GOLDMAN SACHS TRUST, 497, 1998-02-10

GOLDMAN SACHS TRUST
497, 1998-02-10

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PROSPECTUS
January 1, 1998 GOLDMAN SACHS
ASSET ALLOCATION PORTFOLIOS
INSTITUTIONAL SHARES

The Goldman Sachs Asset Allocation Portfolios (the "Portfolios") are
professionally-managed portfolios designed to take advantage of the benefits of
asset allocation. Each Portfolio has a separate objective, which it seeks to
achieve by investing in a number of other Goldman Sachs mutual funds (the
"Underlying Funds").

GOLDMAN SACHS INCOME STRATEGY PORTFOLIO
Seeks a high level of current income with greater stability of principal
than an investment in equity securities alone.

GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO
Seeks long-term capital appreciation and current income.

GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO
Seeks capital appreciation and secondarily current income.

GOLDMAN SACHS AGGRESSIVE GROWTH STRATEGY PORTFOLIO
Seeks capital appreciation.

Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
investment adviser to each Portfolio. GSAM and its affiliates also provide
advisory services to the Underlying Funds. GSAM is also referred to in this
Prospectus as the "Investment Adviser." Goldman Sachs serves as the Portfolios'
distributor and transfer agent.

INSTITUTIONAL SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A PORTFOLIO
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.

This Prospectus provides information about Goldman Sachs Trust (the "Trust")
and the Portfolios 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 January 1, 1998,
containing further information about the Trust and the Portfolios 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.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Portfolio Highlights................ 2
Fees and Expenses................... 6
Investment Objectives and Policies.. 8
Risk Factors and Special
Considerations..................... 10
Description of Underlying Funds..... 11
Management.......................... 18
Net Asset Value..................... 22
Performance Information............. 22
Shares of the Trust................. 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Taxation............................ 23
Additional Information.............. 25
Reports to Shareholders............. 25
Dividends........................... 25
Purchase of Institutional Shares.... 26
Exchange Privilege.................. 28
Redemption of Institutional Shares.. 28
Appendix A.......................... A-1
Appendix B.......................... B-1
</TABLE>
<PAGE>

PORTFOLIO 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 in several investment portfolios (mutual funds).
Each Portfolio pools the monies of investors by selling its shares to the
public and investing these monies in a portfolio of securities designed
to achieve that Portfolio's stated investment objective.

WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?

Each Portfolio has distinct investment objectives and policies. Each
Portfolio seeks to achieve its objectives by investing in a combination
of Underlying Funds for which Goldman Sachs now or in the future acts as
investment adviser or principal underwriter. Some of these Funds invest
primarily in fixed income or money market securities (the "Underlying
Fixed Income Funds"); other Funds invest primarily in equity securities
(the "Underlying Equity Funds"). Investors may choose to invest in one or
more of the Portfolios based on their personal investment goals, risk
tolerances and financial circumstances. For a further description of the
Portfolios' investment objectives and policies, see "Investment
Objectives and Policies."

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO NAMES INVESTMENT OBJECTIVES INVESTMENT CRITERIA
---------------- ------------------------ -------------------------------------------
<S> <C> <C>
GOLDMAN SACHS High level of current Under normal conditions, approximately 60%
INCOME STRATEGY income with greater of the Portfolio's total assets will be
PORTFOLIO stability of principal allocated among Underlying Fixed Income
than an investment in Funds. Allocation to Underlying Equity
equity securities alone. Funds is intended to add diversification
and enhance returns, but will also add some
volatility.
- ----------------------------------------------------------------------------------------
GOLDMAN SACHS Long-term capital Under normal conditions, approximately 60%
GROWTH AND appreciation and current of the Portfolio's total assets will be
INCOME STRATEGY income. allocated among Underlying Equity Funds,
PORTFOLIO which are intended to provide the capital
appreciation component. Allocation to
Underlying Fixed Income Funds is intended
to provide the income component.
- ----------------------------------------------------------------------------------------
GOLDMAN SACHS Capital appreciation and Under normal conditions, approximately 80%
GROWTH STRATEGY secondarily current of the Portfolio's total assets will be
PORTFOLIO income. allocated among Underlying Equity Funds,
with a blend of domestic large cap, small
cap and international exposure to seek
capital appreciation. Allocation to
Underlying Fixed Income Funds is to provide
diversification.
- ----------------------------------------------------------------------------------------
GOLDMAN SACHS Capital appreciation. Under normal conditions, substantially all
AGGRESSIVE of the Portfolio's total assets will be
GROWTH STRATEGY allocated among Underlying Equity Funds,
PORTFOLIO with a greater focus on small cap and
international investments.
</TABLE>

2
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WHAT IS GOLDMAN SACHS ASSET MANAGEMENT'S GLOBAL ASSET ALLOCATION PROCESS?

The Quantitative Research Group at GSAM uses disciplined quantitative models
to determine the relative attractiveness of the world's stock, bond and
currency markets. GSAM's models use financial and economic variables to capture
fundamental relationships that it believes make sense. While GSAM's process is
rigorous and quantitative, it also incorporates clear economic reasoning behind
each recommendation.

Each Portfolio starts with a "base-line" or strategic allocation among the
various asset classes. GSAM will then tactically deviate from the strategic
allocations based on forecasts provided by the models. The tactical process
seeks to add value by overweighting attractive markets and underweighting
unattractive markets. Greater deviations from the strategic allocation of a
given Portfolio result in higher risk that the tactical allocation will
underperform the strategic allocation. However, GSAM's risk control process
balances the amount any asset class can be overweighted or underweighted in
seeking to achieve higher expected returns against the amount of risk imposed
by that deviation from the strategic allocation. GSAM employs Goldman, Sachs &
Co.'s proprietary Black-Litterman asset allocation technique in an effort to
optimally balance these two goals. This technique combines the Quantitative
Research Group's market forecasts with economic equilibrium in seeking to
construct risk-controlled portfolios.

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

The Portfolios are intended as an efficient and cost-effective method of
giving investors access to four different portfolio mixes. The risk/return
balance of each Portfolio is varied by the proportion of assets allocated to
the different kinds of investments. For example, the Aggressive Growth Strategy
Portfolio intends to invest substantially all of its assets in Underlying Funds
that invest in equity securities. An investor seeking capital appreciation
potential, with a longer time horizon and a tolerance for volatility, might
choose this Portfolio. Conversely, an investor seeking a balance of income and
growth, with a shorter time horizon and less tolerance for volatility, might
choose the Income Strategy Portfolio or Growth and Income Strategy Portfolio,
which invest a larger portion of their assets in Underlying Funds that invest
in fixed income securities.

Because the assets of each Portfolio are invested in Underlying Funds, each
Portfolio's investment performance is directly related to the investment
performance of the Underlying Funds held by it. The ability of a Portfolio to
meet its investment objective is, therefore, also directly related to the
ability of the Underlying Funds held to meet their objectives, as well as the
allocation among those Underlying Funds by the Investment Adviser.

The value of the Underlying Funds' investments, and the net asset values of
the shares of both the Underlying Funds and the Portfolios, will fluctuate in
response to changes in market and economic conditions, as well as the financial
condition and prospects of issuers in which the Underlying Funds invest. An
Underlying Fund's use of certain investment techniques, including derivatives,
forward contracts, options and futures, will subject the Fund to greater risk
than funds that do not employ such techniques. In addition, investments by
certain Underlying Funds in foreign issuers, currencies, real estate investment
trusts and small market capitalization companies will expose those Funds to a
higher degree of risk and price volatility. These investments include
securities of issuers located in countries in Asia, Latin America, Eastern
Europe and Africa whose economies or securities markets are considered not to
be fully developed ("Emerging Countries"). Some

3
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Underlying Funds may also invest in non-investment grade fixed income
securities (commonly referred to as "junk bonds"), which are considered to be
speculative by traditional investment standards.

An investor in the Portfolios should realize that investments in the
Underlying Funds can be made directly. By investing in the Underlying Funds
indirectly through the Portfolios, an investor will incur not only a
proportionate share of the expenses of the Underlying Funds (including
operating costs and investment management fees), but also expenses of the
Portfolios. While the Portfolios offer a greater level of diversification than
many other types of mutual funds, a single Portfolio may not provide a complete
investment program for an investor.

For a further description of the risks involved in an investment in the
Portfolios and the Underlying Funds, see "Risk Factors and Special
Considerations" and Appendix A to this Prospectus.

WHO MANAGES THE PORTFOLIOS?

Goldman Sachs Asset Management serves as Investment Adviser to the Portfolios
and, except as noted, to each Underlying Fund. Goldman Sachs Funds Management,
L.P. serves as investment adviser to the CORE U.S. Equity, Capital Growth,
Adjustable Rate Government and Short Duration Government Funds. Goldman Sachs
Asset Management International serves as investment adviser to the
International Equity, Emerging Markets Equity, Asia Growth and Global Income
Funds. As of November 21, 1997, the Investment Adviser, together with its
affiliates, acted as investment adviser or distributor for assets in excess of
$133.6 billion.

WHO DISTRIBUTES THE PORTFOLIOS' SHARES?

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

WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment in Institutional Shares of any Portfolio is
either $1,000,000 or $10,000,000, depending upon the particular investor
involved. See "Purchase of Institutional Shares."

HOW DO I PURCHASE INSTITUTIONAL SHARES?

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

HOW DO I SELL MY INSTITUTIONAL SHARES?

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

4
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How do I Receive Dividends and Distributions?

<TABLE>
<CAPTION>
INVESTMENT INCOME CAPITAL
DIVIDENDS GAINS
PORTFOLIO DECLARED AND PAID DISTRIBUTIONS
- --------- ----------------- -------------
<S> <C> <C>
Income Strategy................................. Monthly Annually
Growth and Income Strategy...................... Quarterly Annually
Growth Strategy................................. Quarterly Annually
Aggressive Growth Strategy...................... Annually Annually
</TABLE>

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

5
<PAGE>

FEES AND EXPENSES
(INSTITUTIONAL SHARES)

<TABLE>
<CAPTION>
GROWTH AND AGGRESSIVE
INCOME INCOME GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Pur-
chases............................. None None None None
Maximum Sales Charge Imposed on Re-
invested Dividends................. None None None None
Redemption Fees..................... None None None None
Exchange Fees....................... None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily
net assets)
Management Fees (for asset
allocation) (after applicable
limitations)/1/.................... 0.15% 0.15% 0.15% 0.15%
Distribution (Rule 12b-1) Fees...... None None None None
Other Expenses:
Underlying Fund Expenses/2/......... 0.65% 0.76% 0.81% 0.90%
Other Expenses (after applicable
limitations)/3/.................... 0.10% 0.10% 0.10% 0.10%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (after
expense limitations)/4/............. 0.90% 1.01% 1.06% 1.15%
==== ==== ==== ====
</TABLE>
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/1/The Investment Adviser has voluntarily agreed that a portion of the
management fees would not be imposed on the Portfolios equal to 0.20%.
Without such limitation, management fees would be 0.35% of each Portfolio's
average daily net assets.
/2/Based on estimated amounts for the current fiscal year. Underlying Fund
expenses for each Portfolio are estimated based upon the initial allocation
of each Portfolio's investment in the Underlying Funds and upon the total
operating expenses of the Underlying Funds for their last fiscal years or
their estimated expenses for the current year. Actual Underlying Fund
expenses incurred by each Portfolio may vary with changes in the allocation
of each Portfolio's assets among the Underlying Funds and with other events
that directly affect the expenses of the Underlying Funds. For additional
information on the total operating expenses of each Underlying Fund, please
refer to "Management--Expenses."
/3/The Investment Adviser voluntarily has agreed to reduce or limit certain
other expenses (excluding management fees, taxes, interest, brokerage fees,
and litigation, indemnification and other extraordinary expenses) for each
Portfolio to the extent such expenses exceed 0.10% of the Portfolio's
average daily net assets.
/4/Without the limitations and waivers described above, "Other Expenses" and
"Total Operating Expenses" of the Portfolios for the current fiscal year are
estimated to be as follows:

<TABLE>
<CAPTION>
GROWTH AND AGGRESSIVE
INCOME STRATEGY INCOME STRATEGY GROWTH STRATEGY GROWTH STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Other Expenses.......... 1.14% 0.60% 0.78% 2.21%
Total Operating
Expenses............... 2.14% 1.71% 1.94% 3.46%
</TABLE>

6
<PAGE>

The Portfolios will invest only in Institutional Shares of the Underlying
Funds and, accordingly, will not pay any sales load or 12b-1 distribution or
service fees in connection with their investments in shares of the Underlying
Funds. The Portfolios will, however, indirectly bear their pro rata share of
the fees and expenses incurred by the Underlying Funds that are applicable to
Institutional Shareholders. The following example assumes the payment by each
Portfolio of operating expenses at the levels set forth in the table above and
of its pro rata share of the Institutional Share expenses of the Underlying
Funds (also as set forth above) in which a Portfolio is expected to initially
invest.

EXAMPLE

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:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Income Strategy Portfolio........................................ $ 9 $29
Growth and Income Strategy Portfolio............................. $10 $32
Growth Strategy Portfolio........................................ $11 $34
Aggressive Growth Strategy Portfolio............................. $12 $37
</TABLE>

The Investment Adviser and Goldman Sachs have no current intention of
modifying or discontinuing any of the limitations set forth above but may do
so in the future at their discretion. The information set forth in the
foregoing table and hypothetical example relates only to Institutional Shares
of the Portfolios. Each Portfolio also offers Class A, B, C 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. Information regarding Class A, B, C and Service Shares
of the Portfolios may be obtained from an investor's sales representative or
from Goldman Sachs by calling the number on the back cover of this Prospectus.

Certain institutions that invest in Institutional Shares on behalf of their
customers may receive certain compensation in connection with the sale and
distribution of such Shares or for services to the Portfolios. For additional
information regarding such compensation, see "Purchase of Institutional
Shares" in this Prospectus and the Additional Statement.

The purpose of the foregoing tables is to assist investors in understanding
the various fees and expenses of a Portfolio that an investor will bear
directly or indirectly. As stated, the information on the fees and expenses
included in the tables and hypothetical example above is based on each
Portfolio's estimated fees and expenses for the current fiscal year and
expected initial allocation among the Underlying Funds, and should not be
considered as representative of past or future expenses. Actual fees and
expenses may be more or less than those indicated. Moreover, while the example
assumes a 5% annual return, a Portfolio's actual performance will vary and may
result in an actual return more or less than 5%. Information about the actual
performance of the Portfolios will be contained in the Portfolios' future
annual shareholder reports, which may be obtained without charge when they
become available.

7
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INVESTMENT OBJECTIVES AND POLICIES

The four Portfolios described in this Prospectus are intended for investors
who prefer to have their asset allocation decisions made by professional money
managers. Each Portfolio seeks to achieve its investment objective by
investing within specified equity and fixed income ranges among Underlying
Funds having different combinations of investments and different degrees of
potential investment risk and reward. An investor should choose a Portfolio
based on personal objectives, investment time horizon, tolerance for risk and
personal financial circumstances.

The Income Strategy Portfolio's investment objective is to seek a high level
of current income with greater stability of principal than an investment in
equity securities alone. The Growth and Income Strategy Portfolio's investment
objective is to seek long-term capital appreciation and current income. The
Growth Strategy Portfolio's investment objective is to seek capital
appreciation and secondarily current income. The Aggressive Growth Strategy
Portfolio's investment objective is to seek capital appreciation. There can be
no assurance that any Portfolio's investment objective will be achieved.

In managing the Portfolios, the Investment Adviser will seek to maintain
different allocations among the Underlying Equity Funds and the Underlying
Fixed Income Funds depending on a Portfolio's investment objective. The tables
below illustrate the initial Underlying Equity/Fixed Income Fund allocation
targets and ranges for each Portfolio:

EQUITY/FIXED INCOME RANGE (PERCENTAGE OF EACH PORTFOLIO'S NET ASSETS)

<TABLE>
<CAPTION>
NAME OF PORTFOLIO TARGET RANGE
----------------- ------ --------
<S> <C> <C>
Income Strategy Portfolio
Equity........................................................ 40% 20%-60%
Fixed Income.................................................. 60% 40%-80%
Growth and Income Strategy Portfolio
Equity........................................................ 60% 40%-80%
Fixed Income.................................................. 40% 20%-60%
Growth Strategy Portfolio
Equity........................................................ 80% 60%-100%
Fixed Income.................................................. 20% 0%-40%
Aggressive Growth Strategy Portfolio
Equity........................................................ 100% 75%-100%
Fixed Income.................................................. 0% 0%-25%
</TABLE>

The Investment Adviser will invest in particular Underlying Funds based on
various criteria. Among other things, the Investment Adviser will analyze the
Underlying Funds' respective investment objectives, policies and investment
strategies in order to determine which Underlying Funds, in combination with
other Underlying Funds, are appropriate in light of a Portfolio's investment
objectives.

Each Portfolio is authorized to invest in any or all of the Underlying
Funds. However, it is expected that a Portfolio will normally be invested in
only some of the Underlying Funds at any particular time. A Portfolio's
investment in any of the Underlying Funds may and, in some cases is expected
to, exceed 25% of its total assets.

8
<PAGE>

For example, the Growth Strategy and Aggressive Growth Strategy Portfolios are
each expected to invest initially more than 25% of their assets in the Growth
& Income Fund described below. Similarly, it is expected that the Aggressive
Growth Strategy and Income Strategy Portfolios will invest more than 25% of
their assets in the CORE International and Short Duration Government Funds,
respectively. The Investment Adviser also expects that each Portfolio (in
addition to those listed above) will initially invest a relatively significant
percentage of its equity allocation in the Growth & Income, CORE Large Cap
Growth and CORE International Equity Funds; that the Growth and Income
Strategy Portfolio will invest a relatively significant percentage of its
assets in the Core Fixed Income and Global Income Funds; and that the Income
Strategy Portfolio will invest a relatively significant percentage of its
assets in the Global Income Fund. THE PARTICULAR UNDERLYING FUNDS IN WHICH
EACH PORTFOLIO MAY INVEST, THE EQUITY/FIXED INCOME FUND TARGETS AND RANGES AND
THE INVESTMENTS IN EACH UNDERLYING FUND MAY BE CHANGED FROM TIME TO TIME
WITHOUT SEEKING THE APPROVAL OF THE PORTFOLIO'S SHAREHOLDERS.

Changes in the net asset values of the Underlying Funds will affect a
Portfolio's net asset value. Because each Portfolio invests primarily in other
mutual funds, which fluctuate in value, the Portfolios' shares will
correspondingly fluctuate in value. Although the Portfolios normally seek to
remain substantially invested in the Underlying Funds, a Portfolio may invest
a portion of its assets in high quality, short-term debt obligations to
maintain liquidity in order to meet shareholder redemptions and other short-
term cash needs. These obligations may include commercial paper, certificates
of deposit, bankers' acceptances, repurchase agreements, debt obligations
backed by the full faith and credit of the U.S. Government and demand and time
deposits of domestic and foreign banks and savings and loan associations.
There may be times when, in the opinion of the Investment Adviser, abnormal
market or economic conditions warrant that, for temporary defensive purposes,
a Portfolio invest without limitation in short-term obligations. A Portfolio
may also borrow money for temporary or emergency purposes.

Each Portfolio's turnover rate is expected not to exceed 50% annually. A
Portfolio may purchase or sell securities to: (a) accommodate purchases and
sales of its shares; (b) change the percentages of its assets invested in each
of the Underlying Funds in response to economic or market conditions; and (c)
maintain or modify the allocation of its assets among the Underlying Funds
within the percentage ranges described above.

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

For information about the investment objectives of the Underlying Funds and
their investment securities, techniques and risks, see "Description of the
Underlying Funds" and Appendix A in this Prospectus, the Additional Statement
and the prospectus for each of the Underlying Funds.

9
<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

INVESTING IN UNDERLYING FUNDS

The investments of each Portfolio are concentrated in the Underlying Funds,
and each Portfolio's investment performance is directly related to the
investment performance of the Underlying Funds held by it. The ability of each
Portfolio to meet its investment objectives is directly related to the ability
of the Underlying Funds to meet their objectives as well as the allocation
among those Underlying Funds by the Investment Adviser. The share prices and
yields of both the Portfolios and the Underlying Funds will fluctuate in
response to various market and economic factors related to the equity and
fixed income markets. There can be no assurance that the investment objectives
of any Portfolio or any Underlying Fund will be achieved.

INVESTMENTS OF THE UNDERLYING FUNDS

Because each Portfolio invests in the Underlying Funds, shareholders of each
Portfolio will be affected by the investment policies of the Underlying Funds
in direct proportion to the amount of assets each Portfolio allocates to those
Funds. Each Portfolio may invest in Underlying Funds that in turn invest in
small capitalization companies and foreign issuers and thus are subject to
additional risks, including changes in foreign currency exchange rates and
political risk. Foreign investments may include securities of issuers located
in Emerging Countries in Asia, Latin America, Eastern Europe and Africa. Each
Portfolio may also invest in Underlying Funds that in turn invest in non-
investment grade fixed income securities ("junk bonds"), which are considered
speculative by traditional standards. In addition, the Underlying Funds may
purchase derivative securities; enter into forward currency transactions; lend
their portfolio securities; enter into futures contracts and options
transactions; purchase zero coupon bonds and payment-in-kind bonds; purchase
securities issued by real estate investment trusts and other issuers in the
real estate industry; purchase restricted and illiquid securities; enter into
forward roll transactions; purchase securities on a when-issued or delayed
delivery basis; enter into repurchase agreements; borrow money; and engage in
various other investment practices. The risks presented by these investment
practices are discussed in Appendix A to this Prospectus, the Additional
Statement and the prospectus for each of the Underlying Funds.

AFFILIATED PERSONS

In managing the Portfolios, the Investment Adviser will have the authority
to select and substitute Underlying Funds. The Investment Adviser is subject
to conflicts of interest in allocating Portfolio assets among the various
Underlying Funds both because the fees payable to it and/or its affiliates by
some Underlying Funds are higher than the fees payable by other Underlying
Funds and because the Investment Adviser and its affiliates are also
responsible for managing the Underlying Funds. The Trustees and officers of
the Trust may also have conflicting interests in fulfilling their fiduciary
duties to both the Portfolios and the Underlying Funds.

EXPENSES

An investor in a Portfolio should realize that investments in the Underlying
Funds can be made directly. By investing in the Underlying Funds indirectly
through a Portfolio, an investor will incur not only a proportionate share of
the expenses of the Underlying Funds held by the Portfolio (including
operating costs and investment management fees), but also expenses of the
Portfolio.

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<PAGE>

DESCRIPTION OF UNDERLYING FUNDS

The following is a concise description of the investment objectives and
practices for each of the Underlying Funds that are available for investment
by the Portfolios as of the date of the Prospectus. A Portfolio may also
invest in other Underlying Funds that may become available for investment in
the future at the discretion of the Investment Adviser without shareholder
approval. There can be no assurance that the investment objectives of the
Underlying Funds will be met. Additional information regarding the investment
practices of the Underlying Funds is located in Appendix A to this Prospectus,
in the Additional Statement and in the prospectus of each of the Underlying
Funds. No offer is made in this Prospectus of any of the Underlying Funds.

<TABLE>
<CAPTION>
FUND NAMES INVESTMENT OBJECTIVES INVESTMENT CRITERIA
---------------- ------------------------ ----------------------------------
<C> <C> <S>
GROWTH AND IN- Long-term growth of At least 65% of total assets in
COME FUND capital and growth of equity securities that are
income. considered to have favorable
prospects for capital appreciation
and/or dividend paying ability.
- -------------------------------------------------------------------------------
CORE U.S. EQUITY Long-term growth of At least 90% of total assets in
FUND capital and dividend equity securities of U.S. issuers.
income. The Fund seeks to achieve its
objective through a broadly
diversified portfolio of large cap
and blue chip equity securities
representing all major sectors of
the U.S. economy. The Fund's
investments are selected using
both a variety of quantitative
techniques and fundamental
research in seeking to maximize
the Fund's expected return, while
maintaining risk, style,
capitalization and industry
characteristics similar to the S&P
500 Index.
- -------------------------------------------------------------------------------
CORE LARGE CAP Long-term growth of At least 90% of total assets in
GROWTH FUND capital. Dividend income equity securities of U.S issuers,
is a secondary including certain foreign issuers
consideration. traded in the U.S. The Fund seeks
to achieve its objective through a
broadly diversified portfolio of
equity securities of large cap
U.S. issuers that are expected to
have better prospects for earnings
growth than the growth rate of the
general domestic economy. The
Fund's investments are selected
using both a variety of
quantitative techniques and
fundamental research in seeking to
maximize the Fund's expected
return, while maintaining risk,
style, capitalization and industry
characteristics similar to the
Russell 1000 Growth Index.
- -------------------------------------------------------------------------------
CORE SMALL CAP Long-term growth of At least 90% of total assets in
EQUITY FUND capital. equity securities of U.S. issuers,
including certain foreign issuers
traded in the U.S. The Fund seeks
to achieve its investment
objective through a broadly
diversified portfolio of equity
securities of U.S. issuers which
are included in the Russell 2000
Index at the time of investment.
The Fund's investments are
selected using both a variety of
quantitative techniques and
fundamental research in seeking to
maximize the Fund's expected
return, while maintaining risk,
style, capitalization and industry
characteristics similar to the
Russell 2000 Index.
</TABLE>

(continued)

11
<PAGE>

<TABLE>
<CAPTION>
FUND NAMES INVESTMENT OBJECTIVES INVESTMENT CRITERIA
---------------- ------------------------ ----------------------------------
<C> <C> <S>
CORE INTERNA- Long-term growth of At least 90% of total assets in
TIONAL EQUITY capital. equity securities of companies
FUND organized outside the United
States or whose securities are
principally traded outside the
United States. The Fund seeks
broad representation of large cap
issuers across major countries and
sectors of the international
economy. The Fund's investments
are selected using both a variety
of quantitative techniques and
fundamental research in seeking to
maximize the Fund's expected
return, while maintaining risk,
style, capitalization and industry
characteristics similar to the
unhedged Morgan Stanley Capital
International (MSCI) Europe,
Australia and Far East Index (the
"EAFE Index"). The Fund may employ
certain currency management
techniques.
- -------------------------------------------------------------------------------
CAPITAL GROWTH Long-term capital At least 90% of total assets in a
FUND growth. diversified portfolio of equity
securities. Long-term capital
appreciation potential is
considered in selecting
investments.
- -------------------------------------------------------------------------------
MID CAP EQUITY Long-term capital At least 65% of total assets in
FUND appreciation. equity securities of companies
with public stock market
capitalizations of between $500
million and $10 billion at the
time of investment.
- -------------------------------------------------------------------------------
INTERNATIONAL Long-term capital Substantially all, and at least
EQUITY FUND appreciation. 65%, of total assets in equity
securities of companies organized
outside the United States or whose
securities are principally traded
outside the United States. The
Fund may employ certain currency
management techniques.
- -------------------------------------------------------------------------------
SMALL CAP VALUE Long-term capital At least 65% of total assets in
FUND growth. equity securities of companies
with public stock market
capitalizations of $1 billion or
less at the time of investment.
The Fund currently emphasizes
investments in companies with
public stock market
capitalizations of $500 million or
less at the time of investment.
- -------------------------------------------------------------------------------
EMERGING MARKETS Long-term capital Substantially all, and at least
EQUITY FUND appreciation. 65%, of total assets in equity
securities of emerging country
issuers. The Fund may employ
certain currency management
techniques.
- -------------------------------------------------------------------------------
ASIA GROWTH FUND Long-term capital Substantially all, and at least
appreciation. 65%, of total assets in equity
securities of companies in China,
Hong Kong, India, Indonesia,
Malaysia, Pakistan, the
Philippines, Singapore, South
Korea, Sri Lanka, Taiwan and
Thailand. The Fund may employ
certain currency management
techniques.
- -------------------------------------------------------------------------------
REAL ESTATE SE- Total return comprised Substantially all, and at least
CURITIES FUND of long-term growth of 80%, of total assets in a
capital and dividend diversified portfolio of equity
income. 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").
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE
INVESTMENT DURATION OR INTEREST RATE
FUND NAMES OBJECTIVES MATURITY SENSITIVITY INVESTMENT SECTOR CREDIT QUALITY OTHER INVESTMENTS
- ---------------------- -------------- ------------------- ------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SQUARE PRIME Maximize Maximum Maturity of 3-month Money market High Quality N/A
OBLIGATIONS FUND current income Individual bill instruments (short-term
to the extent Investments = including U.S. ratings of
consistent 13 months at time Government A-1, P-1 or
with the of purchase Securities, U.S. comparable
maintenance of Maximum Dollar- bank obligations, quality).
liquidity. Weighted Average commercial paper
Portfolio Maturity and other short-
= 90 days term obligations
of U.S.
corporations,
governmental and
other entities,
and related
repurchase
agreements.
- -----------------------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE A high level Target Duration = 9-month At least 65% of U.S. Fixed-rate
GOVERNMENT FUND of current 6-month to 1-year note total assets in Government mortgage pass-
income, U.S. Treasury securities issued Securities through
consistent Security or guaranteed by securities and
with low Maximum Duration*= the U.S. repurchase
volatility of 2 years government, its agreements
principal. agencies, collateralized
instrumentalities by U.S.
or sponsored Government
enterprises Securities.
("U.S. Government
Securities") that
are adjustable
rate mortgage
pass-through
securities and
other mortgage
securities with
periodic interest
rate resets.
- -----------------------------------------------------------------------------------------------------------------------------
SHORT DURATION A high level Target Duration = 2-year At least 65% of U.S. Mortgage pass-
GOVERNMENT FUND of current 2-year U.S. bond total assets in Government through
income and Treasury Security U.S. Government Securities securities and
secondarily, plus or minus .5 Securities and other
in seeking years repurchase securities
current Maximum Duration*= agreements representing an
income, may 3 years collateralized by interest in or
also consider such securities. collateralized
the potential by mortgage
for capital loans.
appreciation.
- -----------------------------------------------------------------------------------------------------------------------------
GOVERNMENT INCOME FUND A high level Target Duration = 5-year At least 65% of U.S. Non-government
of current Lehman Brothers bond assets in U.S. Government mortgage pass-
income, Mutual Fund Government Securities through
consistent Government/Mortgage Securities, and non-U.S. securities,
with safety of Index plus or minus including Government asset-backed
principal. 1 year mortgage-backed Securities = securities,
Maximum Duration*= U.S. Government AAA/Aaa corporate
6 years Securities and fixed-income
repurchase securities and
agreements repurchase
collateralized by agreements
such securities. collateralized
by U.S.
Government
Securities.
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE
INVESTMENT DURATION OR INTEREST RATE
FUND NAMES OBJECTIVES MATURITY SENSITIVITY INVESTMENT SECTOR CREDIT QUALITY OTHER INVESTMENTS
- ---------------------- -------------- -------------- ------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
CORE FIXED INCOME FUND Total return Target 5-year At least 65% of Minimum = Foreign fixed-
consisting of Duration = bond assets in fixed- BBB/Baa income,
capital Lehman income Minimum for municipal and
appreciation Brothers securities, non-dollar convertible
and income Aggregate Bond including U.S. securities = securities,
that exceeds Index plus or Government AA/Aa foreign
the total minus 1 year Securities, currencies and
return of the Maximum corporate, repurchase
Lehman Duration* = 6 mortgage-backed agreements
Brothers years and asset-backed collateralized
Aggregate Bond securities. by U.S.
Index. Government
Securities.
- ----------------------------------------------------------------------------------------------------------------------
GLOBAL INCOME FUND A high total Target 6-year Securities of Minimum = Mortgage and
return, Duration = bond U.S. and foreign BBB/Baa asset-backed
emphasizing J.P. Morgan governments and At least 50% securities,
current Global corporations. = AAA/Aaa foreign
income, and, Government currencies and
to a lesser Bond Index repurchase
extent, (hedged) plus agreements
providing or minus 2.5 collateralized
opportunities years by U.S.
for capital Maximum Government
appreciation. Duration* = Securities or
7.5 years certain foreign
government
securities.
- ----------------------------------------------------------------------------------------------------------------------
HIGH YIELD FUND A high level Target 6-year Except for At least 65% Mortgage-backed
of current Duration = bond temporary = BB/Ba or and asset-
income and, Lehman defensive below backed
secondarily, Brothers High purposes, at securities,
capital Yield Bond least 65% of U.S. Government
appreciation. Index plus or assets in fixed- Securities,
minus 2.5 income investment
years securities rated grade corporate
Maximum below investment fixed- income
Duration* = grade, including securities,
7.5 years U.S. and non- structured
U.S. dollar securities,
corporate debt, foreign
foreign currencies and
government repurchase
securities, agreements
convertible collateralized
securities and by U.S.
preferred stock. Government
Securities.
</TABLE>
- -----
* Under normal interest rate conditions.

14
<PAGE>

In pursuing their investment objectives and programs, each of the Underlying
Funds is permitted to engage in a wide range of investment policies. The risks
of the Underlying Funds are determined by the nature of the securities held
and the investment strategies used by the Funds' investment advisers. Certain
of these policies are described below and further information about the
investment policies, strategies and risks of the Underlying Funds is contained
in Appendix A to this Prospectus and in the Additional Statement as well as
the prospectuses of the Underlying Funds.

UNDERLYING EQUITY FUNDS

The Underlying Equity Funds may purchase common stocks, preferred stocks,
interests in real estate investment trusts, 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 securities, a Fund's
investment adviser utilizes first-hand fundamental research, including
visiting company facilities to assess operations and to meet decision-makers.
An 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 advisers are able to draw on the research
and market expertise of the Goldman Sachs Global Investment Research
Department and other affiliates, as well as information provided by other
securities dealers. Equity securities held by an Underlying Fund will
generally be sold when an investment adviser believes that the market price
fully reflects or exceeds the securities' fundamental valuation or when other
more attractive investments are identified.

VALUE STYLE FUNDS. The Growth and Income, Mid Cap Equity and Small Cap Value
Funds are managed using a value oriented approach. The Funds' investment
adviser evaluates securities using fundamental analysis and intends to
purchase equity securities that are, in its view, underpriced relative to a
combination of such companies' long-term earnings prospects, growth rate, free
cash flow and/or dividend-paying ability.

Consideration will be given to the business quality of the issuer. Factors
positively affecting the investment adviser's view of that quality include the
competitiveness and degree of regulation in the markets in which the company
operates, the existence of a management team with a record of success, the
position of the company in the markets in which it operates, the level of the
company's financial leverage and the sustainable return on capital invested in
the business. The Funds may also purchase securities of companies that have
experienced difficulties and that, in the opinion of the investment adviser,
are available at attractive prices.

GROWTH STYLE FUNDS. The Capital Growth, International Equity, Emerging
Markets Equity and Asia Growth Funds are managed using a growth oriented
approach. Equity securities for these Funds are selected based on their
prospects for above average growth. A Fund's investment adviser will select
securities of growth companies trading, in the investment adviser's opinion,
at a reasonable price relative to other industries, competitors and historical
price/earnings multiples. These Funds will generally invest in companies whose
earnings are believed to be in a relatively strong growth trend, or, to a
lesser extent, in companies in which significant further growth is not
anticipated but whose market value per share is thought to be undervalued.

QUANTITATIVE STYLE FUNDS. The CORE U.S. Equity, CORE Large Cap Growth, CORE
Small Cap Equity and CORE International Equity Funds (the "CORE Equity Funds")
are managed using both quantitative and fundamental techniques. CORE is an
acronym for "Computer-Optimized, Research-Enhanced," which reflects the Funds'
investment process. This investment process and the proprietary multifactor
model used to implement it are discussed below.

INVESTMENT PROCESS. The Funds' investment advisers begin with a broad
universe of U.S. equity securities for the CORE U.S. Equity, CORE Large Cap
Growth and CORE Small Cap Equity Funds (the "CORE U.S.

15
<PAGE>

Equity Funds"), and a broad universe of foreign equity securities for the CORE
International Equity Fund. The investment advisers use a proprietary
multifactor model (the "Multifactor Model") to assign each equity security a
rating. In the case of a U.S. equity security followed by the Goldman Sachs
Global Investment Research Department (the "Research Department"), a second
rating is assigned based upon the Research Department's evaluation. In the
discretion of the investment adviser, such ratings may also be assigned to
U.S. equity securities based on research ratings obtained from other industry
sources. In the case of a foreign equity security, an investment adviser may
rely on research from both the Research Department and other industry sources.

In building a diversified portfolio for each CORE Equity Fund, an investment
adviser utilizes optimization techniques to seek to maximize the Fund's
expected return, while maintaining a risk profile similar to the Fund's
benchmark. Each portfolio is primarily comprised of securities rated highest
by the foregoing investment process and has risk characteristics and industry
weightings similar to the relevant Fund's benchmark.

MULTIFACTOR MODELS. The Multifactor Models are rigorous computerized rating
systems for forecasting the returns of different equity markets, currencies,
and individual equity securities according to fundamental investment
characteristics. The CORE U.S. Equity Funds use one Multifactor Model to
forecast the returns of securities held in each Fund's portfolio. The CORE
International Equity Fund uses multiple Multifactor Models to forecast
returns. Currently, the CORE International Equity Fund uses one model to
forecast equity market returns, one model to forecast currency returns and 22
separate models to forecast individual equity security returns in 22 different
countries. Despite this variety, all Multifactor Models incorporate common
variables covering measures of value, growth, momentum and risk (e.g.,
book/price ratio, earnings/price ratio, price momentum, price volatility,
consensus growth forecasts, earnings estimate revisions, earnings stability,
and, in the case of models for the CORE International Equity Fund, currency
momentum and country political risk ratings). All of the factors used in the
Multifactor Models have been shown to significantly impact the performance of
the securities, currencies and markets they were designed to forecast.

The weightings assigned to the factors in the Multifactor Model used by the
CORE U.S. Equity Funds are derived using a statistical formulation that
considers each factor's historical performance in different market
environments. As such, the U.S. Multifactor Model is designed to evaluate each
security using only the factors that are statistically related to returns in
the anticipated market environment. Because they include many disparate
factors, the Funds' investment advisers believe that all the Multifactor
Models are broader in scope and provide a more thorough evaluation than most
conventional, quantitative models.

Securities and markets ranked highest by the relevant Multifactor Model do
not have one dominant investment characteristic; rather, they possess an
attractive combination of investment characteristics.

RESEARCH DEPARTMENT. In assigning ratings to equity securities, the Research
Department uses a four category rating system ranging from "recommended for
purchase" to "likely to under perform." The ratings reflect the analyst's
judgment as to the investment results of a specific security and incorporate
economic outlook, valuation, risk and a variety of other factors.

By employing both a quantitative (i.e., the Multifactor Models) and a
qualitative (i.e., research enhanced) method of selecting securities, each
CORE Fund seeks to capitalize on the strengths of each discipline.

REAL ESTATE SECURITIES FUND. The investment strategy of the Real Estate
Securities Fund 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

16
<PAGE>

companies with strong property fundamentals and strong management teams. This
process is comprised of real estate market research and securities analysis.
The Fund's 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. As of the date of this Prospectus, the Real Estate
Securities Fund had not commenced operations.

UNDERLYING FIXED INCOME FUNDS

The investment advisers of the Underlying Fixed Income Funds may, in
accordance with the respective Funds' investment objectives and policies,
purchase all types of fixed income securities, including senior and
subordinated corporate debt obligations (such as bonds, debentures, notes and
commercial paper), convertible and non-convertible corporate debt obligations,
loan participations and preferred stock.

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

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

The Underlying Funds may employ certain active management techniques to
manage their duration and term structure, to seek to hedge exposure to foreign
currencies and to seek to enhance returns. These techniques include (with
respect to one or more of the Funds), but are not limited to, the use of
financial futures contracts, option contracts (including options on futures),
forward foreign currency exchange contracts, currency options and futures,
currency, mortgage and interest rate swaps and interest rate floors, caps and
collars. Currency and interest rate management techniques involve risks
different from those associated with investing solely in U.S. dollar-
denominated fixed-income securities of U.S. issuers. Certain of the Funds may
invest in custodial receipts, municipal securities and convertible securities.
The Funds may also employ other investment techniques to seek to enhance
returns, such as lending portfolio securities and entering into mortgage
dollar rolls, repurchase agreements and other investment practices, as
described in Appendix A to this Prospectus.

17
<PAGE>

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 Portfolios' 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 the investment adviser to each Portfolio and, except as noted, to each
Underlying Fund. Goldman Sachs registered as an investment adviser in 1981.
Goldman Sachs Funds Management, L.P., One New York Plaza, New York, New York
10004, a Delaware limited partnership which is an affiliate of Goldman Sachs,
serves as the investment adviser to the CORE U.S. Equity, Capital Growth,
Adjustable Rate Government and Short Duration Government Funds. Goldman Sachs
Funds Management, L.P. registered as an investment adviser in 1990. Goldman
Sachs Asset Management International, 133 Peterborough Court, London EC4A 2BB,
England, an affiliate of Goldman Sachs, serves as the investment adviser to
the International Equity, Emerging Markets Equity, Asia Growth and Global
Income Funds. Goldman Sachs Asset Management International became a member of
the Investment Management Regulatory Organization Limited in 1990 and
registered as an investment adviser in 1991. As of November 21, 1997, GSAM,
together with its affiliates, acted as investment adviser or distributor for
assets in excess of $133.6 billion.

Under an Asset Allocation Management Agreement ("Management Agreement") with
each Portfolio, the Investment Adviser, subject to the general supervision of
the Trustees, provides day-to-day advice as to each Portfolio's investment
transactions, including determinations concerning changes to (a) the
Underlying Funds in which the Portfolios may invest and (b) the percentage
range of assets of any Portfolio that may be invested in the Underlying Equity
Funds and the Underlying Fixed Income Funds as separate groups. Goldman Sachs
has agreed to permit the Portfolios to use the name "Goldman Sachs" or a
derivative thereof as part of each Portfolio's name for as long as a
Portfolio's Management Agreement is in effect.

Under the Management Agreement, the Investment Adviser also: (a) supervises
all non-advisory operations of each Portfolio; (b) provides personnel to
perform such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of each Portfolio; (c) at each
Portfolio's expense arranges for (i) the preparation of all required tax
returns, (ii) the preparation and submission of reports to existing
shareholders, (iii) the periodic updating of prospectuses and statements of
additional information and (iv) the preparation of reports to be filed with
the SEC and other regulatory authorities; (d) maintains each Portfolio's
records; and (e) provides office space and all necessary office equipment and
services.

The investments of each Portfolio are managed by Mark M. Carhart. Mark
joined the Investment Adviser in 1997 as a member of the Quantitative Research
team. Prior to 1997, he was an Assistant Professor of Finance at the Marshall
School of Business at USC and a Senior Fellow of the Wharton Financial
Institutions Center.

18
<PAGE>

of each Portfolio's average daily net assets. The Investment Adviser has
voluntarily agreed to waive 0.20% of this fee. The Investment Adviser may
discontinue or modify its voluntary waiver in the future in its discretion,
although it has no current intention to do so.

The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Portfolios (excluding asset allocation fees, taxes,
interest, brokerage fees, and litigation, indemnification and other
extraordinary expenses) to the extent such expenses exceed 0.10% per annum of
a Portfolio's average daily net assets. Such reductions or limits, if any, are
calculated monthly on a cumulative basis and may be discontinued or modified
by the Investment Adviser in its discretion at any time.

In addition, each Portfolio, as a shareholder in the Underlying Funds, will
indirectly bear its proportionate share of any investment management fees and
other expenses paid by the Underlying Funds. The contractual management fee
payable to GSAM and/or its affiliates by each of the Underlying Funds in which
the Portfolios may invest is set forth below under "Management--Expenses."

It is the responsibility of the investment adviser of each Underlying Fund
to make investment decisions for that Fund and to place the purchase and sale
orders for the Fund's portfolio transactions in U.S. and foreign markets. Such
orders may be directed to any broker including, to the extent and in the
manner permitted by applicable law, Goldman Sachs or its affiliates. In
effecting purchases and sales of portfolio securities for a Fund, its
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 Underlying Fund. See the Additional Statement
for a further description of the applicable brokerage allocation practices.

In performing its investment advisory services, the investment adviser of an
Underlying Fund, while remaining ultimately responsible for the management of
the Fund, may rely upon the asset management division of its Singapore and
Tokyo affiliates for portfolio decisions and management with respect to
certain portfolio securities and is able to draw upon the research and
expertise of its other affiliate offices. In addition, the investment adviser
will have access to the research of, and 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.

Goldman Sachs may from time to time, at its own expense, provide
compensation to certain institutions and other persons for providing
administrative services to their customers. These services include maintaining
account records, processing orders to purchase, redeem and exchange Portfolio
shares and responding to certain customer inquiries. In addition, these
services may also include responding to certain inquiries from and providing
written materials to depository institutions about the Portfolios; furnishing
advice about and assisting depository institutions in obtaining from state
regulatory agencies any rulings, exceptions or other authorizations that may
be required to conduct a mutual fund sales program; acting as liaison between
depository institutions and national regulatory organizations; assisting with
the preparation of sales material; and providing general assistance and advice
in establishing and maintaining mutual fund sales programs on the premises of
depository institutions.

19
<PAGE>

an Underlying Fund or limit the investment activities of an Underlying Fund.
Goldman Sachs and its affiliates engage in proprietary trading and advise
accounts and funds which have investment objectives similar to those of the
Underlying Funds and/or which engage in and compete for transactions in the
same type of securities, currencies and instruments. 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 Underlying Funds and in general it is not anticipated that
the Funds' investment advisers will have access to proprietary information for
the purpose of managing an Underlying Fund. The results of the investment
activities of an Underlying Fund, therefore, may differ from those of Goldman
Sachs and its affiliates and it is possible that the Portfolios and the
Underlying Funds could sustain losses during periods in which Goldman Sachs
and its affiliates and other accounts achieve significant profits on their
trading for proprietary or other accounts. From time to time, the activities
of an Underlying Fund may be limited because of regulatory restrictions
applicable to Goldman Sachs and its affiliates, and/or their internal policies
designed to comply with such restrictions. See "Management--Activities of
Goldman Sachs and its Affiliates and Other Accounts Managed by Goldman Sachs"
in the Additional Statement for further information.

DISTRIBUTOR AND TRANSFER AGENT

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the
exclusive distributor (the "Distributor") of each Portfolio's shares. Goldman
Sachs, 4900 Sears Tower, Chicago, Illinois 60606, also serves as each
Portfolio's transfer agent (the "Transfer Agent") and as such performs various
shareholder servicing functions. Shareholders with inquiries regarding a
Portfolio should contact Goldman Sachs (as Transfer Agent) at the address or
the telephone number set forth on the back cover page of this Prospectus.
Goldman Sachs is entitled to receive a transfer agency fee from each
Portfolio, with respect to Institutional Shares, equal to their proportionate
share of the total transfer agency fees borne by the Portfolio. These fees are
equal to $12,000 per year plus $7.50 per account with respect to Class A,
Class B and Class C shares plus 0.04% of the value of the outstanding shares
of the Institutional and Service classes of a Portfolio. The Portfolios also
pay Goldman Sachs' out-of-pocket and transaction-related expenses, and may
bear fees paid to institutions or other persons providing sub-transfer agency
or similar services.

EXPENSES

The Portfolios are responsible for the payment of their expenses. The
expenses include, without limitation, asset allocation, custodial and transfer
agency fees, brokerage fees and commissions, filing fees for the registration
or qualification of the Portfolios' 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 Portfolios 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 Portfolios), expenses of preparing and setting in type
prospectuses, statements of additional information, proxy material, reports
and notices and the printing and distributing of the same to shareholders and
regulatory authorities, compensation and expenses of the Trust's "non-
interested" Trustees and extraordinary expenses, if any, incurred by the
Trust.

20
<PAGE>

structure of the Portfolios will, however, reduce any layering of costs in the
following manner: (a) any fees charged to the Portfolios under the Management
Agreement are for services that are in addition to, and not duplicative of,
services provided under any Underlying Fund's management agreement; (b) the
Portfolios pay no front-end or contingent deferred sales charges in connection
with the purchase or redemption of shares of the Underlying Funds; (c) the
Portfolios do not pay any sales charges, distribution-related fees or service
fees related to the shares of the Underlying Funds; (d) custodial and other
fees charged by both the Portfolios and the Underlying Funds are not redundant
inasmuch as distinct services are being provided at each level; and (e) any
additional incremental cost incurred by investing in the Portfolios is in
return for a substantial investment management service, namely the initial and
ongoing asset allocation of investments made in the Underlying Funds, and
provision of meaningful additional diversification benefits.

The following chart shows the total operating expense ratios (management fee
plus other operating expenses) of Institutional Shares of each Underlying Fund
for the Fund's most recent fiscal year (except as indicated). In addition, the
following chart shows the contractual investment management fees payable to
GSAM and its affiliates by the Underlying Funds (in each case as an annualized
percentage of the Fund's average net assets). Absent voluntary fee waivers
and/or expense reimbursements, which may be discontinued at any time, the
total operating expense ratios of certain Underlying Funds would be higher.

<TABLE>
<CAPTION>
CONTRACTUAL TOTAL OPERATING
UNDERLYING FUNDS MANAGEMENT FEE EXPENSE RATIO
---------------- -------------- ---------------
<S> <C> <C>
Short Duration Government Fund.................. 0.50% 0.45%
Adjustable Rate Government Fund................. 0.40% 0.51%*
Core Fixed Income Fund.......................... 0.40% 0.45%
Government Income Fund.......................... 0.65% 0.25%*
Global Income Fund.............................. 0.90% 0.65%
High Yield Fund................................. 0.70% 0.83%*
Growth & Income Fund............................ 0.70% 0.82%
CORE U.S. Equity Fund........................... 0.75% 0.65%
CORE Large Cap Growth Fund...................... 0.75% 0.65%*
CORE Small Cap Equity Fund...................... 0.85% 0.95%*
Capital Growth Fund............................. 1.00% 1.09%*
CORE International Equity Fund.................. 0.85% 1.00%*
Mid Cap Equity Fund............................. 0.75% 0.85%
Small Cap Value Fund............................ 1.00% 1.15%*
International Equity Fund....................... 1.00% 1.10%
Emerging Markets Equity Fund.................... 1.20% 1.30%*
Asia Growth Fund................................ 1.00% 1.10%
Real Estate Securities Fund..................... 1.00% 1.05%*
Financial Square Prime Obligations Money Market
Fund........................................... 0.205% 0.18%
</TABLE>
- --------
* Operating expenses of Institutional Shares for this Fund are estimated for
the Fund's current fiscal year.

21
<PAGE>

NET ASSET VALUE

The net asset value per share of each class of a Portfolio is calculated by
the Portfolio's custodian as of the close of regular trading on the New York
Stock Exchange (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"). Net asset value per share of each class is
calculated by determining the net assets attributed to each class and dividing
by the number of outstanding shares of that class. Portfolio securities are
valued based on market quotations or, if accurate quotations are not readily
available, at fair value as determined in good faith under procedures
established by the Trustees.

PERFORMANCE INFORMATION

From time to time each Portfolio 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 net asset value. The total return calculation
assumes a complete redemption of the investment at the end of the relevant
period. Each Portfolio may also from time to time advertise total return on a
cumulative, average, year-by-year or other basis for various specified periods
by means of quotations, charts, graphs or schedules. In addition to the above,
each Portfolio 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 data is available.

The Portfolios compute their 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 Portfolios'
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 net asset value per share on
the last day of the period for which the distribution rate is being
calculated.

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

The investment results of a Portfolio 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
Portfolio's performance may be in any future period. In addition to
information provided in shareholder reports, the Portfolios may, in their
discretion, from time to time make a list of their holdings available to
investors upon request.

22
<PAGE>

SHARES OF THE TRUST

Each Portfolio is classified as "diversified" under the Investment Company
Act of 1940, as amended (the "1940 Act"). Each Portfolio is a series of
Goldman Sachs Trust, which was formed under the laws of the State of Delaware
on January 28, 1997. The Trustees have authority under the Trust's Declaration
of Trust to create and classify shares of beneficial interests in separate
series, without further action by shareholders. Additional series may be added
in the future. The Trustees also have authority to classify and reclassify any
series or portfolio of shares into one or more classes. Information about the
Trust's other series and classes is contained in separate prospectuses.

When issued, shares are fully paid and non-assessable. In the event of
liquidation, shareholders of a particular class are entitled to share pro rata
in the net assets of the applicable Portfolio available for distribution to
such shareholders. 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 net asset values represented by
their shares.

The Trust does not intend to hold annual meetings of shareholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
shares outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of shareholders for any purpose and
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 Portfolios' shares. Instead, the Transfer Agent
maintains a record of each shareholder's ownership. Each shareholder receives
confirmation of purchase and redemption orders from the Transfer Agent.
Portfolio shares and any dividends and distributions paid by a Portfolio are
reflected in account statements from the Transfer Agent.

TAXATION

FEDERAL TAXES

Each Portfolio is treated as a separate entity for tax purposes. Each
Portfolio intends to elect to be treated as a regulated investment company and
qualify for such treatment for each taxable year under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To qualify as such, a
Portfolio must satisfy certain requirements relating to the sources of its
income, diversification of its assets and distribution of its income to
shareholders. As a regulated investment company, a Portfolio will not be
subject to federal income or excise tax on any net investment income and net
realized capital gains that are distributed to its shareholders in accordance
with certain timing requirements of the Code.

Dividends paid by a Portfolio 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 its shareholders as ordinary income. Distributions
out of other net capital gain (the

23
<PAGE>

excess of net long-term capital gain over net short-term capital loss), if
any, of any Portfolio, and out of the portion of such net capital gain that
constitutes mid-term capital gains, will be taxed to shareholders as long-term
or mid-term capital gain, as the case may be, 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. A Portfolio's
dividends that are paid to its corporate shareholders and are attributable to
qualifying dividends such Portfolio or an Underlying 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. A portion of each Portfolio's dividends may generally qualify, in the
hands of corporate shareholders, for the corporate dividends-received
deduction. Certain distributions paid by a Portfolio 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 Portfolios 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) on amounts
treated as ordinary dividends from the Portfolios.

Each Portfolio may be subject to foreign withholding or other foreign taxes
on income or gain from certain foreign securities. The Portfolios do not
anticipate that they will elect to pass such foreign taxes through to their
shareholders, who therefore will generally not take such taxes into account on
their own tax returns. The Portfolios will generally deduct such taxes in
determining the amounts available for distribution to shareholders.

OTHER TAXES

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

24
<PAGE>

ADDITIONAL INFORMATION

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

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.

REPORTS TO SHAREHOLDERS

Recordholders of Institutional Shares of the Portfolios will receive an
annual report containing audited financial statements and a semi-annual
report. 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.

DIVIDENDS

Each dividend from net investment income and capital gain distributions, if
any, declared by a Portfolio on its outstanding Institutional Shares will, at
the election of each shareholder, be paid (i) in cash or (ii) in additional
Institutional Shares of such Portfolio. This election should initially be made
on a shareholder's Account Information Form and may be changed upon written
notice to Goldman Sachs at any time prior to the record date for a particular
dividend or distribution. If no election is made, all dividends from net
investment income and capital gain distributions will be reinvested in
Institutional Shares of the applicable Portfolio.

The election to reinvest dividends and distributions paid by a Portfolio in
additional Institutional Shares of the 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 Institutional Shares of
a Portfolio.

Each Portfolio 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 Income Strategy Portfolio
will pay dividends from net investment income monthly. The Growth and Income
Strategy Portfolio and Growth Strategy Portfolio will each pay dividends from
net investment income quarterly. The Aggressive Growth Strategy Portfolio will
pay dividends from net investment income annually. Each Portfolio will pay
dividends from net realized capital gains, reduced by available capital
losses, at least annually. From time to time, a portion of a Portfolio's
dividends may constitute a return of capital.

25
<PAGE>

investments. Therefore, subsequent distributions on such shares from such
income or realized appreciation may be taxable to the investor even if the net
asset value of the investor's shares is, as a result of the distributions,
reduced below the cost of such shares and the distributions (or portions
thereof) represent a return of a portion of the purchase price.

PURCHASE OF INSTITUTIONAL SHARES

Institutional Shares may be purchased on any Business Day at the net asset
value per share next determined after receipt of an order. No sales load will
be charged. Currently, net asset value is determined as of the close of
regular trading on the New York Stock Exchange (normally, but not always, 3:00
p.m. Chicago time, 4:00 p.m. New York time), as described under "Net Asset
Value." Purchases of Institutional Shares of the Funds must be settled within
three (3) Business Days of the receipt of a complete purchase order. Payment
of the proceeds of redemption of shares purchased by check may be delayed for
a period of time as described under "Redemption of Institutional Shares."

Prior to making an initial investment in a Portfolio, an investor must open
an account with a Portfolio by furnishing necessary information to the
Portfolio 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 Asset Allocation Portfolios--Name
of Portfolio and Class of Shares" and should be directed to "Goldman Sachs
Asset Allocation Portfolios--Name of Portfolio and Class of Shares," c/o
National Financial Data Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City,
MO 64141-6711.

The minimum initial investment is $1,000,000 in Institutional Shares of a
Portfolio alone or in combination with other assets under the management of
GSAM and its affiliates with respect to the following investors: (a) banks,
trust companies or other types of depository institutions investing for their
own account or on behalf of their customers; (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 customers 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. For accounts over which GSAM
or its advisory affiliates have investment discretion, individual investors,
and qualified non-profit organizations, charitable trusts, foundations and
endowments, the minimum initial investment is $10,000,000. The minimum
investment requirement may be waived at the discretion of the Trust's
officers. No minimum amount is required for subsequent investments.

26
<PAGE>

OTHER PURCHASE INFORMATION

The Portfolios reserve the right to redeem the Institutional Shares of any
Institutional Shareholder whose account balance is less than $50 as a result
of earlier redemptions. Such redemptions will not be implemented if the value
of an Institutional Shareholder's account falls below the minimum account
balance solely as a result of market conditions. The Trust will give sixty
(60) days' prior written notice to Institutional Shareholders whose
Institutional Shares are being redeemed to allow them to purchase sufficient
additional Institutional Shares of a Portfolio to avoid such redemption.

Normally, purchase, exchange and redemption orders will not be effective
until received by Goldman Sachs. The Trust may, however, 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 behalf orders placed by or on behalf
of such customers and, if approved by the Trust, to designate other
intermediaries to accept such orders. In these cases, a Portfolio will be
deemed to have received an order in proper form by or on behalf of a customer
when the order is accepted by the authorized institution or intermediary on a
Business Day, and the order will be priced at a Portfolio's net asset value
per share next determined after such acceptance. The institution or
intermediary will be responsible for transmitting accepted orders to the
Portfolios 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 Portfolios or Goldman Sachs
for the services provided by them with respect to the Portfolios'
Institutional Shares. These payments may be in addition to other servicing
and/or sub-transfer agency payments borne by the Portfolios and their share
classes.

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

In the sole discretion of Goldman Sachs, a Portfolio may accept securities
instead of cash for the purchase of shares of the Portfolio. Such purchases
will be permitted only if the Investment Adviser determines that any
securities acquired in this manner are consistent with the Portfolio's
investment objectives, restrictions and policies and are desirable investments
for the Portfolio.

Banks, trust companies, brokers, investment advisers or other institutions
through which investors acquire Institutional Shares may impose charges in
connection with transactions in Institutional Shares. Such institutions should
be consulted for information regarding such charges. The 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
Portfolios, to selected institutions (including banks, trust companies,
brokers and investment advisers) and other persons in connection with the sale
of shares of the Portfolios, the Underlying Funds and other investment
portfolios of the Trust (such as additional payments based on new sales,
amounts exceeding pre-established thresholds, or the length of time customers'
assets have remained in the Trust) and, subject to applicable NASD
regulations, contribute to various non-cash and cash incentive arrangements to
promote the sale of shares, as well as sponsor various educational programs,
sales contests and/or promotions in which participants may receive
reimbursement of expenses, entertainment and prizes such as travel awards,
merchandise, cash, investment research and educational information and related
support materials. This additional compensation can vary among institutions
depending upon such factors as the amounts their customers have invested (or
may invest) in

27
<PAGE>

particular investment portfolios of the Trust, the particular program
involved, or the amount of reimbursable expenses. Additional compensation
based on sales may, but is currently not expected to, exceed .50% (annualized)
of the amount invested. For further information, see the Additional Statement.

EXCHANGE PRIVILEGE

Institutional Shares of a Portfolio 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 net asset value next determined either
by writing to Goldman Sachs, Attention: Goldman Sachs Asset Allocation
Portfolios--Name of Portfolio and Class of Shares, c/o GSAM Shareholder
Services, 4900 Sears Tower, Chicago, Illinois 60606 or, if previously elected
in the Portfolio's Account Information Form, by telephone at 800-621-2550
(7:00 a.m. to 5:30 p.m. Chicago time). A shareholder should obtain and read
the prospectus relating to any other fund and its shares and consider its
investment objective, policies and applicable fees before making an exchange.
Under the telephone exchange privilege, Institutional Shares may be exchanged
among accounts with different names, addresses and social security or other
taxpayer identification numbers only if the exchange request is in writing and
is received in accordance with the procedures set forth under "Redemption of
Institutional Shares."

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

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

REDEMPTION OF INSTITUTIONAL SHARES

The Portfolios will redeem their Institutional Shares upon request of a
recordholder of such shares on any Business Day at the net asset value 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 Trust.) If
Institutional Shares to be redeemed were recently purchased by check, a
Portfolio 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

28
<PAGE>

optional telephone redemption privilege is elected on the Account Information
Form accompanying this Prospectus. It may be difficult to implement
redemptions by telephone in times of drastic economic or market changes.

In an effort to prevent unauthorized or fraudulent redemption or exchange
requests by telephone, Goldman Sachs employs reasonable procedures specified
by the Trust to confirm that such instructions are genuine. Among other
things, any redemption request that requires money to go to an account or
address other than that designated on the Account Information Form must be in
writing and signed by an authorized person designated on the Account
Information Form. Any such written request is also confirmed by telephone with
both the requesting party and the designated bank account to verify
instructions. Exchanges among accounts with different names, addresses and
social security or other taxpayer identification numbers must be in writing
and signed by an authorized person designated on the Account Information Form.
Other procedures may be implemented from time to time 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 Portfolios, the Trust nor
Goldman Sachs will be responsible for the authenticity of redemption or
exchange instructions received by telephone.

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

The Portfolios 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
Portfolios, 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.

29
<PAGE>

APPENDIX A

This Appendix describes various investments and investment techniques that
may be used by the Underlying Funds. This Appendix also describes certain
risks associated with these investments and techniques. Further information is
provided in the Additional Statement and in the prospectuses of the Underlying
Funds.

As noted above, the Underlying Equity Funds invest primarily in common
stocks and other equity securities (including real estate investment trusts),
and the Underlying Fixed Income Funds invest primarily in fixed income
securities. The Short Duration Government and Adjustable Rate Government Funds
invest in U.S. Government securities and related repurchase agreements, and
neither of these Funds, the Government Income Fund nor the Financial Square
Prime Obligations Fund makes foreign investments. The investments of the
Financial Square Prime Obligations Fund are limited by SEC regulations
applicable to money market funds as described in its prospectus, and do not
include many of the types of investments discussed below that are permitted
for the other Underlying Funds. With these exceptions, and the further
exceptions noted below, the following description applies generally to the
Underlying Funds.

(1) DESCRIPTION OF INVESTMENTS AND
INVESTMENT TECHNIQUES OF THE UNDERLYING FUNDS

CONVERTIBLE SECURITIES

The Underlying Funds 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. 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. The convertible securities in which the
CORE U.S. Equity Fund, CORE Large Cap Growth Fund, CORE Small Cap Equity Fund
and CORE International Equity Fund (the "CORE Equity Funds") invest are not
subject to any minimum rating criteria. The convertible debt securities in
which the other Funds may invest are subject to the same rating criteria as a
Fund's investments in non-convertible debt securities.

PREFERRED STOCK, WARRANTS AND RIGHTS

The Underlying Funds may invest in preferred stock, warrants and rights.
Preferred stocks are securities that represent an ownership interest providing
the holder with claims on the issuer's earnings and assets before common stock
owners but after bond owners. Unlike debt securities, the obligations of an
issuer of preferred stock, including dividend and other payment obligations,
may not typically be accelerated by the holders of such preferred stock on the
occurrence of an event of default (such as a covenant default or filing of a
bankruptcy petition) or other non-compliance by the issuer with the terms of
the preferred stock.

Warrants and other rights are options to buy a stated number of shares of
common stock at a specified price during the life of the warrant. The holders
of warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.

A-1
<PAGE>

REAL ESTATE INVESTMENT TRUSTS ("REITS")

The Real Estate Securities Fund expects to invest a substantial portion of
its total assets in REITs, which are pooled investment vehicles that invest
primarily in either real estate or real estate related loans. In addition, the
other Underlying Equity Funds may invest in REITs from time to time. REITs are
dependent upon the ability of the REITs' managers, and are subject to heavy
cash flow dependency, default by borrowers and the qualification of the REITs
under applicable regulatory requirements for favorable federal income tax
treatment. REITs are also subject to risks generally associated with
investments in real estate 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 a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.

FOREIGN INVESTMENTS

Foreign Securities. Certain of the Underlying Funds may invest in foreign
securities in accordance with their investment objectives and policies.
Investing in the securities of foreign issuers involves risks that are not
typically associated with investing in equity securities of domestic issuers
quoted in U.S. dollars. 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.

Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers. There may be less publicly available information about a foreign
issuer than about a U.S. issuer. In addition, there is generally less
government regulation of foreign markets, companies and securities dealers
than in the United States.

Foreign securities markets may have substantially less volume than U.S.
securities markets and securities of many foreign issuers are less liquid and
more volatile than securities of comparable domestic issuers. Furthermore,
with respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes on dividend or interest payments (or, in some
cases, capital gains), limitations on the removal of funds or other assets of
the Funds, political or social instability or diplomatic developments which
could affect investments in those countries.

Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs"), European Depository Receipts ("EDRs") or other similar instruments
representing securities of foreign issuers (together, "Depository Receipts").
ADRs represent the right to receive securities of foreign issuers deposited in
a domestic bank or a correspondent bank. Prices of ADRs are quoted in U.S.
dollars, and ADRs are traded in the United States on exchanges or over-the-
counter and are sponsored and issued by domestic banks. EDRs and GDRs are
receipts evidencing an arrangement with a non-U.S. bank. EDRs and GDRs are not
necessarily quoted in the same currency as the underlying security. To the
extent a Fund acquires Depository Receipts through banks which do not have a
contractual relationship with the foreign issuer of the security underlying
the Depository Receipts to issue and service such Depository Receipts
(unsponsored Depository Receipts), there may be an increased possibility that
the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings involving the foreign
issuer, in a timely manner. In addition, the lack of information may result in
inefficiencies in the

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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 Receipts and the underlying securities
are quoted.

Foreign Currency Transactions. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because certain
Underlying Funds may have currency exposure independent of their securities
positions, the value of the assets of a Fund as measured in U.S. dollars will
be affected by changes in foreign currency exchange rates. A Fund may, to the
extent it invests in foreign securities, purchase or sell foreign currencies
on a spot basis and may also purchase or sell forward foreign currency
exchange contracts for hedging purposes and to seek to protect against
anticipated changes in future foreign currency exchange rates. In addition,
the Core Fixed Income, Global Income, High Yield, CORE International Equity,
International Equity, Emerging Markets Equity and Asia Growth Funds may enter
into such contracts to seek to increase total return when the Fund's
investment adviser anticipates that the foreign currency will appreciate or
depreciate in value, but securities denominated or quoted in that currency do
not present attractive investment opportunities and are not held in the Fund's
portfolio. When entered into to seek to enhance return, forward foreign
currency exchange contracts are considered speculative. Certain Funds may also
engage in cross-hedging by using forward contracts in a currency different
from that in which the hedged security is denominated or quoted if the Fund's
investment adviser determines that there is a pattern of correlation between
the two currencies.

An Underlying Fund will incur costs in connection with conversions between
various currencies. A Fund may hold foreign currency received in connection
with investments in foreign securities when, in the judgment of its 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 rates.

Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, an Underlying Fund's net asset value
to fluctuate. Currency exchange rates generally are determined by the forces
of supply and demand in the foreign exchange markets and the relative merits
of investments in different countries, actual or anticipated changes in
interest rates and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably by the
intervention of U.S. or foreign governments or central banks or the failure to
intervene or by currency controls or political developments in the U.S. or
abroad.

Certain of the Underlying Funds may enter into currency swaps, which involve
the exchange by a Fund with another party for their respective rights to make
or receive payments in specified currencies. Currency swaps usually involve
the delivery of a gross payment stream in one designated currency in exchange
for the gross payment stream in another designated currency. Therefore, the
entire payment stream under a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.

The 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 an Underlying Fund of unrealized profits
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.

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FIXED INCOME SECURITIES

U.S. Government Securities. The Underlying Funds 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.

Foreign Government Securities. The Core Fixed Income, Global Income, High
Yield, CORE International Equity, International Equity, Emerging Markets
Equity and Asia Growth Funds may invest in debt obligations of foreign
governments and governmental agencies, including those of Emerging Countries.
Investment in sovereign debt obligations involves special risks not present in
debt obligations of corporate issuers. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt, and a Fund may have limited recourse in the event of a
default. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt, and in turn a Fund's net asset value, to a
greater extent than the volatility inherent in debt obligations of U.S.
issuers. A sovereign debtor's willingness or ability to repay principal and
pay interest in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign currency reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders and the political
constraints to which a sovereign debtor may be subject.

Mortgage-Backed Securities. The Underlying Funds (other than the four CORE
Equity Funds) 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.
Therefore, Mortgage-Backed Securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of
principal prepayments on the underlying loans. This can result in
significantly greater price and yield volatility than is the case with
traditional fixed-income securities. During periods of declining interest
rates, prepayments can be expected to accelerate, and thus impair a Fund's
ability to reinvest the returns of principal at comparable yields. Conversely,
in a rising interest rate environment, a declining prepayment rate will extend
the average life of many Mortgage-Backed Securities and prevent a Fund from
taking advantage of such higher yields.

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

The Funds may invest in Mortgage-Backed Securities issued or sponsored by
both government and non-governmental entities. Privately issued Mortgage-
Backed Securities are generally backed by pools of

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<PAGE>

conventional (i.e., non-government guaranteed or insured) mortgage loans. In
order to receive a high quality rating from the rating organizations (e.g.,
S&P or Moody's), privately issued Mortgaged-Backed Securities normally are
structured with one or more types of "credit enhancement."

The Funds may also invest in multiple class securities, including
collateralized mortgage obligations ("CMOs") and Real Estate Mortgage
Investment Conduit ("REMIC") pass-through or participation certificates. CMOs
provide an investor with a specified interest in the cash flow from a pool of
underlying mortgages or of other Mortgage-Backed Securities. CMOs are issued
in multiple classes, each with a specified fixed or floating interest rate and
a final scheduled distribution date. In most cases, payments of principal are
applied to the CMO classes in the order of their respective stated maturities,
so that no principal payments will be made on a CMO class until all other
classes having an earlier stated maturity date are paid in full. A REMIC is a
CMO that qualifies for special tax treatment under the Code, and invests in
certain mortgages principally secured by interests in real property and other
permitted investments.

The Underlying Fixed Income Funds 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, a Fund may
fail to fully recoup 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.

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

Asset-Backed Securities. The Underlying Funds (other than the four CORE
Equity Funds, the Adjustable Rate Government Fund and the Short Duration
Government 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.

Corporate and Bank Obligations. The Underlying Funds may invest in
obligations issued or guaranteed by U.S. or foreign corporations and banks.
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

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

Municipal Securities. The Core Fixed Income and High Yield Funds may make
limited investments in instruments issued by state and local governmental
issuers. These securities may include private activity bonds, municipal
leases, certificates of participation and "auction rate" securities.

Zero Coupon, Deferred Interest, Pay-In-Kind and Capital Appreciation
Bonds. Each Fund may invest in zero coupon, deferred interest and capital
appreciation bonds. These are securities issued at a discount from their face
value because interest payments are typically postponed until maturity. These
securities also may take the form of debt securities that have been stripped
of their interest payments. Each Fund may also invest in pay-in-kind
securities which are securities that have interest payable by the delivery of
additional securities. The market prices of zero coupon, deferred interest,
pay-in-kind and capital appreciation bonds generally are more volatile than
the market prices of interest-bearing securities and are likely to respond to
a greater degree to changes in interest rates than interest-bearing securities
having similar maturities and credit quality.

Rating Criteria. The rating requirements for each of the Underlying Fixed
Income Funds are stated above. Except as noted below, the Underlying Equity
Funds (other than the four CORE Equity Funds, which only invest in debt
instruments that are cash equivalents) may invest in debt securities rated at
least investment grade at the time of investment. Investment grade debt
securities are securities rated BBB or higher by Standard & Poor's or Baa or
higher by Moody's. The Growth and Income, Capital Growth, Small Cap Value,
International Equity, Emerging Markets Equity, Asia Growth and Real Estate
Securities Funds may invest up to 10%, 10%, 35%, 35%, 35%, 35% and 20%,
respectively, of their total assets in debt securities which are rated in the
lowest rating categories by Standard & Poor's or 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. The Mid Cap Equity Fund may invest up to 10% of
its total assets in below investment grade debt securities rated B or higher
by Standard & Poor's or Moody's. Fixed income securities rated BB or Ba or
below (or comparable unrated securities) are commonly referred to as "junk
bonds," are considered predominately speculative and may be questionable as to
principal and interest payments as described further below under "Risks of
Investing in Non-Investment Grade Fixed-Income Securities." See Appendix A to
the Additional Statement for a description of the corporate bond ratings
assigned by Standard & Poor's and Moody's.

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OPTIONS ON SECURITIES AND SECURITIES INDICES

An Underlying Fund (other than the CORE U.S. Equity and CORE Large Cap
Growth Funds) 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 Fund's investment adviser is incorrect in its
expectation of fluctuations in securities prices or interest rates. The
successful use of options for hedging purposes also depends in part on the
ability of the investment adviser to manage future price fluctuations and the
degree of correlation between the options and securities markets. If the
investment adviser is incorrect in its expectation of changes in securities
prices or determination of the correlation between the securities indices on
which options are written and purchased and the securities in a Fund's
investment portfolio, the investment performance of the Fund will be less
favorable than it would have been in the absence of such options transactions.
The writing of options could significantly increase a Fund's portfolio
turnover rate and, therefore, associated brokerage commissions or spreads.

OPTIONS ON FOREIGN CURRENCIES

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

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

To seek to increase total return or to hedge against changes in interest
rates, securities prices or currency exchange rates, an Underlying Fund may
purchase and sell various kinds of futures contracts, and purchase and write
call and put options on any of such futures contracts. Each Fund may also
enter into closing purchase and sale transactions with respect to any such
contracts and options.

The futures contracts may be based on various securities (such as U.S.
Government securities), foreign currencies, securities indices and other
financial instruments and indices. An Underlying Fund will engage in

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futures and related options transactions for bona fide hedging purposes as
defined in regulations of the Commodity Futures Trading Commission or to seek
to increase total return to the extent permitted by such regulations. A Fund
may not purchase or sell futures contracts or purchase or sell related options
to seek to increase total return, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial
margin deposits and premiums paid on the Fund's outstanding positions in
futures and related options entered into for the purpose of seeking to
increase total return would exceed 5% of the market value of the Fund's net
assets. These transactions involve brokerage costs, require margin deposits
and, in the case of contracts and options obligating a Fund to purchase
securities or currencies, require the Fund to segregate and maintain cash or
liquid assets with a value equal to the amount of the Fund's obligations or to
otherwise cover the obligations in a manner permitted by the SEC.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Objectives and Policies-Futures Contracts and Options on Future
Contracts" in the Additional Statement. The loss incurred by a Fund in
entering into futures contracts and in writing call options on futures is
potentially unlimited and may exceed the amount of the premium received.
Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's net asset value. The profitability of a Fund's trading
in futures to seek to increase total return depends upon the ability of its
investment adviser to correctly analyze the futures markets. In addition,
because of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in
substantial losses to a Fund. Further, futures contracts and options on
futures may be illiquid, and exchanges may limit fluctuations in futures
contract prices during a single day.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS

The Underlying Funds may purchase when-issued securities. When-issued
transactions arise when securities are purchased by a Fund with payment and
delivery taking place in the future in order to secure what is considered to
be an advantageous price and yield to the Fund at the time of entering into
the transaction. Each Fund may also purchase securities on a forward
commitment basis; that is, make contracts to purchase securities for a fixed
price at a future date beyond the customary 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. Although a Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, a Fund may dispose of when-issued securities or
forward commitments prior to settlement if its investment adviser deems it
appropriate to do so.

ILLIQUID AND RESTRICTED SECURITIES

No Underlying Fund will invest more than 15% (10% in the case of the
Financial Square Prime Obligations Fund) of its net assets in illiquid
investments, which include securities (both foreign and domestic) that are not
readily marketable, swap transactions, certain SMBS, repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter options and certain
restricted securities, unless it is determined, based upon the continuing
review of the trading markets for a specific restricted security, that such
restricted security is eligible for resale under Rule 144A under the
Securities Act of 1933 and, therefore, is liquid. Investing in restricted
securities eligible for resale pursuant to Rule 144A may decrease the
liquidity of an Underlying Fund's portfolio to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.

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<PAGE>

REPURCHASE AGREEMENTS

The Underlying Funds may enter into repurchase agreements with dealers in
U.S. Government securities and member banks of the Federal Reserve System
which furnish collateral at least equal in value or market price to the amount
of their repurchase obligation. The Core Fixed Income, Global Income, High
Yield, CORE International Equity, International Equity, Emerging Markets
Equity and Asia Growth Funds may also enter into repurchase agreements
involving certain foreign government securities. If the other party or
"seller" defaults, a Fund might suffer a loss to the extent that the proceeds
from the sale of the underlying securities and other collateral are less than
the repurchase price. In addition, in the event of bankruptcy of the seller or
failure of the seller to repurchase the securities as agreed, a Fund could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. Each
Underlying Fund, together with other registered investment companies having
management agreements with GSAM 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 Underlying Funds may also seek to increase their 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. The value of the securities loaned may not
exceed 33 1/3% of the value of the total assets of an Underlying Fund. A loss
or delay in the recovery of securities could result if the institution which
borrows securities breaches its agreement with the Fund.

SHORT SALES AGAINST-THE-BOX

Certain Underlying Funds may make short sales of securities or maintain a
short position, provided that at all times when a short position is open a
Fund owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for an equal
amount of the securities of the same issuer as the securities sold short (a
short sale against-the-box). Not more than 25% of a Fund's net assets
(determined at the time of the short sale) may be subject to such short sales.

MORTGAGE DOLLAR ROLLS

The Underlying Fixed Income Funds (except the High Yield Fund) and the Real
Estate Securities Fund may enter into mortgage "dollar rolls" in which a Fund
sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase substantially similar but
not identical securities on a specified future date. During the roll period,
the Fund loses the right to receive principal and interest paid on the
securities sold. However, the Fund would benefit to the extent of any
difference between the price received for the securities sold and the lower
forward price for the future purchase or fee income plus the interest earned
on the cash proceeds of the securities sold until the settlement date for the
forward purchase. Unless such benefits exceed the income, capital appreciation
and gain or loss due to mortgage prepayments that would have been realized on
the securities sold as part of the mortgage dollar roll, the use of this
technique will diminish the investment performance of a Fund.

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TEMPORARY INVESTMENTS

Each Underlying Fund may, for temporary defensive purposes, invest 100% of
its total assets (except that the CORE Equity Funds and Emerging Markets
Equity Fund may only hold up to 35% of their respective total assets) in high
quality fixed income securities. When assets are invested in such instruments,
an Underlying Fund may not be achieving its investment objective.

PORTFOLIO TURNOVER

The turnover rates of the Underlying Funds have ranged from 24% to 396%
during their most recent fiscal years. There can be no assurance that the
turnover rates of these funds will remain within this range during subsequent
fiscal years. Higher turnover rates may result in higher brokerage costs and
higher expenses being incurred by the Underlying Funds. In addition, higher
turnover rates may result in higher taxable realized gains being incurred by
shareholders.

MISCELLANEOUS TECHNIQUES

In addition to the techniques and investments described above, each
Underlying Fund may engage in the following techniques and investments: (i)
mortgage swaps, index swaps and interest rate swaps, caps, floors and collars
(Underlying Fixed Income Funds and Real Estate Securities Fund only), (ii)
yield curve options and inverse floating rate securities (Underlying Fixed
Income Funds and Real Estate Securities Fund only), (iii) loan participations
(High Yield Fund only), (iv) other investment companies, and (v) custodial
receipts.

In addition, each Underlying 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.

(2) RELATED ADDITIONAL RISK FACTORS

RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITs

Investing in the securities of small capitalization companies and REITs
involves greater risk and the possibility of greater portfolio price
volatility. Among the reasons for the greater price volatility of these
securities are the less certain growth prospects of smaller firms and the
lower degree of liquidity in the markets for such securities. Small
capitalization companies and 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. An
Underlying Fund may invest in securities of small capitalization companies and
REITs that have experienced financial difficulties or are in an early
development stage. Other risks associated with REITs are discussed in this
Appendix A under "Real Estate Investment Trusts ("REITs')."

SPECIAL RISKS OF INVESTMENTS IN THE ASIAN AND OTHER EMERGING MARKETS

Investing in the securities of issuers in Emerging Countries involves risks
in addition to those discussed in this Appendix A under "Foreign Investments."
The International Equity, Emerging Markets Equity and Asia Growth Funds may
each invest without limit in the securities of issuers in Emerging Countries.
Up to 35% of the total assets of the Emerging Markets Equity Fund may be
invested in securities of issuers in any one Emerging Country. The High Yield
and CORE International Equity Funds may each invest up to 25%, the

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Growth and Income, Small Cap Value and Mid Cap Equity Funds may each invest up
to 15% and the Core Fixed Income, Global Income and Capital Growth Funds may
each invest up to 10% of its total assets in securities of issuers in Emerging
Countries.

Many Emerging Countries are 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. The governments of
some Emerging Countries are authoritarian in nature or have been installed or
removed as a result of military coups, while governments in other Emerging
Countries have periodically used force to suppress civil dissent. Disparities
of wealth, the pace and success of democratization, and ethnic, religious and
racial disaffection, among other factors, have also led to social unrest,
violence and/or labor unrest in some Asian and other Emerging Countries.
Investing in Emerging Countries involves the risk of loss due to
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of
capital invested. Many Emerging Countries have experienced currency
devaluations and substantial and, in some cases, extremely high rates of
inflation, which have a negative effect on the economies and securities
markets of such Emerging Countries. Economies in Emerging Countries generally
are dependent heavily upon commodity prices and international trade and,
accordingly, have been and may continue to be affected adversely by the
economies of their trading partners, trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade.

The securities markets of Emerging Countries are marked by a high
concentration of market capitalization and trading volume in a small number of
issuers representing a limited number of industries, as well as a high
concentration of ownership of such securities by a limited number of
investors. A Fund's purchase and sale of portfolio securities in certain
Emerging Countries may be constrained by limitations as to daily changes in
the prices of listed securities, periodic trading or settlement volume and/or
limitations on aggregate holdings of foreign investors. In addition,
settlement procedures in Emerging Countries are frequently less developed and
reliable than those in the United States and may involve a Fund's delivery of
securities before receipt of payment for their sale. Significant delays are
common in certain markets in registering the transfer of securities.
Settlement or registration problems may make it more difficult for a Fund to
value its portfolio securities and could cause the Fund to miss attractive
investment opportunities, to have a portion of its assets uninvested or to
incur losses due to the failure of a counterparty to pay for securities the
Fund has delivered or the Fund's inability to complete its contractual
obligations.

RISKS OF INVESTING IN FIXED INCOME SECURITIES

The Financial Square Prime Obligations Fund attempts to maintain a stable
net asset value of $1.00 per share and values its assets using the amortized
cost method in accordance with SEC regulations. There is no assurance,
however, that the Financial Square Prime Obligations Fund will be successful
in maintaining its per share value at $1.00 on a continuous basis. The per
share net asset values of the other Underlying Funds are expected to fluctuate
on a daily basis.

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

A-11
<PAGE>

The Underlying Funds may invest in various types of derivative debt
securities that present more complex types of interest rate risks. These risks
include call risk and extension risk. Call risk (i.e., where the issuer
exercises its right to pay principal on an obligation earlier than scheduled)
causes cash flow to be returned earlier than expected. This typically results
when interest rates have declined and an Underlying Fund will suffer from
having to reinvest in lower yielding securities. Extension risk (i.e., where
the issuer exercises its right to pay principal on an obligation later than
scheduled) causes cash flows to be returned later than expected. This
typically results when interest rates have increased, and a Fund may be unable
to recoup all of its initial investment and will also suffer from the
inability to invest in higher yielding securities.

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

RISKS OF INVESTING IN NON-INVESTMENT GRADE FIXED-INCOME SECURITIES

Non-investment grade fixed-income securities are considered predominantly
speculative by traditional investment standards. In some cases, these
obligations may be highly speculative and have poor prospects for reaching
investment grade standing. Non-investment grade fixed-income securities and
unrated securities of comparable credit quality (commonly known as "junk
bonds") are subject to the increased risk of an issuer's inability to meet
principal and interest obligations. These securities, also referred to as high
yield securities, may be subject to greater price volatility due to such
factors as specific corporate developments, interest rate sensitivity,
negative perceptions of the junk bond markets generally and less secondary
market liquidity. Non-investment grade securities are generally unsecured and
are often subordinated to the rights of other creditors of the issuers of such
securities. Investment by a Fund in defaulted securities poses additional risk
of loss should nonpayment of principal and interest continue in respect of
such securities. Even if such securities are held to maturity, recovery by a
Fund of its initial investment and any anticipated income or appreciation is
uncertain.

RISKS OF OTHER DERIVATIVE TRANSACTIONS

An Underlying Fund's transactions, if any, in options, futures, options on
futures, swaps, structured securities and currency forward contracts involve
certain risks, including a possible lack of correlation between changes in the
value of hedging instruments and the portfolio assets (if any) being hedged,
the potential illiquidity of the markets for derivative instruments, the risks
arising from margin requirements and related leverage factors associated with
such transactions. The use of these management techniques to seek to increase
total return may be regarded as a speculative practice and involves the risk
of loss if the investment adviser is incorrect in its expectation of
fluctuations in securities prices, interest rates or currency prices.

NON-DIVERSIFICATION

The Global Income Fund is registered as a "non-diversified" Fund under the
1940 Act and is, therefore, more susceptible to adverse developments affecting
any single issuer. In addition, the Global Income Fund, and certain other
Underlying Funds, may invest more than 25% of their total assets in the
securities of corporate and governmental issuers located in a single foreign
country. Concentration of a Fund's investments in such issuers will subject
the Fund, to a greater extent than if investment was more limited, to the
risks of adverse securities markets, exchange rates and social, political or
economic events which may occur in those countries.

A-12
<PAGE>

APPENDIX B

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON ACCOUNT
INFORMATION FORM

You are required by law to provide the Portfolio 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 Portfolio 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 Portfolio'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 IRA's, governmental agencies, financial institutions, registered
securities and commodities dealers and others.

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

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

B-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

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

GOLDMAN SACHS

ASSET ALLOCATION PORTFOLIOS

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

PROSPECTUS

INSTITUTIONAL SHARES

[LOGO] GOLDMAN SACHS

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

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

PROSPECTUS
January 1, 1998 GOLDMAN SACHS
ASSET ALLOCATION PORTFOLIOS
SERVICE SHARES

GOLDMAN SACHS INCOME STRATEGY PORTFOLIO
Seeks a high level of current income with greater stability of principal
than an investment in equity securities alone.

GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO
Seeks long-term capital appreciation and current income.

GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO
Seeks capital appreciation and secondarily current income.

GOLDMAN SACHS AGGRESSIVE GROWTH STRATEGY PORTFOLIO
Seeks capital appreciation.

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

This Prospectus provides information about Goldman Sachs Trust (the "Trust")
and the Portfolios 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 January 1, 1998,
containing further information about the Trust and the Portfolios 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.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Portfolio Highlights................ 2
Fees and Expenses................... 6
Investment Objectives and Policies.. 8
Risk Factors and Special
Considerations..................... 10
Description of Underlying Funds..... 11
Management.......................... 18
Net Asset Value..................... 22
Performance Information............. 22
Shares of the Trust................. 23
Taxation............................ 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................ 25
Additional Services................... 25
Reports to Shareholders............... 26
Dividends............................. 26
Purchase of Service Shares............ 26
Exchange Privilege.................... 28
Redemption of Service Shares.......... 28
Appendix A............................ A-1
Appendix B............................ B-1
</TABLE>
<PAGE>

PORTFOLIO 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 PORTFOLIOS?

2
<PAGE>

WHAT IS GOLDMAN SACHS ASSET MANAGEMENT'S GLOBAL ASSET ALLOCATION PROCESS?

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

3
<PAGE>

Underlying Funds may also invest in non-investment grade fixed income
securities (commonly referred to as "junk bonds"), which are considered to be
speculative by traditional investment standards.

For a further description of the risks involved in an investment in the
Portfolios and the Underlying Funds, see "Risk Factors and Special
Considerations" and Appendix A to this Prospectus.

WHO MANAGES THE PORTFOLIOS?

WHO DISTRIBUTES THE PORTFOLIOS' SHARES?

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

WHAT IS THE MINIMUM INVESTMENT?

HOW DO I PURCHASE SERVICE SHARES?

Customers of Service Organizations may invest in Service Shares only through
their Service Organizations. Service Shares of a Portfolio are purchased at the
current net asset value without any sales load. See "Purchase of Service
Shares."

ADDITIONAL SERVICES. The Trust, on behalf of the Portfolios, has adopted a
Service Plan with respect to the Service Shares which authorizes a Portfolio 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 Portfolios, 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

4
<PAGE>

average daily net assets of the Service Shares of the Portfolios attributable
to or held in the name of the Service Organization for its customers. This
compensation is in addition to any other compensation, if any, a Service
Organization may receive from its customers, the Trust or Goldman Sachs. 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 net asset value next determined after
receipt of such request in proper form. See "Redemption of Service Shares."

HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?

<TABLE>
<CAPTION>
CAPITAL
INVESTMENT INCOME DIVIDENDS GAINS
PORTFOLIO DECLARED AND PAID DISTRIBUTIONS
- --------- --------------------------- -------------
<S> <C> <C>
Income Strategy....................... Monthly Annually
Growth and Income Strategy............ Quarterly Annually
Growth Strategy....................... Quarterly Annually
Aggressive Growth Strategy............ Annually Annually
</TABLE>

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

5
<PAGE>

FEES AND EXPENSES
(SERVICE SHARES)

<TABLE>
<CAPTION>
GROWTH AND AGGRESSIVE
INCOME INCOME GROWTH GROWTH
STRATEGY STRATEGY STRATEGY STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Pur-
chases............................. None None None None
Maximum Sales Charge Imposed on Re-
invested Dividends................. None None None None
Redemption Fees..................... None None None None
Exchange Fees....................... None None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily
net assets)
Management Fees (for asset
allocation) (after applicable
limitations)/1/.................... 0.15% 0.15% 0.15% 0.15%
Service Fees/2/..................... 0.50% 0.50% 0.50% 0.50%
Other Expenses:
Underlying Fund Expenses/3/......... 0.65% 0.76% 0.81% .90%
Other Expenses (after applicable
limitations)/4/.................... 0.10% 0.10% 0.10% 0.10%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (after
expense limitations)/5/............. 1.40% 1.51% 1.56% 1.65%
==== ==== ==== ====
</TABLE>
- --------
/1/The Investment Adviser has voluntarily agreed that a portion of the
management fees would not be imposed on the Portfolios equal to 0.20%.
Without such limitation, management fees would be 0.35% of each Portfolio's
average daily net assets.
/2/Service Organizations may charge other fees to their customers who are
beneficial owners of Service Shares in connection with their customer
accounts.
/3/Based on estimated amounts for the current fiscal year. Underlying Fund
expenses for each Portfolio are estimated based upon the initial allocation
of each Portfolio's investment in the Underlying Funds and upon the total
operating expenses of the Underlying Funds for their last fiscal years or
their estimated expenses for the current year. Actual Underlying Fund
expenses incurred by each Portfolio may vary with changes in the allocation
of each Portfolio's assets among the Underlying Funds and with other events
that directly affect the expenses of the Underlying Funds. For additional
information on the total operating expenses of each Underlying Fund, please
refer to "Management--Expenses."
/4/The Investment Adviser voluntarily has agreed to reduce or limit certain
other expenses (excluding management and service fees, taxes, interest,
brokerage fees, and litigation, indemnification and other extraordinary
expenses) for each Portfolio to the extent such expenses exceed 0.10% of the
Portfolio's average daily net assets.
/5/Without the limitations and waivers described above, "Other Expenses" and
"Total Operating Expenses" of the Portfolios for the current fiscal year are
estimated to be as follows:

<TABLE>
<CAPTION>
GROWTH AND AGGRESSIVE
INCOME STRATEGY INCOME STRATEGY GROWTH STRATEGY GROWTH STRATEGY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Other Expenses.......... 1.14% 0.60% 0.78% 2.21%
Total Operating Ex-
penses................. 2.64% 2.21% 2.44% 3.96%
</TABLE>

6
<PAGE>

EXAMPLE

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:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Income Strategy Portfolio........................................ $14 $44
Growth and Income Strategy Portfolio............................. $15 $48
Growth Strategy Portfolio........................................ $16 $49
Aggressive Growth Strategy Portfolio............................. $17 $52
</TABLE>

The Investment Adviser and Goldman Sachs have no current intention of
modifying or discontinuing any of the limitations set forth above but may do
so in the future at their discretion. The information set forth in the
foregoing table and hypothetical example relates only to Service Shares of the
Portfolios. Each Portfolio also offers Class A, B, C and Institutional 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 Class A, B, C and Institutional Shares of the
Portfolios may be obtained from an investor's sales representative or from
Goldman Sachs by calling the number on the back cover of this Prospectus.

Certain Service Organizations may receive compensation in connection with
the sale and distribution of Service Shares. For additional information
regarding such compensation, see "Purchase of Service Shares" in this
Prospectus and the Additional Statement.

7
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

EQUITY/FIXED INCOME RANGE (PERCENTAGE OF EACH PORTFOLIO'S NET ASSETS)

8
<PAGE>

9
<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

INVESTING IN UNDERLYING FUNDS

INVESTMENTS OF THE UNDERLYING FUNDS

AFFILIATED PERSONS

EXPENSES

10
<PAGE>

DESCRIPTION OF UNDERLYING FUNDS

(continued)

11
<PAGE>

12
<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE
INTEREST
INVESTMENT DURATION OR RATE CREDIT OTHER
FUND NAMES OBJECTIVES MATURITY SENSITIVITY INVESTMENT SECTOR QUALITY INVESTMENTS
- ---------------------- -------------- ------------------- ----------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SQUARE PRIME Maximize Maximum Maturity of 3-month Money market High Quality N/A
OBLIGATIONS FUND current income Individual bill instruments (short-term
to the extent Investments = including U.S. ratings of
consistent 13 months at time Government A-1, P-1 or
with the of purchase Securities, U.S. comparable
maintenance of Maximum Dollar- bank obligations, quality).
liquidity. Weighted Average commercial paper
Portfolio and other short-
Maturity = term obligations
90 days of U.S.
corporations,
governmental and
other entities,
and related
repurchase
agreements.
- -----------------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE A high level Target Duration = 9-month At least 65% of U.S. Fixed-rate
GOVERNMENT FUND of current 6-month to 1-year note total assets in Government mortgage pass-
income, U.S. Treasury securities issued Securities through
consistent Security or guaranteed by securities and
with low Maximum Duration*= the U.S. repurchase
volatility of 2 years government, its agreements
principal. agencies, collateralized
instrumentalities by U.S.
or sponsored Government
enterprises Securities.
("U.S. Government
Securities") that
are adjustable
rate mortgage
pass-through
securities and
other mortgage
securities with
periodic interest
rate resets.
- -----------------------------------------------------------------------------------------------------------------------
SHORT DURATION A high level Target Duration = 2-year At least 65% of U.S. Mortgage pass-
GOVERNMENT FUND of current 2-year U.S. bond total assets in Government through
income and Treasury Security U.S. Government Securities securities and
secondarily, plus or minus .5 Securities and other
in seeking years Maximum repurchase securities
current Duration*= 3 years agreements representing an
income, may collateralized by interest in or
also consider such securities. collateralized
the potential by mortgage
for capital loans.
appreciation.
- -----------------------------------------------------------------------------------------------------------------------
GOVERNMENT INCOME FUND A high level Target Duration = 5-year At least 65% of U.S. Non-government
of current Lehman Brothers bond assets in U.S. Government mortgage pass-
income, Mutual Fund Government Securities through
consistent Government/Mortgage Securities, and non-U.S. securities,
with safety of Index plus or minus including Government asset-backed
principal. 1 year mortgage-backed Securities = securities,
Maximum U.S. Government AAA/Aaa corporate
Duration*= 6 years Securities and fixed-income
repurchase securities and
agreements repurchase
collateralized by agreements
such securities. collateralized
by U.S.
Government
Securities.
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE
INTEREST
INVESTMENT DURATION OR RATE CREDIT OTHER
FUND NAMES OBJECTIVES MATURITY SENSITIVITY INVESTMENT SECTOR QUALITY INVESTMENTS
- ---------------------- -------------- -------------- ----------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
CORE FIXED INCOME FUND Total return Target 5-year At least 65% of Minimum = Foreign fixed-
consisting of Duration = bond assets in fixed- BBB/Baa income,
capital Lehman income Minimum for municipal and
appreciation Brothers securities, non-dollar convertible
and income Aggregate Bond including U.S. securities = securities,
that exceeds Index plus or Government AA/Aa foreign
the total minus Securities, currencies and
return of the 1 year corporate, repurchase
Lehman Maximum mortgage-backed agreements
Brothers Duration*= 6 and asset-backed collateralized
Aggregate Bond years securities. by U.S.
Index. Government
Securities.
- ------------------------------------------------------------------------------------------------------------------
GLOBAL INCOME FUND A high total Target 6-year Securities of Minimum = Mortgage and
return, Duration = bond U.S. and foreign BBB/Baa asset-backed
emphasizing J.P. Morgan governments and At least securities,
current Global corporations. 50% = AAA/Aaa foreign
income, and, Government currencies and
to a lesser Bond Index repurchase
extent, (hedged) plus agreements
providing or minus 2.5 collateralized
opportunities years Maximum by U.S.
for capital Duration*= 7.5 Government
appreciation. years Securities or
certain foreign
government
securities.
- ------------------------------------------------------------------------------------------------------------------
HIGH YIELD FUND A high level Target 6-year Except for At least Mortgage-backed
of current Duration = bond temporary 65% = BB/Ba and asset-
income and, Lehman defensive or below backed
secondarily, Brothers High purposes, at securities,
capital Yield Bond least 65% of U.S. Government
appreciation. Index plus or assets in fixed- Securities,
minus 2.5 income investment
years securities rated grade corporate
Maximum below investment fixed-income
Duration*= 7.5 grade, including securities,
years U.S. and non- structured
U.S. dollar securities,
corporate debt, foreign
foreign currencies and
government repurchase
securities, agreements
convertible collateralized
securities and by U.S.
preferred stock. Government
Securities.
</TABLE>
- -----
* Under normal interest rate conditions.

14
<PAGE>

UNDERLYING EQUITY FUNDS

15
<PAGE>

16
<PAGE>

UNDERLYING FIXED INCOME FUNDS

17
<PAGE>

MANAGEMENT

TRUSTEES AND OFFICERS

INVESTMENT ADVISER

18
<PAGE>

As compensation for its services and assumption of certain expenses pursuant
to the Management Agreement, GSAM is entitled to a fee, computed daily and
payable monthly, at the annual rate equal to 0.35% of each Portfolio's average
daily net assets. The Investment Adviser has voluntarily agreed to waive 0.20%
of this fee. The Investment Adviser may discontinue or modify its voluntary
waiver in the future in its discretion, although it has no current intention
to do so.

The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Portfolios (excluding asset allocation and service
fees, taxes, interest, brokerage fees, and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.10% per
annum of a Portfolio's average daily net assets. Such reductions or limits, if
any, are calculated monthly on a cumulative basis and may be discontinued or
modified by the Investment Adviser in its discretion at any time.

Goldman Sachs may from time to time, at its own expense, provide
compensation to certain Service Organizations and other persons for providing
administrative services to their customers. These services include maintaining
account records, processing orders to purchase, redeem and exchange Portfolio
shares and responding to certain customer inquiries. In addition, these
services may also include responding to certain inquiries from and providing
written materials to depository institutions about the Portfolios; furnishing
advice about and assisting depository institutions in obtaining from state
regulatory agencies any rulings, exceptions or other authorizations that may
be required to conduct a mutual fund sales program; acting as liaison between
depository institutions and national regulatory organizations; assisting with
the preparation of sales material; and providing general assistance and advice
in establishing and maintaining mutual fund sales programs on the premises of
depository institutions.

19
<PAGE>

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

DISTRIBUTOR AND TRANSFER AGENT

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the
exclusive distributor (the "Distributor") of each Portfolio's shares. Goldman
Sachs, 4900 Sears Tower, Chicago, Illinois 60606, also serves as each
Portfolio's transfer agent (the "Transfer Agent") and as such performs various
shareholder servicing functions. Shareholders with inquiries regarding a
Portfolio should contact Goldman Sachs (as Transfer Agent) at the address or
the telephone number set forth on the back cover page of this Prospectus.
Goldman Sachs is entitled to receive a transfer agency fee from each
Portfolio, with respect to Service Shares, equal to their proportionate share
of the total transfer agency fees borne by the Portfolio. These fees are equal
to $12,000 per year plus $7.50 per account with respect to Class A, Class B
and Class C shares plus 0.04% of the value of the outstanding shares of the
Institutional and Service classes of a Portfolio. The Portfolios also pay
Goldman Sachs' out-of-pocket and transaction-related expenses, and may bear
fees paid to Service Organizations or other persons providing sub-transfer
agency or similar services.

EXPENSES

The Portfolios are responsible for the payment of their expenses. The
expenses include, without limitation, asset allocation, custodial and transfer
agency fees, service fees paid to Service Organizations, brokerage fees and
commissions, filing fees for the registration or qualification of the
Portfolios' 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 Portfolios 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
Portfolios), expenses of preparing and setting in type prospectuses,
statements of additional information, proxy material, reports and notices and
the printing and distributing of the same to shareholders and regulatory
authorities, compensation and expenses of the Trust's "non-interested"
Trustees and extraordinary expenses, if any, incurred by the Trust.

20
<PAGE>

The expenses associated with investing in a "fund of funds," such as the
Portfolios, are generally higher than those of investment companies that do
not invest in other mutual funds. These increased expenses stem from the fact
that investors must indirectly pay a portion of the operating costs of the
Underlying Funds. The structure of the Portfolios will, however, reduce any
layering of costs in the following manner: (a) any fees charged to the
Portfolios under the Management Agreement are for services that are in
addition to, and not duplicative of, services provided under any Underlying
Fund's management agreement; (b) the Portfolios pay no front-end or contingent
deferred sales charges in connection with the purchase or redemption of shares
of the Underlying Funds; (c) the Portfolios do not pay any sales charges,
distribution-related fees or service fees related to the shares of the
Underlying Funds; (d) custodial and other fees charged by both the Portfolios
and the Underlying Funds are not redundant inasmuch as distinct services are
being provided at each level; and (e) any additional incremental cost incurred
by investing in the Portfolios is in return for a substantial investment
management service, namely the initial and ongoing asset allocation of
investments made in the Underlying Funds, and provision of meaningful
additional diversification benefits.

21
<PAGE>

NET ASSET VALUE

PERFORMANCE INFORMATION

22
<PAGE>

SHARES OF THE TRUST

TAXATION

FEDERAL TAXES

23
<PAGE>

portion of such net capital gain that constitutes mid-term capital gains, will
be taxed to shareholders as long-term or mid-term capital gain, as the case
may be, 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. A Portfolio's dividends that are paid to its
corporate shareholders and are attributable to qualifying dividends such
Portfolio or an Underlying 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. A portion of each Portfolio's
dividends may generally qualify, in the hands of corporate shareholders, for
the corporate dividends-received deduction. Certain distributions paid by a
Portfolio 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 Portfolios for
federal income tax purposes.

Redemptions and exchanges of shares are taxable events.

OTHER TAXES

24
<PAGE>

ADDITIONAL INFORMATION

ADDITIONAL SERVICES

The Trust, on behalf of the Portfolios, has adopted a Service Plan with
respect to the Service Shares which authorizes a Portfolio to compensate
certain institutions ("Service Organizations") 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 Portfolios, enters into agreements with Service Organizations which
purchase Service Shares on behalf of their customers ("Service Agreements").
The Service Agreements provide for compensation to the Service Organizations
in an amount up to 0.50% (on an annualized basis) of the average daily net
assets of the Service Shares of the Portfolios 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 shall not exceed
0.25% of such average daily net assets. The services provided by the Service
Organizations may include acting, directly or through an agent, as the sole
shareholder of record, maintaining account records for customers, processing
orders to purchase, redeem or exchange Service Shares for customers,
responding to inquiries from prospective and existing shareholders and
assisting customers with investment procedures.

Normally, purchase, exchange and redemption orders processed by a Service
Organization on behalf of its customers will not be effective until received
by Goldman Sachs as described herein. The Trust may, however, authorize
certain Service Organizations to accept on the Trust's behalf orders placed by
their customers and, if approved by the Trust, to designate other
intermediaries to accept such orders. In these cases, a Portfolio will be
deemed to have received an order in proper form when the order is accepted by
the authorized Service Organization or intermediary on a Business Day, and the
order will be priced at a Portfolio's net asset value per share next
determined after such acceptance. The Service Organization or intermediary
will be responsible for transmitting accepted orders to the Trust within the
period agreed upon by them. A customer may contact its Service Organization to
learn whether the Service Organization is authorized to accept orders. Service
Organizations that are authorized to accept orders for the Trust may receive
payments from the Portfolios or Goldman Sachs that are in addition to the
payments payable by the Trust under the Service Plan.

Holders of Service Shares of a Portfolio bear the 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 other fees 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 Organization under a Service Agreement and may affect the return
earned on an investment in a Portfolio. The Trust, on behalf of the
Portfolios, accrues payments made pursuant to a Service Agreement daily. All
inquiries of beneficial owners of Service Shares should be directed to such
owners' Service Organizations.

25
<PAGE>

REPORTS TO SHAREHOLDERS

Recordholders of Service Shares of the Portfolios will receive an annual
report containing audited financial statements and a semi-annual report. Each
recordholder of Service Shares will also be provided with a printed
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.

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

DIVIDENDS

Each dividend from net investment income and capital gain distributions, if
any, declared by a Portfolio on its outstanding Service Shares will, at the
election of each shareholder, be paid (i) in cash or (ii) in additional
Service Shares of such Portfolio. 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 Service
Shares of the applicable Portfolio.

The election to reinvest dividends and distributions paid by a Portfolio in
additional Service Shares of the 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 Service Shares of a Portfolio.

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

PURCHASE OF SERVICE SHARES

Customers of Service Organizations may invest in Service Shares only through
Service Organizations. Service Shares may be purchased on any Business Day at
the net asset value per share next determined after

26
<PAGE>

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 another intermediary may be authorized to accept orders for
the Portfolios.) No sales load will be charged. Currently, each Portfolio's
net asset value is determined as of the close of regular trading on the New
York Stock Exchange (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 Portfolio 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. 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 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 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 Asset Allocation Portfolios--Name
of Portfolio and Class of Shares" and should be directed to "Goldman Sachs
Asset Allocation Portfolios--Name of Portfolio and Class of Shares," c/o
National Financial Data Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City,
MO 64141-6711.

OTHER PURCHASE INFORMATION

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

The Portfolios and Goldman Sachs each reserve the right to redeem the
Service Shares of any Service Organization whose account balance is less than
$50 as a result of earlier redemptions. Such redemptions will not be
implemented if the value of such shareholder's account falls below the minimum
account balance solely as a result of market conditions. The Trust will give
sixty (60) days' prior written notice to Service Organizations whose Service
Shares are being redeemed to allow them to purchase sufficient additional
Service Shares of a Portfolio to avoid such redemption.

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

27
<PAGE>

securities acquired in this manner are consistent with the Portfolio's
investment objectives, restrictions and policies and are desirable investments
for the Portfolio.

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 Portfolios, to selected Service Organizations and
other persons in connection with the sale of shares of the Portfolios, the
Underlying Funds and other investment portfolios of the Trust (such as
additional payments based on new sales, amounts exceeding pre-established
thresholds, or the length of time customers' assets have remained in the
Trust) and, subject to applicable NASD regulations, contribute to various non-
cash and cash incentive arrangements to promote the sale of shares, as well as
sponsor various educational programs, sales contests and/or promotions in
which participants may receive reimbursement of expenses, entertainment and
prizes such as travel awards, merchandise, cash, investment research and
educational information and related support materials. This additional
compensation can vary among Service Organizations depending upon such factors
as the amounts their customers have invested (or may invest) in particular
investment portfolios of the Trust, the particular program involved, or the
amount of reimbursable expenses. Additional compensation based on sales may,
but is currently not expected to, exceed .50% (annualized) of the amount
invested. For further information, see the Additional Statement.

EXCHANGE PRIVILEGE

Service Shares of a Portfolio may be exchanged by a Service Organization for
(i) Service Shares of any other mutual fund sponsored by Goldman Sachs and
designated as an eligible fund for this purpose and (ii) the corresponding
class of any Goldman Sachs Money Market Fund at the net asset value next
determined either by writing to Goldman Sachs, Attention: Goldman Sachs Asset
Allocation Portfolios--Name of Portfolio and Class of Shares, c/o GSAM
Shareholder Services, 4900 Sears Tower, Chicago, Illinois 60606 or, if
previously elected in the Portfolio's Account Information Form, by telephone
at 800-621-2550 (7:00 a.m. to 5:30 p.m. Chicago time). A shareholder should
obtain and read the prospectus relating to any other fund and its shares and
consider its investment objective, policies and applicable fees before making
an exchange. Service Shares acquired by 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
difficult to implement. For federal income tax purposes, an exchange is
treated as a sale of the Service Shares surrendered in the exchange on which
an investor may realize a gain or loss, followed by a purchase of Service
Shares, or the corresponding class of any Goldman Sachs Money Market Fund
received in the exchange. Shareholders should consult their own tax adviser
concerning the tax consequences of an exchange. Exchanges are available only
in states where exchanges may legally be made. The exchange privilege may be
modified materially or withdrawn at any time on sixty (60) days' written
notice to recordholders of Service Shares and is subject to certain
limitations. See "Purchase of Service Shares."

REDEMPTION OF SERVICE SHARES

The Portfolios will redeem their Service Shares upon request of the
recordholder of such shares on any Business Day at the net asset value next
determined after receipt of such request in proper form by Goldman

28
<PAGE>

Sachs. (See "Additional Services" for a description of limited situations
where a Service Organization or another intermediary may be authorized to
accept requests for the Portfolios.) If Service Shares to be redeemed were
recently purchased by check, a Portfolio 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 fifteen
(15) days. Redemption requests may be made by a Service Organization by
writing 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 accompanying this
Prospectus. It may be difficult to implement redemptions by telephone in times
of drastic economic or market changes.

The Portfolios will arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the recordholder of Service Shares or,
if the recordholder elects in writing, by check. Redemption proceeds paid by
wire transfer will normally be wired on the next Business Day in federal funds
(for a total one-day delay), but may be paid up to three (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. Once wire transfer instructions have been given by Goldman
Sachs, neither the Portfolios, 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.

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<PAGE>

APPENDIX A

(1) DESCRIPTION OF INVESTMENTS AND INVESTMENT TECHNIQUES OF THE UNDERLYING
FUNDS

CONVERTIBLE SECURITIES

PREFERRED STOCK, WARRANTS AND RIGHTS

A-1
<PAGE>

REAL ESTATE INVESTMENT TRUSTS ("REITS")

FOREIGN INVESTMENTS

A-2
<PAGE>

A-3
<PAGE>

FIXED INCOME SECURITIES

The Funds may invest in Mortgage-Backed Securities issued or sponsored by
both government and non-governmental entities. Privately issued Mortgage-
Backed Securities are generally backed by pools of

A-4
<PAGE>

A-5
<PAGE>

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.

A-6
<PAGE>

OPTIONS ON SECURITIES AND SECURITIES INDICES

OPTIONS ON FOREIGN CURRENCIES

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

A-7
<PAGE>

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS

ILLIQUID AND RESTRICTED SECURITIES

No Underlying Fund will invest more than 15% (10% in the case of the
Financial Square Prime Obligations Fund) of its net assets in illiquid
investments, which include securities (both foreign and domestic) that are not
readily marketable, swap transactions, certain SMBS, repurchase agreements
maturing in more than seven days, time deposits with a notice or demand period
of more than seven days, certain over-the-counter-options and certain
restricted securities, unless it is determined, based upon the continuing
review of the trading markets for a specific restricted security, that such
restricted security is eligible for resale under Rule 144A under the
Securities Act of 1933 and, therefore, is liquid. Investing in restricted
securities eligible for resale pursuant to Rule 144A may decrease the
liquidity of an Underlying Fund's portfolio to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.

A-8
<PAGE>

REPURCHASE AGREEMENTS

LENDING OF PORTFOLIO SECURITIES

SHORT SALES AGAINST-THE-BOX

MORTGAGE DOLLAR ROLLS

A-9
<PAGE>

TEMPORARY INVESTMENTS

PORTFOLIO TURNOVER

MISCELLANEOUS TECHNIQUES

(2) RELATED ADDITIONAL RISK FACTORS

RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS

SPECIAL RISKS OF INVESTMENTS IN THE ASIAN AND OTHER EMERGING MARKETS

A-10
<PAGE>

Fixed Income, Global Income and Capital Growth Funds may each invest up to 10%
of its total assets in securities of issuers in Emerging Countries.

RISKS OF INVESTING IN FIXED INCOME SECURITIES

A-11
<PAGE>

RISKS OF INVESTING IN NON-INVESTMENT GRADE FIXED-INCOME SECURITIES

RISKS OF OTHER DERIVATIVE TRANSACTIONS

NON-DIVERSIFICATION

A-12
<PAGE>

APPENDIX B

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.

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.

B-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.) . . . . . . . . 800-621-2550

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GOLDMAN SACHS

ASSET ALLOCATION PORTFOLIOS

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PROSPECTUS

SERVICE SHARES

GOLDMAN
SACHS

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