstances, the Fund's investments in private
activity bonds and taxable investments will not exceed, in the aggregate, 20%
of the Fund's net assets. The interest from certain private activity bonds
(including the Fund's distributions of such interest) may be a preference item
for purposes of the federal alternative minimum tax and may increase liability
for the corporate environmental tax. 100% of the Fund's portfolio will be
invested in U.S. dollar-denominated securities.

CREDIT QUALITY. The Municipal Securities in which the Fund invests will be
rated, at the time of investment, at least A by S&P or Moody's. The credit
rating assigned to Municipal Securities by these rating organizations or by
the Investment Adviser may reflect the existence of guarantees, letters of
credit or other credit enhancement features available to the issuers or
holders of such Municipal Securities.

CORE FIXED INCOME FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
total return consisting of capital appreciation and income that exceeds the
total return of the Lehman Brothers Aggregate Bond Index (the "Index").

DURATION. Under normal interest rate conditions, the Fund's duration is
expected to be equal to that of the Fund's benchmark, the Lehman Brothers
Aggregate Bond Index, plus or minus 1 year (currently, 4.7 years). In
addition, under normal interest rate conditions, the Fund's maximum duration
will not exceed 6 years. The approximate interest rate sensitivity of the Fund
is comparable to a 5-year bond.

INVESTMENT SECTOR. The Fund invests, under normal circumstances, at least
65% of its total assets in fixed income securities, including U.S. Government
Securities, corporate debt securities, Mortgage-Backed Securities, and Asset-
Backed Securities. The Fund may invest up to 25% of its total assets in
obligations of domestic and foreign issuers which are denominated in
currencies other than the U.S. dollar. A number of investment strategies will
be used to achieve the Fund's investment objective, including market sector
selection, determination of yield curve exposure, and issuer selection. In
addition, the Investment Adviser will attempt to take advantage of pricing
inefficiencies in the fixed income markets.

12
<PAGE>

The Index currently includes U.S. Government Securities and fixed rate,
publicly issued, U.S. dollar-denominated fixed-income securities rated at
least BBB or Baa or in their equivalent ratings category by S&P or Moody's.
The securities currently included in the index have at least one year
remaining to maturity; have an outstanding principal amount of at least $100
million; and are issued by the following types of issuers, with each category
receiving a different weighting in the Index: U.S. Treasury; agencies,
authorities or instrumentalities of the U.S. Government; issuers of Mortgage-
Backed Securities; utilities; industrial issuers; financial institutions;
foreign issuers; and issuers of asset-backed securities. The Index is a
trademark of Lehman Brothers. Inclusion of a security in the Index does not
imply an opinion by Lehman Brothers as to its attractiveness or
appropriateness for investment. Although Lehman Brothers obtains factual
information used in connection with the Index from sources which it considers
reliable, Lehman Brothers claims no responsibility for the accuracy,
completeness or timeliness of such information and has no liability to any
person for any loss arising from results obtained from the use of the index
data.

CREDIT QUALITY. All U.S. dollar-denominated fixed income securities
purchased by the Fund will be rated, at the time of investment, at least BBB
by S&P or Baa by Moody's. The non-U.S. dollar-denominated fixed income
securities in which the Fund may invest will be rated, at the time of
investment, at least AA by S&P or Aa by Moody's. Fixed income securities rated
BBB or Baa are considered medium-grade obligations with speculative
characteristics, and adverse economic conditions or changing circumstances may
weaken their issuers' capability to pay interest and repay principal.

OTHER. The Fund may employ certain active management techniques to manage
the duration and term structure of the Fund and to seek to enhance returns.
These techniques include, but are not limited to, the use of financial futures
contracts, option contracts (including options on futures), forward foreign
currency exchange contracts, currency options and futures, currency, mortgage
and interest rate swaps and interest rate floors, caps and collars. Currency
and interest rate management techniques involve risks different from those
associated with investing solely in U.S. dollar-denominated fixed income
securities of U.S. issuers. It is expected that the Fund will use currency
transactions to seek to hedge its exposure to foreign currencies. The Fund may
invest in custodial receipts, Municipal Securities and convertible securities.
The Fund may also employ other investment techniques to seek to enhance
returns, such as lending portfolio securities, mortgage dollar rolls,
repurchase agreements and other investment practices, described under
"Investment Techniques".

DESCRIPTION OF SECURITIES

U.S. GOVERNMENT SECURITIES

Each Fund may invest in U.S. Government Securities. Generally, these
securities include U.S. Treasury obligations and obligations issued or
guaranteed by U.S. Government agencies, instrumentalities or sponsored
enterprises which are supported by (a) the full faith and credit of the U.S.
Treasury (such as the Government National Mortgage Association ("Ginnie
Mae")), (b) the right of the issuer to borrow from the U.S. Treasury (such as
securities of the Student Loan Marketing Association), (c) the discretionary
authority of the U.S. Government to purchase certain obligations of the issuer
(such as the Federal National Mortgage Association ("Fannie Mae") and Federal
Home Loan Mortgage Corporation ("Freddie Mac")), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide
financial support to U.S. Government agencies, instrumentalities or sponsored
enterprises in the future.

13
<PAGE>

CORPORATE DEBT OBLIGATIONS

The Core Fixed Income Fund may invest in corporate debt obligations. In
addition to obligations of corporations, corporate debt obligations include
securities issued by banks and other financial institutions. Corporate debt
obligations are subject to the risk of an issuer's inability to meet principal
and interest payments on the obligations.

CONVERTIBLE SECURITIES

The Core Fixed Income Fund may invest in convertible securities, which may
include corporate notes or preferred stock but are ordinarily long-term debt
obligations of an issuer convertible at a stated exchange rate into common
stock of the issuer. As with all debt securities, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the
price of the convertible security tends to reflect the value of the underlying
common stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common stock.
Convertible securities in which the Core Fixed Income Fund invests will be
subject to the same rating criteria as its other investments in fixed income
securities.

MORTGAGE-BACKED SECURITIES

ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"). The Adjustable Rate Government Fund
will primarily, and the Short Duration Government and Core Fixed Income Funds
may, invest in ARMs, which are pass-through mortgage securities collateralized
by mortgages with adjustable rather than fixed coupon rates. ARMs generally
provide for a fixed initial mortgage interest rate for a set period.
Thereafter, the interest rates are subject to periodic adjustments based on
changes to a designated benchmark index.

14
<PAGE>

ARMs allow a Fund to participate in increases in interest rates through
periodic increases in the securities' coupon rates. During periods of
declining interest rates, coupon rates may readjust downward resulting in
lower yields to a Fund. Therefore, the value of an ARM is unlikely to rise
during periods of declining interest rates to the same extent as fixed rate
securities. Interest rate declines may result in accelerated prepayment of
mortgages with the result that proceeds from prepayments will be reinvested at
lower interest rates. During periods of rising interest rates, changes in the
coupon rate will lag behind changes in the market rate. ARMs are also
typically subject to maximum increases and decreases in the interest rate
adjustment which can be made on any one adjustment date, in any one year, or
during the life of the security. In the event of dramatic increases or
decreases in prevailing market interest rates, the value of a Fund's
investments in ARMs may fluctuate more substantially since these limits may
prevent the security from fully adjusting its interest rate to the prevailing
market rates.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Core Fixed Income Fund may
invest in Mortgage-Backed Securities issued or sponsored by non-governmental
entities. Privately issued Mortgage-Backed Securities are generally backed by
pools of conventional (i.e., non-government guaranteed or insured) mortgage
loans. Since such Mortgage-Backed Securities normally are not guaranteed by an
entity having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in
order to receive a high quality rating from the rating organizations (i.e.,
S&P or Moody's), they normally are structured with one or more types of
"credit enhancement".

MULTIPLE CLASS MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS. The Adjustable Rate Government, Short Duration Government and
Core Fixed Income Funds may also invest in multiple class securities,
including collateralized mortgage obligations ("CMOs") and Real Estate
Mortgage Investment Conduit ("REMIC") pass-through or participation
certificates. CMOs provide an investor with a specified interest in the cash
flow from a pool of underlying mortgages or of other Mortgage-Backed
Securities. CMOs are issued in multiple classes, each with a specified fixed
or floating interest rate and a final scheduled distribution date. In most
cases, payments of principal are applied to the CMO classes in the order of
their respective stated maturities, so that no principal payments will be made
on a CMO class until all other classes having an earlier stated maturity date
are paid in full. 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. The Funds do not intend to purchase residual
interests in REMICs.

STRIPPED MORTGAGE-BACKED SECURITIES. The Adjustable Rate Government, Short
Duration Government and Core Fixed Income Funds may invest in stripped
Mortgage-Backed Securities ("SMBS"), which are derivative multiple class
Mortgage-Backed Securities. SMBS are usually structured with two different
classes; one that receives 100% of the interest payments and the other that
receives 100% of the principal payments from a pool of mortgage loans. If the
underlying mortgage loans experience different than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. Although the market for SMBS is increasingly liquid, certain SMBS
may not be readily marketable and will be considered illiquid for purposes of
a 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

15
<PAGE>

of SMBS that receives all or most of the interest from mortgage loans are
generally higher than prevailing market yields on other Mortgage-Backed
Securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped.

ASSET-BACKED SECURITIES

The Core Fixed Income Fund may invest in asset-backed securities ("Asset-
Backed Securities"). The principal and interest payments on Asset-Backed
Securities are collateralized by pools of assets such as auto loans, credit
card receivables, leases, installment contracts and personal property. Such
asset pools are securitized through the use of special purpose trusts or
corporations. Principal and interest payments may be credit enhanced by a
letter of credit, a pool insurance policy or a senior/subordinated structure.

MUNICIPAL SECURITIES

GENERAL. Municipal Securities in which the Short Duration Tax-Free Fund and,
to a limited extent, the Core Fixed Income Fund, invest consist of bonds,
notes, commercial paper and other instruments (including participation
interests in such securities) issued by or on behalf of states, territories
and possessions of the United States (including the District of Columbia) and
their political subdivisions, agencies or instrumentalities, the interest on
which, in the opinion of bond counsel for the issuers or counsel selected by
the Investment Adviser, is exempt from regular federal income tax (i.e.,
excluded from gross income for federal income tax purposes but not necessarily
exempt from federal alternative minimum tax or from state or local taxes).
Such securities may pay fixed, variable or floating rates of interest.
Municipal Securities are often issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for which Municipal
Securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses, and obtaining funds to lend to other
public institutions and facilities.

PRIVATE ACTIVITY BONDS. Municipal Securities also include "private activity
bonds" or industrial development bonds, which are issued by or on behalf of
public authorities to obtain funds for such projects as privately-operated
housing facilities, airport, mass transit or port facilities and sewage
disposal. In addition, proceeds of certain industrial development bonds are
used for constructing, equipping, repairing or improving privately operated
industrial or commercial facilities. The Short Duration Tax-Free Fund's
distributions attributable to the interest income from private activity bonds
may subject certain investors to the federal alternative minimum tax.

MUNICIPAL LEASES AND CERTIFICATES OF PARTICIPATION. A municipal lease is an
obligation in the form of a lease or installment purchase which is issued by a
state or local government to acquire equipment and facilities. Certificates of
participation represent undivided interests in municipal leases, installment
purchase agreements or other instruments. The primary risk associated with
municipal lease obligations and certificates of participation is that the
governmental lessee will fail to appropriate funds to enable it to meet its
payment obligations under the lease. Although the obligations may be secured
by the leased equipment or facilities, the disposition of the property in the
event of non-appropriation or foreclosure might prove difficult, time
consuming and costly, and result in a delay in recovering or the failure to
fully recover the Fund's original investment. To the extent that a Fund
invests in unrated municipal leases or participates in such leases, the
Trustees will monitor on an ongoing basis the credit quality rating and risk
of cancellation of such unrated leases. Certain municipal lease obligations
and certificates of participation may be deemed illiquid for the purpose of a
Fund's limitation on investments in illiquid securities.

16
<PAGE>

INSURED SECURITIES. "Insured" Municipal Securities are those for which
scheduled payments of interest and principal are guaranteed by a private (non-
governmental) insurance company. The insurance entitles a Fund to receive only
the face or par value of the securities held by the Fund. The insurance does
not guarantee the market value of the Municipal Securities or the net asset
value of a Fund's shares.

AUCTION RATE SECURITIES. Auction rate Municipal Securities permit the holder
to sell the securities in an auction at par value at specified intervals. The
dividend or interest is typically reset by "Dutch" auction in which bids are
made by broker-dealers and other institutions for a certain amount of
securities at a specified minimum yield. The rate set by the auction is the
lowest interest or dividend rate that covers all securities offered for sale.
While this process is designed to permit auction rate securities to be traded
at par value, there is the risk that an auction will fail due to insufficient
demand for the securities. A Fund will take the time remaining until the next
scheduled auction date into account for purposes of determining the
securities' duration.

FOREIGN INVESTMENTS

FOREIGN SECURITIES. The Core Fixed Income Fund may invest in fixed income
securities of foreign issuers denominated in any currency but will limit its
investments in non-U.S. dollar-denominated fixed income securities to 25% of
its total assets. This may offer potential benefits that are not available
from investing exclusively in U.S. dollar-denominated domestic issues. Foreign
countries may have economic policies or business cycles different from those
of the U.S. and markets for foreign fixed income securities do not necessarily
move in a manner parallel to U.S. markets.

The Core Fixed Income Fund may invest in an issuer domiciled in one country
yet issuing the security in the currency of another country. The Fund may also
invest in debt securities denominated in the European Currency Unit ("ECU"),
which is a "basket" consisting of specified amounts in the currencies of
certain of the twelve member states of the European Community. The specific
amounts of currencies comprising the ECU may be adjusted by the Council of
Ministers of the European Community from time to time to reflect changes in
relative values of the underlying currencies. In addition, the Fund may invest
in securities denominated in other currency "baskets".

17
<PAGE>

Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers. There may be less publicly available information about a foreign
issuer than about a U.S. issuer. In addition, there is generally less
government regulation of foreign markets, companies and securities dealers
than in the U.S. Most foreign securities markets may have substantially less
volume than U.S. securities markets, and securities of many foreign issuers
may be less liquid and more volatile than securities of comparable domestic
issuers. Furthermore, with respect to certain foreign countries, there is a
possibility of nationalization, expropriation or confiscatory taxation,
imposition of withholding taxes on dividend or interest payments, limitations
on the removal of funds or other assets of the Fund, political or social
instability or diplomatic developments which could affect investments in those
countries.

FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers by the
Core Fixed Income Fund will usually involve currencies of foreign countries,
the value of the Fund's assets as measured in U.S. dollars will be affected by
changes in foreign currency exchange rates. The Fund may purchase or sell
forward foreign currency exchange contracts for hedging purposes and to seek
to protect against anticipated changes in future foreign currency exchange
rates. If the Fund enters into a forward foreign currency exchange contract to
buy foreign currency for any purpose, the Fund will be required to place and
maintain cash or liquid, high grade debt securities in a segregated account
with the Fund's custodian in an amount equal to the value of the Fund's total
assets committed to the consummation of the forward contract. The Fund will
incur costs in connection with conversions between various currencies.

STRUCTURED SECURITIES

The Core Fixed Income Fund may invest in structured securities. The value of
the principal of and/or interest on such securities is determined by reference
to changes in the value of specific currencies, interest rates, commodities,
indices or other financial indicators (the "Reference") or the relative change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or

18
<PAGE>

decreased depending upon changes in the applicable Reference. The terms of the
structured securities may provide that in certain circumstances no principal
is due at maturity and, therefore, result in the loss of the Fund's
investment. Structured securities may be positively or negatively indexed, so
that appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, changes in
the interest rates or the value of the security at maturity may be a multiple
of changes in the value of the Reference. Consequently, structured securities
may entail a greater degree of market risk than other types of fixed income
securities. Structured securities may also be more volatile, less liquid and
more difficult to accurately price than less complex securities.

ZERO COUPON, DEFERRED INTEREST AND CAPITAL APPRECIATION BONDS

RISK FACTORS

CALL RISK AND EXTENSION RISK. Fixed income securities may be subject to both
call risk and extension risk. Call risk (i.e., where the issuer exercises its
right to pay principal on an obligation earlier than scheduled) causes cash
flow to be returned earlier than expected. This typically results when
interest rates have declined and a Fund will suffer from having to reinvest in
lower yielding securities. Extension risk (i.e., where the issuer exercises
its right to pay principal on an obligation later than scheduled) causes cash
flows to be returned later than expected. This typically results when interest
rates have increased and a Fund will suffer from the inability to invest in
higher yielding securities. Certain types of U.S. Government, Asset-Backed,
corporate, foreign, Mortgage-Backed and Municipal Securities have this call
and/or extension risk.

19
<PAGE>

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

20
<PAGE>

FOREIGN RISKS. See "Foreign Securities" for a description of the risks of
investing in foreign securities and currencies.

INVESTMENT TECHNIQUES

MORTGAGE DOLLAR ROLLS. The Adjustable Rate Government, Short Duration
Government and Core Fixed Income Funds may enter into mortgage "dollar rolls"
in which a Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase
substantially similar (same type, coupon and maturity) securities on a
specified future date. During the roll period, a Fund loses the right to
receive principal and interest paid on the securities sold. However, a Fund
may benefit from the interest earned on the cash proceeds of the securities
sold until the settlement date of the forward purchase. Each 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.
The benefits derived from the use of mortgage dollar rolls depend upon the
Investment Adviser's ability to manage mortgage prepayments. There is no
assurance that mortgage dollar rolls can be successfully employed. For
financial reporting and tax purposes, each Fund treats mortgage dollar rolls
as two separate transactions; one involving the purchase of a security and a
separate transaction involving a sale. The Funds do not currently intend to
enter into mortgage dollar rolls that are accounted for as a financing.

OPTIONS ON FOREIGN CURRENCIES. The Core Fixed Income Fund may, to the extent
it invests in foreign securities, purchase and sell (write) put and call
options on foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign portfolio securities and against increases
in the U.S. dollar cost of foreign securities to be acquired. As with other
kinds of option transactions, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received. If an option that the Fund has written is exercised, the Fund could
be required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against exchange rate fluctuations; however,
in the event of exchange rate movements adverse to the Fund's position, the
Fund may forfeit the entire amount of the premium plus related transaction
costs. When purchased or sold to seek to increase total return, options on
currencies are considered speculative. Options on foreign currencies to be
written or purchased by a Fund will be traded on U.S. and foreign exchanges or
over-the-counter.

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FUTURES CONTACTS AND OPTIONS ON FUTURES CONTRACTS. To seek to increase total
return or to hedge against changes in interest rates or securities prices or,
in the case of the Core Fixed Income Fund, currency exchange rates, each Fund
may purchase and sell various kinds of futures contracts, and purchase and
write call and put options on any of such futures contracts. Each Fund may
also enter into closing purchase and sale transactions with respect to any
such contracts and options. The futures contracts may be based on various
securities (such as U.S. Government Securities), foreign currencies, in the
case of the Core Fixed Income Fund, securities indices and other financial
instruments and indices. A 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. A Fund may not purchase or sell
futures contracts or purchase or sell related options to seek 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. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require the
Fund to segregate and maintain cash or liquid, high grade debt securities with
a value equal to the amount of the Fund's obligations.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Techniques--Futures Contracts and Options on Futures Contracts" in
the Additional Statement. Thus, while a Fund may benefit from the use of
futures and options on futures, unanticipated changes in interest rates,
securities prices or currency exchange rates may result in a poorer overall
performance than if the Fund had not entered into any futures contracts or
options transactions. Because perfect correlation between a futures position
and portfolio position which is intended to be protected is impossible to
achieve, the desired protection may not be obtained and a Fund may be exposed
to risk of loss. The loss incurred by a Fund in entering into futures
contracts and in writing call options on futures is potentially unlimited and
may exceed the amount of the premium received. Futures markets are highly
volatile and the use of futures may increase the volatility of a Fund's net
asset value. The profitability of a Fund's trading in futures to seek to
increase total return depends upon the ability of the Investment Adviser 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 a Fund.
Further, futures contracts and options on futures may be illiquid, and
exchanges may limit fluctuations in futures contract prices during a single
day.

CURRENCY SWAPS. The Core Fixed Income Fund may enter into currency swaps for
hedging purposes. Currency swaps involve the exchange by a Fund with another
party of their respective rights to make or receive payments in specified
currencies. Currency swaps usually involve the delivery of a gross payment
stream in one designated currency in exchange for the gross payment stream in
another designated currency. Therefore, the entire payment stream under a
currency swap is subject to the risk that the other party to the swap will
default on its contractual delivery obligations. The Fund will not enter into
swap transactions unless the unsecured commercial paper, senior debt or claims
paying ability of the other party thereto is rated either AA or A-1 or better
by S&P or Aa or P-1 or better by Moody's, or if unrated by such rating
organizations, determined to be of comparable quality by the Investment
Adviser. The use of currency swaps 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 currency exchange rates, the investment
performance of the Fund would be less favorable than it would have been if
this investment technique were not

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used. The staff of the SEC currently take the position that swaps are illiquid
and thus subject to the Fund's limitation on investments in illiquid
securities.

RISKS OF DERIVATIVE TRANSACTIONS. A Fund's transactions, if any, in options,
futures, options on futures, swap transactions, interest rate caps, floors and
collars, structured securities, inverse floating rate securities and currency
forward contracts involve certain risks, including a possible lack of
correlation between changes in the value of hedging instruments and the
portfolio assets being hedged, the potential illiquidity of the markets for
derivative instruments, the risks arising from the margin requirements and
related leverage factors associated with such transactions. The use of these
management techniques to seek to increase total return may be regarded as a
speculative practice and involves the risk of loss if the Investment Adviser
is incorrect in its expectation of fluctuations in securities prices, interest
rates or currency prices. A Fund's transactions in certain derivative
transactions may be limited by the requirements of the Internal Revenue Code
(the "Code") for qualification as a regulated investment company.

LLIQUID AND RESTRICTED SECURITIES. A Fund may not invest more than 15% of
its net assets in illiquid investments, which includes securities (both
foreign and domestic) that are not readily marketable, swap transactions,
certain SMBS, certain municipal leases and participation interests, repurchase
agreements maturing in more than seven days, time deposits with a notice or
demand period of more than seven days, certain over-the-counter options, and
certain restricted securities, unless it is determined, based upon the
continuing review of the trading markets for a specific restricted security,
that such restricted security is eligible for sale under Rule 144A and,
therefore, is liquid. The Board of Trustees has adopted guidelines and
delegated to the Investment Adviser the daily function of determining and
monitoring the liquidity of restricted securities. The Board of Trustees,
however, retains oversight focusing on factors such as valuation, liquidity
and availability of information and is ultimately responsible for each
determination. Investing in restricted securities eligible for resale pursuant
to Rule 144A may decrease the liquidity in a Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities. The purchase price and subsequent valuation of
restricted and illiquid securities normally reflect a discount, which may be
significant, from the market price of comparable securities for which a liquid
market exists.

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<PAGE>

In addition, in the event of bankruptcy of the seller or failure of the seller
to repurchase the securities as agreed, a Fund could suffer losses, including
loss of interest on or principal of the security and costs associated with
delay and enforcement of the repurchase agreement. The Trustees of the Trust
have reviewed and approved certain counterparties whom they believe to be
creditworthy and have authorized the Funds to enter into repurchase agreements
with such counterparties. In addition, each Fund, together with other
registered investment companies having advisory agreements with the Investment
Adviser, 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.

TEMPORARY INVESTMENTS. Each Fund may, for temporary defensive purposes
invest 100% of its total assets in (a) U. S. Government Securities or (b)
repurchase agreements collateralized by U.S. Government Securities. The Short
Duration Tax-Free Fund may for temporary defensive purposes depart from its
stated investment objective and invest more than 20% of its net assets in
taxable investments which would subject such income to taxation.

MISCELLANEOUS TECHNIQUES

In addition to the techniques described above, each Fund may, with respect
to no more than 5% of its total assets, engage in the following techniques:
(i) portfolio securities lending, (ii) mortgage swaps (other than Short
Duration Tax-Free Fund) and interest rate swaps, caps, floors and collars,
(iii) inverse floating rate securities, (iv) yield curve options, (v)
investments in other investment companies, (vi) custodial receipts, (vii) with
respect to the Short Duration Tax-Free Fund, tender option bonds and standby
commitments and (viii) with respect to the Core Fixed Income Fund, investments
in securities of issuers in countries with emerging markets and economies. For
more information see the Additional Statement.

INVESTMENT RESTRICTIONS

The Short Duration Tax-Free Fund's policy to invest, under normal market
conditions, at least 80% of its net assets in Municipal Securities the
interest on which is exempt from regular federal income tax is fundamental and
may not be changed without shareholder approval. For more information on a
Fund's investment restrictions, an investor should obtain the Additional
Statement.

PORTFOLIO TURNOVER

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<PAGE>

portfolio turnover rate of each Fund will vary from year to year. The
portfolio turnover rate is computed by dividing the lesser of the dollar
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 a 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 a
Fund consistent with the Fund's investment objectives and portfolio management
policies. A high rate of portfolio turnover results in increased transaction
costs to a Fund. The portfolio turnover rate includes the effect of entering
into mortgage dollar rolls. See "Financial Highlights" for a statement of each
Fund's historical portfolio turnover rates.

MANAGEMENT

TRUSTEES AND OFFICERS

INVESTMENT ADVISERS

INVESTMENT ADVISERS. 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, serves as the investment adviser to the Short
Duration Government and Adjustable Rate Government Funds. Goldman Sachs Funds
Management, L.P. registered as an investment adviser in 1990. Goldman Sachs
Asset Management, One New York Plaza, New York, New York 10004, a separate
operating division of Goldman Sachs, serves as the investment adviser to the
Short Duration Tax-Free and Core Fixed Income Funds. Goldman Sachs registered
as an investment adviser in 1981. As of January 31, 1996, GSAM and GSFM,
together with their affiliates, acted as investment adviser, administrator or
distributor for assets in excess of $57 billion.

Under an Investment Advisory Agreement with each Fund, the applicable
Investment Adviser, subject to the general supervision of the Board of
Trustees, provides day-to-day advice as to the Fund's portfolio transactions.
Goldman Sachs has agreed to permit the Trust to use the name "Goldman Sachs"
or a derivative thereof as part of each Fund's name for as long as a Fund's
Investment Advisory Agreement is in effect.

ADJUSTABLE RATE GOVERNMENT AND SHORT DURATION GOVERNMENT FUNDS. The Funds'
portfolio manager is Jonathan A. Beinner. Mr. Beinner is a Vice President of
Goldman Sachs and joined the Investment Adviser in 1990 after working in the
trading and arbitrage group of Franklin Savings Association.

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<PAGE>

CORE FIXED INCOME FUND. The Fund's portfolio managers are Jonathan A.
Beinner and Richard C. Lucy. See above for information about Mr. Beinner.
Messrs. Beinner and Lucy each specialize in investing in a particular type of
security the Fund may hold. Mr. Lucy is a Vice President of Goldman Sachs and
joined the Investment Adviser in 1992 after spending nine years managing fixed
income assets at Brown Brothers Harriman & Co.

SHORT DURATION TAX-FREE FUND. The Fund's portfolio manager is Benjamin S.
Thompson. Mr. Thompson specializes in municipal securities, where his
responsibilities include developing investment strategy and structuring
portfolios. Mr. Thompson worked in the institutional sales and marketing group
at GSAM until he joined the fixed income team in 1993. Prior to joining GSAM
in early 1992, Mr. Thompson worked in the Structured Finance Group of the
Chase Manhattan Bank.

As compensation for its services rendered and assumption of certain expenses
pursuant to separate Investment Advisory Agreements, GSFM is entitled to a fee
from the Short Duration Government and Adjustable Rate Government Funds,
computed daily and payable monthly, at the annual rates of 0.50% and 0.40%,
respectively, of average daily net assets; however, GSFM is currently only
imposing its advisory fee with respect to the Short Duration Government Fund
at the annual rate of 0.40% of average daily net assets. As compensation for
its services rendered and assumption of certain expenses pursuant to separate
Investment Advisory Agreements, GSAM is entitled to a fee from the Short
Duration Tax-Free and Core Fixed Income Funds, computed daily and payable
monthly, at the annual rates of 0.40% and 0.40%, respectively, of average
daily net assets. The Investment Advisers may discontinue or modify such
limitations in the future at their discretion, although the Investment
Advisers have no current intention to do so. For the fiscal year ended October
31, 1995, the Short Duration Government, Adjustable Rate Government, Short
Duration Tax-Free and Core Fixed Income Funds paid fees at the foregoing
rates.

Each Investment Adviser has voluntarily agreed to reduce the fees payable to
it by a Fund (to the extent of its fees) by the amount (if any) that the
Fund's expenses would exceed the applicable expense limitations imposed by
state securities administrators. See "Management -- Expenses" in the
Additional Statement. In addition, the Investment Advisers to the Short
Duration Government, Adjustable Rate Government, Short Duration Tax-Free and
Core Fixed Income Funds have voluntarily agreed to reduce or limit certain
"Other Expenses" of such Funds (excluding any applicable fees payable by the
Fund classes to service organizations, advisory fees, taxes, interest and
brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.05%, 0.05%, 0.05% and 0.05% per
annum of such Funds' average daily net assets, respectively. Such reductions
or limits, if any, are calculated monthly on a cumulative basis and may be
discontinued or modified by the applicable Investment Adviser in its
discretion at any time.

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<PAGE>

Sachs and its affiliates will not have any obligation to make available any
information regarding their proprietary activities or strategies, or the
activities or strategies used for other accounts managed by them, for the
benefit of the management of the Funds and in general it is not anticipated
that the Investment Advisers will have access to proprietary information for
the purpose of managing a Fund. The results of a Fund's investment activities,
therefore, may differ from those of Goldman Sachs and its affiliates and it is
possible that a Fund could sustain losses during periods in which Goldman
Sachs and its affiliates and other accounts and Funds achieve significant
profits on their trading for proprietary or other accounts. From time to time,
a Fund's activities may be limited because of regulatory restrictions
applicable to Goldman Sachs and its affiliates, and/or their internal policies
designed to comply with such restrictions. See "Management -- 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 10004, serves as the
exclusive distributor of each Fund's shares. Goldman Sachs, 4900 Sears Tower,
Chicago, Illinois 60606 also serves as each Fund's transfer agent (the
"Transfer Agent") and as such performs various shareholder servicing
functions. Shareholders with inquiries regarding any Fund should contact
Goldman Sachs (as Transfer Agent) at the address or the telephone number set
forth on the back cover page of this Prospectus. Goldman Sachs is entitled to
receive a fee from the Short Duration Government, Short Duration Tax-Free and
Core Fixed Income Funds equal to 0.04% of the average daily net assets of each
Fund. Goldman Sachs is entitled to receive a fee from the Adjustable Rate
Government Fund equal to each class' proportionate share of the total transfer
agency fees borne by the Fund. Such fees are equal to the fixed per account
charge of $12,000 per year plus $7.50 per account, together with out-of-pocket
and transaction related expenses (including those out-of-pocket expenses
payable to servicing agents) applicable to Class A shares plus 0.04% of the
average daily net assets attributable to the other classes of the Adjustable
Rate Government Fund.

DIVIDENDS

Each Fund will declare a daily dividend. Such dividend will accrue to
shareholders of record as of 3:00 p.m. Chicago time, and will be paid monthly.
Shares will be eligible for dividends which accrue on or after the date such
shares are purchased 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 Funds also intend 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.

A 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.

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<PAGE>

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, cash
payment will be made on the first Business Day of the succeeding month. Cash
dividends will be paid on or about the last Business Day of the 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 a Fund, a portion of the
net asset value per share may be represented by realized or unrealized
appreciation of any Fund's portfolio securities. Therefore, subsequent
distributions (or portions thereof) of taxable income or realized appreciation
on such shares may be taxable to the investor even if the net asset value of
the shares is, as a result of the distributions, reduced below the cost of
such shares and the distributions (or portions thereof) represent a return of
a portion of the purchase price.

NET ASSET VALUE

The net asset value per share of each class of a Fund 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) on each
Business Day (as such term is defined under "Additional Information")
immediately after the determination, if any, of the income to be declared as a
dividend. 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.

PERFORMANCE INFORMATION

From time to time each Fund may publish yield, distribution rate and average
annual total return and the Short Duration Tax-Free Fund may publish its tax
equivalent yield in advertisements and communications to shareholders or
prospective investors. Average annual total return is determined by computing
the average annual percentage change in value of $1,000 invested at the
maximum public offering price for specified periods ending with the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions at net asset value. The total return calculation assumes a
complete redemption of the investment at the end of the relevant period. Each
Fund may also from time to time advertise total return on a cumulative,
average, year-by-year or other basis for various specified periods by means of
quotations, charts, graphs or schedules. In addition to the above, each Fund
may from time to time advertise its performance relative to certain
performance rankings and indices.

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<PAGE>

Tax equivalent yield represents the yield an investor would have to earn to
equal, after taxes, the Short Duration Tax-Free Fund's tax-free yield. Tax
equivalent yield is calculated by dividing the Short Duration Tax-Free Fund's
tax-exempt yield by one minus a stated federal and/or state tax rate.

SHARES OF THE TRUST

Each Fund is a series of the 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 to create and classify shares of beneficial interest in
separate series, without further action by shareholders. Additional series may
be added in the future. The Trustees have authorization to classify or
reclassify any series or portfolio of shares into one or more classes. The
Short Duration Government, Short Duration Tax-Free and Core Fixed Income Funds
each offer Institutional Shares, Administration Shares and Service Shares. The
Adjustable Rate Government Fund offers Institutional Shares, Administration
Shares, Service Shares and Class A shares.

As of November 30, 1995, the shareholders listed below owned beneficially
and of record 25% or more of the outstanding shares of such Fund: Short
Duration Government Fund--State Street Bank & Trust Company--

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<PAGE>

Goldman Sachs Employee Trust--One Enterprise Drive, No. Quincy, MA 02171
(30.64%) and Short Duration Tax-Free Fund--MGIC, Attn: James McGinnis, P.O.
Box 297, Milwaukee, WI 53201 (27.16%).

TAXATION

FEDERAL TAXES

The Short Duration Tax-Free Fund intends to satisfy certain requirements of
the Code so that it may distribute the tax-exempt interest it receives as
"exempt-interest dividends," as defined in the Code. If such requirements are
satisfied, distributions of the Short Duration Tax-Free Fund that are
attributable to interest on tax-exempt obligations and that the Fund properly
designates as exempt-interest dividends will be exempt from regular federal
income tax, although all or a portion of such a distribution may be subject to
the federal alternative minimum tax and the entire distribution may be
includable in the tax base for determining taxability of social security or
railroad retirement benefits. Persons who are "substantial users" (or related
persons to such substantial users) of facilities financed by industrial
development or certain private activity bonds should consult

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<PAGE>

their own tax advisers before purchasing shares of the Short Duration Tax-Free
Fund. Interest on indebtedness incurred or continued to purchase or carry
shares of the Short Duration Tax-Free Fund is not deductible to the extent
attributable to the Short Duration Tax-Free Fund's distributions that are
exempt-interest dividends.

Dividends paid by a Fund from taxable net investment income, certain net
realized foreign exchange gains, the excess of net short-term capital gain
over net long-term capital loss and original issue discount (except tax-exempt
original issue discount earned by the Short Duration Tax-Free Fund) or market
discount income will be taxable to shareholders as ordinary income. Dividends
paid by a 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 a 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 Funds for federal income tax purposes.

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 taxable distributions, redemptions
and exchanges if they fail to furnish their correct taxpayer identification
number and certain certifications required by the Internal Revenue Service 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 non-resident 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 Funds.

OTHER TAXES

ADDITIONAL INFORMATION

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ADMINISTRATION PLAN

The Trust, on behalf of the Funds, has adopted an Administration Plan with
respect to the Administration Shares which authorizes a Fund to compensate
Service Organizations for providing account administration services to their
customers who are beneficial owners of such Shares. The Trust, on behalf of
the Funds, enters into agreements with Service Organizations which purchase
Administration Shares on behalf of their customers ("Service Agreements"). The
Service Agreements provide for compensation to the Service Organizations in an
amount up to 0.25% (on an annualized basis) of the average daily net assets of
the Administration Shares of the Fund attributable to or held in the name of
the Service Organization for its customers. The services provided by the
Service Organizations may include acting, directly or through an agent, as the
sole shareholder of record, maintaining account records for customers and
processing orders to purchase, redeem or exchange Administration Shares for
customers.

For the fiscal year ended October 31, 1995, the Trust, on behalf of the
Adjustable Rate Government, Short Duration Government and Short Duration Tax-
Free Funds, paid the Service Organizations fees at the annual rate of 0.25% of
each Fund's average daily net assets attributable to the Administration
Shares. No Administration Shares of the Core Fixed Income Fund were
outstanding during the period.

Holders of Administration Shares of a Fund bear all expenses and fees paid
to Service Organizations with respect to such Shares as well as any other
expenses which are directly attributable to such Shares.

Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of Administration Shares in
connection with their customer accounts. These fees would be in addition to
any amounts received by the Service Organization under a Service Agreement and
may affect the return earned on an investment in the Fund. The Trust, on
behalf of the Funds, accrues payments made pursuant to a Service Agreement
daily. All inquiries of beneficial owners of Administration Shares should be
directed to such owners' Service Organization.

REPORTS TO SHAREHOLDERS

Recordholders of Administration Shares of the Funds will receive an annual
report containing audited financial statements and a semi-annual report. Each
recordholder of Administration Shares will also be provided with a printed
confirmation for each transaction in its account and a monthly account
statement. A year-to-date statement for any account will be provided to a
Service Organization upon request made to Goldman Sachs.

Service Organizations will be responsible for providing services similar to
those described above to their customers who are the beneficial owners of such
Shares. For example, Service Organizations are responsible for providing each
customer exercising investment discretion with monthly statements with respect
to such customer's account in lieu of an immediate confirmation of each
transaction.

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PURCHASE OF ADMINISTRATION SHARES

It is expected that all direct purchasers of Administration Shares of the
Funds will be Service Organizations or their nominees. Customers of Service
Organizations may invest in Administration Shares only through their Service
Organizations. Administration Shares may be purchased by a Service
Organization through Goldman Sachs at the net asset value per share next
determined after receipt of an order. No sales load will be charged. If, by
3:00 p.m. Chicago time (4:00 p.m. New York time), an order is received from a
Service Organization by Goldman Sachs, the price per share will be the net
asset value per share computed on the day the purchase order is received. See
"Net Asset Value". Purchases of Administration Shares of the Funds must be
settled within three (3) Business Days of the receipt of a complete purchase
order. Payment of the proceeds of redemption of shares purchased by check may
be delayed for a period of time as described under "Redemption of
Administration Shares".

The Service Organizations are responsible for the timely transmittal of
purchase orders to Goldman Sachs and payments to Northern or Goldman Sachs. In
order to facilitate timely transmittal, the Service Organizations have
established times by which purchase orders and payments must be received by
them.

PURCHASE PROCEDURES

Purchase of Administration Shares by a Service Organization 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 a Service Organization 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 -- Name of Fund" and should be
directed to Goldman Sachs Trust -- Name of Fund, c/o GSAM Shareholder
Services, 4900 Sears Tower, Chicago, Illinois 60606.

OTHER PURCHASE INFORMATION

The Funds do not have any minimum purchase or account requirements with
respect to Administration Shares. A Service Organization may, however, impose
a minimum amount for initial and subsequent investments in Administration
Shares, and may establish other requirements such as a minimum required
account balance. A Service Organization may effect redemptions of noncomplying
accounts, and may impose a charge for any special services rendered to its
customers. Customers should contact their Service Organization for further
information concerning such requirements and charges.

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 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.

33
<PAGE>

The Funds reserve the right to redeem Administration Shares of any Service
Organization whose account balance is less than $100 as a result of earlier
redemptions. Such redemptions will not be implemented if the value of such
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 Service Organizations whose Administration Shares are being redeemed
to allow them to purchase sufficient additional Administration Shares to avoid
such redemption.

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

EXCHANGE PRIVILEGE

Administration Shares of the Funds may be exchanged by Service Organizations
for (i) Administration Shares of any other mutual fund sponsored by Goldman
Sachs and designated as an eligible fund for this purpose and (ii) the
corresponding 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 -- Name of 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.
Administration Shares acquired by telephone exchange must be registered in the
same name(s) and have the same address as Administration Shares of the Fund
for which the exchange is being made.

In an effort to prevent unauthorized or fraudulent exchanges by telephone,
Goldman Sachs employs reasonable procedures as set forth under "Redemption of
Administration Shares" to confirm that such instructions are genuine. In times
of drastic economic or market changes the telephone exchange privilege may be
difficult to implement. For federal income tax purposes, an exchange is
treated as a sale of the Administration Shares surrendered in the exchange, on
which an investor may realize a gain or loss, followed by a purchase of
Administration Shares or the corresponding 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.
Exchanges are available only 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 the recordholders of Administration Shares and is
subject to certain limitations. See "Purchase of Administration Shares".

REDEMPTION OF ADMINISTRATION SHARES

The Funds will redeem their Administration Shares upon request of the
recordholder of such Shares 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 Administration Shares to be redeemed were
recently purchased by check, a Fund may delay transmittal of redemption
proceeds until such time as it has assured itself that good

34
<PAGE>

funds have been collected for the purchase of such Administration 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 cover page of this Prospectus. A Service Organization may request
redemptions by telephone if the optional telephone redemption privilege is
elected on the Account Information Form. It may be difficult to implement
redemptions by telephone in times of drastic economic or market changes.

In an effort to prevent unauthorized or fraudulent redemption 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 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
Funds, the Trust nor Goldman Sachs will be responsible for the authenticity of
redemption or exchange instructions received by telephone. If Goldman Sachs
receives a redemption request by 3:00 p.m. Chicago time, the Administration
Shares to be redeemed earn dividends declared on the day the request is
received.

The Funds will arrange for the proceeds of redemptions effected by any means
to be wired to the recordholder of Administration Shares. Redemption proceeds
paid by wire transfer will normally be wired on the next Business Day in
Federal Funds (for a total one-day delay), but may be paid up to three (3)
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. Once wire transfer instructions have been given by Goldman Sachs,
neither the Funds, the Trust nor Goldman Sachs assumes any further
responsibility for the performance of intermediaries or the customer's Service
Organization. In the transfer process, if a problem with such performance
arises, the customer should deal directly with such intermediaries or Service
Organizations.

Service Organizations are responsible for the timely transmittal of
redemption requests by their customers to the Transfer Agent. In order to
facilitate timely transmittal of redemption requests, Service Organizations
have established times by which redemption requests must be received by them.
Additional documentation may be required when deemed appropriate by a Service
Organization.

35
<PAGE>

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

GOLDMAN SACHS ASSET
MANAGEMENT
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004

GOLDMAN SACHS FUNDS
MANAGEMENT, L.P.
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004

GOLDMAN, SACHS & CO.
DISTRIBUTOR
85 BROAD STREET
NEW YORK, NEW YORK 10004

GOLDMAN, SACHS & CO.
TRANSFER AGENT
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606

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

FIP-1AD-GST/10K/0396
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE GOLDMAN SACHS

FIXED INCOME

PORTFOLIOS

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

PROSPECTUS

ADMINISTRATION SHARES

[LOGO] GOLDMAN SACHS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

- --------------------------------------------------------------------------------
PROSPECTUS
March 1, 1996

TABLE OF CONTENTS

PAGE
----

Fund Highlights........................ 1
Fees and Expenses...................... 5
Financial Highlights................... 7
Investment Objectives and Policies..... 11
Description of Securities.............. 15
Risk Factors........................... 22
Investment Techniques.................. 23
Investment Restrictions................ 27
Portfolio Turnover..................... 27
Management............................. 28
Dividends.............................. 31
Net Asset Value........................ 32
Performance Information................ 32
Shares of the Trust.................... 33
Taxation............................... 34
Additional Information................. 36
Reports to Shareholders................ 37
Purchase of Institutional Shares....... 37
Exchange Privilege..................... 39
Redemption of Institutional Shares..... 40
Appendix............................... A-1
Account Application

GOLDMAN SACHS TRUST
INSTITUTIONAL SHARES

GS ADJUSTABLE RATE GOVERNMENT FUND

GS SHORT DURATION GOVERNMENT FUND

GS SHORT DURATION TAX-FREE FUND

Seeks a high level of current income,
consistent with relatively low volatil-
ity of principal, that is exempt from
regular federal income tax. The Fund in-
vests primarily in municipal securities.

GS CORE FIXED INCOME FUND

Seeks a total return consisting of capi-
tal appreciation and income that exceeds
the total return of the Lehman Brothers
Aggregate Bond Index. The Fund invests
primarily in fixed income securities,
including securities issued or guaran-
teed by the U.S. Government, its agen-
cies, instrumentalities or sponsored en-
terprises, corporate securities, mort-
gage-backed securities and asset-backed
securities.

GOLDMAN SACHS GLOBAL INCOME FUND

(continued on next page)

----------

(cover continued)

THE CORE FIXED INCOME AND GLOBAL INCOME FUNDS INVEST IN SECURITIES OF
FOREIGN ISSUERS AND FOREIGN CURRENCIES THAT ENTAIL CERTAIN RISKS NOT
CUSTOMARILY ASSOCIATED WITH INVESTING IN DOLLAR-DENOMINATED FIXED INCOME
SECURITIES. THESE FUNDS ARE INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS
ASSOCIATED WITH THEIR INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS.
SEE "DESCRIPTION OF SECURITIES".

THE ADJUSTABLE RATE GOVERNMENT AND SHORT DURATION GOVERNMENT FUNDS' NET
ASSET VALUE AND YIELD ARE NOT GUARANTEED BY THE U.S. GOVERNMENT OR BY ITS
AGENCIES, INSTRUMENTALITIES OR SPONSORED ENTERPRISES.

Goldman Sachs Funds Management, L.P. ("GSFM"), New York, New York, an
affiliate of Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment
adviser to the Adjustable Rate Government and Short Duration Government Funds.
Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman Sachs, serves as investment adviser to the Short
Duration Tax-Free and Core Fixed Income Funds and investment adviser and
administrator to the Global Income Fund. Goldman Sachs Asset Management
International ("GSAMI"), London, England, an affiliate of Goldman Sachs,
serves as subadviser to the Global Income Fund. GSAM, GSFM and GSAMI are each
referred to in this Prospectus as the "Investment Adviser". Goldman Sachs
serves as each Fund's distributor and transfer agent.

<PAGE>

FUND HIGHLIGHTS

The following is intended to highlight certain information contained in
this Prospectus and is qualified in its entirety by the more detailed
information contained herein.

WHAT IS THE GOLDMAN SACHS TRUST?

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS?

<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
ADJUSTABLE RATE SHORT DURATION CORE FIXED
GOVERNMENT GOVERNMENT SHORT DURATION INCOME GLOBAL INCOME
FUND FUND TAX-FREE FUND FUND FUND
--------------- -------------- --------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT OBJECTIVES A high level A high level A high level of Total return A high total
of current of current current income, consisting of return, emphasizing
income, income, and consistent with capital current income and,
consistent secondarily, low volatility appreciation to a lesser extent,
with low in seeking of principal, and income that providing
volatility of current that is exempt exceeds the opportunities for
principal. income, may from regular total return of capital
also consider federal income the Lehman appreciation.
the potential tax. Brothers
for capital Aggregate Bond
gain. Index.
------------------------------------------------------------------------------------------------------------
DURATION Target = 6- Target = 2- Target = Lehman Target = Lehman Target = J.P.
month to 1- year U.S. Brothers 3-year Brothers Morgan Global
year U.S. Treasury Municipal Bond Aggregate Bond Government Bond
Treasury Security plus Index plus or Index plus or Index (hedged) plus
Security or minus .5 minus .5 years minus 1year or minus 2.5 years
years
Maximum = 2 Maximum = 3 Maximum = 4 Maximum = 6
years years years years Maximum = 7.5 years
------------------------------------------------------------------------------------------------------------
APPROXIMATE INTEREST 9-month note 2-year bond 3-year bond 5-year bond 6-year bond
RATE SENSITIVITY
- -------------------------------------------------------------------------------------------------------------
</TABLE>

(continued)

1
<PAGE>

<TABLE>
<CAPTION>
ADJUSTABLE RATE SHORT DURATION CORE FIXED
GOVERNMENT GOVERNMENT SHORT DURATION INCOME GLOBAL INCOME
FUND FUND TAX-FREE FUND FUND FUND
----------------- -------------- -------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT SECTOR At least 65% of At least 65% At least 80% At least 65% of Securities of
total assets in of total of net assets assets in fixed U.S. and
securities issued assets in U.S. in Municipal income securities, foreign
or guaranteed by Government Securities. including U.S. governments and
the U.S. Securities and Government corporations.
Government, its repurchase Securities,
agencies, agreements corporate,
instrumentalities collateralized mortgage-backed
or sponsored by such and asset-backed
enterprises securities. securities.
("U.S. Government
Securities") that
are adjustable
rate mortgage
pass-through
securities and
other mortgage
securities with
periodic interest
rate resets.
---------------------------------------------------------------------------------------------------------
CREDIT QUALITY U.S. Government U.S. Minimum = A Minimum = BBB/Baa Minimum = AA/Aa
Securities Government Minimum for or A if
Securities foreign sovereign
securities = AA/Aa issuer
At least 50% =
AAA/Aaa
---------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS Fixed rate Mortgage pass- U.S. Foreign fixed Mortgage and
mortgage pass- through Government income, municipal asset- backed
through securities and Securities and and convertible securities,
securities and other repurchase securities, foreign
repurchase securities agreements foreign currencies currencies and
agreements representing collateralized and repurchase repurchase
collateralized by an interest in by such agreements agreements
U.S. Government or securities. collateralized by collateralized
Securities. collateralized U.S. Government by U.S.
by mortgage Securities. Government
loans. Securities or
certain foreign
government
securities.
---------------------------------------------------------------------------------------------------------
BENCHMARK 6-month and 1- 2-Year U.S. Lehman Lehman Brothers JP Morgan
year U.S. Treasury Brothers 3- Aggregate Bond Global
Treasury security security Year Municipal Index Government Bond
Bond Index Index (hedged)
</TABLE>

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

WHAT ARE THE RISK FACTORS AND SPECIAL CHARACTERISTICS THAT I SHOULD CONSIDER
BEFORE INVESTING?

Each Fund's share price will fluctuate with market, economic and, to the
extent applicable to the Core Fixed Income and Global Income Funds, foreign
exchange conditions, so that an investment in any of the Funds may be worth
more or less when redeemed than when purchased. None of the Funds should be
relied upon as a complete investment program. There can be no assurance that
a Fund's investment objectives will be achieved. See "Risk Factors".

2
<PAGE>

Volatility of a security's market value will differ depending upon the
security's duration, the issuer and the type of instrument.

WHO MANAGES THE FUNDS?

Goldman Sachs Funds Management, L.P. serves as the Investment Adviser to
the Adjustable Rate Government and Short Duration Government Funds. Goldman
Sachs Asset Management acts as administrator to the Global Income Fund and
serves as the Investment Adviser to the Short Duration Tax-Free, Core Fixed
Income and Global Income Funds. Goldman Sachs Asset Management International
serves as subadviser to the Global Income Fund. As of January 31, 1996, the
Investment Advisers, together with their affiliates, acted as investment
adviser, administrator or distributor for assets in excess of $57 billion.

3
<PAGE>

WHO DISTRIBUTES THE FUNDS' SHARES?

Goldman Sachs acts as distributor of each Fund's shares.

WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment is $50,000 ($1,000,000 for the Global
Income Fund) in Institutional Shares of the Fund alone or in combination
with Institutional Shares (or the corresponding class) of any other mutual
fund sponsored by Goldman Sachs and designated as an eligible fund for this
purpose.

HOW DO I PURCHASE INSTITUTIONAL SHARES?

You may purchase Institutional Shares of the Funds through Goldman Sachs.
Institutional Shares are purchased at the current net asset value without
any sales load. See "Purchase of Institutional Shares".

HOW DO I SELL MY INSTITUTIONAL SHARES?

You may redeem Institutional Shares upon request on any Business Day, as
defined under "Additional Information", at the net asset value next
determined after receipt of such request in proper form. See "Redemption of
Institutional Shares".

HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?

<TABLE>
<CAPTION>
INVESTMENT INCOME
DIVIDENDS
------------------ CAPITAL GAINS
FUND DECLARED PAID DISTRIBUTION
---- ------------------ -------------
<S> <C> <C> <C>
Adjustable Rate Government.................. Daily Monthly Annually
Short Duration Government................... Daily Monthly Annually
Short Duration Tax-Free..................... Daily Monthly Annually
Core Fixed Income........................... Daily Monthly Annually
Global Income............................... Monthly Monthly Annually
</TABLE>

You may receive dividends in additional shares of the same class of the
Fund in which you have invested or you may elect to receive cash, shares of
the same class of other mutual funds sponsored by Goldman Sachs or the
corresponding class of any portfolio of Goldman Sachs Money Market Trust.
For further information concerning dividends, see "Dividends".

4
<PAGE>

FEES AND EXPENSES

(INSTITUTIONAL SHARES)

<TABLE>
<CAPTION>
SHORT SHORT
ADJUSTABLE RATE DURATION DURATION CORE FIXED GLOBAL
GOVERNMENT GOVERNMENT TAX-FREE INCOME INCOME
FUND FUND FUND FUND FUND
--------------- ---------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on
Purchases............ none none none none none
Maximum Sales Charge
Imposed on Reinvested
Dividends............ none none none none none
Redemption Fees....... none none none none none
Exchange Fees......... none none none none none
ANNUAL FUND OPERATING
EXPENSES:
(as a percentage of
average daily net
assets)
Management Fees (after
fee adjustments)..... 0.40%/1/ 0.40%/2/ 0.40%/3/ 0.40%/4/ 0.59%/5/
Distribution (Rule
12b-1) Fees.......... none none none none none
Other Expenses (after
applicable
limitations)......... 0.05%/1/ 0.05%/2/ 0.05%/3/ 0.05%/4/ 0.06%/5/
---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES
(AFTER FEE AND
EXPENSE
LIMITATIONS)......... 0.45%/1/ 0.45%/2/ 0.45%/3/ 0.45%/4/ 0.65%/5/
==== ==== ==== ==== ====
</TABLE>

EXAMPLE

You would pay the following expenses on a hypothetical $1,000 investment
assuming (i) a 5% annual return and (ii) redemption at the end of each time
period.

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Adjustable Rate Government...................... $ 5 $14 $25 $57
Short Duration Government....................... $ 5 $14 $25 $57
Short Duration Tax-Free......................... $ 5 $14 $25 $57
Core Fixed Income............................... $ 5 $14 $25 $57
Global Income................................... $ 7 $21 $36 $81
</TABLE>
- --------

/1Based/upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed to reduce or limit certain "Other Expenses"
of Adjustable Rate Government Fund (excluding advisory fees, taxes, interest
and brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.05% of the Fund's average
daily net assets. The Investment Adviser has no current intention of
modifying or discontinuing any of such limitations but may do so in the
future at its discretion. Without such limitations, "Other Expenses" and
"Total Operating Expenses" attributable to Institutional Shares would be
0.13% and 0.53%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1995 (expressed as a percentage of average daily net assets after fee
adjustments) were "Management Fees", "Other Expenses" and "Total Operating
Expenses" of 0.40%, 0.06% and 0.46%, respectively.

5
<PAGE>

Investment Adviser has no current intention of modifying or discontinuing any
of such limitations but may do so in the future at its discretion. Without
such limitations, "Management Fees", "Other Expenses" and "Total Operating
Expenses" attributable to Institutional Shares would be 0.50%, 0.22% and
0.72%, respectively. Annual operating expenses incurred by Institutional
Shares of the Fund during the fiscal year ended October 31, 1995 (expressed
as a percentage of average daily net assets after fee adjustments) were
"Management Fees", "Other Expenses" and "Total Operating Expenses" of 0.40%,
0.05% and 0.45%, respectively.

/3/Based upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed to reduce or limit certain "Other Expenses"
of Short Duration Tax-Free Fund (excluding advisory fees, taxes, interest
and brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.05% of the Fund's average
daily net assets. The Investment Adviser has no current intention of
modifying or discontinuing any of such limitations but may do so in the
future at its discretion. Without such limitations, "Other Expenses" and
"Total Operating Expenses" attributable to Institutional Shares would be
0.37% and 0.77%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1995 (expressed as a percentage of average daily net assets after fee
adjustments) were "Management Fees", "Other Expenses" and "Total Operating
Expenses" of 0.40%, 0.05% and 0.45%, respectively.

/4/Based upon estimated amounts for the current fiscal year. The Investment
Adviser has voluntarily agreed to reduce or limit certain "Other Expenses"
of Core Fixed Income Fund (excluding advisory fees, taxes, interest and
brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.05% of the Fund's average
daily net assets. The Investment Adviser has no current intention of
modifying or discontinuing any of such limitations but may do so in the
future at its discretion. Without such limitations, "Other Expenses" and
"Total Operating Expenses" attributable to Institutional Shares would be
0.56% and 0.96%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1995 (expressed as a percentage of average daily net assets after fee
adjustments) were "Management Fees", "Other Expenses" and "Total Operating
Expenses" of 0.40%, 0.05% and 0.45%, respectively.

/5/Based upon estimated amounts for the current fiscal year. "Management Fees"
paid by Global Income Fund include advisory, subadvisory and administration
fees of 0.12%, 0.32% and 0.15% respectively. The Investment Advisers have
voluntarily agreed to limit their advisory and subadvisory fees to such
amounts. Without such limitations, advisory and subadvisory fees would be
0.25% and 0.50%, respectively. The Investment Advisers have also voluntarily
agreed to reduce or limit certain "Other Expenses" of the Global Income Fund
(excluding advisory, subadvisory and administration fees, taxes, interest
and brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.06% of the Fund's average
daily net assets. Goldman Sachs and the Investment Advisers have no current
intention of modifying or discontinuing any of such limitations but may do
so in the future at their discretion. Without such limitations, Global
Income Fund's "Management Fees", "Other Expenses" and "Total Operating
Expenses" attributable to Institutional Shares would be 0.90%, 0.14% and
1.04%, respectively. Annual operating expenses incurred by Institutional
Shares of the Fund during the fiscal year ended October 31, 1995 (expressed
as a percentage of average daily net assets after fee adjustments) were
"Management Fees", "Other Expenses" and "Total Operating Expenses" of 0.55%,
0.10% and 0.65%, respectively.

The information set forth in the foregoing table and hypothetical example
relates only to Institutional Shares of the Funds. Short Duration Government
Fund, Short Duration Tax-Free Fund and Core Fixed Income Fund also offer
Administration Shares and Service Shares; Adjustable Rate Government Fund also
offers Administration Shares, Service Shares and Class A Shares; and Global
Income Fund also offers Service Shares, Class A Shares and Class B Shares. The
other classes of the Funds are subject to different fees and expenses (which
affects performance), have different minimum investment requirements and are
entitled to different services. Information regarding any other class of the
Funds may be obtained from your sales representative or from Goldman Sachs by
calling the number on the back cover page of this Prospectus.

6
<PAGE>

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------
NET REALIZED NET
AND REALIZED IN EXCESS
UNREALIZED AND FROM NET OF NET
GAIN (LOSS) UNREALIZED REALIZED REALIZED
ON GAIN (LOSS) TOTAL GAIN ON GAIN ON
NET ASSET INVESTMENT, ON FOREIGN INCOME INVESTMENT, IN EXCESS INVESTMENT,
VALUE AT NET OPTION AND CURRENCY (LOSS) FROM FROM NET OPTION AND OF NET OPTIONS AND
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT INVESTMENT FUTURES INVESTMENT FUTURES
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS INCOME INCOME INCOME TRANSACTIONS
--------- ---------- ------------ ------------ ----------- ---------- ----------- ---------- ------------
ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $ 9.74 $0.5630(c) $0.0717 (c) -- $0.6347(c) $(0.5759) $-- $(0.0287) $--
1995--Administration
Shares.......... 9.74 0.5366(c) 0.0737 (c) -- 0.6103(c) (0.5528) -- (0.0275) --
1995--Class A
Shares (d)...... 9.79 0.2721(c) (0.0090)(c) -- 0.2631(c) (0.2697) -- (0.0134) --
1994--Institutional
Shares.......... 10.00 0.4341(c) (0.2455)(c) -- 0.1886(c) (0.4486) -- -- --
1994--Administration
Shares.......... 10.00 0.4211(c) (0.2572)(c) -- 0.1639(c) (0.4239) -- -- --
1993--Institutional
Shares.......... 10.04 0.4397 (0.0376)(a) -- 0.4021 (0.4397) -- (0.0024) --
1993--Administration
Shares(f)....... 10.02 0.2146 (0.0173)(a) -- 0.1973 (0.2146) -- (0.0027) --
1992--Institutional
Shares.......... 10.03 0.5599 (0.0029)(a) -- 0.5570 (0.5470) -- -- --

<CAPTION>
FOR THE PERIOD JULY 17, 1991(g) THROUGH OCTOBER 31,
1991--Institutional
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares.......... 10.00 0.1531 0.0322 (a) -- 0.1853 (0.1553) -- -- --

<CAPTION>
RATIO OF
NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS
FROM TOTAL (DECREASE) NET ASSET NET INCOME AT END
PAID DISTRIBUTIONS IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF
IN TO ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD
CAPITAL SHAREHOLDERS VALUE PERIOD RETURN(b) NET ASSETS NET ASSETS RATE(j) (IN 000's)
------- ------------- --------- --------- --------- ---------- ----------- --------- ----------
ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $-- $(0.6046) $0.0301 $ 9.77 6.75% 0.46% 5.77% 24.12% $ 657,358
1995--Administration
Shares.......... -- (0.5803) 0.0300 9.77 6.48 0.71 5.50 24.12 3,572
1995--Class A
Shares (d)...... -- (0.2831) (0.0200) 9.77 2.74 0.69(e) 5.87(e) 24.12 15,203
1994--Institutional
Shares.......... -- (0.4486) (0.2600) 9.74 1.88 0.46 4.38 37.81 942,523
1994--Administration
Shares.......... -- (0.4239) (0.2600) 9.74 1.63 0.71 4.27 37.81 6,960
1993--Institutional
Shares.......... -- (0.4421) (0.0400) 10.00 4.13 0.45 4.36 103.74 2,760,871
1993--Administration
Shares(f)....... -- (0.2173) (0.0200) 10.00 2.01(k) 0.70(e) 3.81(e) 103.74 5,326
1992--Institutional
Shares.......... -- (0.5470) 0.0100 10.04 6.12 0.42 5.61 286.40 2,145,064

<CAPTION>
FOR THE PERIOD JULY 17, 1991(g) THROUGH OCTOBER 31,
1991--Institutional
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares.......... -- (0.1553) 0.0300 10.03 2.14(k) 0.20(e) 7.31(e) 145.67(e) 239,642

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
---------------------
RATIO OF
NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
---------- ----------
ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C>
1995--Institutional
Shares.......... 0.53% 5.70%
1995--Administration
Shares.......... 0.78 5.43
1995--Class A
Shares (d)...... 1.01(e) 5.55(e)
1994--Institutional
Shares.......... 0.49 4.35
1994--Administration
Shares.......... 0.74 4.24
1993--Institutional
Shares.......... 0.48 4.33
1993--Administration
Shares(f)....... 0.73(e) 3.78(e)
1992--Institutional
Shares.......... 0.55 5.48

<CAPTION>
FOR THE PERIOD JULY 17, 1991(g) THROUGH OCTOBER 31,
<S> <C> <C>
1991--Institutional
Shares.......... 1.02(e) 6.49(e)
</TABLE>

7
<PAGE>

INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------
NET REALIZED NET
AND REALIZED IN EXCESS
UNREALIZED AND FROM NET OF NET
GAIN (LOSS) UNREALIZED REALIZED REALIZED
ON GAIN (LOSS) TOTAL GAIN ON GAIN ON
NET ASSET INVESTMENT, ON FOREIGN INCOME INVESTMENT, IN EXCESS INVESTMENT,
VALUE AT NET OPTION AND CURRENCY (LOSS) FROM FROM NET OPTION AND OF NET OPTIONS AND
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT INVESTMENT FUTURES INVESTMENT FUTURES
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS INCOME INCOME INCOME TRANSACTIONS
--------- ---------- ------------ ------------ ----------- ---------- ----------- ---------- ------------
SHORT DURATION GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $ 9.64 $0.6652(c) $ 0.1666 (c) $-- $0.8318(c) $(0.6518) $ -- $ -- $--
1995--Administration
Shares.......... 9.64 0.2384(c) (0.0433)(c) -- 0.1951(c) (0.2051) -- -- --
1994--Institutional
Shares.......... 10.14 0.5628(c) (0.4592)(c) -- 0.1036(c) (0.5598) (0.0438) -- --
1994--Administration
Shares.......... 10.14 0.5329(c) (0.4539)(c) -- 0.0790(c) (0.5352) (0.0438) -- --
1993--Institutional
Shares.......... 10.16 0.5627 (0.0135)(a) -- 0.5492 (0.5627) -- (0.0065) --
1993--Administration
Shares(f)....... 10.23 0.2725 (0.0900)(a) -- 0.1825 (0.2725) -- -- --
1992--Institutional
Shares.......... 10.22 0.6703 (0.0600)(a) -- 0.6103 (0.6703) -- -- --
1991--Institutional
Shares.......... 10.00 0.8020 0.2200 (a) -- 1.0220 (0.8020) -- -- --
1990--Institutional
Shares.......... 10.07 0.8300 (0.0700)(a) -- 0.7600 (0.8300) -- -- --
1989--Institutional
Shares.......... 10.10 0.8800 -- -- 0.8800 (0.8800) -- -- --

<CAPTION>
FOR THE PERIOD AUGUST 15, 1988(g) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988--Institutional
Shares.......... 10.00 0.1800 0.1000(a) -- 0.2800 (0.1800) -- -- --

<CAPTION>
RATIO OF
NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS
FROM TOTAL (DECREASE) NET ASSET NET INCOME AT END
PAID DISTRIBUTIONS IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF
IN TO ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD
CAPITAL SHAREHOLDERS VALUE PERIOD RETURN(b) NET ASSETS NET ASSETS RATE(j) (IN 000's)
------- ------------- --------- --------- --------- ---------- ----------- --------- ----------
SHORT DURATION GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $ -- $(0.6518) $ 0.1800 $ 9.82 8.97% 0.45% 6.87% 292.56% $103,760
1995--Administration
Shares.......... -- (0.2051) (0.0100) 9.63(h) 2.10 0.70(e) 7.91(e) 292.56 --
1994--Institutional
Shares.......... -- (0.6036) (0.5000) 9.64 0.99 0.45 5.69 289.79 193,095
1994--Administration
Shares.......... -- (0.5790) (0.5000) 9.64 0.73 0.70 5.38 289.79 730
1993--Institutional
Shares.......... -- (0.5692) (0.0200) 10.14 5.55 0.45 5.46 411.66 359,708
1993--Administration
Shares(f)....... -- (0.2725) (0.0900) 10.14 1.74 0.70(e) 4.84(e) 411.66 16,490
1992--Institutional
Shares.......... -- (0.6703) (0.0600) 10.16 6.24 0.45 6.60 216.07 277,927
1991--Institutional
Shares.......... -- (0.8020) 0.2200 10.22 10.93 0.45 8.25 155.44 158,848
1990--Institutional
Shares.......... -- (0.8300) (0.0700) 10.00 8.23 0.45 8.62 173.21 68,995
1989--Institutional
Shares.......... (0.0300) (0.9100) (0.0300) 10.07 9.08 0.46 8.71 137.37 31,015

<CAPTION>
FOR THE PERIOD AUGUST 15, 1988(g) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988--Institutional
Shares.......... -- (0.1800) 0.1000 10.10 3.30 0.55(e) 8.55(e) 167.00(e) 39,052

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
---------------------
RATIO OF
NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
---------- ----------
SHORT DURATION GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C>
1995--Institutional
Shares.......... 0.72% 6.60%
1995--Administration
Shares.......... 0.90(e) 7.71(e)
1994--Institutional
Shares.......... 0.59 5.55
1994--Administration
Shares.......... 0.84 5.24
1993--Institutional
Shares.......... 0.64 5.31
1993--Administration
Shares(f)....... 0.80(e) 4.74(e)
1992--Institutional
Shares.......... 0.69 6.36
1991--Institutional
Shares.......... 0.79 7.91
1990--Institutional
Shares.......... 0.95 8.12
1989--Institutional
Shares.......... 1.39 7.78

<CAPTION>
FOR THE PERIOD AUGUST 15, 1988(g) THROUGH OCTOBER 31,
1988--Institutional
<S> <C> <C>
Shares.......... 1.42(e) 7.68(e)
</TABLE>

8
<PAGE>

INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------
NET REALIZED NET
AND REALIZED IN EXCESS
UNREALIZED AND FROM NET OF NET
GAIN (LOSS) UNREALIZED REALIZED REALIZED
ON GAIN (LOSS) TOTAL GAIN ON GAIN ON
NET ASSET INVESTMENT, ON FOREIGN INCOME INVESTMENT, IN EXCESS INVESTMENT,
VALUE AT NET OPTION AND CURRENCY (LOSS) FROM FROM NET OPTION AND OF NET OPTIONS AND
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT INVESTMENT FUTURES INVESTMENT FUTURES
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS INCOME INCOME INCOME TRANSACTIONS
--------- ---------- ------------ ------------ ----------- ---------- ----------- ---------- ------------
SHORT DURATION TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $ 9.79 $0.4235(c) $0.1500 (c) $-- $0.5735 (c) $(0.4235) $ -- $-- $--
1995--Administration
Shares.......... 9.79 0.3989(c) 0.1500 (c) -- 0.5489 (c) (0.3989) -- -- --
1995--Service
Shares.......... 9.79 0.3744(c) 0.1600 (c) -- 0.5344 (c) (0.3744) -- -- --
1994--Institutional
Shares.......... 10.23 0.3787(c) (0.3575)(c) -- 0.0212 (c) (0.3787) (0.0825) -- --
1994--Administration
Shares.......... 10.23 0.3537(c) (0.3575)(c) -- (0.0038)(c) (0.3537) (0.0825) -- --
1994--Service
Shares(i)....... 9.86 0.0475(c) (0.0700)(c) -- (0.0225)(c) (0.0475) -- -- --
1993--Institutional
Shares.......... 9.93 0.3834 0.3000 (a) -- 0.6834 (0.3834) -- -- --
1993--Administration
Shares(i)....... 10.16 0.1555 0.0720 (a) -- 0.2275 (0.1555) -- -- --

<CAPTION>
FOR THE PERIOD OCTOBER 1, 1992(g) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992--Institutional
Shares.......... 10.00 0.0341 (0.0700)(a) -- (0.0359) (0.0341) -- -- --

<CAPTION>
CORE FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... 9.24 0.6423 0.7610 -- 1.4033 (0.6433) -- -- --

<CAPTION>
FOR THE PERIOD JANUARY 5, 1994(g) THROUGH OCTOBER 31,
1994--Institutional
Shares.......... 10.00 0.4648 (0.7617) -- (0.2969) (0.4648) -- -- --

<CAPTION>
RATIO OF
NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS
FROM TOTAL (DECREASE) NET ASSET NET INCOME AT END
PAID DISTRIBUTIONS IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF
IN TO ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD
CAPITAL SHAREHOLDERS VALUE PERIOD RETURN(b) NET ASSETS NET ASSETS RATE(j) (IN 000's)
------- ------------- --------- --------- --------- ---------- ----------- --------- ----------
SHORT DURATION TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... $-- $(0.4235) $0.1500 $9.94 5.98% 0.45% 4.31% 259.52% $58,389
1995--Administration
Shares.......... -- (0.3989) 0.1500 9.94 5.76 0.70 4.14 259.52 46
1995--Service
Shares.......... -- (0.3744) 0.1600 9.95 5.59 0.95 3.87 259.52 454
1994--Institutional
Shares.......... -- (0.4612) (0.4400) 9.79 0.17 0.45 3.74 354.00 83,704
1994--Administration
Shares.......... -- (0.4362) (0.4400) 9.79 (0.11) 0.70 3.51 354.00 3,866
1994--Service
Shares(i)....... -- (0.0475) (0.0700) 9.79 (0.32)(k) 0.95(e) 4.30(e) 354.00 44
1993--Institutional
Shares.......... -- (0.3834) 0.3000 10.23 7.03 0.41 3.70 404.60 115,803
1993--Administration
Shares(i)....... -- (0.1555) 0.0720 10.23 2.28 (k) 0.70(e) 3.32(e) 404.60 911

<CAPTION>
FOR THE PERIOD OCTOBER 1, 1992(g) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992--Institutional
Shares.......... -- (0.0341) (0.0700) 9.93 (0.34)(k) 0.05(e) 4.58(e) 31.19(k) 14,601

<CAPTION>
CORE FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Institutional
Shares.......... -- (0.6433) 0.7600 10.00 15.72 0.45 6.56 383.26(j) 55,502

<CAPTION>
FOR THE PERIOD JANUARY 5, 1994(g) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994--Institutional
Shares.......... -- (0.4648) (0.7617) 9.24 (3.00) 0.45(e) 6.48(e) 288.25(j) 24,508

<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
---------------------
RATIO OF
NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
---------- ----------
SHORT DURATION TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C>
1995--Institutional
Shares.......... 0.77% 3.99%
1995--Administration
Shares.......... 1.02 3.82
1995--Service
Shares.......... 1.27 3.55
1994--Institutional
Shares.......... 0.61 3.58
1994--Administration
Shares.......... 0.86 3.35
1994--Service
Shares(i)....... 1.11(e) 4.14(e)
1993--Institutional
Shares.......... 1.06 3.05
1993--Administration
Shares(i)....... 1.07(e) 2.95(e)

<CAPTION>
FOR THE PERIOD OCTOBER 1, 1992(g) THROUGH OCTOBER 31,
<S> <C> <C>
1992--Institutional
Shares.......... 2.68(e) 1.95(e)

<CAPTION>
FOR THE PERIOD JANUARY 5, 1994(g) THROUGH OCTOBER 31,
<S> <C> <C>
1994--Institutional
Shares.......... 1.46(e) 5.47(e)
</TABLE>

9
<PAGE>

INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------
NET REALIZED NET
AND REALIZED IN EXCESS
UNREALIZED AND FROM NET OF NET
GAIN (LOSS) UNREALIZED REALIZED REALIZED
ON GAIN (LOSS) TOTAL GAIN ON GAIN ON
NET ASSET INVESTMENT, ON FOREIGN INCOME INVESTMENT, IN EXCESS INVESTMENT,
VALUE AT NET OPTION AND CURRENCY (LOSS) FROM FROM NET OPTION AND OF NET OPTIONS AND
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT INVESTMENT FUTURES INVESTMENT FUTURES
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS INCOME INCOME INCOME TRANSACTIONS
--------- ---------- ------------ ------------ ----------- ---------- ----------- ---------- ------------
GLOBAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1995--Class A
shares.......... $13.43 $0.89 $0.92 $0.15 $1.96 $(0.94) $-- $-- $--
1995--Institutional
shares (l)...... 14.09 0.22 0.34 0.06 0.62 (0.26) -- -- --
1994--Class A
shares.......... 15.07 0.84 (1.37) (0.12) (0.65) (0.22) (0.16) -- --
1993--Class A
shares.......... 14.69 0.85 1.07 (0.42) 1.50 (0.85) (0.27) -- --
1992--Class A
shares.......... 14.60 1.14 0.45 (0.36) 1.23 (1.14) -- -- --

<CAPTION>
FOR THE PERIOD AUGUST 2, 1991(g) THROUGH OCTOBER 31,
1991--Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
shares.......... 14.55 0.25 0.23 (0.19) 0.29 (0.24) -- -- --

<CAPTION>
FOR THE PERIOD AUGUST 2, 1991(g) THROUGH OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991--Class A
shares.......... -- (0.24) 0.05 14.60 2.00 0.38(k) 1.72(k) 34.22 388,744

<CAPTION>
FOR THE PERIOD AUGUST 2, 1991(g) THROUGH OCTOBER 31,
1991--Class A
<S> <C> <C>
shares.......... 0.44(k) 1.66(k)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Includes the balancing effect of calculating per share amounts.

(d) Class A shares commenced operations on May 15, 1995.

(e) Annualized.

(f) Administration share activity commenced on April 15, 1993.

(g) Commencement of operations.

(h) Short Duration Government Administration shares were redeemed in full on
February 23, 1995. Amount shown represents net asset value on February 23,
1995.

(i) Administration and service share activity commenced on May 20, 1993 and
September 20, 1994, respectively.

(j) Includes the effect of mortgage dollar roll transactions.

(k) Not annualized.

(l) Institutional shares commenced operations on August 1, 1995.

10
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

ADJUSTABLE RATE GOVERNMENT FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high level of current income, consistent with low volatility of principal.

11
<PAGE>

CREDIT QUALITY. The Fund invests in U.S. Government Securities and
repurchase agreements collateralized by such securities.

SHORT DURATION GOVERNMENT FUND

OBJECTIVE. The Fund's investment objective is to provide a high level of
current income. Secondarily, the Fund may, in seeking current income, also
consider the potential for capital gain.

CREDIT QUALITY. The Fund invests in U.S. Government Securities and
repurchase agreements collateralized by such securities.

SHORT DURATION TAX-FREE FUND

12
<PAGE>

CORE FIXED INCOME FUND

13
<PAGE>

GLOBAL INCOME FUND

OBJECTIVE. The Fund's investment objective is to provide investors with a
high total return, emphasizing current income and, to a lesser extent,
providing opportunities for capital appreciation.

INVESTMENT SECTOR. The Fund invests primarily in a portfolio of high quality
fixed income securities of U.S. and foreign issuers and enters into
transactions in foreign currencies. Under normal market conditions, the Fund
will (i) have at least 30% of its total assets, after considering the effect
of currency positions, denominated in U.S. dollars and (ii) invest in
securities of issuers in at least three countries. The Fund seeks to meet its
investment objective by pursuing investment opportunities in foreign and
domestic fixed income securities markets and by engaging in currency
transactions to enhance returns and for the purpose of hedging its portfolio.

14
<PAGE>

The fixed income securities in which the Fund may invest include: (i) U.S.
Government Securities and custodial receipts therefor; (ii) securities issued
or guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies, instrumentalities or by supranational entities (i.e.,
international organizations designated or supported by governmental entities
to promote economic reconstruction or development, such as the World Bank);
(iii) corporate debt securities; (iv) certificates of deposit and bankers'
acceptances issued or guaranteed by, or time deposits maintained at, U.S. or
foreign banks (and their branches wherever located) having total assets of
more than $1 billion; (v) commercial paper and (vi) Mortgage-Backed and Asset-
Backed Securities.

OTHER. The Fund may employ certain active management techniques to manage
the duration and term structure of the Fund, to seek to hedge its exposure to
foreign currencies and to seek to enhance returns. These techniques include,
but are not limited to the use of financial futures contracts, option
contracts (including options on futures), forward foreign currency exchange
contracts, currency options and futures, currency, mortgage and interest rate
swaps and interest rate floors, caps and collars. Currency and interest rate
management techniques involve risks different from those associated with
investing solely in U.S. dollar-denominated fixed income securities of U.S.
issuers. It is expected that the Fund will use currency transactions both to
seek to enhance returns for a given level of risk and to seek to hedge its
exposure to foreign currencies. While the Fund will have both long and short
currency positions, its net long and short foreign currency exposure will not
exceed the value of the Fund's total assets. To the extent that the Fund is
fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. The Fund's net currency
positions may expose it to risks independent of its securities positions. The
Fund may also employ other investment techniques to seek to enhance returns,
such as lending portfolio securities, mortgage dollar rolls, repurchase
agreements and other investment practices desired under "Investment
Techniques".

DESCRIPTION OF SECURITIES

U.S. GOVERNMENT SECURITIES

15
<PAGE>

Mortgage Association ("Ginnie Mae")), (b) the right of the issuer to borrow
from the U.S. Treasury (such as securities of the Student Loan Marketing
Association), (c) the discretionary authority of the U.S. Government to
purchase certain obligations of the issuer (such as the Federal National
Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation
("Freddie Mac")), or (d) only the credit of the issuer. No assurance can be
given that the U.S. Government will provide financial support to U.S.
Government agencies, instrumentalities or sponsored enterprises in the future.

CORPORATE DEBT OBLIGATIONS

The Core Fixed Income and Global Income Funds may invest in corporate debt
obligations. In addition to obligations of corporations, corporate debt
obligations include securities issued by banks and other financial
institutions. Corporate debt obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations.

CONVERTIBLE SECURITIES

MORTGAGE-BACKED SECURITIES

16
<PAGE>

in sufficient amounts to fully amortize principal by maturity, although
certain fixed rate mortgage loans provide for a large final "balloon" payment
upon maturity.

ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"). The Adjustable Rate Government Fund
will primarily, and the Short Duration Government, Core Fixed Income and
Global Income Funds may, invest in ARMs, which are pass-through mortgage
securities collateralized by mortgages with adjustable rather than fixed
coupon rates. ARMs generally provide for a fixed initial mortgage interest
rate for a set period. Thereafter, the interest rates are subject to periodic
adjustments based on changes to a designated benchmark index.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Core Fixed Income and
Global Income Funds may invest in Mortgage-Backed Securities issued or
sponsored by non-governmental entities. Privately issued Mortgage-Backed
Securities are generally backed by pools of conventional (i.e., non-government
guaranteed or insured) mortgage loans. Since such Mortgage-Backed Securities
normally are not guaranteed by an entity having the credit standing of Ginnie
Mae, Fannie Mae or Freddie Mac, in order to receive a high quality rating from
the rating organizations (i.e., S&P or Moody's), they normally are structured
with one or more types of "credit enhancement".

MULTIPLE CLASS MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS. The Adjustable Rate Government, Short Duration Government, Core
Fixed Income and Global Income Funds may also invest in multiple class
securities, including collateralized mortgage obligations ("CMOs") and Real
Estate Mortgage Investment Conduit ("REMIC") pass-through or participation
certificates. CMOs provide an investor with a specified interest in the cash
flow from a pool of underlying mortgages or of other Mortgage-Backed
Securities. CMOs are issued in multiple classes, each with a specified fixed
or floating interest rate and a final scheduled distribution date. In most
cases, payments of principal are applied to the CMO classes in the order of
their respective stated maturities, so that no principal payments will be made
on a CMO class until all other classes having an earlier stated maturity date
are paid in full. 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. The Funds do not intend to purchase residual
interests in REMICs.

17
<PAGE>

STRIPPED MORTGAGE-BACKED SECURITIES. The Adjustable Rate Government, Short
Duration Government, Core Fixed Income and Global Income Funds may invest in
stripped Mortgage-Backed Securities ("SMBS"), which are derivative multiple
class Mortgage-Backed Securities. SMBS are usually structured with two
different classes; one that receives 100% of the interest payments and the
other that receives 100% of the principal payments from a pool of mortgage
loans. If the underlying mortgage loans experience different than anticipated
prepayments of principal, a Fund may fail to fully recoup its initial
investment in these securities. Although the market for SMBS is increasingly
liquid, certain SMBS may not be readily marketable and will be considered
illiquid for purposes of a 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 loans are generally higher than prevailing market yields on
other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.

ASSET-BACKED SECURITIES

The Core Fixed Income and Global Income Funds may invest in asset-backed
securities ("Asset-Backed Securities"). The principal and interest payments on
Asset-Backed Securities are collateralized by pools of assets such as auto
loans, credit card receivables, leases, installment contracts and personal
property. Such asset pools are securitized through the use of special purpose
trusts or corporations. Principal and interest payments may be credit enhanced
by a letter of credit, a pool insurance policy or a senior/subordinated
structure.

MUNICIPAL SECURITIES

PRIVATE ACTIVITY BONDS. Municipal Securities also include "private activity
bonds" or industrial development bonds, which are issued by or on behalf of
public authorities to obtain funds for such projects as privately-operated
housing facilities, airport, mass transit or port facilities and sewage
disposal. In addition, proceeds of certain industrial development bonds are
used for constructing, equipping, repairing or improving privately operated
industrial or commercial facilities. The Short Duration Tax-Free Fund's
distributions attributable to the interest income from private activity bonds
may subject certain investors to the federal alternative minimum tax.

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<PAGE>

other instruments. The primary risk associated with municipal lease
obligations and certificates of participation is that the governmental lessee
will fail to appropriate funds to enable it to meet its payment obligations
under the lease. Although the obligations may be secured by the leased
equipment or facilities, the disposition of the property in the event of non-
appropriation or foreclosure might prove difficult, time consuming and costly,
and result in a delay in recovering or the failure to fully recover the Fund's
original investment. To the extent that a Fund invests in unrated municipal
leases or participates in such leases, the Trustees will monitor on an ongoing
basis the credit quality rating and risk of cancellation of such unrated
leases. Certain municipal lease obligations and certificates of participation
may be deemed illiquid for the purpose of a Fund's limitation on investments
in illiquid securities.

AUCTION RATE SECURITIES. Auction rate Municipal Securities permit the holder
to sell the securities in an auction at par value at specified intervals. The
dividend or interest is typically reset by "Dutch" auction in which bids are
made by broker-dealers and other institutions for a certain amount of
securities at a specified minimum yield. The rate set by the auction is the
lowest interest or dividend rate that covers all securities offered for sale.
While this process is designed to permit auction rate securities to be traded
at par value, there is the risk that an auction will fail due to insufficient
demand for the securities. A Fund will take the time remaining until the next
scheduled auction date into account for purposes of determining the
securities' duration.

FOREIGN INVESTMENTS

FOREIGN SECURITIES. The Core Fixed Income and Global Income Funds may invest
in fixed income securities of foreign issuers denominated in any currency.
However, the Core Fixed Income Fund will limit its investments in non-U.S.
dollar-denominated fixed income securities to 25% of its total assets. This
may offer potential benefits that are not available from investing exclusively
in U.S. dollar-denominated domestic issues. Foreign countries may have
economic policies or business cycles different from those of the U.S. and
markets for foreign fixed income securities do not necessarily move in a
manner parallel to U.S. markets.

Investing in the securities of foreign issuers involves risks that are not
typically associated with investing in U.S. dollar-denominated securities of
domestic issuers. Such investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and in exchange control regulations (e.g., currency blockage). A
decline in the exchange rate of the currency (i.e., weakening of the currency
against the U.S. dollar) in which a portfolio security is quoted or
denominated relative to the U.S. dollar would reduce the value of the
portfolio security. In addition, if the exchange rate for the currency in
which a Fund receives interest payments declines against the U.S. dollar
before such income is distributed as dividends to shareholders, the Fund may
have to sell portfolio securities to obtain sufficient cash to pay such
dividends. In addition, clearance and settlement procedures may be different
in foreign countries and, in certain markets, such

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<PAGE>

procedures have on occasion been unable to keep pace with the volume of
securities transactions, making it more difficult to conduct such
transactions.

The Core Fixed Income and Global Income Funds may invest in an issuer
domiciled in one country yet issuing the security in the currency of another
country. The Funds may also invest in debt securities denominated in the
European Currency Unit ("ECU"), which is a "basket" consisting of specified
amounts in the currencies of certain of the twelve member states of the
European Community. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community from time to
time to reflect changes in relative values of the underlying currencies. In
addition, the Funds may invest in securities denominated in other currency
"baskets".

Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers. There may be less publicly available information about a foreign
issuer than about a U.S. issuer. In addition, there is generally less
government regulation of foreign markets, companies and securities dealers
than in the U.S. Most foreign securities markets may have substantially less
volume than U.S. securities markets, and securities of many foreign issuers
may be less liquid and more volatile than securities of comparable domestic
issuers. Furthermore, with respect to certain foreign countries, there is a
possibility of nationalization, expropriation or confiscatory taxation,
imposition of withholding taxes on dividend or interest payments, limitations
on the removal of funds or other assets of a Fund, political or social
instability or diplomatic developments which could affect investments in those
countries.

FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers by the
Core Fixed Income and Global Income Funds will usually involve currencies of
foreign countries, and because the Global Income Fund may have currency
exposure independent of its securities positions, the value of the assets of a
Fund as measured in U.S. dollars will be affected by changes in foreign
currency exchange rates. A Fund may purchase or sell forward foreign currency
exchange contracts for hedging purposes and to seek to protect against
anticipated changes in future foreign currency exchange rates. The Global
Income Fund also may enter into such contracts to seek to increase total
return when the Investment Adviser anticipates that the foreign currency will
appreciate or depreciate in value, but securities denominated or quoted in
that currency do not present attractive investment opportunities and are not
held in the Fund's portfolio. When entered into to seek to increase total
return, forward foreign currency exchange contracts are considered
speculative. The Global Income Fund may also engage in cross-hedging by using
forward contracts in a currency different from that in which the hedged
security is denominated or quoted if the Investment Adviser determines that
there is a pattern of correlation between the two currencies. If a Fund enters
into a forward foreign currency exchange contract to buy foreign currency for
any purpose or the Global Income Fund enters into a forward foreign currency
exchange contract to sell foreign currency to seek to increase total return,
the Fund will be required to place and maintain cash or liquid, high grade
debt securities in a segregated account with the Fund's custodian in an amount
equal to the value of the Fund's total assets committed to the consummation of
the forward contract. A Fund will incur costs in connection with conversions
between various currencies. The Global Income Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgment of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in
the relevant exchange rate.

Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, a Fund's net asset value to fluctuate.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or anticipated changes in interest rates and
other complex factors, as seen from an international

20
<PAGE>

perspective. Currency exchange rates also can be affected unpredictably by the
intervention of U.S. or foreign governments or central banks, or the failure
to intervene, or by currency controls or political developments in the United
States or abroad. To the extent that a substantial portion of a Fund's total
assets, adjusted to reflect the Fund's net position after giving effect to
currency transactions, is denominated or quoted in the currencies of foreign
countries, the Fund will be more susceptible to the risk of adverse economic
and political developments within those countries.

The market in forward foreign currency exchange contracts, currency swaps
and other privately negotiated currency instruments authorized for use by the
Funds offers less protection against defaults by the other party to such
instruments than is available for currency instruments traded on an exchange.
Such contracts are subject to the risk that the counterparty to the contract
will default on its obligations. Since these contracts are not guaranteed by
an exchange or clearinghouse, a default on a contract would deprive a Fund of
unrealized profits, transaction costs or the benefits of a currency hedge or
force the Fund to cover its purchase or sale commitments, if any, at the
current market price. A Fund will not enter into forward foreign currency
exchange contracts unless the credit quality of the unsecured senior debt or
the claims-paying ability of the counterparty is considered to be investment
grade by the Investment Adviser.

STRUCTURED SECURITIES

The Core Fixed Income and Global Income Funds may invest in structured
securities. The value of the principal of and/or interest on such securities
is determined by reference to changes in the value of specific currencies,
interest rates, commodities, indices or other financial indicators (the
"Reference") or the relative change in two or more References. The interest
rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference. The
terms of the structured securities may provide that in certain circumstances
no principal is due at maturity and, therefore, result in the loss of the
Fund's investment. Structured securities may be positively or negatively
indexed, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In
addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may entail a greater degree of market risk
than other types of fixed income securities. Structured securities may also be
more volatile, less liquid and more difficult to accurately price than less
complex securities.

ZERO COUPON, DEFERRED INTEREST AND CAPITAL APPRECIATION BONDS

21
<PAGE>

RISK FACTORS

22
<PAGE>

rate caps, support tranches and discount priced Mortgage-Backed Securities. In
addition, particular derivative securities may be leveraged such that their
exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is
magnified.

FOREIGN RISKS. See "Foreign Securities" for a description of the risks of
investing in foreign securities and currencies.

INVESTMENT TECHNIQUES

MORTGAGE DOLLAR ROLLS. The Adjustable Rate Government, Short Duration
Government, Core Fixed Income and Global Income Funds may enter into mortgage
"dollar rolls" in which a Fund sells securities for delivery in the current
month and simultaneously contracts with the same counterparty to repurchase
substantially similar (same type, coupon and maturity) securities on a
specified future date. During the roll period, a Fund loses the right to
receive principal and interest paid on the securities sold. However, a Fund
may benefit from the interest earned on the cash proceeds of the securities
sold until the settlement date of the forward purchase. Each 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.
The benefits derived from the use of mortgage dollar rolls depend upon the
Investment Adviser's ability to manage mortgage prepayments. There is no
assurance that mortgage dollar rolls can be successfully employed. For
financial reporting and tax purposes, each Fund treats mortgage dollar rolls
as two separate transactions; one involving the purchase of a security and a
separate transaction involving a sale. The Funds do not currently intend to
enter into mortgage dollar rolls that are accounted for as a financing.

23
<PAGE>

of securities in which it may invest. The writing and purchase of options is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. The use of options to seek to increase total return involves the
risk of loss if the Investment Adviser is incorrect in its expectation of
fluctuations in securities prices or interest rates. The successful use of
options for hedging purposes also depends in part on the ability of the
Investment Adviser to manage future price fluctuations and the degree of
correlation between the options and securities markets. If the Investment
Adviser is incorrect in its expectation of changes in securities prices or
determination of the correlation between the securities indices on which
options are written and purchased and the securities in a Fund's investment
portfolio, the investment performance of the Fund will be less favorable than
it would have been in the absence of such options transactions. The writing of
options could increase a Fund's portfolio turnover rate and, therefore,
associated brokerage commissions or spreads.

OPTIONS ON FOREIGN CURRENCIES. The Core Fixed Income and Global Income Funds
may, to the extent they invest in foreign securities, purchase and sell
(write) put and call options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of foreign portfolio
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. In addition, the Global Income Fund may use options on
currency to cross-hedge, which involves writing or purchasing options on one
currency to hedge against changes in exchange rates for a different currency,
if there is a pattern of correlation between the two currencies. As with other
kinds of option transactions, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received. If an option that a Fund has written is exercised, the Fund could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against exchange rate fluctuations; however,
in the event of exchange rate movements adverse to a Fund's position, the Fund
may forfeit the entire amount of the premium plus related transaction costs.
In addition to purchasing put and call options for hedging purposes, the
Global Income Fund may purchase call or put options on currency to seek to
increase total return when the Investment Adviser anticipates that the
currency will appreciate or depreciate in value, but the securities quoted or
denominated in that currency do not present attractive investment
opportunities and are not held in the Fund's portfolio. When purchased or sold
to seek to increase total return, options on currencies are considered
speculative. Options on foreign currencies to be written or purchased by a
Fund will be traded on U.S. and foreign exchanges or over-the-counter.

FUTURES CONTACTS AND OPTIONS ON FUTURES CONTRACTS. To seek to increase total
return to hedge against changes in interest rates or securities prices, or in
the case of the Core Fixed Income (but only for hedging purposes) and Global
Income Funds, currency exchange rates, each Fund may purchase and sell various
kinds of futures contracts, and purchase and write call and put options on any
of such futures contracts. Each Fund may also enter into closing purchase and
sale transactions with respect to any such contracts and options. The futures
contracts may be based on various securities (such as U.S. Government
Securities), foreign currencies, in the case of the Core Fixed Income and
Global Income Funds, securities indices and other financial instruments and
indices. A 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. A Fund may not purchase or sell futures
contracts or purchase or sell related options to seek 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. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require the
Fund

24
<PAGE>

to segregate and maintain cash or liquid, high grade debt securities with a
value equal to the amount of the Fund's obligations.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Techniques--Futures Contracts and Options on Futures Contracts" in
the Additional Statement. Thus, while a Fund may benefit from the use of
futures and options on futures, unanticipated changes in interest rates,
securities prices or currency exchange rates may result in a poorer overall
performance than if the Fund had not entered into any futures contracts or
options transactions. Because perfect correlation between a futures position
and portfolio position which is intended to be protected is impossible to
achieve, the desired protection may not be obtained and a Fund may be exposed
to risk of loss. The loss incurred by a Fund in entering into futures
contracts and in writing call options on futures is potentially unlimited and
may exceed the amount of the premium received. Futures markets are highly
volatile and the use of futures may increase the volatility of a Fund's net
asset value. The profitability of a Fund's trading in futures to seek to
increase total return depends upon the ability of the Investment Adviser 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 a Fund.
Further, futures contracts and options on futures may be illiquid, and
exchanges may limit fluctuations in futures contract prices during a single
day.

CURRENCY SWAPS. The Core Fixed Income and Global Income Funds may enter into
currency swaps for hedging purposes and the Global Income Fund may also enter
into currency swaps to seek to increase total return. Currency swaps involve
the exchange by a Fund with another party of their respective rights to make
or receive payments in specified currencies. Currency swaps usually involve
the delivery of a gross payment stream in one designated currency in exchange
for the gross payment stream in another designated currency. Therefore, the
entire payment stream under a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
A Fund will not enter into swap transactions unless the unsecured commercial
paper, senior debt or claims paying ability of the other party thereto is
rated either AA or A-1 or better by S&P or Aa or P-1 or better by Moody's, or
if unrated by such rating organizations, determined to be of comparable
quality by the Investment Adviser. The use of currency swaps 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 currency exchange rates,
the investment performance of a Fund would be less favorable than it would
have been if this investment technique were not used. The staff of the SEC
currently take the position that swaps are illiquid and thus subject to a
Fund's limitation on investments in illiquid securities.

RISKS OF DERIVATIVE TRANSACTIONS. A Fund's transactions, if any, in options,
futures, options on futures, swap transactions, interest rate caps, floors and
collars, structured securities, inverse floating rate securities and currency
forward contracts involve certain risks, including a possible lack of
correlation between changes in the value of hedging instruments and the
portfolio assets being hedged, the potential illiquidity of the markets for
derivative instruments, the risks arising from the margin requirements and
related leverage factors associated with such transactions. The use of these
management techniques to seek to increase total return may be regarded as a
speculative practice and involves the risk of loss if the Investment Adviser
is incorrect in its expectation of fluctuations in securities prices, interest
rates or currency prices. A Fund's transactions in certain derivative
transactions may be limited by the requirements of the Internal Revenue Code
(the "Code") for qualification as a regulated investment company.

25
<PAGE>

of entering into the transaction. Each Fund may also purchase securities on a
forward commitment basis; that is, make contracts to purchase securities for a
fixed price at a future date beyond the customary 3-day settlement. A Fund is
required to hold and maintain in a segregated account with the Fund's
custodian until 3 days prior to settlement date, cash or liquid, high grade
debt securities in an amount sufficient to meet the purchase price.
Alternatively, each 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 a
Fund would generally purchase securities on a when-issued or forward
commitment basis with the intention of acquiring securities for its portfolio,
a Fund may dispose of when-issued securities or forward commitments prior to
settlement if the Investment Adviser deems it appropriate to do so.

TEMPORARY INVESTMENTS. Each Fund may, for temporary defensive purposes
invest 100% of its total assets in (a) U. S. Government Securities or (b)
repurchase agreements collateralized by U.S. Government Securities. The Short
Duration Tax-Free Fund may for temporary defensive purposes depart from its
stated investment objective and invest more than 20% of its net assets in
taxable investments which would subject such income to taxation.

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<PAGE>

MISCELLANEOUS TECHNIQUES

In addition to the techniques described above, each Fund may, with respect
to no more than 5% of its total assets, engage in the following techniques:
(i) portfolio securities lending, (ii) mortgage swaps (other than Short
Duration Tax-Free Fund) and interest rate swaps, caps, floors and collars,
(iii) inverse floating rate securities, (iv) yield curve options, (v)
investments in other investment companies, (vi) custodial receipts, (vii) with
respect to the Short Duration Tax-Free Fund, tender option bonds and standby
commitments and (viii) with respect to the Core Fixed Income Fund, investments
in securities of issuers in countries with emerging markets and economies. For
more information see the Additional Statement.

INVESTMENT RESTRICTIONS

NON-DIVERSIFICATION STATUS. Since the Global Income Fund is "non-
diversified" under the Act, it is subject only to certain federal tax
diversification requirements. Under federal tax laws, the Global Income Fund
may, with respect to 50% of its total assets, invest up to 25% of its total
assets in the securities of any issuer (except that this limitation does not
apply to U.S. Government Securities). With respect to the remaining 50% of the
Fund's total assets, (1) the Fund may not invest more than 5% of its total
assets in the securities of any one issuer (other than the U.S. Government),
and (2) the Fund may not acquire more than 10% of the outstanding voting
securities of any one issuer. These tests apply at the end of each quarter of
its taxable year and are subject to certain conditions and limitations under
the Code. Since the Global Income Fund is not diversified under the Act, it
will be more susceptible to adverse developments affecting any single issuer.
The Adjustable Rate Government, Short Duration Government, Short Duration Tax-
Free and Core Fixed Income Funds are, in addition to these tax diversification
requirements, also subject to the diversification requirements arising out of
their diversified status under the Act.

PORTFOLIO TURNOVER

27
<PAGE>

year. A 100% turnover rate would occur, for example, if all of the securities
held by a 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 a Fund consistent with the Fund's investment
objectives and portfolio management policies. A high rate of portfolio
turnover results in increased transaction costs to a Fund. The portfolio
turnover rate includes the effect of entering into mortgage dollar rolls. See
"Financial Highlights" for a statement of each Fund's historical portfolio
turnover rates.

MANAGEMENT

TRUSTEES AND OFFICERS

INVESTMENT ADVISERS, SUBADVISER AND ADMINISTRATOR

INVESTMENT ADVISERS AND SUBADVISER. 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, serves as the investment adviser to
the Short Duration Government and Adjustable Rate Government Funds. Goldman
Sachs Funds Management, L.P. registered as an investment adviser in 1990.
Goldman Sachs Asset Management, One New York Plaza, New York, New York 10004,
a separate operating division of Goldman Sachs, serves as the investment
adviser to the Short Duration Tax-Free and Core Fixed Income Funds and
investment adviser and administrator to the Global Income Fund. Goldman Sachs
registered as an investment adviser in 1981. Goldman Sachs Asset Management
International, 140 Fleet Street, London EC4A 2BJ, England, an affiliate of
Goldman Sachs, serves as the subadviser to the Global Income Fund. Goldman
Sachs Asset Management International became a member of the Investment
Management Regulatory Organization Limited in 1990 and registered as an
investment adviser in 1991. As of January 31, 1996, GSAM, GSFM and GSAMI,
together with their affiliates, acted as investment adviser, administrator or
distributor for assets in excess of $57 billion.

28
<PAGE>

GLOBAL INCOME FUND. The Fund's portfolio managers are Stephen Fitzgerald and
Andrew Wilson. Mr. Fitzgerald joined GSAMI in 1992 and is an Executive
Director and Chief Investment Officer for international fixed income. Prior to
1992, he spent two years managing multi-currency fixed income and balanced
portfolios at Invesco MIM Limited, where he was a senior member of the
derivative products group. Prior to his employment at Invesco, Mr. Fitzgerald
spent three years with Foreign and Colonial Management Limited in London
managing fixed income and derivative funds, and, prior to that, in the
treasury department of NRMA Insurance Limited in Sydney. Mr. Wilson joined
GSAMI in 1995 and is Executive Director and Portfolio Manager for
international fixed income. Prior to joining GSAMI, he spent three years as an
Assistant Director at Rothschild Asset Management where he was responsible for
managing global and international bond portfolios, with specific focus on the
U.S., Canadian, Australian and Japanese economies. Prior to his employment at
Rothschild, Mr. Wilson spent seven years at the Reserve Bank of New Zealand,
his most recent position as Trading Manager of foreign reserves management.
Mr. Wilson's employment at the Reserve Bank at New Zealand also included a two
year assignment to the foreign investment unit at the Bank of England in
London.

As compensation for its services rendered and assumption of certain expenses
pursuant to separate Investment Advisory Agreements, GSFM is entitled to a fee
from the Short Duration Government and Adjustable Rate Government Funds,
computed daily and payable monthly, at the annual rates of 0.50% and 0.40%,
respectively, of average daily net assets; however, GSFM is currently only
imposing its advisory fee with respect to the Short Duration Government Fund
at the annual rate of 0.40% of average daily net assets. As compensation for
its services rendered and assumption of certain expenses pursuant to separate
Investment Advisory Agreements, GSAM is entitled to a fee from the Short
Duration Tax-Free, Core Fixed Income and Global Income Funds, computed daily
and payable monthly, at the annual rates of 0.40%, 0.40% and 0.25%,
respectively, of average daily net assets; however, GSAM is currently only
imposing its advisory fee with respect to the Global Income Fund at the annual
rate of 0.12% of average daily net assets. As compensation for its services
rendered and assumption of certain expenses pursuant to a Subadvisory
Agreement, GSAMI is entitled to a fee from the Global Income Fund, computed
daily and payable monthly at the annual rate of 0.50% of average daily net
assets; however, GSAMI is currently only imposing its subadvisory fee with
respect to the Global Income Fund at the annual rate of 0.32% of average daily
net assets. The Investment Advisers may discontinue or modify such limitations
in the future at their discretion, although the Investment Advisers have no
current intention to

29
<PAGE>

do so. For the fiscal year ended October 31, 1995, the Short Duration
Government, Adjustable Rate Government, Short Duration Tax-Free and Core Fixed
Income Funds paid fees at the foregoing rates. At various times during the
fiscal year ended October 31, 1995, GSAM and GSAMI waived part of their
investment advisory and subadvisory fees, respectively, for the Global Income
Fund. The average rate for the period paid by the Global Income Fund to GSAM
and GSAMI was 0.22% and 0.45%, respectively. Without giving effect to fee
limitations, the aggregate management fees paid by the Global Income Fund are
higher than the fees paid by most funds but the Investment Adviser and
subadviser believe such fees are comparable to management fees paid by funds
with similar investment strategies.

Each Investment Adviser has voluntarily agreed to reduce the fees payable to
it by a Fund (to the extent of its fees) by the amount (if any) that the
Fund's expenses would exceed the applicable expense limitations imposed by
state securities administrators. See "Management -- Expenses" in the
Additional Statement. In addition, the Investment Advisers to the Short
Duration Government, Adjustable Rate Government, Short Duration Tax-Free, Core
Fixed Income and Global Income Funds have voluntarily agreed to reduce or
limit certain "Other Expenses" of such Funds (excluding any applicable fees
payable by the Fund classes to service organizations, administration, advisory
and subadvisory fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses to the extent such expenses
exceed 0.05%, 0.05%, 0.05%, 0.05% and 0.06% per annum of such Funds' average
daily net assets, respectively. Such reductions or limits, if any, are
calculated monthly on a cumulative basis and may be discontinued or modified
by the applicable Investment Adviser in its discretion at any time.

ADMINISTRATOR. As administrator, pursuant to an Administration Agreement
with the Global Income Fund, GSAM provides personnel for supervisory,
administrative, and clerical functions; oversees the performance of
administrative and professional services to the Global Income Fund by others;
provides office facilities; and prepares, but does not pay for, reports to
shareholders, the SEC and other regulatory authorities. As compensation for
the services rendered to the Global Income Fund, GSAM is entitled to a fee,
computed daily and payable monthly, at an annual rate equal to 0.15% of such
Fund's average daily net assets. For the period ended October 31, 1995, the
Global Income Fund paid GSAM a fee for administration services at the
foregoing rate. GSAM has agreed to reduce its fees payable by the Fund (to the
extent of its fees) by the amount (if any) that the Fund's expenses 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 Advisers, Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts
and other activities of Goldman Sachs may present conflicts of interest with
respect to a Fund or limit a Fund's investment activities. Goldman Sachs and
its affiliates engage in proprietary trading and advise accounts and funds
which have investment objectives similar to those of the Funds and/or which
engage in and compete for transactions in the same types of securities,
currencies and instruments as the Funds. Goldman Sachs and its affiliates will
not have any obligation to make available any information regarding their
proprietary activities or strategies, or the activities or strategies used for
other accounts managed by them, for the benefit of the management of the Funds
and in general it is not anticipated that the Investment Advisers will have
access to proprietary information for the purpose of managing a Fund. The
results of a Fund's investment activities, therefore, may differ from those of
Goldman Sachs and its affiliates and it is possible that a Fund could sustain
losses during periods in which Goldman Sachs and its affiliates and other
accounts and Funds achieve significant profits on their trading for
proprietary or other accounts. From time to time, a Fund's activities may be
limited

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<PAGE>

because of regulatory restrictions applicable to Goldman Sachs and its
affiliates, and/or their internal policies designed to comply with such
restrictions. See "Management -- 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 10004, serves as the
exclusive distributor of each Fund's shares. Goldman Sachs, 4900 Sears Tower,
Chicago, Illinois 60606 also serves as each Fund's transfer agent (the
"Transfer Agent") and as such performs various shareholder servicing
functions. Shareholders with inquiries regarding any Fund should contact
Goldman Sachs (as Transfer Agent) at the address or the telephone number set
forth on the back cover page of this Prospectus. Goldman Sachs is not entitled
to receive a fee from the Global Income Fund for transfer agency services.
Goldman Sachs is entitled to receive a fee from the Short Duration Government,
Short Duration Tax-Free and Core Fixed Income Funds equal to 0.04% of the
average daily net assets of each Fund. Goldman Sachs is entitled to receive a
fee from the Adjustable Rate Government Fund equal to each class'
proportionate share of the total transfer agency fees borne by the Fund. Such
fees are equal to the fixed per account charge of $12,000 per year plus $7.50
per account, together with out-of-pocket and transaction related expenses
(including those out-of-pocket expenses payable to servicing agents)
applicable to Class A shares plus 0.04% of the average daily net assets of the
other classes of the Adjustable Rate Government Fund.

DIVIDENDS

Each Fund (other than the Global Income Fund) will declare a daily dividend.
Such dividend will accrue to shareholders of record as of 3:00 p.m. Chicago
time, and will be paid monthly. The Global Income Fund will declare and pay
dividends monthly. Shares of Global Income Fund will be eligible for dividends
which accrue on or after the date such shares are purchased 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 Funds also intend 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.

A Fund's net investment income is determined on a daily basis (monthly in
the case of the Global Income Fund). 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 (other than the Global Income Fund) 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, cash payment will be made on the
first Business Day of the succeeding month. In the case of Global Income Fund,
reinvestment of dividends from net investment income in additional shares of
the Fund will be made on the second to last Business Day of each month. Cash
dividends will be paid on or about the last Business Day of the 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

31
<PAGE>

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

NET ASSET VALUE

The net asset value per share of each class of a Fund 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) on each
Business Day (as such term is defined under "Additional Information")
immediately after the determination, if any, of the income to be declared as a
dividend (except in the case of the Global Income Fund). 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.

PERFORMANCE INFORMATION

32
<PAGE>

net investment income for these purposes may differ from the net investment
income determined for accounting purposes.

SHARES OF THE TRUST

Each Fund is a series of the 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 to create and classify shares of beneficial interest in
separate series, without further action by shareholders. Additional series may
be added in the future. The Trustees have authorization to classify or
reclassify any series or portfolio of shares into one or more classes. The
Short Duration Government, Short Duration Tax-Free and Core Fixed Income Funds
each offer Institutional Shares, Administration Shares and Service Shares. The
Adjustable Rate Government Fund offers Institutional Shares, Administration
Shares, Service Shares and Class A shares. The Global Income Fund offers
Institutional Shares, Service Shares, Class A shares and Class B shares.

33
<PAGE>

Goldman Sachs Employee Trust--One Enterprise Drive, No. Quincy, MA 02171
(30.64%) and Short Duration Tax-Free Fund--MGIC, Attn: James McGinnis, P.O.
Box 297, Milwaukee, WI 53201 (27.16%).

TAXATION

FEDERAL TAXES

34
<PAGE>

Dividends paid by a Fund from taxable net investment income, certain net
realized foreign exchange gains, the excess of net short-term capital gain
over net long-term capital loss and original issue discount (except tax-exempt
original issue discount earned by the Short Duration Tax-Free Fund) or market
discount income will be taxable to shareholders as ordinary income. Dividends
paid by a 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 a 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 Funds for federal income tax purposes.

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 taxable distributions, redemptions
and exchanges if they fail to furnish their correct taxpayer identification
number and certain certifications required by the Internal Revenue Services 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 non-resident 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 Funds.

The Core Fixed Income and Global Income Funds may be subject to foreign
withholding or other foreign taxes on income or gain from certain foreign
securities. If more than 50% of the value of its total assets is comprised of
stock or securities of foreign corporations at the end of its taxable year and
the Fund so elects, shareholders will include in their gross incomes (in
addition to dividends they receive) their pro rata shares of qualified foreign
taxes paid by the Fund and may be entitled to take federal income tax credits
or deductions with respect to such taxes. It is not expected that the Core
Fixed Income Fund will qualify to make this election. If either Fund cannot or
does not so elect, it may deduct these taxes in computing its taxable income,
if any.

OTHER TAXES

35
<PAGE>

ADDITIONAL INFORMATION

36
<PAGE>

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 (quarterly in the
case of Global Income Fund). A year-to-date statement for any account will be
provided upon request made to Goldman Sachs.

SUB-ACCOUNTING SERVICE

Each Fund has designed special procedures to assist institutional investors
(including banks) 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. The Global
Income Fund does not generally provide sub-accounting services.

PURCHASE OF INSTITUTIONAL SHARES

Institutional Shares may be purchased through Goldman Sachs at the net asset
value per share next determined after receipt of an order. No sales load will
be charged. If, by 3:00 p.m. Chicago time (4:00 p.m. New York time), an order
is received by Goldman Sachs, the price per share will be the net asset value
per share computed on the day the purchase order is received. See "Net Asset
Value". Purchases of Institutional Shares of the Funds must be settled within
three (3) Business Days of the receipt of a complete purchase order. 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" .

Prior to making an initial investment in a Fund, an investor must open an
account with a 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 open such an account. Subsequent purchases may
be made in the manner set forth below.

PURCHASE PROCEDURES APPLICABLE TO EACH FUND OTHER THAN GLOBAL INCOME FUND

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 payable to "Goldman Sachs Trust--Name of
Fund" and should be directed to Goldman Sachs Trust--Name of Fund, c/o GSAM
Shareholder Services, 4900 Sears Tower, Chicago, Illinois 60606.

The minimum initial investment is $50,000 in Institutional Shares of a Fund
alone or in combination with Institutional Shares of any other mutual fund
sponsored by Goldman Sachs and designated as an eligible fund

37
<PAGE>

for this purpose and the corresponding 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.

PURCHASE PROCEDURES APPLICABLE TO THE GLOBAL INCOME FUND

Purchases of Institutional Shares may be made by placing an order with
Goldman Sachs at 800-621-2550 and either wiring Federal Funds to State Street
or initiating an ACH transfer. 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--Goldman Sachs Global Income Fund"
and should be directed to "Goldman Sachs Trust--Goldman Sachs Global Income
Fund" c/o National Financial Data Services, Inc., P.O. Box 419711, Kansas
City, MO 64141-6711.

The minimum initial investment is $1,000,000 in Institutional Shares of the
Global Income Fund alone or in combination with other assets under the
management of GSAM and its affiliates. Institutional Shares of Global Income
Fund are offered to (a) banks, trust companies or other types of depository
institutions investing for their own account or on behalf of their clients;
(b) pension and profit sharing plans, pension funds and other company-
sponsored benefit plans; (c) qualified non-profit organizations, charitable
trusts, foundations and endowments; (d) any state, county, city or any
instrumentality, department, authority or agency thereof; (e) corporations and
other for-profit business organizations with assets of at least $100 million
or publicly traded securities outstanding; (f) "wrap" accounts for the benefit
of clients of broker-dealers, financial institutions or financial planners,
provided that they have entered into an agreement with GSAM specifying
aggregate minimums and certain operating policies and standards; (g)
registered investment advisers who have entered into an agreement with GSAM
specifying aggregate minimums and certain operating policies and standards;
and (i) accounts over which GSAM or its advisory affiliates have investment
discretion. The minimum investment requirement may be waived at the discretion
of the Trust's officers. No minimum amount is required for subsequent
investments.

OTHER PURCHASE INFORMATION

Institutional Shares of the Global Income Fund will be issued and dividends
will begin to be paid with respect to dividends which accrue on or after the
purchase of Institutional Shares. For the other Funds, the following applies:

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 a Federal Funds wire or an ACH transfer by Northern.

PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT. If a 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.

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.

38
<PAGE>

The Funds reserve the right to redeem the Institutional Shares of any
Institutional Shareholder whose account balance is less than $100 ($50 in the
case of Global Income Fund) 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 a Fund to avoid such redemption.

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

EXCHANGE PRIVILEGE

Institutional Shares of a 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 corresponding 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--Name of Fund, c/o GSAM Shareholders 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 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. In times
of drastic economic or market changes the telephone exchange privilege may be
difficult to implement. For federal income tax purposes, an exchange is
treated as a sale of the shares surrendered in the exchange, on which an
investor may realize a gain or loss, followed by a purchase of Institutional
Shares or the corresponding 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.

Each exchange which represents 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 available only 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".

39
<PAGE>

REDEMPTION OF INSTITUTIONAL SHARES

The Funds will redeem their 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, a 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
Funds, 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, a securities broker
or dealer, a credit union having authority to issue signature guarantees, a
savings and loan association, a building and loan association, a cooperative
bank, a federal savings bank or association, a national securities exchange, a
registered securities association or a clearing agency, provided that such
institution satisfies the standards established by the Transfer Agent. If
Goldman Sachs receives a redemption request by 3:00 p.m. Chicago time, the
Institutional Shares of each Fund (other than Global Income Fund) to be
redeemed earn dividends declared on 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 or, if the shareholder
elects in writing, by check. Redemption proceeds paid by wire transfer will
normally be wired on the next Business Day in Federal Funds (for a total one-
day delay), but may be paid up to three (3) Business 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. Redemption proceeds
paid by check will normally be mailed to the address of record within three
(3) Business Days of receipt of a properly executed redemption request. 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
Funds, the Trust nor Goldman Sachs assumes any further responsibility for the
performance of intermediaries

40
<PAGE>

or 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.

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.

41
<PAGE>

APPENDIX

GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM

You are required by law to provide the Fund with your correct 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 a 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 and writing "exempt" after your
signature. 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 backup withholding on certain
payments. Other payments to you may be subject to nonresident alien
withholding of up to 30%.

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

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.
ACCOUNT INFORMATION FORM
MASTER NO. _________________
SEND TO: GOLDMAN, SACHS & CO.
4900 SEARS TOWER FUND USE ONLY
CHICAGO, ILLINOIS 60606
1-800-621-2550 DATE: _______________________

INITIAL INVESTMENT:

( ) GOLDMAN SACHS MONEY MARKET TRUST
Fill in Portfolio(s): ( ) GS ADJUSTABLE RATE GOVERNMENT FUND

( ) OTHER FUND (Please write name of
Fund in the space provided ( ) GS SHORT DURATION GOVERNMENT FUND
below):

( ) GS SHORT DURATION TAX-FREE FUND
-------------------------------
( ) GS CORE FIXED INCOME FUND

( ) GOLDMAN SACHS GLOBAL INCOME FUND

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

A. ACCOUNT RECORD ---------------------------------
--------------------------------- TELEPHONE NUMBER
NAME OF ACCOUNT

--------------------------------- U.S. CITIZEN OR
STREET OR P.O. BOX RESIDENT? YES [_] NO [_]
--------------------------------- IF NO IS CHECKED, FILL IN
CITY STATE ZIP COUNTRY OF TAX RESIDENCE:
---------------------------------
ATTENTION -----------------------------

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

B. DIVIDENDS AND DISTRIBUTIONS--CHECK APPROPRIATE BOX (SEE "DIVIDENDS")
1. DIVIDENDS (INCLUDING NET SHORT TERM [_] CASH [_] UNITS/SHARES
CAPITAL GAINS)--

2. NET LONG-TERM CAPITAL GAINS [_] CASH [_] UNITS/SHARES
DISTRIBUTIONS--
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.