GOLDMAN SACHS TRUST, 497, 1998-10-02

GOLDMAN SACHS TRUST
497, 1998-10-02

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<PAGE>

- --------------------------------------------------------------------------------
PROSPECTUS
July 27, 1998, as revised
October 1, 1998

GOLDMAN SACHS REAL ESTATE SECURITIES FUND
CLASS A, B AND C SHARES

The Goldman Sachs Real Estate Securities Fund (the "Fund") seeks total return
comprised of long-term growth of capital and dividend income through
investments in equity securities of issuers that are primarily engaged in or
related to the real estate industry. The Fund expects that a substantial
portion of its total assets will be invested in real estate investment trusts.

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 Fund. GSAM is referred to in this Prospectus as the
"Investment Adviser." Goldman Sachs serves as the Fund's distributor and
transfer agent.

This Prospectus provides information about Goldman Sachs Trust (the "Trust")
and the Fund 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 July 27, 1998, as
revised October 1, 1998, containing further information about the Trust and the
Fund which may be of interest to investors, has been filed with the Securities
and Exchange Commission ("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 FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights.................... 3
Fees and Expenses.................. 6
Investment Objectives and Policies. 8
Description of Securities.......... 9
Investment Techniques.............. 13
Risk Factors....................... 17
Investment Restrictions............ 19
Portfolio Turnover................. 19
Management......................... 19
Expenses........................... 23
Reports to Shareholders............ 23
How to Invest...................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Services Available to Shareholders. 29
Distribution and Service Plans..... 32
How to Sell Shares of the Fund..... 33
Dividends.......................... 35
Net Asset Value.................... 36
Performance Information............ 36
Shares of the Trust................ 37
Taxation........................... 37
Additional Information............. 39
Appendix .......................... A-1
Account Application
</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 Real Estate Securities Fund (the "Fund"), a mutual fund
offered under the Trust, pools the monies of investors by selling its Shares to
the public and investing these monies in a portfolio of securities designed to
achieve the Fund's stated investment objectives.

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND?

The Fund has distinct investment objectives and policies. There can be no
assurance that the Fund's objectives will be achieved. The 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 the Fund's
investment objectives and policies, see "Investment Objectives and Policies,"
"Description of Securities" and "Investment Techniques."
<TABLE>

<C> <S>
INVESTMENT OBJECTIVES Total return comprised of long-term
growth of capital and dividend income.
- ----------------------------------------------------------------------------------
INVESTMENT CRITERIA Substantially all, and at least 80%, of
total assets in a diversified portfolio
of equity securities of issuers that
are primarily engaged in or related to
the real estate industry. The Fund
expects that a substantial portion of
its total assets will be invested in
real estate investment trusts
("REITs").
- ----------------------------------------------------------------------------------
BENCHMARK Wilshire Real Estate Securities Index
("WARESI")
</TABLE>

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

The Fund's Share price will fluctuate with market and economic conditions, so
that an investment in the Fund may be worth more or less when redeemed than
when purchased. The Fund should not be relied upon as a complete investment
program. There can be no assurance that the Fund's investment objectives will
be achieved. In view of the specialized nature of the Fund's investments, the
Fund may be suitable only for those investors who are financially able to
assume greater risk and share price volatility than presented by funds that do
not concentrate in the real estate industry. See "Risk Factors."

3
<PAGE>

Risk Factors Associated with the Real Estate Industry. Although the Fund does
not invest directly in real estate, it does invest primarily in common stocks
and other equity securities of REITs and other real estate industry companies
and does have a policy of concentrating its investments in the real estate
industry. Therefore, an investment in the Fund is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in general, including possible declines in the value of real estate,
general and local economic conditions, environmental problems and changes in
interest rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. In addition, if the Fund has rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect
its ability to retain its tax status as a regulated investment company.

Risks of Investing in REITs. Investing in REITs involves certain unique risks
in addition to those risks associated with investing in the real estate
industry in general. Equity REITs may be affected by changes in the value of,
and income produced by, the underlying property owned by the REITs. Mortgage
REITs may be affected by the quality of any credit extended and interest rate
risk. REITs are dependent upon management skills, may have limited
diversification and are subject to heavy cash flow dependency, default by
borrowers and self-liquidation.

Other. The Fund may invest in foreign securities and lower rated debt
securities and may use certain investment techniques, including derivatives,
forward contracts, options and futures. These investments and investment
techniques will subject the Fund to greater risk.

WHO MANAGES THE FUND?

Goldman Sachs Asset Management serves as Investment Adviser to the Fund. As
of August 21, 1998, the Investment Adviser, together with its affiliates, acted
as investment adviser or distributor for assets in excess of $168 billion.

WHO DISTRIBUTES THE FUND'S SHARES?

Goldman Sachs acts as distributor of the 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 Fund"
on page 24.

4
<PAGE>

HOW DO I PURCHASE SHARES?

You may purchase Shares of the Fund 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 23.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers 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 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
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
23.

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> <C>
Quarterly 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 the Fund, or ILA Class B or Class C Units of the Prime Obligations
Portfolio, if you hold Class B or Class C Shares of the Fund (the "ILA
Portfolios"). For further information concerning dividends and distributions,
see "Dividends."

5
<PAGE>

FEES AND EXPENSES

<TABLE>
<CAPTION>
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 applicable
limitations)/6/................................ 0.19% 0.19% 0.19%
---- ---- ----
TOTAL FUND OPERATING EXPENSES (AFTER EXPENSE
LIMITATIONS)/7/................................. 1.69% 2.19% 2.19%
==== ==== ====
</TABLE>
- -------
/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 Fund's annual operating expenses have been restated to reflect fees
and expenses in effect as of September 1, 1998.
/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
the Fund's Class A, B and C Shares), taxes, interest and brokerage fees
and litigation, indemnification and other extraordinary expenses) of the
Fund to the extent such expenses exceed 0.00% of the Fund's average daily
net assets.
/7/ Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Fund would be as set forth below:

<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Class A.............................................. 0.73% 2.23%
Class B.............................................. 0.73% 2.73%
Class C.............................................. 0.73% 2.73%
</TABLE>

6
<PAGE>

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>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class A Shares................................................. $71 $105
Class B Shares
--Assuming complete redemption at end of period................ 72 99
--Assuming no redemption....................................... 22 69
Class C Shares
--Assuming complete redemption at end of period................ 32 69
--Assuming no redemption....................................... 22 69
</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.

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. The 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 Fund or for services to their customers' accounts and/or the
Fund. 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 the 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 the Fund's estimated fees and
expenses 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, the Fund's
actual performance will vary and may result in an actual return greater or
less than 5%. See "Management--Investment Adviser."

7
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

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

The Investment Adviser may purchase for the Fund interests in real estate
investment trusts, common stocks, preferred stocks, convertible debt
obligations, convertible preferred stocks, equity interests in trusts,
partnerships, joint ventures, limited liability companies and similar
enterprises, warrants and stock purchase rights ("equity securities"). In
choosing the 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 the 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.

The Fund's investment strategy is based on the premise that property market
fundamentals are the primary determinant of growth underlying the success of
companies in the real estate industry. The Fund's research and investment
process is designed to identify those companies with strong property
fundamentals and strong management teams. This process is comprised of real
estate market research and securities analysis. The Investment Adviser's
analysis will focus on determining the degree to which a company can achieve
sustainable growth in cash flow and dividend paying capability. The Investment
Adviser will take into account fundamental trends in underlying property
markets as determined by proprietary models, research of local real estate
markets, earnings, cash flow growth and stability, the relationship between
asset values and market prices of the securities and dividend payment history.
The Investment Adviser will attempt to purchase securities so that its
underlying portfolio will be diversified geographically and by property type.

REAL ESTATE SECURITIES FUND

Objective. The Fund's investment objective is to provide investors with
total return comprised of long-term growth of capital and dividend income.

Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 80%, of its total assets in issuers that are
primarily engaged in or related to the real estate industry. The Fund seeks to
achieve its investment objective by investing in a diversified portfolio of
equity securities of REITs and other real estate industry companies. A "real
estate industry company" is a company that derives at least 50% of its gross
revenues or net profits from the ownership, development, construction,
financing, management or sale of commercial, industrial or residential real
estate or interests therein.

Shares of REITs. The Fund may invest without limitation in Shares of REITs.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or

8
<PAGE>

interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority
of their assets in real estate mortgages and derive income from the collection
of interest payments. Similar to investment companies such as the Fund, REITs
are not taxed on income distributed to shareholders provided they comply with
several requirements of the Internal Revenue Code of 1986, as amended (the
"Code"). The Fund will indirectly bear its proportionate share of expenses
incurred by REITs in which the Fund invests in addition to the expenses
incurred directly by the Fund.

Other. Under normal circumstances, the Fund may invest up to 20% of its
total assets in fixed-income securities that, in the opinion of the Investment
Adviser, offer the potential to further the Fund's investment objectives. In
addition, although the Fund will invest primarily in publicly traded U.S.
securities, it may invest up to 15% of its net assets in foreign securities.

DESCRIPTION OF SECURITIES

The Fund 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

The 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
debt securities in which the Fund may invest are not subject to any minimum
rating criteria. Convertible debt securities are equity investments for
purposes of the Fund's investment policies.

FOREIGN INVESTMENTS

FOREIGN SECURITIES. The Fund may 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.

9
<PAGE>

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 the
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 adverse 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 Fund. 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 Fund, political or social instability or
diplomatic developments which could affect investments in those countries.

INVESTMENTS IN ADRS, EDRS AND GDRS. The Fund may invest in foreign
securities which take the form of sponsored and unsponsored American
Depository Receipts ("ADRs") and Global Depository Receipts ("GDRs") and may
also invest in 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 the 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

10
<PAGE>

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, the Fund may avoid currency risks
during the settlement period for purchases and sales.

FOREIGN CURRENCY TRANSACTIONS. Because investments in foreign issuers will
usually involve currencies of foreign countries, the value of the assets of
the Fund as measured in U.S. dollars will be affected by changes in foreign
currency exchange rates. The Fund may, 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. If the Fund enters into a forward foreign currency
exchange contract to buy foreign currency for any purpose, 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. The
Fund may hold foreign currency received in connection with investments in
foreign securities when, in the judgment of the Investment Adviser, it would
be beneficial to convert such currency into U.S. dollars at a later date,
based on anticipated changes in the relevant exchange rate.

Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, the Fund's 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 abroad. To the
extent that a substantial portion of the Fund's total assets, adjusted to
reflect the Fund's net position after giving effect to currency transactions,
is denominated or quoted in the currencies of foreign countries, the Fund will
be more susceptible to the risk of adverse economic and political developments
within those countries.

The market in forward foreign currency exchange contracts, currency swaps
and other privately negotiated currency instruments 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.
The 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.

FIXED-INCOME SECURITIES

U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Government
securities. Generally, these securities include U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies,
instrumentalities or sponsored enterprises. U.S. Government securities also
include Treasury receipts and other stripped U.S. Government securities, where
the interest and principal components of stripped U.S. Government securities
are traded independently. The Fund may also invest in zero coupon U.S.
Treasury securities and in zero coupon securities issued by financial
institutions, which represent a proportionate interest in underlying U.S.
Treasury securities. A zero coupon security pays no interest to its holder
during its life and its value consists of

11
<PAGE>

the difference between its face value at maturity and its cost. The market
prices of zero coupon securities generally are more volatile than the market
prices of securities that pay interest periodically. See "Taxation" in the
Additional Statement.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed securities ("Mortgage-Backed Securities"), which represent
direct or indirect participations in, or are collateralized by and payable
from, mortgage loans secured by real property. The Fund may also invest in
asset-backed securities ("Asset-Backed Securities"). The principal and
interest payments on Asset-Backed Securities are collateralized by pools of
assets such as auto loans, credit card receivables, leases, installment
contracts and personal property. Such asset pools are securitized through the
use of special purpose trusts or corporations. Principal and interest payments
may be credit enhanced by a letter of credit, a pool insurance policy or a
senior/subordinated structure.

The Fund may also invest in stripped Mortgage-Backed Securities ("SMBS")
(including interest only and principal only securities), which are derivative
multiple class Mortgage-Backed Securities. SMBS are usually structured with
two different classes: one that receives 100% of the interest payments and the
other that receives 100% of the principal payments from a pool of mortgage
loans. If the underlying mortgage loans experience different than anticipated
prepayments of principal, the Fund may fail to recoup fully its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest from mortgage loans are generally higher than prevailing
market yields on other Mortgage-Backed Securities because their cash flow
patterns are more volatile and there is a greater risk that the initial
investment will not be fully recouped. The Fund's investments in SMBS may
require the Fund to sell portfolio securities to generate sufficient cash to
satisfy certain income distribution requirements.

CORPORATE DEBT OBLIGATIONS. The Fund may invest in corporate debt
obligations. Corporate debt obligations are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations.

BANK OBLIGATIONS. The Fund may invest in obligations issued or guaranteed by
U.S. or foreign banks. Bank obligations, including without limitation, time
deposits, bankers' acceptances and certificates of deposit, may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Banks are
subject to extensive but different governmental regulations which may limit
both the amount and types of loans which may be made and interest rates which
may be charged. In addition, the profitability of the banking industry is
largely dependent upon the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions. General
economic conditions as well as exposure to credit losses arising from possible
financial difficulties of borrowers play an important part in the operation of
this industry.

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

12
<PAGE>

RATING CRITERIA. Under normal circumstances, the Fund may invest up to 20%
of its total assets in fixed income securities, including 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 BBB or Baa are considered medium-grade obligations with speculative
characteristics, and adverse economic conditions or changing circumstances may
weaken their issuers' capacity to pay interest and repay principal. 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 the 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.

UNSEASONED COMPANIES

The Fund may invest in companies (including predecessors) which have
operated less than three years. The securities of such companies may have
limited liquidity, which can result in their being priced higher or lower than
might otherwise be the case. In addition, investments in unseasoned companies
are more speculative and entail greater risk than do investments in companies
with an established operating record.

INVESTMENT TECHNIQUES

OPTIONS ON SECURITIES AND SECURITIES INDICES

The 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 the 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 the Fund's portfolio
turnover rate and, therefore, associated brokerage commissions or spreads.

OPTIONS ON FOREIGN CURRENCIES

13
<PAGE>

foreign currency will constitute only a partial hedge, up to the amount of the
premium received. If an option that the Fund has written is exercised, the
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
rate fluctuations; however, in the event of exchange rate movements adverse to
the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies written or
purchased by the Fund 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, the Fund may purchase and
sell various kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to any such contracts and options.
The futures contracts may be based on various securities (such as U.S.
Government securities), foreign currencies, securities indices and other
financial instruments and indices. The 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. The 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 the Fund to purchase securities, 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 the Fund may benefit from
the use of futures and options on futures, unanticipated changes in interest
rates or securities prices 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 the Fund may be exposed to risk of loss.
The loss incurred by the 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 the Fund's NAV. The
profitability of the 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 the 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 Fund may
engage in futures transactions on both U.S. and foreign exchanges. Foreign
exchanges may not provide the same protection as U.S. exchanges.

EQUITY SWAPS

14
<PAGE>

swap may be used by the 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, the 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, the Fund may
suffer a loss if the counterparty defaults. In connection with its investments
in equity swaps, the 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

The 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. The
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 three-day 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 the Fund would generally purchase
securities on a when-issued or forward commitment basis with the intention of
acquiring securities for its portfolio, the Fund may dispose of when-issued
securities or forward commitments prior to settlement if the Investment
Adviser deems it appropriate to do so. The 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, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.

ILLIQUID AND RESTRICTED SECURITIES

The 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 SMBS, repurchase agreements maturing in more than
7 days, time deposits with a notice or demand period of more than 7 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 the 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

15
<PAGE>

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 Fund to enter into repurchase agreements with such
counterparties. In addition, the Fund, together with other registered
investment companies having management agreements with the 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

The 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 the
Investment Adviser determines to make securities loans, the value of the
securities loaned may not exceed 33 1/3% of the value of the total assets of
the Fund (including the loan collateral). The Fund may experience a loss or
delay in the recovery of its securities if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement with the Fund.

SHORT SALES AGAINST-THE-BOX

The 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, 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 the 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
the Fund's portfolio.

TEMPORARY INVESTMENTS

The Fund may, for temporary defensive purposes, invest 100% of its 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 and non-convertible
corporate bonds with a remaining maturity of less than one year. When the
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, the 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)
mortgage swaps, credit swaps, index swaps and interest rate swaps, caps,
floors and collars; (iii) yield curve options and inverse floating rate
securities; (iv) other investment companies; (v) mortgage dollar rolls and
(vi) custodial receipts. For more information see the Additional Statement.

In addition, the Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. The Fund may not make additional
investments if borrowings (excluding covered mortgage dollar rolls) exceed 5%
of its total assets. For more information see the Additional Statement.

16
<PAGE>

RISK FACTORS

RISK FACTORS ASSOCIATED WITH THE REAL ESTATE INDUSTRY. Although the Fund
does not invest directly in real estate, it does invest primarily in
securities of issuers that are engaged in or related to the real estate
industry, and does have a policy of concentrating its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible
declines in the value of real estate; risks related to general and local
economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages resulting
from, environmental problems; casualty or condemnation losses; uninsured
damages from floods, earthquakes or other natural disasters; limitations on
and variations in rents; and changes in interest rates. To the extent that
assets underlying the Fund's investments are concentrated geographically, by
property type or in certain other respects, the Fund may be subject to certain
of the foregoing risks to a greater extent.

In addition, if the Fund receives rental income or income from the
disposition of real property acquired as a result of a default on securities
the Fund owns, the receipt of such income or the ownership of such property
may adversely affect the Fund's ability to retain its tax status as a
regulated investment company. Investments by the Fund in securities of
companies providing mortgage servicing will be subject to the risks associated
with refinancings and their impact on servicing rights.

RISKS OF INVESTING IN REITS. Investing in REITs involves certain unique
risks in addition to those risks associated with investing in the real estate
industry in general. Equity REITs may be affected by changes in the value of
the underlying property owned by the REITs. Mortgage REITs may be affected by
the quality of any credit extended. REITs are dependent upon management
skills, may not be diversified, are subject to heavy cash flow dependency,
default by borrowers and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax free pass-through of income under
the Code and failing to maintain their exemptions from registration under the
Investment Company Act of 1940, as amended (the "1940 Act"). REITs whose
underlying properties are concentrated in a particular industry or geographic
region are also subject to risks affecting such industries and regions.

REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will
gradually align themselves to reflect changes in market interest rates,
causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.

Investing in REITs involves risks similar to those associated with investing
in small capitalization companies. REITs may have limited financial resources,
may trade less frequently and in a limited volume and may be subject to more
abrupt or erratic price movements than larger capitalization companies.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the
Standard & Poor's Index of 500 Common 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 and the lower degree of
liquidity in the markets for such stocks.

17
<PAGE>

RISKS OF INVESTING IN EQUITY SECURITIES In general, the Fund is 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 the Fund holds may decline over
short or extended periods. The U.S. 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, domestic stock markets were
trading at or close to record high levels and there can be no guarantee that
such levels will continue.

SPECIAL RISKS OF INVESTMENTS IN 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
Fund may invest up to 15% 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.

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.
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 the Fund. The repatriation of both investment income and capital
from certain Emerging Countries is subject to restrictions such as the need
for governmental consents. Many Emerging Countries may be subject to a greater
degree of economic, political and social instability 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. 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. Settlement procedures in Emerging Countries are frequently less
developed and reliable than those in the United States and may involve the
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 the 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.

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 the Fund could sustain losses on such
investments. A default could impact both interest and principal payments.

18
<PAGE>

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. The
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

The Fund is subject to certain investment restrictions that are described in
detail under "Investment Restrictions" in the Additional Statement.
Fundamental investment restrictions of the Fund can not be changed without
approval of a majority of the outstanding Shares of the Fund as defined in the
Additional Statement. The 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 the Fund's investment
objectives, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial positions and
needs.

PORTFOLIO TURNOVER

A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by the Fund and its shareholders and may
under certain circumstances make it more difficult for the Fund to qualify as
a regulated investment company under the Code. It is anticipated that the
annual portfolio turnover rate of the Fund will generally not exceed 100%. 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 the 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 determining factor in making
investment decisions for the 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 the Fund's daily
business operations. The Additional Statement contains information as to the
identity of, and other information about, the Trustees and officers of the
Trust.

INVESTMENT ADVISER

INVESTMENT ADVISER. Goldman Sachs Asset Management, One New York Plaza,
New York, New York 10004, a separate operating division of Goldman Sachs,
serves as investment adviser to the Fund. Goldman Sachs registered as an
investment adviser in 1981. As of August 21, 1998, GSAM together with its
affiliates, acted as investment adviser or distributor for assets in excess of
$168 billion.

Under a Management Agreement with the Fund, the 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 Fund
to use the name "Goldman Sachs" or a derivative thereof as part of the Fund's
name for as long as the Fund's Management Agreement is in effect.

19
<PAGE>

In performing its investment advisory services, the Investment Adviser,
while remaining ultimately responsible for the management of the Fund, 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 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, the Investment Adviser also: (i) supervises
all non-advisory operations of the Fund; (ii) provides personnel to perform
such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of the Fund; (iii) arranges for
at the 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 the Fund's records; and (v) provides office space
and all necessary office equipment and services.

FUND MANAGERS

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ----------- ----------------------------
<C> <C> <S>
Herbert E. Ehlers Since 1998 Mr. Ehlers joined the Investment
Managing Director and Adviser in 1997 and is part of the
Portfolio Manager portfolio management team of the
Real Estate Securities Fund and the
Chief Investment Officer of the
Growth Equity Strategy. From 1994 to
1997, he was the Chief Investment
Officer and Chairman of Liberty
Investment Management Inc. He was a
portfolio manager and president at
Liberty's predecessor firm, Eagle
Asset Management, from 1984 to 1994.

- -------------------------------------------------------------------------------
Elizabeth Groves Since 1998 Ms. Groves joined the Investment
Vice President and Adviser in 1998 and is a portfolio
Portfolio Manager manager for the Real Estate
Securities Fund. Her previous
experience includes 12 years in the
real estate and real estate finance
business. From 1991 to 1997, she
worked in the Real Estate Department
of the Investment Banking Division
of Goldman Sachs, where she was
responsible for both public and
private capital market transactions.
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ----------- ----------------------------
<C> <C> <S>
Mark Howard-Johnson Since 1998 Mr. Howard-Johnson joined the
Vice President and Investment Adviser in 1998 and is a
Portfolio Manager portfolio manager for the Real
Estate Securities Fund. His previous
experience includes 15 years in the
real estate finance business. From
1996 to 1998, he was the senior
equity analyst for Boston Financial,
responsible for the Pioneer Real
Estate Shares Fund. Prior to joining
Boston Financial, from 1994 to 1996,
Mr. Howard-Johnson was a real estate
securities analyst for The Penobscot
Group, Inc., one of only two
independent research firms in the
public real estate securities
business. For five years prior to
this, he held senior management
positions within various real estate
divisions of the Fleet Financial
Group.
</TABLE>

It is the responsibility of the Investment Adviser to make the investment
decisions for the Fund and to place the purchase and sale orders for the
Fund's portfolio transactions in the 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 Fund, the Investment Adviser will seek
the best price and execution of the 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 the Management Agreement, the Investment Adviser is entitled to a
fee, computed daily and payable monthly at an annual rate equal to 1.00% of
the Fund's average daily net assets.

The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Fund (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 0.00% per annum of the Fund's average daily net assets. Such reductions
or limits, if any, may be discontinued or modified by the Investment Adviser
in its discretion at any time.

21
<PAGE>

Goldman Sachs and its affiliates will not have any obligation to make
available any information regarding their proprietary activities or
strategies, or the activities or strategies used for other accounts managed by
them, for the benefit of the management of the Fund. The results of the Fund's
investment activities, therefore, may differ from those of Goldman Sachs and
its affiliates and it is possible that the Fund could sustain losses during
periods in which Goldman Sachs and its affiliates and other accounts achieve
significant profits on their trading for proprietary or other accounts. In
addition, the Fund may, from time to time, enter into transactions in which
other clients of Goldman Sachs have an adverse interest. From time to time,
the Fund's activities may be limited because of regulatory restrictions
applicable to Goldman Sachs and its affiliates, and/or their internal policies
designed to comply with such restrictions. See "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 the 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 the
Fund's transfer agent (the "Transfer Agent") and as such performs various
shareholder servicing functions. As compensation for the services rendered to
the Fund by Goldman Sachs (as Transfer Agent), Goldman Sachs is entitled to a
fee with respect to the 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 the 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 Fund. 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 Fund 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 Fund at current levels. In
addition, the Investment Adviser has sought assurances from the Fund's 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 Fund's other service
providers will be sufficient to avoid any adverse effect on the Fund due to
the Year 2000 Problem.

22
<PAGE>

EXPENSES

The Fund is responsible for the payment of its expenses. The expenses
include, without limitation: 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 Fund 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 Fund); 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 semiannual 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 Fund does not generally provide sub-
accounting services.

HOW TO INVEST

ALTERNATIVE PURCHASE ARRANGEMENTS

The 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 Fund." If
you do not specify in your instructions to the Fund which class of Shares you
wish to purchase, the Fund 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
the 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 the 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

23
<PAGE>

1.00% per annum of the 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, 8 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 the
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 that will be 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 6 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 8
years, you may prefer Class C Shares. There is no limit on the purchase of
Class A Shares. A maximum purchase limitation of $250,000 and $1,000,000
normally applies to in the aggregate on purchases of Class B Shares and Class
C Shares, respectively. Although Class C Shares are subject to a CDSC for only
twelve months at a lower rate than Class B Shares, 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 FUND--CLASS A, CLASS B AND CLASS C SHARES

You may purchase Shares of the Fund through any Authorized Dealer (including
Goldman Sachs) or directly from the 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, the 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 the 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"), an initial investment minimum of $200 applies to purchases in
connection with 403(b) plans. The minimum

24
<PAGE>

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 Real Estate Securities Fund--(Name of 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 the Fund, an investor must
establish an account with the Fund by furnishing to the Fund, Goldman Sachs or
the investor's Authorized Dealer the information in the Account Application
attached to this Prospectus. The Fund may refuse to open an account for any
investor who fails to (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 Fund reserves 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. The 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 Fund
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.

OFFERING PRICE--CLASS A SHARES

The offering price of Class A Shares of the 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 Fund 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

25
<PAGE>

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 Fund which satisfies 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.

Class A Shares of the Fund 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) buy Shares worth $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

26
<PAGE>

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 Fund 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 the 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 the Fund at the next determined NAV
without the imposition of an initial sales charge. However, Class B Shares
redeemed within 6 years of purchase will be subject to a CDSC at the rates
shown in the table below. 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.

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
Fund 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>

27
<PAGE>

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 Fund 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 the Fund will automatically convert into Class A Shares of
the Fund at the end of the calendar quarter that is 8 years after the purchase
date, except as noted below. Class B Shares of the Fund acquired by exchange
from Class B Shares of another Goldman Sachs Fund will convert into Class A
Shares of the 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 Fund is advised that such conversions may constitute
taxable events for federal tax purposes, which the Fund believes 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 the 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.

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 Fund 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 Fund 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 the 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 the 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 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

28
<PAGE>

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, Class C 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 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 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.

29
<PAGE>

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS AND AUTOMATIC EXCHANGE
PROGRAM

A shareholder may elect to cross-reinvest dividends and capital gain
distributions paid by the 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 the 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.

TAX-SHELTERED RETIREMENT PLANS

The Fund offers its 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. The information sets forth the service fee charged
for retirement plans and describes the federal income tax consequences of
establishing a plan. This information should be read carefully, and
consultation with an attorney or tax adviser may be advisable.

EXCHANGE PRIVILEGE

Shares of the 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 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 Fund without a sales charge. In addition to
free automatic exchanges pursuant to the Automatic Exchange Program, 6 free
exchanges are permitted in each 12 month period. A fee of $12.50 may be
charged for each subsequent

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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 Real
Estate Securities Fund, 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 Fund." 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 Fund." 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 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, call Goldman Sachs at the
number set forth at 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, exchange and redemption 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, the 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. The order
will be priced at the Fund's NAV per Share (adjusted for any applicable sales
charge) next determined after such acceptance. Otherwise, the 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 Fund 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.

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

In the sole discretion of Goldman Sachs, the 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 Fund, 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 the length of
time their customers' assets have remained in the 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 Fund's
Class A, Class B and Class C Shares (each a "Plan"). Under the Plans, Goldman
Sachs is entitled to a monthly fee from the Fund for distribution services
equal, on an annual basis, to 0.25%, 0.75% and 0.75%, respectively, of the
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 Fund. 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

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<PAGE>

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 the 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 Fund. If the distribution or
service 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 fees are paid by Goldman Sachs on a quarterly basis.

HOW TO SELL SHARES OF THE FUND

The 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 3 Business
Days of receipt of a properly executed request. If the Shares to be redeemed
were recently purchased by check, the Fund may delay transmittal of redemption
proceeds until such time as it has assured itself that good funds have been
collected for the purchase of such 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 7 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 as the owner of an account or the owner's
broker where the owner has not declined in writing to utilize this service.

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<PAGE>

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 Fund will also arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the bank account designated in the
shareholder's Account Application. Redemption proceeds will normally be wired
on the next Business Day in federal funds (for a total 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 the 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
the 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

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<PAGE>

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 the 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 the 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.

The 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. The Fund will pay dividends from
net investment income quarterly. The 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
the Fund's dividends may constitute a return of capital.

In addition, distributions paid by the Fund's REIT investments often include
a "return of capital." The Code requires a REIT to distribute at least 95% of
its taxable income to investors. In many cases, however, because of "non-cash"
expenses such as property depreciation, an equity REIT's cash flow will exceed
its taxable income. The REIT may distribute this excess cash to offer a more
competitive yield. This portion of the distribution is deemed a return of
capital, and is generally not taxable to shareholders. However, when
shareholders receive a return of capital, the cost basis of their shares is
decreased by the amount of such return of capital. This, in turn, affects the
capital gain or loss realized when Shares of the Fund are exchanged or sold.
Therefore, a shareholder's original investment in the Fund will be reduced by
the amount of the return of capital and capital gains included in a
distribution if such shareholder elects to receive distributions in cash (as
opposed to having them reinvested in additional Shares of the Fund). Once a
shareholder's cost basis is reduced to zero, any return of capital is taxable
as a capital gain.

The Fund's REIT investments often do not provide complete tax information to
the Fund until after the calendar year-end. Consequently, because of this
delay, it may be necessary for the Fund to request permission to extend the
deadline for issuance of Forms 1099-DIV beyond January 31.

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<PAGE>

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 the 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 attributable 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 the Fund may publish average annual total return, yield
and distribution rates 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 or Class C
Shares reflect deduction of the applicable CDSC imposed upon redemption of
Class B or Class C Shares held for the applicable period. The Fund may also
from time to time advertise total return on a cumulative, average, year-by-
year or other basis for various specified periods by means of quotations,
charts, graphs or schedules. In addition, the Fund may furnish total return
calculations based on investments at various sales charge levels or at NAV.
Any performance information which is based on the Fund's NAV per Share would
be reduced if any applicable sales charge were taken into account. In addition
to the above, the 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.

The Fund computes its yield by dividing net investment income earned during
a recent 30 day period by the product of the average daily number of Shares
outstanding and entitled to receive dividends during the period and the
maximum offering price per Share on the last day of the relevant period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized. Net investment income per Share is equal to the dividends and
interest earned during the period, reduced by accrued expenses for the period.
The calculation of net investment income for these purposes may differ from
the net investment income determined for accounting purposes. The Fund's
quotations of distribution rate are calculated by annualizing the most recent
distribution of net investment income for a monthly, quarterly or other
relevant period and dividing this amount by the NAV per Share on the last day
of the period for which the distribution rate is being calculated.

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<PAGE>

distribution rate 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 Fund's performance quotations do not reflect any fees charged by an
Authorized Dealer to its customer accounts in connection with investments in
the Fund. The investment results of the Fund will fluctuate over time and any
presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the Fund's
performance may be in any future period. In addition to information provided
in shareholder reports, the Funds may, in their discretion, from time to time,
make a list of their holdings available to investors upon request.

SHARES OF THE TRUST

Goldman Sachs Trust was formed under the laws of the State of Delaware on
January 28, 1997. On April 30, 1997, Goldman Sachs Trust, formerly a Maryland
corporation, was reorganized into the Trust. 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 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.

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 Fund's Shares. Instead, the Transfer Agent
maintains a record of each shareholder's ownership. Each shareholder of record
receives confirmation of purchase and redemption orders from the Transfer
Agent. Fund Shares and any dividends and distributions paid by the Fund are
reflected in account statements from the Transfer Agent.

TAXATION

FEDERAL TAXES

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<PAGE>

of its income, diversification of its assets and distribution of its income to
shareholders. As a regulated investment company, the Fund will not be subject
to federal income or excise tax on any net investment income and net realized
capital gains that are distributed to its shareholders in accordance with
certain timing requirements of the Code.

Dividends paid by the Fund from net investment income, 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 the Fund will be taxed to shareholders as long-term
capital gains, regardless of the length of time a shareholder has held his or
her 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. The Fund's dividends that are paid to its
corporate shareholders and are attributable to qualifying dividends the 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. Since dividends the Fund receives from REITs are not
qualifying dividends for this purpose, it is not likely that a substantial
portion of the Fund's dividends will generally qualify for the corporate
dividends-received deduction. Certain distributions paid by the Fund in
January of a given year may be taxable to shareholders as if received the
prior December 31. Shareholders will be informed annually about the amount and
character of distributions received from the Fund for federal income tax
purposes.

Investors should consider the tax implications of buying Shares immediately
prior to a distribution. Investors who purchase Shares shortly before the
record date for a distribution will pay a per Share price that includes the
value of the anticipated distribution and will be taxed on the distribution
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 Fund.

The Fund may be subject to foreign withholding or other foreign taxes on
income or gain from certain foreign securities. In general, the Fund does not
anticipate that it will be eligible to pass any foreign tax credits through to
its shareholders; however, the Fund may deduct these taxes in computing its
taxable income, if any.

OTHER TAXES

In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from the Fund. A state income (and
possibly local income and/or intangible property) tax exemption may be
available to the extent (if any) the 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 Fund, 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, 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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APPENDIX

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
the Fund alone or in combination with Class A Shares of 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>

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

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

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

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

EQ PROAC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GOLDMAN SACHS

REAL ESTATE SECURITIES FUND

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

PROSPECTUS

CLASS A, B AND C SHARES

LOGO
Goldman
Sachs

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

- --------------------------------------------------------------------------------
PROSPECTUS
July 27, 1998, as revised
October 1, 1998

GOLDMAN SACHS REAL ESTATE SECURITIES FUND
SERVICE SHARES

This Prospectus provides information about Goldman Sachs Trust (the "Trust")
and the Fund 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 July 27, 1998, as
revised October 1, 1998, containing further information about the Trust and the
Fund which may be of interest to investors, has been filed with the Securities
and Exchange Commission ("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 FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights.................... 3
Fees and Expenses.................. 5
Investment Objectives and Policies. 6
Description of Securities.......... 7
Investment Techniques.............. 11
Risk Factors....................... 15
Investment Restrictions............ 17
Portfolio Turnover................. 17
Management......................... 17
Expenses........................... 20
Net Asset Value.................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Performance Information....... 21
Shares of the Trust........... 22
Taxation...................... 22
Additional Information........ 23
Additional Services........... 24
Reports to Shareholders....... 25
Dividends..................... 25
Purchase of Service Shares.... 26
Exchange Privilege............ 27
Redemption of Service Shares.. 28
Appendix...................... A-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?

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND?

<C> <S>
INVESTMENT OBJECTIVES Total return comprised of long-term
growth of capital and dividend income.
- ----------------------------------------------------------------------------------------
INVESTMENT CRITERIA Substantially all, and at least 80%, of total
assets in a diversified portfolio of equity
securities of issuers that are primarily
engaged in or related to the real estate
industry. The Fund expects that a substantial
portion of its total assets will be invested
in real estate investment trusts ("REITs").
- ----------------------------------------------------------------------------------------
BENCHMARK Wilshire Real Estate Securities Index
("WARESI")
</TABLE>

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

3
<PAGE>

WHO MANAGES THE FUND?

WHO DISTRIBUTES THE FUND'S SHARES?

Goldman Sachs acts as distributor of the Fund's Shares (the
"Distributor").

WHAT IS THE MINIMUM INVESTMENT?

HOW DO I PURCHASE SERVICE SHARES?

Customers of certain institutions ("Service Organizations") may invest in
Service Shares only through their Service Organizations. Service Shares of
the 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 Fund, has adopted a
Service Plan with respect to the Service Shares which authorizes the 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 Fund, 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 Fund 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>
Quarterly Annually
</TABLE>

Recordholders of Service Shares may receive dividends and distributions
in additional Service Shares of the Fund in which you have invested or may
elect to receive them in cash. For further information concerning dividends
and distributions, see "Dividends."

4
<PAGE>

FEES AND EXPENSES
(SERVICE SHARES)

/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 the Fund's Service
Shares), taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.00% of the Fund's average daily net assets.

/4/ Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Service Shares of the Fund would have been
0.58% and 2.08%, respectively.

<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS
- -------- ------ -------
<S> <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................................ $16 $49
</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 Fund. The Fund also offers Institutional, 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 Fund. 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 the 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 the Fund's estimated fees and
expenses 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, the Fund's actual
performance will vary and may result in an actual return greater or less than
5%. See "Management--Investment Adviser" and "Additional Services."

5
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

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

The Fund's investment strategy is based on the premise that property market
fundamentals are the primary determinant of growth underlying the success of
companies in the real estate industry. The Fund's research and investment
process is designed to identify those companies with strong property
fundamentals and strong management teams. This process is comprised of real
estate market research and securities analysis. The Investment Adviser's
analysis will focus on determining the degree to which a company can achieve
sustainable growth in cash flow and dividend paying capability. The Investment
Adviser will take into account fundamental trends in underlying property
markets as determined by proprietary models, research of local real estate
markets, earnings, cash flow growth and stability, the relationship between
asset values and market prices of the securities and dividend payment history.
The Investment Adviser will attempt to purchase securities of companies whose
underlying portfolios are diversified geographically and by property type.

REAL ESTATE SECURITIES FUND

Objectives. The Fund's investment objective is to provide investors with
total return comprised of long-term growth of capital and dividend income.

Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 80% of its total assets in issuers that are
primarily engaged in or related to the real estate industry. The Fund seeks to
achieve its investment objective by investing in a diversified portfolio of
equity securities of REITs and other real estate industry companies. A "real
estate industry company" is a company that derives at least 50% of its gross
revenues or net profits from the ownership, development, construction,
financing, management or sale of commercial, industrial or residential real
estate or interests therein.

6
<PAGE>

Shares of REITs. The Fund may invest without limitation in shares of REITs.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the collection of
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of their assets
in real estate mortgages and derive income from the collection of interest
payments. Similar to investment companies such as the Fund, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
REITs are dependent upon cash flow from their investments to repay financing
cost and the ability of the REIT's merger. REITs are also subject to risks
generally associated with investments in real estate. The Fund will indirectly
bear its proportionate share of expenses incurred by REITs in which the Fund
invests in addition to the expenses incurred directly by the Fund.

Other. The Fund may invest up to 20% of its total assets in fixed-income
securities that, in the opinion of the Investment Adviser, offer the potential
to further the Fund's investment objectives. In addition, although the Fund
will invest primarily in publicly traded U.S. securities, it may invest up to
15% of its net assets in foreign securities.

DESCRIPTION OF SECURITIES

The Fund 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

FOREIGN INVESTMENTS

7
<PAGE>

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 the 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 adverse 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
Fund. 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.

8
<PAGE>

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, the 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, the value of the assets of
the Fund as measured in U.S. dollars will be affected by changes in foreign
currency exchange rates. The Fund may, 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. If the Fund enters into a forward foreign currency
exchange contract to buy foreign currency for any purpose, 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. The
Fund may hold foreign currency received in connection with investments in
foreign securities when, in the judgment of the Investment Adviser, it would
be beneficial to convert such currency into U.S. dollars at a later date,
based on anticipated changes in the relevant exchange rate.

FIXED-INCOME SECURITIES

9
<PAGE>

instrumentalities or sponsored enterprises. U.S. Government securities also
include Treasury receipts and other stripped U.S. Government securities, where
the interest and principal components of stripped U.S. Government securities
are traded independently. The Fund may also invest in zero coupon U.S.
Treasury securities and in zero coupon securities issued by financial
institutions, which represent a proportionate interest in underlying U.S.
Treasury securities. A zero coupon security pays no interest to its holder
during its life and its value consists of the difference between its face
value at maturity and its cost. The market prices of zero coupon securities
generally are more volatile than the market prices of securities that pay
interest periodically. See "Taxation" in the Additional Statement.

The Fund may also invest in stripped Mortgage-Backed Securities ("SMBS")
(including interest only and principal only securities), which are derivative
multiple class Mortgage-Backed Securities. SMBS are usually structured with
two different classes: one that receives 100% of the interest payments and the
other that receives 100% of the principal payments from a pool of mortgage
loans. If the underlying mortgage loans experience different than anticipated
prepayments of principal, the Fund may fail to recoup fully its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest from mortgage loans are generally higher than prevailing
market yields on other Mortgage-Backed Securities because their cash flow
patterns are more volatile and there is a greater risk that the initial
investment will not be fully recouped. The Fund's investments in SMBS may
require the Fund to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.

10
<PAGE>

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

RATING CRITERIA. The Fund may invest up to 20% of its total assets in debt
securities, including 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 BBB or Baa are considered
medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers'
capacity to pay interest and repay principal. Fixed-income securities rated BB
or Ba or below (or comparable unrated securities) are commonly referred to as
"junk bonds," and 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 the
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.

UNSEASONED COMPANIES

INVESTMENT TECHNIQUES

OPTIONS ON SECURITIES AND SECURITIES INDICES

11
<PAGE>

the securities in the 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
the Fund's portfolio turnover rate and, therefore, associated brokerage
commissions or spreads.

OPTIONS ON FOREIGN CURRENCIES

The 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. As with other
kinds of options transactions, however, the writing of an option of a foreign
currency will constitute only a partial hedge, up to the amount of the premium
received. If an option that the Fund has written is exercised, the Fund could
be required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against exchange rate fluctuations; however,
in the event of exchange rate movements adverse to the Fund's position, the
Fund may forfeit the entire amount of the premium plus related transaction
costs. Options on foreign currencies written or purchased by the Fund 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 rate, the Fund may purchase and
sell various kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to any such contracts and options.
The futures contracts may be based on various securities (such as U.S.
Government securities), foreign currencies securities indices and other
financial instruments and indices. The 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. The 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 the Fund to purchase securities, 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.

12
<PAGE>

markets. In addition, because of the low margin deposits normally required in
futures trading, a relatively small price movement in a futures contract may
result in substantial losses to the Fund. Further, futures contracts and
options on futures may be illiquid, and exchanges may limit fluctuations in
futures contract prices during a single day. The Fund 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

The 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 the 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, the 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, the Fund may suffer a loss if the counterparty
defaults. In connection with its investments in equity swaps, the 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

ILLIQUID AND RESTRICTED SECURITIES

The 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 resale under 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 the Fund's portfolio to the extent that qualified
institutional buyers become for a

13
<PAGE>

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

The Fund may enter into repurchase agreements with dealers in U.S.
Government securities and member banks of the Federal Reserve System which
furnish collateral at least equal in value or market price to the amount of
their repurchase obligation. If the other party or "seller" defaults, the Fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the Fund in connection with
the related repurchase agreement are less than the repurchase price. In
addition, in the event of bankruptcy of the seller or failure of the seller to
repurchase the securities as agreed, the 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 Fund to enter into repurchase agreements with such
counterparties. In addition, the Fund, together with other registered
investment companies having management agreements with the 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

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

SHORT SALES AGAINST-THE-BOX

The 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, 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 the 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 no longer be used to defer the
recognition of gain for tax purposes with respect to appreciated securities in
the Fund's portfolio.

TEMPORARY INVESTMENTS

14
<PAGE>

MISCELLANEOUS TECHNIQUES

In addition to the techniques and investments described above, the 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)
mortgage swaps, credit swaps, index swaps and interest rate swaps, caps,
floors and collars; (iii) yield curve options and inverse floating rate
securities; (iv) other investment companies; (v) mortgage dollar rolls and
(vi) custodial receipts. For more information see the Additional Statement.

In addition, the 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 (excluding covered mortgage dollar rolls) exceed 5%
of its total assets. For more information see the Additional Statement.

RISK FACTORS

RISK FACTORS ASSOCIATED WITH THE REAL ESTATE INDUSTRY. Although the Fund
does not invest directly in real estate, it does invest primarily in
securities of issuers that are primarily engaged in or related to the real
estate industry, and does have a policy of concentrating its investments in
the real estate industry. Therefore, an investment in the Fund is subject to
certain risks associated with the direct ownership of real estate and with the
real estate industry in general. These risks include, among others: possible
declines in the value of real estate; risks related to general and local
economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages resulting
from, environmental problems; casualty or condemnation losses; uninsured
damages from floods, earthquakes or other natural disasters; limitations on
and variations in rents; and changes in interest rates. To the extent that
assets underlying the Fund's investments are concentrated geographically, by
property type or in certain other respects, the Fund may be subject to certain
of the foregoing risks to a greater extent.

15
<PAGE>

rates on adjustable rate mortgage loans are reset periodically, yields on a
REIT's investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than
would investments in fixed rate obligations.

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.
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 the Fund. The repatriation of both investment income and capital
from certain Emerging Countries is subject to restrictions such as the need
for governmental consents. Many Emerging Countries may be subject to a greater
degree of economic, political and social instability 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. 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. Settlement procedures in Emerging Countries are frequently less
developed and reliable than those in the United States and may involve the
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 the 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.

16
<PAGE>

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 the Fund could sustain losses on such investments. A default
could impact both interest and principal payments.

RISKS OF DERIVATIVE TRANSACTIONS. The 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 being hedged, the potential illiquidity of the markets for
derivative instruments, the risks arising from the margin requirements and
related leverage factors associated with such transactions. The use of these
management techniques to seek to increase total return may be regarded as a
speculative practice and involves the risk of loss if the Investment Adviser
is incorrect in its expectation of fluctuations in securities prices, interest
rates or currency prices. The Fund's use of certain derivative transactions
may be limited by the requirements of the Code, for qualification as a
regulated investment company.

INVESTMENT RESTRICTIONS

PORTFOLIO TURNOVER

A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by the Fund and its shareholders and may
under certain circumstances make it more difficult for the Fund to qualify as
a regulated investment company under the Code. It is anticipated that the
annual portfolio turnover rate of the Fund will generally not exceed 100%. 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 the 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

17
<PAGE>

INVESTMENT ADVISER

INVESTMENT ADVISER. Goldman Sachs Asset Management, One New York Plaza, New
York, New York 10004, a separate operating division of Goldman Sachs, serves
as investment adviser to the Fund. Goldman Sachs registered as an investment
adviser in 1981. As of August 21, 1998, GSAM, together with its affiliates,
acted as investment adviser or distributor for assets in excess of $168
billion.

Under a Management Agreement with the Fund, the 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
Trust to use the name "Goldman Sachs" or a derivative thereof as part of the
Fund's name for as long as the Fund's Management Agreement is in effect.

Under the Management Agreement, the Investment Adviser also: (i) supervises
all non-advisory operations of the Fund that it advises; (ii) provides
personnel to perform such executive, administrative and clerical services as
are reasonably necessary to provide effective administration of the Fund;
(iii) arranges for at the 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 the Fund's records; and (v)
provides office space and all necessary office equipment and services.

FUND MANAGERS

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ----------- ----------------------------
<C> <C> <S>
Herbert E. Ehlers Since 1998 Mr. Ehlers joined the Investment Adviser in
Managing Director 1997 and is part of the portfolio management
and Portfolio Man- team of the Real Estate Securities Fund and
ager the Chief Investment Officer of the Growth
Equity Strategy. From 1994 to 1997, he was
the Chief Investment Officer of Liberty
Investment Management, Inc. He was a
portfolio manager and president of Liberty's
predecessor from Eagle Asset Management, from
1984 to 1994.

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

Elizabeth Groves Since 1998 Ms. Groves joined the Investment Adviser in
Vice President and 1998 and is a portfolio manager for the Real
Portfolio Manager Estate Securities Fund. Her previous
experience includes 12 years in the real
estate and real estate finance business. From
1991 to 1997, she worked in the Real Estate
Department of the Investment Banking Division
of Goldman Sachs, where she was responsible
for both public and private capital market
transactions.
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ----------- ----------------------------
<C> <C> <S>
Mark Howard-Johnson Since 1998 Mr. Howard-Johnson joined the Investment
Vice President and Adviser in 1998 and is a portfolio manager
Portfolio Manager for the Real Estate Securities Fund. His
previous experience includes 15 years in the
real estate finance business. From 1996 to
1998, he was the senior equity analyst for
Boston Financial, responsible for the Pioneer
Real Estate Shares Fund. Prior to joining
Boston Financial, from 1994 to 1996, Mr.
Howard-Johnson was a real estate securities
analyst for The Penobscot Group, Inc., one of
only two independent research firms in the
public real estate securities business. For
five years prior to this, he held senior
management positions within various real
estate divisions of the Fleet Financial
Group.
</TABLE>

The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Fund (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 0.00% per annum of the Fund's average daily net assets. Such reductions
or limits, if any, may be discontinued or modified by the 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 the Fund or limit the 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 Fund and/or which
engage in and compete for transactions in the same type of securities,
currencies and instruments as the Fund. Goldman Sachs and its affiliates will
not have any obligation to make available any information regarding their
proprietary activities or strategies, or the activities or strategies used for
other accounts managed by them, for the benefit of the management of the Fund.
The results of the Fund's investment activities, therefore, may differ from
those of Goldman Sachs and its affiliates and it is possible that the Fund
could sustain losses during periods in which Goldman Sachs and its affiliates
and other accounts achieve significant profits on their trading for
proprietary or other accounts. In addition, the Fund may, from time to time,
enter into transactions in which other clients of Goldman Sachs have an
adverse interest. From time to time, the Fund's activities may be limited
because of regulatory restrictions applicable to Goldman Sachs and its
affiliates, and/or their internal policies

19
<PAGE>

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 the Fund's Shares. Goldman Sachs,
4900 Sears Tower, Chicago, Illinois 60606, also serves as the Fund's transfer
agent (the "Transfer Agent") and as such performs various shareholder
servicing functions. As compensation for the services rendered to the Fund by
Goldman Sachs (as Transfer Agent), Goldman Sachs is entitled to receive a
transfer agency fee with respect to the Fund's Institutional and Service
Shares equal, on an annual basis, to 0.04% of the average daily net assets.
Shareholders with inquiries regarding the 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 Fund. Goldman Sachs reserves the right to redeem at any
time some or all of the Fund 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 accounts 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 Fund is responsible for the payment of its expenses. The expenses
include, without limitation; fees payable to the Investment Adviser; 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 Fund 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 Fund); 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.

20
<PAGE>

NET ASSET VALUE

The NAV per Share of the Class of the 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 the Fund may publish average annual total return, yield
and distribution rates 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. The Fund may
also from time to time advertise total return on a cumulative, average, year-
by-year or other basis for various specified periods by means of quotations,
charts, graphs or schedules. In addition, the Fund may furnish total return
calculations based on investments at various sales charge levels or at NAV.
Any performance information which is based on the Fund's NAV per Share would
be reduced if any applicable sales charge were taken into account. In addition
to the above, the 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.

The Fund computes its yield by dividing net investment income earned during
a recent thirty-day period by the product of the average daily number of
Shares outstanding and entitled to receive dividends during the period and the
maximum offering price per Share on the last day of the relevant period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized. Net investment income per Share is equal to the dividends and
interest earned during the period, reduced by accrued expenses for the period.
The calculation of net investment income for these purposes may differ from
the net investment income determined for accounting purposes. The Fund's
quotations of distribution rate are calculated by annualizing the most recent
distribution of net investment income for a monthly, quarterly or other
relevant period and dividing this amount by the NAV per Share on the last day
of the period for which the distribution rates are being calculated.

The Fund's yield, total return and distribution rate will be calculated
separately for each Class of Shares in existence. Because each Class of Shares
may be subject to different expenses, yield, the total return and distribution
rate calculations with respect to each Class of Shares for the same period
will differ. See "Shares of the Trust."

The Fund's performance quotations do not reflect any fees charged by a
Service Organization to its customers' accounts in connection with investments
in the Fund. The investment results of the Fund will fluctuate over time and
any presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the Fund's
performance may be in any future period. In addition to information provided
in shareholder reports, the Fund may, in its discretion, from time to time
make a list of its holdings available to investors upon request.

21
<PAGE>

SHARES OF THE TRUST

Goldman Sachs Trust was formed under the laws of the State of Delaware on
January 28, 1997. On April 30, 1997, Goldman Sachs Trust, formerly a Maryland
corporation, was reorganized into the Trust. 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.

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 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.

TAXATION

FEDERAL TAXES

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

22
<PAGE>

are received in cash or reinvested in Shares. The Fund's dividends that are
paid to its corporate shareholders and are attributable to qualifying
dividends the 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. Since dividends the Fund receives from
REITs are not qualifying dividends for this purpose, it is not likely that a
substantial portion of the Fund's dividends will generally qualify for the
corporate dividends-received deduction. Certain distributions paid by the Fund
in January of a given year may be taxable to shareholders as if received the
prior December 31. Shareholders will be informed annually about the amount and
character of distributions received from the Fund for federal income tax
purposes.

Redemptions and exchanges of Shares are taxable events.

OTHER 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, Martin Luther King Day, Presidents' Day (observed), Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

23
<PAGE>

ADDITIONAL SERVICES

The Trust, on behalf of the Fund, has adopted a Service Plan with respect to
the Service Shares which authorizes the Fund to compensate Service Organiza-
tions for providing account administration and personal and account maintenance
services to their customers who are beneficial owners of such Shares. The
Trust, on behalf of the Fund, enters into agreements with Service Organizations
which purchase Service Shares on behalf of their customers ("Service Agree-
ments"). The Service Agreements provide for compensation to the Service Organi-
zations 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 maintenance services may not exceed 0.25% of
such average daily net assets. The services provided by the Service Organiza-
tions may include acting, directly or through an agent, as the sole shareholder
of record, maintaining account records for customers, processing orders to pur-
chase, redeem or exchange Service Shares for customers, responding to inquiries
from prospective and existing shareholders and assisting customers with invest-
ment procedures.

The Trust may authorize certain Service Organizations to accept on the
Trust's behalf, purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Fund will be deemed to have received an or-
der in proper form when the order is accepted by the authorized Service Organi-
zation 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 Organi-
zation 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 Fund or Goldman Sachs that are in addi-
tion to the payments payable by the Trust under the Service Plan.

Holders of Service Shares of the Fund bear all expenses and fees paid to
Service 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 accounts.
These fees would be in addition to any amounts received by the Service Organi-
zation under a Service Agreement and may affect the return earned on an invest-
ment in the Fund. The Trust, on behalf of the Fund, accrues payments made pur-
suant to a Service Agreement daily. All inquiries of beneficial owners of Serv-
ice Shares should be directed to such owners' Service Organization.

The Investment Adviser, Distributor, and/or their affiliates, also pay addi-
tional compensation from time to time, out of their assets and not as an addi-
tional charge to the Fund, to selected Service Organizations and other persons
in connection with the sale of Shares of the Fund and other investment portfo-
lios of the Trust (such as additional payments based on new sales amounts ex-
ceeding 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, enter-
tainment and prizes such as travel awards, merchandise, cash, investment re-
search and educational information and related support materials. This addi-
tional compensation can vary among Service Organizations depending upon such
factors as the amounts their customers have invested (or may invest) in partic-
ular investment portfo-

24
<PAGE>

lios of the Trust, and the particular program involved, or the amount of reim-
bursement expenses. Additional compensation based on sales may, but is cur-
rently not expected to, exceed 0.50% (annualized) of the amount invested. For
further information, see the Additional Statement.

REPORTS TO SHAREHOLDERS

Recordholders of Service Shares of the Fund will receive an annual report
containing audited financial statements and a semiannual 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.

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 the 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 the 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 distri-
bution. If no election is made, all dividends from net investment income and
capital gain distributions will be reinvested in Service Shares of the Fund.

The election to reinvest dividends and distributions paid by the Fund in ad-
ditional 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 the Fund.

The 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. The Fund will pay dividends from net investment income
quarterly. The 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 the Fund's dividends may constitute a
return of capital.

At the time of an investor's purchase of Shares of the 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.

25
<PAGE>

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 description
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. Cur-
rently, 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 Fund must be settled within three (3) Business Days of
the receipt of a complete purchase order. Payment of the proceeds of redemption
of Shares purchased by check may be delayed for a period of time as described
under "Redemption of Service Shares."

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 Real Estate Securities Fund--Name of Class of Shares"
and should be directed to "Goldman Sachs Real Estate Securities Fund--Name of
Class of Shares," c/o National Financial Data Services, Inc. ("NFDS"), P.O. Box
419711, Kansas City, MO 64141-6711.

OTHER PURCHASE INFORMATION

The Fund does 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 Fund, to selected Service Organizations and other
persons in connection with the sale of Shares of the Fund 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.

26
<PAGE>

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 Fund reserves the right to redeem Service Shares of any Service Organiza-
tion 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 ac-
count falls below the minimum account balance solely as a result of market con-
ditions. The Trust will give 60 days' prior written notice to Service Organiza-
tions whose Service Shares are being redeemed to allow them to purchase suffi-
cient additional Service Shares to avoid such redemption.

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

EXCHANGE PRIVILEGE

Service Shares of the Fund may be exchanged by a Service Organization for (i)
Service Shares of any other mutual fund sponsored by Goldman Sachs and desig-
nated 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 writ-
ing to Goldman Sachs, Attention: Goldman Sachs Real Estate Securities Fund--
Name of Class of Shares, c/o GSAM Shareholder Services, 4900 Sears Tower, Chi-
cago, Illinois 60606 or, if previously elected in the Fund's Account Informa-
tion 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 objectives, policies and applicable
fees before making an exchange. Service Shares acquired by telephone exchange
must be registered in the same name(s) and have the same address 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 dif-
ficult 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 received in the ex-
change. Shareholders should consult their own tax advisers concerning the tax
consequences of an exchange. Exchanges are available only in states where ex-
changes may legally be made. The exchange privilege may be materially modified
or withdrawn at any time on 60 days' written notice to recordholders of Service
Shares and is subject to certain limitations. See "Purchase of Service Shares."

27
<PAGE>

REDEMPTION OF SERVICE SHARES

The Fund will redeem its Service Shares upon request of the recordholder of
such Shares on any Business Day at the NAV next determined after receipt of
such 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 be authorized to accept requests for the Fund.) If Service Shares
to be redeemed were recently purchased by check, the Fund may delay transmittal
of redemption proceeds until such time as it has assured itself that good funds
have been collected for the purchase of such 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 Fund,
the Trust nor Goldman Sachs will be responsible for the authenticity of
redemption or exchange instructions received by telephone.

The Fund 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 of
one-day delay), but may be paid up to 3 days after receipt of a properly
executed redemption request. Wiring of redemption proceeds may be delayed one
additional Business Day if the Federal Reserve Bank is closed on the day
redemption proceeds would ordinarily be wired. Redemption proceeds paid by
check will normally be mailed to the address of record within 3 Business Days
of receipt of a properly executed redemption request. Once wire transfer
instructions have been given by Goldman Sachs, neither the Fund, the Trust nor
Goldman Sachs assumes any further responsibility for the performance of
intermediaries or the customer's Service Organization in the transfer process.
If a problem with such performance arises, the customer should deal directly
with such intermediaries or Service Organizations.

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

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

28
<PAGE>

APPENDIX

GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM

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

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

If you do not have a TIN, you should apply for one immediately by contacting
your local office of the Social Security Administration or the Internal
Revenue Service (IRS). Backup withholding could also apply to payments
relating to your account prior to the 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 the Fund in order to avoid backup withholding on certain
payments. Other payments to you may be subject to nonresident alien
withholding of up to 30%.

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

A-1
<PAGE>

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

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

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

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

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

REPROSVC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GOLDMAN SACHS
REAL ESTATE
SECURITIES FUND

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

PROSPECTUS

SERVICE SHARES

LOGO
Goldman
Sachs

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

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

PROSPECTUS
July 27, 1998, as revised October 1, 1998

GOLDMAN SACHS REAL ESTATE SECURITIES FUND
INSTITUTIONAL SHARES

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights.................... 3
Fees and Expenses.................. 5
Investment Objectives and Policies. 6
Description of Securities.......... 7
Investment Techniques.............. 11
Risk Factors....................... 15
Investment Restrictions............ 17
Portfolio Turnover................. 17
Management......................... 17
Expenses........................... 20
Net Asset Value.................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Performance Information............ 21
Shares of the Trust................ 22
Taxation........................... 22
Additional Information............. 23
Reports to Shareholders............ 24
Dividends.......................... 24
Purchase of Institutional Shares... 24
Exchange Privilege................. 27
Redemption of Institutional Shares. 27
Appendix .......................... A-1
Account Application
</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?

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND?

The Fund has distinct investment objectives and policies. There can be no
assurance that the Fund's objective will be achieved. The Fund is a
"diversified open-end management investment company" as defined in the
Investment Company Act of 1940, as amended (the "Act"). For a further
description of the Fund's investment objectives and policies, see "Investment
Objectives and Policies," "Description of Securities" and "Investment
Techniques."
<TABLE>

<S> <C>
INVESTMENT OBJECTIVE Total return comprised of long-term
growth of capital and dividend
income.
- ----------------------------------------------------------------------------
INVESTMENT CRITERIA Substantially all, and at least 80%,
of total assets in a diversified
portfolio of equity securities of
issuers that are primarily engaged in
or related to the real estate
industry. The Fund expects that a
substantial portion of its total
assets will be invested in real
estate investment trusts ("REITs").
- ----------------------------------------------------------------------------
BENCHMARK Wilshire Real Estate Securities Index
("WARESI").
</TABLE>

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

The Fund's Share price will fluctuate with market and conditions, so that
an investment in the Fund may be worth more or less when redeemed than when
purchased. The Fund should not be relied upon as a complete investment
program. There can be no assurance that the Fund's investment objective
will be achieved. In view of the specialized nature of the Fund's
investments, the Fund may be suitable only for those investors who are
financially able to assume greater risk and share price volatility than
presented by funds that do not concentrate in the real estate industry. See
"Risk Factors."

3
<PAGE>

the real estate industry in general, including possible declines in the
value of real estate, general and local economic conditions, environmental
problems and changes in interest rates. To the extent that assets
underlying the Fund's investments are concentrated geographically, by
property type or in certain other respects, these risks may be heightened.
In addition, if the Fund has rental income or income from the disposition
of real property acquired as a result of a default on securities the Fund
owns, the receipt of such income may adversely affect its ability to retain
its tax status as a regulated investment company.

Other. The Fund may invest in foreign securities and lower rated debt
securities and may use certain investment techniques, including
derivatives, forward contracts, options and futures. These investments and
investment techniques will subject the Fund to greater risk.

WHO MANAGES THE FUND?

Goldman Sachs Asset Management serves as Investment Adviser to the Fund.
As of August 21, 1998, the Investment Adviser, together with its
affiliates, acted as investment adviser, administrator or distributor for
assets in excess of $168 billion.

WHO DISTRIBUTES THE FUND'S SHARES?

Goldman Sachs acts as distributor of the 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 the Fund alone
or in combination with Institutional Shares (or the corresponding class) of
any other mutual fund sponsored by Goldman Sachs and designated as an
eligible fund for this purpose.

HOW DO I PURCHASE INSTITUTIONAL SHARES?

You may purchase Institutional Shares of the Fund 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>
<CAPTION>
INVESTMENT INCOME DIVIDENDS CAPITAL GAINS
DECLARED AND PAID DISTRIBUTIONS
----------------- -------------
<S> <C> <C>
Quarterly Annually
</TABLE>

Recordholders of Institutional Shares may receive dividends and
distributions in additional Institutional Shares of the Fund in which you
have invested or may elect to receive them in cash. For further information
concerning dividends and distributions, see "Dividends."

4
<PAGE>

FEES AND EXPENSES
(INSTITUTIONAL SHARES)

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases.............................. None
Maximum Sales Charge Imposed on Reinvested Dividends................... None
Redemption Fees........................................................ None
Exchange Fees.......................................................... None
ANNUAL FUND OPERATING EXPENSES: (as a percentage of average daily net
assets)/1/
Management Fees........................................................ 1.00%
Distribution Fees...................................................... None
Other Expenses (after applicable limitations)/2/....................... 0.04%
----
TOTAL FUND OPERATING EXPENSES (AFTER EXPENSE LIMITATIONS)/3/............ 1.04%
====
</TABLE>
- ---------------------
/1/ The Fund's annual operating expenses have been restated to reflect fees
and expenses in effect as of September 1, 1998.
/2/ The Investment 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 the Fund's Institutional Shares),
taxes, interest and brokerage fees and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.00% of
the Fund's average daily net assets.
/3/ Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Institutional Shares of the Fund would have
been 0.58% and 1.58%, respectively.

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 Fund. The Fund also offers Service Shares,
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 sales and distribution of Institutional Shares or for services to their
customer's accounts and/or the Fund. For additional information regarding such
compensation, see "Purchase of Institutional Shares" in the Prospectus and the
Additional Statement.

5
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

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

The Fund's investment strategy is based on the premise that property market
fundamentals are the primary determinant of growth underlying the success of
companies in the real estate industry. The Fund's research and investment
process is designed to identify those companies with strong property
fundamentals and strong management teams. This process is comprised of real
estate market research and securities analysis. The Investment Adviser's
analysis will focus on determining the degree to which a company can achieve
sustainable growth in cash flow and dividend paying capability. The Investment
Adviser will take into account fundamental trends in underlying property
markets as determined by proprietary models, research of local real estate
markets, earnings, cash flow growth and stability, the relationship between
asset values and market prices of the securities and dividend payment history.
The Investment Adviser will attempt to purchase securities of companies whose
underlying portfolios are diversified geographically and by property type.

REAL ESTATE SECURITIES FUND

Objectives. The Fund's investment objective is to provide investors with
total return comprised of long-term growth of capital and dividend income.

6
<PAGE>

DESCRIPTION OF SECURITIES

The Fund 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

FOREIGN INVESTMENTS

7
<PAGE>

8
<PAGE>

FIXED-INCOME SECURITIES

9
<PAGE>

The Fund may also invest in stripped Mortgage-Backed Securities ("SMBS")
(including interest only and principal only securities), which are derivative
multiple class Mortgage-Backed Securities. SMBS are usually structured with
two different classes: one that receives 100% of the interest payments and the
other that receives 100% of the principal payments from a pool of mortgage
loans. If the underlying mortgage loans experience different than anticipated
prepayments of principal, the Fund may fail to recoup fully its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest from mortgage loans are generally higher than prevailing
market yields on other Mortgage-Backed Securities because their cash flow
patterns are more volatile and there is a greater risk that the initial
investment will not be fully recouped. The Fund's investments in SMBS may
require the Fund to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.

10
<PAGE>

UNSEASONED COMPANIES

INVESTMENT TECHNIQUES

OPTIONS ON SECURITIES AND SECURITIES INDICES

11
<PAGE>

OPTIONS ON FOREIGN CURRENCIES

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

12
<PAGE>

EQUITY SWAPS

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS

ILLIQUID AND RESTRICTED SECURITIES

13
<PAGE>

REPURCHASE AGREEMENTS

LENDING OF PORTFOLIO SECURITIES

SHORT SALES AGAINST-THE-BOX

The 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, 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 the 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 no longer be used to defer the
recognition of gain for tax purposes with respect to appreciated securities in
the Fund's portfolio.

TEMPORARY INVESTMENTS

14
<PAGE>

MISCELLANEOUS TECHNIQUES

RISK FACTORS

15
<PAGE>

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.
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 the Fund. The repatriation of both investment income and capital
from certain Emerging Countries is subject to restrictions such as the need
for governmental consents. Many Emerging Countries may be subject to a greater
degree of economic, political and social instability 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. 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. Settlement procedures in Emerging Countries are frequently less
developed and reliable than those in the United States and may involve the
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 the 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.

16
<PAGE>

INVESTMENT RESTRICTIONS

PORTFOLIO TURNOVER

A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by the Fund and its shareholders and may
under certain circumstances make it more difficult for the Fund to qualify as
a regulated investment company under the Code. It is anticipated that the
annual portfolio turnover rate of the Fund will generally not exceed 100%. 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 the 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

17
<PAGE>

INVESTMENT ADVISER

INVESTMENT ADVISER. Goldman Sachs Asset Management, One New York Plaza, New
York, New York 10004, a separate operating division of Goldman Sachs, serves
as investment adviser to the Fund. Goldman Sachs registered as an investment
adviser in 1981. As of August 21, 1998, GSAM, together with its affiliates,
acted as investment adviser or distributor for assets in excess of $168
billion.

Under a Management Agreement with the Fund, the 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
Trust to use the name "Goldman Sachs" or a derivative thereof as part of the
Fund's name for as long as the Fund's Management Agreement is in effect.

FUND MANAGERS

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ----------- ----------------------------
<C> <C> <S>
Herbert E. Ehlers Since 1998 Mr. Ehlers joined the Investment Adviser in
Managing Director 1997 and is part of the portfolio management
and Portfolio Man- team of the Real Estate Securities Fund and
ager the Chief Investment Officer of the Growth
Equity Strategy. From 1994 to 1997, he was
the Chief Investment Officer of Liberty
Investment Management, Inc. He was a
portfolio manager and president of Liberty's
predecessor from Eagle Asset Management, from
1984 to 1994.

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

18
<PAGE>

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ----------- ----------------------------
<C> <C> <S>
Mark Howard-Johnson Since 1998 Mr. Howard-Johnson joined the Investment
Vice President and Adviser in 1998 and is a portfolio manager
Portfolio Manager for the Real Estate Securities Fund. His
previous experience includes 15 years in the
real estate finance business. From 1996 to
1998, he was the senior equity analyst for
Boston Financial, responsible for the Pioneer
Real Estate Shares Fund. Prior to joining
Boston Financial, from 1994 to 1996, Mr.
Howard-Johnson was a real estate securities
analyst for The Penobscot Group, Inc., one of
only two independent research firms in the
public real estate securities business. For
five years prior to this, he held senior
management positions within various real
estate divisions of the Fleet Financial
Group.
</TABLE>

19
<PAGE>

DISTRIBUTOR AND TRANSFER AGENT

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 accounts 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

20
<PAGE>

NET ASSET VALUE

PERFORMANCE INFORMATION

From time to time the Fund may publish average annual total return, yield
and distribution rates 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. The Fund may
also from time to time advertise total return on a cumulative, average, year-
by-year or other basis for various specified periods by means of quotations,
charts, graphs or schedules. In addition, the Fund may furnish total return
calculations based on investments at various sales charge levels or at NAV.
Any performance information which is based on the Fund's NAV per Share would
be reduced if any applicable sales charge were taken into account. In addition
to the above, the 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.

21
<PAGE>

SHARES OF THE TRUST

Goldman Sachs Trust was formed under the laws of the State of Delaware on
January 28, 1997. On April 30, 1997, Goldman Sachs Trust, formerly a Maryland
corporation, was reorganized into the Trust. 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.

TAXATION

FEDERAL TAXES

22
<PAGE>

Redemptions and exchanges of Shares are taxable events.

OTHER 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, Martin Luther King Day, Presidents' Day (observed), Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

23
<PAGE>

REPORTS TO SHAREHOLDERS

Recordholders of Institutional Shares of the Fund will receive an annual
report containing audited financial statements and a semiannual report. To
eliminate unnecessary duplication, only one copy of such report may be sent to
recordholders with the same mailing address. Recordholders who desire a
duplicate copy of such reports to be mailed to their residence should contact
Goldman Sachs at 800-621-2550. 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 Fund does 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 the 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 the 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 Fund.

The election to reinvest dividends and distributions paid by the 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 the Fund.

At the time of an investor's purchase of Shares of the 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

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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 Fund 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 the Fund, an investor must open an
account with the Fund by furnishing necessary information to the Fund or
Goldman Sachs. An Account Information Form, a copy of which is attached to this
Prospectus, should be used to 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 and Trust Company ("State Street") 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 Real Estate Securities Fund--Name
of Class of Shares" and should be directed to "Goldman Sachs Real Estate
Securities Fund--Name of 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 the 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

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<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, the 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 the 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 Fund or Goldman Sachs for the services provided by them with
respect to the Fund's Institutional Shares. These payments may be in addition
to other servicing and/or sub-transfer agency payments borne by the Fund and
its 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 Fund, 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 Fund 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 may 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 0.50% (annualized) of the amount invested.
For further information, see the Additional Statement.

The Fund reserves 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 sixty (60) days' prior written
notice to recordholders whose Institutional Shares are being redeemed to allow
them to purchase sufficient additional Institutional Shares of the Fund to
avoid such redemption.

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

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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 Real Estate Securities Fund--Name of 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 objectives, 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 "Redemptions 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 the 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 sixty (60) days' written notice to holders
of Institutional Shareholders and is subject to certain limitations. See
"Purchase of Institutional Shares."

REDEMPTION OF INSTITUTIONAL SHARES

The Fund will redeem its 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 Fund. If Institutional Shares to be redeemed were
recently purchased by check, the Fund may delay transmittal of redemption
proceeds until such time as it has assured itself that good funds have been
collected for the purchase of such Institutional Shares. This may take up to
fifteen (15) days. Redemption requests may be made by 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>

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

The Fund will arrange for the proceeds of redemptions effected by any means
to be wired as federal funds to the bank account designated in the
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 (3) Business Days after receipt of a properly
executed redemption request. Wiring of redemption proceeds may be delayed one
additional Business Day if the Federal Reserve Bank is closed on the day
redemption proceeds would originally be wired. Redemption proceeds paid by
check will normally be mailed to the address of record within three (3)
Business Days of receipt of a properly executed redemption request. In order to
change the bank designated on the Account Information Form to receive
redemption proceeds, a written request must be received by the Transfer Agent.
This request must be signature guaranteed as set forth above. Further
documentation may be required for executors, trustees or corporations. Once
wire transfer instructions have been given by Goldman Sachs, neither the Fund,
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.

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

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APPENDIX

GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM

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

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.

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

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

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

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

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

REPROINST
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GOLDMAN SACHS
REAL ESTATE SECURITIES FUND

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PROSPECTUS

INSTITUTIONAL SHARES

LOGO
Goldman
Sachs

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