<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
October 1, 1998
GOLDMAN SACHS INTERNATIONAL EQUITY FUNDS
SERVICE SHARES
GOLDMAN SACHS CORE INTERNATIONAL GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
EQUITY FUND Seeks long-term capital appreciation
Seeks long term growth of cap- through investments in equity securities
ital through a broadly diver- of companies with public stock market
sified portfolio of equity se- capitalizations of $1 billion or less at
curities of large cap compa- the time of investment that are orga-
nies that are organized out- nized outside the U.S. or whose securi-
side the U.S. or whose securi- ties are principally traded outside the
ties are principally traded U.S.
outside the U.S.
GOLDMAN SACHS EMERGING MARKETS
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
EQUITY FUND Seeks long-term capital appreciation
Seeks long-term capital appre- through investments in equity securities
ciation through investments in of emerging country issuers.
equity securities of companies
that are organized outside the GOLDMAN SACHS ASIA GROWTH FUND
U.S. or whose securities are Seeks long-term capital appreciation
principally traded outside the through investments in equity securities
U.S. of companies related (in the manner de-
scribed herein) to Asian countries.
GOLDMAN SACHS EUROPEAN EQUITY
FUND
Seeks long-term capital appre-
ciation through investments in
equity securities of European
companies.
GOLDMAN SACHS JAPANESE EQUITY
FUND
Seeks long-term capital appre-
ciation through investments in
equity securities of Japanese
companies.
-------------
Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
investment adviser to the CORE International Equity Fund. Goldman Sachs Asset
Management International ("GSAMI"), London, England, an affiliate of Goldman
Sachs, serves as investment adviser to each other Fund. GSAM 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 October 1, 1998,
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 ("SEC"), is incorporated herein by reference in its entirety, and
may be obtained without charge from Service Organizations (as defined herein),
or Goldman Sachs by calling the telephone number, or writing to one of the
addresses, listed on the back cover of this Prospectus. The SEC maintains a Web
site (http://www.sec.gov) that contains the Additional Statement and other
information regarding the Trust.
SERVICE 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.
(continued on next page)
<PAGE>
(cover continued)
A FUND'S INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS AND FOREIGN CURRENCIES
ENTAIL CERTAIN RISKS NOT CUSTOMARILY ASSOCIATED WITH INVESTING IN SECURITIES OF
U.S. ISSUERS QUOTED IN U.S. DOLLARS, INCLUDING RISKS RELATING TO CHANGES IN
RELATIVE CURRENCY EXCHANGE RATES OR (AS IN THE CASE OF THE EXPECTED
INTRODUCTION OF THE EURO) THE CREATION OF NEW CURRENCIES. THE SECURITIES
MARKETS OF ASIAN, LATIN AMERICAN, EASTERN EUROPEAN, AFRICAN AND OTHER EMERGING
COUNTRIES IN WHICH THE CORE INTERNATIONAL EQUITY FUND CAN INVEST A PORTION OF
ITS ASSETS AND THE EUROPEAN EQUITY, INTERNATIONAL SMALL CAP, INTERNATIONAL
EQUITY, EMERGING MARKETS AND ASIA GROWTH FUNDS MAY INVEST WITHOUT LIMIT, ARE
LESS LIQUID, ARE ESPECIALLY SUBJECT TO GREATER PRICE VOLATILITY, HAVE SMALLER
MARKET CAPITALIZATIONS, HAVE LESS GOVERNMENT REGULATION AND ARE NOT SUBJECT TO
AS EXTENSIVE AND FREQUENT ACCOUNTING, FINANCIAL AND OTHER REPORTING
REQUIREMENTS AS THE SECURITIES MARKETS OF MORE DEVELOPED COUNTRIES. FURTHER,
INVESTMENT IN EQUITY SECURITIES OF ISSUERS LOCATED IN RUSSIA AND CERTAIN OTHER
EMERGING COUNTRIES INVOLVES RISK OF LOSS RESULTING FROM PROBLEMS IN SHARE
REGISTRATION AND CUSTODY AND SUBSTANTIAL ECONOMIC AND POLITICAL DISRUPTIONS,
WHICH RISKS ARE NOT NORMALLY ASSOCIATED WITH INVESTMENT IN MORE DEVELOPED
COUNTRIES. FUNDS THAT INVEST IN FOREIGN SECURITIES AND EMERGING MARKETS ARE
INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS ASSOCIATED WITH THESE
INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. THE EUROPEAN EQUITY,
JAPANESE EQUITY AND ASIA GROWTH FUNDS WILL BE PARTICULARLY SUBJECT TO EVENTS
AFFECTING THE MARKETS IN WHICH THESE FUNDS CONCENTRATE THEIR INVESTMENTS. SEE
"DESCRIPTION OF SECURITIES" AND "RISK FACTORS."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights.................... 3
Fees and Expenses.................. 6
Financial Highlights............... 8
Investment Objectives and Policies. 12
Description of Securities.......... 17
Investment Techniques.............. 21
Risk Factors....................... 25
Investment Restrictions............ 28
Portfolio Turnover................. 29
Management......................... 29
Expenses........................... 35
Net Asset Value.................... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Performance Information....... 36
Shares of the Trust........... 37
Taxation...................... 37
Additional Information........ 39
Additional Services........... 40
Reports to Shareholders....... 40
Dividends..................... 41
Purchase of Service Shares.... 41
Exchange Privilege............ 43
Redemption of Service Shares.. 43
Appendix A.................... A-1
Appendix B.................... B-1
</TABLE>
2
<PAGE>
FUND HIGHLIGHTS
The following is intended to highlight certain information and is
qualified in its entirety by the more detailed information contained in
this Prospectus.
WHAT IS THE GOLDMAN SACHS TRUST?
The Goldman Sachs Trust is an open-end management investment company
that offers its shares ("Shares") in several investment funds (commonly
known as mutual funds (the "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 objectives.
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. Each Fund is a
"diversified open-end management company" as defined in the Investment
Company Act of 1940, as amended (the "Act"). For a further description of
each Fund's investment objectives and policies, see "Investment
Objectives and Policies," "Description of Securities" and "Investment
Techniques."
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT
FUND NAME OBJECTIVES INVESTMENT CRITERIA BENCHMARK
- -------------- ---------------- --------------------------------------- ----------------
<S> <C> <C> <C>
CORE Long-term growth At least 90% of total assets in equity EAFE Index
INTERNATIONAL of capital. securities of companies organized (unhedged)
EQUITY FUND outside the United States or whose
securities are principally traded
outside the United States. The Fund
seeks broad representation of large cap
issuers across major countries and
sectors of the international economy.
The Fund's investments are selected
using both a variety of quantitative
techniques and fundamental research in
seeking to maximize the Fund's expected
return, while maintaining risk, style,
capitalization and industry
characteristics similar to the unhedged
Morgan Stanley Capital International
(MSCI) Europe, Australasia and Far East
Index (the "EAFE Index"). The Fund may
employ certain currency management
techniques.
- -------------------------------------------------------------------------------------------
INTERNATIONAL Long-term Substantially all, and at least 65%, of FT/S&P Actuaries
EQUITY FUND capital total assets in equity securities Europe & Pacific
appreciation. of companies organized outside Index (unhedged)
the United States or whose securities
are principally traded outside the
United States. The Fund may employ
currency management techniques.
- -------------------------------------------------------------------------------------------
EUROPEAN Long-term Substantially all, and at least 65%, of FT/S&P Actuaries
EQUITY FUND capital total assets in equity securities of Europe Index
appreciation. European companies. The Fund may employ (unhedged)
currency management techniques.
- -------------------------------------------------------------------------------------------
JAPANESE Long-term Substantially all, and at least 65%, of Tokyo Price
EQUITY FUND capital total assets in equity securities of Index ("TOPIX")
appreciation. Japanese companies. The Fund may employ
currency management techniques.
- -------------------------------------------------------------------------------------------
INTERNATIONAL Long-term Substantially all, and at least 65%, of Morgan Stanley
SMALL CAP capital total assets in equity securities of Capital
FUND appreciation. companies with public stock market International
capitalizations of $1 billion or less EAFE Small Cap
at the time of investment that are Index
organized outside the United States or
whose securities are principally traded
outside the United States. The Fund may
employ currency management techniques.
</TABLE>
(continued)
3
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT
FUND NAME OBJECTIVES INVESTMENT CRITERIA BENCHMARK
- ------------ ---------------- --------------------------------------- ----------------
<S> <C> <C> <C>
EMERGING Long-term Substantially all, and at least 65%, of Morgan Stanley
MARKETS capital its total assets in equity securities Capital
EQUITY FUND appreciation. of emerging country issuers. The Fund International
may employ certain currency management Emerging Markets
techniques. Free Index
- ----------------------------------------------------------------------------------------
ASIA GROWTH Long-term Substantially all, and at least 65%, of Morgan Stanley
FUND capital total assets in equity securities Capital
appreciation. of companies in China, Hong International
Kong, India, Indonesia, Malaysia, All Country Asia
Pakistan, the Philippines, Singapore, Free ex-Japan
South Korea, Sri Lanka, Taiwan, Index
Thailand and other Asian countries.
The Fund may employ certain currency
management techniques.
</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, 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."
Risks of Investing in Small Capitalization Companies. To the extent that
a Fund invests in the securities of small market capitalization companies,
the Fund may be exposed to a higher degree of risk and price volatility.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop
in price.
Foreign Risks. Investments in securities of foreign issuers and
currencies involve risks that are different from those associated with
investments in domestic securities. The risks associated with foreign
investments and currencies include changes in relative currency exchange
rates (or, as in the case of the expected introduction of the euro next
year, the creation of new currencies), political and economic developments,
the imposition of exchange controls, confiscation and other governmental
restrictions. Generally, there is less availability of data on foreign
companies and securities markets as well as less regulation of foreign
stock exchanges, brokers and issuers. A Fund's investments in emerging
markets and countries ("Emerging Countries") involves greater risks than
investments in the developed countries of Western Europe, the United
States, Canada, Australia, New Zealand and Japan. In addition, because the
Funds invest primarily outside the United States, they may involve greater
risks, since the securities markets of foreign countries are generally less
liquid and subject to greater price volatility. The securities markets of
Emerging Countries, including those in Asia, Latin America, Eastern Europe
and Africa are marked by a high concentration of market capitalization and
trading volume in a small number of issuers representing a limited number
of industries, as well as a high concentration of ownership of such
securities by a limited number of investors.
Risks of Investing in Japanese Markets. The Japanese Equity Fund will
concentrate in Japanese securities and, therefore, will be particularly
subject to the risk of adverse social, political and economic events which
occur in Japan or affect the Japanese markets.
Other. A Fund's use of certain investment techniques, including
derivatives, forward contracts, options and futures, will subject the Fund
to greater risk than funds that do not employ such techniques.
WHO MANAGES THE FUNDS?
Goldman Sachs Asset Management serves as Investment Adviser to the CORE
International Equity Fund. Goldman Sachs Asset Management International
serves as Investment Adviser to each other Fund. As of
4
<PAGE>
August 21, 1998, the Investment Advisers, together with their affiliates,
acted as investment adviser or distributor for assets in excess of $168
billion.
WHO DISTRIBUTES THE FUNDS' SHARES?
Goldman Sachs acts as distributor of each Fund's Shares (the
"Distributor").
WHAT IS THE MINIMUM INVESTMENT?
The Funds do not have any minimum purchase or account requirements with
respect to Service Shares. A Service Organization may, however, impose a
minimum amount for initial and subsequent investments in Service Shares,
and may establish other requirements such as a minimum account balance.
HOW DO I PURCHASE SERVICE SHARES?
Customers of Service Organizations may invest in Service Shares only
through their Service Organizations. Service Shares of a Fund are purchased
at the current net asset value ("NAV") without any sales load. See
"Purchase of Service Shares."
ADDITIONAL SERVICES. The Trust, on behalf of the Funds, has adopted a
Service Plan with respect to the Service Shares which authorizes a Fund to
compensate Service Organizations for providing account administration and
shareholder liaison services to their customers who are the beneficial
owners of such Shares. The Trust, on behalf of the Funds, will enter into
agreements with each Service Organization which will provide for
compensation to the Service Organization in an amount up to 0.50% (on an
annualized basis) of the average daily net assets of the Service Shares of
the Funds attributable to or held in the name of the Service Organization
for its customers. See "Additional Services."
HOW DO I SELL MY SERVICE SHARES?
You may redeem Service Shares upon request on any Business Day, as
defined under "Additional Information," at the NAV next determined after
receipt of such request in proper form. See "Redemption of Service Shares."
HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?
<TABLE>
<CAPTION>
INVESTMENT INCOME DIVIDENDS CAPITAL GAINS
DECLARED AND PAID DISTRIBUTIONS
--------------------------- -------------
<S> <C>
Annually Annually
</TABLE>
Recordholders of Service Shares may receive dividends and distributions
in additional Service Shares of the Fund in which they have invested or may
elect to receive them in cash. For further information concerning dividends
and distributions, see "Dividends."
5
<PAGE>
FEES AND EXPENSES
(SERVICE SHARES)
<TABLE>
<CAPTION>
CORE INT'L EMERGING
INT'L INT'L EUROPEAN JAPANESE SMALL MARKETS ASIA
EQUITY EQUITY EQUITY EQUITY CAP EQUITY GROWTH
FUND FUND FUND FUND FUND FUND FUND/5/
------ ------ -------- -------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None
Maximum Sales Charge
Imposed on Reinvested
Dividends............. None None None None None None None
Redemption Fees........ None None None None None None None
Exchange Fees.......... None None None None None None None
ANNUAL FUND OPERATING
EXPENSES: (as a
percentage of average
daily net assets)/1/
Management Fees........ 0.85% 1.00% 1.00% 1.00% 1.20% 1.20% 1.00%
Service Fees/2/........ 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Other Expenses (after
waivers and reimburse-
ments)/3/............. 0.16% 0.14% 0.14% 0.05% 0.20% 0.19% 0.20%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES (AFTER WAIVERS
AND REIMBURSEMENTS)/4/. 1.51% 1.64% 1.64% 1.55% 1.90% 1.89% 1.70%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ---------------------
/1/ The Funds' annual operating expenses have been restated to reflect fees
and expenses in effect as of September 1, 1998, except for European Equity
Fund which is based on estimated amounts for the current fiscal year.
/2/ Service Organizations may charge other fees to their customers who are
beneficial owners of Service Shares in connection with their customer
accounts.
/3/The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, service fees, transfer agency
fees (equal to 0.04% of the average daily net assets of each Funds' Service
Shares), taxes, interest and brokerage fees and litigation, indemnification
and other extraordinary expenses) for each Fund to the extent such expenses
exceed the following percentages of average daily net assets:
<TABLE>
<CAPTION>
OTHER
EXPENSES
--------
<S> <C> <C>
CORE International Equity.............................. 0.12%
International Equity................................... 0.10%
European Equity........................................ 0.10%
Japanese Equity........................................ 0.01%
International Small Cap................................ 0.16%
Emerging Markets Equity................................ 0.15%
Asia Growth............................................ 0.16%
/4/ Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Service Shares of the Funds would be as set
forth below:
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
CORE International Equity.............................. 0.44% 1.79%
International Equity................................... 0.22% 1.72%
European Equity........................................ 0.69% 2.19%
Japanese Equity........................................ 2.07% 3.57%
International Small Cap................................ 3.35% 5.05%
Emerging Markets Equity................................ 0.50% 2.20%
Asia Growth............................................ 0.35% 1.85%
</TABLE>
/5/ Service Shares had not commenced operations as of the date of this
Prospectus.
6
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
hypothetical $1,000 investment, assuming (1)
a 5% annual return and (2) redemption at the
end of each time period:
CORE International Equity..................... $15 $48 $ 82 $180
International Equity.......................... 17 52 89 194
European Equity............................... 17 52 N/A N/A
Japanese Equity............................... 16 49 N/A N/A
International Small Cap....................... 19 60 N/A N/A
Emerging Markets Equity....................... 19 59 N/A N/A
Asia Growth................................... 17 54 92 201
</TABLE>
The Investment Adviser and Goldman Sachs may modify or discontinue any of
the limitations set forth above in the future at their discretion. The
information set forth in the foregoing table and hypothetical example relates
only to Service Shares of the Funds. Each Fund also offers Institutional
Shares and Class A, Class B and Class C Shares, which are subject to different
fees and expenses (which affect performance), have different minimum
investment requirements and are entitled to different services. Information
regarding Institutional, Class A, Class B and Class C Shares may be obtained
from an investor's sales representative or from Goldman Sachs by calling the
number on the back of this Prospectus.
In addition to the compensation itemized above, certain Service
Organizations may receive other compensation in connection with the sale and
distribution of Service Shares or for services to their customers' accounts
and/or the Funds. For additional information regarding such compensation, see
"Purchase of Service Shares" in this Prospectus and the Additional Statement.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on the fees and expenses included in the table and
hypothetical example above is based on each Fund's fees and expenses (actual
or estimated) and should not be considered as representative of 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" and "Additional Services."
7
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following data have 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 of the
Funds for the year ended January 31, 1998 (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. During
the periods shown, the Trust did not offer Shares of the European Equity,
Japanese Equity and International Small Cap Funds. Accordingly, there are no
financial highlights for these Funds. Investors in the European Equity Fund
are referred to the historical performance information set forth in Appendix B
to this Prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- -----------------------
FROM NET
NET REALIZED NET REALIZED REALIZED
AND UNREALIZED AND UNREALIZED GAIN ON
NET ASSET GAIN (LOSS) ON GAIN (LOSS) ON FROM INVESTMENT NET NET ASSET
VALUE, NET INVESTMENTS CURRENCY NET AND DECREASE VALUE,
BEGINNING INVESTMENT AND FUTURES RELATED INVESTMENT FUTURES IN NET END OF TOTAL
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS INCOME TRANSACTIONS ASSET VALUE PERIOD RETURN(A)
--------- ---------- -------------- -------------- ---------- ------------ ----------- --------- ---------
CORE INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1998--Class A
Shares(b)....... $10.00 $ -- $0.13 $(0.91) $ -- -- $(0.78) $9.22 (7.66)%(d)
1998--Class B
Shares(b)....... 10.00 (0.02) 0.13 (0.90) -- -- (0.79) 9.21 (7.90)(d)
1998--Class C
Shares(b)....... 10.00 (0.02) 0.13 (0.89) -- -- (0.78) 9.22 (7.80)(d)
1998--Institu-
tional
Shares(b)....... 10.00 0.02 0.13 (0.89) (0.02) -- (0.76) 9.24 (7.45)(d)
1998--Service
Shares(b)....... 10.00 0.01 0.13 (0.91) -- -- (0.77) 9.23 (7.70)(d)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
--------------------------
RATIO OF RATIO OF
NET RATIO OF NET NET
ASSETS AT NET INVESTMENT RATIO OF INVESTMENT
PORTFOLIO AVERAGE END OF EXPENSES TO INCOME TO EXPENSES INCOME (LOSS)
TURNOVER COMMISSION PERIOD AVERAGE NET AVERAGE NET TO AVERAGE TO AVERAGE
RATE RATE IN (000'S) ASSETS ASSETS NET ASSETS NET ASSETS
--------- ---------- ---------- ------------ ------------- ----------- --------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1998--Class A
Shares(b)....... 25.16% $.0069 $ 7,087 1.50%(c) (0.27)%(c) 4.87%(c) (3.90)%(c)
1998--Class B
Shares(b)....... 25.16 .0069 2,721 2.00(c) (0.72)(c) 5.12(c) (3.84)(c)
1998--Class C
Shares(b)....... 25.16 .0069 1,608 2.00(c) (0.73)(c) 5.12(c) (3.85)(c)
1998--Institu-
tional
Shares(b)....... 25.16 .0069 17,719 1.00(c) 0.59(c) 4.12(c) (2.53)(c)
1998--Service
Shares(b)....... 25.16 .0069 1 1.50(c) 0.26(c) 4.62(c) (2.86)(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Commenced operations on August 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
8
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
-------------------------------------- -----------------------------------------------
FROM NET IN EXCESS OF
NET REALIZED REALIZED NET REALIZED
AND GAIN ON GAIN ON NET
UNREALIZED INVESTMENT INVESTMENT INCREASE
NET ASSET NET NET REALIZED GAIN (LOSS) IN EXCESS AND FOREIGN AND FOREIGN (DECREASE)
VALUE, INVESTMENT AND UNREALIZED ON CURRENCY FROM NET OF NET CURRENCY CURRENCY IN NET
BEGINNING INCOME GAIN (LOSS) ON RELATED INVESTMENT INVESTMENT RELATED RELATED ASSET
OF PERIOD (LOSS) INVESTMENTS TRANSACTIONS INCOME INCOME TRANSACTIONS TRANSACTIONS VALUE
--------- ---------- -------------- ------------ ---------- ---------- ------------ ------------ ----------
INTERNATIONAL EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $19.32 $0.03 $2.99 $(0.95) $ -- $(0.30) $(0.88) $(0.36) $0.53
1998--Class B
Shares.......... 19.24 (0.08) 2.96 (0.94) -- (0.25) (0.47) (0.76) 0.46
1998--Class C
Shares(b)....... 22.60 (0.04) (2.03) 0.65 -- (0.38) -- (1.24) (3.04)
1998--Institu-
tional Shares... 19.40 0.10 3.09 (0.98) (0.07) (0.33) (0.97) (0.27) 0.57
1998--Service
Shares.......... 19.34 0.02 3.02 (0.96) -- (0.35) (0.18) (1.05) 0.50
- ----------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 17.20 0.10 3.51 (1.28) -- -- (0.21) -- 2.12
1997--Class B
Shares(b)....... 18.91 (0.06) 0.94 (0.34) -- -- (0.21) -- 0.33
1997--Institu-
tional
Shares(b)....... 17.45 0.04 3.39 (1.24) (0.03) -- (0.21) -- 1.95
1997--Service
Shares(b)....... 17.70 (0.02) 2.95 (1.08) -- -- (0.21) -- 1.64
- ----------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares.......... 14.52 0.13 2.58 1.42 (0.58) -- (0.87) -- 2.68
- ----------------------------------------------------------------------------------------------------------------------------
1995--Class A
Shares.......... 18.10 0.06 (3.04) (0.01) -- -- (0.59) -- (3.58)
- ----------------------------------------------------------------------------------------------------------------------------
1994--Class A
Shares.......... 14.35 0.05 4.08 (0.38) -- -- -- -- 3.75
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993--Class A
Shares(b)....... 14.18 (0.01) 0.29 (0.11) -- -- -- -- 0.17
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-----------------------
NET RATIO OF RATIO OF
ASSETS NET NET RATIO OF RATIO OF
NET AT END EXPENSES INVESTMENT EXPENSES NET
ASSET OF TO INCOME TO INVESTMENT
VALUE, PORTFOLIO AVERAGE PERIOD AVERAGE (LOSS) TO AVERAGE INCOME (LOSS)
END OF TOTAL TURNOVER COMMISSION (IN NET AVERAGE NET TO AVERAGE
PERIOD RETURN(A) RATE RATE(F) 000S) ASSETS NET ASSETS ASSETS NET ASSETS
------ ------------ --------- ---------- -------- --------- ------------ --------- -------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $19.85 11.12% 40.82% $.0207 $697,590 1.67% (0.27)% 1.80% (0.40)%
1998--Class B
Shares.......... 19.70 10.51 40.82 .0207 55,324 2.20 (0.90) 2.30 (1.00)
1998--Class C
Shares(b)....... 19.56 (5.92)(d) 40.82 .0207 3,369 2.27(c) (1.43)(c) 2.37(c) (1.53)(c)
1998--Institu-
tional Shares... 19.97 11.82 40.82 .0207 56,263 1.08 0.30 1.18 0.20
1998--Service
Shares.......... 19.84 11.25 40.82 .0207 3,035 1.55 (0.36) 1.65 (0.46)
- ----------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 19.32 13.48 38.01 .0318 536,283 1.69 (0.07) 1.88 (0.26)
1997--Class B
Shares(b)....... 19.24 2.83(d) 38.01 .0318 19,198 2.23(c) (0.97)(c) 2.38(c) (1.12)(c)
1997--Institu-
tional
Shares(b)....... 19.40 12.53(d) 38.01 .0318 68,374 1.10(c) 0.43(c) 1.25(c) 0.28(c)
1997--Service
Shares(b)....... 19.34 10.42(d) 38.01 .0318 674 1.60(c) (0.40)(c) 1.75(c) (0.55)(c)
- ----------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares.......... 17.20 28.68 68.48 -- 330,860 1.52 0.26 1.77 0.01
- ----------------------------------------------------------------------------------------------------------------------------
1995--Class A
Shares.......... 14.52 (16.65) 84.54 -- 275,086 1.73 0.40 1.98 0.15
- ----------------------------------------------------------------------------------------------------------------------------
1994--Class A
Shares.......... 18.10 26.13 60.04 -- 269,091 1.76 0.51 2.01 0.26
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993--Class A
Shares(b)....... 14.35 1.23(d) 0.00 -- 66,063 1.80(c) (0.42)(c) 2.58(c) (1.20)(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 1, 1992, May 1, 1996, August 15, 1997, February 7,
1996 and March 6, 1996, respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
9
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------ -----------------------------------
NET REALIZED FROM NET
NET ASSET NET REALIZED AND UNREALIZED REALIZED GAIN IN EXCESS
VALUE, NET AND UNREALIZED LOSS ON FOREIGN FROM NET ON INVESTMENT OF NET NET DECREASE NET ASSET
BEGINNING INVESTMENT GAIN (LOSS) ON CURRENCY RELATED INVESTMENT AND OPTIONS INVESTMENT IN NET ASSET VALUE, END
OF PERIOD INCOME INVESTMENTS TRANSACTIONS INCOME TRANSACTIONS INCOME VALUE OF PERIOD
--------- ---------- -------------- ---------------- ---------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JANUARY 31, 1998
- -------------------------------------
1998 -- Class A
Shares(b)....... $10.00 $ -- $(0.11) $(0.20) -- -- -- $(0.31) $9.69
1998 -- Class B
Shares(b)....... 10.00 -- (0.11) (0.20) -- -- -- (0.31) 9.69
1998 -- Class C
Shares(b)....... 10.00 -- (0.10) (0.20) -- -- -- (0.30) 9.70
1998 -- Institu-
tional
Shares(b)....... 10.00 0.01 (0.11) (0.20) -- -- -- (0.30) 9.70
1998 -- Service
Shares(b)....... 10.00 -- (0.11) (0.20) -- -- -- (0.31) 9.69
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER
OF FEES
OR EXPENSE LIMITATIONS
---------------------------
RATIO OF RATIO OF NET
NET ASSETS RATIO OF NET INVESTMENT RATIO OF INVESTMENT
PORTFOLIO AVERAGE AT END OF NET EXPENSES INCOME (LOSS) EXPENSES TO LOSS TO
TOTAL TURNOVER COMMISSION PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE
RETURN(A) RATE RATE (IN 000S) NET ASSETS NET ASSETS ASSETS NET ASSETS
------------ --------- ---------- ---------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JANUARY 31, 1998
- -------------------------------------
1998 -- Class A
Shares(b)....... (3.10)%(d) 3.35% $0.0005 $17,681 1.90%(c) 0.55%(c) 5.88%(c) (3.43)%(c)
1998 -- Class B
Shares(b)....... (3.10)(d) 3.35 0.0005 64 2.41(c) 0.05(c) 6.39(c) (3.93)(c)
1998 -- Class C
Shares(b)....... (3.00)(d) 3.35 0.0005 73 2.48(c) (0.27)(c) 6.46(c) (4.25)(c)
1998 -- Institu-
tional
Shares(b)....... (3.00)(d) 3.35 0.0005 19,120 1.30(c) 0.80(c) 5.28(c) (3.18)(c)
1998 -- Service
Shares(b)....... (3.10)(d) 3.35 0.0005 2 2.72(c) (0.05)(c) 6.70(c) (4.03)(c)
</TABLE>
------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
10
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- ----------------------------------
NET REALIZED FROM NET NET
AND UNREALIZED REALIZED INCREASE NET
NET ASSET NET NET REALIZED ON FOREIGN IN EXCESS GAIN ON (DECREASE) ASSET
VALUE, INVESTMENT AND UNREALIZED CURRENCY FROM NET OF NET INVESTMENT IN NET VALUE,
BEGINNING INCOME GAIN (LOSS) ON RELATED INVESTMENT INVESTMENT AND FUTURES ASSET END OF
OF PERIOD (LOSS) INVESTMENTS TRANSACTIONS INCOME INCOME TRANSACTIONS VALUE PERIOD
--------- ---------- -------------- -------------- ---------- ---------- ------------ ---------- ------
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
1998--Class A
Shares.......... $16.31 $ -- $(5.78) $(2.12) $ -- $(0.03) $ -- $(7.93) $8.38
1998--Class B
Shares.......... 16.24 0.01 (5.79) (2.12) -- (0.03) -- (7.93) 8.31
1998--Class C
Shares(b)....... 15.73 0.01 (5.43) (1.99) -- (0.03) -- (7.44) 8.29
1998--Institu-
tional Shares... 16.33 0.10 (5.83) (2.13) (0.03) -- -- (7.89) 8.44
- ------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 16.49 0.06 (0.11) -- (0.12) -- (0.01) (0.18) 16.31
1997--Class B
Shares(b)....... 17.31 (0.05) (0.48) -- (0.51) (0.03) -- (1.07) 16.24
1997--Institu-
tional
Shares(b)....... 16.61 0.04 (0.11) -- (0.11) (0.06) (0.04) (0.28) 16.33
- ------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares 13.31 0.17 3.44 -- (0.12) (0.14) (0.17) 3.18 16.49
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1995--Class A
Shares(b)....... 14.18 0.11 (0.89) -- 0.01 -- (0.10) (0.87) 13.31
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-----------------------
NET RATIO OF RATIO OF
ASSETS NET NET RATIO OF RATIO OF
AT END EXPENSES INVESTMENT EXPENSES NET
OF TO INCOME TO INVESTMENT
PORTFOLIO AVERAGE PERIOD AVERAGE (LOSS) TO AVERAGE INCOME (LOSS)
TOTAL TURNOVER COMMISSION (IN NET AVERAGE NET TO AVERAGE
RETURN(A) RATE RATE(F) 000S) ASSETS NET ASSETS ASSETS NET ASSETS
------------ --------- ---------- ------- --------- ------------ --------- -------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
1998--Class A
Shares.......... (48.49)% 105.16% $.0070 $87,437 1.75% 0.31% 1.99% 0.07%
1998--Class B
Shares.......... (48.70) 105.16 .0070 3,359 2.30 (0.29) 2.50 (0.49)
1998--Class C
Shares(b)....... (47.17)(d) 105.16 .0070 436 2.35(c) (0.26)(c) 2.55(c) (0.46)(c)
1998--Institu-
tional Shares... (48.19) 105.16 .0070 874 1.11 0.87 1.31 0.67
- ------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... (1.01) 48.40 .0151 263,014 1.67 0.20 1.87 0.00
1997--Class B
Shares(b)....... (6.02)(d) 48.40 .0151 3,354 2.21(c) (0.56)(c) 2.37(c) (0.72)(c)
1997--Institu-
tional
Shares(b)....... (1.09)(d) 48.40 .0151 13,322 1.10(c) 0.54(c) 1.26(c) 0.38 (c)
- ------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares 26.49 88.80 -- 205,539 1.77 1.05 2.02 0.80
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1995--Class A
Shares(b)....... (5.46)(d) 36.08 -- 124,298 1.90(c) 1.83(c) 2.38(c) 1.35(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C and Institutional share activity commenced on
July 8, 1994, May 1, 1996, August 15, 1997 and February 2, 1996,
respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
11
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and principal investment policies of each Fund are
described below. In particular, each Fund may employ certain currency
techniques to seek to hedge against currency exchange rate fluctuations or to
seek to increase total return. When used to seek to enhance return, these
management techniques are considered speculative. Such currency management
techniques involve risks different from those associated with investing solely
in securities of U.S. issuers quoted in U.S. dollars. To the extent that a
Fund is fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. A Fund's net currency
positions may expose it to risks independent of its securities positions.
There can be no assurance that a Fund's investment objectives will be
achieved.
The Investment Adviser may purchase for the Funds common stocks, preferred
stocks, interests in real estate investment trusts, convertible debt
obligations, convertible preferred stocks, bonds with attached warrants,
equity-related transferable securities, equity interests in trusts,
partnerships, joint ventures, limited liability companies and similar
enterprises, warrants and stock purchase rights ("equity securities"). In
choosing a Fund's securities, the Investment Adviser utilizes first-hand
fundamental research, including visiting company facilities to assess
operations and to meet decision-makers. The Investment Adviser may also use
macro analysis of numerous economic and valuation variables to anticipate
changes in company earnings and the overall investment climate. The Investment
Adviser is able to draw on the research and market expertise of the Goldman
Sachs Global Investment Research Department and other affiliates of the
Investment Adviser, as well as information provided by other securities
dealers. Equity securities in a Fund's portfolio will generally be sold when
the Investment Adviser believes that the market price fully reflects or
exceeds the securities' fundamental valuation or when other more attractive
investments are identified. Other investment practices and management
techniques, which involve certain risks are described under "Description of
Securities," "Risk Factors" and "Investment Techniques."
Actively Managed Funds. The International Equity, European Equity, Japanese
Equity, International Small Cap, Emerging Markets Equity and Asia Growth Funds
are managed using an active international approach, which utilizes a
consistent process of stock selection undertaken by portfolio management teams
located within each of the major investment regions, including Europe, Japan,
Asia and the United States. In selecting securities, the Investment Adviser
uses a long-term, bottom-up strategy based on first-hand fundamental research
that is designed to give broad exposure to the available opportunities while
seeking to add return primarily through stock selection. Equity securities for
these Funds are evaluated based on three key factors--the business, the
management and the valuation. The Investment Adviser ordinarily seeks
securities that have, in the Investment Adviser's opinion, superior earnings
growth potential, sustainable franchise value with management attuned to
creating shareholder value and relatively discounted valuations. In addition,
the Investment Adviser uses a multi-factor risk model which seeks to assure
that deviations from the benchmark are justifiable.
Quantitative Style Fund. The CORE International Equity Fund is managed using
both quantitative and fundamental techniques. CORE is an acronym for
"Computer-Optimized, Research-Enhanced," which reflects the CORE International
Equity Fund's investment process. This investment process and the proprietary
multifactor models used to implement it are discussed below.
Investment Process. The Investment Adviser begins with a broad universe of
foreign equity securities for the CORE International Equity Fund. As described
more fully below, the Investment Adviser uses proprietary
12
<PAGE>
multifactor models (each a "Multifactor Model") to forecast the returns of
different markets, currencies and individual securities. The Investment
Adviser may rely on research from both the Goldman Sachs Global Investment
Research Department (the "Research Department") and other industry sources.
In building a diversified portfolio for the CORE International Equity Fund,
the Investment Adviser utilizes optimization techniques to seek to maximize
the Fund's expected return, while maintaining a risk profile similar to the
Fund's benchmark. The Fund's portfolio is primarily composed of securities
rated highest by the foregoing investment process and has risk characteristics
and industry weightings similar to the Fund's benchmark.
Multifactor Models. The Multifactor Models are rigorous computerized rating
systems for forecasting the returns of different equity markets, currencies,
and individual equity securities according to fundamental investment
characteristics. The CORE International Equity Fund uses multiple Multifactor
Models to forecast returns. Currently, the CORE International Equity Fund uses
one model to forecast equity market returns, one model to forecast currency
returns and 22 separate models to forecast individual equity security returns
in 22 different countries. Despite this variety, all Multifactor Models
incorporate common variables covering measures of value, growth, momentum and
risk (e.g., book/price ratio, earnings/price ratio, price momentum, price
volatility, consensus growth forecasts, earnings estimate revisions, earnings
stability, currency momentum and country political risk ratings). All of the
factors used in the Multifactor Models have been shown to significantly impact
the performance of the securities, currencies and markets they were designed
to forecast.
Because they include many disparate factors, the Investment Adviser believes
that all the Multifactor Models are broader in scope and provide a more
thorough evaluation than most conventional quantitative models. Securities and
markets ranked highest by the relevant Multifactor Model do not have one
dominant investment characteristic; rather, they possess an attractive
combination of investment characteristics.
Research Department. In assigning ratings to equity securities, the Research
Department uses a four category rating system ranging from "recommended for
purchase" to "likely to underperform." The ratings reflect the analyst's
judgment as to the investment results of a specific security and incorporate
economic outlook, valuation, risk and a variety of other factors.
By employing both a quantitative (i.e., the Multifactor Models) and a
qualitative (i.e., research enhanced) method of selecting securities, the CORE
International Equity Fund seeks to capitalize on the strengths of each
discipline.
CORE INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term growth of capital. The Fund seeks to achieve its objective through a
broadly diversified portfolio of large cap equity securities of companies that
are organized outside the United States or whose securities are primarily
traded outside the United States.
Primary Investment Focus. The Fund invests, under normal circumstances, at
least 90% of its total assets in equity securities of companies that are
organized outside the United States or whose securities are principally traded
outside the United States. The Fund seeks broad representation of large cap
issuers across major countries and sectors of the international economy. The
Fund's investments are selected using both a variety of quantitative
13
<PAGE>
techniques and fundamental research in seeking to maximize the Fund's expected
return, while maintaining risk, style, capitalization and industry
characteristics similar to the EAFE Index. In addition, the Fund seeks a
portfolio composed of companies with attractive valuations and stronger
momentum characteristics than the EAFE Index.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time, provided the Fund's assets are invested
in at least three foreign countries. The Fund may invest in securities of
issuers in Emerging Countries which involve certain risks, as described below
under "Risk Factors--Special Risks of Investments in the Asian and Other
Emerging Markets," which are not present in investments in more developed
countries.
For a description of the investment process of the Fund, see "Investment
Objectives and Policies--Quantitative Style Fund."
Other. The Fund may invest only in fixed-income securities that are
considered to be cash equivalents.
INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund may allocate its
assets among countries as determined by the Investment Adviser from time to
time provided that the Fund's assets are invested in at least three foreign
countries. The Fund expects to invest a substantial portion of its assets in
the securities of issuers located in the developed countries of Western Europe
and in Japan. However, the Fund may also invest in the securities of issuers
located in Australia, Canada, New Zealand and the Emerging Countries in which
the Emerging Markets Equity Fund may invest. Many of the countries in which
the Fund may invest have emerging markets or economies which involve certain
risks, as described below under "Risk Factors--Special Risks of Investments in
the Asian and Other Emerging Markets," which are not present in investments in
more developed countries. The Fund intends to invest in companies with public
stock market capitalizations that are larger than those in which the
International Small Cap Fund primarily intends to invest.
Other. Up to 35% of the Fund's total assets may be invested in fixed-income
securities.
EUROPEAN EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of European companies. Because of its focus, the Fund will be more susceptible
to European economic, market, political and local risks than a fund that is
more geographically diversified. "European companies" are companies that
satisfy at least one of the following criteria: (i) their securities are
traded principally on stock exchanges in one or more of the European
countries; (ii) they derive 50% or more of their total revenue from goods
produced, sales made or services performed in one or more of the European
countries; (iii) they maintain 50% or more of their assets in one or more of
the European countries; or (iv) they are organized under the laws of a
European country. The Fund may allocate its assets among different countries
as determined by the Investment Adviser, provided that the Fund's assets are
invested in at least three
14
<PAGE>
European countries. It is currently anticipated that a majority of the Fund's
assets will be invested in the equity securities of large cap companies
located in the developed countries of Western Europe. However, the Fund may
also invest, without limit, in mid cap companies and small cap companies, as
well as companies located in Emerging Countries in which the Emerging Markets
Equity Fund may invest, including Eastern European countries and the states
that formerly comprised the Soviet Union and Yugoslavia. These investments
will involve additional risks as described below under "Risk Factors--Special
Risks of Investments in the Asian and Other Emerging Markets" and "Risks of
Investing in Small Capitalization Companies."
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-European countries and in fixed-income securities.
JAPANESE EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of Japanese companies. Japanese companies include those organized under the
laws of Japan or whose shares are traded primarily on a Japanese stock
exchange as well as those whose shares are registered with the Japan
Securities Dealers Association for trading primarily on Japan's over-the-
counter market. The Fund's concentration in Japanese companies will expose it
to the risk of adverse social, political and economic events which occur in
Japan or affect the Japanese markets as described under "Risk Factors--Special
Risks of Investment in the Japanese Markets."
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-Japanese companies and in fixed-income securities.
INTERNATIONAL SMALL CAP FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies with public stock market capitalizations of
$1 billion or less at the time of investment that are organized outside the
U.S. or whose securities are principally traded outside the U.S. The Fund may
allocate its assets among countries as determined by the Investment Adviser
from time to time provided that the Fund's assets are invested in at least
three foreign countries. The Fund expects to invest a substantial portion of
its assets in small cap securities of companies in the developed countries of
Western Europe, Japan and Asia. However, the Fund may also invest in the
securities of issuers located in Australia, Canada, New Zealand and the
Emerging Countries in which the Emerging Markets Equity Fund may invest. Many
of the countries in which the Fund may invest have emerging markets or
economics which involve certain risks, as described below under "Risk
Factors--Special Risks of Investments in Asian and Other Emerging Markets,"
which are not present in investments in more developed countries. If the
market capitalization of a company held by the Fund increases above $1
billion, the Fund may, consistent with its investment objective, continue to
hold the security.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of larger cap companies with public stock market
capitalizations of more than $1 billion at the time of investment and in
fixed-income securities.
15
<PAGE>
EMERGING MARKETS EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of Emerging Country issuers. For purposes of the Fund's
investment policies, Emerging Countries are countries with economies or
securities markets that are considered by the Investment Adviser not to be
fully developed. The Investment Adviser may consider classifications by the
World Bank, the International Finance Corporation or the United Nations and
its agencies in determining whether a country is emerging or developed.
Currently, Emerging Countries include among others, most Latin American,
African, Asian and Eastern European nations. The Investment Adviser currently
intends that the Fund's investment focus will be in the following Emerging
Countries: Argentina, Botswana, Brazil, Chile, China, Colombia, the Czech
Republic, Egypt, Greece, Hong Kong, Hungary, India, Indonesia, Israel, Jordan,
Kenya, Malaysia, Mexico, Morocco, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, Singapore, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Venezuela and Zimbabwe.
An Emerging Country issuer is any entity that satisfies at least one of the
following criteria: (i) it derives 50% or more of its total revenue from goods
produced, sales made or services performed in one or more Emerging Countries;
(ii) it is organized under the laws of, or has a principal office in, an
Emerging Country; (iii) it maintains 50% or more of its assets in one or more
of the Emerging Countries; or (iv) the principal securities trading market for
a class of its securities is in an Emerging Country.
Investments in Emerging Countries involve certain risks as described under
"Risk Factors--Special Risks of Investments in the Asian and Other Emerging
Markets," which are not present in investments in more developed countries.
The Fund may purchase privately placed equity securities, equity securities of
companies that are in the process of being privatized by foreign governments,
securities of issuers that have not paid dividends on a timely basis, equity
securities of issuers that have experienced difficulties, and securities of
companies without performance records.
Other. Under normal circumstances, the Fund maintains investments in at
least six Emerging Countries, and will not invest more than 35% of its total
assets in securities of issuers in any one Emerging Country. Allocation of the
Fund's investments will depend upon the relative attractiveness of the
Emerging Country markets and particular issuers. In addition, macro-economic
factors and the portfolio managers' and Goldman Sachs economists' views of the
relative attractiveness of Emerging Countries and currencies are considered in
allocating the Fund's assets among Emerging Countries. Concentration of the
Fund's assets in one or a few Emerging Countries and currencies will subject
the Fund to greater risks than if the Fund's assets were not geographically
concentrated. See "Description of Securities--Foreign Transactions" and "Risk
Factors." The Fund may invest in the aggregate up to 35% of its total assets
in (i) fixed-income securities of private and governmental Emerging Country
issuers; and (ii) equity and fixed-income securities of issuers in developed
countries.
ASIA GROWTH FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies that satisfy at least one of the following
criteria:
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(i) their securities are traded principally on stock exchanges in one or more
of the Asian countries; (ii) they derive 50% or more of their total revenue
from goods produced, sales made or services performed in one or more of the
Asian countries; (iii) they maintain 50% or more of their assets in one or
more of the Asian countries; or (iv) they are organized under the laws of one
of the Asian countries. The Fund seeks to achieve its objective by investing
primarily in equity securities of Asian companies which are considered by the
Investment Adviser to have long-term capital appreciation potential. Many of
the countries in which the Fund may invest have emerging markets or economies
which involve certain risks as described under "Risk Factors--Special Risks of
Investments in the Asian and Other Emerging Markets," which are not present in
investments in more developed
countries. The Fund may purchase equity securities of issuers that have not
paid dividends on a timely basis, securities of companies that have
experienced difficulties, and securities of companies without performance
records.
Other. The Fund may allocate its assets among the Asian countries as
determined from time to time by the Investment Adviser. For purposes of the
Fund's investment policies, Asian countries are China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri
Lanka, Taiwan and Thailand, as well as any other country in Asia (other than
Japan) to the extent that foreign investors are permitted by applicable law to
make such investments. Allocation of the Fund's investments will depend upon
the Investment Adviser's views of the relative attractiveness of the Asian
markets and particular issuers. For example, on January 31, 1998 (the end of
the Fund's last fiscal year), more than 35% of the Fund's assets were invested
in securities traded in Hong Kong. Concentration of the Fund's assets in one
or a few of the Asian countries and Asian currencies will subject the Fund to
greater risks than if the Fund's assets were not geographically concentrated.
See "Description of Securities--Foreign Investments." The Fund may invest in
the aggregate up to 35% of its total assets in equity securities of issuers in
other countries, including Japan, and in fixed-income securities.
DESCRIPTION OF SECURITIES
The Funds may invest in equity and fixed income securities in accordance
with the investment policies stated above. Certain of these permitted
investments are described in more detail in this section.
CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities, including debt obligations
and preferred stock of the issuer convertible at a stated exchange rate into
common stock of the issuer. Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar
quality. As with all fixed-income securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. However, when the market price of the
common stock underlying a convertible security exceeds the conversion price,
the convertible security tends to reflect the market price 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 decline in price to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an issuer's capital
structure and consequently entail less risk than the issuer's common stock. In
evaluating a convertible security, the Investment Adviser will give primary
emphasis to the attractiveness of the underlying common stock. The convertible
securities in which the Funds invest are not subject to any minimum rating
criteria. Convertible debt securities are equity investments for purposes of
each Fund's investment policies.
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FOREIGN INVESTMENTS
FOREIGN SECURITIES. Each Fund will invest in the securities of foreign
issuers. Investments in foreign securities may offer potential benefits that
are not available from investments exclusively in equity securities of
domestic issuers quoted in U.S. dollars. Foreign countries may have economic
policies or business cycles different from those of the U.S. and markets for
foreign securities do not necessarily move in a manner parallel to U.S.
markets.
Investing in the securities of foreign issuers involves certain special
risks, including those set forth below, which are not typically associated
with investing in U.S. dollar-denominated or quoted securities of U.S.
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 currency in which a Fund receives dividends, interest or
other payments declines in value against the U.S. dollar before such income is
distributed as dividends to shareholders or converted to U.S. dollars, the
Fund may have to sell portfolio securities to obtain sufficient cash to pay
such dividends. The expected introduction of a single currency, the euro, on
January 1, 1999 for participating European nations in the Economic and
Monetary Union ("EU") presents unique uncertainties, including whether the
payment and operational systems of banks and other financial institutions will
be ready by the scheduled launch date; the creation of suitable clearing and
settlement payment systems for the new currency; the legal treatment of
certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the euro; the establishment and maintenance of
exchange rates for currencies being converted into the euro and the euro; the
fluctuation of the euro relative to non-euro currencies during the transition
period from January 1, 1999 to December 31, 2000 and beyond; whether the
interest rate, tax and labor regimes of European countries participating in
the euro will converge over time; and whether the conversion of the currencies
of other EU countries such as the United Kingdom, Denmark and Greece into the
euro and the admission of other non-EU countries such as Poland, Latvia and
Lithuania as members of the EU may have an impact on the euro. These or other
factors, including political and economic risks, could cause market
disruptions before or after the introduction of the euro, and could adversely
affect the value of securities held by the Funds. Commissions on transactions
in foreign securities may be higher than those for similar transactions on
domestic stock markets. In addition, clearance and settlement procedures may
be different in foreign countries and, in certain markets, such procedures
have been unable to keep pace with the volume of securities transactions, thus
making it difficult to conduct such transactions.
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 United States. Foreign securities markets may have substantially
less volume than U.S. securities markets and securities of many foreign
issuers are 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 or other taxes on dividend or interest
payments (or, in some cases, capital gains), limitations on the removal of
funds or other assets of the Funds, political or social instability or
diplomatic developments which could affect investments in those countries.
Concentration of a Fund's assets in one or a few countries and currencies
will subject a Fund to greater risks than if a Fund's assets were not
geographically concentrated.
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INVESTMENTS IN ADRS, EDRS AND GDRS. Each Fund may invest in foreign
securities which take the form of sponsored and unsponsored American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), European
Depository Receipts ("EDRs") or other similar instruments representing
securities of foreign issuers (together, "Depository Receipts"). ADRs
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. Prices of ADRs are quoted in U.S.
dollars, and ADRs are traded in the United States on exchanges or over-the-
counter and are sponsored and issued by domestic banks. EDRs and GDRs are
receipts evidencing an arrangement with a non-U.S. bank. EDRs and GDRs are not
necessarily quoted in the same currency as the underlying security. To the
extent a Fund acquires Depository Receipts through banks which do not have a
contractual relationship with the foreign issuer of the security underlying
the Depository Receipts to issue and service such Depository Receipts
(unsponsored Depository Receipts), there may be an increased possibility that
the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings involving the foreign
issuer, in a timely manner. In addition, the lack of information may result in
inefficiencies in the valuation of such instruments. Investment in Depository
Receipts does not eliminate all the risks inherent in investing in securities
of non-U.S. issuers. The market value of Depository Receipts is dependent upon
the market value of the underlying securities and fluctuations in the relative
value of the currencies in which the Depository Receipt and the underlying
securities are quoted. However, by investing in Depository Receipts, such as
ADRs, that are quoted in U.S. dollars, a Fund may avoid currency risks during
the settlement period for purchases and sales.
FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because each 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, to the extent it invests in
foreign securities, purchase or sell foreign currencies on a spot basis and
may also 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. In addition, each Fund 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 enhance return, forward foreign currency exchange
contracts are considered speculative. Each 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 to sell foreign currency to seek to
increase total return, the Fund will segregate cash or liquid assets in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract, or otherwise cover its position in a
manner permitted by the SEC. The Fund will incur costs in connection with
conversions between various currencies. A 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 NAV to fluctuate. Currency
exchange rates generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or
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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 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 the contract would deprive the Fund of unrealized profits,
transaction costs or the benefits of a currency hedge or force the Fund to
cover its purchase or sale commitments, if any, at the current market price. A
Fund will not enter into forward foreign currency exchange contracts, currency
swaps or other privately negotiated currency instruments 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.
Each Fund may also engage in a variety of foreign currency management
techniques. However, due to the limited market for these instruments with
respect to the currencies of many Emerging Countries, including certain Asian
countries, the Investment Advisers do not currently anticipate that a
significant portion of International Equity, European Equity, International
Small Cap, Emerging Markets Equity or Asia Growth Fund's currency exposure
will be covered by such instruments. For a discussion of such instruments and
the risks associated with their use, see "Investment Objective and Policies"
in the Additional Statement.
FIXED-INCOME SECURITIES
Each Fund may invest in fixed-income securities, including U.S. Government
securities, corporate debt obligations, obligations issued by U.S. or foreign
banks (including without limitation, time deposits, bankers' acceptances and
certificates of deposit), mortgage-backed securities (including stripped
mortgage-backed securities) and asset-backed securities.
Investments in fixed-income securities may include obligations of foreign
governments and governmental agencies, including those of Emerging Countries.
Investment in sovereign debt obligations involves special risks not present in
debt obligations of corporate issuers. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt, and a Fund may have limited recourse in the event of a
default. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt, and in turn a Fund's NAV, to a greater extent
than the volatility inherent in debt obligations of U.S. issuers. A sovereign
debtor's willingness or ability to repay principal and pay interest in a
timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's
policy toward international lenders and the political constraints to which a
sovereign debtor may be subject.
Fixed-income investments may also include investments 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
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loss of a 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 price accurately
than less complex securities.
Each Fund (other than the CORE International Equity Fund, which only invests
in debt instruments that are cash equivalents) may invest up to 35% of its
total assets in debt securities which are unrated or rated in the lowest
rating categories by Standard & Poor's Ratings Group ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's") (i.e., BB or lower by Standard &
Poor's or Ba or lower by Moody's), including securities rated D by Moody's or
Standard & Poor's. Fixed-income securities rated BB or Ba or below (or
comparable unrated securities) are commonly referred to as "junk bonds," are
considered predominately speculative and may be questionable as to principal
and interest payments. In some cases, such bonds may be highly speculative,
have poor prospects for reaching investment grade standing and be in default.
As a result, investment in such bonds will entail greater speculative risks
than those associated with investment in investment grade bonds. Also, to the
extent that the rating assigned to a security in a Fund's portfolio is
downgraded by a rating organization, the market price and liquidity of such
security may be adversely affected. See Appendix A to the Additional Statement
for a description of the corporate bond ratings assigned by Standard & Poor's
and Moody's.
REAL ESTATE INVESTMENT TRUSTS ("REITS")
Each Fund may invest in REITs, which are pooled investment vehicles that
invest primarily in either real estate or real estate related loans. The value
of a REIT is affected by changes in the value of the properties owned by the
REIT or securing mortgage loans held by the REIT. REITs are dependent upon
cash flow from their investments to repay financing costs and the ability of
the REITs' managers. REITs are also subject to risks generally associated with
investments in real estate. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
INVESTMENT TECHNIQUES
OPTIONS ON SECURITIES AND SECURITIES INDICES
Each Fund may write (sell) covered call and put options and purchase call
and put options on any securities in which it may invest or on any securities
index composed of securities in which it may invest. The writing and purchase
of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. The use of options to seek to increase total return
involves the risk of loss if the Investment Adviser is incorrect in its
expectation of fluctuations in securities prices or interest rates. The
successful use of options for hedging purposes also depends in part on the
ability of the Investment Adviser to manage future price fluctuations and the
degree of correlation between the options and securities markets. If the
Investment Adviser is incorrect in its expectation of changes in securities
prices or determination of the correlation between the securities indices on
which options are written and purchased and the securities in a Fund's
investment portfolio, the investment performance of the Fund will be less
favorable than it would have been in the absence of such options transactions.
The writing of options could significantly increase a Fund's portfolio
turnover rate and, therefore, associated brokerage commissions or spreads.
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OPTIONS ON FOREIGN CURRENCIES
A Fund may, to the extent it invests in foreign securities, purchase and
sell (write) call and put options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of foreign portfolio
securities and anticipated dividends on such securities and against increases
in the U.S. dollar cost of foreign securities to be acquired. In addition,
each 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 options transactions, however, the
writing of an option on a 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 call
and put options for hedging purposes, each 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 written or purchased
by the Funds are traded on U.S. and foreign exchanges or over-the-counter.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To seek to increase total return or to hedge against changes in interest
rates, securities prices or currency exchange rates, a 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, foreign
currencies, securities indices and other financial instruments and indices,
whether domestic or foreign. A Fund will engage in futures and related options
transactions for bona fide hedging purposes as defined in regulations of the
Commodity Futures Trading Commission or to seek to increase total return to
the extent permitted by such regulations. A Fund may not purchase or sell
futures contracts or purchase or sell related options to seek to increase
total return, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of initial margin deposits and premiums paid
on the Fund's outstanding positions in futures and related options entered
into for the purpose of seeking to increase total return would exceed 5% of
the market value of the Fund's net assets. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require the
Fund to segregate and maintain cash or liquid assets with a value equal to the
amount of the Fund's obligations or to otherwise cover the obligations in a
manner permitted by the SEC.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Objectives and Policies--Futures Contracts and Options on Future
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 poorer
overall performance than if the Fund had not entered into any futures
contracts or options transactions. Because perfect correlation between a
futures position and portfolio position that is intended to be protected is
impossible to achieve, the desired protection may not be obtained and a Fund
may be exposed to risk of loss. The loss incurred by a Fund in entering into
futures contracts and in writing call options on futures is potentially
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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 NAV. The profitability of a Fund's trading in futures to seek to
increase total return depends upon the ability of the Investment Adviser to
analyze correctly 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. The Funds may engage in futures transactions on both U.S. and foreign
exchanges. Foreign exchanges may not provide the same protections as U.S.
exchanges.
EQUITY SWAPS
Each Fund may invest up to 10% of its total assets in equity swaps. Equity
swaps allow the parties to a swap agreement to exchange the dividend income or
other components of return on an equity investment (e.g., a group of equity
securities or an index) for a component of return on another non-equity or
equity investment. An equity swap may be used by a Fund to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment may be restricted for legal reasons or is otherwise
impractical. Equity swaps are derivatives and their value can be very
volatile. To the extent that the Investment Adviser does not accurately
analyze and predict the potential relative fluctuation of the components
swapped with another party, a Fund may suffer a loss. The value of some
components of an equity swap (such as the dividends on a common stock) may
also be sensitive to changes in interest rates. Furthermore, during the period
a swap is outstanding, a Fund may suffer a loss if the counterparty defaults.
In connection with its investments in equity swaps, a Fund will either
segregate cash or liquid assets or otherwise cover its obligations in a manner
required by the SEC.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fund may purchase when-issued securities. When-issued transactions
arise when securities are purchased by a Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. Each Fund may also purchase or sell securities on a forward
commitment basis; that is, make contracts to purchase or sell securities for a
fixed price at a future date beyond the customary settlement period. 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. Conversely, securities sold on a forward commitment basis
involve the risk that the value of the securities to be sold may increase
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. A Fund will segregate cash or liquid
assets in an amount sufficient to meet the purchase price until three days
prior to the settlement date. Alternatively, each Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
ILLIQUID AND RESTRICTED SECURITIES
A Fund will not invest more than 15% of its net assets in illiquid
investments, which include securities (both foreign and domestic) that are not
readily marketable, certain stripped mortgage-backed securities, 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 a review of
the trading markets for a specific restricted security, that such restricted
security is eligible for
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resale pursuant to Rule 144A under the Securities Act of 1933 and, therefore,
is liquid. The Trustees have adopted guidelines under which the Investment
Adviser determines and monitors the liquidity of portfolio securities, subject
to the oversight of the Trustees. Investing in restricted securities eligible
for resale pursuant to Rule 144A may decrease the liquidity of a Fund's
portfolio 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. Each 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 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 management agreements with an
Investment Adviser or its affiliates, may transfer uninvested cash balances
into a single joint account, the daily aggregate balance of which will be
invested in one or more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
Each Fund may also seek to increase its income by lending portfolio
securities. Under present regulatory policies, such loans may be made to
institutions, such as certain broker-dealers, and are required to be secured
continuously by collateral in cash, cash equivalents, or U.S. Government
securities maintained on a current basis in an amount at least equal to the
market value of the securities loaned. Cash collateral may be invested in cash
equivalents. If an Investment Adviser determines to make securities loans, the
value of the securities loaned may not exceed 33 1/3% of the value of the
total assets of a Fund (including the loan collateral). A Fund may experience
a loss or delay in the recovery of its securities if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement
with the Fund.
SHORT SALES AGAINST-THE-BOX
Each Fund (other than the CORE International Equity Fund) may make short
sales of securities or maintain a short position, provided that at all times
when a short position is open the Fund owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, for an equal amount of the securities of the same
issuer as the securities sold short (a short sale against-the-box). Not more
than 25% of a Fund's net assets (determined at the time of the short sale) may
be subject to such short sales. As a result of recent tax legislation, short
sales may not generally be used to defer the recognition of gain for tax
purposes with respect to appreciated securities in a Fund's portfolio.
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TEMPORARY INVESTMENTS
Each Fund may, for temporary defensive purposes, invest 100% of its total
assets (except that the CORE International Equity Fund and Emerging Markets
Equity Fund may only hold up to 35% of their respective total assets) in U.S.
Government securities, repurchase agreements collateralized by U.S. Government
securities, commercial paper rated at least A-2 by Standard & Poor's or P-2 by
Moody's, certificates of deposit, bankers' acceptances, repurchase agreements,
non-convertible preferred stocks, non-convertible corporate bonds with a
remaining maturity of less than one year. When a Fund's assets are invested in
such instruments, the Fund may not be achieving its investment objective.
MISCELLANEOUS TECHNIQUES
In addition to the techniques and investments described above, each Fund
may, with respect to no more than 5% of its net assets, engage in the
following techniques and investments: (i) warrants and stock purchase rights;
(ii) currency swaps; (iii) other investment companies including World Equity
Benchmark Shares and Standard & Poor's Depository Receipts; (iv) unseasoned
companies; and (v) custodial receipts.
In addition, each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Additional Statement.
RISK FACTORS
RISKS OF INVESTING IN EQUITY SECURITIES. In general, the Funds are subject
to the risks associated with investments in common stocks and other equity
securities. Stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions and,
accordingly, the value of the stocks that a Fund holds may decline over short
or extended periods. Stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, certain foreign stock markets were trading at or
close to record high levels and there can be no guarantee that such levels
will continue.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES. Investing in the
securities of such companies involves greater risk and the possibility of
greater portfolio price volatility. Historically, small market capitalization
stocks and stocks of recently organized companies have been more volatile in
price than larger market capitalization stocks. Among the reasons for the
greater price volatility of these small company and unseasoned stocks are the
less certain growth prospects of smaller firms, less institutional investor
interest and the lower degree of liquidity in the markets for such stocks.
SPECIAL RISKS OF INVESTMENTS IN THE ASIAN AND OTHER EMERGING
MARKETS. Investing in the securities of issuers in Emerging Countries involves
risks in addition to those discussed under "Description of Securities--
Foreign Investments." The International Equity, European Equity, International
Small Cap, Emerging Markets Equity and Asia Growth Funds may each invest
without limit in the securities of issuers in Emerging Countries. The CORE
International Equity Fund may invest up to 25% of its total assets in
securities of issuers in Emerging Countries. Emerging Countries are generally
located in the Asia-Pacific region, Eastern Europe, Latin and South America
and Africa. A Fund's purchase and sale of portfolio securities in certain
Emerging Countries may be
25
<PAGE>
constrained by limitations as to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed
based on the aggregate trading volume by or holdings of a Fund, the Investment
Adviser, its affiliates and their respective clients and other service
providers. A Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain Emerging Countries
is restricted or controlled to varying degrees which may limit investment in
such Countries or increase the administrative costs of such investments. For
example, certain countries require governmental approval prior to investments
by foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by a Fund. The repatriation of both investment income and capital
from certain Emerging Countries is subject to restrictions such as the need
for governmental consents. Due to restrictions on direct investment in equity
securities in certain Asian countries, such as Taiwan, it is anticipated that
a Fund may invest in such countries only through other investment funds in
such countries. See "Other Investment Companies" in the Additional Statement.
Many Emerging Countries may be subject to a substantially greater degree of
economic, political and social instability and disruption than is the case in
Western Europe, the United States, Canada, Australia, New Zealand and Japan.
Many Emerging Countries do not have fully democratic governments. For example,
governments of some Emerging Countries are authoritarian in nature or have
been installed or removed as a result of military coups, while governments in
other Emerging Countries have periodically used force to suppress civil
dissent. Disparities of wealth, the pace and success of democratization, and
ethnic, religious and racial disaffection, among other factors, have also led
to social unrest, violence and/or labor unrest in some Asian, Eastern European
and other Emerging Countries. Unanticipated political or social developments
may affect the values of a Fund's investments. Investing in Emerging Countries
involves the risk of loss due to expropriation, nationalization, confiscation
of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested. For example, in the past,
Eastern European governments have expropriated substantial amounts of private
property, and have not settled the claims of property owners. Similar
expropriations could occur in the future.
Starting in mid-1997 some Pacific region countries began to experience
currency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. This situation resulted in a significant drop
in the securities prices of companies located in the region. Some countries
have experienced government intervention, have sought assistance from the
International Monetary Fund and are undergoing substantial domestic unrest.
Although some countries are taking steps to restructure their financial
sectors in a manner that may facilitate a return to long-term economic growth,
there can be no assurance that these efforts will be successful or that their
current problems will not persist. At the end of its last fiscal year, a
substantial portion of the Asia Growth Fund was invested in securities traded
in the Hong Kong market. In 1997, the sovereignty of Hong Kong reverted from
the United Kingdom to China. Although Hong Kong is, by law, to maintain a high
degree of autonomy, there can also be no assurance that the general economic
position of Hong Kong will not be adversely affected as a result of the
exercise of Chinese sovereignty over Hong Kong. In particular, business
confidence in Hong Kong can be significantly affected by political
developments and statements by public figures in China, which can in turn
affect the performance of the securities markets. In addition, the reversion
of Hong
26
<PAGE>
Kong to China has created uncertainty as to future currency valuations
relative to the U.S. dollar. Any future valuation changes could be adverse
from the perspective of U.S. investors.
Economies in individual Emerging Countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, currency valuation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Many Emerging
Countries have experienced currency devaluations and substantial and, in some
cases, extremely high rates of inflation, which have a negative effect on the
economies and securities markets of such Emerging Countries. Economies in
Emerging Countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, have been and may continue to be
affected adversely by the economies of their trading partners, trade barriers,
exchange controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade.
Brokerage commissions, custodial services and other costs relating to
investment in international securities markets generally are more expensive
than in the United States. A Fund's investment in Emerging Countries may also
be subject to withholding or other taxes, which may be significant and may
reduce the return from an investment in such country to the Fund. Settlement
procedures in Emerging Countries are frequently less developed and reliable
than those in the United States and may involve a Fund's delivery of
securities before receipt of payment for their sale. In addition, significant
delays are common in certain markets in registering the transfer of
securities. Settlement or registration problems may make it more difficult for
a Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities, to have a portion of its assets
uninvested or to incur losses due to the failure of a counterparty to pay for
securities the Fund has delivered or the Fund's inability to complete its
contractual obligations.
Currently, there is no market or only a limited market for many of the
management techniques and instruments with respect to the currencies and
securities markets of the Emerging Countries. Consequently, there can be no
assurance that suitable instruments for hedging currency and market-related
risks will be available at the times when a Fund wishes to use them.
SPECIAL RISKS OF INVESTMENTS IN THE JAPANESE MARKETS. The Japanese Equity
Fund invests primarily in equity securities of Japanese companies.
Accordingly, the Japanese Equity Fund's performance will be closely tied to
economic and market conditions in Japan, and may be more volatile than more
geographically diversified funds. Changes in regulatory, as well as tax or
economic, policy in Japan could significantly affect the Japanese securities
markets and, therefore, the Japanese Equity Fund's performance.
Japan's economy, the second largest in the world, has grown substantially
over the last three decades. Since 1990, however, Japan's economic growth has
declined significantly, and is currently subject to deflationary pressures. In
addition to this economic downturn, Japan is undergoing structural adjustments
related to high wages and taxes, currency valuations and structural
rigidities. Japan has also been experiencing notable uncertainty and loss of
public confidence in connection with the reform of its political process and
the deregulation of its economy. These conditions present risks to the
Japanese Equity Fund and its ability to attain its investment objective.
Japan's economy is heavily dependent upon international trade, and is
especially sensitive to trade barriers and disputes. In particular, Japan
relies on large imports of agricultural products, raw materials and fuels. A
substantial rise in world oil or commodity prices, or a fall-off in Japan's
manufactured exports, could be expected to adversely affect Japan's economy.
In addition, Japan is vulnerable to earthquakes, volcanoes and other natural
27
<PAGE>
disasters. As of the date of this Prospectus, Japan's banking industry
continued to suffer from non-performing loans, declining real estate values
and lower valuations of securities holdings.
The Japanese securities markets are less regulated than the U.S. markets.
Evidence has emerged from time to time of distortion of market prices to serve
political or other purposes. Shareholders' rights are also not always equally
enforced.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those of U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies, and
Japanese interest rates have generally been lower than U.S. interest rates.
These factors have contributed to lower discount rates and higher price-
earnings ratios in Japan than in the U.S.
During the recent past the average stock market prices of Japanese
companies, as measured by major indices such as the NIKKEI 225 Average, have
experienced a substantial decline. It is not possible to determine whether
this general decline will continue.
RISKS OF INVESTING IN FIXED-INCOME SECURITIES. 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.
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.
RISKS OF DERIVATIVE TRANSACTIONS. A Fund's transactions, if any, in options,
futures, options on futures, swaps, structured securities and currency
transactions involve certain risks, including a possible lack of correlation
between changes in the value of hedging instruments and the portfolio assets
(if any) being hedged, the potential illiquidity of the markets for derivative
instruments, the risks arising from 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 use of certain derivative transactions may be
limited by the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.
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 cannot be changed without
approval of a majority of the outstanding shares of that Fund as defined in
the Additional Statement. Each Fund's investment objectives and all 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 that Fund remains
an appropriate investment in light of their then current financial positions
and needs.
28
<PAGE>
PORTFOLIO TURNOVER
A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by a Fund and its shareholders. See
"Financial Highlights" for a statement of the historical portfolio turnover
rate of each Fund (other than the European Equity, Japanese Equity and
International Small Cap Funds). It is anticipated that the annual portfolio
turnover rates of the European Equity, Japanese Equity and International Small
Cap Funds will generally not exceed 75%. The portfolio turnover rate is
calculated by dividing the lesser of the dollar amount of sales or purchases
of portfolio securities by the average monthly value of a Fund's portfolio
securities, excluding securities having a maturity at the date of purchase of
one year or less. 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.
MANAGEMENT
TRUSTEES AND OFFICERS
The Trustees are responsible for deciding matters of general policy and
reviewing the actions of the Investment Advisers, distributor and transfer
agent. The officers of the Trust conduct and supervise the Funds' 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
INVESTMENT ADVISERS. 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 CORE International Equity Fund. Goldman Sachs
registered as an investment adviser in 1981. Goldman Sachs Asset Management
International, 133 Peterborough Court, London EC4A 2BB, England, an affiliate
of Goldman Sachs, serves as the investment adviser to the International
Equity, European Equity, Japanese Equity, International Small Cap, Emerging
Markets Equity and Asia Growth Funds. Goldman Sachs Asset Management
International became a member of the Investment Management Regulatory
Organisation Limited in 1990 and registered as an investment adviser in 1991.
As of August 21, 1998, GSAM and GSAMI, together with their affiliates, acted
as investment adviser or distributor for assets in excess of $168 billion.
Under a Management Agreement with each Fund, the applicable Investment
Adviser, subject to the general supervision of the Trustees, provides day-to-
day advice as to the Fund's portfolio transactions. Goldman Sachs has agreed
to permit the Funds to use the name "Goldman Sachs" or a derivative thereof as
part of each Fund's name for as long as a Fund's Management 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 asset management
affiliates for portfolio decisions and management with respect to certain
portfolio securities. In addition, the Investment Adviser will have access to
the research of, and certain proprietary technical models
29
<PAGE>
developed by, Goldman Sachs and may apply quantitative and qualitative
analysis in determining the appropriate allocations among the categories of
issuers and types of securities.
Under the Management Agreement, each Investment Adviser also: (i) supervises
all non-advisory operations of each Fund; (ii) provides personnel to perform
such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of each Fund; (iii) arranges for
at each Fund's expense (a) the preparation of all required tax returns, (b)
the preparation and submission of reports to existing shareholders, (c) the
periodic updating of prospectuses and Additional Statements and (d) the
preparation of reports to be filed with the SEC and other regulatory
authorities; (iv) maintains each Fund's records; and (v) provides office space
and all necessary office equipment and services.
FUND MANAGERS
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Anna G. Antici Portfolio Manager-- Since Ms. Antici joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager in
1997. From 1974 to 1997,
she was a Vice President
for HSBC Asset
Management, where she
was a portfolio manager
for emerging markets and
head of the Latin
American Department. In
1993, she was a senior
research analyst for
Baring Securities.
- ------------------------------------------------------------------------------------------------------
Robert A. Beckwitt Senior Portfolio Manager-- Since Mr. Beckwitt joined the
Vice President and Emerging Markets Equity 1997 Investment Adviser as a
Co-Head Emerging Market portfolio manager in
Equities 1996. From 1986 to 1996,
he was Chief Investment
Strategist-Portfolio
Adviser to high net
worth investors at
Fidelity Investments.
- ------------------------------------------------------------------------------------------------------
Guy P. de C. Bennett Portfolio Manager-- Since Mr. Bennett joined the
Vice President International Equity 1997 Investment Adviser as a
Senior Portfolio Manager-- portfolio manager in
Japanese Equity 1998 1996 and is also co-head
of GSAM's Japanese
Equity Group in Tokyo.
From 1984 to 1996, he
was a portfolio manager
and an Executive
Director at CIN
Management.
- ------------------------------------------------------------------------------------------------------
Melissa Brown Senior Portfolio Manager-- Since Ms. Brown joined the
Vice President CORE International Equity 1998 Investment Adviser as a
portfolio manager in
1998. From 1984 to 1998,
she was the director of
Quantitative Equity
Research and served on
the Investment Policy
Committee at Prudential
Securities.
- ------------------------------------------------------------------------------------------------------
Mark M. Carhart Senior Portfolio Manager-- Since Mr. Carhart joined the
Vice President CORE International Equity 1998 Investment Adviser as a
member of the
Quantitative Research
and Risk Management team
in 1997. From August
1995 to September 1997,
he was Assistant
Professor of Finance at
the Marshall School of
Business at USC and a
Senior Fellow of the
Wharton Financial
Institutions Center.
From 1993 to 1995, he
was a lecturer and
graduate student at the
University of Chicago
Graduate School of
Business.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Kent A. Clark Senior Portfolio Manager-- Since Mr. Clark joined the
Vice President CORE International Equity 1997 Investment Adviser as a
portfolio manager in the
quantitative equity
management team in 1992.
Prior to joining the
Investment Adviser, Mr.
Clark was studying for a
Ph.D. in finance at the
University of Chicago.
- ------------------------------------------------------------------------------------------
David Dick Senior Portfolio Manager-- Since Mr. Dick joined the
Executive Director European Equity 1998 Investment Adviser as a
senior portfolio manager
on the European Equity
team in 1998. From 1990
to 1998, he was with
Mercury Asset
Management, where he was
a portfolio manager for
european equity and was
head of Mercury's
european sector
strategy.
- ------------------------------------------------------------------------------------------
Ivor H. Farman Portfolio Manager-- Since Mr. Farman joined the
Executive Director International Equity 1996 Investment Adviser as a
European Equity 1998 senior portfolio manager
in 1996. From 1995 to
1996, he was responsible
for originating and
marketing French equity
ideas at Exane in Paris.
Prior to 1995, he spent
five years engaged in
French equity research
and marketing at Banque
Nationale de Paris and
Schroders in London.
- ------------------------------------------------------------------------------------------
Paul Greener Portfolio Manager-- Since Mr. Greener joined the
Associate CORE International Equity 1996 Investment Adviser as a
European Equity 1998 member of the Pan-
European Equity Team
responsible for European
general retailers,
business services and
technology sectors in
1996. From 1994 to 1996,
he was an equity analyst
at CIN Management. Prior
to 1994, he was a
student at the
University of
Birmingham.
- ------------------------------------------------------------------------------------------
James P. Hordern Portfolio Manager-- Since Mr. Hordern joined the
Executive Director International Small Cap 1998 Investment Adviser as a
portfolio manager in
1997. From 1991 to 1997,
he was an Assistant
Director and portfolio
manager at Mercury Asset
Management on the
European Specialist
Team.
- ------------------------------------------------------------------------------------------
Raymond J. Iwanowski Portfolio Manager-- Since Mr. Iwanowski joined the
Vice President CORE International Equity 1998 Investment Adviser as an
associate and portfolio
manager in 1997. From
1993 to 1997, he was a
Vice President and head
of the Fixed Derivatives
Client Research group at
Salomon Brothers. Prior
to 1993, he was a
lecturer and graduate
student at the
University of Chicago
Graduate School of
Business.
- ------------------------------------------------------------------------------------------
Robert C. Jones Senior Portfolio Manager-- Since Mr. Jones joined the
Managing Director CORE International Equity 1997 Investment Adviser as a
portfolio manager in
1989. From 1987 to 1989,
he was the senior
quantitative analyst in
the Goldman, Sachs & Co.
Investment Research
Department.
- ------------------------------------------------------------------------------------------
Shigeka Kouda Portfolio Manager-- Since Mr. Kouda joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1997. From 1992 to 1997,
he was at the Fixed
Income Division of
Goldman Sachs (Japan)
Limited, where he was
extensively involved in
emerging markets trading
as well as International
Fixed Income
institutional sales.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Ralf Laier Portfolio Manager-- Since Mr. Laier joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on Central/Eastern
Europe (CEE) and the
Commonwealth of
Independent States (CIS)
in 1997. Prior to
joining the Investment
Adviser, from 1995 to
1997, he was Vice
President of Soros
Global Research where he
analyzed investment
opportunities in CEE/CI.
From 1994 to 1995, he
achieved a Ph.D. from
the Academy of Economics
in Pozan, Poland, and
from 1992 to 1994 he
worked for the Polish
Ministry of
Privatization as a
Project Director
developing privatization
strategies for several
industry sectors.
- ---------------------------------------------------------------------------------------------
Alice Lui Portfolio Manager-- Since Ms. Lui joined the
Vice President Asia Growth 1994 Investment Adviser
as a portfolio manager
in 1990. Prior to 1990,
she was a management
consultant with Andersen
Consulting in Hong Kong.
- ---------------------------------------------------------------------------------------------
Shogo Maeda Portfolio Manager-- Since Mr. Maeda joined the
Managing Director International Equity 1994 Investment Adviser as a
International Small Cap 1998 portfolio manager in
Senior Portfolio Manager-- 1994. From 1987 to 1994,
Japanese Equity 1998 he worked at Nomura
Investment Management
Incorporated as a Senior
Portfolio Manager.
- ---------------------------------------------------------------------------------------------
Warwick M. Negus Senior Portfolio Manager-- Since Mr. Negus joined the
Managing Director and Asia Growth 1994 Investment Adviser as a
Co-Head Emerging Portfolio Manager-- portfolio manager in
Market International Equity 1994 1994. From 1987 to 1994,
Equities Emerging Markets Equity 1997 he was a Vice President
International Small Cap 1998 of Bankers Trust
Australia Ltd where he
was the Chief Investment
Officer of their
Southeast Asian
investment team. He is
also a member of Goldman
Sachs Asset Management's
global asset allocation
committee.
- ---------------------------------------------------------------------------------------------
Susan Noble Senior Portfolio Manager-- Since Ms. Noble joined the
Executive Director International Equity 1998 Investment Adviser as a
European Equity 1998 senior portfolio manager
and head of the European
Equity team in October
1997. From 1986 to 1997,
she worked at Fleming
Investment Management in
London, where she most
recently was Portfolio
Management Director for
the European equity
investment strategy and
process.
- ---------------------------------------------------------------------------------------------
Ebru Ozsezgin Portfolio Manager-- Since Ms. Ozsezgin joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on the
Mediterranean and Middle
East region in 1997.
From 1996 to 1997, she
was a portfolio manager
at Foreign & Colonial,
responsible for Middle
East investments. From
1994 to 1996, she was a
fund manager with
Framlington Investment
Management. From 1990 to
1994, she was a manager
at Global Securities
Ltd.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Victor H. Pinter Senior Portfolio Manager-- Since Mr. Pinter joined the
Vice President CORE International Equity 1997 Investment Adviser as a
portfolio manager in
1990. From 1985 to 1990,
he was a project manager
in the Information
Technology Division of
the Investment Adviser.
- -----------------------------------------------------------------------------------------
Ramakrishna Shankar Portfolio Manager-- Since Mr. Shankar joined the
Vice President Asia Growth 1997 Investment Adviser as a
Emerging Markets Equity 1998 portfolio manager in
1997. From July 1996 to
1997, he worked for
Goldman, Sachs & Co. in
Singapore as a strategic
advisor for transactions
involving infrastructure
industries in Asia. From
1988 to 1996, he worked
at Goldman, Sachs & Co.
as an investment banker
in the Investment
Banking Division.
- -----------------------------------------------------------------------------------------
Miyako Shibamoto Portfolio Manager-- Since Ms. Shibamoto joined the
Vice President Japanese Equity 1998 Investment Adviser as a
member of the Japanese
Equity team in March
1998. From 1993 to 1998,
she was a Vice President
at Scudder Stevens and
Clark (Japan).
- -----------------------------------------------------------------------------------------
Andrew Shrimpton Portfolio Manager-- Since Mr. Shrimpton joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on Africa as well
as the financial
industry in the EMEA
region in 1996. Prior to
joining the Investment
Adviser, since 1985, he
was a UK equity analyst
and portfolio manager
for CIN Management,
where he initiated CIN
Management's first
investments in Latin
America.
- -----------------------------------------------------------------------------------------
Robert Stewart Portfolio Manager-- Since Mr. Stewart joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1996. Prior to 1996, he
was at CIN Management
for seven years as a
portfolio manager,
managing Japanese
equities.
- -----------------------------------------------------------------------------------------
Takeya Suzuki Portfolio Manager-- Since Mr. Suzuki joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1996. From 1990 to 1996,
he was a Japanese equity
portfolio manager at
Nomura Investment
Management where he
actively managed assets
for U.S. pension funds.
- -----------------------------------------------------------------------------------------
Danny Truell Senior Portfolio Manager-- Since Mr. Truell joined the
Executive Director European Equity 1998 Investment Adviser as a
senior portfolio manager
and head of UK equities
in 1998. From 1992 to
1996, he was Investment
Banking Executive
Director for SBC Warburg
and Chief Asian Equity
Strategist. From 1986 to
1992, he was Assistant
Director of Fund
Management at CIN
Management.
</TABLE>
33
<PAGE>
It is the responsibility of the Investment Adviser to make the investment
decisions for a Fund and to place the purchase and sale orders for the Fund's
portfolio transactions in U.S. and foreign 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. In effecting purchases and
sales of portfolio securities for the Funds, the Investment Adviser will seek
the best price and execution of a Fund's orders. In doing so, where two or
more brokers or dealers offer comparable prices and execution for a particular
trade, consideration may be given to whether the broker or dealer provides
investment research or brokerage services or sells Shares of any Goldman Sachs
Fund. See the Additional Statement for a further description of the Investment
Adviser's brokerage allocation practices.
As compensation for its services rendered and assumption of certain expenses
pursuant to separate Management Agreements, GSAM and GSAMI are entitled to the
following fees, computed daily and payable monthly at the annual rates listed
below:
<TABLE>
<CAPTION>
FOR THE FISCAL
CONTRACTUAL YEAR OR PERIOD ENDED
RATE* JANUARY 31, 1998*
----------- --------------------
<S> <C> <C>
GSAM
--------
CORE International Equity ................ 0.85% 0.75%
GSAMI
---------
International Equity...................... 1.00% 0.90%
European Equity........................... 1.00% N/A
Japanese Equity........................... 1.00% N/A
International Small Cap................... 1.20% N/A
Emerging Markets Equity................... 1.20% 1.10%
Asia Growth............................... 1.00% 0.86%
</TABLE>
- ---------------------
*All numbers are annualized. The difference, if any, between the stated fees
and the actual fees paid by the Funds reflects that the applicable Investment
Adviser did not charge the full amount of the fees to which it would have been
entitled. Effective September 1, 1998, the management fee for the CORE
International Equity, International Equity, Emerging Markets Equity and Asia
Growth Funds will equal 0.85%, 1.00%, 1.20% and 1.00%, respectively. As of
January 31, 1998, the Japanese Equity, International Small Cap and European
Equity Funds had not commenced operations.
The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Funds (excluding management fees, service fees,
transfer agency fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such expenses
exceed 0.12%, 0.10%, 0.10%, 0.01%, 0.16%, 0.15% and 0.16% per annum of the
average daily net assets of the CORE International Equity, International
Equity, European Equity, Japanese Equity, International Small Cap, Emerging
Markets Equity and Asia Growth Funds, respectively. Such reductions or limits,
if any, may be discontinued or modified by the applicable Investment Adviser
in its discretion at any time.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS. The involvement of the Investment Adviser, Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts
and other activities of Goldman Sachs may present conflicts of interest with
respect to 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 type 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. The results of a Fund's investment activities, therefore, may differ
from those of
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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 achieve significant profits on their trading for proprietary or other
accounts. In addition, the Funds may, from time to time, enter into
transactions in which other clients of Goldman Sachs have an adverse interest.
From time to time, a Fund's activities may be limited because of regulatory
restrictions applicable to Goldman Sachs and its affiliates, and/or their
internal policies designed to comply with such restrictions. See "Management--
Activities of Goldman Sachs and its Affiliates and Other Accounts Managed by
Goldman Sachs" in the Additional Statement for further information.
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the
exclusive distributor (the "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 a Fund should
contact Goldman Sachs (as Transfer Agent) at the address or the telephone
number set forth on the back cover page of this Prospectus. Goldman Sachs is
entitled to receive a transfer agency fee with respect to each Fund's
Institutional and Service Shares equal, on an annual basis, to 0.04% of
average daily net assets.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold Shares of the Funds. Goldman Sachs reserves the right to redeem at any
time some or all of the Shares acquired for its own account.
YEAR 2000
Many computer systems were designed using only two digits to signify the
year (for example, "98" for "1998"). On January 1, 2000, if these computer
systems are not corrected, they may incorrectly interpret "00" as the year
"1900" rather than the year "2000," leading to computer shutdowns or errors
(commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to
process securities trades, price securities, provide shareholder account
services and otherwise conduct normal business operations if the Investment
Adviser or other Fund service providers do not adequately address this problem
in a timely manner. The Investment Adviser has established a dedicated group
to analyze these issues and to implement the systems modifications necessary
to prepare for the Year 2000 Problem. Currently, the Investment Adviser does
not anticipate that the transition to the 21st Century will have any material
impact on its ability to continue to service the Funds at current levels. In
addition, the Investment Adviser has sought assurances from the Funds' other
service providers that they are taking the steps necessary so that they do not
experience Year 2000 Problems, and the Investment Adviser will continue to
monitor the situation. At this time, however, no assurance can be given that
the actions taken by the Investment Adviser and the Funds' other service
providers will be sufficient to avoid any adverse effect on the Funds due to
the Year 2000 Problem.
EXPENSES
The Funds are responsible for the payment of their expenses. The expenses
include, without limitation, the fees payable to the Investment Adviser;
custodial and transfer agency fees; service fees paid to Service
Organizations; brokerage fees and commissions; filing fees for the
registration or qualification of the Fund's Shares under federal or state
securities laws; organizational expenses; fees and expenses incurred in
connection
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with membership in investment company organizations; taxes; interest; costs of
liability insurance, fidelity bonds or indemnification, any costs, expenses or
losses arising out of any liability of, or claim for damages or other relief
asserted against, the Funds for violation of any law; legal and auditing fees
and expenses (including the cost of legal and certain accounting services
rendered by employees of the Investment Adviser and its affiliates with
respect to the Funds); expenses of preparing and setting in type prospectuses,
Additional Statements, proxy material, reports and notices and the printing
and distributing of the same to shareholders and regulatory authorities;
compensation and expenses of the Trust's "non-interested" Trustees; and
extraordinary organizational expenses, if any, incurred by the Trust.
NET ASSET VALUE
The NAV 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
(which is normally, but not always, 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"). The NAV per share of each Class is calculated by determining
the net assets attributed to each Class and dividing by the number of
outstanding Shares of that Class. Portfolio securities are valued based on
market quotations or, if accurate quotations are not readily available, at
fair value as determined in good faith under procedures established by the
Trustees.
PERFORMANCE INFORMATION
From time to time each Fund may publish average annual total return 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 NAV. 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, each Fund may furnish total return calculations based on investments
at various sales charge levels or at NAV. Any performance data which are based
on the NAV per Share would be reduced if any applicable sales charge were
taken into account. In addition to the above, each Fund may from time to time
advertise its performance relative to certain averages, performance rankings,
indices, other information prepared by recognized mutual fund statistical
services and investments for which reliable performance information is
available.
Each Fund's total return will be calculated separately for each Class of
Shares in existence. Because each Class of Shares may be subject to different
expenses, the total return calculations with respect to each Class of Shares
for the same period will differ. See "Shares of the Trust."
The Funds' performance quotations do not reflect any fees charged by a
Service Organization to its customer accounts in connection with investments
in the Funds. 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.
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SHARES OF THE TRUST
Each Fund is a series of Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. Each Fund (except the
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and CORE International Equity Funds) was formerly a series of Goldman
Sachs Equity Portfolios, Inc., a Maryland corporation, and was reorganized
into the Trust as of April 30, 1997. The Trustees have authority under the
Trust's Declaration of Trust to create and classify Shares of beneficial
interests in separate series, without further action by shareholders.
Additional series may be added in the future. The Trustees also have authority
to classify and reclassify any series or portfolio of Shares into one or more
Classes. Information about the Trust's other series and classes is contained
in separate prospectuses.
When issued, Shares are fully paid and non-assessable. In the event of
liquidation, shareholders of each class are entitled to share pro rata in the
net assets of the applicable Fund available for distribution to the
shareholders of such Class. All Shares, are freely transferable and have no
preemptive, subscription or conversion rights. Shareholders are entitled to
one vote per Share, provided that, at the option of the Trustees, shareholders
will be entitled to a number of votes based upon the NAVs represented by their
shares.
As of September 21, 1998, The Goldman Sachs Group LP, 85 Broad Street, 10th
floor, New York, New York 10004 was recordholder of 65.15% and 29.40% of the
Japanese Equity and International Small Cap Funds outstanding Shares. The
Goldman Sachs CORE International Equity Omnibus A/C--Growth & Income Strategy
and Goldman Sachs CORE International Equity Omnibus A/C--Growth Strategy, 4900
Sears Tower, Chicago, Illinois 60606 was recordholder of 35.37% and 30.03%,
respectively of CORE International Equity Fund's outstanding shares.
The Trust does not intend to hold annual meetings of shareholders. However,
recordholders may, under certain circumstances, as permitted by the Act,
communicate with other shareholders in connection with requiring a special
meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
TAXATION
FEDERAL TAXES
Each Fund is treated as a separate entity for tax purposes. The European
Equity, Japanese Equity and International Small Cap Funds intend to elect and
each other Fund has elected to be treated as a regulated investment company,
and each Fund intends to continue 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.
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Dividends paid by a Fund from 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 or market discount income
will be taxable to shareholders as ordinary income. Distributions out of the
net capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, of a Fund will be taxed as long-term capital gain,
regardless of the length of time a shareholder has held Shares or whether such
gain was reflected in the price paid for the Shares. These tax consequences
will apply whether distributions are received in cash or reinvested in Shares.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends such Fund receives from U.S. domestic
corporations may be eligible, in the hands of such corporate shareholders, for
the corporate dividends-received deduction, subject to certain holding period
requirements and debt financing limitations under the Code. Dividends paid by
the Funds are not generally expected to qualify, in the hands of corporate
shareholders, for the corporate dividends-received deduction. 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 will pay a per Share price that includes the
value of the anticipated distribution and will be taxed on the distribution
even though the distribution represents a return of a portion of the purchase
price.
Redemptions and exchanges of Shares are taxable events.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on distributions, redemptions and
exchanges if they fail to furnish their correct taxpayer identification number
and certain certifications required by the Internal Revenue Service or if they
are otherwise subject to backup withholding. Individuals, corporations and
other shareholders that are not U.S. persons under the Code are subject to
different tax rules and may be subject to nonresident alien withholding at the
rate of 30% (or a lower rate provided by an applicable tax treaty, if any) on
amounts treated as ordinary dividends from the Funds.
Each Fund may be subject to foreign withholding or other foreign taxes on
income or gain from certain foreign securities. The Funds may elect to pass
such foreign taxes through to their shareholders, who would then take such
taxes into account on their own tax returns. Alternatively, the Funds may
simply deduct such taxes in determining the amounts available for distribution
to shareholders. Generally, the Funds have taken the latter approach and
anticipate that they may continue to do so.
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 may be
available to the extent (if any) a Fund's distributions are derived from
interest on (or, in the case of intangible property taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. For a further discussion of certain tax
consequences of investing in Shares of the 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.
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ADDITIONAL INFORMATION
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, Dr. Martin Luther King, Jr. Day, Presidents' Day (observed),
Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
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ADDITIONAL SERVICES
The Trust, on behalf of the Funds, has adopted a Service Plan with respect
to the Service Shares which authorizes a Fund to compensate certain institu-
tions ("Service Organizations") for providing account administration and per-
sonal and account maintenance services to their customers who are beneficial
owners of such Shares. The Trust, on behalf of the Funds, enters into agree-
ments with Service Organizations which purchase Service Shares on behalf of
their customers ("Service Agreements"). The Service Agreements provide for
compensation to the Service Organizations in an amount up to 0.50% (on an
annualized basis) of the average daily net assets of the Service Shares of the
Fund attributable to or held in the name of the Service Organization for its
customers; provided, however, that the fee paid for personal and account main-
tenance services may not exceed 0.25% of such average daily net assets. The
services provided by the Service Organizations may include acting, directly or
through an agent, as the sole shareholder of record, maintaining account rec-
ords for customers, processing orders to purchase, redeem or exchange Service
Shares for customers, responding to inquiries from prospective and existing
shareholders and assisting customers with investment procedures.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf, purchase, redemption and exchange orders placed by their
customers and, if approved by the Trust, to designate other intermediaries to
accept such orders. In these cases, a Fund will be deemed to have received an
order in proper form when the order is accepted by the authorized Service
Organization or intermediary on a Business Day, and the order will be priced
at a Fund's NAV per Share next determined after such acceptance. The Service
Organization or intermediary will be responsible for transmitting accepted
orders to the Trust within the period agreed upon by them. A customer may
contact its Service Organization to learn whether the Service Organization is
authorized to accept orders. Service Organizations that are authorized to
accept orders for the Trust may receive payments from the Funds or Goldman
Sachs that are in addition to the payments payable by the Trust under the
Service Plan.
Holders of Service Shares of a Fund bear all expenses and fees paid to Serv-
ice Organizations under the Service Plan as well as any other expenses which
are directly attributable to such Shares.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of Service Shares in connection with their customer ac-
counts. These fees would be in addition to any amounts received by the Service
Organization under a Service Agreement and may affect the return earned on an
investment in a Fund. The Trust, on behalf of the Funds, accrues payments made
pursuant to a Service Agreement daily. All inquiries of beneficial owners of
Service Shares should be directed to such owners' Service Organization.
For the fiscal year ended January 31, 1998, the Trust paid the Service
Organizations fees at the annual rate of 0.50% of each Fund's average daily
net assets attributable to Service Shares for those Funds that had commenced
operations.
REPORTS TO SHAREHOLDERS
Recordholders of Service Shares of the Funds will receive an annual report
containing audited financial statements and a semi-annual report. Each
recordholder of Service Shares will also be provided with a printed confirma-
tion for each transaction in its account and a quarterly account statement. A
year-to-date statement for any account will be provided to a Service Organiza-
tion upon request made to Goldman Sachs.
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Service Organizations will be responsible for providing services similar to
those described above to their customers who are the beneficial owners of such
Shares. For example, Service Organizations are responsible for providing each
customer exercising investment discretion with quarterly statements with re-
spect to such customer's account in lieu of an immediate confirmation of each
transaction.
DIVIDENDS
Each dividend from net investment income and capital gain distributions, if
any, declared by a Fund on its outstanding Service Shares will, at the elec-
tion of each shareholder, be paid (i) in cash or (ii) in additional Service
Shares of such Fund. This election should initially be made on a shareholder's
Account Information Form and may be changed upon written notice to Goldman
Sachs at any time prior to the record date for a particular dividend or dis-
tribution. If no election is made, all dividends from net investment income
and capital gain distributions will be reinvested in Service Shares of the ap-
plicable Fund.
The election to reinvest dividends and distributions paid by a Fund in addi-
tional Service Shares of the Fund will not affect the tax treatment of such
dividends and distributions, which will be treated as received by the share-
holder and then used to purchase Service Shares of a Fund.
Each Fund intends that all or substantially all its net investment income
and net capital gains, after reduction by available capital losses, including
any capital losses carried forward from prior years, will be declared as
dividends for each taxable year. Each Fund will pay dividends from net
investment income, and dividends from net realized capital gains, reduced by
available capital losses, at least annually. From time to time, a portion of a
Fund's dividends may constitute a return of capital.
At the time of an investor's purchase of Shares of a Fund, a portion of the
NAV per Share may be represented by undistributed income of the Fund or real-
ized or unrealized appreciation of the Fund's portfolio securities. Therefore,
subsequent distributions on such Shares from such income or realized apprecia-
tion may be taxable to the investor even if the NAV of the investor's Shares
is, as a result of the distributions, reduced below the cost of such Shares
and the distributions (or portions thereof) represent a return of a portion of
the purchase price.
PURCHASE OF SERVICE SHARES
Customers of Service Organizations may invest in Service Shares only through
their Service Organizations. Service Shares may be purchased on any Business
Day at the NAV per Share next determined after receipt of an order by Goldman
Sachs from a Service Organization. (See "Additional Services" for a descrip-
tion of limited situations where a Service Organization or other intermediary
may be authorized to accept orders for the Funds.) No sales load will be
charged. Currently, the NAV is determined as of the close of regular trading
on the New York Stock Exchange (which is normally, but not always, 3:00 p.m.
Chicago time, 4:00 p.m. New York time), as described under "Net Asset Value."
Purchases of Service Shares of the Funds must be settled within three (3)
Business Days of the receipt of a complete purchase order. Payment of the pro-
ceeds of redemption of Shares purchased by check may be delayed for a period
of time as described under "Redemption of Service Shares."
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The Service Organizations are responsible for the timely transmittal of
purchase orders to Goldman Sachs and payments to State Street Bank and Trust
Company ("State Street"). In order to facilitate timely transmittal, the
Service Organizations have established times by which purchase orders and
payments must be received by them.
PURCHASE PROCEDURES
Purchases of Service Shares may be made by a Service Organization 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 a
Service Organization by check (except that the Trust will not accept a check
drawn on a foreign bank or a third party check) or Federal Reserve draft made
payable to "Goldman Sachs International Equity Funds--Name of Fund and Class
of Shares" and should be directed to "Goldman Sachs International Equity
Funds--Name of Fund and Class of Shares," c/o National Financial Data
Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City, MO 64141-6711.
OTHER PURCHASE INFORMATION
The Funds do not have any minimum purchase or account requirements with
respect to Service Shares. A Service Organization may, however, impose a
minimum amount for initial and subsequent investments in Service Shares, and
may establish other requirements such as a minimum account balance. A Service
Organization may effect redemptions of noncomplying accounts, and may impose a
charge for any special services rendered to its customers. Customers should
contact their Service Organization for further information concerning such
requirements and charges.
The Investment Adviser, Distributor, and/or their affiliates also pay
additional compensation, from time to time, out of their assets and not as an
additional charge to the Funds, to selected Service Organizations and other
persons in connection with the sale of Shares of the Funds and other
investment portfolios of the Trust (such as additional payments based on new
sales amounts exceeding pre-established thresholds, or the length of time
customer assets have remained in the Trust) and, subject to applicable NASD
regulations, contribute to various non-cash and cash incentive arrangements to
promote the sale of Shares, as well as sponsor various educational programs,
sales contests and/or promotions in which participants may receive
reimbursement of expenses, entertainment and prizes such as travel awards,
merchandise, cash, investment research and educational information and related
support materials. This additional compensation can vary among Service
Organizations depending upon such factors as the amounts their customers have
invested (or may invest) in particular investment portfolios of the Trust, the
particular program involved, or the amount of reimbursable expenses.
Additional compensation based on sales may, but is currently not expected to,
exceed 0.50% (annualized) of the amount invested. For further information, see
the Additional Statement.
The Funds reserve the right to redeem Service Shares of any Service Organi-
zation whose account balance is less than $50 as a result of earlier redemp-
tions. Such redemptions will not be implemented if the value of a
recordholder's account falls below the minimum account balance solely as a re-
sult of market conditions. The Trust will give 60 days' prior written notice
to Service Organizations whose Service Shares are being redeemed to allow them
to purchase sufficient additional Service Shares to avoid such redemption.
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The Funds and Goldman Sachs each reserve the right to reject any specific
purchase order (including exchanges) or to restrict purchases or exchanges by
a particular purchaser (or group of related purchasers). This may occur, for
example, when a purchaser or group of purchaser's pattern of frequent pur-
chases, sales or exchanges of Service Shares of a Fund is evident, or if pur-
chases, sales, or exchanges are, or a subsequent abrupt redemption might be,
of a size that would disrupt management of a Fund.
In the sole discretion of Goldman Sachs, a Fund may accept securities
instead of cash for the purchase of Shares of the Fund. Such purchases will be
permitted only if the Investment Adviser determines that any securities
acquired in this manner are consistent with the Fund's investment objectives,
restrictions and policies and are desirable investments for the Fund.
EXCHANGE PRIVILEGE
Service Shares of the Funds may be exchanged by a Service Organization for
(i) Service 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 Goldman Sachs Money Market Fund at the NAV next determined either
by writing to Goldman Sachs, Attention: Goldman Sachs International Equity
Funds--Name of Fund and Class of Shares, c/o GSAM Shareholder Services, 4900
Sears Tower, Chicago, Illinois 60606 or, if previously elected in the Fund's
Account Information Form, by telephone at 800-621-2550 (7:00 a.m. to 5:30 p.m.
Chicago time). A shareholder should obtain and read the prospectus relating to
any other fund and its Shares and consider its investment objective, policies
and applicable fees before making an exchange. Service Shares acquired by tel-
ephone exchange must be registered in the same name(s) and have the same ad-
dress as Service Shares of the Fund for which the exchange is being made.
In an effort to prevent unauthorized or fraudulent exchanges by telephone,
Goldman Sachs employs reasonable procedures as set forth under "Redemption of
Service 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 Service Shares surrendered in the exchange, on which
an investor may realize a gain or loss, followed by a purchase of Service
Shares or the corresponding class of any Goldman Sachs Money Market Fund re-
ceived in the exchange. Shareholders should consult their own tax advisers
concerning the tax consequences of an exchange. Exchanges are available only
in states where exchanges may legally be made. The exchange privilege may be
materially modified or withdrawn at any time on sixty (60) days' written no-
tice to recordholders of Service Shares and is subject to certain limitations.
See "Purchase of Service Shares."
REDEMPTION OF SERVICE SHARES
The Funds will redeem their Service Shares upon request of a recordholder of
such Shares on any Business Day at the NAV next determined after the receipt
of a request in proper form by Goldman Sachs. (See "Additional Services" for a
description of limited situations where a Service Organization or other inter-
mediary may
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be authorized to accept requests for the Funds.) If Service Shares to be re-
deemed were recently purchased by check, a Fund may delay transmittal of re-
demption proceeds until such time as it has assured itself that good funds
have been collected for the purchase of such Service Shares. This may take up
to 15 days. Redemption requests may be made by a Service Organization by writ-
ing to or calling the Transfer Agent at the address or telephone number set
forth on the back cover of this Prospectus. A Service Organization may request
redemptions by telephone if the optional telephone redemption privilege is
elected on the Account Information Form. It may be difficult to implement re-
demptions 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 concerning telephone
redemptions and exchanges. 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.
The Funds will arrange for the proceeds of redemptions effected by any means
to be wired to the recordholder of Service Shares or, if the recordholder
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 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 Business
Days of receipt of a properly executed redemption request. Once wire transfer
instructions have been given by Goldman Sachs, neither the Funds, the Trust
nor Goldman Sachs assumes any further responsibility for the performance of
intermediaries or the customer's Service Organization in the transfer process.
If a problem with such performance arises, the customer should deal directly
with such intermediaries or Service Organizations.
Additional documentation regarding a redemption by any means may be required
to effect a redemption when deemed appropriate by the Transfer Agent. The
request for such redemption will not be considered to have been received in
proper form until such additional documentation has been submitted to the
Transfer Agent by the recordholder of Service Shares.
Service Organizations are responsible for the timely transmittal of
redemption requests by their customers to the Transfer Agent. In order to
facilitate timely transmittal of redemption requests, Service Organizations
have established times by which redemption requests must be received by them.
Additional documentation may be required when deemed appropriate by a Service
Organization.
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APPENDIX A
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON ACCOUNT
INFORMATION FORM
You are required by law to provide a 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 also apply to payments
relating to your account prior to a Fund's receipt of your 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 all your interest and/or dividend
income on your tax return and you have not been notified by the IRS that such
withholding should cease, you must cross out item (2) in the Certification
section 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 IRAs, 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 a 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 Code and consult your tax adviser.
A-1
<PAGE>
APPENDIX B
GOLDMAN SACHS EUROPEAN EQUITY FUND
PRIOR PERFORMANCE OF SIMILARLY ADVISED ACCOUNTS OF THE INVESTMENT ADVISER
<TABLE>
<CAPTION>
FT/S&P
EUROPEAN ACTUARIES
EQUITY EUROPE INDEX
COMPOSITE (UNHEDGED)
--------- ------------
<S> <C> <C>
1/1/1998-6/30/1998....................................... 25.10% 26.09%
1997..................................................... 18.95% 23.66%
1996..................................................... 41.20% 23.51%
1995..................................................... 29.30% 22.17%
1994..................................................... 7.85% 2.95%
10/1/93-12/31/93......................................... 4.03% 9.12%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
--------------------------
SINCE
ONE YEAR ENDED INCEPTION
6/30/1998 (10/1/1993)
-------------- -----------
<S> <C> <C>
European Equity Composite............................ 33.69% 26.44%
FT/S&P Actuaries Europe
Index (unhedged).................................... 37.39% 22.72%
</TABLE>
The preceding table sets forth the Investment Adviser's composite
performance data relating to the historical performance of all discretionary
private accounts managed by the Investment Adviser that have investment
objectives, policies, and strategies substantially similar to the European
Equity Fund. The information is provided to illustrate the past performance of
the Investment Adviser in managing substantially similar accounts as measured
against the FT/S&P Actuaries Europe Index (unhedged) and does not represent
the performance of the European Equity Fund. Investors should not consider
this performance data as a substitute for the performance of the European
Equity Fund nor should investors consider this data as an indication of future
performance of the European Equity Fund or of the Investment Adviser. The
FT/S&P Actuaries Europe Index (unhedged) is unmanaged and investors cannot
invest directly in the index.
In accordance with the standards of the Association for Investment
Management and Research ("AIMR"), the Investment Adviser's composite
performance data was calculated on a time-weighted and asset-weighted total
return basis which includes realized and unrealized gains and losses plus
income. Total return performance of the European Equity Fund will be
calculated in accordance with the regulations of the SEC. The SEC standardized
average annual total return is neither time-weighted nor asset-weighted and is
determined for specified periods by computing the annual percentage change in
the value of an initial amount that is invested in a share class of the Fund
at the maximum public offering price. Investors should be aware that the
differences in methodology between AIMR and SEC requirements could result in
different performance data for identical time periods.
The actual expenses of the private accounts included in the composite were
lower than the estimated expenses of the Fund. Accordingly, the performance
record of the composite has been adjusted downward based on the estimated
expenses of the Service Shares of the European Equity Fund during its first
year of operations. All returns presented reflect the reinvestment of
dividends and other earnings. The private accounts are not subject to the same
diversification requirements, specific tax restrictions and investment
limitations imposed on the European Equity Fund by the Investment Company Act
of 1940 and Subchapter M of the Internal Revenue Code. Consequently, the
performance results of the Investment Adviser's composite could have been
adversely affected if the private accounts had been regulated as investment
companies under the federal securities laws.
B-1
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASSET
MANAGEMENT
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
133 PETERBOROUGH COURT
LONDON, ENGLAND EC4A 2BB
GOLDMAN, SACHS & CO.
DISTRIBUTOR
85 BROAD STREET
NEW YORK, NEW YORK 10004
GOLDMAN, SACHS & CO.
TRANSFER AGENT
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN
1776 HERITAGE DRIVE
NORTH QUINCY, MASSACHUSETTS 02171
ARTHUR ANDERSEN LLP
INDEPENDENT PUBLIC ACCOUNTANTS
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TOLL FREE (IN U.S.) . . . . . . . . 800-621-2550
EQINTLPROSVC
502074
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS
INTERNATIONAL
EQUITY FUNDS
- --------------------------------------------------------------------------------
PROSPECTUS
SERVICE SHARES
LOGO
Goldman
Sachs
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
October 1, 1998
GOLDMAN SACHS INTERNATIONAL EQUITY FUNDS INSTITUTIONAL SHARES
GOLDMAN SACHS CORE INTERNATIONAL GOLDMAN SACHS INTERNATIONAL
EQUITY FUND SMALL CAP FUND
Seeks long-term growth of cap- Seeks long-term capital appre-
ital through a broadly diver- ciation through investments in
sified portfolio of equity se- equity securities of companies
curities of large cap compa- with public stock market capi-
nies that are organized out- talizations of $1 billion or
side the U.S. or whose securi- less at the time of investment
ties are principally traded that are organized outside the
outside the U.S. U.S. or whose securities are
principally traded outside the
GOLDMAN SACHS INTERNATIONAL EQ- U.S.
UITY FUND
Seeks long-term capital appre- GOLDMAN SACHS EMERGING MARKETS
ciation through investments in EQUITY FUND
equity securities of companies Seeks long-term capital appre-
that are organized outside the ciation through investments in
U.S. or whose securities are equity securities of emerging
principally traded outside the country issuers.
U.S.
GOLDMAN SACHS ASIA GROWTH FUND
GOLDMAN SACHS EUROPEAN EQUITY Seeks long-term capital appre-
FUND ciation through investments in
Seeks long-term capital appre- equity securities of companies
ciation through investments in related (in the manner de-
equity securities of European scribed herein) to Asian coun-
companies. tries.
GOLDMAN SACHS JAPANESE EQUITY
FUND
Seeks long-term capital appre-
ciation through investments in
equity securities of Japanese
companies.
-----------------
Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
investment adviser to the CORE International Equity Fund. Goldman Sachs Asset
Management International ("GSAMI"), London, England, an affiliate of Goldman
Sachs, serves as investment adviser to each other Fund. GSAM 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 October 1, 1998,
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 ("SEC"), 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. The SEC maintains a Web site (http://www.sec.gov) that contains the
Additional Statement and other information regarding the Trust.
INSTITUTIONAL 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.
(continued on next page)
<PAGE>
(cover continued)
A FUND'S INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS AND FOREIGN CURRENCIES
ENTAIL CERTAIN RISKS NOT CUSTOMARILY ASSOCIATED WITH INVESTING IN SECURITIES OF
U.S. ISSUERS QUOTED IN U.S. DOLLARS, INCLUDING RISKS RELATING TO CHANGES IN
RELATIVE CURRENCY EXCHANGE RATES OR (AS IN THE CASE OF THE EXPECTED
INTRODUCTION OF THE EURO) THE CREATION OF NEW CURRENCIES. THE SECURITIES
MARKETS OF ASIAN, LATIN AMERICAN, EASTERN EUROPEAN, AFRICAN AND OTHER EMERGING
COUNTRIES IN WHICH THE CORE INTERNATIONAL EQUITY FUND CAN INVEST A PORTION OF
ITS ASSETS AND THE EUROPEAN EQUITY, INTERNATIONAL SMALL CAP, INTERNATIONAL
EQUITY, EMERGING MARKETS AND ASIA GROWTH FUNDS MAY INVEST WITHOUT LIMIT, ARE
LESS LIQUID, ARE ESPECIALLY SUBJECT TO GREATER PRICE VOLATILITY, HAVE SMALLER
MARKET CAPITALIZATIONS, HAVE LESS GOVERNMENT REGULATION AND ARE NOT SUBJECT TO
AS EXTENSIVE AND FREQUENT ACCOUNTING, FINANCIAL AND OTHER REPORTING
REQUIREMENTS AS THE SECURITIES MARKETS OF MORE DEVELOPED COUNTRIES. FURTHER,
INVESTMENT IN EQUITY SECURITIES OF ISSUERS LOCATED IN RUSSIA AND CERTAIN OTHER
EMERGING COUNTRIES INVOLVES RISK OF LOSS RESULTING FROM PROBLEMS IN SHARE
REGISTRATION AND CUSTODY AND SUBSTANTIAL ECONOMIC AND POLITICAL DISRUPTIONS,
WHICH RISKS ARE NOT NORMALLY ASSOCIATED WITH INVESTMENT IN MORE DEVELOPED
COUNTRIES. FUNDS THAT INVEST IN FOREIGN SECURITIES AND EMERGING MARKETS ARE
INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS ASSOCIATED WITH THESE
INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. THE EUROPEAN EQUITY,
JAPANESE EQUITY AND ASIA GROWTH FUNDS WILL BE PARTICULARLY SUBJECT TO EVENTS
AFFECTING THE MARKETS IN WHICH THESE FUNDS CONCENTRATE THEIR INVESTMENTS. SEE
"DESCRIPTION OF SECURITIES" AND "RISK FACTORS."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights.................... 3
Fees and Expenses.................. 6
Financial Highlights............... 8
Investment Objectives and Policies. 12
Description of Securities.......... 17
Investment Techniques.............. 21
Risk Factors....................... 25
Investment Restrictions............ 28
Portfolio Turnover................. 29
Management......................... 29
Expenses........................... 35
Net Asset Value.................... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Performance Information............ 36
Shares of the Trust................ 37
Taxation........................... 37
Additional Information............. 39
Reports to Shareholders............ 40
Dividends.......................... 40
Purchase of Institutional Shares... 40
Exchange Privilege................. 43
Redemption of Institutional Shares. 43
Appendix A......................... A-1
Appendix B......................... B-1
Account Information Form
</TABLE>
2
<PAGE>
FUND HIGHLIGHTS
The following is intended to highlight certain information and is
qualified in its entirety by the more detailed information contained in
this Prospectus.
WHAT IS THE GOLDMAN SACHS TRUST?
The Goldman Sachs Trust is an open-end management investment company
that offers its shares ("Shares") in several investment funds (commonly
known as mutual funds (the "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 objectives.
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. Each Fund is a
"diversified open-end management company" as defined in the Investment
Company Act of 1940, as amended (the "Act"). For a further description of
each Fund's investment objectives and policies, see "Investment
Objectives and Policies," "Description of Securities" and "Investment
Techniques."
<TABLE>
<CAPTION>
INVESTMENT
FUND NAME OBJECTIVES INVESTMENT CRITERIA BENCHMARK
------------- ---------------- -------------------------------------- --------------------
<S> <C> <C> <C>
CORE Long-term growth At least 90% of total assets in equity EAFE Index
INTERNATIONAL of capital. securities of companies organized (unhedged)
EQUITY FUND outside the United States or whose
securities are principally traded
outside the United States. The Fund
seeks broad representation of large cap
issuers across major countries and
sectors of the international economy.
The Fund's investments are selected
using both a variety of quantitative
techniques and fundamental research in
seeking to maximize the Fund's expected
return, while maintaining risk, style,
capitalization and industry
characteristics similar to the unhedged
Morgan Stanley Capital International
(MSCI) Europe, Australasia and Far East
Index (the "EAFE Index"). The Fund may
employ certain currency management
techniques.
- -------------------------------------------------------------------------------------------
INTERNATIONAL Long-term Substantially all, and at least 65%, of FT/S&P Actuaries
EQUITY FUND capital total assets in equity securities Europe & Pacific
appreciation. of companies organized outside Index (unhedged)
the United States or whose securities
are principally traded outside the
United States. The Fund may employ
currency management techniques.
- -------------------------------------------------------------------------------------------
EUROPEAN Long-term Substantially all, and at least 65%, of FT/S&P Actuaries
EQUITY FUND capital total assets in equity securities of Europe Index
appreciation. European companies. The Fund may employ (unhedged)
currency management techniques.
- -------------------------------------------------------------------------------------------
JAPANESE Long-term Substantially all, and at least 65%, of Tokyo Price
EQUITY FUND capital total assets in equity securities of Index ("TOPIX")
appreciation. Japanese companies. The Fund may employ
currency management techniques.
</TABLE>
(continued)
3
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT
FUND NAME OBJECTIVES INVESTMENT CRITERIA BENCHMARK
----------- ---------------- --------------------------------------- ----------------
<S> <C> <C> <C>
EMERGING Long-term Substantially all, and at least 65%, of Morgan Stanley
MARKETS capital total assets in equity securities Capital
EQUITY FUND appreciation. of emerging country issuers. The Fund International
may employ certain currency management Emerging Markets
techniques. Free Index
- ----------------------------------------------------------------------------------------
ASIA GROWTH Long-term Substantially all, and at least 65%, of Morgan Stanley
FUND capital total assets in equity securities Capital
appreciation. of companies in China, Hong International
Kong, India, Indonesia, Malaysia, All Country Asia
Pakistan, the Philippines, Singapore, Free ex-Japan
South Korea, Sri Lanka, Taiwan, Index
Thailand and other Asian countries.
The Fund may employ certain currency
management techniques.
</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, 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."
Risks of Investing in Small Capitalization Companies. To the extent that
a Fund invests in the securities of small market capitalization companies,
the Fund may be exposed to a higher degree of risk and price volatility.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop
in price.
Foreign Risks. Investments in securities of foreign issuers and
currencies involve risks that are different from those associated with
investments in domestic securities. The risks associated with foreign
investments and currencies include changes in relative currency exchange
rates (or, as in the case of the expected introduction of the euro next
year, the creation of new currencies), political and economic developments,
the imposition of exchange controls, confiscation and other governmental
restrictions. Generally, there is less availability of data on foreign
companies and securities markets as well as less regulation of foreign
stock exchanges, brokers and issuers. A Fund's investments in emerging
markets and countries ("Emerging Countries") involves greater risks than
investments in the developed countries of Western Europe, the United
States, Canada, Australia, New Zealand and Japan. In addition, because the
Funds invest primarily outside the United States, they may involve greater
risks, since the securities markets of foreign countries are generally less
liquid and subject to greater price volatility. The securities markets of
Emerging Countries, including those in Asia, Latin America, Eastern Europe
and Africa are marked by a high concentration of market capitalization and
trading volume in a small number of issuers representing a limited number
of industries, as well as a high concentration of ownership of such
securities by a limited number of investors.
Risks of Investing in Japanese Markets. The Japanese Equity Fund will
concentrate in Japanese securities and, therefore, will be particularly subject
to the risk of adverse social, political and economic events which occur in
Japan or affect the Japanese markets.
4
<PAGE>
Other. A Fund's use of certain investment techniques, including
derivatives, forward contracts, options and futures, will subject the Fund
to greater risk than funds that do not employ such techniques.
WHO MANAGES THE FUNDS?
Goldman Sachs Asset Management serves as Investment Adviser to the CORE
International Equity Fund. Goldman Sachs Asset Management International
serves as Investment Adviser to each other Fund. As of August 21, 1998, the
Investment Advisers, together with their affiliates, acted as investment
adviser or distributor for assets in excess of $168 billion.
WHO DISTRIBUTES THE FUNDS' SHARES?
Goldman Sachs acts as distributor of each Fund's Shares (the
"Distributor").
WHAT IS THE MINIMUM INVESTMENT?
The minimum initial investment is $1,000,000 or $10,000,000 (depending
upon an investor's eligibility) in Institutional Shares of a 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 ("NAV")
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 NAV next determined after
receipt of such request in proper form. See "Redemption of Institutional
Shares."
HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?
<TABLE>
<S> <C>
INVESTMENT INCOME CAPITAL GAINS
DIVIDENDS DECLARED AND PAID DISTRIBUTIONS
---------------------------- -------------
Annually Annually
</TABLE>
Recordholders of Institutional Shares may receive dividends and
distributions in additional Institutional Shares of the Fund in which they
have invested or may elect to receive them in cash. For further information
concerning dividends and distributions, see "Dividends."
5
<PAGE>
FEES AND EXPENSES
(INSTITUTIONAL SHARES)
<TABLE>
<CAPTION>
CORE INT'L EMERGING
INT'L INT'L EUROPEAN JAPANESE SMALL MARKETS ASIA
EQUITY EQUITY EQUITY EQUITY CAP EQUITY GROWTH
FUND FUND FUND/1/ FUND FUND FUND FUND
------ ------ -------- -------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on Purchases.. None None None None None None None
Maximum Sales Charge
Imposed on Reinvested
Dividends............. None None None None None None None
Redemption Fees........ None None None None None None None
Exchange Fees.......... None None None None None None None
ANNUAL FUND OPERATING
EXPENSES: (as a
percentage of average
daily net assets)/1/
Management Fees........ 0.85% 1.00% 1.00% 1.00% 1.20% 1.20% 1.00%
Distribution Fees...... None None None None None None None
Other Expenses (after
waivers and
reimbursements)/2/.... 0.16% 0.14% 0.14% 0.05% 0.20% 0.19% 0.20%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES (AFTER WAIVERS
AND REIMBURSEMENTS)/3/. 1.01% 1.14% 1.14% 1.05% 1.40% 1.39% 1.20%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- ---------------------
/1/ The Funds' annual operating expenses have been restated to reflect fees and
expenses in effect as of September 1, 1998, except for European Equity Fund
which is based on estimated amounts for the current fiscal year.
/2/ TheInvestment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, transfer agency fees (equal to
0.04% of the average daily net assets of each Fund's Institutional Shares),
taxes, interest and brokerage fees and litigation, indemnification and
other extraordinary expenses) for each Fund to the extent such expenses
exceed the following percentages of average daily net assets:
<TABLE>
<CAPTION>
OTHER
EXPENSES
--------
<S> <C>
CORE International Equity........................................ 0.12%
International Equity............................................. 0.10%
European Equity.................................................. 0.10%
Japanese Equity ................................................. 0.01%
International Small Cap.......................................... 0.16%
Emerging Markets Equity.......................................... 0.15%
Asia Growth...................................................... 0.16%
</TABLE>
/3/ Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Institutional Shares of the Funds would be as
set forth below:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
CORE International Equity.............................. 0.44% 1.29%
International Equity................................... 0.22% 1.22%
European Equity........................................ 0.69% 1.69%
Japanese Equity........................................ 2.07% 3.07%
International Small Cap................................ 3.35% 4.55%
Emerging Markets Equity................................ 0.50% 1.70%
Asia Growth............................................ 0.35% 1.35%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
hypothetical $1,000 investment, assuming (1)
a 5% annual return and (2) redemption at the
end of each time period:
CORE International Equity..................... $10 $32 $56 $124
International Equity.......................... 12 36 63 139
European Equity............................... 12 36 N/A N/A
Japanese Equity............................... 11 33 N/A N/A
International Small Cap....................... 14 44 N/A N/A
Emerging Markets Equity....................... 14 44 N/A N/A
Asia Growth................................... 12 38 66 145
</TABLE>
The Investment Adviser and Goldman Sachs may modify or discontinue any of
the limitations set forth above in the future at their discretion. The
information set forth in the foregoing table and hypothetical example relates
only to Institutional Shares of the Funds. Each Fund also offers Service
Shares and Class A, Class B and Class C Shares, which are subject to different
fees and expenses (which affect performance), have different minimum
investment requirements and are entitled to different services. Information
regarding Service, Class A, Class B and Class C Shares may be obtained from an
investor's sales representative or from Goldman Sachs by calling the number on
the back cover of this Prospectus.
Institutions that invest in Institutional Shares on behalf of their
customers may charge fees directly to their customer accounts in connection
with their investments. Such fees, if any, may affect the return such
customers realize with respect to their investments.
Certain institutions may also receive other compensation in connection with
the sale and distribution of Institutional Shares or for services to their
customers' accounts and/or the Funds. For additional information regarding
such compensation, see "Purchase of Institutional Shares" in this Prospectus
and the Additional Statement.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on the fees and expenses included in the table and
hypothetical example above are based on each Fund's fees and expenses (actual
or estimated) 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."
7
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following data have 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 of the
Funds for the year ended January 31, 1998 (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. During
the periods shown, the Trust did not offer Shares of the European Equity,
Japanese Equity and International Small Cap Funds. Accordingly, there are no
financial highlights for these Funds. Investors in the European Equity Fund
are referred to the historical performance information set forth in Appendix B
to this Prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- -----------------------
FROM NET
NET REALIZED NET REALIZED REALIZED
AND UNREALIZED AND UNREALIZED GAIN ON
NET ASSET GAIN (LOSS) ON GAIN (LOSS) ON FROM INVESTMENT NET NET ASSET
VALUE, NET INVESTMENTS CURRENCY NET AND DECREASE VALUE,
BEGINNING INVESTMENT AND FUTURES RELATED INVESTMENT FUTURES IN NET END OF TOTAL
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS INCOME TRANSACTIONS ASSET VALUE PERIOD RETURN(A)
--------- ---------- -------------- -------------- ---------- ------------ ----------- --------- ---------
CORE INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1998--Class A
Shares(b)....... $10.00 $ -- $0.13 $(0.91) $ -- -- $(0.78) $9.22 (7.66)%(d)
1998--Class B
Shares(b)....... 10.00 (0.02) 0.13 (0.90) -- -- (0.79) 9.21 (7.90)(d)
1998--Class C
Shares(b)....... 10.00 (0.02) 0.13 (0.89) -- -- (0.78) 9.22 (7.80)(d)
1998--Institu-
tional
Shares(b)....... 10.00 0.02 0.13 (0.89) (0.02) -- (0.76) 9.24 (7.45)(d)
1998--Service
Shares(b)....... 10.00 0.01 0.13 (0.91) -- -- (0.77) 9.23 (7.70)(d)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
--------------------------
RATIO OF RATIO OF
NET RATIO OF NET NET
ASSETS AT NET INVESTMENT RATIO OF INVESTMENT
PORTFOLIO AVERAGE END OF EXPENSES TO INCOME TO EXPENSES INCOME (LOSS)
TURNOVER COMMISSION PERIOD AVERAGE NET AVERAGE NET TO AVERAGE TO AVERAGE
RATE RATE IN (000'S) ASSETS ASSETS NET ASSETS NET ASSETS
--------- ---------- ---------- ------------ ------------- ----------- --------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1998--Class A
Shares(b)....... 25.16% $.0069 $ 7,087 1.50%(c) (0.27)%(c) 4.87%(c) (3.90)%(c)
1998--Class B
Shares(b)....... 25.16 .0069 2,721 2.00(c) (0.72)(c) 5.12(c) (3.84)(c)
1998--Class C
Shares(b)....... 25.16 .0069 1,608 2.00(c) (0.73)(c) 5.12(c) (3.85)(c)
1998--Institu-
tional
Shares(b)....... 25.16 .0069 17,719 1.00(c) 0.59(c) 4.12(c) (2.53)(c)
1998--Service
Shares(b)....... 25.16 .0069 1 1.50(c) 0.26(c) 4.62(c) (2.86)(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Commenced operations on August 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
8
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
-------------------------------------- -----------------------------------------------
FROM NET IN EXCESS OF
NET REALIZED REALIZED NET REALIZED
AND GAIN ON GAIN ON NET
UNREALIZED INVESTMENT INVESTMENT INCREASE
NET ASSET NET NET REALIZED GAIN (LOSS) IN EXCESS AND FOREIGN AND FOREIGN (DECREASE)
VALUE, INVESTMENT AND UNREALIZED ON CURRENCY FROM NET OF NET CURRENCY CURRENCY IN NET
BEGINNING INCOME GAIN (LOSS) ON RELATED INVESTMENT INVESTMENT RELATED RELATED ASSET
OF PERIOD (LOSS) INVESTMENTS TRANSACTIONS INCOME INCOME TRANSACTIONS TRANSACTIONS VALUE
--------- ---------- -------------- ------------ ---------- ---------- ------------ ------------ ----------
INTERNATIONAL EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $19.32 $0.03 $2.99 $(0.95) $ -- $(0.30) $(0.88) $(0.36) $0.53
1998--Class B
Shares.......... 19.24 (0.08) 2.96 (0.94) -- (0.25) (0.47) (0.76) 0.46
1998--Class C
Shares(b)....... 22.60 (0.04) (2.03) 0.65 -- (0.38) -- (1.24) (3.04)
1998--Institu-
tional Shares... 19.40 0.10 3.09 (0.98) (0.07) (0.33) (0.97) (0.27) 0.57
1998--Service
Shares.......... 19.34 0.02 3.02 (0.96) -- (0.35) (0.18) (1.05) 0.50
- ----------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 17.20 0.10 3.51 (1.28) -- -- (0.21) -- 2.12
1997--Class B
Shares(b)....... 18.91 (0.06) 0.94 (0.34) -- -- (0.21) -- 0.33
1997--Institu-
tional
Shares(b)....... 17.45 0.04 3.39 (1.24) (0.03) -- (0.21) -- 1.95
1997--Service
Shares(b)....... 17.70 (0.02) 2.95 (1.08) -- -- (0.21) -- 1.64
- ----------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares.......... 14.52 0.13 2.58 1.42 (0.58) -- (0.87) -- 2.68
- ----------------------------------------------------------------------------------------------------------------------------
1995--Class A
Shares.......... 18.10 0.06 (3.04) (0.01) -- -- (0.59) -- (3.58)
- ----------------------------------------------------------------------------------------------------------------------------
1994--Class A
Shares.......... 14.35 0.05 4.08 (0.38) -- -- -- -- 3.75
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993--Class A
Shares(b)....... 14.18 (0.01) 0.29 (0.11) -- -- -- -- 0.17
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-----------------------
NET RATIO OF RATIO OF
ASSETS NET NET RATIO OF RATIO OF
NET AT END EXPENSES INVESTMENT EXPENSES NET
ASSET OF TO INCOME TO INVESTMENT
VALUE, PORTFOLIO AVERAGE PERIOD AVERAGE (LOSS) TO AVERAGE INCOME (LOSS)
END OF TOTAL TURNOVER COMMISSION (IN NET AVERAGE NET TO AVERAGE
PERIOD RETURN(A) RATE RATE(F) 000S) ASSETS NET ASSETS ASSETS NET ASSETS
------ ------------ --------- ---------- -------- --------- ------------ --------- -------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $19.85 11.12% 40.82% $.0207 $697,590 1.67% (0.27)% 1.80% (0.40)%
1998--Class B
Shares.......... 19.70 10.51 40.82 .0207 55,324 2.20 (0.90) 2.30 (1.00)
1998--Class C
Shares(b)....... 19.56 (5.92)(d) 40.82 .0207 3,369 2.27(c) (1.43)(c) 2.37(c) (1.53)(c)
1998--Institu-
tional Shares... 19.97 11.82 40.82 .0207 56,263 1.08 0.30 1.18 0.20
1998--Service
Shares.......... 19.84 11.25 40.82 .0207 3,035 1.55 (0.36) 1.65 (0.46)
- ----------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 19.32 13.48 38.01 .0318 536,283 1.69 (0.07) 1.88 (0.26)
1997--Class B
Shares(b)....... 19.24 2.83(d) 38.01 .0318 19,198 2.23(c) (0.97)(c) 2.38(c) (1.12)(c)
1997--Institu-
tional
Shares(b)....... 19.40 12.53(d) 38.01 .0318 68,374 1.10(c) 0.43(c) 1.25(c) 0.28(c)
1997--Service
Shares(b)....... 19.34 10.42(d) 38.01 .0318 674 1.60(c) (0.40)(c) 1.75(c) (0.55)(c)
- ----------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares.......... 17.20 28.68 68.48 -- 330,860 1.52 0.26 1.77 0.01
- ----------------------------------------------------------------------------------------------------------------------------
1995--Class A
Shares.......... 14.52 (16.65) 84.54 -- 275,086 1.73 0.40 1.98 0.15
- ----------------------------------------------------------------------------------------------------------------------------
1994--Class A
Shares.......... 18.10 26.13 60.04 -- 269,091 1.76 0.51 2.01 0.26
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993--Class A
Shares(b)....... 14.35 1.23(d) 0.00 -- 66,063 1.80(c) (0.42)(c) 2.58(c) (1.20)(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 1, 1992, May 1, 1996, August 15, 1997, February 7,
1996 and March 6, 1996, respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
9
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------ -----------------------------------
NET REALIZED FROM NET
NET ASSET NET REALIZED AND UNREALIZED REALIZED GAIN IN EXCESS
VALUE, NET AND UNREALIZED LOSS ON FOREIGN FROM NET ON INVESTMENT OF NET NET DECREASE NET ASSET
BEGINNING INVESTMENT GAIN (LOSS) ON CURRENCY RELATED INVESTMENT AND OPTIONS INVESTMENT IN NET ASSET VALUE, END
OF PERIOD INCOME INVESTMENTS TRANSACTIONS INCOME TRANSACTIONS INCOME VALUE OF PERIOD
--------- ---------- -------------- ---------------- ---------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS EQUITY FUND
---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JANUARY 31, 1998
- -------------------------------------
1998 -- Class A
Shares(b)....... $10.00 $ -- $(0.11) $(0.20) -- -- -- $(0.31) $9.69
1998 -- Class B
Shares(b)....... 10.00 -- (0.11) (0.20) -- -- -- (0.31) 9.69
1998 -- Class C
Shares(b)....... 10.00 -- (0.10) (0.20) -- -- -- (0.30) 9.70
1998 -- Institu-
tional
Shares(b)....... 10.00 0.01 (0.11) (0.20) -- -- -- (0.30) 9.70
1998 -- Service
Shares(b)....... 10.00 -- (0.11) (0.20) -- -- -- (0.31) 9.69
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER
OF FEES
OR EXPENSE LIMITATIONS
---------------------------
RATIO OF RATIO OF NET
NET ASSETS RATIO OF NET INVESTMENT RATIO OF INVESTMENT
PORTFOLIO AVERAGE AT END OF NET EXPENSES INCOME (LOSS) EXPENSES TO LOSS TO
TOTAL TURNOVER COMMISSION PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE
RETURN(A) RATE RATE (IN 000S) NET ASSETS NET ASSETS ASSETS NET ASSETS
------------ --------- ---------- ---------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JANUARY 31, 1998
- -------------------------------------
1998 -- Class A
Shares(b)....... (3.10)%(d) 3.35% $0.0005 $17,681 1.90%(c) 0.55%(c) 5.88%(c) (3.43)%(c)
1998 -- Class B
Shares(b)....... (3.10)(d) 3.35 0.0005 64 2.41(c) 0.05(c) 6.39(c) (3.93)(c)
1998 -- Class C
Shares(b)....... (3.00)(d) 3.35 0.0005 73 2.48(c) (0.27)(c) 6.46(c) (4.25)(c)
1998 -- Institu-
tional
Shares(b)....... (3.00)(d) 3.35 0.0005 19,120 1.30(c) 0.80(c) 5.28(c) (3.18)(c)
1998 -- Service
Shares(b)....... (3.10)(d) 3.35 0.0005 2 2.72(c) (0.05)(c) 6.70(c) (4.03)(c)
</TABLE>
------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
10
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- ----------------------------------
NET REALIZED FROM NET NET
AND UNREALIZED REALIZED INCREASE NET
NET ASSET NET NET REALIZED ON FOREIGN IN EXCESS GAIN ON (DECREASE) ASSET
VALUE, INVESTMENT AND UNREALIZED CURRENCY FROM NET OF NET INVESTMENT IN NET VALUE,
BEGINNING INCOME GAIN (LOSS) ON RELATED INVESTMENT INVESTMENT AND FUTURES ASSET END OF
OF PERIOD (LOSS) INVESTMENTS TRANSACTIONS INCOME INCOME TRANSACTIONS VALUE PERIOD
--------- ---------- -------------- -------------- ---------- ---------- ------------ ---------- ------
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
1998--Class A
Shares.......... $16.31 $ -- $(5.78) $(2.12) $ -- $(0.03) $ -- $(7.93) $8.38
1998--Class B
Shares.......... 16.24 0.01 (5.79) (2.12) -- (0.03) -- (7.93) 8.31
1998--Class C
Shares(b)....... 15.73 0.01 (5.43) (1.99) -- (0.03) -- (7.44) 8.29
1998--Institu-
tional Shares... 16.33 0.10 (5.83) (2.13) (0.03) -- -- (7.89) 8.44
- ------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 16.49 0.06 (0.11) -- (0.12) -- (0.01) (0.18) 16.31
1997--Class B
Shares(b)....... 17.31 (0.05) (0.48) -- (0.51) (0.03) -- (1.07) 16.24
1997--Institu-
tional
Shares(b)....... 16.61 0.04 (0.11) -- (0.11) (0.06) (0.04) (0.28) 16.33
- ------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares 13.31 0.17 3.44 -- (0.12) (0.14) (0.17) 3.18 16.49
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1995--Class A
Shares(b)....... 14.18 0.11 (0.89) -- 0.01 -- (0.10) (0.87) 13.31
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-----------------------
NET RATIO OF RATIO OF
ASSETS NET NET RATIO OF RATIO OF
AT END EXPENSES INVESTMENT EXPENSES NET
OF TO INCOME TO INVESTMENT
PORTFOLIO AVERAGE PERIOD AVERAGE (LOSS) TO AVERAGE INCOME (LOSS)
TOTAL TURNOVER COMMISSION (IN NET AVERAGE NET TO AVERAGE
RETURN(A) RATE RATE(F) 000S) ASSETS NET ASSETS ASSETS NET ASSETS
------------ --------- ---------- ------- --------- ------------ --------- -------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
1998--Class A
Shares.......... (48.49)% 105.16% $.0070 $87,437 1.75% 0.31% 1.99% 0.07%
1998--Class B
Shares.......... (48.70) 105.16 .0070 3,359 2.30 (0.29) 2.50 (0.49)
1998--Class C
Shares(b)....... (47.17)(d) 105.16 .0070 436 2.35(c) (0.26)(c) 2.55(c) (0.46)(c)
1998--Institu-
tional Shares... (48.19) 105.16 .0070 874 1.11 0.87 1.31 0.67
- ------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... (1.01) 48.40 .0151 263,014 1.67 0.20 1.87 0.00
1997--Class B
Shares(b)....... (6.02)(d) 48.40 .0151 3,354 2.21(c) (0.56)(c) 2.37(c) (0.72)(c)
1997--Institu-
tional
Shares(b)....... (1.09)(d) 48.40 .0151 13,322 1.10(c) 0.54(c) 1.26(c) 0.38 (c)
- ------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares 26.49 88.80 -- 205,539 1.77 1.05 2.02 0.80
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1995--Class A
Shares(b)....... (5.46)(d) 36.08 -- 124,298 1.90(c) 1.83(c) 2.38(c) 1.35(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C and Institutional share activity commenced on
July 8, 1994, May 1, 1996, August 15, 1997 and February 2, 1996,
respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
11
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and principal investment policies of each Fund are
described below. In particular, each Fund may employ certain currency
techniques to seek to hedge against currency exchange rate fluctuations or to
seek to increase total return. When used to seek to enhance return, these
management techniques are considered speculative. Such currency management
techniques involve risks different from those associated with investing solely
in securities of U.S. issuers quoted in U.S. dollars. To the extent that a
Fund is fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. A Fund's net currency
positions may expose it to risks independent of its securities positions.
There can be no assurance that a Fund's investment objectives will be
achieved.
The Investment Adviser may purchase for the Funds common stocks, preferred
stocks, interests in real estate investment trusts, convertible debt
obligations, convertible preferred stocks, bonds with attached warrants,
equity-related transferable securities, equity interests in trusts,
partnerships, joint ventures, limited liability companies and similar
enterprises, warrants and stock purchase rights ("equity securities"). In
choosing a Fund's securities, the Investment Adviser utilizes first-hand
fundamental research, including visiting company facilities to assess
operations and to meet decision-makers. The Investment Adviser may also use
macro analysis of numerous economic and valuation variables to anticipate
changes in company earnings and the overall investment climate. The Investment
Adviser is able to draw on the research and market expertise of the Goldman
Sachs Global Investment Research Department and other affiliates of the
Investment Adviser, as well as information provided by other securities
dealers. Equity securities in a Fund's portfolio will generally be sold when
the Investment Adviser believes that the market price fully reflects or
exceeds the securities' fundamental valuation or when other more attractive
investments are identified. Other investment practices and management
techniques, which involve certain risks are described under "Description of
Securities," "Risk Factors" and "Investment Techniques."
Actively Managed Funds. The International Equity, European Equity, Japanese
Equity, International Small Cap, Emerging Markets Equity and Asia Growth Funds
are managed using an active international approach, which utilizes a
consistent process of stock selection undertaken by portfolio management teams
located within each of the major investment regions, including Europe, Japan,
Asia and the United States. In selecting securities, the Investment Adviser
uses a long-term, bottom-up strategy based on first-hand fundamental research
that is designed to give broad exposure to the available opportunities while
seeking to add return primarily through stock selection. Equity securities for
these Funds are evaluated based on three key factors--the business, the
management and the valuation. The Investment Adviser ordinarily seeks
securities that have, in the Investment Adviser's opinion, superior earnings
growth potential, sustainable franchise value with management attuned to
creating shareholder value and relatively discounted valuations. In addition,
the Investment Adviser uses a multi-factor risk model which seeks to assure
that deviations from the benchmark are justifiable.
Quantitative Style Fund. The CORE International Equity Fund is managed using
both quantitative and fundamental techniques. CORE is an acronym for
"Computer-Optimized, Research-Enhanced," which reflects the CORE International
Equity Fund's investment process. This investment process and the proprietary
multifactor models used to implement it are discussed below.
Investment Process. The Investment Adviser begins with a broad universe of
foreign equity securities for the CORE International Equity Fund. As described
more fully below, the Investment Adviser uses proprietary
12
<PAGE>
multifactor models (each a "Multifactor Model") to forecast the returns of
different markets, currencies and individual securities. The Investment
Adviser may rely on research from both the Goldman Sachs Global Investment
Research Department (the "Research Department") and other industry sources.
In building a diversified portfolio for the CORE International Equity Fund,
the Investment Adviser utilizes optimization techniques to seek to maximize
the Fund's expected return, while maintaining a risk profile similar to the
Fund's benchmark. The Fund's portfolio is primarily composed of securities
rated highest by the foregoing investment process and has risk characteristics
and industry weightings similar to the Fund's benchmark.
Multifactor Models. The Multifactor Models are rigorous computerized rating
systems for forecasting the returns of different equity markets, currencies,
and individual equity securities according to fundamental investment
characteristics. The CORE International Equity Fund uses multiple Multifactor
Models to forecast returns. Currently, the CORE International Equity Fund uses
one model to forecast equity market returns, one model to forecast currency
returns and 22 separate models to forecast individual equity security returns
in 22 different countries. Despite this variety, all Multifactor Models
incorporate common variables covering measures of value, growth, momentum and
risk (e.g., book/price ratio, earnings/price ratio, price momentum, price
volatility, consensus growth forecasts, earnings estimate revisions, earnings
stability, currency momentum and country political risk ratings). All of the
factors used in the Multifactor Models have been shown to significantly impact
the performance of the securities, currencies and markets they were designed
to forecast.
Because they include many disparate factors, the Investment Adviser believes
that all the Multifactor Models are broader in scope and provide a more
thorough evaluation than most conventional quantitative models. Securities and
markets ranked highest by the relevant Multifactor Model do not have one
dominant investment characteristic; rather, they possess an attractive
combination of investment characteristics.
Research Department. In assigning ratings to equity securities, the Research
Department uses a four category rating system ranging from "recommended for
purchase" to "likely to underperform." The ratings reflect the analyst's
judgment as to the investment results of a specific security and incorporate
economic outlook, valuation, risk and a variety of other factors.
By employing both a quantitative (i.e., the Multifactor Models) and a
qualitative (i.e., research enhanced) method of selecting securities, the CORE
International Equity Fund seeks to capitalize on the strengths of each
discipline.
CORE INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term growth of capital. The Fund seeks to achieve its objective through a
broadly diversified portfolio of large cap equity securities of companies that
are organized outside the United States or whose securities are primarily
traded outside the United States.
Primary Investment Focus. The Fund invests, under normal circumstances, at
least 90% of its total assets in equity securities of companies that are
organized outside the United States or whose securities are principally traded
outside the United States. The Fund seeks broad representation of large cap
issuers across major countries and sectors of the international economy. The
Fund's investments are selected using both a variety of quantitative
13
<PAGE>
techniques and fundamental research in seeking to maximize the Fund's expected
return, while maintaining risk, style, capitalization and industry
characteristics similar to the EAFE Index. In addition, the Fund seeks a
portfolio composed of companies with attractive valuations and stronger
momentum characteristics than the EAFE Index.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time, provided the Fund's assets are invested
in at least three foreign countries. The Fund may invest in securities of
issuers in Emerging Countries which involve certain risks, as described below
under "Risk Factors--Special Risks of Investments in the Asian and Other
Emerging Markets," which are not present in investments in more developed
countries.
For a description of the investment process of the Fund, see "Investment
Objectives and Policies--Quantitative Style Fund."
Other. The Fund may invest only in fixed-income securities that are
considered to be cash equivalents.
INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund may allocate its
assets among countries as determined by the Investment Adviser from time to
time provided that the Fund's assets are invested in at least three foreign
countries. The Fund expects to invest a substantial portion of its assets in
the securities of issuers located in the developed countries of Western Europe
and in Japan. However, the Fund may also invest in the securities of issuers
located in Australia, Canada, New Zealand and the Emerging Countries in which
the Emerging Markets Equity Fund may invest. Many of the countries in which
the Fund may invest have emerging markets or economies which involve certain
risks, as described below under "Risk Factors--Special Risks of Investments in
the Asian and Other Emerging Markets," which are not present in investments in
more developed countries. The Fund intends to invest in companies with public
stock market capitalizations that are larger than those in which the
International Small Cap Fund primarily intends to invest.
Other. Up to 35% of the Fund's total assets may be invested in fixed-income
securities.
EUROPEAN EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of European companies. Because of its focus, the Fund will be more susceptible
to European economic, market, political and local risks than a fund that is
more geographically diversified. "European companies" are companies that
satisfy at least one of the following criteria: (i) their securities are
traded principally on stock exchanges in one or more of the European
countries; (ii) they derive 50% or more of their total revenue from goods
produced, sales made or services performed in one or more of the European
countries; (iii) they maintain 50% or more of their assets in one or more of
the European countries; or (iv) they are organized under the laws of a
European country. The Fund may allocate its assets among different countries
as determined by the Investment Adviser, provided that the Fund's assets are
invested in at least three
14
<PAGE>
European countries. It is currently anticipated that a majority of the Fund's
assets will be invested in the equity securities of large cap companies
located in the developed countries of Western Europe. However, the Fund may
also invest, without limit, in mid cap companies and small cap companies, as
well as companies located in Emerging Countries in which the Emerging Markets
Equity Fund may invest, including Eastern European countries and the states
that formerly comprised the Soviet Union and Yugoslavia. These investments
will involve additional risks as described below under "Risk Factors--Special
Risks of Investments in the Asian and Other Emerging Markets" and "Risks of
Investing in Small Capitalization Companies."
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-European countries and in fixed-income securities.
JAPANESE EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of Japanese companies. Japanese companies include those organized under the
laws of Japan or whose shares are traded primarily on a Japanese stock
exchange as well as those whose shares are registered with the Japan
Securities Dealers Association for trading primarily on Japan's over-the-
counter market. The Fund's concentration in Japanese companies will expose it
to the risk of adverse social, political and economic events which occur in
Japan or affect the Japanese markets as described under "Risk Factors--Special
Risks of Investment in the Japanese Markets."
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-Japanese companies and in fixed-income securities.
INTERNATIONAL SMALL CAP FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies with public stock market capitalizations of
$1 billion or less at the time of investment that are organized outside the
U.S. or whose securities are principally traded outside the U.S. The Fund may
allocate its assets among countries as determined by the Investment Adviser
from time to time provided that the Fund's assets are invested in at least
three foreign countries. The Fund expects to invest a substantial portion of
its assets in small cap securities of companies in the developed countries of
Western Europe, Japan and Asia. However, the Fund may also invest in the
securities of issuers located in Australia, Canada, New Zealand and the
Emerging Countries in which the Emerging Markets Equity Fund may invest. Many
of the countries in which the Fund may invest have emerging markets or
economics which involve certain risks, as described below under "Risk
Factors--Special Risks of Investments in Asian and Other Emerging Markets,"
which are not present in investments in more developed countries. If the
market capitalization of a company held by the Fund increases above $1
billion, the Fund may, consistent with its investment objective, continue to
hold the security.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of larger cap companies with public stock market
capitalizations of more than $1 billion at the time of investment and in
fixed-income securities.
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EMERGING MARKETS EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of Emerging Country issuers. For purposes of the Fund's
investment policies, Emerging Countries are countries with economies or
securities markets that are considered by the Investment Adviser not to be
fully developed. The Investment Adviser may consider classifications by the
World Bank, the International Finance Corporation or the United Nations and
its agencies in determining whether a country is emerging or developed.
Currently, Emerging Countries include among others, most Latin American,
African, Asian and Eastern European nations. The Investment Adviser currently
intends that the Fund's investment focus will be in the following Emerging
Countries: Argentina, Botswana, Brazil, Chile, China, Colombia, the Czech
Republic, Egypt, Greece, Hong Kong, Hungary, India, Indonesia, Israel, Jordan,
Kenya, Malaysia, Mexico, Morocco, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, Singapore, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Venezuela and Zimbabwe.
An Emerging Country issuer is any entity that satisfies at least one of the
following criteria: (i) it derives 50% or more of its total revenue from goods
produced, sales made or services performed in one or more Emerging Countries;
(ii) it is organized under the laws of, or has a principal office in, an
Emerging Country; (iii) it maintains 50% or more of its assets in one or more
of the Emerging Countries; or (iv) the principal securities trading market for
a class of its securities is in an Emerging Country.
Investments in Emerging Countries involve certain risks as described under
"Risk Factors--Special Risks of Investments in the Asian and Other Emerging
Markets," which are not present in investments in more developed countries.
The Fund may purchase privately placed equity securities, equity securities of
companies that are in the process of being privatized by foreign governments,
securities of issuers that have not paid dividends on a timely basis, equity
securities of issuers that have experienced difficulties, and securities of
companies without performance records.
Other. Under normal circumstances, the Fund maintains investments in at
least six Emerging Countries, and will not invest more than 35% of its total
assets in securities of issuers in any one Emerging Country. Allocation of the
Fund's investments will depend upon the relative attractiveness of the
Emerging Country markets and particular issuers. In addition, macro-economic
factors and the portfolio managers' and Goldman Sachs economists' views of the
relative attractiveness of Emerging Countries and currencies are considered in
allocating the Fund's assets among Emerging Countries. Concentration of the
Fund's assets in one or a few Emerging Countries and currencies will subject
the Fund to greater risks than if the Fund's assets were not geographically
concentrated. See "Description of Securities--Foreign Transactions" and "Risk
Factors." The Fund may invest in the aggregate up to 35% of its total assets
in (i) fixed-income securities of private and governmental Emerging Country
issuers; and (ii) equity and fixed-income securities of issuers in developed
countries.
ASIA GROWTH FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies that satisfy at least one of the following
criteria:
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(i) their securities are traded principally on stock exchanges in one or more
of the Asian countries; (ii) they derive 50% or more of their total revenue
from goods produced, sales made or services performed in one or more of the
Asian countries; (iii) they maintain 50% or more of their assets in one or
more of the Asian countries; or (iv) they are organized under the laws of one
of the Asian countries. The Fund seeks to achieve its objective by investing
primarily in equity securities of Asian companies which are considered by the
Investment Adviser to have long-term capital appreciation potential. Many of
the countries in which the Fund may invest have emerging markets or economies
which involve certain risks as described under "Risk Factors--Special Risks of
Investments in the Asian and Other Emerging Markets," which are not present in
investments in more developed
countries. The Fund may purchase equity securities of issuers that have not
paid dividends on a timely basis, securities of companies that have
experienced difficulties, and securities of companies without performance
records.
Other. The Fund may allocate its assets among the Asian countries as
determined from time to time by the Investment Adviser. For purposes of the
Fund's investment policies, Asian countries are China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri
Lanka, Taiwan and Thailand, as well as any other country in Asia (other than
Japan) to the extent that foreign investors are permitted by applicable law to
make such investments. Allocation of the Fund's investments will depend upon
the Investment Adviser's views of the relative attractiveness of the Asian
markets and particular issuers. For example, on January 31, 1998 (the end of
the Fund's last fiscal year), more than 35% of the Fund's assets were invested
in securities traded in Hong Kong. Concentration of the Fund's assets in one
or a few of the Asian countries and Asian currencies will subject the Fund to
greater risks than if the Fund's assets were not geographically concentrated.
See "Description of Securities--Foreign Investments." The Fund may invest in
the aggregate up to 35% of its total assets in equity securities of issuers in
other countries, including Japan, and in fixed-income securities.
DESCRIPTION OF SECURITIES
The Funds may invest in equity and fixed income securities in accordance
with the investment policies stated above. Certain of these permitted
investments are described in more detail in this section.
CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities, including debt obligations
and preferred stock of the issuer convertible at a stated exchange rate into
common stock of the issuer. Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar
quality. As with all fixed-income securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. However, when the market price of the
common stock underlying a convertible security exceeds the conversion price,
the convertible security tends to reflect the market price 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 decline in price to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an issuer's capital
structure and consequently entail less risk than the issuer's common stock. In
evaluating a convertible security, the Investment Adviser will give primary
emphasis to the attractiveness of the underlying common stock. The convertible
securities in which the Funds invest are not subject to any minimum rating
criteria. Convertible debt securities are equity investments for purposes of
each Fund's investment policies.
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FOREIGN INVESTMENTS
FOREIGN SECURITIES. Each Fund will invest in the securities of foreign
issuers. Investments in foreign securities may offer potential benefits that
are not available from investments exclusively in equity securities of
domestic issuers quoted in U.S. dollars. Foreign countries may have economic
policies or business cycles different from those of the U.S. and markets for
foreign securities do not necessarily move in a manner parallel to U.S.
markets.
Investing in the securities of foreign issuers involves certain special
risks, including those set forth below, which are not typically associated
with investing in U.S. dollar-denominated or quoted securities of U.S.
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 currency in which a Fund receives dividends, interest or
other payments declines in value against the U.S. dollar before such income is
distributed as dividends to shareholders or converted to U.S. dollars, the
Fund may have to sell portfolio securities to obtain sufficient cash to pay
such dividends. The expected introduction of a single currency, the euro, on
January 1, 1999 for participating European nations in the Economic and
Monetary Union ("EU") presents unique uncertainties, including whether the
payment and operational systems of banks and other financial institutions will
be ready by the scheduled launch date; the creation of suitable clearing and
settlement payment systems for the new currency; the legal treatment of
certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the euro; the establishment and maintenance of
exchange rates for currencies being converted into the euro and the euro; the
fluctuation of the euro relative to non-euro currencies during the transition
period from January 1, 1999 to December 31, 2000 and beyond; whether the
interest rate, tax and labor regimes of European countries participating in
the euro will converge over time; and whether the conversion of the currencies
of other EU countries such as the United Kingdom, Denmark and Greece into the
euro and the admission of other non-EU countries such as Poland, Latvia and
Lithuania as members of the EU may have an impact on the euro. These or other
factors, including political and economic risks, could cause market
disruptions before or after the introduction of the euro, and could adversely
affect the value of securities held by the Funds. Commissions on transactions
in foreign securities may be higher than those for similar transactions on
domestic stock markets. In addition, clearance and settlement procedures may
be different in foreign countries and, in certain markets, such procedures
have been unable to keep pace with the volume of securities transactions, thus
making it difficult to conduct such transactions.
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 United States. Foreign securities markets may have substantially
less volume than U.S. securities markets and securities of many foreign
issuers are 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 or other taxes on dividend or interest
payments (or, in some cases, capital gains), limitations on the removal of
funds or other assets of the Funds, political or social instability or
diplomatic developments which could affect investments in those countries.
Concentration of a Fund's assets in one or a few countries and currencies
will subject a Fund to greater risks than if a Fund's assets were not
geographically concentrated.
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INVESTMENTS IN ADRS, EDRS AND GDRS. Each Fund may invest in foreign
securities which take the form of sponsored and unsponsored American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), European
Depository Receipts ("EDRs") or other similar instruments representing
securities of foreign issuers (together, "Depository Receipts"). ADRs
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. Prices of ADRs are quoted in U.S.
dollars, and ADRs are traded in the United States on exchanges or over-the-
counter and are sponsored and issued by domestic banks. EDRs and GDRs are
receipts evidencing an arrangement with a non-U.S. bank. EDRs and GDRs are not
necessarily quoted in the same currency as the underlying security. To the
extent a Fund acquires Depository Receipts through banks which do not have a
contractual relationship with the foreign issuer of the security underlying
the Depository Receipts to issue and service such Depository Receipts
(unsponsored Depository Receipts), there may be an increased possibility that
the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings involving the foreign
issuer, in a timely manner. In addition, the lack of information may result in
inefficiencies in the valuation of such instruments. Investment in Depository
Receipts does not eliminate all the risks inherent in investing in securities
of non-U.S. issuers. The market value of Depository Receipts is dependent upon
the market value of the underlying securities and fluctuations in the relative
value of the currencies in which the Depository Receipt and the underlying
securities are quoted. However, by investing in Depository Receipts, such as
ADRs, that are quoted in U.S. dollars, a Fund may avoid currency risks during
the settlement period for purchases and sales.
FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because each 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, to the extent it invests in
foreign securities, purchase or sell foreign currencies on a spot basis and
may also 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. In addition, each Fund 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 enhance return, forward foreign currency exchange
contracts are considered speculative. Each 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 to sell foreign currency to seek to
increase total return, the Fund will segregate cash or liquid assets in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract, or otherwise cover its position in a
manner permitted by the SEC. The Fund will incur costs in connection with
conversions between various currencies. A 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 NAV to fluctuate. Currency
exchange rates generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or
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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 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 the contract would deprive the Fund of unrealized profits,
transaction costs or the benefits of a currency hedge or force the Fund to
cover its purchase or sale commitments, if any, at the current market price. A
Fund will not enter into forward foreign currency exchange contracts, currency
swaps or other privately negotiated currency instruments 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.
Each Fund may also engage in a variety of foreign currency management
techniques. However, due to the limited market for these instruments with
respect to the currencies of many Emerging Countries, including certain Asian
countries, the Investment Advisers do not currently anticipate that a
significant portion of International Equity, European Equity, International
Small Cap, Emerging Markets Equity or Asia Growth Fund's currency exposure
will be covered by such instruments. For a discussion of such instruments and
the risks associated with their use, see "Investment Objective and Policies"
in the Additional Statement.
FIXED-INCOME SECURITIES
Each Fund may invest in fixed-income securities, including U.S. Government
securities, corporate debt obligations, obligations issued by U.S. or foreign
banks (including without limitation, time deposits, bankers' acceptances and
certificates of deposit), mortgage-backed securities (including stripped
mortgage-backed securities) and asset-backed securities.
Investments in fixed-income securities may include obligations of foreign
governments and governmental agencies, including those of Emerging Countries.
Investment in sovereign debt obligations involves special risks not present in
debt obligations of corporate issuers. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt, and a Fund may have limited recourse in the event of a
default. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt, and in turn a Fund's NAV, to a greater extent
than the volatility inherent in debt obligations of U.S. issuers. A sovereign
debtor's willingness or ability to repay principal and pay interest in a
timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's
policy toward international lenders and the political constraints to which a
sovereign debtor may be subject.
Fixed-income investments may also include investments 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
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loss of a 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 price accurately
than less complex securities.
Each Fund (other than the CORE International Equity Fund, which only invests
in debt instruments that are cash equivalents) may invest up to 35% of its
total assets in debt securities which are unrated or rated in the lowest
rating categories by Standard & Poor's Ratings Group ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's") (i.e., BB or lower by Standard &
Poor's or Ba or lower by Moody's), including securities rated D by Moody's or
Standard & Poor's. Fixed-income securities rated BB or Ba or below (or
comparable unrated securities) are commonly referred to as "junk bonds," are
considered predominately speculative and may be questionable as to principal
and interest payments. In some cases, such bonds may be highly speculative,
have poor prospects for reaching investment grade standing and be in default.
As a result, investment in such bonds will entail greater speculative risks
than those associated with investment in investment grade bonds. Also, to the
extent that the rating assigned to a security in a Fund's portfolio is
downgraded by a rating organization, the market price and liquidity of such
security may be adversely affected. See Appendix A to the Additional Statement
for a description of the corporate bond ratings assigned by Standard & Poor's
and Moody's.
REAL ESTATE INVESTMENT TRUSTS ("REITS")
Each Fund may invest in REITs, which are pooled investment vehicles that
invest primarily in either real estate or real estate related loans. The value
of a REIT is affected by changes in the value of the properties owned by the
REIT or securing mortgage loans held by the REIT. REITs are dependent upon
cash flow from their investments to repay financing costs and the ability of
the REITs' managers. REITs are also subject to risks generally associated with
investments in real estate. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
INVESTMENT TECHNIQUES
OPTIONS ON SECURITIES AND SECURITIES INDICES
Each Fund may write (sell) covered call and put options and purchase call
and put options on any securities in which it may invest or on any securities
index composed of securities in which it may invest. The writing and purchase
of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. The use of options to seek to increase total return
involves the risk of loss if the Investment Adviser is incorrect in its
expectation of fluctuations in securities prices or interest rates. The
successful use of options for hedging purposes also depends in part on the
ability of the Investment Adviser to manage future price fluctuations and the
degree of correlation between the options and securities markets. If the
Investment Adviser is incorrect in its expectation of changes in securities
prices or determination of the correlation between the securities indices on
which options are written and purchased and the securities in a Fund's
investment portfolio, the investment performance of the Fund will be less
favorable than it would have been in the absence of such options transactions.
The writing of options could significantly increase a Fund's portfolio
turnover rate and, therefore, associated brokerage commissions or spreads.
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OPTIONS ON FOREIGN CURRENCIES
A Fund may, to the extent it invests in foreign securities, purchase and
sell (write) call and put options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of foreign portfolio
securities and anticipated dividends on such securities and against increases
in the U.S. dollar cost of foreign securities to be acquired. In addition,
each 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 options transactions, however, the
writing of an option on a 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 call
and put options for hedging purposes, each 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 written or purchased
by the Funds are traded on U.S. and foreign exchanges or over-the-counter.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To seek to increase total return or to hedge against changes in interest
rates, securities prices or currency exchange rates, a 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, foreign
currencies, securities indices and other financial instruments and indices,
whether domestic or foreign. A Fund will engage in futures and related options
transactions for bona fide hedging purposes as defined in regulations of the
Commodity Futures Trading Commission or to seek to increase total return to
the extent permitted by such regulations. A Fund may not purchase or sell
futures contracts or purchase or sell related options to seek to increase
total return, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of initial margin deposits and premiums paid
on the Fund's outstanding positions in futures and related options entered
into for the purpose of seeking to increase total return would exceed 5% of
the market value of the Fund's net assets. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require the
Fund to segregate and maintain cash or liquid assets with a value equal to the
amount of the Fund's obligations or to otherwise cover the obligations in a
manner permitted by the SEC.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Objectives and Policies--Futures Contracts and Options on Future
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 poorer
overall performance than if the Fund had not entered into any futures
contracts or options transactions. Because perfect correlation between a
futures position and portfolio position that is intended to be protected is
impossible to achieve, the desired protection may not be obtained and a Fund
may be exposed to risk of loss. The loss incurred by a Fund in entering into
futures contracts and in writing call options on futures is potentially
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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 NAV. The profitability of a Fund's trading in futures to seek to
increase total return depends upon the ability of the Investment Adviser to
analyze correctly 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. The Funds may engage in futures transactions on both U.S. and foreign
exchanges. Foreign exchanges may not provide the same protections as U.S.
exchanges.
EQUITY SWAPS
Each Fund may invest up to 10% of its total assets in equity swaps. Equity
swaps allow the parties to a swap agreement to exchange the dividend income or
other components of return on an equity investment (e.g., a group of equity
securities or an index) for a component of return on another non-equity or
equity investment. An equity swap may be used by a Fund to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment may be restricted for legal reasons or is otherwise
impractical. Equity swaps are derivatives and their value can be very
volatile. To the extent that the Investment Adviser does not accurately
analyze and predict the potential relative fluctuation of the components
swapped with another party, a Fund may suffer a loss. The value of some
components of an equity swap (such as the dividends on a common stock) may
also be sensitive to changes in interest rates. Furthermore, during the period
a swap is outstanding, a Fund may suffer a loss if the counterparty defaults.
In connection with its investments in equity swaps, a Fund will either
segregate cash or liquid assets or otherwise cover its obligations in a manner
required by the SEC.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fund may purchase when-issued securities. When-issued transactions
arise when securities are purchased by a Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. Each Fund may also purchase or sell securities on a forward
commitment basis; that is, make contracts to purchase or sell securities for a
fixed price at a future date beyond the customary settlement period. 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. Conversely, securities sold on a forward commitment basis
involve the risk that the value of the securities to be sold may increase
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. A Fund will segregate cash or liquid
assets in an amount sufficient to meet the purchase price until three days
prior to the settlement date. Alternatively, each Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
ILLIQUID AND RESTRICTED SECURITIES
A Fund will not invest more than 15% of its net assets in illiquid
investments, which include securities (both foreign and domestic) that are not
readily marketable, certain stripped mortgage-backed securities, 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 a review of
the trading markets for a specific restricted security, that such restricted
security is eligible for
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resale pursuant to Rule 144A under the Securities Act of 1933 and, therefore,
is liquid. The Trustees have adopted guidelines under which the Investment
Adviser determines and monitors the liquidity of portfolio securities, subject
to the oversight of the Trustees. Investing in restricted securities eligible
for resale pursuant to Rule 144A may decrease the liquidity of a Fund's
portfolio 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. Each 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 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 management agreements with an
Investment Adviser or its affiliates, may transfer uninvested cash balances
into a single joint account, the daily aggregate balance of which will be
invested in one or more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
Each Fund may also seek to increase its income by lending portfolio
securities. Under present regulatory policies, such loans may be made to
institutions, such as certain broker-dealers, and are required to be secured
continuously by collateral in cash, cash equivalents, or U.S. Government
securities maintained on a current basis in an amount at least equal to the
market value of the securities loaned. Cash collateral may be invested in cash
equivalents. If an Investment Adviser determines to make securities loans, the
value of the securities loaned may not exceed 33 1/3% of the value of the
total assets of a Fund (including the loan collateral). A Fund may experience
a loss or delay in the recovery of its securities if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement
with the Fund.
SHORT SALES AGAINST-THE-BOX
Each Fund (other than the CORE International Equity Fund) may make short
sales of securities or maintain a short position, provided that at all times
when a short position is open the Fund owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, for an equal amount of the securities of the same
issuer as the securities sold short (a short sale against-the-box). Not more
than 25% of a Fund's net assets (determined at the time of the short sale) may
be subject to such short sales. As a result of recent tax legislation, short
sales may not generally be used to defer the recognition of gain for tax
purposes with respect to appreciated securities in a Fund's portfolio.
24
<PAGE>
TEMPORARY INVESTMENTS
Each Fund may, for temporary defensive purposes, invest 100% of its total
assets (except that the CORE International Equity Fund and Emerging Markets
Equity Fund may only hold up to 35% of their respective total assets) in U.S.
Government securities, repurchase agreements collateralized by U.S. Government
securities, commercial paper rated at least A-2 by Standard & Poor's or P-2 by
Moody's, certificates of deposit, bankers' acceptances, repurchase agreements,
non-convertible preferred stocks, non-convertible corporate bonds with a
remaining maturity of less than one year. When a Fund's assets are invested in
such instruments, the Fund may not be achieving its investment objective.
MISCELLANEOUS TECHNIQUES
In addition to the techniques and investments described above, each Fund
may, with respect to no more than 5% of its net assets, engage in the
following techniques and investments: (i) warrants and stock purchase rights;
(ii) currency swaps; (iii) other investment companies including World Equity
Benchmark Shares and Standard & Poor's Depository Receipts; (iv) unseasoned
companies; and (v) custodial receipts.
In addition, each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Additional Statement.
RISK FACTORS
RISKS OF INVESTING IN EQUITY SECURITIES. In general, the Funds are subject
to the risks associated with investments in common stocks and other equity
securities. Stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions and,
accordingly, the value of the stocks that a Fund holds may decline over short
or extended periods. Stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, certain foreign stock markets were trading at or
close to record high levels and there can be no guarantee that such levels
will continue.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES. Investing in the
securities of such companies involves greater risk and the possibility of
greater portfolio price volatility. Historically, small market capitalization
stocks and stocks of recently organized companies have been more volatile in
price than larger market capitalization stocks. Among the reasons for the
greater price volatility of these small company and unseasoned stocks are the
less certain growth prospects of smaller firms, less institutional investor
interest and the lower degree of liquidity in the markets for such stocks.
SPECIAL RISKS OF INVESTMENTS IN THE ASIAN AND OTHER EMERGING
MARKETS. Investing in the securities of issuers in Emerging Countries involves
risks in addition to those discussed under "Description of Securities--
Foreign Investments." The International Equity, European Equity, International
Small Cap, Emerging Markets Equity and Asia Growth Funds may each invest
without limit in the securities of issuers in Emerging Countries. The CORE
International Equity Fund may invest up to 25% of its total assets in
securities of issuers in Emerging Countries. Emerging Countries are generally
located in the Asia-Pacific region, Eastern Europe, Latin and South America
and Africa. A Fund's purchase and sale of portfolio securities in certain
Emerging Countries may be
25
<PAGE>
constrained by limitations as to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed
based on the aggregate trading volume by or holdings of a Fund, the Investment
Adviser, its affiliates and their respective clients and other service
providers. A Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain Emerging Countries
is restricted or controlled to varying degrees which may limit investment in
such Countries or increase the administrative costs of such investments. For
example, certain countries require governmental approval prior to investments
by foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by a Fund. The repatriation of both investment income and capital
from certain Emerging Countries is subject to restrictions such as the need
for governmental consents. Due to restrictions on direct investment in equity
securities in certain Asian countries, such as Taiwan, it is anticipated that
a Fund may invest in such countries only through other investment funds in
such countries. See "Other Investment Companies" in the Additional Statement.
Many Emerging Countries may be subject to a substantially greater degree of
economic, political and social instability and disruption than is the case in
Western Europe, the United States, Canada, Australia, New Zealand and Japan.
Many Emerging Countries do not have fully democratic governments. For example,
governments of some Emerging Countries are authoritarian in nature or have
been installed or removed as a result of military coups, while governments in
other Emerging Countries have periodically used force to suppress civil
dissent. Disparities of wealth, the pace and success of democratization, and
ethnic, religious and racial disaffection, among other factors, have also led
to social unrest, violence and/or labor unrest in some Asian, Eastern European
and other Emerging Countries. Unanticipated political or social developments
may affect the values of a Fund's investments. Investing in Emerging Countries
involves the risk of loss due to expropriation, nationalization, confiscation
of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested. For example, in the past,
Eastern European governments have expropriated substantial amounts of private
property, and have not settled the claims of property owners. Similar
expropriations could occur in the future.
Starting in mid-1997 some Pacific region countries began to experience
currency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. This situation resulted in a significant drop
in the securities prices of companies located in the region. Some countries
have experienced government intervention, have sought assistance from the
International Monetary Fund and are undergoing substantial domestic unrest.
Although some countries are taking steps to restructure their financial
sectors in a manner that may facilitate a return to long-term economic growth,
there can be no assurance that these efforts will be successful or that their
current problems will not persist. At the end of its last fiscal year, a
substantial portion of the Asia Growth Fund was invested in securities traded
in the Hong Kong market. In 1997, the sovereignty of Hong Kong reverted from
the United Kingdom to China. Although Hong Kong is, by law, to maintain a high
degree of autonomy, there can also be no assurance that the general economic
position of Hong Kong will not be adversely affected as a result of the
exercise of Chinese sovereignty over Hong Kong. In particular, business
confidence in Hong Kong can be significantly affected by political
developments and statements by public figures in China, which can in turn
affect the performance of the securities markets. In addition, the reversion
of Hong
26
<PAGE>
Kong to China has created uncertainty as to future currency valuations
relative to the U.S. dollar. Any future valuation changes could be adverse
from the perspective of U.S. investors.
Economies in individual Emerging Countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, currency valuation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Many Emerging
Countries have experienced currency devaluations and substantial and, in some
cases, extremely high rates of inflation, which have a negative effect on the
economies and securities markets of such Emerging Countries. Economies in
Emerging Countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, have been and may continue to be
affected adversely by the economies of their trading partners, trade barriers,
exchange controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade.
Brokerage commissions, custodial services and other costs relating to
investment in international securities markets generally are more expensive
than in the United States. A Fund's investment in Emerging Countries may also
be subject to withholding or other taxes, which may be significant and may
reduce the return from an investment in such country to the Fund. Settlement
procedures in Emerging Countries are frequently less developed and reliable
than those in the United States and may involve a Fund's delivery of
securities before receipt of payment for their sale. In addition, significant
delays are common in certain markets in registering the transfer of
securities. Settlement or registration problems may make it more difficult for
a Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities, to have a portion of its assets
uninvested or to incur losses due to the failure of a counterparty to pay for
securities the Fund has delivered or the Fund's inability to complete its
contractual obligations.
Currently, there is no market or only a limited market for many of the
management techniques and instruments with respect to the currencies and
securities markets of the Emerging Countries. Consequently, there can be no
assurance that suitable instruments for hedging currency and market-related
risks will be available at the times when a Fund wishes to use them.
SPECIAL RISKS OF INVESTMENTS IN THE JAPANESE MARKETS. The Japanese Equity
Fund invests primarily in equity securities of Japanese companies.
Accordingly, the Japanese Equity Fund's performance will be closely tied to
economic and market conditions in Japan, and may be more volatile than more
geographically diversified funds. Changes in regulatory, as well as tax or
economic, policy in Japan could significantly affect the Japanese securities
markets and, therefore, the Japanese Equity Fund's performance.
Japan's economy, the second largest in the world, has grown substantially
over the last three decades. Since 1990, however, Japan's economic growth has
declined significantly, and is currently subject to deflationary pressures. In
addition to this economic downturn, Japan is undergoing structural adjustments
related to high wages and taxes, currency valuations and structural
rigidities. Japan has also been experiencing notable uncertainty and loss of
public confidence in connection with the reform of its political process and
the deregulation of its economy. These conditions present risks to the
Japanese Equity Fund and its ability to attain its investment objective.
Japan's economy is heavily dependent upon international trade, and is
especially sensitive to trade barriers and disputes. In particular, Japan
relies on large imports of agricultural products, raw materials and fuels. A
substantial rise in world oil or commodity prices, or a fall-off in Japan's
manufactured exports, could be expected to adversely affect Japan's economy.
In addition, Japan is vulnerable to earthquakes, volcanoes and other natural
27
<PAGE>
disasters. As of the date of this Prospectus, Japan's banking industry
continued to suffer from non-performing loans, declining real estate values
and lower valuations of securities holdings.
The Japanese securities markets are less regulated than the U.S. markets.
Evidence has emerged from time to time of distortion of market prices to serve
political or other purposes. Shareholders' rights are also not always equally
enforced.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those of U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies, and
Japanese interest rates have generally been lower than U.S. interest rates.
These factors have contributed to lower discount rates and higher price-
earnings ratios in Japan than in the U.S.
During the recent past the average stock market prices of Japanese
companies, as measured by major indices such as the NIKKEI 225 Average, have
experienced a substantial decline. It is not possible to determine whether
this general decline will continue.
RISKS OF INVESTING IN FIXED-INCOME SECURITIES. 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.
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.
RISKS OF DERIVATIVE TRANSACTIONS. A Fund's transactions, if any, in options,
futures, options on futures, swaps, structured securities and currency
transactions involve certain risks, including a possible lack of correlation
between changes in the value of hedging instruments and the portfolio assets
(if any) being hedged, the potential illiquidity of the markets for derivative
instruments, the risks arising from 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 use of certain derivative transactions may be
limited by the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.
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 cannot be changed without
approval of a majority of the outstanding shares of that Fund as defined in
the Additional Statement. Each Fund's investment objectives and all 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 that Fund remains
an appropriate investment in light of their then current financial positions
and needs.
28
<PAGE>
PORTFOLIO TURNOVER
A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by a Fund and its shareholders. See
"Financial Highlights" for a statement of the historical portfolio turnover
rate of each Fund (other than the European Equity, Japanese Equity and
International Small Cap Funds). It is anticipated that the annual portfolio
turnover rates of the European Equity, Japanese Equity and International Small
Cap Funds will generally not exceed 75%. The portfolio turnover rate is
calculated by dividing the lesser of the dollar amount of sales or purchases
of portfolio securities by the average monthly value of a Fund's portfolio
securities, excluding securities having a maturity at the date of purchase of
one year or less. 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.
MANAGEMENT
TRUSTEES AND OFFICERS
The Trustees are responsible for deciding matters of general policy and
reviewing the actions of the Investment Advisers, distributor and transfer
agent. The officers of the Trust conduct and supervise the Funds' 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
INVESTMENT ADVISERS. 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 CORE International Equity Fund. Goldman Sachs
registered as an investment adviser in 1981. Goldman Sachs Asset Management
International, 133 Peterborough Court, London EC4A 2BB, England, an affiliate
of Goldman Sachs, serves as the investment adviser to the International
Equity, European Equity, Japanese Equity, International Small Cap, Emerging
Markets Equity and Asia Growth Funds. Goldman Sachs Asset Management
International became a member of the Investment Management Regulatory
Organisation Limited in 1990 and registered as an investment adviser in 1991.
As of August 21, 1998, GSAM and GSAMI, together with their affiliates, acted
as investment adviser or distributor for assets in excess of $168 billion.
Under a Management Agreement with each Fund, the applicable Investment
Adviser, subject to the general supervision of the Trustees, provides day-to-
day advice as to the Fund's portfolio transactions. Goldman Sachs has agreed
to permit the Funds to use the name "Goldman Sachs" or a derivative thereof as
part of each Fund's name for as long as a Fund's Management 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 asset management
affiliates for portfolio decisions and management with respect to certain
portfolio securities. In addition, the Investment Adviser will have access to
the research of, and certain proprietary technical models
29
<PAGE>
developed by, Goldman Sachs and may apply quantitative and qualitative
analysis in determining the appropriate allocations among the categories of
issuers and types of securities.
Under the Management Agreement, each Investment Adviser also: (i) supervises
all non-advisory operations of each Fund; (ii) provides personnel to perform
such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of each Fund; (iii) arranges for
at each Fund's expense (a) the preparation of all required tax returns, (b)
the preparation and submission of reports to existing shareholders, (c) the
periodic updating of prospectuses and Additional Statements and (d) the
preparation of reports to be filed with the SEC and other regulatory
authorities; (iv) maintains each Fund's records; and (v) provides office space
and all necessary office equipment and services.
FUND MANAGERS
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Anna G. Antici Portfolio Manager-- Since Ms. Antici joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager in
1997. From 1974 to 1997,
she was a Vice President
for HSBC Asset
Management, where she
was a portfolio manager
for emerging markets and
head of the Latin
American Department. In
1993, she was a senior
research analyst for
Baring Securities.
- ------------------------------------------------------------------------------------------------------
Robert A. Beckwitt Senior Portfolio Manager-- Since Mr. Beckwitt joined the
Vice President and Emerging Markets Equity 1997 Investment Adviser as a
Co-Head Emerging Market portfolio manager in
Equities 1996. From 1986 to 1996,
he was Chief Investment
Strategist-Portfolio
Adviser to high net
worth investors at
Fidelity Investments.
- ------------------------------------------------------------------------------------------------------
Guy P. de C. Bennett Portfolio Manager-- Since Mr. Bennett joined the
Vice President International Equity 1997 Investment Adviser as a
Senior Portfolio Manager-- portfolio manager in
Japanese Equity 1998 1996 and is also co-head
of GSAM's Japanese
Equity Group in Tokyo.
From 1984 to 1996, he
was a portfolio manager
and an Executive
Director at CIN
Management.
- ------------------------------------------------------------------------------------------------------
Melissa Brown Senior Portfolio Manager-- Since Ms. Brown joined the
Vice President CORE International Equity 1998 Investment Adviser as a
portfolio manager in
1998. From 1984 to 1998,
she was the director of
Quantitative Equity
Research and served on
the Investment Policy
Committee at Prudential
Securities.
- ------------------------------------------------------------------------------------------------------
Mark M. Carhart Senior Portfolio Manager-- Since Mr. Carhart joined the
Vice President CORE International Equity 1998 Investment Adviser as a
member of the
Quantitative Research
and Risk Management team
in 1997. From August
1995 to September 1997,
he was Assistant
Professor of Finance at
the Marshall School of
Business at USC and a
Senior Fellow of the
Wharton Financial
Institutions Center.
From 1993 to 1995, he
was a lecturer and
graduate student at the
University of Chicago
Graduate School of
Business.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Kent A. Clark Senior Portfolio Manager-- Since Mr. Clark joined the
Vice President CORE International Equity 1997 Investment Adviser as a
portfolio manager in the
quantitative equity
management team in 1992.
Prior to joining the
Investment Adviser, Mr.
Clark was studying for a
Ph.D. in finance at the
University of Chicago.
- ------------------------------------------------------------------------------------------
David Dick Senior Portfolio Manager-- Since Mr. Dick joined the
Executive Director European Equity 1998 Investment Adviser as a
senior portfolio manager
on the European Equity
team in 1998. From 1990
to 1998, he was with
Mercury Asset
Management, where he was
a portfolio manager for
european equity and was
head of Mercury's
european sector
strategy.
- ------------------------------------------------------------------------------------------
Ivor H. Farman Portfolio Manager-- Since Mr. Farman joined the
Executive Director International Equity 1996 Investment Adviser as a
European Equity 1998 senior portfolio manager
in 1996. From 1995 to
1996, he was responsible
for originating and
marketing French equity
ideas at Exane in Paris.
Prior to 1995, he spent
five years engaged in
French equity research
and marketing at Banque
Nationale de Paris and
Schroders in London.
- ------------------------------------------------------------------------------------------
Paul Greener Portfolio Manager-- Since Mr. Greener joined the
Associate CORE International Equity 1996 Investment Adviser as a
European Equity 1998 member of the Pan-
European Equity Team
responsible for European
general retailers,
business services and
technology sectors in
1996. From 1994 to 1996,
he was an equity analyst
at CIN Management. Prior
to 1994, he was a
student at the
University of
Birmingham.
- ------------------------------------------------------------------------------------------
James P. Hordern Portfolio Manager-- Since Mr. Hordern joined the
Executive Director International Small Cap 1998 Investment Adviser as a
portfolio manager in
1997. From 1991 to 1997,
he was an Assistant
Director and portfolio
manager at Mercury Asset
Management on the
European Specialist
Team.
- ------------------------------------------------------------------------------------------
Raymond J. Iwanowski Portfolio Manager-- Since Mr. Iwanowski joined the
Vice President CORE International Equity 1998 Investment Adviser as an
associate and portfolio
manager in 1997. From
1993 to 1997, he was a
Vice President and head
of the Fixed Derivatives
Client Research group at
Salomon Brothers. Prior
to 1993, he was a
lecturer and graduate
student at the
University of Chicago
Graduate School of
Business.
- ------------------------------------------------------------------------------------------
Robert C. Jones Senior Portfolio Manager-- Since Mr. Jones joined the
Managing Director CORE International Equity 1997 Investment Adviser as a
portfolio manager in
1989. From 1987 to 1989,
he was the senior
quantitative analyst in
the Goldman, Sachs & Co.
Investment Research
Department.
- ------------------------------------------------------------------------------------------
Shigeka Kouda Portfolio Manager-- Since Mr. Kouda joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1997. From 1992 to 1997,
he was at the Fixed
Income Division of
Goldman Sachs (Japan)
Limited, where he was
extensively involved in
emerging markets trading
as well as International
Fixed Income
institutional sales.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Ralf Laier Portfolio Manager-- Since Mr. Laier joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on Central/Eastern
Europe (CEE) and the
Commonwealth of
Independent States (CIS)
in 1997. Prior to
joining the Investment
Adviser, from 1995 to
1997, he was Vice
President of Soros
Global Research where he
analyzed investment
opportunities in CEE/CI.
From 1994 to 1995, he
achieved a Ph.D. from
the Academy of Economics
in Pozan, Poland, and
from 1992 to 1994 he
worked for the Polish
Ministry of
Privatization as a
Project Director
developing privatization
strategies for several
industry sectors.
- ---------------------------------------------------------------------------------------------
Alice Lui Portfolio Manager-- Since Ms. Lui joined the
Vice President Asia Growth 1994 Investment Adviser
as a portfolio manager
in 1990. Prior to 1990,
she was a management
consultant with Andersen
Consulting in Hong Kong.
- ---------------------------------------------------------------------------------------------
Shogo Maeda Portfolio Manager-- Since Mr. Maeda joined the
Managing Director International Equity 1994 Investment Adviser as a
International Small Cap 1998 portfolio manager in
Senior Portfolio Manager-- 1994. From 1987 to 1994,
Japanese Equity 1998 he worked at Nomura
Investment Management
Incorporated as a Senior
Portfolio Manager.
- ---------------------------------------------------------------------------------------------
Warwick M. Negus Senior Portfolio Manager-- Since Mr. Negus joined the
Managing Director and Asia Growth 1994 Investment Adviser as a
Co-Head Emerging Portfolio Manager-- portfolio manager in
Market International Equity 1994 1994. From 1987 to 1994,
Equities Emerging Markets Equity 1997 he was a Vice President
International Small Cap 1998 of Bankers Trust
Australia Ltd where he
was the Chief Investment
Officer of their
Southeast Asian
investment team. He is
also a member of Goldman
Sachs Asset Management's
global asset allocation
committee.
- ---------------------------------------------------------------------------------------------
Susan Noble Senior Portfolio Manager-- Since Ms. Noble joined the
Executive Director International Equity 1998 Investment Adviser as a
European Equity 1998 senior portfolio manager
and head of the European
Equity team in October
1997. From 1986 to 1997,
she worked at Fleming
Investment Management in
London, where she most
recently was Portfolio
Management Director for
the European equity
investment strategy and
process.
- ---------------------------------------------------------------------------------------------
Ebru Ozsezgin Portfolio Manager-- Since Ms. Ozsezgin joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on the
Mediterranean and Middle
East region in 1997.
From 1996 to 1997, she
was a portfolio manager
at Foreign & Colonial,
responsible for Middle
East investments. From
1994 to 1996, she was a
fund manager with
Framlington Investment
Management. From 1990 to
1994, she was a manager
at Global Securities
Ltd.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Victor H. Pinter Senior Portfolio Manager-- Since Mr. Pinter joined the
Vice President CORE International Equity 1997 Investment Adviser as a
portfolio manager in
1990. From 1985 to 1990,
he was a project manager
in the Information
Technology Division of
the Investment Adviser.
- -----------------------------------------------------------------------------------------
Ramakrishna Shankar Portfolio Manager-- Since Mr. Shankar joined the
Vice President Asia Growth 1997 Investment Adviser as a
Emerging Markets Equity 1998 portfolio manager in
1997. From July 1996 to
1997, he worked for
Goldman, Sachs & Co. in
Singapore as a strategic
advisor for transactions
involving infrastructure
industries in Asia. From
1988 to 1996, he worked
at Goldman, Sachs & Co.
as an investment banker
in the Investment
Banking Division.
- -----------------------------------------------------------------------------------------
Miyako Shibamoto Portfolio Manager-- Since Ms. Shibamoto joined the
Vice President Japanese Equity 1998 Investment Adviser as a
member of the Japanese
Equity team in March
1998. From 1993 to 1998,
she was a Vice President
at Scudder Stevens and
Clark (Japan).
- -----------------------------------------------------------------------------------------
Andrew Shrimpton Portfolio Manager-- Since Mr. Shrimpton joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on Africa as well
as the financial
industry in the EMEA
region in 1996. Prior to
joining the Investment
Adviser, since 1985, he
was a UK equity analyst
and portfolio manager
for CIN Management,
where he initiated CIN
Management's first
investments in Latin
America.
- -----------------------------------------------------------------------------------------
Robert Stewart Portfolio Manager-- Since Mr. Stewart joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1996. Prior to 1996, he
was at CIN Management
for seven years as a
portfolio manager,
managing Japanese
equities.
- -----------------------------------------------------------------------------------------
Takeya Suzuki Portfolio Manager-- Since Mr. Suzuki joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1996. From 1990 to 1996,
he was a Japanese equity
portfolio manager at
Nomura Investment
Management where he
actively managed assets
for U.S. pension funds.
- -----------------------------------------------------------------------------------------
Danny Truell Senior Portfolio Manager-- Since Mr. Truell joined the
Executive Director European Equity 1998 Investment Adviser as a
senior portfolio manager
and head of UK equities
in 1998. From 1992 to
1996, he was Investment
Banking Executive
Director for SBC Warburg
and Chief Asian Equity
Strategist. From 1986 to
1992, he was Assistant
Director of Fund
Management at CIN
Management.
</TABLE>
33
<PAGE>
It is the responsibility of the Investment Adviser to make the investment
decisions for a Fund and to place the purchase and sale orders for the Fund's
portfolio transactions in U.S. and foreign 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. In effecting purchases and
sales of portfolio securities for the Funds, the Investment Adviser will seek
the best price and execution of a Fund's orders. In doing so, where two or
more brokers or dealers offer comparable prices and execution for a particular
trade, consideration may be given to whether the broker or dealer provides
investment research or brokerage services or sells Shares of any Goldman Sachs
Fund. See the Additional Statement for a further description of the Investment
Adviser's brokerage allocation practices.
As compensation for its services rendered and assumption of certain expenses
pursuant to separate Management Agreements, GSAM and GSAMI are entitled to the
following fees, computed daily and payable monthly at the annual rates listed
below:
<TABLE>
<CAPTION>
FOR THE FISCAL
CONTRACTUAL YEAR OR PERIOD ENDED
RATE* JANUARY 31, 1998*
----------- --------------------
<S> <C> <C>
GSAM
--------
CORE International Equity ................ 0.85% 0.75%
GSAMI
---------
International Equity...................... 1.00% 0.90%
European Equity........................... 1.00% N/A
Japanese Equity........................... 1.00% N/A
International Small Cap................... 1.20% N/A
Emerging Markets Equity................... 1.20% 1.10%
Asia Growth............................... 1.00% 0.86%
</TABLE>
- ---------------------
*All numbers are annualized. The difference, if any, between the stated fees
and the actual fees paid by the Funds reflects that the applicable Investment
Adviser did not charge the full amount of the fees to which it would have been
entitled. Effective September 1, 1998, the management fee for the CORE
International Equity, International Equity, Emerging Markets Equity and Asia
Growth Funds will equal 0.85%, 1.00%, 1.20% and 1.00%, respectively. As of
January 31, 1998, the Japanese Equity, International Small Cap and European
Equity Funds had not commenced operations.
The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Funds (excluding management fees, service fees,
transfer agency fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such expenses
exceed 0.12%, 0.10%, 0.10%, 0.01%, 0.16%, 0.15% and 0.16% per annum of the
average daily net assets of the CORE International Equity, International
Equity, European Equity, Japanese Equity, International Small Cap, Emerging
Markets Equity and Asia Growth Funds, respectively. Such reductions or limits,
if any, may be discontinued or modified by the applicable Investment Adviser
in its discretion at any time.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS. The involvement of the Investment Adviser, Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts
and other activities of Goldman Sachs may present conflicts of interest with
respect to 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 type 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. The results of a Fund's investment activities, therefore, may differ
from those of
34
<PAGE>
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 achieve significant profits on their trading for proprietary or other
accounts. In addition, the Funds may, from time to time, enter into
transactions in which other clients of Goldman Sachs have an adverse interest.
From time to time, a Fund's activities may be limited because of regulatory
restrictions applicable to Goldman Sachs and its affiliates, and/or their
internal policies designed to comply with such restrictions. See "Management--
Activities of Goldman Sachs and its Affiliates and Other Accounts Managed by
Goldman Sachs" in the Additional Statement for further information.
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the
exclusive distributor (the "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 a Fund should
contact Goldman Sachs (as Transfer Agent) at the address or the telephone
number set forth on the back cover page of this Prospectus. Goldman Sachs is
entitled to receive a transfer agency fee with respect to each Fund's
Institutional and Service Shares equal, on an annual basis, to 0.04% of
average daily net assets.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold Shares of the Funds. Goldman Sachs reserves the right to redeem at any
time some or all of the Shares acquired for its own account.
YEAR 2000
Many computer systems were designed using only two digits to signify the
year (for example, "98" for "1998"). On January 1, 2000, if these computer
systems are not corrected, they may incorrectly interpret "00" as the year
"1900" rather than the year "2000," leading to computer shutdowns or errors
(commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to
process securities trades, price securities, provide shareholder account
services and otherwise conduct normal business operations if the Investment
Adviser or other Fund service providers do not adequately address this problem
in a timely manner. The Investment Adviser has established a dedicated group
to analyze these issues and to implement the systems modifications necessary
to prepare for the Year 2000 Problem. Currently, the Investment Adviser does
not anticipate that the transition to the 21st Century will have any material
impact on its ability to continue to service the Funds at current levels. In
addition, the Investment Adviser has sought assurances from the Funds' other
service providers that they are taking the steps necessary so that they do not
experience Year 2000 Problems, and the Investment Adviser will continue to
monitor the situation. At this time, however, no assurance can be given that
the actions taken by the Investment Adviser and the Funds' other service
providers will be sufficient to avoid any adverse effect on the Funds due to
the Year 2000 Problem.
EXPENSES
The Funds are responsible for the payment of their expenses. The expenses
include, without limitation, the fees payable to the Investment Adviser;
custodial and transfer agency fees; service fees paid to Service
Organizations; brokerage fees and commissions; filing fees for the
registration or qualification of the Fund's Shares under federal or state
securities laws; organizational expenses; fees and expenses incurred in
connection
35
<PAGE>
with membership in investment company organizations; taxes; interest; costs of
liability insurance, fidelity bonds or indemnification, any costs, expenses or
losses arising out of any liability of, or claim for damages or other relief
asserted against, the Funds for violation of any law; legal and auditing fees
and expenses (including the cost of legal and certain accounting services
rendered by employees of the Investment Adviser and its affiliates with
respect to the Funds); expenses of preparing and setting in type prospectuses,
Additional Statements, proxy material, reports and notices and the printing
and distributing of the same to shareholders and regulatory authorities;
compensation and expenses of the Trust's "non-interested" Trustees; and
extraordinary organizational expenses, if any, incurred by the Trust.
NET ASSET VALUE
The NAV 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
(which is normally, but not always, 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"). The NAV per share of each Class is calculated by determining
the net assets attributed to each Class and dividing by the number of
outstanding Shares of that Class. Portfolio securities are valued based on
market quotations or, if accurate quotations are not readily available, at
fair value as determined in good faith under procedures established by the
Trustees.
PERFORMANCE INFORMATION
From time to time each Fund may publish average annual total return 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 NAV. 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, each Fund may furnish total return calculations based on investments
at various sales charge levels or at NAV. Any performance data which are based
on the NAV per Share would be reduced if any applicable sales charge were
taken into account. In addition to the above, each Fund may from time to time
advertise its performance relative to certain averages, performance rankings,
indices, other information prepared by recognized mutual fund statistical
services and investments for which reliable performance information is
available.
Each Fund's total return will be calculated separately for each Class of
Shares in existence. Because each Class of Shares may be subject to different
expenses, the total return calculations with respect to each Class of Shares
for the same period will differ. See "Shares of the Trust."
The Funds' performance quotations do not reflect any fees charged by a
Service Organization to its customer accounts in connection with investments
in the Funds. 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.
36
<PAGE>
SHARES OF THE TRUST
Each Fund is a series of Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. Each Fund (except the
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and CORE International Equity Funds) was formerly a series of Goldman
Sachs Equity Portfolios, Inc., a Maryland corporation, and was reorganized
into the Trust as of April 30, 1997. The Trustees have authority under the
Trust's Declaration of Trust to create and classify Shares of beneficial
interests in separate series, without further action by shareholders.
Additional series may be added in the future. The Trustees also have authority
to classify and reclassify any series or portfolio of Shares into one or more
Classes. Information about the Trust's other series and classes is contained
in separate prospectuses.
When issued, Shares are fully paid and non-assessable. In the event of
liquidation, shareholders of each class are entitled to share pro rata in the
net assets of the applicable Fund available for distribution to the
shareholders of such Class. All Shares, are freely transferable and have no
preemptive, subscription or conversion rights. Shareholders are entitled to
one vote per Share, provided that, at the option of the Trustees, shareholders
will be entitled to a number of votes based upon the NAVs represented by their
shares.
As of September 21, 1998, The Goldman Sachs Group LP, 85 Broad Street, 10th
floor, New York, New York 10004 was recordholder of 65.15% and 29.40% of the
Japanese Equity and International Small Cap Funds outstanding Shares. The
Goldman Sachs CORE International Equity Omnibus A/C--Growth & Income Strategy
and Goldman Sachs CORE International Equity Omnibus A/C--Growth Strategy, 4900
Sears Tower, Chicago, Illinois 60606 was recordholder of 35.37% and 30.03%,
respectively of CORE International Equity Fund's outstanding shares.
The Trust does not intend to hold annual meetings of shareholders. However,
recordholders may, under certain circumstances, as permitted by the Act,
communicate with other shareholders in connection with requiring a special
meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
TAXATION
FEDERAL TAXES
Each Fund is treated as a separate entity for tax purposes. The European
Equity, Japanese Equity and International Small Cap Funds intend to elect and
each other Fund has elected to be treated as a regulated investment company,
and each Fund intends to continue 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.
37
<PAGE>
Dividends paid by a Fund from 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 or market discount income
will be taxable to shareholders as ordinary income. Distributions out of the
net capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, of a Fund will be taxed as long-term capital gain,
regardless of the length of time a shareholder has held Shares or whether such
gain was reflected in the price paid for the Shares. These tax consequences
will apply whether distributions are received in cash or reinvested in Shares.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends such Fund receives from U.S. domestic
corporations may be eligible, in the hands of such corporate shareholders, for
the corporate dividends-received deduction, subject to certain holding period
requirements and debt financing limitations under the Code. Dividends paid by
the Funds are not generally expected to qualify, in the hands of corporate
shareholders, for the corporate dividends-received deduction. 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 will pay a per Share price that includes the
value of the anticipated distribution and will be taxed on the distribution
even though the distribution represents a return of a portion of the purchase
price.
Redemptions and exchanges of Shares are taxable events.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on distributions, redemptions and
exchanges if they fail to furnish their correct taxpayer identification number
and certain certifications required by the Internal Revenue Service or if they
are otherwise subject to backup withholding. Individuals, corporations and
other shareholders that are not U.S. persons under the Code are subject to
different tax rules and may be subject to nonresident alien withholding at the
rate of 30% (or a lower rate provided by an applicable tax treaty, if any) on
amounts treated as ordinary dividends from the Funds.
Each Fund may be subject to foreign withholding or other foreign taxes on
income or gain from certain foreign securities. The Funds may elect to pass
such foreign taxes through to their shareholders, who would then take such
taxes into account on their own tax returns. Alternatively, the Funds may
simply deduct such taxes in determining the amounts available for distribution
to shareholders. Generally, the Funds have taken the latter approach and
anticipate that they may continue to do so.
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 may be
available to the extent (if any) a Fund's distributions are derived from
interest on (or, in the case of intangible property taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. For a further discussion of certain tax
consequences of investing in Shares of the 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.
38
<PAGE>
ADDITIONAL INFORMATION
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, Dr. Martin Luther King, Jr. Day, Presidents' Day (observed),
Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
39
<PAGE>
REPORTS TO SHAREHOLDERS
Recordholders of Institutional Shares of the Funds will receive an annual
report containing audited financial statements and a semi-annual report. To
eliminate unnecessary duplications, only one copy of such reports may be sent
to recordholders with the same mailing address. Recordholders of Institutional
Shares who desire a duplicate copy of such reports to be mailed to their
residence should contact Goldman Sachs as provided below. Each recordholder of
Institutional Shares will also be provided with a printed confirmation for
each transaction in its account and a quarterly account statement. A year-to-
date statement for any account will be provided upon request made to Goldman
Sachs. The Funds do not generally provide subaccounting services with respect
to beneficial ownership of Institutional Shares.
DIVIDENDS
Each dividend from net investment income and capital gain distributions, if
any, declared by a Fund on its outstanding Institutional Shares will, at the
election of each shareholder, be paid: (i) in cash; or (ii) in additional
Institutional Shares of such Fund. This election should initially be made on a
shareholder's Account Information Form and may be changed upon written notice
to Goldman Sachs at any time prior to the record date for a particular
dividend or distribution. If no election is made, all dividends from net
investment income and capital gain distributions will be reinvested in
Institutional Shares of the applicable Fund.
The election to reinvest dividends and distributions paid by a Fund in
additional Institutional Shares of the Fund will not affect the tax treatment
of such dividends and distributions, which will be treated as received by the
shareholder and then used to purchase Institutional Shares of a Fund.
Each Fund intends that all or substantially all its net investment income
and net capital gains, after reduction by available capital losses, including
any capital losses carried forward from prior years, will be declared as
dividends for each taxable year. Each Fund will pay dividends from net
investment income, and dividends from net realized capital gains, reduced by
available capital losses, at least annually. From time to time, a portion of a
Fund's dividends may constitute a return of capital.
At the time of an investor's purchase of Shares of a Fund, a portion of the
NAV per Share may be represented by undistributed income of the Fund or
realized or unrealized appreciation of the Fund's portfolio securities.
Therefore, subsequent distributions on such Shares from such income or
realized appreciation may be taxable to the investor even if the NAV of the
investor's Shares is, as a result of the distributions, reduced below the cost
of such Shares and the distributions (or portions thereof) represent a return
of a portion of the purchase price.
PURCHASE OF INSTITUTIONAL SHARES
Institutional Shares may be purchased on any Business Day at the NAV per
Share next determined after receipt of an order. No sales load will be
charged. Currently, the NAV is determined as of the close of regular
40
<PAGE>
trading on the New York Stock Exchange (which is normally, but not always,
3:00 p.m. Chicago time, 4:00 p.m. New York time) as described under "Net Asset
Value." Purchases of Institutional Shares of the Funds must be settled within
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
Purchases of Institutional Shares may be made by qualified investors by
placing an order with Goldman Sachs at 800-621-2550 and either wiring federal
funds to State Street Bank or initiating an ACH transfer. Purchases may also
be made by check (except that the Trust will not accept a check drawn on a
foreign bank or a third party check) or Federal Reserve draft made payable to
"Goldman Sachs International Equity Funds--Name of Fund and Class of Shares"
and should be directed to "Goldman Sachs International Equity Funds--Name of
Fund and Class of Shares," c/o National Financial Data Services, Inc.
("NFDS"), P.O. Box 419711, Kansas City, MO 64141-6711.
MINIMUM INITIAL INVESTMENTS
Institutional Shares of the 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) any state, county, city
or any instrumentality, department, authority or agency thereof; (d)
corporations and other for-profit business organizations with assets of at
least $100 million or publicly traded securities outstanding; (e) "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; and (f) registered investment advisers investing for accounts for
which they receive asset-based fees. With respect to these investors, the
minimum initial investment is $1,000,000 in Institutional Shares of a Fund
alone or in combination with other assets under the management of GSAM and its
affiliates.
The minimum initial investment in Institutional Shares for (a) individual
investors; (b) qualified non-profit organizations, charitable trusts,
foundations and endowments; and (c) accounts over which GSAM or its advisory
affiliates have investment discretion is $10,000,000.
The foregoing minimum investment requirements may be waived at the
discretion of the Trust's officers. In addition, 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.
OTHER PURCHASE INFORMATION
The Trust may authorize certain institutions (including banks, trust
companies, brokers and investment advisers) that provide recordkeeping,
reporting and processing services to their customers to accept on the Trust's
41
<PAGE>
behalf, purchase, redemption and exchange orders placed by or on behalf of
such customers and, if approved by the Trust, to designate other
intermediaries to accept such orders. In these cases, a Fund will be deemed to
have received an order in proper form by or on behalf of a customer when the
order is accepted by the authorized institution or intermediary on a Business
Day, and the order will be priced at a Fund's NAV per Share next determined
after such acceptance. The institution or intermediary will be responsible for
transmitting accepted orders to the Trust within the period agreed upon by
them. A customer should contact an institution to learn whether it is
authorized to accept orders for the Trust. Such institutions may receive
payments from the Funds or Goldman Sachs for the services provided by them
with respect to the Funds' Institutional Shares. These payments may be in
addition to other servicing and/or sub-transfer agency payments borne by the
Funds and their Share Classes.
The Investment Adviser, Distributor, and/or their affiliates also pay
additional compensation, from time to time, out of their assets and not as an
additional charge to the Funds, to selected institutions (including banks,
trust companies, brokers and investment advisers) and other persons in
connection with the sale and/or servicing of Shares of the Funds and other
investment portfolios of the Trust (such as additional payments based on new
sales, amounts exceeding pre-established thresholds, or the length of time
clients' assets have remained in the Trust), and subject to applicable NASD
regulations, contribute to various non-cash and cash incentive arrangements to
promote the sale of Shares, as well as sponsor various educational programs,
sales contests and/or promotions in which participants may receive
reimbursement of expenses, entertainment and prizes such as travel awards,
merchandise, cash, investment research and educational information and related
support materials. This additional compensation can vary among institutions
depending upon such factors as the amounts their clients have invested (or may
invest) in particular portfolios of the Trust, the particular program
involved, or the amount of reimbursable expenses. Additional compensation
based on sales may, but is currently not expected to, exceed .50% (annualized)
of the amount invested. For further information, see the Additional Statement.
The Funds reserve the right to redeem the Institutional Shares of any
shareholder of record whose account balance is less than $50 as a result of
earlier redemptions. Such redemptions will not be implemented if the value of
a recordholder's account falls below the minimum account balance solely as a
result of market conditions. The Trust will give 60 days' prior written notice
to recordholders 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 reserve the right to reject any specific
purchase order (including exchanges) or to restrict purchases or exchanges by
a particular purchaser (or group of related purchasers). This may occur, for
example, when a purchaser or group of purchasers' 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 a Fund.
In the sole discretion of Goldman Sachs, a Fund may accept securities
instead of cash for the purchase of Shares of the Fund. Such purchases will be
permitted only if the Investment Adviser determines that any securities
acquired in this manner are consistent with the Fund's investment objectives,
restrictions and policies and are desirable investments for the Fund.
42
<PAGE>
EXCHANGE PRIVILEGE
Institutional Shares of the Fund may be exchanged for: (i) Institutional
Shares of any other mutual fund sponsored by Goldman Sachs and designated as
an eligible fund for this purpose; and (ii) the corresponding class of any
Goldman Sachs Money Market Fund at the NAV next determined either by writing
to Goldman Sachs, Attention: Goldman Sachs International Equity Funds--Name of
Fund and Class of Shares, c/o GSAM Shareholder Services, 4900 Sears Tower,
Chicago, Illinois 60606 or, if previously elected in the Fund's Account
Information Form, by telephone at 800-621-2550 (7:00 a.m. to 5:30 p.m. Chicago
time). A shareholder should obtain and read the prospectus relating to any
other fund and its Shares 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 Institutional Shares surrendered in the exchange on
which an investor may realize a gain or loss, followed by a purchase of
Institutional Shares, or the corresponding class of any Goldman Sachs Money
Market Fund received in the exchange. Shareholders should consult their own
tax adviser 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 the Fund. Exchanges are available only in states
where exchanges may legally be made. The exchange privilege may be materially
modified or withdrawn at any time on 60 days' written notice to Institutional
Shareholders and is subject to certain limitations. See "Purchase of
Institutional Shares."
REDEMPTION OF INSTITUTIONAL SHARES
The Funds will redeem their Institutional Shares upon request of a
recordholder of such Shares on any Business Day at the NAV next determined
after receipt of a request in proper form by Goldman Sachs from the
recordholder. (See "Purchase of Institutional Shares--Other Purchase
Information" for a description of limited situations where an institution or
other intermediary may be authorized to accept requests for the Funds.) 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 15 days. Redemption requests may be
made by a shareholder of record by writing to or calling the Transfer Agent at
the address or telephone number set forth on the back cover of this
Prospectus. A shareholder of record 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.
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<PAGE>
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 concerning telephone
redemptions and exchanges. 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 recordholder 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.
The Funds will arrange for the proceeds of redemptions effected by any means
to be wired as federal funds to the bank account designated in the
recordholder's Account Information Form or, if the recordholder 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 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 originally be wired. Redemption proceeds paid by
check will normally be mailed to the address of record within three 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 or the recordholder's bank in the transfer process. If a
problem with such performance arises, the recordholder 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.
Institutions (including banks, trust companies, brokers and investment
advisers) are responsible for the timely transmittal of redemption requests by
their customers to the Transfer Agent. In order to facilitate the timely
transmittal of redemption requests, these institutions have established times
by which redemption requests must be received by them. Additional
documentation may be required when deemed appropriate by an institution.
---------------------
44
<PAGE>
APPENDIX A
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON ACCOUNT
INFORMATION FORM
You are required by law to provide a 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 also apply to payments
relating to your account prior to a Fund's receipt of your 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 all your interest and/or dividend
income on your tax return and you have not been notified by the IRS that such
withholding should cease, you must cross out item (2) in the Certification
section 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 IRAs, 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 a 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 Code and consult your tax adviser.
A-1
<PAGE>
APPENDIX B
GOLDMAN SACHS EUROPEAN EQUITY FUND
PRIOR PERFORMANCE OF SIMILARLY ADVISED ACCOUNTS OF THE INVESTMENT ADVISER
<TABLE>
<CAPTION>
FT/S&P
EUROPEAN ACTUARIES
EQUITY EUROPE INDEX
COMPOSITE (UNHEDGED)
--------- ------------
<S> <C> <C>
1/1/1998-6/30/1998....................................... 25.40% 26.09%
1997..................................................... 19.54% 23.66%
1996..................................................... 41.89% 23.51%
1995..................................................... 29.93% 22.17%
1994..................................................... 8.38% 2.95%
10/1/93-12/31/93......................................... 4.16% 9.12%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
---------------------
ONE YEAR SINCE
ENDED INCEPTION
6/30/1998 (10/1/1993)
--------- -----------
<S> <C> <C>
European Equity Composite................................. 34.35% 27.06%
FT/S&P Actuaries Europe
Index (unhedged)......................................... 37.39% 22.72%
</TABLE>
The preceding table sets forth the Investment Adviser's composite
performance data relating to the historical performance of all discretionary
private accounts managed by the Investment Adviser that have investment
objectives, policies, and strategies substantially similar to the European
Equity Fund. The information is provided to illustrate the past performance of
the Investment Adviser in managing substantially similar accounts as measured
against the FT/S&P Actuaries Europe Index (unhedged) and does not represent
the performance of the European Equity Fund. Investors should not consider
this performance data as a substitute for the performance of the European
Equity Fund nor should investors consider this data as an indication of future
performance of the European Equity Fund or of the Investment Adviser. The
FT/S&P Actuaries Europe Index (unhedged) is unmanaged and investors cannot
invest directly in the index.
In accordance with the standards of the Association for Investment
Management and Research ("AIMR"), the Investment Adviser's composite
performance data was calculated on a time-weighted and asset-weighted total
return basis which includes realized and unrealized gains and losses plus
income. Total return performance of the European Equity Fund will be
calculated in accordance with the regulations of the SEC. The SEC standardized
average annual total return is neither time-weighted nor asset-weighted and is
determined for specified periods by computing the annual percentage change in
the value of an initial amount that is invested in a share class of the Fund
at the maximum public offering price. Investors should be aware that the
differences in methodology between AIMR and SEC requirements could result in
different performance data for identical time periods.
The actual expenses of the private accounts included in the composite were
lower than the estimated expenses of the Fund. Accordingly, the performance
record of the composite has been adjusted downward based on the estimated
expenses of the Institutional Shares of the European Equity Fund during its
first year of operations. All returns presented reflect the reinvestment of
dividends and other earnings. The private accounts are not subject to the same
diversification requirements, specific tax restrictions and investment
limitations imposed on the European Equity Fund by the Investment Company Act
of 1940 and Subchapter M of the Internal Revenue Code. Consequently, the
performance results of the Investment Adviser's composite could have been
adversely affected if the private accounts had been regulated as investment
companies under the federal securities laws.
B-1
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASSET
MANAGEMENT
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
133 PETERBOROUGH COURT
LONDON, ENGLAND EC4A 2BB
GOLDMAN, SACHS & CO.
DISTRIBUTOR
85 BROAD STREET
NEW YORK, NEW YORK 10004
GOLDMAN, SACHS & CO.
TRANSFER AGENT
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN
1776 HERITAGE DRIVE
NORTH QUINCY, MASSACHUSETTS 02171
ARTHUR ANDERSEN LLP
INDEPENDENT PUBLIC ACCOUNTANTS
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TOLL FREE (IN U.S.) . . . . . . . . 800-621-2550
EQINTLPROINS
502073
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS
INTERNATIONAL
EQUITY FUNDS
- --------------------------------------------------------------------------------
PROSPECTUS
INSTITUTIONAL SHARES
LOGO
Goldman
Sachs
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
October 1, 1998 GOLDMAN SACHS INTERNATIONAL EQUITY FUNDS
CLASS A, B AND C SHARES
GOLDMAN SACHS CORE INTERNATIONAL EQUITY FUND
Seeks long-term growth of capital through a broadly diversified portfolio of
equity securities of large cap companies that are organized outside the U.S.
or whose securities are principally traded outside the U.S.
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Seeks long-term capital appreciation through investments in equity securi-
ties of companies that are organized outside the U.S. or whose securities
are principally traded outside the U.S.
GOLDMAN SACHS EUROPEAN EQUITY FUND
Seeks long-term capital appreciation through investments in equity securi-
ties of European companies.
GOLDMAN SACHS JAPANESE EQUITY FUND
Seeks long-term capital appreciation through investments in equity securi-
ties of Japanese companies.
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Seeks long-term capital appreciation through investments in equity securi-
ties of companies with public stock market capitalizations of $1 billion or
less at the time of investment that are organized outside the U.S. or whose
securities are principally traded outside the U.S.
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Seeks long-term capital appreciation through investments in equity securi-
ties of emerging country issuers.
GOLDMAN SACHS ASIA GROWTH FUND
Seeks long-term capital appreciation through investments in equity securi-
ties of companies related (in the manner described herein) to Asian coun-
tries.
Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
investment adviser to the CORE International Equity Fund. Goldman Sachs Asset
Management International ("GSAMI"), London, England, an affiliate of Goldman
Sachs, serves as investment adviser to each other Fund. GSAM 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 October 1, 1998,
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 ("SEC"), 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. The SEC maintains a Web site (http://www.sec.gov) that contains the
Additional Statement and other information regarding the Trust.
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.
(continued on next page)
<PAGE>
A FUND'S INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS AND FOREIGN CURRENCIES
ENTAIL CERTAIN RISKS NOT CUSTOMARILY ASSOCIATED WITH INVESTING IN SECURITIES
OF U.S. ISSUERS QUOTED IN U.S. DOLLARS, INCLUDING RISKS RELATING TO CHANGES IN
RELATIVE CURRENCY EXCHANGE RATES OR (AS IN THE CASE OF THE EXPECTED
INTRODUCTION OF THE EURO) THE CREATION OF NEW CURRENCIES. THE SECURITIES
MARKETS OF ASIAN, LATIN AMERICAN, EASTERN EUROPEAN, AFRICAN AND OTHER EMERGING
COUNTRIES IN WHICH THE CORE INTERNATIONAL EQUITY FUND CAN INVEST A PORTION OF
ITS ASSETS AND THE EUROPEAN EQUITY, INTERNATIONAL SMALL CAP, INTERNATIONAL
EQUITY, EMERGING MARKETS EQUITY AND ASIA GROWTH FUNDS MAY INVEST WITHOUT
LIMIT, ARE LESS LIQUID, ARE ESPECIALLY SUBJECT TO GREATER PRICE VOLATILITY,
HAVE SMALLER MARKET CAPITALIZATIONS, HAVE LESS GOVERNMENT REGULATION AND ARE
NOT SUBJECT TO AS EXTENSIVE AND FREQUENT ACCOUNTING, FINANCIAL AND OTHER
REPORTING REQUIREMENTS AS THE SECURITIES MARKETS OF MORE DEVELOPED COUNTRIES.
FURTHER, INVESTMENT IN EQUITY SECURITIES OF ISSUERS LOCATED IN RUSSIA AND
CERTAIN OTHER EMERGING COUNTRIES INVOLVES RISK OF LOSS RESULTING FROM PROBLEMS
IN SHARE REGISTRATION AND CUSTODY AND SUBSTANTIAL ECONOMIC AND POLITICAL
DISRUPTIONS, WHICH RISKS ARE NOT NORMALLY ASSOCIATED WITH INVESTMENT IN MORE
DEVELOPED COUNTRIES. FUNDS THAT INVEST IN FOREIGN SECURITIES AND EMERGING
MARKETS ARE INTENDED FOR INVESTORS WHO CAN ACCEPT THE RISKS ASSOCIATED WITH
THESE INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. THE EUROPEAN
EQUITY, JAPANESE EQUITY AND ASIA GROWTH FUNDS WILL BE PARTICULARLY SUBJECT TO
EVENTS AFFECTING THE MARKETS IN WHICH THESE FUNDS CONCENTRATE THEIR
INVESTMENTS. SEE "DESCRIPTION OF SECURITIES" AND "RISK FACTORS."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights.................... 3
Fees and Expenses.................. 7
Financial Highlights............... 11
Investment Objectives and Policies. 15
Description of Securities.......... 20
Investment Techniques.............. 24
Risk Factors....................... 28
Investment Restrictions............ 31
Portfolio Turnover................. 32
Management......................... 32
Expenses .......................... 39
Reports to Shareholders............ 39
How to Invest...................... 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Services Available to Shareholders. 46
Distribution and Service Plans..... 49
How to Sell Shares of the Funds.... 50
Dividends.......................... 51
Net Asset Value.................... 52
Performance Information............ 52
Shares of the Trust................ 53
Taxation........................... 54
Additional Information............. 55
Appendix A ........................ A-1
Appendix B......................... B-1
Account Application
</TABLE>
<PAGE>
FUND HIGHLIGHTS
The following is intended to highlight certain information and is
qualified in its entirety by the more detailed information contained in
this Prospectus.
WHAT IS THE GOLDMAN SACHS TRUST?
The Goldman Sachs Trust is an open-end management investment company
that offers its shares ("Shares") in several investment funds (commonly
known as mutual funds (the "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 objectives.
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. Each Fund is a
"diversified open-end management company" as defined in the Investment
Company Act of 1940, as amended (the "Act"). For a further description of
each Fund's investment objectives and policies, see "Investment
Objectives and Policies," "Description of Securities" and "Investment
Techniques."
<TABLE>
<S> <C> <C> <C>
FUND NAME INVESTMENT OBJECTIVES INVESTMENT CRITERIA BENCHMARK
- -------------- --------------------- ------------------------------ ---------------------
CORE Long-term growth of At least 90% of total assets EAFE Index (unhedged)
INTERNATIONAL capital. in equity securities of
EQUITY FUND companies organized outside
the United States or whose
securities are principally
traded outside the United
States. The Fund seeks broad
representation of large cap
issuers across major countries
and sectors of the
international economy. The
Fund's investments are
selected using both a variety
of quantitative techniques and
fundamental research in
seeking to maximize the Fund's
expected return, while
maintaining risk, style,
capitalization and industry
characteristics similar to the
unhedged Morgan Stanley
Capital International (MSCI)
Europe, Australasia and Far
East Index (the "EAFE Index").
The Fund may employ certain
currency management
techniques.
- -------------------------------------------------------------------------------------------
INTERNATIONAL Long-term capital Substantially all, and at FT/S&P Actuaries
EQUITY FUND appreciation. least 65%, of total assets in Europe & Pacific
equity securities of companies Index (unhedged)
organized outside the United
States or whose securities are
principally traded outside the
United States. The Fund may
employ currency management
techniques.
- -------------------------------------------------------------------------------------------
EUROPEAN Long-term capital Substantially all, and at FT/S&P Actuaries
EQUITY FUND appreciation. least 65%, of total assets in Europe Index
equity securities of European (unhedged)
companies. The Fund may employ
currency management
techniques.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
FUND NAME INVESTMENT OBJECTIVES INVESTMENT CRITERIA BENCHMARK
- -------------- --------------------- ------------------------------ ---------------------
JAPANESE Long-term capital Substantially all, and at Tokyo Price Index
EQUITY FUND appreciation. least 65%, of total assets in ("TOPIX")
equity securities of Japanese
companies. The Fund may employ
currency management
techniques.
- -------------------------------------------------------------------------------------------
INTERNATIONAL Long-term capital Substantially all, and at Morgan Stanley
SMALL CAP appreciation. least 65%, of total assets in Capital International
FUND equity securities of companies EAFE Small Cap Index
with public stock market
capitalizations of $1 billion
or less at the time of
investment that are organized
outside the United States or
whose securities are
principally traded outside the
United States. The Fund may
employ currency management
techniques.
- -------------------------------------------------------------------------------------------
EMERGING Long-term capital Substantially all, and at Morgan Stanley
MARKETS appreciation. least 65%, of total assets in Capital International
EQUITY FUND equity securities of emerging Emerging Markets Free
country issuers. The Fund may Index
employ certain currency
management techniques.
- -------------------------------------------------------------------------------------------
ASIA GROWTH Long-term capital Substantially all, and at Morgan Stanley
FUND appreciation. least 65%, of total assets in Capital International
equity securities of companies All Country Asia Free
in China, Hong Kong, India, ex-Japan Index
Indonesia, Malaysia, Pakistan,
the Philippines,
Singapore, South Korea, Sri
Lanka, Taiwan, Thailand and
other Asian countries. The
Fund may employ certain
currency management
techniques.
</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, 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."
Risks of Investing in Small Capitalization Companies. To the extent
that a Fund invests in the securities of small market capitalization
companies, the Fund may be exposed to a higher degree of risk and price
volatility. Securities of such issuers may lack sufficient market
liquidity to enable a Fund to effect sales at an advantageous time or
without a substantial drop in price.
Foreign Risks. Investments in securities of foreign issuers and
currencies involve risks that are different from those associated with
investments in domestic securities. The risks associated with foreign
investments and currencies include changes in relative currency exchange
rates (or, as in the case of the expected introduction of the euro next
year, the creation of new currencies), political and economic
developments, the imposition of exchange controls, confiscation and other
governmental restrictions. Generally, there is less availability of data
on foreign companies and securities markets as well as less regulation of
foreign stock exchanges, brokers and issuers. A Fund's investments in
emerging markets and countries ("Emerging Countries") involves greater
risks than investments in the developed countries of Western Europe, the
United States, Canada, Australia, New Zealand and Japan. In addition,
because the Funds invest primarily outside the United States, they may
involve greater risks, since the securities markets of foreign countries
are
4
<PAGE>
generally less liquid and subject to greater price volatility. The securities
markets of Emerging Countries, including those in Asia, Latin America, Eastern
Europe and Africa are marked by a high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number
of industries, as well as a high concentration of ownership of such securities
by a limited number of investors.
Risks of Investing in Japanese Markets. The Japanese Equity Fund will
concentrate in Japanese securities and therefore, will be particularly subject
to the risk of adverse social, political and economic events which occur in
Japan or affect the Japanese markets.
Other. A Fund's use of certain investment techniques, including derivatives,
forward contracts, options and futures, will subject the Fund to greater risk
than funds that do not employ such techniques.
WHO MANAGES THE FUNDS?
Goldman Sachs Asset Management serves as Investment Adviser to the CORE
International Equity Fund. Goldman Sachs Asset Management International serves
as Investment Adviser to each other Fund. As of August 21, 1998, the Investment
Advisers, together with their affiliates, acted as investment adviser or
distributor for assets in excess of $168 billion.
WHO DISTRIBUTES THE FUNDS' SHARES?
Goldman Sachs acts as distributor of each Fund's Shares (the "Distributor").
WHAT IS THE MINIMUM INVESTMENT?
<TABLE>
<CAPTION>
MINIMUM
--------------------
INITIAL
PURCHASE ADDITIONAL
TYPE OF PURCHASE AMOUNT INVESTMENTS
- ---------------- -------- -----------
<S> <C> <C>
Regular Purchases......................................... $1,000 $50
Tax-Sheltered Retirement Plans (excluding SIMPLE IRAs and
Education IRAs) and UGMA/UTMA Purchases.................. $ 250 $50
SIMPLE IRAs and Education IRAs............................ $ 50 $50
Automatic Investment Plan................................. $ 50 $50
403(b) Plans.............................................. $ 200 $50
</TABLE>
For further information, see "How to Invest--How to Buy Shares of the Funds"
on page 41.
HOW DO I PURCHASE SHARES?
You may purchase Shares of the Funds through Goldman Sachs and certain
investment dealers, including members of the National Association of Securities
Dealers, Inc. (the "NASD") and certain other financial service firms that have
agreements with Goldman Sachs relating to the sale of Shares ("Authorized
Dealers"). See "How to Invest" on page 40.
WHAT ARE MY PURCHASE ALTERNATIVES?
The Funds offer three classes of Shares through this Prospectus. These Shares
may be purchased, at the investor's choice, at a price equal to their next
determined net asset value ("NAV") (i) plus an initial sales
5
<PAGE>
charge imposed at the time of purchase ("Class A Shares"); (ii) with a
contingent deferred sales charge (CDSC) imposed on redemptions within six years
of purchase ("Class B Shares"); or (iii) without any initial sales charge or
CDSC, as long as Shares are held for one year or more ("Class C Shares").
Direct purchases of $1 million or more of Class A Shares will be sold without
an initial sales charge and may be subject to a CDSC at the time of certain
redemptions.
<TABLE>
<CAPTION>
MAXIMUM INITIAL MAXIMUM CONTINGENT
ALL FUNDS SALES CHARGE DEFERRED SALES CHARGE
--------- --------------- ---------------------
<S> <C> <C>
Class A................. 5.5% (See above)
Class B................. N/A 5% declining to 0% after six years
Class C................. N/A 1% if Shares are redeemed within 12 months of purchase
</TABLE>
Over time, the CDSC and distribution and service fees attributable to Class B
or Class C Shares will exceed the initial sales charge and the distribution and
service fees attributable to Class A Shares. Class B Shares convert to Class A
Shares, which are subject to lower distribution and service fees, eight years
after initial purchase. Class C Shares, which are subject to the same
distribution and service fees as Class B Shares, do not convert to Class A
Shares and are subject to the higher distribution and service fees
indefinitely. See "How to Invest--Alternative Purchase Arrangements" on page
40.
HOW DO I SELL MY SHARES?
You may redeem Shares upon request on any Business Day, as defined under
"Additional Information," at the NAV next determined after receipt of such
request in proper form, subject to any applicable CDSC. See "How to Sell Shares
of the Funds."
HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?
<TABLE>
<CAPTION>
INVESTMENT INCOME DIVIDENDS CAPITAL GAINS
DECLARED AND PAID DISTRIBUTIONS
--------------------------- -------------
<S> <C>
Annually Annually
</TABLE>
You may receive dividends and distributions in additional Shares of the same
Class of the Fund in which you have invested or you may elect to receive them
in cash, Shares of the same Class of other mutual funds sponsored by Goldman
Sachs (the "Goldman Sachs Funds") or ILA Service Units of the Prime Obligations
Portfolio or the Tax-Exempt Diversified Portfolio, if you hold Class A Shares
of a Fund, or ILA Class B or Class C Units of the Prime Obligations Portfolio,
if you hold Class B or Class C Shares of a Fund (the "ILA Portfolios"). For
further information concerning dividends and distributions, see "Dividends."
6
<PAGE>
FEES AND EXPENSES
<TABLE>
<CAPTION>
CORE INT'L EUROPEAN
INT'L EQUITY EQUITY
EQUITY FUND FUND FUND
----------------------------- ----------------------------- -----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge
Imposed on
Purchases.......... 5.5%/1/ none none 5.5%/1/ none none 5.5%/1/ none none
Maximum Sales Charge
Imposed on
Reinvested
Dividends.......... none none none none none none none none none
Maximum Deferred
Sales Charge....... none/1/ 5.0%/2/ 1.0%/3/ none/1/ 5.0%/2/ 1.0%/3/ none/1/ 5.0%/2/ 1.0%/3/
Redemption Fees/4/.. none none none none none none none none none
Exchange Fees/4/.... none none none none none none none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)/5/
Management Fees..... 0.85% 0.85% 0.85% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and
Service Fees....... 0.50% 1.00% 1.00% 0.50% 1.00% 1.00% 0.50% 1.00% 1.00%
Other Expenses
(after waivers and
reimbursements)/6/.. 0.31% 0.31% 0.31% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES (AFTER
WAIVERS AND
REIMBURSEMENTS)/7/.. 1.66% 2.16% 2.16% 1.79% 2.29% 2.29% 1.79% 2.29% 2.29%
==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
INT'L EMERGING ASIA
SMALL CAP MARKETS GROWTH
FUND EQUITY FUND FUND
----------------------------- ----------------------------- -----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on
Purchases.......... 5.5%/1/ none none 5.5%/1/ none none 5.5%/1/ none none
Maximum Sales Charge
Imposed on
Reinvested
Dividends.......... none none none none none none none none none
Maximum Deferred
Sales Charge....... none/1/ 5.0%/2/ 1.0%/3/ none/1/ 5.0%/2/ 1.0%/3/ none/1/ 5.0%/2/ 1.0%/3/
Redemption Fees/4/.. none none none none none none none none none
Exchange Fees/4/.... none none none none none none none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)/5/
Management Fees..... 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.00% 1.00% 1.00%
Distribution and
Service Fees....... 0.50% 1.00% 1.00% 0.50% 1.00% 1.00% 0.50% 1.00% 1.00%
Other Expenses
(after waivers and
reimbursements)/6/.. 0.35% 0.35% 0.35% 0.34% 0.34% 0.34% 0.35% 0.35% 0.35%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES (AFTER
WAIVERS AND
REIMBURSEMENTS)/7/.. 2.05% 2.55% 2.55% 2.04% 2.54% 2.54% 1.85% 2.35% 2.35%
==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
JAPANESE
EQUITY
FUND
--------------------------------
CLASS A CLASS B CLASS C
---------- ---------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge
Imposed on
Purchases.......... 5.5%/1/ none none
Maximum Sales Charge
Imposed on
Reinvested
Dividends.......... none none none
Maximum Deferred
Sales Charge....... none/1/ 5.0%/2/ 1.0%/3/
Redemption Fees/4/.. none none none
Exchange Fees/4/.... none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)/5/
Management Fees..... 1.00% 1.00% 1.00%
Distribution and
Service Fees....... 0.50% 1.00% 1.00%
Other Expenses
(after waivers and
reimbursements)/6/.. 0.20% 0.20% 0.20%
---------- ---------- ----------
TOTAL FUND OPERATING
EXPENSES (AFTER
WAIVERS AND
REIMBURSEMENTS)/7/.. 1.70% 2.20% 2.20%
========== ========== ==========
<CAPTION>
<S> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on
Purchases..........
Maximum Sales Charge
Imposed on
Reinvested
Dividends..........
Maximum Deferred
Sales Charge.......
Redemption Fees/4/..
Exchange Fees/4/....
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)/5/
Management Fees.....
Distribution and
Service Fees.......
Other Expenses
(after waivers and
reimbursements)/6/..
TOTAL FUND OPERATING
EXPENSES (AFTER
WAIVERS AND
REIMBURSEMENTS)/7/..
</TABLE>
7
<PAGE>
- --------
/1/ As a percentage of the offering price. No sales charge is imposed on
purchases of Class A Shares by certain classes of investors. A CDSC of
1.00% is imposed on certain redemptions (within 18 months of purchase) of
Class A Shares sold without an initial sales charge as part of an
investment of $1 million or more. See "How to Invest--Offering Price--
Class A Shares."
/2/ A CDSC is imposed upon Shares redeemed within six years of purchase at a
rate of 5% in the first year, declining to 1% in the sixth year, and
eliminated thereafter. See "How to Invest--Offering Price--Class B
Shares."
/3/ A CDSC of 1.00% is imposed on Shares redeemed within 12 months of
purchase. See "How to Invest--Offering Price--Class C Shares."
/4/ A transaction fee of $7.50 may be charged for redemption proceeds paid by
wire. In addition to free reinvestments of dividends and distributions in
shares of other Goldman Sachs Funds or units of the ILA Portfolios and
free automatic exchanges pursuant to the Automatic Exchange Program, six
free exchanges are permitted in each twelve month period. A fee of $12.50
may be charged for each subsequent exchange during such period. See "How
to Invest--Exchange Privilege."
/5/ The Funds' annual operating expenses have been restated to reflect fees
and expenses in effect as of September 1, 1998, except for European Equity
Fund which is based on estimated amounts for the current fiscal year.
/6/ The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management, distribution and service fees,
transfer agency fees (equal to 0.19% of the average daily net assets of
each Fund's Class A, B and C Shares), taxes, interest and brokerage fees
and litigation, indemnification and other extraordinary expenses) for each
Fund to the extent such expenses exceed the following percentages of
average daily net assets:
<TABLE>
<CAPTION>
OTHER
EXPENSES
--------
<S> <C>
CORE International Equity........................................ 0.12%
International Equity............................................. 0.10%
European Equity.................................................. 0.10%
Japanese Equity.................................................. 0.01%
International Small Cap.......................................... 0.16%
Emerging Markets Equity.......................................... 0.15%
Asia Growth...................................................... 0.16%
</TABLE>
/7/ Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Funds would be as set forth below:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
CORE International Equity
Class A............................................. 0.59% 1.94%
Class B............................................. 0.59% 2.44%
Class C............................................. 0.59% 2.44%
International Equity
Class A............................................. 0.37% 1.87%
Class B............................................. 0.37% 2.37%
Class C............................................. 0.37% 2.37%
European Equity
Class A............................................. 0.84% 2.34%
Class B............................................. 0.84% 2.84%
Class C............................................. 0.84% 2.84%
Japanese Equity
Class A............................................. 2.22% 3.72%
Class B............................................. 2.22% 4.22%
Class C............................................. 2.22% 4.22%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
International Small Cap
Class A.............................................. 3.50% 5.20%
Class B.............................................. 3.50% 5.70%
Class C.............................................. 3.50% 5.70%
Emerging Markets Equity
Class A.............................................. 0.65% 2.35%
Class B.............................................. 0.65% 2.85%
Class C.............................................. 0.65% 2.85%
Asia Growth
Class A.............................................. 0.50% 2.00%
Class B.............................................. 0.50% 2.50%
Class C.............................................. 0.50% 2.50%
</TABLE>
EXAMPLE
You would pay the following expenses on a hypothetical $1,000 investment
(including the maximum sales charge) assuming (i) a 5% annual return; and (ii)
redemption at the end of each time period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
CORE International Equity
Class A Shares................................ $71 $104 $140 $241
Class B Shares
--Assuming complete redemption at end of
period....................................... 69 96 135 237
--Assuming no redemption...................... 22 68 116 237
Class C Shares
--Assuming complete redemption at end of
period....................................... 31 68 116 249
--Assuming no redemption...................... 22 68 116 249
International Equity
Class A Shares................................ 72 108 147 254
Class B Shares
--Assuming complete redemption at end of
period....................................... 70 100 142 250
--Assuming no redemption...................... 23 72 123 250
Class C Shares
--Assuming complete redemption at end of
period....................................... 32 72 123 263
--Assuming no redemption...................... 23 72 123 263
European Equity
Class A Shares................................ 72 108 N/A N/A
Class B Shares
--Assuming complete redemption at end of
period....................................... 70 100 N/A N/A
--Assuming no redemption...................... 23 72 N/A N/A
Class C Shares
--Assuming complete redemption at end of
period....................................... 32 72 N/A N/A
--Assuming no redemption...................... 23 72 N/A N/A
Japanese Equity
Class A Shares................................ 71 106 N/A N/A
Class B Shares
--Assuming complete redemption at end of
period....................................... 69 97 N/A N/A
--Assuming no redemption...................... 22 69 N/A N/A
Class C Shares
--Assuming complete redemption at end of
period....................................... 31 69 N/A N/A
--Assuming no redemption...................... 22 69 N/A N/A
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
International Small Cap
Class A Shares................................ $75 $116 N/A N/A
Class B Shares
--Assuming complete redemption at end of
period....................................... 73 107 N/A N/A
--Assuming no redemption...................... 26 79 N/A N/A
Class C Shares
--Assuming complete redemption at end of
period....................................... 35 79 N/A N/A
--Assuming no redemption...................... 26 79 N/A N/A
Emerging Markets Equity
Class A Shares................................ 75 115 N/A N/A
Class B Shares
--Assuming complete redemption at end of
period....................................... 73 107 N/A N/A
--Assuming no redemption...................... 26 79 N/A N/A
Class C Shares
--Assuming complete redemption at end of
period....................................... 35 79 N/A N/A
--Assuming no redemption...................... 26 79 N/A N/A
Asia Growth
Class A Shares................................ 73 110 $150 $260
Class B Shares
--Assuming complete redemption at end of
period....................................... 71 101 145 256
--Assuming no redemption...................... 24 73 126 256
Class C Shares
--Assuming complete redemption at end of
period....................................... 33 73 126 269
--Assuming no redemption...................... 24 73 126 269
</TABLE>
The hypothetical example assumes that a CDSC will not apply to redemptions
of Class A Shares within the first 18 months. Class B Shares convert to Class
A Shares eight years after purchase; therefore, Class A expenses are used in
the hypothetical example after year eight.
The Investment Adviser and Goldman Sachs may modify or discontinue any of
the limitations set forth above in the future at their discretion. The
information set forth in the foregoing table and hypothetical example relates
only to Class A, B and C Shares. Each Fund also offers Institutional and
Service Shares, which are subject to different fees and expenses (which affect
performance), have different minimum investment requirements and are entitled
to different services than Class A, Class B and Class C Shares. Information
regarding Institutional and Service Shares may be obtained from your sales
representative or from Goldman Sachs by calling the number on the back cover
page of this Prospectus. Because of the Distribution and Service Plans, long-
term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the NASD's rules regarding investment
companies.
In addition to the compensation itemized above, certain institutions that
sell Fund Shares and/or their salespersons may receive other compensation in
connection with the sale and distribution of Class A, Class B and Class C
Shares of the Funds or for services to their customers' accounts and/or the
Funds. For additional information regarding such compensation, see
"Management" and "Services Available to Shareholders" in this Prospectus and
"Other Information Regarding Purchases, Redemptions, Exchanges and Dividends"
in the Additional Statement.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on the fees and expenses included in the table and
hypothetical example above are based on each Fund's fees and expenses (actual
or estimated) 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."
10
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following data have 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 of the
Funds for the year ended January 31, 1998 (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. During
the periods shown, the Trust did not offer Class A, Class B or Class C Shares
of the European Equity, Japanese Equity or International Small Cap Funds.
Accordingly, there are no financial highlights for these Funds. Investors in
the European Equity Fund are referred to the historical performance
information set forth in Appendix B to this Prospectus.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- -----------------------
FROM NET
NET REALIZED NET REALIZED REALIZED
AND UNREALIZED AND UNREALIZED GAIN ON
NET ASSET GAIN (LOSS) ON GAIN (LOSS) ON FROM INVESTMENT NET NET ASSET
VALUE, NET INVESTMENTS CURRENCY NET AND DECREASE VALUE,
BEGINNING INVESTMENT AND FUTURES RELATED INVESTMENT FUTURES IN NET END OF TOTAL
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS INCOME TRANSACTIONS ASSET VALUE PERIOD RETURN(A)
--------- ---------- -------------- -------------- ---------- ------------ ----------- --------- ---------
CORE INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1998--Class A
Shares(b)....... $10.00 $ -- $0.13 $(0.91) $ -- -- $(0.78) $9.22 (7.66)%(d)
1998--Class B
Shares(b)....... 10.00 (0.02) 0.13 (0.90) -- -- (0.79) 9.21 (7.90)(d)
1998--Class C
Shares(b)....... 10.00 (0.02) 0.13 (0.89) -- -- (0.78) 9.22 (7.80)(d)
1998--Institu-
tional
Shares(b)....... 10.00 0.02 0.13 (0.89) (0.02) -- (0.76) 9.24 (7.45)(d)
1998--Service
Shares(b)....... 10.00 0.01 0.13 (0.91) -- -- (0.77) 9.23 (7.70)(d)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
--------------------------
RATIO OF RATIO OF
NET RATIO OF NET NET
ASSETS AT NET INVESTMENT RATIO OF INVESTMENT
PORTFOLIO AVERAGE END OF EXPENSES TO INCOME TO EXPENSES INCOME (LOSS)
TURNOVER COMMISSION PERIOD AVERAGE NET AVERAGE NET TO AVERAGE TO AVERAGE
RATE RATE IN (000'S) ASSETS ASSETS NET ASSETS NET ASSETS
--------- ---------- ---------- ------------ ------------- ----------- --------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1998--Class A
Shares(b)....... 25.16% $.0069 $ 7,087 1.50%(c) (0.27)%(c) 4.87%(c) (3.90)%(c)
1998--Class B
Shares(b)....... 25.16 .0069 2,721 2.00(c) (0.72)(c) 5.12(c) (3.84)(c)
1998--Class C
Shares(b)....... 25.16 .0069 1,608 2.00(c) (0.73)(c) 5.12(c) (3.85)(c)
1998--Institu-
tional
Shares(b)....... 25.16 .0069 17,719 1.00(c) 0.59(c) 4.12(c) (2.53)(c)
1998--Service
Shares(b)....... 25.16 .0069 1 1.50(c) 0.26(c) 4.62(c) (2.86)(c)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Commenced operations on August 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
11
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- -----------------------------------------------
FROM NET IN EXCESS OF
NET REALIZED NET REALIZED
REALIZED GAIN ON GAIN ON
NET AND UNREALIZED INVESTMENT INVESTMENT NET
NET ASSET NET REALIZED GAIN (LOSS) IN EXCESS AND FOREIGN AND FOREIGN INCREASE
VALUE, INVESTMENT AND UNREALIZED ON CURRENCY FROM NET OF NET CURRENCY CURRENCY (DECREASE)
BEGINNING INCOME GAIN (LOSS) ON RELATED INVESTMENT INVESTMENT RELATED RELATED IN NET
OF PERIOD (LOSS) INVESTMENTS TRANSACTIONS INCOME INCOME TRANSACTIONS TRANSACTIONS ASSET VALUE
--------- ---------- -------------- -------------- ---------- ---------- ------------ ------------ -----------
INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $19.32 $0.03 $2.99 $(0.95) $-- $(0.30) $(0.88) $(0.36) $0.53
1998--Class B
Shares.......... 19.24 (0.08) 2.96 (0.94) -- (0.25) (0.47) (0.76) 0.46
1998--Class C
Shares(b)....... 22.60 (0.04) (2.03) 0.65 -- (0.38) -- (1.24) (3.04)
1998--
Institutional
Shares.......... 19.40 0.10 3.09 (0.98) (0.07) (0.33) (0.97) (0.27) 0.57
1998--Service
Shares.......... 19.34 0.02 3.02 (0.96) -- (0.35) (0.18) (1.05) 0.50
- -------------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 17.20 0.10 3.51 (1.28) -- -- (0.21) -- 2.12
1997--Class B
Shares(b)....... 18.91 (0.06) 0.94 (0.34) -- -- (0.21) -- 0.33
1997--
Institutional
Shares(b)....... 17.45 0.04 3.39 (1.24) (0.03) -- (0.21) -- 1.95
1997--Service
Shares(b)....... 17.70 (0.02) 2.95 (1.08) -- -- (0.21) -- 1.64
- -------------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares.......... 14.52 0.13 2.58 1.42 (0.58) -- (0.87) -- 2.68
- -------------------------------------------------------------------------------------------------------------------------------
1995--Class A
Shares.......... 18.10 0.06 (3.04) (0.01) -- -- (0.59) -- (3.58)
- -------------------------------------------------------------------------------------------------------------------------------
1994--Class A
Shares.......... 14.35 0.05 4.08 (0.38) -- -- -- -- 3.75
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993--Class A
Shares(b)....... 14.18 (0.01) 0.29 (0.11) -- -- -- -- 0.17
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
------------------------
RATIO OF
NET
INVESTMENT RATIO
NET RATIO INCOME OF NET
NET ASSET ASSETS AT OF NET (LOSS) TO RATIO OF INVESTMENT
VALUE, PORTFOLIO AVERAGE END OF EXPENSES TO AVERAGE EXPENSES INCOME (LOSS)
END OF TOTAL TURNOVER COMMISSION PERIOD AVERAGE NET TO AVERAGE TO AVERAGE
PERIOD RETURN(A) RATE RATE(F) IN (000S) NET ASSETS ASSETS NET ASSETS NET ASSETS
--------- ------------ --------- ---------- --------- ----------- ------------ ---------- -------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $19.85 11.12% 40.82% $.0207 $697,590 1.67% (.027)% 1.80% (0.40)%
1998--Class B
Shares.......... 19.70 10.51 40.82 .0207 55,324 2.20 (0.90) 2.30 (1.00)
1998--Class C
Shares(b)....... 19.56 (5.92)(d) 40.82 .0207 3,369 2.27(c) (1.43)(c) 2.37(c) (1.53)(c)
1998--
Institutional
Shares.......... 19.97 11.82 40.82 .0207 56,263 1.08 0.30 1.18 0.20
1998--Service
Shares.......... 19.84 11.25 40.82 .0207 3,035 1.55 (0.36) 1.65 (0.46)
- -------------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 19.32 13.48 38.01 .0318 536,283 1.69 (0.07) 1.88 (0.26)
1997--Class B
Shares(b)....... 19.24 2.83 (d) 38.01 .0318 19,198 2.23(c) (0.97)(c) 2.38(c) (1.12)(c)
1997--
Institutional
Shares(b)....... 19.40 12.53 (d) 38.01 .0318 68,374 1.10(c) 0.43 (c) 1.25(c) 0.28 (c)
1997--Service
Shares(b)....... 19.34 10.42 (d) 38.01 .0318 674 1.60(c) (0.40)(c) 1.75(c) (0.55)(c)
- -------------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares.......... 17.20 28.68 68.48 -- 330,860 1.52 0.26 1.77 0.01
- -------------------------------------------------------------------------------------------------------------------------------
1995--Class A
Shares.......... 14.52 (16.65) 84.54 -- 275,086 1.73 0.40 1.98 0.15
- -------------------------------------------------------------------------------------------------------------------------------
1994--Class A
Shares.......... 18.10 26.13 60.04 -- 269,091 1.76 0.51 2.01 0.26
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993--Class A
Shares(b)....... 14.35 1.23 (d) 0.00 -- 66,063 1.80(c) (0.42)(c) 2.58(c) (1.20)(c)
</TABLE>
- -----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 1, 1992, May 1, 1996, August 15, 1997, February 7,
1996 and March 6, 1996, respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
12
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------ -----------------------------------
NET REALIZED FROM NET
NET ASSET NET REALIZED AND UNREALIZED REALIZED GAIN IN EXCESS
VALUE, NET AND UNREALIZED LOSS ON FOREIGN FROM NET ON INVESTMENT OF NET NET DECREASE NET ASSET
BEGINNING INVESTMENT GAIN (LOSS) ON CURRENCY RELATED INVESTMENT AND OPTIONS INVESTMENT IN NET VALUE, END
OF PERIOD INCOME INVESTMENTS TRANSACTIONS INCOME TRANSACTIONS INCOME ASSET VALUE OF PERIOD
--------- ---------- -------------- ---------------- ---------- ------------- ---------- ------------ ----------
EMERGING MARKETS EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31, 1998
- -------------------------------------
1998--Class A
Shares(b)....... $10.00 $-- $(0.11) $(0.20) -- -- -- $(0.31) $9.69
1998--Class B
Shares(b)....... 10.00 -- (0.11) (0.20) -- -- -- (0.31) 9.69
1998--Class C
Shares(b)....... 10.00 -- (0.10) (0.20) -- -- -- (0.30) 9.70
1998--Institu-
tional
Shares(b)....... 10.00 0.01 (0.11) (0.20) -- -- -- (0.30) 9.70
1998--Service
Shares(b)....... 10.00 -- (0.11) (0.20) -- -- -- (0.31) 9.69
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
---------------------------
RATIO OF RATIO OF NET
NET ASSETS RATIO OF NET INVESTMENT RATIO OF INVESTMENT
PORTFOLIO AVERAGE AT END OF NET EXPENSES INCOME (LOSS) EXPENSES TO LOSS TO
TOTAL TURNOVER COMMISSION PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE
RETURN(A) RATE RATE (IN 000S) NET ASSETS NET ASSETS ASSETS NET ASSETS
------------ --------- ---------- ---------- ------------ -------------- ------------ --------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANUARY 31, 1998
- -------------------------------------
1998--Class A
Shares(b)....... (3.10)%(d) 3.35% $0.0005 $17,681 1.90%(c) 0.55%(c) 5.88%(c) (3,43)%(c)
1998--Class B
Shares(b)....... (3.10)(d) 3.35 0.0005 64 2.41(c) 0.05(c) 6.39(c) (3.93)(c)
1998--Class C
Shares(b)....... (3.00)(d) 3.35 0.0005 73 2.48(c) (0.27)(c) 6.46(c) (4.25)(c)
1998--Institu-
tional
Shares(b)....... (3.00)(d) 3.35 0.0005 19,120 1.30(c) 0.80(c) 5.28(c) (3.18)(c)
1998--Service
Shares(b)....... (3.10)(d) 3.35 0.0005 2 2.72(c) (0.05)(c) 6.70(c) (4.03)(c)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
13
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
---------------------------------------- ----------------------------------
NET REALIZED
AND UNREALIZED FROM NET NET
LOSS ON REALIZED INCREASE NET
NET ASSET NET NET REALIZED FOREIGN IN EXCESS GAIN ON (DECREASE) ASSET
VALUE, INVESTMENT AND UNREALIZED CURRENCY FROM NET OF NET INVESTMENT IN NET VALUE,
BEGINNING INCOME GAIN (LOSS) ON RELATED INVESTMENT INVESTMENT AND FUTURES ASSET END OF
OF PERIOD (LOSS) INVESTMENTS TRANSACTIONS INCOME INCOME TRANSACTIONS VALUE PERIOD
--------- ---------- -------------- -------------- ---------- ---------- ------------ ---------- ------
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... $16.31 $ -- $(5.78) $(2.12) $ -- $(0.03) $ -- $(7.93) $8.38
1998--Class B
Shares.......... 16.24 0.01 (5.79) (2.12) -- (0.03) -- (7.93) 8.31
1998--Class C
Shares(b)....... 15.73 0.01 (5.43) (1.99) -- (0.03) -- (7.44) 8.29
1998--Institu-
tional Shares... 16.33 0.10 (5.83) (2.13) (0.03) -- -- (7.89) 8.44
- ------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... 16.49 0.06 (0.11) -- (0.12) -- (0.01) (0.18) 16.31
1997--Class B
Shares(b)....... 17.31 (0.05) (0.48) -- (0.51) (0.03) -- (1.07) 16.24
1997--Institu-
tional
Shares(b)....... 16.61 0.04 (0.11) -- (0.11) (0.06) (0.04) (0.28) 16.33
- ------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares 13.31 0.17 3.44 -- (0.12) (0.14) (0.17) 3.18 16.49
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1995--Class A
Shares(b)....... 14.18 0.11 (0.89) -- 0.01 -- (0.10) (0.87) 13.31
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-----------------------
NET RATIO OF RATIO OF
ASSETS NET NET RATIO OF RATIO OF
AT END EXPENSES INVESTMENT EXPENSES NET
OF TO INCOME TO INVESTMENT
PORTFOLIO AVERAGE PERIOD AVERAGE (LOSS) TO AVERAGE INCOME (LOSS)
TOTAL TURNOVER COMMISSION (IN NET AVERAGE NET TO AVERAGE
RETURN(A) RATE RATE(F) 000S) ASSETS NET ASSETS ASSETS NET ASSETS
------------ --------- ---------- ------- --------- ------------ --------- -------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1998--Class A
Shares.......... (48.49)% 105.16% $.0070 $87,437 1.75% 0.31% 1.99% 0.07%
1998--Class B
Shares.......... (48.70) 105.16 .0070 3,359 2.30 (0.29) 2.50 (0.49)
1998--Class C
Shares(b)....... (47.17)(d) 105.16 .0070 436 2.35(c) (0.26)(c) 2.55(c) (0.46)(c)
1998--Institu-
tional Shares... (48.19) 105.16 .0070 874 1.11 0.87 1.31 0.67
- ------------------------------------------------------------------------------------------------------------------------
1997--Class A
Shares.......... (1.01) 48.40 .0151 263,014 1.67 0.20 1.87 0.00
1997--Class B
Shares(b)....... (6.02)(d) 48.40 .0151 3,354 2.21(c) (0.56)(c) 2.37(c) (0.72)(c)
1997--Institu-
tional
Shares(b)....... (1.09)(d) 48.40 .0151 13,322 1.10(c) 0.54 (c) 1.26(c) 0.38 (c)
- ------------------------------------------------------------------------------------------------------------------------
1996--Class A
Shares 26.49 88.80 -- 205,539 1.77 1.05 2.02 0.80
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1995--Class A
Shares(b)....... (5.46)(d) 36.08 -- 124,298 1.90(c) 1.83(c) 2.38(c) 1.35(c)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(b) Class A, Class B, Class C and Institutional share activity commenced on
July 8, 1994, May 1, 1996, August 15, 1997 and February 2, 1996,
respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
14
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and principal investment policies of each Fund are
described below. In particular, each Fund may employ certain currency
techniques to seek to hedge against currency exchange rate fluctuations or to
seek to increase total return. When used to seek to enhance return, these
management techniques are considered speculative. Such currency management
techniques involve risks different from those associated with investing solely
in securities of U.S. issuers quoted in U.S. dollars. To the extent that a
Fund is fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater combined risk. A Fund's net currency
positions may expose it to risks independent of its securities positions.
There can be no assurance that a Fund's investment objectives will be
achieved.
The Investment Advisers may purchase for the Funds common stocks, preferred
stocks, interests in real estate investment trusts, convertible debt
obligations, convertible preferred stocks, bonds with attached warrants,
equity-related transferable securities, equity interests in trusts,
partnerships, joint ventures, limited liability companies and similar
enterprises, warrants and stock purchase rights ("equity securities"). In
choosing a Fund's securities, the Investment Advisers utilize first-hand
fundamental research, including visiting company facilities to assess
operations and to meet decision-makers. The Investment Advisers may also use
macro analysis of numerous economic and valuation variables to anticipate
changes in company earnings and the overall investment climate. The Investment
Advisers are able to draw on the research and market expertise of the Goldman
Sachs Global Investment Research Department and other affiliates of the
Investment Advisers, as well as information provided by other securities
dealers. Equity securities in a Fund's portfolio will generally be sold when
the Investment Adviser believes that the market price fully reflects or
exceeds the securities' fundamental valuation or when other more attractive
investments are identified. Other investment practices and management
techniques, which involve certain risks, are described below under
"Description of Securities," "Risk Factors" and "Investment Techniques."
Actively Managed Funds. The International Equity, European Equity, Japanese
Equity, International Small Cap, Emerging Markets Equity and Asia Growth Funds
are managed using an active international approach, which utilizes a
consistent process of stock selection undertaken by portfolio management teams
located within each of the major investment regions, including Europe, Japan,
Asia and the United States. In selecting securities, the Investment Adviser
uses a long-term, bottom-up strategy based on first-hand fundamental research
that is designed to give broad exposure to the available opportunities while
seeking to add return primarily through stock selection. Equity securities for
these Funds are evaluated based on three key factors--the business, the
management and the valuation. The Investment Adviser ordinarily seeks
securities that have, in the Investment Adviser's opinion, superior earnings
growth potential, sustainable franchise value with management attuned to
creating shareholder value and relatively discounted valuations. In addition,
the Investment Adviser uses a multi-factor risk model which seeks to assure
that deviations from the benchmark are justifiable.
Quantitative Style Fund. The CORE International Equity Fund is managed using
both quantitative and fundamental techniques. CORE is an acronym for
"Computer-Optimized, Research-Enhanced," which reflects the CORE International
Equity Fund's investment process. This investment process and the proprietary
multifactor models used to implement it are discussed below.
Investment Process. The Investment Adviser begins with a broad universe of
foreign equity securities for the CORE International Equity Fund. As described
more fully below, the Investment Adviser uses proprietary multifactor models
(each a "Multifactor Model") to forecast the returns of different markets,
currencies and
15
<PAGE>
individual securities. The Investment Adviser may rely on research from both
the Goldman Sachs Global Investment Research Department (the "Research
Department") and other industry sources.
In building a diversified portfolio for the CORE International Equity Fund,
the Investment Adviser utilizes optimization techniques to seek to maximize
the Fund's expected return, while maintaining a risk profile similar to the
Fund's benchmark. The Fund's portfolio is primarily composed of securities
rated highest by the foregoing investment process and has risk characteristics
and industry weightings similar to the Fund's benchmark.
Multifactor Models. The Multifactor Models are rigorous computerized rating
systems for forecasting the returns of different equity markets, currencies,
and individual equity securities according to fundamental investment
characteristics. The CORE International Equity Fund uses multiple Multifactor
Models to forecast returns. Currently, the CORE International Equity Fund uses
one model to forecast equity market returns, one model to forecast currency
returns and 22 separate models to forecast individual equity security returns
in 22 different countries. Despite this variety, all Multifactor Models
incorporate common variables covering measures of value, growth, momentum and
risk (e.g., book/price ratio, earnings/price ratio, price momentum, price
volatility, consensus growth forecasts, earnings estimate revisions, earnings
stability, currency momentum and country political risk ratings). All of the
factors used in the Multifactor Models have been shown to significantly impact
the performance of the securities, currencies and markets they were designed
to forecast.
Because they include many disparate factors, the Investment Adviser believes
that all the Multifactor Models are broader in scope and provide a more
thorough evaluation than most conventional quantitative models. Securities and
markets ranked highest by the relevant Multifactor Model do not have one
dominant investment characteristic; rather, they possess an attractive
combination of investment characteristics.
Research Department. In assigning ratings to equity securities, the Research
Department uses a four category rating system ranging from "recommended for
purchase" to "likely to underperform." The ratings reflect the analyst's
judgment as to the investment results of a specific security and incorporate
economic outlook, valuation, risk and a variety of other factors.
By employing both a quantitative (i.e., the Multifactor Models) and a
qualitative (i.e., research enhanced) method of selecting securities, the CORE
International Equity Fund seeks to capitalize on the strengths of each
discipline.
CORE INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term growth of capital. The Fund seeks to achieve its objective through a
broadly diversified portfolio of large cap equity securities of companies that
are organized outside the United States or whose securities are principally
traded outside the United States.
Primary Investment Focus. The Fund invests, under normal circumstances, at
least 90% of its total assets in equity securities of companies that are
organized outside the United States or whose securities are principally traded
outside the United States. The Fund seeks broad representation of large cap
issuers across major countries and sectors of the international economy. The
Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's expected
return, while maintaining risk, style, capitalization and industry
characteristics similar to the EAFE Index. In addition, the Fund seeks a
portfolio composed of companies with attractive valuations and stronger
momentum characteristics than the EAFE Index.
16
<PAGE>
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time, provided the Fund's assets are invested
in at least three foreign countries. The Fund may invest in securities of
issuers in Emerging Countries which involve certain risks, as described below
under "Risk Factors--Special Risks of Investments in the Asian and Other
Emerging Markets," which are not present in investments in more developed
countries.
For a description of the investment process of the Fund, see "Investment
Objectives and Policies--Quantitative Style Fund."
Other. The Fund may invest only in fixed-income securities that are
considered to be cash equivalents.
INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund may allocate its
assets among countries as determined by the Investment Adviser from time to
time provided that the Fund's assets are invested in at least three foreign
countries. The Fund expects to invest a substantial portion of its assets in
the securities of issuers located in the developed countries of Western Europe
and in Japan. However, the Fund may also invest in the securities of issuers
located in Australia, Canada, New Zealand and the Emerging Countries in which
the Emerging Markets Equity Fund may invest. Many of the countries in which
the Fund may invest have emerging markets or economies which involve certain
risks, as described below under "Risk Factors--Special Risks of Investments in
the Asian and Other Emerging Markets," which are not present in investments in
more developed countries. The Fund intends to invest in companies with public
stock market capitalizations that are larger than those in which the
International Small Cap Fund primarily intends to invest.
Other. Up to 35% of the Fund's total assets may be invested in fixed-income
securities.
EUROPEAN EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of European companies. Because of its focus, the Fund will be more susceptible
to European economic, market, political and local risks than a fund that is
more geographically diversified. "European companies" are companies that
satisfy at least one of the following criteria: (i) their securities are
traded principally on stock exchanges in one or more of the European
countries; (ii) they derive 50% or more of their total revenue from goods
produced, sales made or services performed in one or more of the European
countries; (iii) they maintain 50% or more of their assets in one or more of
the European countries; or (iv) they are organized under the laws of a
European country. The Fund may allocate its assets among different countries
as determined by the Investment Adviser, provided that the Fund's assets are
invested in at least three European countries. It is currently anticipated
that a majority of the Fund's assets will be invested in the equity securities
of large cap companies located in the developed countries of Western Europe.
However, the Fund may also invest, without limit, in mid cap companies and
small cap companies, as well as companies located in
17
<PAGE>
Emerging Countries in which the Emerging Markets Equity Fund may invest,
including Eastern European countries and the states that formerly comprised
the Soviet Union and Yugoslavia. These investments will involve additional
risks as described below under "Risk Factors--Special Risks of Investments in
the Asian and Other Emerging Markets" and "Risks of Investing in Small
Capitalization Companies."
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-European countries and in fixed-income securities.
JAPANESE EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of Japanese companies. Japanese companies include those organized under the
laws of Japan or whose shares are traded primarily on a Japanese stock
exchange as well as those whose shares are registered with the Japan
Securities Dealers Association for trading primarily on Japan's over-the-
counter market. The Fund's concentration in Japanese companies will expose it
to the risk of adverse social, political and economic events which occur in
Japan or affect the Japanese markets as described under "Risk Factors--Special
Risks of Investment in the Japanese Markets."
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-Japanese companies and in fixed-income securities.
INTERNATIONAL SMALL CAP FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies with public stock market capitalizations of $1
billion or less at the time of investment that are organized outside the U.S.
or whose securities are principally traded outside the U.S. The Fund may
allocate its assets among countries as determined by the Investment Adviser
from time to time provided that the Fund's assets are invested in at least
three foreign countries. The Fund expects to invest a substantial portion of
its assets in small cap securities of companies in the developed countries of
Western Europe, Japan and Asia. However, the Fund may also invest in the
securities of issuers located in Australia, Canada, New Zealand and the
Emerging Countries in which the Emerging Markets Equity Fund may invest. Many
of the countries in which the Fund may invest have emerging markets or
economies which involve certain risks, as described below under "Risk
Factors--Special Risks of Investments in the Asian and Other Emerging
Markets," which are not present in investments in more developed countries. If
the market capitalization of a company held by the Fund increases above $1
billion, the Fund may, consistent with its investment objective, continue to
hold the security.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of larger cap companies with public stock market
capitalizations of more than $1 billion at the time of investment and in
fixed-income securities.
18
<PAGE>
EMERGING MARKETS EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of Emerging Country issuers. For purposes of the Fund's
investment policies, Emerging Countries are countries with economies or
securities markets that are considered by the Investment Adviser not to be
fully developed. The Investment Adviser may consider classifications by the
World Bank, the International Finance Corporation or the United Nations and
its agencies in determining whether a country is emerging or developed.
Currently, Emerging Countries include among others, most Latin American,
African, Asian and Eastern European nations. The Investment Adviser currently
intends that the Fund's investment focus will be in the following Emerging
Countries: Argentina, Botswana, Brazil, Chile, China, Colombia, the Czech
Republic, Egypt, Greece, Hong Kong, Hungary, India, Indonesia, Israel, Jordan,
Kenya, Malaysia, Mexico, Morocco, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, Singapore, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Venezuela and Zimbabwe.
An Emerging Country issuer is any entity that satisfies at least one of the
following criteria: (i) it derives 50% or more of its total revenue from goods
produced, sales made or services performed in one or more Emerging Countries;
(ii) it is organized under the laws of, or has a principal office in, an
Emerging Country; (iii) it maintains 50% or more of its assets in one or more
of the Emerging Countries; or (iv) the principal securities trading market for
a class of its securities is in an Emerging Country.
Investments in Emerging Countries involve certain risks as described under
"Risk Factors--Special Risks of Investments in the Asian and Other Emerging
Markets," which are not present in investments in more developed countries.
The Fund may purchase privately placed equity securities, equity securities of
companies that are in the process of being privatized by foreign governments,
securities of issuers that have not paid dividends on a timely basis, equity
securities of issuers that have experienced difficulties, and securities of
companies without performance records.
Other. Under normal circumstances, the Fund maintains investments in at
least six Emerging Countries, and will not invest more than 35% of its total
assets in securities of issuers in any one Emerging Country. Allocation of the
Fund's investments will depend upon the relative attractiveness of the
Emerging Country markets and particular issuers. In addition, macro-economic
factors and the portfolio managers' and Goldman Sachs economists' views of the
relative attractiveness of Emerging Countries and currencies are considered in
allocating the Fund's assets among Emerging Countries. Concentration of the
Fund's assets in one or a few Emerging Countries and currencies will subject
the Fund to greater risks than if the Fund's assets were not geographically
concentrated. See "Description of Securities--Foreign Investments" and "Risk
Factors." The Fund may invest in the aggregate up to 35% of its total assets
in (i) fixed-income securities of private and governmental Emerging Country
issuers; and (ii) equity and fixed-income securities of issuers in developed
countries.
ASIA GROWTH FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies that satisfy at least one of the following
criteria: (i)
19
<PAGE>
their securities are traded principally on stock exchanges in one or more of
the Asian countries; (ii) they derive 50% or more of their total revenue from
goods produced, sales made or services performed in one or more of the Asian
countries; (iii) they maintain 50% or more of their assets in one or more of
the Asian countries; or (iv) they are organized under the laws of one of the
Asian countries. The Fund seeks to achieve its objective by investing
primarily in equity securities of Asian companies which are considered by the
Investment Adviser to have long-term capital appreciation potential. Many of
the countries in which the Fund may invest have emerging markets or economies
which involve certain risks as described under "Risk Factors--Special Risks of
Investments in the Asian and Other Emerging Markets," which are not present in
investments in more developed countries. The Fund may purchase equity
securities of issuers that have not paid dividends on a timely basis,
securities of companies that have experienced difficulties, and securities of
companies without performance records.
Other. The Fund may allocate its assets among the Asian countries as
determined from time to time by the Investment Adviser. For purposes of the
Fund's investment policies, Asian countries are China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri
Lanka, Taiwan and Thailand, as well as any other country in Asia (other than
Japan) to the extent that foreign investors are permitted by applicable law to
make such investments. Allocation of the Fund's investments will depend upon
the Investment Adviser's views of the relative attractiveness of the Asian
markets and particular issuers. For example, on January 31, 1998 (the end of
the Fund's last fiscal year), more than 35% of the Fund's assets were invested
in securities traded in Hong Kong. Concentration of the Fund's assets in one
or a few of the Asian countries and Asian currencies will subject the Fund to
greater risks than if the Fund's assets were not geographically concentrated.
See "Description of Securities--Foreign Investments." The Fund may invest in
the aggregate up to 35% of its total assets in equity securities of issuers in
other countries, including Japan, and in fixed-income securities.
DESCRIPTION OF SECURITIES
The Funds may invest in equity and fixed income securities in accordance
with the investment policies stated above. Certain of these permitted
investments are described in more detail in this section.
CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities, including debt obligations
and preferred stock of the issuer convertible at a stated exchange rate into
common stock of the issuer. Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar
quality. As with all fixed-income securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. However, when the market price of the
common stock underlying a convertible security exceeds the conversion price,
the convertible security tends to reflect the market price 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 decline in price to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an issuer's capital
structure and consequently entail less risk than the issuer's common stock. In
evaluating a convertible security, the Investment Adviser will give primary
emphasis to the attractiveness of the underlying common stock. The convertible
securities in which the Funds invest are not subject to any minimum rating
criteria. Convertible debt securities are equity investments for purposes of
each Fund's investment policies.
20
<PAGE>
FOREIGN INVESTMENTS
FOREIGN SECURITIES. Each Fund will invest in the securities of foreign
issuers. Investments in foreign securities may offer potential benefits that
are not available from investments exclusively in equity securities of
domestic issuers quoted in U.S. dollars. Foreign countries may have economic
policies or business cycles different from those of the U.S. and markets for
foreign securities do not necessarily move in a manner parallel to U.S.
markets.
Investing in the securities of foreign issuers involves certain special
risks, including those set forth below, which are not typically associated
with investing in U.S. dollar-denominated or quoted securities of U.S.
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 currency in which a Fund receives dividends, interest or
other payments declines in value against the U.S. dollar before such income is
distributed as dividends to shareholders or converted to U.S. dollars, the
Fund may have to sell portfolio securities to obtain sufficient cash to pay
such dividends. The expected introduction of a single currency, the euro, on
January 1, 1999 for participating European nations in the Economic and
Monetary Union ("EU") presents unique uncertainties, including whether the
payment and operational systems of banks and other financial institutions will
be ready by the scheduled launch date; the creation of suitable clearing and
settlement payment systems for the new currency; the legal treatment of
certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the euro; the establishment and maintenance of
exchange rates for currencies being converted into the euro; the fluctuation
of the euro relative to non-euro currencies during the transition period from
January 1, 1999 to December 31, 2000 and beyond; whether the interest rate,
tax and labor regimes of European countries participating in the Fund will
converge over time; and whether the conversion of the currencies of other EU
countries such as the United Kingdom, Denmark and Greece into the euro and the
admission of other non-EU countries such as Poland, Latvia and Lithuania as
members of the EU may have an impact on the euro. These or other factors,
including political and economic risks, could cause market disruptions before
or after the introduction of the euro, and could adversely affect the value of
securities and foreign currencies held by the Funds. Commissions on
transactions in foreign securities may be higher than those for similar
transactions on domestic stock markets. In addition, clearance and settlement
procedures may be different in foreign countries and, in certain markets, such
procedures have been unable to keep pace with the volume of securities
transactions, thus making it difficult to conduct such transactions.
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 United States. Foreign securities markets may have substantially
less volume than U.S. securities markets and securities of many foreign
issuers are 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 or other taxes on dividend or interest
payments (or, in some cases, capital gains), limitations on the removal of
funds or other assets of the Funds, political or social instability or
diplomatic developments which could affect investments in those countries.
Concentration of a Fund's assets in one or a few countries and currencies
will subject a Fund to greater risks than if a Fund's assets were not
geographically concentrated.
21
<PAGE>
INVESTMENTS IN ADRS, EDRS AND GDRS. Each Fund may invest in foreign
securities which take the form of sponsored and unsponsored American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), European
Depository Receipts ("EDRs") or other similar instruments representing
securities of foreign issuers (together, "Depository Receipts"). ADRs
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. Prices of ADRs are quoted in U.S.
dollars, and ADRs are traded in the United States on exchanges or over-the-
counter and are sponsored and issued by domestic banks. EDRs and GDRs are
receipts evidencing an arrangement with a non-U.S. bank. EDRs and GDRs are not
necessarily quoted in the same currency as the underlying security. To the
extent a Fund acquires Depository Receipts through banks which do not have a
contractual relationship with the foreign issuer of the security underlying
the Depository Receipts to issue and service such Depository Receipts
(unsponsored Depository Receipts), there may be an increased possibility that
the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings involving the foreign
issuer, in a timely manner. In addition, the lack of information may result in
inefficiencies in the valuation of such instruments. Investment in Depository
Receipts does not eliminate all the risks inherent in investing in securities
of non-U.S. issuers. The market value of Depository Receipts is dependent upon
the market value of the underlying securities and fluctuations in the relative
value of the currencies in which the Depository Receipt and the underlying
securities are quoted. However, by investing in Depository Receipts, such as
ADRs, that are quoted in U.S. dollars, a Fund may avoid currency risks during
the settlement period for purchases and sales.
FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because each 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, to the extent it invests in
foreign securities, purchase or sell foreign currencies on a spot basis and
may also 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. In addition, each Fund 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 enhance return, forward foreign currency exchange
contracts are considered speculative. Each 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 to sell foreign currency to seek to
increase total return, the Fund will segregate cash or liquid assets in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract, or otherwise cover its position in a
manner permitted by the SEC. The Fund will incur costs in connection with
conversions between various currencies. A 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 NAV to fluctuate. Currency
exchange rates generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or
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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 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 the contract would deprive the Fund of unrealized profits,
transaction costs or the benefits of a currency hedge or force the Fund to
cover its purchase or sale commitments, if any, at the current market price. A
Fund will not enter into forward foreign currency exchange contracts, currency
swaps or other privately negotiated currency instruments 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.
Each Fund may also engage in a variety of foreign currency management
techniques. However, due to the limited market for these instruments with
respect to the currencies of many Emerging Countries, including certain Asian
countries, the Investment Advisers do not currently anticipate that a
significant portion of International Equity, European Equity, International
Small Cap, Emerging Markets Equity or Asia Growth Fund's currency exposure
will be covered by such instruments. For a discussion of such instruments and
the risks associated with their use, see "Investment Objective and Policies"
in the Additional Statement.
FIXED-INCOME SECURITIES
Each Fund may invest in fixed-income securities, including U.S. Government
securities, corporate debt obligations, obligations issued by U.S. or foreign
banks (including without limitation, time deposits, bankers' acceptances and
certificates of deposit), mortgage-backed securities (including stripped
mortgage-backed securities) and asset-backed securities.
Investments in fixed-income securities may include obligations of foreign
governments and governmental agencies, including those of Emerging Countries.
Investment in sovereign debt obligations involves special risks not present in
debt obligations of corporate issuers. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt, and a Fund may have limited recourse in the event of a
default. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt, and in turn a Fund's NAV, to a greater extent
than the volatility inherent in debt obligations of U.S. issuers. A sovereign
debtor's willingness or ability to repay principal and pay interest in a
timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's
policy toward international lenders and the political constraints to which a
sovereign debtor may be subject.
Fixed-income investments may also include investments 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
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loss of a 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 price accurately
than less complex securities.
Each Fund (other than the CORE International Equity Fund, which only invests
in debt instruments that are cash equivalents) may invest up to 35% of its
total assets in debt securities which are unrated or rated in the lowest
rating categories by Standard & Poor's Ratings Group ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's") (i.e., BB or lower by Standard &
Poor's or Ba or lower by Moody's), including securities rated D by Moody's or
Standard & Poor's. Fixed-income securities rated BB or Ba or below (or
comparable unrated securities) are commonly referred to as "junk bonds" and
are considered predominantly speculative and may be questionable as to
principal and interest payments. In some cases, such bonds may be highly
speculative, have poor prospects for reaching investment grade standing and be
in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment grade
bonds. Also, to the extent that the rating assigned to a security in a Fund's
portfolio is downgraded by a rating organization, the market price and
liquidity of such security may be adversely affected. See Appendix A to the
Additional Statement for a description of the corporate bond ratings assigned
by Standard & Poor's and Moody's.
REAL ESTATE INVESTMENT TRUSTS ("REITS")
Each Fund may invest in REITs, which are pooled investment vehicles that
invest primarily in either real estate or real estate related loans. The value
of a REIT is affected by changes in the value of the properties owned by the
REIT or securing mortgage loans held by the REIT. REITs are dependent upon
cash flow from their investments to repay financing costs and the ability of
the REITs' managers. REITs are also subject to risks generally associated with
investments in real estate. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
INVESTMENT TECHNIQUES
OPTIONS ON SECURITIES AND SECURITIES INDICES
Each Fund may write (sell) covered call and put options and purchase call
and put options on any securities in which it may invest or on any securities
index composed of securities in which it may invest. The writing and purchase
of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. The use of options to seek to increase total return
involves the risk of loss if the Investment Adviser is incorrect in its
expectation of fluctuations in securities prices or interest rates. The
successful use of options for hedging purposes also depends in part on the
ability of the Investment Adviser to manage future price fluctuations and the
degree of correlation between the options and securities markets. If the
Investment Adviser is incorrect in its expectation of changes in securities
prices or determination of the correlation between the securities indices on
which options are written and purchased and the securities in a Fund's
investment portfolio, the investment performance of the Fund will be less
favorable
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than it would have been in the absence of such options transactions. The
writing of options could significantly increase a Fund's portfolio turnover
rate and, therefore, associated brokerage commissions or spreads.
OPTIONS ON FOREIGN CURRENCIES
A Fund may, to the extent it invests in foreign securities, purchase and
sell (write) call and put options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of foreign portfolio
securities and anticipated dividends on such securities and against increases
in the U.S. dollar cost of foreign securities to be acquired. In addition,
each 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 options transactions, however, the
writing of an option on a 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, each 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 written or purchased
by the Funds are traded on U.S. and foreign exchanges or over-the-counter.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To seek to increase total return or to hedge against changes in interest
rates, securities prices or currency exchange rates, a 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, foreign
currencies, securities indices and other financial instruments and indices,
whether domestic or foreign. A Fund will engage in futures and related options
transactions for bona fide hedging purposes as defined in regulations of the
Commodity Futures Trading Commission or to seek to increase total return to
the extent permitted by such regulations. A Fund may not purchase or sell
futures contracts or purchase or sell related options to seek to increase
total return, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of initial margin deposits and premiums paid
on the Fund's outstanding positions in futures and related options entered
into for the purpose of seeking to increase total return would exceed 5% of
the market value of the Fund's net assets. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require the
Fund to segregate and maintain cash or liquid assets with a value equal to the
amount of the Fund's obligations or to otherwise cover the obligations in a
manner permitted by the SEC.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Objectives and Policies--Futures Contracts and Options on Futures
Contracts" in the Additional Statement. Thus, while 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 poorer
overall performance than if the Fund had not entered into any futures
contracts or options transactions.
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Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired
protection may not be obtained and a Fund may be exposed to risk of loss. The
loss incurred by a Fund in entering into futures contracts and in writing call
options on futures is potentially unlimited and may exceed the amount of the
premium received. Futures markets are highly volatile and the use of futures
may increase the volatility of a Fund's NAV. The profitability of a Fund's
trading in futures to seek to increase total return depends upon the ability
of the Investment Adviser to analyze correctly 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. The Funds may engage in futures
transactions on both U.S. and foreign exchanges. Foreign exchanges may not
provide the same protections as U.S. exchanges.
EQUITY SWAPS
Each Fund may invest up to 10% of its total assets in equity swaps. Equity
swaps allow the parties to a swap agreement to exchange the dividend income or
other components of return on an equity investment (e.g., a group of equity
securities or an index) for a component of return on another non-equity or
equity investment. An equity swap may be used by a Fund to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment may be restricted for legal reasons or is otherwise
impractical. Equity swaps are derivatives and their value can be very
volatile. To the extent that the Investment Adviser does not accurately
analyze and predict the potential relative fluctuation of the components
swapped with another party, a Fund may suffer a loss. The value of some
components of an equity swap (such as the dividends on a common stock) may
also be sensitive to changes in interest rates. Furthermore, during the period
a swap is outstanding, a Fund may suffer a loss if the counterparty defaults.
In connection with its investments in equity swaps, a Fund will either
segregate cash or liquid assets or otherwise cover its obligations in a manner
required by the SEC.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fund may purchase when-issued securities. When-issued transactions
arise when securities are purchased by a Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. Each Fund may also purchase or sell securities on a forward
commitment basis; that is, make contracts to purchase or sell securities for a
fixed price at a future date beyond the customary settlement period. 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. Conversely, securities sold on a forward commitment basis
involve the risk that the value of the securities to be sold may increase
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. A Fund will segregate cash or liquid
assets in an amount sufficient to meet the purchase price until three days
prior to the settlement date. Alternatively, each Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
ILLIQUID AND RESTRICTED SECURITIES
A Fund will not invest more than 15% of its net assets in illiquid
investments, which include securities (both foreign and domestic) that are not
readily marketable, certain stripped mortgage-backed securities,
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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 a review of the trading markets for a specific restricted security, that
such restricted security is eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 and, therefore, is liquid. The Trustees have
adopted guidelines under which the Investment Adviser determines and monitors
the liquidity of portfolio securities, subject to the oversight of the
Trustees. Investing in restricted securities eligible for resale pursuant to
Rule 144A may decrease the liquidity of a Fund's portfolio 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. Each 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 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 management agreements with an
Investment Adviser or its affiliates may transfer uninvested cash balances
into a single joint account, the daily aggregate balance of which will be
invested in one or more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
Each Fund may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to institutions,
such as certain broker-dealers, and are required to be secured continuously by
collateral in cash, cash equivalents, or U.S. Government securities maintained
on a current basis in an amount at least equal to the market value of the
securities loaned. Cash collateral may be invested in cash equivalents. If an
Investment Adviser determines to make securities loans, the value of the
securities loaned may not exceed 33 1/3% of the value of the total assets of a
Fund (including the loan collateral). A Fund may experience a loss or delay in
the recovery of its securities if the institution with which it has engaged in
a portfolio loan transaction breaches its agreement with the Fund.
SHORT SALES AGAINST-THE-BOX
Each Fund (other than the CORE International Equity Fund) may make short
sales of securities or maintain a short position, provided that at all times
when a short position is open the Fund owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, for an equal amount of the securities of the same
issuer as the securities sold short (a short sale against-the-box). Not more
than 25% of a Fund's net assets (determined at the time of the short sale) may
be subject to such short sales. As a result of recent tax legislation, short
sales may not generally be used to defer the recognition of gain for tax
purposes with respect to appreciated securities in a Fund's portfolio.
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TEMPORARY INVESTMENTS
Each Fund may, for temporary defensive purposes, invest 100% of its total
assets (except that the CORE International Equity Fund and Emerging Markets
Equity Fund may only hold up to 35% of their respective total assets) in U.S.
Government securities, repurchase agreements collateralized by U.S. Government
securities, commercial paper rated at least A-2 by Standard & Poor's or P-2 by
Moody's, certificates of deposit, bankers' acceptances, repurchase agreements,
non-convertible preferred stocks, non-convertible corporate bonds with a
remaining maturity of less than one year. When a Fund's assets are invested in
such instruments, the Fund may not be achieving its investment objective.
MISCELLANEOUS TECHNIQUES
In addition to the techniques and investments described above, each Fund
may, with respect to no more than 5% of its net assets, engage in the
following techniques and investments: (i) warrants and stock purchase rights;
(ii) currency swaps; (iii) other investment companies including World Equity
Benchmark Shares and Standard & Poor's Depository Receipts; (iv) unseasoned
companies; and (v) custodial receipts.
In addition, each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Additional Statement.
RISK FACTORS
RISKS OF INVESTING IN EQUITY SECURITIES. In general, the Funds are subject
to the risks associated with investments in common stocks and other equity
securities. Stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions and,
accordingly, the value of the stocks that a Fund holds may decline over short
or extended periods. Stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, certain foreign stock markets were trading at or
close to record high levels and there can be no guarantee that such levels
will continue.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES. Investing in the
securities of such companies involves greater risk and the possibility of
greater portfolio price volatility. Historically, small market capitalization
stocks and stocks of recently organized companies have been more volatile in
price than larger market capitalization stocks. Among the reasons for the
greater price volatility of these small company and unseasoned stocks are the
less certain growth prospects of smaller firms, less institutional investor
interest and the lower degree of liquidity in the markets for such stocks.
SPECIAL RISKS OF INVESTMENTS IN THE ASIAN AND OTHER EMERGING
MARKETS. Investing in the securities of issuers in Emerging Countries involves
risks in addition to those discussed under "Description of Securities--Foreign
Investments." The International Equity, European Equity, International Small
Cap, Emerging Markets Equity and Asia Growth Funds may each invest without
limit in the securities of issuers in Emerging Countries. The CORE
International Equity Fund may invest up to 25% of its total assets in
securities of issuers in Emerging Countries. Emerging Countries are generally
located in the Asia-Pacific region, Eastern Europe, Latin and South America
and Africa. A Fund's purchase and sale of portfolio securities in certain
Emerging Countries may be constrained by limitations as to daily changes in
the prices of listed securities, periodic trading or settlement
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volume and/or limitations on aggregate holdings of foreign investors. Such
limitations may be computed based on the aggregate trading volume by or
holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other service providers. A Fund may not be able to sell
securities in circumstances where price, trading or settlement volume
limitations have been reached.
Foreign investment in the securities markets of certain Emerging Countries
is restricted or controlled to varying degrees which may limit investment in
such Countries or increase the administrative costs of such investments. For
example, certain countries require governmental approval prior to investments
by foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by a Fund. The repatriation of both investment income and capital
from certain Emerging Countries is subject to restrictions such as the need
for governmental consents. Due to restrictions on direct investment in equity
securities in certain Asian countries, such as Taiwan, it is anticipated that
a Fund may invest in such countries only through other investment funds in
such countries. See "Other Investment Companies" in the Additional Statement.
Many Emerging Countries may be subject to a substantially greater degree of
economic, political and social instability and disruption than is the case in
Western Europe, the United States, Canada, Australia, New Zealand and Japan.
Many Emerging Countries do not have fully democratic governments. For example,
governments of some Emerging Countries are authoritarian in nature or have
been installed or removed as a result of military coups, while governments in
other Emerging Countries have periodically used force to suppress civil
dissent. Disparities of wealth, the pace and success of democratization, and
ethnic, religious and racial disaffection, among other factors, have also led
to social unrest, violence and/or labor unrest in some Asian, Eastern European
and other Emerging Countries. Unanticipated political or social developments
may affect the values of a Fund's investments. Investing in Emerging Countries
involves the risk of loss due to expropriation, nationalization, confiscation
of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested. For example, in the past,
Eastern European governments have expropriated substantial amounts of private
property, and have not settled the claims of property owners. Similar
expropriations could occur in the future.
Starting in mid-1997 some Pacific region countries began to experience
currency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. This situation resulted in a significant drop
in the securities prices of companies located in the region. Some countries
have experienced government intervention, have sought assistance from the
International Monetary Fund and are undergoing substantial domestic unrest.
Although some countries are taking steps to restructure their financial
sectors in a manner that may facilitate a return to long-term economic growth,
there can be no assurance that these efforts will be successful or that their
current problems will not persist. At the end of its last fiscal year, a
substantial portion of the Asia Growth Fund was invested in securities traded
in the Hong Kong market. In 1997, the sovereignty of Hong Kong reverted from
the United Kingdom to China. Although Hong Kong is, by law, to maintain a high
degree of autonomy, there can also be no assurance that the general economic
position of Hong Kong will not be adversely affected as a result of the
exercise of Chinese sovereignty over Hong Kong. In particular, business
confidence in Hong Kong can be significantly affected by political
developments and statements by public figures in China, which can in turn
affect the performance of the securities markets. In addition, the reversion
of Hong Kong to China has created uncertainty as to future currency valuations
relative to the U.S. dollar. Any future valuation changes could be adverse
from the perspective of U.S. investors.
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Economies in individual Emerging Countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, currency valuation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Many Emerging
Countries have experienced currency devaluations and substantial and, in some
cases, extremely high rates of inflation, which have a negative effect on the
economies and securities markets of such Emerging Countries. Economies in
Emerging Countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, have been and may continue to be
affected adversely by the economies of their trading partners, trade barriers,
exchange controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade.
Brokerage commissions, custodial services and other costs relating to
investment in international securities markets generally are more expensive
than in the United States. A Fund's investment in Emerging Countries may also
be subject to withholding or other taxes, which may be significant and may
reduce the return from an investment in such country to the Fund. Settlement
procedures in Emerging Countries are frequently less developed and reliable
than those in the United States and may involve a Fund's delivery of
securities before receipt of payment for their sale. In addition, significant
delays are common in certain markets in registering the transfer of
securities. Settlement or registration problems may make it more difficult for
a Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities, to have a portion of its assets
uninvested or to incur losses due to the failure of a counterparty to pay for
securities the Fund has delivered or the Fund's inability to complete its
contractual obligations.
Currently, there is no market or only a limited market for many of the
management techniques and instruments with respect to the currencies and
securities markets of the Emerging Countries. Consequently, there can be no
assurance that suitable instruments for hedging currency and market-related
risks will be available at the times when a Fund wishes to use them.
SPECIAL RISKS OF INVESTMENTS IN THE JAPANESE MARKETS. The Japanese Equity
Fund invests primarily in equity securities of Japanese companies.
Accordingly, the Japanese Equity Fund's performance will be closely tied to
economic and market conditions in Japan, and may be more volatile than more
geographically diversified funds. Changes in regulatory, as well as tax or
economic, policy in Japan could significantly affect the Japanese securities
markets and, therefore, the Japanese Equity Fund's performance.
Japan's economy, the second largest in the world, has grown substantially
over the last three decades. Since 1990, however, Japan's economic growth has
declined significantly, and is currently subject to deflationary pressures. In
addition to this economic downturn, Japan is undergoing structural adjustments
related to high wages and taxes, currency valuations and structural
rigidities. Japan has also been experiencing notable uncertainty and loss of
public confidence in connection with the reform of its political process and
the deregulation of its economy. These conditions present risks to the
Japanese Equity Fund and its ability to attain its investment objective.
Japan's economy is heavily dependent upon international trade, and is
especially sensitive to trade barriers and disputes. In particular, Japan
relies on large imports of agricultural products, raw materials and fuels. A
substantial rise in world oil or commodity prices, or a fall-off in Japan's
manufactured exports, could be expected to adversely affect Japan's economy.
In addition, Japan is vulnerable to earthquakes, volcanoes and other natural
disasters. As of the date of this Prospectus, Japan's banking industry
continued to suffer from non-performing loans, declining real estate values
and lower valuations of securities holdings.
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The Japanese securities markets are less regulated than the U.S. markets.
Evidence has emerged from time to time of distortion of market prices to serve
political or other purposes. Shareholders' rights are also not always equally
enforced.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those of U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies, and
Japanese interest rates have generally been lower than U.S. interest rates.
These factors have contributed to lower discount rates and higher price-
earnings ratios in Japan than in the U.S.
During the recent past, the average stock market prices of Japanese
companies, as measured by major indices such as the NIKKEI 225 Average, have
experienced a substantial decline. It is not possible to determine whether
this general decline will continue.
RISKS OF INVESTING IN FIXED-INCOME SECURITIES. 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.
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.
RISKS OF DERIVATIVE TRANSACTIONS. A Fund's transactions, if any, in options,
futures, options on futures, swaps, structured securities and currency
transactions involve certain risks, including a possible lack of correlation
between changes in the value of hedging instruments and the portfolio assets
(if any) being hedged, the potential illiquidity of the markets for derivative
instruments, the risks arising from 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 use of certain derivative transactions may be
limited by the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.
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 cannot be changed without
approval of a majority of the outstanding Shares of that Fund as defined in
the Additional Statement. Each Fund's investment objectives and all 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 that Fund remains
an appropriate investment in light of their then current financial positions
and needs.
31
<PAGE>
PORTFOLIO TURNOVER
A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by a Fund and its shareholders. See
"Financial Highlights" for a statement of the historical portfolio turnover
rate of each Fund (other than the European Equity, Japanese Equity and
International Small Cap Funds). It is anticipated that the annual portfolio
turnover rates of the European Equity, Japanese Equity and International Small
Cap Funds will generally not exceed 75%. The portfolio turnover rate is
calculated by dividing the lesser of the dollar amount of sales or purchases
of portfolio securities by the average monthly value of a Fund's portfolio
securities, excluding securities having a maturity at the date of purchase of
one year or less. 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.
MANAGEMENT
TRUSTEES AND OFFICERS
The Trustees are responsible for deciding matters of general policy and
reviewing the actions of the Investment Adviser, distributor and transfer
agent. The officers of the Trust conduct and supervise 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
INVESTMENT ADVISERS. 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 CORE International Equity Fund.
Goldman Sachs registered as an investment adviser in 1981. Goldman Sachs Asset
Management International, 133 Peterborough Court, London EC4A 2BB, England, an
affiliate of Goldman Sachs, serves as the investment adviser to the
International Equity, European Equity, Japanese Equity, International Small
Cap, Emerging Markets Equity and Asia Growth Funds. Goldman Sachs Asset
Management International became a member of the Investment Management
Regulatory Organisation Limited in 1990 and registered as an investment
adviser in 1991. As of August 21, 1998, GSAM and GSAMI, together with their
affiliates, acted as investment adviser or distributor for assets in excess of
$168 billion.
Under a Management Agreement with each Fund, the applicable Investment
Adviser, subject to the general supervision of the Trustees, provides day-to-
day advice as to the Fund's portfolio transactions. Goldman Sachs has agreed
to permit the Funds to use the name "Goldman Sachs" or a derivative thereof as
part of each Fund's name for as long as a Fund's Management 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 asset management
affiliates for portfolio decisions and management with respect to certain
portfolio securities. In addition, the Investment Adviser will have access to
the research of, and certain proprietary technical models
32
<PAGE>
developed by, Goldman Sachs and may apply quantitative and qualitative
analysis in determining the appropriate allocations among the categories of
issuers and types of securities.
Under the Management Agreement, each Investment Adviser also: (i) supervises
all non-advisory operations of each Fund; (ii) provides personnel to perform
such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of each Fund; (iii) arranges for
at each Fund's expense (a) the preparation of all required tax returns, (b)
the preparation and submission of reports to existing shareholders, (c) the
periodic updating of prospectuses and Additional Statements and (d) the
preparation of reports to be filed with the SEC and other regulatory
authorities; (iv) maintains each Fund's records; and (v) provides office space
and all necessary office equipment and services.
FUND MANAGERS
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Anna G. Antici Portfolio Manager-- Since Ms. Antici joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager in
1997. From 1994 to 1997,
she was a Vice President
for HSBC Asset
Management, where she
was a portfolio manager
for emerging markets and
head of the Latin
American Department. In
1993, she was a senior
research analyst for
Baring Securities.
- ------------------------------------------------------------------------------------------------------
Robert A. Beckwitt Senior Portfolio Manager-- Since Mr. Beckwitt joined the
Vice President and Emerging Markets Equity 1997 Investment Adviser as a
Co-Head Emerging Market portfolio manager in
Equities 1996. From 1986 to 1996,
he was Chief Investment
Strategist-Portfolio
Adviser to high net
worth investors at
Fidelity Investments.
- ------------------------------------------------------------------------------------------------------
Guy P. de C. Bennett Portfolio Manager-- Since Mr. Bennett joined the
Vice President International Equity 1997 Investment Adviser as a
Senior Portfolio Manager-- portfolio manager in
Japanese Equity 1998 1996 and is also co-head
of GSAM's Japanese
Equity Group in Tokyo.
From 1984 to 1996, he
was a portfolio manager
and an Executive
Director at CIN
Management.
- ------------------------------------------------------------------------------------------------------
Melissa Brown Senior Portfolio Manager-- Since Ms. Brown joined the
Vice President CORE International Equity 1998 Investment Adviser as a
portfolio manager in
1998. From 1984 to 1998,
she was the director of
Quantitative Equity
Research and served on
the Investment Policy
Committee at Prudential
Securities.
- ------------------------------------------------------------------------------------------------------
Mark M. Carhart Senior Portfolio Manager-- Since Mr. Carhart joined the
Vice President CORE International Equity 1998 Investment Adviser as a
member of the Quantative
Research and Risk
Management team in 1997.
From August 1995 to
September 1997, he was
Assistant Professor of
Finance at the Marshall
School of Business at
USC and a Senior Fellow
of the Wharton Financial
Institutions Center.
From 1993 to 1995, he
was a lecturer and
graduate student at the
University of Chicago
Graduate School of
Business.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Kent A. Clark Senior Portfolio Manager-- Since Mr. Clark joined the
Vice President CORE International Equity 1997 Investment Adviser as a
portfolio manager in the
quantitative equity
management team in 1992.
Prior to joining the
Investment Adviser, Mr.
Clark was studying for a
Ph.D. in finance at the
University of Chicago.
- ------------------------------------------------------------------------------------------
David Dick Senior Portfolio Manager-- Since Mr. Dick joined the
Executive Director European Equity 1998 Investment Adviser as a
senior portfolio manager
on the European Equity
team in 1998. From 1990
to 1998, he was with
Mercury Asset
Management, where he was
a portfolio manager for
european equity and was
head of Mercury's
european sector
strategy.
- ------------------------------------------------------------------------------------------
Ivor H. Farman Portfolio Manager-- Since Mr. Farman joined the
Executive Director International Equity 1996 Investment Adviser as a
European Equity 1998 senior portfolio manager
in 1996. From 1995 to
1996, he was responsible
for originating and
marketing French equity
ideas at Exane in Paris.
Prior to 1995, he spent
five years engaged in
French equity research
and marketing at Banque
Nationale de Paris and
Schroders in London.
- ------------------------------------------------------------------------------------------
Paul Greener Portfolio Manager-- Since Mr. Greener joined the
Associate CORE International Equity 1998 Investment Adviser as a
European Equity 1998 member of the Pan-
European Equity Team
responsible for European
general retailers,
business services and
technology sectors in
1996. From 1994 to 1996,
he was an equity analyst
at CIN Management. Prior
to 1994, he was a
student at the
University of
Birmingham.
- ------------------------------------------------------------------------------------------
James P. Hordern Portfolio Manager-- Since Mr. Hordern joined the
Executive Director International Small Cap 1998 Investment Adviser as a
portfolio manager in
1997. From 1991 to 1997,
he was an Assistant
Director and portfolio
manager at Mercury Asset
Management on the
European Specialist
Team.
- ------------------------------------------------------------------------------------------
Raymond J. Iwanowski Portfolio Manager-- Since Mr. Iwanowski joined the
Vice President CORE International Equity 1998 Investment Adviser as an
associate and portfolio
manager in 1997. From
1993 to 1997, he was a
Vice President and head
of the Fixed Derivatives
Client Research group at
Salomon Brothers. Prior
to 1993, he was a
lecturer and graduate
student at the
University of Chicago
Graduate School of
Business.
- ------------------------------------------------------------------------------------------
Robert C. Jones Senior Portfolio Manager-- Since Mr. Jones joined the
Managing Director CORE International Equity 1997 Investment Adviser as a
portfolio manager in
1989. From 1987 to 1989,
he was the senior
quantitative analyst in
the Goldman, Sachs & Co.
Investment Research
Department.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Shigeka Kouda Portfolio Manager-- Since Mr. Kouda joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1997. From 1992 to 1997,
he was at the Fixed
Income Division of
Goldman Sachs (Japan)
Limited, where he was
extensively involved in
emerging markets trading
as well as International
Fixed Income
institutional sales.
- ---------------------------------------------------------------------------------------------
Ralf Laier Portfolio Manager-- Since Mr. Laier joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on Central/Eastern
European (CEE) and the
Commonwealth of
Independent States (CIS)
in 1997. Prior to
joining the Investment
Adviser, from 1995 to
1997, he was Vice
President of Soros
Global Research, where
he analyzed investment
opportunities in
CEE/CIS. From 1994 to
1995, he achieved a
Ph.D. from the Academy
of Economics in Pozan,
Poland, and from 1992 to
1994 he worked for the
Polish Ministry of
Privatization as a
Project Director
developing privatization
strategies for several
industry sectors.
- ---------------------------------------------------------------------------------------------
Alice Lui Portfolio Manager-- Since Ms. Lui joined the
Vice President Asia Growth 1994 Investment Adviser as a
portfolio manager in
1990. Prior to 1990, she
was a management
consultant with Andersen
Consulting in Hong Kong.
- ---------------------------------------------------------------------------------------------
Shogo Maeda Portfolio Manager-- Since Mr. Maeda joined the
Managing Director International Equity 1994 Investment Adviser as a
International Small Cap 1998 portfolio manager in
Senior Portfolio Manager-- 1994. From 1987 to 1994,
Japanese Equity 1998 he worked at Nomura
Investment Management
Incorporated as a Senior
Portfolio Manager.
- ---------------------------------------------------------------------------------------------
Warwick M. Negus Senior Portfolio Manager-- Since Mr. Negus joined the
Managing Director and Asia Growth 1994 Investment Adviser as a
Co-Head Emerging Portfolio Manager-- portfolio manager in
Market International Equity 1994 1994. From 1987 to 1994,
Equities Emerging Markets Equity 1997 he was a Vice President
International Small Cap 1998 of Bankers Trust
Australia Ltd where he
was the Chief Investment
Officer of their
Southeast Asian
investment team. He is
also a member of Goldman
Sachs Asset Management's
global asset allocation
committee.
- ---------------------------------------------------------------------------------------------
Susan Noble Senior Portfolio Manager-- Since Ms. Noble joined the
Executive Director International Equity 1998 Investment Adviser as a
European Equity 1998 senior portfolio manager
and head of the European
Equity team in October
1997. From 1986 to 1997,
she worked at Fleming
Investment Management in
London, where she most
recently was Portfolio
Management Director for
the European equity
investment strategy and
process.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Ebru Ozsezgin Portfolio Manager-- Since Ms. Ozsezgin joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on the
Mediterranean and Middle
East region in 1997.
From 1996 to 1997, she
was a portfolio manager
at Foreign & Colonial,
responsible for Middle
East investments. From
1994 to 1996, she was a
fund manager with
Framlington Investment
Management. From 1990 to
1994, she was a manager
at Global Securities
Ltd.
- -----------------------------------------------------------------------------------------
Victor H. Pinter Senior Portfolio Manager-- Since Mr. Pinter joined the
Vice President CORE International Equity 1997 Investment Adviser as a
operations manager in
1990. From 1985 to 1990,
he was a project manager
in the Information
Technology Division of
the Investment Adviser.
- -----------------------------------------------------------------------------------------
Ramakrishna Shankar Portfolio Manager-- Since Mr. Shankar joined the
Vice President Asia Growth 1997 Investment Adviser as a
Emerging Markets Equity 1998 operations manager in
1997. From July 1996 to
1997, he worked for
Goldman, Sachs & Co. in
Singapore as a strategic
advisor for transactions
involving infrastructure
industries in Asia. From
1988 to 1996, he worked
for Goldman, Sachs & Co.
as an investment banker
in the Investment
Banking Division.
- -----------------------------------------------------------------------------------------
Miyako Shibamoto Portfolio Manager-- Since Ms. Shibamoto joined the
Vice President Japanese Equity 1998 Investment Adviser as a
member of the Japanese
Equity team in March
1998. From 1993 to 1998
she was a Vice President
at Scudder Stevens and
Clark (Japan).
- -----------------------------------------------------------------------------------------
Andrew Shrimpton Portfolio Manager-- Since Mr. Shrimpton joined the
Vice President Emerging Markets 1998 Investment Adviser as a
portfolio manager with a
focus on Africa as well
as the financial
industry in the EMEA
region in 1996. Prior to
joining the Investment
Adviser, since 1985, he
was a UK equity analyst
and portfolio manager
for CIN Management,
where he initiated CIN
Management's first
investments in Latin
America.
- -----------------------------------------------------------------------------------------
Robert Stewart Portfolio Manager-- Since Mr. Stewart joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1996. Prior to 1996, he
was at CIN Management
for seven years as a
portfolio manager,
managing Japanese
equities.
- -----------------------------------------------------------------------------------------
Takeya Suzuki Portfolio Manager-- Since Mr. Suzuki joined the
Vice President Japanese Equity 1998 Investment Adviser as a
portfolio manager in
1996. From 1990 to 1996,
he was a Japanese equity
portfolio manager at
Nomura Investment
Management where he
actively managed assets
for U.S. pension funds.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
Danny Truell Senior Portfolio Manager-- Since Mr. Truell joined the
Executive Director European Equity 1998 Investment Adviser as a
senior portfolio manager
and head of UK equities
in 1998. From 1992 to
1996, he was Investment
Banking Executive
Director for SBC Warburg
and Chief Asian Equity
Strategist. From 1986 to
1992, he was Assistant
Director of Fund
Management at CIN
Management.
</TABLE>
It is the responsibility of the Investment Adviser to make the investment
decisions for a Fund and to place the purchase and sale orders for the Fund's
portfolio transactions in U.S. and foreign 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. In effecting purchases and
sales of portfolio securities for the Funds, the Investment Adviser will seek
the best price and execution of a Fund's orders. In doing so, where two or
more brokers or dealers offer comparable prices and execution for a particular
trade, consideration may be given to whether the broker or dealer provides
investment research or brokerage services or sells Shares of any Goldman Sachs
Fund. See the Additional Statement for a further description of the Investment
Adviser's brokerage allocation practices.
As compensation for its services rendered and assumption of certain expenses
pursuant to separate Management Agreements, GSAM and GSAMI are entitled to the
following fees, computed daily and payable monthly at the annual rates listed
below:
<TABLE>
<CAPTION>
FOR THE FISCAL
CONTRACTUAL YEAR OR PERIOD ENDED
RATE* JANUARY 31, 1998*
----------- --------------------
<S> <C> <C>
GSAM
CORE International Equity................. 0.85% 0.75%
GSAMI
International Equity...................... 1.00% 0.90%
European Equity........................... 1.00% N/A
Japanese Equity........................... 1.00% N/A
International Small Cap................... 1.20% N/A
Emerging Markets Equity................... 1.20% 1.10%
Asia Growth............................... 1.00% 0.86%
</TABLE>
- --------
*All numbers are annualized. The difference, if any, between the stated fees
and the actual fees paid by the Funds reflects that the applicable Investment
Adviser did not charge the full amount of the fees to which it would have been
entitled. Effective September 1, 1998, the management fee for the CORE
International Equity, International Equity, Emerging Markets Equity and Asia
Growth Funds will equal 0.85%, 1.00%, 1.20% and 1.00%, respectively. As of
January 31, 1998, the Japanese Equity, International Small Cap and European
Equity Funds had not commenced operations.
The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Funds (excluding management, distribution and service
fees, transfer agency fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such expenses
exceed 0.12%,
37
<PAGE>
0.10%, 0.10%, 0.01%, 0.16%, 0.15% and 0.16% per annum of the average daily net
assets of the CORE International Equity, International Equity, European
Equity, Japanese Equity, International Small Cap, Emerging Markets Equity and
Asia Growth Funds, respectively. Such reductions or limits, if any, may be
discontinued or modified by the applicable Investment Adviser in its
discretion at any time.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS. The involvement of the Investment Adviser, Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts
and other activities of Goldman Sachs may present conflicts of interest with
respect to 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. 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 achieve significant profits on their trading for
proprietary or other accounts. In addition, the Funds may, from time to time,
enter into transactions in which other clients of Goldman Sachs have an
adverse interest. From time to time, a Fund's activities may be limited
because of regulatory restrictions applicable to Goldman Sachs and its
affiliates, and/or their internal policies designed to comply with such
restrictions. See "Management--Activities of Goldman Sachs and its Affiliates
and Other Accounts Managed by Goldman Sachs" in the Additional Statement for
further information.
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the
exclusive distributor (the "Distributor") of each Fund's Shares. Shares may
also be sold by Authorized Dealers. Authorized Dealers include investment
dealers that are members of the NASD and certain other financial service
firms. To become an Authorized Dealer, a dealer or financial service firm must
enter into a sales agreement with Goldman Sachs. The minimum investment
requirements, services, programs and purchase and redemption options for
Shares purchased through a particular Authorized Dealer may be different from
those available to investors purchasing through other Authorized Dealers.
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, also serves as
each Fund's transfer agent (the "Transfer Agent") and as such performs various
shareholder servicing functions. As compensation for the services rendered to
each Fund by Goldman Sachs (as Transfer Agent), Goldman Sachs is entitled to a
fee with respect to each Fund's Class A, Class B and Class C Shares equal, on
an annual basis, to 0.19% of the average daily net assets. 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.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold Shares of the Funds. Goldman Sachs reserves the right to redeem at any
time some or all of the Shares acquired for its own account.
YEAR 2000
Many computer systems were designed using only two digits to signify the
year (for example, "98" for "1998"). On January 1, 2000, if these computer
systems are not corrected, they may incorrectly interpret "00" as the year
"1900" rather than the year "2000," leading to computer shutdowns or errors
(commonly known as
38
<PAGE>
the "Year 2000 Problem"). To the extent these systems conduct forward-looking
calculations, these computer problems may occur prior to January 1, 2000. Like
other investment companies and financial and business organizations, the Funds
could be adversely affected in their ability to process securities trades,
price securities, provide shareholder account services and otherwise conduct
normal business operations if the Investment Adviser or other Fund service
providers do not adequately address this problem in a timely manner. The
Investment Adviser has established a dedicated group to analyze these issues
and to implement the systems modifications necessary to prepare for the Year
2000 Problem. Currently, the Investment Adviser does not anticipate that the
transition to the 21st Century will have any material impact on its ability to
continue to service the Funds at current levels. In addition, the Investment
Adviser has sought assurances from the Funds' other service providers that
they are taking the steps necessary so that they do not experience Year 2000
Problems, and the Investment Adviser will continue to monitor the situation.
At this time, however, no assurance can be given that the actions taken by the
Investment Adviser and the Funds' other service providers will be sufficient
to avoid any adverse effect on the Funds due to the Year 2000 Problem.
EXPENSES
The Funds are responsible for the payment of their expenses. The expenses
include, without limitation: the fees payable to the Investment Adviser;
distribution and service fees; custodial and transfer agency fees; brokerage
fees and commissions; filing fees for the registration or qualification of the
Fund's Shares under federal or state securities laws; organizational expenses;
fees and expenses incurred in connection with membership in investment company
organizations; taxes; interest; costs of liability insurance, fidelity bonds
or indemnification; any costs, expenses or losses arising out of any liability
of, or claim for damages or other relief asserted against, the Funds for
violation of any law; legal and auditing fees and expenses (including the cost
of legal and certain accounting services rendered by employees of the
Investment Adviser and its affiliates with respect to the Funds); expenses of
preparing and setting in type prospectuses, Additional Statements, proxy
material, financial reports and notices and the printing and distributing of
the same to shareholders and regulatory authorities; compensation and expenses
of the Trust's "non-interested" Trustees; and extraordinary organizational
expenses, if any, incurred by the Trust.
REPORTS TO SHAREHOLDERS
Shareholders will receive an annual report containing audited financial
statements and a semi-annual report. To eliminate unnecessary duplication,
only one copy of such reports may be sent to shareholders with the same
mailing address. Shareholders who desire a duplicate copy of such reports to
be mailed to their residence should contact Goldman Sachs at 800-526-7384.
Each shareholder will also be provided with a printed confirmation for each
transaction in the shareholder's account and an individual quarterly account
statement. A year-to-date statement for any account will be provided upon
request made to Goldman Sachs. The Funds do not generally provide sub-
accounting services.
39
<PAGE>
HOW TO INVEST
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Fund continuously offers through this Prospectus Class A, Class B and
Class C Shares, as described more fully in "How to Buy Shares of the Funds."
If you do not specify in your instructions to the Funds which Class of Shares
you wish to purchase, the Funds will assume that your instructions apply to
Class A Shares.
CLASS A SHARES. If you invest less than $1 million in Class A Shares you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $1 million or more in Class A Shares of a
Fund, no sales charge will be imposed at the time of purchase, but you may
incur a deferred sales charge equal to 1.00% if you redeem your Shares within
18 months of purchase. Class A Shares are subject to distribution and service
fees of 0.50% per annum of each Fund's average daily net assets attributable
to Class A Shares.
CLASS B SHARES. Class B Shares are sold without an initial sales charge, but
are subject to a CDSC of up to 5% if redeemed within six years of purchase.
Class B Shares are subject to distribution and service fees of 1.00% per annum
of each Fund's average daily net assets attributable to Class B Shares. See
"Distribution and Service Plans." Class B Shares will automatically convert to
Class A Shares, based on their relative NAVs, eight years after the initial
purchase. Your entire investment in Class B Shares is available to work for
you from the time you make your initial investment, but the distribution and
service fee paid by Class B Shares will cause your Class B Shares (until
conversion to Class A Shares) to have a higher expense ratio and to pay lower
dividends, to the extent dividends are paid, than Class A Shares.
CLASS C SHARES. Class C Shares are sold without an initial sales charge, but
are subject to a CDSC of 1% if redeemed within 12 months of purchase. Class C
Shares are subject to distribution and service fees of 1.00% per annum of each
Fund's average daily net assets attributable to Class C Shares. See
"Distribution and Service Plans." Class C Shares have no conversion feature,
and accordingly, an investor that purchases Class C Shares will be subject to
the distribution and service fee imposed on Class C Shares for an indefinite
period, subject to annual approval by the Fund's Board of Trustees and certain
regulatory limitations. Your entire investment in Class C Shares is available
to work for you from the time you make your initial investment, but the
distribution and service fee paid by Class C Shares will cause your Class C
Shares to have a higher expense ratio and to pay lower dividends, to the
extent dividends are paid, than Class A Shares (or Class B Shares after
conversion to Class A Shares).
FACTORS TO CONSIDER IN CHOOSING CLASS A, CLASS B OR CLASS C SHARES. The
decision as to which Class to purchase depends on the amount you invest, the
intended length of the investment and your personal situation. For example, if
you are making an investment of $50,000 or more that qualifies for a reduced
sales charge, you should consider purchasing Class A Shares. A brief
description of when the initial sales charge may be reduced or eliminated is
set forth below under "Right of Accumulation" and "Statement of Intention." If
you prefer not to pay an initial sales charge on an investment and plan to
hold your investment for at least six years, you might consider purchasing
Class B Shares. If you prefer not to pay an initial sales charge and are
unsure of the length of your investment or plan to hold your investment for
less than eight years, you may prefer Class C Shares. There is no size limit
on the purchase of Class A Shares. A maximum purchase limitation of $250,000
and $1,000,000 in the aggregate normally applies to purchases of Class B
Shares and Class C Shares, respectively. Although Class C Shares are subject
to a CDSC for only 12 months and at a lower rate than Class B Shares,
40
<PAGE>
Class C Shares do not have the conversion feature applicable to Class B
Shares, making them subject to higher distribution and service fees for an
indefinite period. Authorized Dealers may receive different compensation for
selling Class A, Class B or Class C Shares.
HOW TO BUY SHARES OF THE FUNDS--CLASS A, CLASS B AND CLASS C SHARES
You may purchase Shares of the Funds through any Authorized Dealer
(including Goldman Sachs) or directly from a Fund, c/o National Financial Data
Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City, MO 64141-6711 on any
Business Day (as defined under "Additional Information") at the NAV next
determined after receipt of an order as described below under "Other Purchase
Information," plus, in the case of Class A Shares,
any applicable sales charge. Currently, each Fund's NAV is determined as of
the close of regular trading on the New York Stock Exchange (which is
normally, but not always, 4:00 p.m. New York time).
The minimum initial investment in each Fund is $1,000. An initial investment
minimum of $250 applies to purchases in connection with tax-sheltered
retirement plans, Individual Retirement Account Plans (excluding SIMPLE IRAs
and Education IRAs) or accounts established under the Uniform Gift to Minors
Act ("UGMA"), and an initial investment minimum of $200 applies to purchases
in connection with 403(b) plans. The minimum initial investment for purchases
in connection with SIMPLE and Education IRAs, as well as purchases through the
Automatic Investment Plan, is $50. The minimum subsequent investment is $50.
These requirements may be waived at the discretion of the Trust's officers.
You may pay for purchases of Shares by check (except that the Trust will not
accept a check drawn on a foreign bank or a third party check), Federal
Reserve draft, federal funds wire, ACH transfer or bank wire. Purchases of
Shares by check or Federal Reserve draft should be made payable as follows:
(i) to an investor's Authorized Dealer, if purchased through such Authorized
Dealer; or (ii) to Goldman Sachs International Equity Funds--(Name of Fund and
Class of Shares) and sent to NFDS, P.O. Box 419711, Kansas City, MO 64141-
6711. Federal funds wires, ACH transfers and bank wires should be sent to
State Street Bank and Trust Company ("State Street"). Payment must be received
within three Business Days after receipt of the purchase order. An investor's
Authorized Dealer is responsible for forwarding payment promptly to the Fund.
In order to make an initial investment in a Fund, an investor must establish
an account with the Fund by furnishing to the Fund, Goldman Sachs or the
investor's Authorized Dealer the information in the Account Application
attached to this Prospectus. The Funds may refuse to open an account for any
investor who fails to (i) provide a social security number or other taxpayer
identification number; or (ii) certify that such number is correct (if
required to do so under applicable law).
The Funds reserve the right to redeem Shares of any shareholder whose
account balance is less than $50 as a result of earlier redemptions. Such
redemptions will not be implemented if the value of a shareholder's account
falls below the minimum account balance solely as a result of market
conditions. A Fund will give 60 days' prior written notice to shareholders
whose Shares are being redeemed to allow them to purchase sufficient
additional Shares of the Fund to avoid such redemption. In addition, the Funds
and Goldman Sachs reserve the right to modify the minimum investment, the
manner in which Shares are offered and the sales charge rates applicable to
future purchases of Shares.
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OFFERING PRICE--CLASS A SHARES
The offering price of Class A Shares of each Fund is the next determined NAV
per Share plus a sales charge, if any, paid to Goldman Sachs at the time of
purchase of Shares as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE MAXIMUM DEALER
SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS
AMOUNT OF PURCHASE PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF
INCLUDING SALES CHARGE, IF ANY)( OFFERING PRICE INVESTED OFFERING PRICE***
- -------------------------------- --------------- ------------- -----------------
<S> <C> <C> <C>
Less than $50,000.............................. 5.50% 5.82% 5.00%
$50,000 up to (but less than) $100,000......... 4.75 4.99 4.00
$100,000 up to (but less than) $250,000........ 3.75 3.90 3.00
$250,000 up to (but less than) $500,000........ 2.75 2.83 2.25
$500,000 up to (but less than) $1 million...... 2.00 2.04 1.75
$1 million or more............................. 0.00* 0.00* **
</TABLE>
- --------
* No sales charge is payable at the time of purchase of Class A Shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions made within 18 months of purchase.
** Goldman Sachs pays a one-time commission to Authorized Dealers who
initiate or are responsible for purchases of $1 million or more of Shares
of the Funds equal to 1.00% of the amount under $3 million, 0.50% of the
next $2 million, and 0.25% thereafter. Goldman Sachs may also pay, with
respect to all or a portion of the amount purchased, a commission in
accordance with the foregoing schedule to Authorized Dealers who initiate
or are responsible for plans investing in the Funds which satisfy the
criteria set forth in (h) below or "wrap" accounts purchasing $1 million
or more which satisfy the criteria set forth in (i) below. Purchases by
such plans will be made at NAV with no initial sales charge, but if all of
the Shares held are redeemed within 18 months after the end of the
calendar month in which such purchase was made, a CDSC, as described
below, of 1.00% may be imposed upon the plan sponsor or the third party
administrator. In addition, Authorized Dealers shall remit to Goldman
Sachs such payments received in connection with "wrap" accounts in the
event that Shares are redeemed within 18 months after the end of the
calendar month in which the purchase was made.
*** During special promotions, the entire sales charge may be reallowed to
Authorized Dealers. Authorized Dealers to whom substantially the entire
sales charge is reallowed may be deemed to be "underwriters" under the
Securities Act of 1933.
Purchases of $1 million or more of Class A Shares will be made at NAV with
no initial sales charge, but if the Shares are redeemed within 18 months after
the end of the calendar month in which the purchase was made, excluding any
period of time in which the Shares were exchanged into and remained invested
in an ILA Portfolio (the "CDSC period"), a CDSC of 1.00% may be imposed
unless, in certain cases, the investor's Authorized Dealer enters into an
agreement with Goldman Sachs to return all or an applicable prorated portion
of its commission to Goldman Sachs. Any applicable CDSC will be assessed on an
amount equal to the lesser of the current market value or the original
purchase cost of the redeemed Class A Shares. Accordingly, no CDSC will be
imposed on increases in account value above the initial purchase price,
including any dividend or capital gains distributions which have been
reinvested in additional Class A Shares. Upon redemption of shares subject to
a CDSC, shareholders will receive that portion of the appreciation in account
value attributable to the Shares actually redeemed. In determining whether a
CDSC applies to a redemption, it will be assumed that the redemption is first
made from any Class A Shares in your account that are not subject to the CDSC.
The CDSC is waived on redemptions in certain circumstances. See "Waiver or
Reduction of Contingent Deferred Sales Charges" below.
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Class A Shares of the Funds may be sold at NAV without payment of any sales
charge to: (a) Goldman Sachs, its affiliates or their respective officers,
partners, directors or employees (including retired employees and former
partners), any partnership of which Goldman Sachs is a general partner, any
Trustee or officer of the Trust and designated family members of any of the
above individuals; (b) qualified retirement plans of Goldman Sachs; (c)
trustees or directors of investment companies for which Goldman Sachs or an
affiliate acts as sponsor; (d) any employee or registered representative of
any Authorized Dealer or their respective spouses, children and parents; (e)
banks, trust companies or other types of depository institutions investing for
their own account or investing for accounts for which they have investment
discretion; (f) banks, trust companies or other types of depository
institutions investing for accounts for which they do not have investment
discretion; (g) any state, county or city, or any instrumentality, department,
authority or agency thereof, which is prohibited by applicable investment laws
from paying a sales charge or commission in connection with the purchase of
Shares of a Fund; (h) pension and profit sharing plans, pension funds and
other company-sponsored benefit plans that (1) buys Shares costing $500,000 or
more, or (2) have at the time of purchase, 100 or more eligible participants,
or (3) certify that they project to have annual plan purchases of $200,000 or
more, or (4) are provided administrative services by certain third-party
administrators that have entered into a special service arrangement with
Goldman Sachs relating to such plan; (i) "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; (j)
registered investment advisers investing for accounts for which they receive
asset-based fees; (k) accounts over which GSAM or its advisory affiliates have
investment discretion; and (l) shareholders receiving distributions from a
qualified retirement plan invested in the Goldman Sachs Funds and reinvesting
such proceeds in a Goldman Sachs IRA. Purchasers must certify eligibility for
an exemption on the Account Application and notify Goldman Sachs if the
shareholder is no longer eligible for an exemption. Exemptions will be granted
subject to confirmation of a purchaser's entitlement. Investors purchasing
Shares of the Funds at NAV without payment of any initial sales charge may be
charged a fee if they effect transactions in Shares through a broker or agent.
In addition, under certain circumstances, dividends and distributions from any
of the Goldman Sachs Funds may be reinvested in Shares of each Fund at NAV, as
described under "Cross-Reinvestment of Dividends and Distributions and
Automatic Exchange Program."
RIGHT OF ACCUMULATION--CLASS A SHARES
Class A purchasers may qualify for reduced sales charges when the current
market value of holdings (Shares at current offering price), plus new
purchases, reaches $50,000 or more. Class A Shares of the Goldman Sachs Funds
may be combined under the Right of Accumulation. See the Additional Statement
for more information about the Right of Accumulation.
STATEMENT OF INTENTION--CLASS A SHARES
Purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Class A Shares of the Goldman Sachs Funds may be
combined under the Statement of Intention. See the Additional Statement for
more information about the Statement of Intention.
OFFERING PRICE--CLASS B SHARES
Investors may purchase Class B Shares of a Fund at the next determined NAV
without the imposition of an initial sales charge. However, Class B Shares
redeemed within six years of purchase will be subject to a CDSC at the rates
shown in the table that follows. At redemption, the charge will be assessed on
the amount equal to the lesser of the current market value or the original
purchase cost of the Shares being redeemed. No CDSC will
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<PAGE>
be imposed on increases in account value above the initial purchase price,
including Shares derived from the reinvestment of dividends or capital gains
distributions. Upon redemption of Shares subject to a CDSC, shareholders will
receive that portion of the appreciation in account value attributable to the
Shares actually redeemed.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B Shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a month will be aggregated and deemed to have been made on
the first day of that month. In processing redemptions of Class B Shares, the
Funds will first redeem shares not subject to any CDSC, and then Shares held
longest during the applicable period.
<TABLE>
<CAPTION>
CDSC AS A
PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CDSC
---------- ---------------
<S> <C>
First........................................................ 5.0%
Second....................................................... 4.0%
Third........................................................ 3.0%
Fourth....................................................... 3.0%
Fifth........................................................ 2.0%
Sixth........................................................ 1.0%
Seventh and thereafter....................................... none
</TABLE>
Proceeds from the CDSC are payable to the Distributor and may be used in
whole or part to defray the Distributor's expenses related to providing
distribution-related services to the Funds in connection with the sale of
Class B Shares, including the payment of compensation to Authorized Dealers. A
commission equal to 4.00% of the amount invested is paid to Authorized
Dealers.
Class B Shares of a Fund will automatically convert into Class A Shares of
the same Fund at the end of the calendar quarter that is eight years after the
purchase date, except as noted below. Class B Shares of a Fund acquired by
exchange from Class B Shares of another Goldman Sachs Fund will convert into
Class A Shares of such Fund based on the date of the initial purchase. Class B
Shares acquired through reinvestment of distributions will convert into Class
A Shares based on the date of the initial purchase of the Shares on which the
distribution was paid. The conversion of Class B Shares to Class A Shares will
not occur at any time the Funds are advised that such conversions may
constitute taxable events for federal tax purposes, which the Funds believe is
unlikely. If conversions do not occur as a result of possible taxability,
Class B Shares would continue to be subject to higher expenses than Class A
Shares for an indeterminate period.
OFFERING PRICE--CLASS C SHARES
Investors may purchase Class C Shares of a Fund at the next determined NAV
without the imposition of an initial sales charge. However, if Class C Shares
are redeemed within 12 months of purchase, a CDSC of 1% will be deducted from
the redemption proceeds. At redemption, the charge will be assessed on the
amount equal to the lesser of the current market value or the original
purchase cost of the Shares being redeemed. No CDSC will be imposed on
increases in account value above the initial purchase price, including Shares
derived from the reinvestment of dividends or capital gains distributions.
Upon redemption of Shares subject to a CDSC, shareholders will receive that
portion of the appreciation in account value attributable to the Shares
actually redeemed.
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<PAGE>
For the purpose of determining the number of months from the time of any
purchase, all payments during a month will be aggregated and deemed to have
been made on the first day of that month. In processing redemptions of Class C
Shares, the Funds will first redeem Shares held for longer than 12 months, and
then Shares held for the longest period during the 12 month period. Proceeds
from the CDSC are payable to the Distributor and may be used in whole or in
part to defray the Distributor's expenses related to providing distribution-
related services to the Funds in connection with the sale of Class C Shares,
including the payment of compensation to Authorized Dealers. An amount equal
to 1.00% of the amount invested is paid by the Distributor to Authorized
Dealers.
REINVESTMENT OF REDEMPTION PROCEEDS--CLASS A, CLASS B AND CLASS C SHARES
A shareholder who redeems Class A or Class B Shares of a Fund may reinvest
at NAV any portion or all of the redemption proceeds (plus that amount
necessary to acquire a fractional Share to round off the purchase to the
nearest full Share) in Class A Shares of the same Fund or any other Goldman
Sachs Fund. A shareholder who redeems Class C Shares of a Fund may reinvest at
NAV any portion or all of the redemption proceeds (plus that amount necessary
to acquire a fractional Share to round off the purchase to the nearest full
Share) in Class C Shares of the same Fund or any other Goldman Sachs Fund.
Shareholders should obtain and read the applicable prospectuses of such other
funds and consider their objectives, policies and applicable fees before
investing in any of such funds. This reinvestment privilege is subject to the
condition that the shares redeemed have been held for at least 30 days before
the redemption and that the reinvestment is effected within 90 days after such
redemption. If you redeemed Class A or Class C Shares, paid a CDSC upon a
redemption and reinvest in Class A or Class C Shares subject to the conditions
set forth above, your account will be credited with the amount of the CDSC
previously charged, and the reinvested Shares will continue to be subject to a
CDSC. In this case, the holding period of the Class A or Class C Shares
acquired through reinvestment for purposes of computing the CDSC payable upon
a subsequent redemption will include the holding period of the redeemed
Shares. If you redeemed Class B Shares and paid a CDSC upon redemption, you
are permitted to reinvest the redemption proceeds in Class A Shares at NAV as
described above, but the amount of the CDSC paid upon redemption will not be
credited to your account.
A reinvesting shareholder may be subject to tax as a result of such
redemption. If the redemption occurs within 90 days after the original
purchase of Class A Shares, any sales charge paid on the original purchase
cannot be taken into account by a reinvesting shareholder to the extent an
otherwise applicable sales charge is not imposed pursuant to the reinvestment
privilege for purposes of determining gain or loss, if any, realized on the
redemption, but instead will be added to the tax basis of the Class A Shares
received in the reinvestment. To the extent that any loss is realized and
Shares of the same Fund are purchased within 30 days before or after the
redemption, some or all of the loss may not be allowed as a deduction
depending upon the number of shares purchased. Shareholders should consult
their own tax advisers concerning the tax consequences of a redemption and
reinvestment. Upon receipt of a written request, the reinvestment privilege
may be exercised once annually by a shareholder, except that there is no such
time limit as to the availability of this privilege in connection with
transactions the sole purpose of which is to reinvest the proceeds at NAV in a
tax-sheltered retirement plan.
WAIVER OR REDUCTION OF CONTINGENT DEFERRED SALES CHARGE--CLASS A, B AND C
SHARES
The CDSC on Class B Shares, Class C Shares and Class A Shares that are
subject to a CDSC may be waived or reduced if the redemption relates to: (a)
retirement distributions or loans to participants or beneficiaries from
pension and profit sharing plans, pension funds and other company-sponsored
benefit plans (each a "Plan"); (b) the death or disability (as defined in
Section 72(m)(7) of the Code) of a participant or beneficiary
45
<PAGE>
in a Plan; (c) hardship withdrawals by a participant or beneficiary in a Plan;
(d) satisfying the minimum distribution requirements of the Code; (e) the
establishment of "substantially equal periodic payments" as described in
Section 72(t)(2) of the Code; (f) the separation from service by a participant
or beneficiary in a Plan; (g) the death or disability (as defined in Section
72(m)(7) of the Code) of a shareholder if the redemption is made within one
year of such event; (h) excess contributions being distributed from a Plan;
(i) distributions from a qualified retirement plan invested in the Goldman
Sachs Funds which are being rolled over to a Goldman Sachs IRA; and (j)
redemption proceeds which are to be reinvested in accounts or non-registered
products over which GSAM or its advisory affiliates have investment
discretion. In addition, Class A, Class B and Class C Shares subject to a
Systematic Withdrawal Plan may be redeemed without a CDSC. However, Goldman
Sachs reserves the right to limit such redemptions, on an annual basis, to 12%
each of the value of your Class B and Class C Shares and 10% of the value of
your Class A Shares.
SERVICES AVAILABLE TO SHAREHOLDERS
AUTOMATIC INVESTMENT PLAN
Systematic cash investments may be made through a shareholder's bank via the
Automated Clearing House Network or a shareholder's checking account via bank
draft each month. Required forms are available from Goldman Sachs or any
Authorized Dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS AND AUTOMATIC EXCHANGE
PROGRAM
A shareholder may elect to cross-reinvest dividends and capital gain
distributions paid by a Fund in Shares of the same Class or an equivalent
class of other Goldman Sachs Funds or ILA Portfolios. See "Fund Highlights." A
shareholder may also elect to exchange automatically a specified dollar amount
of Shares of a Fund for Shares of the same Class or an equivalent class of any
other Goldman Sachs Fund or ILA Portfolio. Shares acquired through cross-
reinvestment of dividends or the automatic exchange program will be purchased
at NAV and will not be subject to any initial sales charge or CDSC as a result
of the cross-reinvestment or exchange, but Shares subject to a CDSC acquired
under the automatic exchange program may be subject to a CDSC at the time of
redemption from the fund into which the exchange is made determined on the
basis of the date and value of the investor's initial purchase of the fund
from which the exchange (or any prior exchange) is made. Automatic exchanges
are made monthly on the 15th day of each month or the first Business Day
thereafter. The minimum dollar amount for automatic exchanges must be at least
$50 per month. Cross-reinvestments and automatic exchanges are subject to the
following conditions: (i) the value of the shareholder's account(s) in the
fund which is paying the dividend or from which the automatic exchange is
being made must equal or exceed $5,000; and (ii) the value of the account in
the acquired fund must equal or exceed the acquired fund's minimum initial
investment requirement or the shareholder must elect to continue cross-
reinvestment or automatic exchanges until the value of acquired Fund Shares in
the shareholder's account equals or exceeds the acquired fund's minimum
initial investment requirement. A Fund shareholder may elect cross-
reinvestment into an identical account or an account registered in a different
name or with a different address, social security or other taxpayer
identification number, provided that the account in the acquired fund has been
established, appropriate signatures have been obtained and the minimum initial
investment requirement has been satisfied. A Fund shareholder should obtain
and read the prospectus of the fund into which dividends are invested or
automatic exchanges are made.
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<PAGE>
TAX-SHELTERED RETIREMENT PLANS
The Funds offer their Shares for purchase by retirement plans, including
traditional and Roth IRAs for individuals and their spouses, IRA plans for
employees in connection with employer sponsored SEP, SAR-SEP and SIMPLE IRA
plans, 403(b) plans and defined contribution plans such as 401(k) Salary
Reduction Plans. Detailed information concerning these plans may be obtained
from the Transfer Agent. This information should be read carefully, and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan.
EXCHANGE PRIVILEGE
Shares of a Fund may be exchanged at NAV without the imposition of an
initial sales charge or CDSC at the time of exchange for Shares of the same
Class or an equivalent class of any other Fund, Goldman Sachs Fund or ILA
Portfolio. A shareholder needs to obtain and read the prospectus of the fund
into which the exchange is made. The Shares of these other funds acquired by
an exchange may later be exchanged for Shares of the same Class (or an
equivalent Class) of the original Fund at the next determined NAV without the
imposition of an initial sales charge or CDSC if the dollar amount in the Fund
resulting from such exchanges is below the shareholder's all-time highest
dollar amount on which it has previously paid the applicable sales charge.
Shares of these other funds purchased through dividends and/or capital gains
reinvestment may be exchanged for Shares of the Funds without a sales charge.
In addition to free automatic exchanges pursuant to the Automatic Exchange
Program, six free exchanges are permitted in each 12 month period. A fee of
$12.50 may be charged for each subsequent exchange during such period. The
exchange privilege may be materially modified or withdrawn at any time upon 60
days' notice to shareholders and is subject to certain limitations.
An exchange of Shares subject to a CDSC will not be subject to the
applicable CDSC at the time of exchange. Shares subject to a CDSC acquired in
an exchange will be subject to the CDSC of the Shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
a shareholder has owned Shares will be measured from the date the shareholder
acquired the original Shares subject to a CDSC and will not be affected by any
subsequent exchange.
An exchange may be made by identifying the applicable Fund and Class of
Shares and either writing to Goldman Sachs, Attention: Goldman Sachs
International Equity Funds, Shareholder Services, c/o NFDS, P.O. Box 419711,
Kansas City, MO 64141-6711 or, unless the investor has specifically declined
telephone exchange privileges on the Account Application or elected in writing
not to utilize telephone exchanges, by a telephone request to the Transfer
Agent at 800-526-7384 (7:00 a.m. to 3:00 p.m. Chicago time). Certain
procedures are employed to prevent unauthorized or fraudulent exchange
requests as set forth under "How to Sell Shares of the Funds." Under the
telephone exchange privilege, Shares may be exchanged among accounts with
different names, addresses and social security or other taxpayer
identification numbers only if the exchange instructions are in writing and
received in accordance with the procedures set forth under "How to Sell Shares
of the Funds." In times of drastic economic or market changes the telephone
exchange privilege may be difficult to implement.
For federal income tax purposes, an exchange, including an automatic
exchange, is treated as a redemption of the Shares surrendered in the
exchange, on which an investor may be subject to tax, followed by a purchase
of Shares received in the exchange. If such redemption occurs within 90 days
after the purchase of such Shares, to the extent a sales charge that would
otherwise apply to the Shares received in the exchange is not imposed, the
sales charge paid on such purchase of Class A Shares cannot be taken into
account by the exchanging
47
<PAGE>
shareholder for purposes of determining gain or loss, if any, realized on such
redemption for federal income tax purposes, but instead will be added to the
tax basis of the Shares received in the exchange. Shareholders should consult
their own tax advisers concerning the tax consequences of an exchange.
Eligible investors may exchange certain classes of shares for another class
of shares of the same Fund. For further information contact Goldman Sachs at
the number set forth on the back of the Prospectus.
All exchanges which represent an initial investment in a Fund must satisfy
the minimum investment requirements of the Fund into which the Shares are
being exchanged. Exchanges are available only in states where exchanges may
legally be made.
OTHER PURCHASE INFORMATION
Authorized Dealers and other financial intermediaries may be authorized to
accept, on the Trust's behalf, purchase, redemption and exchange orders placed
by or on behalf of their customers and, if approved by the Trust, to designate
other intermediaries to accept such orders. In these cases, a Fund will be
deemed to have received an order that is in proper form when the order is
accepted by an Authorized Dealer or intermediary on a Business Day, and the
order will be priced at a Fund's NAV per Share (adjusted for any applicable
sales charge) next determined after such acceptance. Otherwise, a Fund or
Goldman Sachs must receive an order in proper form before it is effective.
Authorized Dealers and intermediaries will be responsible for transmitting
accepted orders to the Funds within the period agreed upon by them. Customers
should contact their Authorized Dealers or intermediaries to learn whether
they are authorized to accept orders for the Trust.
Authorized Dealers and other financial intermediaries provide varying
arrangements for their clients to purchase and redeem Fund Shares. Some may
establish higher minimum investment requirements and others may limit the
availability of certain privileges with respect to the purchase and redemption
of Shares or the reinvestment of dividends. Firms may arrange with their
clients for other investment or administrative services and may independently
establish and charge additional fees not described in this Prospectus to their
clients for such services. If Shares of a Fund are held in a "street name"
account or were purchased through an Authorized Dealer, shareholders should
contact the Authorized Dealer to purchase, redeem or exchange Shares, to make
changes in or give instructions concerning the account or to obtain
information about the account.
The Funds and Goldman Sachs each reserves the right to reject any specific
purchase order (including exchanges) or to restrict purchases or exchanges by
a particular purchaser (or group of related purchasers). This may occur, for
example, when a purchaser or a group of purchasers' pattern of frequent
purchases, sales or exchanges of 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 a Fund.
In the sole discretion of Goldman Sachs, a Fund may accept securities
instead of cash for the purchase of Shares of the Fund. Such purchases will be
permitted only if the Investment Adviser determines that any securities
acquired in this manner are consistent with the Fund's investment objectives,
restrictions and policies and are desirable investments for the Fund.
The Investment Adviser, Distributor, and/or their affiliates also pay
additional compensation, from time to time, out of their assets and not as an
additional charge to the Funds, to selected Authorized Dealers and other
persons in connection with the sale, distribution and/or servicing of Shares
of the Funds and other Goldman Sachs Funds (such as additional payments based
on new sales, amounts exceeding pre-established thresholds, or
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<PAGE>
the length of time their customers' assets have remained in a Fund) and,
subject to applicable NASD regulations, contribute to various non-cash and
cash incentive arrangements to promote the sale of Shares, as well as sponsor
various educational programs, sales contests and/or promotions in which
participants may receive reimbursement of expenses, entertainment and prizes
such as travel awards, merchandise, cash, investment research and educational
information and related support materials. This additional compensation can
vary among Authorized Dealers depending upon such factors as the amounts their
customers have invested (or may invest) in particular Goldman Sachs Funds, the
particular program involved, or the amount of reimbursable expenses.
Additional compensation based on sales may, but is currently not expected to,
exceed 0.50% (annualized) of the amount invested. For further information, see
"Other Information Regarding Purchases, Redemptions, Exchanges and Dividends"
in the Additional Statement.
DISTRIBUTION AND SERVICE PLANS
The Trust has adopted distribution and service plans on behalf of the Funds'
Class A, Class B and Class C Shares (each a "Plan"). Under the Plans, Goldman
Sachs is entitled to a monthly fee from each Fund for distribution services
equal, on an annual basis, to 0.25%, 0.75% and 0.75%, respectively, of a
Fund's average daily net assets attributable to Class A, Class B and Class C
Shares, respectively.
Goldman Sachs may use this distribution fee for its expenses of distributing
Class A, Class B and Class C Shares of the Funds. The types of expenses for
which Goldman Sachs may be compensated for distribution services under the
Plans include: compensation paid to and expenses incurred by Authorized
Dealers, Goldman Sachs and their respective officers, employees and sales
representatives; commissions paid to Authorized Dealers; allocable overhead;
telephone and travel expenses; interest expenses and other costs associated
with the financing of such compensation and expenses; the printing of
prospectuses for prospective shareholders; preparation and distribution of
sales literature and advertising of any type; and all other expenses incurred
in connection with activities primarily intended to result in the sale of
Class A, Class B and Class C Shares. The aggregate compensation that may be
received under the Plans for distribution services may not exceed the
limitations imposed by the NASD's Conduct Rules. Payments for distribution
services are also subject to the requirements of Rule 12b-1 under the Act.
Under the Plans, Goldman Sachs is also entitled to receive a separate fee
equal on an annual basis to 0.25% of each Fund's average daily net assets
attributable to Class A, Class B or Class C Shares. This fee is for personal
and account maintenance services, and may be used to make payments to Goldman
Sachs, Authorized Dealers and their officers, sales representatives and
employees for responding to inquires of, and furnishing assistance to,
shareholders regarding ownership of their Shares or their accounts or similar
services not otherwise provided on behalf of the Funds. If the fees received
by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may
realize a profit from these arrangements. The Plans will be reviewed and are
subject to approval annually by the Trustees.
In connection with the sale of Class C Shares, Goldman Sachs begins paying
the 0.75% distribution fee as an ongoing commission, and the 0.25% ongoing
service fee, to Authorized Dealers after the Shares have been held for one
year. All of these fees are paid by Goldman Sachs on a quarterly basis.
49
<PAGE>
HOW TO SELL SHARES OF THE FUNDS
Each Fund will redeem its Shares upon request of a shareholder on any
Business Day at the NAV next determined after the receipt of such request in
proper form, subject to any applicable CDSC. See "Net Asset Value." Redemption
proceeds will normally be mailed by check to a shareholder within three
Business Days of receipt of a properly executed request. If the Shares to be
redeemed were recently purchased by check, a Fund may delay transmittal of
redemption proceeds until such time as it has assured itself that good funds
have been collected for the purchase of such Shares. This may take up to 15
days. Redemption requests may be made by writing to or calling the Transfer
Agent at the address or telephone number set forth on the back cover page of
this Prospectus or an Authorized Dealer.
The Trust accepts telephone requests for redemption of Shares for amounts up
to $50,000 within any seven calendar day period, except for investors who have
specifically declined telephone redemption privileges on the Account
Application or elected in writing not to utilize telephone redemptions
(proceeds which are sent to a Goldman Sachs brokerage account are not subject
to the $50,000 limit). It may be difficult to implement redemptions by
telephone in times of drastic economic or market changes. By completing an
Account Application, an investor agrees that the Trust, the Distributor and
the Transfer Agent shall not be liable for any loss incurred by the investor
by reason of the Trust accepting unauthorized telephone redemption requests if
the Trust reasonably believes the instructions to be genuine. Thus,
shareholders risk possible losses in the event of a telephone redemption not
authorized by them. The Trust may accept telephone redemption instructions
from any person identifying himself or herself as the owner of an account or
the owner's broker where the owner has not declined in writing to utilize this
service.
In an effort to prevent unauthorized or fraudulent redemption and exchange
requests by telephone, Goldman Sachs and NFDS each employ reasonable
procedures specified by the Trust to confirm that such instructions are
genuine. Consequently, proceeds of telephone redemption requests will be sent
only to the shareholder's address of record or authorized bank account
designated in the Account Application and exchanges of Shares will be made
only to an identical account. Telephone requests will also be recorded. The
Trust may implement other procedures from time to time concerning telephone
redemptions and exchanges. If reasonable procedures are not employed, the
Trust may be liable for any loss due to unauthorized or fraudulent
transactions. Proceeds of telephone redemptions will be mailed to the
shareholder's address of record or wired to the authorized bank account
indicated on the Account Application, unless the shareholder provides written
instructions (accompanied by a signature guarantee) indicating another
address. Telephone redemptions will not be accepted during the 30-day period
following any change in a shareholder's address of record. This redemption
option does not apply to shares held in a "street name" account. Shareholders
whose accounts are held in "street name" should contact their broker of record
who may effect telephone redemptions on their behalf. The Trust reserves the
right to terminate or modify the telephone redemption service at any time.
Written requests for redemptions must be signed by each shareholder with its
signature guaranteed by a bank, a securities broker or dealer, a credit union
having authority to issue signature guarantees, a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association, a national securities exchange, a registered
securities association or a clearing agency, provided that such institution
satisfies the standards established by the Transfer Agent.
The Funds will also arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the bank account designated in the
shareholder's Account Application. Redemption proceeds will
50
<PAGE>
normally be wired on the next Business Day in federal funds (for a total of
one Business Day delay) following receipt of a properly executed wire transfer
redemption request. Wiring of redemption proceeds may be delayed one
additional Business Day if the Federal Reserve Bank is closed on the day
redemption proceeds would ordinarily be wired. A transaction fee of $7.50 may
be charged for payments of redemption proceeds by wire. In order to change the
bank designated on the Account Application to receive redemption proceeds, a
written request must be received by the Transfer Agent. This request must be
signature guaranteed as set forth above. Further documentation may be required
for executors, trustees or corporations. Once wire transfer instructions have
been given by Goldman Sachs or an Authorized Dealer, neither a Fund, the
Trust, Goldman Sachs nor any Authorized Dealer assumes any further
responsibility for the performance of intermediaries or the shareholder's bank
in the transfer process. If a problem with such performance arises, the
shareholder should deal directly with such intermediaries or bank.
Additional documentation regarding a redemption by any means may be required
to effect a redemption when deemed appropriate by the Transfer Agent. The
request for such redemption will not be considered to have been received in
proper form until such additional documentation has been received.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may draw on shareholdings systematically via check or ACH in
any amount specified by the shareholder over $50. Checks are only available on
or about the 25th of each month. Each systematic withdrawal is a redemption
and therefore a taxable transaction. A minimum balance of $5,000 in Shares of
a Fund is required. The maintenance of a withdrawal plan concurrently with
purchases of additional Class A, Class B or Class C Shares would be
disadvantageous because of the sales charge imposed on your purchases of Class
A Shares or the imposition of a CDSC on your redemptions of Class A, Class B
or Class C Shares. The CDSC applicable to Class A, Class B or Class C Shares
redeemed under a systematic withdrawal plan may be waived. See "How to
Invest--Waiver or Reduction of Contingent Deferred Sales Charge." See the
Additional Statement for more information about the Systematic Withdrawal
Plan.
DIVIDENDS
Each dividend from net investment income and capital gains distributions, if
any, declared by a Fund on its outstanding Shares will, at the election of
each shareholder, be paid in (i) cash; (ii) additional Shares of the same
Class of the Fund or (iii) Shares of the same or an equivalent class of other
Goldman Sachs Funds or units of the ILA Portfolios (the Prime Obligations
Portfolio only for Class B and Class C), as described under "Cross-
Reinvestment of Dividends and Distributions and Automatic Exchange Program."
This election should initially be made on a shareholder's Account Application
and may be changed upon written notice to Goldman Sachs at any time prior to
the record date for a particular dividend or distribution. If no election is
made, all dividends from net investment income and capital gain distributions
will be reinvested in the applicable Fund.
The election to reinvest dividends and distributions paid by a Fund in
additional Shares or units of the Fund or another Goldman Sachs Fund or ILA
Portfolio will not affect the tax treatment of such dividends and
distributions, which will be treated as received by the shareholder and then
used to purchase Shares or units of the Fund, another Goldman Sachs Fund or an
ILA Portfolio.
51
<PAGE>
Each Fund intends that all or substantially all of its net investment income
and net realized capital gains, after reduction by available capital losses,
including any capital losses carried forward from prior years, will be
declared as dividends for each taxable year. Each Fund will pay dividends at
least annually. Each Fund will pay dividends from net investment income, and
dividends from net realized capital gains, reduced by available capital
losses, at least annually. From time to time, a portion of a Fund's dividends
may constitute a return of capital.
At the time of an investor's purchase of Shares of a Fund, a portion of the
NAV per Share may be represented by undistributed income of the Fund or
realized or unrealized appreciation of the Fund's portfolio securities.
Therefore, subsequent distributions on such Shares from such income or
realized appreciation may be taxable to the investor even if the NAV of the
investor's Shares is, as a result of the distributions, reduced below the cost
of such Shares and the distributions (or portions thereof) represent a return
of a portion of the purchase price.
NET ASSET VALUE
The NAV 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
(which is normally, but not always, 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"). The NAV per Share of each Class is calculated by determining
the net assets attributed to each Class and dividing by the number of
outstanding Shares of that Class. Portfolio securities are valued based on
market quotations or, if accurate quotations are not readily available, at
fair value as determined in good faith under procedures established by the
Trustees.
PERFORMANCE INFORMATION
From time to time each Fund may publish average annual total return 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 NAV. The total
return calculation assumes a complete redemption of the investment at the end
of the relevant period. Total return calculations for Class A Shares reflect
the effect of paying the maximum initial sales charge. Investment at a lower
sales charge would result in higher performance figures. Total return
calculations for Class B and Class C Shares reflect deduction of the
applicable CDSC imposed upon redemption of Class B and Class C Shares held for
the applicable period. Each Fund may also from time to time advertise total
return on a cumulative, average, year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules. In
addition, each Fund may furnish total return calculations based on investments
at various sales charge levels or at NAV. Any performance information which is
based on a Fund's NAV per Share would be reduced if any applicable sales
charge were taken into account. In addition to the above, each Fund may from
time to time advertise its performance relative to certain averages,
performance rankings, indices, other information prepared by recognized mutual
fund statistical services and investments for which reliable performance
information is available.
52
<PAGE>
Each Fund's total return will be calculated separately for each Class of
Shares in existence. Because each Class of Shares may be subject to different
expenses, the total return calculations with respect to each Class of Shares
for the same period will differ. The investment performance of the Class A,
Class B and Class C Shares will be affected by the payment of a sales charge,
distribution and service fees and other Class specific expenses. See "Shares
of the Trust."
The Funds' performance quotations do not reflect any fees charged by an
Authorized Dealer to its customer accounts in connection with investments in
the Funds. 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 Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. Each Fund (except the
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and CORE International Equity Funds) was formerly a series of Goldman
Sachs Equity Portfolios, Inc., a Maryland corporation, and was reorganized
into the Trust as of April 30, 1997. The Trustees have authority under the
Trust's Declaration of Trust 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 also have authority
to classify and reclassify any series or portfolio of Shares into one or more
Classes. Information about the Trust's other series and classes is contained
in separate prospectuses.
When issued, Shares are fully paid and non-assessable. In the event of
liquidation, shareholders of each class are entitled to share pro rata in the
net assets of the applicable Fund available for distribution to the
shareholders of such Class. All Shares are freely transferable and have no
preemptive, subscription or conversion rights. Shareholders are entitled to
one vote per Share, provided that at the option of the Trustees, shareholders
will be entitled to a number of votes based upon the NAVs represented by their
Shares.
As of September 21, 1998, the Goldman Sachs Group LP, 85 Broad Street, 10th
floor, New York, New York 10004 was recordholder of 65.15% and 29.40% of the
Japanese Equity and International Small Cap Funds outstanding Shares. The
Goldman Sachs CORE International Equity Omnibus A/C--Growth & Income Strategy
and Goldman Sachs CORE International Equity Omnibus A/C--Growth Strategy, 4900
Sears Tower, Chicago, Illinois 60606 was recordholder of 35.37% and 30.03%,
respectively of CORE International Equity Fund's outstanding shares.
The Trust does not intend to hold annual meetings of shareholders. However,
recordholders may, under certain circumstances, as permitted by the Act,
communicate with other shareholders in connection with requiring a special
meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
53
<PAGE>
TAXATION
FEDERAL TAXES
Each Fund is treated as a separate entity for tax purposes. The European
Equity, Japanese Equity and International Small Cap Funds intend to elect and
each other Fund has elected to be treated as a regulated investment company,
and each Fund intends to continue 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.
Dividends paid by a Fund from 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 or market discount income
will be taxable to shareholders as ordinary income. Distributions out of the
net capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, of a Fund will be taxed as long-term capital gains,
regardless of the length of time a shareholder has held Shares or whether such
gain was reflected in the price paid for the Shares. These tax consequences
will apply whether distributions are received in cash or reinvested in Shares.
A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends such Fund receives from U.S. domestic
corporations may be eligible, in the hands of such corporate shareholders, for
the corporate dividends-received deduction, subject to certain holding period
requirements and debt financing limitations under the Code. Dividends paid by
the Funds are not generally expected to qualify, in the hands of corporate
shareholders, for the corporate dividends-received deduction. 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 will pay a per Share price that includes the
value of the anticipated distribution and will be taxed on the distribution
even though the distribution represents a return of a portion of the purchase
price.
Redemptions and exchanges of Shares are taxable events.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on distributions, redemptions and
exchanges if they fail to furnish their correct taxpayer identification number
and certain certifications required by the Internal Revenue Service or if they
are otherwise subject to backup withholding. Individuals, corporations and
other shareholders that are not U.S. persons under the Code are subject to
different tax rules and may be subject to nonresident alien withholding at the
rate of 30% (or a lower rate provided by an applicable tax treaty, if any) on
amounts treated as ordinary dividends from the Funds.
Each Fund may be subject to foreign withholding or other foreign taxes on
income or gain from certain foreign securities. The Funds may elect to pass
such foreign taxes through to their shareholders, who would then take such
taxes into account on their own tax returns. Alternatively, the Funds may
simply deduct such taxes in determining the amounts available for distribution
to shareholders. Generally, the Funds have taken the latter approach and
anticipate that they may continue to do so.
54
<PAGE>
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 may be
available to the extent (if any) a Fund's distributions are derived from
interest on (or, in the case of intangible property taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. For a further discussion of certain tax
consequences of investing in Shares of the Funds, see "Taxation" in the
Additional Statement. Shareholders are urged to consult their own tax advisers
regarding specific questions as to federal, state and local taxes as well as
to any foreign taxes.
ADDITIONAL INFORMATION
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, Dr. Martin Luther King, Jr. Day, Presidents' Day (observed),
Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
55
<PAGE>
APPENDIX A
STATEMENT OF INTENTION
(APPLICABLE ONLY TO CLASS A SHARES PURCHASED SUBJECT TO A SALES CHARGE)
If a shareholder anticipates purchasing $50,000 or more of Class A Shares of
a Fund alone or in combination with Class A Shares of another Fund or another
Goldman Sachs Fund within a 13-month period, the shareholder may obtain Shares
of the Fund at the same reduced sales charge as though the total quantity were
invested in one lump sum by filing this Statement of Intention incorporated by
reference in the Account Application. Income dividends and capital gain
distributions taken in additional Shares will not apply toward the completion
of this Statement of Intention.
To ensure that the reduced price will be received on future purchases, the
investor must inform Goldman Sachs that this Statement of Intention is in
effect each time Shares are purchased. Subject to the conditions mentioned
below, each purchase will be made at the public offering price applicable to a
single transaction of the dollar amount specified on the Account Application.
The investor makes no commitment to purchase additional shares, but if the
investor's purchases within 13 months plus the value of Shares credited toward
completion do not total the sum specified, the investor will pay the increased
amount of the sales charge prescribed in the Escrow Agreement.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary), 5% of
the dollar amount specified on the Account Application shall be held in escrow
by the Transfer Agent in the form of Shares registered in the investor's name.
All income dividends and capital gains distributions on escrowed Shares will
be paid to the investor or to his or her order. When the minimum investment so
specified is completed (either prior to or by the end of the 13th month), the
investor will be notified and the escrowed Shares will be released. In signing
the Account Application, the investor irrevocably constitutes and appoints the
Transfer Agent his or her attorney to surrender for redemption any or all
escrowed Shares with full power of substitution in the premises.
If the intended investment is not completed, the investor will be asked to
remit to Goldman Sachs any difference between the sales charge on the amount
specified and on the amount actually attained. If the investor does not within
20 days after written request by Goldman Sachs pay such difference in the
sales charge, the Transfer Agent will redeem an appropriate number of the
escrowed Shares in order to realize such difference. Shares remaining after
any such redemption will be released by the Transfer Agent.
A-1
<PAGE>
APPENDIX B
GOLDMAN SACHS EUROPEAN EQUITY FUND
PRIOR PERFORMANCE OF SIMILARLY ADVISED ACCOUNTS OF THE INVESTMENT ADVISER
<TABLE>
<CAPTION>
CLASS A SHARE CLASS A SHARE CLASS B SHARE CLASS B SHARE CLASS C SHARE CLASS C SHARE
EXPENSE EXPENSE EXPENSE EXPENSE EXPENSE EXPENSE FT/S&P
COMPOSITE COMPOSITE COMPOSITE COMPOSITE COMPOSITE COMPOSITE ACTUARIES
(EXCLUDING (INCLUDING (EXCLUDING (INCLUDING (EXCLUDING (INCLUDING EUROPE
SALES SALES SALES SALES SALES SALES INDEX
CHARGES) CHARGES) CHARGES) CHARGES) CHARGES) CHARGES) (UNHEDGED)
------------- ------------- ------------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1/1/1998-6/30/1998...... 25.03% 18.15% 24.73% 19.73% 24.73% 23.73% 26.09%
1997.................... 18.83% 12.29% 18.24% 13.24% 18.24% 17.24% 23.66%
1996.................... 41.05% 33.29% 40.36% 35.36% 40.36% 39.36% 23.51%
1995.................... 29.16% 22.05% 28.53% 23.53% 28.53% 27.53% 22.17%
1994.................... 7.73% 1.80% 7.19% 2.19% 7.19% 6.19% 2.95%
10/1/93-12/31/93........ 4.00% -1.72% 3.87% -1.13% 3.87% 2.87% 9.12%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
ONE YEAR SINCE INCEPTION
ENDED 6/30/1998 (10/1/1993)
--------------- ---------------
<S> <C> <C>
Class A Share Expense Composite (excluding
sales charge)................................. 33.55% 26.30%
Class A Share Expense Composite (including
sales charge)................................. 26.20% 24.81%
Class B Share Expense Composite (excluding
sales charge)................................. 32.90% 25.68%
Class B Share Expense Composite (including
sales charge)................................. 27.90% 25.50%
Class C Share Expense Composite (excluding
sales charge)................................. 32.90% 25.68%
Class C Share Expense Composite (including
sales charge)................................. 31.90% 25.68%
FT/S&P Actuaries Europe Index (Unhedged)....... 37.39% 22.72%
</TABLE>
The preceding table sets forth the Investment Adviser's composite
performance data relating to the historical performance of all discretionary
private accounts managed by the Investment Adviser that have investment
objectives, policies, and strategies substantially similar to the European
Equity Fund. The information is provided to illustrate the past performance of
the Investment Adviser in managing substantially similar accounts as measured
against the FT/S&P Actuaries Europe (Unhedged) Index and does not represent
the performance of the European Equity Fund. Investors should not consider
this performance data as a substitute for the performance of the European
Equity Fund nor should investors consider this data as an indication of future
performance of the European Equity Fund or of the Investment Adviser. The
FT/S&P Actuaries Europe Index (unhedged) is unmanaged and investors cannot
invest directly in the index.
In accordance with the standards of the Association for Investment
Management and Research ("AIMR"), the Investment Adviser's composite
performance data was calculated on a time-weighted and asset-weighted total
return basis which includes realized and unrealized gains and losses plus
income. Total return performance of the European Equity Fund will be
calculated in accordance with the regulations of the SEC. The SEC standardized
average annual total return is neither time-weighted nor asset-weighted and is
determined for specified periods by computing the annual percentage change in
the value of an initial amount that is invested in a share class of the Fund
at the maximum public offering price. Investors should be aware that the
differences in methodology between AIMR and SEC requirements could result in
different performance data for identical time periods.
B-1
<PAGE>
The actual expenses of the private accounts included in the composite were
lower than the estimated expenses of the Fund. Accordingly, the performance
record of the composite has been adjusted downward based on the estimated
expenses of the A, B, and C Classes of the European Equity Fund during its
first year of operations. Performance also reflects the deduction of the
maximum 5.5% front-end sales charge with respect to Class A Shares and the
maximum contingent deferred sales charge with respect to Class B (5%) and
Class C Shares (1%). All returns presented reflect the reinvestment of
dividends and other earnings. The private accounts are not subject to the same
diversification requirements, specific tax restrictions and investment
limitations imposed on the European Equity Fund by the Investment Company Act
of 1940 and Subchapter M of the Internal Revenue Code. Consequently, the
performance results of the Investment Adviser's composite could have been
adversely affected if the private accounts had been regulated as investment
companies under the federal securities laws.
B-2
<PAGE>
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GOLDMAN SACHS ASSET
MANAGEMENT
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
133 PETERBOROUGH COURT
LONDON, ENGLAND EC4A 2BB
GOLDMAN, SACHS & CO.
DISTRIBUTOR
85 BROAD STREET
NEW YORK, NEW YORK 10004
GOLDMAN, SACHS & CO.
TRANSFER AGENT
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN
1776 HERITAGE DRIVE
NORTH QUINCY, MASSACHUSETTS 02171
ARTHUR ANDERSEN LLP
INDEPENDENT PUBLIC ACCOUNTANTS
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
TOLL FREE (IN U.S.) . . . . . . . . 800-526-7384
EQINTLPROABC
502072
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GOLDMAN SACHS
INTERNATIONAL
EQUITY FUNDS
- --------------------------------------------------------------------------------
PROSPECTUS
CLASS A, B AND C SHARES
LOGO
Goldman
Sachs
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