GOLDMAN SACHS TRUST, 485APOS, 1996-12-27

GOLDMAN SACHS TRUST
485APOS, 1996-12-27

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<PAGE>

As filed with the Securities and Exchange Commission on
December 27, 1996.

1933 Act Registration No. 33-17619
1940 Act Registration No. 811-5349

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

____________

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ( X )

Post-Effective Amendment No. 27 ( X )

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( X )

Amendment No. 29 ( X )
(Check appropriate box or boxes)
__________

GOLDMAN SACHS TRUST
(Exact name of registrant as specified in charter)

4900 Sears Tower
Chicago, Illinois 60606-6303
(Address of principal executive offices)

Registrant's Telephone Number,
including Area Code 312-993-4400
____________

Michael J. Richman, Esq. Copies to:
Goldman, Sachs & Co. Pamela J. Wilson, Esq.
85 Broad Street - 12th Floor Hale and Dorr
New York, New York 10004 60 State Street
Boston, MA 02109
(Name and address of agent for service)
<PAGE>

It is proposed that this filing will become effective (check appropriate box)

( ) immediately upon filing pursuant to paragraph (b)
( ) on (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)

(X) On February 25, 1997 pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2)
( ) On (date) pursuant to paragraph (a)(2) of rule 485.

Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2. On December 20, 1996, Registrant
filed a Rule 24f-2 notice for its fiscal year ended October 31, 1996.
<PAGE>

GOLDMAN SACHS TRUST

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

CROSS REFERENCE SHEET
(as required by Rule 485)

Part A CAPTION
- ------ -------

(GS Short Duration Government Fund, GS Short Duration Tax-Free Fund, GS
- -----------------------------------------------------------------------
Adjustable Rate Government Fund, GS Core Fixed Income Fund and Goldman Sachs
- ----------------------------------------------------------------------------
Global Income Fund - Institutional Shares)
- ------------------------------------------

1. Cover Page Cover Page

2. Synopsis Fund Highlights

3. Condensed Financial
Information Financial Highlights

4. General Description Cover Page; Fund Highlights;
of Registrant Investment Objective and Policies;
Description of Securities; Risk Factors;
Investment Techniques; Investment Re
strictions; Portfolio Turn over; Reports to
Shareholders; Shares of the Trust; Additional
Information

5. Management of the Fund Management

6. Capital Stock and Dividends; Shares of the Trust; Taxation;
Other Securities Additional Information

7. Purchase of Securities Purchase of Institutional Being Offered
Shares; Net Asset Value; Additional
Information

8. Redemption or Redemption of Institutional
Repurchase Shares; Additional Information

9. Pending Legal Not Applicable
Proceedings
<PAGE>

(GS Short-Duration Government Fund, GS Short Duration Tax-Free Fund, GS
- -----------------------------------------------------------------------
Adjustable Rate Government Fund and GS Core Fixed Income Fund - Administration
- -------------------------------------------------------------
Shares)

1. Cover Page Cover Page

2. Synopsis Fund Highlights

3. Condensed Financial
Information Financial Highlights

4. General Description Cover Page; Fund Highlights;
of Registrant Investment Objective and Policies;
Description of Securities; Risk
Factors; Investment Techniques;
Investment Restrictions; Portfolio
Turnover; Reports to Shareholders;
Shares of the Trust; Additional
Information

5. Management of the Management
Fund

6. Capital Stock and Dividends; Shares of the
Other Securities Trust; Taxation; Additional
Information

7. Purchase of Securities Purchase of Administration
Being Offered Shares; Net Asset Value;
Additional Information

8. Redemption or Redemption of Administration
Repurchase Shares; Additional Information

9. Pending Legal Not Applicable
Proceedings
<PAGE>

1. Cover Page Cover Page

2. Synopsis Fund Highlights

3. Condensed Financial
Information Financial Highlights

4. General Description Cover Page; Fund Highlights;
of Registrant Investment Objective and Policies;
Description of Securities; Risk Factors;
Investment Techniques; Investment
Restrictions; Portfolio Turnover; Reports to
Shareholders; Shares of the Trust; Additional
Information

5. Management of the Management
Fund

6. Capital Stock and Dividends; Shares of the
Other Securities Trust; Taxation; Additional Information

7. Purchase of Securities Purchase of Service
Being Offered Shares; Net Asset Value;
Additional Information

8. Redemption or Redemption of Service
Repurchase Shares; Additional Information

9. Pending Legal Not Applicable
Proceedings
<PAGE>

(GS Adjustable Rate Government Fund, Goldman Sachs Municipal Income Fund,
- -------------------------------------------------------------------------
Goldman Sachs Government Income Fund and Goldman Sachs Global Income Fund-Class
- -------------------------------------------------------------------------
A Shares and Class B Shares)

1. Cover Page Cover Page

2. Synopsis Summary

3. Condensed Financial
Information Financial Highlights

4. General Description Cover Page; Summary; Investment
of Registrant Objective and Policies; Municipal Securities
and Other Investments; Other Investments and
Practices; Reports to Shareholders; Shares of
the Trust; Additional Information

5. Management of the Investment Adviser; Management
Fund

6. Capital Stock and Dividends; Taxation; Shares of
Other Securities the Trust; Additional Information

7. Purchase of Securities Purchase of
Being Offered Shares; Net Asset Value;
Additional Information

8. Redemption or Redemption of Shares;
Repurchase Additional Information

9. Pending Legal Not Applicable
Proceedings
<PAGE>

Part B
- ------
(GS Short Duration Government Fund, GS Short Duration Tax-Free Fund, GS
- -----------------------------------------------------------------------
Adjustable Rate Government Fund, GS Core Fixed Income Fund, Goldman Sachs Global
- -------------------------------- -----------------------------------------------
Income Fund-Institutional Shares
- -----------

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information Not Applicable
and History

13. Investment Objectives Investment Objective and Policies;
and Policies Investment Restrictions

14. Management of the Management
Registrant

15. Control Persons and Shares of the Trust
Principal Holders of
Securities

16. Investment Advisory Management
and Other Services

17. Brokerage Allocation Portfolio Transactions
and Other Securities

18. Capital Stock and Shares of the Trust
Other Securities

19. Purchase, Redemption Management; Net Asset Value
and Pricing of
Securities Being
Offered

20. Tax Status Taxation

21. Underwriters Management-Distributor

22. Calculation of Performance Information
Performance Data

23. Financial Statements Financial Statements

(GS Short Duration Government Fund, GS Short Duration Tax-Free Fund, GS
- -----------------------------------------------------------------------
Adjustable Rate Government Fund, GS Core Fixed Income Fund, Goldman Sachs Global
- --------------------------------------------------------------------------------
Income Fund- Administration Shares
- -----------
<PAGE>

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information Not Applicable
and History

13. Investment Objectives Investment Objective and Policies;
and Policies Investment Restrictions

14. Management of the Management
Registrant

15. Control Persons and Shares of the Trust
Principal Holders of
Securities

16. Investment Advisory Management
and Other Services

17. Brokerage Allocation Portfolio Transactions
and Other Securities

18. Capital Stock and Shares of the Trust
Other Securities

19. Purchase, Redemption Management; Net Asset Value
and Pricing of
Securities Being
Offered

20. Tax Status Taxation

21. Underwriters Management-Distributor;
Administration Plan

22. Calculation of Performance Information
Performance Data

23. Financial Statements Financial Statements

(GS Short Duration Government Fund, GS Short Duration Tax-Free Fund, GS
- -----------------------------------------------------------------------
Adjustable Rate Government Fund, GS Core Fixed Income Fund, Goldman Sachs Global
- --------------------------------------------------------------------------------
Income Fund- Service Shares
- -----------

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information Not Applicable
and History
<PAGE>

13. Investment Objectives Investment Objective and Policies;
and Policies Investment Restrictions

14. Management of the Management
Registrant

15. Control Persons and Shares of the Trust
Principal Holders of
Securities

16. Investment Advisory Management
and Other Services

17. Brokerage Allocation Portfolio Transactions
and Other Securities

18. Capital Stock and Shares of the Trust
Other Securities

19. Purchase, Redemption Management; Net Asset Value
and Pricing of
Securities Being
Offered

20. Tax Status Taxation

21. Underwriters Management-Distributor; Service Plan

22. Calculation of Performance Information
Performance Data

23. Financial Statements Financial Statements
<PAGE>

(GS Adjustable Rate Government Fund, Goldman Sachs Municipal Income Fund,
- -------------------------------------------------------------------------
Goldman Sachs Government Income Fund and Goldman Sachs Global Income Fund- Class
- --------------------------------------------------------------------------------
A Shares and Class B Shares
- ---------------------------

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information Not Applicable
and History

13. Investment Objectives Investment Objective and Policies;
and Policies Investment Restrictions

14. Management of the Management
Registrant

15. Control Persons and Shares of the Trust
Principal Holders of
Securities

16. Investment Advisory Management
and Other Services

17. Brokerage Allocation Portfolio Transactions
and Other Securities

18. Capital Stock and Shares of the Trust
Other Securities

19. Purchase, Redemption Management; Net Asset Value
and Pricing of
Securities Being
Offered

20. Tax Status Taxation

21. Underwriters Management-Distributor

22. Calculation of Performance Information
Performance Data

23. Financial Statements Financial Statements

Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE>

GOLDMAN SACHS TRUST

GS ADJUSTABLE RATE GOVERNMENT FUND
GS SHORT DURATION GOVERNMENT FUND
GS SHORT DURATION TAX-FREE FUND
GS CORE FIXED INCOME FUND
GOLDMAN SACHS GLOBAL INCOME FUND

INSTITUTIONAL SHARES

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

SUPPLEMENT DATED MARCH 1, 1997 TO
PROSPECTUS DATED MARCH 1, 1996

GS ADJUSTABLE RATE GOVERNMENT FUND
Seeks a high level of current income, consistent with low volatility of
principal. The Fund invests primarily in adjustable rate mortgage pass-
through securities and other mortgage securities with periodic interest
rate resets, which are issued or guaranteed by the U.S. government, its
agencies, instrumentalities or sponsored enterprises.

GS SHORT DURATION GOVERNMENT FUND
Seeks a high level of current income and secondarily, in seeking current
income, may also consider the potential for capital gain. The Fund invests
primarily in securities issued or guaranteed by the U.S. government, its
agencies, instrumentalities or sponsored enterprises.

GS SHORT DURATION TAX-FREE FUND
Seeks a high level of current income, consistent with relatively low
volatility of principal, that is exempt from regular federal income tax.
The Fund invests primarily in municipal securities.

GS CORE FIXED INCOME FUND
Seeks a total return consisting of capital appreciation and income that
exceeds the total return of the Lehman Brothers Aggregate Bond Index. 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, mortgage-
backed securities and asset-backed securities.

GOLDMAN SACHS GLOBAL INCOME FUND
Seeks a high total return, emphasizing current income and, to a lesser
extend, providing opportunities for capital appreciation. The Fund invests
primarily in a portfolio of high quality fixed-income securities of U.S.
and foreign issuers and foreign currencies.

This Prospectus Supplement and the accompanying Prospectus provide 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, 1997, 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 the accompanying Prospectus.

The following replaces the Fees and Expenses Table and supplements the
information under the sections entitled "What are the Investment Objectives and
Policies of the Funds", "Management" and "Shares of the Trust" in the
accompanying Prospectus:
<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.

/1/ Based 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
0.11% and 0.51%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1996 (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.

2
<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%,
0.21% and 0.71%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1996 (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
0.50% and 1.01%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1996 (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
0.37% and 0.83%, respectively. Annual operating expenses incurred by
Institutional Shares of the Fund during the fiscal year ended October 31,
1996 (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%, 0.21% and
1.11%, respectively. Annual operating expenses incurred by Institutional
Shares of the Fund during the fiscal year ended October 31, 1996 (expressed
as a percentage of average daily net assets after fee adjustments) were
"Management Fees", "Other Expenses" and "Total Operating Expenses" of 0.59%,
0.16% 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.

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, Subadviser and
Administrator".

<PAGE>

With respect to GS Short Duration Tax-Free Fund:

The Municipal Securities in which the Fund invests 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.

With respect to GS Core Fixed Income Fund:

Non-dollar securities in which the Fund invests will be rated at least AA
by S&P or Aa by Moody's at the time of investment.

The following replaces the information provided for Short Duration Tax-Free
Fund under the caption "Management--Investment Advisers, Subadviser and
Administrator":

The Fund's portfolio managers are Benjamin S. Thompson and Elisabeth Schupf
Lonsdale. Mr. Thompson and Ms. Lonsdale each specialize in municipal
securities. Mr. Thompson's responsibilities include developing investment
strategy and structuring portfolios. Ms. Lonsdale is also responsible for
GSAM's municipal credit research. 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. Before rejoining
Goldman Sachs in 1995, Ms. Lonsdale was a Director of Fitch Investors
Service evaluating the credit ratings of tax-backed issues. Prior to that,
she worked for ten years in Goldman Sachs's Municipal Finance Department.

The following is added under the caption "Management--Investment Advisers,
Subadviser and Administrator":

For the fiscal year ended October 31, 1996, GS Adjustable Rate Government
Fund, GS Short Duration Government Fund, GS Short Duration Tax-Free Fund,
GS Core Fixed INcome Fund and Goldman Sachs Global Income Fund, paid
advisory fees at the rate of .40%, .40%, .40%, .40% and .44%, respectively,
of average daily net assets and Goldman Sachs Global Income Fund paid
administration fees at the rate of .15% of average daily net assets.

The following is added under the caption "Shares of the Trust":

At a shareholders meeting called for April 1, 1997, shareholders of each
Fund as of February 1, 1997 will consider a proposal to reorganize the
Funds into series of a Delaware business trust. The above description
regarding shares of the Funds applies equally to shares of a Delaware
business trust except that, under Delaware law, shareholders of a Delaware
business trust are not personally liable as partners for the obligations of
a Delaware business trust.

As of November 29, 1996, the shareholder listed below owned of record 25% or
more of the outstanding Institutional Shares of Short Duration Government
Fund:

<TABLE>
<S> <C>
State Street Bank and Trust Company 29.67%
P.O. Box 1992
Boston, MA 02105
</TABLE>

As of November 29, 1996, the shareholder listed below owned of record 25% or
more of the outstanding Institutional Shares of Core Fixed Income Fund:

<TABLE>
<S> <C>
Vinson and Elkins Lawyers Retirement
Plan 16 HCB 09 37%
P.O. Box 2558
Houston, TX 77252-2558
</TABLE>

<PAGE>

As of November 29, 1996, the shareholder listed below owned of record 25% or
more of the outstanding Institutional Shares of Global Income Fund:

<TABLE>
<S> <C>
State Street Bank and Trust Company
GS Profit Sharing Master Trust 64%
Attn.: Louis Pereira
P.O. Box 1992
Boston, MA 02105-1992
</TABLE>

<PAGE>

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

GOLDMAN SACHS TRUST
INSTITUTIONAL SHARES

TABLE OF CONTENTS GS ADJUSTABLE RATE GOVERNMENT FUND

Seeks a high level of current income,
consistent with low volatility of prin-
PAGE cipal. The Fund invests primarily in ad-
---- justable rate mortgage pass-through se-
curities and other mortgage securities
Fund Highlights............... 1 with periodic interest rate resets,
Fees and Expenses............. 5 which are issued or guaranteed by the
Financial Highlights.......... 7 U.S. Government, its agencies, instru-
Investment Objectives and mentalities or sponsored enterprises.
Policies.................... 11
Description of Securities..... 15 GS SHORT DURATION GOVERNMENT FUND
Risk Factors.................. 22
Investment Techniques......... 23 Seeks a high level of current income and
Investment Restrictions....... 27 secondarily, in seeking current income,
Portfolio Turnover............ 27 may also consider the potential for cap-
Management.................... 28 ital gain. The Fund invests primarily in
Dividends..................... 31 securities issued or guaranteed by the
Net Asset Value............... 32 U.S. Government, its agencies, instru-
Performance Information....... 32 mentalities or sponsored enterprises.
Shares of the Trust........... 33
Taxation...................... 34 GS SHORT DURATION TAX-FREE FUND
Additional Information........ 36
Reports to Shareholders....... 37 Seeks a high level of current income,
Purchase of Institutional consistent with relatively low volatil-
Shares...................... 37 ity of principal, that is exempt from
Exchange Privilege............ 39 regular federal income tax. The Fund in-
Redemption of Institutional vests primarily in municipal securities.
Shares...................... 40
Appendix...................... A-1 GS CORE FIXED INCOME FUND
Account Application
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

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 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.

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 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.

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.

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 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)

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>
- --------
/1/ Based 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.

6
<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
-------------------------------------------------------------
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>

<TABLE>
<CAPTION>
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
--------- ---------- ------------ ------------ ----------
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 LIMITAITONS
----------------------
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>

<TABLE>
<CAPTION>
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
--------- ---------- ------------ ------------ ----------
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>
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 TAX-FREE FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1995--Institutional
Shares.......... $(0.4235) $ -- $ -- $ -- $ -- $(0.4235)
1995--Administration
Shares.......... (0.3989) -- -- -- -- (0.3989)
1995--Service
Shares.......... (0.3744) -- -- -- -- (0.3744)
1994--Institutional
Shares.......... (0.3787) (0.0825) -- -- -- (0.4612)
1994--Administration
Shares.......... (0.3537) (0.0825) -- -- -- (0.4362)
1994--Service
Shares(i)....... (0.0475) -- -- -- -- (0.0475)
1993--Institutional
Shares.......... (0.3834) -- -- -- -- (0.3834)
1993--Administration
Shares(i)....... (0.1555) -- -- -- -- (0.1555)

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

<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 TAX-FREE FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1995--Institutional
Shares.......... $0.1500 $9.94 5.98% 0.45% 4.31% 259.52% $58,389 0.77% 3.99%
1995--Administration
Shares.......... 0.1500 9.94 5.76 0.70 4.14 259.52 46 1.02 3.82
1995--Service
Shares.......... 0.1600 9.95 5.59 0.95 3.87 259.52 454 1.27 3.55
1994--Institutional
Shares.......... (0.4400) 9.79 0.17 0.45 3.74 354.00 83,704 0.61 3.58
1994--Administration
Shares.......... (0.4400) 9.79 (0.11) 0.70 3.51 354.00 3,866 0.86 3.35
1994--Service
Shares(i)....... (0.0700) 9.79 (0.32)(k) 0.95(e) 4.30(e) 354.00 44 1.11(e) 4.14(e)
1993--Institutional
Shares.......... 0.3000 10.23 7.03 0.41 3.70 404.60 115,803 1.06 3.05
1993--Administration
Shares(i)....... 0.0720 10.23 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.......... (0.0700) 9.93 (0.34)(k) 0.05(e) 4.58(e) 31.19(k) 14,601 2.68(e) 1.95(e)
</TABLE>

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

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

FOR THE PERIOD JANUARY 5, 1994(g) THROUGH OCTOBER 31,
1994--Institutional
Shares.......... (0.7617) 9.24 (3.00) 0.45(e) 6.48(e) 288.25(j) 24,508 1.46(e) 5.47(e)
</TABLE>

9
<PAGE>

FOR THE PERIOD AUGUST 2, 1991(g) THROUGH OCTOBER 31,
1991--Class A
shares.......... 14.55 0.25 0.23 (0.19) 0.29

FOR THE PERIOD AUGUST 2, 1991(g) THROUGH OCTOBER 31,
1991--Class A
shares.......... (0.24) -- -- -- -- (0.24)

<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
---------- --------- --------- ---------- ---------- --------- ---------- ---------- ----------
GLOBAL INCOME FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
1995--Class A
shares.......... $1.02 $14.45 15.08% 1.29% 6.23% 265.86% $245,835 1.58% 5.94%
1995--Institutional
shares (l)...... 0.36 14.45 4.42 0.65(e) 6.01(e) 265.86 31,619 1.08(e) 5.58(e)
1994--Class A
shares.......... (1.64) 13.43 (4.49) 1.28 5.73 343.74 396,584 1.53 5.48
1993--Class A
shares.......... 0.38 15.07 10.75 1.30 5.78 313.88 675,662 1.55 5.53
1992--Class A
shares.......... 0.09 14.69 8.77 1.37 7.85 270.75 588,893 1.62 7.60
FOR THE PERIOD AUGUST 2, 1991(g) THROUGH OCTOBER 31,
1991--Class A
shares.......... 0.05 14.60 2.00 0.38(k) 1.72(k) 34.22 388,744 0.44(k) 1.66(k)
- -----------------------------------------------------------------------------------------------------------------------------------
</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.
(c) Calculated based on the average shares outstanding methodology.
(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

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.

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.

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.

12
<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.

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".

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.

13
<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".

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 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.

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 desired 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 securities of
any other foreign country.

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.

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 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

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

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.

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.

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.

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 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.

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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

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.

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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.

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.

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 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

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<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

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.

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<PAGE>

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. 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

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<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.

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.

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.

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, 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.

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<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

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<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.

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<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.

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.

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 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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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

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.

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.

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

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<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

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.

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.

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 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.

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.

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 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

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<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.

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 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.

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

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<PAGE>

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 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.

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. 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
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.

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.

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%).

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.

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 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.

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 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

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.

35
<PAGE>

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.

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

INITIAL INVESTMENT:

( ) GOLDMAN SACHS MONEY MARKET TRUST ( ) GS ADJUSTABLE RATE GOVERNMENT FUND
Fill in Portfolio(s): ( ) GS SHORT DURATION GOVERNMENT FUND
( ) OTHER FUND (Please write name of ( ) GS SHORT DURATION TAX-FREE FUND
Fund in the space provided ( ) GS CORE FIXED INCOME FUND
below): ( ) 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
--------------------------------- COUNTRY OF TAX RESIDENCE:
CITY STATE ZIP
-----------------------------
---------------------------------
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.