GOLDMAN SACHS TRUST, 485APOS, 1999-07-16

GOLDMAN SACHS TRUST
485APOS, 1999-07-16

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<PAGE>

As filed with the Securities and Exchange Commission on
July 16, 1999

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

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

-------------
Form N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ( X )

Post-Effective Amendment No. 55( X )

and/or

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

Amendment No. 57( X )

(Check appropriate box or boxes)

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

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

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

Michael J. Richman, Esq. Copies to:
Goldman, Sachs & Co. Jeffrey A. Dalke, Esq.
85 Broad Street - 12th Floor Drinker Biddle & Reath LLP
New York, New York 10004 One Logan Square
18th and Cherry Streets
(Name and address of agent for service) Philadelphia, PA 19103

1
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It is proposed that this filing will become effective (check appropriate box)

( ) Immediately upon filing pursuant to paragraph (b)
( ) On (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On (date) pursuant to paragraph (a)(1)
(X) 75 days after filing pursuant to paragraph (a)(2)
( ) On (date) pursuant to paragraph (a)(2) of rule 485.

2
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Preliminary Prospectus dated July 16, 1999
Subject to Completion

Class A, B
Prospectus and C Shares

, 1999

- --------------------------------------------------------------------------------
GOLDMAN SACHS SPECIALTY FUNDS
- --------------------------------------------------------------------------------

.Goldman Sachs Internet
Tollkeeper Fund

.Goldman Sachs Real
Estate Securities Fund

[Artwork to Appear Here]

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
A FUND INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------

[LOGO OF GOLDMAN SACHS APPEARS HERE]
<PAGE>

General Investment Management Approach

Goldman Sachs Asset Management, a separate operating division of Goldman,
Sachs & Co. ("Goldman Sachs"), serves as investment adviser to the Internet
Tollkeeper and Real Estate Securities Funds. Goldman Sachs Asset Management
is referred to in this Prospectus as the "Investment Adviser."

GROWTH STYLE FUNDS

Goldman Sachs' Growth Investment Philosophy:
1. Invest as if buying the company/business, not simply trading its stock:
..Understand the business, management, products and competition.
..Perform intensive, hands-on fundamental research.
..Seek businesses with strategic competitive advantages.
..Over the long-term, expect each company's stock price ultimately to track
the growth of the business.

2. Buy high-quality growth businesses that possess strong business fran-
chises, favorable long-term prospects and excellent management.

3. Purchase superior long-term growth companies at a favorable price--seek
to purchase at a fair valuation, giving the investor the potential to
fully capture returns from above-average growth rates.

Growth companies have earnings expectations that exceed those of the stock
market as a whole.

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

REAL ESTATE SECURITIES FUND

Goldman Sachs' Real Estate Securities Investment Philosophy:
When choosing the Fund's securities, the Investment Adviser:
..Selects stocks based on quality of assets, experienced management and a
sustainable competitive advantage.

1
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..Seeks to buy securities at a discount to the intrinsic value of the busi-
ness (assets and management).
..Seeks a team approach to decision making.

Over time, REITs (which stand for Real Estate Investment Trusts) have
offered investors important diversification and competitive total returns
versus the broad equity market.

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

2
<PAGE>

Fund Investment Objectives and Strategies

Goldman Sachs
Internet Tollkeeper Fund

FUND FACTS
- --------------------------------------------------------------------------------

Objective: Long-term growth of capital

Investment Focus: U.S. equity securities that offer long-term capital
appreciation with a primary focus on the media,
telecommunications, technology and Internet sectors.

Investment Style: Growth

INVESTMENT OBJECTIVE

The Fund seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities and at least 65% of its total
assets in equity securities of "Internet Tollkeeper" companies (as described
below), which include companies in the media, telecommunications, technology
and Internet sectors which provide access, infrastructure, content and serv-
ices to Internet companies and Internet users. The Fund seeks to achieve its
investment objective by investing in equity securities of companies that the
Investment Adviser believes will benefit from the growth of the Internet by
providing access, infrastructure, content and services to Internet companies
and customers. The Fund will also seek its investment objective by investing
in companies whose rapid adoption of an Internet strategy is expected to
improve their cost structure or competitive advantage. Internet-based compa-
nies that exhibit a sustainable business model may also be candidates for
purchase in the Fund. Although the Fund invests primarily in publicly traded
U.S. securities, it may invest up to 10% of its total

3
<PAGE>

assets in foreign securities, including securities of issuers in emerging
countries and securities quoted in foreign currencies.

The Internet. The Internet is a global collection of connected computers
that allows commercial and professional organizations, educational institu-
tions, government agencies, and individuals to communicate electronically,
access and share information, and conduct business.

The Internet has had, and is expected to continue to have, a significant
impact on the global economy, as it changes the way many companies operate.
Benefits of the Internet for businesses may include global scalability,
acquisition of new clients, new revenue sources and increased efficiencies.

Our Approach to Investing in the Internet. While the Internet is clearly a
significant force in shaping businesses and driving the economy, the Invest-
ment Adviser believes that many Internet-based companies may not have sus-
tainable growth. Many Internet-based companies that are engaged in elec-
tronic commerce are focused on driving sales volume and competing with other
Internet-based companies. Often, this competition is based on price, and if
these companies do not own strong franchises, then the Investment Adviser
believes there could be significant uncertainty regarding their long-term
profitability.

The Investment Adviser believes that another attractive way to invest in the
Internet sector is to invest in businesses participating in the growth of
the Internet that potentially have long-lasting strategic advantages. Char-
acteristics of these companies may include: dominant market share, strong
brand names, recurring revenue streams, cost advantages, economies of scale,
financial strength, technological advantages and strong, experienced manage-
ment teams.

Beneficiaries of the Internet that may meet the above criteria include those
companies (Internet Tollkeepers) providing access, infrastructure, content,
and services to Internet companies and Internet users. The Fund will also
invest in companies whose rapid adoption of an Internet strategy is expected
to improve their cost structure or competitive advantage. Internet-based
companies that exhibit a sustainable business model may also be candidates
for purchase in the Fund. The Investment Adviser pays careful attention to
the stock prices of these companies, seeking to purchase them at a discount
to their intrinsic value.

4
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FUND INVESTMENT OBJECTIVES AND STRATEGIES

Because of its narrow industry focus, the Fund's investment performance will
be closely tied to many factors which affect the Internet and Internet-
related industries. These factors include intense competition, consumer
preferences, problems with product compatibility and government regulation.
Internet and Internet-related securities may experience significant price
movements caused by disproportionate investor optimism or pessimism with
little or no basis in fundamental economic conditions. As a result, the
Fund's net asset value is more likely to have greater fluctuations than that
of a Fund which invests in other industries.

Internet Tollkeepers. The Fund intends to invest a substantial portion of
its assets in companies the Investment Adviser describes as Internet toll-
keepers. In general, the Investment Adviser defines a tollkeeper as a com-
pany with recurring revenue streams. Like a toll collector for a highway or
bridge, these tollkeeper companies may grow revenue by increasing "traffic,"
or customers and sales, and raising "tolls," or prices. The Investment
Adviser believes that the characteristics of many of these tollkeepers,
including dominant market share and strong brand name, will enable them to
sustain this consistent earnings growth.

5
<PAGE>

Goldman Sachs
Real Estate Securities Fund

FUND FACTS
- --------------------------------------------------------------------------------

Objective: Total return comprised of long-term growth of capital
and dividend income

Benchmark: Wilshire Real Estate Securities Index

Investment Focus: REITs and real estate industry companies

Investment Style: Growth at a discount

INVESTMENT OBJECTIVE

The Fund seeks total return comprised of long-term growth of capital and
dividend income.

PRINCIPAL INVESTMENT STRATEGIES

Equity Securities. The Fund invests, under normal circumstances, substan-
tially all and at least 80% of its total assets in a diversified portfolio
of equity securities of issuers that are primarily engaged in or related to
the real estate industry. The Fund expects that a substantial portion of its
assets will be invested in REITs and real estate industry companies.

A "real estate industry company" is a company that derives at least 50% of
its gross revenues or net profits from the ownership, development, construc-
tion, financing, management or sale of commercial, industrial or residential
real estate or interests therein.

The Fund's investment strategy is based on the premise that property market
fundamentals are the primary determinant of growth, underlying the success
of companies in the real estate industry. The Investment Adviser focuses on
companies that can achieve sustainable growth in cash flow and dividend pay-
ing capability. The Investment Adviser attempts to purchase securities so
that its underlying portfolio will be diversified geographically and by
property type. Although the Fund will invest primarily in publicly traded
U.S. securities, it may invest up to 15% of its total assets in foreign
securities, including securities of issuers in emerging countries and secu-
rities quoted in foreign currencies.

6
<PAGE>

GOLDMAN SACHS REAL ESTATE SECURITIES FUND

Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property
owned by the REITs. Mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skill, may not be
diversified, and are subject to heavy cash flow dependency, default by bor-
rowers and self-liquidation. REITs are also subject to the possibilities of
failing to qualify for tax free pass-through of income and failing to main-
tain their exemptions from investment company registration. REITs whose
underlying properties are concentrated in a particular industry or geo-
graphic region are also subject to risks affecting such industries and
regions.

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

The REIT investments of the Real Estate Securities Fund often do not provide
complete tax information to the Fund until after the calendar year-end. Con-
sequently, because of the delay, it may be necessary for the Fund to request
permission to extend the deadline for issuance of Forms 1099-DIV beyond Jan-
uary 31.

Other. The Fund may invest up to 20% of its total assets in fixed-income
securities, such as corporate debt and bank obligations, that offer the
potential to further the Fund's investment objective.

7
<PAGE>

Other Investment Practices and Securities

The table below identifies some of the investment techniques that may (but are
not required to) be used by the Funds in seeking to achieve their investment
objectives. The table also highlights the differences among the Funds in their
use of these techniques and other investment practices and investment securi-
ties. Numbers in this table show allowable usage only; for actual usage, con-
sult the Fund's annual/semiannual reports. For more information see Appendix A.

10Percent of total assets (italic type)
10Percent of net assets (roman type)
.. No specific percentage limitation on usage;limited only by the objectives and
strategies of the Fund
- --Not permitted
<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- -----------------------------------------------------------------------------
<S> <C> <C>
Investment Practices
Borrowings 33 1/3 33 1/3
Credit, currency, index, interest rate and mortgage
swaps -- .
Custodial receipts . .
Equity Swaps 10 10
Foreign Currency Transactions* . .
Futures Contracts and Options on Futures Contracts . .
Interest rate caps, floors and collars -- .
Investment Company Securities (including World Equity
Benchmark Shares and Standard & Poor's Depository
Receipts) 10 10
Mortgage Dollar Rolls -- .
Options on Foreign Currencies/1/ . .
Options on Securities and Securities Indices/2/ . .
Repurchase Agreements . .
Securities Lending 33 1/3 33 1/3
Short Sales Against the Box 25 25
Unseasoned Companies . .
Warrants and Stock Purchase Rights . .
When-Issued Securities and Forward Commitments . .
- -----------------------------------------------------------------------------
</TABLE>

* Limited by the amount the Fund invests in foreign securities.
1 May purchase and sell call and put options.
2 May sell covered call and put options and purchase call and put options.

8
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OTHER INVESTMENT PRACTICES AND SECURITIES

10Percent of total assets (italic type)
10Percent of net assets (roman type)
.. No specific percentage
limitation on usage;
limited only by the
objectives andstrategies
of the Fund
- --Not permitted
<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- ------------------------------------------------
<S> <C> <C>
Investment Securities
American, European and
Global Depository
Receipts . .
Asset-Backed and
Mortgage-Backed
Securities/3/ . .
Bank Obligations/3/ . .
Convertible
Securities/4/ . .
Corporate Debt
Obligations/3/ . .
Equity Securities 90+ 80+
Emerging Country
Securities 10/5/ 15/5/
Fixed Income Securities 10 20
Foreign Securities 10/5/ 15/5/
Non-Investment Grade
Fixed Income Securities 10/6/ 20/6/
Real Estate Investment
Trusts . .
Stripped Mortgage Backed
Securities/3/ -- .
Structured Securities/3/ . .
Temporary Investments 100 100
U.S. Government
Securities/3/ . .
Yield Curve Options and
Inverse Floating Rate
Securities -- .
- ------------------------------------------------
</TABLE>

3 Limited by the amount the Fund invests in fixed-income securities.
4 Convertible securities purchased by the Funds use the same rating criteria
for convertible and non-convertible debt securities.
5 The Internet Tollkeeper and REIT Funds may invest in the aggregate up to 10%
and 15%, respectively, of their total assets in foreign securities, includ-
ing emerging country securities.
6 May be BB or lower by Standard & Poor's or Ba or lower by Moody's.

9
<PAGE>

Principal Risks of the Funds

Loss of money is a risk of investing in each Fund. An investment in a Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. The following
summarizes important risks that apply to the Funds and may result in a loss of
your investment. None of the Funds should be relied upon as a complete invest-
ment program. There can be no assurance that a Fund will achieve its investment
objective.

<TABLE>
<CAPTION>
Real
Internet Estate
..Applicable Tollkeeper Securities
- --Not applicable Fund Fund
- ---------------------------------------------
<S> <C> <C>
Credit/Default . .
Foreign . .
Emerging Countries . .
Industry Concentration . .
Stock . .
Derivatives . .
Interest Rate . .
Management . .
Market . .
Liquidity . .
Other . .
- ---------------------------------------------
</TABLE>

10
<PAGE>

PRINCIPAL RISKS OF THE FUNDS

All Funds:

..Credit/Default Risk--The risk that an issuer of fixed-income securities held
by a Fund (which may have low credit ratings) may default on its obligation to
pay interest and repay principal.
..Foreign Risks--The risk that when a Fund invests in foreign securities, it
will be subject to risk of loss not typically associated with domestic
issuers. Loss may result because of less foreign government regulation, less
public information and less economic, political and social stability. Loss may
also result from the imposition of exchange controls, confiscations and other
government restrictions. A Fund will also be subject to the risk of negative
foreign currency rate fluctuations. Foreign risks will normally be greatest
when a Fund invests in issuers located in emerging countries.
..Emerging Countries Risk--The securities markets of Asian, Latin American,
Eastern European, African and other emerging countries are less liquid, are
especially subject to greater price volatility, have smaller market capital-
izations, have less government regulation and are not subject to as extensive
and frequent accounting, financial and other reporting requirements as the
securities markets of more developed countries. Further, investment in equity
securities of issuers located in Russia and certain other emerging countries
involves risk of loss resulting from problems in share registration and cus-
tody and substantial economic and political disruptions. These risks are not
normally associated with investment in more developed countries.
..Industry Concentration Risk--The risk that each of the Funds concentrates its
investments in specific industry sectors that have historically experienced
substantial price volatility. Each Fund is subject to greater risk of loss as
a result of adverse economic, business or other developments than if its
investments were diversified across different industry sectors. Securities of
issuers held by the Funds may lack sufficient market liquidity to enable a
Fund to sell the securities at an advantageous time or without a substantial
drop in price.
..Stock Risk--The risk that stock prices have historically risen and fallen in
periodic cycles. As of the date of this Prospectus, U.S. stock markets and
certain foreign stock markets were trading at or close to record high levels.
There is no guarantee that such levels will continue.
..Derivatives Risk--The risk that loss may result from a Fund's investments in
options, futures, swaps, structured securities and other derivative instru-
ments. These instruments may be leveraged so that small changes may produce
disproportionate losses to a Fund.
..Interest Rate Risk--The risk that when interest rates increase, securities
held by a Fund will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term secu-
rities.

11
<PAGE>

..Management Risk--The risk that a strategy used by the Investment Adviser may
fail to produce the intended results.
..Market Risk--The risk that the value of the securities in which a Fund invests
may go up or down in response to the prospects of individual companies and/or
general economic conditions. Price changes may be temporary or last for
extended periods.
..Liquidity Risk--The risk that a Fund will not be able to pay redemption pro-
ceeds within the time period stated in this Prospectus because of unusual mar-
ket conditions, an unusually high volume of redemption requests, or other rea-
sons. Funds that invest in non-investment grade fixed-income securities, small
capitalization stocks, REITs and emerging country issuers will be especially
subject to the risk that during certain periods the liquidity of particular
issuers or industries, or all securities within these investment categories,
will shrink or disappear suddenly and without warning as a result of adverse
economic, market or political events, or adverse investor perceptions whether
or not accurate.
..Other Risks--Each Fund is subject to other risks, such as the risk that its
operations, or the value of its portfolio securities, will be disrupted by the
"Year 2000 Problem."

More information about the Funds' portfolio securities and investment tech-
niques, and their associated risks, is provided in Appendix A. You should con-
sider the investment risks discussed in this section and in Appendix A. Both
are important to your investment choice.

12
<PAGE>

Fund Performance

HOW THE FUNDS HAVE PERFORMED

The Internet Tollkeeper Fund has not commenced operations as of the date of
this Prospectus, and the Real Estate Securities Fund commenced operations on
July 27, 1998. Since neither Fund has at least one full calendar year's per-
formance for the period ending on December 31, 1998, no performance informa-
tion is provided in this section. See Appendix B for the Real Estate Securi-
ties Fund's financial highlights.

13
<PAGE>

Fund Fees and Expenses (Class A, B and C Shares)

This table describes the fees and expenses that you would pay if you buy and
hold Class A, Class B, or Class C Shares of a Fund.

<TABLE>
<CAPTION>
Internet Tollkeeper
Fund
------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases 5.5%1 None None
Maximum Deferred Sales Charge (Load)2 None1 5.0%3 1.0%4
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends None None None
Redemption Fees5 None None None
Exchange Fees5 None None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):6
Management Fees 1.00% 1.00% 1.00%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses8 0.29% 0.29% 0.29%
- --------------------------------------------------------------------------
Total Fund Operating Expenses* 1.54% 2.29% 2.29%
- --------------------------------------------------------------------------
</TABLE>
See page 16 for all other footnotes.

* As a result of the current expense limitations,
"Other Expenses" and "Total Fund Operating Expenses"
of the Fund which are actually incurred are as set
forth below. The expense limitations may be termi-
nated at any time at the option of the Investment
Adviser. If this occurs, "Other Expenses" and "Total
Fund Operating Expenses" may increase without share-
holder approval.

<TABLE>
<CAPTION>
Internet Tollkeeper
Fund
-----------------------
Class A Class B Class C
------------------------------------------------------------------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):6
Management Fees 1.00% 1.00% 1.00%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses8 0.25% 0.25% 0.25%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current expense
limitations) 1.50% 2.25% 2.25%
------------------------------------------------------------------------------
</TABLE>

14
<PAGE>

FUND FEES AND EXPENSES

<TABLE>
<CAPTION>
Real Estate Securities
Fund
---------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases 5.5%1 None None
Maximum Deferred Sales Charge (Load)2 None1 5.0%3 1.0%4
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends None None None
Redemption Fees5 None None None
Exchange Fees5 None None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):6
Management Fees 1.00% 1.00% 1.00%
Distribution and Service Fees7 0.50% 1.00% 1.00%
Other Expenses8 1.51% 1.51% 1.51%
- --------------------------------------------------------------------------
Total Fund Operating Expenses* 3.01% 3.51% 3.51%
- --------------------------------------------------------------------------
</TABLE>
See page 16 for all other footnotes.

* As a result of the current waivers and expense limitations,
"Other Expenses" and "Total Fund Operating Expenses" of the
Fund which are actually incurred are as set forth below.
The waivers and expense limitations may be terminated at
any time at the option of the Investment Adviser. If this
occurs, "Other Expenses" and "Total Fund Operating
Expenses" may increase without shareholder approval.

<TABLE>
<CAPTION>
Real Estate Securities
Fund
-----------------------
Class A Class B Class C
------------------------------------------------------------------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):6
Management Fees 1.00% 1.00% 1.00%
Distribution and Service Fees7 0.25% 1.00% 1.00%
Other Expenses8 0.19% 0.19% 0.19%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.44% 2.19% 2.19%
------------------------------------------------------------------------------
</TABLE>

15
<PAGE>

Fund Fees and Expenses continued

/1/The maximum sales charge is a percentage of the offering price. A CDSC of
1% is imposed on certain redemptions (within 18 months of purchase) of Class
A Shares sold without an initial sales charge as part of an investment of $1
million or more.
/2/The maximum CDSC is a percentage of the lesser of the net asset value
("NAV") at the time of the redemption or the NAV when the shares were origi-
nally purchased.
/3/A CDSC is imposed upon Class B Shares redeemed within six years of pur-
chase at a rate of 5% in the first year, declining to 1% in the sixth year,
and eliminated thereafter.
/4/A CDSC of 1% is imposed on Class C Shares redeemed within 12 months of
purchase.
/5/A transaction fee of $7.50 may be charged for redemption proceeds paid by
wire. In addition to free reinvestments of dividends and distributions in
shares of other Goldman Sachs Funds or shares of the Goldman Sachs Institu-
tional Liquid Assets Portfolios (the "ILA Portfolios") and free automatic
exchanges pursuant to the Automatic Exchange Program, six free exchanges are
permitted in each 12-month period. A fee of $12.50 may be charged for each
subsequent exchange during such period.
/6/The Funds' annual operating expenses have been estimated for the current
fiscal year.
/7/The Distributor has voluntarily agreed not to impose a portion of the dis-
tribution and service fee on the Real Estate Securities Fund equal to 0.25%
of the Fund's average daily net assets. As a result of fee waivers, the cur-
rent distribution and service fee of the Real Estate Securities Fund is
0.25% of the Fund's average daily net assets. The waiver may be terminated
at any time at the option of the Distributor.
/8/"Other Expenses" include transfer agency fees equal to 0.19% of the aver-
age daily net assets of each Fund's Class A, B and C Shares, plus all other
ordinary expenses not detailed above. The Investment Adviser has voluntar-
ily agreed to reduce or limit "Other Expenses" (excluding management fees,
distribution and service fees, transfer agency fees, taxes, interest and
brokerage fees and litigation, indemnification and other extraordinary
expenses) to the following percentages of each Fund's average daily net
assets:
<TABLE>
<CAPTION>
Other
Fund Expenses
--------------------------
<S> <C>
Internet
Tollkeeper 0.06%
Real Estate
Securities 0.00%
</TABLE>

16
<PAGE>

Example
The following Example is intended to help you compare the cost of investing in
a Fund (without the waivers and expense limitations) with the cost of investing
in other mutual funds. The Example assumes that you invest $10,000 in Class A,
B or C Shares of a Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that a Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

<TABLE>
<CAPTION>
Fund 1 Year 3 Years
- ---------------------------------------------------------------
<S> <C> <C>
Internet Tollkeeper
Class A Shares $698 $1,010
Class B Shares
- Assuming complete redemption at end of period $732 $1,015
- Assuming no redemption $232 $ 715
Class C Shares
- Assuming complete redemption at end of period $332 $ 715
- Assuming no redemption $232 $ 715
- ---------------------------------------------------------------
Real Estate Securities
Class A Shares $357 $ 980
Class B Shares
- Assuming complete redemption at end of period $854 $1,377
- Assuming no redemption $354 $1,077
Class C Shares
- Assuming complete redemption at end of period $454 $1,077
- Assuming no redemption $354 $1,077
- ---------------------------------------------------------------
</TABLE>
The hypothetical example assumes that a CDSC will not apply to redemptions
of Class A Shares within the first 18 months. Class B Shares convert to
Class A Shares eight years after purchase; therefore, Class A expenses are
used in the hypothetical example after year eight.
Certain institutions that sell Fund Shares and/or their salespersons may
receive other compensation in connection with the sale and distribution of
Class A, Class B and Class C Shares for services to their customers'
accounts and/or the Funds. For additional information regarding such
compensation, see "What I Should Know When I Purchase Shares Through An
Authorized Dealer?"

17
<PAGE>

Service Providers

INVESTMENT ADVISER

<TABLE>
<CAPTION>
Investment Adviser
---------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM")
One New York Plaza
New York, New York 10004
---------------------------------------------
</TABLE>

GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. The Goldman Sachs Group, Inc. controls the
Investment Adviser. As of March 31, 1999, GSAM, together with its affili-
ates, acted as investment adviser or distributor for assets in excess of
$201 billion.

The Investment Adviser provides day-to-day advice regarding the Funds' port-
folio transactions. The Investment Adviser makes the investment decisions
for the Funds and places purchase and sale orders for the Funds' portfolio
transactions in U.S. and foreign markets. As permitted by applicable law,
these orders may be directed to any brokers, including Goldman Sachs and its
affiliates. While the Investment Adviser is ultimately responsible for the
management of the Funds, it is able to draw upon the research and expertise
of its asset management affiliates for portfolio decisions and management
with respect to certain portfolio securities. In addition, the Investment
Adviser has access to the research and certain proprietary technical models
developed by Goldman Sachs, and will apply quantitative and qualitative
analysis in determining the appropriate allocations among categories of
issuers and types of securities.

The Investment Adviser also performs the following additional services for
the Funds:
..Supervises all non-advisory operations of the Funds
..Provides personnel to perform necessary executive, administrative and cler-
ical services to the Funds
..Arranges for the preparation of all required tax returns, reports to share-
holders, prospectuses and statements of additional information and other
reports filed with the Securities and Exchange Commission (the "SEC") and
other regulatory authorities
..Maintains the records of each Fund
..Provides office space and all necessary office equipment and services

18
<PAGE>

SERVICE PROVIDERS

MANAGEMENT FEES

As compensation for its services and its assumption of certain expenses, the
Investment Adviser is entitled to the following fees, computed daily and
payable monthly, at the annual rates listed below:

<TABLE>
<CAPTION>
Actual Rate
For the Fiscal Year
or Period Ended
Contractual Rate December 31, 1998
-------------------------------------------------------------
<S> <C> <C>
Internet Tollkeeper 1.00% N/A
-------------------------------------------------------------
Real Estate Securities 1.00% 1.00%
-------------------------------------------------------------
</TABLE>

FUND MANAGERS

M. Roch Hillenbrand, a Managing Director of Goldman Sachs, is the Head of
Global Equities for GSAM, overseeing the United States, Europe, Japan, and
non-Japan Asia. In this capacity, he is responsible for managing the group
as it defines and implements global portfolio management processes that are
consistent, reliable and predictable. Mr. Hillenbrand is also President of
Commodities Corporation LLC, of which Goldman Sachs is the parent company.
Over the course of his 18-year career at Commodities Corporation, Mr.
Hillenbrand has had extensive experience in dealing with internal and exter-
nal investment managers who have managed a range of futures and equities
strategies across multiple markets, using a variety of styles.

Growth Equity Investment Team
..18 year consistent investment style applied through diverse and complete
market cycles
..More than $12 billion in equities currently under management
..More than 250 client account relationships
..A portfolio management and analytical team with more than 150 years com-
bined investment experience

19
<PAGE>

- --------------------------------------------------------------------------------
Growth Equity Investment Team

<TABLE>
<CAPTION>
Years
Primarily
Name and Title Fund Responsibility Responsible Five Year Employment History
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
George D. Adler Senior Portfolio Manager-- Since Mr. Adler joined the
Vice President Internet Tollkeeper 1999 Investment Adviser as a
portfolio manager in
1997. From 1990 to 1997,
he was a portfolio
manager at Liberty
Investment Management,
Inc. ("Liberty").
- ------------------------------------------------------------------------------------------
Robert G. Senior Portfolio Manager-- Since Mr. Collins joined the
Collins Internet Tollkeeper 1999 Investment Adviser as
Vice President portfolio manager and
Co-Chair of the Growth
Equity Investment
Committee in 1997. From
1991 to 1997, he was a
portfolio manager at
Liberty. His past
experience includes work
as a special situations
analyst with Raymond
James & Associates for
five years.
- ------------------------------------------------------------------------------------------
Herbert E. Senior Portfolio Manager-- Since Mr. Ehlers joined the
Ehlers Internet Tollkeeper 1999 Investment Adviser as a
Managing senior portfolio manager
Director and Chief Investment
Officer of the Growth
Equity team in 1997.
From 1994 to 1997, he
was the Chief Investment
Officer and Chairman of
Liberty. He was a
portfolio manager and
President at Liberty's
predecessor firm, Eagle
Asset Management
("Eagle"), from 1984 to
1994.
- ------------------------------------------------------------------------------------------
Gregory H. Senior Portfolio Manager-- Since Mr. Ekizian joined the
Ekizian Internet Tollkeeper 1999 Investment Adviser as
Vice President portfolio manager and
Co-Chair of the Growth
Equity Investment
Committee in 1997. From
1990 to 1997, he was a
portfolio manager at
Liberty and its
predecessor firm, Eagle.
- ------------------------------------------------------------------------------------------
David G. Shell Senior Portfolio Manager-- Since Mr. Shell joined the
Vice President Internet Tollkeeper 1999 Investment Adviser as a
portfolio manager in
1997. From 1987 to 1997,
he was a portfolio
manager at Liberty and
its predecessor firm,
Eagle.
- ------------------------------------------------------------------------------------------
Ernest C. Senior Portfolio Manager-- Since Mr. Segundo joined the
Segundo, Jr. Internet Tollkeeper 1999 Investment Adviser as a
Vice President portfolio manager in
1997. From 1992 to 1997,
he was a portfolio
manager at Liberty.
- ------------------------------------------------------------------------------------------
Steve Barry Senior Portfolio Manager-- Since Mr. Barry joined the
Vice President Internet Tollkeeper 1999 Investment Adviser as a
portfolio manager in
1999. From 1988 to 1999,
he was a portfolio
manager at Alliance
Capital Management.
- ------------------------------------------------------------------------------------------
</TABLE>

20
<PAGE>

SERVICE PROVIDERS

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

Real Estate Securities Team
The Real Estate Securities portfolio management team includes individuals
with backgrounds in:
..Fundamental real estate acquisition, development and operations
..Real estate capital markets
..Mergers and acquisitions
..Asset management

21
<PAGE>

DISTRIBUTOR AND TRANSFER AGENT

Goldman Sachs, 85 Broad Street, New York, New York 10004, serves as the
exclusive distributor (the "Distributor") of each Fund's shares. Goldman
Sachs, 4900 Sears Tower, Chicago, Illinois 60606-6372, also serves as the
Funds' transfer agent (the "Transfer Agent") and, as such, performs various
shareholder servicing functions.

From time to time, Goldman Sachs or any of its affiliates may purchase and
hold shares of the Funds. Goldman Sachs reserves the right to redeem at any
time some or all of the shares acquired for its own account.

ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS

The involvement of the Investment Adviser, Goldman Sachs and their affili-
ates in the management of, or their interest in, other accounts and other
activities of Goldman Sachs may present conflicts of interest with respect
to a Fund or limit a Fund's investment activities. Goldman Sachs and its
affiliates engage in proprietary trading and advise accounts and funds which
have investment objectives similar to those of the Funds and/or which engage
in and compete for transactions in the same types of securities, currencies
and instruments as the Funds. Goldman Sachs and its affiliates will not have
any obligation to make available any information regarding their proprietary
activities or strategies, or the activities or strategies used for other
accounts managed by them, for the benefit of the management of the Funds.
The results of a Fund's investment activities, therefore, may differ from
those of Goldman Sachs and its affiliates, and it is possible that a Fund
could sustain losses during periods in which Goldman Sachs and its affili-
ates and other accounts achieve significant profits on their trading for
proprietary or other accounts. In addition, the Funds may, from time to
time, enter into transactions in which other clients of Goldman Sachs have
an adverse interest. A Fund's activities may be limited because of regula-
tory restrictions applicable to Goldman Sachs and its affiliates, and/or
their internal policies designed to comply with such restrictions.

YEAR 2000

Many computer systems were designed using only two digits to signify the
year (for example, "98" for "1998"). On January 1, 2000, if these computer
systems are not corrected, they may incorrectly interpret "00" as the year
"1900" rather than the year "2000," leading to computer shutdowns or errors
(commonly

22
<PAGE>

SERVICE PROVIDERS

known as the "Year 2000 Problem"). To the extent these systems conduct for-
ward-looking calculations, these computer problems may occur prior to
January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to
process securities trades, price securities, provide shareholder account
services and otherwise conduct normal business operations if the Investment
Adviser or other Fund service providers do not adequately address this prob-
lem in a timely manner.

In order to address the Year 2000 Problem, the Investment Adviser has taken
the following measures:
..The Investment Adviser has established a dedicated group to analyze these
issues and to implement the systems modifications necessary to prepare for
the Year 2000 Problem.
..The Investment Adviser has sought assurances from the Funds' other service
providers that they are taking the steps necessary so that they do not
experience Year 2000 Problems, and the Investment Adviser will continue to
monitor the situation.

Currently, the Investment Adviser does not anticipate that the transition to
the 21st century will have any material impact on its ability to continue to
service the Funds at current levels.

In addition, the Investment Adviser has undertaken measures to appropriately
take into account available information concerning the Year 2000 prepared-
ness of the issuers of securities held by the Funds. The Investment Adviser
may obtain such Year 2000 information from various sources which the Invest-
ment Adviser believes to be reliable, including the issuers' public regula-
tory filings. However, the Investment Adviser is not in a position to verify
the accuracy or completeness of such information.

At this time, however, no assurance can be given that the actions taken by
the Investment Adviser and the Funds' other service providers will be suffi-
cient to avoid any adverse effect on the Funds due to the Year 2000 Problem.

23
<PAGE>

Dividends

Each Fund pays dividends from its net investment income and distributions from
net realized capital gains. You may choose to have dividends and distributions
paid in:
..Cash
..Additional shares of the same class of the same Fund
..Shares of the same or an equivalent class of another Goldman Sachs Fund. Spe-
cial restrictions may apply for certain ILA Portfolios. See the Additional
Statement.

You may indicate your election on your Account Application. Any changes may be
submitted in writing to Goldman Sachs at any time before the record date for a
particular dividend or distribution. If you do not indicate any choice, your
dividends and distributions will be reinvested automatically in the applicable
Fund.

The election to reinvest dividends and distributions in additional shares will
not affect the tax treatment of such dividends and distributions, which will be
treated as received by you and then used to purchase the shares.

Dividends from net investment income and distributions from net capital gains
are declared and paid as follows:

<TABLE>
<CAPTION>
Investment Capital Gains
Fund Income Dividends Distributions
- ------------------------------------------------------
<S> <C> <C>
Internet Tollkeeper Annually Annually
- ------------------------------------------------------
Real Estate Securities Quarterly Annually
- ------------------------------------------------------
</TABLE>

From time to time a portion of a Fund's dividends may constitute a return of
capital.

At the time of an investor's purchase of shares of a Fund, a portion of the NAV
per share may be represented by undistributed income or realized or unrealized
appreciation of the Fund's portfolio securities. Therefore, subsequent distri-
butions on such shares from such income or realized appreciation may be taxable
to the investor even if the NAV of the shares is, as a result of the distribu-
tions, reduced below the cost of such shares and the distributions (or portions
thereof) represent a return of a portion of the purchase price.

24
<PAGE>

Shareholder Guide

The following section will provide you with answers to some of the most
often asked questions regarding buying and selling the Funds' shares.

HOW TO BUY SHARES

How Can I Purchase Class A, Class B And Class C Shares Of The Funds?
You may purchase shares of the Funds through:
..Goldman Sachs:
..Authorized Dealers; or
..Directly from Goldman Sachs Trust (the "Trust").

In order to make an initial investment in a Fund, you must furnish to the
Fund, Goldman Sachs or your Authorized Dealer the information in the Account
Application attached to this Prospectus.

To Open an Account:
..Complete the enclosed Account Application
..Mail your payment and Account Application to:
Your Authorized Dealer
- Purchases by check or Federal Reserve draft should be made payable to
your Authorized Dealer
- Your Authorized Dealer is responsible for forwarding payment promptly
(within three business days) to the Fund

Goldman Sachs Funds c/o National Financial Data Services, Inc. ("NFDS"),
P.O. Box 419711, Kansas City, MO 64141-6711
- Purchases by check or Federal Reserve draft should be made payable to
Goldman Sachs Funds - (Name of Fund and Class of Shares)
- NFDS will not accept a check drawn on a foreign bank, a third-party
check, cash, money orders, travelers checques or credit card checks
- Federal funds wire, Automated Clearing House Network ("ACH") transfer or
bank wires should be sent to State Street Bank and Trust Company ("State
Street") (each Fund's custodian). Please call the Funds at 1-800-526-7384
to get detailed instructions on how to wire your money.

25
<PAGE>

What Is My Minimum Investment In The Funds?

<TABLE>
<CAPTION>
Initial Additional
------------------------------------------------------------------------------
<S> <C> <C>
Regular Accounts $1,000 $50
------------------------------------------------------------------------------
Tax-Sheltered Retirement Plans (excluding SIMPLE IRAs and
Education IRAs) $250 $50
------------------------------------------------------------------------------
Uniform Gift to Minors Act Accounts/Uniform Transfer to
Minors Act Accounts $250 $50
------------------------------------------------------------------------------
403(b) Plan Accounts $200 $50
------------------------------------------------------------------------------
SIMPLE IRAs and Education IRAs $50 $50
------------------------------------------------------------------------------
Automatic Investment Plan Accounts $50 $50
------------------------------------------------------------------------------
</TABLE>

What Alternative Sales Arrangements Are Available?
The Funds offer three classes of shares through this Prospectus.

-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Maximum Amount You Can Buy In The Class A No limit
Aggregate Across Funds
------------------------------------------------
Class B $250,000
------------------------------------------------
Class C $1,000,000
------------------------------------------------------------------------
Initial Sales Charge Class A Applies to purchases of less
than $1 million--varies by
size of investment with a
maximum of 5.5%
------------------------------------------------
Class B None
------------------------------------------------
Class C None
------------------------------------------------------------------------
CDSC Class A 1.00% on certain investments
of $1 million or more if you
sell within 18 months
------------------------------------------------
Class B 6 year declining CDSC with a
maximum of 5%
------------------------------------------------
Class C 1% if shares are redeemed
within 12 months of purchase
------------------------------------------------------------------------
Conversion Feature Class A None
------------------------------------------------
Class B Class B Shares convert to
Class A Shares after 8 years
------------------------------------------------
Class C None
------------------------------------------------------------------------
</TABLE>

What Else Should I Know About Share Purchases?
The Trust reserves the right to:
..Refuse to open an account if you fail to (i) provide a social security num-
ber or other taxpayer identification number; or (ii) certify that such num-
ber is correct (if required to do so under applicable law).
..Reject or restrict any purchase or exchange order by a particular purchaser
(or group of related purchasers). This may occur, for example, when a pat-
tern of

26
<PAGE>

SHAREHOLDER GUIDE

frequent purchases, sales or exchanges of shares of a Fund is evident, or
if purchases, sales or exchanges are, or a subsequent abrupt redemption
might be, of a size that would disrupt management of a Fund.
..Modify or waive the minimum investment amounts.
..Modify the manner in which shares are offered.
..Modify the sales charge rates applicable to future purchases of shares.

The Funds may allow you to purchase shares with securities instead of cash
if consistent with a Fund's investment policies and operations and if
approved by the Fund's Investment Adviser.

How Are Shares Priced?
The price you pay or receive when you buy, sell or exchange shares is deter-
mined by a Fund's NAV and share class. Each class calculates its NAV as fol-
lows:

(Value of Assets of the Class)
- (Liabilities of the Class)
NAV = _______________________________
Number of Outstanding Shares of the Class

The Funds' investments are valued based on market quotations or if accurate
quotations are not readily available, the fair value of the Fund's invest-
ments may be determined in good faith under procedures established by the
Trustees.

..NAV per share of each share class is calculated by the Fund's custodian on
each business day as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. New York time). Fund shares will not be priced
on any day the New York Stock Exchange is closed.
..When you buy shares, you pay the NAV next calculated after the Funds
receive your order in proper form, plus any applicable sales charge.
..When you sell shares, you receive the NAV next calculated after the Funds
receive your order in proper form, less any applicable CDSC.

Note: The time at which transactions and shares are priced and the time by
which orders must be received may be changed in case of an emergency or if
regular trading on the New York Stock Exchange is stopped at a time other
than 4:00 p.m. New York time.

Foreign securities may trade in their local markets on days a Fund is
closed. As a result, the NAV of a Fund that holds foreign securities may be
impacted on days when investors may not purchase or redeem Fund shares.

27
<PAGE>

determined NAV unless the Trust, in its discretion, makes an adjustment in
light of the nature and materiality of the event, its effect on Fund opera-
tions and other relevant factors.

COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS A SHARES

What Is The Offering Price Of Class A Shares?
The offering price of Class A Shares of each Fund is the next determined NAV
per share plus an initial sales charge paid to Goldman Sachs at the time of
purchase of shares. The sales charge varies depending upon the amount you
purchase. In some cases, described below, the initial sales charge may be
eliminated altogether, and the offering price will be the NAV per share. The
current sales charges and commissions paid to Authorized Dealers are as fol-
lows:

<TABLE>
<CAPTION>
Sales Charge Maximum Dealer
Sales Charge as as Percentage Allowance as
Amount of Purchase Percentage of of Net Amount Percentage of
(including sales charge, if any) Offering Price Invested Offering Price*
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 up to (but less than)
$100,000 4.75 4.99 4.00
$100,000 up to (but less than)
$250,000 3.75 3.90 3.00
$250,000 up to (but less than)
$500,000 2.75 2.83 2.25
$500,000 up to (but less than)
$1 million 2.00 2.04 1.75
$1 million or more 0.00** 0.00** ***
---------------------------------------------------------------------------------
</TABLE>

* Dealer's allowance may be changed periodically. During special promo-
tions, the entire sales charge may be allowed to Authorized Dealers.
Authorized Dealers to whom substantially the entire sales charge is
allowed may be deemed to be "underwriters" under the Securities Act of
1933.
** No sales charge is payable at the time of purchase of Class A Shares of
$1 million or more, but a CDSC of 1% may be imposed in the event of cer-
tain redemptions within 18 months of purchase.
*** The Distributor pays a one-time commission to Authorized Dealers who
initiate or are responsible for purchases of $1 million or more of
shares of the Funds equal to 1.00% of the amount under $3 million, 0.50%
of the next $2 million, and 0.25% thereafter. The Distributor may also
pay, with respect to all or a portion of the amount purchased, a commis-
sion in accordance with the foregoing schedule to Authorized Dealers who
initiate or are responsible for purchases of $500,000 or more by certain
pension and profit sharing plans, pension funds and other company-spon-
sored benefit plans investing in the Funds which satisfy the criteria
set forth below in "When Are Class A Shares Not Subject To A Sales
Load?" or $1 million or more by certain "wrap" accounts. Purchases by
such plans will be made at NAV with no initial sales charge, but if all
of the shares held are redeemed within 18 months after the end of the
calendar month in which such purchase was made, a CDSC of 1% may be
imposed upon the plan sponsor or the third party administrator. In addi-
tion, Authorized Dealers will remit to the Distributor such payments
received in connection with "wrap" accounts in the event that shares are
redeemed within 18 months after the end of the calendar month in which
the purchase was made.

28
<PAGE>

SHAREHOLDER GUIDE

What Else Do I Need To Know About Class A Shares' CDSC?
Purchases of $1 million or more of Class A Shares will be made at NAV with
no initial sales charge. However, if you redeem shares within 18 months
after the end of the calendar month in which the purchase was made, exclud-
ing any period of time in which the shares were exchanged into and remained
invested in an equivalent class of an ILA Portfolio, a CDSC of 1% may be
imposed. The CDSC may not be imposed if your Authorized Dealer enters into
an agreement with the Distributor to return all or an applicable prorated
portion of its commission to the Distributor. The CDSC is waived on redemp-
tions in certain circumstances. See "In What Situations May The CDSC On
Class A, B Or C Shares Be Waived Or Reduced?" below.

When Are Class A Shares Not Subject To A Sales Load?
Class A Shares of the Funds may be sold at NAV without payment of any sales
charge to the following individuals and entities:
..Goldman Sachs, its affiliates or their respective officers, partners,
directors or employees (including retired employees and former partners),
any partnership of which Goldman Sachs is a general partner, any Trustee or
officer of the Trust and designated family members of any of these individ-
uals;
..Qualified retirement plans of Goldman Sachs;
..Trustees or directors of investment companies for which Goldman Sachs or an
affiliate acts as sponsor;
..Any employee or registered representative of any Authorized Dealer or their
respective spouses, children and parents;
..Banks, trust companies or other types of depository institutions investing
for their own account or investing for discretionary or non-discretionary
accounts;
..Any state, county or city, or any instrumentality, department, authority or
agency thereof, which is prohibited by applicable investment laws from pay-
ing a sales charge or commission in connection with the purchase of shares
of a Fund;
..Pension and profit sharing plans, pension funds and other company-sponsored
benefit plans that:
.Buy shares of Goldman Sachs Funds worth $500,000 or more; or
.Have 100 or more eligible employees at the time of purchase; or
.Certify that they expect to have annual plan purchases of shares of
Goldman Sachs Funds of $200,000 or more; or
.Are provided administrative services by certain third-party administra-
tors that have entered into a special service arrangement with Goldman
Sachs relating to such plans; or
.Have at the time of purchase aggregate assets of at least $2,000,000;

29
<PAGE>

.."Wrap" accounts for the benefit of clients of broker-dealers, financial
institutions or financial planners, provided they have entered into an
agreement with GSAM specifying aggregate minimums and certain operating
policies and standards;
..Registered investment advisers investing for accounts for which they
receive asset-based fees;
..Accounts over which GSAM or its advisory affiliates have investment discre-
tion; or
..Shareholders receiving distributions from a qualified retirement plan
invested in the Goldman Sachs Funds and reinvesting such proceeds in a
Goldman Sachs IRA.

You must certify eligibility for any of the above exemptions on your Account
Application and notify the Fund if you no longer are eligible for the exemp-
tion. The Fund will grant you an exemption subject to confirmation of your
entitlement. You may be charged a fee if you effect your transactions
through a broker or agent.

How Can The Sales Charge On Class A Shares Be Reduced?
..Right of Accumulation: When buying Class A Shares in Goldman Sachs Funds,
your current aggregate investment determines the initial sales load you
pay. You may qualify for reduced sales charges when the current market
value of holdings (shares at current offering price), plus new purchases,
reaches $50,000 or more. Class A Shares of any of the Goldman Sachs Funds
may be combined under the Right of Accumulation. To qualify for a reduced
sales load, you or your Authorized Dealer must notify the Funds' Transfer
Agent at the time of investment that a quantity discount is applicable. Use
of this service is subject to a check of appropriate records. The Addi-
tional Statement has more information about the Right of Accumulation.
..Statement of Intention: You may obtain a reduced sales charge by means of a
written Statement of Intention which expresses your non-binding commitment
to invest in the aggregate $50,000 or more (not counting reinvestments of
dividends and distributions) within a period of 13 months in Class A Shares
of one or more Goldman Sachs Fund. Any investments you make during the
period will receive the discounted sales load based on the full amount of
your investment commitment. If the investment commitment of the Statement
of Intention is not met prior to the expiration of the 13-month period, the
entire amount will be subject to the higher applicable sales charge. By
signing the Statement of Intention, you authorize the Transfer Agent to
escrow and redeem Class A Shares in your account to pay this additional
charge. The Additional Statement has more information about the Statement
of Intention, which you should read carefully.

30
<PAGE>

SHAREHOLDER GUIDE

COMMON QUESTIONS ABOUT THE PURCHASE OF CLASS B SHARES

What Is The Offering Price Of Class B Shares?
You may purchase Class B Shares of the Funds at the next determined NAV
without an initial sales charge. However, Class B Shares redeemed within six
years of purchase will be subject to a CDSC at the rates shown in the table
below based on how long you held your shares.

The CDSC schedule is as follows:

<TABLE>
<CAPTION>
CDSC as a
Percentage of
Dollar Amount
Year Since Purchase Subject to CDSC
----------------------------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter None
----------------------------------------
</TABLE>

Proceeds from the CDSC are payable to the Distributor and may be used in
whole or in part to defray the Distributor's expenses related to providing
distribution-related services to the Funds in connection with the sale of
Class B Shares, including the payment of compensation to Authorized Dealers.
A commission equal to 4% of the amount invested is paid to Authorized Deal-
ers.

What Should I Know About The Automatic Conversion Of Class B Shares?
Class B Shares of a Fund will automatically convert into Class A Shares of
the same Fund at the end of the calendar quarter that is eight years after
the purchase date.

If you acquire Class B Shares of a Fund by exchange from Class B Shares of
another Goldman Sachs Fund, your Class B Shares will convert into Class A
Shares of such Fund based on the date of the initial purchase and the CDSC
schedule of that purchase.

If you acquire Class B Shares through reinvestment of distributions, your
Class B Shares will convert into Class A Shares based on the date of the
initial purchase of the shares on which the distribution was paid.

The conversion of Class B Shares to Class A Shares will not occur at any
time the Funds are advised that such conversions may constitute taxable
events for federal tax purposes, which the Funds believe is unlikely. If
conversions do not occur as a

31
<PAGE>

result of possible taxability, Class B Shares would continue to be subject
to higher expenses than Class A Shares for an indeterminate period.

A COMMON QUESTION ABOUT THE PURCHASE OF CLASS C SHARES

What Is The Offering Price Of Class C Shares?
You may purchase Class C Shares of the Funds at the next determined NAV
without paying an initial sales charge. However, if you redeem Class C
Shares within 12 months of purchase, a CDSC of 1% will be deducted from the
redemption proceeds; provided that in connection with purchases by pension
and profit sharing plans, pension funds and other company-sponsored benefit
plans, where all of the Class C Shares are redeemed within 12 months of pur-
chase, a CDSC of 1% may be imposed upon the plan sponsor or third party
administrator.

Proceeds from the CDSC are payable to the Distributor and may be used in
whole or in part to defray the Distributor's expenses related to providing
distribution-related services to the Funds in connection with the sale of
Class C Shares, including the payment of compensation to Authorized Dealers.
An amount equal to 1% of the amount invested is paid by the Distributor to
Authorized Dealers.

COMMON QUESTIONS APPLICABLE TO THE PURCHASE OF CLASS A, B
AND C SHARES

What Else Do I Need To Know About The CDSC On Class A, B Or C Shares?
..The CDSC is based on the lesser of the NAV of the shares at the time of
redemption or the original offering price (which is the original NAV).
.No CDSC is charged on shares acquired from reinvested dividends or capi-
tal gains distributions.
.No CDSC is charged on the per share appreciation of your account over the
initial purchase price.
.When counting the number of months since a purchase of Class B or Class C
Shares was made, all payments made during a month will be combined and
considered to have been made on the first day of that month.
..To keep your CDSC as low as possible, each time you place a request to sell
shares, the Funds will first sell any shares in your account that do not
carry a CDSC and then the shares in your account that have been held the
longest.

32
<PAGE>

SHAREHOLDER GUIDE

In What Situations May The CDSC On Class A, B Or C Shares Be Waived Or
Reduced?
The CDSC on Class A, Class B and Class C Shares that are subject to a CDSC
may be waived or reduced if the redemption relates to:
..Retirement distributions or loans to participants or beneficiaries from
pension and profit sharing plans, pension funds and other company-sponsored
benefit plans (each a "Retirement Plan");
..The death or disability (as defined in Section 72(m)(7) of the Internal
Revenue Code of 1986, as amended (the "Code")) of a participant or benefi-
ciary in a Retirement Plan;
..Hardship withdrawals by a participant or beneficiary in a Retirement Plan;
..Satisfying the minimum distribution requirements of the Code;
..Establishing "substantially equal periodic payments" as described under
Section 72(t)(2) of the Code;
..The separation from service by a participant or beneficiary in a Retirement
Plan;
..The death or disability (as defined in Section 72(m)(7) of the Code) of a
shareholder if the redemption is made within one year of the event;
..Excess contributions distributed from a Retirement Plan;
..Distributions from a qualified Retirement Plan invested in the Goldman
Sachs Funds which are being rolled over to a Goldman Sachs IRA; or
..Redemption proceeds which are to be reinvested in accounts or non-regis-
tered products over which GSAM or its advisory affiliates have investment
discretion.

In addition, Class A, B and C Shares subject to a systematic withdrawal plan
may be redeemed without a CDSC. The Funds reserve the right to limit such
redemptions, on an annual basis, to 12% each of the value of your Class B
and C Shares and 10% of the value of your Class A Shares.

How Do I Decide Whether To Buy Class A, B Or C Shares?
The decision as to which Class to purchase depends on the amount you invest,
the intended length of the investment and your personal situation.

..Class A Shares. If you are making an investment of $50,000 or more that
qualifies for a reduced sales charge, you should consider purchasing Class
A Shares.
..Class B Shares. If you plan to hold your investment for at least six years
and would prefer not to pay an initial sales charge, you might consider
purchasing Class B Shares. By not paying a front-end sales charge, your
entire investment in Class B Shares is available to work for you from the
time you make your initial investment. However, the distribution and serv-
ice fee paid by Class B

33
<PAGE>

Shares will cause your Class B Shares (until conversion to Class A Shares)
to have a higher expense ratio, and thus, lower performance and lower divi-
dend payments (to the extent dividends are paid) than Class A Shares. A
maximum purchase limitation of $250,000 in the aggregate normally applies
to Class B Shares.
..Class C Shares. If you are unsure of the length of your investment or plan
to hold your investment for less than six years and would prefer not to pay
an initial sales charge, you may prefer Class C Shares. By not paying a
front-end sales charge, your entire investment in Class C Shares is avail-
able to work for you from the time you make your initial investment. Howev-
er, the distribution and service fee paid by Class C Shares will cause your
Class C Shares to have a higher expense ratio, and thus lower performance
and lower dividend payments (to the extent dividends are paid) than Class A
Shares (or Class B Shares after conversion to Class A Shares).
Although Class C Shares are subject to a CDSC for only 12 months, Class C
Shares do not have the conversion feature applicable to Class B Shares and
your investment will therefore pay higher distribution fees indefinitely.
A maximum purchase limitation of $1,000,000 in the aggregate normally
applies to purchases of Class C Shares.

Note: Authorized Dealers may receive different compensation for selling
Class A, Class B or Class C Shares.

In addition to Class A, Class B and Class C Shares, each Fund also offers
other classes of shares to investors. These other share classes are subject
to different fees and expenses (which affect performance), have different
minimum investment requirements and are entitled to different services.
Information regarding these other share classes may be obtained from your
sales representative or from Goldman Sachs by calling the number on the back
cover of this Prospectus.

HOW TO SELL SHARES

How Can I Sell Class A, Class B And Class C Shares Of The Funds?
You may arrange to take money out of your account by selling (redeeming)
some or all of your shares. Each Fund will redeem its shares upon request on
any business day at the NAV next determined after receipt of such request in
proper form, subject to any applicable CDSC. You may request that redemption
proceeds be sent to you by check or by wire (if the wire instructions are on
record). Redemptions may be requested in writing or by telephone.

34
<PAGE>

SHAREHOLDER GUIDE

<TABLE>
<CAPTION>
Instructions For Redemptions:
-------------------------------------------------------------------------
<S> <C>
By Writing: .Write a letter of instruction that includes:
.Your name(s) and signature(s)
.Your account number
.The Fund name and Class of Shares
.The dollar amount you want to sell
.How and where to send the proceeds
.Obtain a signature guarantee (see details below)
.Mail your request to:
Goldman Sachs Funds
c/o NFDS
P.O. Box 419711
Kansas City, MO 64141-6711
-------------------------------------------------------------------------
By Telephone: If you have not declined the telephone redemption
privileges on your Account Application:
.1-800-526-7384
(8:00 a.m. to 4:00 p.m. New York time)
.You may redeem up to $50,000 of your shares
within any 7 calendar day period
.Proceeds which are sent directly to a Goldman
Sachs brokerage account are not subject to the
$50,000 limit
-------------------------------------------------------------------------
</TABLE>
When Do I Need A Signature Guarantee To Redeem Shares?
A signature guarantee is required if:
..You are requesting in writing to redeem shares in an amount over $50,000;
..You would like the redemption proceeds sent to an address that is not your
address of record; or
..You would like to change the bank designated on your Account Application.

A signature guarantee is designed to protect you, the Funds and Goldman
Sachs from fraud. You may obtain a signature guarantee from a bank, securi-
ties broker or dealer, credit union having the authority to issue signature
guarantees, savings and loan association, building and loan association,
cooperative bank, federal savings bank or association, national securities
exchange, registered securities association or clearing agency, provided
that such institution satisfies the standards established by Goldman Sachs.
Additional documentation may be required for executors, trustees or corpora-
tions or when deemed appropriate by the Transfer Agent.

35
<PAGE>

herself as the owner of an account or the owner's registered representative
where the owner has not declined in writing to use this service. Thus, you
risk possible losses if a telephone redemption is not authorized by you.

In an effort to prevent unauthorized or fraudulent redemption and exchange
requests by telephone, Goldman Sachs and NFDS each employ reasonable proce-
dures specified by the Trust to confirm that such instructions are genuine.
If reasonable procedures are not employed, the Trust may be liable for any
loss due to unauthorized or fraudulent transactions. The following general
policies are currently in effect:
..All telephone requests are recorded.
..Proceeds of telephone redemption requests will be sent only to your address
of record or authorized bank account designated in the Account Application
(unless you provide written instructions and a signature guarantee, indi-
cating another address or account) and exchanges of shares normally will be
made only to an identically registered account.
..Telephone redemptions will not be accepted during the 30-day period follow-
ing any change in your address of record.
..The telephone redemption option does not apply to shares held in a "street
name" account. "Street name" accounts are accounts maintained and serviced
by your Authorized Dealer. If your account is held in "street name," you
should contact your registered representative of record, who may make tele-
phone redemptions on your behalf.
..The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic
economic or market conditions.

How Are Redemption Proceeds Paid?
By Wire: You may arrange for your redemption proceeds to be wired as federal
funds to the bank account designated in your Account Application. The fol-
lowing general policies govern wiring redemption proceeds:
..Redemption proceeds will normally be wired on the next business day in fed-
eral funds (for a total of one business day delay), but may be paid up to
three business days following receipt of a properly executed wire transfer
redemption request. If you are selling shares you recently paid for by
check, the Fund will pay you when your check has cleared, which may take up
to 15 days. If the Federal Reserve Bank is closed on the day that the
redemption proceeds would ordinarily be wired, wiring the redemption pro-
ceeds may be delayed one additional business day.
..A transaction fee of $7.50 may be charged for payments of redemption pro-
ceeds by wire. Your bank may also charge wiring fees. You should contact
your bank directly to learn whether it charges such fees.

36
<PAGE>

SHAREHOLDER GUIDE

..To change the bank designated on your Account Application, you must send
written instructions (with your signature guaranteed) to the Transfer
Agent.
..Neither the Trust, Goldman Sachs nor any Authorized Dealer assume any
responsibility for the performance of your bank or any intermediaries in
the transfer process. If a problem with such performance arises, you should
deal directly with your bank or any such intermediaries.
By Check: You may elect to receive your redemption proceeds by check.
Redemption proceeds paid by check will normally be mailed to the address of
record within three business days of a properly executed redemption request.
If you are selling shares you recently paid for by check, the Fund will pay
you when your check has cleared, which may take up to 15 days.

The Trust reserves the right to:
..Redeem your shares if your account balance is less than $50 as a result of
a redemption. The Funds will not redeem your shares on this basis if the
value of your account falls below the minimum account balance solely as a
result of market conditions. The Funds will give you 60 days' prior written
notice to allow you to purchase sufficient additional shares of the Fund in
order to avoid such redemption.
..Redeem your shares in other circumstances determined by the Board of Trust-
ees to be in the best interests of the Trust.
..Pay redemptions by a distribution in-kind of securities (instead of cash).
If you receive redemption proceeds in-kind, you should expect to incur
transaction costs upon the disposition of those securities.

Can I Reinvest Redemption Proceeds In The Same Or Another Goldman Sachs
Fund?
You may redeem shares of a Fund and reinvest a portion or all of the redemp-
tion proceeds (plus any additional amounts needed to round off purchases to
the nearest full share) at NAV. To be eligible for this privilege, you must
hold the shares you want to redeem for at least 30 days and you must rein-
vest the share proceeds within 90 days after you redeem. You may reinvest as
follows:
..Class A or B Shares--Class A Shares of the same Fund or any other Goldman
Sachs Fund
..Class C Shares--Class C Shares of the same Fund or any other Goldman Sachs
Fund

37
<PAGE>

..You should obtain and read the applicable prospectuses before investing in
any other Funds.
..If you pay a CDSC upon redemption of Class A or Class C Shares and then
reinvest in Class A or Class C Shares as described above, your account will
be credited with the amount of the CDSC you paid. The reinvested shares
will, however, continue to be subject to a CDSC. The holding period of the
shares acquired through reinvestment will include the holding period of the
redeemed shares for purposes of computing the CDSC payable upon a subse-
quent redemption. For Class B Shares, you may reinvest the redemption pro-
ceeds in Class A Shares at NAV but the amount of the CDSC paid upon redemp-
tion of the Class B Shares will not be credited to your account.
..The reinvestment privilege may be exercised at any time in connection with
transactions in which the proceeds are reinvested at NAV in a tax-sheltered
retirement plan. In other cases, the reinvestment privilege may be exer-
cised once per year upon receipt of a written request.
..You may be subject to tax as a result of a redemption. You should consult
your tax adviser concerning the tax consequences of a redemption and rein-
vestment.

Can I Exchange My Investment From One Fund To Another?
You may exchange shares of a Fund at NAV without the imposition of an ini-
tial sales charge or CDSC at the time of exchange for shares of the same
class or an equivalent class of any other Goldman Sachs Fund. The exchange
privilege may be materially modified or withdrawn at any time upon 60 days'
written notice to you.

<TABLE>
<CAPTION>
Instructions For Exchanging Shares:
-----------------------------------------------------------------------
<S> <C>
By Writing: .Write a letter of instruction that includes:
.Your name(s) and signature(s)
.Your account number
.The Fund name and Class of Shares
.The dollar amount you want to exchange
.Obtain a signature guarantee (see details above)
.Mail the request to:
Goldman Sachs Funds
c/o NFDS
P.O. Box 419711
Kansas City, MO 64141-6711
or for overnight delivery -
Goldman Sachs Funds
c/o NFDS
330 West 9th St.
Poindexter Bldg., 1st Floor
Kansas City, MO 64105
-----------------------------------------------------------------------
By Telephone: If you have not declined the telephone redemption
privilege on your Account Application:
.1-800-526-7384 (8:00 a.m. to 4:00 p.m.
New York time)
-----------------------------------------------------------------------
</TABLE>

38
<PAGE>

SHAREHOLDER GUIDE

You should keep in mind the following factors when making or considering an
exchange:
..You should obtain and carefully read the prospectus of the Fund you are
acquiring before making an exchange.
..Six free exchanges are allowed in each 12 month period.
..A $12.50 fee may be charged for each subsequent exchange.
..There is no charge for exchanges made pursuant to the Automatic Exchange
Program.
..The exchanged shares may later be exchanged for shares of the same class
(or an equivalent class) of the original Fund at the next determined NAV
without the imposition of an initial sales charge or CDSC if the amount in
the Fund resulting from such exchanges is less than the largest amount on
which you have previously paid the applicable sales charge.
..When you exchange shares subject to a CDSC, no CDSC will be charged at that
time. The exchanged shares will be subject to the CDSC of the shares origi-
nally held. For purposes of determining the amount of the applicable CDSC,
the length of time you have owned the shares will be measured from the date
you acquired the original shares subject to a CDSC and will not be affected
by a subsequent exchange.
..Eligible investors may exchange certain classes of shares for another class
of shares of the same Fund. For further information, call Goldman Sachs
Funds at 1-800-526-7384.
..All exchanges which represent an initial investment in a Fund must satisfy
the minimum initial investment requirements of that Fund.
..Exchanges are available only in states where exchanges may be legally made.
..It may be difficult to make telephone exchanges in times of drastic eco-
nomic or market conditions.
..Goldman Sachs and NFDS may use reasonable procedures described under "What
Do I Need to Know About Telephone Redemption Requests?" in an effort to
prevent unauthorized or fraudulent telephone exchange requests.
..Telephone exchanges normally will be made only to an identically registered
account. Shares may be exchanged among accounts with different names,
addresses and social security or other taxpayer identification numbers only
if the exchange instructions are in writing and accompanied by a signature
guarantee.

For federal income tax purposes, an exchange is treated as a redemption of
the shares surrendered in the exchange, on which you may be subject to tax,
followed by a purchase of shares received in the exchange. You should con-
sult your tax adviser concerning the tax consequences of an exchange.

39
<PAGE>

SHAREHOLDER SERVICES

Can I Arrange To Have Automatic Investments Made On A Regular Basis?
You may be able to make systematic cash investments through your bank via
ACH transfer or your checking account via bank draft each month. Forms for
this option are available from Goldman Sachs, your Authorized Dealer or you
may check the appropriate box on the Account Application.

Can My Dividends And Distributions From A Fund Be Invested In Other Funds?
You may elect to cross-reinvest dividends and capital gain distributions
paid by a Fund in shares of the same class or an equivalent class of any
other Goldman Sachs Fund.
..Shares will be purchased at NAV.
..No initial sales charge or CDSC will be imposed.
..You may elect cross-reinvestment into an identically registered account or
an account registered in a different name or with a different address,
social security number or taxpayer identification number provided that the
account has been properly established, appropriate signature guarantees
obtained and the minimum initial investment has been satisfied.

Can I Arrange To Have Automatic Exchanges Made On A Regular Basis?
You may elect to exchange automatically a specified dollar amount of shares
of a Fund for shares of the same class or an equivalent class of any other
Goldman Sachs Fund.
..Shares will be purchased at NAV.
..No initial sales charge is imposed.
..Shares subject to a CDSC acquired under this program may be subject to a
CDSC at the time of redemption from the Fund into which the exchange is
made depending upon the date and value of your original purchase.
..Automatic exchanges are made monthly on the 15th day of each month or the
first business day thereafter.
..Minimum dollar amount: $50 per month.

What Else Should I Know About Cross-Reinvestments And Automatic Exchanges?
Cross-reinvestments and automatic exchanges are subject to the following
conditions:
..You must hold $5,000 or more in the Fund which is paying the dividend or
from which the exchange is being made.

40
<PAGE>

SHAREHOLDER GUIDE

..You must invest an amount in the Fund into which cross-reinvestments or
automatic exchanges are being made that is equal to that Fund's minimum
initial investment or continue to cross-reinvest or to make automatic
exchanges until such minimum initial investment is met.
..You should obtain and read the prospectus of the Fund into which dividends
are invested or automatic exchanges are made.

Can I Have Automatic Withdrawals Made On A Regular Basis?
You may draw on your account systematically via check or ACH transfer in any
amount of $50 or more.
..It is normally undesirable to maintain a systematic withdrawal plan at the
same time that you are purchasing additional Class A, Class B or Class C
Shares because of the sales charge imposed on your purchases of Class A
Shares or the imposition of a CDSC on your redemptions of Class A, Class B
or Class C Shares.
..You must have a minimum balance of $5,000 in a Fund.
..Checks are mailed on or about the 25th day of each month.
..Each systematic withdrawal is a redemption and therefore a taxable transac-
tion.
..The CDSC applicable to Class A, Class B or Class C Shares redeemed under
the systematic withdrawal plan may be waived.

What Types of Reports Will I Be Sent Regarding My Investment?
You will receive an annual report containing audited financial statements
and a semiannual report. To eliminate unnecessary duplication, only one copy
of such reports will be sent to shareholders with the same mailing address.
If you would like a duplicate copy to be mailed to you, please contact
Goldman Sachs Funds at 1-800-526-7384. You will also be provided with a
printed confirmation for each transaction in your account and an individual
quarterly account statement. A year-to-date statement for your account will
be provided upon request made to Goldman Sachs. If your account is held in
"street name" you may receive your statement and confirmations on a differ-
ent schedule. The Funds do not generally provide sub-accounting services.

What Should I Know When I Purchase Shares Through An Authorized Dealer?
Authorized Dealers and other financial intermediaries may provide varying
arrangements for their clients to purchase and redeem Fund shares. They may
charge additional fees not described in this Prospectus to their customers
for such services.

If shares of a Fund are held in a "street name" account with an Authorized
Dealer, all recordkeeping, transaction processing and payments of distribu-
tions relating to your account will be performed by the Authorized Dealer,
and not by the Fund and its Transfer Agent. Since the Funds will have no
record of your

41
<PAGE>

transactions, you should contact the Authorized Dealer to purchase, redeem
or exchange shares, to make changes in or give instructions concerning the
account or to obtain information about your account. The transfer of shares
in a "street name" account to an account with another dealer or to an
account directly with the Fund involves special procedures and will require
you to obtain historical purchase information about the shares in the
account from the Authorized Dealer.

Authorized Dealers and other financial intermediaries may be authorized to
accept, on behalf of the Trust, purchase, redemption and exchange orders
placed by or on behalf of their customers, and if approved by the Trust, to
designate other intermediaries to accept such orders. In these cases:
..A Fund will be deemed to have received an order that is in proper form when
the order is accepted by an Authorized Dealer or intermediary on a business
day, and the order will be priced at the Fund's NAV per share (adjusted for
any applicable sales charge) next determined after such acceptance.
..Authorized Dealers and intermediaries are responsible for transmitting
accepted orders to the Funds within the time period agreed upon by them.

You should contact your Authorized Dealer or intermediary to learn whether
it is authorized to accept orders for the Trust.

The Investment Adviser, Distributor and/or their affiliates may pay addi-
tional compensation from time to time, out of their assets and not as an
additional charge to the Funds, to selected Authorized Dealers and other
persons in connection with the sale, distribution and/or servicing of shares
of the Funds and other Goldman Sachs Funds. Subject to applicable NASD regu-
lations, the Investment Adviser, Distributor and/or their affiliates may
also contribute to various cash and non-cash incentive arrangements to pro-
mote the sale of shares. This additional compensation can vary among Autho-
rized Dealers depending upon such factors as the amounts their customers
have invested (or may invest) in particular Goldman Sachs Funds, the partic-
ular program involved, or the amount of reimbursable expenses. Additional
compensation based on sales may, but is currently not expected to, exceed
0.50% (annualized) of the amount invested.

DISTRIBUTION SERVICES AND FEES

What Are The Different Distribution And Service Fees Paid By Class A, B and
C Shares?
The Trust has adopted distribution and service plans (each a "Plan") under
which Class A, Class B and Class C Shares bear distribution and service fees
paid to Authorized Dealers and Goldman Sachs. If the fees received by
Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may
realize a profit from

42
<PAGE>

SHAREHOLDER GUIDE

their arrangements. Goldman Sachs pays the distribution and service fees on
a quarterly basis.

Under the Plans, Goldman Sachs is entitled to a monthly fee from each Fund
for distribution services equal, on an annual basis, to 0.25%, 0.75% and
0.75%, respectively, of a Fund's average daily net assets attributed to
Class A, Class B and Class C Shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time, these fees will increase the
cost of your investment and may cost you more than paying other types of
such charges.

The distribution fees are subject to the requirements of Rule 12b-1 under
the Act, and may be used (among other things) for:
..Compensation paid to and expenses incurred by Authorized Dealers, Goldman
Sachs and their respective officers, employees and sales representatives;
..Commissions paid to Authorized Dealers;
..Allocable overhead;
..Telephone and travel expenses;
..Interest and other costs associated with the financing of such compensation
and expenses;
..Printing of prospectuses for prospective shareholders;
..Preparation and distribution of sales literature or advertising of any
type; and
..All other expenses incurred in connection with activities primarily
intended to result in the sale of Class A, Class B and Class C Shares.

In connection with the sale of Class C Shares, Goldman Sachs begins paying
the 0.75% distribution fee as an ongoing commission to Authorized Dealers
after the shares have been held for one year.

PERSONAL ACCOUNT MAINTENANCE SERVICES AND FEES

Under the Plans, Goldman Sachs is also entitled to receive a separate fee
equal on an annual basis to 0.25% of each Fund's average daily net assets
attributed to Class A Shares (Real Estate Securities Fund only), Class B or
Class C Shares. This fee is for personal and account maintenance services,
and may be used to make payments to Goldman Sachs, Authorized Dealers and
their officers, sales representatives and employees for responding to inqui-
ries of, and furnishing assistance to, shareholders regarding ownership of
their shares or their accounts or similar services not otherwise provided on
behalf of the Funds. If the fees received by Goldman Sachs pursuant to the
Plans exceed its expenses, Goldman Sachs may realize a profit from this
arrangement.

In connection with the sale of Class C Shares, Goldman Sachs begins paying
the 0.25% ongoing service fee to Authorized Dealers after the shares have
been held for one year.

43
<PAGE>

Taxation

TAXABILITY OF DISTRIBUTIONS

Fund distributions are taxable to you as ordinary income (unless your
investment is in an IRA or other tax-advantaged account) to the extent they
are attributable to the Fund's net investment income, certain net realized
foreign exchange gains and net short-term capital gains. They are taxable as
long-term capital gains to the extent they are attributable to the Fund's
excess of net long-term capital gains over net short-term capital losses.
The tax status of any distribution is the same regardless of how long you
have been in the Fund and whether you reinvest in additional shares or take
the distribution as cash. Certain distributions paid by a Fund in January of
a given year may be taxable to shareholders as if received the prior Decem-
ber 31. The tax status and amounts of the distributions for each calendar
year will be detailed in your annual tax statement from the Fund.

A Fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends the Fund receives from U.S. domestic
corporations may be eligible, in the hands of the corporate shareholders,
for the corporate dividends-received deduction, subject to certain holding
period requirements and debt financing limitations.

Each Fund may be subject to foreign withholding or other foreign taxes on
income or gain from certain foreign securities. In general, the Funds may
deduct these taxes in computing their taxable income.

There are certain tax requirements that the Funds must follow in order to
avoid federal taxation. In its efforts to adhere to these requirements, the
Funds may have to limit their investment activity in some types of instru-
ments.

44
<PAGE>

TAXATION

TAXABILITY OF SALES AND EXCHANGES

Any sale or exchange of Fund shares may generate a tax liability (unless
your investment is in an IRA or other tax-advantaged account). Depending
upon the purchase or sale price of the shares you sell or exchange, you may
have a gain or a loss on the transaction.

You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive
for them. (To aid in computing your tax basis, you generally should retain
your account statements for the periods that you hold shares.) Any loss rec-
ognized on shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received
with respect to the shares.

In addition to federal income taxes, you may be subject to state, local or
foreign taxes on payments received from a Fund or on the value of the shares
held by you. More tax information is provided in the Additional Statement.
You should also consult your own tax adviser for information regarding all
tax consequences applicable to your investments in the Funds.

45
<PAGE>

Appendix A
Additional Information on Portfolio Risks, Securities and Techniques

A. General Portfolio Risks

The Funds will be subject to the risks associated with equity securities.
"Equity securities" include 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 pur-
chase rights. In general, stock values fluctuate in response to the activi-
ties of individual companies and in response to general market and economic
conditions. Accordingly, the value of the stocks that a Fund holds may
decline over short or extended periods. The stock markets tend to be cycli-
cal, with periods when stock prices generally rise and periods when prices
generally decline. The volatility of equity securities means that the value
of your investment in the Funds may increase or decrease. As of the date of
this Prospectus, certain stock markets were trading at or close to record
high levels and there can be no guarantee that such levels will continue.

To the extent that a Fund invests in fixed-income securities, that Fund will
also be subject to the risks associated with its fixed-income securities.
These risks include interest rate risk, credit risk and call/extension risk.
In general, interest rate risk involves the risk that when interest rates
decline, the market value of fixed-income securities tends to increase. Con-
versely, when interest rates increase, the market value of fixed-income
securities tends to decline. Credit risk involves the risk that an issuer
could default on its obligations, and a Fund will not recover its invest-
ment. Call risk and extension risk are normally present in mortgage-backed
securities and asset-backed securities. For example, homeowners have the
option to prepay their mortgages. Therefore, the duration of a security
backed by home mortgages can either shorten (call risk) or lengthen (exten-
sion risk). In general, if interest rates on new mortgage loans fall suffi-
ciently below the interest rates on existing outstanding mortgage loans, the
rate of prepayment would be expected to increase. Conversely, if mortgage
loan interest rates rise above the interest rates on existing outstanding
mortgage loans, the rate of prepayment would be expected to decrease. In
either case, a change in the prepayment rate can result in losses to invest-
ors.

The Investment Adviser will not consider the portfolio turnover rate a lim-
iting factor in making investment decisions for a Fund. A high rate of port-
folio turnover (100% or more) involves correspondingly greater expenses
which must be

46
<PAGE>

APPENDIX A

borne by a Fund and its shareholders. The portfolio turnover rate is calcu-
lated by dividing the lesser of the dollar amount of sales or purchases of
portfolio securities by the average monthly value of a Fund's portfolio
securities, excluding securities having a maturity at the date of purchase
of one year or less. During the Internet Tollkeeper's first year of opera-
tions, its portfolio turnover rate is not expected to exceed 50%. See "Fi-
nancial Highlights" in Appendix B for a statement of the Real Estate Securi-
ties Fund's historical portfolio turnover rates.

The following sections provide further information on certain types of secu-
rities and investment techniques that may be used by the Funds, including
their associated risks. Additional information is provided in the Additional
Statement, which is available upon request. Among other things, the Addi-
tional Statement describes certain fundamental investment restrictions that
cannot be changed without shareholder approval. You should note, however,
that all investment objectives and policies not specifically designated as
fundamental are non-fundamental and may be changed without shareholder
approval. If there is a change in a Fund's investment objective, you should
consider whether that Fund remains an appropriate investment in light of
your then current financial position and needs.

B. Other Portfolio Risks

Risks of Investing In Internet and Internet-Related Companies. Internet and
Internet-related companies are generally subject to a rate of change in
technology which is higher than other industries and often requires exten-
sive and sustained investment in research and development. As a result,
Internet and Internet-related companies are exposed to the risk of rapid
product obsolescence. Changes in governmental policies, such as telephone
and cable regulations and anti-trust enforcement, and the need for regula-
tory approvals may have an adverse effect on the products, services and
securities of Internet and Internet-related companies. Internet and
Internet-related companies may also produce or use products or services that
prove commercially unsuccessful. In addition competitive pressures and
changing demand can have a significant effect on the financial conditions of
companies in these industries. Competitive pressures in the Internet and
Internet-related industries may affect negatively the financial condition of
Internet and Internet-related companies. In addition, Internet and Internet-
related companies are subject to the risk of service disruptions (which may
be caused by the "Year 2000 Problem" or other reasons), and the risk of
losses arising out of litigation related to these losses. In certain
instances, Internet and Internet-related securities may experience signifi-
cant price movements caused by disproportionate investor optimism or pessi-
mism with little or no basis in fundamental economic conditions. As a result
of these and other reasons, investments in the Internet and

47
<PAGE>

Internet-related industry can experience sudden and rapid appreciation and
depreciation.

Risks of Investing in Small Capitalization Companies and REITs. Investments
in small capitalization companies and REITs involve greater risk and portfo-
lio price volatility than investments in larger capitalization stocks. Among
the reasons for the greater price volatility of these investments 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 be thinly traded and may have to be sold at a discount from
current market prices or in small lots over an extended period of time. In
addition, these securities are subject to the risk that during certain peri-
ods the liquidity of particular issuers or industries, or all securities in
these investment categories, will shrink or disappear suddenly and without
warning as a result of adverse economic or market conditions, or adverse
investor perceptions whether or not accurate. Because of the lack of suffi-
cient market liquidity, a Fund may incur losses because it will be required
to effect sales at a disadvantageous time and only then at a substantial
drop in price. Small capitalization companies and REITs include "unseasoned"
issuers that do not have an established financial history; often have lim-
ited product lines, markets or financial resources; may depend on or use a
few key personnel for management; and may be susceptible to losses and risks
of bankruptcy. Transaction costs for these investments are often higher than
those of larger capitalization companies. Investments in small capitaliza-
tion companies and REITs may be more difficult to price precisely than other
types of securities because of their characteristics and lower trading vol-
umes.

Risks of Foreign Investments. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securi-
ties of U.S. issuers. Foreign investments may be affected by changes in cur-
rency rates, changes in foreign or U.S. laws or restrictions applicable to
such investments and changes in exchange control regulations (e.g., currency
blockage). A decline in the exchange rate of the currency (i.e., weakening
of the currency against the U.S. dollar) in which a portfolio security is
quoted or denominated relative to the U.S. dollar would reduce the value of
the portfolio security. In addition, if the currency in which a Fund
receives dividends, interest or other payments declines in value against the
U.S. dollar before such income is distributed as dividends to shareholders
or converted to U.S. dollars, the Fund may have to sell portfolio securities
to obtain sufficient cash to pay such dividends.

The introduction of a single currency, the euro, on January 1, 1999 for par-
ticipating nations in the European Economic and Monetary Union presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts

48
<PAGE>

APPENDIX A

after January 1, 1999 that refer to existing currencies rather than the
euro; the establishment and maintenance of exchange rates for currencies
being converted into the euro; the fluctuation of the euro relative to non-
euro currencies during the transition period from January 1, 1999 to Decem-
ber 31, 2001 and beyond; whether the interest rate, tax and labor regimes of
European countries participating in the euro will converge over time; and
whether the conversion of the currencies of other countries that now are or
may in the future become members of the European Union ("EU"), may have an
impact on the euro. These or other factors, including political and economic
risks, could cause market disruptions, and could adversely affect the value
of securities held by the Funds.

Brokerage commissions, custodial services and other costs relating to
investment in international securities markets generally are more expensive
than in the United States. In addition, clearance and settlement procedures
may be different in foreign countries and, in certain markets, such proce-
dures have been unable to keep pace with the volume of securities transac-
tions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers. There may be less publicly available information about a foreign
issuer than about a U.S. issuer. In addition, there is generally less gov-
ernment 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. Efforts in foreign countries to remediate potential Year 2000 prob-
lems are not as extensive as those in the United States. As a result, the
operations of foreign markets, foreign issuers and foreign governments may
be disrupted by the Year 2000 Problem, and the investment portfolio of a
Fund may be adversely affected. Furthermore, with respect to certain foreign
countries, there is a possibility of nationalization, expropriation or con-
fiscatory 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, and political or social
instability or diplomatic developments which could affect investments in
those countries.

Concentration of a Fund's assets in one or a few countries and currencies
will subject a Fund to greater risks than if a Fund's assets were not geo-
graphically concentrated.

Investment in sovereign debt obligations by the Funds involves 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

49
<PAGE>

to repay principal or interest when due in accordance with the terms of such
debt, and a Fund may have limited recourse to compel payment in the event of
a default. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt, and in turn a Fund's NAV, to a greater
extent than the volatility inherent in debt obligations of U.S. issuers.

A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign currency reserves, the avail-
ability 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 sov-
ereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.

Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). The Funds may also invest in European Depository Receipts
("EDRs") or other similar instruments representing securities of foreign
issuers. 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. 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 secu-
rity.

Risks of Emerging Countries. The Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are height-
ened when the issuer is located in an emerging country. Emerging countries
are generally located in the Asia-Pacific region, Eastern Europe, Latin and
South America and Africa. A Fund's purchase and sale of portfolio securities
in certain emerging countries may be constrained by limitations as to daily
changes in the prices of listed securities, periodic trading or settlement
volume and/or limitations on aggregate holdings of foreign investors. Such
limitations may be computed based on the aggregate trading volume by or
holdings of a Fund, the Investment Adviser, its affiliates and their respec-
tive clients and other service providers. A Fund may not be able to sell
securities in circumstances where price, trading or settlement volume limi-
tations have been reached.

Foreign investment in the securities markets of certain emerging countries
is restricted or controlled to varying degrees which may limit investment in
such countries or increase the administrative costs of such investments. For
example, certain Asian countries require governmental approval prior to
investments by foreign persons or limit investment by foreign persons to
only a specified percentage of an issuer's outstanding securities or a spe-
cific class of securities which may have less advantageous terms (including
price) than securities of the issuer

50
<PAGE>

APPENDIX A

available for purchase by nationals. In addition, certain countries may
restrict or prohibit investment opportunities in issuers or industries
deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for govern-
mental consents. Due to restrictions on direct investment in equity securi-
ties in certain Asian countries, it is anticipated that a Fund may invest in
such countries through other investment funds in such countries.

Many emerging countries have experienced currency devaluations and substan-
tial (and, in some cases, extremely high) rates of inflation, which have had
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.

Many emerging countries are subject to a substantial degree of economic,
political and social instability. 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 periodi-
cally used force to suppress civil dissent. Disparities of wealth, the pace
and success of democratization, and ethnic, religious and racial disaffec-
tion, among other factors, have also led to social unrest, violence and/or
labor unrest in some emerging countries. Unanticipated political or social
developments may result in sudden and significant investment losses. Invest-
ing in emerging countries involves greater risk of loss due to expropria-
tion, nationalization, confiscation of assets and property or the imposition
of restrictions on foreign investments and on repatriation of capital
invested.

A Fund's investment in emerging countries may also be subject to withholding
or other taxes, which may be significant and may reduce the return from an
investment in such country to the Fund.

Settlement procedures in emerging countries are frequently less developed
and reliable than those in the United States and often may involve a Fund's
delivery of securities before receipt of payment for their sale. In addi-
tion, 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

51
<PAGE>

counterparty to pay for securities the Fund has delivered or the Fund's
inability to complete its contractual obligations. The creditworthiness of
the local securities firms used by the Fund in emerging countries may not be
as sound as the creditworthiness of firms used in more developed countries.
As a result, the Fund may be subject to a greater risk of loss if a securi-
ties firm defaults in the performance of its responsibilities.

The small size and inexperience of the securities markets in certain emerg-
ing countries and the limited volume of trading in securities in those coun-
tries may make a Fund's investments in such countries less liquid and more
volatile than investments in countries with more developed securities mar-
kets (such as the United States, Japan and most Western European countries).
A Fund's investments in emerging countries are subject to the risk that the
liquidity of a particular investment, or investments generally, in such
countries will shrink or disappear suddenly and without warning as a result
of adverse economic, market or political conditions or adverse investor per-
ceptions, whether or not accurate. Because of the lack of sufficient market
liquidity, a Fund may incur losses because it will be required to effect
sales at a disadvantageous time and only then at a substantial drop in
price. Investments in emerging countries may be more difficult to price pre-
cisely because of the characteristics discussed above and lower trading vol-
umes.

A Fund's use of foreign currency management techniques in emerging countries
may be limited. Due to the limited market for these instruments in emerging
countries, the Investment Adviser does not currently anticipate that a sig-
nificant portion of the Funds' currency exposure in emerging countries, if
any, will be covered by such instruments.

Risks of Derivative Investments. A Fund's transactions, if any, in options,
futures, options on futures, swaps, interest rate caps, floors and collars,
structured securities and currency transactions involve additional risk of
loss. Loss can result from a lack of correlation between changes in the
value of derivative instruments and the portfolio assets (if any) being
hedged, the potential illiquidity of the markets for derivative instruments,
or the risks arising from margin requirements and related leverage factors
associated with such transactions. The use of these management techniques
also involves the risk of loss if the Investment Adviser is incorrect in its
expectation of fluctuations in securities prices, interest rates or currency
prices. Each Fund may also invest in derivative investments for non-hedging
purposes (that is, to seek to increase total return). Investing for non-
hedging purposes is considered a speculative practice and presents even
greater risk of loss.

52
<PAGE>

APPENDIX A

Risks of Illiquid Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities which cannot be disposed of in seven days in
the ordinary course of business at fair value. Illiquid securities include:
..Both domestic and foreign securities that are not readily marketable
..Certain stripped mortgage-backed securities
..Repurchase agreements and time deposits with a notice or demand period of
more than seven days
..Certain over-the-counter options
..Certain restricted securities, unless it is determined, based upon a review
of the trading markets for a specific restricted security, that such
restricted security is eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 ("144A Securities") and, therefore, is liquid

Investing in 144A Securities may decrease the liquidity of a Fund's portfo-
lio to the extent that qualified institutional buyers become for a time
uninterested in purchasing these restricted securities. The purchase price
and subsequent valuation of restricted and illiquid securities normally
reflect a discount, which may be significant, from the market price of com-
parable securities for which a liquid market exists.

Credit Risks. Debt securities purchased by the Funds may include securities
(including zero coupon bonds) issued by the U.S. government (and its agen-
cies, instrumentalities and sponsored enterprises), foreign governments,
domestic and foreign corporations, banks and other issuers. Further informa-
tion is provided in the Additional Statement.

Debt securities rated BBB or higher by Standard & Poor's or Baa or higher by
Moody's are considered "investment grade." Securities rated BBB or Baa are
considered medium-grade obligations with speculative characteristics, and
adverse economic conditions or changing circumstances may weaken their
issuers' capacity to pay interest and repay principal. A security will be
deemed to have met a rating requirement if it receives the minimum required
rating from at least one such rating organization even though it has been
rated below the minimum rating by one or more other rating organizations, or
if unrated by such rating organizations, determined by the Investment
Adviser to be of comparable credit quality.

The Funds may invest in fixed-income securities rated BB or Ba or below (or
comparable unrated securities) which are commonly referred to as "junk
bonds." Junk bonds are considered predominantly speculative and may be ques-
tionable as to principal and interest payments.

In some cases, junk bonds may be highly speculative, have poor prospects for
reaching investment grade standing and be in default. As a result, invest-
ment in

53
<PAGE>

such bonds will present greater speculative risks than those associated with
investment in investment grade bonds. Also, to the extent that the rating
assigned to a security in a Fund's portfolio is downgraded by a rating
organization, the market price and liquidity of such security may be
adversely affected.

Temporary Investment Risks. Each Fund may, for temporary defensive purposes,
invest a certain percentage of its total assets in:
..U.S. government securities
..Commercial paper rated at least A-2 by Standard & Poor's or P-2 by Moody's
..Certificates of deposit
..Bankers' acceptances
..Repurchase agreements
..Non-convertible preferred stocks and non-convertible corporate bonds with a
remaining maturity of less than one year

When a Fund's assets are invested in such instruments, the Fund may not be
achieving its investment objective.

C. Portfolio Securities and Techniques

This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associ-
ated risks. Further information is provided in the Additional Statement,
which is available upon request.

Convertible Securities. Each Fund may invest in convertible securities. Con-
vertible securities are preferred stock or debt obligations that are con-
vertible into common stock. Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar qual-
ity. Convertible securities in which a Fund invests are subject to the same
rating criteria as its other investments in fixed-income securities. Con-
vertible securities have both equity and fixed-income risk characteristics.
Like all fixed-income securities, the value of convertible securities is
susceptible to the risk of market losses attributable to changes in interest
rates. Generally, 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 of the convertible secu-
rity, the convertible security tends to reflect the market price of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security, like a fixed-income security, tends to
trade increasingly on a yield basis, and thus may not decline in price to
the same extent as the underlying common stock.

54
<PAGE>

APPENDIX A

Foreign Currency Transactions. A Fund may, to the extent consistent with its
investment policies, purchase or sell foreign currencies on a cash basis or
through forward contracts. A forward contract involves an obligation to pur-
chase or sell a specific currency at a future date at a price set at the
time of the contract. A Fund may engage in foreign currency transactions for
hedging purposes and to seek to protect against anticipated changes in
future foreign currency exchange rates. In addition, certain Funds may also
enter into such transactions to seek to increase total return, which is con-
sidered a speculative practice.

Currency exchange rates may fluctuate significantly over short periods of
time, causing, along with other factors, a Fund's NAV to fluctuate (when the
Fund's NAV fluctuates, the value of your shares may go up or down). Currency
exchange rates also can be affected unpredictably by the intervention of
U.S. or foreign governments or central banks, or the failure to intervene,
or by currency controls or political developments in the United States or
abroad.

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 obli-
gations. Since these contracts are not guaranteed by an exchange or clear-
inghouse, a default on a contract would deprive a Fund of unrealized prof-
its, transaction costs or the benefits of a currency hedge or could force
the Fund to cover its purchase or sale commitments, if any, at the current
market price.

Structured Securities. Each Fund may invest in structured securities. Struc-
tured securities are securities whose value 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. Structured securities may be posi-
tively or negatively indexed, so that appreciation of the Reference may pro-
duce 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 Refer-
ence. Consequently, structured securities may present a greater degree of
market risk than other types of fixed-income securities and may be more vol-
atile, less liquid and more difficult to price accurately than less complex
securities.

REITs. Each Fund may invest in REITS. REITS are pooled investment vehicles
that invest primarily in either real estate or real estate related loans.
The value of a REIT is affected by changes in the value of the properties
owned by the REIT

55
<PAGE>

or securing mortgage loans held by the REIT. REITs are dependent upon the
ability of the REITs' managers, and are subject to heavy cash flow dependen-
cy, default by borrowers and the qualification of the REITs under applicable
regulatory requirements for favorable 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 height-
ened. A Fund will indirectly bear its proportionate share of any expenses,
including management fees, paid by a REIT in which it invests.

Options on Securities, Securities Indices and Foreign Currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) of the option the obligation to buy, the underlying instrument dur-
ing the option period. A call option gives the purchaser of the option the
right to buy, and the writer (seller) of the option the obligation to sell,
the underlying instrument during the option period. Each Fund may write
(sell) covered call and put options and purchase put and call options on any
securities in which they may invest or on any securities index comprised of
securities in which they may invest. A Fund may also, to the extent that it
invests in foreign securities, purchase and sell (write) put and call
options on foreign currencies.

The writing and purchase of options is a highly specialized activity which
involves special investment risks. Options may be used for either hedging or
cross-hedging purposes, or to seek to increase total return (which is con-
sidered a speculative activity). The successful use of options depends in
part on the ability of the Investment Adviser to manage future price fluctu-
ations and the degree of correlation between the options and securities (or
currency) markets. If the Investment Adviser is incorrect in its expectation
of changes in market prices or determination of the correlation between the
instruments or indices on which options are written and purchased and the
instruments in a Fund's investment portfolio, the Fund may incur losses that
it would not otherwise incur. The use of options can also increase a Fund's
transaction costs. Options written or purchased by the Funds may be traded
on either U.S. or foreign exchanges or over-the-counter. Foreign and over-
the-counter options will present greater possibility of loss because of
their greater illiquidity and credit risks.

Futures Contracts and Options on Futures Contracts. Futures contracts are
standardized, exchange-traded contracts that provide for the sale or pur-
chase of a specified financial instrument or currency at a future time at a
specified price. An option on a futures contract gives the purchaser the
right (and the writer of the

56
<PAGE>

APPENDIX A

option the obligation) to assume a position in a futures contract at a spec-
ified exercise price within a specified period of time. A futures contract
may be based on various securities (such as U.S. government securities),
foreign currencies, securities indices and other financial instruments and
indices. The Funds may engage in futures transactions on both U.S. and for-
eign exchanges.

Each Fund may purchase and sell futures contracts, and purchase and write
call and put options on futures contracts, in order to seek to increase
total return or to hedge against changes in interest rates, securities
prices or, to the extent a Fund invests in foreign securities, currency
exchange rates, or to otherwise manage their term structures, sector selec-
tion and durations in accordance with their investment objectives and poli-
cies. Each Fund may also enter into closing purchase and sale transactions
with respect to such contracts and options. A Fund will engage in futures
and related options transactions for bona fide hedging purposes as defined
in regulations of the Commodity Futures Trading Commission or to seek to
increase total return to the extent permitted by such regulations. A Fund
may not purchase or sell futures contracts or purchase or sell related
options to seek to increase total return, except for closing purchase or
sale transactions, if immediately thereafter the sum of the amount of ini-
tial 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.

Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency
exchange rates may result in poorer overall performance than if the Fund
had not entered into any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio posi-
tion that is intended to be protected is impossible to achieve, the desired
protection may not be obtained and a Fund may be exposed to additional risk
of loss.
..The loss incurred by a Fund in entering into futures contracts and in writ-
ing call options on futures is potentially unlimited and may exceed the
amount of the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trad-
ing, a relatively small price movement in a futures contract may result in
substantial losses to a Fund.
..Futures contracts and options on futures may be illiquid, and exchanges may
limit fluctuations in futures contract prices during a single day.
..Foreign exchanges may not provide the same protection as U.S. exchanges.

57
<PAGE>

Equity Swaps. Each Fund may invest in equity swaps. Equity swaps allow the
parties to a swap agreement to exchange the dividend income or other compo-
nents of return on an equity investment (for example, a group of equity
securities or an index) for a component of return on another non-equity or
equity investment.

An equity swap may be used by a Fund to invest in a market without owning or
taking physical custody of securities in circumstances in which direct
investment may be restricted for legal reasons or is otherwise impractical.
Equity swaps are derivatives and their value can be very volatile. To the
extent that the Investment Adviser does not accurately analyze and predict
the potential relative fluctuation of the components swapped with another
party, a Fund may suffer a loss. The value of some components of an equity
swap (such as the dividends on a common stock) may also be sensitive to
changes in interest rates. Furthermore, a Fund may suffer a loss if the
counterparty defaults.

When-Issued Securities and Forward Commitments. Each Fund may purchase when-
issued securities and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. When-issued
securities are securities that have been authorized, but not yet issued.
When-issued securities are purchased 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. A forward commitment involves the entering into a con-
tract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period.

The purchase of securities on a when-issued or forward commitment basis
involves a risk of loss if the value of the security to be purchased
declines before the settlement date. Conversely, the sale of securities on a
forward commitment basis involves the risk that the value of the securities
sold may increase before the settlement date. Although a Fund will generally
purchase securities on a when-issued or forward commitment basis with the
intention of acquiring securities for its portfolio, a Fund may dispose of
when-issued securities or forward commitments prior to settlement if the
Investment Adviser deems it appropriate.

Repurchase Agreements. Repurchase agreements involve the purchase of securi-
ties subject to the seller's agreement to repurchase them at a mutually
agreed upon date and price. Each Fund may enter into repurchase agreements
with primary dealers in U.S. government securities and member banks of the
Federal Reserve System which furnish collateral at least equal in value or
market price to the amount of their repurchase obligation.

If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and
other collateral held by

58
<PAGE>

APPENDIX A

the Fund are less than the repurchase price and the Fund's costs associated
with delay and enforcement of the repurchase agreement. In addition, in the
event of bankruptcy of the seller, a Fund could suffer additional losses if
a court determines that the Fund's interest in the collateral is not
enforceable.

In evaluating whether to enter into a repurchase agreement, the Investment
Adviser will carefully consider the creditworthiness of the seller. Certain
Funds, together with other registered investment companies having advisory
agreements with the Investment Adviser or any of its affiliates, may trans-
fer uninvested cash balances into a single joint account, the daily aggre-
gate balance of which will be invested in one or more repurchase agreements.

Lending of Portfolio Securities. Each Fund may engage in securities lending.
Securities lending involves the lending of securities owned by a Fund to
financial institutions such as certain broker-dealers. The borrowers are
required to secure their loan continuously with cash, cash equivalents, U.S.
government securities or letters of credit in an amount at least equal to
the market value of the securities loaned. Cash collateral may be invested
in cash equivalents. If the Investment Adviser determines to make securities
loans, the value of the securities loaned may not exceed 33 1/3% of the
value of the total assets of a Fund (including the loan collateral).

A Fund may lend its securities to increase its income. A Fund may, however,
experience delay in the recovery of its securities if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement
with the Fund.

Short Sales Against-the-Box. Each Fund may make short sales against-the-box.
A short sale against-the-box means that at all times when a short position
is open the Fund will own an equal amount of securities sold short, or secu-
rities convertible into or exchangeable for, without payment of any further
consideration, an equal amount of the securities of the same issuer as the
securities sold short.

Preferred Stock, Warrants and Rights. Each Fund 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 earn-
ings 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
or other non-compliance by the issuer of the preferred stock.

Warrants and other rights are options to buy a stated number of shares of
common stock at a specified price at any time during the life of the war-
rant. The holders of

59
<PAGE>

warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.

Other Investment Companies. Each Fund may invest in securities of other
investment companies (including SPDRs and WEBs, as defined below) subject to
statutory limitations prescribed by the Act. These limitations include a
prohibition on any Fund acquiring more than 3% of the voting shares of any
other investment company, and a prohibition on investing more than 5% of a
Fund's total assets in securities of any one investment company or more than
10% of its total assets in securities of all investment companies. A Fund
will indirectly bear its proportionate share of any management fees and
other expenses paid by such other investment companies. Such other invest-
ment companies will have investment objectives, policies and restrictions
substantially similar to those of the acquiring Fund and will be subject to
substantially the same risks.

..Standard & Poor's Depository Receipts. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts
("SPDRs"). SPDRs are securities traded on the American Stock Exchange
("AMEX") that represent ownership in the SPDR Trust, a trust which has been
established to accumulate and hold a portfolio of common stocks that is
intended to track the price performance and dividend yield of the S&P 500.
The SPDR Trust is sponsored by a subsidiary of the AMEX. SPDRs may be used
for several reasons, including, but not limited to, facilitating the han-
dling of cash flows or trading, or reducing transaction costs. The price
movement of SPDRs may not perfectly parallel the price action of the S&P
500.

..World Equity Benchmark Shares. World Equity Benchmark Shares ("WEBS") are
shares of an investment company that invests substantially all of its
assets in securities included in the MSCI indices for specified countries.
WEBS are listed on the AMEX and were initially offered to the public in
1996. The market prices of WEBS are expected to fluctuate in accordance
with both changes in the NAVs of their underlying indices and supply and
demand of WEBS on the AMEX. To date, WEBS have traded at relatively modest
discounts and premiums to their NAVs. However, WEBS have a limited operat-
ing history and information is lacking regarding the actual performance and
trading liquidity of WEBS for extended periods or over complete market
cycles. In addition, there is no assurance that the requirements of the
AMEX necessary to maintain the listing of WEBS will continue to be met or
will remain unchanged. In the event substantial market or other disruptions
affecting WEBS should occur in the future, the liquidity and value of a
Fund's shares could also be substantially and adversely affected. If such
disruptions were to occur, a

60
<PAGE>

APPENDIX A

Fund could be required to reconsider the use of WEBS as part of its invest-
ment strategy.

Unseasoned Companies. Each Fund may invest in companies (including predeces-
sors) which have operated less than three years, except that this limitation
does not apply to debt securities which have been rated investment grade or
better by at least one NRSRO. The securities of such companies may have lim-
ited liquidity, which can result in their being priced higher or lower than
might otherwise be the case. In addition, investments in unseasoned compa-
nies are more speculative and entail greater risk than do investments in
companies with an established operating record.

Corporate Debt Obligations. Corporate debt obligations include bonds, notes,
debentures and other obligations of corporations to pay interest and repay
principal, and include securities issued by banks and other financial insti-
tutions. Each Fund may invest in corporate debt obligations issued by U.S.
and certain non-U.S. issuers which issue securities denominated in the U.S.
dollar (including Yankee and Euro obligations). In addition to obligations
of corporations, corporate debt obligations include securities issued by
banks and other financial institutions and supranational entities (i.e., the
World Bank, the International Monetary Fund, etc.).

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

U.S. Government Securities and Related Custodial Receipts. Each Fund may
invest in U.S. government securities and related custodial receipts. U.S.
government securities include U.S. Treasury obligations and obligations
issued or guaranteed by U.S. government agencies, instrumentalities or spon-
sored enterprises. U.S. government securities may be supported by (a) the
full faith and credit of the U.S. Treasury (such as the Government National
Mortgage Association ("Ginnie Mae")); (b) the right of the issuer to borrow
from the U.S. Treasury (such as securities of the Student Loan Marketing
Association); (c) the discretionary author-

61
<PAGE>

ity of the U.S. government to purchase certain obligations of the issuer
(such as the Federal National Mortgage Association ("Fannie Mae") and Fed-
eral Home Loan Mortgage Corporation ("Freddie Mac")); or (d) only the credit
of the issuer. U.S. government securities also include Treasury receipts,
zero coupon bonds and other stripped U.S. government securities, where the
interest and principal components of stripped U.S. government securities are
traded independently.

Interests in U.S. government securities may be purchased in the form of cus-
todial receipts that evidence ownership of future interest payments, princi-
pal payments or both on certain notes or bonds issued or guaranteed as to
principal and interest by the U.S. government, its agencies, instrumentali-
ties, political subdivisions or authorities. For certain securities law pur-
poses, custodial receipts are not considered obligations of the U.S.
government.

Mortgage-Backed Securities. Each Fund may invest in mortgage-backed securi-
ties. Mortgage-backed securities represent direct or indirect participations
in, or are collateralized by and payable from, mortgage loans secured by
real property. Mortgage-backed securities can be backed by either fixed rate
mortgage loans or adjustable rate mortgage loans, and may be issued by
either a governmental or non-governmental entity. Privately issued mortgage-
backed securities are normally structured with one or more types of "credit
enhancement." However, these mortgage-backed securities typically do not
have the same credit standing as U.S. government guaranteed mortgage-backed
securities.

Mortgage-backed securities may include 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. In most cases, payments of principal are
applied to the CMO classes in the order of their respective stated maturi-
ties, 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 and invests in cer-
tain mortgages principally secured by interests in real property and other
permitted investments.

Mortgaged-backed securities also include stripped mortgage-backed securities
("SMBS"), which are derivative multiple class mortgage-backed securities.
SMBS are usually structured with two different classes: one that receives
100% of the interest payments and the other that receives 100% of the prin-
cipal payments from a pool of mortgage loans. The market value of SMBS con-
sisting entirely of principal payments generally is unusually volatile in
response to changes in interest rates. The yields on SMBS that receive all
or most of the interest from mort-

62
<PAGE>

APPENDIX A

gage loans are generally higher than prevailing market yields on other mort-
gage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped.

Asset-Backed Securities. Each Fund may invest in asset-backed securities.
Asset-backed securities are securities whose principal and interest payments
are collateralized by pools of assets such as auto loans, credit card
receivables, leases, installment contracts and personal property. Asset-
backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of pre-
payments of principal on the underlying loans. During periods of declining
interest rates, prepayment of loans underlying asset-backed securities can
be expected to accelerate. Accordingly, a Fund's ability to maintain posi-
tions in such securities will be affected by reductions in the principal
amount of such securities resulting from prepayments, and its ability to
reinvest the returns of principal at comparable yields is subject to gener-
ally prevailing interest rates at that time. Asset-backed securities present
credit risks that are not presented by mortgage-backed securities. This is
because asset-backed securities generally do not have the benefit of a secu-
rity 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. In the event
of a default, a Fund may suffer a loss if it cannot sell collateral quickly
and receive the amount it is owed.

Borrowings. Each Fund can borrow money from banks and other financial insti-
tutions in amounts not exceeding one-third of their total assets for tempo-
rary or emergency purposes. A Fund may not make additional investments if
borrowings exceed 5% of its total assets.

Mortgage Dollar Rolls. The Real Estate Securities Fund may enter into mort-
gage dollar rolls. A mortgage dollar roll involves the sale by a Fund of
securities for delivery in the current month. The Fund simultaneously con-
tracts with the same counterparty to repurchase substantially similar (same
type, coupon and maturity) 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 bene-
fits to the extent of any difference between (a) the price received for the
securities sold and (b) the lower forward price for the future purchase
and/or fee income plus the interest earned on the cash proceeds of the secu-
rities sold. Unless the benefits of a mortgage dollar roll 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 roll,
the use of this technique will diminish the Fund's performance.

63
<PAGE>

Successful use of mortgage dollar rolls depends upon the Investment Advis-
er's ability to predict correctly interest rates and mortgage prepayments.
If the Investment Adviser is incorrect in its prediction, a Fund may experi-
ence a loss. For financial reporting and tax purposes, the Fund treats mort-
gage dollar rolls as two separate transactions: one involving the purchase
of a security and a separate transaction involving a sale. The Fund does not
currently intend to enter into mortgage dollar rolls that are accounted for
as a financing and do not treat them as borrowings.

Yield Curve Options. The Real Estate Securities Fund may enter into options
on the yield "spread" or differential between two securities. Such transac-
tions are referred to as "yield curve" options. In contrast to other types
of options, a yield curve option is based on the difference between the
yields of designated securities, rather than the prices of the individual
securities, and is settled through cash payments. Accordingly, a yield curve
option is profitable to the holder if this differential widens (in the case
of a call) or narrows (in the case of a put), regardless of whether the
yields of the underlying securities increase or decrease.

The trading of yield curve options is subject to all of the risks associated
with the trading of other types of options. In addition, such options pres-
ent a risk of loss even if the yield of one of the underlying securities
remains constant, or if the spread moves in a direction or to an extent
which was not anticipated.

Interest Rate Swaps, Mortgage Swaps, Credit Swaps, Currency Swaps and Inter-
est Rate Caps, Floors and Collars. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or
receive interest, such as an exchange of fixed-rate payments for floating
rate payments. Mortgage swaps are similar to interest rate swaps in that
they represent commitments to pay and receive interest. The notional princi-
pal amount, however, is tied to a reference pool or pools of mortgages.
Credit swaps involve the receipt of floating or fixed rate payments in
exchange for assuming potential credit losses of an underlying security.
Credit swaps give one party to a transaction the right to dispose of or
acquire an asset (or group of assets), or the right to receive or make a
payment from the other party, upon the occurrence of specified credit
events. Currency swaps involve the exchange of the parties' respective
rights to make or receive payments in specified currencies. The purchase of
an interest rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payment of interest
on a notional principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling the interest rate floor. An interest rate collar is the combination
of a cap

64
<PAGE>

APPENDIX A

and a floor that preserves a certain return within a predetermined range of
interest rates.

The Real Estate Securities Fund may enter into swap transactions for hedging
purposes or to seek to increase total return. The use of interest rate,
mortgage, credit and currency swaps, as well as interest rate caps, floors
and collars, is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Investment Adviser is incorrect in its fore-
casts of market value, interest rates and currency exchange rates, the
investment performance of a Fund would be less favorable than it would have
been if these investment techniques were not used.

Inverse Floaters. The Real Estate Securities Fund may invest in inverse
floating rate debt securities ("inverse floaters"). The interest rate on
inverse floaters resets in the opposite direction from the market rate of
interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher the degree of leverage of an inverse floater, the
greater the volatility of its market value.

65
<PAGE>

Appendix B
Financial Highlights

The financial highlights tables are intended to help you understand a Fund's
financial performance for the past five years (or less if the Fund has not
been in operation for less than five years). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an invest-
ment in a Fund (assuming reinvestment of all dividends and distributions).
This information has been audited by Arthur Andersen LLP, whose report,
along with a Fund's financial statements, is included in the Fund's annual
report (available upon request). As of the date of this Prospectus the
Internet Tollkeeper Fund had not commenced operations.

REAL ESTATE SECURITIES FUND

<TABLE>
<CAPTION>
Income from
investment operationsa
-------------------------
Net realized
Net asset and unrealized
value, Net gain (loss) on
beginning investment investment
of period income transactions
- ------------------------------------------------------------------------------
For the Period Ended December 31,
<S> <C> <C> <C>
1998 - Class A Shares (commenced July 27) $10.00 $0.15 $(0.80)
1998 - Class B Shares (commenced July 27) 10.00 0.14e (0.83)e
1998 - Class C Shares (commenced July 27) 10.00 0.22e (0.91)e
1998 - Institutional Shares (commenced
July 27) 10.00 0.31e (0.95)e
1998 - Service Shares (commenced July 27) 10.00 0.25e (0.91)e
- ------------------------------------------------------------------------------
</TABLE>

a Includes the balancing effect of calculating per share amounts.
b Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales or
redemption charges. Total return would be reduced if a sales or redemption
charge were taken into account.
c Annualized.
d Not annualized.
e Calculated based on the average shares outstanding methodology.

66
<PAGE>

APPENDIX B

Distributions to shareholders
--------------------------------------
From net
In excess realized gain Net assets Ratio of
From net of net on investment Net decrease Net asset at end of net expenses
investment investment and options in net asset value, end Total period to average
income income transactions value of period returnb (in 000s) net assets
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.15) $ -- $ -- $(0.80) $9.20 (6.53)%d $19,961 1.47%c
(0.04) -- -- (0.73) 9.27 (6.88)d 2 2.19c
(0.10) -- -- (0.79) 9.21 (6.85)d 1 2.19c
(0.15) -- -- (0.79) 9.21 (6.37)d 47,516 1.04c
(0.13) -- -- (0.79) 9.21 (6.56)d 1 1.54c
- -------------------------------------------------------------------------------------------------
</TABLE>

67
<PAGE>

REAL ESTATE SECURITIES FUND (continued)

<TABLE>
<CAPTION>
Ratios assuming
no voluntary waiver
of fees
or expense limitations
--------------------------
Ratio of Ratio of
net investment Ratio of net investment
income to expenses to income Portfolio
average average net to average turnover
net assets assets net assets rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 - Class A Shares
(commenced July 27) 23.52%c 3.52%c 21.47%c 6.03%d
1998 - Class B Shares
(commenced July 27) 3.60c 4.02c 1.77c 6.03d
1998 - Class C Shares
(commenced July 27) 5.49c 4.02c 3.66c 6.03d
1998 - Institutional
Shares (commenced July 27) 8.05c 2.87c 6.22c 6.03d
1998 - Service Shares
(commenced July 27) 6.29c 3.37c 4.46c 6.03d
- --------------------------------------------------------------------------------
</TABLE>

68
<PAGE>

Index

1 General Investment Management Approach
5 Fund Investment Objectives and Strategies
3 Goldman Sachs Internet Tollkeeper Fund
6 Goldman Sachs Real Estate Securities Fund
8 Other Investment Practices and Securities
10 Principal Risks of the Funds
13 Fund Performance
14 Fund Fees and Expenses
18 Service Providers
24 Dividends
25 Shareholder Guide
25 How To Buy Shares
34 How To Sell Shares
44 Taxation
46 Appendix A
Additional Information
on Portfolio Risks,
Securities and
Techniques
66 Appendix B
Financial Highlights

<PAGE>

Specialty Funds
Prospectus (Class A, B and C Shares)

FOR MORE INFORMATION

Annual/Semiannual Report
Additional information about the Funds' investments is available in the
Funds' annual and semiannual reports to shareholders. In the Funds' annual
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the
last fiscal year. As of the date of this Prospectus, the Internet Tollkeeper
Fund had not commenced operations and its annual report for the fiscal
period ended December 31, 1999 will become available to shareholders in Feb-
ruary 2000.

Statement of Additional Information
Additional information about the Funds and their policies is also available
in the Funds' Additional Statement. The Additional Statement is incorporated
by reference into this Prospectus (is legally considered part of this Pro-
spectus).

The Funds' annual and semiannual reports, and the Additional Statement, are
available free upon request by calling Goldman Sachs at 1-800-526-7384.

To obtain other information and for shareholder inquiries:
By telephone - Call 1-800-526-7384
By mail - Goldman Sachs Funds, 4900 Sears Tower - 60th Floor, Chicago, IL
60606-6372
By e-mail - [email protected]
On the Internet - Text-only versions of the Funds' documents are located
online and may be downloaded from:
SEC - http://www.sec.gov
Goldman Sachs - http://www.gs.com (Prospectus Only)

You may review and obtain copies of Fund documents by visiting the SEC's
Public Reference Room in Washington, D.C. You may also obtain copies of Fund
documents by sending your request and a duplicating fee to the SEC's Public
Reference Section, Washington, D.C. 20549-6009. Information on the operation
of the public reference room may be obtained by calling the SEC at 1-800-
SEC-0330.

[LOGO OF GOLDMAN SACHS APPEARS HERE]

The Funds' investment company registration number is 811-5349.
<PAGE>

Preliminary Prospectus dated July 16, 1999
Subject to Completion

Prospectus

GOLDMAN SACHS SPECIALTY FUNDS

Institutional
Shares

, 1999

..Goldman
Sachs
Internet
Tollkeeper
Fund

..Goldman
Sachs Real
Estate
Securities
Fund

[LOGO OF GOLDMAN SACHS]

[Artwork to Appear Here]
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES
OR PASSED UPON THE ADEQUACY OF
THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

AN INVESTMENT IN A FUND IS NOT
A BANK DEPOSIT AND IS NOT
INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN A FUND INVOLVES
INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.

[ART]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
<PAGE>

General Investment Management Approach

GROWTH STYLE FUNDS

2. Buy high-quality growth businesses that possess strong business fran-
chises, favorable long-term prospects and excellent management.

3. Purchase superior long-term growth companies at a favorable price--seek
to purchase at a fair valuation, giving the investor the potential to
fully capture returns from above-average growth rates.

Growth companies have earnings expectations that exceed those of the stock
market as a whole.

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

REAL ESTATE SECURITIES FUND

1
<PAGE>

..Seeks to buy securities at a discount to the intrinsic value of the busi-
ness (assets and management).
..Seeks a team approach to decision making.

Over time, REITs (which stand for Real Estate Investment Trusts) have
offered investors important diversification and competitive total returns
versus the broad equity market.

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

2
<PAGE>

Fund Investment Objectives and Strategies

Goldman Sachs
Internet Tollkeeper Fund

FUND FACTS
- --------------------------------------------------------------------------------

Objective: Long-term growth of capital

Investment Focus: U.S. equity securities that offer long-term capital
appreciation with a primary focus on the media,
telecommunications, technology and Internet sectors.

Investment Style: Growth

INVESTMENT OBJECTIVE

The Fund seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities and at least 65% of its total
assets in equity securities of "Internet Tollkeeper" companies (as described
below), which includes companies in the media, telecommunications, technol-
ogy and Internet sectors which provide access, infrastructure, content and
services to Internet companies and Internet users. The Fund seeks to achieve
its investment objective by investing in equity securities of companies that
the Investment Adviser believes will benefit from the growth of the Internet
by providing access, infrastructure, content and services to Internet compa-
nies and customers. The Fund will also seek its investment objective by
investing in companies whose rapid adoption of an Internet strategy is
expected to improve their cost structure or competitive advantage. Internet-
based companies that exhibit a sustainable business model may also be candi-
dates for purchase in the Fund. Although the Fund invests primarily in pub-
licly traded U.S. securities, it may invest up to 10% of its total assets in
for-

3
<PAGE>

eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.

4
<PAGE>

FUND INVESTMENT OBJECTIVES AND STRATEGIES

5
<PAGE>

Goldman Sachs
Real Estate Securities Fund

FUND FACTS
- --------------------------------------------------------------------------------

Objective: Total return comprised of long-term growth of capital
and dividend income

Benchmark: Wilshire Real Estate Securities Index

Investment Focus: REITs and real estate industry companies

Investment Style: Growth at a discount

INVESTMENT OBJECTIVE

The Fund seeks total return comprised of long-term growth of capital and
dividend income.

PRINCIPAL INVESTMENT STRATEGIES

6
<PAGE>

FUND INVESTMENT OBJECTIVES AND STRATEGIES

Other. The Fund may invest up to 20% of its total assets in fixed-income
securities, such as corporate debt and bank obligations, that offer the
potential to further the Fund's investment objective.

7
<PAGE>

Other Investment Practices and Securities

10Percent of total assets (italic type)
10Percent of net assets (roman type)
.. No specific percentage limitation on usage;limited only by the objectives and
strategies of the Fund
<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- -----------------------------------------------------------------------------
<S> <C> <C>
Investment Practices
Borrowings 33 1/3 33 1/3
Credit, currency, index, interest rate and mortgage
swaps -- .
Custodial receipts . .
Equity Swaps 10 10
Foreign Currency Transactions* . .
Futures Contracts and Options on Futures Contracts . .
Interest rate caps, floors and collars -- .
Investment Company Securities (including World Equity
Benchmark Shares and Standard & Poor's Depository
Receipts) 10 10
Mortgage Dollar Rolls -- .
Options on Foreign Currencies/1/ . .
Options on Securities and Securities Indices/2/ . .
Repurchase Agreements . .
Securities Lending 33 1/3 33 1/3
Short Sales Against the Box 25 25
Unseasoned Companies . .
Warrants and Stock Purchase Rights . .
When-Issued Securities and Forward Commitments . .
- -----------------------------------------------------------------------------
</TABLE>
- --Not permitted
* Limited by the amount the Fund invests in foreign securities.
1 May purchase and sell call and put options.
2 May sell covered call and put options and purchase call and put options.

8
<PAGE>

OTHER INVESTMENT PRACTICES AND SECURITIES

10Percent of total assets (italic type)
10Percent of net assets (roman type)
.. No specific percentage
limitation on usage;
limited only by the
objectives andstrategies
of the Fund

<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- ------------------------------------------------
<S> <C> <C>
Investment Securities
American, European and
Global Depository
Receipts . .
Asset-Backed and
Mortgage-Backed
Securities/3/ . .
Bank Obligations/3/ . .
Convertible
Securities/4/ . .
Corporate Debt
Obligations/3/ . .
Equity Securities 90+ 80+
Emerging Country
Securities 10/5/ 15/5/
Fixed Income Securities 10 20
Foreign Securities 10/5/ 15/5/
Non-Investment Grade
Fixed Income Securities 10/6/ 20/6/
Real Estate Investment
Trusts . .
Stripped Mortgage Backed
Securities/3/ -- .
Structured Securities/3/ . .
Temporary Investments 100 100
U.S. Government
Securities/3/ . .
Yield Curve Options and
Inverse Floating Rate
Securities -- .
- ------------------------------------------------
</TABLE>
- --Not permitted

9
<PAGE>

Principal Risks of the Funds

10
<PAGE>

PRINCIPAL RISKS OF THE FUNDS

All Funds:

11
<PAGE>

12
<PAGE>

Fund Performance

HOW THE FUNDS HAVE PERFORMED

13
<PAGE>

Fund Fees and Expenses (Institutional Shares)

This table describes the fees and expenses that you would pay if you buy and
hold Institutional Shares of a Fund.

<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- -------------------------------------------------------------------------
<S> <C> <C>
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases None None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends None None
Redemption Fees None None
Exchange Fees None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):1
Management Fees 1.00% 1.00%
Distribution and Service Fees None None
Other Expenses2 0.14% 1.36%
- -------------------------------------------------------------------------
Total Fund Operating Expenses* 1.14% 2.36%
- -------------------------------------------------------------------------
</TABLE>
See page 15 for all other footnotes.

* As a result of current waivers and expense limita-
tions, "Other Expenses" and "Total Fund Operating
Expenses" of the Funds which are actually incurred
are as set forth below. The waivers and expense limi-
tations may be terminated at any time at the option
of the Investment Adviser. If this occurs, "Other
Expenses" and "Total Fund Operating Expenses" may
increase without shareholder approval.

<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
------------------------------------------------------------------------
<S> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):1
Management Fees 1.00% 1.00%
Distribution and Services Fees None None
Other Expenses2 0.10% 0.04%
------------------------------------------------------------------------
Total Fund Operating Expenses (after
current waivers and expense limitations) 1.10% 1.04%
------------------------------------------------------------------------
</TABLE>

14
<PAGE>

/1/The Funds' annual operating expenses have been estimated for the current
fiscal year.
/2/"Other Expenses" include transfer agency fees equal to 0.04% of the average
daily net assets of each Fund's Institutional Shares plus all other ordinary
expenses not detailed above. The Investment Adviser has voluntarily agreed to
reduce or limit "Other Expenses"(excluding management fees, transfer agency
fees, taxes, interest and brokerage fees and litigation, indemnification and
other extraordinary expenses) to the following percentages of each Fund's aver-
age daily net assets:

<TABLE>
<CAPTION>
Other
Fund Expenses
- -------------------------
<S> <C>
Internet
Tollkeeper 0.06%
Real Estate
Securities 0.00%
</TABLE>

15
<PAGE>

Example

The following Example is intended to help you compare the cost of investing in
a Fund (without the waivers and expense limitations) with the cost of investing
in other mutual funds. The Example assumes that you invest $10,000 in Institu-
tional Shares of a Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that a Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

<TABLE>
<CAPTION>
Fund 1 Year 3 Years
- --------------------------------------
<S> <C> <C>
Internet Tollkeeper $116 $362
Real Estate Securities $239 $736
- --------------------------------------
</TABLE>

Institutions that invest in Institutional Shares on behalf of their customers
may charge other fees directly to their customer accounts in connection with
their investments. You should contact your institution for information regard-
ing such charges. Such fees, if any, may affect the return such customers real-
ize with respect to their investments.

Certain institutions that invest in Institutional Shares on behalf of their
customers may receive other compensation in connection with the sale and dis-
tribution of such shares or for services to their customers' accounts and/or
the Funds. For additional information regarding such compensation, see "Share-
holder Guide" in the Prospectus and "Other Information" in the Statement of
Additional Information ("Additional Statement").

16
<PAGE>

Service Providers

INVESTMENT ADVISER

17
<PAGE>

MANAGEMENT FEES

FUND MANAGERS

18
<PAGE>

SERVICE PROVIDERS

- --------------------------------------------------------------------------------
Growth Equity Investment Team

19
<PAGE>

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

20
<PAGE>

SERVICE PROVIDERS

DISTRIBUTOR AND TRANSFER AGENT

ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS

YEAR 2000

21
<PAGE>

Currently, the Investment Adviser does not anticipate that the transition to
the 21st century will have any material impact on its ability to continue to
service the Funds at current levels.

22
<PAGE>

Dividends

Dividends from net investment income and distributions from net capital gains
are declared and paid as follows:

From time to time a portion of a Fund's dividends may constitute a return of
capital.

23
<PAGE>

Shareholder Guide

The following section will provide you with answers to some of the most
often asked questions regarding buying and selling the Funds' Institutional
Shares.

HOW TO BUY SHARES

How Can I Purchase Institutional Shares Of The Funds?
You may purchase Institutional Shares on any business day at their net asset
value ("NAV") next determined after receipt of an order. No sales load is
charged. You should place an order with Goldman Sachs at 1-800-621-2550 and
either:
..Wire federal funds to The Northern Trust Company ("Northern"), as
subcustodian for State Street Bank and Trust Company ("State Street") (each
Fund's custodian) on the next business day; or
..Initiate an Automated Clearing House Network ("ACH") transfer to Northern;
or
..Send a check or Federal Reserve draft payable to Goldman Sachs Funds--(Name
of Fund and Class of Shares), 4900 Sears Tower--60th Floor, Chicago, IL
60606-6372. The Fund will not accept a check drawn on a foreign bank or a
third-party check.

In order to make an initial investment in a Fund, you must furnish to the
Fund or Goldman Sachs the Account Application attached to this Prospectus.
Purchases of Institutional Shares must be settled within three business days
of receipt of a complete purchase order.

How Do I Purchase Shares Through A Financial Institution?
Certain institutions (including banks, trust companies, brokers and invest-
ment advisers) that provide recordkeeping, reporting and processing services
to their customers may be authorized to accept, on behalf of Goldman Sachs
Trust (the "Trust"), purchase, redemption and exchange orders placed by or
on behalf of their customers, and may designate other intermediaries to
accept such orders, if approved by the Trust. In these cases:
..A Fund will be deemed to have received an order in proper form when the
order is accepted by the authorized institution or intermediary on a busi-
ness day, and the order will be priced at the Fund's NAV next determined
after such acceptance.

24
<PAGE>

SHAREHOLDER GUIDE

..Authorized institutions and intermediaries will be responsible for trans-
mitting accepted orders and payments to the Trust within the time period
agreed upon by them.
You should contact your institution or intermediary to learn whether it is
authorized to accept orders for the Trust.

These institutions may receive payments from the Funds or Goldman Sachs for
the services provided by them with respect to the Funds' Institutional
Shares. These payments may be in addition to other payments borne by the
Funds.

The Investment Adviser, Distributor and/or their affiliates may pay addi-
tional compensation from time to time, out of their assets and not as an
additional charge to the Funds, to certain institutions and other persons in
connection with the sale, distribution and/or servicing of shares of the
Funds and other Goldman Sachs Funds. Subject to applicable NASD regulations,
the Investment Adviser, Distributor and/or their affiliates may also con-
tribute to various cash and non-cash incentive arrangements to promote the
sale of shares. This additional compensation can vary among such institu-
tions depending upon such factors as the amounts their customers have
invested (or may invest) in particular Goldman Sachs Funds, the particular
program involved, or the amount of reimbursable expenses. Additional compen-
sation based on sales may, but is currently not expected to, exceed 0.50%
(annualized) of the amount invested.

In addition to Institutional Shares, each Fund also offers other classes of
shares to investors. These other share classes are subject to different fees
and expenses (which affect performance), have different minimum investment
requirements and are entitled to different services than Institutional
Shares. Information regarding these other share classes may be obtained from
your sales representative or from Goldman Sachs by calling the number on the
back cover of this Prospectus.

25
<PAGE>

What is My Minimum Investment in the Funds?

<TABLE>
<CAPTION>
Type of Investor Minimum Investment
-------------------------------------------------------------------------------
<S> <C>
.Banks, trust companies or $1,000,000 in Institutional Shares of a Fund
other depository alone or in combination with other assets
institutions investing for under the management of GSAM and its affiliates
their own account or on
behalf of clients
.Pension and profit sharing
plans, pension funds and
other company-sponsored
benefit plans
.State, county, city or any
instrumentality, department,
authority or agency thereof
.Corporations with at least
$100 million in assets or in
outstanding publicly traded
securities
."Wrap" account sponsors
(provided they have an
agreement covering the
arrangement with GSAM)
.Registered investment
advisers investing for
accounts for which they
receive asset-based fees
-------------------------------------------------------------------------------
.Individual investors $10,000,000
.Qualified non-profit
organizations, charitable
trusts, foundations and
endowments
.Accounts over which GSAM or
its advisory affiliates have
investment discretion
-------------------------------------------------------------------------------
</TABLE>
The minimum investment requirement may be waived for current and former
officers, partners, directors or employees of Goldman Sachs or any of its
affiliates or for other investors at the discretion of the Trust's officers.
No minimum amount is required for subsequent investments.

What Else Should I Know About Share Purchases?
The Trust reserves the right to:
..Modify or waive the minimum investment amounts.
..Reject or restrict any purchase or exchange orders by a particular pur-
chaser (or group of related purchasers). This may occur, for example, when
a pattern of frequent purchases, sales or exchanges of Institutional Shares
of a Fund is evident, or if purchases, sales or exchanges are, or a subse-
quent abrupt redemption might be, of a size that would disrupt the manage-
ment of a Fund.

26
<PAGE>

SHAREHOLDER GUIDE

The Funds may allow you to purchase shares with securities instead of cash
if consistent with a Fund's investment policies and operations and if
approved by the Fund's Investment Adviser.

How Are Shares Priced?
The price you pay or receive when you buy, sell or exchange Institutional
Shares is determined by a Fund's NAV. The Funds calculate NAV as follows:

(Value of Assets of the Class)
- (Liabilities of the Class)
NAV = _______________________________
Number of Outstanding Shares of the Class

The Funds' investments are valued based on market quotations or, if accurate
quotations are not readily available, the fair value of the Fund's invest-
ments may be determined in good faith under procedures established by the
Trustees.
..NAV per share of each class is calculated by State Street on each business
day as of the close of regular trading on the New York Stock Exchange (nor-
mally 4:00 p.m. New York time). Fund shares will not be priced on any day
the New York Stock Exchange is closed.
..When you buy shares, you pay the NAV next calculated after the Funds
receive your order in proper form.
..When you sell shares, you receive the NAV next calculated after the Funds
receive your order in proper form.

In addition, the impact of events that occur after the publication of market
quotations used by a Fund to price its securities but before the close of
regular trading on the New York Stock Exchange will normally not be
reflected in a Fund's next determined NAV unless the Trust, in its discre-
tion, makes an adjustment in light of the nature and materiality of the
event, its effect on Fund operations and other relevant factors.

27
<PAGE>

HOW TO SELL SHARES

How Can I Sell Institutional Shares Of The Funds?
You may arrange to take money out of your account by selling (redeeming)
some or all of your shares. Generally, each Fund will redeem its Institu-
tional Shares upon request on any business day at their NAV next determined
after receipt of such request in proper form. You may request that redemp-
tion proceeds be sent to you by check or by wire (if the wire instructions
are on record). Redemptions may be requested in writing or by telephone.

<TABLE>
<CAPTION>
Instructions For Redemptions:
-----------------------------------------------------------------------
<S> <C> <C>
By Writing: .Write a letter of instruction that includes:
.Your name(s) and signature(s)
.Your account number
.The Fund name and Class of Shares
.The dollar amount you want to sell
.How and where to send the proceeds
.Mail your request to:
Goldman Sachs Funds
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-----------------------------------------------------------------------
By Telephone: If you have elected the telephone
redemption privilege on your Account Application:
.1-800-621-2550
(8:00 a.m. to 4:00 p.m. New York time)
-----------------------------------------------------------------------
</TABLE>
Certain institutions and intermediaries are authorized to accept redemption
requests on behalf of the Funds as described under "How Do I Purchase Shares
Through A Financial Institution?"

What Do I Need To Know About Telephone Redemption Requests?
The Trust, the Distributor and the Transfer Agent will not be liable for any
loss you may incur in the event that the Trust accepts unauthorized tele-
phone redemption requests that the Trust reasonably believes to be genuine.
In an effort to prevent unauthorized or fraudulent redemption and exchange
requests by telephone, Goldman Sachs employs reasonable procedures specified
by the Trust to confirm that such instructions are genuine. If reasonable
procedures are not employed, the Trust may be liable for any loss due to
unauthorized or fraudulent transactions. The following general policies are
currently in effect:
..All telephone requests are recorded.
..Any redemption request that requires money to go to an account or address
other than that designated on the Account Application must be in writing
and signed by an authorized person designated on the Account Application.
The

28
<PAGE>

SHAREHOLDER GUIDE

written request may be confirmed by telephone with both the requesting
party and the designated bank account to verify instructions.
..The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic
economic or market conditions.

How Are Redemption Proceeds Paid?
By Wire: You may arrange for your redemption proceeds to be wired as federal
funds to the bank account designated in your Account Application. The fol-
lowing general policies govern wiring redemption proceeds:
..Redemption proceeds will normally be wired on the next business day in fed-
eral funds (for a total of one business day delay), but may be paid up to
three business days following receipt of a properly executed wire transfer
redemption request. If you are selling shares you recently paid for by
check, the Fund will pay you when your check has cleared, which may take up
to 15 days. If the Federal Reserve Bank is closed on the day that the
redemption proceeds would ordinarily be wired, wiring the redemption pro-
ceeds may be delayed one additional business day.
..To change the bank designated on your Account Application, you must send
written instructions signed by an authorized person designated on the
account application to the Transfer Agent.
..Neither the Trust, Goldman Sachs nor any other institution assume any
responsibility for the performance of your bank or any intermediaries in
the transfer process. If a problem with such performance arises, you should
deal directly with your bank or any such intermediaries.

By Check: You may elect in writing to receive your redemption proceeds by
check. Redemption proceeds paid by check will normally be mailed to the
address of record within three business days of a properly executed redemp-
tion request. If you are selling shares you recently paid for by check, the
Fund will pay you when your check has cleared, which may take up to 15 days.

What Else Do I Need To Know About Redemptions?
The following generally applies to redemption requests:
..Additional documentation may be required when deemed appropriate by the
Transfer Agent. A redemption request will not be 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 may set times by
which they must receive

29
<PAGE>

redemption requests. These institutions may also require additional docu-
mentation from you.

The Trust reserves the right to:
..Redeem your shares if your account balance falls below $50 as a result of
earlier redemptions. The Funds will not redeem your shares on this basis if
the value of your account falls below the minimum account balance solely as
a result of market conditions. The Fund will give you 60 days' prior writ-
ten notice to allow you to purchase sufficient additional shares of the
Fund in order to avoid such redemption.
..Redeem your shares in other circumstances determined by the Board of Trust-
ees to be in the best interest of the Trust.
..Pay redemptions by a distribution in-kind of securities (instead of cash).
If you receive redemption proceeds in-kind, you should expect to incur
transaction costs upon the disposition of those securities.

Can I Exchange My Investment From One Fund To Another?
You may exchange Institutional Shares of a Fund at NAV for Institutional
Shares of any other Goldman Sachs Fund. The exchange privilege may be mate-
rially modified or withdrawn at any time upon 60 days' written notice to
you.

<TABLE>
<CAPTION>
Instructions For Exchanging Shares:
-------------------------------------------------------------------
<S> <C> <C>
By Writing: .Write a letter of instruction that includes:
.Your name(s) and signature(s)
.Your account number
.The Fund name and Class of Shares
.The dollar amount to be exchanged
.Mail the request to:
Goldman Sachs Funds
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-------------------------------------------------------------------
By Telephone: If you have elected the telephone redemption
privilege on your Account Application:
.1-800-621-2550
(8:00 a.m. to 4:00 p.m. New York time)
-------------------------------------------------------------------
</TABLE>

You should keep in mind the following factors when making or considering an
exchange:
..You should obtain and carefully read the prospectus of the Fund you are
acquiring before making an exchange.
..All exchanges which represent an initial investment in a Fund must satisfy
the minimum initial investment requirements of that Fund, except that this
requirement may be waived at the discretion of the Trust.

30
<PAGE>

SHAREHOLDER GUIDE

..Telephone exchanges normally will be made only to an identically registered
account.
..Shares may be exchanged among accounts with different names, addresses and
social security or other taxpayer identification numbers only if the
exchange instructions are in writing and are signed by an authorized person
designated on the Account Application.
..Exchanges are available only in states where exchanges may be legally made.
..It may be difficult to make telephone exchanges in times of drastic eco-
nomic or market conditions.
..Goldman Sachs may use reasonable procedures described under "What Do I Need
To Know About Telephone Redemption Requests?" in an effort to prevent unau-
thorized or fraudulent telephone exchange requests.

What Types of Reports Will I Be Sent Regarding Investments In Institutional
Shares?
You will receive an annual report containing audited financial statements
and a semiannual report. To eliminate unnecessary duplication, only one copy
of such reports will be sent to shareholders with the same mailing address.
If you would like a duplicate copy to be mailed to you, please contact
Goldman Sachs Funds at 1-800-621-2550. You will also be provided with a
printed confirmation for each transaction in your account and a monthly
account statement. The Funds do not generally provide sub-accounting servic-
es.

31
<PAGE>

Taxation

TAXABILITY OF DISTRIBUTIONS

32
<PAGE>

TAXATION

TAXABILITY OF SALES AND EXCHANGES

33
<PAGE>

Appendix A
Additional Information on Portfolio Risks, Securities and Techniques

A. General Portfolio Risks

34
<PAGE>

APPENDIX A

B. Other Portfolio Risks

35
<PAGE>

Internet-related industry can experience sudden and rapid appreciation and
depreciation.

36
<PAGE>

APPENDIX A

Concentration of a Fund's assets in one or a few countries and currencies
will subject a Fund to greater risks than if a Fund's assets were not geo-
graphically concentrated.

37
<PAGE>

38
<PAGE>

APPENDIX A

A Fund's investment in emerging countries may also be subject to withholding
or other taxes, which may be significant and may reduce the return from an
investment in such country to the Fund.

39
<PAGE>

40
<PAGE>

APPENDIX A

In some cases, junk bonds may be highly speculative, have poor prospects for
reaching investment grade standing and be in default. As a result, invest-
ment in

41
<PAGE>

When a Fund's assets are invested in such instruments, the Fund may not be
achieving its investment objective.

C. Portfolio Securities and Techniques

42
<PAGE>

APPENDIX A

43
<PAGE>

44
<PAGE>

APPENDIX A

45
<PAGE>

If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and
other collateral held by

46
<PAGE>

APPENDIX A

Warrants and other rights are options to buy a stated number of shares of
common stock at a specified price at any time during the life of the war-
rant. The holders of

47
<PAGE>

warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.

48
<PAGE>

APPENDIX A

Fund could be required to reconsider the use of WEBS as part of its invest-
ment strategy.

49
<PAGE>

50
<PAGE>

APPENDIX A

51
<PAGE>

52
<PAGE>

APPENDIX A

and a floor that preserves a certain return within a predetermined range of
interest rates.

53
<PAGE>

Appendix B
Financial Highlights

REAL ESTATE SECURITIES FUND

54
<PAGE>

APPENDIX B

55
<PAGE>

REAL ESTATE SECURITIES FUND (continued)

56
<PAGE>

Index

<TABLE>
<C> <C> <S>
1 General Investment
Management Approach
3 Fund Investment Objectives
and Strategies
3 Goldman Sachs Internet Tollkeeper Fund
6 Goldman Sachs Real Estate
Securities Fund
8 Other Investment Practices and Securities
10 Principal Risks of the Funds
13 Fund Performance
14 Fund Fees and Expenses
</TABLE>
<TABLE>
<C> <C> <S>
17 Service Providers
23 Dividends
24 Shareholder Guide
24 How To Buy Shares
28 How To Sell Shares
32 Taxation
34 Appendix A
Additional Information
on Portfolio Risks,
Securities and
Techniques
54 Appendix B
Financial Highlights
</TABLE>
<PAGE>

Specialty Funds
Prospectus (Institutional Shares)

FOR MORE INFORMATION

The Funds' annual and semiannual reports, and the Additional Statement, are
available free upon request by calling Goldman Sachs at 1-800-621-2550.

To obtain other information and for shareholder inquiries:
By telephone - Call 1-800-621-2550
By mail - Goldman Sachs Funds, 4900 Sears Tower - 60th Floor, Chicago, IL
60606-6372
By e-mail - [email protected]
On the Internet - Text-only versions of the Funds' documents are located
online and may be downloaded from:
SEC - http://www.sec.gov

[LOGO OF GOLDMAN SACHS]

The Funds' investment company registration number is 811-5349.

<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Preliminary Prospectus dated July 16, 1999
Subject to Completion

Prospectus

Service
Shares

, 1999

GOLDMAN SACHS SPECIALTY FUNDS

.. Goldman Sachs Internet Tollkeeper Fund

.. Goldman Sachs Real Estate Securities Fund

[Artwork to Appear Here]

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
- --------------------------------------------------------------------------------

[LOGO OF GOLDMAN SACHS APPEARS HERE]

<PAGE>

General Investment Management Approach

GROWTH STYLE FUNDS

Goldman Sachs' Growth Investment Philosophy:
1. Invest as if buying the company/business, not simply trading its stock:
.. Understand the business, management, products and competition.
.. Perform intensive, hands-on fundamental research.
.. Seek businesses with strategic competitive advantages.
.. Over the long-term, expect each company's stock price ultimately to track
the growth of the business.

2. Buy high-quality growth businesses that possess strong business fran-
chises, favorable long-term prospects and excellent management.

3. Purchase superior long-term growth companies at a favorable price--seek
to purchase at a fair valuation, giving the investor the potential to
fully capture returns from above-average growth rates.

Growth companies have earnings expectations that exceed those of the stock
market as a whole.

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

REAL ESTATE SECURITIES FUND

1
<PAGE>

..Seeks to buy securities at a discount to the intrinsic value of the busi-
ness (assets and management).
..Seeks a team approach to decision making.

Over time, REITs (which stand for Real Estate Investment Trusts) have
offered investors important diversification and competitive total returns
versus the broad equity market.

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

2
<PAGE>

Fund Investment Objectives and Strategies

Goldman Sachs
Internet Tollkeeper Fund

FUND FACTS
- --------------------------------------------------------------------------------

Objective: Long-term growth of capital

Investment Focus: U.S. equity securities that offer long-term capital
appreciation with a primary focus on the media,
telecommunications, technology and Internet sectors.

Investment Style: Growth

INVESTMENT OBJECTIVE

The Fund seeks long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities and at least 65% of its total
assets in equity securities of "Internet Tollkeeper" companies (as described
below), which includes companies in the media, telecommunications, technol-
ogy and Internet sectors which provide access, infrastructure, content and
services to Internet companies and Internet users. The Fund seeks to achieve
its investment objective by investing in equity securities of companies that
the Investment Adviser believes will benefit from the growth of the Internet
by providing access, infrastructure, content and services to Internet compa-
nies and customers. The Fund will also seek its investment objective by
investing in companies whose rapid adoption of an Internet strategy is
expected to improve their cost structure or competitive advantage. Internet-
based companies that exhibit a sustainable business model may also be candi-
dates for purchase in the Fund. Although the Fund invests primarily in pub-
licly traded U.S. securities, it may invest up to 10% of its total

3
<PAGE>

assets in foreign securities, including securities of issuers in emerging
countries and securities quoted in foreign currencies.

Beneficiaries of the Internet that may meet the above criteria include those
companies (Internet Tollkeepers) providing access, infrastructure, content,
and services to Internet companies and Internet users. The Fund will also
invest in companies whose rapid adoption of an Internet strategy is expected
to improves their cost structure or competitive advantage. Internet-based
companies that exhibit a sustainable business model may also be candidates
for purchase in the Fund. The Investment Adviser pays careful attention to
the stock prices of these companies, seeking to purchase them at a discount
to their intrinsic value.

4
<PAGE>

FUND INVESTMENT OBJECTIVES AND STRATEGIES

5
<PAGE>

Goldman Sachs
Real Estate Securities Fund

FUND FACTS
- --------------------------------------------------------------------------------

Objective: Total return comprised of long-term growth of capital
and dividend income

Benchmark: Wilshire Real Estate Securities Index

Investment Focus: REITs and real estate industry companies

Investment Style: Growth at a discount

INVESTMENT OBJECTIVE

The Fund seeks total return comprised of long-term growth of capital and
dividend income.

PRINCIPAL INVESTMENT STRATEGIES

6
<PAGE>

GOLDMAN SACHS REAL ESTATE SECURITIES FUND

Other. The Fund may invest up to 20% of its total assets in fixed-income
securities, such as corporate debt and bank obligations, that offer the
potential to further the Fund's investment objective.

7
<PAGE>

Other Investment Practices and Securities

10Percent of total assets (italic type)
10Percent of net assets (roman type)
.. No specific percentage limitation on usage;limited only by the objectives and
strategies of the Fund
<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- -----------------------------------------------------------------------------
<S> <C> <C>
Investment Practices
Borrowings 33 1/3 33 1/3
Credit, currency, index, interest rate and mortgage
swaps -- .
Custodial receipts . .
Equity Swaps 10 10
Foreign Currency Transactions* . .
Futures Contracts and Options on Futures Contracts . .
Interest rate caps, floors and collars -- .
Investment Company Securities (including World Equity
Benchmark Shares and Standard & Poor's Depository
Receipts) 10 10
Mortgage Dollar Rolls -- .
Options on Foreign Currencies/1/ . .
Options on Securities and Securities Indices/2/ . .
Repurchase Agreements . .
Securities Lending 33 1/3 33 1/3
Short Sales Against the Box 25 25
Unseasoned Companies . .
Warrants and Stock Purchase Rights . .
When-Issued Securities and Forward Commitments . .
- -----------------------------------------------------------------------------
</TABLE>
- --Not permitted
* Limited by the amount the Fund invests in foreign securities.
1 May purchase and sell call and put options.
2 May sell covered call and put options and purchase call and put options.

8
<PAGE>

OTHER INVESTMENT PRACTICES AND SECURITIES

10Percent of total assets (italic type)
10Percent of net assets (roman type)
.. No specific percentage
limitation on usage;
limited only by the
objectives andstrategies
of the Fund

9
<PAGE>

Principal Risks of the Funds

10
<PAGE>

PRINCIPAL RISKS OF THE FUNDS

All Funds:

11
<PAGE>

12
<PAGE>

Fund Performance

13
<PAGE>

Fund Fees and Expenses (Service Shares)

This table describes the fees and expenses that you would pay if you buy and
hold Service Shares of a Fund.

<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
- -----------------------------------------------------------------------
<S> <C> <C>
Shareholder Fees
(fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed
on Purchases None None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None
Redemption Fees None None
Exchange Fees None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):1
Management Fees 1.00% 1.00%
Service Fees2 0.50% 0.50%
Other Expenses3 0.14% 1.36%
- -----------------------------------------------------------------------
Total Fund Operating Expenses* 1.64% 2.86%
- -----------------------------------------------------------------------
</TABLE>
See page 15 for all other footnotes.

* As a result of current waivers and expense
limitations, "Other Expenses" and "Total Fund
Operating Expenses" of the Funds which are actually
incurred are as set forth below. The waivers and
expense limitations may be terminated at any time at
the option of the Investment Adviser. If this occurs,
"Other Expenses" and "Total Fund Operating Expenses"
may increase without shareholder approval.

<TABLE>
<CAPTION>
Internet Real Estate
Tollkeeper Securities
Fund Fund
---------------------------------------------------------------------------
<S> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):1
Management Fees 1.00% 1.00%
Service Fees2 0.50% 0.50%
Other Expenses3 0.10% 0.04%
---------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.60% 1.54%
---------------------------------------------------------------------------
</TABLE>

14
<PAGE>

Fund Fees and Expenses continued

/1/The Funds' annual operating expenses have been estimated for the current
fiscal year.
/2/Service Organizations may charge other fees to their customers who are bene-
ficial owners of Service Shares in connection with their customers' accounts.
Such fees may affect the return customers realize with respect to their invest-
ments.
/3/"Other Expenses" include transfer agency fees equal to 0.04% of the average
daily net assets of each Fund's Service Shares, plus all other ordinary
expenses not detailed above. The Investment Adviser has voluntarily agreed to
reduce or limit "Other Expenses" (excluding management fees, transfer agency
fees, service fees, taxes, interest and brokerage fees and litigation, indemni-
fication and other extraordinary expenses) to the following percentages of each
Fund's average daily net assets:

<TABLE>
<CAPTION>
Other
Fund Expenses
- -------------------------
<S> <C>
Internet
Tollkeeper 0.06%
Real Estate
Securities 0.00%
</TABLE>

15
<PAGE>

Example

The following Example is intended to help you compare the cost of investing in
a Fund (without the waivers and expense limitations) with the cost of investing
in other mutual funds. The Example assumes that you invest $10,000 in Service
Shares of a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your invest-
ment has a 5% return each year and that a Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these assump-
tions your costs would be:

<TABLE>
<CAPTION>
Fund 1 Year 3 Years
- --------------------------------------
<S> <C> <C>
Internet Tollkeeper $167 $517
- --------------------------------------
Real Estate Securities $289 $886
- --------------------------------------
</TABLE>

Service Organizations that invest in Service Shares on behalf of their custom-
ers may charge other fees directly to their customer accounts in connection
with their investments. You should contact your Service Organization for infor-
mation regarding such charges. Such fees, if any, may affect the return such
customers realize with respect to their investments.

Certain Service Organizations that invest in Service Shares may receive other
compensation in connection with the sale and distribution of service shares or
for services to their customers' accounts and/or the Funds. For additional
information regarding such compensation, see "Shareholder Guide" in the Pro-
spectus and "Other Information" in the Statement of Additional Information
("Additional Statement").

16
<PAGE>

Service Providers

INVESTMENT ADVISER

17
<PAGE>

MANAGEMENT FEES

FUND MANAGERS

18
<PAGE>

SERVICE PROVIDERS

- --------------------------------------------------------------------------------
Growth Equity Investment Team

19
<PAGE>

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

20
<PAGE>

SERVICE PROVIDERS

DISTRIBUTOR AND TRANSFER AGENT

ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS

YEAR 2000

21
<PAGE>

Currently, the Investment Adviser does not anticipate that the transition to
the 21st century will have any material impact on its ability to continue to
service the Funds at current levels.

22
<PAGE>

Dividends

Dividends from net investment income and distributions from net capital gains
are declared and paid as follows:

From time to time a portion of a Fund's dividends may constitute a return of
capital.

23
<PAGE>

Shareholder Guide

The following section will provide you with answers to some of the most
often asked questions regarding buying and selling the Funds' Service
Shares.

HOW TO BUY SHARES

How Can I Purchase Service Shares Of The Funds?
Generally, Service Shares may be purchased only through institutions that
have agreed to provide account administration and personal and account main-
tenance services to their customers who are the beneficial owners of Service
Shares. These institutions are called "Service Organizations." Customers of
a Service Organization will normally give their purchase instructions to the
Service Organization, and the Service Organization will, in turn, place pur-
chase orders with Goldman Sachs. Service Organizations will set times by
which purchase orders and payments must be received by them from their cus-
tomers. Generally, Service Shares may be purchased from the Funds on any
business day at their net asset value ("NAV") next determined after receipt
of an order by Goldman Sachs from a Service Organization. No sales load is
charged. Purchases of Service Shares must be settled within three business
days of receipt of a complete purchase order.

Service Organizations are responsible for transmitting purchase orders and
payments to Goldman Sachs in a timely fashion. Service Organizations should
place an order with Goldman Sachs at 1-800-621-2550 and either:
..Wire federal funds to The Northern Trust Company ("Northern"), as
subcustodian for State Street Bank and Trust Company ("State Street") (each
Fund's custodian) on the next business day; or
..Initiate an Automated Clearing House Network ("ACH") transfer to Northern;
or
..Send a check or Federal Reserve draft payable to Goldman Sachs Funds--(Name
of Fund and Class of Shares), 4900 Sears Tower--60th Floor, Chicago, IL
60606-6372. The Fund will not accept a check drawn on a foreign bank or a
third-party check.

What Do I Need To Know About Service Organizations?
Service Organizations may provide the following services in connection with
their customers' investments in Service Shares:
..Acting, directly or through an agent, as the sole shareholder of record
..Maintaining account records for customers

24
<PAGE>

SHAREHOLDER GUIDE

..Processing orders to purchase, redeem or exchange shares for customers
..Responding to inquiries from prospective and existing shareholders
..Assisting customers with investment procedures

In addition, some (but not all) Service Organizations are authorized to
accept, on behalf of Goldman Sachs Trust (the "Trust"), purchase, redemption
and exchange orders placed by or on behalf of their customers, and may des-
ignate other intermediaries to accept such orders, if approved by the Trust.
In these cases:
..A Fund will be deemed to have received an order in proper form when the
order is accepted by the authorized Service Organization or intermediary on
a business day, and the order will be priced at the Fund's NAV next deter-
mined after such acceptance.
..Service Organizations or intermediaries will be responsible for transmit-
ting accepted orders and payments to the Trust within the time period
agreed upon by them.

You should contact your Service Organization directly to learn whether it is
authorized to accept orders for the Trust.

Pursuant to a service plan adopted by the Trust's Board of Trustees, Service
Organizations are entitled to receive payment for their services from the
Trust of up to 0.50% (on an annualized basis) of the average daily net
assets of the Service Shares of the Funds, which are attributable to or held
in the name of the Service Organization for its customers.

The Investment Adviser, Distributor and/or their affiliates may pay addi-
tional compensation from time to time, out of their assets and not as an
additional charge to the Funds, to selected Service Organizations and other
persons in connection with the sale, distribution and/or servicing of shares
of the Funds and other Goldman Sachs Funds. Subject to applicable NASD regu-
lations, the Investment Adviser, Distributor and/or their affiliates may
also contribute to various cash and non-cash incentive arrangements to pro-
mote the sale of shares. This additional compensation can vary among Service
Organizations depending upon such factors as the amounts their customers
have invested (or may invest) in particular Goldman Sachs Funds, the partic-
ular program involved, or the amount of reimbursable expenses. Additional
compensation based on sales may, but is currently not expected to, exceed
0.50% (annualized) of the amount invested.

In addition to Service Shares, each Fund also offers other classes of shares
to investors. These other share classes are subject to different fees and
expenses (which affect performance), have different minimum investment
requirements and
are entitled to different services than Service Shares. Information regard-
ing these

25
<PAGE>

other share classes may be obtained from your sales representative or from
Goldman Sachs by calling the number on the back cover of this Prospectus.

What Is My Minimum Investment In The Funds?
The Funds do not have any minimum purchase or account requirements with
respect to Service Shares. A Service Organization may, however, impose a
minimum amount for initial and subsequent investments in Service Shares, and
may establish other requirements such as a minimum account balance. A Serv-
ice Organization may redeem Service Shares held by non-complying accounts,
and may impose a charge for any special services.

What Else Should I Know About Share Purchases?
The Trust reserves the right to:
..Reject or restrict any purchase or exchange orders by a particular pur-
chaser (or group of related purchasers). This may occur, for example, when
a pattern of frequent purchases, sales or exchanges of Service Shares of a
Fund is evident, or if purchases, sales or exchanges are, or a subsequent
abrupt redemption might be, of a size that would disrupt the management of
a Fund.

The Funds may allow Service Organizations to purchase shares with securities
instead of cash if consistent with a Fund's investment policies and opera-
tions and if approved by the Fund's Investment Adviser.

How Are Shares Priced?
The price you pay or receive when you buy, sell or exchange Service Shares
is determined by a Fund's NAV. The Funds calculate NAV as follows:

(Value of Assets of the Class)
- (Liabilities of the Class)
NAV = _________________________________________
Number of Outstanding Shares of the Class

26
<PAGE>

SHAREHOLDER GUIDE

HOW TO SELL SHARES

How Can I Sell Service Shares Of The Funds?
Generally, Service Shares may be sold (redeemed) only through Service Orga-
nizations. Customers of a Service Organization will normally give their
redemption instructions to the Service Organization, and the Service Organi-
zation will, in turn, place redemption orders with the Funds. Generally,
each Fund will redeem its Service Shares upon request on any business day at
their NAV next determined after receipt of such request in proper form.
Redemption proceeds may be sent to recordholders by check or by wire (if the
wire instructions are on record).

A Service Organization may request redemptions in writing or by telephone if
the optional telephone redemption privilege is elected on the Account
Application.

<TABLE>
------------------------------------------------
<S> <C>
By Writing: Goldman Sachs Funds
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
------------------------------------------------
By Telephone: 1-800-621-2550
(8:00 a.m. to 4:00 p.m. New York
time)
------------------------------------------------
</TABLE>

27
<PAGE>

phone, Goldman Sachs employs reasonable procedures specified by the Trust to
confirm that such instructions are genuine. If reasonable procedures are not
employed, the Trust may be liable for any loss due to unauthorized or fraud-
ulent transactions. The following general policies are currently in effect:
..All telephone requests are recorded.
..Any redemption request that requires money to go to an account or address
other than that designated on the Account Application must be in writing
and signed by an authorized person designated on the Account Application.
The written request may be confirmed by telephone with both the requesting
party and the designated bank account to verify instructions.
..The telephone redemption option may be modified or terminated at any time.

Note: It may be difficult to make telephone redemptions in times of drastic
economic or market conditions.

How Are Redemption Proceeds Paid?
By Wire: The Funds will arrange for redemption proceeds to be wired as fed-
eral funds to the bank account designated in the recordholder's Account
Application. The following general policies govern wiring redemption pro-
ceeds:
..Redemption proceeds will normally be wired on the next business day in fed-
eral funds (for a total of one business day delay), but may be paid up to
three business days following receipt of a properly executed wire transfer
redemption request. If the shares to be sold were recently paid for by
check, the Fund will pay the redemption proceeds when the check has
cleared, which may take up to 15 days. If the Federal Reserve Bank is
closed on the day that the redemption proceeds would ordinarily be wired,
wiring the redemption proceeds may be delayed one additional business day.
..To change the bank designated on your Account Application, you must send
written instructions signed by an authorized person designated on the
Account Application to the Service Organization.
..Neither the Trust, nor Goldman Sachs assume any responsibility for the per-
formance of intermediaries or your Service Organization in the transfer
process. If a problem with such performance arises, you should deal
directly with such intermediaries or Service Organization.

By Check: A recordholder may elect in writing to receive redemption proceeds
by check. Redemption proceeds paid by check will normally be mailed to the
address of record within three business days of receipt of a properly exe-
cuted redemption request. If the shares to be sold were recently paid for by
check, the Fund will pay the redemption proceeds when the check has cleared,
which may take up to 15 days.

28
<PAGE>

SHAREHOLDER GUIDE

What Else Do I Need To Know About Redemptions?
The following generally applies to redemption requests:
..Additional documentation may be required when deemed appropriate by the
Transfer Agent. A redemption request will not be in proper form until such
additional documentation has been received.
..Service Organizations are responsible for the timely transmittal of redemp-
tion requests by their customers to the Transfer Agent. In order to facili-
tate the timely transmittal of redemption requests, Service Organizations
may set times by which they must receive redemption requests. Service Orga-
nizations may also require additional documentation from you.

The Trust reserves the right to:
..Redeem the Service Shares of any Service Organization whose account balance
falls below $50 as a result of a redemption. The Funds will not redeem
Service Shares on this basis if the value of the account falls below the
minimum account balance solely as a result of market conditions. The Fund
will give 60 days' prior written notice to allow a Service Organization to
purchase sufficient additional shares of the Fund in order to avoid such
redemption.
..Redeem the shares in other circumstances determined by the Board of Trust-
ees to be in the best interest of the Trust.
..Pay redemptions by a distribution in-kind of securities (instead of cash).
If you receive redemption proceeds in-kind, you should expect to incur
transaction costs upon the disposition of those securities.

Can I Exchange My Investment From One Fund To Another?
A Service Organization may exchange Service Shares of a Fund at NAV for
Service Shares of any other Goldman Sachs Fund. The exchange privilege may
be materially modified or withdrawn at any time upon 60 days' written
notice.

<TABLE>
<CAPTION>
Instructions For Exchanging Shares:
-------------------------------------------------------------------
<S> <C> <C>
By Writing: .Write a letter of instruction that includes:
.The recordholder name(s) and signature(s)
.The account number
.The Fund names and Class of Shares
.The dollar amount to be exchanged
.Mail the request to:
Goldman Sachs Funds
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-------------------------------------------------------------------
By Telephone: If you have elected the telephone redemption
privilege on your Account Application:
.1-800-621-2550
(8:00 a.m. to 4:00 p.m. New York time)
-------------------------------------------------------------------
</TABLE>

29
<PAGE>

You should keep in mind the following factors when making or considering an
exchange:
..You should obtain and carefully read the prospectus of the Fund you are
acquiring before making an exchange.
..All exchanges which represent an initial investment in a Fund must satisfy
the minimum initial investment requirement of that Fund, except that this
requirement may be waived at the discretion of the Trust.
..Telephone exchanges normally will be made only to an identically registered
account.
..Shares may be exchanged among accounts with different names, addresses and
social security or other taxpayer identification numbers only if the
exchange instructions are in writing and are signed by an authorized person
designated on the Account Application.
..Exchanges are available only in states where exchanges may be legally made.
..It may be difficult to make telephone exchanges in times of drastic eco-
nomic or market conditions.
..Goldman Sachs may use reasonable procedures described under "What Do I Need
To Know About Telephone Redemption Requests?" in an effort to prevent unau-
thorized or fraudulent telephone exchange requests.

What Types Of Reports Will Be Sent Regarding Investments In Service Shares?
Service Organizations will receive from the Funds annual reports containing
audited financial statements and semiannual reports. Service Organizations
will also be provided with a printed confirmation for each transaction in
their account and a monthly account statement. Service Organizations are
responsible for providing these or other reports to their customers who are
the beneficial owners of Service Shares in accordance with the rules that
apply to their accounts with the Service Organizations.

30
<PAGE>

Taxation

TAXABILITY OF DISTRIBUTIONS

31
<PAGE>

TAXABILITY OF SALES AND EXCHANGES

32
<PAGE>

Appendix A
Additional Information on Portfolio Risks, Securities and Techniques

A. General Portfolio Risks

33
<PAGE>

B. Other Portfolio Risks

34
<PAGE>

APPENDIX A

Internet-related industry can experience sudden and rapid appreciation and
depreciation.

35
<PAGE>

Concentration of a Fund's assets in one or a few countries and currencies
will subject a Fund to greater risks than if a Fund's assets were not geo-
graphically concentrated.

36
<PAGE>

APPENDIX A

37
<PAGE>

A Fund's investment in emerging countries may also be subject to withholding
or other taxes, which may be significant and may reduce the return from an
investment in such country to the Fund.

38
<PAGE>

APPENDIX A

39
<PAGE>

In some cases, junk bonds may be highly speculative, have poor prospects for
reaching investment grade standing and be in default. As a result, invest-
ment in

40
<PAGE>

APPENDIX A

When a Fund's assets are invested in such instruments, the Fund may not be
achieving its investment objective.

C. Portfolio Securities and Techniques

41
<PAGE>

42
<PAGE>

APPENDIX A

43
<PAGE>

44
<PAGE>

APPENDIX A

If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and
other collateral held by

45
<PAGE>

Warrants and other rights are options to buy a stated number of shares of
common stock at a specified price at any time during the life of the war-
rant. The holders of

46
<PAGE>

APPENDIX A

warrants and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.

47
<PAGE>

Fund could be required to reconsider the use of WEBS as part of its invest-
ment strategy.

48
<PAGE>

APPENDIX A

49
<PAGE>

50
<PAGE>

APPENDIX A

51
<PAGE>

and a floor that preserves a certain return within a predetermined range of
interest rates.

52
<PAGE>

Appendix B
Financial Highlights

REAL ESTATE SECURITIES FUND

53
<PAGE>

54
<PAGE>

APPENDIX B

REAL ESTATE SECURITIES FUND (continued)

Index

1 General Investment
Management Approach
3 Fund Investment Objectives
and Strategies
3 Goldman Sachs Internet Tollkeeper Fund
6 Goldman Sachs Real Estate
Securities Fund
8 Other Investment Practices
and Securities
10 Principal Risks of the Funds
13 Fund Performance
14 Fund Fees and Expenses
17 Service Providers
23 Dividends
24 Shareholder Guide
24 How To Buy Shares
27 How To Sell Shares
31 Taxation
33 Appendix A
Additional Information
on Portfolio Risks,
Securities and
Techniques
53 Appendix B
Financial Highlights
<PAGE>

Specialty Funds
Prospectus (Service Shares)

FOR MORE INFORMATION

The Funds' annual and semiannual reports, and the Additional Statement, are
available free upon request by calling Goldman Sachs at 1-800-621-2550.

To obtain other information and for shareholder inquiries:

By telephone - Call 1-800-621-2550
By mail - Goldman Sachs Funds, 4900 Sears Tower - 60th Floor, Chicago, IL
60606-6372
By e-mail - [email protected]
On the Internet - Text-only versions of the Funds' documents are located
online and may be downloaded from:
SEC - http://www.sec.gov

[LOGO OF GOLDMAN SACHS]

The Funds' investment company registration number is 811-5349.
<PAGE>

PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED JULY 16, 1999
SUBJECT TO COMPLETION

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.

PART B
STATEMENT OF ADDITIONAL INFORMATION
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
SERVICE SHARES
INSTITUTIONAL SHARES

GOLDMAN SACHS INTERNET TOLLKEEPER FUND
GOLDMAN SACHS REAL ESTATE SECURITIES FUND

4900 Sears Tower
Chicago, Illinois 60606-6303

This Statement of Additional Information (the "Additional Statement") is
not a Prospectus. This Additional Statement should be read in conjunction with
the Prospectuses for the Class A Shares, Class B Shares, Class C Shares, Service
Shares and Institutional Shares of: Goldman Sachs Internet Tollkeeper Fund and
Goldman Sachs Real Estate Securities Fund dated __________, 1999 (the
"Prospectuses"), which may be obtained without charge from Goldman, Sachs & Co.
by calling the telephone number, or writing to one of the addresses, listed
below.

The audited financial statements and related report of
____________________, independent public accountants, for the Real Estate
Securities Fund contained in such Fund's 1998 annual report is incorporated
herein by reference in the section "Financial Statements." No other portions of
the Fund's Annual Report are incorporated by reference.
<PAGE>

GOLDMAN SACHS ASSET MANAGEMENT GOLDMAN, SACHS & CO.
Investment Adviser Distributor
One New York Plaza 85 Broad Street
New York, New York 10004 New York, New York 10004

GOLDMAN, SACHS & CO.
Transfer Agent
4900 Sears Tower
Chicago, Illinois 60606

Toll free (in U.S.) . . . 800-621-2550

The date of this Additional Statement is _________, 1999.

B-2
<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
----

<S> <C>
INTRODUCTION............................................................ B-3
INVESTMENT POLICIES..................................................... B-4
INVESTMENT RESTRICTIONS................................................. B-37
MANAGEMENT.............................................................. B-39
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................... B-58
NET ASSET VALUE......................................................... B-60
PERFORMANCE INFORMATION................................................. B-62
SHARES OF THE TRUST..................................................... B-67
TAXATION................................................................ B-71
FINANCIAL STATEMENTS.................................................... B-78
OTHER INFORMATION....................................................... B-78
DISTRIBUTION AND SERVICE PLANS.......................................... B-80
OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE,
PURCHASES, REDEMPTIONS, EXCHANGES AND DIVIDENDS........................ B-81
SERVICE PLAN............................................................ B-85
Appendix A.............................................................. 1-A
Appendix B.............................................................. 1-B
Appendix C (Statement of Intention and Escrow Agreement)................ 1-C
</TABLE>

B-3
<PAGE>

INTRODUCTION

Goldman Sachs Trust (the "Trust") is an open-end, management investment
company. The Trust is organized as a Delaware business trust, established by a
Declaration of Trust dated January 28, 1997. The Trust is a successor to a
Massachusetts business trust that was combined with the Trust on April 30, 1997.
The following series of the Trust are described in this Additional Statement:
Goldman Sachs Internet Tollkeeper Fund ("Internet Tollkeeper Fund") and Goldman
Sachs Real Estate Securities Fund ("Real Estate Securities Fund") (collectively
referred to herein as the "Funds"). As of the date of this Additional
Statement, the Internet Tollkeeper Fund had not commenced investment
operations.

The Trustees have authority under the Trust's charter to create and
classify shares into separate series and to classify and reclassify any series
or portfolio of shares into one or more classes without further action by
shareholders. Pursuant thereto, the Trustees have created the Funds and other
series. Additional series may be added in the future from time to time. Each
Fund currently offers five classes of shares: Class A Shares, Class B Shares,
Class C Shares, Institutional Shares and Service Shares. See "Shares of the
Trust."

Goldman Sachs Asset Management, ("GSAM" or the "Investment Adviser") a
separate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
the Investment Adviser to the Funds. In addition, Goldman Sachs serves as each
Fund's distributor and transfer agent. Each Fund's custodian is State Street
Bank and Trust Company ("State Street").

The following information relates to and supplements the description of
each Fund's investment policies contained in the Prospectuses. See the
Prospectuses for a fuller description of the Funds' investment objectives and
policies. There is no assurance that a Fund will achieve its objective.

B-4
<PAGE>

INVESTMENT POLICIES

Each Fund has distinct investment objectives and policies. There can be no
assurance that a Fund's objectives will be achieved. Each Fund is a diversified
open-end management company as defined in the Investment Company Act of 1940, as
amended (the "Act").

Each Fund's share price will fluctuate with market, economic and, to the
extent applicable, foreign exchange conditions, so that an investment in either
Fund may be worth more or less when redeemed than when purchased. Neither Fund
should be relied upon as a complete investment program.

General Information Regarding The Funds.
- ---------------------------------------

The Investment Adviser may purchase for the Funds' 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 a Fund's securities, the Investment Adviser utilizes first-hand
fundamental research, including visiting company facilities to assess operations
and to meet decision-makers. The Investment Adviser may also use macro analysis
of numerous economic and valuation variables to anticipate changes in company
earnings and the overall investment climate. The Investment Adviser is able to
draw on the research and market expertise of the Goldman Sachs Global Investment
Research Department and other affiliates of the Investment Adviser, as well as
information provided by other securities dealers. Equity securities in a Fund's
portfolio will generally be sold when the Investment Adviser believes that the
market price fully reflects or exceeds the securities' fundamental valuation or
when other more attractive investments are identified.

Internet Tollkeeper Fund - Growth Style. The Internet Tollkeeper Fund is
managed using a growth equity oriented approach. Equity securities for this Fund
are selected based on their prospects for above average growth. The 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. The Fund 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. In order to determine whether a security has favorable growth
prospects, the Investment Adviser ordinarily looks for one or more of the
following characteristics in relation to the security's prevailing price:
prospects for above average sales and earnings growth per share; high return on
invested capital; free cash flow generation; sound balance sheet, financial and
accounting policies, and overall financial strength; strong competitive
advantages; effective research, product development, and marketing; pricing
flexibility; strength of management; and general operating characteristics that
will enable the company to compete successfully in its marketplace.

The Internet Generally. The Internet is a global collection of connected
computers that allows commercial and professional organizations, educational
institutions,

B-5
<PAGE>

government agencies, and consumers to communicate electronically, access and
share information and conduct business. It is dramatically changing the way
consumers and businesses are buying and selling goods and services. The World
Wide Web, a means of graphically interfacing with the Internet, provides
companies with the ability to reach a global audience with greater operating
efficiency and conveniently provides consumers with a broad selection.

Historical technological breakthroughs like the invention of the telephone,
electricity and the automobile changed the way people lived and conducted
commerce. As with previous advancements in communication there is a tremendous
amount of excitement and activity being generated by people researching
information, consumers shopping for products, companies improving their business
plans and investors seeking to capitalize on opportunities. The advent of the
radio, television and the personal computer was also met with a high degree of
excitement and many of the companies that were associated with the new
technology received high stock valuations. Only a few of these original
companies were able to achieve long-term success. The Investment Adviser
believes that it is difficult to predict which of the new Internet companies
will ultimately succeed but that there will be many established companies that
will benefit from the growth of the Internet.

Origins of the Internet. The evolution of the Internet began as a result
of the Cold War. In 1962, The Rand Corporation was asked by the United States
Military to devise a military communication network that could survive a nuclear
war. The basic premise of the network was to have a decentralized network that
would still be able to deliver messages to their destinations even if some nodes
(cities) were destroyed along the route.

The first network called ARAPNET connected four universities in 1969. The
original use of the network was for long-distance computation that allowed
researchers to collaborate on projects. A secondary use also evolved as people
began to use the network as an electronic post office to trade e-mails. As
networking technology improved and the number of personal computers increased,
the Internet evolved into much more than a global communications medium. Today,
electronic commerce has become an integral part of the global economy.
International Data Corporation (IDC) estimates that at the end of 1998, there
were over 97 million web users worldwide.

Growth of the Internet. Personal and business use of the Internet is
growing quickly. Personal uses of the Internet have advanced beyond teenage
chat rooms and pictorials featuring the emperor's clothing to sending electronic
mail, researching information, accessing on-line versions of publications,
getting maps and driving directions and listing group or association schedules
and events. Businesses are offering products and services to both consumers and
business clients. Forrestor Research has estimated that business to consumer
electronic commerce was $8 billion in 1998 and business to business commerce was
$43 billion. Companies are offering products and services that do not require
the customer's physical presence to purchase including books, music, videos,
airline tickets and stock trading. Business to business commerce will likely
benefit as companies are better equipped and connected than most consumers.

B-6
<PAGE>

Risk Considerations Regarding the Internet Industry.
The market in which many Internet companies compete is characterized by rapidly
changing technology, evolving industry standards, frequent new service and
product announcements, introductions and enhancements and changing customer
demands. The failure of an Internet company to adapt to such changes could have
a material adverse effect on the company's business, results of operations and
financial condition. In addition, the widespread adoption of new Internet,
networking or telecommunications technologies or other technological changes
could require substantial expenditures by an Internet company to modify or adapt
its services or infrastructure, which could have a material adverse effect on an
Internet company's business, results of operations and financial condition.

The success of the many Internet companies will also depend in large part
upon the development and maintenance of the infrastructure of the World Wide Web
for providing reliable Web access and services, such as a reliable network
backbone with the necessary speed, data capacity and security, or timely
development of complementary products such as high speed modems. There can be no
assurance that the infrastructure or

B-7
<PAGE>

complementary products or services necessary to make the Web a viable commercial
marketplace for the long term will be developed or that if they are developed,
that the Web will become a viable commercial marketplace for services such as
those offered by Internet companies.

The market for the purchase of products and services over the Internet is a
new and emerging market. If acceptance and growth of Internet use does not
occur, an Internet company's business and financial performance will suffer.
Although there has been substantial interest in the commercial possibilities for
the Internet, many businesses and consumers have been slow to purchase Internet
access services for a number of reasons, including inconsistent quality of
service, lack of availability of cost-effective, high-speed service, a limited
number of local access points for corporate users, inability to integrate
business applications on the Internet, the need to deal with multiple and
frequently incompatible vendors, inadequate protection of the confidentiality of
stored data and information moving across the Internet and a lack of tools to
simplify Internet access and use. It is possible that a sufficiently broad base
of consumers may not adopt, or continue to use, the Internet as a medium of
commerce.

Despite the implementation of security measures, an Internet company's
networks may be vulnerable to unauthorized access, computer viruses and other
disruptive problems. Internet companies have in the past experienced, and may
in the future experience, interruptions in service as a result of the accidental
or intentional actions of Internet users, current and former employees or
others. Unauthorized access could also potentially jeopardize the security of
confidential information stored in the computer systems of a company and its
subscribers. These events may result in liability of the company to its
subscribers and also may deter potential subscribers.

The law relating to the liability of online services companies for
information carried on or disseminated through their services is currently
unsettled. It is possible that claims could be made against online services
companies under both United States and foreign law for defamation, libel,
invasion of privacy, negligence, copyright or trademark infringement, or other
theories based on the nature and content of the materials disseminated through
their services. Several private lawsuits seeking to impose such liability upon
other online services companies are currently pending. In addition, legislation
has been proposed that imposes liability for or prohibits the transmission over
the Internet of certain types of information. The increased attention focused
upon liability issues as a result of these lawsuits and legislative proposals
could also impact the growth of Internet use.

B-8
<PAGE>

It is possible that a number of laws and regulations may be adopted with
respect to the Internet or other online services covering issues such as user
privacy, freedom of expression, pricing, content and quality of products and
services, taxation, advertising, intellectual property rights and information
security. The nature of such governmental action and the manner in which it may
be interpreted and enforced cannot be fully determined. Such action could
subject an Internet company and/or its customers to potential liability, which
in turn could have an adverse effect on the Internet company's business, results
of operations and financial condition. The adoption of any such laws or
regulations might also decrease the rate of growth of Internet use, which in
turn could decrease the demand for the services of Internet companies or
increase the cost of doing business or in some other manner have a material
adverse effect on an Internet company's business, results of operations and
financial condition. In addition, applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel, obscenity and personal privacy is uncertain.
The vast majority of such laws were adopted prior to the advent of the Internet
and related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies.

Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could create uncertainty in
the marketplace that could reduce demand for the services of an Internet company
or increase the cost of doing business as a result of litigation costs or
increased service delivery costs, or could in some other manner have a material
adverse effect an Internet company's business, results of operations and
financial condition.

Internet companies do not collect sales or other similar taxes. However,
one or more states may seek to impose sales tax collection obligations on
Internet companies which engage in or facilitate online commerce, and a number
of proposals have been made at the state and local level that would impose
additional taxes on the sale of goods and services through the Internet. Such
proposals, if adopted, could substantially impair the growth of electronic
commerce, and could adversely affect an Internet company's opportunity to derive
financial benefit from such activities. Moreover, a successful assertion by one
or more states or any foreign country that an Internet company should collect
sales or other taxes on the exchange of merchandise on its system could have
a
B-9
<PAGE>

material adverse effect on an Internet company's business, results of operations
and financial condition.

Legislation limiting the ability of the states to impose taxes on Internet-
based transactions has been proposed in the U.S. Congress. There can be no
assurance that this legislation will ultimately be enacted into law or that the
final version of this legislation will not contain a limited time period in
which such tax moratorium will apply. In the event that the tax moratorium is
imposed for a limited time period, there can be no assurance that the
legislation will be renewed at the end of such period. Failure to enact or
renew this legislation could allow various states to impose taxes on Internet-
based commerce and the imposition of such taxes could have a material adverse
affect on an Internet company's business, results of operations and financial
condition.

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 focuses on
companies that can achieve sustainable growth in cash flow and dividend paying
capability. 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 market, 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.

Other Information. Since normal settlement for equity securities is three
trading days (for certain international markets settlement may be longer), the
Funds will need to hold cash balances to satisfy shareholder redemption
requests. Such cash balances will normally range from 2% to 5% of a Fund's net
assets. Additionally, the Funds may purchase futures contracts to manage their
cash position. For example, if cash balances are equal to 5% of the net assets,
the Fund may enter into long futures contracts covering an amount equal to 5% of
the Fund's net assets. As cash balances fluctuate based on new contributions or
withdrawals, a Fund may enter into additional contracts or close out existing
positions.

Corporate Debt Obligations
- --------------------------

Each Fund may, under normal market conditions, invest in corporate debt
obligations, including obligations of industrial, utility and financial issuers.
Corporate debt obligations are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations and may also be subject
to price volatility due to such factors as market interest rates, market
perception of the creditworthiness of the issuer and general market
liquidity.

B-10
<PAGE>

An economic downturn could severely affect the ability of highly leveraged
issuers of junk bond securities to service their debt obligations or to repay
their obligations upon maturity. Factors having an adverse impact on the market
value of junk bonds will have an adverse effect on a Fund's net asset value to
the extent it invests in such securities. In addition, a Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in payment of principal or interest on its portfolio holdings.

The secondary market for junk bonds, which is concentrated in relatively
few market makers, may not be as liquid as the secondary market for more highly
rated securities. This reduced liquidity may have an adverse effect on the
ability of the Funds to dispose of a particular security when necessary to meet
their redemption requests or other liquidity needs. Under adverse market or
economic conditions, the secondary market for junk bonds could contract further,
independent of any specific adverse changes in the condition of a particular
issuer. As a result, the Investment Adviser could find it difficult to sell
these securities or may be able to sell the securities only at prices lower than
if such securities were widely traded. Prices realized upon the sale of such
lower rated or unrated securities, under such circumstances, may be less than
the prices used in calculating a Fund's net asset value.

Since investors generally perceive that there are greater risks associated
with the medium to lower rated securities of the type in which the Funds may
invest, the yields and prices of such securities may tend to fluctuate more than
those for higher rated securities. In the lower quality segments of the fixed-
income securities market, changes in perceptions of issuers' creditworthiness
tend to occur more frequently and in a more pronounced manner than do changes in
higher quality segments of the fixed-income securities market, resulting in
greater yield and price volatility.

Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In
addition, the prices of fixed-income securities fluctuate in response to the
general level of interest rates. Fluctuations in the prices of portfolio
securities subsequent to their acquisition will not affect cash income from such
securities but will be reflected in a Fund's net asset value.

Medium to lower rated and comparable non-rated securities tend to offer
higher yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. Since medium to lower rated securities
generally involve greater risks of loss of income and principal than higher
rated securities, investors should consider carefully the relative risks
associated with investment in securities which carry medium to lower ratings and
in comparable unrated securities. In addition to the risk of default, there are
the related costs of recovery on defaulted issues. The Investment Adviser will
attempt to reduce these risks through portfolio diversification and by analysis
of each issuer and its ability to make timely payments of income and principal,
as well as broad economic trends and corporate developments.

The Investment Adviser employs its own credit research and analysis, which
includes a study of existing debt, capital structure, ability to service debt
and to pay dividends, the

B-11
<PAGE>

issuer's sensitivity to economic conditions, its operating history and the
current trend of earnings. The Investment Adviser continually monitors the
investments in a Fund's portfolio and evaluates whether to dispose of or to
retain non-investment grade and comparable unrated securities whose credit
ratings or credit quality may have changed.

U.S. Government Securities
- --------------------------

Each Fund may invest in U.S. Government securities. Generally, these
securities include U.S. Treasury obligations and obligations issued or
guaranteed by U.S. Government agencies, instrumentalities or sponsored
enterprises. 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. A Fund may
also invest in zero coupon U.S. Treasury securities and in zero coupon
securities issued by financial institutions, which represent a proportionate
interest in underlying U.S. Treasury securities. A zero coupon security pays no
interest to its holder during its life and its value consists of the difference
between its face value at maturity and its cost. The market prices of zero
coupon securities generally are move volatile than the market prices of
securities that pay interest periodically.

Bank Obligations
- ----------------

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

Zero Coupon Bonds
- -----------------

A Fund's investments in fixed-income securities may include zero coupon
bonds, which are debt obligations issued or purchased at a significant discount
from face value. The discount approximates the total amount of interest the
bonds would have accrued and compounded over the period until maturity. Zero
coupon bonds do not require the periodic payment of interest. Such investments
benefit the issuer by mitigating its need for cash to meet debt service but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash. Such investments may experience greater volatility in
market value than debt obligations which provide for regular payments of
interest. In addition, if an issuer of zero coupon bonds held by a Fund
defaults, the Fund may obtain no return at all on its investment. Each Fund
will accrue income on such investments for each taxable year which (net of
deductible expenses, if any) is distributable to shareholders and which, because
no cash is generally received at the time of

B-12
<PAGE>

accrual, may require the liquidation of other portfolio securities to obtain
sufficient cash to satisfy the Fund's distribution obligations.

Variable and Floating Rate Securities
- -------------------------------------

The interest rates payable on certain fixed-income securities in which a
Fund may invest are not fixed and may fluctuate based upon changes in market
rates. A variable rate obligation has an interest rate which is adjusted at
predesignated periods in response to changes in the market rate of interest on
which the interest rate is based. Variable and floating rate obligations are
less effective than fixed rate instruments at locking in a particular yield.
Nevertheless, such obligations may fluctuate in value in response to interest
rate changes if there is a delay between changes in market interest rates and
the interest reset date for the obligation.

Custodial Receipts
- ------------------

Each Fund may invest in custodial receipts in respect of securities issued
or guaranteed as to principal and interest by the U.S. Government, its agencies,
instrumentalities, political subdivisions or authorities. Such custodial
receipts evidence ownership of future interest payments, principal payments or
both on certain notes or bonds issued or guaranteed as to principal and interest
by the U.S. Government, its agencies, instrumentalities, political subdivisions
or authorities. These custodial receipts are known by various names, including
"Treasury Receipts," "Treasury Investors Growth Receipts" ("TIGRs"), and
"Certificates of Accrual on Treasury Securities" ("CATs"). For certain
securities law purposes, custodial receipts are not considered U.S. Government
Securities.

Mortgage-Backed Securities
- --------------------------

General Characteristics. Each Fund may invest in mortgage-backed
securities. Each mortgage pool underlying mortgage-backed securities consists
of mortgage loans evidenced by promissory notes secured by first mortgages or
first deeds of trust or other similar security instruments creating a first lien
on owner occupied and non-owner occupied one-unit to four-unit residential
properties, multifamily (i.e., five or more) properties, agriculture properties,
commercial properties and mixed use properties (the "Mortgaged Properties").
The Mortgaged Properties may consist of detached individual dwelling units,
multifamily dwelling units, individual condominiums, townhouses, duplexes,
triplexes, fourplexes, row houses, individual units in planned unit developments
and other attached dwelling units. The Mortgaged Properties may also include
residential investment properties and second homes.

The investment characteristics of adjustable and fixed rate mortgage-backed
securities differ from those of traditional fixed-income securities. The major
differences include the payment of interest and principal on mortgage-backed
securities on a more frequent (usually monthly) schedule, and the possibility
that principal may be prepaid at any time due to prepayments on the underlying
mortgage loans or other assets. These differences can result in

B-13
<PAGE>

significantly greater price and yield volatility than is the case with
traditional fixed-income securities. As a result, if a Fund purchases mortgage-
backed securities at a premium, a faster than expected prepayment rate will
reduce both the market value and the yield to maturity from those which were
anticipated. A prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and market value. Conversely, if
a Fund purchases mortgage-backed securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce
yield to maturity and market values. To the extent that a Fund invests in
mortgage-backed securities, its Investment Adviser may seek to manage these
potential risks by investing in a variety of mortgage-backed securities and by
using certain hedging techniques.

Government Guaranteed Mortgage-Backed Securities. There are several types
of guaranteed mortgage-backed securities currently available, including
guaranteed mortgage pass-through certificates and multiple class securities,
which include guaranteed Real Estate Mortgage Investment Conduit Certificates
("REMIC Certificates"), collateralized mortgage obligations and stripped
mortgage-backed securities. A Fund is permitted to invest in other types of
mortgage-backed securities that may be available in the future to the extent
consistent with its investment policies and objective.

A Fund's investments in mortgage-backed securities may include securities
issued or guaranteed by the U.S. Government or one of its agencies, authorities,
instrumentalities or sponsored enterprises, such as the Government National
Mortgage Association ("Ginnie Mae"), the Federal National Mortgage Association
("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac").

Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States. Ginnie Mae is authorized to guarantee the
timely payment of the principal of and interest on certificates that are based
on and backed by a pool of mortgage loans insured by the Federal Housing
Administration ("FHA Loans"), or guaranteed by the Veterans Administration ("VA
Loans"), or by pools of other eligible mortgage loans. In order to meet its
obligations under any guaranty, Ginnie Mae is authorized to borrow from the
United States Treasury in an unlimited amount.

Fannie Mae Certificates. Fannie Mae is a stockholder-owned corporation
chartered under an act of the United States Congress. Each Fannie Mae
Certificate is issued and guaranteed by Fannie Mae and represents an undivided
interest in a pool of mortgage loans (a "Pool") formed by Fannie Mae. Each Pool
consists of residential mortgage loans ("Mortgage Loans") either previously
owned by Fannie Mae or purchased by it in connection with the formation of the
Pool. The Mortgage Loans may be either conventional Mortgage Loans (i.e., not
insured or guaranteed by any U.S. Government agency) or Mortgage Loans that are
either insured by the Federal Housing Administration ("FHA") or guaranteed by
the Veterans Administration ("VA"). However, the Mortgage Loans in Fannie Mae
Pools are primarily conventional Mortgage Loans. The lenders originating and
servicing the Mortgage Loans are subject to certain eligibility requirements
established by Fannie Mae.

B-14
<PAGE>

Fannie Mae has certain contractual responsibilities. With respect to each
Pool, Fannie Mae is obligated to distribute scheduled monthly installments of
principal and interest after Fannie Mae's servicing and guaranty fee, whether or
not received, to Certificate holders. Fannie Mae also is obligated to
distribute to holders of Certificates an amount equal to the full principal
balance of any foreclosed Mortgage Loan, whether or not such principal balance
is actually recovered. The obligations of Fannie Mae under its guaranty of the
Fannie Mae Certificates are obligations solely of Fannie Mae.

Freddie Mac Certificates. Freddie Mac is a publicly held U.S. Government
sponsored enterprise. The principal activity of Freddie Mac currently is the
purchase of first lien, conventional, residential mortgage loans and
participation interests in such mortgage loans and their resale in the form of
mortgage securities, primarily Freddie Mac Certificates. A Freddie Mac
Certificate represents a pro rata interest in a group of mortgage loans or
participation in mortgage loans (a "Freddie Mac Certificate group") purchased by
Freddie Mac.

Freddie Mac guarantees to each registered holder of a Freddie Mac
Certificate the timely payment of interest at the rate provided for by such
Freddie Mac Certificate (whether or not received on the underlying loans).
Freddie Mac also guarantees to each registered Certificate holder ultimate
collection of all principal of the related mortgage loans, without any offset or
deduction, but does not, generally, guarantee the timely payment of scheduled
principal. The obligations of Freddie Mac under its guaranty of Freddie Mac
Certificates are obligations solely of Freddie Mac.

The mortgage loans underlying the Freddie Mac and Fannie Mae Certificates
consist of adjustable rate or fixed rate mortgage loans with original terms to
maturity of between five and thirty years. Substantially all of these mortgage
loans are secured by first liens on one-to-four-family residential properties or
multifamily projects. Each mortgage loan must meet the applicable standards set
forth in the law creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate
group may include whole loans, participation interests in whole loans and
undivided interests in whole loans and participations comprising another Freddie
Mac Certificate group.

Mortgage Pass-Through Securities. Each Fund may invest in both government
guaranteed and privately issued mortgage pass-through securities ("Mortgage
Pass-Throughs"); that is, fixed or adjustable rate mortgage-backed securities
which provide for monthly payments that are a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans, net of any fees or other
amounts paid to any guarantor, administrator and/or servicer of the underlying
mortgage loans.

The following discussion describes only a few of the wide variety of
structures of Mortgage Pass-Throughs that are available or may be issued.

Description of Certificates. Mortgage Pass-Throughs may be issued in one
or more classes of senior certificates and one or more classes of subordinate
certificates. Each such class may bear a different pass-through rate.
Generally, each certificate will evidence the specified

B-15
<PAGE>

interest of the holder thereof in the payments of principal or interest or both
in respect of the mortgage pool comprising part of the trust fund for such
certificates.

Any class of certificates may also be divided into subclasses entitled to
varying amounts of principal and interest. If a REMIC election has been made,
certificates of such subclasses may be entitled to payments on the basis of a
stated principal balance and stated interest rate, and payments among different
subclasses may be made on a sequential, concurrent, pro rata or disproportionate
--------
basis, or any combination thereof. The stated interest rate on any such
subclass of certificates may be a fixed rate or one which varies in direct or
inverse relationship to an objective interest index.

Generally, each registered holder of a certificate will be entitled to
receive its pro rata share of monthly distributions of all or a portion of
--------
principal of the underlying mortgage loans or of interest on the principal
balances thereof, which accrues at the applicable mortgage pass-through rate, or
both. The difference between the mortgage interest rate and the related
mortgage pass-through rate (less the amount, if any, of retained yield) with
respect to each mortgage loan will generally be paid to the servicer as a
servicing fee. Since certain adjustable rate mortgage loans included in a
mortgage pool may provide for deferred interest (i.e., negative amortization),
the amount of interest actually paid by a mortgagor in any month may be less
than the amount of interest accrued on the outstanding principal balance of the
related mortgage loan during the relevant period at the applicable mortgage
interest rate. In such event, the amount of interest that is treated as
deferred interest will be added to the principal balance of the related mortgage
loan and will be distributed pro rata to certificate-holders as principal of
--------
such mortgage loan when paid by the mortgagor in subsequent monthly payments or
at maturity.

Ratings. The ratings assigned by a rating organization to Mortgage Pass-
Throughs address the likelihood of the receipt of all distributions on the
underlying mortgage loans by the related certificate-holders under the
agreements pursuant to which such certificates are issued. A rating
organization's ratings take into consideration the credit quality of the related
mortgage pool, including any credit support providers, structural and legal
aspects associated with such certificates, and the extent to which the payment
stream on such mortgage pool is adequate to make payments required by such
certificates. A rating organization's ratings on such certificates do not,
however, constitute a statement regarding frequency of prepayments on the
related mortgage loans. In addition, the rating assigned by a rating
organization to a certificate does not address the remote possibility that, in
the event of the insolvency of the issuer of certificates where a subordinated
interest was retained, the issuance and sale of the senior certificates may be
recharacterized as a financing and, as a result of such recharacterization,
payments on such certificates may be affected.

Credit Enhancement. Credit support falls generally into two categories:
(i) liquidity protection and (ii) protection against losses resulting from
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pools of
mortgages, the provision of a reserve fund, or a combination thereof, to ensure,
subject to certain limitations, that scheduled payments on the underlying pool
are made in a timely fashion. Protection against losses resulting from default
ensures ultimate

B-16
<PAGE>

payment of the obligations on at least a portion of the assets in the pool. Such
credit support can be provided by, among other things, payment guarantees,
letters of credit, pool insurance, subordination, or any combination thereof.

Subordination; Shifting of Interest; Reserve Fund. In order to achieve
ratings on one or more classes of Mortgage Pass-Throughs, one or more classes of
certificates may be subordinate certificates which provide that the rights of
the subordinate certificate-holders to receive any or a specified portion of
distributions with respect to the underlying mortgage loans may be subordinated
to the rights of the senior certificate-holders. If so structured, the
subordination feature may be enhanced by distributing to the senior certificate-
holders on certain distribution dates, as payment of principal, a specified
percentage (which generally declines over time) of all principal payments
received during the preceding prepayment period ("shifting interest credit
enhancement"). This will have the effect of accelerating the amortization of
the senior certificates while increasing the interest in the trust fund
evidenced by the subordinate certificates. Increasing the interest of the
subordinate certificates relative to that of the senior certificates is intended
to preserve the availability of the subordination provided by the subordinate
certificates. In addition, because the senior certificate-holders in a shifting
interest credit enhancement structure are entitled to receive a percentage of
principal prepayments which is greater than their proportionate interest in the
trust fund, the rate of principal prepayments on the mortgage loans will have an
even greater effect on the rate of principal payments and the amount of interest
payments on, and the yield to maturity of, the senior certificates.

In addition to providing for a preferential right of the senior
certificate-holders to receive current distributions from the mortgage pool, a
reserve fund may be established relating to such certificates (the "Reserve
Fund"). The Reserve Fund may be created with an initial cash deposit by the
originator or servicer and augmented by the retention of distributions otherwise
available to the subordinate certificate-holders or by excess servicing fees
until the Reserve Fund reaches a specified amount.

The subordination feature, and any Reserve Fund, are intended to enhance
the likelihood of timely receipt by senior certificate-holders of the full
amount of scheduled monthly payments of principal and interest due them and will
protect the senior certificate-holders against certain losses; however, in
certain circumstances the Reserve Fund could be depleted and temporary
shortfalls could result. In the event the Reserve Fund is depleted before the
subordinated amount is reduced to zero, senior certificate-holders will
nevertheless have a preferential right to receive current distributions from the
mortgage pool to the extent of the then outstanding subordinated amount. Unless
otherwise specified, until the subordinated amount is reduced to zero, on any
distribution date any amount otherwise distributable to the subordinate
certificates or, to the extent specified, in the Reserve Fund will generally be
used to offset the amount of any losses realized with respect to the mortgage
loans ("Realized Losses"). Realized Losses remaining after application of such
amounts will generally be applied to reduce the ownership interest of the
subordinate certificates in the mortgage pool. If the subordinated amount has
been reduced to zero, Realized Losses generally will be allocated pro rata among
--------
all certificate-holders in proportion to their respective outstanding interests
in the mortgage pool.

B-17
<PAGE>

Alternative Credit Enhancement. As an alternative, or in addition to the
credit enhancement afforded by subordination, credit enhancement for Mortgage
Pass-Throughs may be provided by mortgage insurance, hazard insurance, by the
deposit of cash, certificates of deposit, letters of credit, a limited guaranty
or by such other methods as are acceptable to a rating agency. In certain
circumstances, such as where credit enhancement is provided by guarantees or a
letter of credit, the security is subject to credit risk because of its exposure
to an external credit enhancement provider.

Voluntary Advances. Generally, in the event of delinquencies in payments
on the mortgage loans underlying the Mortgage Pass-Throughs, the servicer agrees
to make advances of cash for the benefit of certificate-holders, but only to the
extent that it determines such voluntary advances will be recoverable from
future payments and collections on the mortgage loans or otherwise.

Optional Termination. Generally, the servicer may, at its option with
respect to any certificates, repurchase all of the underlying mortgage loans
remaining outstanding at such time if the aggregate outstanding principal
balance of such mortgage loans is less than a specified percentage (generally 5-
10%) of the aggregate outstanding principal balance of the mortgage loans as of
the cut-off date specified with respect to such series.

Multiple Class Mortgage-Backed Securities and Collateralized Mortgage
Obligations. A Fund may invest in multiple class securities including
collateralized mortgage obligations ("CMOs") and REMIC Certificates. These
securities may be issued by U.S. Government agencies and instrumentalities such
as Fannie Mae or Freddie Mac or by trusts formed by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
bankers, commercial banks, insurance companies, investment banks and special
purpose subsidiaries of the foregoing. In general, CMOs are debt obligations of
a legal entity that are collateralized by, and multiple class mortgage-backed
securities represent direct ownership interests in, a pool of mortgage loans or
mortgage-backed securities the payments on which are used to make payments on
the CMOs or multiple class mortgage-backed securities.

Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are otherwise available.

Freddie Mac guarantees the timely payment of interest on Freddie Mac REMIC
Certificates and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified level payment,
residential mortgages or participation therein purchased by Freddie Mac and
placed in a PC pool. With respect to principal payments on PCs, Freddie Mac
generally guarantees ultimate collection of all principal of the related
mortgage loans without offset or deduction. Freddie Mac also guarantees timely
payment of principal of certain PCs.

B-18
<PAGE>

CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie Mac
are types of multiple class mortgage-backed securities. Investors may purchase
beneficial interests in REMICs, which are known as "regular" interests or
"residual" interests. The Funds do not intend to purchase residual interests in
REMICs. The REMIC Certificates represent beneficial ownership interests in a
REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage-backed securities (the "Mortgage Assets").
The obligations of Fannie Mae or Freddie Mac under their respective guaranty of
the REMIC Certificates are obligations solely of Fannie Mae or Freddie Mac,
respectively.

CMOs and REMIC Certificates are issued in multiple classes. Each class of
CMOs or REMIC Certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Principal prepayments on the Mortgage Loans
or the Mortgage Assets underlying the CMOs or REMIC Certificates may cause some
or all of the classes of CMOs or REMIC Certificates to be retired substantially
earlier than their final distribution dates. Generally, interest is paid or
accrues on all classes of CMOs or REMIC Certificates on a monthly basis.

The principal of and interest on the Mortgage Assets may be allocated among
the several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets generally
are applied to the classes of CMOs or REMIC Certificates in the order of their
respective final distribution dates. Thus, no payment of principal will be made
on any class of sequential pay CMOs or REMIC Certificates until all other
classes having an earlier final distribution date have been paid in full.

Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.

A wide variety of REMIC Certificates may be issued in parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates that generally require that specified amounts of principal be
applied on each payment date to one or more classes or REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the Mortgage Assets are then required to be applied to one or more other classes
of the Certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount payable on the next payment date. The PAC
Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying

B-19
<PAGE>

mortgage assets. These tranches tend to have market prices and yields that are
much more volatile than other PAC classes.

Stripped Mortgage-Backed Securities. The Real Estate Securities Fund may
invest in stripped mortgage-backed securities ("SMBS"), which are derivative
multiclass mortgage securities. Although the market for such securities is
increasingly liquid, certain SMBS may not be readily marketable and will be
considered illiquid for purposes of the Fund's limitation on investments in
illiquid securities. The market value of the class consisting entirely of
principal payments generally is unusually volatile in response to changes in
interest rates. The yields on a class of SMBS that receives all or most of the
interest from Mortgage Assets 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.

Inverse Floating Rate Securities
- --------------------------------

The Real Estate Securities Fund may invest in leveraged inverse floating
rate debt instruments ("inverse floaters"). The interest rate on an inverse
floater resets in the opposite direction from the market rate of interest to
which the inverse floater is indexed. An inverse floater may be considered to
be leveraged to the extent that its interest rate varies by a magnitude that
exceeds the magnitude of the change in the index rate of interest. The higher
degree of leverage inherent in inverse floaters is associated with greater
volatility in their market values. Accordingly, the duration of an inverse
floater may exceed its stated final maturity. Certain inverse floaters may be
deemed to be illiquid securities for purposes of each Fund's 15% limitation on
investments in such securities.

Asset-Backed Securities
- -----------------------

Each Fund may invest in asset-backed securities. Asset-backed securities
represent participation in, or are secured by and payable from, assets such as
motor vehicle installment sales, installment loan contracts, leases of various
types of real and personal property, receivables from revolving credit (credit
card) agreements and other categories of receivables. Such assets are
securitized through the use of trusts and special purpose corporations. Payments
or distributions of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit or a pool insurance
policy issued by a financial institution unaffiliated with the trust or
corporation, or other credit enhancements may be present.

Like mortgage-backed securities, asset-backed securities are often subject
to more rapid repayment than their stated maturity date would indicate as a
result of the pass-through of prepayments of principal on the underlying loans.
A Fund's ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at comparable
yields is subject to generally prevailing interest rates at that time. To the
extent that a Fund invests in asset-backed securities, the values of such Fund's
portfolio securities will vary with changes in market interest rates generally
and the differentials in yields among various kinds of asset-backed securities.

B-20
<PAGE>

Asset-backed securities present certain additional 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. Credit card receivables are generally unsecured
and the debtors on such receivables are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set-off certain amounts owed on the credit cards, thereby reducing the
balance due. Automobile receivables generally are secured, but by automobiles
rather than residential real property. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations.
If the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is the
possibility that, in some cases, recoveries on repossessed collateral may not be
available to support payments on these securities.

Futures Contracts and Options on Futures Contracts
- --------------------------------------------------

Each Fund may purchase and sell futures contracts and may also purchase and
write options on futures contracts. The Funds may purchase and sell futures
contracts based on various securities (such as U.S. Government securities),
securities indices, foreign currencies and other financial instruments and
indices. Each Fund will engage in futures and related options transactions,
only for bona fide hedging purposes as defined below or for purposes of seeking
to increase total return to the extent permitted by regulations of the Commodity
Futures Trading Commission ("CFTC"). Futures contracts entered into by a Fund
are traded on U.S. exchanges or boards of trade that are licensed and regulated
by the CFTC or on foreign exchanges. Neither the CFTC, National Futures
Association nor any domestic exchange regulates activities of any foreign
exchange or boards of trade, including the execution, delivery and clearing of
transactions, or has the power to compel enforcement of the rules of a foreign
exchange or board of trade or any applicable foreign law. This is true even if
the exchange is formally linked to a domestic market so that a position taken on
the market may be liquidated by a transaction on another market. Moreover, such
laws or regulations will vary depending on the foreign country in which the
foreign futures or foreign options transaction occurs. For these reasons,
persons who trade foreign futures or foreign options contracts may not be
afforded certain of the protective measures provided by the Commodity Exchange
Act, the CFTC's regulations and the rules of the National Futures Association
and any domestic exchange, including the right to use reparations proceedings
before the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, a Fund's
investments in foreign futures or foreign options transactions may not be
provided the same protections in respect of transactions on United States
futures exchanges.

B-21
<PAGE>

Futures Contracts. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).

When interest rates are rising or securities prices are falling, a Fund can
seek through the sale of futures contracts to offset a decline in the value of
its current portfolio securities. When rates are falling or prices are rising,
a Fund, through the purchase of futures contracts, can attempt to secure better
rates or prices than might later be available in the market when it effects
anticipated purchases. Similarly, each Fund can purchase and sell futures
contracts on a specified currency in order to seek to increase total return or
to hedge against changes in currency exchange rates. Each Fund can purchase
futures contracts on foreign currency to establish the price in U.S. dollars of
a security quoted or denominated in such currency that such Fund has acquired or
expects to acquire.

Positions taken in the futures market are not normally held to maturity,
but are instead liquidated through offsetting transactions which may result in a
profit or a loss. While each Fund will usually liquidate futures contracts on
securities or currency in this manner, a Fund may instead make or take delivery
of the underlying securities or currency whenever it appears economically
advantageous for the Fund to do so. A clearing corporation associated with the
exchange on which futures are traded guarantees that, if still open, the sale or
purchase will be performed on the settlement date.

Hedging Strategies. Hedging, by use of futures contracts, seeks to
establish with more certainty than would otherwise be possible the effective
price, rate of return or currency exchange rate on portfolio securities or
securities that a Fund owns or proposes to acquire. A Fund may, for example,
take a "short" position in the futures market by selling futures contracts to
seek to hedge against an anticipated rise in interest rates or a decline in
market prices or foreign currency rates that would adversely affect the dollar
value of such Fund's portfolio securities. Similarly, each Fund may sell
futures contracts on a currency in which its portfolio securities are quoted or
denominated or in one currency to seek to hedge against fluctuations in the
value of securities quoted or denominated in a different currency if there is an
established historical pattern of correlation between the two currencies. If,
in the opinion of the applicable Investment Adviser, there is a sufficient
degree of correlation between price trends for a Fund's portfolio securities and
futures contracts based on other financial instruments, securities indices or
other indices, a Fund may also enter into such futures contracts as part of its
hedging strategy. Although under some circumstances prices of securities in a
Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Investment Adviser will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any such
differential by having a Fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting a Fund's securities portfolio. When hedging of this character is
successful, any depreciation in the value of portfolio securities will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of a Fund's
portfolio securities would be substantially offset by a decline in the value of
the futures position.

B-22
<PAGE>

On other occasions, a Fund may take a "long" position by purchasing such
futures contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.

Options on Futures Contracts. The acquisition of put and call options on
futures contracts will give a Fund the right (but not the obligation), for a
specified price, to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Fund obtains the benefit of the futures position if prices
move in a favorable direction but limits its risk of loss in the event of an
unfavorable price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of a Fund's assets. By
writing a call option, a Fund becomes obligated, in exchange for the premium, to
sell a futures contract if the option is exercised, which may have a value
higher than the exercise price. Conversely, the writing of a put option on a
futures contract generates a premium, which may partially offset an increase in
the price of securities that a Fund intends to purchase. However, a Fund
becomes obligated to purchase a futures contract if the option is exercised,
which may have a value lower than the exercise price. Thus, the loss incurred
by a Fund in writing options on futures is potentially unlimited and may exceed
the amount of the premium received. A Fund will incur transaction costs in
connection with the writing of options on futures.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same financial
instrument. There is no guarantee that such closing transactions can be
effected. A Fund's ability to establish and close out positions on such options
will be subject to the development and maintenance of a liquid market.

Other Considerations. Each Fund will engage in futures transactions and
will engage in related options transactions only for bona fide hedging as
defined in the regulations of the CFTC or to seek to increase total return to
the extent permitted by such regulations.

In addition to bona fide hedging, a CFTC regulation permits a Fund to
engage in other future transactions if the aggregate initial margin and premiums
required to establish such positions in futures contracts and options on futures
do not exceed 5% of the net asset value of such Fund's portfolio, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. A
Fund will engage in transactions in futures contracts and, for a Fund permitted
to do so, related options transactions only to the extent such transactions are
consistent with the requirements of the Code for maintaining its qualification
as a regulated investment company for federal income tax purposes.

B-23
<PAGE>

Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in certain cases, require the Fund to
segregate with its custodian cash or liquid assets in an amount equal to the
underlying value of such contracts and options.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for a Fund than if it had not
entered into any futures contracts or options transactions. In the event of an
imperfect correlation between a futures position and a portfolio position which
is intended to be protected, the desired protection may not be obtained and a
Fund may be exposed to risk of loss.

Perfect correlation between a Fund's futures positions and portfolio
positions will be difficult to achieve because no futures contracts based on
individual equity or corporate fixed-income securities are currently available.
In addition, it is not possible for a Fund to hedge fully or perfectly against
currency fluctuations affecting the value of securities quoted or denominated in
foreign currencies because the value of such securities is likely to fluctuate
as a result of independent factors not related to currency fluctuations. The
profitability of a Fund's trading in futures depends upon the ability of the
Investment Adviser to analyze correctly the futures markets.

Options on Securities and Securities Indices
- --------------------------------------------

Writing Covered Options. Each Fund may write (sell) covered call and put
options on any securities in which it may invest. A call option written by a
Fund obligates such Fund to sell specified securities to the holder of the
option at a specified price if the option is exercised at any time before the
expiration date. All call options written by a Fund are covered, which means
that such Fund will own the securities subject to the option as long as the
option is outstanding or such Fund will use the other methods described below.
A Fund's purpose in writing covered call options is to realize greater income
than would be realized on portfolio securities transactions alone. However, a
Fund may forego the opportunity to profit from an increase in the market price
of the underlying security.

A put option written by a Fund would obligate such Fund to purchase
specified securities from the option holder at a specified price if the option
is exercised at any time before the expiration date. All put options written by
a Fund would be covered, which means that such Fund will segregate cash or
liquid assets with a value at least equal to the exercise price of the put
option or will use the other methods described below. The purpose of writing
such options is to generate additional income for the Fund. However, in return
for the option premium, each Fund accepts the risk that it may be required to
purchase the underlying securities at a price in excess of the securities'
market value at the time of purchase.

Call and put options written by a Fund will also be considered to be
covered to the extent that the Fund's liabilities under such options are wholly
or partially offset by its rights under call

B-24
<PAGE>

and put options purchased by the Fund or by an offsetting forward contract
which, by virtue of its exercise price or otherwise, reduces a Fund's net
exposure on its written option position.

A Fund may also write (sell) covered call and put options on any securities
index consisting of securities in which it may invest. Options on securities
indices are similar to options on securities, except that the exercise of
securities index options requires cash payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are
designed to reflect price fluctuations in a group of securities or segment of
the securities market rather than price fluctuations in a single security.

A Fund may cover call options on a securities index by owning securities
whose price changes are expected to be similar to those of the underlying index,
or by having an absolute and immediate right to acquire such securities without
additional cash consideration (or for additional cash consideration which has
been segregated by the Fund) upon conversion or exchange of other securities in
its portfolio. A Fund may cover call and put options on a securities index by
segregating cash or liquid assets with a value equal to the exercise price.

A Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."

Purchasing Options. Each Fund may purchase put and call options on any
securities in which it may invest or options on any securities index composed of
securities in which it may invest. A Fund would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.

A Fund may purchase call options in anticipation of an increase in the
market value of securities of the type in which it may invest. The purchase of
a call option would entitle a Fund, in return for the premium paid, to purchase
specified securities at a specified price during the option period. A Fund
would ordinarily realize a gain if, during the option period, the value of such
securities exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise such a Fund would realize either no gain or a loss
on the purchase of the call option.

A Fund may purchase put options in anticipation of a decline in the market
value of securities in its portfolio ("protective puts") or in securities in
which it may invest. The purchase of a put option would entitle a Fund, in
exchange for the premium paid, to sell specified securities at a specified price
during the option period. The purchase of protective puts is designed to offset
or hedge against a decline in the market value of a Fund's securities. Put
options may also be purchased by a Fund for the purpose of affirmatively
benefiting from a decline in the price of securities which it does not own. A
Fund would ordinarily realize a gain if, during the option period, the value of
the underlying securities decreased below the exercise price sufficiently to
more than cover the premium and transaction costs; otherwise such a Fund would
realize either no gain or a loss on the purchase of the put option. Gains and
losses on the

B-25
<PAGE>

purchase of protective put options would tend to be offset by countervailing
changes in the value of the underlying portfolio securities.

A Fund would purchase put and call options on securities indices for the
same purposes as it would purchase options on individual securities. For a
description of options on securities indices, see "Writing Covered Options"
above.

Yield Curve Options. The Real Estate Securities Fund may enter into
options on the yield "spread" or differential between two securities. Such
transactions are referred to as "yield curve" options. In contrast to other
types of options, a yield curve option is based on the difference between the
yields of designated securities, rather than the prices of the individual
securities, and is settled through cash payments. Accordingly, a yield curve
option is profitable to the holder if this differential widens (in the case of a
call) or narrows (in the case of a put), regardless of whether the yields of the
underlying securities increase or decrease.

The Real Estate Securities Fund may purchase or write yield curve options
for the same purposes as other options on securities. For example, the Fund may
purchase a call option on the yield spread between two securities if it owns one
of the securities and anticipates purchasing the other security and wants to
hedge against an adverse change in the yield spread between the two securities.
The Real Estate Securities Fund may also purchase or write yield curve options
in an effort to increase current income if, in the judgment of the Investment
Adviser, the Fund will be able to profit from movements in the spread between
the yields of the underlying securities. The trading of yield curve options is
subject to all of the risks associated with the trading of other types of
options. In addition, however, such options present risk of loss even if the
yield of one of the underlying securities remains constant, if the spread moves
in a direction or to an extent which was not anticipated.

Yield curve options written by the Real Estate Securities Fund will be
"covered." A call (or put) option is covered if the Fund holds another call (or
put) option on the spread between the same two securities and segregates cash or
liquid assets sufficient to cover the Fund's net liability under the two
options. Therefore, the Fund's liability for such a covered option is generally
limited to the difference between the amount of such Fund's liability under the
option written by the Fund less the value of the option held by the Fund. Yield
curve options may also be covered in such other manner as may be in accordance
with the requirements of the counterparty with which the option is traded and
applicable laws and regulations. Yield curve options are traded over-the-
counter, and because they have been only recently introduced, established
trading markets for these options have not yet developed.

Risks Associated with Options Transactions. There is no assurance that a
liquid secondary market on an options exchange will exist for any particular
exchange-traded option or at any particular time. If a Fund is unable to effect
a closing purchase transaction with respect to covered options it has written,
the Fund will not be able to sell the underlying securities or dispose of
segregated assets until the options expire or are exercised. Similarly, if a
Fund is unable to effect a closing sale transaction with respect to options it
has purchased, it will have to

B-26
<PAGE>

exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

Each Fund may purchase and sell both options that are traded on U.S. and
foreign exchanges and options traded over-the-counter with broker-dealers who
make markets in these options. The ability to terminate over-the-counter
options is more limited than with exchange-traded options and may involve the
risk that broker-dealers participating in such transactions will not fulfill
their obligations.

Transactions by each Fund in options on securities and indices will be
subject to limitations established by each of the exchanges, boards of trade or
other trading facilities governing the maximum number of options in each class
which may be written or purchased by a single investor or group of investors
acting in concert. Thus, the number of options which a Fund may write or
purchase may be affected by options written or purchased by other investment
advisory clients of the Investment Adviser. An exchange, board of trade or
other trading facility may order the liquidation of positions found to be in
excess of these limits, and it may impose certain other sanctions.

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

Real Estate Investment Trusts
- -----------------------------

B-27
<PAGE>

Each Fund may invest in shares of REITs. The Real Estate Securities Fund
expects that a substantial portion of its total assets will be invested in
REITs. REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interest. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. Like regulated investment companies such as the Funds, REITs are not
taxed on income distributed to shareholders provided they comply with certain
requirements under the Code. A Fund will indirectly bear its proportionate share
of any expenses paid by REITs in which it invests in addition to the expenses
paid by a Fund.

Investing in REITs involves certain unique risks. Equity REITs may be
affected by changes in the value of the underlying property owned by such REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified (except to the
extent the Code requires), and are subject to the risks of financing projects.
REITs are subject to heavy cash flow dependency, default by borrowers, self-
liquidation, and the possibilities of failing to qualify for the exemption from
tax for distributed income under the Code and failing to maintain their
exemptions from the Act. REITs (especially mortgage REITs) are also subject to
interest rate risks.

Warrants and Stock Purchase Rights
- ----------------------------------

Each Fund may invest in warrants or rights (other than those acquired in
units or attached to other securities) which entitle the holder to buy equity
securities at a specific price for a specific period of time. A Fund will
invest in warrants and rights only if such equity securities are deemed
appropriate by the Investment Adviser for investment by the Fund. Warrants and
rights have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.

Foreign Securities
- ------------------

The Internet Tollkeeper and Real Estate Securities Funds may invest in the
aggregate up to 10% and 15%, respectively, of their total assets in foreign
securities, including securities of issuers in emerging countries. Investments
in foreign securities may offer potential benefits not available from
investments solely in U.S. dollar-denominated or quoted securities of domestic
issuers. Such benefits may include the opportunity to invest in foreign issuers
that appear, in the opinion of the applicable Investment Adviser, to offer the
potential for long-term growth of capital and income, the opportunity to invest
in foreign countries with economic policies or business cycles different from
those of the United States and the opportunity to reduce fluctuations in
portfolio value by taking advantage of foreign stock markets that do not
necessarily move in a manner parallel to U.S. markets.

B-28
<PAGE>

Investing in foreign securities involves certain special risks, including
those set forth below, which are not typically associated with investing in U.S.
dollar-denominated or quoted securities of U.S. issuers. Investments in foreign
securities usually involve currencies of foreign countries. Accordingly, any
Fund that invests in foreign securities may be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations and may incur
costs in connection with conversions between various currencies. The Funds may
be subject to currency exposure independent of their securities positions. To
the extent that a Fund is fully invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk.

Currency exchange rates may fluctuate significantly over short periods of
time. They 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 intervention by U.S. or foreign
governments or central banks or the failure to intervene or by currency controls
or political developments in the United States or abroad.

Since foreign issuers generally are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a U.S. company. Volume
and liquidity in most foreign securities markets are less than in the United
States and securities of many foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. Fixed commissions on
foreign securities exchanges are generally higher than negotiated commissions on
U.S. exchanges, although each Fund endeavors to achieve the most favorable net
results on its portfolio transactions. There is generally less government
supervision and regulation of foreign securities exchanges, brokers, dealers and
listed and unlisted companies than in the United States.

Foreign markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Such delays in settlement could result in temporary
periods when some of a Fund's assets are uninvested and no return is earned on
such assets. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio securities or, if the Fund has entered into a contract to
sell the securities, could result in possible liability to the purchaser. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect a Fund's investments in those
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.

B-29
<PAGE>

Each Fund may invest in foreign securities which take the form of sponsored
and unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs") and may also invest in European Depository Receipts ("EDRs")
or other similar instruments representing securities of foreign issuers
(together, "Depository Receipts").

ADRs represent the right to receive securities of foreign issuers deposited
in a domestic bank or a correspondent bank. ADRs are traded on domestic
exchanges or in the U.S. over-the-counter market and, generally, are in
registered form. EDRs and GDRs are receipts evidencing an arrangement with a
non-U.S. bank similar to that for ADRs and are designed for use in the non-U.S.
securities markets. 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), there may be an increased possibility that the Fund would not
become aware of and be able to respond to corporate actions such as stock splits
or rights offerings involving the foreign issuer in a timely manner. In
addition, the lack of information may result in inefficiencies in the valuation
of such instruments. Investment in Depository Receipts does not eliminate all
the risks inherent in investing in securities of non-U.S. issuers. The market
value of Depository Receipts is dependent upon the market value of the
underlying securities and fluctuations in the relative value of the currencies
in which the Depository receipts and the underlying securities are quoted.
However, by investing in Depository Receipts, such as ADRs, that are quoted in
U.S. dollars, a Fund may avoid currency risks during the settlement period for
purchases and sales.

As described more fully below, each Fund may invest in countries with
emerging economies or securities markets. Political and economic structures in
many of such countries may be undergoing significant evolution and rapid
development, and such countries may lack the social, political and economic
stability characteristic of more developed countries. Certain of such countries
may have in the past failed to recognize private property rights and have at
times nationalized or expropriated the assets of private companies. As a
result, the risks described above, including the risks of nationalization or
expropriation of assets, may be heightened. See "Investing in Emerging Markets,
including Asia and Eastern Europe," below.

Investing in Emerging Countries, including Asia and Eastern Europe. Each
of the securities markets of the emerging countries is less liquid and subject
to greater price volatility and has a smaller market capitalization than the
U.S. securities markets. Issuers and securities markets in such countries are
not subject to as extensive and frequent accounting, financial and other
reporting requirements or as comprehensive government regulations as are issuers
and securities markets in the U.S. In particular, the assets and profits
appearing on the financial statements of emerging country issuers may not
reflect their financial position or results of operations in the same manner as
financial statements for U.S. issuers. Substantially less information may be
publicly available about emerging country issuers than is available about
issuers in the United States.

B-30
<PAGE>

Emerging country securities markets are typically 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.
The markets for securities in certain emerging countries are in the earliest
stages of their development. Even the markets for relatively widely traded
securities in emerging countries may not be able to absorb, without price
disruptions, a significant increase in trading volume or trades of a size
customarily undertaken by institutional investors in the securities markets of
developed countries. The limited size of many of these securities markets can
cause prices to be erratic for reasons apart from factors that affect the
soundness and competitiveness of the securities issuers. For example, prices
may be unduly influenced by traders who control large positions in these
markets. Additionally, market making and arbitrage activities are generally
less extensive in such markets, which may contribute to increased volatility and
reduced liquidity of such markets. The limited liquidity of emerging country
markets may also affect a Fund's ability to accurately value its portfolio
securities or to acquire or dispose of securities at the price and time it
wishes to do so or in order to meet redemption requests.

Transaction costs, including brokerage commissions or dealer mark-ups, in
emerging countries may be higher than in the United States and other developed
securities markets. In addition, existing laws and regulations are often
inconsistently applied. As legal systems in emerging countries develop, foreign
investors may be adversely affected by new or amended laws and regulations. In
circumstances where adequate laws exist, it may not be possible to obtain swift
and equitable enforcement of the law.

Foreign investment in the securities markets of certain emerging countries
is restricted or controlled to varying degrees. These restrictions may limit a
Fund's investment in certain emerging countries and may increase the expenses of
the Fund. Certain emerging countries require governmental approval prior to
investments by foreign persons or limit investment by foreign persons to only a
specified percentage of an issuer's outstanding securities or a specific class
of securities which may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. In addition, the
repatriation of both investment income and capital from several of the emerging
countries is subject to restrictions which require governmental consents or
prohibit repatriation entirely for a period of time. Even where there is no
outright restriction on repatriation of capital, the mechanics of repatriation
may affect certain aspects of the operation of a Fund. A Fund may be required
to establish special custodial or other arrangements before investing in certain
emerging countries.

Each of the emerging countries may be subject to a substantially greater
degree of economic, political and social instability and disruption than is the
case in the United States, Japan and most Western European countries. This
instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision making, including changes or attempted changes in governments through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic or social conditions; (iii) internal insurgencies;
(iv) hostile relations with neighboring countries; (v) ethnic, religious and
racial disaffection or conflict; and (vi) the absence of developed legal
structures governing foreign private investments and private property. Such

B-31
<PAGE>

economic, political and social instability could disrupt the principal financial
markets in which the Funds may invest and adversely affect the value of the
Funds' assets. A Fund's investments could in the future be adversely affected by
any increase in taxes or by political, economic or diplomatic developments. A
Fund may seek investment opportunities within former "east bloc" countries in
Eastern Europe. All or a substantial portion of such investments may be
considered "not readily marketable" for purposes of the limitation on illiquid
securities set forth below. For example, most Eastern European countries have
had a centrally planned, socialist economy since shortly after World War II. The
governments of a number of Eastern European countries currently are implementing
reforms directed at political and economic liberalization, including efforts to
decentralize the economic decision-making process and move towards a market
economy. However, business entities in many Eastern European countries do not
have any recent history of operating in a market-oriented economy, and the
ultimate impact of Eastern European countries' attempts to move toward more
market-oriented economies is currently unclear. In addition, any change in the
leadership or policies of Eastern European countries may halt the expansion of
or reverse the liberalization of foreign investment policies now occurring and
adversely affect existing investment opportunities. To the extent a Fund invests
in an issuer located (1) in a country which was formerly part of Yugoslavia, (2)
in a country that shares a border with the former country of Yugoslavia, (3) in
a country which is a member of the North Atlantic Treaty Organization ("NATO"),
or (4) in other countries in Europe, such Fund could suffer investment losses as
a result of the recent conflict between Serbia and the members of NATO.

The economies of emerging countries may differ unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments. Many
emerging countries have experienced in the past, and continue to experience,
high rates of inflation. In certain countries inflation has at times
accelerated rapidly to hyperinflationary levels, creating a negative interest
rate environment and sharply eroding the value of outstanding financial assets
in those countries. The economies of many emerging countries are heavily
dependent upon international trade and are accordingly affected by protective
trade barriers and the economic conditions of their trading partners. In
addition, the economies of some emerging countries are vulnerable to weakness in
world prices for their commodity exports.

A Fund's income and, in some cases, capital gains from foreign stocks and
securities will be subject to applicable taxation in certain of the countries in
which it invests, and treaties between the U.S. and such countries may not be
available in some cases to reduce the otherwise applicable tax rates. See
"Taxation."

B-32
<PAGE>

security purchases or sales due to settlement problems could result either in
losses to the Fund due to subsequent declines in value of the portfolio
securities or, if the Fund has entered into a contract to sell the securities,
could result in possible liability to the purchaser.

Forward Foreign Currency Exchange Contracts. The Funds may enter into
forward foreign currency exchange contracts for hedging purposes and to seek to
protect against anticipated changes in future foreign currency exchange rates.
A forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded in the interbank market
between currency traders (usually large commercial banks) and their customers.
A forward contract generally has no deposit requirement, and no commissions are
generally charged at any stage for trades.

At the maturity of a forward contract a Fund may either accept or make
delivery of the currency specified in the contract or, at or prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts are often, but
not always, effected with the currency trader who is a party to the original
forward contract.

A Fund may enter into forward foreign currency exchange contracts in
several circumstances. First, when a Fund enters into a contract for the
purchase or sale of a security denominated or quoted in a foreign currency, or
when a Fund anticipates the receipt in a foreign currency of dividend or
interest payments on such a security which it holds, the Fund may desire to
"lock in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such dividend or interest payment, as the case may be. By entering into a
forward contract for the purchase or sale, for a fixed amount of dollars, of the
amount of foreign currency involved in the underlying transactions, the Fund
will attempt to protect itself against an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.

Additionally, when the Investment Adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of U.S.
dollars, the amount of foreign currency approximating the value of some or all
of such Fund's portfolio securities quoted or denominated in such foreign
currency. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. Using forward contracts to
protect the value of a Fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which a Fund can
achieve at some future point in time.

B-33
<PAGE>

The precise projection of short-term currency market movements is not possible,
and short-term hedging provides a means of fixing the U.S. dollar value of only
a portion of a Fund's foreign assets.

Unless otherwise covered in accordance with applicable regulations, cash or
liquid assets of a Fund will be segregated in an amount equal to the value of
the Fund's total assets committed to the consummation of forward foreign
currency exchange contracts. The segregated assets will be marked-to-market on
a daily basis. If the value of the segregated assets declines, additional cash
or liquid assets will be segregated on a daily basis so that the value of the
assets will equal the amount of a Fund's commitments with respect to such
contracts. Although the contracts are not presently regulated by the CFTC, the
CFTC may in the future assert authority to regulate these contracts. In such
event, a Fund's ability to utilize forward foreign currency exchange contracts
may be restricted.

While a Fund may enter into forward contracts to reduce currency exchange
rate risks, transactions in such contracts involve certain other risks. Thus,
while the Fund may benefit from such transactions, unanticipated changes in
currency prices may result in a poorer overall performance for the Fund than if
it had not engaged in any such transactions. Moreover, there may be imperfect
correlation between a Fund's portfolio holdings of securities quoted or
denominated in a particular currency and forward contracts entered into by such
Fund. Such imperfect correlation may cause a Fund to sustain losses which will
prevent the Fund from achieving a complete hedge or expose the Fund to risk of
foreign exchange loss.

Markets for trading foreign forward currency contracts offer less
protection against defaults than is available when trading in currency
instruments on an exchange. Forward contracts are subject to the risk that the
counterparty to such contract will default on its obligations. Since a forward
foreign currency exchange contract is not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive a Fund of unrealized
profits, transaction costs or the benefits of a currency hedge or force the Fund
to cover its purchase or sale commitments, if any, at the current market price.
A Fund will not enter into forward foreign currency exchange contracts, currency
swaps or other privately negotiated currency instruments unless the credit
quality of the unsecured senior debt or the claims-paying ability of the
counterparty is considered to be investment grade by the Investment Adviser. To
the extent that a substantial portion of a Fund's total assets, adjusted to
reflect the Fund's net position after giving effect to currency transactions, is
denominated or quoted in the currencies of foreign countries, the Fund will be
more susceptible to the risk of adverse economic and political developments
within those countries.

Writing and Purchasing Currency Call and Put Options. Each Fund may, to
the extent that it invests in foreign securities, write and purchase put and
call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and against
increases in the U.S. dollar cost of foreign securities to be acquired. As with
other kinds of option transactions, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received. If and when a Fund seeks to close out an option, the Fund could be
required to purchase or sell

B-34
<PAGE>

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. Options on foreign currencies to
be written or purchased by a Fund will be traded on U.S. and foreign exchanges
or over-the-counter.

Options on currency may be used for hedging purposes or to seek to increase
total return when the Investment Adviser anticipates that the currency will
appreciate or depreciate in value, but the securities quoted or denominated in
that currency do not present attractive investment opportunities and are not
included in the Fund's portfolio.

A call option written by a Fund obligates a Fund to sell a specified
currency to the holder of the option at a specified price if the option is
exercised at any time before the expiration date. A put option written by a
Fund would obligate a Fund to purchase a specified currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. The writing of currency options involves a risk that a Fund
will, upon exercise of the option, be required to sell currency subject to a
call at a price that is less than the currency's market value or be required to
purchase currency subject to a put at a price that exceeds the currency's market
value. For a description of how to cover written put and call options, see
"Writing Covered Options" above.

A Fund may terminate its obligations under a call or put option by
purchasing an option identical to the one it has written. Such purchases are
referred to as "closing purchase transactions." A Fund may enter into closing
sale transactions in order to realize gains or minimize losses on options
purchased by the Fund.

A Fund would normally purchase call options on foreign currency in
anticipation of an increase in the U.S. dollar value of currency in which
securities to be acquired by a Fund are quoted or denominated. The purchase of
a call option would entitle the Fund, in return for the premium paid, to
purchase specified currency at a specified price during the option period. A
Fund would ordinarily realize a gain if, during the option period, the value of
such currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.

A Fund would normally purchase put options in anticipation of a decline in
the U.S. dollar value of currency in which securities in its portfolio are
quoted or denominated ("protective puts"). The purchase of a put option would
entitle a Fund, in exchange for the premium paid, to sell specified currency at
a specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the dollar value of a
Fund's portfolio securities due to currency exchange rate fluctuations. A Fund
would ordinarily realize a gain if, during the option period, the value of the
underlying currency decreased below the exercise price sufficiently to more than
cover the premium and transaction costs; otherwise the Fund would realize either
no gain or a loss on the purchase of the put option.

B-35
<PAGE>

Gains and losses on the purchase of protective put options would tend to be
offset by countervailing changes in the value of underlying currency or
portfolio securities.

In addition to using options for the hedging purposes described above, the
Funds may use options on currency to seek to increase total return. The Funds
may write (sell) covered put and call options on any currency in order to
realize greater income than would be realized on portfolio securities
transactions alone. However, in writing covered call options for additional
income, the Funds may forego the opportunity to profit from an increase in the
market value of the underlying currency. Also, when writing put options, the
Funds accept, in return for the option premium, the risk that they may be
required to purchase the underlying currency at a price in excess of the
currency's market value at the time of purchase.

Special Risks Associated With Options on Currency. An exchange traded
options position may be closed out only on an options exchange which provides a
secondary market for an option of the same series. Although a Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time.
For some options no secondary market on an exchange may exist. In such event,
it might not be possible to effect closing transactions in particular options,
with the result that a Fund would have to exercise its options in order to
realize any profit and would incur transaction costs upon the sale of underlying
securities pursuant to the exercise of put options. If a Fund as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying currency (or security quoted
or denominated in that currency) until the option expires or it delivers the
underlying currency upon exercise.

There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities of
the Options Clearing Corporation inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with the
timely execution of customers' orders.

A Fund may purchase and write over-the-counter options to the extent
consistent with its limitation on investments in illiquid securities. Trading
in over-the-counter options is subject to the risk that the other party will be
unable or unwilling to close out options purchased or written by a Fund.

The amount of the premiums which a Fund may pay or receive may be adversely
affected as new or existing institutions, including other investment companies,
engage in or increase their option purchasing and writing activities.

Currency Swaps, Mortgage Swaps, Credit Swaps, Index Swaps and Interest Rate
- ---------------------------------------------------------------------------
Swaps, Caps, Floors and Collars
- -------------------------------

The Real Estate Securities Fund may enter into currency, mortgage, credit,
index and interest rate swaps and other interest rate swap arrangements such as
rate caps, floors and collars, for hedging purposes or to seek to increase total
return. Currency swaps involve the

B-36
<PAGE>

exchange by a Fund with another party of their respective rights to make or
receive payments in specified currencies. Interest rate swaps involve the
exchange by a Fund with another party of their respective commitments to pay or
receive interest, such as an exchange of fixed rate payments for floating rate
payments. Mortgage swaps are similar to interest rate swaps in that they
represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages. Index swaps
involve the exchange by a Fund with another party of the respective amounts
payable with respect to a notional principal amount at interest rates equal to
two specified indices. Credit swaps involve the receipt of floating or fixed
rate payments in exchange for assuming potential credit losses of an underlying
security. Credit swaps give one party to a transaction the right to dispose of
or acquire an asset (or group of assets), or the right to receive or make a
payment for the other party, upon the occurrence of specified credit events. The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payment of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling the interest rate floor. An interest rate collar is the combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates.

A Fund will enter into interest rate, mortgage and index swaps only on a
net basis, which means that the two payment streams are netted out, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate, index and mortgage swaps do not involve the delivery
of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate, index and mortgage swaps is limited to the
net amount of interest payments that the Fund is contractually obligated to
make. If the other party to an interest rate, index or mortgage swap defaults,
the Fund's risk of loss consists of the net amount of interest payments that the
Fund is contractually entitled to receive. In contrast, 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. To the extent that the Fund's potential exposure in a transaction
involving a swap or an interest rate floor, cap or collar is covered by the
segregation of cash or liquid assets or otherwise, the Funds and the Investment
Adviser believe that swaps do not constitute senior securities under the Act
and, accordingly, will not treat them as being subject to a Fund's borrowing
restrictions.

A Fund will not enter into transactions involving swaps, caps, floors or
collars unless the unsecured commercial paper, senior debt or claims paying
ability of the other party thereto is considered to be investment grade by the
Investment Adviser.

The use of interest rate, mortgage, index, credit and currency swaps, as
well as interest rate caps, floors and collars, is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. If an Investment Adviser is
incorrect in its forecasts of market values, interest rates and currency
exchange rates, the investment performance of a Fund would be less favorable
than

B-37
<PAGE>

it would have been if this investment technique were not used. The Investment
Adviser, under the supervision of the Board of Trustees, is responsible for
determining and monitoring the liquidity of the Funds' transactions in swaps,
caps, floors and collars.

Convertible Securities
- ----------------------

Each Fund may invest in convertible securities. Convertible securities
include corporate notes or preferred stock but are ordinarily long-term debt
obligation of the issuer convertible at a stated exchange rate into common stock
of the issuer. As with all debt securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of similar
quality. However, when the market price of the common stock underlying a
convertible security exceeds the conversion price, the price of the convertible
security tends to reflect the value of the underlying common stock. As the
market price of the underlying common stock declines, the convertible security
tends to trade increasingly on a yield basis, and thus may not depreciate to the
same extent as the underlying common stock. Convertible securities rank senior
to common stocks in an issuer's capital structure and consequently entail less
risk than the issuer's common stock. In evaluating a convertible security, the
Investment Adviser will give primary emphasis to the attractiveness of the
underlying common stock. Convertible debt securities are equity investments for
purposes of each Fund's investment policies.

Preferred Securities
- --------------------

Each Fund may invest in preferred securities. 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
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. Often, however, on the occurrence
of any such event of default or non-compliance by the issuer, preferred
stockholders will be entitled to gain representation on the issuer's board of
directors or increase their existing board representation. In addition,
preferred stockholders may be granted voting rights with respect to certain
issues on the occurrence of any event of default.

Equity Swaps
- ------------

Each Fund may enter into equity swap contracts to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment is restricted for legal reasons or is otherwise
impracticable. Equity swaps may also be used for hedging purposes or to seek to
increase total return. The counterparty to an equity swap contract will
typically be a bank, investment banking firm or broker/dealer. Equity swap
contracts may be structured in different ways. For example, a counterparty may
agree to pay the Fund the amount, if any, by which the notional amount of the
equity swap contract would have increased in value had it been invested in the
particular stocks (or an index of stocks), plus the dividends that would have
been received on those stocks. In these cases, the Fund may agree to pay to the
counterparty a floating

B-38
<PAGE>

rate of interest on the notional amount of the equity swap contract plus the
amount, if any, by which that notional amount would have decreased in value had
it been invested in such stocks. Therefore, the return to the Fund on the equity
swap contract should be the gain or loss on the notional amount plus dividends
on the stocks less the interest paid by the Fund on the notional amount. In
other cases, the counterparty and the Fund may each agree to pay the other the
difference between the relative investment performances that would have been
achieved if the notional amount of the equity swap contract had been invested in
different stocks (or indices of stocks).

A Fund will enter into equity swaps only on a net basis, which means that
the two payment streams are netted out, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Payments may be made
at the conclusion of an equity swap contract or periodically during its term.
Equity swaps do not involve the delivery of securities or other underlying
assets. Accordingly, the risk of loss with respect to equity swaps is limited
to the net amount of payments that a Fund is contractually obligated to make.
If the other party to an equity swap defaults, a Fund's risk of loss consists of
the net amount of payments that such Fund is contractually entitled to receive,
if any. Inasmuch as these transactions are entered into for hedging purposes or
are offset by segregated cash or liquid assets to cover the Funds' potential
exposure, the Funds and their Investment Adviser believe that transactions do
not constitute senior securities under the Act and, accordingly, will not treat
them as being subject to a Fund's borrowing restrictions.

A Fund will not enter into swap transactions unless the unsecured
commercial paper, senior debt or claims paying ability of the other party
thereto is considered to be investment grade by the Investment Adviser.

Lending of Portfolio Securities
- -------------------------------

Each Fund may lend portfolio securities. Under present regulatory
policies, such loans may be made to institutions, such as brokers or dealers and
would be required to be secured continuously by collateral in cash, cash
equivalents, letters of credit or U.S. Government securities maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. A Fund would be required to have the right to call a loan and obtain
the securities loaned at any time on five days' notice. For the duration of a
loan, a Fund would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also receive
compensation from investment of the collateral. A Fund would not have the right
to vote any securities having voting rights during the existence of the loan,
but a Fund would call the loan in anticipation of an important vote to be taken
among holders of the securities or the giving or withholding of their consent on
a material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovering, or even loss of rights in, the
collateral should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the Investment Adviser to be of good
standing, and when, in the judgment of the Investment Adviser, the consideration
which can be earned currently from securities loans of this type justifies the
attendant risk. If the Investment Adviser determines to make securities loans,
it is intended that the value of the securities loaned

B-39
<PAGE>

would not exceed one-third of the value of the total assets of a Fund (including
the loan collateral).

When-Issued Securities and Forward Commitments
- ----------------------------------------------

Each Fund may purchase securities on a when-issued basis or purchase or
sell securities on a forward commitment basis. These transactions involve a
commitment by a Fund to purchase or sell securities at a future date. The price
of the underlying securities (usually expressed in terms of yield) and the date
when the securities will be delivered and paid for (the settlement date) are
fixed at the time the transaction is negotiated. When-issued purchases and
forward commitment transactions are negotiated directly with the other party,
and such commitments are not traded on exchanges. A Fund will purchase
securities on a when-issued basis or purchase or sell securities on a forward
commitment basis only with the intention of completing the transaction and
actually purchasing or selling the securities. If deemed advisable as a matter
of investment strategy, however, a Fund may dispose of or negotiate a commitment
after entering into it. A Fund may realize a capital gain or loss in connection
with these transactions. For purposes of determining a Fund's duration, the
maturity of when-issued or forward commitment securities will be calculated from
the commitment date. A Fund is required to segregate until three days prior to
the settlement date, cash and liquid assets in an amount sufficient to meet the
purchase price. Alternatively, a Fund may enter into offsetting contracts for
the forward sale of other securities that it owns. Securities purchased or sold
on a when-issued or forward commitment basis involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date or if the
value of the security to be sold increases prior to the settlement date.

Investment in Unseasoned Companies
- ----------------------------------

Each Fund may invest in companies (including predecessors) which have
operated less than three years, except that this limitation does not apply to
debt securities which have been rated investment grade or better by at least one
nationally recognized statistical ratings organization ("NRSRO"). The
securities of such companies may have limited liquidity, which can result in
their being priced higher or lower than might otherwise be the case. In
addition, investments in unseasoned companies are more speculative and entail
greater risk than do investments in companies with an established operating
record.

Other Investment Companies
- --------------------------

A Fund reserves the right to invest up to 10% of its total assets in the
securities of all investment companies (including SPDRs) but may not acquire
more than 3% of the voting securities of any other investment company. Pursuant
to an exemptive order obtained from the SEC, the Funds may invest in money
market funds for which the Investment Adviser or any of its affiliates serves as
investment adviser. A Fund will indirectly bear its proportionate share of any
management fees and other expenses paid by investment companies in which it
invests in addition to the advisory and administration fees paid by the Fund.
However, to the extent that the Fund invests in a money market fund for which
the Investment Adviser or any of its

B-40
<PAGE>

affiliates acts as investment adviser, the advisory and administration fees
payable by the Fund to the Investment Adviser will be reduced by an amount equal
to the Fund's proportionate share of the advisory and administration fees paid
by such money market fund to the investment adviser.

SPDRs are interests in a unit investment trust ("UIT") that may be obtained
from the UIT or purchased in the secondary market (SPDRs are listed on the
American Stock Exchange). There is a 5% limit based on total assets on
investments by any one Fund in SPDRs. The UIT will issue SPDRs in aggregations
known as "Creation Units" in exchange for a "Portfolio Deposit" consisting of
(a) a portfolio of securities substantially similar to the component securities
("Index Securities") of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P Index"), (b) a cash payment equal to a pro rata portion of the
dividends accrued on the UIT's portfolio securities since the last dividend
payment by the UIT, net of expenses and liabilities, and (c) a cash payment or
credit ("Balancing Amount") designed to equalize the net asset value of the S&P
Index and the net asset value of a Portfolio Deposit.

SPDRs are not individually redeemable, except upon termination of the UIT.
To redeem, the Portfolio must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the
Portfolio will receive Index Securities and cash identical to the Portfolio
Deposit required of an investor wishing to purchase a Creation Unit that day.

The price of SPDRs is derived from and based upon the securities held by
the UIT. Accordingly, the level of risk involved in the purchase or sale of a
SPDR is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for SPDRs is based
on a basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by the Funds could result in losses on SPDRs.

Each Fund may also purchase shares of investment companies investing
primarily in foreign securities, including "country funds." Country funds have
portfolios consisting primarily of securities of issuers located in one foreign
country or region. Each Fund may, subject to the limitations stated above,
invest in World Equity Benchmark Shares ("WEBS") and similar securities that
invest in securities included in foreign securities indices.

Repurchase Agreements
- ---------------------

Each Fund may enter into repurchase agreements with dealers in U.S.
Government securities and member banks of the Federal Reserve System which
furnish collateral at least equal in value or market price to the amount of
their repurchase obligation. A repurchase agreement is an arrangement under
which a Fund purchases securities and the seller agrees to repurchase the
securities within a particular time and at a specified price. Custody of the
securities is maintained by a Fund's custodian (or subcustodian). The
repurchase price may be higher than the purchase price, the difference being
income to a Fund, or the purchase and repurchase prices may be the same, with
interest at a stated rate due to a Fund together with the

B-41
<PAGE>

repurchase price on repurchase. In either case, the income to a Fund is
unrelated to the interest rate on the security subject to the repurchase
agreement.

For purposes of the Act and generally for tax purposes, a repurchase
agreement is deemed to be a loan from a Fund to the seller of the security. For
other purposes, it is not always clear whether a court would consider the
security purchased by a Fund subject to a repurchase agreement as being owned by
a Fund or as being collateral for a loan by a Fund to the seller. In the event
of commencement of bankruptcy or insolvency proceedings with respect to the
seller of the security before repurchase of the security under a repurchase
agreement, a Fund may encounter delay and incur costs before being able to sell
the security. Such a delay may involve loss of interest or a decline in price
of the security. If the court characterizes the transaction as a loan and a
Fund has not perfected a security interest in the security, a Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
risk of losing some or all of the principal and interest involved in the
transaction.

The Investment Adviser seeks to minimize the risk of loss from repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the security. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
security. However, if the market value of the security subject to the
repurchase agreement becomes less than the repurchase price (including accrued
interest), a Fund will direct the seller of the security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement equals or exceeds the repurchase price. Certain repurchase agreements
which provide for settlement in more than seven days can be liquidated before
the nominal fixed term on seven days or less notice. Such repurchase agreements
will be regarded as liquid instruments.

In addition, a Fund, together with other registered investment companies
having advisory agreements with the Investment Adviser or its affiliates, may
transfer uninvested cash balances into a single joint account, the daily
aggregate balance of which will be invested in one or more repurchase
agreements.

Mortgage Dollar Rolls
- ---------------------

When Real Estate Securities Fund enters into a mortgage dollar roll, it
will segregate cash or liquid assets in an amount equal to the forward purchase
price until the settlement date.

Portfolio Turnover
- ------------------

Each Fund may engage in active short-term trading to benefit from yield
disparities among different issues of securities or among the markets for equity
securities, or for other reasons. It is anticipated that the portfolio turnover
rate of each Fund will vary from year to year.

B-42
<PAGE>

During the Internet Tollkeeper Fund's first year of operations its portfolio
turnover rate is not expected to exceed 50%.

INVESTMENT RESTRICTIONS

The following investment restrictions have been adopted by the Trust as
fundamental policies that cannot be changed without the affirmative vote of the
holders of a majority (as defined in the Act) of the outstanding voting
securities of the affected Fund. The investment objective of each Fund and all
other investment policies or practices of each Fund are considered by the Trust
not to be fundamental and accordingly may be changed without shareholder
approval. See "Investment Objectives and Policies" in the Prospectus. For
purposes of the Act, "majority" means the lesser of (a) 67% or more of the
shares of the Trust or a Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust or a Fund are present or represented
by proxy, or (b) more than 50% of the shares of the Trust or a Fund. For
purposes of the following limitations, any limitation which involves a maximum
percentage shall not be considered violated unless an excess over the percentage
occurs immediately after, and is caused by, an acquisition or encumbrance of
securities or assets of, or borrowings by, a Fund. With respect to the Funds'
fundamental investment restriction no. 3, asset coverage of at least 300% (as
defined in the Act), inclusive of any amounts borrowed, must be maintained at
all times.

A Fund may not:

(1) Make any investment inconsistent with the Fund's classification as
a diversified company under the Investment Company Act of 1940, as
amended (the "Act").

(2) Invest 25% or more of its total assets in the securities of one or
more issuers conducting their principal business activities in the
same industry (other than the Goldman Sachs Real Estate Securities
Fund, which will invest at least 25% or more of its total assets in
the real estate industry and the Goldman Sachs Internet TollKeeper
Fund which will invest at least 25% of its total assets in the
media, telecommunications, technology and/or internet industries
(excluding the U.S. Government or any of its agencies or
instrumentalities).

(3) Borrow money, except (a) the Fund may borrow from banks (as defined
in the Act) or through reverse repurchase agreements in amounts up
to 33-1/3% of its total assets (including the amount borrowed), (b)
the Fund may, to the extent permitted by applicable law, borrow up
to an additional 5% of its total assets for temporary purposes, (c)
the Fund may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of portfolio securities, (d)
the Fund may purchase securities on margin to the extent permitted
by applicable law and (e) the Fund may engage in transactions in
mortgage dollar rolls which are accounted for as financings.

B-43
<PAGE>

(4) Make loans, except through (a) the purchase of debt obligations in
accordance with the Fund's investment objective and policies, (b)
repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities as permitted by
applicable law.

(5) Underwrite securities issued by others, except to the extent that
the sale of portfolio securities by the Fund may be deemed to be an
underwriting.

(6) Purchase, hold or deal in real estate, although a Fund may purchase
and sell securities that are secured by real estate or interests
therein, securities of real estate investment trusts and mortgage-
related securities and may hold and sell real estate acquired by a
Fund as a result of the ownership of securities.

(7) Invest in commodities or commodity contracts, except that the Fund
may invest in currency and financial instruments and contracts that
are commodities or commodity contracts.

(8) Issue senior securities to the extent such issuance would violate
applicable law.

Each Fund may, notwithstanding any other fundamental investment restriction
or policy, invest some or all of its assets in a single open-end investment
company or series thereof with substantially the same investment objective,
restrictions and policies as the Fund.

In addition to the fundamental policies mentioned above, the Trustees have
adopted the following non-fundamental policies which can be changed or amended
by action of the Trustees without approval of shareholders.

A Fund may not:

(a) Invest in companies for the purpose of exercising control or
management.

(b) Invest more than 15% of the Fund's net assets in illiquid investments
including repurchase agreements with a notice or demand period of more
than seven days, securities which are not readily marketable and
restricted securities not eligible for resale pursuant to Rule 144A
under the 1933 Act.

(c) Purchase additional securities if the Fund's borrowings (excluding
covered mortgage dollar rolls) exceed 5% of its net assets.

(d) Make short sales of securities, except short sales against the box.

B-44
<PAGE>

MANAGEMENT

The Trustees are responsible for deciding matters of general policy
and reviewing the actions of the Investment Adviser, distributor and transfer
agent. The officers of the Trust conduct and supervise each Fund's daily
business operations.

Information pertaining to the Trustees and officers of the Trust is
set forth below. Trustees and officers deemed to be "interested persons" of the
Trust for purposes of the Act are indicated by an asterisk.

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
Ashok N. Bakhru, 57 Chairman Chairman of the Board and Trustee
P.O. Box 143 & Trustee Goldman Sachs Variable Insurance Trust
Lima, PA 19037 (registered investment company) (since
October 1997); President, ABN Associates
(July 1994-March 1996 and November 1998
to present); Executive Vice President
Finance and Administration and Chief
Financial Officer, Coty Inc.
(manufacturer of fragrances and
cosmetics) (April 1996-November 1998);
Senior Vice President of Scott Paper
Company (until June 1994); Director of
Arkwright Mutual Insurance Company
(1994-Present); Trustee of International
House of Philadelphia (1989-Present);
Member of Cornell University Council
(1992-Present); Trustee of the Walnut
Street Theater (1992-Present); Director,
Private Equity Investors-III (since
November 1998); Trustee, Citizens
Scholarship Foundation of America (since
1998).
</TABLE>

B-45
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
*David B. Ford, 53 Trustee Trustee- Goldman Sachs Variable
One New York Plaza Insurance Trust (registered investment
New York, NY 10004 company) (since October 1997); Director,
Commodities Corp. LLC (futures and
commodities traders) (since April 1997);
Managing Director, J. Aron & Company
(commodity dealer and risk management
adviser) (since November 1996); Managing
Director, Goldman Sachs & Co. Investment
Banking Division (since November 1996);
Chief Executive Officer and Director,
CIN Management (investment adviser)
(since August 1996); Chief Executive
Officer & Managing Director and
Director, Goldman Sachs Asset Management
International (since November 1995 and
December 1994, respectively); Co-Head,
Goldman Sachs Asset Management Division
(since November 1995); Co-Head and
Director, Goldman Sachs Funds Management
Inc. (since November 1995 and December
1994, respectively); Chairman and
Director, Goldman Sachs Asset Management
Japan Limited (since November 1994).

*Douglas C. Grip, 37 Trustee Trustee and President Goldman Sachs
One New York Plaza & President Variable Insurance Trust (registered
New York, NY 10004 investment company) (since October
1997); Trustee, Trust for credit Unions
(registered investment company)
(Since March 1998). Managing Director,
Goldman Sachs Asset Management Division
(since November 1997); President, Goldman
Sachs Fund Group (since April 1996);
President, MFS Retirement Services Inc.,
of Massachusetts Financial Services
(prior thereto).
</TABLE>

B-46
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
*John P. McNulty, 46 Trustee Trustee Goldman Sachs Variable
One New York Plaza Insurance Trust (registered investment
New York, NY 10004 company) (since October 1997); Managing
Director, Goldman Sachs (since November
1996); General Partner, J. Aron &
Company (since November 1995); Director
and Co-Head, Goldman Sachs Funds
Management Inc. (since November 1995);
Director, Goldman Sachs Asset Management
International (since January 1996);
Co-Head, GSAM (November 1995 to
present); Director, Global Capital
Reinsurance (insurance) (since 1989);
Director, Commodities Corp. LLC (since
April 1997); Limited Partner of Goldman
Sachs (1994 - November 1995) and
Trustee, Trust for Credit Unions
(registered investment company)
(January 1996 - March 1998).
</TABLE>

B-47
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
Mary P. McPherson, 63 Trustee Trustee Goldman Sachs Variable
The Andrew W. Mellon Foundation Insurance Trust (registered investment
140 East 62nd Street company) (since October 1997); Vice
New York, NY 10021 President and Senior Program Officer,
The Andrew W. Mellon Foundation
(provider of grants for conservation,
environmental and educational purposes)
(since October 1997); President of Bryn
Mawr College (1978-1997); Director,
Smith College (since 1998); Director,
Josiah Macy, Jr. Foundation (health
education programs) (since 1977);
Director of the Philadelphia
Contributionship (insurance) (since
1985); Director, Amherst College
(1986-1998); Director, Dayton Hudson
Corporation (general retailing
merchandising) (1988-1997); Director,
The Spenser Foundation (educational
research) (since 1993); and member of
PNC Advisory Board (banking) (since
1993).

*Alan A. Shuch, 49 Trustee Trustee Goldman Sachs Variable
One New York Plaza Insurance Trust (registered investment
New York, NY 10004 company) (since October 1997); Limited
Partner, Goldman Sachs (since December
1994); Consultant to GSAM (since
December 1994); Director, Chief
Operating Officer and Vice President of
Goldman Sachs Funds Management Inc.
(from November 1993 - November 1994);
Chairman and Director, Goldman Sachs
Asset Management Japan Limited
(November 1993 November 1994);
Director, Goldman Sachs Asset Management
International (November 1993 November
1994); General Partner, Goldman Sachs &
Co. Investment Banking Division
(December 1986 November 1994).
</TABLE>

B-48
<PAGE>

William H. Springer, 69 Trustee Trustee Goldman Sachs Variable
701 Morningside Drive Insurance Trust (registered investment
Lake Forest, IL 60045 company) (since October 1997); Director,
The Walgreen Co. (a retail drug store
business) (since April 1988); Director
of Baker, Fentress & Co. (a closed-end,
non-diversified management investment
company) (April 1992 - present);
Chairman and Trustee, Northern
Institutional Funds (since April 1984).

</TABLE>
B-49
<PAGE>

*Nancy L. Mucker, 49 Vice President Vice President Goldman Sachs Variable
4900 Sears Tower Insurance Trust (registered investment
Chicago, IL 60606 company) (since 1997); Vice President,
Goldman Sachs (since April 1985);
Co-Manager of Shareholder Servicing of
Goldman Sachs Asset Management (since
November 1989).

*John M. Perlowski, 34 Treasurer Treasurer Goldman Sachs Variable
One New York Plaza Insurance Trust (registered investment
New York, NY 10004 company) (since 1997); Vice President,
Goldman Sachs (since July 1995); Banking
Director, Investors Bank and Trust
(November 1993 - July 1995).

*James A. Fitzpatrick, 39 Vice President Vice President Goldman Sachs Variable
4900 Sears Tower Insurance Trust (registered investment
Chicago, IL 60606 company) (since October 1997); Vice
President, Goldman Sachs (sine 1998);
Vice President of GSAM (since April
1997); Vice President and General
Manager, First Data Corporation -
Investor Services Group (1994 to 1997).
</TABLE>

B-50
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>

*Jesse Cole, 35 Vice President Vice President Goldman Sachs Variable
4900 Sears Tower Insurance Trust (registered investment
Chicago, IL 60606 company) (since 1998); Vice President,
GSAM (June 1998 to Present); Vice
President, AIM Management Group, Inc.
(investment advisor) (April 1996-June
1998); Assistant Vice President, The
Northern Trust Company (June 1987-April
1996).

*Philip V. Giuca, Jr., 37 Assistant Treasurer Assistant Treasurer Goldman Sachs
One New York Plaza Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997); Vice
President, Goldman Sachs (May
1992-Present).

*Dee Moran, 33 Assistant Treasurer Assistant Treasurer Goldman Sachs
One New York Plaza Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1999); Vice
President, Mutual Fund Administration,
GSAM (since 1995).

*Adrien Deberghes, 31 Assistant Treasurer Assistant Treasurer Goldman Sachs
One New York Plaza Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1999); Vice
President, Mutual Fund Administration,
GSAM (since 1998); Senior Associate,
GSAM (1997-1998).

*Anne Marcel, 40 Vice President Vice President Goldman Sachs Variable
4900 Sears Tower Insurance Trust (registered investment
Chicago, IL 60606 company) (since 1998); Vice President,
GSAM (June 1998-Present); Vice
President, Stein Roe & Farnham, Inc.
(October 1992-June 1998).
</TABLE>

B-51
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>

*Michael J. Richman, 38 Secretary Secretary Goldman Sachs Variable
85 Broad Street Insurance Trust (registered investment
New York, NY 10004 company) (since 1997); General Counsel
of the Funds Group of GSAM (since
December 1997); Associate General
Counsel of GSAM (February 1994 -
December 1997); Counsel to the Funds
Group, GSAM (June 1992 to December
1997); Associate General Counsel,
Goldman Sachs (since December 1998);
Vice President of Goldman Sachs (since
June 1992); and Assistant General
Counsel of Goldman Sachs (June 1992 to
December 1998).
</TABLE>

B-52
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
*Howard B. Surloff, 33 Assistant Secretary Assistant Secretary Goldman Sachs
85 Broad Street Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Assistant General Counsel, GSAM and
Associate General Counsel to the Funds
Group (since December 1997); Assistant
General Counsel and Vice President,
Goldman Sachs (since November 1993 and
May 1994, respectively); Counsel to the
Funds Group, GSAM (November 1993 -
December 1997); Associate of Shereff,
Friedman, Hoffman & Goodman (October
1990 to November 1993).

*Valerie A. Zondorak, 33 Assistant Secretary Assistant Secretary Goldman Sachs
85 Broad Street Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Assistant General Counsel, GSAM and
Assistant General Counsel to the Funds
Group (since December 1997); Vice
President and Counsel, Goldman Sachs
(since March 1997); Counsel to the Funds
Group, GSAM (March 1997 - December
1997); Associate of Shereff, Friedman,
Hoffman & Goodman (September 1990 to
February 1997).

*Deborah A. Farrell, 27 Assistant Secretary Assistant Secretary Goldman Sachs
85 Broad Street Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997); Legal
Products Analyst, Goldman Sachs (since
December 1998); Legal Assistant, Goldman
Sachs (January 1996-December 1998);
Assistant Secretary to the Funds Group
(1996 to present); Executive Secretary,
Goldman Sachs (January 1994 January
1996); Legal Secretary, Cleary,
Gottlieb, Steen and Hamilton (September
1990 to January 1994).
</TABLE>

B-53
<PAGE>

Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>

*Kaysie P. Uniacke, 38 Assistant Secretary Assistant Secretary Goldman Sachs
One New York Plaza Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Managing Director, GSAM (since 1997);
Vice President and Senior Portfolio
Manager, GSAM (1988 to 1997).

*Elizabeth D. Anderson, 29 Assistant Secretary Assistant Secretary Goldman Sachs
One New York Plaza Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Portfolio Manager, GSAM (since April
1996); Junior Portfolio Manager, GSAM
(1995 April 1996); Funds Trading
Assistant, GSAM (1993 - 1995);
Compliance Analyst, Prudential Insurance
(1991 - 1993).

*Amy E. Belanger, 29 Assistant Secretary Assistant Secretary Goldman Sachs
85 Broad Street Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1999);
Counsel, Goldman Sachs (since 1998);
Associate, Dechert Price & Rhoads
(September 1996-1998).
</TABLE>

Each interested Trustee and officer holds comparable positions with certain
other companies of which Goldman Sachs, GSAM or an affiliate thereof is the
investment adviser, administrator and/or distributor. As of ________, 1999, the
Trustees and officers of the Trust as a group owned less than 1% of the
outstanding shares of beneficial interest of the Real Estate Securities Fund.
As of such date, no shares of the Internet Tollkeeper Fund were
outstanding.

The Trust pays each Trustee, other than those who are "interested persons"
of Goldman Sachs, a fee for each Trustee meeting attended and an annual fee.
Such Trustees are also reimbursed for travel expenses incurred in connection
with attending such meetings.

B-54
<PAGE>

The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the fiscal year ended December 31,
1998:

<TABLE>
<CAPTION>
Aggregate Total Compensation from Goldman
Compensation Pension or Retirement Benefits Sachs Trust and the Goldman Sachs
Name of Trustee from the Funds/2/ Accrued as Part of Funds' Expenses fund complex (including the Funds)/3/
- --------------- --------------- ---------------------------------- -------------------------------------
<S> <C> <C> <C>
Ashok N. Bakhru/1/ $ 0 $0 $117,066
David B. Ford 0 0 0
Douglas C. Grip 0 0 0
John P. McNulty 0 0 0
Mary P. McPherson 0 0 84,875
Alan A. Shuch 0 0 0
Jackson W. Smart 0 0 84,875
William H. Springer 0 0 84,875
Richard P. Strubel 0 0 84,875
</TABLE>

- ------------------------
1 Includes compensation as Chairman of the Board of Trustees.

2 Reflects amount paid by the Real Estate Securities Fund during the fiscal
year ended December 31, 1998. As of December 31, 1998, the Internet
Tollkeeper Fund had not commenced investment operations.

3 The Goldman Sachs Fund complex consists of the Goldman Sachs Trust and
Goldman Sachs Variable Insurance Trust. Goldman Sachs Trust consists of 45
mutual funds, including 17 equity funds, on December 31, 1998. Goldman Sachs
Variable Insurance Trust consisted of 8 mutual funds as of December 31,
1998.

B-55
<PAGE>

Class A Shares of the Funds may be sold at net asset value without payment of
any sales charge to Goldman Sachs, its affiliates or their respective officers,
partners, directors or employees (including rehired employees and former
partners), any partnership of which Goldman Sachs is a general partner, any
trustee or officer of the Trust and designated family members of any of the
above individuals. The sales load waivers are due to the nature of the
investors and the reduced sales effort that is needed to obtain such
investments.

Management Services
===================

As stated in the Funds' Prospectuses, GSAM, One New York Plaza, New York, New
York, a separate operating division of Goldman Sachs, 85 Broad Street, New York,
New York, serves as Investment Adviser to the Funds. See "Service Providers" in
the Funds' Prospectuses for a description of the Investment Adviser's duties to
the Funds. The Goldman Sachs Group, Inc., controls the Funds' Investment
Adviser.

Founded in 1869, Goldman Sachs is among the oldest and largest investment
banking firms in the United States. Goldman Sachs is a leader in developing
portfolio strategies and in many fields of investing and financing,
participating in financial markets worldwide and serving individuals,
institutions, corporations and governments. Goldman Sachs is also among the
principal market sources for current and thorough information on companies,
industrial sectors, markets, economies and currencies, and trades and makes
markets in a wide range of equity and debt securities 24-hours a day. The firm
is headquartered in New York and has offices throughout the United States and in
Beijing, Frankfurt, George Town, Hong Kong, London, Madrid, Mexico City, Milan,
Montreal, Osaka, Paris, Sao Paulo, Seoul, Shanghai, Singapore, Sydney, Taipei,
Tokyo, Toronto, Vancouver and Zurich. It has trading professionals throughout
the United States, as well as in London, Tokyo, Hong Kong and Singapore. The
active participation of Goldman Sachs in the world's financial markets enhances
its ability to identify attractive investments. Goldman Sachs has agreed to
permit the Funds to use the name "Goldman Sachs" or a derivative thereof as part
of each Fund's name for as long as a Fund's Management Agreement is in effect.

The Investment Adviser is able to draw on the substantial research and market
expertise of Goldman Sachs, whose investment research effort is one of the
largest in the industry. The Goldman Sachs Global Investment Research
Department covers approximately 2,200 companies, including approximately 1,000
U.S. corporations in 60 industries. The in-depth information and analyses
generated by Goldman Sachs' research analysts are available to the Investment
Adviser.

For more than a decade, Goldman Sachs has been among the top-ranked firms
in Institutional Investor's annual "All-America Research Team" survey. In
addition, many of Goldman Sachs' economists, securities analysts, portfolio
strategists and credit analysts have consistently been highly ranked in
respected industry surveys conducted in the U.S. and abroad. Goldman Sachs is
also among the leading investment firms using quantitative analytics (now used
by a growing number of investors) to structure and evaluate portfolios.

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<PAGE>

In managing the Funds, the Investment Adviser has access to Goldman Sachs'
economics research. The Economics Research Department, based in London,
conducts economic, financial and currency markets research which analyzes
economic trends and interest and exchange rate movement worldwide. The
Economics Research Department tracks factors such as inflation and money supply
figures, balance of trade figures, economic growth, commodity prices, monetary
and fiscal policies, and political events that can influence interest rates and
currency trends. The success of Goldman Sachs' international research team has
brought wide recognition to its members. The team has earned top rankings in
various external surveys such as Extel, Institutional Investor and Reuters.
These rankings acknowledge the achievements of the firm's economists,
strategists and equity analysts.

In allocating assets among foreign countries and currencies for the Funds, the
Investment Adviser will have access to the Global Asset Allocation Model. The
model is based on the observation that the prices of all financial assets,
including foreign currencies, will adjust until investors globally are
comfortable holding the pool of outstanding assets. Using the model, the
Investment Adviser will estimate the total returns from each currency sector
which are consistent with the average investor holding a portfolio equal to the
market capitalization of the financial assets among those currency sectors.
These estimated equilibrium returns are then combined with the expectations of
Goldman Sachs' research professionals to produce an optimal currency and asset
allocation for the level of risk suitable for a Fund given its investment
objectives and criteria.

The Management Agreement provides that GSAM, in its capacity as Investment
Adviser, may render similar services to others as long as the services under the
Management Agreement are not impaired thereby. The Internet Tollkeeper and Real
Estate Securities Funds' Management Agreement was initially approved by the
Trustees, including a majority of the non-interested Trustees (as defined below)
who are not parties to the Management Agreement, on ________, 1999 and July 22,
1997, respectively. The Real Estate Securities Fund's Management Agreement was
most recently approved by the Trustees, including a majority of the Trustees who
are not parties to the Management Agreement or "interested persons" (as such
term is defined in the Act) of any party thereto (the "non-interested
Trustees"), on April 27, 1999. The sole shareholder of the Internet Tollkeeper
and Real Estate Securities Funds approved these arrangements on __________, 1999
and July 21, 1997, respectively. The Management Agreement will remain in effect
until June 30, 2000 and will continue in effect with respect to the applicable
Fund from year to year thereafter provided such continuance is specifically
approved at least annually by (a) the vote of a majority of the outstanding
voting securities of such Fund or a majority of the Trustees of the Trust, and
(b) the vote of a majority of the non-interested Trustees of the Trust, cast in
person at a meeting called for the purpose of voting on such approval.

The Management Agreement will terminate automatically if assigned (as
defined in the Act). The Management Agreement is also terminable at any time
without penalty by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the particular Fund on 60 days' written notice
to the Investment Adviser and by the Investment Adviser on 60 days' written
notice to the Trust.

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<PAGE>

Pursuant to the Management Agreement the Investment Adviser is entitled to
receive fees, payable monthly, at the annual rate of 1.00% of each Fund's
average daily net assets.

During the period July 27, 1998 (commencement of operations) through December
31, 1998, the Real Estate Securities Fund incurred $82,560 in investment
advisory fees. As of the date of this Additional Statement, the Internet
Tollkeeper Fund had not commenced investment operations.

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

Activities of Goldman Sachs and Its Affiliates and Other Accounts Managed by
Goldman Sachs. The involvement of the Investment Adviser and Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts and
other activities of Goldman Sachs may present conflicts of interest with respect
to the Funds or impede their investment activities.

Goldman Sachs and its affiliates, including, without limitation, the
Investment Adviser and its advisory affiliates, have proprietary interests in,
and may manage or advise with respect to, accounts or funds (including separate
accounts and other funds and collective investment vehicles) which have
investment objectives similar to those of the Funds and/or which engage in
transactions in the same types of securities, currencies and instruments as the
Funds. Goldman Sachs and its affiliates are major participants in the global
currency, equities, swap and fixed-income markets, in each case both on a
proprietary basis and for the accounts of customers. As such, Goldman Sachs and
its affiliates are actively engaged in transactions in the same securities,
currencies and instruments in which the Funds invest. Such activities could
affect the prices and availability of the securities, currencies and instruments
in which the Funds will invest, which could have an adverse impact on each
Fund's performance. Such transactions, particularly in respect of proprietary
accounts or customer accounts other than those included in the Investment
Adviser's and its advisory affiliates' asset management activities, will be
executed independently of the Funds' transactions and thus at prices or rates
that may be more or less favorable. When the Investment Adviser and its
advisory affiliates seek to purchase or sell the same assets for their managed
accounts, including the Funds, the assets actually purchased or sold may be
allocated among the accounts on a basis determined in its good faith discretion
to be

B-58
<PAGE>

equitable. In some cases, this system may adversely affect the size or the price
of the assets purchased or sold for the Funds.

From time to time, the Funds' activities may be restricted because of
regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or
their internal policies designed to comply with such restrictions. As a result,
there may be periods, for example, when the Investment Adviser and/or its
affiliates will not initiate or recommend certain types of transactions in
certain securities or instruments with respect to which the Investment Adviser
and/or its affiliates are performing services or when position limits have been
reached.

In connection with their management of the Funds, the Investment Adviser may
have access to certain fundamental analysis and proprietary technical models
developed by Goldman Sachs and other affiliates. The Investment Adviser will
not be under any obligation, however, to effect transactions on behalf of the
Funds in accordance with such analysis and models. In addition, neither Goldman
Sachs nor any of its affiliates will have any obligation to make available any
information regarding their proprietary activities or strategies, or the
activities or strategies used for other accounts managed by them, for the
benefit of the management of the Funds and it is not anticipated that the
Investment Adviser will have access to such information for the purpose of
managing the Funds. The proprietary activities or portfolio strategies of
Goldman Sachs and its affiliates or the activities or strategies used for
accounts managed by them or other customer accounts could conflict with the
transactions and strategies employed by the Investment Adviser in managing the
Funds.

The results of each Fund's investment activities may differ significantly from
the results achieved by the Investment Adviser and its affiliates for their
proprietary accounts or accounts (including investment companies or collective
investment vehicles) managed or advised by them. It is possible that Goldman
Sachs and its affiliates and such other accounts will achieve investment results
which are substantially more or less favorable than the results achieved by a
Fund. Moreover, it is possible that a Fund will sustain losses during periods
in which Goldman Sachs and its affiliates achieve significant profits on their
trading for proprietary or other accounts. The opposite result is also
possible.

The investment activities of Goldman Sachs and its affiliates for their
proprietary accounts and accounts under their management may also limit the
investment opportunities for the Fund in certain emerging markets in which
limitations are imposed upon the aggregate amount of investment, in the
aggregate or individual issuers, by affiliated foreign investors.

An investment policy committee which may include partners of Goldman Sachs and
its affiliates may develop general policies regarding a Fund's activities but
will not be involved in the day-to-day management of such Fund. In such
instances, those individuals may, as a result, obtain information regarding the
Fund's proposed investment activities which is not generally available to the
public. In addition, by virtue of their affiliation with Goldman Sachs, any
such member of an investment policy committee will have direct or indirect
interests in the activities of Goldman Sachs and its affiliates in securities
and investments similar to those in which the Fund invests.

B-59
<PAGE>

In addition, certain principals and certain of the employees of the Investment
Adviser are also principals or employees of Goldman Sachs or their affiliated
entities. As a result, the performance by these principals and employees of
their obligations to such other entities may be a consideration of which
investors in the Funds should be aware.

The Investment Adviser may enter into transactions and invest in currencies or
instruments on behalf of a Fund in which customers of Goldman Sachs serve as the
counterparty, principal or issuer. In such cases, such party's interests in the
transaction will be adverse to the interests of a Fund, and such party may have
no incentive to assure that the Funds obtain the best possible prices or terms
in connection with the transactions. Goldman Sachs and its affiliates may also
create, write or issue derivative instruments for customers of Goldman Sachs or
its affiliates, the underlying securities or instruments of which may be those
in which a Fund invests or which may be based on the performance of a Fund. The
Funds may, subject to applicable law, purchase investments which are the subject
of an underwriting or other distribution by Goldman Sachs or its affiliates and
may also enter transactions with other clients of Goldman Sachs or its
affiliates where such other clients have interests adverse to those of the
Funds. At times, these activities may cause departments of the Firm to give
advice to clients that may cause these clients to take actions adverse to the
interests of the client. To the extent affiliated transactions are permitted,
the Funds will deal with Goldman Sachs and its affiliates on an arms-length
basis.

Each Fund will be required to establish business relationships with its
counterparties based on the Fund's own credit standing. Neither Goldman Sachs
nor its affiliates will have any obligation to allow their credit to be used in
connection with a Fund's establishment of its business relationships, nor is it
expected that a Fund's counterparties will rely on the credit of Goldman Sachs
or any of its affiliates in evaluating the Fund's creditworthiness.

From time to time, Goldman Sachs or any of its affiliates may, but is not
required to, purchase and hold shares of a Fund in order to increase the assets
of the Fund. Increasing a Fund's assets may enhance investment flexibility and
diversification and may contribute to economies of scale that tend to reduce the
Fund's expense ratio. Goldman Sachs reserves the right to redeem at any time
some or all of the shares of a Fund acquired for its own account. A large
redemption of shares of a Fund by Goldman Sachs could significantly reduce the
asset size of the Fund, which might have an adverse effect on the Fund's
investment flexibility, portfolio diversification and expense ratio. Goldman
Sachs will consider the effect of redemptions on a Fund and other shareholders
in deciding whether to redeem its shares.

It is possible that a Fund's holdings will include securities of entities for
which Goldman Sachs performs investment banking services as well as securities
of entities in which Goldman Sachs makes a market. From time to time, Goldman
Sachs' activities may limit the Funds' flexibility in purchases and sales of
securities. When Goldman Sachs is engaged in an underwriting or other
distribution of securities of an entity, the Investment Adviser may be
prohibited from purchasing or recommending the purchase of certain securities of
that entity for the Funds.

B-60
<PAGE>

Distributor and Transfer Agent
==============================

Goldman Sachs serves as the exclusive distributor of shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution agreement
with the Trust on behalf of each Fund. Shares of the Funds are offered and sold
on a continuous basis by Goldman Sachs, acting as agent. Pursuant to the
distribution agreement, after the Prospectus and periodic reports have been
prepared, set in type and mailed to shareholders, Goldman Sachs will pay for the
printing and distribution of copies thereof used in connection with the offering
to prospective investors. Goldman Sachs will also pay for other supplementary
sales literature and advertising costs. Goldman Sachs may enter into sales
agreements with certain investment dealers and other financial service firms
(the "Authorized Dealers") to solicit subscriptions for shares of the Funds.
Goldman Sachs receives a portion of the sales charge imposed on the sale, in the
case of Class A Shares, or redemption in the case of Class B and Class C Shares
(and in certain cases, Class A Shares), of such Fund shares.

During the period July 27, 1998 (commencement of operations) through December
31, 1998, Goldman Sachs retained approximately $125,000 in combined commissions
on sales of the Real Estate Securities Fund's Class A, Class B and Class C
shares. As of the date of this Additional Statement, the Internet Tollkeeper
Fund had not commenced investment operations.

Goldman Sachs serves as the Trust's transfer agent. Under its transfer agency
agreement with the Trust, Goldman Sachs has undertaken with the Trust to (i)
record the issuance, transfer and redemption of shares, (ii) provide
confirmations of purchases and redemptions, and quarterly statements, as well as
certain other statements, (iii) provide certain information to the Trust's
custodian and the relevant sub-custodian in connection with redemptions, (iv)
provide dividend crediting and certain disbursing agent services, (v) maintain
shareholder accounts, (vi) provide certain state Blue Sky and other information,
(vii) provide shareholders and certain regulatory authorities with tax related
information, (viii) respond to shareholder inquiries, and (ix) render certain
other miscellaneous services. For its transfer agency services, Goldman Sachs is
entitled to receive a transfer agency fee equal, on an ongoing basis, to 0.04%
of average daily net assets with respect to each Fund's Institutional and
Service Shares and 0.19% of average daily net assets with respect to each Fund's
Class A, Class B and Class C Shares.

During the period July 27, 1998 (commencement of operations) through December
31, 1998, Goldman Sachs received fees of $1,133, $3,064 and $0 from the Real
Estate Securities Fund's Class A, B and C shares; Institutional shares and
Service shares, respectively, as compensation for its services rendered to the
Fund as transfer agent and the assumption by Goldman Sachs of expenses related
thereto. As of the date of this Additional Statement, the Internet Tollkeeper
Fund had not commenced investment operations.

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<PAGE>

The Trust's distribution and transfer agency agreements each provide that
Goldman Sachs may render similar services to others so long as the services
Goldman Sachs provides thereunder are not impaired thereby. Such agreements
also provide that the Trust will indemnify Goldman Sachs against certain
liabilities.

Expenses
========

The Trust, on behalf of each Fund, is responsible for the payment of each
Fund's respective expenses. The expenses include, without limitation, the fees
payable to the Investment Adviser, service fees paid to Service Organizations,
the fees and expenses of the Trust's custodian and subcustodians, transfer agent
fees, brokerage fees and commissions, filing fees for the registration or
qualification of the Trust's shares under federal or state securities laws,
expenses of the organization of the Trust, fees and expenses incurred by the
Trust 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 Trust for violation of any law, legal and
auditing fees and expenses (including the cost of legal and certain accounting
services rendered by employees of GSAM, Goldman Sachs Asset Management
International ("GSAMI") and Goldman Sachs with respect to the Trust), 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 the Trust's shareholders and regulatory authorities,
any expenses assumed by a Fund pursuant to its distribution and service plans,
compensation and expenses of its "non-interested" Trustees and extraordinary
expenses, if any, incurred by the Trust. Except for fees under any distribution
and service plans applicable to a particular class and transfer agency fees, all
Fund expenses are borne on a non-class specific basis.

The imposition of the Investment Adviser's fee, as well as other operating
expenses, will have the effect of reducing the total return to investors. From
time to time, the Investment Adviser may waive receipt of is fees and/or
voluntarily assume certain expenses of a Fund, which would have the effect of
lowering that Fund's overall expense ratio and increasing total return to
investors at the time such amounts are waived or assumed, as the case may
be.

The Investment Adviser voluntarily has agreed to reduce or limit certain
"Other Expenses" (excluding management, distribution and service fees, transfer
agency fees, service share fees, taxes, interest, brokerage, and litigation,
indemnification and other extraordinary expenses) for the Internet Tollkeeper
and Real Estate Securities Funds to the extent such expenses exceed 0.06% and
0.00%, of each Fund'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 applicable Investment Adviser
in its discretion at any time.

Fees and expenses of legal counsel, registering shares of a Fund, holding
meetings and communicating with shareholders may include an allocable portion of
the cost of maintaining an

B-62
<PAGE>

internal legal and compliance department. Each Fund may also bear an allocable
portion of the Investment Adviser's costs of performing certain accounting
services not being provided by a Fund's Custodian.

During the period July 27, 1998 (commencement of operations) through December
31, 1998, the amount of certain of the Real Estate Securities Fund's "Other
Expenses" that was reduced or otherwise limited was $151,328 under the expense
limitations that were then in effect. As of the date of this Additional
---------------------------------
Statement, the Internet Tollkeeper Fund has not commenced investment operations.
- --------------------------------------------------------------------------------

Custodian and Sub-Custodians
============================

State Street, P.O. Box 1713, Boston, Massachusetts 02105, is the custodian of
the Trust's portfolio securities and cash. State Street also maintains the
Trust's accounting records. State Street may appoint domestic and foreign sub-
custodians from time to time to hold certain securities purchased by the Trust
and to hold cash for the Trust.

Independent Public Accountants
==============================

______________________, independent public accountants,
________________________, have been selected as auditors of the Trust. In
addition to audit services, _____________________ prepares the Trust's federal
and state tax returns, and provides consultation and assistance on accounting,
internal control and related matters.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Investment Adviser is responsible for decisions to buy and sell securities
for the Funds, the selection of brokers and dealers to effect the transactions
and the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a securities exchange are effected through brokers who charge a
commission for their services. Orders may be directed to any broker including,
to the extent and in the manner permitted by applicable law, Goldman Sachs.

In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of a security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.

In placing orders for portfolio securities of a Fund, the Investment Adviser
is generally required to give primary consideration to obtaining the most
favorable execution and net price available. This means that the Investment
Adviser will seek to execute each transaction at a price and commission, if any,
which provides the most favorable total cost or proceeds

B-63
<PAGE>

reasonably attainable in the circumstances. As permitted by Section 28(e) of the
Securities Exchange Act of 1934, the Fund may pay a broker which provides
brokerage and research services to the Fund an amount of disclosed commission in
excess of the commission which another broker would have charged for effecting
that transaction. Such practice is subject to a good faith determination that
such commission is reasonable in light of the services provided and to such
policies as the Trustees may adopt from time to time. While the Investment
Adviser generally seeks reasonably competitive spreads or commissions, a Fund
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Investment Adviser will consider research and
investment services provided by brokers or dealers who effect or are parties to
portfolio transactions of a Fund, the Investment Adviser and its affiliates, or
their other clients. Such research and investment services are those which
brokerage houses customarily provide to institutional investors and include
research reports on particular industries and companies, economic surveys and
analyses, recommendations as to specific securities and other products or
services (e.g., quotation equipment and computer related costs and expenses),
advice concerning the value of securities, the advisability of investing in,
purchasing or selling securities, the availability of securities or the
purchasers or sellers of securities, furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts, effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement) and providing
lawful and appropriate assistance to the Investment Adviser in the performance
of their decision-making responsibilities. Such services are used by the
Investment Adviser in connection with all of their investment activities, and
some of such services obtained in connection with the execution of transactions
for a Fund may be used in managing other investment accounts. Conversely,
brokers furnishing such services may be selected for the execution of
transactions of such other accounts, whose aggregate assets are far larger than
those of a Fund, and the services furnished by such brokers may be used by the
Investment Adviser in providing management services for the Trust.

In circumstances where two or more broker-dealers offer comparable prices and
execution capability, preference may be given to a broker-dealer which has sold
shares of the Fund as well as shares of other investment companies or accounts
managed by the Investment Adviser. This policy does not imply a commitment to
execute all portfolio transactions through all broker-dealers that sell shares
of the Fund.

On occasions when the Investment Adviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as its other customers
(including any other fund or other investment company or advisory account for
which the Investment Adviser acts as investment adviser or sub-investment
adviser), the Investment Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased for the Fund
with those to be sold or purchased for such other customers in order to obtain
the best net price and most favorable execution under the circumstances. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Investment Adviser in
the manner it considers to be equitable and consistent with its fiduciary
obligations to such Fund and such other customers. In some instances, this
procedure may adversely affect the price and size of the position obtainable for
a Fund.

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<PAGE>

Commission rates in the U.S. are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
broker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Trustees.

Subject to the above considerations, the Investment Adviser may use Goldman
Sachs as a broker for a Fund. In order for Goldman Sachs to effect any
portfolio transactions for each Fund, the commissions, fees or other
remuneration received by Goldman Sachs must be reasonable and fair compared to
the commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. This standard
would allow Goldman Sachs to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate arm's-
length transaction. Furthermore, the Trustees, including a majority of the
Trustees who are not "interested" Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to Goldman Sachs are consistent with the foregoing standard. Brokerage
transactions with Goldman Sachs are also subject to such fiduciary standards as
may be imposed upon Goldman Sachs by applicable law.

For the period July 27, 1998 (commencement of operations) through December 31,
1998, the Real Estate Securities Fund paid total brokerage commissions of
$133,807, of which $5,876 were paid to affiliated persons (representing 4% of
total commissions paid). The total amount of transactions on which commissions
were paid was $61,448,321 of which 9% involved the payment of commissions
effected through affiliated persons.

During the fiscal year ended December 31, 1998, the Real Estate Securities
Fund acquired and sold securities of its regular broker-dealers. As of December
31, 1998 such Fund held securities of its regular broker/dealers, as defined in
Rule 10b-1 under the Act, or their parents as follows ($ in thousands): J.P.
Morgan ($8,517), Morgan Stanley ($2,505) and Donaldson, Lufkin & Jennette
($1,837)

B-65
<PAGE>

NET ASSET VALUE

Under the Act, the Trustees are responsible for determining in good faith the
fair value of securities of each Fund. In accordance with procedures adopted by
the Trustees, the net value per share of each class of each Fund is calculated
by determining the value of the net assets attributed to each class of that Fund
and dividing by the number of outstanding shares of that class. All securities
are valued as of the close of regular trading on the New York Stock Exchange
(normally, but not always, 4:00 p.m. New York time) on each Business Day. 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 (observed), Labor Day, Thanksgiving Day and Christmas Day
(observed).

In the event that the New York Stock Exchange or the national securities
exchange on which stock options are traded adopt different trading hours on
either a permanent or temporary basis, the Trustees will reconsider the time at
which net asset value is computed. In addition, each Fund may compute its net
asset value as of any time permitted pursuant to any exemption, order or
statement of the SEC or its staff.

Portfolio securities of the Fund for which accurate market quotations are
available are valued as follows: (a) securities listed on any U.S. or foreign
stock exchange or on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ") will be valued at the last sale price on the
exchange or system in which they are principally traded on the valuation date.
If there is no sale on the valuation day, securities traded will be valued at
the closing bid price, or if a closing bid price is not available, at either the
exchange or system-defined close price on the exchange or system in which such
securities are principally traded. If the relevant exchange or system has not
closed by the above-mentioned time for determining the Funds net asset value,
the securities will be valued at the last sale price, or if not available at the
bid price at the time the net asset value is determined; (b) over-the-counter
securities not quoted on NASDAQ will be valued at the last sale price on the
valuation day or, if no sale occurs, at the last bid price at the time net asset
value is determined; (c) equity securities for which no prices are obtained
under section (a) or (b) including those for which a pricing service supplies no
exchange quotation or a quotation that is believed by the portfolio
manager/trader to be inaccurate, will be valued at their fair value in
accordance with procedures approved by the Board of Trustees; (d) fixed-income
securities with a remaining maturity of 60 days or more for which accurate
market quotations are readily available will normally be valued according to
dealer-supplied bid quotations or bid quotations from a recognized pricing
service (e.g., Merrill Lynch, J.J. Kenny, Muller Data Corp., Bloomberg, EJV,
Reuters or Standard & Poor's); (e) fixed-income securities for which accurate
market quotations are not readily available are valued by the Investment Adviser
based on valuation models that take into account spread and daily yield changes
on government securities in the appropriate market (i.e., matrix pricing); (f)
debt securities with a remaining maturity of 60 days or less are valued by the
Investment Adviser at amortized cost, which the Trustees have determined to
approximate fair value; and (g) all other instruments, including those for which
a pricing service supplies no exchange quotation or a

B-66
<PAGE>

quotation that is believed by the portfolio manager/trader to be inaccurate,
will be valued at fair value in accordance with the valuation procedures
approved by the Board of Trustees.

The value of all assets and liabilities expressed in foreign currencies will
be converted into U.S. dollar values at current exchange rates of such
currencies against U.S. dollars last quoted by any major bank. If such
quotations are not available, the rate of exchange will be determined in good
faith by or under procedures established by the Board of Trustees.

Generally, trading in securities on European and Far Eastern securities
exchanges and on over-the-counter markets is substantially completed at various
times prior to the close of business on each Business Day in New York (i.e., a
day on which the New York Stock Exchange is open for trading). In addition,
European or Far Eastern securities trading generally or in a particular country
or countries may not take place on all Business Days in New York. Furthermore,
trading takes place in various foreign markets on days which are not Business
Days in New York and days on which the Funds' net asset values are not
calculated. Such calculation does not take place contemporaneously with the
determination of the prices of the majority of the portfolio securities used in
such calculation. The impact of events that occur after the publication of
market quotations used by a Fund to price its securities but before the close of
regular trading on the New York Stock Exchange will normally not be reflected in
a Fund's next determined NAV unless the Trust, in its discretion, makes an
adjustment in light of the nature and materiality of the event, its effect on
Fund operations and other relevant factors.

The proceeds received by each Fund and each other series of the Trust from the
issue or sale of its shares, and all net investment income, realized and
unrealized gain and proceeds thereof, subject only to the rights of creditors,
will be specifically allocated to such Fund and constitute the underlying assets
of that Fund or series. The underlying assets of each Fund will be segregated
on the books of account, and will be charged with the liabilities in respect of
such Fund and with a share of the general liabilities of the Trust. Expenses of
the Trust with respect to the Funds and the other series of the Trust are
generally allocated in proportion to the net asset values of the respective
Funds or series except where allocations of direct expenses can otherwise be
fairly made.

PERFORMANCE INFORMATION

Each Fund may from time to time quote or otherwise use yield and total return
information in advertisements, shareholder reports or sales literature. Average
annual total return and yield are computed pursuant to formulas specified by the
SEC.

Thirty-day yield is derived by dividing net investment income per share earned
during the period by the maximum public offering price per share on the last day
of such 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.

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<PAGE>

Distribution rate for a specified period is calculated by annualizing
distributions of net investment income for such period and dividing this amount
by the net asset value per share or maximum public offering price on the last
day of the period.

Average annual total return for a specified period is derived by calculating
the actual dollar amount of the investment return on a $1,000 investment made at
the maximum public offering price at the beginning of the period, and then
calculating the annual compounded rate of return which would produce that
amount, assuming a redemption at the end of the period. This calculation
assumes a complete redemption of the investment. It also assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period.

Year-by-year total return and cumulative total return for a specified period
are each derived by calculating the percentage rate required to make a $1,000
investment (made at the maximum public offering price with all distributions
reinvested) at the beginning of such period equal to the actual total value of
such investment at the end of such period. The table set forth below indicates
the total return (capital changes plus reinvestment of all distributions) on a
hypothetical investment of $1,000 in a Fund for the periods indicated.

Total return calculations for Class A Shares reflect the effect of paying the
maximum initial sales charge. Investment at a lower sales charge would result
in higher performance figures. Total return calculations for Class B and Class
C Shares reflect deduction of the applicable CDSC imposed upon redemption of
Class B and Class C Shares held for the applicable period. Each Fund may also
from time to time advertise total return on a cumulative, average, year-by-year
or other basis for various specified periods by means of quotations, charts
graphs or schedules. In addition, each Fund may furnish total return
calculations based on investments at various sales charge levels or at NAV. Any
performance information which is based on a Fund's NAV per Share would be
reduced if any applicable sales charge were taken into account. In addition to
the above, each Fund may from time to time advertise its performance relative to
certain averages, performance rankings, indices, other information prepared by
recognized mutual fund statistical services and investments for which reliable
performance information is available. The Funds' performance quotations do not
reflect any fees charged by an Authorized Dealer, Service Organization or other
financial intermediary to its customer accounts in connection with investments
in the Funds.

Occasionally, statistics may be used to specify Fund volatility or risk.
Measures of volatility or risk are generally used to compare a Fund's net asset
value or performance relative to a market index. One measure of volatility is
beta. Beta is the volatility of a Fund relative to the total market. A beta of
more than 1.00 indicates volatility greater than the market, and a beta of less
than 1.00 indicates volatility less than the market. Another measure of
volatility or risk is standard deviation. Standard deviation is used to measure
variability of net asset value or total return around an average, over a
specified period of time. The premise is that greater volatility connotes
greater risk undertaken in achieving performance.

From time to time the Trust may publish an indication of a Fund's past
performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Inc.,

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Morningstar Mutual Funds, Weisenberger Investment Companies Service, Donoghue's
Money Fund Report, Micropal, Barron's, Business Week, Consumer's Digest,
Consumer's Report, Investors Business Daily, The New York Times, Kiplinger's
Personal Finance Magazine, Changing Times, Financial World, Forbes, Fortune,
Money, Personal Investor, Sylvia Porter's Personal Finance and The Wall Street
Journal. The Trust may also advertise information which has been provided to the
NASD for publication in regional and local newspapers. In addition, the Trust
may from time to time advertise a Fund's performance relative to certain indices
and benchmark investments, including: (a) the Lipper Analytical Services, Inc.
Mutual Fund Performance Analysis, Fixed-Income Analysis and Mutual Fund Indices
(which measure total return and average current yield for the mutual fund
industry and rank mutual fund performance); (b) the CDA Mutual Fund Report
published by CDA Investment Technologies, Inc. (which analyzes price, risk and
various measures of return for the mutual fund industry); (c) the Consumer Price
Index published by the U.S. Bureau of Labor Statistics (which measures changes
in the price of goods and services); (d) Stocks, Bonds, Bills and Inflation
published by Ibbotson Associates (which provides historical performance figures
for stocks, government securities and inflation); (e) the Salomon Brothers'
World Bond Index (which measures the total return in U.S. dollar terms of
government bonds, Eurobonds and foreign bonds of ten countries, with all such
bonds having a minimum maturity of five years); (f) the Lehman Brothers
Aggregate Bond Index or its component indices; (g) the Standard & Poor's Bond
Indices (which measure yield and price of corporate, municipal and U.S.
Government bonds); (h) the J.P. Morgan Global Government Bond Index; (i) other
taxable investments including certificates of deposit (CDs), money market
deposit accounts (MMDAs), checking accounts, savings accounts, money market
mutual funds and repurchase agreements; (j) Donoghues' Money Fund Report (which
provides industry averages for 7-day annualized and compounded yields of
taxable, tax-free and U.S. Government money funds); (k) the Hambrecht & Quist
Growth Stock Index; (l) the NASDAQ OTC Composite Prime Return; (m) the Russell
Midcap Index; (n) the Russell 2000 Index- Total Return; (o) the Russell 1000
Value Index; (p) the Russell 1000 Growth Index-Total Return; (q) the Value-Line
Composite-Price Return; (r) the Wilshire 4500 Index; (s) the FT-Actuaries Europe
and Pacific Index; (t) historical investment data supplied by the research
departments of Goldman Sachs, Lehman Brothers, First Boston Corporation, Morgan
Stanley (including the EAFE Indices, the Morgan Stanley Capital International
Combined Asia ex Japan Free Index and the Morgan Stanley Capital International
Emerging Markets Free Index), Salomon Brothers, Merrill Lynch, Donaldson Lufkin
and Jenrette or other providers of such data; (u) CDA/Wiesenberger Investment
Companies Services or Wiesenberger Investment Companies Service; (v) The Goldman
Sachs Commodities Index; (w) information produced by Micropal, Inc.; and (x) The
Tokyo Price Index. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of a Fund's portfolio. These indices and
averages are generally unmanaged and the items included in the calculations of
such indices and averages may not be identical to the formulas used by a Fund to
calculate its performance figures.

Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:

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<PAGE>

.. cost associated with aging parents;

.. funding a college education (including its actual and estimated cost);

.. health care expenses (including actual and projected expenses);

.. long-term disabilities (including the availability of, and coverage provided
by, disability insurance);

.. retirement (including the availability of social security benefits, the tax
treatment of such benefits and statistics and other information relating to
maintaining a particular standard of living and outliving existing assets);

.. asset allocation strategies and the benefits of diversifying among asset
classes;

.. the benefits of international and emerging market investments;

.. the effects of inflation on investing and saving;

.. the benefits of establishing and maintaining a regular pattern of investing
and the benefits of dollar-cost averaging; and

.. measures of portfolio risk, including but not limited to, alpha, beta and
standard deviation.

The Trust may from time to time use comparisons, graphs or charts in
advertisements to depict the following types of information:

.. the performance of various types of securities (common stocks, small
company stocks, long-term government bonds, treasury bills and certificates of
deposit) over time. However, the characteristics of these securities are not
identical to, and may be very different from, those of a Fund's portfolio;

.. the dollar and non-dollar based returns of various market indices
(i.e., Morgan Stanley Capital International EAFE Index, FT-Actuaries Europe &
Pacific Index and the Standard & Poor's Index of 500 Common Stocks) over varying
periods of time;

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<PAGE>

.. total stock market capitalizations of specific countries and regions
on a global basis;

.. performance of securities markets of specific countries and regions;
and

.. value of a dollar amount invested in a particular market or type of
security over different periods of time.

In addition, the Trust may from time to time include rankings of
Goldman, Sachs & Co.'s research department by publications such as the
Institutional Investor and the Wall Street Journal in advertisements.

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<PAGE>

INTRODUCTION
VALUE OF 1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)

Assuming no voluntary
waiver of fees and no
expense reimbursements
----------------------
Assumes Assumes
Maximum maximum
Applicable Assumes Applicable Assumes
Sales no sales sales sales
Fund Class Time Period Charge** Charge Charge Charge
- ----------------------- ------------- --------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Securities A 7/27/98 - __/__/99- __% __% __% __%
Since inception*
Real Estate Securities B 7/27/98 - __/__/99- __% __% __% __%
Since inception*
Real Estate Securities C 7/27/98 - __/__/99- __% __% __% __%
Since inception*
Real Estate Securities Institutional 7/27/98 - __/__/99- N/A __% N/A __%
Since inception*
Real Estate Securities Service 7/27/98 - __/__/99- N/A __% N/A __%
Since inception*
</TABLE>
__________________________

* Represents an aggregate total return (not annualized) since this class has
not completed a full twelve months of operations.
** Total return reflects a maximum initial sales charge of 5.5% for Class A
Shares, the assumed deferred sales charge for Class B Shares (5% maximum
declining to 0% after six years) and the assumed deferred sales charge for Class
C Shares (1% if redeemed within 12 months of purchase).

Prior to the date of this Additional Statement, no shares of the Internet
Tollkeeper Fund had been offered.

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<PAGE>

From time to time, advertisements or information may include a discussion
of the origin, evolution and growth of the Internet, the benefits of the
Internet to consumers and businesses and the impact of the Internet on society
in general and more specifically on the investment landscape.

From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in a Fund.
Such advertisements or information may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
in the communication.

The Trust may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish the Investment
Adviser's views as to markets, the rationale for a Fund's investments and
discussions of a Fund's current asset allocation.

In addition, from time to time, advertisements or information may include a
discussion of asset allocation models developed by GSAM and/or its affiliates,
certain attributes or benefits to be derived from asset allocation strategies
and the Goldman Sachs mutual funds that may be offered as investment options for
the strategic asset allocations. Such advertisements and information may also
include GSAM's current economic outlook and domestic and international market
views to suggest periodic tactical modifications to current asset allocation
strategies. Such advertisements and information may include other materials
which highlight or summarize the services provided in support of an asset
allocation program.

A Fund's performance data will be based on historical results and will not
be intended to indicate future performance. A Fund's total return and yield
will vary based on market conditions, portfolio expenses, portfolio investments
and other factors. The value of a Fund's shares will fluctuate and an
investor's shares may be worth more or less than their original cost upon
redemption. The Trust may also, at its discretion, from time to time make a
list of a Fund's holdings available to investors upon request.

Total return will be calculated separately for each class of shares in
existence. Because each class of shares is subject to different expenses, total
return with respect to each class of shares of a Fund will differ.

SHARES OF THE TRUST

The Trustees have authority under the Trust's Declaration of Trust to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. The Trustees also have authority to classify
and reclassify any series of shares into one or more classes of shares. As of
the date of this Additional Statement, the Trustees have classified the shares
of each of the Funds into five classes: Institutional Shares, Service Shares,
Class A Shares, Class B Shares and Class C Shares.

Each Institutional Share, Service Share, Class A Share, Class B Share and
Class C Share of a Fund represents a proportionate interest in the assets
belonging to the applicable class of the Fund. All expenses of a Fund are borne
at the same rate by each class of shares, except that fees under Service Plans
are borne exclusively by Service Shares, fees under Distribution and Service
Plans are borne exclusively by Class A, Class B or Class C Shares and transfer
agency fees are

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<PAGE>

borne at different rates by different share classes. The Trustees may determine
in the future that it is appropriate to allocate other expenses differently
between classes of shares and may do so to the extent consistent with the rules
of the SEC and positions of the Internal Revenue Service. Each class of shares
may have different minimum investment requirements and be entitled to different
shareholder services. With limited exceptions, shares of a class may only be
exchanged for shares of the same or an equivalent class of another fund. See
"Shareholder Guide" in the Prospectus.

Institutional Shares may be purchased at net asset value without a sales
charge for accounts in the name of an investor or institution that is not
compensated by a Fund under a Plan for services provided to the institution's
customers.

Service Shares may be purchased at net asset value without a sales charge
for accounts held in the name of an institution that, directly or indirectly,
provides certain account administration and shareholder liaison services to its
customers, including maintenance of account records and processing orders to
purchase, redeem and exchange Service Shares. Service Shares bear the cost of
account administration fees at the annual rate of up to 0.50% of the average
daily net assets of the Fund attributable to Service Shares.

Class A Shares are sold, with an initial sales charge of up to 5.5%,
through brokers and dealers who are members of the National Association of
Securities Dealers, Inc. and certain other financial service firms that have
sales agreements with Goldman Sachs. Class A Shares bear the cost of
distribution and service fees at the aggregate rate of up to 0.25% of the
average daily net assets of Class A Shares of the Internet Tollkeeper Fund and
0.50% of the average daily net assets of the Real Estate Securities Fund. With
respect to Class A Shares, the Distributor at its discretion may use
compensation for distribution services paid under the Distribution and Services
Plan for personal and account maintenance services and expenses so long as such
total compensation under the Plan does not exceed the maximum cap on "service
fees" imposed by the NASD.

Class B Shares of the Funds are sold subject to a contingent deferred sales
charge of up to 5.0% through brokers and dealers who are members of the National
Association of Securities Dealers, Inc. and certain other financial services
firms that have sales arrangements with Goldman Sachs. Class B Shares bear the
cost of distribution (Rule 12b-1) fees at the aggregate rate of up to 0.75% of
the average daily net assets attributable to Class B Shares. Class B Shares
also bear the cost of service fees at an annual rate of up to 0.25% of the
average daily net assets attributable to Class B Shares.

Class C Shares of the Funds are sold subject to a contingent deferred sales
charge of up to 1.0% through brokers and dealers who are members of the National
Association of Securities Dealers, Inc. and certain other financial services
firms that have sales arrangements with Goldman Sachs. Class C Shares bear the
cost of distribution (Rule 12b-1) fees at the aggregate rate of up to 0.75% of
the average daily net assets attributable to Class C Shares. Class C Shares
also bear the cost of service fees at an annual rate of up to 0.25% of the
average daily net assets attributable to Class C Shares.

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<PAGE>

It is possible that an institution or its affiliate may offer different
classes of shares (i.e., Institutional, Service, Class A Shares, Class B Shares
and Class C Shares) to its customers and thus receive different compensation
with respect to different classes of shares of each Fund. Dividends paid by
each Fund, if any, with respect to each class of shares will be calculated in
the same manner, at the same time on the same day and will be the same amount,
except for differences caused by the differences in expenses discussed above.
Similarly, the net asset value per share may differ depending upon the class of
shares purchased.

Certain aspects of the shares may be altered after advance notice to
shareholders if it is deemed necessary in order to satisfy certain tax
regulatory requirements.

When issued for the consideration described in the Prospectus, shares are
fully paid and non-assessable. In the event of liquidation, shareholders are
entitled to share pro rata in the net assets of the applicable class of the
relevant Fund available for distribution to such shareholders. All shares are
freely transferable and have no preemptive, subscription or conversion rights.

As of ______, 1999 the following entities owned of record or beneficially
more than 5% of the outstanding shares of the Real Estate Securities Fund:

The Act requires that where more than one class or series of shares exists,
each class or series must be preferred over all other classes or series in
respect of assets specifically allocated to such class or series. In addition,
Rule 18f-2 under the Act provides that any matter required to be submitted by
the provisions of the Act or applicable state law, or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Trust
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, Rule 18f-2 exempts the selection of
independent public accountants, the approval of principal distribution contracts
and the election of trustees from the separate voting requirements of Rule 18f-
2.

The Trust is not required to hold annual meetings of shareholders and does
not intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees,
either to one vote for each share or to one vote for each dollar of net asset
value represented by such shares on all matters presented to shareholders
including the elections of Trustees (this method of voting being referred to as
"dollar based voting"). However, to the extent required by the Act or otherwise
determined by the Trustees, series and classes of the Trust will vote separately
from each other. Shareholders of the Trust do not have cumulative voting rights
in the election of Trustees. Meetings of shareholders of the Trust, or any
series or class thereof, may be called by the Trustees, certain officers or upon
the written request of holders of 10% or more of the shares entitled to vote at
such meetings. 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. The shareholders of
the Trust will have voting rights only with respect to the limited number of

B-75
<PAGE>

matters specified in the Declaration of Trust and such other matters as the
Trustees may determine or may be required by law.

The Declaration of Trust provides for indemnification of Trustees,
officers, employees and agents of the Trust unless the recipient is adjudicated
(i) to be liable by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such person's
office or (ii) not to have acted in good faith in the reasonable belief that
such person's actions were in the best interest of the Trust. The Declaration of
Trust provides that, if any shareholder or former shareholder of any series is
held personally liable solely by reason of being or having been a shareholder
and not because of the shareholder's acts or omissions or for some other reason,
the shareholder or former shareholder (or heirs, executors, administrators,
legal representatives or general successors) shall be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
acting on behalf of any affected series, must, upon request by such shareholder,
assume the defense of any claim made against such shareholder for any act or
obligation of the series and satisfy any judgment thereon from the assets of the
series.

The Declaration of Trust permits the termination of the Trust or of any
series or class of the Trust (i) by a majority of the affected shareholders at a
meeting of shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust, series or its respective
shareholders. The factors and events that the Trustees may take into account in
making such determination include (i) the inability of the Trust or any
successor series or class to maintain its assets at an appropriate size; (ii)
changes in laws or regulations governing the Trust, series or class or affecting
assets of the type in which it invests; or (iii) economic developments or trends
having a significant adverse impact on their business or operations.

The Declaration of Trust authorizes the Trustees without shareholder
approval to cause the Trust, or any series thereof, to merge or consolidate with
any corporation, association, trust or their organization or sell or exchange
all or substantially all of the property belonging to the Trust or any series
thereof. In addition, the Trustees, without shareholder approval, may adopt a
master-feeder structure by investing all or a portion of the assets of a series
of the Trust in the securities of another open-end investment company.

The Declaration of Trust permits the Trustees to amend the Declaration of
Trust without a shareholder vote. However, shareholders of the Trust have the
right to vote on any amendment (i) that would adversely affect the voting rights
of shareholder; (ii) that is required by law to be approved by shareholders;
(iii) that would amend the provisions of the Declaration of Trust regarding
amendments and supplements thereto; or (iv) that the Trustees determine to
submit to shareholders.

The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's shares (the "Series Trustees"). Series Trustees
may, but are not required to, serve as Trustees of the Trust or any other series
or class of the Trust. The Series Trustees have, to the

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<PAGE>

exclusion of any other Trustees of the Delaware Trust, all the powers and
authorities of Trustees under the Declaration of Trust with respect to any other
series or class.

Shareholder and Trustee Liability
- ---------------------------------

Under Delaware Law, the shareholders of the Funds are not generally subject
to liability for the debts or obligations of the Trust. Similarly, Delaware law
provides that a series of the Trust will not be liable for the debts or
obligations of any other series of the Trust. However, no similar statutory or
other authority limiting business trust shareholder liability exists in other
states. As a result, to the extent that a Delaware business trust or a
shareholder is subject to the jurisdiction of courts of such other states, the
courts may not apply Delaware law and may thereby subject the Delaware business
trust shareholders to liability. To guard against this risk, the Declaration of
Trust contains an express disclaimer of shareholder liability for acts or
obligations of a Fund. Notice of such disclaimer will normally be given in each
agreement, obligation or instrument entered into or executed by a series or the
Trustees. The Declaration of Trust provides for indemnification by the relevant
Fund for all loss suffered by a shareholder as a result of an obligation of the
series. The Declaration of Trust also provides that a series shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the series and satisfy any judgment thereon. In view of
the above, the risk of personal liability of shareholders of a Delaware business
trust is remote.

In addition to the requirements under Delaware law, the Declaration of
Trust provides that shareholders of a series may bring a derivative action on
behalf of the series only if the following conditions are met: (a) shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding shares of the series, or 10% of the outstanding shares of
the class to which such action relates, shall join in the request for the
Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of and to employ other advisers in considering the merits
of the request and shall require an undertaking by the shareholders making such
request to reimburse the series for the expense of any such advisers in the
event that the Trustees determine not to bring such action.

The Declaration of Trust further provides that the Trustees will not be
liable for error of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.

TAXATION

The following is a summary of the principal U.S. federal income, and
certain state and local, tax considerations regarding the purchase, ownership
and disposition of shares in each Fund of the Trust. This summary does not
address special tax rules applicable to certain classes of investors, such as
tax-exempt entities, insurance companies and financial institutions. Each
prospective shareholder is urged to consult his own tax adviser with respect to
the specific

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<PAGE>

federal, state, local and foreign tax consequences of investing in each Fund.
The summary is based on the laws in effect on the date of this Additional
Statement, which are subject to change.

General
=======

Each Fund is a separate taxable entity. The Internet Tollkeeper Fund
intends to elect, and the Real Estate Securities Fund has elected, to be treated
and intends to qualify for each taxable year as a regulated investment company
under Subchapter M of the Code.

Qualification as a regulated investment company under the Code requires,
among other things, that (a) a Fund derive at least 90% of its gross income for
its taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stocks or securities or
foreign currencies, or other income (including but not limited to gains from
options, futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% gross income test");
and (b) such Fund diversify its holdings so that, at the close of each quarter
of its taxable year, (i) at least 50% of the market value of such Fund's total
(gross) assets is comprised of cash, cash items, U.S. Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater in value than 5% of the
value of such Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total (gross) assets is invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies) or two or more issuers controlled by the Fund and engaged in the
same, similar or related trades or businesses. For purposes of the 90% gross
income test, income that a Fund earns from equity interests in certain entities
that are not treated as corporations (e.g., partnerships or trusts) for U.S. tax
purposes will generally have the same character for such Fund as in the hands of
such an entity; consequently, a Fund may be required to limit its equity
investments in such entities that earn fee income, rental income, or other
nonqualifying income. In addition, future Treasury regulations could provide
that qualifying income under the 90% gross income test will not include gains
from foreign currency transactions that are not directly related to a Fund's
principal business of investing in stock or securities or options and futures
with respect to stock or securities. Using foreign currency positions or
entering into foreign currency options, futures and forward or swap contracts
for purposes other than hedging currency risk with respect to securities in a
Fund's portfolio or anticipated to be acquired may not qualify as "directly-
related" under these tests.

If a Fund complies with such provisions, then in any taxable year in which
such Fund distributes, in compliance with the Code's timing and other
requirements, at least 90% of its "investment company taxable income" (which
includes dividends, taxable interest, taxable accrued original issue discount
and market discount income, income from securities lending, any net short-term
capital gain in excess of net long-term capital loss, certain net realized
foreign exchange gains and any other taxable income other than "net capital
gain," as defined below, and is reduced by deductible expenses), and at least
90% of the excess of its gross tax-exempt interest income (if any) over certain
disallowed deductions, such Fund (but not its shareholders) will be relieved of
federal income tax on any income of the Fund, including long-term capital

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<PAGE>

gains, distributed to shareholders. However, if a Fund retains any investment
company taxable income or "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), it will be subject to a tax at
regular corporate rates on the amount retained. If the Fund retains any net
capital gain, the Fund may designate the retained amount as undistributed
capital gains in a notice to its shareholders who, if subject to U.S. federal
income tax on long-term capital gains, (i) will be required to include in income
for federal income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by the Fund against their U.S. federal income tax
liabilities, if any, and to claim refunds to the extent the credit exceeds such
liabilities. For U.S. federal income tax purposes, the tax basis of shares owned
by a shareholder of the Fund will be increased by an amount equal under current
law to 65% of the amount of undistributed net capital gain included in the
shareholder's gross income. Each Fund intends to distribute for each taxable
year to its shareholders all or substantially all of its investment company
taxable income, net capital gain and any net tax-exempt interest. Exchange
control or other foreign laws, regulations or practices may restrict
repatriation of investment income, capital or the proceeds of securities sales
by foreign investors and may therefore make it more difficult for such a Fund to
satisfy the distribution requirements described above, as well as the excise tax
distribution requirements described below. However, each Fund generally expects
to be able to obtain sufficient cash to satisfy such requirements from new
investors, the sale of securities or other sources. If for any taxable year a
Fund does not qualify as a regulated investment company, it will be taxed on all
of its investment company taxable income and net capital gain at corporate
rates, and its distributions to shareholders will be taxable as ordinary
dividends to the extent of its current and accumulated earnings and profits.

In order to avoid a 4% federal excise tax, each Fund must distribute (or be
deemed to have distributed) by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
capital gains over its capital losses (generally computed on the basis of the
one-year period ending on October 31 of such year), and all taxable ordinary
income and the excess of capital gains over capital losses for the previous year
that were not distributed for such year and on which the Fund paid no federal
income tax. For federal income tax purposes, dividends declared by a Fund in
October, November or December to shareholders of record on a specified date in
such a month and paid during January of the following year are taxable to such
shareholders as if received on December 31 of the year declared. The Funds
anticipate that they will generally make timely distributions of income and
capital gains in compliance with these requirements so that they will generally
not be required to pay the excise tax. For federal income tax purposes, each
Fund is permitted to carry forward a net capital loss in any year to offset its
own capital gains, if any, during the eight years following the year of the
loss. At December 31, 1998, the Real Estate Securities Fund had capital loss
carry forwards approximating $254,182, expiring in 2006. These amounts are
available to be carried forward to offset future capital gains to the extent
permitted by the Code and applicable tax regulations.

Gains and losses on the sale, lapse, or other termination of options and
futures contracts, options thereon and certain forward contracts (except certain
foreign currency options, forward contracts and futures contracts) will
generally be treated as capital gains and losses. Certain of

B-79
<PAGE>

the futures contracts, forward contracts and options held by a Fund will be
required to be "marked-to-market" for federal income tax purposes, that is,
treated as having been sold at their fair market value on the last day of the
Fund's taxable year. These provisions may require a Fund to recognize income or
gains without a concurrent receipt of cash. Any gain or loss recognized on
actual or deemed sales of these futures contracts, forward contracts, or options
will (except for certain foreign currency options, forward contracts, and
futures contracts) be treated as 60% long-term capital gain or loss and 40%
short-term capital gain or loss. As a result of certain hedging transactions
entered into by a Fund, the Fund may be required to defer the recognition of
losses on futures contracts, forward contracts, and options or underlying
securities or foreign currencies to the extent of any unrecognized gains on
related positions held by such Fund and the characterization of gains or losses
as long-term or short-term may be changed. The tax provisions described above
applicable to options, futures and forward contracts may affect the amount,
timing and character of a Fund's distributions to shareholders. Application of
certain requirements for qualification as a regulated investment company and/or
these tax rules to certain investment practices, such as dollar rolls, or
certain derivatives such as interest rate swaps, floors, caps and collars and
currency, mortgage or index swaps may be unclear in some respects, and a Fund
may therefore be required to limit its participation in such transactions.
Certain tax elections may be available to a Fund to mitigate some of the
unfavorable consequences described in this paragraph.

Section 988 of the Code contains special tax rules applicable to certain
foreign currency transactions and instruments that may affect the amount, timing
and character of income, gain or loss recognized by a Fund. Under these rules,
foreign exchange gain or loss realized with respect to foreign currencies and
certain futures and options thereon, foreign currency-denominated debt
instruments, foreign currency forward contracts, and foreign currency-
denominated payables and receivables will generally be treated as ordinary
income or loss, although in some cases elections may be available that would
alter this treatment. If a net foreign exchange loss treated as ordinary loss
under Section 988 of the Code were to exceed a Fund's investment company taxable
income (computed without regard to such loss) for a taxable year, the resulting
loss would not be deductible by the Fund or its shareholders in future years.
Net loss, if any, from certain foregoing currency transactions or instruments
could exceed net investment income otherwise calculated for accounting purposes
with the result being either no dividends being paid or a portion of a Fund's
dividends being treated as a return of capital for tax purposes, nontaxable to
the extent of a shareholder's tax basis in his shares and, once such basis is
exhausted, generally giving rise to capital gains.

A Fund's investment in zero coupon securities, deferred interest
securities, certain structured securities or other securities bearing original
issue discount or, if a Fund elects to include market discount in income
currently, market discount, as well as any "mark to market" gain from certain
options, futures or forward contracts, as described above, will generally cause
it to realize income or gain prior to the receipt of cash payments with respect
to these securities or contracts. In order to obtain cash to enable it to
distribute this income or gain, maintain its qualification as a regulated
investment company and avoid federal income or excise taxes, the Fund may be
required to liquidate portfolio securities that it might otherwise have
continued to hold.

B-80
<PAGE>

Each Fund anticipates that it will be subject to foreign taxes on its
income (possibly including, in some cases, capital gains) from foreign
securities. Tax conventions between certain countries and the U.S. may reduce
or eliminate such taxes in some cases.

If a Fund acquires stock (including, under proposed regulations, an option
to acquire stock such as is inherent in a convertible bond) in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, rents, royalties or capital gain) or hold
at least 50% of their assets in investments producing such passive income
("passive foreign investment companies"), the Fund could be subject to federal
income tax and additional interest charges on "excess distributions" received
from such companies or gain from the sale of stock in such companies, even if
all income or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such a tax. In some cases, elections may be
available that would ameliorate these adverse tax consequences, but such
elections would require the Fund to include each year certain amounts as income
or gain (subject to the distribution requirements described above) without a
concurrent receipt of cash. Each Fund may limit and/or manage its holdings in
passive foreign investment companies to minimize its tax liability or maximize
its return from these investments.

Investments in lower-rated securities may present special tax issues for a
Fund to the extent actual or anticipated defaults may be more likely with
respect to such securities. Tax rules are not entirely clear about issues such
as when a Fund may cease to accrue interest, original issue discount, or market
discount; when and to what extent deductions may be taken for bad debts or
worthless securities; how payments received on obligations in default should be
allocated between principal and income; and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by a Fund, in the event it invests in such securities, in order to
seek to eliminate or minimize any adverse tax consequences.

Taxable U.S. Shareholders - Distributions
=========================================

For U.S. federal income tax purposes, distributions by a Fund, whether
reinvested in additional shares or paid in cash, generally will be taxable to
shareholders who are subject to tax. Shareholders receiving a distribution in
the form of newly issued shares will be treated for U.S. federal income tax
purposes as receiving a distribution in an amount equal to the amount of cash
they would have received had they elected to receive cash and will have a cost
basis in each share received equal to such amount divided by the number of
shares received.

Distributions from investment company taxable income for the year will be
taxable as ordinary income. Distributions designated as derived from a Fund's
dividend income, if any, that would be eligible for the dividends received
deduction if such Fund were not a regulated investment company may be eligible,
for the dividends received deduction for corporate shareholders. The dividends-
received deduction, if available, is reduced to the extent the shares

B-81
<PAGE>

with respect to which the dividends are received are treated as debt-financed
under federal income tax law and is eliminated if the shares are deemed to have
been held for less than a minimum period, generally 46 days. The entire
dividend, including the deducted amount, is considered in determining the
excess, if any, of a corporate shareholder's adjusted current earnings over its
alternative minimum taxable income, which may increase its liability for the
federal alternative minimum tax, and the dividend may, if it is treated as an
"extraordinary dividend" under the Code, reduce such shareholder's tax basis in
its shares of a Fund. Capital gain dividends (i.e., dividends from net capital
gain) if designated as such in a written notice to shareholders mailed not later
than 60 days after a Fund's taxable year closes, will be taxed to shareholders
as long-term capital gain regardless of how long shares have been held by
shareholders, but are not eligible for the dividends received deduction for
corporations. Such long-term capital gain will be taxed at a maximum rate of
20%. Distributions, if any, that are in excess of a Fund's current and
accumulated earnings and profits will first reduce a shareholder's tax basis in
his shares and, after such basis is reduced to zero, will generally constitute
capital gains to a shareholder who holds his shares as capital assets.

Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.

Taxable U.S. Shareholders - Sale of Shares
==========================================

When a shareholder's shares are sold, redeemed or otherwise disposed of in
a transaction that is treated as a sale for tax purposes, the shareholder will
generally recognize gain or loss equal to the difference between the
shareholder's adjusted tax basis in the shares and the cash, or fair market
value of any property, received. If the shareholder holds the shares as a
capital asset at the time of sale, the character of the gain or loss should be
capital, and treated as long-term if the shareholder's holding period is more
than one year, and short-term otherwise. In general, the maximum long-term
capital gain rate will be 20% for capital gains on assets held more than one
year. Shareholders should consult their own tax advisers with reference to
their particular circumstances to determine whether a redemption (including an
exchange) or other disposition of Fund shares is properly treated as a sale for
tax purposes, as is assumed in this discussion. If a shareholder receives a
capital gain dividend with respect to shares and such shares have a tax holding
period of six months or less at the time of a sale or redemption of such shares,
then any loss the shareholder realizes on the sale or redemption will be treated
as a long-term capital loss to the extent of such capital gain dividend. All or
a portion of any sales load paid upon the purchase of shares of a Fund will not
be taken into account in determining gain or loss on the redemption or exchange
of such shares within 90 days after their purchase to the extent the redemption
proceeds are reinvested, or the exchange is effected, without payment of an
additional sales load pursuant to the reinvestment or exchange privilege. The
load not taken into account will be added to the tax basis of the newly-acquired
shares. Additionally, any loss realized on a sale or redemption of shares of a
Fund may be disallowed under "wash sale" rules to the extent the shares disposed
of

B-82
<PAGE>

are replaced with other shares of the same Fund within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of,
such as pursuant to a dividend reinvestment in shares of such Fund. If
disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.

Each Fund may be required to withhold, as "backup withholding," federal
income tax at a rate of 31% from dividends (including capital gain dividends)
and share redemption and exchange proceeds to individuals and other non-exempt
shareholders who fail to furnish such Fund with a correct taxpayer
identification number ("TIN") certified under penalties of perjury, or if the
Internal Revenue Service or a broker notifies the Fund that the payee is subject
to backup withholding as a result of failing to properly report interest or
dividend income to the Internal Revenue Service or that the TIN furnished by the
payee to the Fund is incorrect, or if (when required to do so) the payee fails
to certify under penalties of perjury that it is not subject to backup
withholding. A Fund may refuse to accept an application that does not contain
any required TIN or certification that the TIN provided is correct. If the
backup withholding provisions are applicable, any such dividends and proceeds,
whether paid in cash or reinvested in additional shares, will be reduced by the
amounts required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. If you do not have a TIN, you
should apply for one immediately by contacting your local office of the Social
Security Administration or the Internal Revenue Service (IRS). Backup
withholding could apply to payments relating to your account while you are
waiting receipt of a TIN. Special rules apply for certain entities. For
example, for an account established under a Uniform Gifts or Transfer to Minors
Act, the TIN of the minor should be furnished.

Non-U.S. Shareholders
=====================

The discussion above relates solely to U.S. federal income tax law as it
applies to "U.S. persons" subject to tax under such law. Shareholders who, as to
the United States, are not "U.S. persons," (i.e., are nonresident aliens,
foreign corporations, fiduciaries of foreign trusts or estates, foreign
partnerships or other non-U.S. investors) generally will be subject to U.S.
federal withholding tax at the rate of 30% on distributions treated as ordinary
income unless the tax is reduced or eliminated pursuant to a tax treaty or the
dividends are effectively connected with a U.S. trade or business of the
shareholder. In the latter case the dividends will be subject to tax on a net
income basis at the graduated rates applicable to U.S. individuals or domestic
corporations. Distributions of net capital gain, including amounts retained by
a Fund which are designated as undistributed capital gains, to a non-U.S.
shareholder will not be subject to U.S. federal income or withholding tax unless
the distributions are effectively connected with the shareholder's trade or
business in the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met.

Any capital gain realized by a non-U.S. shareholder upon a sale or
redemption of shares of a Fund will not be subject to U.S. federal income or
withholding tax unless the gain is effectively connected with the shareholder's
trade or business in the U.S., or in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the U.S. for 183
days or more during the taxable year and certain other conditions are met.

B-83
<PAGE>

Non-U.S. persons who fail to furnish a Fund with an IRS Form W-8 or an
acceptable substitute may be subject to backup withholding at the rate of 31% on
capital gain dividends and the proceeds of redemptions and exchanges. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and non-U.S. tax consequences of ownership of shares of and
receipt of distributions from the Funds.

State and Local
===============

Each Fund may be subject to state or local taxes in jurisdictions in which
such Fund may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of such Fund and its
shareholders under such laws may differ from their treatment under federal
income tax laws, and investment in such Fund may have tax consequences for
shareholders different from those of a direct investment in such Fund's
portfolio securities. Shareholders should consult their own tax advisers
concerning these matters.

FINANCIAL STATEMENTS

The audited financial statements and related report of ___________________,
independent public accountants, contained in the Real Estate Securities Fund's
1998 Annual Report are hereby incorporated by reference. A copy of the annual
report may be obtained without charge by writing Goldman, Sachs & Co., 4900
Sears Tower, Chicago, Illinois 60606 or by calling Goldman, Sachs & Co., at the
telephone number on the back cover of such Fund's prospectus. No other part of
the Annual Report is incorporated herein by reference. No financial statements
are supplied for the Internet Tollkeeper Fund because, as of the date of this
Additional Statement, the Fund has no operating history.

OTHER INFORMATION

Each Fund will redeem shares solely in cash up to the lesser of $250,000 or
1% of the net asset value of the Fund during any 90-day period for any one
shareholder. Each Fund, however, reserves the right to pay redemptions
exceeding $250,000 or 1% of the net asset value of the Fund at the time of
redemption by a distribution in kind of securities (instead of cash) from such
Fund. The securities distributed in kind would be readily marketable and would
be valued for this purpose using the same method employed in calculating the
Fund's net asset value per share. See "Net Asset Value." If a shareholder
receives redemption proceeds in kind, the shareholder should expect to incur
transaction costs upon the disposition of the securities received in the
redemption.

The right of a shareholder to redeem shares and the date of payment by each
Fund may be suspended for more than seven days for any period during which the
New York Stock Exchange is closed, other than the customary weekends or
holidays, or when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for such Fund to dispose of securities

B-84
<PAGE>

owned by it or fairly to determine the value of its net assets; or for such
other period as the SEC may by order permit for the protection of shareholders
of such Fund.

As stated in the Prospectuses, the Trust may authorize Service
Organizations and other institutions that provide recordkeeping, reporting and
processing services to their customers to accept on the Trust's behalf purchase,
redemption and exchange orders placed by or on behalf of their customers and, if
approved by the Trust, to designate other intermediaries to accept such orders.
These institutions may receive payments from the Trust or Goldman Sachs for
their services. Certain Service Organizations or institutions may enter into
sub-transfer agency agreements with the Trust or Goldman Sachs with respect to
their services.

The Investment Adviser, Distributor and/or their affiliates may pay, out of
their own assets, compensation to Authorized Dealers, Service Organization and
other financial intermediaries ("Intermediaries") for the sale and distribution
of Shares of the Funds and/or for the servicing of those shares. These payments
("Additional Payments") would be in addition to the payments by the Funds
described in the Funds' Prospectus and this Additional Statement for
distribution and shareholder servicing and processing, and would also be in
addition to the sales commissions payable to Intermediaries as set forth in the
Prospectus. These Additional Payments may take the form of "due diligence"
payments for an Intermediary's examination of the Funds and payments for
providing extra employee training and information relating to the Funds;
"listing" fees for the placement of the Funds on an Intermediary's list of
mutual funds available for purchase by its customers; "finders" or "referral"
fees for directing investors to the Funds; "marketing support" fees for
providing assistance in promoting the sale of the Funds' shares; and payments
for the sale of shares and/or the maintenance of share balances. In addition,
the Investment Adviser, Distributor and/or their affiliates may make Additional
Payments for subaccounting, administrative and/or shareholder processing
services that are in addition to the shareholder servicing and processing fees
paid by the Funds. The Additional Payments made by the Investment Adviser,
Distributor and their affiliates may be a fixed dollar amount, may be based on
the number of customer accounts maintained by an Intermediary, or may be based
on a percentage of the value of shares sold to, or held by, customers of the
Intermediary involved, and may be different for different Intermediaries.
Furthermore, the Investment Adviser, Distributor and/or their affiliates may, to
the extent permitted by applicable 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. The
Investment Adviser, Distributor and their affiliates may also pay for the travel
expenses, meals, lodging and entertainment of Intermediaries and their
salespersons and guests in connection with educational, sales and promotional
programs subject to applicable NASD regulations.

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

B-85
<PAGE>

The Prospectuses and this Additional Statement do not contain all the
information included in the Registration Statement filed with the SEC under the
1933 Act with respect to the securities offered by the Prospectuses. Certain
portions of the Registration Statement have been omitted from the Prospectuses
and this Additional Statement pursuant to the rules and regulations of the SEC.
The Registration Statement including the exhibits filed therewith may be
examined at the office of the SEC in Washington, D.C.

Statements contained in the Prospectuses or in this Additional Statement as
to the contents of any contract or other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectuses and this Additional Statement form a part,
each such statement being qualified in all respects by such reference.

DISTRIBUTION AND SERVICE PLANS
(Class A Shares, Class B Shares and Class C Shares Only)

Distribution and Service Plans. As described in the Prospectus, the Trust
has adopted, on behalf of Class A, Class B and Class C Shares of each Fund,
distribution and service plans (each a "Plan") pursuant to Rule 12b-1 under the
Act. See "Shareholder Services" in the Prospectus.

The Plans for the Internet Tollkeeper Fund were initially approved on
_____, 1999, and the Plans for the Real Estate Securities Fund were most
recently approved on April 27, 1999, in each instance by a majority vote of the
Trustees of the Trust, including a majority of the non-interested Trustees of
the Trust who have no direct or indirect financial interest in the Plans, cast
in person at a meeting called for the purpose of approving the Plans.

The compensation for distribution services payable under a Plan may not
exceed 0.25% (0.50% with respect to the Real Estate Securities Fund), 0.75% and
0.75%, per annum of a Fund's average daily net assets attributable to Class A,
Class B and Class C Shares respectively, of such Fund. Under the Plans for Class
A, Class B and Class C Shares, Goldman Sachs is also entitled to received a
separate fee for personal and account maintenance services equal to an annual
basis of 0.25% of each Fund's average daily net assets attributable to Class A
(Real Estate Securities Fund only), Class B or Class C Shares. With respect to
Class A Shares, the Distributor at its discretion may use compensation for
distribution services paid under the Plan for personal and account maintenance
services and expenses so long as such total compensation under the Plan does not
exceed the maximum cap on "service fees" imposed by the NASD.

Each Plan is a compensation plan which provides for the payment of a
specified fee without regard to the expenses actually incurred by Goldman Sachs.
If such fee exceeds Goldman Sachs' expenses, Goldman Sachs may realize a profit
from these arrangements. The distribution fees received by Goldman Sachs under
the Plans and contingent deferred sales charge on Class A, Class B and Class C
Shares may be sold by Goldman Sachs as distributor to entities which provide
financing for payments to Authorized Dealers in respect of sales of Class A,
Class B and Class C Shares. To the extent such fees are not paid to such
dealers, Goldman

B-86
<PAGE>

Sachs may retain such fee as compensation for its services and expenses of
distributing the Funds' Class A, Class B and Class C Shares.

Under each Plan, Goldman Sachs, as distributor of each Fund's Class A,
Class B and Class C Shares, will provide to the Trustees of the Trust for their
review, and the Trustees of the Trust will review at least quarterly, a written
report of the services provided and amounts expended by Goldman Sachs under the
Plans and the purposes for which such services were performed and expenditures
were made.

The Plans will remain in effect until May 1, 2000 and from year to year
thereafter, provided that such continuance is approved annually by a majority
vote of the Trustees of the Trust, including a majority of the non-interested
Trustees of the Trust who have no direct or indirect financial interest in the
Plans. The Plans may not be amended to increase materially the amount of
distribution compensation without approval of a majority of the outstanding
Class A, Class B or Class C Shares of the affected Fund and share class. All
material amendments of a Plan must also be approved by the Trustees of the Trust
in the manner described above. A Plan may be terminated at any time as to any
Fund without payment of any penalty by a vote of a majority of the non-
interested Trustees of the Trust or by vote of a majority of the Class A, Class
B or Class C Shares, respectively, of the applicable Fund and share class. If a
Plan was so terminated, and no successor plan was adopted, the Fund would cease
to make payments to Goldman Sachs under the Plan and Goldman Sachs would be
unable to recover the amount of any of its unreimbursed expenditures. So long as
a Plan is in effect, the selection and nomination of non-interested Trustees of
the Trust will be committed to the discretion of the non-interested Trustees of
the Trust. The Trustees of the Trust have determined that in their judgment
there is a reasonable likelihood that the Plans will benefit the Funds and their
Class A, Class B and Class C Shareholders.

During the period July 27, 1998 (commencement of operations) through
December 31, 1998, the Real Estate Securities Fund paid Goldman Sachs $1,681,
$31 and $6 in distribution and service fees pursuant to the Class A Plan, Class
B Plan and Class C Plan, respectively. During the same period the Real Estate
Securities Fund would have paid Goldman Sachs $2,963 in distribution and service
fees pursuant to the Class A Plan, without the voluntary limitations then in
effect. As of the date of this Additional Statement, the Internet Tollkeeper
Fund had not commenced investment operations.

During the period July 27, 1998 (commencement of operations) through
December 31, 1998, Goldman Sachs incurred the following expenses in connection
with distribution under the Class A Plan, Class B Plan and Class C Plan with
respect to the Real Estate Securities Fund: $293, $0 and $1, respectively
(compensation to dealers); $160,926, $3,872 and $383, respectively (compensation
and expenses of the Distributor and its sales personnel); $186,868, $4,711 and
$466, respectively (allocable overhead, telephone and travel expenses); $14,958,
$377 and $37, respectively (printing and mailing of prospectuses to other than
current shareholders); and $52,610, $1,326 and $131, respectively (preparation
and distribution of sales

B-87
<PAGE>

literature and advertising). With respect to compensation to dealers, advance
commissions paid to dealers of 1%, 4% and 1% on Class A Shares, Class B Shares
and Class C Shares, respectively, are considered deferred assets which are
amortized over a period of 1 year, 6 years and 1 year, respectively; the amounts
presented above reflect amortization expense recorded during the period.

The information contained in the preceding paragraph reflects amounts expended
by Goldman Sachs, which amounts are in excess of the compensation received by
Goldman Sachs under the Plans. The payments under the Plans were used by
Goldman Sachs to compensate it for the expenses shown above on a pro-rata basis.

OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE, PURCHASES, REDEMPTIONS,
EXCHANGES AND DIVIDENDS
(Class A Shares, Class B Shares and Class C Shares Only)

Maximum Sales Charges
- ---------------------

Class A Shares of each Fund are sold at a maximum sales charge of 5.5%.
Using the initial offering price per share as of ________, 1999 (with respect to
the Real Estate Securities Fund) and the initial net asset value of the Internet
Tollkeeper Fund on the date it commences investment operations, the maximum
offering price of each Fund's Class A shares would be as follows:

<TABLE>
<CAPTION>
Maximum Offering
Net Asset Sales Price to
Value Charge Public
--------- --------- --------
<S> <C> <C> <C>
Internet Tollkeeper Fund $10.00 5.5% $10.55
------ ------- ------
Real Estate Securities Fund ___ 5.5% ___
=======
</TABLE>

The following information supplements the information in the Prospectus under
the captions "Shareholder Guide" and "Dividends." Please see the Prospectus for
more complete information.

Other Purchase Information
- --------------------------

If shares of a Fund are held in a "street name" account with an
Authorized Dealer, all recordkeeping, transaction processing and payments of
distributions relating to the beneficial owner's account will be performed by
the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the
Funds will have no record of the beneficial owner's transactions, a beneficial
owner should contact the Authorized Dealer to purchase, redeem or exchange
shares, to make changes in or give instructions concerning the account or to
obtain information about the account. The transfer of shares in a "street name"
account to an account with another dealer or to an account directly with the
Fund involves special procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the account from the
Authorized Dealer.

B-88
<PAGE>

Right of Accumulation (Class A)
- -------------------------------

A Class A shareholder qualifies for cumulative quantity discounts if
the current purchase price of the new investment plus the shareholder's current
holdings of existing Class A Shares (acquired by purchase or exchange) of the
Funds and Class A Shares of any other Goldman Sachs Fund (as defined in the
Prospectus) total the requisite amount for receiving a discount. For example,
if a shareholder owns shares with a current market value of $35,000 and
purchases additional Class A Shares of any Fund with a purchase price of
$25,000, the sales charge for the $25,000 purchase would be 4.75% (the rate
applicable to a single purchase of more than $50,000). Class A Shares purchased
without the imposition of a sales charge may not be aggregated with Class A
Shares purchased subject to a sales charge. Class A Shares of the Funds and any
other Goldman Sachs Fund purchased (i) by an individual, his spouse and his
children, and (ii) by a trustee, guardian or other fiduciary of a single trust
estate or a single fiduciary account, will be combined for the purpose of
determining whether a purchase will qualify for such right of accumulation and,
if qualifying, the applicable sales charge level. For purposes of applying the
right of accumulation, shares of the Funds and any other Goldman Sachs Fund
purchased by an existing client of the Private Client Services Division of
Goldman Sachs will be combined with Class A Shares held by any other Private
Client Services account. In addition, Class A Shares of the Funds and Class A
Shares of any other Goldman Sachs Fund purchased by partners, directors,
officers or employees of the same business organization, groups of individuals
represented by and investing on the recommendation of the same accounting firm,
certain affinity groups or other similar organizations (collectively, "eligible
persons") may be combined for the purpose of determining whether a purchase will
qualify for the right of accumulation and, if qualifying, the applicable sales
charge level. This right of accumulation is subject to the following
conditions: (i) the business organization's, group's or firm's agreement to
cooperate in the offering of the Funds' shares to eligible persons; and (ii)
notification to the Funds at the time of purchase that the investor is eligible
for this right of accumulation. In addition, in connection with SIMPLE IRA
accounts, cumulative quantity discounts are available on a per plan basis if (1)
your employee has been assigned a cumulative discount number by Goldman Sachs,
and (2) your account, alone or in combination with the accounts of other plan
participants also invested in Class A Shares of the Goldman Sachs Funds, totals
the requisite aggregate amount as described in the Prospectus.

Statement of Intention (Class A)
- --------------------------------

If a shareholder anticipates purchasing at least $50,000 of Class A
Shares of a Fund alone or in combination with Class A Shares of any other
Goldman Sachs Fund within a 13-month period, the shareholder may purchase shares
of the Fund at a reduced sales charge by submitting a Statement of Intention
(the "Statement"). Shares purchased pursuant to a Statement will be eligible
for the same sales charge discount that would have been available if all of the
purchases had been made at the same time. The shareholder or his Authorized
Dealer must inform Goldman Sachs that the Statement is in effect each time
shares are purchased. There is no obligation to purchase the full amount of
shares indicated in the Statement. A shareholder may include the value of all
Class A Shares on which a sales charge has previously been paid as an

B-89
<PAGE>

"accumulation credit" toward the completion of the Statement, but a price
readjustment will be made only on Class A Shares purchased within ninety (90)
days before submitting the Statement. The Statement authorizes the Transfer
Agent to hold in escrow a sufficient number of shares which can be redeemed to
make up any difference in the sales charge on the amount actually invested. For
purposes of satisfying the amount specified on the Statement, the gross amount
of each investment, exclusive of any appreciation on shares previously
purchased, will be taken into account.

The provisions applicable to the Statement, and the terms of the
related escrow agreement, are set forth in Appendix C to this Additional
Statement.

Cross-Reinvestment of Dividends and Distributions
- -------------------------------------------------

Shareholders may receive dividends and distributions in additional
Shares of the same class of the Fund in which they have invested or they may
elect to receive them in cash or Shares of the same class of other mutual funds
sponsored by Goldman Sachs (the "Goldman Sachs Funds") or ILA Service Units of
the Prime Obligations Portfolio or the Tax-Exempt Diversified Portfolio, if they
hold Class A Shares of a Fund, or ILA, Class B or Class C Units of the Prime
Obligations Portfolio, if they hold Class B or Class C Shares of a Fund (the
"ILA Portfolios").

A Fund shareholder should obtain and read the prospectus relating to
any other Fund, Goldman Sachs Fund or ILA Portfolio and its shares or units and
consider its investment objective, policies and applicable fees before electing
cross-reinvestment into that Fund or Portfolio. The election to cross-reinvest
dividends and capital gain distributions will not affect the tax treatment of
such dividends and distributions, which will be treated as received by the
shareholder and then used to purchase shares of the acquired fund. Such
reinvestment of dividends and distributions in shares of other Goldman Sachs
Funds or in units of ILA Portfolios is available only in states where such
reinvestment may legally be made.

Automatic Exchange Program
- --------------------------

A Fund shareholder may elect to exchange automatically a specified
dollar amount of shares of a Fund into an identical account of another Fund or
an account registered in a different name or with a different address, social
security or other taxpayer identification number, provided that the account in
the acquired fund has been established, appropriate signatures have been
obtained and the minimum initial investment requirement has been satisfied. A
Fund shareholder should obtain and read the prospectus relating to any other
Goldman Sachs Fund and its shares and consider its investment objective,
policies and applicable fees and expenses before electing an automatic exchange
into that Goldman Sachs Fund.

Systematic Withdrawal Plan
- --------------------------

A systematic withdrawal plan (the "Systematic Withdrawal Plan") is
available to shareholders of a Fund whose shares are worth at least $5,000. The
Systematic Withdrawal Plan provides for monthly payments to the participating
shareholder of any amount not less than $50.

B-90
<PAGE>

Dividends and capital gain distributions on shares held under the
Systematic Withdrawal Plan are reinvested in additional full and fractional
shares of the applicable Fund at net asset value. The Transfer Agent acts as
agent for the shareholder in redeeming sufficient full and fractional shares to
provide the amount of the systematic withdrawal payment. The Systematic
Withdrawal Plan may be terminated at any time. Goldman Sachs reserves the right
to initiate a fee of up to $5 per withdrawal, upon thirty (30) days written
notice to the shareholder. Withdrawal payments should not be considered to be
dividends, yield or income. If periodic withdrawals continuously exceed new
purchases and reinvested dividends and capital gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. The maintenance of a withdrawal plan concurrently with purchases of
additional Class A, Class B or Class C Shares would be disadvantageous because
of the sales charge imposed on purchases of Class A Shares or the imposition of
a CDSC on redemptions of Class A, Class B or Class C Shares. The CDSC
applicable to Class A, Class B or Class C Shares redeemed under a systematic
withdrawal plan may be waived. See "Shareholder Guide" in the Prospectus. In
addition, each withdrawal constitutes a redemption of shares, and any gain or
loss realized must be reported for federal and state income tax purposes. A
shareholder should consult his or her own tax adviser with regard to the tax
consequences of participating in the Systematic Withdrawal Plan. For further
information or to request a Systematic Withdrawal Plan, please write or call the
Transfer Agent.

B-91
<PAGE>

SERVICE PLAN
(Service Shares Only)

The Funds have adopted a service plan (the "Plan") with respect to its
Service Shares which authorizes it to compensate Service Organizations for
providing certain administration services and personal and account maintenance
services to their customers who are or may become beneficial owners of such
Shares. Pursuant to the Plan, each Fund enters into agreements with Service
Organizations which purchase Service Shares of the Fund on behalf of their
customers ("Service Agreements"). Under such Service Agreements the Service
Organizations may perform some or all of the following services: (a) act,
directly or through an agent, as the sole shareholder of record and nominee for
all customers, (b) maintain account records for each customer who beneficially
owns Service Shares of a Fund, (c) answer questions and handle correspondence
from customers regarding their accounts, (d) process customer orders to
purchase, redeem and exchange Service Shares of a Fund, and handle the
transmission of funds representing the customers' purchase price or redemption
proceeds, (e) issue confirmations for transactions in shares by customers, (f)
provide facilities to answer questions from prospective and existing investors
about Service Shares of a Fund, (g) receive and answer investor correspondence,
including requests for prospectuses and statements of additional information,
(h) display and make prospectuses available on the Service Organization's
premises, (i) assist customers in completing application forms, selecting
dividend and other account options and opening custody accounts with the Service
Organization and (j) act as liaison between customers and a Fund, including
obtaining information from the Fund, working with the Fund to correct errors and
resolve problems and providing statistical and other information to a Fund. As
compensation for such services, each Fund will pay each Service Organization a
service fee in an amount up to 0.50% (on an annualized basis) of the average
daily net assets of the Service Shares of such Fund attributable to or held in
the name of such Service Organization.

During the period July 27, 1998 (commencement of operations) through
December 31, 1998, the Real Estate Securities Fund paid Service Organizations $3
pursuant to the Plan. As of the date of this Additional Statement, the Internet
Tollkeeper Fund had not commenced investment operations.

The Funds have adopted the Plan pursuant to Rule 12b-1 under the Act
in order to avoid any possibility that payments to the Service Organizations
pursuant to the Service Agreements might violate the Act. Rule 12b-1, which was
adopted by the SEC under the Act, regulates the circumstances under which an
investment company or series thereof may bear expenses associated with the
distribution of its shares. In particular, such an investment company or series
thereof cannot engage directly or indirectly in financing any activity which is
primarily intended to result in the sale of shares issued by the company unless
it has adopted a plan pursuant to, and complies with the other requirements of,
such Rule. The Trust believes that fees paid for the services provided in the
Plan and described above are not expenses incurred primarily for effecting the
distribution of Service Shares. However, should such payments be deemed by a

B-92
<PAGE>

court or the SEC to be distribution expenses, such payments would be duly
authorized by the Plan.

The Glass-Steagall Act prohibits all entities which receive deposits
from engaging to any extent in the business of issuing, underwriting, selling or
distributing securities, although institutions such as national banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. In addition, under some state securities laws, banks and other
financial institutions purchasing Service Shares on behalf of their customers
may be required to register as dealers. Should future legislative or
administrative action or judicial or administrative decisions or interpretations
prohibit or restrict the activities of one or more of the Service Organizations
in connection with a Fund, such Service Organizations might be required to alter
materially or discontinue the services performed under their Service Agreements.
If one or more of the Service Organizations were restricted from effecting
purchases or sales of Service Shares automatically pursuant to pre-authorized
instructions, for example, effecting such transactions on a manual basis might
affect the size and/or growth of a Fund. Any such alteration or discontinuance
of services could require the Board of Trustees to consider changing a Fund's
method of operations or providing alternative means of offering Service Shares
of the Fund to customers of such Service Organizations, in which case the
operation of such Fund, its size and/or its growth might be significantly
altered. It is not anticipated, however, that any alteration of a Fund's
operations would have any effect on the net asset value per share or result in
financial losses to any shareholder.

Conflict of interest restrictions (including the Employee Retirement
Income Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by a Fund in connection with the investment of fiduciary
assets in Service Shares of a Fund. Service Organizations, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board or the
Federal Deposit Insurance Corporation, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult their legal advisers before
investing fiduciary assets in Service Shares of a Fund. In addition, under some
state securities laws, banks and other financial institutions purchasing Service
Shares on behalf of their customers may be required to register as dealers.

The Trustees, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or the related Service Agreements,
initially approved the Plan and related Service Agreements with respect to the
Internet Tollkeeper Fund on ______, 1999 and most recently voted to approve the
Plan and related Service Agreements with respect to the Real Estate Securities
Fund on April 27, 1999, in each instance at a meeting called for the purpose of
voting on such Plan and Service Agreements. The Plan and related Service
Agreements will remain in effect until May 1, 2000 and will continue in effect
thereafter only if such continuance is specifically approved annually by a vote
of the Trustees in the manner described above. The Plan may not be amended to
increase materially the amount to be spent for the services described therein
without approval of the Shareholders of the affected Fund's Service Class and
all material amendments of the Plan must also be approved by the Trustees in the
manner described above.

B-93
<PAGE>

The Plan may be terminated at any time by a majority of the Trustees as
described above or by a vote of a majority of the outstanding Service Shares of
the affected Fund. The Service Agreements may be terminated at any time, without
payment of any penalty, by vote of a majority of the Trustees as described above
or by a vote of a majority of the outstanding Service Shares of the affected
Fund on not more than sixty (60) days' written notice to any other party to the
Service Agreements. The Service Agreements will terminate automatically if
assigned. So long as the Plan is in effect, the selection and nomination of
those Trustees who are not interested persons will be committed to the
discretion of the non-interested Trustees. The Trustees have determined that, in
its judgment, there is a reasonable likelihood that the Plans will benefit the
Funds and the holders of Service Shares of the Funds.
<PAGE>

APPENDIX A

Commercial Paper Ratings
- ------------------------

A Standard & Poor's ("S&P") commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. The following summarizes the rating categories used by Standard
and Poor's for commercial paper:

"A-1" - Obligations are rated in the highest category indicating that the
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation.

"D" - Obligations are in payment default. The "D" rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the
rating categories used by Moody's for commercial paper:

1-A
<PAGE>

"Prime-1" - Issuers (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics: leading market
positions in well-established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

"Prime-2" - Issuers (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

"Prime-3" - Issuers (or supporting institutions) have an acceptable ability
for repayment of senior short-term debt obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating categories.

The three rating categories of Duff & Phelps for investment grade commercial
paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps employs
three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors.
Risk factors are minor.

"D-1-" - Debt possesses high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.

"D-3" - Debt possesses satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.

2-A
<PAGE>

"D-4" - Debt possesses speculative investment characteristics. Liquidity is
not sufficient to insure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation.

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.

"F2" - Securities possess good credit quality. This designation indicates a
satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation indicates
that the capacity for timely payment of financial commitments is adequate;
however, near-term adverse changes could result in a reduction to non-investment
grade.

"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

"C" - Securities possess high default risk. This designation indicates that
default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.

"D" - Securities are in actual or imminent payment default.

Thomson BankWatch short-term ratings assess the likelihood of an untimely
payment of principal and interest of debt instruments with original maturities
of one year or less. The following summarizes the ratings used by Thomson
BankWatch:

"TBW-1" - This designation represents Thomson BankWatch's highest category and
indicates a very high likelihood that principal and interest will be paid on a
timely basis.

"TBW-2" - This designation represents Thomson BankWatch's second-highest
category and indicates that while the degree of safety regarding timely
repayment of

3-A
<PAGE>

principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."

"TBW-3" - This designation represents Thomson BankWatch's lowest investment-
grade category and indicates that while the obligation is more susceptible to
adverse developments (both internal and external) than those with higher
ratings, the capacity to service principal and interest in a timely fashion is
considered adequate.

"TBW-4" - This designation represents Thomson BankWatch's lowest rating
category and indicates that the obligation is regarded as non-investment grade
and therefore speculative.

Corporate and Municipal Long-Term Debt Ratings
- ----------------------------------------------

The following summarizes the ratings used by Standard & Poor's for corporate and
municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment
on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

4-A
<PAGE>

"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to nonpayment.

"C" - The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.

"D" - An obligation rated "D" is in payment default. The "D" rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon
the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

"r" - This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

The following summarizes the ratings used by Moody's for corporate and municipal
long-term debt:

"Aaa" - Bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

5-A
<PAGE>

"Aa" - Bonds are judged to be of high quality by all standards. Together with
the "Aaa" group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than the "Aaa" securities.

"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

"Baa" - Bonds are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa". The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.

The following summarizes the long-term debt ratings used by Duff & Phelps for
corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered to be of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

6-A
<PAGE>

"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable in periods of greater economic stress.

"BBB" - Debt possesses below-average protection factors but such protection
factors are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these ratings is
considered to be below investment grade. Although below investment grade, debt
rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal, interest or preferred dividends. Debt rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A," "BBB,"
"BB" and "B" ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within these major categories.

The following summarizes the ratings used by Fitch IBCA for corporate and
municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of credit risk and are
assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit quality.
These ratings denote a low expectation of credit risk and indicate strong
capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit quality.
These ratings denote that there is currently a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions are more likely
to impair this capacity.

"BB" - Bonds considered to be speculative. These ratings indicate that there
is a possibility of credit risk developing, particularly as the result of
adverse economic changes over

7-A
<PAGE>

time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.

"B" - Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

"CCC", "CC", "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.

"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations in
this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have
the highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

To provide more detailed indications of credit quality, the Fitch IBCA ratings
from and including "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within these major rating
categories.

Thomson Financial BankWatch assesses the likelihood of an untimely repayment
of principal or interest over the term to maturity of long term debt and
preferred stock which are issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:

"AAA" - This designation indicates that the ability to repay principal and
interest on a timely basis is extremely high.

"AA" - This designation indicates a very strong ability to repay principal and
interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.

8-A
<PAGE>

"A" - This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

"BBB" - This designation represents the lowest investment-grade category and
indicates an acceptable capacity to repay principal and interest. Issues rated
"BBB" are more vulnerable to adverse developments (both internal and external)
than obligations with higher ratings.

"BB," "B," "CCC" and "CC" - These designations are assigned by Thomson
Financial BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.

"D" - This designation indicates that the long-term debt is in default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include a plus
or minus sign designation which indicates where within the respective category
the issue is placed.

Municipal Note Ratings
- ----------------------

A Standard and Poor's rating reflects the liquidity factors and market access
risks unique to notes due in three years or less. The following summarizes the
ratings used by Standard & Poor's Ratings Group for municipal notes:

"SP-1" - The issuers of these municipal notes exhibit a strong capacity to pay
principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative capacity to
pay principal and interest.

Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade ("MIG") and variable rate demand obligations
are designated Variable Moody's Investment Grade ("VMIG"). Such ratings
recognize the

9-A
<PAGE>

differences between short-term credit risk and long-term risk.
The following summarizes the ratings by Moody's Investors Service, Inc. for
short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins of
protection that are ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.

"SG" - This designation denotes speculative quality. Debt instruments in this
category lack of margins of protection.

Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.

10-A

<PAGE>

APPENDIX B

BUSINESS PRINCIPLES OF GOLDMAN, SACHS & CO.

Goldman Sachs is noted for its Business Principles, which guide all of the
firm's activities and serve as the basis for its distinguished reputation among
investors worldwide.

Our client's interests always come first. Our experience shows that if we
serve our clients well, our own success will follow.

Our assets are our people, capital and reputation. If any of these is ever
diminished, the last is the most difficult to restore. We are dedicated to
complying fully with the letter and spirit of the laws, rules and ethical
principles that govern us. Our continued success depends upon unswerving
adherence to this standard.

We take great pride in the professional quality of our work. We have an
uncompromising determination to achieve excellence in everything we undertake.
Though we may be involved in a wide variety and heavy volume of activity, we
would, if it came to a choice, rather be best than biggest.

We stress creativity and imagination in everything we do. While recognizing
that the old way may still be the best way, we constantly strive to find a
better solution to a client's problems. We pride ourselves on having pioneered
many of the practices and techniques that have become standard in the industry.

We make an unusual effort to identify and recruit the very best person for
every job. Although our activities are measured in billions of dollars, we
select our people one by one. In a service business, we know that without the
best people, we cannot be the best firm.

We offer our people the opportunity to move ahead more rapidly than is
possible at most other places. We have yet to find limits to the responsibility
that our best people are able to assume. Advancement depends solely on ability,
performance and contribution to the Firm's success, without regard to race,
color, religion, sex, age, national origin, disability, sexual orientation, or
any other impermissible criterion or circumstance.

We stress teamwork in everything we do. While individual creativity is always
encouraged, we have found that team effort often produces the best results. We
have no room for those who put their personal interests ahead of the interests
of the Firm and its clients.

The dedication of our people to the Firm and the intense effort they give
their jobs are greater than one finds in most other organizations. We think
that this is an important part of our success.

1-B
<PAGE>

Our profits are a key to our success. They replenish our capital and attract
and keep our best people. It is our practice to share our profits generously
with all who help create them. Profitability is crucial to our future.

We consider our size an asset that we try hard to preserve. We want to be big
enough to undertake the largest project that any of our clients could
contemplate, yet small enough to maintain the loyalty, the intimacy and the
esprit de corps that we all treasure and that contribute greatly to our success.

We constantly strive to anticipate the rapidly changing needs of our clients
and to develop new services to meet those needs. We know that the world of
finance will not stand still and that complacency can lead to extinction.

We regularly receive confidential information as part of our normal client
relationships. To breach a confidence or to use confidential information
improperly or carelessly would be unthinkable.

Our business is highly competitive, and we aggressively seek to expand our
client relationships. However, we must always be fair competitors and must
never denigrate other firms.

Integrity and honesty are the heart of our business. We expect our people to
maintain high ethical standards in everything they do, both in their work for
the firm and in their personal lives.

2-B
<PAGE>

GOLDMAN, SACHS & CO.'S INVESTMENT BANKING AND SECURITIES ACTIVITIES

Goldman Sachs is a leading financial services firm traditionally known on Wall
Street and around the world for its institutional and private client service.

With thirty-seven offices around the world Goldman Sachs employs over 11,000
professionals focused on opportunities in major markets.

The number one underwriter of all international equity issues from 1989-1997.

The number one lead manager of U.S. common stock offerings for the past nine
years (1989-1997).*

The number one lead manager for initial public offerings (IPOs) worldwide
(1989-1997).

* Source: Securities Data Corporation. Common stock ranking excludes REITs,
====================================
Investment Trusts and Rights.

3-B
<PAGE>

GOLDMAN, SACHS & CO.'S HISTORY OF EXCELLENCE

1869 Marcus Goldman opens Goldman Sachs for business

1890 Dow Jones Industrial Average first published

1896 Goldman, Sachs & Co. joins New York Stock Exchange

1906 Goldman, Sachs & Co. takes Sears Roebuck & Co. public (at 93 years, the
firm's longest-standing client relationship)

Dow Jones Industrial Average tops 100

1925 Goldman, Sachs & Co. finances Warner Brothers, producer of the first
talking film

1956 Goldman, Sachs & Co. co-manages Ford's public offering, the largest to
date

1970 Goldman, Sachs & Co. opens London office

1972 Dow Jones Industrial Average breaks 1000

1986 Goldman, Sachs & Co. takes Microsoft public

1988 Goldman Sachs Asset Management is formally established

1991 Goldman, Sachs & Co. provides advisory services for the largest
privatization in the region of the sale of Telefonos de Mexico

1995 Goldman Sachs Asset Management introduces Global Tactical Asset
Allocation Program

Dow Jones Industrial Average breaks 5000

1996 Goldman, Sachs & Co. takes Deutsche Telekom public

Dow Jones Industrial Average breaks 6000

1997 Goldman Sachs Asset Management increases assets under management by 100%
over 1996

Dow Jones Industrial Average breaks 7000

4-B
<PAGE>

1998 Goldman Sachs Asset Management reaches $195.5 billion in assets under
management

Dow Jones Industrial Average breaks 9000

1999 Goldman Sachs becomes a public company.

5-B
<PAGE>

APPENDIX C

Statement of Intention
(applicable only to Class A shares)

If a shareholder anticipates purchasing $50,000 or more of Class A
Shares of a Fund alone or in combination with Class A Shares of another Goldman
Sachs Fund within a 13-month period, the shareholder may obtain shares of the
Fund at the same reduced sales charge as though the total quantity were invested
in one lump sum by checking and filing the Statement of Intention in the Account
Application. Income dividends and capital gain distributions taken in
additional shares will not apply toward the completion of the Statement of
Intention.

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

Escrow Agreement

Out of the initial purchase (or subsequent purchases if necessary), 5%
of the dollar amount specified on the Account Application will be held in escrow
by the Transfer Agent in the form of shares registered in the investor's name.
All income dividends and capital gains distributions on escrowed shares will be
paid to the investor or to his or her order. When the minimum investment so
specified is completed (either prior to or by the end of the 13th month), the
investor will be notified and the escrowed shares will be released.

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

1-C
<PAGE>

PART C
OTHER INFORMATION

Item 23. Exhibits
--------

The following exhibits relating to Goldman Sachs Trust are incorporated
herein by reference to Post-Effective Amendment No. 26 to Goldman Sachs Trust's
Registration Statement on Form N-1A (Accession No. 000950130-95-002856); to
Post-Effective Amendment No. 27 to such Registration Statement (Accession No.
0000950130-96-004931); to Post-Effective Amendment No. 29 to such Registration
Statement (Accession No. 0000950130-97-000573); to Post-Effective Amendment No.
31 to such Registration Statement (Accession No. 0000950130-97-000805); to Post-
Effective Amendment No. 32 to such Registration Statement (Accession No.
0000950130-97-0001846); to Post-Effective Amendment No. 40 to such Registration
Statement (Accession No. 0000950130-97-004495); to Post-Effective Amendment No.
41 to such Registration Statement (Accession No 0000950130-98-000676); Post-
Effective Amendment No. 43 to such Registration Statement (Accession No.
0000950130-98-000965); to Post-Effective Amendment No. 44 to such Registration
Statement (Accession No. 0000950130-98-002160); to Post-Effective Amendment No.
46 to such Registration Statement (Accession No. 0000950130-98-003563); to Post-
Effective Amendment No. 47 to such Registration Statement (Accession No.
0000950130-98-004845), to Post-Effective Amendment No. 48 to such Registration
Statement (Accession No. 0000950109-98-005275); to Post-Effective Amendment No.
50 to such Registration Statement (Accession No. 0000950130-98-006081), to Post-
Effective Amendment No. 51 to such Registration Statement (Accession No.
0000950130-99-000178), to Post-Effective Amendment No. 52 to such Registration
Statement (Accession No. 0000950130-99-000742), to Post-Effective Amendment No.
53 to such Registration Statement (Accession No. 0000950130-99-001069) and to
Post-Effective Amendment No. 54 to such Registration Statement (Accession No.
0000950130-99-002212).

(a)(1). Agreement and Declaration of Trust dated January 28, 1997.
(Accession No. 0000950130-97-000573).

(a)(2). Amendment No. 1 dated April 24, 1997 to Agreement and Declaration
of Trust January 28, 1997. (Accession No. 0000950130-97-004495).

(a)(3). Amendment No. 2 dated July 21, 1997 to Agreement and Declaration
of Trust, as amended, dated January 28, 1997. (Accession No.
0000950130-97-004495).

(a)(4). Amendment No.3 dated October 21, 1997 to the Agreement and
Declaration of Trust, as amended, dated January 28, 1997.
(Accession No. 0000950130-98-000676).

3
<PAGE>

(a)(5). Amendment No. 4 dated January 28, 1998 to the Agreement and
Declaration of Trust, as amended, dated January 28, 1997.
(Accession No. 0000950130-98-000676).

(a)(6). Amendment No. 5 dated April 23, 1998 to Agreement and Declaration
of Trust as amended, dated January 28, 1997. (Accession No.
0000950130-98-004845).

(a)(7). Amendment No. 6 dated July 22, 1998 to Agreement and Declaration
of Trust as amended, dated January 28, 1997. (Accession No.
0000950130-98-004845).

(a)(8). Amendment No. 7 dated November 3, 1998 to Agreement and
Declaration of Trust as amended, dated January 28, 1997
(Accession No. 0000950130-98-006081).

(a)(9) Amendment No. 8 dated January 22, 1999 to Agreement and
Declaration of Trust as amended, dated January 28, 1997
(Accession No. 0000950130-99-000742).

(b). Amended and Restated By-laws of the Delaware business trust dated
January 28, 1997. (Accession No. 0000950130-97-000573).

(c). Not applicable.

(d)(1). Management Agreement dated April 30, 1997 between Registrant, on
behalf of Goldman Sachs Short Duration Government Fund, and
Goldman Sachs Funds Management, L.P. (Accession No. 0000950130-
98-000676).

(d)(2). Management Agreement dated April 30, 1997 between Registrant, on
behalf of Goldman Sachs Adjustable Rate Government Fund, and
Goldman Sachs Funds Management, L.P. (Accession No. 0000950130-
98-000676).

(d)(3). Management Agreement dated April 30, 1997 between Registrant, on
behalf of Goldman Sachs Short Duration Tax-Free Fund, and Goldman
Sachs Asset Management. (Accession No. 0000950130-98-000676).

(d)(4). Management Agreement dated April 30, 1997 between Registrant, on
behalf of Goldman Sachs Core Fixed Income Fund, and Goldman Sachs
Asset Management. (Accession No. 0000950130-98-000676).

4
<PAGE>

(d)(5). Management Agreement dated April 30, 1997 between the Registrant,
on behalf of Goldman Sachs - Institutional Liquid Assets, and
Goldman Sachs Asset Management. (Accession No. 0000950130-98-
000676).

(d)(6). Management Agreement dated April 30, 1997 as amended November 3,
1998, between Registrant, Goldman Sachs Asset Management,
Goldman Sachs Fund Management L.P. and Goldman, Sachs Asset
Management International (Accession No. 0000950109-98-005275).

(d)(7). Management Agreement dated January 1, 1998 on behalf of the
Goldman Sachs Asset Allocation Portfolios and Goldman Sachs
Asset Management (Accession No. 0000950130-98-000676).

(d)(8) Amended Annex A to Management Agreement dated January 1, 1998 on
behalf of the Goldman Sachs Asset Allocation Portfolios and
Goldman Sachs Asset Management (Conservative Strategy Portfolio)
(Accession No. 0000950130-99-000742).

(e) None.

(f). Not applicable.

(g)(1). Custodian Agreement dated July 15, 1991, between Registrant and
State Street Bank and Trust Company. (Accession No. 0000950130-
95-002856).

(g)(2). Custodian Agreement dated December 27, 1978 between Registrant
and State Street Bank and Trust Company, on behalf of Goldman
Sachs - Institutional Liquid Assets, filed as Exhibit 8(a).
(Accession No. 0000950130-98-000965).

(g)(3). Letter-Agreement dated December 27, 1978 between Registrant and
State Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, pertaining to the fees payable by
Registrant pursuant to the Custodian Agreement, filed as Exhibit
8(b). (Accession No. 0000950130-98-000965).

(g)(4). Amendment dated May 28, 1981 to the Custodian Agreement referred
to above as Exhibit (g)(2) (Accession No. 0000950130-98-000965).

5
<PAGE>

(g)(5). Fee schedule relating to the Custodian Agreement between
Registrant on behalf of the Goldman Sachs Asset Allocation
Portfolios and State Street Bank and Trust Company. (Accession
No. 0000950130-97-004495).

(g)(6). Letter Agreement dated June 14, 1984 between Registrant and State
Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, pertaining to a change in wire
charges under the Custodian Agreement, filed as Exhibit 8(d).
(Accession No. 0000950130-98-000965).

(g)(7). Letter Agreement dated March 29, 1983 between Registrant and
State Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, pertaining to the latter's
designation of Bank of America, N.T. and S.A. as its subcustodian
and certain other matters, filed as Exhibit 8(f). (Accession No.
0000950130-98-000965).

(g)(8). Letter Agreement dated March 21, 1985 between Registrant and
State Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, pertaining to the creation of a
joint repurchase agreement account, filed as Exhibit 8(g).
(Accession No. 0000950130-98-000965).

(g)(9). Letter Agreement dated November 7, 1985, with attachments,
between Registrant and State Street Bank and Trust Company, on
behalf of Goldman Sachs - Institutional Liquid Assets,
authorizing State Street Bank and Trust Company to permit
redemption of units by check, filed as Exhibit 8(h). (Accession
No. 0000950130-98-000965).

(g)(10). Money Transfer Services Agreement dated November 14, 1985,
including attachment, between Registrant and State Street Bank
and Trust Company, on behalf of Goldman Sachs - Institutional
Liquid Assets, pertaining to transfers of funds on deposit with
State Street Bank and Trust Company, filed as Exhibit 8(i).
(Accession No. 0000950130-98-000965).

(g)(11). Letter Agreement dated November 27, 1985 between Registrant and
State Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, amending the

6
<PAGE>

Custodian Agreement. (Accession No. 0000950130-98-000965).

(g)(12). Letter Agreement dated July 22, 1986 between Registrant and State
Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, pertaining to a change in wire
charges. (Accession No. 0000950130-98-000965).

(g)(13). Letter Agreement dated June 20, 1987 between Registrant and State
Street Bank and Trust Company, on behalf of Goldman Sachs -
Institutional Liquid Assets, amending the Custodian Agreement.
(Accession No. 0000950130-98-000965).

(g)(14). Letter Agreement between Registrant and State Street Bank and
Trust Company, on behalf of Goldman Sachs - Institutional Liquid
Assets, pertaining to the latter's designation of Security
Pacific National Bank as its sub-custodian and certain other
matters. (Accession No. 0000950130-98-000965).

(g)(15). Amendment dated July 19, 1988 to the Custodian Agreement between
Registrant and State Street Bank and Trust Company, on behalf of
Goldman Sachs - Institutional Liquid Assets. (Accession No.
0000950130-98-000965).

(g)(16). Amendment dated December 19, 1988 to the Custodian Agreement
between Registrant and State Street Bank and Trust Company, on
behalf of Goldman Sachs - Institutional Liquid Assets. (Accession
No. 0000950130-98-000965).

(g)(17). Custodian Agreement dated April 6, 1990 between Registrant and
State Street Bank and Trust Company on behalf of Goldman Sachs
Capital Growth Fund. (Accession No. 0000950130-98-006081).

(g)(18). Sub-Custodian Agreement dated March 29, 1983 between State Street
Bank and Trust Company and Bank of America, National Trust and
Savings Association on behalf of Goldman Sachs Institutional
Liquid Assets. (Accession No. 0000950130-98-006081).

(g)(19) Fee schedule dated January 8, 1999 relating to Custodian
Agreement dated April 6, 1990 between Registrant and State Street
Bank and Trust Company

7
<PAGE>

(Conservative Strategy Portfolio)(Accession No. 0000950130-99-
000742).

(h)(1). Wiring Agreement dated June 20, 1987 among Goldman, Sachs & Co.,
State Street Bank and Trust Company and The Northern Trust
Company. (Accession No. 0000950130-98-000965).

(h)(2). Letter Agreement dated June 20, 1987 regarding use of checking
account between Registrant and The Northern Trust Company.
(Accession No. 0000950130-98-000965).

(h)(3). Transfer Agency Agreement dated July 15, 1991 between Registrant
and Goldman, Sachs & Co. (Accession No. 0000950130-95-002856).

(h)(4). Fee schedule relating to Transfer Agency Agreement between
Registrant on behalf of the Goldman Sachs Asset Allocation
Portfolios and Goldman, Sachs & Co. (Accession No. 0000950130-
97-004495).

(h)(7). Fee schedule dated July 31, 1998 relating to Transfer Agency
Agreement between Registrant and Goldman, Sachs & Co. on behalf
of all Funds of Goldman Sachs Trust other than the Institutional
Liquid Assets and Financial Square Money Market Funds.
(Accession No. 0000950130-98-004845).

(h)(8). Transfer Agency Agreement dated May 1, 1988 between Goldman Sachs
Institutional Liquid Assets and Goldman, Sachs & Co. (Accession
No. 0000950130-98-006081).

(h)(9). Fee Schedule dated July 31, 1998 relating to Transfer Agency
Agreement between Registrant and Goldman, Sachs & Co. on behalf
of ILA Money Market Funds. (Accession No. 0000950130-98-006081).

(h)(10). Transfer Agency Agreement dated April 30, 1997 between Registrant
and Goldman, Sachs & Co. on behalf of the Financial Square Funds.
(Accession No. 0000950130-98-006081).

(h)(11). Transfer Agency Agreement dated April 6, 1990 between GS-Capital
Growth Fund, Inc. and Goldman Sachs & Co. (Accession No.
0000950130-98-006081).

(h)(12). Goldman Sachs - Institutional Liquid Assets Administration Class
Administration Plan dated April 22, 1998. (Accession No.
0000950130-98-006081).

8
<PAGE>

(h)(13). FST Administration Class Administration Plan dated April 22,
1998. (Accession No. 0000950130-98-006081).

(h)(14). Goldman Sachs - Institutional Liquid Assets Service Class Service
Plan dated April 22, 1998. (Accession No. 0000950130-98-006081).

(h)(15). FST Service Class Service Plan dated April 22, 1998. (Accession
No. 0000950130-98-006081).

(h)(16). FST Preferred Class Preferred Administration Plan dated April 22,
1998. (Accession No. 0000950130-98-006081).

(h)(17). Goldman Sachs Trust Administration Class Administration Plan
dated April 23, 1998. (Accession No. 0000950130-98-006081).

(h)(18). Goldman Sachs Trust Service Class Service Plan dated April 22,
1998 (Accession No. 0000950130-98-006081).

(h)(19). Cash Management Shares Service Plan dated May 1, 1998.
(Accession No. 0000950130-98-006081).

(h)(20). Form of Retail Service Agreement on behalf of Goldman Sachs Trust
relating to Class A Shares of Goldman Sachs Asset Allocation
Portfolios, Goldman Sachs Fixed Income Funds, Goldman Sachs
Domestic Equity Funds and Goldman Sachs International Equity
Funds. (Accession No. 0000950130-98-006081).

(h)(21). Form of Retail Service Agreement on behalf of Goldman Sachs Trust
relating to the Preferred Class, Administration Class, Service
Class and Cash Management Class, as applicable, of Goldman Sachs
Financial Square Funds, Goldman Sachs - International Liquid
Asset Portfolios, Goldman Sachs Fixed Income Funds, Goldman Sachs
Domestic Equity Funds, Goldman Sachs International Equity Funds
and Goldman Sachs Asset Allocation Portfolios. (Accession No.
0000950130-98-006081).

(h)(22). Form of Supplemental Service Agreement on behalf of Goldman Sachs
Trust relating to the Administrative Class, Service Class and
Cash Management Class of Goldman Sachs - Institutional Liquid
Assets Portfolios. (Accession No. 0000950130-98-006081).

9
<PAGE>

(h)(23). Form of Supplemental Service Agreement on behalf of Goldman Sachs
Trust relating to the FST Shares, FST Preferred Shares, FST
Administration Shares and FST Service Shares of Goldman Sachs
Financial Square Funds. (Accession No. 0000950130-98-006081).

(i)(1). Opinion of Drinker, Biddle & Reath LLP. (With respect to the
Asset Allocation Portfolios). (Accession No. 0000950130-97-
004495).

(i)(2). Opinion of Morris, Nichols, Arsht & Tunnell. (Accession No.
0000950130-97-001846)

(i)(3). Opinion of Drinker Biddle & Reath LLP.(With respect to Japanese
Equity and International Small Cap). (Accession No. 0000950130-
98-003563).

(i)(4). Opinion of Drinker Biddle & Reath LLP. (With respect to Cash
Management Shares). (Accession No. 0000950130-98-003563)

(i)(5). Opinion of Drinker Biddle & Reath LLP. (With respect to the
European Equity Fund). (Accession No. 0000950130-98-006081).

(i)(6). Opinion of Drinker Biddle & Reath LLP. (With respect to the CORE
Large Cap Value Fund). (Accession No. 0000950130-98-006081).

(i)(7) Opinion of Drinker Biddle & Reath LLP (with respect to the
Conservative Strategy Portfolio) (Accession No. 0000950130-99-
001069).

(j) None.

(k). Not applicable.

(l). Not applicable.

(m)(1). Class A Distribution and Service Plan amended and restated as of
September 1, 1998. (Accession No. 0000950130-98-004845)

(m)(2). Class B Distribution and Service Plan amended and restated as of
September 1, 1998. (Accession No. 0000950130-98-004845)

(m)(3). Class C Distribution and Service Plan amended and restated as of
September 1, 1998. (Accession No. 0000950130-98-004845)

10
<PAGE>

(m)(4). Cash Management Shares Plan of Distribution pursuant to Rule 12b-
1 dated May 1, 1998. (Accession No. 0000950130-98-006081).

(n) None.

(o). Plan dated September 1, 1998 entered into by Registrant pursuant
to Rule 18f-3. (Accession No. 0000950130-98-004845)

(p)(1). Powers of Attorney of Messrs. Bakhru, Ford, Grip, Shuch, Smart,
Springer, Strubel, McNulty, Mosior, Gilman, Perlowski, Richman,
Surloff, Mmes. MacPherson, Mucker and Taylor. (Accession No.
0000950130-97-000805)

(p)(2). Powers of Attorney dated October 21, 1997 on behalf of James A.
Fitzpatrick and Valerie A. Zondorak. (Accession No. 0000950130-
98-000676)

The following exhibits relating to Goldman Sachs Trust are filed herewith
electronically pursuant to EDGAR rules:

(a)(10) Amendment No. 9 dated April 28, 1999 to Agreement and Declaration
of Trust as amended, dated January 28, 1997

(d)(9) Amended Annex A dated April 28, 1999 to Management Agreement
dated April 30, 1997

(e)(1) Distribution Agreement dated April 30, 1997 as amended April 28,
1999 between Registrant and Goldman, Sachs & Co.

(g)(20) Fee schedule dated April 12, 1999 relating to Custodian Agreement
dated April 6, 1990 between Registrant and State Street Bank and
Trust Company (Strategic Growth and Growth Opportunities
Portfolios)

(i)(8). Opinion of Drinker Biddle & Reath LLP (with respect to the
Strategic Growth and Growth Opportunities Portfolios).

Item 24. Persons Controlled by or Under Common Control with Registrant.
-------------------------------------------------------------

Not Applicable.

Item 25. Indemnification
---------------

Article IV of the Declaration of Trust of Goldman Sachs Trust, Delaware business
trust, provides for indemnification of the Trustees, officers and agents of the
Trust, subject to certain limitations. The Declaration of Trust is incorporated
by reference to Exhibit (a)(1).

The Management Agreement with each of the Funds (other than the ILA Portfolios)
provides that the applicable Investment Adviser will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Investment Adviser or from reckless disregard by the Investment Adviser of
its obligations or duties under the Management Agreement. Section 7 of the
Management Agreement with respect to the ILA Portfolios provides that the ILA
Portfolios will indemnify the Adviser against certain liabilities; provided,
however, that such indemnification does not apply to any loss by reason of its
willful misfeasance, bad faith or gross negligence or the Adviser's reckless
disregard of its obligation under the

11
<PAGE>

Management Agreement. The Management Agreements are incorporated by reference to
Exhibits (d)(1) through (d)(7);

Section 9 of the Distribution Agreement between the Registrant and Goldman Sachs
dated April 30, 1997, as amended January 22, 1999 and Section 7 of the Transfer
Agency Agreements between the Registrant and Goldman, Sachs & Co. dated July 15,
1991, May 1, 1988, April 30, 1997 and April 6, 1990 each provide that the
Registrant will indemnify Goldman, Sachs & Co. against certain liabilities. A
copy of the Distribution Agreement is incorporated by reference to Exhibit
(e)(1). The Transfer Agency Agreements are incorporated by reference as Exhibits
(h)(3), (h)(8), (h)(10) and (h)(11), respectively, to the Registrant's
Registration Statement.

Mutual fund and Trustees and officers liability policies purchased jointly by
the Registrant, Trust for Credit Unions, Goldman Sachs Variable Insurance Trust
and The Commerce Funds insure such persons and their respective trustees,
partners, officers and employees, subject to the policies' coverage limits and
exclusions and varying deductibles, against loss resulting from claims by reason
of any act, error, omission, misstatement, misleading statement, neglect or
breach of duty.

Item 26. Business and Other Connections of Investment Adviser.
----------------------------------------------------

The business and other connections of the officers and Managing Directors of
Goldman, Sachs & Co., Goldman Sachs Funds Management, L.P., and Goldman Sachs
Asset Management International are listed on their respective Forms ADV as
currently filed with the Commission (File Nos. 801-16048, 801-37591 and 801-
38157, respectively) the texts of which are hereby incorporated by reference.

Item 27. Principal Underwriters.
----------------------

(a) Goldman, Sachs & Co. or an affiliate or a division thereof currently serves
as investment adviser and distributor of the units of Trust for Credit Unions,
for shares of Goldman Sachs Trust and for shares of Goldman Sachs Variable
Insurance Trust. Goldman, Sachs & Co., or a division thereof currently serves as
administrator and distributor of the units or shares of The Commerce Funds.

(b) Set forth below is certain information pertaining to the Managing Directors
of Goldman, Sachs & Co., the Registrant's principal underwriter, who are members
of Goldman, Sachs & Co.'s Management Committee. None of the members of the
management committee holds a position or office with the Registrant, except John
P. McNulty who is a trustee of the Registrant.

GOLDMAN SACHS MANAGEMENT COMMITTEE

12
<PAGE>

Name and Principal
Business Address Position
---------------- --------

Henry M. Paulson, Jr. (1) Chairman and Chief Executive Officer
Robert J. Hurst (1) Vice Chairman
John A. Thain (1)(3) President and Co-Chief Operating Officer
John L. Thornton (3) President and Co-Chief Operating Officer
Lloyd C. Blankfein (1) Managing Director
Richard A. Friedman (1) Managing Director
Steven M. Heller (1) Managing Director
Robert S. Kaplan (1) Managing Director
Robert J. Katz (1) Managing Director
John P. McNulty (2) Managing Director
Michael P. Mortara (1) Managing Director
Daniel M. Neidich (1) Managing Director
Robin Neustein (2) Managing Director
Mark Schwartz (4) Managing Director
Robert K. Steel (2) Managing Director
Leslie C. Tortora (2) Managing Director
Patrick J. Ward (3) Managing Director
Gregory K. Palm (1) Counsel and Managing Director

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

(1) 85 Broad Street, New York, NY 10004
(2) One New York Plaza, New York, NY 10004
(3) Peterborough Court, 133 Fleet Street, London EC4A 2BB, England
(4) ARK Mori Building, 12-32 Akasaka I-Chome Minato-Ky, Tokyo 107-6019,
Japan
(c) Not Applicable.

Item 28. Location of Accounts and Records.
--------------------------------

The Declaration of Trust, By-laws and minute books of the Registrant and certain
investment adviser records are in the physical possession of Goldman Sachs Asset
Management, One New York Plaza, New York, New York 10004. All other accounts,
books and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder are in the
physical possession of State Street Bank and Trust Company, P.O. Box 1713,
Boston, Massachusetts 02105 except for certain transfer agency records which are
maintained by Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.

Item 29. Management Services
-------------------

Not applicable.

Item 30. Undertakings
------------

Not applicable.

13
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this Post-
Effective Amendment No. 55 to its Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in the City and State of New York on
the 16th day of July, 1999.

GOLDMAN SACHS TRUST
(A Delaware business trust)

By: /s/Michael J. Richman
---------------------
Michael J. Richman
Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to said Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.

Name Title Date
- ---- ----- ----
<S> <C> <C>
*Douglas C. Grip President and
--------------- Trustee July 16, 1999
Douglas C. Grip

*John M. Perlowski Principal Accounting
----------------- Officer And Principal
John M. Perlowski Financial Officer July 16, 1999

*David B. Ford Trustee July 16, 1999
-------------
David B. Ford

*Mary Patterson McPherson Trustee July 16, 1999
------------------------
Mary Patterson McPherson

*Ashok N. Bakhru Chairman and Trustee July 16, 1999
---------------
Ashok N. Bakhru

*Alan A. Shuch Trustee July 16, 1999
-------------
Alan A. Shuch

*Jackson W. Smart Trustee July 16, 1999
----------------
Jackson W. Smart, Jr.

*John P. McNulty Trustee July 16, 1999
---------------
John P. McNulty

*William H. Springer Trustee July 16, 1999
-------------------
William H. Springer

*Richard P. Strubel Trustee July 16, 1999
------------------
Richard P. Strubel
</TABLE>

*By: /s/ Michael J. Richman
------------------------
Michael J. Richman,
Attorney-In-Fact

* Pursuant to a power of attorney previously filed.

14
<PAGE>

EXHIBIT INDEX

(a)(10) Amendment No. 9 dated April 28, 1999 to Agreement and
Declaration of Trust as amended, dated January 28, 1997.

(d)(9) Amended Annex A dated April 28, 1999 to Management Agreement
dated April 30, 1997

(e)(1) Distribution Agreement dated April 30, 1997 as amended April
28, 1999 between Registrant and Goldman Sachs & Co.

(g)(20) Fee schedule dated April 12, 1999 relating to Custodian
Agreement dated April 6, 1990 between Registrant and State
Street Bank and Trust Company (Strategic Growth and Growth
Opportunities Portfolios).

(i)(8). Opinion of Drinker Biddle & Reath LLP (with respect to the
Strategic Growth and Growth Opportunities Portfolios).

<PAGE>

Exhibit (a)(10)

AMENDMENT NO. 9
TO THE
DECLARATION OF TRUST
OF
GOLDMAN SACHS TRUST

This AMENDMENT NO. 9 dated the 28th day of April, 1999 to the AGREEMENT
AND DECLARATION OF TRUST (the "Declaration"), as amended, dated the 28th day of
January, 1997 is made by the Trustees name below;

WHEREAS, the Trustees have established a trust for the investment and
reinvestment of funds contributed thereto;

WHEREAS, the Trustees divided the beneficial interest in the trust
assets into transferable shares of beneficial interest and divided such shares
of beneficial interest into separate Series;

WHEREAS, the Trustees desire to create new Series and designate new
Classes of shares;

NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein, the undersigned, being all of the Trustees of the
Trust and acting in accordance with Article V, Section 1 of the Declaration,
hereby amend the Declaration as follows:

The Trust shall consist of one or more Series. Without limiting the
authority of the Trustees to establish and designate any further
Series, the Trustees hereby establish the following 48 Series: Goldman
Sachs Adjustable Rate Government Fund, Goldman Sachs Short Duration
Government Fund, Goldman Sachs Short Duration Tax-Free Fund, Goldman
Sachs Core Fixed Income Fund, Goldman Sachs Global Income Fund, Goldman
Sachs Government Income Fund, Goldman Sachs Municipal Income Fund,
Goldman Sachs High Yield Fund, Goldman Sachs Balanced Fund, Goldman
Sachs CORE Large Cap Growth Fund, Goldman Sachs CORE U.S. Equity Fund,
Goldman Sachs CORE Small Cap Equity Fund, Goldman Sachs CORE
International Equity Fund, Goldman Sachs Growth and Income Fund,
Goldman Sachs Capital Growth Fund, Goldman Sachs Mid Cap Value Fund,
Goldman Sachs Small Cap Value Fund, Goldman Sachs International Equity
Fund, Goldman Sachs Asia Growth Fund, Goldman Sachs Emerging Markets
Equity Fund, Goldman Sachs Real Estate Securities Fund, Goldman Sachs
International Small Cap Fund, Goldman Sachs Japanese Equity Fund,
Goldman Sachs European Equity Fund, Goldman Sachs CORE Large Cap Value
Fund, Goldman Sachs Strategic Growth Fund, Goldman Sachs Growth
Opportunities Fund, Goldman Sachs Growth Strategy Portfolio, Goldman
Sachs Aggressive Growth Strategy Portfolio, Goldman Sachs Balanced
Strategy Portfolio, Goldman Sachs Growth and Income Strategy Portfolio,
Goldman Sachs Conservative Strategy Portfolio, Institutional Liquid
Assets- - Prime Obligations Portfolio, Institutional Liquid
Assets-Government Portfolio, Institutional Liquid Assets-Treasury
Obligations Portfolio, Institutional Liquid Assets-Money Market
Portfolio, Institutional Liquid Assets-Federal Portfolio, Institutional
Liquid Assets-Treasury Instruments Portfolio, Institutional Liquid
Assets-Tax-Exempt Diversified Portfolio, Institutional Liquid
Assets-Tax-Exempt New York Portfolio, Institutional Liquid
Assets-Tax-Exempt California Portfolio, Goldman Sachs-Financial Square
Prime Obligations Fund,
<PAGE>

Goldman Sachs-Financial Square Government Fund, Goldman Sachs-Financial
Square Treasury Obligations Fund, Goldman Sachs-Financial Square Money
Market Fund, Goldman Sachs-Financial Square Premium Money Market Fund,
Goldman Sachs-Financial Square Municipal Money Market Fund, Goldman
Sachs-Financial Square Tax-Free Money Market Fund, Goldman
Sachs-Financial Square Federal Fund, and Goldman Sachs-Financial Square
Treasury Instruments Fund (the "Existing Series"). Each additional
Series shall be established and is effective upon the adoption of a
resolution of a majority of the Trustees or any alternative date
specified in such resolution. The Trustees may designate the relative
rights and preferences of the Shares of each Series. The Trustees may
divide the Shares of any Series into Classes. Without limiting the
authority of the Trustees to establish and designate any further
Classes, the Trustees hereby establish the following classes of shares
with respect to the series set forth below:

Class A Shares: Goldman Sachs Adjustable Rate Government Fund, Goldman Sachs
Global Income Fund, Goldman Sachs Government Income Fund,
Goldman Sachs Municipal Income Fund, Goldman Sachs High Yield
Fund, Goldman Sachs Short Duration Government Fund, Goldman
Sachs Short Duration Tax-Free Fund, Goldman Sachs Core Fixed
Income Fund, Goldman Sachs Balanced Fund, Goldman Sachs CORE
U.S. Equity Fund, Goldman Sachs CORE Small Cap Equity Fund,
Goldman Sachs CORE International Equity Fund, Goldman Sachs
CORE Large Cap Growth Fund, Goldman Sachs Growth and Income
Fund, Goldman Sachs Mid Cap Value Fund, Goldman Sachs Capital
Growth Fund, Goldman Sachs Small Cap Value Fund, Goldman Sachs
International Equity Fund, Goldman Sachs Emerging Markets
Equity Fund, Goldman Sachs Asia Growth Fund, Goldman Sachs
Real Estate Securities Fund, Goldman Sachs International Small
Cap Fund, Goldman Sachs Japanese Equity Fund, Goldman Sachs
European Equity Fund, Goldman Sachs CORE Large Cap Value Fund,
Goldman Sachs Strategic Growth Fund, Goldman Sachs Growth
Opportunities Fund, Goldman Sachs Growth Strategy Portfolio,
Goldman Sachs Aggressive Growth Strategy Portfolio, Goldman
Sachs Balanced Strategy Portfolio, Goldman Sachs Growth and
Income Strategy Portfolio, Goldman Sachs Conservative Strategy
Portfolio.

Class B Shares: Goldman Sachs Global Income Fund, Goldman Sachs Government
Income Fund, Goldman Sachs Municipal Income Fund, Goldman
Sachs High Yield Fund, Goldman Sachs Short Duration Government
Fund, Goldman Sachs Short Duration Tax-Free Fund, Goldman
Sachs Core Fixed Income Fund, Goldman Sachs Balanced Fund,
Goldman Sachs CORE U.S. Equity Fund, Goldman Sachs CORE Small
Cap Equity Fund, Goldman Sachs CORE International Equity Fund,
Goldman Sachs CORE Large Cap Growth Fund, Goldman Sachs Growth
and Income Fund, Goldman Sachs Mid Cap Value Fund, Goldman
Sachs Capital Growth Fund, Goldman Sachs Small Cap Value Fund,
Goldman Sachs International Equity Fund, Goldman Sachs
Emerging Markets Equity Fund, Goldman Sachs Asia Growth Fund,
Goldman Sachs International Small Cap Fund, Goldman Sachs
Japanese Equity Fund, Goldman Sachs CORE Large Cap Value Fund,
Goldman Sachs Growth Opportunities Fund, Goldman Sachs
Strategic Growth Fund, Institutional Liquid Assets Prime
Obligations Portfolio, Goldman Sachs Real Estate Securities
Fund, Goldman Sachs European Equity Fund, Goldman Sachs Growth
Strategy Portfolio, Goldman Sachs Aggressive Growth Strategy
Portfolio, Goldman Sachs Balanced Strategy Portfolio, Goldman
Sachs Growth and Income Strategy Portfolio, Goldman Sachs
Conservative Strategy Portfolio.

Class C Shares: Goldman Sachs Global Income Fund, Goldman Sachs Government
Income Fund, Goldman Sachs Municipal Income Fund, Goldman
Sachs High Yield Fund, Goldman Sachs Short Duration Government
Fund, Goldman Sachs Short Duration Tax-Free Fund, Goldman
Sachs Core Fixed Income Fund, Goldman Sachs Balanced Fund,
Goldman Sachs CORE U.S. Equity Fund, Goldman Sachs CORE Small
Cap Equity Fund, Goldman Sachs CORE International Equity Fund,
Goldman Sachs CORE Large Cap Growth Fund, Goldman Sachs Growth
and Income Fund, Goldman Sachs Mid Cap Value
<PAGE>

Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs Small
Cap Value Fund, Goldman Sachs International Equity Fund,
Goldman Sachs Emerging Markets Equity Fund, Goldman Sachs Asia
Growth Fund, Goldman Sachs International Small Cap Fund,
Goldman Sachs Japanese Equity Fund, Institutional Liquid
Assets Prime Obligations Portfolio, Goldman Sachs Real Estate
Securities Fund, Goldman Sachs European Equity Fund, Goldman
Sachs CORE Large Cap Value Fund, Goldman Sachs Strategic
Growth Fund, Goldman Sachs Growth Opportunities Fund, Goldman
Sachs Growth Strategy Portfolio, Goldman Sachs Aggressive
Growth Strategy Portfolio, Goldman Sachs Balanced Strategy
Portfolio, Goldman Sachs Growth and Income Strategy Portfolio,
Goldman Sachs Conservative Strategy Portfolio.

Institutional
Shares: Goldman Sachs Adjustable Rate Government Fund, Goldman Sachs
Short Duration Government Fund, Goldman Sachs Short Duration
Tax-Free Fund, Goldman Sachs Government Income Fund, Goldman
Sachs Municipal Income Fund, Goldman Sachs Core Fixed Income
Fund, Goldman Sachs Global Income Fund, Goldman Sachs High
Yield Fund, Goldman Sachs Balanced Fund, Goldman Sachs Small
Cap Value Fund, Goldman Sachs Capital Growth Fund, Goldman
Sachs CORE Large Cap Growth Fund, Goldman Sachs CORE U.S.
Equity Fund, Goldman Sachs CORE Small Cap Equity Fund, Goldman
Sachs CORE International Equity Fund, Goldman Sachs Growth and
Income Fund, Goldman Sachs Mid Cap Value Fund, Goldman Sachs
International Equity Fund, Goldman Sachs Emerging Markets
Equity Fund, Goldman Sachs Asia Growth Fund, Goldman Sachs
International Small Cap Fund, Goldman Sachs Japanese Equity
Fund, Goldman Sachs Real Estate Securities Fund, Goldman Sachs
European Equity Fund, Goldman Sachs CORE Large Cap Value Fund,
Goldman Sachs Growth Opportunities Fund, Goldman Sachs
Strategic Growth Fund, Goldman Sachs-Financial Square Prime
Obligations Fund, Goldman Sachs-Financial Square Government
Fund, Goldman Sachs-Financial Square Treasury Obligations
Fund, Goldman Sachs-Financial Square Money Market Fund,
Goldman Sachs-Financial Square Premium Money Market Fund,
Goldman Sachs-Financial Square Municipal Money Market Fund,
Goldman Sachs-Financial Square Tax-Free Money Market Fund,
Goldman Sachs-Financial Square Federal Fund, Goldman
Sachs-Financial Square Treasury Instruments Fund,
Institutional Liquid Assets-Prime Obligations Portfolio,
Institutional Liquid Assets-Government Portfolio,
Institutional Liquid Assets- Treasury Obligations Portfolio,
Institutional Liquid Assets-Money Market Portfolio,
Institutional Liquid Assets-Federal Portfolio, Institutional
Liquid Assets-Treasury Instruments Portfolio, Institutional
Liquid Assets-Tax-Exempt Diversified Portfolio, Institutional
Liquid Assets-Tax-Exempt New York Portfolio, Institutional
Liquid Assets-Tax-Exempt California Portfolio, Goldman Sachs
Growth Strategy Portfolio, Goldman Sachs Aggressive Growth
Strategy Portfolio, Goldman Sachs Balanced Strategy Portfolio,
Goldman Sachs Growth and Income Strategy Portfolio, Goldman
Sachs Conservative Strategy Portfolio.

Service Shares: Goldman Sachs Adjustable Rate Government Fund, Goldman Sachs
Short Duration Government Fund, Goldman Sachs Short Duration
Tax-Free Fund, Goldman Sachs Government Income Fund, Goldman
Sachs Municipal Income Fund, Goldman Sachs Core Fixed Income
Fund, Goldman Sachs Global Income Fund, Goldman Sachs High
Yield Fund, Goldman Sachs Balanced Fund, Goldman Sachs Small
Cap Value Fund, Goldman Sachs Capital Growth Fund, Goldman
Sachs CORE U.S. Equity Fund, Goldman Sachs CORE Large Cap
Growth Fund, Goldman Sachs CORE Small Cap Equity Fund, Goldman
Sachs CORE International Equity Fund, Goldman Sachs Growth and
Income Fund, Goldman Sachs Mid Cap Value Fund, Goldman Sachs
International Equity Fund, Goldman Sachs Emerging Markets
Equity Fund, Goldman Sachs Asia Growth Fund, Goldman Sachs
International Small Cap Fund, Goldman Sachs Japanese Equity
Fund, Goldman Sachs Real Estate Securities Fund, Goldman Sachs
European Equity Fund, Goldman Sachs CORE Large Cap Value Fund,
Goldman Sachs Strategic Growth Fund,
<PAGE>

Goldman Sachs Growth Opportunities Fund, Goldman
Sachs-Financial Square Prime Obligations Fund, Goldman
Sachs-Financial Square Government Fund, Goldman
Sachs-Financial Square Treasury Obligations Fund, Goldman
Sachs-Financial Square Money Market Fund, Goldman
Sachs-Financial Square Premium Money Market Fund, Goldman
Sachs-Financial Square Municipal Money Market Fund, Goldman
Sachs-Financial Square Tax-Free Money Market Fund, Goldman
Sachs-Financial Square Federal Fund, Goldman Sachs-Financial
Square Treasury Instruments Fund, Institutional Liquid
Assets-Prime Obligations Portfolio, Institutional Liquid
Assets-Government Portfolio, Institutional Liquid Assets-
Treasury Obligations Portfolio, Institutional Liquid
Assets-Money Market Portfolio, Institutional Liquid
Assets-Federal Portfolio, Institutional Liquid Assets-Treasury
Instruments Portfolio, Institutional Liquid Assets-Tax-Exempt
Diversified Portfolio, Institutional Liquid Assets-Tax-Exempt
New York Portfolio, Institutional Liquid Assets-Tax-Exempt
California Portfolio, Goldman Sachs Growth Strategy Portfolio,
Goldman Sachs Aggressive Growth Strategy Portfolio, Goldman
Sachs Balanced Strategy Portfolio, Goldman Sachs Growth and
Income Strategy Portfolio, Goldman Sachs Conservative Strategy
Portfolio.

Administration
Shares: Goldman Sachs-Financial Square Prime Obligations Fund, Goldman
Sachs-Financial Square Government Fund, Goldman
Sachs-Financial Square Treasury Obligations Fund, Goldman
Sachs-Financial Square Money Market Fund, Goldman
Sachs-Financial Square Premium Money Market Fund, Goldman
Sachs-Financial Square Municipal Money Market Fund, Goldman
Sachs-Financial Square Tax-Free Money Market Fund, Goldman
Sachs-Financial Square Federal Fund, Goldman Sachs-Financial
Square Treasury Instruments Fund, Institutional Liquid
Assets-Prime Obligations Portfolio, Institutional Liquid
Assets-Government Portfolio, Institutional Liquid
Assets-Treasury Obligations Portfolio, Institutional Liquid
Assets-Money Market Portfolio, Institutional Liquid
Assets-Federal Portfolio, Institutional Liquid Assets-Treasury
Instruments Portfolio, Institutional Liquid Assets-Tax-Exempt
Diversified Portfolio, Institutional Liquid Assets-Tax- Exempt
New York Portfolio and Institutional Liquid Assets-Tax-Exempt
California Portfolio.

Preferred
Administration
Shares: Goldman Sachs-Financial Square Prime Obligations Fund, Goldman
Sachs-Financial Square Government Fund, Goldman
Sachs-Financial Square Treasury Obligations Fund, Goldman
Sachs-Financial Square Money Market Fund, Goldman
Sachs-Financial Square Premium Money Market Fund, Goldman
Sachs-Financial Square Municipal Money Market Fund, Goldman
Sachs-Financial Square Tax-Free Money Market Fund, Goldman
Sachs-Financial Square Federal Fund and Goldman
Sachs-Financial Square Treasury Instruments Fund.

Cash Management
Shares: Institutional Liquid Assets-Prime Obligations Portfolio,
Institutional Liquid Assets-Money Market Portfolio,
Institutional Liquid Assets-Government Portfolio,
Institutional Liquid Assets-Tax-Exempt Diversified Portfolio,
Institutional Liquid Assets-Tax-Exempt California Portfolio,
Institutional Liquid Assets-Tax-Exempt New York Portfolio.

All capitalized terms which are not defined herein shall have the same
meanings as are assigned to those terms in the Declaration.

IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date first written above.

/s/ Ashok N. Bakhru
-----------------------------------------
Ashok N. Bakhru,
<PAGE>

as Trustee and not individually

/s/ David B. Ford
----------------------------------------
David B. Ford,
as Trustee and not individually

/s/ Douglas Grip
----------------------------------------
Douglas Grip,
as Trustee and not individually

/s/ John P. McNulty
----------------------------------------
John P. McNulty,
as Trustee and not individually

/s/ Mary P. McPherson
----------------------------------------
Mary P. McPherson
as Trustee and not individually

/s/ Alan A. Shuch
----------------------------------------
Alan A. Shuch
as Trustee and not individually

/s/ Jackson W. Smart, Jr.
----------------------------------------
Jackson W. Smart, Jr.
as Trustee and not individually

/s/ William H. Springer
----------------------------------------
William H. Springer
as Trustee and not individually

/s/ Richard P. Strubel
----------------------------------------
Richard P. Strubel
as Trustee and not individually

<PAGE>

Exhibit (d)(9)

Amended Annex A
---------------

The compensation payable under Paragraph 5 of the Management Agreement between
Goldman Sachs Trust and each of the undersigned shall be as follows:

Goldman Sachs Asset Management
- ------------------------------
Annual Rate
-----------
Goldman Sachs Government Income Fund 0.65%
Goldman Sachs Municipal Income Fund 0.55%
Goldman Sachs High Yield Fund 0.70%
Goldman Sachs Balanced Fund 0.65%
Goldman Sachs Growth and Income Fund 0.70%
Goldman Sachs CORE Large Cap Value Fund4 0.60%
Goldman Sachs CORE Large Cap Growth Fund 0.75%
Goldman Sachs CORE Small Cap Equity Fund1 1.00%
Goldman Sachs CORE International Equity Fund1 1.00%
Goldman Sachs Mid Cap Equity Fund 0.75%
Goldman Sachs Small Cap Value Fund 1.00%
Goldman Sachs Real Estate Securities Fund1 1.00%
Goldman Sachs Strategic Growth Fund5 1.00%
Goldman Sachs Growth Opportunities Fund5 1.00%
Goldman Sachs-Financial Square Prime Obligations Fund 0.205%
Goldman Sachs-Financial Square Money Market Fund 0.205%
Goldman Sachs-Financial Square Premium Money Market Fund 0.205%
Goldman Sachs-Financial Square Treasury Obligations Fund 0.205%
Goldman Sachs-Financial Square Treasury Instruments Fund 0.205%
Goldman Sachs-Financial Square Government Fund 0.205%
Goldman Sachs-Financial Square Federal Fund 0.205%
Goldman Sachs-Financial Square Tax-Free Money Market Fund 0.205%
Goldman Sachs-Financial Square Municipal Money Market Fund 0.205%

Goldman Sachs Funds Management L.P.
- -----------------------------------

Goldman Sachs CORE U.S. Equity Fund 0.75%
Goldman Sachs Capital Growth Fund 1.00%

Goldman Sachs Asset Management International
- --------------------------------------------

Goldman Sachs Global Income Fund 0.90%
Goldman Sachs International Equity Fund 1.00%
Goldman Sachs Emerging Markets Equity Fund 1.20%
Goldman Sachs Asia Growth Fund 1.00%
Goldman Sachs International Small Cap Fund2 1.20%
Goldman Sachs Japanese Equity Fund2 1.00%
Goldman Sachs European Equity Fund3 1.00%

- --------

1 Please note that the CORE Small Cap Equity Fund, CORE International Equity
Fund and Real Estate Securities Fund were approved at the July 21, 1997 Goldman
Sachs Trust Board Meeting.

2 Please note that the International Small Cap Fund and Japanese Equity Fund
were approved at the April 23, 1998 Goldman Sachs Trust Board Meeting.

3 Please note that the European Equity Fund was approved at the July 22, 1998
Goldman Sachs Trust Board Meeting.

4 Please note that the CORE Large Cap Value Fund was approved at the November 3,
1998 Goldman Sachs Trust Board Meeting.

5 Please note that the Strategic Growth Fund and Growth Opportunities Fund were
approved at the April 28, 1999 Goldman Sachs Trust Board Meeting.
<PAGE>

Pursuant to an exemption from the Commodities Futures Trading Commission
("CFTC") in connection with accounts of qualified eligible clients, this account
document is not required to be, and has not been filed with the CFTC. The CFTC
does not pass upon the merits of participating in a trading program or upon the
adequacy or accuracy or commodity trading advisor disclosure. Consequently, the
CFTC has not reviewed or approved the trading program adopted hereunder or any
brochure or account document.

GOLDMAN SACHS TRUST

By: /s/ Douglas C. Grip
-----------------------
Title: President
-----------------------

GOLDMAN SACHS ASSET MANAGEMENT,
a division of Goldman, Sachs & Co.

By: /s/ David B. Ford
-----------------------
Title: Managing Director
-----------------------

GOLDMAN SACHS FUNDS MANAGEMENT, L.P.,
an affiliate of Goldman, Sachs & Co.

By: /s/ David B. Ford
-----------------------
Title: Managing Director
-----------------------

GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL, an affiliate of Goldman,
Sachs Co.

By: /s/ David B. Ford
-----------------------
Title: Managing Director
-----------------------

Dated: April 28, 1999

<PAGE>

GOLDMAN SACHS TRUST

Exhibit (e)(1)

Distribution Agreement

April 30, 1997, as amended April 28, 1999

Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

Dear Sirs:

This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Goldman Sachs Trust (the "Trust"), an open-end
-----
management investment company organized as a business trust under the laws of
the State of Delaware, and consisting of one or more separate series, has
appointed you, the "Distributor," and that you shall be the exclusive
-----------
distributor in connection with the offering and sale of the shares of beneficial
interest, par value $.001 per share (the "Shares"), corresponding to each of the
------
series of the Trust listed in Exhibit A, as the same may be supplemented from
time to time (each such series, a "Fund"). Each Fund may offer one or more
----
classes of its shares (each a "Class") which Classes shall have such relative
rights and conditions and shall be sold in the manner set forth from time to
time in the Trust's Registration Statements, as defined below. The organization,
administration and policies of each Fund are described in its respective
Prospectuses and SAIs (as those terms are defined below). (This letter, as
amended from time to time, shall be referred to hereinafter as the "Agreement".)
---------

1. Definitions. (a) The terms which follow, when used in this Agreement,
-----------
shall have the meanings indicated.

"Effective Date" shall mean the date that any Registration
--------------
Statement or any post-effective amendment thereto becomes effective.

"Preliminary Prospectus" shall mean any preliminary prospectus
----------------------
relating to the Shares of a Fund or Funds or one or more Classes
included in any Registration Statement or filed with the Securities and
Exchange Commission (the "Commission") pursuant to Rule 497(a).

"Prospectus" shall mean any prospectus relating to the Shares of
----------
a Fund or Funds or one or more Classes, filed with the Commission
pursuant to Rule 497 or, if no filing pursuant to Rule 497 is required,
the form of final prospectus relating thereto included in any
Registration Statement, in each case together with any amendments or
supplements thereto.

"Registration Statement" shall mean any registration statement
----------------------
on Form N-1A relating to the Shares of a Fund, including all exhibits
thereto, as of the Effective Date of the most recent post-effective
amendment thereto. The registration statements of the Trust may be
separately filed with the Commission according to its fixed income,
equity and money market fund offerings.

"Rule 497" refers to such rule (or any successor rule or rules)
--------
under the Securities Act (as defined in Section 2 below).

"SAI" shall mean any statement of additional information
---
relating to the Shares of a Fund or Funds or one or more Classes, filed
with the Commission pursuant to Rule 497 or, if no filing pursuant to
Rule 497 is required, the final statement of additional information
included in any Registration Statement.
<PAGE>

The "Initial Acceptance Date" of any Fund shall mean the first
-----------------------
date on which the Trust sells Shares of such Fund pursuant to any Registration
Statement.

References in this Agreement to "Rules and Regulations" shall be
deemed to be references to such rules and regulations as then in effect,
and references to this Agreement and the Fund Agreements (as defined in
Section 2 below), shall be deemed to be references to such agreements as
then in effect.

2. Representations and Warranties. The Trust represents and warrants to and
------------------------------
agrees with you, for your benefit and the benefit of each Authorized
Dealer (as defined in Section 3 below), as set forth below in this
Section 2. Each of the representations, warranties and agreements made
in this Section 2 shall be deemed made on the date hereof, on the date
of any filing of any Prospectus pursuant to Rule 497 and any Effective
Date after the date hereof, with the same effect as if made on each such
date.

(a) The Trust meets the requirements for use of Form N-1A under the
Securities Act of 1933, as amended (the "Securities Act"), the
--------------
Investment Company Act of 1940, as amended (the "Investment Company
------------------
Act"), and the Rules and Regulations of the Commission under each such
---
Act and in respect of said form (or of such successor form as the
Commission may adopt). The Trust has filed with the Commission
Registration Statements (File Number 33-17619) on Form N-1A with respect
to an indefinite number of Shares of the Funds and is duly registered as
an open-end management investment company. Prior to the date hereof, the
Trust has filed post-effective amendments to the Registration
Statements, including related Preliminary Prospectuses, for the
registration under the Securities Act and the Investment Company Act of
the offering and sale of the Shares of the Funds, each of which has
previously been furnished to you. Each such amendment has become
effective and no stop order suspending the effectiveness of any such
amendment has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission.

(b) The Trust's notification of registration on Form N-8A (as amended)
complies with the applicable requirements of the Investment Company Act
and the Rules and Regulations thereunder.

(c) Each Registration Statement, Prospectus and SAI conform, and any further
amendments or supplements to any Registration Statement, Prospectus or
SAI will conform, in all material respects, with the Securities Act and
Investment Company Act and the Rules and Regulations thereunder; the
Prospectuses and the SAIs do not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and, on each Effective Date, the
Registration Statements did not and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein not misleading; provided, however, that the Trust makes no
-------- -------
representations or warranties as to the information contained in or
omitted from any Registration Statement, Prospectus or SAI in reliance
upon and in conformity with information furnished in writing to the
Trust by you (with respect to information relating solely to your role
as distributor of the Shares of the Funds) expressly for use therein.

(d) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus, at
the time of filing thereof, conformed in all material respects to the
requirements of the Securities Act and the Rules and Regulations of the
Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this

-2-
<PAGE>

representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Trust by you (with respect to information
relating solely to your role as the exclusive distributor of the Shares
of the Funds) expressly for use therein.

(e) The Trust has been duly created and is lawfully and validly existing as
a business trust under the laws of the State of Delaware, and has, on
the date hereof, and will have, on and after the date hereof, full power
and authority to own its properties and conduct its business as
described in each Registration Statement, Prospectus and SAI, and is
duly qualified to do business under the laws of each jurisdiction which
requires such qualification wherein it owns or leases material
properties or conducts material business.

(f) The Trust's authorized capitalization is as set forth in the
Registration Statements. Issuance of the Shares of the Funds as
contemplated by this Agreement and by each Prospectus and SAI has been
duly and validly authorized, and the Shares of the Funds, when issued
and paid for as contemplated hereby and thereby, will be fully-paid and,
except as contemplated by the Prospectus and SAI, nonassessable and will
conform to the description thereof contained in the corresponding
Prospectus and SAI. The holders of outstanding shares of each Fund are
not entitled to preemptive or other rights to subscribe for the Shares
of any Fund, other than as contemplated by the Prospectus and SAI
relating to each Fund.

(g) This Agreement has been duly authorized, executed and delivered by the
Trust.

(h) On or prior to the Initial Acceptance Date, all of the agreements
described in each Prospectus and SAI relating to the Fund or Funds whose
Shares are first being sold on such date (collectively, the "Fund
----
Agreements") will have been duly authorized, executed and delivered by
----------
the Trust, and will comply in all material respects with the Investment
Company Act and the Rules and Regulations thereunder.

(i) The Fund Agreements constitute or will constitute, on and after the
Initial Acceptance Date, assuming due authorization, execution and
delivery by the parties thereto other than the Trust, valid and legally
binding instruments, enforceable in accordance with their respective
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.

(j) No consent, approval, authorization or order of any court or
governmental agency or body is or shall be required, as the case may be,
for the consummation from time to time of the transactions contemplated
by this Agreement and the Fund Agreements, except such as may be
required (i) under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Investment Company Act, the
------------
Rules and Regulations under each of the foregoing or the Conduct Rules
of the National Association of Securities Dealers, Inc. (the "NASD")
----
(any of which that were required before offers were made will have been
obtained before such offers were made and all of which will have been
obtained, with respect to each Fund, by the Effective Date of the
post-effective amendment relating to the Fund, except for those which
become required under such acts or rules or any other law or regulation
after the Fund's Effective Date but that were not required before such
Effective Date, all of which shall be obtained in a timely manner) or
(ii) state securities laws of any jurisdiction in connection with the
issuance, offer or redemption of the Shares of each Fund by the Trust.

(k) The operations and activities of the Trust and each Fund as contemplated
by the Prospectuses and the SAIs, the performance by the Trust and each
Fund of this Agreement and the Fund Agreements,

-3-
<PAGE>

the making of the offer or the sale of Shares of each Fund and
consummation from time to time of such sales, the redemption of Shares
of each Fund, or any other transactions contemplated herein, in the Fund
Agreements, in the Prospectuses or in the SAIs, will not conflict with,
result in a breach of, or constitute a default under, the declaration of
trust or the Trust's By-laws or, in any material respect, the terms of
any other agreement or instrument to which the Trust is a party or by
which it is bound, or any order or regulation applicable to the Trust of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Trust.

(l) There is not pending, or to the best knowledge of the Trust, threatened,
any action, suit or proceeding before any court or governmental agency,
authority or body or any arbitrator to which the Trust is (or, to the
best knowledge of the Trust, is threatened to be) a party, of a
character required to be described in any Registration Statement,
Prospectus or SAI which is not described as required.

(m) There is no contract or other document of a character required to be
described in any Registration Statement, Prospectus or SAI, or to be
filed as an exhibit, which is not described or filed as required.

(n) Except as stated or contemplated in the Registration Statements,
Prospectuses and SAIs, (i) the Trust has not incurred any liabilities or
obligations, direct or contingent, or entered into any transactions,
whether or not in the ordinary course of business, that are material to
the Trust, (ii) there has not been any material adverse change, or, any
development involving a prospective material adverse change, in the
condition (financial or other) of the Trust, (iii) there has been no
dividend or distribution paid or declared in respect of the Trust, and
(iv) the Trust has not incurred any indebtedness for borrowed money.

(o) Each Fund will elect or has elected to be treated as a regulated
investment company as defined in Section 851(a) of the Internal Revenue
Code of 1986 for its first taxable year and will operate so as to
qualify as such in its current and all subsequent taxable years.

(p) Except as stated or contemplated in any Prospectus or SAI, the Trust
owns all of its assets free and clear in all material respects of all
liens, security interests, pledges, mortgages, charges and other
encumbrances or defects.

3. Selection of Authorized Dealers; Other Services as Distributor.
--------------------------------------------------------------

(a) With respect to each Class subject to a sales charge, the Distributor
shall have the right on the basis of the representations, warranties and
agreements herein contained and subject to the terms and conditions
herein set forth, to make arrangements for (i) securities dealers
(including bank-affiliated dealers) that are members in good standing of
the NASD, (ii) foreign securities dealers which are not eligible for
membership in the NASD who have agreed to comply as though they were
NASD members with the provisions of Sections 2730, IM-2730, 2740,
IM-2740, 2750 and IM-2750 of the Conduct Rules of the NASD and with
Section 2420 thereof as that Section applies to a non-NASD member broker
or dealer in a foreign country, or (iii) banks, as defined in Section
3(a)(6) of the Exchange Act, which are duly organized and validly
existing in good standing under the laws of the jurisdiction in which
they are organized, to solicit from the public orders to purchase Shares
of the Funds. Such securities dealers and banks ("Authorized Dealers")
------------------
selected by you in accordance with dealer agreements with you ("Dealer
------
Agreements") shall solicit such orders pursuant to their respective
----------
Dealer Agreements. You will act only on your own behalf as principal in
entering into each such Dealer Agreement. With respect to each Class
that is not subject to a sales charge, you shall act as Principal
Underwriter of such shares.

(b) You acknowledge that the only information provided to you by the Trust
is that contained in each

-4-
<PAGE>

Registration Statement, Prospectus and SAI. Neither you nor any
Authorized Dealer nor any other person is authorized by the Trust to
give any information or to make any representations, other than those
contained in the relevant Registration Statement, Prospectus and SAI and
any sales literature approved by appropriate representatives of the
Trust. You may undertake or arrange for such advertising and promotion
as you believe is reasonable in connection with the solicitation of
orders to purchase Shares of a Fund; provided, however, that you will
-------- -------
provide the Trust with and obtain the Trust's approval of copies of any
advertising and promotional materials approved, produced or used by you
prior to their use. You will file such materials with the Commission and
the NASD as may be required by the Exchange Act and the Investment
Company Act and the Rules and Regulations thereunder and by the rules of
the NASD.

(c) You agree to perform such services as are described in each Registration
Statement, Prospectus and SAI as to be performed by the Distributor
including, without limitation, distributing Account Information Forms.

(d) All of your activities as distributor of the Shares of the Funds shall
comply, in all material respects, with all applicable laws, Rules and
Regulations, including, without limitation, all rules and regulations
made or adopted by the Commission or by any securities association
registered under the Exchange Act, including the NASD, as in effect from
time to time.

4. Offering by the Distributor.
---------------------------

(a) You will act as agent for the Trust in the distribution of Shares of the
Funds and you agree to use your best efforts to offer and sell Shares of
the Funds subject to a sales charge to the public at the public offering
price as set forth in the relevant Prospectus, subject to any waivers or
reductions of any applicable sales charges, dealer allowances and fees
as you and each of the Authorized Dealers, if any, shall have agreed to
in writing. You may also subscribe for Shares of a Fund as principals
for resale to the public or for resale to Authorized Dealers. You shall
devote reasonable time and effort to effect sales of Shares of the
Funds, but you shall not be obligated to sell any specific number of
Shares. Nothing contained herein shall prevent you from entering into
like distribution arrangements with other investment companies.

(b) The Distributor is authorized to purchase Shares of any Fund presented
to them by Authorized Dealers at the price determined in accordance
with, and in the manner set forth in, the Prospectus for such Fund.

(c) Unless you are otherwise notified by the Trust, any right granted to you
to accept orders for Shares of any Fund or to make sales on behalf of
the Trust or to purchase Shares of any Fund for resale will not apply to
(i) Shares issued in connection with the merger or consolidation of any
other investment company with the Trust or its acquisition, by purchase
or otherwise, of all or substantially all of the assets of any
investment company or substantially all the outstanding securities of
any such company, and (ii) Shares that may be offered by the Trust to
shareholders by virtue of their being such shareholders.

5. Compensation.
------------

(a) With respect to any Class which is sold to the public subject to a sales
charge, you will be entitled to receive that portion of the sales
charges applicable to sales of Shares of such Class and not reallocated
to Authorized Dealers as set forth in the relevant Prospectus, subject
to any waivers or

-5-
<PAGE>

reductions of such sales charges, if any, in accordance with Section 4
of this Agreement. In addition, you shall be entitled to receive the
-------------------------------------------------
entire amount of any contingent deferred sales charge imposed and paid
----------------------------------------------------------------------
by shareholders upon the redemption or repurchase of Shares of any Class
------------------------------------------------------------------------
subject to such charges as set forth in the relevant Prospectus, subject
------------------------------------------------------------------------
to any waivers or reductions of such sales charges that may be disclosed
------------------------------------------------------------------------
in such Prospectus. With respect to any shares sold subject to a
------------------
contingent deferred sales charge, such charge shall be payable in such
amounts as disclosed in the applicable Prospectus as the same was in
effect at the time of sale. The right to receive any contingent deferred
sales charge granted hereunder shall apply to all shares sold during the
term of this Agreement, and to the extent permitted by the Investment
Company Act and other applicable laws, shall continue with respect to
such shares notwithstanding termination of this Agreement. In connection
with each transaction in which you are acting as an Authorized Dealer,
you also will be entitled to that portion of the sales charges, if any,
payable to an Authorized Dealer in such transaction.

(b) The Trust has entered into Plans of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plans") with respect to certain classes
of certain Funds. The Trust shall pay to you as distributor of such
Classes the compensation pursuant to the Rule 12b-1 Plans as shall be
set forth from time to time in the Prospectuses and SAIs and provided
for under the Rule 12b-1 Plan.

(c) The amounts payable as compensation pursuant to this Section 5 shall be
subject to the limitations in Section 2830 of the Conduct Rules of the
NASD.

6. Undertakings. The Trust agrees with you, for your benefit, that:
------------

(a) The Trust shall sell Shares of the Funds so long as it has such Shares
available for sale and shall cause the transfer agent (the "Transfer
--------
Agent") to record on its books the ownership of such Shares registered
-----
in such names and amounts as you have requested in writing or other
means, as promptly as practicable after receipt by the Trust of the
payment therefor. The Trust will make such filings under the Investment
Company Act with, and pay such fees to, the Commission as are necessary
to register Shares of any Fund sold by you on behalf of the Trust. Prior
to the termination of this Agreement, the Trust will not file any
amendment to any Registration Statement or amendment or supplement to
any Prospectus or SAI (whether pursuant to the Securities Act, the
Investment Company Act, or otherwise) without prior notice to you;
provided, however, that nothing contained in this Agreement shall in any
-------- -------
way limit the Trust's right to file such amendments to any Registration
Statement, or amendments or supplements to any Prospectus or SAI as the
Trust may deem advisable, such right being in all respects absolute and
unconditional, it being understood that this proviso shall not relieve
the Trust of its obligation to give prior notice of any such amendment
or supplement to you. Subject to the foregoing sentence, if the filing
of any Prospectus or SAI, as the case may be, contained in any
Registration Statement at the relevant Effective Date, or any amendment
or supplement thereto, is required under Rule 497, the Trust will cause
such Prospectus or SAI, and any amendment or supplement thereto, to be
filed with the Commission pursuant to the applicable paragraph of Rule
497 within the time period prescribed and will, if requested, provide
evidence satisfactory to you of such timely filing. The Trust will
promptly advise you (i) when such Prospectus or SAI shall have been
filed (if required) with the Commission pursuant to Rule 497, (ii) when,
prior to termination of this Agreement, any amendment to any
Registration Statement shall have been filed or become effective, (iii)
of any request by the Commission for any amendment of any Registration
Statement or amendment or supplement to any Prospectus or SAI or for any
additional information relating to or that could affect disclosure in
any of the foregoing, (iv) of the issuance by the Commission of any
order suspending the effectiveness of any Registration Statement, or
suspending the registration of the Trust under the Investment Company
Act, or the institution or (to the best knowledge of the Trust)
threatening of any proceeding for that purpose, and (v) of the receipt
by the

-6-
<PAGE>

Trust of any notification with respect to the suspension of the
qualification of the offer or sale of Shares of a Fund in any
jurisdiction or the initiation or (to the best knowledge of the Trust)
threatening of any proceeding for such purpose. The Trust will use its
best efforts to prevent the issuance of any such order or suspension
and, if issued, to obtain as soon as possible the withdrawal or
suspension thereof.

(b) If, at any time when a Prospectus or SAI is required to be delivered
under the Securities Act, any event occurs as a result of which such
Prospectus or SAI would include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend any Registration
Statement or amend or supplement any Prospectus or SAI to comply with
the Securities Act, the Investment Company Act or the Rules and
Regulations thereunder, the Trust will notify you promptly of any such
circumstance and promptly will prepare and file with the Commission,
subject to the third sentence of Section 6(a), an amendment or
supplement which will correct such statement or omission or effect such
compliance.

(c) As soon as practicable (giving effect to the normal periodic reporting
requirements under the Investment Company Act and the Rules and
Regulations thereunder), the Trust will make generally available to its
shareholders and, subject to Section 8 of this Agreement, to you (with
sufficient copies for the Authorized Dealers), a report containing the
financial statements required to be included in such reports under
Section 30(d) of the Investment Company Act and Rule 30d-1 thereunder.

(d) Subject to Section 8 of this Agreement, the Trust will furnish to you as
many conformed copies of the Registration Statements including exhibits
thereto, on each Effective Date, as you may reasonably request for
yourself and for delivery to the Authorized Dealers and, so long as
delivery of a Prospectus or SAI by you or any Authorized Dealer may be
required by law, the number of copies of each Prospectus and each SAI as
you may reasonably request for yourself and for delivery to the
Authorized Dealers.

(e) To the extent required by applicable state law, the Trust will use its
best efforts to arrange for the qualification of an appropriate number
of the Shares of the Funds for sale under the laws of such of the 50
states of the United States, the District of Columbia, the Commonwealth
of Puerto Rico, the Territory of Guam, and such other jurisdiction as
you and the Trust may approve, and will maintain such qualifications in
effect as long as may be reasonably requested by you, provided that the
Trust shall not be required in connection herewith or as a condition
hereto to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction. You shall furnish
such information and other material relating to your affairs and
activities as may be required by the Trust in connection with such
qualifications.

(f) The Trust shall keep you fully informed with respect to its affairs and,
subject to Section 8 of this Agreement, the Trust, if so requested, will
furnish to you, as soon as they are available (with sufficient copies
for the Authorized Dealers), copies of all reports, communications and
financial statements sent by the Trust to its shareholders or filed by,
or on behalf of, the Trust with the Commission.

(g) The Trust agrees that on each date the Trust is required to file with
the Commission a notice under paragraph (b)(1) of Rule 24f-2 under the
Investment Company Act, the Trust, if so requested, shall furnish to you
a copy of the opinion of counsel for the Trust required by such Rule to
the effect that the Shares covered by the notice were legally issued,
fully paid and nonassessable. The Trust further agrees that if, in
connection with the filing of any post-effective amendment to any
Registration Statement after the date of this Agreement:

-7-
<PAGE>

(i) a change is made to the statements under the caption "Shares of the
Fund" in any Prospectus or SAI that is deemed material by you, the
Trust, if so requested, shall furnish to you an opinion of counsel for
the Trust, dated the date of such post-effective amendment, to the
effect of paragraph 2 (to the extent it relates to the description of
the Shares);

(ii) the Fund Agreements are amended or modified in any manner, the Trust, if
so requested, shall furnish to you an opinion of counsel for the Trust,
dated the date of such post-effective amendment; or

(iii) any change is made to the statements under the caption "Taxation" in any
Prospectus or SAI, the Trust, if so requested, shall furnish to you an
opinion of counsel for the Trust, dated the date of such post-effective
amendment.

Any opinion or statement furnished pursuant to this Section 6(g) shall
be modified as necessary to relate to this Agreement and the Fund
Agreements and the Rules and Regulations as then in effect and shall
state that the Authorized Dealers may rely on it.

(h) The Trust, if so requested, shall furnish to you on each subsequent
Effective Date with respect to an amendment of a Registration Statement
which first includes certified financial statements for the preceding
fiscal year, in respect of a Fund, a copy of the report of the Trust's
independent public accountants with respect to the financial statements
and selected per share data and ratios relating to such Fund, addressed
to you. The Trust further agrees that the Trust, if so requested, shall
furnish to you (i) on each date on which the Trust, pursuant to the
preceding sentence, furnishes to you a report of its independent public
accountants, a certificate of its treasurer or assistant treasurer in a
form reasonably satisfactory to you describing in reasonable detail how
the figures included under the captions "Portfolio Transactions" and
"Performance Information" (or similar captions) in the Prospectus or SAI
of such Fund and the figures relating to the aggregate amounts of
remuneration paid to officers, trustees and members of the advisory
board and affiliated persons thereof (as required by Section 30(d)(5) of
the Investment Company Act) were calculated and confirming that such
calculations are in conformity with the Rules and Regulations under the
Investment Company Act and (ii) on each date the Trust files with the
Commission the Trust's required semi-annual financial statements, a
certificate of its treasurer or assistant treasurer in a form reasonably
satisfactory to you, describing the manner in which such financial
statements were prepared and confirming that such financial statements
have been prepared in conformity with the Rules and Regulations under
the Investment Company Act.

7. Conditions to Your Obligations as Distributor and Principal Underwriter.
-----------------------------------------------------------------------
Your obligations as distributor of the Shares of the Funds shall be
subject to the accuracy of the representations and warranties on the
part of the Trust contained herein as of the dates when made or deemed
to have been made, to the accuracy in all material respects of the
statements made in any certificates, letters or opinions delivered
pursuant to the provisions of Sections 6 or 7 of this Agreement, to the
performance by the Trust of its obligations hereunder and to the
following additional conditions:

(a) If filing of any Prospectus or SAI, or any amendment or supplement to
any Prospectus or SAI, or any other document is required pursuant to any
applicable provision of Rule 497, such Prospectus or SAI, or any such
amendment or supplement and other document will be filed in the manner
and within the time period required by the applicable provision of Rule
497; and no order suspending the effectiveness of the amendment shall
have been issued and no proceedings for that purpose shall have been
instituted or, to the best knowledge of the Trust, threatened and the
Trust shall have complied with any request of the Commission for
additional information (to be included in the relevant
<PAGE>

Registration Statement, Prospectus, SAI or as the Commission otherwise
shall have requested).

(b) At the Initial Acceptance Date with respect to each Fund, you shall have
received from counsel to the Distributors, if so requested, such opinion
or opinions, dated the Initial Acceptance Date, with respect to the
issuance and sale of the Shares, the relevant Registration Statement,
Prospectus and SAI and other related matters as you may reasonably
require, and the Trust shall have furnished to such counsel such
documents as they may request for the purpose of enabling them to pass
upon such matters. Each such opinion shall state that the Authorized
Dealers may rely on it.

(c) There shall not have been any change, or any development involving a
prospective change, in or affecting the Trust the effect of which in any
case is, in your good faith judgment, so material and adverse as to make
it impractical or inadvisable to proceed with the offering of Shares of
the Funds as contemplated by this Agreement.

(d) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities in New York declared by
either Federal or New York State authorities; (iii) the outbreak or
escalation of hostilities involving the United States or the declaration
of a national emergency or war if the effect of any such event specified
in this Clause (iii) in your judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares of a Fund on the terms and in the manner contemplated in any
Prospectus.

(e) The Trust shall have furnished to you such further information,
certificates and documents as you may have reasonably requested.

If any of the conditions specified in this Section 7 shall not have been
fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions, certificates or letters mentioned
above or elsewhere in this Agreement shall not be in all material
respects reasonably satisfactory in form and substance to you, this
Agreement and all your obligations hereunder may be cancelled by you. In
the event of such cancellation, the Trust shall remain liable for the
expenses set forth in Section 8.

8. Expenses.
--------

(a) The Trust will pay (or will enter into arrangements providing that
parties other than you will pay) all fees and expenses:

(1) in connection with the preparation, setting in type and filing
of the Registration Statements (including Prospectuses and SAIs)
under the Securities Act or the Investment Company Act, or both,
and any amendments or supplements thereto that may be made from
time to time;

(2) in connection with the registration and qualification of Shares
of the Funds for sale in the various jurisdictions in which it
is determined to be advisable to qualify such Shares of the
Funds for sale (including registering the Trust as a broker or
dealer or any officer of the Trust or other person as agent or
salesman of the Trust in any such jurisdictions);

(3) of preparing, setting in type, printing and mailing any notice,
proxy statement, report, Prospectus, SAI or other communication
to shareholders in their capacity as such;

(4) of preparing, setting in type, printing and mailing Prospectuses
annually, and any supplements thereto, to existing shareholders;

-9-
<PAGE>

(5) in connection with the issue and transfer of Shares of the Funds
resulting from the acceptance by you of orders to purchase
Shares of the Funds placed with you by investors, including the
expenses of printing and mailing confirmations of such purchase
orders and the expenses of printing and mailing a Prospectus
included with the confirmation of such orders and, if requested
by the purchaser, an SAI;

(6) of any issue taxes or any initial transfer taxes;

(7) of WATS (or equivalent) telephone lines other than the portion
allocated to you in this Section 8;

(8) of wiring funds in payment of Share purchases or in satisfaction
of redemption or repurchase requests, unless such expenses are
paid for by the investor or shareholder who initiates the
transaction;

(9) of the cost of printing and postage of business reply envelopes
sent to shareholders;

(10) of one of more CRT terminals connected with the computer
facilities of the Transfer Agent other than the portion
allocated to you in this Section 8;

(11) permitted to be paid or assumed by any Fund or Funds or any
Class thereof pursuant to (a) a Rule 12b-1 Plan adopted by such
Fund or Funds in conformity with the requirements of Rule 12b-1
under the Investment Company Act ("Rule 12b-1") or any successor
----------
rule, notwithstanding any other provision to the contrary herein
or (b) any other plan adopted by a Fund providing for account
administration or shareholder liaison services (a "Service
Plan");

(12) of the expense of setting in type, printing and postage of any
periodic newsletter to shareholders other than the portion
allocated to you in this Section 8; and

(13) of the salaries and overhead of persons employed by you as
shareholder representatives other than the portion allocated to
you in this Section 8.

(b) Except as provided in any Rule 12b-1 Plan or Service Plan, you shall pay
or arrange for the payment of all fees and expenses:

(1) of printing and distributing any Prospectuses or reports
prepared for your use in connection with the offering of Shares
of the Funds to the public;

(2) of preparing, setting in type, printing and mailing any other
literature used by you in connection with the offering of Shares
of the Funds to the public;

(3) of advertising in connection with the offering of Shares of the
Funds to the public;

(4) incurred in connection with your registration as a broker or
dealer or the registration or qualification of your officers,
partners, directors, agents or representatives under Federal and
state laws;

(5) of that portion of WATS (or equivalent) telephone lines
allocated to you on the basis of use by investors (but not
shareholders) who request information or Prospectuses;

-10-
<PAGE>

(6) of that portion of the expense of setting in type, printing and
postage of any periodic newsletter to shareholders attributable
to promotional material included in such newsletter at your
request concerning investment companies other than the Trust or
concerning the Trust to the extent you are required to assume
the expense thereof pursuant to this Section 8, except such
material which is limited to information, such as listings of
other investment companies and their investment objectives,
given in connection with the exchange privilege as from time to
time described in the Prospectuses;

(7) of that portion of the salaries and overhead of persons employed
by you as shareholder representatives attributable to the time
spent by such persons in responding to requests from investors,
but not shareholders, for information about the Trust;

(8) of any activity which is primarily intended to result in the
sale of Shares of any Class of a Fund, unless a 12b-1 Plan shall
be in effect which provides that shares of such Classes shall
bear some or all of such expenses, in which case such Class
shall bear such expenses in accordance with such Plan; and

(9) of that portion of one or more CRT terminals connected with the
computer facilities of the Transfer Agent attributable to your
use of such terminal(s) to gain access to such of the Transfer
Agent's records as also serve as your records.

Expenses which are to be allocated between you and the Trust shall be
allocated pursuant to reasonable procedures or formulae mutually agreed
upon from time to time, which procedures or formulae shall to the extent
practicable reflect studies of relevant empirical data.

9. Indemnification and Contribution.
--------------------------------

(a) The Trust will indemnify you and hold you harmless against any losses,
claims, damages or liabilities, to which you may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, Registration Statement,
Prospectus, or SAI or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, and
will reimburse you for any legal or other expenses reasonably incurred
by you in connection with investigating or defending any such action or
claim; provided, however, that the Trust shall not be liable in any such
-------- -------
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Registration Statement, any
Preliminary Prospectus, or any Prospectus or SAI in reliance upon and in
conformity with written information furnished to the Trust by you
expressly for use therein.

(b) You will indemnify and hold harmless the Trust against any losses,
claims, damages or liabilities to which the Trust may become subject,
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof), arise out of or
are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, any Preliminary
Prospectus, or any Prospectus or SAI, or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Registration Statement, any
Preliminary Prospectus, or any Prospectus or SAI in reliance upon and in
conformity with written information furnished to the Trust by you
expressly for use therein; and will reimburse the

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<PAGE>

Trust for any legal or other expenses reasonably incurred by the Trust
in connection with investigating or defending any such action or claim.

(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify
the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under such subsection.
In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof
the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party under such subsection for
any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation.

(d) If the indemnification provided for in this Section 9 is unavailable to,
or insufficient to hold harmless, an indemnified party under subsection
(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Trust on
the one hand and you on the other from the offering of the Shares of the
Fund or Funds in respect of which such losses, claims, damages or
liabilities (or actions in respect thereof) arose. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give
the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Trust on
the one hand and you on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities
(or actions in respect thereof) as well as any other relative equitable
considerations. The relative benefits received by the Trust on the one
hand and you on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares of the
relevant Funds (before deducting expenses) received by the Trust bear to
the total compensation received by you in selling Shares of such Funds
under this Agreement, including any sales charge as set forth in the
Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Trust on the one hand or you
on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Trust and you agree that it would not be just and
equitable if the contributions pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), you shall not be required to
contribute any amount in excess of the amount by which the total price
at which the Shares of the relevant Funds sold by you and distributed to
the public were offered to the public exceeds the amount of any damages
which you have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of

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<PAGE>

fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.

(e) The obligations of the Trust under this Section 9 shall be in addition
to any liability which the Trust may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls
you within the meaning of the Securities Act; and your obligations under
this Section 9 shall be in addition to any liability which you may
otherwise have and shall extend, upon the same terms and conditions, to
each trustee or officer of the Trust (including any person who, with his
consent, is named in the relevant Registration Statement as about to
become a trustee of the Trust) and to each person, if any, who controls
the Trust within the meaning of the Securities Act.

(f) It is understood, however, that nothing in this paragraph 9 shall
protect any indemnified party against, or entitle any indemnified party
to indemnification against, or contribution with respect to, any
liability to the Trust or its shareholders to which such indemnified
party is subject, by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of any
reckless disregard of its obligations and duties, under this Agreement,
or otherwise to an extent or in a manner that is inconsistent with
Section 17(i) of the Investment Company Act.

10. Term.
----

(a) This Agreement shall commence on the date first set forth above and
continue in effect until June 30, 1998 and then for successive annual
periods after June 30, 1998, provided such continuance is specifically
approved at least annually by (i) the Trustees of the Trust or (ii) a
vote of a majority (as defined in the Investment Company Act) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a vote of a majority of the Trustees of
the Trust who are not interested persons (as defined in the Investment
Company Act) of the Trust or any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such
approval. The Trust authorizes, if and when you so determine, you to
assign to a third party any payments with respect to one or more Classes
of Shares that you are entitled to receive for your services hereunder,
including any payments of initial or deferred sales charges or payments
in accordance with a Rule 12b-1 or Service Plan so long as such Plan is
in effect, free and clear of any offset, defense or counterclaim the
Trust may have against you and except to the extent that any change or
modification after the date hereof of (x) the provisions of the
Investment Company Act, the Rules and Regulations thereunder or other
applicable law or (y) any interpretation of the Investment Company Act,
the Rules and Regulations thereunder or other applicable law shall
restrict your right to make such transfer free and clear of any offset,
defense or counterclaim.

(b) The sale of Shares of the Funds in accordance with the terms of this
Agreement shall be subject to termination or suspension in the absolute
discretion of the Trust, by notice given to you as set forth in Section
12 hereof.

(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Investment Company Act). In addition, this
Agreement may be terminated by the Trust at any time with respect to any
Class of its Shares, without the payment of any penalty, by vote of a
majority of the Trustees of the Trust who are not interested persons (as
defined in the Investment Company Act) of the Trust or by a vote of a
majority of the outstanding voting securities of such Class on 60 days'
written notice.

11. Representation and Indemnities to Survive. The respective agreements,
-----------------------------------------
representations, warranties, indemnities and other statements of the
Trust and you set forth in or made pursuant to this Agreement will, to
the extent permitted by applicable law, remain in full force and effect,
regardless of

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<PAGE>

any investigation made by or on behalf of you, any Authorized Dealer or
the Trust, or any of the controlling persons referred to in Section 9
hereof, and will survive the offer of the Shares of the Funds. The
provisions of Section 8, 9 and 11 hereof and your right to receive any
contingent deferred sale charges shall, to the extent permitted by
applicable law, survive the termination or cancellation of this
Agreement.

12. Notices. All communications hereunder will be in writing and effective
-------
only on receipt, and, if sent to you, mailed, delivered or telegraphed
and confirmed to you at Goldman, Sachs & Co., 85 Broad Street, York, New
York 10004, Attention: Registration Department (Distributors - Goldman
Sachs Funds) or, if sent to the Trust, mailed, delivered or telegraphed
and confirmed to it at Goldman Sachs Trust, 4900 Sears Tower, Chicago,
Ill. 60606, Attention: Secretary.

13. Affiliates. The Trust recognizes that your partners, officers and
----------
employees may from time to time serve as directors, trustees, officers
and employees of corporations and business entities (including other
investment companies), and that you or your affiliates may enter into
distribution or other agreements with other corporations and business
entities.

14. Successors. This Agreement will inure to the benefit of and be binding
----------
upon the parties hereto and their respective successors and, to the
extent set forth herein, each of the officers, trustees and controlling
persons referred to in Section 9 hereof, and no other person will have
any right or obligation hereunder.

15. Applicable Law. This Agreement will be governed by and construed in
--------------
accordance with the laws of the State of New York.

16. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

The name "Goldman Sachs Trust" is the designation of the Trustees for
the time being under a Declaration of Trust dated January 28, 1997, as
amended from time to time, and all persons dealing with the Trust must
look solely to the property of the Trust for the enforcement of any
claims against the Trust as neither the Trustees, officers, agents or
shareholders assume any personal liability for obligations entered into
on behalf of the Trust. No series of the Trust shall be liable for any
claims against any other series of the Trust.

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<PAGE>

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between you and
the Trust, and, to the extent set forth herein, shall be for the benefit of each
Authorized Dealer.

Very truly yours,

GOLDMAN SACHS TRUST

By: /s/ Douglas C. Grip
---------------------------
Name: Douglas C. Grip
Title: President of the Trust

The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.

/s/ David B. Ford
- -----------------------------
(Goldman, Sachs & Co.)

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<PAGE>

EXHIBIT A

Series ("Funds") of GOLDMAN SACHS TRUST, a Delaware business trust (the "Trust")
- --------------------------------------------------------------------------------

GOLDMAN SACHS FIXED INCOME FUNDS:
- --------------------------------

Goldman Sachs Adjustable Rate Government Fund
Goldman Sachs Core Fixed Income Fund
Goldman Sachs Global Income Fund
Goldman Sachs Government Income Fund
Goldman Sachs Municipal Income Fund
Goldman Sachs Short Duration Tax-Free Fund
Goldman Sachs Short Duration Government Fund
Goldman Sachs High Yield Fund

GOLDMAN SACHS EQUITY FUNDS:
- --------------------------

Goldman Sachs Balanced Fund
Goldman Sachs CORE Large Cap Growth Fund
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs CORE Small Cap Equity Fund
Goldman Sachs CORE International Equity Fund
Goldman Sachs CORE Large Cap Value Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs International Equity Fund
Goldman Sachs Small Cap Value Fund
Goldman Sachs Asia Growth Fund
Goldman Sachs Emerging Markets Equity Fund
Goldman Sachs Mid-Cap Equity Fund
Goldman Sachs Real Estate Securities Fund
Goldman Sachs International Small Cap Fund
Goldman Sachs Japanese Equity Fund
Goldman Sachs European Equity Fund
Goldman Sachs Strategic Growth Fund
Goldman Sachs Growth Opportunities Fund

GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
- -----------------------------------------

Goldman Sachs Growth Strategy Portfolio
Goldman Sachs Aggressive Growth Strategy Portfolio
Goldman Sachs Balanced Strategy Portfolio
Goldman Sachs Growth and Income Strategy Portfolio
Goldman Sachs Conservative Strategy Portfolio

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<PAGE>

GOLDMAN SACHS MONEY MARKET FUNDS:
- --------------------------------

Goldman Sachs-Institutional Liquid Assets Portfolios:
----------------------------------------------------
Prime Obligations Portfolio
Government Portfolio
Treasury Obligations Portfolio
Federal Portfolio
Money Market Portfolio
Treasury Instruments Portfolio
Tax-Exempt Diversified Portfolio
Tax-Exempt California Portfolio
Tax-Exempt New York Portfolio

Financial Square Funds:
- ----------------------
Prime Obligations Fund
Government Fund
Treasury Obligations Fund
Money Market Fund
Tax-Free Money Market Fund
Federal Fund
Treasury Instruments Fund
Municipal Money Market Fund
Premium Money Market Fund

-17-

<PAGE>

Exhibit (g)(20)

One New York Plaza
New York, New York 1004
Telephone: 212-902-0800
Toll Free: 800-292-4726

Goldman Sachs Equity Portfolios, Inc.

April 12, 1999

State Street Bank and Trust Company
1 Heritage Drive, P3N
North Quincy, MA 02171

Gentlemen:

This is to advise you that Goldman Sachs Equity has established a new series of
shares to be known as Goldman Sachs Strategic Growth and Goldman Sachs Growth
and Opportunities Fund. In accordance with the Additional Funds provisions in
Section 17 of the Custodian Contract dated April 6, 1990 between the Company and
the State Street Bank and Trust Company, the Company hereby requests that you
act as Custodian for the new series under the terms of the respective contracts.

Please indicate your acceptance of the foregoing by executing two copies of the
Letter Agreement, returning one to the Company and retaining one copy for your
records.

By: [SIGNATURE ILLEGIBLE]
----------------------------
Treasurer of the Company

Agreed to this 12th day of April, 1999.

State Street Bank and Trust Company

By: [SIGNATURE ILLEGIBLE]
----------------------------
Vice President

<PAGE>

Exhibit (i)(8)
Law Offices

DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Suite 1100
Philadelphia, PA 19107
Telephone: (215) 988-2700
Telex: 834684
Fax: (215) 988-2757

April 30, 1999

Goldman Sachs Trust
4900 Sears Tower
Chicago, IL 60606

Re: Strategic Growth and Growth Opportunities Portfolios of Goldman Sachs
---------------------------------------------------------------------
Trust
-----

Ladies and Gentlemen:

We have acted as counsel for Goldman Sachs Trust, a Delaware business trust
(the "Trust"), in connection with the registration under the Securities Act of
1933 of shares of beneficial interest ("Shares") representing interests in two
additional series, or funds, of the Trust known as the Strategic Growth
Portfolio and Growth Opportunities Portfolio. The Strategic Growth Portfolio and
Growth Opportunities Portfolio each have five classes of shares: Class A Shares,
Class B Shares, Class C Shares, Institutional Shares and Service Shares. The
Trust is authorized to issue an unlimited number of shares of each class. These
classes are hereinafter referred to as the "Shares."

We have reviewed the Trust's Declaration of Trust, its by-laws, and certain
resolutions adopted by its Board of Trustees, and have considered such other
legal and factual matters as we have deemed appropriate.

This opinion is based exclusively on the Delaware Business Trust Act and
the federal law of the United States.

Based on the foregoing, we are of the opinion that the Shares, when issued
against payment therefor as described in the Trust's prospectus relating
thereto, will be legally issued, fully paid and non-assessable by the Trust, and
that the holders of the Shares will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the general corporation law of the State of Delaware (except
that we express no opinion as to such holders who are also trustees of the
Trust). Pursuant to Section 2 of Article
<PAGE>

VIII of the Declaration of Trust, the Trustees have the power to cause
shareholders, or shareholders of a particular series or class, to pay certain
custodian, transfer, servicing or similar agent charges by setting off the same
against declared but unpaid dividends or by reducing Share ownership (or by both
means).

We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as part of a Post-Effective Amendment to the Registration
Statement of the Trust. Except as provided in this paragraph, the opinion set
forth above is expressed solely for the benefit of the addressee hereof in
connection with the matters contemplated hereby and may not be relied upon by,
or filed with, any other person or entity or for any other purpose without our
prior written consent.

Very truly yours,

/s/ DRINKER BIDDLE & REATH LLP
------------------------------
DRINKER BIDDLE & REATH LLP

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