<PAGE>
As filed with the Securities and Exchange Commission on
April 15, 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. 54( X )
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( X )
Amendment No. 56( 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 1345 Chestnut Street
Philadelphia, PA 19107
(Name and address of agent for service)
It is proposed that this filing will become effective (check appropriate box)
( ) Immediately upon filing pursuant to paragraph (b)
(X) On April 30, 1999 to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On (date) pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2)
( ) On (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
Prospectus
CLASS A, B
AND C SHARES
April 30, 1999
- --------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUNDS
- --------------------------------------------
.Goldman Sachs
CORE
International
Equity Fund
.Goldman Sachs
(INSERT ARTWORK) International
Equity Fund
.Goldman Sachs
European Equity
Fund
.Goldman Sachs
Japanese Equity
Fund
.Goldman Sachs
International
Small Cap Fund
.Goldman Sachs
Emerging
Markets Equity
Fund
.Goldman Sachs
Asia Growth
Fund
[LOGO OF GOLDMAN SACHS APPEARS 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.
- ------------------------------------------------
<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 CORE
International Equity Fund. Goldman Sachs Asset Management International
serves as investment adviser to International Equity, European Equity, Japa-
nese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds. Goldman Sachs Asset Management and Goldman Sachs Asset Manage-
ment International are each referred to in this Prospectus as the "Invest-
ment Adviser."
ACTIVELY MANAGED STYLE FUNDS
Goldman Sachs Actively Managed Investment Philosophy
<TABLE>
<CAPTION>
HOW THE INVESTMENT ADVISER ACTS ON
BELIEF BELIEF
- ------------------------------------------------------------------------------
<S> <C>
.Equity markets are inefficient Seeks excess return through team
driven, research intensive and
bottom-up stock selection.
.Returns are variable Seeks to capitalize on variability
of market and regional returns
through value-added asset allocation
decisions.
.Corporate fundamentals ultimately Seeks to conduct rigorous, first-
drive share price hand research of business and
company management.
.A businesses' intrinsic value will be Seeks to realize value through a
achieved over time long-term investment horizon.
.Portfolio risk must be carefully Seeks to systematically monitor and
analyzed and monitored manage risk through diversification,
multi factor risk models and
currency management.
</TABLE>
Equity securities for these Funds are evaluated based on a bottom-up stock
selection process, disciplined portfolio construction, and continual portfo-
lio review and analysis.
- --------------------------------------------------------------------------------
1-I
<PAGE>
QUANTITATIVE ("CORE") STYLE FUNDS
Goldman Sachs Quantitative Multifactor Model
The CORE International Equity Fund uses the Goldman Sachs proprietary
multifactor models (each a "Multifactor Model"), rigorous computerized rat-
ing systems, to forecast the returns of securities held in the Fund's port-
folio.
The Multifactor Models incorporate common variables covering measures of:
..VALUE (price-to-book, price-to-earnings, cash flow to enterprise value)
..MOMENTUM (earnings momentum, price momentum, sustainable growth)
..RISK (market risk, company-specific risk, earnings risk)
ALL OF THE ABOVE FACTORS ARE CAREFULLY EVALUATED WITHIN THE MULTIFACTOR MOD-
ELS SINCE EACH HAS DEMONSTRATED A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE SECURITIES AND MARKETS THEY WERE DESIGNED TO FORECAST.
Goldman Sachs' CORE Funds provide broad foundation portfolios for investors
to build upon.
- --------------------------------------------------------------------------------
2-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs CORE International Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term growth of capital
Benchmarks Morgan Stanley Capital International Europe, Australia,
Far East ("EAFE") Index (unhedged)
Investment Focus Large capitalization equity securities of companies that
are organized outside the United States or whose securi-
ties are primarily traded outside the United States
Investment Style Quantitative
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of large cap
companies that are organized outside the United States or whose securities
are principally traded outside the United States.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of companies that are organized
outside the United States or whose securities are principally traded outside
the United States.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time, provided the Fund's assets are
invested in at least three foreign countries. Emerging countries are coun-
tries with economies or securities markets that are considered by the
Investment Adviser not to be fully developed.
The Fund seeks broad representation of large cap issuers across major coun-
tries and sectors of the international economy. The Fund's investments are
selected using both a variety of quantitative techniques and fundamental
research in seeking to maximize the Fund's expected return, while maintain-
ing risk, style, capitalization and industry characteristics similar to the
EAFE Index. In addition, the Fund seeks a portfolio composed of companies
with attractive valuations and stronger momentum characteristics than the
EAFE Index.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered to be cash equivalents.
3-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs International Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark FT/S&P Actuaries Europe & Pacific Index (unhedged)
Investment Focus Equity securities of companies organized outside the
United States or whose securities are principally traded
outside the United States
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund intends to invest
in companies with public stock market capitalizations that are larger than
those in which the International Small Cap Fund primarily intends to invest.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time provided that the Fund's assets are
invested in at least three foreign countries.
The Fund expects to invest a substantial portion of its assets in the secu-
rities of issuers located in the developed countries of Western Europe and
in Japan. However, the Fund may also invest in the securities of issuers
located in Australia, Canada, New Zealand and the emerging countries in
which the Emerging Markets Equity Fund may invest. Many of the emerging
countries in which the Fund may invest involve risks that are not present in
investments in more developed countries.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities.
4-I
<PAGE>
Goldman Sachs European Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark FT/S&P Actuaries Europe Index (unhedged)
Investment Focus Equity securities of European companies
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
European companies. Because of its focus, the Fund will be more susceptible
to European economic, market, political and local risks than a fund that is
more geographically diversified.
A European issuer is a company that either:
..Has a class of its securities whose principal securities markets is in a
European country;
..Is organized under the laws of, or has a principal office in, a European
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more of the European countries; or
..Maintains 50% or more of its assets in one or more of the European coun-
tries.
The Fund may allocate its assets among different countries as determined by
the Investment Adviser from time to time, provided that the Fund's assets
are invested in at least three European countries. It is currently antici-
pated that a majority of the Fund's assets will be invested in the equity
securities of large cap companies located in the developed countries of
Western Europe. However, the Fund may also invest, without limit, in mid cap
companies and small cap companies, as well as companies located in emerging
countries in which the Emerging Markets Equity Fund may invest, including
the states that formerly comprised the Soviet Union and Yugoslavia.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-European countries and in fixed-income securities.
5-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Japanese Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Tokyo Price Index ("TOPIX") (unhedged)
Investment Focus Equity securities of Japanese companies
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
Japanese companies. A Japanese issuer is a company that either:
..Has a class of its securities whose principal securities markets is in
Japan;
..Is organized under the laws of, or has a principal office in Japan;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in Japan; or
..Maintains 50% or more of its assets in Japan.
The Fund's concentration in Japanese companies will expose it to the risk of
adverse social, political and economic events which occur in Japan or affect
the Japanese markets.
Japan's economy, the second largest in the world, has grown substantially
over the last three decades. Since 1990, however, Japan's economic growth
has declined significantly, and is currently subject to deflationary pres-
sures. In addition to this economic downturn, Japan is undergoing structural
adjustments related to high wages and taxes, currency valuations and struc-
tural rigidities. Japan has also been experiencing notable uncertainty and
loss of public confidence in connection with the reform of its political
process and the deregulation of its economy. These conditions present risks
to the Japanese Equity Fund and its ability to attain its investment objec-
tive.
6-I
<PAGE>
Japan's economy is heavily dependent upon international trade, and is espe-
cially sensitive to trade barriers and disputes. In particular, Japan relies
on large imports of agricultural products, raw materials and fuels. A sub-
stantial rise in world oil or commodity prices, or a fall-off in Japan's
manufactured exports, could be expected to adversely affect Japan's economy.
In addition, Japan is vulnerable to earthquakes, volcanoes and other natural
disasters. As of the date of this Prospectus, Japan's banking industry con-
tinued to suffer from non-performing loans, declining real estate values and
lower valuations of securities holdings.
The Japanese securities markets are less regulated than the U.S. markets.
Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are also not always
equally enforced.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason
price-earnings ratios of the stocks of Japanese companies have tended his-
torically to be higher than those of U.S. stocks. In addition, Japanese com-
panies have tended to have higher growth rates than U.S. companies, and Jap-
anese interest rates have generally been lower than U.S. interest rates.
These factors have contributed to lower discount rates and higher price-
earnings ratios in Japan than in the U.S.
During the recent past the average stock market prices of Japanese compa-
nies, as measured by major indices such as the NIKKEI 225 Average, have
experienced a substantial decline. It is not possible to determine whether
this general decline will continue.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-Japanese companies and in fixed-income securities,
which may include up to 10% in emerging countries. Many of the emerging
countries in which the Fund may invest involve risks that are not present in
investments in more developed countries.
7-I
<PAGE>
Goldman Sachs International Small Cap Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International EAFE Small Cap
Index (unhedged)
Investment Focus Equity securities of foreign companies with public stock
market capitalizations of $1 billion or less at the time
of investment
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
companies:
..With public stock market capitalizations of $1 billion or less at the time
of investment; and
..That are organized outside the United States or whose securities are prin-
cipally traded outside the United States.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time provided that the Fund's assets are
invested in at least three foreign countries. The Fund expects to invest a
substantial portion of its assets in small cap securities of companies in
the developed countries of Western Europe, Japan and Asia. However, the Fund
may also invest in the securities of issuers located in Australia, Canada,
New Zealand and the emerging countries in which the Emerging Market Equity
Fund may invest. Many of the emerging countries in which the Fund may invest
involve risks that are not present in investments in more developed coun-
tries.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of larger cap companies with public stock market capital-
izations of more than $1 billion at the time of investment and in fixed-
income securities. If the market capitalization of a company held by the
Fund increases above $1 billion, the Fund may, consistent with its invest-
ment objective, continue to hold the security.
8-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Emerging Markets Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International Emerging Markets
Free Index
Investment Focus Equity securities of emerging country issuers
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
emerging country issuers. The Investment Adviser may consider classifica-
tions by the World Bank, the International Finance Corporation or the United
Nations and its agencies in determining whether a country is emerging or
developed. Currently, emerging countries include among others, most Latin
American, African, Asian and Eastern European nations. The Investment
Adviser currently intends that the Fund's investment focus will be in the
following emerging countries:
<TABLE>
<S> <C> <C> <C> <C>
.Argentina .Egypt .Jordan .Philippines .Sri Lanka
.Botswana .Greece .Kenya .Poland .Taiwan
.Brazil .Hong Kong .Malaysia .Portugal .Thailand
.Chile .Hungary .Mexico .Russia .Turkey
.China .India .Morocco .Singapore .Venezuela
.Colombia .Indonesia .Pakistan .South Africa .Zimbabwe
.Czech Republic .Israel .Peru .South Korea
</TABLE>
9-I
<PAGE>
An emerging country issuer is any company that either:
..Has a class of its securities whose principal securities market is in an
emerging country;
..Is organized under the laws of, or has a principal office in, an emerging
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more emerging countries; or
..Maintains 50% or more of its assets in one or more of the emerging coun-
tries.
Concentration of the Fund's assets in one or a few emerging countries and
currencies will subject the Fund to greater risks than if the Fund's assets
were not so concentrated.
Under normal circumstances, the Fund maintains investments in at least six
emerging countries, and will not invest more than 35% of its total assets in
securities of issuers in any one emerging country. Allocation of the Fund's
investments will depend upon the relative attractiveness of the emerging
country markets and particular issuers. In addition, macro-economic factors
and the portfolio managers' and Goldman Sachs economists' views of the rela-
tive attractiveness of emerging countries and currencies are considered in
allocating the Fund's assets among emerging countries. Investments in emerg-
ing countries involve risks that are not present in investments in more
developed countries.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
(i) fixed-income securities of private and governmental emerging country
issuers; and (ii) equity and fixed-income securities of issuers in developed
countries.
10-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Asia Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International All County Asia
Free ex-Japan Index (unhedged)
Investment Focus Equity securities of companies in Asian countries
Investment Process Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
Asian issuers.
An Asian issuer is any company that either:
..Has a class of its securities whose principal securities markets is in one
or more Asian country;
..Is organized under the laws of, or has a principal office in, an Asian
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more Asian countries; or
..Maintains 50% or more of its assets in one or more Asian countries.
The Fund may allocate its assets among the Asian countries as determined
from time to time by the Investment Adviser. For purposes of the Fund's
investment policies, Asian countries are:
..China .Malaysia .South Korea
..Hong Kong .Pakistan .Sri Lanka
..India .Philippines .Taiwan
..Indonesia .Singapore .Thailand
as well as any other country in Asia (other than Japan) to the extent that
foreign investors are permitted by applicable law to make such investments.
11-I
<PAGE>
Allocation of the Fund's investments will depend upon the Investment Advis-
er's views of the relative attractiveness of the Asian markets and particu-
lar issuers.
Concentration of the Fund's assets in one or a few of the Asian countries
and Asian currencies will subject the Fund to greater risks than if the
Fund's assets were not so concentrated. For example, on January 31, 1999
(the end of the Fund's last fiscal year), more than 35% of the Fund's assets
were invested in securities that traded in Hong Kong.
Starting in mid-1997 some Pacific region countries began to experience cur-
rency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. This situation resulted in a significant
drop in the securities prices of companies located in the region. Some coun-
tries have experienced government intervention, have sought assistance from
the International Monetary Fund and are undergoing substantial domestic
unrest. Although some countries are taking steps to restructure their finan-
cial sectors in a manner that may facilitate a return to long-term economic
growth, there can be no assurance that these efforts will be successful or
that their current problems will not persist. At the end of its last fiscal
year, a substantial portion of the Asia Growth Fund was invested in securi-
ties traded in the Hong Kong market. In 1997, the sovereignty of Hong Kong
reverted from the United Kingdom to China. Although Hong Kong is, by law, to
maintain a high degree of autonomy, there can also be no assurance that the
general economic position of Hong Kong will not be adversely affected as a
result of the exercise of Chinese sovereignty over Hong Kong. In particular,
business confidence in Hong Kong can be significantly affected by political
developments and statements by public figures in China, which can in turn
affect the performance of the securities markets. In addition, the reversion
of Hong Kong to China has created uncertainty as to future currency valua-
tions relative to the U.S. dollar. Any future valuation changes could be
adverse from the perspective of U.S. investors.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of issuers in other countries, including Japan, and in
fixed-income securities.
12-I
<PAGE>
[This page intentionally left blank]
13-I
<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.
10 Percent of total assets (italic type)
10 Percent 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>
CORE
INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY EQUITY
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT PRACTICES
Cross Hedging of currencies . . .
Equity Swaps 10 10 10
Currency Swaps . . .
Foreign Currency Transactions . . .
Futures Contracts and Options on Futures
Contracts . . .
Options on Foreign Currencies/1/ . . .
Options on Securities and Securities
Indices/2/ . . .
Custodial Receipts . . .
Unseasoned Companies . . .
Warrants and Stock Purchase Rights . . .
Repurchase Agreements . . .
Securities Lending 33 1/3 33 1/3 33 1/3
Short Sales Against the Box -- 25 25
- ------------------------------------------------------------------------------
</TABLE>
1 May purchase and sell call and put options.
2 May sell covered call and put options and purchase call and put options.
14-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
JAPANESE INTERNATIONAL EMERGING ASIA
EQUITY SMALL CAP MARKETS GROWTH
FUND FUND EQUITY FUND FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. . . .
10 10 10 10
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
33 1/3 33 1/3 33 1/3 33 1/3
25 25 25 25
- ------------------------------------------------------------------------------------------------------------
</TABLE>
15-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
10 Percent of total assets (italic type)
10 Percent 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>
CORE
INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY EQUITY
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT SECURITIES
American, European and Global Depository
Receipts . . .
Asset-Backed and Mortgage-Backed
Securities -- . .
Bank Obligations/1/ . . .
Convertible Securities . . .
Corporate Debt Obligations ./2/ 35 35
Equity Securities 90+ 65+ 65+
Emerging Market Securities 25 . .
Fixed Income Securities/3/ ./2/ 35 35/1/
Foreign Securities . . .
Foreign Government Securities . . .
Non-Investment Grade Fixed Income
Securities -- 35/4/ 35/4/
Real Estate Investment Trusts . . .
Structured Securities . . .
Temporary Defensive Investments 35 100 100
U.S. Government Securities 35 . .
- ------------------------------------------------------------------------------
</TABLE>
1 Issued by U.S. or foreign banks.
2 Cash equivalents only.
3 Except as noted under "Non-Investment Grade Fixed Income Securities,"
fixed-income securities are rated at least investment grade (i.e. BBB or
higher by Standard & Poor's Rating Group ("Standard & Poor's") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's").
4 May be unrated or rated BB or lower by Standard & Poor's or Ba or lower
by Moody's.
16-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
JAPANESE INTERNATIONAL EMERGING
EQUITY SMALL CAP MARKETS ASIA GROWTH
FUND FUND EQUITY FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. . . .
. . . .
. . . .
. . . .
35 . . .
65+ 65+ 65+ 65+
. . . .
35 . . 35
. . . .
. -- . .
35/4/ 35/4/ 35/4/ 35/4/
. . . .
. . . .
100 100 35 100
. . 35 .
- ----------------------------------------------------------------------------------------------------
</TABLE>
17-I
<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
investment program. There can be no assurance that a Fund will achieve its
investment objective.
<TABLE>
<CAPTION>
.. Applicable
- --Not applicable
CORE INTERNATIONAL EMERGING
INTERNATIONAL INTERNATIONAL EUROPEAN JAPANESE SMALL CAP MARKETS ASIA
EQUITY EQUITY EQUITY EQUITY EQUITY EQUITY GROWTH
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Credit/Default -- . . . . . .
Emerging Markets . . . . . . .
Interest Rate . . . . . . .
Small Cap/REIT -- -- -- -- . . .
Foreign . . . . . . .
Derivatives . . . . . . .
Management . . . . . . .
Market . . . . . . .
Liquidity . . . . . . .
Stock . . . . . . .
Concentration -- -- . . -- -- --
Other . . . . . . .
- ---------------------------------------------------------------------------------------------
</TABLE>
All Funds:
..FOREIGN RISKS--The risk that when a Fund invests in foreign securities, it
will be subject to special risks not typically associated with domestic
issuers. Losses 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.
18-I
<PAGE>
..EMERGING MARKETS RISK--The securities markets of Asian, Latin American, East-
ern European, African and other emerging countries are less liquid, are espe-
cially subject to greater price volatility, have smaller market capitaliza-
tions, have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the securi-
ties markets of more developed countries. Further, investment in equity secu-
rities 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.
..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, fixed-income
securities held by a Fund will decline in value. Long-term fixed-income secu-
rities will normally have more price volatility because of this risk than
short-term securities.
..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
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in 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.
19-I
<PAGE>
PRINCIPAL INVESTMENT SECURITIES AND TECHNIQUES
..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."
..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.
..SMALL CAP STOCK AND REIT RISK--The securities of small capitalization stocks
and REITs involve greater risks than those associated with larger, more estab-
lished companies and may be subject to more abrupt or erratic price movements.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop in
price.
..NON-DIVERSIFICATION AND GEOGRAPHIC RISK--The European Equity Fund invests pri-
marily in equity securities of European companies. The Japanese Equity Fund
invests primarily in equity securities of Japanese equity companies. Concen-
tration of the investments of these or other Funds in issuers located in a
particular country or region will subject the Fund, to a greater extent than
if investments were not so concentrated, to the risks of adverse securities
markets, exchange rates and social, political, regulatory or economic events
which may occur in that country or region.
More information about the Fund's 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.
20-I
<PAGE>
Fund Performance
HOW THE FUNDS HAVE PERFORMED
The bar chart and table below provide an indication of the risks of invest-
ing in a Fund by showing: (a) changes in the performance of a Fund's Class A
Shares from year to year and (b) how the average annual returns of a Fund's
Class A, B and C Shares compare to those of broad-based securities market
indices. The bar chart and table assume reinvestment of dividends and dis-
tributions. A Fund's past performance is not necessarily an indication of
how the Fund will perform in the future. The average annual total return
calculation reflects a maximum initial sales charge of 5.5% for Class A
Shares, the assumed contingent deferred sales charge ("CDSC") for Class B
Shares (5% maximum declining to 0% after six years), and the assumed CDSC
for Class C Shares (1% if redeemed within 12 months of purchase). The bar
chart does not reflect the sales loads applicable to Class A Shares. If the
sales loads were reflected, returns would be less. Performance reflects
expense limitations in effect. If expense limitations were not in place, a
Fund's performance would have been reduced. The European Equity, Japanese
Equity and International Small Cap Funds did not commence operations until
October 1, 1998, May 1, 1998 and May 1, 1998, respectively. Since these
Funds have less than one calendar year's performance, no performance infor-
mation is provided in this section.
2
<PAGE>
CORE International Equity Fund
TOTAL RETURN CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
---------------------------------------------------------------------
<S> <C> <C>
CLASS A (INCEPTION 8/15/97)
Including Sales Charges % %
Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index* % %
---------------------------------------------------------------------
CLASS B (INCEPTION 8/15/97)
Including CDSC % %
Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index* % %
---------------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % %
Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index* % %
---------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International Europe, Australia, Far
East (EAFE) Index is a market capitalization-weighted composite of securi-
ties in 20 developed markets. The Index figures do not reflect any fees or
expenses.
3
<PAGE>
FUND PERFORMANCE
International Equity Fund
TOTAL RETURN CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (INCEPTION 12/1/92)
Including Sales Charges % % %
FT/S&P Actuaries Europe & Pacific Index
(unhedged)* % % %
------------------------------------------------------------------------
CLASS B (INCEPTION 5/1/96)
Including CDSC % N/A %
FT/S&P Actuaries Europe & Pacific Index
(unhedged)* % N/A %
------------------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % N/A %
FT/S&P Actuaries Europe & Pacific Index
(unhedged)* % N/A %
------------------------------------------------------------------------
</TABLE>
* The unmanaged FT/S&P Actuaries Europe & Pacific Index ("EuroPac") is a mar-
ket capitalization-weighted composite of approximately 1,500 stocks from 20
countries in Europe and the Asia-Pacific region. From the inception of the
Fund until 8/31/94, the Fund was managed using the hedged EuroPac as a
benchmark, and after such date, the unhedged EuroPac as a benchmark. The
Index figures do not reflect any fees or expenses.
4
<PAGE>
Emerging Markets Equity Fund
TOTAL RETURN CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
------------------------------------------------------------------------------
<S> <C> <C>
CLASS A (INCEPTION 12/15/97)
Including Sales Charges % %
Morgan Stanley Capital International Emerging Markets
Free (EMF) Index* % %
------------------------------------------------------------------------------
CLASS B (INCEPTION 12/15/97)
Including CDSC % %
Morgan Stanley Capital International Emerging Markets
Free (EMF) Index* % %
------------------------------------------------------------------------------
CLASS C (INCEPTION 12/15/97)
Including CDSC % %
Morgan Stanley Capital International Emerging Markets
Free (EMF) Index* % %
------------------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International Emerging Markets Free
(EMF) Index is a market capitalization-weighted composite of securities in
over 30 emerging markets countries. "Free" indicates an index that excludes
shares in otherwise free markets that are not purchasable by foreigners.
The Index figures do not reflect any fees or expenses.
5
<PAGE>
FUND PERFORMANCE
Asia Growth Fund
TOTAL RETURN CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q "9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR 3 YEAR SINCE INCEPTION
--------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (Inception 7/8/94)
Including Sales Charges % % %
Morgan Stanley Capital International
All Country Asia Free ex-Japan* % % %
--------------------------------------------------------------------
CLASS B (Inception 5/1/96)
Including CDSC % N/A %
Morgan Stanley Capital International
All Country Asia Free ex-Japan* % N/A %
--------------------------------------------------------------------
CLASS C (Inception 8/15/97)
Including CDSC % N/A %
Morgan Stanley Capital International
All Country Asia Free ex-Japan* % N/A %
--------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International All Country Asia Free
ex-Japan Index is a market capitalization-weighted composite of securities
in ten Asian countries. "Free" indicates an index that excludes shares in
otherwise free markets that are not purchasable by foreigners. The Index
figures do not reflect any fees or expenses.
6
<PAGE>
[This page intentionally left blank]
7
<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>
CORE INTERNATIONAL
EQUITY 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.85% 0.85% 0.85%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/7/ 0.59% 0.59% 0.59%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.94% 2.44% 2.44%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
CORE INTERNATIONAL
EQUITY 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 0.85% 0.85% 0.85%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/7/ 0.31% 0.31% 0.31%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.66% 2.16% 2.16%
------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.37% 0.37% 0.37%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.87% 2.37% 2.37%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
INTERNATIONAL EQUITY
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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.29% 0.29% 0.29%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.79% 2.29% 2.29%
------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
EUROPEAN EQUITY 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.84% 0.84% 0.84%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 2.34% 2.84% 2.84%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
EUROPEAN EQUITY 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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.29% 0.29% 0.29%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.79% 2.29% 2.29%
------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
JAPANESE EQUITY 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 0.50% 1.00% 1.00%
Other Expenses/7/ 2.22% 2.22% 2.22%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 3.72% 4.22% 4.22%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
JAPANESE EQUITY 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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.20% 0.20% 0.20%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.70% 2.20% 2.20%
------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 1.20% 1.20% 1.20%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/7/ 3.50% 3.50% 3.50%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 5.20% 5.70% 5.70%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
INTERNATIONAL SMALL CAP
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 1.20% 1.20% 1.20%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/7/ 0.35% 0.35% 0.35%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 2.05% 2.55% 2.55%
------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 1.20% 1.20% 1.20%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/7/ 0.65% 0.65% 0.65%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 2.35% 2.85% 2.85%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
EMERGING MARKETS EQUITY
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 1.20% 1.20% 1.20%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/7/ 0.34% 0.34% 0.34%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 2.04% 2.54% 2.54%
------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
ASIA GROWTH 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.50% 0.50% 0.50%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 2.00% 2.50% 2.50%
- --------------------------------------------------------------------------------
</TABLE>
See page 15 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 expense waivers and 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>
ASIA GROWTH 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 0.50% 1.00% 1.00%
Other Expenses/7/ 0.35% 0.35% 0.35%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.85% 2.35% 2.35%
------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
FUND FEES AND EXPENSES
/1/The maximum sales charge is a percentage of the offering price. A contingent
deferred sales charge ("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 purchase
at a rate of 5% in the first year, declining to 1% in the sixth year, and elim-
inated thereafter.
/4/A CDSC of 1% is imposed on Class C Shares redeemed within 12 months of pur-
chase.
/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 sub-
sequent exchange during such period.
/6/The Funds' annual operating expenses have been restated to reflect current
fees.
/7/"Other Expenses" include transfer agency fees equal to 0.19% of the average
daily net assets of each Fund's Class A, B and C Shares, plus all other ordi-
nary expenses not detailed above. The Investment Adviser has voluntarily agreed
to reduce or limit certain "Other Expenses" (excluding management fees, distri-
bution 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:
OTHER
FUND EXPENSES
- --------------------------------------
CORE International Equity 0.12%
International Equity 0.10%
European Equity 0.10%
Japanese Equity 0.01%
International Small Cap 0.16%
Emerging Markets Equity 0.15%
Asia Growth 0.16%
15
<PAGE>
FUND FEES AND EXPENSES
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 5 YEARS 10 YEARS
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
CORE INTERNATIONAL EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ----------------------------------------------------------
INTERNATIONAL EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ----------------------------------------------------------
EUROPEAN EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ----------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
JAPANESE EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
INTERNATIONAL SMALL CAP
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
EMERGING MARKETS EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
ASIA GROWTH
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
Class C Shares $ $ $ $
- Assuming complete
redemption at end of
period
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
</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 Should I Know When I Purchase Shares Through An Authorized Dealer?"
17
<PAGE>
Service Providers
INVESTMENT ADVISERS
<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
------------------------------------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM") CORE International Equity
One New York Plaza
New York, New York 10004
------------------------------------------------------------------------
Goldman Sachs Asset Management International
("GSAMI") International Equity
133 Petersborough Court European Equity
London, England EC4A 2BB Japanese Equity
International Small Cap
Emerging Markets Equity
Asia Growth
------------------------------------------------------------------------
</TABLE>
GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. GSAMI, a member of the Investment Management
Regulatory Organization Limited since 1990 and a registered investment
adviser since 1991, is an affiliate of Goldman Sachs. As of December 31,
1998, GSAM and GSAMI, together with their affiliates, acted as investment
adviser or distributor for assets in excess of $195 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
1-J
<PAGE>
..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
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>
FOR THE FISCAL YEAR
OR PERIOD ENDED
CONTRACTUAL RATE JANUARY 31, 1999
----------------------------------------------------------------
<S> <C> <C>
GSAM:
----------------------------------------------------------------
CORE International Equity 0.85% %
----------------------------------------------------------------
GSAMI:
----------------------------------------------------------------
International Equity 1.00% %
----------------------------------------------------------------
European Equity 1.00% %
----------------------------------------------------------------
Japanese Equity 1.00% %
----------------------------------------------------------------
International Small Cap 1.20% %
----------------------------------------------------------------
Emerging Markets Equity 1.20% %
----------------------------------------------------------------
Asia Growth 1.00% %
----------------------------------------------------------------
</TABLE>
The difference, if any, between the stated fees and the actual fees paid by
the Funds reflects that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled. The Investment
Adviser may discontinue or modify any such voluntary limitations in the
future at its discretion.
FUND MANAGERS
M. Roch Hillenbrand, a Managing Director of Goldman Sachs, is the Head of
Global Equities for GSAM, overseeing U.S., 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 con-
sistent, reliable and predictable. Roch 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, Roch has had exten-
sive experience in dealing with inter-
2-J
<PAGE>
SERVICE PROVIDERS
nal and external investment managers who have managed a range of futures and
equities strategies across multiple markets, using a variety of styles.
International Equity Portfolio Management Team
..Global portfolio teams based in London, Singapore, Tokyo and New York.
Local presence is a key to the Investment Adviser's fundamental research
capabilities
..Teams manage over $27 billion in international equities for retail, insti-
tutional and high net worth clients
..Focus on bottom-up stock selection as main driver of returns, though the
teams leverage the asset allocation, currency and risk management capabili-
ties of GSAM
London-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
David Dick SENIOR PORTFOLIO MANAGER-- SINCE MR. DICK JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR SENIOR PORTFOLIO MANAGER
ON THE EUROPEAN EQUITY
TEAM IN 1998. FROM 1990
TO 1998, HE WAS WITH
MERCURY ASSET
MANAGEMENT, WHERE HE WAS
A PORTFOLIO MANAGER FOR
EUROPEAN EQUITY AND WAS
HEAD OF MERCURY'S
EUROPEAN SECTOR
STRATEGY.
- ----------------------------------------------------------------------------------------------
Ivor H. Farman PORTFOLIO MANAGER-- SINCE MR. FARMAN JOINED THE
EXECUTIVE INTERNATIONAL EQUITY FUND 1996 INVESTMENT ADVISER AS A
DIRECTOR EUROPEAN EQUITY FUND 1998 SENIOR PORTFOLIO MANAGER
IN 1996. FROM 1995 TO
1996, HE WAS RESPONSIBLE
FOR ORIGINATING AND
MARKETING FRENCH EQUITY
IDEAS AT EXANE IN PARIS.
PRIOR TO 1995, HE SPENT
FIVE YEARS ENGAGED IN
FRENCH EQUITY RESEARCH
AND MARKETING AT BANQUE
NATIONALE DE PARIS AND
SCHRODERS IN LONDON.
- ----------------------------------------------------------------------------------------------
</TABLE>
3-J
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------
<C> <C> <C> <S>
Paul Greener PORTFOLIO SINCE MR. GREENER JOINED THE
ASSOCIATE MANAGER-- 1998 INVESTMENT ADVISER AS A
INTERNATIONAL 1998 MEMBER OF THE PAN-EUROPEAN
EQUITY FUND EQUITY TEAM RESPONSIBLE FOR
EUROPEAN EQUITY EUROPEAN GENERAL RETAILERS,
FUND BUSINESS SERVICES AND
TECHNOLOGY SECTORS IN 1996.
FROM 1994 TO 1996, HE WAS
AN EQUITY ANALYST AT CIN
MANAGEMENT. PRIOR TO 1994,
HE WAS A STUDENT AT THE
UNIVERSITY OF BIRMINGHAM.
- ----------------------------------------------------------------------------------
James P. PORTFOLIO SINCE MR. HORDERN JOINED THE
Hordern MANAGER-- 1998 INVESTMENT ADVISER AS A
EXECUTIVE INTERNATIONAL PORTFOLIO MANAGER IN 1997.
DIRECTOR SMALL CAP FUND FROM 1991 TO 1997, HE WAS
AN ASSISTANT DIRECTOR AND
PORTFOLIO MANAGER AT
MERCURY ASSET MANAGEMENT ON
THE EUROPEAN SPECIALIST
TEAM.
- ----------------------------------------------------------------------------------
Ralf Laier PORTFOLIO SINCE MR. LAIER JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER AS A
EMERGING MARKETS PORTFOLIO MANAGER WITH A
EQUITY FUND FOCUS ON CENTRAL/EASTERN
EUROPEAN (CEE) AND THE
COMMONWEALTH OF INDEPENDENT
STATES (CIS) IN 1997. PRIOR
TO JOINING THE INVESTMENT
ADVISER, FROM 1995 TO 1997,
HE WAS VICE PRESIDENT OF
SOROS GLOBAL RESEARCH,
WHERE HE ANALYZED
INVESTMENT OPPORTUNITIES IN
CEE/CIS. FROM 1994 TO 1995,
HE ACHIEVED A PH.D. FROM
THE ACADEMY OF ECONOMICS IN
POZAN, POLAND, AND FROM
1992 TO 1994 HE WORKED FOR
THE POLISH MINISTRY OF
PRIVATIZATION AS A PROJECT
DIRECTOR DEVELOPING
PRIVATIZATION STRATEGIES
FOR SEVERAL INDUSTRY
SECTORS.
- ----------------------------------------------------------------------------------
</TABLE>
4-J
<PAGE>
SERVICE PROVIDERS
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Susan Noble SENIOR PORTFOLIO MANAGER-- SINCE MS. NOBLE JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR INTERNATIONAL EQUITY FUND 1998 SENIOR PORTFOLIO MANAGER
AND HEAD OF THE EUROPEAN
EQUITY TEAM IN OCTOBER
1997. FROM 1986 TO 1997,
SHE WORKED AT FLEMING
INVESTMENT MANAGEMENT IN
LONDON, WHERE SHE MOST
RECENTLY WAS PORTFOLIO
MANAGEMENT DIRECTOR FOR
THE EUROPEAN EQUITY
INVESTMENT STRATEGY AND
PROCESS.
- ----------------------------------------------------------------------------------------------
Andrew PORTFOLIO MANAGER-- SINCE MR. SHRIMPTON JOINED THE
Shrimpton EMERGING MARKETS EQUITY 1998 INVESTMENT ADVISER AS A
VICE PRESIDENT FUND PORTFOLIO MANAGER WITH A
FOCUS ON AFRICA AS WELL
AS THE FINANCIAL
INDUSTRY IN THE EMEA
REGION IN 1996. SINCE
1985 HE WAS A UK EQUITY
ANALYST AND PORTFOLIO
MANAGER FOR CIN
MANAGEMENT, WHERE HE
INITIATED CIN
MANAGEMENT'S FIRST
INVESTMENTS IN LATIN
AMERICA.
- ----------------------------------------------------------------------------------------------
Danny Truell SENIOR PORTFOLIO MANAGER-- SINCE MR. TRUELL JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR SENIOR PORTFOLIO MANAGER
AND HEAD OF UK EQUITIES
IN 1998. FROM 1992 TO
1996, HE WAS INVESTMENT
BANKING EXECUTIVE
DIRECTOR FOR SBC WARBURG
AND CHIEF ASIAN EQUITY
STRATEGIST.
- ----------------------------------------------------------------------------------------------
Anna G. Antici PORTFOLIO MANAGER-- SINCE MS. ANTICI JOINED THE
VICE PRESIDENT EMERGING MARKETS EQUITY 1998 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN
1997. FROM 1994 TO 1997,
SHE WAS A VICE PRESIDENT
FOR HSBC ASSET
MANAGEMENT, WHERE SHE
WAS A PORTFOLIO MANAGER
FOR EMERGING MARKETS AND
HEAD OF THE LATIN
AMERICAN DEPARTMENT. IN
1993, SHE WAS A SENIOR
RESEARCH ANALYST FOR
BARING SECURITIES.
- ----------------------------------------------------------------------------------------------
</TABLE>
5-J
<PAGE>
New York-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Robert A. SENIOR PORTFOLIO MANAGER-- SINCE MR. BECKWITT JOINED THE
Beckwitt EMERGING MARKETS EQUITY INVESTMENT ADVISER AS A
VICE PRESIDENT FUND 1997 PORTFOLIO MANAGER IN
AND 1996. FROM 1986 TO 1996,
CO-HEAD HE WAS CHIEF INVESTMENT
EMERGING MARKET STRATEGIST-PORTFOLIO
EQUITIES ADVISER TO HIGH NET
WORTH INVESTORS AT
FIDELITY INVESTMENTS.
- -----------------------------------------------------------------------------------------------
Melissa Brown SENIOR PORTFOLIO MANAGER-- SINCE MS. BROWN JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN
1998. FROM 1984 TO 1998,
SHE WAS THE DIRECTOR OF
QUANTITATIVE EQUITY
RESEARCH AND SERVED ON
THE INVESTMENT POLICY
COMMITTEE AT PRUDENTIAL
SECURITIES.
- -----------------------------------------------------------------------------------------------
Mark M. Carhart SENIOR PORTFOLIO MANAGER-- SINCE MR. CARHART JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS A
FUND MEMBER OF THE
QUANTITATIVE RESEARCH
AND RISK MANAGEMENT TEAM
IN 1997. FROM AUGUST
1995 TO SEPTEMBER 1997,
HE WAS ASSISTANT
PROFESSOR OF FINANCE AT
THE MARSHALL SCHOOL OF
BUSINESS AT USC AND A
SENIOR FELLOW OF THE
WHARTON FINANCIAL
INSTITUTIONS CENTER.
FROM 1993 TO 1995, HE
WAS A LECTURER AND
GRADUATE STUDENT AT THE
UNIVERSITY OF CHICAGO
GRADUATE SCHOOL OF
BUSINESS.
- -----------------------------------------------------------------------------------------------
Kent A. Clark SENIOR PORTFOLIO MANAGER-- SINCE MR. CLARK JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1997 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN THE
QUANTITATIVE EQUITY
MANAGEMENT TEAM IN 1992.
- -----------------------------------------------------------------------------------------------
Raymond J. PORTFOLIO MANAGER-- SINCE MR. IWANOWSKI JOINED THE
Iwanowski CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS AN
VICE PRESIDENT FUND ASSOCIATE AND PORTFOLIO
MANAGER IN 1997. FROM
1993 TO 1997, HE WAS A
VICE PRESIDENT AND HEAD
OF THE FIXED DERIVATIVES
CLIENT RESEARCH GROUP AT
SALOMON BROTHERS.
- -----------------------------------------------------------------------------------------------
</TABLE>
6-J
<PAGE>
SERVICE PROVIDERS
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Robert C. Jones SENIOR PORTFOLIO MANAGER-- SINCE MR. JONES JOINED THE
MANAGING CORE INTERNATIONAL EQUITY 1997 INVESTMENT ADVISER AS A
DIRECTOR FUND PORTFOLIO MANAGER IN
1989.
- -----------------------------------------------------------------------------------------------
</TABLE>
Singapore-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Alice Lui PORTFOLIO MANAGER-- SINCE MS. LUI JOINED THE
VICE PRESIDENT ASIA GROWTH FUND 1994 INVESTMENT ADVISER AS A
PORTFOLIO MANAGER IN
1990.
- -----------------------------------------------------------------------------------------------
Warwick M. SENIOR PORTFOLIO MANAGER-- SINCE MR. NEGUS JOINED THE
Negus ASIA GROWTH FUND INVESTMENT ADVISER AS A
MANAGING EMERGING MARKETS EQUITY 1994 PORTFOLIO MANAGER IN
DIRECTOR AND FUND 1997 1994. FROM 1987 TO 1994,
CO-HEAD PORTFOLIO MANAGER-- HE WAS A VICE PRESIDENT
EMERGING MARKET INTERNATIONAL EQUITY FUND OF BANKERS TRUST
EQUITIES INTERNATIONAL SMALL CAP 1994 AUSTRALIA LTD WHERE HE
FUND 1998 WAS THE CHIEF INVESTMENT
OFFICER OF ITS SOUTHEAST
ASIAN INVESTMENT TEAM.
- -----------------------------------------------------------------------------------------------
Ramakrishna PORTFOLIO MANAGER-- SINCE MR. SHANKAR JOINED THE
Shankar ASIA GROWTH FUND 1997 INVESTMENT ADVISER AS AN
VICE PRESIDENT EMERGING MARKETS EQUITY 1998 OPERATIONS MANAGER IN
FUND 1997. FROM JULY 1996 TO
1997, HE WORKED FOR
GOLDMAN SACHS IN
SINGAPORE AS A STRATEGIC
ADVISOR FOR TRANSACTIONS
INVOLVING INFRASTRUCTURE
INDUSTRIES IN ASIA. FROM
1988 TO 1996, HE WORKED
FOR GOLDMAN SACHS AS AN
INVESTMENT BANKER IN THE
INVESTMENT BANKING
DIVISION.
</TABLE>
- --------------------------------------------------------------------------------
Tokyo-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Guy P. de C. SENIOR PORTFOLIO MANAGER-- SINCE MR. BENNETT JOINED THE
Bennett JAPANESE EQUITY FUND INVESTMENT ADVISER AS A
VICE PRESIDENT PORTFOLIO MANAGER-- 1998 PORTFOLIO MANAGER IN
INTERNATIONAL EQUITY FUND 1996 AND IS ALSO CO-HEAD
1997 OF GSAM'S JAPANESE
EQUITY GROUP IN TOKYO.
FROM 1984 TO 1996, HE
WAS A PORTFOLIO MANAGER
AND AN EXECUTIVE
DIRECTOR AT CIN
MANAGEMENT.
- -----------------------------------------------------------------------------------------------
</TABLE>
7-J
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- --------------------------------------------------------------------------------------
<C> <C> <C> <S>
Shigeka Kouda PORTFOLIO MANAGER-- SINCE MR. KOUDA JOINED THE
VICE PRESIDENT INTERNATIONAL SMALL 1998 INVESTMENT ADVISER AS A
CAP FUND PORTFOLIO MANAGER IN
1997. FROM 1992 TO 1997,
HE WAS AT THE FIXED
INCOME DIVISION OF
GOLDMAN SACHS (JAPAN)
LIMITED, WHERE HE WAS
EXTENSIVELY INVOLVED IN
EMERGING MARKETS TRADING
AS WELL AS INTERNATIONAL
FIXED INCOME
INSTITUTIONAL SALES.
- --------------------------------------------------------------------------------------
Shogo Maeda SENIOR PORTFOLIO SINCE MR. MAEDA JOINED THE
MANAGING MANAGER-- INVESTMENT ADVISER AS A
DIRECTOR JAPANESE EQUITY FUND 1994 PORTFOLIO MANAGER IN
PORTFOLIO MANAGER-- 1994. FROM 1987 TO 1994,
INTERNATIONAL EQUITY 1994 HE WORKED AT NOMURA
FUND 1998 INVESTMENT MANAGEMENT
INTERNATIONAL SMALL INCORPORATED AS A SENIOR
CAP FUND PORTFOLIO MANAGER.
- --------------------------------------------------------------------------------------
Miyako PORTFOLIO MANAGER-- SINCE MS. SHIBAMOTO JOINED THE
Shibamoto JAPANESE EQUITY FUND 1998 INVESTMENT ADVISER AS A
VICE PRESIDENT MEMBER OF THE JAPANESE
EQUITY TEAM IN MARCH
1998. FROM 1993 TO 1998,
SHE WAS A VICE PRESIDENT
AT SCUDDER STEVENS AND
CLARK (JAPAN).
- --------------------------------------------------------------------------------------
Takeya Suzuki PORTFOLIO MANAGER-- SINCE MR. SUZUKI JOINED THE
VICE PRESIDENT JAPANESE EQUITY FUND 1998 INVESTMENT ADVISER AS A
PORTFOLIO MANAGER IN
1996. FROM 1990 TO 1996,
HE WAS A JAPANESE EQUITY
PORTFOLIO MANAGER AT
NOMURA INVESTMENT
MANAGEMENT WHERE HE
ACTIVELY MANAGED ASSETS
FOR U.S. PENSION FUNDS.
- --------------------------------------------------------------------------------------
</TABLE>
8-J
<PAGE>
SERVICE PROVIDERS
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," which may lead to computer shutdowns or
errors
9-J
<PAGE>
(commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur
prior to January 1, 2000. Like other investment companies and financial and
business organizations, the Funds could be adversely affected in their abil-
ity to process securities trades, price securities, provide shareholder
account services and otherwise conduct normal business operations if the
Investment Adviser or other Fund service providers do not adequately address
this problem in a timely manner.
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 Advisor 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.
10-J
<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 dis-
tributions 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 or
units of the ILA Portfolios. Special restrictions may apply for exchanges
in 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 annually.
From time to time a portion of a Fund's dividends may constitute a return
of capital.
At the time of an investor's purchase of shares of a Fund, a portion of the
NAV per share may be represented by undistributed income or realized or
unrealized appreciation of the Fund's portfolio securities. Therefore, sub-
sequent distributions on such shares from such income or realized apprecia-
tion may be taxable to the investor even if the NAV of the shares is, as a
result of the distributions, reduced below the cost of such shares and the
distributions (or portions thereof) represent a return of a portion of the
purchase price.
11-J
<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
OR
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 cheques 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.
1-C
<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 AGGREGATE ACROSS FUNDS Class A No limit
------------------
Class B $250,000
------------------
Class C $1,000,000
</TABLE>
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
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<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
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.
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 discretion, makes an
adjustment in light of
3-C
<PAGE>
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 reallowance may be changed periodically. During special promo-
tions, the entire sales charge may be reallowed to Authorized Dealers.
Authorized Dealers to whom substantially the entire sales charge is
reallowed may be deemed to be "underwriters" under the Securities Act of
1933.
** 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 cal-
endar month in which such purchase was made, a CDSC of 1% may be imposed
upon the plan sponsor or the third party administrator. In addition,
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 pur-
chase was made.
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<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
.Effective May, 1, 1999, have at the time of purchase aggregate assets of
at least $2,000,000;
5-C
<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 Fund's 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 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. The Additional Statement has more information about the Statement
of Intention.
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<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 part to defray the Distributor's expenses related to providing dis-
tribution-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 Dealers.
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
7-C
<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.
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.
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");
8-C
<PAGE>
SHAREHOLDER GUIDE
..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 Shares will cause your Class B Shares (until con-
version to Class A Shares) to have a higher expense ratios, and thus, lower
performance and lower dividend 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
9-C
<PAGE>
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 available to
work for you from the time you make your initial investment. However, 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.
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<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
4900 Sears Tower-60th Floor
Chicago, Illinois 60606-6372
-------------------------------------------------------------------------
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.
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.
The Trust may accept telephone redemption instructions from any person iden-
tifying himself or herself as the owner of an account or the owner's regis-
tered representative where
11-C
<PAGE>
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.
12-C
<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 assumes 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.
What Else Do I Need To Know About Redemptions?
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.
The Trust reserves the right to:
..Redeem your shares if your account balance is less than $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 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
13-C
<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 redemption 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
.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
privileges on your Account Application:
.1-800-526-7384 (8:00 a.m. to 4:00 p.m.
New York time)
-----------------------------------------------------------------------
</TABLE>
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<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
originally 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 sat-
isfy 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 regis-
tered 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.
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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 signatures 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.
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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
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<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
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<PAGE>
SHAREHOLDER GUIDE
this arrangement. 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 1940 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.
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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, 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 inquiries of, and furnishing assistance to,
shareholders regarding ownership of their shares or their accounts or simi-
lar 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.
18
<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.
At any time, a portion of a Fund's NAV per share may be represented by
undistributed income or realized or unrealized appreciation of the Fund's
portfolio securities. Therefore, subsequent distributions on a Fund's shares
may be taxable to you, even if the NAV of your shares is, as a result,
reduced below the cost of those shares and the distributions represent a
return of your purchase price.
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. Under certain circum-
stances, the Funds may make an election to treat a proportionate amount of
such taxes as constituting a distribution to you, which would allow you
either (1) to credit such proportionate amount of taxes against your U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
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<PAGE>
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.
There are certain tax requirements that all 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.
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.
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Appendix A
Additional Information on Portfolio Risks, Securities and Techniques
The Funds will be subject to the risks associated with equity securities. "Eq-
uity 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 lia-
bility companies and similar enterprises, warrants and stock purchase rights.
In general, stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions. According-
ly, the value of the stocks that a Fund holds may decline over short or
extended periods. The stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The vol-
atility 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 investments.
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. Conversely, 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 investment. Call risk and exten-
sion 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 (extension risk). In general, if interest rates
on new mortgage loans fall sufficiently below the interest rates on existing
outstanding mortgage loans, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the interest
rates on existing outstanding mortgage loans, the rate of prepayment would be
expected to decrease. In either case, a change in the prepayment rate can
result in losses to investors.
The Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover (100% or more) involves correspondingly greater expenses which must be
borne by a Fund and its shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund's portfolio securities,
excluding secu-
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<PAGE>
rities having a maturity at the date of purchase of one year or less. See
"Financial Highlights" in Appendix B for a statement of the Funds' historical
portfolio turnover rates.
The following sections provide further information on certain types of securi-
ties and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the Additional State-
ment, which is available upon request. Among other things, the Additional
Statement describes certain fundamental investment restrictions that cannot be
changed without shareholder approval. You should note, however, that all poli-
cies not specifically designated as fundamental are non-fundamental and may be
changed without shareholder approval. If there is a change in a Fund's invest-
ment objective, you should consider whether that Fund remains an appropriate
investment in light of your then current financial position and needs.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS. Investments in
small capitalization companies and REITs involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Among the
reasons for the greater price volatility of these investments are the less cer-
tain 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 periods 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 eco-
nomic or market conditions, or adverse investor perceptions, 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. Small capitalization companies
and REITs also often have limited 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 capitalization companies and REITs may be more difficult
to price precisely than other types of securities because of their characteris-
tics and lower trading volumes.
RISKS OF FOREIGN INVESTMENTS. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securities
of U.S. issuers. Foreign investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and changes in exchange control regulations (e.g., currency block-
age). A decline in
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<PAGE>
APPENDIX A
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 partic-
ipating nations in the European Economic and Monetary Union ("EU") presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 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 in the European
Union, such as the United Kingdom and Denmark, into the euro and the admission
of other non-EU countries such as Poland, Latvia and Lithuania as members of
the EU may have an impact on the euro. These or other factors, including polit-
ical and economic risks, could cause market disruptions before or after the
introduction of the euro, and could adversely affect the value of securities
held by the Funds.
Brokerage commissions, custodial services and other costs relating to invest-
ment in international securities markets generally are more expensive than in
the United States. In addition, clearance and settlement procedures may be dif-
ferent in foreign countries and, in certain markets, such procedures have been
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S. securi-
ties markets and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationaliza-
tion, expropriation or confiscatory taxation, imposition of withholding or
other taxes on dividend or interest payments (or, in some cases, capital
gains), limitations on the removal of funds or other
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<PAGE>
assets of the Funds, political or social instability or diplomatic developments
which could affect investments in those countries.
Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.
Investment in sovereign debt obligations by certain Funds involves special
risks not present in debt obligations of corporate issuers. The issuer of the
debt or the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or pay interest when due in accor-
dance with the terms of such debt, and a Fund may have limited recourse to com-
pel 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 obliga-
tions of U.S. issuers. A sovereign debtor's willingness or ability to repay
principal and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign currency reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.
Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). Certain Funds may also invest in European Depository
Receipts ("EDRs") or other similar instruments representing securities of for-
eign 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 security.
RISKS OF EMERGING COUNTRIES. Certain Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are heightened
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 port-
folio securities in certain emerging countries may be constrained by limita-
tions 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 vol-
ume by or holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other
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APPENDIX A
service providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For exam-
ple, 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 specific class of securi-
ties which may have less advantageous terms (including price) than securities
of the issuer available for purchase by nationals. In addition, certain coun-
tries may restrict or prohibit investment opportunities in issuers or indus-
tries deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for governmental
consents. Due to restrictions on direct investment in equity securities in cer-
tain Asian countries, such as Taiwan, it is anticipated that a Fund may invest
in such countries only through other investment funds in such countries.
Many emerging countries are subject to a substantial degree of economic, polit-
ical and social instability. Governments of some emerging countries are author-
itarian in nature or have been installed or removed as a result of military
coups, while governments in other emerging countries have periodically used
force to suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging countries. Unanticipated political or social developments may result
in sudden and significant investment losses. Investing in emerging countries
involves greater risk of loss due to expropriation, nationalization, confisca-
tion 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 invest-
ment 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 addition, significant delays are common in certain markets in
registering the transfer of securities. Settlement or registration problems may
make it more difficult for a Fund to value its portfolio securities and could
cause the Fund to miss attractive investment opportunities, to have a portion
of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's inabil-
ity to complete its contractual obligations. The creditworthiness of the local
securi-
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<PAGE>
ties 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 crditworthiness of firms used
in more developed countires, thus subjecting the Fund to a greater risk of loss
if a securities firm defaults in the performance of its responsibilities.
The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries
may make a Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets (such as
the United States, Japan and most Western European countries). A Fund's invest-
ments 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, mar-
ket or political conditions, or adverse investor perceptions, 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 precisely because of their characteristics and
lower trading volumes.
Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a nega-
tive 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 barri-
ers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
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 signifi-
cant 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, structured securities and currency transac-
tions involve additional risk of loss. Loss can result from a lack of correla-
tion 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
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APPENDIX A
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) which is considered a speculative practice and
presents even greater risk of loss.
RISK 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 ordi-
nary 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 portfolio
to the extent that qualified institutional buyers become for a time uninter-
ested in purchasing these restricted securities. The purchase price and subse-
quent valuation of restricted and illiquid securities normally reflect a dis-
count, which may be significant, from the market price of comparable 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 agencies,
instrumentalities and sponsored enterprises), foreign governments, domestic and
foreign corporations, banks and other issuers. Some of these fixed-income secu-
rities are described in the next section below. Further information 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 con-
sidered medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers' capac-
ity 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.
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Certain 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 questionable 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, investment
in such
bonds will present greater speculative risks than those associated with invest-
ment 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.
This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks. Further information is provided in the Additional Statement, which is
available upon request.
CONVERTIBLE SECURITIES. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities gen-
erally offer lower interest or dividend yields than non-convertible securities
of similar quality. Convertible securities in which a Fund invests are subject
to the same rating criteria as its other investments in fixed-income securi-
ties. Convertible securities have both equity and fixed-income risk character-
istics. 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 con-
vertible security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock
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APPENDIX A
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.
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 considered a speculative
practice. Some Funds may also engage in cross-hedging by using forward contracts
in a currency dif-ferent from that in which the hedged security is denominated
or quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgement of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date.
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 con-
trols 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 obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or could force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
STRUCTURED SECURITIES. Structured securities are securities whose value is
determined by reference to changes in the value of specific currencies, inter-
est 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 secu-
rities may be positively or negatively indexed, so that appreciation of the
Reference may produce an
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increase or decrease in the interest rate or value of the security at maturity.
In addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may 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.
Structured securities include, but are not limited to, 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.
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 or securing mortgage
loans held by the REIT. REITs are dependent upon the ability of the REITs' man-
agers, and are subject to heavy cash flow dependency, 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 asso-
ciated with investments in real estate including possible declines in the value
of real estate, general and local economic conditions, environmental problems
and changes in interest rates. To the extent that assets underlying a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
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 during 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. Certain Funds 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 for-
eign securities, purchase and sell (write) put and call options on foreign cur-
rencies.
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 consid-
ered a
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APPENDIX A
speculative activity). The successful use of options 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 (or currency) mar-kets.
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 other-wise
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 liquidity and credit risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts are stan-
dardized, exchange-traded contracts that provide for the sale or purchase 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 option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures con-
tract 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 foreign
exchanges.
A 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 currency
exchange rates, or to the extent applicable, otherwise manage its term struc-
ture and duration in accordance with its investment objective and policies.
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 regu-
lations of the Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations. A Fund may not pur-
chase or sell futures contracts or purchase or sell related options to seek to
increase total return, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of initial margin deposits and
premiums paid on the Fund's outstanding positions in futures and related
options entered into for the purpose of seeking to increase total return would
exceed 5% of the market value of the Fund's net assets.
Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures, unan-
ticipated changes in interest rates, securities prices or currency exchange
rates
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<PAGE>
may result in poorer overall performance than if the Fund had not entered into
any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired protec-
tion 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 writing
call options on futures is potentially unlimited and may exceed the amount of
the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in substan-
tial 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.
EQUITY SWAPS. Equity swaps allow the parties to a swap agreement to exchange
the dividend income or other components of return on an equity investment (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 invest-
ment 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 div-
idends 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. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securi-
ties 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 contract 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 sold securities may
increase before the
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<PAGE>
APPENDIX A
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 secu-rities or forward
commitments before settlement whenever the Investment Adviser deems it
appropriate.
REPURCHASE AGREEMENTS. Certain Funds may enter into repurchase agreements with
primary dealers in U.S. Government securities and banks affiliated with primary
dealers. Repurchase agreements involve the purchase of securities subject to
the seller's agreement to repurchase them at a mutually agreed upon date and
price. The repurchase price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate on
the purchased security.
If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the repurchase agreement are
less than the repurchase price and Fund's costs associated with delay and
enforcement of the repurchase agreement. In addition, in the event of bank-
ruptcy of the seller, a Fund could suffer additional losses if a court deter-
mines 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. Distribu-
tions of the income from repurchase agreements will be taxable to a Fund's
shareholders. In addition, certain Funds, together with other registered
investment companies having advisory agreements with the Investment Adviser or
any of its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. 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 col-
lateral may be invested in cash equivalents. If the Investment Adviser deter-
mines 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 or possible loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
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<PAGE>
SHORT SALES AGAINST-THE-BOX. Certain Funds 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 securi-
ties convertible into or exchangeable for, without payment of any further con-
sideration, an equal amount of the securities of the same issuer as the securi-
ties sold short.
PREFERRED STOCK, WARRANTS AND RIGHTS. Each Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an owner-
ship interest providing the holder with claims on the issuer's earnings and
assets before common stock owners but after bond owners. Unlike debt securi-
ties, 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 of other non-com-
pliance by the issuer of the preferred stock.
Warrants and other rights are options to buy a stated number of shares of com-
mon stock at a specified price at any time during the life of the warrant. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
STANDARD & POOR'S DEPOSITORY RECEIPTS. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts ("SPDRs").
SPDRs are American Stock Exchange-traded securities 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 is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including, but
not limited to, facilitating the handling 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 American Stock Exchange (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 net asset values of their underlying indi-
ces and supply and demand of WEBS on the AMEX. To date, WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating 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 require-
ments of
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<PAGE>
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 disrup-
tions affecting WEBS should occur in the future, the liquidity and value of
Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE Index could be impaired. If such disruptions were to
occur, a Fund could be required to reconsider the use of WEBS as part of its
investment strategy.
OTHER INVESTMENT COMPANIES. A Fund may invest in securities of other investment
companies subject to the limitations prescribed by the Investment Company 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 invest-
ing 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 manage-
ment fees and other expenses paid by such other investment companies. Such
other investment 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.
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<PAGE>
MORTGAGE DOLLAR ROLLS. Certain Funds may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by a Fund of securities for delivery in
the current month. The Fund simultaneously contracts 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 benefits 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 pro-
ceeds of the securities sold. Unless the benefits of a mortgage dollar roll
exceed the income, capital appreciation and gain or loss due to mortgage pre-
payments 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.
Successful use of mortgage dollar rolls depends upon the Investment Adviser's
ability to predict correctly interest rates and mortgage prepayments. If the
Investment Adviser is incorrect in its predictions, the Fund may experience a
loss. For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The Funds do not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing and
do not treat them as borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
loans secured by real property. 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 invest-
ment conduit ("REMIC") pass-through or participation certificates. CMOs provide
an investor with a specified interest in the cash flow from a pool of under-
lying mortgages or of other Mortgage-Backed Securities. CMOs are issued in mul-
tiple classes. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no princi-
pal payments will be made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. A REMIC is a CMO that qualifies for
special tax treatment under
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<PAGE>
the Code and invests in certain mortgages princi pally 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 principal pay-
ments from a pool of mortgage loans. The market value of SMBS consisting
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 mortgage loans are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
Mortgage-Backed Securities (including CMOs, REMICs and SMBS) are subject to
both call risk and extension risk as previously described. Because of these
risks, these securities can have significantly greater price and yield volatil-
ity than with traditional fixed-income securities.
The value of Mortgage-Backed Securities that are structured as pass-through
mortgage securities that are collateralized by ARMs are less likely to rise
during periods of declining interest rates to the same extent as fixed-rate
securities. This is because interest rate declines may result in accelerated
prepayments of mortgages with the result that proceeds from prepayments will be
reinvested at lower interest rates. On the other hand, during periods of rising
interest rates, the value of ARMs will lag behind changes in the market rate.
ARMs are also typically subject to maximum increases and decreases in the
interest rate adjustment which can be made on any one adjustment date, in any
one year, or during the life of the security. In the event of dramatic
increases or decreases in prevailing market interest rates, the value of a
Fund's investments in ARMs may fluctuate more substantially since these limits
may prevent the security from fully adjusting its interest rate to the prevail-
ing market rates.
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 prepay-
ments of principal on the underlying loans. During periods of declining inter-
est rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, 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,
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<PAGE>
and its ability to reinvest the returns of principal at comparable yields is
subject to generally 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 security interest in collateral that is comparable to mortgage
assets. There is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities. 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.
ZERO COUPON, DEFERRED INTEREST, PAY-IN-KIND AND CAPITAL APPRECIATION BONDS.
Zero coupon, deferred interest, pay-in-kind and capital appreciation bonds are
issued at a discount from their face value because interest payments are typi-
cally postponed until maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. The market prices of
these securities generally are more volatile than the market prices of inter-
est-bearing securities and are likely to respond to a greater degree to changes
in interest rates than interest-bearing securities having similar maturities
and credit quality.
YIELD CURVE OPTIONS. Certain Funds 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 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 present a
risk of loss even if the yield of one of the underlying securities remains con-
stant, or if the spread moves in a direction or to an extent which was not
anticipated.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Certain Funds can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions in amounts not exceeding one-third of its total assets.
Reverse repurchase agreements involve the sale of securities held by a Fund
subject to the Fund's agreement to repurchase them at a mutually agreed upon
date and price (including interest). These transactions may be entered into as
a temporary measure for emergency purposes or to meet redemption requests.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of
the transaction proceeds will be greater than the related interest expense.
Borrowings and reverse repurchase agreements involve leveraging. If the securi-
ties held by a Fund
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<PAGE>
decline in value while these transactions are outstanding, the NAV of the Fund's
outstanding shares will decline in value by proportion ately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the interest income earned by a Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by a Fund will decline below the price
the Fund is obligated to pay to repurchase the securi ties, and that the
securities may not be returned to the Fund.
INTEREST RATE SWAPS, MORTGAGE SWAPS, CREDIT SWAPS, CURRENCY SWAPS AND INTEREST
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 pay-
ments. Mortgage swaps are similar to interest rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, howev-
er, 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 occur-
rence 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 and a floor that preserves a certain return within a predetermined range
of interest rates.
Certain Funds may enter into swap transactions for hedging purposes or to seek
to increase total return. The use of interest rate, mortgage, credit and cur-
rency 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 forecasts 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.
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Appendix C
Prior Performance of Similarly Advised Accounts of the Investment Adviser
The following table sets forth the Investment Adviser's composite performance
data relating to the historical performance of all discretionary private
accounts managed by the Investment Adviser that have investment objectives,
policies, and strategies substantially similar to the European Equity Fund. The
information is provided to illustrate the past performance of the Investment
Adviser in managing substantially similar accounts as measured against the
FT/S&P Actuaries Europe Index (unhedged) and does not represent the performance
of the European Equity Fund. Investors should not consider this performance
data as a substitute for the performance of the European Equity Fund nor should
investors consider this data as an indication of future performance of the
European Equity Fund or of the Investment Adviser. The FT/S&P Actuaries Europe
Index (unhedged) is unmanaged and investors cannot invest directly in the
index.
<TABLE>
<CAPTION>
PRIVATE PRIVATE PRIVATE
ACCOUNT ACCOUNT ACCOUNT PRIVATE
NET NET NET ACCOUNT
COMPOSITE COMPOSITE COMPOSITE NET
PERFORMANCE PERFORMANCE PERFORMANCE COMPOSITE FT/S&P
(INCLUDING (INCLUDING (INCLUDING PERFORMANCE ACTUARIES
CLASS A CLASS B CLASS C (EXCLUDING EUROPE
SALES SALES SALES SALES INDEX
CHARGES) CHARGES) CHARGES) CHARGES) (UNHEDGED)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 % % % % %
1997 12.29% 13.24% 17.24% 18.24% 23.66%
1996 33.29% 35.36% 39.36% 40.36% 23.51%
1995 22.05% 23.53% 27.53% 28.53% 22.17%
1994 1.80% 2.19% 6.19% 7.19% 2.95%
10/1/93-12/31/93 -1.72% -1.13% 2.87% 3.87% 9.12%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/98
-------------------------------
SINCE INCEPTION
ONE YEAR THREE YEARS FIVE YEARS 10/1/93
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net
Composite Performance
(including Class A sales
charge) % % % %
Private Account Net
Composite Performance
(including Class B sales
charge) % % % %
Private Account Net
Composite Performance
(including Class C sales
charge) % % % %
Private Account Net
Composite Performance
(excluding sales
charges) % % % %
FT/S&P Actuaries Europe
Index (Unhedged) % % % %
- ---------------------------------------------------------------------------
</TABLE>
20
<PAGE>
APPENDIX C
In accordance with the standards of the Association for Investment Management
and Research ("AIMR"), the Investment Adviser's composite performance data was
calculated on a time-weighted and asset-weighted total return basis which
includes realized and unrealized gains and losses plus income. The composite
performance is net of applicable investment management fees, brokerage commis-
sions, execution costs and custodial fees, without provision for federal and
state taxes, if any. Total return performance of the European Equity Fund will
be calculated in accordance with the regulations of the SEC. The SEC standard-
ized average annual total return is neither time-weighted nor asset-weighted
and is determined for specified periods by computing the annual percentage
change in the value of an initial amount that is invested in a share class of
the Fund at the maximum public offering price. Investors should be aware that
the differences in methodology between AIMR and SEC requirements could result
in different performance data for identical time periods.
The actual expenses of the private accounts included in the composite were
lower than the estimated expenses of the Fund. Accordingly, the performance
record of the composite has been adjusted downward based on the estimated
expenses of the A, B, and C Classes of the European Equity Fund during its
first year of operations. Performance also reflects the deduction of the maxi-
mum 5.5% front-end sales charge with respect to Class A Shares and the maximum
CDSC with respect to Class B (5%) and Class C Shares (1%). All returns pre-
sented reflect the reinvestment of dividends and other earnings. The private
accounts are not subject to the same diversification requirements, specific tax
restrictions and investment limitations imposed on the European Equity Fund by
the Investment Company Act of 1940 and Subchapter M of the Code. Consequently,
the performance results of the Investment Adviser's composite could have been
adversely affected if the private accounts had been regulated as investment
companies under the federal securities laws.
21
<PAGE>
Index
1 General Investment Management Approach
3 Fund Investment Objectives and Strategies
3 Goldman Sachs CORE International Equity Fund
4 Goldman Sachs International Equity Fund
4 Goldman Sachs European Equity Fund
5 Goldman Sachs Japanese Equity Fund
6 Goldman Sachs International Small Cap Fund
6 Goldman Sachs Emerging Markets Equity Fund
7 Goldman Sachs Asia Growth Fund
9 Other Investment Practices and Securities
11 Principal Risks of the Funds
12 Fund Performance
21 Fund Fees and Expenses
25 Service Providers
30 Dividends
32 Shareholder Guide
32 How To Buy Shares
42 How To Sell Shares
47 Shareholder Services
51 Taxation
A-1 Appendix A
Additional Information
on Portfolio Risks,
Securities and
Techniques
B-1 Appendix B:
Financial Highlights
C-1 Appendix C
22
<PAGE>
Equity 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.
Statement of Additional Information
Additional information about the Funds and their policies is also available
in the Funds' Statement of Additional Information ("Additional Statement").
The Additional Statement is incorporated by reference into this Prospectus
(is legally considered part of this Prospectus).
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 & Co., 4900 Sears Tower, Chicago, Illinois 60606
By e-mail - gs - funds @ gs.com
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. The Funds' investment company registration number is 811-5349.
[LOGO]
23
<PAGE>
Prospectus Institutional
Shares
April 30, 1999
- --------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUNDS
- --------------------------------------------
.Goldman Sachs
CORE
International
Equity Fund
.Goldman Sachs
International
Equity Fund
.Goldman Sachs
European Equity
Fund
(INSERT ARTWORK)
.Goldman Sachs
Japanese Equity
Fund
.Goldman Sachs
International
Small Cap Fund
.Goldman Sachs
Emerging
Markets Equity
Fund
.Goldman Sachs
Asia Growth
Fund
[LOGO OF GOLDMAN SACHS APPEARS 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.
- -------------------------------------------------
<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 CORE
International Equity Fund. Goldman Sachs Asset Management International
serves as investment adviser to International Equity, European Equity, Japa-
nese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds. Goldman Sachs Asset Management and Goldman Sachs Asset Manage-
ment International are each referred to in this Prospectus as the "Invest-
ment Adviser."
ACTIVELY MANAGED STYLE FUNDS
Goldman Sachs Actively Managed Investment Philosophy
<TABLE>
<CAPTION>
HOW THE INVESTMENT ADVISER ACTS ON
BELIEF BELIEF
- ------------------------------------------------------------------------------
<S> <C>
.Equity markets are inefficient Seeks excess return through team
driven, research intensive and
bottom-up stock selection.
.Returns are variable Seeks to capitalize on variability
of market and regional returns
through value-added asset allocation
decisions.
.Corporate fundamentals ultimately Seeks to conduct rigorous, first-
drive share price hand research of business and
company management.
.A businesses' intrinsic value will be Seeks to realize value through a
achieved over time long-term investment horizon.
.Portfolio risk must be carefully Seeks to systematically monitor and
analyzed and monitored manage risk through diversification,
multi factor risk models and
currency management.
</TABLE>
Equity securities for these Funds are evaluated based on a bottom-up stock
selection process, disciplined portfolio construction, and continual portfo-
lio review and analysis.
- --------------------------------------------------------------------------------
1-I
<PAGE>
QUANTITATIVE ("CORE") STYLE FUNDS
Goldman Sachs Quantitative Multifactor Model
The CORE International Equity Fund uses the Goldman Sachs proprietary
multifactor models (each a "Multifactor Model"), rigorous computerized rat-
ing systems, to forecast the returns of securities held in the Fund's port-
folio.
The Multifactor Models incorporate common variables covering measures of:
..VALUE (price-to-book, price-to-earnings, cash flow to enterprise value)
..MOMENTUM (earnings momentum, price momentum, sustainable growth)
..RISK (market risk, company-specific risk, earnings risk)
ALL OF THE ABOVE FACTORS ARE CAREFULLY EVALUATED WITHIN THE MULTIFACTOR MOD-
ELS SINCE EACH HAS DEMONSTRATED A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE SECURITIES AND MARKETS THEY WERE DESIGNED TO FORECAST.
Goldman Sachs' CORE Funds provide broad foundation portfolios for investors
to build upon.
- --------------------------------------------------------------------------------
2-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs CORE International Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term growth of capital
Benchmarks Morgan Stanley Capital International Europe, Australia,
Far East ("EAFE") Index (unhedged)
Investment Focus Large capitalization equity securities of companies that
are organized outside the United States or whose securi-
ties are primarily traded outside the United States
Investment Style Quantitative
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of large cap
companies that are organized outside the United States or whose securities
are principally traded outside the United States.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of companies that are organized
outside the United States or whose securities are principally traded outside
the United States.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time, provided the Fund's assets are
invested in at least three foreign countries. Emerging countries are coun-
tries with economies or securities markets that are considered by the
Investment Adviser not to be fully developed.
The Fund seeks broad representation of large cap issuers across major coun-
tries and sectors of the international economy. The Fund's investments are
selected using both a variety of quantitative techniques and fundamental
research in seeking to maximize the Fund's expected return, while maintain-
ing risk, style, capitalization and industry characteristics similar to the
EAFE Index. In addition, the Fund seeks a portfolio composed of companies
with attractive valuations and stronger momentum characteristics than the
EAFE Index.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered to be cash equivalents.
3-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs International Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark FT/S&P Actuaries Europe & Pacific Index (unhedged)
Investment Focus Equity securities of companies organized outside the
United States or whose securities are principally traded
outside the United States
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund intends to invest
in companies with public stock market capitalizations that are larger than
those in which the International Small Cap Fund primarily intends to invest.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time provided that the Fund's assets are
invested in at least three foreign countries.
The Fund expects to invest a substantial portion of its assets in the secu-
rities of issuers located in the developed countries of Western Europe and
in Japan. However, the Fund may also invest in the securities of issuers
located in Australia, Canada, New Zealand and the emerging countries in
which the Emerging Markets Equity Fund may invest. Many of the emerging
countries in which the Fund may invest involve risks that are not present in
investments in more developed countries.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities.
4-I
<PAGE>
Goldman Sachs European Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark FT/S&P Actuaries Europe Index (unhedged)
Investment Focus Equity securities of European companies
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
European companies. Because of its focus, the Fund will be more susceptible
to European economic, market, political and local risks than a fund that is
more geographically diversified.
A European issuer is a company that either:
..Has a class of its securities whose principal securities markets is in a
European country;
..Is organized under the laws of, or has a principal office in, a European
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more of the European countries; or
..Maintains 50% or more of its assets in one or more of the European coun-
tries.
The Fund may allocate its assets among different countries as determined by
the Investment Adviser from time to time, provided that the Fund's assets
are invested in at least three European countries. It is currently antici-
pated that a majority of the Fund's assets will be invested in the equity
securities of large cap companies located in the developed countries of
Western Europe. However, the Fund may also invest, without limit, in mid cap
companies and small cap companies, as well as companies located in emerging
countries in which the Emerging Markets Equity Fund may invest, including
the states that formerly comprised the Soviet Union and Yugoslavia.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-European countries and in fixed-income securities.
5-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Japanese Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Tokyo Price Index ("TOPIX") (unhedged)
Investment Focus Equity securities of Japanese companies
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
Japanese companies. A Japanese issuer is a company that either:
..Has a class of its securities whose principal securities markets is in
Japan;
..Is organized under the laws of, or has a principal office in Japan;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in Japan; or
..Maintains 50% or more of its assets in Japan.
The Fund's concentration in Japanese companies will expose it to the risk of
adverse social, political and economic events which occur in Japan or affect
the Japanese markets.
Japan's economy, the second largest in the world, has grown substantially
over the last three decades. Since 1990, however, Japan's economic growth
has declined significantly, and is currently subject to deflationary pres-
sures. In addition to this economic downturn, Japan is undergoing structural
adjustments related to high wages and taxes, currency valuations and struc-
tural rigidities. Japan has also been experiencing notable uncertainty and
loss of public confidence in connection with the reform of its political
process and the deregulation of its economy. These conditions present risks
to the Japanese Equity Fund and its ability to attain its investment objec-
tive.
6-I
<PAGE>
Japan's economy is heavily dependent upon international trade, and is espe-
cially sensitive to trade barriers and disputes. In particular, Japan relies
on large imports of agricultural products, raw materials and fuels. A sub-
stantial rise in world oil or commodity prices, or a fall-off in Japan's
manufactured exports, could be expected to adversely affect Japan's economy.
In addition, Japan is vulnerable to earthquakes, volcanoes and other natural
disasters. As of the date of this Prospectus, Japan's banking industry con-
tinued to suffer from non-performing loans, declining real estate values and
lower valuations of securities holdings.
The Japanese securities markets are less regulated than the U.S. markets.
Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are also not always
equally enforced.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason
price-earnings ratios of the stocks of Japanese companies have tended his-
torically to be higher than those of U.S. stocks. In addition, Japanese com-
panies have tended to have higher growth rates than U.S. companies, and Jap-
anese interest rates have generally been lower than U.S. interest rates.
These factors have contributed to lower discount rates and higher price-
earnings ratios in Japan than in the U.S.
During the recent past the average stock market prices of Japanese compa-
nies, as measured by major indices such as the NIKKEI 225 Average, have
experienced a substantial decline. It is not possible to determine whether
this general decline will continue.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-Japanese companies and in fixed-income securities,
which may include up to 10% in emerging countries. Many of the emerging
countries in which the Fund may invest involve risks that are not present in
investments in more developed countries.
7-I
<PAGE>
Goldman Sachs International Small Cap Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International EAFE Small Cap
Index (unhedged)
Investment Focus Equity securities of foreign companies with public stock
market capitalizations of $1 billion or less at the time
of investment
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
companies:
..With public stock market capitalizations of $1 billion or less at the time
of investment; and
..That are organized outside the United States or whose securities are prin-
cipally traded outside the United States.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time provided that the Fund's assets are
invested in at least three foreign countries. The Fund expects to invest a
substantial portion of its assets in small cap securities of companies in
the developed countries of Western Europe, Japan and Asia. However, the Fund
may also invest in the securities of issuers located in Australia, Canada,
New Zealand and the emerging countries in which the Emerging Market Equity
Fund may invest. Many of the emerging countries in which the Fund may invest
involve risks that are not present in investments in more developed coun-
tries.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of larger cap companies with public stock market capital-
izations of more than $1 billion at the time of investment and in fixed-
income securities. If the market capitalization of a company held by the
Fund increases above $1 billion, the Fund may, consistent with its invest-
ment objective, continue to hold the security.
8-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Emerging Markets Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International Emerging Markets
Free Index
Investment Focus Equity securities of emerging country issuers
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
emerging country issuers. The Investment Adviser may consider classifica-
tions by the World Bank, the International Finance Corporation or the United
Nations and its agencies in determining whether a country is emerging or
developed. Currently, emerging countries include among others, most Latin
American, African, Asian and Eastern European nations. The Investment
Adviser currently intends that the Fund's investment focus will be in the
following emerging countries:
<TABLE>
<S> <C> <C> <C> <C>
.Argentina .Egypt .Jordan .Philippines .Sri Lanka
.Botswana .Greece .Kenya .Poland .Taiwan
.Brazil .Hong Kong .Malaysia .Portugal .Thailand
.Chile .Hungary .Mexico .Russia .Turkey
.China .India .Morocco .Singapore .Venezuela
.Colombia .Indonesia .Pakistan .South Africa .Zimbabwe
.Czech Republic .Israel .Peru .South Korea
</TABLE>
9-I
<PAGE>
An emerging country issuer is any company that either:
..Has a class of its securities whose principal securities market is in an
emerging country;
..Is organized under the laws of, or has a principal office in, an emerging
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more emerging countries; or
..Maintains 50% or more of its assets in one or more of the emerging coun-
tries.
Concentration of the Fund's assets in one or a few emerging countries and
currencies will subject the Fund to greater risks than if the Fund's assets
were not so concentrated.
Under normal circumstances, the Fund maintains investments in at least six
emerging countries, and will not invest more than 35% of its total assets in
securities of issuers in any one emerging country. Allocation of the Fund's
investments will depend upon the relative attractiveness of the emerging
country markets and particular issuers. In addition, macro-economic factors
and the portfolio managers' and Goldman Sachs economists' views of the rela-
tive attractiveness of emerging countries and currencies are considered in
allocating the Fund's assets among emerging countries. Investments in emerg-
ing countries involve risks that are not present in investments in more
developed countries.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
(i) fixed-income securities of private and governmental emerging country
issuers; and (ii) equity and fixed-income securities of issuers in developed
countries.
10-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Asia Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International All County Asia
Free ex-Japan Index (unhedged)
Investment Focus Equity securities of companies in Asian countries
Investment Process Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
Asian issuers.
An Asian issuer is any company that either:
..Has a class of its securities whose principal securities markets is in one
or more Asian country;
..Is organized under the laws of, or has a principal office in, an Asian
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more Asian countries; or
..Maintains 50% or more of its assets in one or more Asian countries.
The Fund may allocate its assets among the Asian countries as determined
from time to time by the Investment Adviser. For purposes of the Fund's
investment policies, Asian countries are:
..China .Malaysia .South Korea
..Hong Kong .Pakistan .Sri Lanka
..India .Philippines .Taiwan
..Indonesia .Singapore .Thailand
as well as any other country in Asia (other than Japan) to the extent that
foreign investors are permitted by applicable law to make such investments.
11-I
<PAGE>
Allocation of the Fund's investments will depend upon the Investment Advis-
er's views of the relative attractiveness of the Asian markets and particu-
lar issuers.
Concentration of the Fund's assets in one or a few of the Asian countries
and Asian currencies will subject the Fund to greater risks than if the
Fund's assets were not so concentrated. For example, on January 31, 1999
(the end of the Fund's last fiscal year), more than 35% of the Fund's assets
were invested in securities that traded in Hong Kong.
Starting in mid-1997 some Pacific region countries began to experience cur-
rency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. This situation resulted in a significant
drop in the securities prices of companies located in the region. Some coun-
tries have experienced government intervention, have sought assistance from
the International Monetary Fund and are undergoing substantial domestic
unrest. Although some countries are taking steps to restructure their finan-
cial sectors in a manner that may facilitate a return to long-term economic
growth, there can be no assurance that these efforts will be successful or
that their current problems will not persist. At the end of its last fiscal
year, a substantial portion of the Asia Growth Fund was invested in securi-
ties traded in the Hong Kong market. In 1997, the sovereignty of Hong Kong
reverted from the United Kingdom to China. Although Hong Kong is, by law, to
maintain a high degree of autonomy, there can also be no assurance that the
general economic position of Hong Kong will not be adversely affected as a
result of the exercise of Chinese sovereignty over Hong Kong. In particular,
business confidence in Hong Kong can be significantly affected by political
developments and statements by public figures in China, which can in turn
affect the performance of the securities markets. In addition, the reversion
of Hong Kong to China has created uncertainty as to future currency valua-
tions relative to the U.S. dollar. Any future valuation changes could be
adverse from the perspective of U.S. investors.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of issuers in other countries, including Japan, and in
fixed-income securities.
12-I
<PAGE>
[This page intentionally left blank]
13-I
<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.
10 Percent of total assets (italic type)
10 Percent 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>
CORE
INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY EQUITY
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT PRACTICES
Cross Hedging of currencies . . .
Equity Swaps 10 10 10
Currency Swaps . . .
Foreign Currency Transactions . . .
Futures Contracts and Options on Futures
Contracts . . .
Options on Foreign Currencies/1/ . . .
Options on Securities and Securities
Indices/2/ . . .
Custodial Receipts . . .
Unseasoned Companies . . .
Warrants and Stock Purchase Rights . . .
Repurchase Agreements . . .
Securities Lending 33 1/3 33 1/3 33 1/3
Short Sales Against the Box -- 25 25
- ------------------------------------------------------------------------------
</TABLE>
1 May purchase and sell call and put options.
2 May sell covered call and put options and purchase call and put options.
14-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
JAPANESE INTERNATIONAL EMERGING ASIA
EQUITY SMALL CAP MARKETS GROWTH
FUND FUND EQUITY FUND FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. . . .
10 10 10 10
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
33 1/3 33 1/3 33 1/3 33 1/3
25 25 25 25
- ------------------------------------------------------------------------------------------------------------
</TABLE>
15-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
10 Percent of total assets (italic type)
10 Percent 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>
CORE
INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY EQUITY
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT SECURITIES
American, European and Global Depository
Receipts . . .
Asset-Backed and Mortgage-Backed
Securities -- . .
Bank Obligations/1/ . . .
Convertible Securities . . .
Corporate Debt Obligations ./2/ 35 35
Equity Securities 90+ 65+ 65+
Emerging Market Securities 25 . .
Fixed Income Securities/3/ ./2/ 35 35/1/
Foreign Securities . . .
Foreign Government Securities . . .
Non-Investment Grade Fixed Income
Securities -- 35/4/ 35/4/
Real Estate Investment Trusts . . .
Structured Securities . . .
Temporary Defensive Investments 35 100 100
U.S. Government Securities 35 . .
- ------------------------------------------------------------------------------
</TABLE>
1 Issued by U.S. or foreign banks.
2 Cash equivalents only.
3 Except as noted under "Non-Investment Grade Fixed Income Securities,"
fixed-income securities are rated at least investment grade (i.e. BBB or
higher by Standard & Poor's Rating Group ("Standard & Poor's") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's").
4 May be unrated or rated BB or lower by Standard & Poor's or Ba or lower
by Moody's.
16-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
JAPANESE INTERNATIONAL EMERGING
EQUITY SMALL CAP MARKETS ASIA GROWTH
FUND FUND EQUITY FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. . . .
. . . .
. . . .
. . . .
35 . . .
65+ 65+ 65+ 65+
. . . .
35 . . 35
. . . .
. -- . .
35/4/ 35/4/ 35/4/ 35/4/
. . . .
. . . .
100 100 35 100
. . 35 .
- ----------------------------------------------------------------------------------------------------
</TABLE>
17-I
<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
investment program. There can be no assurance that a Fund will achieve its
investment objective.
<TABLE>
<CAPTION>
.. Applicable
- --Not applicable
CORE INTERNATIONAL EMERGING
INTERNATIONAL INTERNATIONAL EUROPEAN JAPANESE SMALL CAP MARKETS ASIA
EQUITY EQUITY EQUITY EQUITY EQUITY EQUITY GROWTH
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Credit/Default -- . . . . . .
Emerging Markets . . . . . . .
Interest Rate . . . . . . .
Small Cap/REIT -- -- -- -- . . .
Foreign . . . . . . .
Derivatives . . . . . . .
Management . . . . . . .
Market . . . . . . .
Liquidity . . . . . . .
Stock . . . . . . .
Concentration -- -- . . -- -- --
Other . . . . . . .
- ---------------------------------------------------------------------------------------------
</TABLE>
All Funds:
..FOREIGN RISKS--The risk that when a Fund invests in foreign securities, it
will be subject to special risks not typically associated with domestic
issuers. Losses 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.
18-I
<PAGE>
..EMERGING MARKETS RISK--The securities markets of Asian, Latin American, East-
ern European, African and other emerging countries are less liquid, are espe-
cially subject to greater price volatility, have smaller market capitaliza-
tions, have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the securi-
ties markets of more developed countries. Further, investment in equity secu-
rities 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.
..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, fixed-income
securities held by a Fund will decline in value. Long-term fixed-income secu-
rities will normally have more price volatility because of this risk than
short-term securities.
..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
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in 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.
19-I
<PAGE>
PRINCIPAL INVESTMENT SECURITIES AND TECHNIQUES
..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."
..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.
..SMALL CAP STOCK AND REIT RISK--The securities of small capitalization stocks
and REITs involve greater risks than those associated with larger, more estab-
lished companies and may be subject to more abrupt or erratic price movements.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop in
price.
..NON-DIVERSIFICATION AND GEOGRAPHIC RISK--The European Equity Fund invests pri-
marily in equity securities of European companies. The Japanese Equity Fund
invests primarily in equity securities of Japanese equity companies. Concen-
tration of the investments of these or other Funds in issuers located in a
particular country or region will subject the Fund, to a greater extent than
if investments were not so concentrated, to the risks of adverse securities
markets, exchange rates and social, political, regulatory or economic events
which may occur in that country or region.
More information about the Fund's 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.
20-I
<PAGE>
Fund Performance
HOW THE FUNDS HAVE PERFORMED
The bar chart and table below provide an indication of the risks of invest-
ing in a Fund by showing: (a) changes in the performance of a Fund's Insti-
tutional Shares from year to year; and (b) how the average annual returns of
a Fund's Institutional Shares compare to those of broad-based securities
market indices. The bar chart and table assume reinvestment of dividends and
distributions. A Fund's past performance is not necessarily an indication of
how the Fund will perform in the future. Performance reflects expense limi-
tations in effect. If expense limitations were not in place, a Fund's per-
formance would have been reduced. The European Equity, Japanese Equity and
International Small Cap Funds did not commence operations until October 1,
1998, May 1, 1998 and May 1, 1998, respectively. Since these Funds have less
than one calendar year's performance, no performance information is provided
in this section.
2
<PAGE>
FUND PERFORMANCE
CORE International Equity Fund
TOTAL RETURN
CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
For the period ended December 31, 1998 1 Year Since Inception
---------------------------------------------------------------------
<S> <C> <C>
Institutional Shares (Inception 8/15/97) % %
Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index* % %
---------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International Europe, Australia, Far
East (EAFE) Index is a market capitalization-weighted composite of securi-
ties in 20 developed markets. The Index figures do not reflect any fees or
expenses.
3
<PAGE>
International Equity Fund
TOTAL RETURN
CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
For the period ended December 31, 1998 1 Year Since Inception
----------------------------------------------------------------------------
<S> <C> <C>
Institutional Shares (Inception 2/7/96) % %
FT/S&P Actuaries Europe & Pacific Index (unhedged)* % %
----------------------------------------------------------------------------
</TABLE>
* The unmanaged FT/S&P Actuaries Europe & Pacific Index ("EuroPac") is a mar-
ket capitalization-weighted composite of approximately 1,500 stocks from 20
countries in Europe and the Asia-Pacific region. The Index figures do not
reflect any fees or expenses.
4
<PAGE>
FUND PERFORMANCE
Emerging Markets Equity Fund
TOTAL RETURN
CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
1
For the period ended December 31, 1998 Year Since Inception
----------------------------------------------------------------------------
<S> <C> <C>
Institutional Shares (Inception 12/15/97) % %
Morgan Stanley Capital International Emerging Markets
Free (EMF) Index* % %
----------------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International Emerging Markets Free
(EMF) Index is a market capitalization-weighted composite of securities in
over 30 emerging market countries. "Free" indicates an index that excludes
shares in otherwise free markets that are not purchasable by foreigners.
The Index figures do not reflect any fees or expenses.
5
<PAGE>
Asia Growth Fund
TOTAL RETURN
CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
For the period ended December 31, 1998 1 Year Since Inception
------------------------------------------------------------------------------
<S> <C> <C>
Institutional Shares (Inception 2/2/96) % %
Morgan Stanley Capital International All Country Asia
Free ex-Japan Index* % %
------------------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International All Country Asia Free
ex-Japan Index is a market capitalization-weighted composite of securities
in ten Asian countries. "Free" indicates an index that excludes shares in
otherwise free markets that are not purchasable by foreigners. The Index
figures do not reflect any fees or expenses.
6
<PAGE>
[This page intentionally left blank]
7
<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>
CORE
International International European
Equity Fund Equity Fund Equity Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on
Purchases None None None
Maximum Sales Charge (Load) imposed on
Reinvested Dividends None None None
Redemption Fees None None None
Exchange Fees None None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets):/1/
Management Fees 0.85% 1.00% 1.00%
Distribution and Service Fees None None None
Other Expenses/2/ 0.44% 0.22% 0.69%
- ------------------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.29% 1.22% 1.69%
- ------------------------------------------------------------------------------------------
</TABLE>
See page 10 for all other footnotes
*As a result of the 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
expense waivers and 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>
CORE
International International European
Equity Fund Equity Fund Equity Fund
------------------------------------------------------------------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from
Fund assets):/1/
Management Fees 0.85% 1.00% 1.00%
Distribution and Service Fees None None None
Other Expenses/2/ 0.16% 0.14% 0.14%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after
current waivers and expense
limitations) 1.01% 1.14% 1.14%
------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
Emerging Asia
Japanese International Markets Growth
Equity Fund Small Cap Fund Equity Fund Fund
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
None None None None
None None None None
None None None None
None None None None
1.00% 1.20% 1.20% 1.00%
None None None None
2.07% 3.35% 0.50% 0.35%
- ----------------------------------------------------------------------------------------------
3.07% 4.55% 1.70% 1.35%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Emerging Asia
Japanese International Markets Growth
Equity Fund Small Cap Fund Equity Fund Fund
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.00% 1.20% 1.20% 1.00%
None None None None
0.05% 0.20% 0.19% 0.20%
- ----------------------------------------------------------------------------------------------
1.05% 1.40% 1.39% 1.20%
- ----------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
/1/The Funds' annual operating expenses have been restated to reflect current
fees.
/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 of the Funds not detailed above. The Investment Adviser has voluntar-
ily agreed to reduce or limit "Other Expenses" (excluding management fees,
transfer agency fees, taxes, interest and brokerage fees and litigation, indem-
nification and other extraordinary expenses) to the following percentages of
each Fund's average daily net assets:
Other
Fund Expenses
----------------------------------------------
CORE International Equity 0.12%
International Equity 0.10%
European Equity 0.10%
Japanese Equity 0.01%
International Small Cap 0.16%
Emerging Markets Equity 0.15%
Asia Growth 0.16%
10
<PAGE>
FUND FEES AND EXPENSES
Example
The following Example is intended to help you compare the cost of investing in
a Fund (without the expense limitations) with the cost of investing in other
mutual funds. The Example assumes that you invest $10,000 in Institutional
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 5 Years 10 Years
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
CORE International Equity $ $ $ $
- ----------------------------------------------------------
International Equity $ $ $ $
- ----------------------------------------------------------
European Equity $ $ N/A N/A
- ----------------------------------------------------------
Japanese Equity $ $ $ $
- ----------------------------------------------------------
International Small Cap $ $ $ $
- ----------------------------------------------------------
Emerging Markets Equity $ $ $ $
- ----------------------------------------------------------
Asia Growth $ $ $ $
- ----------------------------------------------------------
</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 customers realize
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").
11
<PAGE>
Service Providers
INVESTMENT ADVISERS
<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
------------------------------------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM") CORE International Equity
One New York Plaza
New York, New York 10004
------------------------------------------------------------------------
Goldman Sachs Asset Management International
("GSAMI") International Equity
133 Petersborough Court European Equity
London, England EC4A 2BB Japanese Equity
International Small Cap
Emerging Markets Equity
Asia Growth
------------------------------------------------------------------------
</TABLE>
GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. GSAMI, a member of the Investment Management
Regulatory Organization Limited since 1990 and a registered investment
adviser since 1991, is an affiliate of Goldman Sachs. As of December 31,
1998, GSAM and GSAMI, together with their affiliates, acted as investment
adviser or distributor for assets in excess of $195 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
1-J
<PAGE>
..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
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>
FOR THE FISCAL YEAR
OR PERIOD ENDED
CONTRACTUAL RATE JANUARY 31, 1999
----------------------------------------------------------------
<S> <C> <C>
GSAM:
----------------------------------------------------------------
CORE International Equity 0.85% %
----------------------------------------------------------------
GSAMI:
----------------------------------------------------------------
International Equity 1.00% %
----------------------------------------------------------------
European Equity 1.00% %
----------------------------------------------------------------
Japanese Equity 1.00% %
----------------------------------------------------------------
International Small Cap 1.20% %
----------------------------------------------------------------
Emerging Markets Equity 1.20% %
----------------------------------------------------------------
Asia Growth 1.00% %
----------------------------------------------------------------
</TABLE>
The difference, if any, between the stated fees and the actual fees paid by
the Funds reflects that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled. The Investment
Adviser may discontinue or modify any such voluntary limitations in the
future at its discretion.
FUND MANAGERS
M. Roch Hillenbrand, a Managing Director of Goldman Sachs, is the Head of
Global Equities for GSAM, overseeing U.S., 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 con-
sistent, reliable and predictable. Roch 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, Roch has had exten-
sive experience in dealing with inter-
2-J
<PAGE>
SERVICE PROVIDERS
nal and external investment managers who have managed a range of futures and
equities strategies across multiple markets, using a variety of styles.
International Equity Portfolio Management Team
..Global portfolio teams based in London, Singapore, Tokyo and New York.
Local presence is a key to the Investment Adviser's fundamental research
capabilities
..Teams manage over $27 billion in international equities for retail, insti-
tutional and high net worth clients
..Focus on bottom-up stock selection as main driver of returns, though the
teams leverage the asset allocation, currency and risk management capabili-
ties of GSAM
London-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
David Dick SENIOR PORTFOLIO MANAGER-- SINCE MR. DICK JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR SENIOR PORTFOLIO MANAGER
ON THE EUROPEAN EQUITY
TEAM IN 1998. FROM 1990
TO 1998, HE WAS WITH
MERCURY ASSET
MANAGEMENT, WHERE HE WAS
A PORTFOLIO MANAGER FOR
EUROPEAN EQUITY AND WAS
HEAD OF MERCURY'S
EUROPEAN SECTOR
STRATEGY.
- ----------------------------------------------------------------------------------------------
Ivor H. Farman PORTFOLIO MANAGER-- SINCE MR. FARMAN JOINED THE
EXECUTIVE INTERNATIONAL EQUITY FUND 1996 INVESTMENT ADVISER AS A
DIRECTOR EUROPEAN EQUITY FUND 1998 SENIOR PORTFOLIO MANAGER
IN 1996. FROM 1995 TO
1996, HE WAS RESPONSIBLE
FOR ORIGINATING AND
MARKETING FRENCH EQUITY
IDEAS AT EXANE IN PARIS.
PRIOR TO 1995, HE SPENT
FIVE YEARS ENGAGED IN
FRENCH EQUITY RESEARCH
AND MARKETING AT BANQUE
NATIONALE DE PARIS AND
SCHRODERS IN LONDON.
- ----------------------------------------------------------------------------------------------
</TABLE>
3-J
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------
<C> <C> <C> <S>
Paul Greener PORTFOLIO SINCE MR. GREENER JOINED THE
ASSOCIATE MANAGER-- 1998 INVESTMENT ADVISER AS A
INTERNATIONAL 1998 MEMBER OF THE PAN-EUROPEAN
EQUITY FUND EQUITY TEAM RESPONSIBLE FOR
EUROPEAN EQUITY EUROPEAN GENERAL RETAILERS,
FUND BUSINESS SERVICES AND
TECHNOLOGY SECTORS IN 1996.
FROM 1994 TO 1996, HE WAS
AN EQUITY ANALYST AT CIN
MANAGEMENT. PRIOR TO 1994,
HE WAS A STUDENT AT THE
UNIVERSITY OF BIRMINGHAM.
- ----------------------------------------------------------------------------------
James P. PORTFOLIO SINCE MR. HORDERN JOINED THE
Hordern MANAGER-- 1998 INVESTMENT ADVISER AS A
EXECUTIVE INTERNATIONAL PORTFOLIO MANAGER IN 1997.
DIRECTOR SMALL CAP FUND FROM 1991 TO 1997, HE WAS
AN ASSISTANT DIRECTOR AND
PORTFOLIO MANAGER AT
MERCURY ASSET MANAGEMENT ON
THE EUROPEAN SPECIALIST
TEAM.
- ----------------------------------------------------------------------------------
Ralf Laier PORTFOLIO SINCE MR. LAIER JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER AS A
EMERGING MARKETS PORTFOLIO MANAGER WITH A
EQUITY FUND FOCUS ON CENTRAL/EASTERN
EUROPEAN (CEE) AND THE
COMMONWEALTH OF INDEPENDENT
STATES (CIS) IN 1997. PRIOR
TO JOINING THE INVESTMENT
ADVISER, FROM 1995 TO 1997,
HE WAS VICE PRESIDENT OF
SOROS GLOBAL RESEARCH,
WHERE HE ANALYZED
INVESTMENT OPPORTUNITIES IN
CEE/CIS. FROM 1994 TO 1995,
HE ACHIEVED A PH.D. FROM
THE ACADEMY OF ECONOMICS IN
POZAN, POLAND, AND FROM
1992 TO 1994 HE WORKED FOR
THE POLISH MINISTRY OF
PRIVATIZATION AS A PROJECT
DIRECTOR DEVELOPING
PRIVATIZATION STRATEGIES
FOR SEVERAL INDUSTRY
SECTORS.
- ----------------------------------------------------------------------------------
</TABLE>
4-J
<PAGE>
SERVICE PROVIDERS
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Susan Noble SENIOR PORTFOLIO MANAGER-- SINCE MS. NOBLE JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR INTERNATIONAL EQUITY FUND 1998 SENIOR PORTFOLIO MANAGER
AND HEAD OF THE EUROPEAN
EQUITY TEAM IN OCTOBER
1997. FROM 1986 TO 1997,
SHE WORKED AT FLEMING
INVESTMENT MANAGEMENT IN
LONDON, WHERE SHE MOST
RECENTLY WAS PORTFOLIO
MANAGEMENT DIRECTOR FOR
THE EUROPEAN EQUITY
INVESTMENT STRATEGY AND
PROCESS.
- ----------------------------------------------------------------------------------------------
Andrew PORTFOLIO MANAGER-- SINCE MR. SHRIMPTON JOINED THE
Shrimpton EMERGING MARKETS EQUITY 1998 INVESTMENT ADVISER AS A
VICE PRESIDENT FUND PORTFOLIO MANAGER WITH A
FOCUS ON AFRICA AS WELL
AS THE FINANCIAL
INDUSTRY IN THE EMEA
REGION IN 1996. SINCE
1985 HE WAS A UK EQUITY
ANALYST AND PORTFOLIO
MANAGER FOR CIN
MANAGEMENT, WHERE HE
INITIATED CIN
MANAGEMENT'S FIRST
INVESTMENTS IN LATIN
AMERICA.
- ----------------------------------------------------------------------------------------------
Danny Truell SENIOR PORTFOLIO MANAGER-- SINCE MR. TRUELL JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR SENIOR PORTFOLIO MANAGER
AND HEAD OF UK EQUITIES
IN 1998. FROM 1992 TO
1996, HE WAS INVESTMENT
BANKING EXECUTIVE
DIRECTOR FOR SBC WARBURG
AND CHIEF ASIAN EQUITY
STRATEGIST.
- ----------------------------------------------------------------------------------------------
Anna G. Antici PORTFOLIO MANAGER-- SINCE MS. ANTICI JOINED THE
VICE PRESIDENT EMERGING MARKETS EQUITY 1998 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN
1997. FROM 1994 TO 1997,
SHE WAS A VICE PRESIDENT
FOR HSBC ASSET
MANAGEMENT, WHERE SHE
WAS A PORTFOLIO MANAGER
FOR EMERGING MARKETS AND
HEAD OF THE LATIN
AMERICAN DEPARTMENT. IN
1993, SHE WAS A SENIOR
RESEARCH ANALYST FOR
BARING SECURITIES.
- ----------------------------------------------------------------------------------------------
</TABLE>
5-J
<PAGE>
New York-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Robert A. SENIOR PORTFOLIO MANAGER-- SINCE MR. BECKWITT JOINED THE
Beckwitt EMERGING MARKETS EQUITY INVESTMENT ADVISER AS A
VICE PRESIDENT FUND 1997 PORTFOLIO MANAGER IN
AND 1996. FROM 1986 TO 1996,
CO-HEAD HE WAS CHIEF INVESTMENT
EMERGING MARKET STRATEGIST-PORTFOLIO
EQUITIES ADVISER TO HIGH NET
WORTH INVESTORS AT
FIDELITY INVESTMENTS.
- -----------------------------------------------------------------------------------------------
Melissa Brown SENIOR PORTFOLIO MANAGER-- SINCE MS. BROWN JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN
1998. FROM 1984 TO 1998,
SHE WAS THE DIRECTOR OF
QUANTITATIVE EQUITY
RESEARCH AND SERVED ON
THE INVESTMENT POLICY
COMMITTEE AT PRUDENTIAL
SECURITIES.
- -----------------------------------------------------------------------------------------------
Mark M. Carhart SENIOR PORTFOLIO MANAGER-- SINCE MR. CARHART JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS A
FUND MEMBER OF THE
QUANTITATIVE RESEARCH
AND RISK MANAGEMENT TEAM
IN 1997. FROM AUGUST
1995 TO SEPTEMBER 1997,
HE WAS ASSISTANT
PROFESSOR OF FINANCE AT
THE MARSHALL SCHOOL OF
BUSINESS AT USC AND A
SENIOR FELLOW OF THE
WHARTON FINANCIAL
INSTITUTIONS CENTER.
FROM 1993 TO 1995, HE
WAS A LECTURER AND
GRADUATE STUDENT AT THE
UNIVERSITY OF CHICAGO
GRADUATE SCHOOL OF
BUSINESS.
- -----------------------------------------------------------------------------------------------
Kent A. Clark SENIOR PORTFOLIO MANAGER-- SINCE MR. CLARK JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1997 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN THE
QUANTITATIVE EQUITY
MANAGEMENT TEAM IN 1992.
- -----------------------------------------------------------------------------------------------
Raymond J. PORTFOLIO MANAGER-- SINCE MR. IWANOWSKI JOINED THE
Iwanowski CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS AN
VICE PRESIDENT FUND ASSOCIATE AND PORTFOLIO
MANAGER IN 1997. FROM
1993 TO 1997, HE WAS A
VICE PRESIDENT AND HEAD
OF THE FIXED DERIVATIVES
CLIENT RESEARCH GROUP AT
SALOMON BROTHERS.
- -----------------------------------------------------------------------------------------------
</TABLE>
6-J
<PAGE>
SERVICE PROVIDERS
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Robert C. Jones SENIOR PORTFOLIO MANAGER-- SINCE MR. JONES JOINED THE
MANAGING CORE INTERNATIONAL EQUITY 1997 INVESTMENT ADVISER AS A
DIRECTOR FUND PORTFOLIO MANAGER IN
1989.
- -----------------------------------------------------------------------------------------------
</TABLE>
Singapore-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Alice Lui PORTFOLIO MANAGER-- SINCE MS. LUI JOINED THE
VICE PRESIDENT ASIA GROWTH FUND 1994 INVESTMENT ADVISER AS A
PORTFOLIO MANAGER IN
1990.
- -----------------------------------------------------------------------------------------------
Warwick M. SENIOR PORTFOLIO MANAGER-- SINCE MR. NEGUS JOINED THE
Negus ASIA GROWTH FUND INVESTMENT ADVISER AS A
MANAGING EMERGING MARKETS EQUITY 1994 PORTFOLIO MANAGER IN
DIRECTOR AND FUND 1997 1994. FROM 1987 TO 1994,
CO-HEAD PORTFOLIO MANAGER-- HE WAS A VICE PRESIDENT
EMERGING MARKET INTERNATIONAL EQUITY FUND OF BANKERS TRUST
EQUITIES INTERNATIONAL SMALL CAP 1994 AUSTRALIA LTD WHERE HE
FUND 1998 WAS THE CHIEF INVESTMENT
OFFICER OF ITS SOUTHEAST
ASIAN INVESTMENT TEAM.
- -----------------------------------------------------------------------------------------------
Ramakrishna PORTFOLIO MANAGER-- SINCE MR. SHANKAR JOINED THE
Shankar ASIA GROWTH FUND 1997 INVESTMENT ADVISER AS AN
VICE PRESIDENT EMERGING MARKETS EQUITY 1998 OPERATIONS MANAGER IN
FUND 1997. FROM JULY 1996 TO
1997, HE WORKED FOR
GOLDMAN SACHS IN
SINGAPORE AS A STRATEGIC
ADVISOR FOR TRANSACTIONS
INVOLVING INFRASTRUCTURE
INDUSTRIES IN ASIA. FROM
1988 TO 1996, HE WORKED
FOR GOLDMAN SACHS AS AN
INVESTMENT BANKER IN THE
INVESTMENT BANKING
DIVISION.
</TABLE>
- --------------------------------------------------------------------------------
Tokyo-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Guy P. de C. SENIOR PORTFOLIO MANAGER-- SINCE MR. BENNETT JOINED THE
Bennett JAPANESE EQUITY FUND INVESTMENT ADVISER AS A
VICE PRESIDENT PORTFOLIO MANAGER-- 1998 PORTFOLIO MANAGER IN
INTERNATIONAL EQUITY FUND 1996 AND IS ALSO CO-HEAD
1997 OF GSAM'S JAPANESE
EQUITY GROUP IN TOKYO.
FROM 1984 TO 1996, HE
WAS A PORTFOLIO MANAGER
AND AN EXECUTIVE
DIRECTOR AT CIN
MANAGEMENT.
- -----------------------------------------------------------------------------------------------
</TABLE>
7-J
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- --------------------------------------------------------------------------------------
<C> <C> <C> <S>
Shigeka Kouda PORTFOLIO MANAGER-- SINCE MR. KOUDA JOINED THE
VICE PRESIDENT INTERNATIONAL SMALL 1998 INVESTMENT ADVISER AS A
CAP FUND PORTFOLIO MANAGER IN
1997. FROM 1992 TO 1997,
HE WAS AT THE FIXED
INCOME DIVISION OF
GOLDMAN SACHS (JAPAN)
LIMITED, WHERE HE WAS
EXTENSIVELY INVOLVED IN
EMERGING MARKETS TRADING
AS WELL AS INTERNATIONAL
FIXED INCOME
INSTITUTIONAL SALES.
- --------------------------------------------------------------------------------------
Shogo Maeda SENIOR PORTFOLIO SINCE MR. MAEDA JOINED THE
MANAGING MANAGER-- INVESTMENT ADVISER AS A
DIRECTOR JAPANESE EQUITY FUND 1994 PORTFOLIO MANAGER IN
PORTFOLIO MANAGER-- 1994. FROM 1987 TO 1994,
INTERNATIONAL EQUITY 1994 HE WORKED AT NOMURA
FUND 1998 INVESTMENT MANAGEMENT
INTERNATIONAL SMALL INCORPORATED AS A SENIOR
CAP FUND PORTFOLIO MANAGER.
- --------------------------------------------------------------------------------------
Miyako PORTFOLIO MANAGER-- SINCE MS. SHIBAMOTO JOINED THE
Shibamoto JAPANESE EQUITY FUND 1998 INVESTMENT ADVISER AS A
VICE PRESIDENT MEMBER OF THE JAPANESE
EQUITY TEAM IN MARCH
1998. FROM 1993 TO 1998,
SHE WAS A VICE PRESIDENT
AT SCUDDER STEVENS AND
CLARK (JAPAN).
- --------------------------------------------------------------------------------------
Takeya Suzuki PORTFOLIO MANAGER-- SINCE MR. SUZUKI JOINED THE
VICE PRESIDENT JAPANESE EQUITY FUND 1998 INVESTMENT ADVISER AS A
PORTFOLIO MANAGER IN
1996. FROM 1990 TO 1996,
HE WAS A JAPANESE EQUITY
PORTFOLIO MANAGER AT
NOMURA INVESTMENT
MANAGEMENT WHERE HE
ACTIVELY MANAGED ASSETS
FOR U.S. PENSION FUNDS.
- --------------------------------------------------------------------------------------
</TABLE>
8-J
<PAGE>
SERVICE PROVIDERS
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," which may lead to computer shutdowns or
errors
9-J
<PAGE>
(commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur
prior to January 1, 2000. Like other investment companies and financial and
business organizations, the Funds could be adversely affected in their abil-
ity to process securities trades, price securities, provide shareholder
account services and otherwise conduct normal business operations if the
Investment Adviser or other Fund service providers do not adequately address
this problem in a timely manner.
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 Advisor 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.
10-J
<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 dis-
tributions 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 or
units of the ILA Portfolios. Special restrictions may apply for exchanges
in 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 annually.
From time to time a portion of a Fund's dividends may constitute a return
of capital.
At the time of an investor's purchase of shares of a Fund, a portion of the
NAV per share may be represented by undistributed income or realized or
unrealized appreciation of the Fund's portfolio securities. Therefore, sub-
sequent distributions on such shares from such income or realized apprecia-
tion may be taxable to the investor even if the NAV of the shares is, as a
result of the distributions, reduced below the cost of such shares and the
distributions (or portions thereof) represent a return of a portion of the
purchase price.
11-J
<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 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; 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.
..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.
1-G
<PAGE>
These institutions may receive payments from the Funds or Goldman Sachs for
the services provided by them with respect to the Fund's Institutional
Shares. These payments may be in addition to other 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.
2-G
<PAGE>
SHAREHOLDER GUIDE
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.
3-G
<PAGE>
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, at fair value as determined in good
faith under procedures established by the Trustees.
..NAV per share of each class is calculated by State Street 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.
..When you sell shares, you receive the NAV next calculated after the Funds
receive your order in proper form.
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.
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.
4-G
<PAGE>
SHAREHOLDER GUIDE
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>
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
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
.You may request that redemption proceeds be
sent to you by check or by wire
------------------------------------------------------------------------
BY TELEPHONE: If you have not declined the telephone
redemption privileges 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 Is A Signature Guarantee?
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.
5-G
<PAGE>
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 written request will 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 assumes 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.
6-G
<PAGE>
SHAREHOLDER GUIDE
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 redemption requests. These institutions may also
require additional documentation 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.
7-G
<PAGE>
<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 to be exchanged
.Mail the request to:
Goldman Sachs Funds
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-----------------------------------------------------------------------
BY TELEPHONE: If you have not declined the telephone redemption
privileges on your Account Application:
.1-800-621-2550 (8:00a.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.
..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.
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.
8-G
<PAGE>
SHAREHOLDER GUIDE
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. A year-to-date statement for your account will be pro-
vided upon request made to Goldman Sachs. The Funds do not generally provide
sub-accounting services.
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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.
At any time, a portion of a Fund's NAV per share may be represented by
undistributed income or realized or unrealized appreciation of the Fund's
portfolio securities. Therefore, subsequent distributions on a Fund's shares
may be taxable to you, even if the NAV of your shares is, as a result,
reduced below the cost of those shares and the distributions represent a
return of your purchase price.
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. Under certain circum-
stances, the Funds may make an election to treat a proportionate amount of
such taxes as constituting a distribution to you, which would allow you
either (1) to credit such proportionate amount of taxes against your U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
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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.
There are certain tax requirements that all 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.
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.
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Appendix A
Additional Information on Portfolio Risks, Securities and Techniques
The Funds will be subject to the risks associated with equity securities. "Eq-
uity 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 lia-
bility companies and similar enterprises, warrants and stock purchase rights.
In general, stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions. According-
ly, the value of the stocks that a Fund holds may decline over short or
extended periods. The stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The vol-
atility 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 investments.
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. Conversely, 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 investment. Call risk and exten-
sion 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 (extension risk). In general, if interest rates
on new mortgage loans fall sufficiently below the interest rates on existing
outstanding mortgage loans, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the interest
rates on existing outstanding mortgage loans, the rate of prepayment would be
expected to decrease. In either case, a change in the prepayment rate can
result in losses to investors.
The Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover (100% or more) involves correspondingly greater expenses which must be
borne by a Fund and its shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund's portfolio securities,
excluding secu-
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rities having a maturity at the date of purchase of one year or less. See
"Financial Highlights" in Appendix B for a statement of the Funds' historical
portfolio turnover rates.
The following sections provide further information on certain types of securi-
ties and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the Additional State-
ment, which is available upon request. Among other things, the Additional
Statement describes certain fundamental investment restrictions that cannot be
changed without shareholder approval. You should note, however, that all poli-
cies not specifically designated as fundamental are non-fundamental and may be
changed without shareholder approval. If there is a change in a Fund's invest-
ment objective, you should consider whether that Fund remains an appropriate
investment in light of your then current financial position and needs.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS. Investments in
small capitalization companies and REITs involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Among the
reasons for the greater price volatility of these investments are the less cer-
tain 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 periods 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 eco-
nomic or market conditions, or adverse investor perceptions, 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. Small capitalization companies
and REITs also often have limited 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 capitalization companies and REITs may be more difficult
to price precisely than other types of securities because of their characteris-
tics and lower trading volumes.
RISKS OF FOREIGN INVESTMENTS. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securities
of U.S. issuers. Foreign investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and changes in exchange control regulations (e.g., currency block-
age). A decline in
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APPENDIX A
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 partic-
ipating nations in the European Economic and Monetary Union ("EU") presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 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 in the European
Union, such as the United Kingdom and Denmark, into the euro and the admission
of other non-EU countries such as Poland, Latvia and Lithuania as members of
the EU may have an impact on the euro. These or other factors, including polit-
ical and economic risks, could cause market disruptions before or after the
introduction of the euro, and could adversely affect the value of securities
held by the Funds.
Brokerage commissions, custodial services and other costs relating to invest-
ment in international securities markets generally are more expensive than in
the United States. In addition, clearance and settlement procedures may be dif-
ferent in foreign countries and, in certain markets, such procedures have been
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S. securi-
ties markets and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationaliza-
tion, expropriation or confiscatory taxation, imposition of withholding or
other taxes on dividend or interest payments (or, in some cases, capital
gains), limitations on the removal of funds or other
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<PAGE>
assets of the Funds, political or social instability or diplomatic developments
which could affect investments in those countries.
Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.
Investment in sovereign debt obligations by certain Funds involves special
risks not present in debt obligations of corporate issuers. The issuer of the
debt or the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or pay interest when due in accor-
dance with the terms of such debt, and a Fund may have limited recourse to com-
pel 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 obliga-
tions of U.S. issuers. A sovereign debtor's willingness or ability to repay
principal and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign currency reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.
Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). Certain Funds may also invest in European Depository
Receipts ("EDRs") or other similar instruments representing securities of for-
eign 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 security.
RISKS OF EMERGING COUNTRIES. Certain Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are heightened
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 port-
folio securities in certain emerging countries may be constrained by limita-
tions 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 vol-
ume by or holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other
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<PAGE>
APPENDIX A
service providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For exam-
ple, 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 specific class of securi-
ties which may have less advantageous terms (including price) than securities
of the issuer available for purchase by nationals. In addition, certain coun-
tries may restrict or prohibit investment opportunities in issuers or indus-
tries deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for governmental
consents. Due to restrictions on direct investment in equity securities in cer-
tain Asian countries, such as Taiwan, it is anticipated that a Fund may invest
in such countries only through other investment funds in such countries.
Many emerging countries are subject to a substantial degree of economic, polit-
ical and social instability. Governments of some emerging countries are author-
itarian in nature or have been installed or removed as a result of military
coups, while governments in other emerging countries have periodically used
force to suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging countries. Unanticipated political or social developments may result
in sudden and significant investment losses. Investing in emerging countries
involves greater risk of loss due to expropriation, nationalization, confisca-
tion 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 invest-
ment 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 addition, significant delays are common in certain markets in
registering the transfer of securities. Settlement or registration problems may
make it more difficult for a Fund to value its portfolio securities and could
cause the Fund to miss attractive investment opportunities, to have a portion
of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's inabil-
ity to complete its contractual obligations. The creditworthiness of the local
securi-
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<PAGE>
ties 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 crditworthiness of firms used
in more developed countires, thus subjecting the Fund to a greater risk of loss
if a securities firm defaults in the performance of its responsibilities.
The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries
may make a Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets (such as
the United States, Japan and most Western European countries). A Fund's invest-
ments 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, mar-
ket or political conditions, or adverse investor perceptions, 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 precisely because of their characteristics and
lower trading volumes.
Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a nega-
tive 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 barri-
ers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
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 signifi-
cant 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, structured securities and currency transac-
tions involve additional risk of loss. Loss can result from a lack of correla-
tion 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
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APPENDIX A
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) which is considered a speculative practice and
presents even greater risk of loss.
RISK 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 ordi-
nary 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 portfolio
to the extent that qualified institutional buyers become for a time uninter-
ested in purchasing these restricted securities. The purchase price and subse-
quent valuation of restricted and illiquid securities normally reflect a dis-
count, which may be significant, from the market price of comparable 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 agencies,
instrumentalities and sponsored enterprises), foreign governments, domestic and
foreign corporations, banks and other issuers. Some of these fixed-income secu-
rities are described in the next section below. Further information 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 con-
sidered medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers' capac-
ity 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.
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Certain 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 questionable 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, investment
in such
bonds will present greater speculative risks than those associated with invest-
ment 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.
This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks. Further information is provided in the Additional Statement, which is
available upon request.
CONVERTIBLE SECURITIES. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities gen-
erally offer lower interest or dividend yields than non-convertible securities
of similar quality. Convertible securities in which a Fund invests are subject
to the same rating criteria as its other investments in fixed-income securi-
ties. Convertible securities have both equity and fixed-income risk character-
istics. 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 con-
vertible security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock
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APPENDIX A
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.
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 considered a speculative
practice. Some Funds may also engage in cross-hedging by using forward contracts
in a currency dif-ferent from that in which the hedged security is denominated
or quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgement of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date.
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 con-
trols 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 obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or could force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
STRUCTURED SECURITIES. Structured securities are securities whose value is
determined by reference to changes in the value of specific currencies, inter-
est 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 secu-
rities may be positively or negatively indexed, so that appreciation of the
Reference may produce an
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increase or decrease in the interest rate or value of the security at maturity.
In addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may 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.
Structured securities include, but are not limited to, 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.
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 or securing mortgage
loans held by the REIT. REITs are dependent upon the ability of the REITs' man-
agers, and are subject to heavy cash flow dependency, 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 asso-
ciated with investments in real estate including possible declines in the value
of real estate, general and local economic conditions, environmental problems
and changes in interest rates. To the extent that assets underlying a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
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 during 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. Certain Funds 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 for-
eign securities, purchase and sell (write) put and call options on foreign cur-
rencies.
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 consid-
ered a
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APPENDIX A
speculative activity). The successful use of options 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 (or currency) mar-kets.
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 other-wise
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 liquidity and credit risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts are stan-
dardized, exchange-traded contracts that provide for the sale or purchase 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 option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures con-
tract 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 foreign
exchanges.
A 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 currency
exchange rates, or to the extent applicable, otherwise manage its term struc-
ture and duration in accordance with its investment objective and policies.
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 regu-
lations of the Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations. A Fund may not pur-
chase or sell futures contracts or purchase or sell related options to seek to
increase total return, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of initial margin deposits and
premiums paid on the Fund's outstanding positions in futures and related
options entered into for the purpose of seeking to increase total return would
exceed 5% of the market value of the Fund's net assets.
Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures, unan-
ticipated changes in interest rates, securities prices or currency exchange
rates
13-D
<PAGE>
may result in poorer overall performance than if the Fund had not entered into
any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired protec-
tion 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 writing
call options on futures is potentially unlimited and may exceed the amount of
the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in substan-
tial 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.
EQUITY SWAPS. Equity swaps allow the parties to a swap agreement to exchange
the dividend income or other components of return on an equity investment (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 invest-
ment 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 div-
idends 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. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securi-
ties 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 contract 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 sold securities may
increase before the
14-D
<PAGE>
APPENDIX A
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 secu-rities or forward
commitments before settlement whenever the Investment Adviser deems it
appropriate.
REPURCHASE AGREEMENTS. Certain Funds may enter into repurchase agreements with
primary dealers in U.S. Government securities and banks affiliated with primary
dealers. Repurchase agreements involve the purchase of securities subject to
the seller's agreement to repurchase them at a mutually agreed upon date and
price. The repurchase price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate on
the purchased security.
If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the repurchase agreement are
less than the repurchase price and Fund's costs associated with delay and
enforcement of the repurchase agreement. In addition, in the event of bank-
ruptcy of the seller, a Fund could suffer additional losses if a court deter-
mines 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. Distribu-
tions of the income from repurchase agreements will be taxable to a Fund's
shareholders. In addition, certain Funds, together with other registered
investment companies having advisory agreements with the Investment Adviser or
any of its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. 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 col-
lateral may be invested in cash equivalents. If the Investment Adviser deter-
mines 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 or possible loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
15-D
<PAGE>
SHORT SALES AGAINST-THE-BOX. Certain Funds 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 securi-
ties convertible into or exchangeable for, without payment of any further con-
sideration, an equal amount of the securities of the same issuer as the securi-
ties sold short.
PREFERRED STOCK, WARRANTS AND RIGHTS. Each Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an owner-
ship interest providing the holder with claims on the issuer's earnings and
assets before common stock owners but after bond owners. Unlike debt securi-
ties, 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 of other non-com-
pliance by the issuer of the preferred stock.
Warrants and other rights are options to buy a stated number of shares of com-
mon stock at a specified price at any time during the life of the warrant. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
STANDARD & POOR'S DEPOSITORY RECEIPTS. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts ("SPDRs").
SPDRs are American Stock Exchange-traded securities 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 is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including, but
not limited to, facilitating the handling 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 American Stock Exchange (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 net asset values of their underlying indi-
ces and supply and demand of WEBS on the AMEX. To date, WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating 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 require-
ments of
16-D
<PAGE>
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 disrup-
tions affecting WEBS should occur in the future, the liquidity and value of
Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE Index could be impaired. If such disruptions were to
occur, a Fund could be required to reconsider the use of WEBS as part of its
investment strategy.
OTHER INVESTMENT COMPANIES. A Fund may invest in securities of other investment
companies subject to the limitations prescribed by the Investment Company 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 invest-
ing 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 manage-
ment fees and other expenses paid by such other investment companies. Such
other investment 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.
17-D
<PAGE>
MORTGAGE DOLLAR ROLLS. Certain Funds may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by a Fund of securities for delivery in
the current month. The Fund simultaneously contracts 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 benefits 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 pro-
ceeds of the securities sold. Unless the benefits of a mortgage dollar roll
exceed the income, capital appreciation and gain or loss due to mortgage pre-
payments 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.
Successful use of mortgage dollar rolls depends upon the Investment Adviser's
ability to predict correctly interest rates and mortgage prepayments. If the
Investment Adviser is incorrect in its predictions, the Fund may experience a
loss. For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The Funds do not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing and
do not treat them as borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
loans secured by real property. 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 invest-
ment conduit ("REMIC") pass-through or participation certificates. CMOs provide
an investor with a specified interest in the cash flow from a pool of under-
lying mortgages or of other Mortgage-Backed Securities. CMOs are issued in mul-
tiple classes. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no princi-
pal payments will be made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. A REMIC is a CMO that qualifies for
special tax treatment under
1-E
<PAGE>
the Code and invests in certain mortgages princi pally 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 principal pay-
ments from a pool of mortgage loans. The market value of SMBS consisting
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 mortgage loans are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
Mortgage-Backed Securities (including CMOs, REMICs and SMBS) are subject to
both call risk and extension risk as previously described. Because of these
risks, these securities can have significantly greater price and yield volatil-
ity than with traditional fixed-income securities.
The value of Mortgage-Backed Securities that are structured as pass-through
mortgage securities that are collateralized by ARMs are less likely to rise
during periods of declining interest rates to the same extent as fixed-rate
securities. This is because interest rate declines may result in accelerated
prepayments of mortgages with the result that proceeds from prepayments will be
reinvested at lower interest rates. On the other hand, during periods of rising
interest rates, the value of ARMs will lag behind changes in the market rate.
ARMs are also typically subject to maximum increases and decreases in the
interest rate adjustment which can be made on any one adjustment date, in any
one year, or during the life of the security. In the event of dramatic
increases or decreases in prevailing market interest rates, the value of a
Fund's investments in ARMs may fluctuate more substantially since these limits
may prevent the security from fully adjusting its interest rate to the prevail-
ing market rates.
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 prepay-
ments of principal on the underlying loans. During periods of declining inter-
est rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, 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,
2-E
<PAGE>
and its ability to reinvest the returns of principal at comparable yields is
subject to generally 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 security interest in collateral that is comparable to mortgage
assets. There is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities. 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.
ZERO COUPON, DEFERRED INTEREST, PAY-IN-KIND AND CAPITAL APPRECIATION BONDS.
Zero coupon, deferred interest, pay-in-kind and capital appreciation bonds are
issued at a discount from their face value because interest payments are typi-
cally postponed until maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. The market prices of
these securities generally are more volatile than the market prices of inter-
est-bearing securities and are likely to respond to a greater degree to changes
in interest rates than interest-bearing securities having similar maturities
and credit quality.
YIELD CURVE OPTIONS. Certain Funds 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 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 present a
risk of loss even if the yield of one of the underlying securities remains con-
stant, or if the spread moves in a direction or to an extent which was not
anticipated.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Certain Funds can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions in amounts not exceeding one-third of its total assets.
Reverse repurchase agreements involve the sale of securities held by a Fund
subject to the Fund's agreement to repurchase them at a mutually agreed upon
date and price (including interest). These transactions may be entered into as
a temporary measure for emergency purposes or to meet redemption requests.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of
the transaction proceeds will be greater than the related interest expense.
Borrowings and reverse repurchase agreements involve leveraging. If the securi-
ties held by a Fund
3-E
<PAGE>
decline in value while these transactions are outstanding, the NAV of the Fund's
outstanding shares will decline in value by proportion ately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the interest income earned by a Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by a Fund will decline below the price
the Fund is obligated to pay to repurchase the securi ties, and that the
securities may not be returned to the Fund.
INTEREST RATE SWAPS, MORTGAGE SWAPS, CREDIT SWAPS, CURRENCY SWAPS AND INTEREST
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 pay-
ments. Mortgage swaps are similar to interest rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, howev-
er, 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 occur-
rence 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 and a floor that preserves a certain return within a predetermined range
of interest rates.
Certain Funds may enter into swap transactions for hedging purposes or to seek
to increase total return. The use of interest rate, mortgage, credit and cur-
rency 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 forecasts 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.
4-E
<PAGE>
Appendix C
Prior Performance of Similarly Advised Accounts of the Investment Adviser
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies and strategies substantially similar to the European Equity
Fund. The information is provided to illustrate the past performance of the
Investment Adviser in managing substantially similar accounts as measured
against the FT/S&P Actuaries Europe Index (unhedged) and does not represent
the performance of the European Equity Fund. Investors should not consider
this performance data as a substitute for the performance of the European
Equity Fund nor should investors consider this data as an indication of
future performance of the European Equity Fund or of the Investment Adviser.
The FT/S&P Actuaries Europe Index (unhedged) is unmanaged and investors can-
not invest directly in the Index.
<TABLE>
<CAPTION>
FT/S&P
Private Account Actuaries
Net Composite Europe Index
Performance (unhedged)
- ------------------------------------------------
<S> <C> <C>
1998 % %
1997 19.54% 23.66%
1996 41.89% 23.51%
1995 29.93% 22.17%
1994 8.38% 2.95%
10/1/93-12/31/93 4.16% 9.12%
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended 12/31/98
-------------------------------
Since Inception
One Year Three Years Five Years 10/1/93
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net
Composite Performance % % % %
FT/S&P Actuaries Europe
Index (unhedged) % % % %
- --------------------------------------------------------------------------
</TABLE>
In accordance with the standards of the Association for Investment Manage-
ment and Research ("AIMR"), the Investment Adviser's composite performance
data was calculated on a time-weighted and asset-weighted total return basis
which includes realized and unrealized gains and losses plus income. The
composite per-
12
<PAGE>
APPENDIX C
formance is net of applicable investment management fees, brokerage commis-
sions, execution costs and custodial fees, without provision for federal and
state taxes, if any. Total return performance of the European Equity Fund will
be calculated in accordance with the regulations of the SEC. The SEC standard-
ized average annual total return is neither time-weighted nor asset-weighted
and is determined for specified periods by computing the annual percentage
change in the value of an initial amount that is invested in a share class of
the Fund at the maximum public offering price. Investors should be aware that
the differences in methodology between AIMR and SEC requirements could result
in different performance data for identical time periods.
The actual expenses of the private accounts included in the composite were
lower than the estimated expenses of the Fund. Accordingly, the performance
record of the composite has been adjusted downward based on the estimated
expenses of the Institutional Shares of the European Equity Fund during its
first year of operations. All returns presented reflect the reinvestment of
dividends and other earnings. The private accounts are not subject to the same
diversification requirements, specific tax restrictions and investment limita-
tions imposed on the European Equity Fund by the Investment Company Act of 1940
and Subchapter M of the Code. Consequently, the performance results of the
Investment Adviser's composite could have been adversely affected if the pri-
vate accounts had been regulated as investment companies under the federal
securities laws.
13
<PAGE>
Index
1 General Investment Management Approach
Fund Investment Objectives and Strategies
3 Goldman Sachs Core International Equity Fund
4 Goldman Sachs International Equity Fund
Goldman Sachs European Equity Fund
Goldman Sachs Japanese Equity Fund
Goldman Sachs International Small Cap Fund
5 Goldman Sachs Emerging Markets Equity Fund
6 Goldman Sachs Asia Growth Fund
Other Investment Practices and Securities
Principal Risks of the
Funds
Fund Performance
8 Fund Fees and Expenses
Service Providers
Dividends
Shareholder Guide
How To Buy Shares
How To Sell Shares
Shareholder Services
Taxation
A-1 Appendix A
Additional Information
on Portfolio Risks,
Securities and
Techniques
B-1 Appendix B
Financial Highlights
C-1 Appendix C
14
<PAGE>
International Equity Funds
Prospectus (Institutional 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.
Statement of Additional Information
Additional information about the Funds and their policies is also available
in the Funds' Statement of Additional Information ("Additional Statement").
The Additional Statement is incorporated by reference into this Prospectus
(is legally considered part of this Prospectus).
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 & Co., 4900 Sears Tower, Chicago, Illinois 60606
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. The Funds' investment company registration number is 811-5349.
[LOGO]
15
<PAGE>
PROSPECTUS
SERVICE SHARES
April 30, 1999
GOLDMAN SACHS INTERNATIONAL EQUITY FUNDS
(INSERT ARTWORK)
.. Goldman Sachs
CORE
International
Equity Fund
.. Goldman Sachs
International
Equity Fund
.. Goldman Sachs
European Equity
Fund
.. Goldman Sachs
Japanese Equity
Fund
.. Goldman Sachs
International
Small Cap Fund
.. Goldman Sachs
Emerging
Markets Equity
Fund
.. Goldman Sachs
Asia Growth
Fund
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] GOLDMAN SACHS
<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 CORE
International Equity Fund. Goldman Sachs Asset Management International
serves as investment adviser to International Equity, European Equity, Japa-
nese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds. Goldman Sachs Asset Management and Goldman Sachs Asset Manage-
ment International are each referred to in this Prospectus as the "Invest-
ment Adviser."
ACTIVELY MANAGED STYLE FUNDS
Goldman Sachs Actively Managed Investment Philosophy
<TABLE>
<CAPTION>
HOW THE INVESTMENT ADVISER ACTS ON
BELIEF BELIEF
- ------------------------------------------------------------------------------
<S> <C>
.Equity markets are inefficient Seeks excess return through team
driven, research intensive and
bottom-up stock selection.
.Returns are variable Seeks to capitalize on variability
of market and regional returns
through value-added asset allocation
decisions.
.Corporate fundamentals ultimately Seeks to conduct rigorous, first-
drive share price hand research of business and
company management.
.A businesses' intrinsic value will be Seeks to realize value through a
achieved over time long-term investment horizon.
.Portfolio risk must be carefully Seeks to systematically monitor and
analyzed and monitored manage risk through diversification,
multi factor risk models and
currency management.
</TABLE>
Equity securities for these Funds are evaluated based on a bottom-up stock
selection process, disciplined portfolio construction, and continual portfo-
lio review and analysis.
- --------------------------------------------------------------------------------
1-I
<PAGE>
QUANTITATIVE ("CORE") STYLE FUNDS
Goldman Sachs Quantitative Multifactor Model
The CORE International Equity Fund uses the Goldman Sachs proprietary
multifactor models (each a "Multifactor Model"), rigorous computerized rat-
ing systems, to forecast the returns of securities held in the Fund's port-
folio.
The Multifactor Models incorporate common variables covering measures of:
..VALUE (price-to-book, price-to-earnings, cash flow to enterprise value)
..MOMENTUM (earnings momentum, price momentum, sustainable growth)
..RISK (market risk, company-specific risk, earnings risk)
ALL OF THE ABOVE FACTORS ARE CAREFULLY EVALUATED WITHIN THE MULTIFACTOR MOD-
ELS SINCE EACH HAS DEMONSTRATED A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE SECURITIES AND MARKETS THEY WERE DESIGNED TO FORECAST.
Goldman Sachs' CORE Funds provide broad foundation portfolios for investors
to build upon.
- --------------------------------------------------------------------------------
2-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs CORE International Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term growth of capital
Benchmarks Morgan Stanley Capital International Europe, Australia,
Far East ("EAFE") Index (unhedged)
Investment Focus Large capitalization equity securities of companies that
are organized outside the United States or whose securi-
ties are primarily traded outside the United States
Investment Style Quantitative
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of large cap
companies that are organized outside the United States or whose securities
are principally traded outside the United States.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of companies that are organized
outside the United States or whose securities are principally traded outside
the United States.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time, provided the Fund's assets are
invested in at least three foreign countries. Emerging countries are coun-
tries with economies or securities markets that are considered by the
Investment Adviser not to be fully developed.
The Fund seeks broad representation of large cap issuers across major coun-
tries and sectors of the international economy. The Fund's investments are
selected using both a variety of quantitative techniques and fundamental
research in seeking to maximize the Fund's expected return, while maintain-
ing risk, style, capitalization and industry characteristics similar to the
EAFE Index. In addition, the Fund seeks a portfolio composed of companies
with attractive valuations and stronger momentum characteristics than the
EAFE Index.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered to be cash equivalents.
3-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs International Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark FT/S&P Actuaries Europe & Pacific Index (unhedged)
Investment Focus Equity securities of companies organized outside the
United States or whose securities are principally traded
outside the United States
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund intends to invest
in companies with public stock market capitalizations that are larger than
those in which the International Small Cap Fund primarily intends to invest.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time provided that the Fund's assets are
invested in at least three foreign countries.
The Fund expects to invest a substantial portion of its assets in the secu-
rities of issuers located in the developed countries of Western Europe and
in Japan. However, the Fund may also invest in the securities of issuers
located in Australia, Canada, New Zealand and the emerging countries in
which the Emerging Markets Equity Fund may invest. Many of the emerging
countries in which the Fund may invest involve risks that are not present in
investments in more developed countries.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities.
4-I
<PAGE>
Goldman Sachs European Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark FT/S&P Actuaries Europe Index (unhedged)
Investment Focus Equity securities of European companies
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
European companies. Because of its focus, the Fund will be more susceptible
to European economic, market, political and local risks than a fund that is
more geographically diversified.
A European issuer is a company that either:
..Has a class of its securities whose principal securities markets is in a
European country;
..Is organized under the laws of, or has a principal office in, a European
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more of the European countries; or
..Maintains 50% or more of its assets in one or more of the European coun-
tries.
The Fund may allocate its assets among different countries as determined by
the Investment Adviser from time to time, provided that the Fund's assets
are invested in at least three European countries. It is currently antici-
pated that a majority of the Fund's assets will be invested in the equity
securities of large cap companies located in the developed countries of
Western Europe. However, the Fund may also invest, without limit, in mid cap
companies and small cap companies, as well as companies located in emerging
countries in which the Emerging Markets Equity Fund may invest, including
the states that formerly comprised the Soviet Union and Yugoslavia.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-European countries and in fixed-income securities.
5-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Japanese Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Tokyo Price Index ("TOPIX") (unhedged)
Investment Focus Equity securities of Japanese companies
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
Japanese companies. A Japanese issuer is a company that either:
..Has a class of its securities whose principal securities markets is in
Japan;
..Is organized under the laws of, or has a principal office in Japan;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in Japan; or
..Maintains 50% or more of its assets in Japan.
The Fund's concentration in Japanese companies will expose it to the risk of
adverse social, political and economic events which occur in Japan or affect
the Japanese markets.
Japan's economy, the second largest in the world, has grown substantially
over the last three decades. Since 1990, however, Japan's economic growth
has declined significantly, and is currently subject to deflationary pres-
sures. In addition to this economic downturn, Japan is undergoing structural
adjustments related to high wages and taxes, currency valuations and struc-
tural rigidities. Japan has also been experiencing notable uncertainty and
loss of public confidence in connection with the reform of its political
process and the deregulation of its economy. These conditions present risks
to the Japanese Equity Fund and its ability to attain its investment objec-
tive.
6-I
<PAGE>
Japan's economy is heavily dependent upon international trade, and is espe-
cially sensitive to trade barriers and disputes. In particular, Japan relies
on large imports of agricultural products, raw materials and fuels. A sub-
stantial rise in world oil or commodity prices, or a fall-off in Japan's
manufactured exports, could be expected to adversely affect Japan's economy.
In addition, Japan is vulnerable to earthquakes, volcanoes and other natural
disasters. As of the date of this Prospectus, Japan's banking industry con-
tinued to suffer from non-performing loans, declining real estate values and
lower valuations of securities holdings.
The Japanese securities markets are less regulated than the U.S. markets.
Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are also not always
equally enforced.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason
price-earnings ratios of the stocks of Japanese companies have tended his-
torically to be higher than those of U.S. stocks. In addition, Japanese com-
panies have tended to have higher growth rates than U.S. companies, and Jap-
anese interest rates have generally been lower than U.S. interest rates.
These factors have contributed to lower discount rates and higher price-
earnings ratios in Japan than in the U.S.
During the recent past the average stock market prices of Japanese compa-
nies, as measured by major indices such as the NIKKEI 225 Average, have
experienced a substantial decline. It is not possible to determine whether
this general decline will continue.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of non-Japanese companies and in fixed-income securities,
which may include up to 10% in emerging countries. Many of the emerging
countries in which the Fund may invest involve risks that are not present in
investments in more developed countries.
7-I
<PAGE>
Goldman Sachs International Small Cap Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International EAFE Small Cap
Index (unhedged)
Investment Focus Equity securities of foreign companies with public stock
market capitalizations of $1 billion or less at the time
of investment
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
companies:
..With public stock market capitalizations of $1 billion or less at the time
of investment; and
..That are organized outside the United States or whose securities are prin-
cipally traded outside the United States.
The Fund may allocate its assets among countries as determined by the
Investment Adviser from time to time provided that the Fund's assets are
invested in at least three foreign countries. The Fund expects to invest a
substantial portion of its assets in small cap securities of companies in
the developed countries of Western Europe, Japan and Asia. However, the Fund
may also invest in the securities of issuers located in Australia, Canada,
New Zealand and the emerging countries in which the Emerging Market Equity
Fund may invest. Many of the emerging countries in which the Fund may invest
involve risks that are not present in investments in more developed coun-
tries.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of larger cap companies with public stock market capital-
izations of more than $1 billion at the time of investment and in fixed-
income securities. If the market capitalization of a company held by the
Fund increases above $1 billion, the Fund may, consistent with its invest-
ment objective, continue to hold the security.
8-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Emerging Markets Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International Emerging Markets
Free Index
Investment Focus Equity securities of emerging country issuers
Investment Style Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
emerging country issuers. The Investment Adviser may consider classifica-
tions by the World Bank, the International Finance Corporation or the United
Nations and its agencies in determining whether a country is emerging or
developed. Currently, emerging countries include among others, most Latin
American, African, Asian and Eastern European nations. The Investment
Adviser currently intends that the Fund's investment focus will be in the
following emerging countries:
<TABLE>
<S> <C> <C> <C> <C>
.Argentina .Egypt .Jordan .Philippines .Sri Lanka
.Botswana .Greece .Kenya .Poland .Taiwan
.Brazil .Hong Kong .Malaysia .Portugal .Thailand
.Chile .Hungary .Mexico .Russia .Turkey
.China .India .Morocco .Singapore .Venezuela
.Colombia .Indonesia .Pakistan .South Africa .Zimbabwe
.Czech Republic .Israel .Peru .South Korea
</TABLE>
9-I
<PAGE>
An emerging country issuer is any company that either:
..Has a class of its securities whose principal securities market is in an
emerging country;
..Is organized under the laws of, or has a principal office in, an emerging
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more emerging countries; or
..Maintains 50% or more of its assets in one or more of the emerging coun-
tries.
Concentration of the Fund's assets in one or a few emerging countries and
currencies will subject the Fund to greater risks than if the Fund's assets
were not so concentrated.
Under normal circumstances, the Fund maintains investments in at least six
emerging countries, and will not invest more than 35% of its total assets in
securities of issuers in any one emerging country. Allocation of the Fund's
investments will depend upon the relative attractiveness of the emerging
country markets and particular issuers. In addition, macro-economic factors
and the portfolio managers' and Goldman Sachs economists' views of the rela-
tive attractiveness of emerging countries and currencies are considered in
allocating the Fund's assets among emerging countries. Investments in emerg-
ing countries involve risks that are not present in investments in more
developed countries.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
(i) fixed-income securities of private and governmental emerging country
issuers; and (ii) equity and fixed-income securities of issuers in developed
countries.
10-I
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs Asia Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective Long-term capital appreciation
Benchmark Morgan Stanley Capital International All County Asia
Free ex-Japan Index (unhedged)
Investment Focus Equity securities of companies in Asian countries
Investment Process Actively Managed
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all, and at least 65% of its total assets in equity securities of
Asian issuers.
An Asian issuer is any company that either:
..Has a class of its securities whose principal securities markets is in one
or more Asian country;
..Is organized under the laws of, or has a principal office in, an Asian
country;
..Derives 50% or more of its total revenue from goods produced, sales made or
services performed in one or more Asian countries; or
..Maintains 50% or more of its assets in one or more Asian countries.
The Fund may allocate its assets among the Asian countries as determined
from time to time by the Investment Adviser. For purposes of the Fund's
investment policies, Asian countries are:
..China .Malaysia .South Korea
..Hong Kong .Pakistan .Sri Lanka
..India .Philippines .Taiwan
..Indonesia .Singapore .Thailand
as well as any other country in Asia (other than Japan) to the extent that
foreign investors are permitted by applicable law to make such investments.
11-I
<PAGE>
Allocation of the Fund's investments will depend upon the Investment Advis-
er's views of the relative attractiveness of the Asian markets and particu-
lar issuers.
Concentration of the Fund's assets in one or a few of the Asian countries
and Asian currencies will subject the Fund to greater risks than if the
Fund's assets were not so concentrated. For example, on January 31, 1999
(the end of the Fund's last fiscal year), more than 35% of the Fund's assets
were invested in securities that traded in Hong Kong.
Starting in mid-1997 some Pacific region countries began to experience cur-
rency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. This situation resulted in a significant
drop in the securities prices of companies located in the region. Some coun-
tries have experienced government intervention, have sought assistance from
the International Monetary Fund and are undergoing substantial domestic
unrest. Although some countries are taking steps to restructure their finan-
cial sectors in a manner that may facilitate a return to long-term economic
growth, there can be no assurance that these efforts will be successful or
that their current problems will not persist. At the end of its last fiscal
year, a substantial portion of the Asia Growth Fund was invested in securi-
ties traded in the Hong Kong market. In 1997, the sovereignty of Hong Kong
reverted from the United Kingdom to China. Although Hong Kong is, by law, to
maintain a high degree of autonomy, there can also be no assurance that the
general economic position of Hong Kong will not be adversely affected as a
result of the exercise of Chinese sovereignty over Hong Kong. In particular,
business confidence in Hong Kong can be significantly affected by political
developments and statements by public figures in China, which can in turn
affect the performance of the securities markets. In addition, the reversion
of Hong Kong to China has created uncertainty as to future currency valua-
tions relative to the U.S. dollar. Any future valuation changes could be
adverse from the perspective of U.S. investors.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
equity securities of issuers in other countries, including Japan, and in
fixed-income securities.
12-I
<PAGE>
[This page intentionally left blank]
13-I
<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.
10 Percent of total assets (italic type)
10 Percent 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>
CORE
INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY EQUITY
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT PRACTICES
Cross Hedging of currencies . . .
Equity Swaps 10 10 10
Currency Swaps . . .
Foreign Currency Transactions . . .
Futures Contracts and Options on Futures
Contracts . . .
Options on Foreign Currencies/1/ . . .
Options on Securities and Securities
Indices/2/ . . .
Custodial Receipts . . .
Unseasoned Companies . . .
Warrants and Stock Purchase Rights . . .
Repurchase Agreements . . .
Securities Lending 33 1/3 33 1/3 33 1/3
Short Sales Against the Box -- 25 25
- ------------------------------------------------------------------------------
</TABLE>
1 May purchase and sell call and put options.
2 May sell covered call and put options and purchase call and put options.
14-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
JAPANESE INTERNATIONAL EMERGING ASIA
EQUITY SMALL CAP MARKETS GROWTH
FUND FUND EQUITY FUND FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. . . .
10 10 10 10
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
. . . .
33 1/3 33 1/3 33 1/3 33 1/3
25 25 25 25
- ------------------------------------------------------------------------------------------------------------
</TABLE>
15-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
10 Percent of total assets (italic type)
10 Percent 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>
CORE
INTERNATIONAL INTERNATIONAL EUROPEAN
EQUITY EQUITY EQUITY
FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT SECURITIES
American, European and Global Depository
Receipts . . .
Asset-Backed and Mortgage-Backed
Securities -- . .
Bank Obligations/1/ . . .
Convertible Securities . . .
Corporate Debt Obligations ./2/ 35 35
Equity Securities 90+ 65+ 65+
Emerging Market Securities 25 . .
Fixed Income Securities/3/ ./2/ 35 35/1/
Foreign Securities . . .
Foreign Government Securities . . .
Non-Investment Grade Fixed Income
Securities -- 35/4/ 35/4/
Real Estate Investment Trusts . . .
Structured Securities . . .
Temporary Defensive Investments 35 100 100
U.S. Government Securities 35 . .
- ------------------------------------------------------------------------------
</TABLE>
1 Issued by U.S. or foreign banks.
2 Cash equivalents only.
3 Except as noted under "Non-Investment Grade Fixed Income Securities,"
fixed-income securities are rated at least investment grade (i.e. BBB or
higher by Standard & Poor's Rating Group ("Standard & Poor's") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's").
4 May be unrated or rated BB or lower by Standard & Poor's or Ba or lower
by Moody's.
16-I
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
JAPANESE INTERNATIONAL EMERGING
EQUITY SMALL CAP MARKETS ASIA GROWTH
FUND FUND EQUITY FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. . . .
. . . .
. . . .
. . . .
35 . . .
65+ 65+ 65+ 65+
. . . .
35 . . 35
. . . .
. -- . .
35/4/ 35/4/ 35/4/ 35/4/
. . . .
. . . .
100 100 35 100
. . 35 .
- ----------------------------------------------------------------------------------------------------
</TABLE>
17-I
<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
investment program. There can be no assurance that a Fund will achieve its
investment objective.
<TABLE>
<CAPTION>
.. Applicable
- --Not applicable
CORE INTERNATIONAL EMERGING
INTERNATIONAL INTERNATIONAL EUROPEAN JAPANESE SMALL CAP MARKETS ASIA
EQUITY EQUITY EQUITY EQUITY EQUITY EQUITY GROWTH
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Credit/Default -- . . . . . .
Emerging Markets . . . . . . .
Interest Rate . . . . . . .
Small Cap/REIT -- -- -- -- . . .
Foreign . . . . . . .
Derivatives . . . . . . .
Management . . . . . . .
Market . . . . . . .
Liquidity . . . . . . .
Stock . . . . . . .
Concentration -- -- . . -- -- --
Other . . . . . . .
- ---------------------------------------------------------------------------------------------
</TABLE>
All Funds:
..FOREIGN RISKS--The risk that when a Fund invests in foreign securities, it
will be subject to special risks not typically associated with domestic
issuers. Losses 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.
18-I
<PAGE>
..EMERGING MARKETS RISK--The securities markets of Asian, Latin American, East-
ern European, African and other emerging countries are less liquid, are espe-
cially subject to greater price volatility, have smaller market capitaliza-
tions, have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the securi-
ties markets of more developed countries. Further, investment in equity secu-
rities 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.
..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, fixed-income
securities held by a Fund will decline in value. Long-term fixed-income secu-
rities will normally have more price volatility because of this risk than
short-term securities.
..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
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in 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.
19-I
<PAGE>
PRINCIPAL INVESTMENT SECURITIES AND TECHNIQUES
..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."
..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.
..SMALL CAP STOCK AND REIT RISK--The securities of small capitalization stocks
and REITs involve greater risks than those associated with larger, more estab-
lished companies and may be subject to more abrupt or erratic price movements.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop in
price.
..NON-DIVERSIFICATION AND GEOGRAPHIC RISK--The European Equity Fund invests pri-
marily in equity securities of European companies. The Japanese Equity Fund
invests primarily in equity securities of Japanese equity companies. Concen-
tration of the investments of these or other Funds in issuers located in a
particular country or region will subject the Fund, to a greater extent than
if investments were not so concentrated, to the risks of adverse securities
markets, exchange rates and social, political, regulatory or economic events
which may occur in that country or region.
More information about the Fund's 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.
20-I
<PAGE>
Fund Performance
HOW THE FUNDS HAVE PERFORMED
The bar chart and table below provide an indication of the risks of invest-
ing in a Fund by showing: (a) changes in the performance of a Fund's Service
Shares from year to year; and (b) how the average annual returns of a Fund's
Service Shares compare to those of broad-based securities market indices.
The bar chart and table assume reinvestment of dividends and distributions.
A Fund's past performance is not necessarily an indication of how the Fund
will perform in the future. Performance reflects expense limitations in
effect. If expense limitations were not in place, a Fund's performance would
have been reduced. The European Equity, Japanese Equity and International
Small Cap Funds did not commence operations until October 1, 1998, May 1,
1998 and May 1, 1998, respectively. Since these Funds have less than one
calendar year's performance, no performance information is provided in this
section. As of the date of this Prospectus, Service Shares of the Asia
Growth Fund had not commenced operations. Performance of the Asia Growth
Fund is represented by the Class A Shares. Class A Shares are not offered in
this Prospectus but have substantially similar annual returns because the
shares are invested in the same investment portfolio of securities. Annual
returns differ only to the extent that Class A Shares has a 0.50% distribu-
tion and service fee and a 0.19% transfer agency fee while Service Shares
have a 0.50% service fee and a 0.04% transfer agency fee.
2
<PAGE>
CORE International Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
[BAR CHART]
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
---------------------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 8/15/97) % %
Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index* % %
---------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International Europe, Australia, Far
East (EAFE) Index is a market capitalization-weighted composite of securi-
ties in 20 developed markets. The Index figures do not reflect any fees or
expenses.
3
<PAGE>
FUND PERFORMANCE
International Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
[BAR CHART]
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 3/6/96) % %
FT/S&P Actuaries Europe & Pacific Index (unhedged)* % %
----------------------------------------------------------------------------
</TABLE>
* The unmanaged FT/S&P Actuaries Europe & Pacific Index ("EuroPac") is a mar-
ket capitalization-weighted composite of approximately 1,500 stocks from 20
countries in Europe and the Asia-Pacific region. The Index figures do not
reflect any fees or expenses.
4
<PAGE>
Emerging Markets Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
[BAR CHART]
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
------------------------------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (Inception 12/15/97) % %
Morgan Stanley Capital International Emerging Markets
Free (EMF) Index* % %
------------------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International Emerging Markets Free
(EMF) Index is a market capitalization-weighted composite of securities in
over 30 emerging market countries. "Free" indicates an index that excludes
shares in otherwise free markets that are not purchasable by foreigners.
The Index figures do not reflect any fees or expenses.
5
<PAGE>
FUND PERFORMANCE
Asia Growth Fund
TOTAL RETURN CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
Worst Quarter
Q '9 %
<TABLE>
<CAPTION>
3
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR YEARS SINCE INCEPTION
-----------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (Inception 7/8/94)
Including Sales Charges % % %
Morgan Stanley Capital International All
Country Asia Free ex-Japan* % % %
-----------------------------------------------------------------------
</TABLE>
* The unmanaged Morgan Stanley Capital International All Country Asia Free
ex-Japan Index is a market capitalization-weighted composite of securities
in ten Asian countries. "Free" indicates an index that excludes shares in
otherwise free markets that are not purchasable by foreigners. The Index
figures do not reflect any fees or expenses.
6
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
7
<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>
CORE INTERNATIONAL EUROPEAN
INTERNATIONAL EQUITY EQUITY
EQUITY FUND FUND FUND
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT):
Maximum Sales Charge (Load) Imposed on
Purchases None None None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees None None None
Exchange Fees None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/2/
Management Fees 0.85% 1.00% 1.00%
Service Fees/3/ 0.50% 0.50% 0.50%
Other Expenses/4/ 0.44% 0.22% 0.69%
- ----------------------------------------------------------------------------
Total Fund Operating Expenses* 1.79% 1.72% 2.19%
- ----------------------------------------------------------------------------
</TABLE>
See page 10 for all other footnotes.
* As a result of the 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 expense waivers and 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>
CORE INTERNATIONAL EUROPEAN
INTERNATIONAL EQUITY EQUITY
EQUITY FUND FUND FUND
----------------------------------------------------------------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets):/2/
Management Fees 0.85% 1.00% 1.00%
Service Fees/3/ 0.50% 0.50% 0.50%
Other Expenses/4/ 0.16% 0.14% 0.14%
----------------------------------------------------------------------------
Total Fund Operating Expenses (after
current waivers and expense
limitations) 1.51% 1.64% 1.64%
----------------------------------------------------------------------------
</TABLE>
8
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
JAPANESE EMERGING ASIA
EQUITY INTERNATIONAL SMALL MARKETS GROWTH
FUND CAP FUND EQUITY FUND FUND/1/
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
None None None None
None None None None
None None None None
None None None None
1.00% 1.20% 1.20% 1.00%
0.50% 0.50% 0.50% 0.50%
2.07% 3.35% 0.50% 0.35%
- ---------------------------------------------------------------------------------------------
3.57% 5.05% 2.20% 1.85%
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JAPANESE EMERGING ASIA
EQUITY INTERNATIONAL SMALL MARKETS GROWTH
FUND CAP FUND EQUITY FUND FUND/1/
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.00% 1.20% 1.20% 1.00%
0.50% 0.50% 0.50% 0.50%
0.05% 0.20% 0.19% 0.20%
--------------------------------------------------------------------------------------------
1.55% 1.90% 1.89% 1.70%
--------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
FUND FEES AND EXPENSES
/1/Service Shares had not commenced operations as of the date of this Prospec-
tus.
/2/The Funds' annual operating expenses have been restated to reflect current
fees.
/3/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 such customers realize with respect to their
investments.
/4/"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>
CORE
International
Equity 0.12%
International
Equity 0.10%
European Equity 0.10%
Japanese Equity 0.01%
International
Small Cap 0.16%
Emerging Markets
Equity 0.15%
Asia Growth 0.16%
</TABLE>
10
<PAGE>
FUND FEES AND EXPENSES
Example
The following Example is intended to help you compare the cost of investing in
a Fund (without the 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 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 5 YEARS 10 YEARS
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
CORE INTERNATIONAL EQUITY $ $ $ $
- ----------------------------------------------------------
INTERNATIONAL EQUITY $ $ $ $
- ----------------------------------------------------------
EUROPEAN EQUITY $ $ N/A N/A
- ----------------------------------------------------------
JAPANESE EQUITY $ $ $ $
- ----------------------------------------------------------
INTERNATIONAL SMALL CAP $ $ $ $
- ----------------------------------------------------------
EMERGING MARKETS EQUITY $ $ $ $
- ----------------------------------------------------------
ASIA GROWTH $ $ $ $
- ----------------------------------------------------------
</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 such shares or for
services to their customers' accounts and/or the Funds. For additional informa-
tion regarding such compensation, see "Shareholder Guide" in the Prospectus and
the Statement of Additional Information ("Additional Statement").
11
<PAGE>
Service Providers
INVESTMENT ADVISERS
<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
------------------------------------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM") CORE International Equity
One New York Plaza
New York, New York 10004
------------------------------------------------------------------------
Goldman Sachs Asset Management International
("GSAMI") International Equity
133 Petersborough Court European Equity
London, England EC4A 2BB Japanese Equity
International Small Cap
Emerging Markets Equity
Asia Growth
------------------------------------------------------------------------
</TABLE>
GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. GSAMI, a member of the Investment Management
Regulatory Organization Limited since 1990 and a registered investment
adviser since 1991, is an affiliate of Goldman Sachs. As of December 31,
1998, GSAM and GSAMI, together with their affiliates, acted as investment
adviser or distributor for assets in excess of $195 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
1-J
<PAGE>
..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
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>
FOR THE FISCAL YEAR
OR PERIOD ENDED
CONTRACTUAL RATE JANUARY 31, 1999
----------------------------------------------------------------
<S> <C> <C>
GSAM:
----------------------------------------------------------------
CORE International Equity 0.85% %
----------------------------------------------------------------
GSAMI:
----------------------------------------------------------------
International Equity 1.00% %
----------------------------------------------------------------
European Equity 1.00% %
----------------------------------------------------------------
Japanese Equity 1.00% %
----------------------------------------------------------------
International Small Cap 1.20% %
----------------------------------------------------------------
Emerging Markets Equity 1.20% %
----------------------------------------------------------------
Asia Growth 1.00% %
----------------------------------------------------------------
</TABLE>
The difference, if any, between the stated fees and the actual fees paid by
the Funds reflects that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled. The Investment
Adviser may discontinue or modify any such voluntary limitations in the
future at its discretion.
FUND MANAGERS
M. Roch Hillenbrand, a Managing Director of Goldman Sachs, is the Head of
Global Equities for GSAM, overseeing U.S., 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 con-
sistent, reliable and predictable. Roch 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, Roch has had exten-
sive experience in dealing with inter-
2-J
<PAGE>
SERVICE PROVIDERS
nal and external investment managers who have managed a range of futures and
equities strategies across multiple markets, using a variety of styles.
International Equity Portfolio Management Team
..Global portfolio teams based in London, Singapore, Tokyo and New York.
Local presence is a key to the Investment Adviser's fundamental research
capabilities
..Teams manage over $27 billion in international equities for retail, insti-
tutional and high net worth clients
..Focus on bottom-up stock selection as main driver of returns, though the
teams leverage the asset allocation, currency and risk management capabili-
ties of GSAM
London-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
David Dick SENIOR PORTFOLIO MANAGER-- SINCE MR. DICK JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR SENIOR PORTFOLIO MANAGER
ON THE EUROPEAN EQUITY
TEAM IN 1998. FROM 1990
TO 1998, HE WAS WITH
MERCURY ASSET
MANAGEMENT, WHERE HE WAS
A PORTFOLIO MANAGER FOR
EUROPEAN EQUITY AND WAS
HEAD OF MERCURY'S
EUROPEAN SECTOR
STRATEGY.
- ----------------------------------------------------------------------------------------------
Ivor H. Farman PORTFOLIO MANAGER-- SINCE MR. FARMAN JOINED THE
EXECUTIVE INTERNATIONAL EQUITY FUND 1996 INVESTMENT ADVISER AS A
DIRECTOR EUROPEAN EQUITY FUND 1998 SENIOR PORTFOLIO MANAGER
IN 1996. FROM 1995 TO
1996, HE WAS RESPONSIBLE
FOR ORIGINATING AND
MARKETING FRENCH EQUITY
IDEAS AT EXANE IN PARIS.
PRIOR TO 1995, HE SPENT
FIVE YEARS ENGAGED IN
FRENCH EQUITY RESEARCH
AND MARKETING AT BANQUE
NATIONALE DE PARIS AND
SCHRODERS IN LONDON.
- ----------------------------------------------------------------------------------------------
</TABLE>
3-J
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------
<C> <C> <C> <S>
Paul Greener PORTFOLIO SINCE MR. GREENER JOINED THE
ASSOCIATE MANAGER-- 1998 INVESTMENT ADVISER AS A
INTERNATIONAL 1998 MEMBER OF THE PAN-EUROPEAN
EQUITY FUND EQUITY TEAM RESPONSIBLE FOR
EUROPEAN EQUITY EUROPEAN GENERAL RETAILERS,
FUND BUSINESS SERVICES AND
TECHNOLOGY SECTORS IN 1996.
FROM 1994 TO 1996, HE WAS
AN EQUITY ANALYST AT CIN
MANAGEMENT. PRIOR TO 1994,
HE WAS A STUDENT AT THE
UNIVERSITY OF BIRMINGHAM.
- ----------------------------------------------------------------------------------
James P. PORTFOLIO SINCE MR. HORDERN JOINED THE
Hordern MANAGER-- 1998 INVESTMENT ADVISER AS A
EXECUTIVE INTERNATIONAL PORTFOLIO MANAGER IN 1997.
DIRECTOR SMALL CAP FUND FROM 1991 TO 1997, HE WAS
AN ASSISTANT DIRECTOR AND
PORTFOLIO MANAGER AT
MERCURY ASSET MANAGEMENT ON
THE EUROPEAN SPECIALIST
TEAM.
- ----------------------------------------------------------------------------------
Ralf Laier PORTFOLIO SINCE MR. LAIER JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER AS A
EMERGING MARKETS PORTFOLIO MANAGER WITH A
EQUITY FUND FOCUS ON CENTRAL/EASTERN
EUROPEAN (CEE) AND THE
COMMONWEALTH OF INDEPENDENT
STATES (CIS) IN 1997. PRIOR
TO JOINING THE INVESTMENT
ADVISER, FROM 1995 TO 1997,
HE WAS VICE PRESIDENT OF
SOROS GLOBAL RESEARCH,
WHERE HE ANALYZED
INVESTMENT OPPORTUNITIES IN
CEE/CIS. FROM 1994 TO 1995,
HE ACHIEVED A PH.D. FROM
THE ACADEMY OF ECONOMICS IN
POZAN, POLAND, AND FROM
1992 TO 1994 HE WORKED FOR
THE POLISH MINISTRY OF
PRIVATIZATION AS A PROJECT
DIRECTOR DEVELOPING
PRIVATIZATION STRATEGIES
FOR SEVERAL INDUSTRY
SECTORS.
- ----------------------------------------------------------------------------------
</TABLE>
4-J
<PAGE>
SERVICE PROVIDERS
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Susan Noble SENIOR PORTFOLIO MANAGER-- SINCE MS. NOBLE JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR INTERNATIONAL EQUITY FUND 1998 SENIOR PORTFOLIO MANAGER
AND HEAD OF THE EUROPEAN
EQUITY TEAM IN OCTOBER
1997. FROM 1986 TO 1997,
SHE WORKED AT FLEMING
INVESTMENT MANAGEMENT IN
LONDON, WHERE SHE MOST
RECENTLY WAS PORTFOLIO
MANAGEMENT DIRECTOR FOR
THE EUROPEAN EQUITY
INVESTMENT STRATEGY AND
PROCESS.
- ----------------------------------------------------------------------------------------------
Andrew PORTFOLIO MANAGER-- SINCE MR. SHRIMPTON JOINED THE
Shrimpton EMERGING MARKETS EQUITY 1998 INVESTMENT ADVISER AS A
VICE PRESIDENT FUND PORTFOLIO MANAGER WITH A
FOCUS ON AFRICA AS WELL
AS THE FINANCIAL
INDUSTRY IN THE EMEA
REGION IN 1996. SINCE
1985 HE WAS A UK EQUITY
ANALYST AND PORTFOLIO
MANAGER FOR CIN
MANAGEMENT, WHERE HE
INITIATED CIN
MANAGEMENT'S FIRST
INVESTMENTS IN LATIN
AMERICA.
- ----------------------------------------------------------------------------------------------
Danny Truell SENIOR PORTFOLIO MANAGER-- SINCE MR. TRUELL JOINED THE
EXECUTIVE EUROPEAN EQUITY FUND 1998 INVESTMENT ADVISER AS A
DIRECTOR SENIOR PORTFOLIO MANAGER
AND HEAD OF UK EQUITIES
IN 1998. FROM 1992 TO
1996, HE WAS INVESTMENT
BANKING EXECUTIVE
DIRECTOR FOR SBC WARBURG
AND CHIEF ASIAN EQUITY
STRATEGIST.
- ----------------------------------------------------------------------------------------------
Anna G. Antici PORTFOLIO MANAGER-- SINCE MS. ANTICI JOINED THE
VICE PRESIDENT EMERGING MARKETS EQUITY 1998 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN
1997. FROM 1994 TO 1997,
SHE WAS A VICE PRESIDENT
FOR HSBC ASSET
MANAGEMENT, WHERE SHE
WAS A PORTFOLIO MANAGER
FOR EMERGING MARKETS AND
HEAD OF THE LATIN
AMERICAN DEPARTMENT. IN
1993, SHE WAS A SENIOR
RESEARCH ANALYST FOR
BARING SECURITIES.
- ----------------------------------------------------------------------------------------------
</TABLE>
5-J
<PAGE>
New York-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Robert A. SENIOR PORTFOLIO MANAGER-- SINCE MR. BECKWITT JOINED THE
Beckwitt EMERGING MARKETS EQUITY INVESTMENT ADVISER AS A
VICE PRESIDENT FUND 1997 PORTFOLIO MANAGER IN
AND 1996. FROM 1986 TO 1996,
CO-HEAD HE WAS CHIEF INVESTMENT
EMERGING MARKET STRATEGIST-PORTFOLIO
EQUITIES ADVISER TO HIGH NET
WORTH INVESTORS AT
FIDELITY INVESTMENTS.
- -----------------------------------------------------------------------------------------------
Melissa Brown SENIOR PORTFOLIO MANAGER-- SINCE MS. BROWN JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN
1998. FROM 1984 TO 1998,
SHE WAS THE DIRECTOR OF
QUANTITATIVE EQUITY
RESEARCH AND SERVED ON
THE INVESTMENT POLICY
COMMITTEE AT PRUDENTIAL
SECURITIES.
- -----------------------------------------------------------------------------------------------
Mark M. Carhart SENIOR PORTFOLIO MANAGER-- SINCE MR. CARHART JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS A
FUND MEMBER OF THE
QUANTITATIVE RESEARCH
AND RISK MANAGEMENT TEAM
IN 1997. FROM AUGUST
1995 TO SEPTEMBER 1997,
HE WAS ASSISTANT
PROFESSOR OF FINANCE AT
THE MARSHALL SCHOOL OF
BUSINESS AT USC AND A
SENIOR FELLOW OF THE
WHARTON FINANCIAL
INSTITUTIONS CENTER.
FROM 1993 TO 1995, HE
WAS A LECTURER AND
GRADUATE STUDENT AT THE
UNIVERSITY OF CHICAGO
GRADUATE SCHOOL OF
BUSINESS.
- -----------------------------------------------------------------------------------------------
Kent A. Clark SENIOR PORTFOLIO MANAGER-- SINCE MR. CLARK JOINED THE
VICE PRESIDENT CORE INTERNATIONAL EQUITY 1997 INVESTMENT ADVISER AS A
FUND PORTFOLIO MANAGER IN THE
QUANTITATIVE EQUITY
MANAGEMENT TEAM IN 1992.
- -----------------------------------------------------------------------------------------------
Raymond J. PORTFOLIO MANAGER-- SINCE MR. IWANOWSKI JOINED THE
Iwanowski CORE INTERNATIONAL EQUITY 1998 INVESTMENT ADVISER AS AN
VICE PRESIDENT FUND ASSOCIATE AND PORTFOLIO
MANAGER IN 1997. FROM
1993 TO 1997, HE WAS A
VICE PRESIDENT AND HEAD
OF THE FIXED DERIVATIVES
CLIENT RESEARCH GROUP AT
SALOMON BROTHERS.
- -----------------------------------------------------------------------------------------------
</TABLE>
6-J
<PAGE>
SERVICE PROVIDERS
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Robert C. Jones SENIOR PORTFOLIO MANAGER-- SINCE MR. JONES JOINED THE
MANAGING CORE INTERNATIONAL EQUITY 1997 INVESTMENT ADVISER AS A
DIRECTOR FUND PORTFOLIO MANAGER IN
1989.
- -----------------------------------------------------------------------------------------------
</TABLE>
Singapore-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Alice Lui PORTFOLIO MANAGER-- SINCE MS. LUI JOINED THE
VICE PRESIDENT ASIA GROWTH FUND 1994 INVESTMENT ADVISER AS A
PORTFOLIO MANAGER IN
1990.
- -----------------------------------------------------------------------------------------------
Warwick M. SENIOR PORTFOLIO MANAGER-- SINCE MR. NEGUS JOINED THE
Negus ASIA GROWTH FUND INVESTMENT ADVISER AS A
MANAGING EMERGING MARKETS EQUITY 1994 PORTFOLIO MANAGER IN
DIRECTOR AND FUND 1997 1994. FROM 1987 TO 1994,
CO-HEAD PORTFOLIO MANAGER-- HE WAS A VICE PRESIDENT
EMERGING MARKET INTERNATIONAL EQUITY FUND OF BANKERS TRUST
EQUITIES INTERNATIONAL SMALL CAP 1994 AUSTRALIA LTD WHERE HE
FUND 1998 WAS THE CHIEF INVESTMENT
OFFICER OF ITS SOUTHEAST
ASIAN INVESTMENT TEAM.
- -----------------------------------------------------------------------------------------------
Ramakrishna PORTFOLIO MANAGER-- SINCE MR. SHANKAR JOINED THE
Shankar ASIA GROWTH FUND 1997 INVESTMENT ADVISER AS AN
VICE PRESIDENT EMERGING MARKETS EQUITY 1998 OPERATIONS MANAGER IN
FUND 1997. FROM JULY 1996 TO
1997, HE WORKED FOR
GOLDMAN SACHS IN
SINGAPORE AS A STRATEGIC
ADVISOR FOR TRANSACTIONS
INVOLVING INFRASTRUCTURE
INDUSTRIES IN ASIA. FROM
1988 TO 1996, HE WORKED
FOR GOLDMAN SACHS AS AN
INVESTMENT BANKER IN THE
INVESTMENT BANKING
DIVISION.
</TABLE>
- --------------------------------------------------------------------------------
Tokyo-Based Portfolio Management Team
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Guy P. de C. SENIOR PORTFOLIO MANAGER-- SINCE MR. BENNETT JOINED THE
Bennett JAPANESE EQUITY FUND INVESTMENT ADVISER AS A
VICE PRESIDENT PORTFOLIO MANAGER-- 1998 PORTFOLIO MANAGER IN
INTERNATIONAL EQUITY FUND 1996 AND IS ALSO CO-HEAD
1997 OF GSAM'S JAPANESE
EQUITY GROUP IN TOKYO.
FROM 1984 TO 1996, HE
WAS A PORTFOLIO MANAGER
AND AN EXECUTIVE
DIRECTOR AT CIN
MANAGEMENT.
- -----------------------------------------------------------------------------------------------
</TABLE>
7-J
<PAGE>
<TABLE>
<CAPTION>
YEARS PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- --------------------------------------------------------------------------------------
<C> <C> <C> <S>
Shigeka Kouda PORTFOLIO MANAGER-- SINCE MR. KOUDA JOINED THE
VICE PRESIDENT INTERNATIONAL SMALL 1998 INVESTMENT ADVISER AS A
CAP FUND PORTFOLIO MANAGER IN
1997. FROM 1992 TO 1997,
HE WAS AT THE FIXED
INCOME DIVISION OF
GOLDMAN SACHS (JAPAN)
LIMITED, WHERE HE WAS
EXTENSIVELY INVOLVED IN
EMERGING MARKETS TRADING
AS WELL AS INTERNATIONAL
FIXED INCOME
INSTITUTIONAL SALES.
- --------------------------------------------------------------------------------------
Shogo Maeda SENIOR PORTFOLIO SINCE MR. MAEDA JOINED THE
MANAGING MANAGER-- INVESTMENT ADVISER AS A
DIRECTOR JAPANESE EQUITY FUND 1994 PORTFOLIO MANAGER IN
PORTFOLIO MANAGER-- 1994. FROM 1987 TO 1994,
INTERNATIONAL EQUITY 1994 HE WORKED AT NOMURA
FUND 1998 INVESTMENT MANAGEMENT
INTERNATIONAL SMALL INCORPORATED AS A SENIOR
CAP FUND PORTFOLIO MANAGER.
- --------------------------------------------------------------------------------------
Miyako PORTFOLIO MANAGER-- SINCE MS. SHIBAMOTO JOINED THE
Shibamoto JAPANESE EQUITY FUND 1998 INVESTMENT ADVISER AS A
VICE PRESIDENT MEMBER OF THE JAPANESE
EQUITY TEAM IN MARCH
1998. FROM 1993 TO 1998,
SHE WAS A VICE PRESIDENT
AT SCUDDER STEVENS AND
CLARK (JAPAN).
- --------------------------------------------------------------------------------------
Takeya Suzuki PORTFOLIO MANAGER-- SINCE MR. SUZUKI JOINED THE
VICE PRESIDENT JAPANESE EQUITY FUND 1998 INVESTMENT ADVISER AS A
PORTFOLIO MANAGER IN
1996. FROM 1990 TO 1996,
HE WAS A JAPANESE EQUITY
PORTFOLIO MANAGER AT
NOMURA INVESTMENT
MANAGEMENT WHERE HE
ACTIVELY MANAGED ASSETS
FOR U.S. PENSION FUNDS.
- --------------------------------------------------------------------------------------
</TABLE>
8-J
<PAGE>
SERVICE PROVIDERS
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," which may lead to computer shutdowns or
errors
9-J
<PAGE>
(commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur
prior to January 1, 2000. Like other investment companies and financial and
business organizations, the Funds could be adversely affected in their abil-
ity to process securities trades, price securities, provide shareholder
account services and otherwise conduct normal business operations if the
Investment Adviser or other Fund service providers do not adequately address
this problem in a timely manner.
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 Advisor 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.
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<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 dis-
tributions 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 or
units of the ILA Portfolios. Special restrictions may apply for exchanges
in 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 annually.
From time to time a portion of a Fund's dividends may constitute a return
of capital.
At the time of an investor's purchase of shares of a Fund, a portion of the
NAV per share may be represented by undistributed income or realized or
unrealized appreciation of the Fund's portfolio securities. Therefore, sub-
sequent distributions on such shares from such income or realized apprecia-
tion may be taxable to the investor even if the NAV of the shares is, as a
result of the distributions, reduced below the cost of such shares and the
distributions (or portions thereof) represent a return of a portion of the
purchase price.
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<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 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 on the next
business day; 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
..Processing orders to purchase, redeem or exchange shares for customers
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<PAGE>
..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 and 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, that are attributable to or held
in the name of a 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 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.
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<PAGE>
SHAREHOLDER GUIDE
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
The Funds' investments are valued based on market quotations or if accurate
quotations are not readily available, at fair value as determined in good
faith under procedures established by the Trustees.
..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.
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
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<PAGE>
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.
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 materially of the
event, its effect on Fund operations and other relevant factors.
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 SERVICE SHARES UPON REQUEST ON ANY BUSINESS DAY AT
THEIR NAV NEXT DETERMINED AFTER RECEIPT OF SUCH REQUEST OF AN ORDER 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 not declined 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>
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
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<PAGE>
SHAREHOLDER GUIDE
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 will 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 Transfer Agent.
..Neither the Trust nor Goldman Sachs assumes 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.
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<PAGE>
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 earlier redemptions. 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 Organiza-
tion 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 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 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
to you.
<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 Fund
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-----------------------------------------------------------------------
BY TELEPHONE: If you have not declined the telephone redemption
privileges on your Account Application:
.1-800-621-2550 (8:00 a.m. to
4:00 p.m. New York time)
-----------------------------------------------------------------------
</TABLE>
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<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.
..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.
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.
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. A year-to-date statement for
accounts will be provided upon request made to Goldman Sachs. Service Orga-
nizations are responsible for providing these or other reports to their cus-
tomers who are the beneficial owners of Service Shares in accordance with
the rules that apply to their accounts with the Service Organizations.
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<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.
At any time, a portion of a Fund's NAV per share may be represented by
undistributed income or realized or unrealized appreciation of the Fund's
portfolio securities. Therefore, subsequent distributions on a Fund's shares
may be taxable to you, even if the NAV of your shares is, as a result,
reduced below the cost of those shares and the distributions represent a
return of your purchase price.
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. Under certain circum-
stances, the Funds may make an election to treat a proportionate amount of
such taxes as constituting a distribution to you, which would allow you
either (1) to credit such proportionate amount of taxes against your U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
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<PAGE>
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.
There are certain tax requirements that all 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.
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.
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<PAGE>
Appendix A
Additional Information on Portfolio Risks, Securities and Techniques
The Funds will be subject to the risks associated with equity securities. "Eq-
uity 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 lia-
bility companies and similar enterprises, warrants and stock purchase rights.
In general, stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions. According-
ly, the value of the stocks that a Fund holds may decline over short or
extended periods. The stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The vol-
atility 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 investments.
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. Conversely, 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 investment. Call risk and exten-
sion 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 (extension risk). In general, if interest rates
on new mortgage loans fall sufficiently below the interest rates on existing
outstanding mortgage loans, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the interest
rates on existing outstanding mortgage loans, the rate of prepayment would be
expected to decrease. In either case, a change in the prepayment rate can
result in losses to investors.
The Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover (100% or more) involves correspondingly greater expenses which must be
borne by a Fund and its shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund's portfolio securities,
excluding secu-
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<PAGE>
rities having a maturity at the date of purchase of one year or less. See
"Financial Highlights" in Appendix B for a statement of the Funds' historical
portfolio turnover rates.
The following sections provide further information on certain types of securi-
ties and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the Additional State-
ment, which is available upon request. Among other things, the Additional
Statement describes certain fundamental investment restrictions that cannot be
changed without shareholder approval. You should note, however, that all poli-
cies not specifically designated as fundamental are non-fundamental and may be
changed without shareholder approval. If there is a change in a Fund's invest-
ment objective, you should consider whether that Fund remains an appropriate
investment in light of your then current financial position and needs.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS. Investments in
small capitalization companies and REITs involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Among the
reasons for the greater price volatility of these investments are the less cer-
tain 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 periods 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 eco-
nomic or market conditions, or adverse investor perceptions, 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. Small capitalization companies
and REITs also often have limited 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 capitalization companies and REITs may be more difficult
to price precisely than other types of securities because of their characteris-
tics and lower trading volumes.
RISKS OF FOREIGN INVESTMENTS. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securities
of U.S. issuers. Foreign investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and changes in exchange control regulations (e.g., currency block-
age). A decline in
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<PAGE>
APPENDIX A
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 partic-
ipating nations in the European Economic and Monetary Union ("EU") presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 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 in the European
Union, such as the United Kingdom and Denmark, into the euro and the admission
of other non-EU countries such as Poland, Latvia and Lithuania as members of
the EU may have an impact on the euro. These or other factors, including polit-
ical and economic risks, could cause market disruptions before or after the
introduction of the euro, and could adversely affect the value of securities
held by the Funds.
Brokerage commissions, custodial services and other costs relating to invest-
ment in international securities markets generally are more expensive than in
the United States. In addition, clearance and settlement procedures may be dif-
ferent in foreign countries and, in certain markets, such procedures have been
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S. securi-
ties markets and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationaliza-
tion, expropriation or confiscatory taxation, imposition of withholding or
other taxes on dividend or interest payments (or, in some cases, capital
gains), limitations on the removal of funds or other
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<PAGE>
assets of the Funds, political or social instability or diplomatic developments
which could affect investments in those countries.
Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.
Investment in sovereign debt obligations by certain Funds involves special
risks not present in debt obligations of corporate issuers. The issuer of the
debt or the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or pay interest when due in accor-
dance with the terms of such debt, and a Fund may have limited recourse to com-
pel 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 obliga-
tions of U.S. issuers. A sovereign debtor's willingness or ability to repay
principal and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign currency reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.
Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). Certain Funds may also invest in European Depository
Receipts ("EDRs") or other similar instruments representing securities of for-
eign 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 security.
RISKS OF EMERGING COUNTRIES. Certain Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are heightened
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 port-
folio securities in certain emerging countries may be constrained by limita-
tions 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 vol-
ume by or holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other
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APPENDIX A
service providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For exam-
ple, 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 specific class of securi-
ties which may have less advantageous terms (including price) than securities
of the issuer available for purchase by nationals. In addition, certain coun-
tries may restrict or prohibit investment opportunities in issuers or indus-
tries deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for governmental
consents. Due to restrictions on direct investment in equity securities in cer-
tain Asian countries, such as Taiwan, it is anticipated that a Fund may invest
in such countries only through other investment funds in such countries.
Many emerging countries are subject to a substantial degree of economic, polit-
ical and social instability. Governments of some emerging countries are author-
itarian in nature or have been installed or removed as a result of military
coups, while governments in other emerging countries have periodically used
force to suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging countries. Unanticipated political or social developments may result
in sudden and significant investment losses. Investing in emerging countries
involves greater risk of loss due to expropriation, nationalization, confisca-
tion 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 invest-
ment 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 addition, significant delays are common in certain markets in
registering the transfer of securities. Settlement or registration problems may
make it more difficult for a Fund to value its portfolio securities and could
cause the Fund to miss attractive investment opportunities, to have a portion
of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's inabil-
ity to complete its contractual obligations. The creditworthiness of the local
securi-
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<PAGE>
ties 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 crditworthiness of firms used
in more developed countires, thus subjecting the Fund to a greater risk of loss
if a securities firm defaults in the performance of its responsibilities.
The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries
may make a Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets (such as
the United States, Japan and most Western European countries). A Fund's invest-
ments 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, mar-
ket or political conditions, or adverse investor perceptions, 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 precisely because of their characteristics and
lower trading volumes.
Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a nega-
tive 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 barri-
ers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
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 signifi-
cant 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, structured securities and currency transac-
tions involve additional risk of loss. Loss can result from a lack of correla-
tion 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
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APPENDIX A
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) which is considered a speculative practice and
presents even greater risk of loss.
RISK 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 ordi-
nary 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 portfolio
to the extent that qualified institutional buyers become for a time uninter-
ested in purchasing these restricted securities. The purchase price and subse-
quent valuation of restricted and illiquid securities normally reflect a dis-
count, which may be significant, from the market price of comparable 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 agencies,
instrumentalities and sponsored enterprises), foreign governments, domestic and
foreign corporations, banks and other issuers. Some of these fixed-income secu-
rities are described in the next section below. Further information 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 con-
sidered medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers' capac-
ity 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.
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<PAGE>
Certain 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 questionable 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, investment
in such
bonds will present greater speculative risks than those associated with invest-
ment 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.
This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks. Further information is provided in the Additional Statement, which is
available upon request.
CONVERTIBLE SECURITIES. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities gen-
erally offer lower interest or dividend yields than non-convertible securities
of similar quality. Convertible securities in which a Fund invests are subject
to the same rating criteria as its other investments in fixed-income securi-
ties. Convertible securities have both equity and fixed-income risk character-
istics. 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 con-
vertible security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock
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APPENDIX A
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.
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 considered a speculative
practice. Some Funds may also engage in cross-hedging by using forward contracts
in a currency dif-ferent from that in which the hedged security is denominated
or quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgement of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date.
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 con-
trols 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 obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or could force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
STRUCTURED SECURITIES. Structured securities are securities whose value is
determined by reference to changes in the value of specific currencies, inter-
est 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 secu-
rities may be positively or negatively indexed, so that appreciation of the
Reference may produce an
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<PAGE>
increase or decrease in the interest rate or value of the security at maturity.
In addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may 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.
Structured securities include, but are not limited to, 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.
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 or securing mortgage
loans held by the REIT. REITs are dependent upon the ability of the REITs' man-
agers, and are subject to heavy cash flow dependency, 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 asso-
ciated with investments in real estate including possible declines in the value
of real estate, general and local economic conditions, environmental problems
and changes in interest rates. To the extent that assets underlying a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
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 during 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. Certain Funds 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 for-
eign securities, purchase and sell (write) put and call options on foreign cur-
rencies.
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 consid-
ered a
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<PAGE>
APPENDIX A
speculative activity). The successful use of options 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 (or currency) mar-kets.
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 other-wise
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 liquidity and credit risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts are stan-
dardized, exchange-traded contracts that provide for the sale or purchase 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 option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures con-
tract 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 foreign
exchanges.
A 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 currency
exchange rates, or to the extent applicable, otherwise manage its term struc-
ture and duration in accordance with its investment objective and policies.
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 regu-
lations of the Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations. A Fund may not pur-
chase or sell futures contracts or purchase or sell related options to seek to
increase total return, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of initial margin deposits and
premiums paid on the Fund's outstanding positions in futures and related
options entered into for the purpose of seeking to increase total return would
exceed 5% of the market value of the Fund's net assets.
Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures, unan-
ticipated changes in interest rates, securities prices or currency exchange
rates
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<PAGE>
may result in poorer overall performance than if the Fund had not entered into
any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired protec-
tion 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 writing
call options on futures is potentially unlimited and may exceed the amount of
the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in substan-
tial 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.
EQUITY SWAPS. Equity swaps allow the parties to a swap agreement to exchange
the dividend income or other components of return on an equity investment (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 invest-
ment 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 div-
idends 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. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securi-
ties 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 contract 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 sold securities may
increase before the
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<PAGE>
APPENDIX A
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 secu-rities or forward
commitments before settlement whenever the Investment Adviser deems it
appropriate.
REPURCHASE AGREEMENTS. Certain Funds may enter into repurchase agreements with
primary dealers in U.S. Government securities and banks affiliated with primary
dealers. Repurchase agreements involve the purchase of securities subject to
the seller's agreement to repurchase them at a mutually agreed upon date and
price. The repurchase price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate on
the purchased security.
If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the repurchase agreement are
less than the repurchase price and Fund's costs associated with delay and
enforcement of the repurchase agreement. In addition, in the event of bank-
ruptcy of the seller, a Fund could suffer additional losses if a court deter-
mines 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. Distribu-
tions of the income from repurchase agreements will be taxable to a Fund's
shareholders. In addition, certain Funds, together with other registered
investment companies having advisory agreements with the Investment Adviser or
any of its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. 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 col-
lateral may be invested in cash equivalents. If the Investment Adviser deter-
mines 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 or possible loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
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<PAGE>
SHORT SALES AGAINST-THE-BOX. Certain Funds 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 securi-
ties convertible into or exchangeable for, without payment of any further con-
sideration, an equal amount of the securities of the same issuer as the securi-
ties sold short.
PREFERRED STOCK, WARRANTS AND RIGHTS. Each Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an owner-
ship interest providing the holder with claims on the issuer's earnings and
assets before common stock owners but after bond owners. Unlike debt securi-
ties, 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 of other non-com-
pliance by the issuer of the preferred stock.
Warrants and other rights are options to buy a stated number of shares of com-
mon stock at a specified price at any time during the life of the warrant. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
STANDARD & POOR'S DEPOSITORY RECEIPTS. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts ("SPDRs").
SPDRs are American Stock Exchange-traded securities 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 is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including, but
not limited to, facilitating the handling 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 American Stock Exchange (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 net asset values of their underlying indi-
ces and supply and demand of WEBS on the AMEX. To date, WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating 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 require-
ments of
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<PAGE>
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 disrup-
tions affecting WEBS should occur in the future, the liquidity and value of
Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE Index could be impaired. If such disruptions were to
occur, a Fund could be required to reconsider the use of WEBS as part of its
investment strategy.
OTHER INVESTMENT COMPANIES. A Fund may invest in securities of other investment
companies subject to the limitations prescribed by the Investment Company 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 invest-
ing 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 manage-
ment fees and other expenses paid by such other investment companies. Such
other investment 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.
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<PAGE>
MORTGAGE DOLLAR ROLLS. Certain Funds may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by a Fund of securities for delivery in
the current month. The Fund simultaneously contracts 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 benefits 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 pro-
ceeds of the securities sold. Unless the benefits of a mortgage dollar roll
exceed the income, capital appreciation and gain or loss due to mortgage pre-
payments 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.
Successful use of mortgage dollar rolls depends upon the Investment Adviser's
ability to predict correctly interest rates and mortgage prepayments. If the
Investment Adviser is incorrect in its predictions, the Fund may experience a
loss. For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The Funds do not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing and
do not treat them as borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
loans secured by real property. 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 invest-
ment conduit ("REMIC") pass-through or participation certificates. CMOs provide
an investor with a specified interest in the cash flow from a pool of under-
lying mortgages or of other Mortgage-Backed Securities. CMOs are issued in mul-
tiple classes. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no princi-
pal payments will be made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. A REMIC is a CMO that qualifies for
special tax treatment under
1-E
<PAGE>
the Code and invests in certain mortgages princi pally 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 principal pay-
ments from a pool of mortgage loans. The market value of SMBS consisting
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 mortgage loans are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
Mortgage-Backed Securities (including CMOs, REMICs and SMBS) are subject to
both call risk and extension risk as previously described. Because of these
risks, these securities can have significantly greater price and yield volatil-
ity than with traditional fixed-income securities.
The value of Mortgage-Backed Securities that are structured as pass-through
mortgage securities that are collateralized by ARMs are less likely to rise
during periods of declining interest rates to the same extent as fixed-rate
securities. This is because interest rate declines may result in accelerated
prepayments of mortgages with the result that proceeds from prepayments will be
reinvested at lower interest rates. On the other hand, during periods of rising
interest rates, the value of ARMs will lag behind changes in the market rate.
ARMs are also typically subject to maximum increases and decreases in the
interest rate adjustment which can be made on any one adjustment date, in any
one year, or during the life of the security. In the event of dramatic
increases or decreases in prevailing market interest rates, the value of a
Fund's investments in ARMs may fluctuate more substantially since these limits
may prevent the security from fully adjusting its interest rate to the prevail-
ing market rates.
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 prepay-
ments of principal on the underlying loans. During periods of declining inter-
est rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, 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,
2-E
<PAGE>
and its ability to reinvest the returns of principal at comparable yields is
subject to generally 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 security interest in collateral that is comparable to mortgage
assets. There is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities. 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.
ZERO COUPON, DEFERRED INTEREST, PAY-IN-KIND AND CAPITAL APPRECIATION BONDS.
Zero coupon, deferred interest, pay-in-kind and capital appreciation bonds are
issued at a discount from their face value because interest payments are typi-
cally postponed until maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. The market prices of
these securities generally are more volatile than the market prices of inter-
est-bearing securities and are likely to respond to a greater degree to changes
in interest rates than interest-bearing securities having similar maturities
and credit quality.
YIELD CURVE OPTIONS. Certain Funds 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 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 present a
risk of loss even if the yield of one of the underlying securities remains con-
stant, or if the spread moves in a direction or to an extent which was not
anticipated.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Certain Funds can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions in amounts not exceeding one-third of its total assets.
Reverse repurchase agreements involve the sale of securities held by a Fund
subject to the Fund's agreement to repurchase them at a mutually agreed upon
date and price (including interest). These transactions may be entered into as
a temporary measure for emergency purposes or to meet redemption requests.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of
the transaction proceeds will be greater than the related interest expense.
Borrowings and reverse repurchase agreements involve leveraging. If the securi-
ties held by a Fund
3-E
<PAGE>
decline in value while these transactions are outstanding, the NAV of the Fund's
outstanding shares will decline in value by proportion ately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the interest income earned by a Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by a Fund will decline below the price
the Fund is obligated to pay to repurchase the securi ties, and that the
securities may not be returned to the Fund.
INTEREST RATE SWAPS, MORTGAGE SWAPS, CREDIT SWAPS, CURRENCY SWAPS AND INTEREST
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 pay-
ments. Mortgage swaps are similar to interest rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, howev-
er, 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 occur-
rence 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 and a floor that preserves a certain return within a predetermined range
of interest rates.
Certain Funds may enter into swap transactions for hedging purposes or to seek
to increase total return. The use of interest rate, mortgage, credit and cur-
rency 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 forecasts 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.
4-E
<PAGE>
Appendix C
Prior Performance of Similarly Advised Accounts of the Investment Adviser
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies and strategies substantially similar to the European Equity
Fund. The information is provided to illustrate the past performance of the
Investment Adviser in managing substantially similar accounts as measured
against the FT/S&P Actuaries Europe Index (unhedged) and does not represent
the performance of the European Equity Fund. Investors should not consider
this performance data as a substitute for the performance of the European
Equity Fund nor should investors consider this data as an indication of
future performance of the European Equity Fund or of the Investment Adviser.
The FT/S&P Actuaries Europe Index (unhedged) is unmanaged and investors can-
not invest directly in the index.
<TABLE>
<CAPTION>
FT/S&P
PRIVATE ACCOUNT ACTUARIES
NET COMPOSITE EUROPE INDEX
PERFORMANCE (UNHEDGED)
- ------------------------------------------------
<S> <C> <C>
1998 % %
1997 18.95% 23.66%
1996 41.20% 23.51%
1995 29.30% 22.17%
1994 7.85% 2.95%
10/1/93-12/31/93 4.03% 9.12%
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/98
-------------------------------
SINCE INCEPTION
ONE YEAR THREE YEARS FIVE YEARS 10/1/93
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net
Composite Performance % % % %
FT/S&P Actuaries Europe
Index (unhedged) % % % %
- --------------------------------------------------------------------------
</TABLE>
In accordance with the standards of the Association for Investment Manage-
ment and Research ("AIMR"), the Investment Adviser's composite performance
data was calculated on a time-weighted and asset-weighted total return basis
which
12
<PAGE>
includes realized and unrealized gains and losses plus income. The composite
performance is net of applicable investment management fees, brokerage commis-
sions, execution costs and custodial fees, without provision for federal and
state taxes, if any. Total return performance of the European Equity Fund will
be calculated in accordance with the regulations of the SEC. The SEC standard-
ized average annual total return is neither time-weighted nor asset-weighted
and is determined for specified periods by computing the annual percentage
change in the value of an initial amount that is invested in a share class of
the Fund at the maximum public offering price. Investors should be aware that
the differences in methodology between AIMR and SEC requirements could result
in different performance data for identical time periods.
The actual expenses of the private accounts included in the composite were
lower than the estimated expenses of the Fund. Accordingly, the performance
record of the composite has been adjusted downward based on the estimated
expenses of the Service Shares of the European Equity Fund during its first
year of operations. All returns presented reflect the reinvestment of dividends
and other earnings. The private accounts are not subject to the same diversifi-
cation requirements, specific tax restrictions and investment limitations
imposed on the European Equity Fund by the Investment Company Act of 1940 and
Subchapter M of the Code. Consequently, the performance results of the Invest-
ment Adviser's composite could have been adversely affected if the private
accounts had been regulated as investment companies under the federal securi-
ties laws.
13
<PAGE>
Index
<TABLE>
<C> <C> <S>
1 General Investment Management Approach
Fund Investment Objectives and Strategies
3 Goldman Sachs CORE International Equity Fund
4 Goldman Sachs International Equity Fund
Goldman Sachs European Equity Fund
Goldman Sachs Japanese Equity Fund
Goldman Sachs International Small Cap Fund
5 Goldman Sachs Emerging Markets Equity Fund
Goldman Sachs Asia Growth Fund
Other Investment Practices and Securities
</TABLE>
<TABLE>
<C> <C> <S>
Principal Risks of the
Funds
Fund Performance
6 Fund Fees and Expenses
Service Providers
Dividends
Shareholder Guide
32 How To Buy Shares
42 How To Sell Shares
Shareholder Services
Taxation
A-1 Appendix A
Additional Information on
Portfolio Risks,
Securities and Techniques
B-1 Appendix B
Financial Highlights
C-1 Appendix C
</TABLE>
14
<PAGE>
International Equity Funds
Prospectus (Service 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.
Statement of Additional Information
Additional information about the Funds and their policies is also available
in the Funds' Statement of Additional Information ("Additional Statement").
The Additional Statement is incorporated by reference into this Prospectus
(is legally considered part of this Prospectus).
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 & Co., 4900 Sears Tower, Chicago, Illinois 60606
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. The Funds' investment company registration number is 811-5349.
[LOGO]
15
<PAGE>
Prospectus CLASS A, B AND C
SHARES
April 30, 1999
- ----------------------------------------------------------------------
GOLDMAN SACHS DOMESTIC EQUITY FUNDS
- ----------------------------------------------------------------------
.Goldman Sachs
Balanced Fund
.Goldman Sachs
Growth and
Income Fund
.Goldman Sachs
CORE Large Cap
Value Fund
(INSERT ARTWORK) .Goldman Sachs
CORE U.S.
Equity Fund
.Goldman Sachs
CORE Large Cap
Growth Fund
.Goldman Sachs
CORE Small Cap
Equity Fund
.Goldman Sachs
Capital Growth
Fund
.Goldman Sachs
Strategic
Growth Fund
.Goldman Sachs
Growth
Opportunities
Fund
.Goldman Sachs
Mid Cap Value
Fund (formerly
"Mid Cap
Equity")
.Goldman Sachs
Small Cap Value
Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT APPROVED OR DISAPPROVED THESE SECURITIES .Goldman Sachs
OR PASSED UPON THE ADEQUACY OF THIS Real Estate
PROSPECTUS. ANY REPRESENTATION TO THE Securities
CONTRARY IS A CRIMINAL OFFENSE. Fund
- ------------------------------------------------------------
AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY [LOGO OF GOLDMAN
OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES SACHS APPEARS HERE]
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
-----------------------------------------------------------
<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 Balanced,
Growth and Income, CORE Large Cap Value, CORE Large Cap Growth, CORE Small
Cap Equity, Strategic Growth, Growth Opportunities, Mid Cap Equity, Small
Cap Value and Real Estate Securities Funds. Goldman Sachs Funds Management,
L.P. serves as investment adviser to the CORE U.S. Equity and Capital Growth
Funds. Goldman Sachs Asset Management and Goldman Sachs Funds Management,
L.P. are each referred to in this Prospectus as the "Investment Adviser."
VALUE STYLE FUNDS
Goldman Sachs Value Investment Philosophy
The Investment Adviser seeks companies that are discounted due to:
..Company-specific problems that are over-discounted in the marketplace.
..Cyclically out-of-favor status.
..Unrecognized positive fundamentals.
The Investment Adviser seeks to identify value through:
..Firsthand fundamental research.
..Maintaining a long-term investment horizon.
..A team approach to decision making.
Value exists when a stock's price becomes inexpensive relative to the
company's estimated earnings and/or dividend-paying ability over the long-
term.
- --------------------------------------------------------------------------------
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.
1-A
<PAGE>
GENERAL INVESTMENT MANAGEMENT APPROACH
..Over the long-term, expect each company's stock price to ultimately 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 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.
- --------------------------------------------------------------------------------
QUANTITATIVE ("CORE") STYLE FUNDS
Goldman Sachs Quantitative Multifactor Model
The CORE Funds use the Goldman Sachs proprietary multifactor model
("Multifactor Model"), a rigorous computerized rating system, to forecast
the returns of securities held in each Fund's portfolio.
The Multifactor Model incorporates common variables covering measures of:
..VALUE (price-to-book, price-to-earnings, cash flow to enterprise value)
..MOMENTUM (earnings momentum, price momentum, sustainable growth)
..RISK (market risk, company-specific risk, earnings risk)
ALL OF THE ABOVE FACTORS ARE CAREFULLY EVALUATED WITHIN THE MULTIFACTOR
MODEL SINCE EACH HAS DEMONSTRATED A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE SECURITIES AND MARKETS THEY WERE DESIGNED TO FORECAST.
Goldman Sachs' CORE Funds provide broad foundation portfolios for investors
to build upon.
- --------------------------------------------------------------------------------
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.
2-A
<PAGE>
GENERAL INVESTMENT MANAGEMENT APPROACH
..Buys securities at a discount to the intrinsic value of the business (as-
sets and management).
..Seeks a term approach to decision making.
REIT stands for Real Estate Investment Trust
- --------------------------------------------------------------------------------
3-A
<PAGE>
Fund Investment Objectives and Strategies
Goldman Sachs Balanced Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and current income
Benchmarks: S&P 500 Index and Lehman Brothers Aggregate Bond Index
Investment Focus: Large capitalization U.S. stocks and investment grade U.S.
fixed income
Investment Style: Asset Allocation
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term growth of capital and current income.
The Fund seeks growth of capital primarily through investments in equity
securities (stocks). The Fund seeks to provide current income through
investment in fixed-income securities (bonds).
PRINCIPAL INVESTMENT STRATEGIES
Historically, stock and bond markets have often had different cycles, with
one asset class rising when the other is falling. A balanced objective seeks
to reduce the volatility associated with investing in a single market. There
is no guarantee, however, that market cycles will move in opposition to one
another or that a balanced investment program will successfully reduce vola-
tility.
Equity Securities. The Fund invests, under normal circumstances, between 45%
and 65% of its total assets in equity securities. Although the Fund's equity
investments consist primarily of publicly traded U.S. securities, the Fund
may invest up to 10% of its total assets in the equity securities of foreign
issuers, including issuers in countries with emerging markets or economies
("emerging countries") and equity securities quoted in foreign currencies.
A portion of the Fund's portfolio of equity securities may be selected pri-
marily to provide current income (includ-
4-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
ing interests in real estate investment trusts, convertible securities, pre-
ferred stocks, utility stocks, and interests in limited partnerships).
Other. The Fund invests at least 25% of its total assets in fixed-income
senior securities. The remainder of the Fund's assets are invested in other
fixed-income securities and cash.
The Fund's fixed-income securities primarily include:
..Securities issued by the U.S. Government, its agencies, instrumentalities
or sponsored enterprises
..Securities issued by corporations, banks and other issuers
..Mortgage-backed and asset-backed securities
The Fund may also invest up to 10% of its total assets in debt obligations
(U.S. dollar and non-U.S.-dollar denominated) issued or guaranteed by one or
more foreign governments or any of their political subdivisions, agencies or
instrumentalities and foreign corporations or other entities. The issuers of
these securities may be located in emerging countries.
The percentage of the portfolio invested in equity and fixed-income securi-
ties will vary from time to time as the Investment Adviser evaluates such
securities' relative attractiveness based on market valuations, economic
growth and inflation prospects. The allocation between equity and fixed-
income securities is subject to the Fund's intention to pay regular quar-
terly dividends. The amount of quarterly dividends can also be expected to
fluctuate in accordance with factors such as prevailing interest rates and
the percentage of the Fund's assets invested in fixed-income securities.
5-A
<PAGE>
Goldman Sachs
Growth and Income Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and growth of income
Benchmark: S&P 500 Index
Investment Focus: Large capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace
Investment Style: Value
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and growth of income.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
65% of its total assets in equity securities that the Investment Adviser
considers to have favorable prospects for capital appreciation and/or divi-
dend-paying ability. Although the Fund will invest primarily in publicly
traded U.S. securities, it may invest up to 25% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities that offer the potential to further the Fund's investment
objective.
6-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
CORE Large Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and dividend income
Benchmark: Russell 1000 Value Index
Investment Focus: Diversified portfolio of equity securities of large cap
U.S. issuers selling at low to modest valuations
Investment Proc- Value, enhanced by a proprietary quantitative model
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified portfolio of equity secu-
rities of large cap U.S. issuers that are selling at low to modest valua-
tions relative to general market measures, such as earnings, book value and
other fundamental accounting measures, and that are expected to have favora-
ble prospects for capital appreciation and/or dividend-paying ability.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the Russell 1000 Value Index. The Fund seeks a
portfolio comprised of companies with above average capitalizations and low
to moderate valuations as measured by price/earnings ratios, book value and
other fundamental accounting measures.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
7-A
<PAGE>
Goldman Sachs
CORE U.S. Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and dividend income
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities representing a variety of indus-
tries
Investment Style: Blend (Value and Growth), enhanced by a proprietary
quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified portfolio of large cap
and blue chip equity securities representing all major sectors of the U.S.
economy.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the S&P 500 Index. The Fund seeks a broad repre-
sentation in most major sectors of the U.S. economy and a portfolio com-
prised of companies with average long-term earnings growth expectations and
dividend yields.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
8-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
CORE Large Cap Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital; dividend income is a
secondary consideration
Benchmark: Russell 1000 Growth Index
Investment Focus: Large-cap, growth-oriented U.S. stocks
Investment Style: Growth, enhanced by a proprietary quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of large cap
U.S. issuers that are expected to have better prospects for earnings growth
than the growth rate of the general domestic economy. Dividend income is a
secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Investment Adviser emphasizes a company's growth prospects in analyzing
equity securities to be purchased by the Fund. The Fund's investments are
selected using both a variety of quantitative techniques and fundamental
research in seeking to maximize the Fund's expected return, while maintain-
ing risk, style, capitalization and industry characteristics similar to the
Russell 1000 Growth Index. The Fund seeks a portfolio comprised of companies
with above average capitalizations and earnings growth expectations and
below average dividend yields.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
9-A
<PAGE>
Goldman Sachs
CORE Small Cap Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell 2000 Index
Investment Focus: Stocks of small capitalization U.S. companies
Investment Proc- Blend (Value and Growth), enhanced by a proprietary
ess: quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of U.S. issuers
which are included in the Russell 2000 Index at the time of investment.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the Russell 2000 Index. The Fund seeks a portfo-
lio comprised of companies with small market capitalizations, strong
expected earnings growth and momentum, and better valuation and risk charac-
teristics than the Russell 2000 Index. If the issuer of a portfolio security
held by the Fund is no longer included in the Russell 2000 Index, the Fund
may, but is not required to, sell the security.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
10-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Capital Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that offer long-term capital
appreciation potential
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to have long-term capi-
tal appreciation potential. Although the Fund invests primarily in publicly
traded U.S. securities, it may invest up to 10% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
11-A
<PAGE>
Goldman Sachs
Strategic Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that are considered to be strate-
gically positioned for consistent long-term growth
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to be strategically
positioned for consistent long-term growth. Although the Fund invests pri-
marily in publicly traded U.S. securities, it may invest up to 10% of its
total assets in foreign securities, including securities of issuers in
emerging countries and securities quoted in foreign currencies.
12-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Growth Opportunities Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that offer long-term capital
appreciation with a primary focus on mid capitalization
companies.
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to have long-term capi-
tal appreciation potential. Although the Fund invests primarily in publicly
traded U.S. securities, it may invest up to 10% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
13-A
<PAGE>
Goldman Sachs
Mid Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell Midcap Value Index
Investment Focus: Mid-capitalization U.S. stocks that are believed
to be undervalued or undiscovered by the marketplace.
Investment Proc- Value
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all of its assets in equity securities and at least 65% of its total
assets in equity securities of mid-cap companies with public stock market
capitalizations (based upon shares available for trading on an unrestricted
basis) within the range of the market capitalization of companies constitut-
ing the Russell Midcap Value Index at the time of investment (currently
between $400 million and $16 billion). If the capitalization of an issuer
decreases below $400 million or increases above $16 billion after purchase,
the Fund may, but is not required to, sell the securities. Dividend income,
if any, is an incidental consideration. Although the Fund will invest pri-
marily in publicly traded U.S. securities, it may invest up to 25% of its
total assets in foreign securities, including securities of issuers in
emerging countries and securities quoted in foreign currencies.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities.
14-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Small Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell 2000 Index
Investment Focus: Small-capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace
Investment Proc- Value
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
65% of its total assets in equity securities of companies with public stock
market capitalizations of $1 billion or less at the time of investment.
Under normal circumstances, the Fund's investment horizon for ownership of
stocks will be two to three years. Dividend income, if any, is an incidental
consideration. If the market capitalization of a company held by the Fund
increases above $1 billion, the Fund may, consistent with its investment
objective, continue to hold the security.
The Fund invests in companies which the Investment Adviser believes are
well- managed niche businesses that have the potential to achieve high or
improving returns on capital and/or above average sustainable growth. The
Fund may invest in securities of small market capitalization companies which
may have experienced financial difficulties. Investments may also be made in
companies that are in the early stages of their life and that the Investment
Adviser believes have significant growth potential. The Investment Adviser
believes that the companies in which the Fund may invest offer greater
opportunity for growth of capital than larger, more mature, better known
companies. Although the Fund will invest primarily in publicly traded U.S.
Securities, it may invest up to 25% of its total assets in foreign securi-
ties, including securities of issuers in emerging countries and securities
quoted in foreign currencies.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
companies with public stock market capitalizations in excess of $1 billion
at the time of investment and in fixed-income securities.
15-A
<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: A substantial portion of assets will be invested in
REITS
Investment Proc- Growth at a discount
ess:
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.
Other. The Fund may invest up to 20% of its total assets in fixed-income
securities that offer the potential to further the Fund's investment objec-
tives.
16-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
RISKS ASSOCIATED WITH INVESTING IN REITS
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property
owned by the REITs. Mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management 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 under the Code and
failing to maintain their exemptions from registration under the 1940 Act.
REITs whose underlying properties are concentrated in a particular industry
or geographic region are also subject to risks affecting such industries and
regions.
REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REITs investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REITs 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 REITs 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.
Investing in REITs involves risks similar to those associated with investing
in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be sub-
ject to more abrupt or erratic price movements than larger capitalization
companies. Historically, small capitalization stocks, such as REITs, have
been more volatile in price than the larger capitalization stocks included
in the Standard & Poor's Index of 500 Common Stocks. Among the reasons for
the greater price volatility of these small company and unseasoned stocks
are the less certain growth prospects of smaller firms and the lower degree
of liquidity in the markets for such stocks.
17-A
<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
objectivesand strategies
of the Fund
<TABLE>
<CAPTION>
GROWTH CORE CORE
BALANCED AND INCOME LARGE CAP U.S. EQUITY
FUND FUND VALUE FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT PRACTICES
Borrowings 33 1/3 33 1/3 33 1/3 33 1/3
Credit, currency, index, interest
rate and mortgage swaps . -- -- --
Cross Hedging of Currencies . -- -- --
Custodial receipts . . . .
Equity Swaps 10 10 10 10
Foreign Currency Transactions ./1/ . . .
Futures Contracts and Options on
Futures Contracts . . ./2/ ./3/
Interest rate caps, floors and
collars . -- -- --
Loan Participations . -- -- --
Mortgage Dollar Rolls . -- -- --
Options on Foreign Currencies/4/ . . . .
Options on Securities and
Securities Indices/5/ . . -- --
Repurchase Agreements . . . .
Reverse Repurchase Agreements (for
investment purposes) . -- -- --
Securities Lending 33 1/3 33 1/3 33 1/3 33 1/3
Short Sales Against the Box 25 25 -- --
Unseasoned Companies . . . .
- ------------------------------------------------------------------------------
</TABLE>
- --Not permitted
1 The Balanced Fund may also enter into forward foreign currency exchange
contracts to seek to increase total return.
2 The CORE Large Cap Value, CORE Large Cap Growth and CORE Small Cap Equity
Funds may enter into futures transactions only with respect to a represen-
tative index.
3 The CORE U.S. Equity Fund may enter into futures transactions only with
respect to the S&P 500 Index.
4 May purchase and sell call and put options.
5 May sell covered call and put options and purchase call and put options.
18-A
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
CORE CORE CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
LARGE CAP SMALL CAP GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
GROWTH FUND EQUITY FUND FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
33
1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
-- -- -- -- -- -- -- .
-- -- -- -- -- -- --
. . . . . . . .
10 10 10 10 10 10 10 10
. . . . . . . .
./2/ ./2/ . . . . . .
-- -- -- -- -- -- -- .
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- .
. . . . . . . .
-- . . . . . . .
. . . . . . . .
-- -- -- -- -- -- -- --
33
1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
-- -- 25 -- -- 25 25 25
. . . . . . . .
- -----------------------------------------------------------------------------------------
</TABLE>
19-A
<PAGE>
10Percent of total assets (BOLD 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>
GROWTH CORE CORE
BALANCED AND INCOME LARGE CAP U.S. EQUITY
FUND FUND VALUE FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES
American, European and Global
Depository Receipts . . ./6/ ./6/
Asset-Backed and Mortgage-Backed
Securities . . -- --
Bank Obligations . . . .
Convertible Securities/7/ . . . .
Corporate Debt Obligations . . ./8/ ./8/
Equity Securities 45-65 65+ 90+ 90+
Emerging Market Securities 20 25 -- --
Fixed Income Securities/9/ 25+ 35 ./8/ ./8/
Foreign Securities 20 25 ./10/ ./10/
Foreign Government Securities 10 -- -- --
Municipal Securities . -- -- --
Non-Investment Grade Fixed Income
Securities 10/11/ 10/12/ -- --
Real Estate Investment Trusts . . . .
Stripped Mortgage Backed
Securities . -- -- --
Structured Securities . . . .
Temporary Defensive Investments 100 100 35 35
U.S. Government Securities . . . .
Yield Curve Options and Inverse
Floating Rate Securities . -- -- --
- ------------------------------------------------------------------------------
</TABLE>
6 The CORE Funds may not invest in European Depository Receipts.
7 Convertible securities purchased by the Balanced Fund will be rated at the
time of investment B or better or, if unrated, determined to be of compa-
rable quality by the Investment Adviser. The CORE Funds have no minimum
rating criteria and all other Funds use the same rating criteria for con-
vertible and non-convertible debt securities.
8 Cash equivalents only.
9 Except as noted under "Non-Investment Grade Fixed Income Securities,"
fixed-income securities are rated at least investment grade (i.e., BBB or
higher by Standard & Poor's Rating Group ("Standard & Poor's") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's").
10 Equity securities of foreign issuers must be traded in the United
States.
11 Must be rated at least BB or B by Standard & Poor's or Ba or B by
Moody's.
12 May be rated BB or lower by Standard & Poor's or Ba or lower by
Moody's.
13 Must be rated B or higher by Standard & Poor's or B or higher by
Moody's.
20-A
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
CORE CORE CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
LARGE CAP SMALL CAP GROWTH GROWTH OPPORTUNITY VALUE VALUE SECURITIES
GROWTH FUND EQUITY FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
./6/ ./6/ . . . . . .
-- -- . . . . . .
. . . . . . . .
. . . . . . . .
./8/ ./8/ . . . . . .
90+ 90+ 90+ 90+ 90+ 65+ 65+ 80+
-- -- 10 10 10 25 25 15
./8/ ./8/ . 10 10 35 . 20
./10/ ./10/ 10 10 10 25 25 15
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- 10/12/ 10/12/ 10/12/ 10/13/ 35/12/ 20/12/
. . . . . . . .
-- -- -- -- -- -- -- .
. . . . . . . .
35 35 100 100 100 100 100 100
. . . . . . . .
-- -- -- -- -- -- -- .
- ------------------------------------------------------------------------------------------
</TABLE>
21-A
<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.
.. Applicable
- --Not applicable
<TABLE>
<CAPTION>
CORE CORE CORE
GROWTH LARGE CORE LARGE SMALL
AND CAP U.S. CAP CAP
PRINCIPAL BALANCED INCOME VALUE EQUITY GROWTH EQUITY
INVESTMENT RISKS FUND FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit/Default . . -- -- -- --
Foreign . . -- -- -- --
Emerging Markets . . -- -- -- --
Small Cap/REIT -- -- -- -- -- .
Stock . . . . . .
Derivatives . . . . . .
Interest Rate . . -- -- -- --
Management . . . . . .
Market . . . . . .
Liquidity Risk . . . . . .
Other . . . . . .
- ----------------------------------------------------------------------------------
</TABLE>
22-A
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
<TABLE>
<CAPTION>
MID SMALL REAL
CAPITAL STRATEGIC GROWTH CAP CAP ESTATE
GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- -- -- . . .
. . . . . .
. . . . . .
-- -- -- . . --
. . . . . .
. . . . . .
-- -- -- . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
- -------------------------------------------------------------------------------------------
</TABLE>
23-A
<PAGE>
All Funds:
..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.
..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
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in 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
with these investment categories, will shrink or disappear suddenly and with-
out 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."
Specific 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 special risks not typically associated with domestic
issuers. Losses may result because of less foreign government regulation, less
public information and less economic, political and social stability. Losses
may also result from the imposition of exchange controls, confiscations and
other government restrictions. A
24-A
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
Fund will also be subject to the risk of negative foreign currency rate fluc-
tuations. Foreign risks will normally be greatest when a Fund invests in
issuers located in emerging countries.
..EMERGING MARKETS RISK--The securities markets of Asian, Latin American, East-
ern European, African and other emerging countries are less liquid, are espe-
cially subject to greater price volatility, have smaller market capitaliza-
tions, have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the securi-
ties markets of more developed countries. Further, investment in equity secu-
rities 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.
..SMALL CAP STOCK AND REIT RISK--The securities of small capitalization stocks
and REITs involve greater risks than those associated with larger, more estab-
lished companies and may be subject to more abrupt or erratic price movements.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop in
price.
More information about the Fund's 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.
25-A
<PAGE>
Fund Performance
HOW THE FUNDS HAVE PERFORMED
The bar chart and table below provide an indication of the risks of invest-
ing in a Fund by showing: (a) changes in the performance of a Fund's Class A
Shares from year to year and (b) how the average annual returns of a Fund's
Class A, B and C Shares compare to those of broad-based securities market
indices. The bar chart and table assume reinvestment of dividends and dis-
tributions. A Fund's past performance is not necessarily an indication of
how the Fund will perform in the future. The average annual total return
calculation reflects a maximum initial sales charge of 5.5% for Class A
Shares, the assumed contingent deferred sales charge ("CDSC") for Class B
Shares (5% maximum declining to 0% after six years), and the assumed CDSC
for Class C Shares (1% if redeemed within 12 months of purchase). The bar
chart does not reflect the sales loads applicable to Class A Shares. If the
sales loads were reflected, returns would be less. Performance reflects
expense limitations in effect. If expense limitations were not in place, a
Fund's performance would have been reduced. The CORE Large Cap Value and
Real Estate Securities Funds did not commence operations until December 31,
1998 and July 27, 1998, respectively. The Strategic Growth and Growth Oppor-
tunities Funds had not commenced operations as of the date of this Prospec-
tus. Since these Funds have less than one calendar year's performance, no
performance information is provided in this section.
2
<PAGE>
Balanced Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR 3 YEARS SINCE INCEPTION
------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (INCEPTION 10/12/94)
Including Sales Charges % % %
S&P 500 Index* % % %
Lehman Brothers Aggregate Bond Index** % % %
------------------------------------------------------------------------
CLASS B (INCEPTION 5/1/96)
Including CDSC % N/A %
S&P 500 Index* % N/A %
Lehman Brothers Aggregate Bond Index** % N/A %
------------------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % N/A %
S&P 500 Index* % N/A %
Lehman Brothers Aggregate Bond Index** % N/A %
------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index of bond
prices. The Index figures do not reflect any fees or expenses.
3
<PAGE>
FUND PERFORMANCE
Growth and Income Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (INCEPTION 2/5/93)
Including Sales Charges % % %
S&P 500 Index* % % %
------------------------------------------------------------
CLASS B (INCEPTION 5/1/96)
Including CDSC % N/A %
S&P 500 Index* % N/A %
------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % N/A %
S&P 500 Index* % N/A %
------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
4
<PAGE>
CORE U.S. Equity Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q2 ' %
Worst Quarter
Q ' %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (INCEPTION 5/24/91)
Including Sales Charges % % %
S&P 500 Index* % % %
------------------------------------------------------------
CLASS B (INCEPTION 5/1/96)
Including CDSC % N/A %
S&P 500 Index* % % %
------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % N/A %
S&P 500 Index* % N/A %
------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
5
<PAGE>
FUND PERFORMANCE
CORE Large Cap Growth Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '98 %
Worst Quarter
Q '98 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------
<S> <C> <C>
CLASS A (INCEPTION 5/1/97)
Including Sales Charges % %
Russell 1000 Growth Index* % %
----------------------------------------------------
CLASS B (INCEPTION 5/1/97)
Including CDSC % %
Russell 1000 Growth Index* % %
----------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % %
Russell 1000 Growth Index* % %
----------------------------------------------------
</TABLE>
* The Russell 1000 Growth Index is an unmanaged index of common stock prices.
The Index figures do not reflect any fees or expenses.
6
<PAGE>
CORE Small Cap Equity Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '98 %
Worst Quarter
Q '98 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------
<S> <C> <C>
CLASS A (INCEPTION 8/15/97)
Including Sales Charges % %
Russell 2000 Index* % %
----------------------------------------------------
CLASS B (INCEPTION 8/15/97)
Including CDSC % %
Russell 2000 Index* % %
----------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % %
Russell 2000 Index* % %
----------------------------------------------------
</TABLE>
* The Russell 2000 Index is an unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
7
<PAGE>
FUND PERFORMANCE
Capital Growth Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (INCEPTION 4/20/90)
Including Sales Charges % % %
S&P 500 Index* % % %
------------------------------------------------------------
CLASS B (INCEPTION 5/1/96)
Including CDSC % N/A %
S&P 500 Index* % N/A %
------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % N/A %
S&P 500 Index* % N/A %
------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
8
<PAGE>
Mid Cap Value Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '98 %
Worst Quarter
Q '98 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------
<S> <C> <C>
CLASS A (INCEPTION 8/15/97)
Including Sales Charges % %
Russell Midcap Value Index* % %
Russell Midcap Index* % %
----------------------------------------------------
CLASS B (INCEPTION 8/15/97)
Including CDSC % %
Russell Midcap Value Index* % %
Russell Midcap Index* % %
----------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % %
Russell Midcap Value Index* % %
Russell Midcap Index* % %
----------------------------------------------------
</TABLE>
* The Russell Midcap Value and the Russell Midcap indices unmanaged indices
of common stock prices. The figures for the indices do not reflect any fees
or expenses.
9
<PAGE>
FUND PERFORMANCE
Small Cap Value Fund
TOTAL RETURN
CALENDAR YEAR (CLASS A)
- --------------------------------------------------------------------------------
The total
return for
Class A Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998 1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (INCEPTION 10/22/92)
Including Sales Charges % % %
Russell 2000 Value Index* % % %
Russell 2000 Index* % % %
-------------------------------------------------------------
CLASS B (INCEPTION 5/1/96)
Including CDSC % N/A %
Russell 2000 Value Index* % N/A %
Russell 2000 Index* % N/A %
-------------------------------------------------------------
CLASS C (INCEPTION 8/15/97)
Including CDSC % N/A %
Russell 2000 Value Index* % N/A %
Russell 2000 Index* % N/A %
-------------------------------------------------------------
</TABLE>
* The Russell 2000 Value and the Russell 2000 indices are unmanaged indices
of common stock prices. The figures for the indices do not reflect any fees
or expenses.
10
<PAGE>
[This page intentionally left blank]
11
<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>
BALANCED 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.65% 0.65% 0.65%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.43% 0.43% 0.43%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.33% 2.08% 2.08%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
BALANCED 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 0.65% 0.65% 0.65%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.20% 0.20% 0.20%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.10% 1.85% 1.85%
------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
GROWTH AND INCOME 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.70% 0.70% 0.70%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.27% 0.27% 0.27%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.22% 1.97% 1.97%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
GROWTH AND INCOME 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 0.70% 0.70% 0.70%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.24% 0.24% 0.24%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.19% 1.94% 1.94%
------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
CORE LARGE CAP VALUE
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.60% 0.60% 0.60%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.71% 0.71% 0.71%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.56% 2.31% 2.31%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
CORE LARGE CAP VALUE
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 0.60% 0.60% 0.60%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.19% 0.19% 0.19%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.04% 1.79% 1.79%
------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
CORE U.S. EQUITY 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.75% 0.75% 0.75%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.27% 0.27% 0.27%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.27% 2.02% 2.02%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
CORE U.S. EQUITY 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 0.70% 0.70% 0.70%
Distribution and Service Fees 0.85% 1.00% 1.00%
Other Expenses/9/ 0.19% 0.19% 0.19%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.14% 1.89% 1.89%
------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
CORE LARGE CAP GROWTH
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.75% 0.75% 0.75%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.37% 0.37% 0.37%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.37% 2.12% 2.12%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
CORE LARGE CAP GROWTH
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 0.80% 0.80% 0.80%
Distribution and Service Fees 0.23% 1.00% 1.00%
Other Expenses/9/ 0.19% 0.19% 0.19%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations)* 1.09% 1.79% 1.79%
------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
CORE SMALL CAP EQUITY
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.85% 0.85% 0.85%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.63% 0.63% 0.63%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.73% 2.48% 2.48%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
CORE SMALL CAP EQUITY
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 0.85% 0.85% 0.85%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.23% 0.23% 0.23%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.33% 2.08% 2.08%
------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
CAPITAL GROWTH 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 Expenses/9/ 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.50% 2.25% 2.25%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
CAPITAL GROWTH 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 Expenses/9/ 0.19% 0.19% 0.19%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.44% 2.19% 2.19%
------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
STRATEGIC GROWTH 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.80% 0.80% 0.80%
Distribution and Service Fees 0.50% 1.00% 1.00%
Other Expenses/9/ 0.84% 0.84% 0.84%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 2.34% 2.84% 2.84%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
STRATEGIC GROWTH 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 0.80% 0.80% 0.80%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ --% --% --%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) --% --% --%
------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
GROWTH OPPORTUNITIES
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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.85% 0.85% 0.85%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ -- % -- % -- %
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* -- % -- % -- %
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
GROWTH OPPORTUNITIES
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 0.85% 0.85% 0.85%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ --% --% --%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) --% --% --%
------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
MID CAP VALUE 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS):/6/
Management Fees 0.75% 0.75% 0.75%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.31% 0.31% 0.31%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.31% 2.06% 2.06%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
MID CAP VALUE 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 0.75% 0.75% 0.75%
Distribution and Service Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.29% 0.29% 0.29%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.29% 2.04% 2.04%
------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Fund Fees and Expenses continued
<TABLE>
<CAPTION>
SMALL CAP VALUE 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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 Expenses/9/ 0.28% 0.28% 0.28%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.53% 2.28% 2.28%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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>
SMALL CAP VALUE 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 Expenses/9/ 0.25% 0.25% 0.25%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.50% 2.25% 2.25%
------------------------------------------------------------------------------
</TABLE>
22
<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/ None/1/ 5.0%/3/ 1.0%/4/
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None
Redemption Fees/5/ None None None
Exchange Fees/5/ 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 Expenses/9/ 0.73% 0.73% 0.73%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses* 1.98% 2.73% 2.73%
- --------------------------------------------------------------------------------
</TABLE>
See page 24 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 expense waivers and 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 Fees 0.25% 1.00% 1.00%
Other Expenses/9/ 0.19% 0.19% 0.19%
------------------------------------------------------------------------------
Total Fund Operating Expenses (after current waivers
and expense limitations) 1.44% 2.19% 2.19%
------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Fund Fees and Expenses continued
/1/The maximum sales charge is a percentage of the offering price. A contin-
gent deferred sales charge ("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 Fund's annual operating expenses have been restated to reflect current
fees, except for the CORE Large Cap Value, Strategic Growth and Growth Oppor-
tunities Funds whose expenses are estimated for the current fiscal year.
/7/The Investment Adviser has voluntarily agreed not to impose a portion of
the management fee on the CORE U.S. Equity Fund and the CORE Large Cap Growth
Fund equal to 0.05% and 0.15%, respectively. AS A RESULT OF FEE WAIVERS, THE
CURRENT MANAGEMENT FEES OF THE CORE U.S. EQUITY FUND AND CORE LARGE CAP
GROWTH FUND ARE 0.70% AND 0.60%, RESPECTIVELY, OF SUCH FUND'S AVERAGE DAILY
NET ASSETS. THE WAIVERS MAY BE TERMINATED AT ANY TIME AT THE OPTION OF THE
INVESTMENT ADVISER.
/8/Reflects the amount of distribution and service fees. Total distribution
and service fees may not exceed, in the aggregate, 0.50% of the Real Estate
Securities Fund's average daily net assets.
/9/"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>
Balanced 0.01%
Growth and
Income 0.05%
CORE Large Cap
Value 0.00%
CORE U.S. Equity 0.00%
CORE Large Cap
Growth 0.00%
CORE Small Cap
Equity 0.04%
Capital Growth 0.00%
Strategic Growth 0.00%
Growth
Opportunities 0.00%
Mid Cap Value 0.10%
Small Cap Value 0.06%
Real Estate
Securities 0.00%
</TABLE>
24
<PAGE>
FUND FEES AND EXPENSES
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 5 YEARS 10 YEARS
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
GROWTH AND INCOME
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
CORE LARGE CAP VALUE
Class A Shares $ $ N/A N/A
Class B Shares
- Assuming complete
redemption at end of
period $ $ N/A N/A
- Assuming no redemption $ $ N/A N/A
Class C Shares
- Assuming complete
redemption at end of
period $ $ N/A N/A
- Assuming no redemption $ $ N/A N/A
- ---------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
CORE U.S. EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
CORE LARGE CAP GROWTH
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
CORE SMALL CAP EQUITY
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
CAPITAL GROWTH
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
STRATEGIC GROWTH
Class A Shares $ $ N/A N/A
Class B Shares
- Assuming complete
redemption at end of
period $ $ N/A N/A
- Assuming no redemption $ $ N/A N/A
Class C Shares
- Assuming complete
redemption at end of
period $ $ N/A N/A
- Assuming no redemption $ $ N/A N/A
- ---------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
GROWTH OPPORTUNITIES
Class A Shares $ $ N/A N/A
Class B Shares
- - Assuming complete
redemption at end of
period $ $ N/A N/A
- - Assuming no redemption $ $ N/A N/A
Class C Shares
- - Assuming complete
redemption at end of
period $ $ N/A N/A
- - Assuming no redemption $ $ N/A N/A
- ---------------------------------------------------------
MID CAP VALUE
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
SMALL CAP VALUE
Class A Shares $ $ $ $
Class B Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
Class C Shares
- Assuming complete
redemption at end of
period $ $ $ $
- Assuming no redemption $ $ $ $
- ---------------------------------------------------------
REAL ESTATE SECURITIES
Class A Shares $ $ N/A N/A
Class B Shares
- - Assuming complete
redemption at end of
period $ $ N/A N/A
- - Assuming no redemption $ $ N/A N/A
Class C Shares
- - Assuming complete
redemption at end of
period $ $ N/A N/A
- - Assuming no redemption $ $ N/A N/A
- ---------------------------------------------------------
</TABLE>
27
<PAGE>
Fund Fees and Expenses continued
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?"
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
inquiries 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.
28
<PAGE>
Service Providers
INVESTMENT ADVISERS
<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
----------------------------------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM") Balanced
One New York Plaza Growth and Income
New York, New York 10004 CORE Large Cap Value
CORE Large Cap Growth
CORE Small Cap Equity
Strategic Growth
Growth Opportunities
Mid Cap Value
Small Cap Value
Real Estate Securities
----------------------------------------------------------------------
Goldman Sachs Funds Management, L.P. ("GSFM") CORE U.S. Equity
One New York Plaza Capital Growth
New York, New York 10004
----------------------------------------------------------------------
</TABLE>
GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. GSFM, a registered investment adviser since
1990, is a Delaware limited partnership which is an affiliate of Goldman
Sachs. As of December 31, 1998, GSAM and GSFM, together with their affili-
ates, acted as investment adviser or distributor for assets in excess of
$195 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
1-B
<PAGE>
..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
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>
FOR THE FISCAL YEAR OR PERIOD
FUND CONTRACTUAL RATE ENDED JANUARY 31, 1999
-----------------------------------------------------------------------
<S> <C> <C>
GSAM:
-----------------------------------------------------------------------
Balanced 0.65% %
-----------------------------------------------------------------------
Growth and Income 0.70% %
-----------------------------------------------------------------------
CORE Large Cap Value 0.60% N/A
-----------------------------------------------------------------------
CORE Large Cap Growth 0.75% %
-----------------------------------------------------------------------
CORE Small Cap Equity 0.85% %
-----------------------------------------------------------------------
Strategic Growth 0.80% N/A
-----------------------------------------------------------------------
Growth Opportunities 0.85% N/A
-----------------------------------------------------------------------
Mid Cap Value 0.75% %
-----------------------------------------------------------------------
Small Cap Value 1.00% %
-----------------------------------------------------------------------
Real Estate Securities 1.00% %
-----------------------------------------------------------------------
GSFM:
-----------------------------------------------------------------------
CORE U.S. Equity 0.70% %
-----------------------------------------------------------------------
Capital Growth 1.00% %
-----------------------------------------------------------------------
</TABLE>
The difference, if any, between the stated fees and the actual fees paid by
the Funds reflects that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled. The Investment
Adviser may discontinue or modify any such voluntary limitations in the
future at its discretion.
2-B
<PAGE>
SERVICE PROVIDERS
FUND MANAGERS
M. Roch Hillenbrand, a Managing Director of Goldman, Sachs & Co., is the
Head of Global Equities for Goldman Sachs Asset Management, overseeing U.S.,
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. Roch is also Presi-
dent of Commodities Corporation LLC, of which Goldman, Sachs & Co. is the
parent company. Over the course of his 18-year career at Commodities Corpo-
ration, Roch has had extensive experience in dealing with internal and
external investment managers who have managed a range of futures and equi-
ties strategies across multiple markets, using a variety of styles.
Value Team
..Thirteen portfolio managers/analysts compose the Investment Adviser's value
investment team
..Multi-sector focus provides a balanced perspective
..Across all value products, the Investment Adviser leverages the industry
research expertise of its small, mid and large cap investment teams
Value Team
<TABLE>
<CAPTION>
YEARS
FUND PRIMARILY
NAME AND TITLE RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Eileen A. PORTFOLIO SINCE MS. APTMAN JOINED THE
Aptman MANAGER-- 1996 INVESTMENT ADVISER IN 1993.
VICE PRESIDENT MID CAP VALUE 1997
SMALL CAP VALUE
- -------------------------------------------------------------------------------
Paul D. Farrell SENIOR PORTFOLIO SINCE MR. FARRELL JOINED THE
MANAGING MANAGER-- SMALL 1992 INVESTMENT ADVISER IN 1991. IN
DIRECTOR CAP VALUE 1998 1998, HE BECAME RESPONSIBLE FOR
MID CAP VALUE 1999 MANAGING THE INVESTMENT
GROWTH AND 1999 ADVISER'S VALUE TEAM.
INCOME
BALANCED
(EQUITY)
- -------------------------------------------------------------------------------
Matthew B. PORTFOLIO SINCE MR. MCLENNAN JOINED THE
McLennan MANAGER-- 1996 INVESTMENT ADVISER IN 1995.
VICE PRESIDENT SMALL CAP VALUE 1998 FROM 1994 TO 1995, HE
MID CAP VALUE WORKED IN THE INVESTMENT BANKING
DIVISION OF GOLDMAN SACHS
IN AUSTRALIA. FROM 1991 TO 1994,
MR. MCLENNAN WORKED AT
QUEENSLAND INVESTMENT
CORPORATION IN AUSTRALIA.
- -------------------------------------------------------------------------------
Karma Wilson PORTFOLIO SINCE MS. WILSON JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER IN 1994.
BALANCED 1998 PRIOR TO 1994, SHE WAS AN
(EQUITY) 1998 INVESTMENT ANALYST WITH
GROWTH AND BANKERS TRUST AUSTRALIA LTD.
INCOME
MID CAP VALUE
- -------------------------------------------------------------------------------
</TABLE>
3-B
<PAGE>
Quantitative Equity Team
..A stable and growing team supported by an extensive internal staff
..Access to the research ideas of Goldman Sachs' renowned Global Investment
Research Department
..More than $19 billion in equities currently under management
Quantitative Equity Team
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ---------------------------------------------------------------------------------
<C> <C> <C> <S>
Melissa Brown PORTFOLIO SINCE MS. BROWN JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER IN 1998.
CORE LARGE CAP 1998 FROM 1984 TO 1998, SHE WAS THE
VALUE 1998 DIRECTOR OF QUANTITATIVE EQUITY
CORE U.S. EQUITY 1998 RESEARCH AND SERVED ON THE
CORE LARGE CAP INVESTMENT POLICY COMMITTEE AT
GROWTH PRUDENTIAL SECURITIES.
CORE SMALL CAP
EQUITY
- ---------------------------------------------------------------------------------
Kent A. Clark SENIOR PORTFOLIO SINCE MR. CLARK JOINED THE
MANAGING MANAGER--CORE 1996 INVESTMENT ADVISER IN 1992.
DIRECTOR U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
Robert C. Jones SENIOR PORTFOLIO SINCE MR. JONES JOINED THE
MANAGING MANAGER--CORE 1991 INVESTMENT ADVISER IN 1989.
DIRECTOR U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
Victor H. SENIOR PORTFOLIO SINCE MR. PINTER JOINED THE
Pinter MANAGER--CORE 1996 INVESTMENT ADVISER IN 1990.
VICE PRESIDENT U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
</TABLE>
Growth Equity Investment Team
..17 year consistent investment style applied through diverse and complete
market cycles
..More than $8 billion in equities currently under management
..More than 150 client account relationships
..A portfolio management and analytical team with more than 130 years com-
bined investment experience
4-B
<PAGE>
SERVICE PROVIDERS
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 PORTFOLIO MANAGER-- SINCE MR. ADLER JOINED THE
VICE PRESIDENT BALANCED (EQUITY) 1997 INVESTMENT ADVISER IN
CAPITAL GROWTH 1997 1997.
STRATEGIC GROWTH 1999 FROM 1990 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS
A PORTFOLIO MANAGER AT
LIBERTY
INVESTMENT MANAGEMENT,
INC. ("LIBERTY").
- ------------------------------------------------------------------------------------------
Robert G. SENIOR PORTFOLIO MANAGER-- SINCE MR. COLLINS JOINED THE
Collins CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1991 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS
A PORTFOLIO MANAGER AT
LIBERTY.
HIS PAST EXPERIENCES
INCLUDE WORK AS A
SPECIAL SITUATIONS
ANALYST WITH
RAYMOND JAMES &
ASSOCIATES FOR
FIVE YEARS.
- ------------------------------------------------------------------------------------------
Herbert E. SENIOR PORTFOLIO MANAGER-- SINCE MR. EHLERS JOINED THE
Ehlers CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
MANAGING BALANCED (EQUITY) 1998 1997.
DIRECTOR STRATEGIC GROWTH 1999 FROM 1994 TO 1997, HE
GROWTH OPPORTUNITIES 1999 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 CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1990 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY AND ITS
PREDECESSOR FIRM, EAGLE.
- ------------------------------------------------------------------------------------------
David G. Shell PORTFOLIO MANAGER-- SINCE MR. SHELL JOINED THE
VICE PRESIDENT CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1987 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY
AND ITS PREDECESSOR
FIRM, EAGLE.
- ------------------------------------------------------------------------------------------
Ernest C. PORTFOLIO MANAGER-- SINCE MR. SEGUNDO JOINED THE
Segundo, Jr. CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1992 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY.
- ------------------------------------------------------------------------------------------
</TABLE>
5-B
<PAGE>
Fixed-Income Portfolio Management Team
..Fixed-income portfolio management is comprised of a deep team of sector
specialists.
..The team strives to maximize the risk-adjusted returns by de-emphasizing
interest and anticipation and focusing on security selection and sector
allocation
..The team manages approximately $40 billion in fixed-income assets for
retail, institutional and high net worth clients.
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Jonathan A. SENIOR PORTFOLIO SINCE MR. BEINNER JOINED THE
Beinner MANAGER -- 1994 INVESTMENT ADVISER IN 1990.
MANAGING BALANCED (FIXED-
DIRECTOR AND INCOME)
CO-HEAD U.S.
FIXED INCOME
- --------------------------------------------------------------------------------
Richard C. Lucy SENIOR PORTFOLIO SINCE MR. LUCY JOINED THE INVESTMENT
MANAGING MANAGER -- 1994 ADVISER IN 1992.
DIRECTOR AND BALANCED (FIXED-
CO-HEAD U.S. INCOME)
FIXED INCOME
- --------------------------------------------------------------------------------
</TABLE>
6-B
<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
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Herbert E. SENIOR PORTFOLIO MANAGER-- SINCE MR. EHLERS JOINED THE
Ehlers REAL ESTATE SECURITIES 1998 INVESTMENT ADVISER IN
MANAGING 1997.
DIRECTOR 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.
- ------------------------------------------------------------------------------------------
Elizabeth PORTFOLIO MANAGER-- SINCE MS. GROVES JOINED THE
Groves REAL ESTATE SECURITIES 1998 INVESTMENT ADVISER IN
VICE PRESIDENT 1998. HER PREVIOUS
EXPERIENCE INCLUDES 12
YEARS IN THE REAL ESTATE
AND REAL ESTATE FINANCE
BUSINESS. FROM 1991 TO
1997, SHE WORKED IN THE
REAL ESTATE DEPARTMENT
OF THE INVESTMENT
BANKING DIVISION OF
GOLDMAN SACHS, WHERE SHE
WAS RESPONSIBLE FOR BOTH
PUBLIC AND PRIVATE
CAPITAL MARKET
TRANSACTIONS.
- ------------------------------------------------------------------------------------------
Mark Howard- PORTFOLIO MANAGER-- SINCE MR. HOWARD-JOHNSON
Johnson REAL ESTATE SECURITIES 1998 JOINED THE INVESTMENT
VICE PRESIDENT ADVISER IN 1998. HIS
PREVIOUS EXPERIENCE
INCLUDES 15 YEARS IN THE
REAL ESTATE FINANCE
BUSINESS. FROM 1996 TO
1998, HE WAS THE SENIOR
EQUITY ANALYST FOR
BOSTON FINANCIAL,
RESPONSIBLE FOR THE
PIONEER REAL ESTATE
SHARES FUND. PRIOR TO
JOINING BOSTON
FINANCIAL, FROM 1994 TO
1996, MR. HOWARD-JOHNSON
WAS A REAL ESTATE
SECURITIES ANALYST FOR
THE PENOBSCOT GROUP,
INC., ONE OF ONLY TWO
INDEPENDENT RESEARCH
FIRMS IN THE PUBLIC REAL
ESTATE SECURITIES
BUSINESS. FOR FIVE YEARS
PRIOR TO THIS, HE HELD
SENIOR MANAGEMENT
POSITIONS WITHIN VARIOUS
REAL ESTATE DIVISIONS OF
THE FLEET FINANCIAL
GROUP.
- ------------------------------------------------------------------------------------------
</TABLE>
7-B
<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," which may lead to computer shutdowns or
errors (com-
8-B
<PAGE>
SERVICE PROVIDERS
monly known as the "Year 2000 Problem"). To the extent these systems conduct
forward-looking calculations, these computer problems may occur prior to
January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to
process securities trades, price securities, provide shareholder account
services and otherwise conduct normal business operations if the Investment
Adviser or other Fund service providers do not adequately address this 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 appropri-
ately take into account available information concerning the Year 2000 pre-
paredness of the issuers of securities held by the Funds. The Investment
Adviser may obtain such Year 2000 information from various sources which
the Investment Adviser believes to be reliable, including the issuers' pub-
lic regulatory filings. However, the Investment Adviser is not in a posi-
tion 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.
9-B
<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 exchanges in 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>
Balanced QUARTERLY ANNUALLY
- ------------------------------------------------------
Growth and Income QUARTERLY ANNUALLY
- ------------------------------------------------------
CORE Large Cap Value QUARTERLY ANNUALLY
- ------------------------------------------------------
CORE U.S. Equity ANNUALLY ANNUALLY
- ------------------------------------------------------
CORE Large Cap Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
CORE Small Cap Equity ANNUALLY ANNUALLY
- ------------------------------------------------------
Capital Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
Strategic Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
Growth Opportunities ANNUALLY ANNUALLY
- ------------------------------------------------------
Mid Cap Value ANNUALLY ANNUALLY
- ------------------------------------------------------
Small Cap Value ANNUALLY ANNUALLY
- ------------------------------------------------------
Real Estate Securities QUARTERLY ANNUALLY
- ------------------------------------------------------
</TABLE>
10-B
<PAGE>
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.
11-B
<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
OR
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 cheques 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.
1-C
<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 AGGREGATE ACROSS FUNDS Class A No limit
------------------
Class B $250,000
------------------
Class C $1,000,000
</TABLE>
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
2-C
<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
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.
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 discretion, makes an
adjustment in light of
3-C
<PAGE>
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 reallowance may be changed periodically. During special promo-
tions, the entire sales charge may be reallowed to Authorized Dealers.
Authorized Dealers to whom substantially the entire sales charge is
reallowed may be deemed to be "underwriters" under the Securities Act of
1933.
** 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 cal-
endar month in which such purchase was made, a CDSC of 1% may be imposed
upon the plan sponsor or the third party administrator. In addition,
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 pur-
chase was made.
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<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
.Effective May, 1, 1999, have at the time of purchase aggregate assets of
at least $2,000,000;
5-C
<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 Fund's 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 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. The Additional Statement has more information about the Statement
of Intention.
6-C
<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 part to defray the Distributor's expenses related to providing dis-
tribution-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 Dealers.
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
7-C
<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.
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.
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");
8-C
<PAGE>
SHAREHOLDER GUIDE
..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 Shares will cause your Class B Shares (until con-
version to Class A Shares) to have a higher expense ratios, and thus, lower
performance and lower dividend 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
9-C
<PAGE>
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 available to
work for you from the time you make your initial investment. However, 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.
10-C
<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
4900 Sears Tower-60th Floor
Chicago, Illinois 60606-6372
-------------------------------------------------------------------------
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.
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.
The Trust may accept telephone redemption instructions from any person iden-
tifying himself or herself as the owner of an account or the owner's regis-
tered representative where
11-C
<PAGE>
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.
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<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 assumes 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.
What Else Do I Need To Know About Redemptions?
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.
The Trust reserves the right to:
..Redeem your shares if your account balance is less than $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 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
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<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 redemption 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
.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
privileges on your Account Application:
.1-800-526-7384 (8:00 a.m. to 4:00 p.m.
New York time)
-----------------------------------------------------------------------
</TABLE>
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<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
originally 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 sat-
isfy 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 regis-
tered 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.
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<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 signatures 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.
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<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
17-C
<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
18-C
<PAGE>
SHAREHOLDER GUIDE
this arrangement. 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 1940 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.
19-C
<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.
At any time, a portion of a Fund's NAV per share may be represented by
undistributed income or realized or unrealized appreciation of the Fund's
portfolio securities. Therefore, subsequent distributions on a Fund's shares
may be taxable to you, even if the NAV of your shares is, as a result,
reduced below the cost of those shares and the distributions represent a
return of your purchase price.
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. Under certain circum-
stances, the Funds may make an election to treat a proportionate amount of
such taxes as constituting a distribution to you, which would allow you
either (1) to credit such proportionate amount of taxes against your U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
1-D
<PAGE>
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.
There are certain tax requirements that all 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.
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.
2-D
<PAGE>
Appendix A
Additional Information on Portfolio Risks, Securities and Techniques
The Funds will be subject to the risks associated with equity securities. "Eq-
uity 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 lia-
bility companies and similar enterprises, warrants and stock purchase rights.
In general, stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions. According-
ly, the value of the stocks that a Fund holds may decline over short or
extended periods. The stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The vol-
atility 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 investments.
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. Conversely, 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 investment. Call risk and exten-
sion 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 (extension risk). In general, if interest rates
on new mortgage loans fall sufficiently below the interest rates on existing
outstanding mortgage loans, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the interest
rates on existing outstanding mortgage loans, the rate of prepayment would be
expected to decrease. In either case, a change in the prepayment rate can
result in losses to investors.
The Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover (100% or more) involves correspondingly greater expenses which must be
borne by a Fund and its shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund's portfolio securities,
excluding secu-
3-D
<PAGE>
rities having a maturity at the date of purchase of one year or less. See
"Financial Highlights" in Appendix B for a statement of the Funds' historical
portfolio turnover rates.
The following sections provide further information on certain types of securi-
ties and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the Additional State-
ment, which is available upon request. Among other things, the Additional
Statement describes certain fundamental investment restrictions that cannot be
changed without shareholder approval. You should note, however, that all poli-
cies not specifically designated as fundamental are non-fundamental and may be
changed without shareholder approval. If there is a change in a Fund's invest-
ment objective, you should consider whether that Fund remains an appropriate
investment in light of your then current financial position and needs.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS. Investments in
small capitalization companies and REITs involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Among the
reasons for the greater price volatility of these investments are the less cer-
tain 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 periods 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 eco-
nomic or market conditions, or adverse investor perceptions, 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. Small capitalization companies
and REITs also often have limited 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 capitalization companies and REITs may be more difficult
to price precisely than other types of securities because of their characteris-
tics and lower trading volumes.
RISKS OF FOREIGN INVESTMENTS. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securities
of U.S. issuers. Foreign investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and changes in exchange control regulations (e.g., currency block-
age). A decline in
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<PAGE>
APPENDIX A
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 partic-
ipating nations in the European Economic and Monetary Union ("EU") presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 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 in the European
Union, such as the United Kingdom and Denmark, into the euro and the admission
of other non-EU countries such as Poland, Latvia and Lithuania as members of
the EU may have an impact on the euro. These or other factors, including polit-
ical and economic risks, could cause market disruptions before or after the
introduction of the euro, and could adversely affect the value of securities
held by the Funds.
Brokerage commissions, custodial services and other costs relating to invest-
ment in international securities markets generally are more expensive than in
the United States. In addition, clearance and settlement procedures may be dif-
ferent in foreign countries and, in certain markets, such procedures have been
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S. securi-
ties markets and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationaliza-
tion, expropriation or confiscatory taxation, imposition of withholding or
other taxes on dividend or interest payments (or, in some cases, capital
gains), limitations on the removal of funds or other
5-D
<PAGE>
assets of the Funds, political or social instability or diplomatic developments
which could affect investments in those countries.
Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.
Investment in sovereign debt obligations by certain Funds involves special
risks not present in debt obligations of corporate issuers. The issuer of the
debt or the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or pay interest when due in accor-
dance with the terms of such debt, and a Fund may have limited recourse to com-
pel 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 obliga-
tions of U.S. issuers. A sovereign debtor's willingness or ability to repay
principal and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign currency reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.
Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). Certain Funds may also invest in European Depository
Receipts ("EDRs") or other similar instruments representing securities of for-
eign 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 security.
RISKS OF EMERGING COUNTRIES. Certain Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are heightened
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 port-
folio securities in certain emerging countries may be constrained by limita-
tions 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 vol-
ume by or holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other
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APPENDIX A
service providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For exam-
ple, 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 specific class of securi-
ties which may have less advantageous terms (including price) than securities
of the issuer available for purchase by nationals. In addition, certain coun-
tries may restrict or prohibit investment opportunities in issuers or indus-
tries deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for governmental
consents. Due to restrictions on direct investment in equity securities in cer-
tain Asian countries, such as Taiwan, it is anticipated that a Fund may invest
in such countries only through other investment funds in such countries.
Many emerging countries are subject to a substantial degree of economic, polit-
ical and social instability. Governments of some emerging countries are author-
itarian in nature or have been installed or removed as a result of military
coups, while governments in other emerging countries have periodically used
force to suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging countries. Unanticipated political or social developments may result
in sudden and significant investment losses. Investing in emerging countries
involves greater risk of loss due to expropriation, nationalization, confisca-
tion 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 invest-
ment 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 addition, significant delays are common in certain markets in
registering the transfer of securities. Settlement or registration problems may
make it more difficult for a Fund to value its portfolio securities and could
cause the Fund to miss attractive investment opportunities, to have a portion
of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's inabil-
ity to complete its contractual obligations. The creditworthiness of the local
securi-
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<PAGE>
ties 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 crditworthiness of firms used
in more developed countires, thus subjecting the Fund to a greater risk of loss
if a securities firm defaults in the performance of its responsibilities.
The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries
may make a Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets (such as
the United States, Japan and most Western European countries). A Fund's invest-
ments 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, mar-
ket or political conditions, or adverse investor perceptions, 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 precisely because of their characteristics and
lower trading volumes.
Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a nega-
tive 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 barri-
ers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
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 signifi-
cant 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, structured securities and currency transac-
tions involve additional risk of loss. Loss can result from a lack of correla-
tion 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
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APPENDIX A
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) which is considered a speculative practice and
presents even greater risk of loss.
RISK 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 ordi-
nary 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 portfolio
to the extent that qualified institutional buyers become for a time uninter-
ested in purchasing these restricted securities. The purchase price and subse-
quent valuation of restricted and illiquid securities normally reflect a dis-
count, which may be significant, from the market price of comparable 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 agencies,
instrumentalities and sponsored enterprises), foreign governments, domestic and
foreign corporations, banks and other issuers. Some of these fixed-income secu-
rities are described in the next section below. Further information 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 con-
sidered medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers' capac-
ity 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.
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Certain 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 questionable 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, investment
in such
bonds will present greater speculative risks than those associated with invest-
ment 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.
This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks. Further information is provided in the Additional Statement, which is
available upon request.
CONVERTIBLE SECURITIES. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities gen-
erally offer lower interest or dividend yields than non-convertible securities
of similar quality. Convertible securities in which a Fund invests are subject
to the same rating criteria as its other investments in fixed-income securi-
ties. Convertible securities have both equity and fixed-income risk character-
istics. 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 con-
vertible security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock
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APPENDIX A
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.
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 considered a speculative
practice. Some Funds may also engage in cross-hedging by using forward contracts
in a currency dif-ferent from that in which the hedged security is denominated
or quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgement of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date.
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 con-
trols 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 obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or could force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
STRUCTURED SECURITIES. Structured securities are securities whose value is
determined by reference to changes in the value of specific currencies, inter-
est 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 secu-
rities may be positively or negatively indexed, so that appreciation of the
Reference may produce an
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increase or decrease in the interest rate or value of the security at maturity.
In addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may 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.
Structured securities include, but are not limited to, 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.
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 or securing mortgage
loans held by the REIT. REITs are dependent upon the ability of the REITs' man-
agers, and are subject to heavy cash flow dependency, 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 asso-
ciated with investments in real estate including possible declines in the value
of real estate, general and local economic conditions, environmental problems
and changes in interest rates. To the extent that assets underlying a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
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 during 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. Certain Funds 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 for-
eign securities, purchase and sell (write) put and call options on foreign cur-
rencies.
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 consid-
ered a
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<PAGE>
APPENDIX A
speculative activity). The successful use of options 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 (or currency) mar-kets.
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 other-wise
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 liquidity and credit risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts are stan-
dardized, exchange-traded contracts that provide for the sale or purchase 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 option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures con-
tract 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 foreign
exchanges.
A 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 currency
exchange rates, or to the extent applicable, otherwise manage its term struc-
ture and duration in accordance with its investment objective and policies.
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 regu-
lations of the Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations. A Fund may not pur-
chase or sell futures contracts or purchase or sell related options to seek to
increase total return, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of initial margin deposits and
premiums paid on the Fund's outstanding positions in futures and related
options entered into for the purpose of seeking to increase total return would
exceed 5% of the market value of the Fund's net assets.
Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures, unan-
ticipated changes in interest rates, securities prices or currency exchange
rates
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<PAGE>
may result in poorer overall performance than if the Fund had not entered into
any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired protec-
tion 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 writing
call options on futures is potentially unlimited and may exceed the amount of
the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in substan-
tial 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.
EQUITY SWAPS. Equity swaps allow the parties to a swap agreement to exchange
the dividend income or other components of return on an equity investment (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 invest-
ment 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 div-
idends 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. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securi-
ties 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 contract 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 sold securities may
increase before the
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<PAGE>
APPENDIX A
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 secu-rities or forward
commitments before settlement whenever the Investment Adviser deems it
appropriate.
REPURCHASE AGREEMENTS. Certain Funds may enter into repurchase agreements with
primary dealers in U.S. Government securities and banks affiliated with primary
dealers. Repurchase agreements involve the purchase of securities subject to
the seller's agreement to repurchase them at a mutually agreed upon date and
price. The repurchase price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate on
the purchased security.
If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the repurchase agreement are
less than the repurchase price and Fund's costs associated with delay and
enforcement of the repurchase agreement. In addition, in the event of bank-
ruptcy of the seller, a Fund could suffer additional losses if a court deter-
mines 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. Distribu-
tions of the income from repurchase agreements will be taxable to a Fund's
shareholders. In addition, certain Funds, together with other registered
investment companies having advisory agreements with the Investment Adviser or
any of its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. 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 col-
lateral may be invested in cash equivalents. If the Investment Adviser deter-
mines 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 or possible loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
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<PAGE>
SHORT SALES AGAINST-THE-BOX. Certain Funds 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 securi-
ties convertible into or exchangeable for, without payment of any further con-
sideration, an equal amount of the securities of the same issuer as the securi-
ties sold short.
PREFERRED STOCK, WARRANTS AND RIGHTS. Each Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an owner-
ship interest providing the holder with claims on the issuer's earnings and
assets before common stock owners but after bond owners. Unlike debt securi-
ties, 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 of other non-com-
pliance by the issuer of the preferred stock.
Warrants and other rights are options to buy a stated number of shares of com-
mon stock at a specified price at any time during the life of the warrant. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
STANDARD & POOR'S DEPOSITORY RECEIPTS. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts ("SPDRs").
SPDRs are American Stock Exchange-traded securities 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 is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including, but
not limited to, facilitating the handling 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 American Stock Exchange (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 net asset values of their underlying indi-
ces and supply and demand of WEBS on the AMEX. To date, WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating 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 require-
ments of
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<PAGE>
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 disrup-
tions affecting WEBS should occur in the future, the liquidity and value of
Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE Index could be impaired. If such disruptions were to
occur, a Fund could be required to reconsider the use of WEBS as part of its
investment strategy.
OTHER INVESTMENT COMPANIES. A Fund may invest in securities of other investment
companies subject to the limitations prescribed by the Investment Company 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 invest-
ing 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 manage-
ment fees and other expenses paid by such other investment companies. Such
other investment 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.
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<PAGE>
MORTGAGE DOLLAR ROLLS. Certain Funds may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by a Fund of securities for delivery in
the current month. The Fund simultaneously contracts 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 benefits 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 pro-
ceeds of the securities sold. Unless the benefits of a mortgage dollar roll
exceed the income, capital appreciation and gain or loss due to mortgage pre-
payments 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.
Successful use of mortgage dollar rolls depends upon the Investment Adviser's
ability to predict correctly interest rates and mortgage prepayments. If the
Investment Adviser is incorrect in its predictions, the Fund may experience a
loss. For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The Funds do not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing and
do not treat them as borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
loans secured by real property. 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 invest-
ment conduit ("REMIC") pass-through or participation certificates. CMOs provide
an investor with a specified interest in the cash flow from a pool of under-
lying mortgages or of other Mortgage-Backed Securities. CMOs are issued in mul-
tiple classes. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no princi-
pal payments will be made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. A REMIC is a CMO that qualifies for
special tax treatment under
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<PAGE>
the Code and invests in certain mortgages princi pally 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 principal pay-
ments from a pool of mortgage loans. The market value of SMBS consisting
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 mortgage loans are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
Mortgage-Backed Securities (including CMOs, REMICs and SMBS) are subject to
both call risk and extension risk as previously described. Because of these
risks, these securities can have significantly greater price and yield volatil-
ity than with traditional fixed-income securities.
The value of Mortgage-Backed Securities that are structured as pass-through
mortgage securities that are collateralized by ARMs are less likely to rise
during periods of declining interest rates to the same extent as fixed-rate
securities. This is because interest rate declines may result in accelerated
prepayments of mortgages with the result that proceeds from prepayments will be
reinvested at lower interest rates. On the other hand, during periods of rising
interest rates, the value of ARMs will lag behind changes in the market rate.
ARMs are also typically subject to maximum increases and decreases in the
interest rate adjustment which can be made on any one adjustment date, in any
one year, or during the life of the security. In the event of dramatic
increases or decreases in prevailing market interest rates, the value of a
Fund's investments in ARMs may fluctuate more substantially since these limits
may prevent the security from fully adjusting its interest rate to the prevail-
ing market rates.
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 prepay-
ments of principal on the underlying loans. During periods of declining inter-
est rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, 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,
2-E
<PAGE>
and its ability to reinvest the returns of principal at comparable yields is
subject to generally 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 security interest in collateral that is comparable to mortgage
assets. There is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities. 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.
ZERO COUPON, DEFERRED INTEREST, PAY-IN-KIND AND CAPITAL APPRECIATION BONDS.
Zero coupon, deferred interest, pay-in-kind and capital appreciation bonds are
issued at a discount from their face value because interest payments are typi-
cally postponed until maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. The market prices of
these securities generally are more volatile than the market prices of inter-
est-bearing securities and are likely to respond to a greater degree to changes
in interest rates than interest-bearing securities having similar maturities
and credit quality.
YIELD CURVE OPTIONS. Certain Funds 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 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 present a
risk of loss even if the yield of one of the underlying securities remains con-
stant, or if the spread moves in a direction or to an extent which was not
anticipated.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Certain Funds can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions in amounts not exceeding one-third of its total assets.
Reverse repurchase agreements involve the sale of securities held by a Fund
subject to the Fund's agreement to repurchase them at a mutually agreed upon
date and price (including interest). These transactions may be entered into as
a temporary measure for emergency purposes or to meet redemption requests.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of
the transaction proceeds will be greater than the related interest expense.
Borrowings and reverse repurchase agreements involve leveraging. If the securi-
ties held by a Fund
3-E
<PAGE>
decline in value while these transactions are outstanding, the NAV of the Fund's
outstanding shares will decline in value by proportion ately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the interest income earned by a Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by a Fund will decline below the price
the Fund is obligated to pay to repurchase the securi ties, and that the
securities may not be returned to the Fund.
INTEREST RATE SWAPS, MORTGAGE SWAPS, CREDIT SWAPS, CURRENCY SWAPS AND INTEREST
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 pay-
ments. Mortgage swaps are similar to interest rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, howev-
er, 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 occur-
rence 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 and a floor that preserves a certain return within a predetermined range
of interest rates.
Certain Funds may enter into swap transactions for hedging purposes or to seek
to increase total return. The use of interest rate, mortgage, credit and cur-
rency 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 forecasts 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.
4-E
<PAGE>
Appendix C
Prior Performance of Similarly Advised Accounts of the Investment Adviser
CORE LARGE CAP VALUE FUND
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies, and strategies substantially similar to the CORE Large Cap
Value Fund. The information is provided to illustrate the past performance
of the Investment Adviser in managing substantially similar accounts as mea-
sured against the Russell 1000 Value Index and does not represent the per-
formance of the CORE Large Cap Value Fund. Investors should not consider
this performance data as a substitute for the performance of the CORE Large
Cap Value Fund nor should investors consider this data as an indication of
future performance of the CORE Large Cap Value Fund or of the Investment
Adviser. The Russell 1000 Value Index is unmanaged and investors cannot
invest directly in the index.
<TABLE>
<CAPTION>
PRIVATE ACCOUNT PRIVATE ACCOUNT PRIVATE ACCOUNT PRIVATE ACCOUNT
NET COMPOSITE NET COMPOSITE NET COMPOSITE NET COMPOSITE RUSSELL
PERFORMANCE PERFORMANCE PERFORMANCE PERFORMANCE 1000
(INCLUDING CLASS A (INCLUDING CLASS B (INCLUDING CLASS C (EXCLUDING VALUE
SALES CHARGE) SALES CHARGE) SALES CHARGE) SALES CHARGES) INDEX
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 5.28% 6.41% 10.46% 11.41% 15.64%
1997 25.56% 27.57% 31.87% 32.87% 35.18%
1996 19.35% 21.29% 25.29% 26.29% 21.64%
1995 30.34% 32.92% 36.92% 37.92% 38.35%
1994 (7.55)% (7.06)% (3.14)% (2.17)% (2.01)%
1993 10.48% 11.90% 15.90% 16.90% 18.12%
8/1/92-12/31/92 (0.41)% 0.39% 4.39% 5.39% 4.01%
- ---------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN FOR
THE
PERIODS ENDED 12/31/98
SINCE
INCEPTION
ONE YEAR 3 YEARS 5 YEARS (8/1/92)
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net
Composite Performance
(including Class A
sales charge) 5.28% 20.87% 18.95% 18.69%
Private Account Net
Composite Performance
(including Class B
sales charge) 6.41% 22.66% 20.14% 19.33%
Private Account Net
Composite Performance
(including Class C
sales charge) 10.46% 23.18% 20.33% 19.33%
Private Account Net
Composite Performance
(excluding sales
charges) 11.41% 23.18% 20.33% 19.33%
Russell 1000 Value Index 15.64% 23.88% 20.85% 19.68%
- --------------------------------------------------------------
</TABLE>
In accordance with the standards of the Association for Investment Manage-
ment and Research ("AIMR"), the Investment Adviser's composite performance
data was calculated on a time-weighted and asset-weighted total return basis
which includes realized and unrealized gains and losses plus income. The
composite performance is net of applicable investment management fees, bro-
kerage commissions, execution costs and custodial fees, without provision
for federal and state taxes, if any. Total return performance of the CORE
Large Cap Value Fund will be calculated in accordance with the regulations
of the SEC. The SEC standardized average annual total return is neither
time-weighted nor asset-weighted and is determined for specified periods by
computing the annual percentage change in the value of an initial amount
that is invested in a share class of the Fund at the maximum public offering
price. Investors should be aware that the differences in methodology between
AIMR and SEC requirements could result in different performance data for
identical time periods.
Performance reflects the deduction of the maximum 5.5% front-end sales
charge with respect to Class A Shares and the maximum contingent deferred
sales charge with respect to Class B (5%) and Class C Shares (1%). All
returns presented reflect the reinvestment of dividends and other earnings.
The weighted-average expenses of the private accounts used in calculating
the Investment Adviser's net composite performance data were 0.59%
annualized, which are lower than the estimated expenses of Class A, Class B
and Class C Shares of the CORE Large Cap Value Fund stated under "Fees and
Expenses" above. The performance of the private accounts would have been
lower if they had been subject to the expenses of the CORE Large Cap Value
Fund. In addition, the private accounts are not subject to the same diversi-
fication requirements, specific tax restrictions and investment limitations
imposed on the CORE Large Cap Value Fund by the
30
<PAGE>
Appendix C
Investment Company Act of 1940 and Subchapter M of the Internal Revenue
Code. Consequently, the performance results of the Investment Adviser's com-
posite could have been adversely affected if the private accounts had been
regulated as investment companies under the federal securities laws.
31
<PAGE>
Appendix D
Prior Performance of Similarly Advised Accounts of the Investment Adviser
STRATEGIC GROWTH
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies, and strategies substantially similar to the Strategic
Growth Fund. The information is provided to illustrate the past performance
of the Investment Adviser in managing substantially similar accounts as mea-
sured against the S&P 500 Index and does not represent the performance of
the Strategic Growth Fund. Investors should not consider this performance
data as a substitute for the performance of the Strategic Growth Fund nor
should investors consider this data as an indication of future performance
of the Strategic Growth Fund or of the Investment Adviser. The S&P 500 Index
is unmanaged and investors cannot invest directly in the index.
<TABLE>
<CAPTION>
PRIVATE ACCOUNT PRIVATE ACCOUNT PRIVATE ACCOUNT PRIVATE ACCOUNT
NET COMPOSITE NET COMPOSITE NET COMPOSITE NET COMPOSITE
PERFORMANCE PERFORMANCE PERFORMANCE PERFORMANCE
(INCLUDING CLASS A (INCLUDING CLASS B (INCLUDING CLASS C (EXCLUDING S&P 500
SALES CHARGE) SALES CHARGE) SALES CHARGE) SALES CHARGES) INDEX
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 % % % % %
1997 % % % % %
1996 % % % % %
1995 % % % % %
1994 % % % % %
1993 % % % % %
8/1/92-12/31/92 % % % % %
- ---------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Appendix C
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN FOR
THE
PERIODS ENDED 12/31/98
SINCE
INCEPTION
ONE YEAR 3 YEARS 5 YEARS (8/1/92)
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net
Composite Performance
(including Class A
sales charge) % % % %
Private Account Net
Composite Performance
(including Class B
sales charge) % % % %
Private Account Net
Composite Performance
(including Class C
sales charge) % % % %
Private Account Net
Composite Performance
(excluding sales
charges) % % % %
S&P 500 Index % % % %
- ------------------------------------------------------------
</TABLE>
In accordance with the standards of the Association for Investment Management
and Research ("AIMR"), the Investment Adviser's composite performance data was
calculated on a time-weighted and asset-weighted total return basis which
includes realized and unrealized gains and losses plus income. The composite
performance is net of applicable investment management fees, brokerage commis-
sions, execution costs and custodial fees, without provision for federal and
state taxes, if any. Total return performance of the Strategic Growth Fund will
be calculated in accordance with the regulations of the SEC. The SEC standard-
ized average annual total return is neither time-weighted nor asset-weighted
and is determined for specified periods by computing the annual percentage
change in the value of an initial amount that is invested in a share class of
the Fund at the maximum public offering price. Investors should be aware that
the differences in methodology between AIMR and SEC requirements could result
in different performance data for identical time periods.
Performance reflects the deduction of the maximum 5.5% front-end sales charge
with respect to Class A Shares and the maximum contingent deferred sales charge
with respect to Class B (5%) and Class C Shares (1%). All returns presented
reflect the reinvestment of dividends and other earnings. The weighted-average
expenses of the private accounts used in calculating the Investment Adviser's
net composite performance data were 0.59% annualized, which are lower than the
estimated expenses of Class A, Class B and Class C Shares of the Stragetic
Growth Fund stated under "Fees and Expenses" above. The performance of the pri-
vate accounts would have been lower if they had been subject to the expenses of
the Strategic Growth Fund. In addition, the private accounts are not subject to
the same diversification requirements, specific tax restrictions and investment
limitations imposed on the Strategic Growth
33
<PAGE>
Fund by the Investment Company Act of 1940 and Subchapter M of the Internal
Revenue Code. Consequently, the performance results of the Investment Adviser's
composite could have been adversely affected if the private accounts had been
regulated as investment companies under the federal securities laws.
34
<PAGE>
Index
<TABLE>
<C> <C> <S>
General Investment Management Approach
Fund Investment Objectives And Strategies
3 Goldman Sachs Balanced Fund
4 Goldman Sachs Growth And Income Fund
x Goldman Sachs CORE Large Cap Value Fund
5 Goldman Sachs CORE U.S. Equity Fund
6 Goldman Sachs CORE Large Cap Growth Fund
7 Goldman Sachs CORE Small Cap Equity Fund
8 Goldman Sachs Capital Growth Fund
x Goldman Sachs Strategic Growth Fund
x Goldman Sachs Growth Opportunities Fund
9 Goldman Sachs Mid Cap Value Fund
10 Goldman Sachs Small Cap Value Fund
</TABLE>
<TABLE>
<C> <C> <S>
xx Goldman Sachs Real Estate Securities Fund
Other Investment Practices and Securities
Principal Risks of the Funds
Fund Performance
12 Fund Fees and Expenses
Service Providers
Dividends
Shareholder Guide
32 How To Buy Shares
42 How To Sell Shares
47 Shareholder Services
Taxation
A-1 Appendix A - Additional Information on
Portfolio Risks, Securities and Techniques
B-1 Appendix B - Financial Highlights
C-1 Appendix C
D-1 Appendix D
</TABLE>
35
<PAGE>
Domestic Equity 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.
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 & Co., 4900 Sears Tower, Chicago, Illinois 60606
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. The Funds' investment company registration number is 811-5349.
[LOGO]
36
<PAGE>
Prospectus
INSTITUTIONAL
SHARES
April 30, 1999
- ---------------------------------------------------------------------
GOLDMAN SACHS DOMESTIC EQUITY FUNDS
- ---------------------------------------------------------------------
.Goldman Sachs
Balanced Fund
.Goldman Sachs
Growth and
Income Fund
.Goldman Sachs
CORE Large Cap
Value Fund
(INSERT ARTWORK) .Goldman Sachs
CORE U.S.
Equity Fund
.Goldman Sachs
CORE Large Cap
Growth Fund
.Goldman Sachs
CORE Small Cap
Equity Fund
.Goldman Sachs
Capital Growth
Fund
.Goldman Sachs
Strategic
Growth Fund
.Goldman Sachs
Growth
Opportunities
Fund
.Goldman Sachs
Mid Cap Value
Fund (formerly
Mid Cap Equity)
.Goldman Sachs
Small Cap Value
Fund
.Goldman Sachs
Real Estate
Securities
Fund
[LOGO OF GOLDMAN SACHS APPEARS 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.
- -------------------------------------------------
<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 Balanced,
Growth and Income, CORE Large Cap Value, CORE Large Cap Growth, CORE Small
Cap Equity, Strategic Growth, Growth Opportunities, Mid Cap Equity, Small
Cap Value and Real Estate Securities Funds. Goldman Sachs Funds Management,
L.P. serves as investment adviser to the CORE U.S. Equity and Capital Growth
Funds. Goldman Sachs Asset Management and Goldman Sachs Funds Management,
L.P. are each referred to in this Prospectus as the "Investment Adviser."
VALUE STYLE FUNDS
Goldman Sachs Value Investment Philosophy
The Investment Adviser seeks companies that are discounted due to:
..Company-specific problems that are over-discounted in the marketplace.
..Cyclically out-of-favor status.
..Unrecognized positive fundamentals.
The Investment Adviser seeks to identify value through:
..Firsthand fundamental research.
..Maintaining a long-term investment horizon.
..A team approach to decision making.
Value exists when a stock's price becomes inexpensive relative to the
company's estimated earnings and/or dividend-paying ability over the long-
term.
- --------------------------------------------------------------------------------
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.
1-A
<PAGE>
GENERAL INVESTMENT MANAGEMENT APPROACH
..Over the long-term, expect each company's stock price to ultimately 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 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.
- --------------------------------------------------------------------------------
QUANTITATIVE ("CORE") STYLE FUNDS
Goldman Sachs Quantitative Multifactor Model
The CORE Funds use the Goldman Sachs proprietary multifactor model
("Multifactor Model"), a rigorous computerized rating system, to forecast
the returns of securities held in each Fund's portfolio.
The Multifactor Model incorporates common variables covering measures of:
..VALUE (price-to-book, price-to-earnings, cash flow to enterprise value)
..MOMENTUM (earnings momentum, price momentum, sustainable growth)
..RISK (market risk, company-specific risk, earnings risk)
ALL OF THE ABOVE FACTORS ARE CAREFULLY EVALUATED WITHIN THE MULTIFACTOR
MODEL SINCE EACH HAS DEMONSTRATED A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE SECURITIES AND MARKETS THEY WERE DESIGNED TO FORECAST.
Goldman Sachs' CORE Funds provide broad foundation portfolios for investors
to build upon.
- --------------------------------------------------------------------------------
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.
2-A
<PAGE>
GENERAL INVESTMENT MANAGEMENT APPROACH
..Buys securities at a discount to the intrinsic value of the business (as-
sets and management).
..Seeks a term approach to decision making.
REIT stands for Real Estate Investment Trust
- --------------------------------------------------------------------------------
3-A
<PAGE>
Fund Investment Objectives and Strategies
Goldman Sachs Balanced Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and current income
Benchmarks: S&P 500 Index and Lehman Brothers Aggregate Bond Index
Investment Focus: Large capitalization U.S. stocks and investment grade U.S.
fixed income
Investment Style: Asset Allocation
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term growth of capital and current income.
The Fund seeks growth of capital primarily through investments in equity
securities (stocks). The Fund seeks to provide current income through
investment in fixed-income securities (bonds).
PRINCIPAL INVESTMENT STRATEGIES
Historically, stock and bond markets have often had different cycles, with
one asset class rising when the other is falling. A balanced objective seeks
to reduce the volatility associated with investing in a single market. There
is no guarantee, however, that market cycles will move in opposition to one
another or that a balanced investment program will successfully reduce vola-
tility.
Equity Securities. The Fund invests, under normal circumstances, between 45%
and 65% of its total assets in equity securities. Although the Fund's equity
investments consist primarily of publicly traded U.S. securities, the Fund
may invest up to 10% of its total assets in the equity securities of foreign
issuers, including issuers in countries with emerging markets or economies
("emerging countries") and equity securities quoted in foreign currencies.
A portion of the Fund's portfolio of equity securities may be selected pri-
marily to provide current income (includ-
4-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
ing interests in real estate investment trusts, convertible securities, pre-
ferred stocks, utility stocks, and interests in limited partnerships).
Other. The Fund invests at least 25% of its total assets in fixed-income
senior securities. The remainder of the Fund's assets are invested in other
fixed-income securities and cash.
The Fund's fixed-income securities primarily include:
..Securities issued by the U.S. Government, its agencies, instrumentalities
or sponsored enterprises
..Securities issued by corporations, banks and other issuers
..Mortgage-backed and asset-backed securities
The Fund may also invest up to 10% of its total assets in debt obligations
(U.S. dollar and non-U.S.-dollar denominated) issued or guaranteed by one or
more foreign governments or any of their political subdivisions, agencies or
instrumentalities and foreign corporations or other entities. The issuers of
these securities may be located in emerging countries.
The percentage of the portfolio invested in equity and fixed-income securi-
ties will vary from time to time as the Investment Adviser evaluates such
securities' relative attractiveness based on market valuations, economic
growth and inflation prospects. The allocation between equity and fixed-
income securities is subject to the Fund's intention to pay regular quar-
terly dividends. The amount of quarterly dividends can also be expected to
fluctuate in accordance with factors such as prevailing interest rates and
the percentage of the Fund's assets invested in fixed-income securities.
5-A
<PAGE>
Goldman Sachs
Growth and Income Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and growth of income
Benchmark: S&P 500 Index
Investment Focus: Large capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace
Investment Style: Value
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and growth of income.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
65% of its total assets in equity securities that the Investment Adviser
considers to have favorable prospects for capital appreciation and/or divi-
dend-paying ability. Although the Fund will invest primarily in publicly
traded U.S. securities, it may invest up to 25% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities that offer the potential to further the Fund's investment
objective.
6-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
CORE Large Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and dividend income
Benchmark: Russell 1000 Value Index
Investment Focus: Diversified portfolio of equity securities of large cap
U.S. issuers selling at low to modest valuations
Investment Proc- Value, enhanced by a proprietary quantitative model
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified portfolio of equity secu-
rities of large cap U.S. issuers that are selling at low to modest valua-
tions relative to general market measures, such as earnings, book value and
other fundamental accounting measures, and that are expected to have favora-
ble prospects for capital appreciation and/or dividend-paying ability.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the Russell 1000 Value Index. The Fund seeks a
portfolio comprised of companies with above average capitalizations and low
to moderate valuations as measured by price/earnings ratios, book value and
other fundamental accounting measures.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
7-A
<PAGE>
Goldman Sachs
CORE U.S. Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and dividend income
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities representing a variety of indus-
tries
Investment Style: Blend (Value and Growth), enhanced by a proprietary
quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified portfolio of large cap
and blue chip equity securities representing all major sectors of the U.S.
economy.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the S&P 500 Index. The Fund seeks a broad repre-
sentation in most major sectors of the U.S. economy and a portfolio com-
prised of companies with average long-term earnings growth expectations and
dividend yields.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
8-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
CORE Large Cap Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital; dividend income is a
secondary consideration
Benchmark: Russell 1000 Growth Index
Investment Focus: Large-cap, growth-oriented U.S. stocks
Investment Style: Growth, enhanced by a proprietary quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of large cap
U.S. issuers that are expected to have better prospects for earnings growth
than the growth rate of the general domestic economy. Dividend income is a
secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Investment Adviser emphasizes a company's growth prospects in analyzing
equity securities to be purchased by the Fund. The Fund's investments are
selected using both a variety of quantitative techniques and fundamental
research in seeking to maximize the Fund's expected return, while maintain-
ing risk, style, capitalization and industry characteristics similar to the
Russell 1000 Growth Index. The Fund seeks a portfolio comprised of companies
with above average capitalizations and earnings growth expectations and
below average dividend yields.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
9-A
<PAGE>
Goldman Sachs
CORE Small Cap Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell 2000 Index
Investment Focus: Stocks of small capitalization U.S. companies
Investment Proc- Blend (Value and Growth), enhanced by a proprietary
ess: quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of U.S. issuers
which are included in the Russell 2000 Index at the time of investment.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the Russell 2000 Index. The Fund seeks a portfo-
lio comprised of companies with small market capitalizations, strong
expected earnings growth and momentum, and better valuation and risk charac-
teristics than the Russell 2000 Index. If the issuer of a portfolio security
held by the Fund is no longer included in the Russell 2000 Index, the Fund
may, but is not required to, sell the security.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
10-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Capital Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that offer long-term capital
appreciation potential
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to have long-term capi-
tal appreciation potential. Although the Fund invests primarily in publicly
traded U.S. securities, it may invest up to 10% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
11-A
<PAGE>
Goldman Sachs
Strategic Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that are considered to be strate-
gically positioned for consistent long-term growth
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to be strategically
positioned for consistent long-term growth. Although the Fund invests pri-
marily in publicly traded U.S. securities, it may invest up to 10% of its
total assets in foreign securities, including securities of issuers in
emerging countries and securities quoted in foreign currencies.
12-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Growth Opportunities Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that offer long-term capital
appreciation with a primary focus on mid capitalization
companies.
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to have long-term capi-
tal appreciation potential. Although the Fund invests primarily in publicly
traded U.S. securities, it may invest up to 10% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
13-A
<PAGE>
Goldman Sachs
Mid Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell Midcap Value Index
Investment Focus: Mid-capitalization U.S. stocks that are believed
to be undervalued or undiscovered by the marketplace.
Investment Proc- Value
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all of its assets in equity securities and at least 65% of its total
assets in equity securities of mid-cap companies with public stock market
capitalizations (based upon shares available for trading on an unrestricted
basis) within the range of the market capitalization of companies constitut-
ing the Russell Midcap Value Index at the time of investment (currently
between $400 million and $16 billion). If the capitalization of an issuer
decreases below $400 million or increases above $16 billion after purchase,
the Fund may, but is not required to, sell the securities. Dividend income,
if any, is an incidental consideration. Although the Fund will invest pri-
marily in publicly traded U.S. securities, it may invest up to 25% of its
total assets in foreign securities, including securities of issuers in
emerging countries and securities quoted in foreign currencies.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities.
14-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Small Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell 2000 Index
Investment Focus: Small-capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace
Investment Proc- Value
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
65% of its total assets in equity securities of companies with public stock
market capitalizations of $1 billion or less at the time of investment.
Under normal circumstances, the Fund's investment horizon for ownership of
stocks will be two to three years. Dividend income, if any, is an incidental
consideration. If the market capitalization of a company held by the Fund
increases above $1 billion, the Fund may, consistent with its investment
objective, continue to hold the security.
The Fund invests in companies which the Investment Adviser believes are
well- managed niche businesses that have the potential to achieve high or
improving returns on capital and/or above average sustainable growth. The
Fund may invest in securities of small market capitalization companies which
may have experienced financial difficulties. Investments may also be made in
companies that are in the early stages of their life and that the Investment
Adviser believes have significant growth potential. The Investment Adviser
believes that the companies in which the Fund may invest offer greater
opportunity for growth of capital than larger, more mature, better known
companies. Although the Fund will invest primarily in publicly traded U.S.
Securities, it may invest up to 25% of its total assets in foreign securi-
ties, including securities of issuers in emerging countries and securities
quoted in foreign currencies.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
companies with public stock market capitalizations in excess of $1 billion
at the time of investment and in fixed-income securities.
15-A
<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: A substantial portion of assets will be invested in
REITS
Investment Proc- Growth at a discount
ess:
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.
Other. The Fund may invest up to 20% of its total assets in fixed-income
securities that offer the potential to further the Fund's investment objec-
tives.
16-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
RISKS ASSOCIATED WITH INVESTING IN REITS
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property
owned by the REITs. Mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management 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 under the Code and
failing to maintain their exemptions from registration under the 1940 Act.
REITs whose underlying properties are concentrated in a particular industry
or geographic region are also subject to risks affecting such industries and
regions.
REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REITs investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REITs 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 REITs 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.
Investing in REITs involves risks similar to those associated with investing
in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be sub-
ject to more abrupt or erratic price movements than larger capitalization
companies. Historically, small capitalization stocks, such as REITs, have
been more volatile in price than the larger capitalization stocks included
in the Standard & Poor's Index of 500 Common Stocks. Among the reasons for
the greater price volatility of these small company and unseasoned stocks
are the less certain growth prospects of smaller firms and the lower degree
of liquidity in the markets for such stocks.
17-A
<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
objectivesand strategies
of the Fund
<TABLE>
<CAPTION>
GROWTH CORE CORE
BALANCED AND INCOME LARGE CAP U.S. EQUITY
FUND FUND VALUE FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT PRACTICES
Borrowings 33 1/3 33 1/3 33 1/3 33 1/3
Credit, currency, index, interest
rate and mortgage swaps . -- -- --
Cross Hedging of Currencies . -- -- --
Custodial receipts . . . .
Equity Swaps 10 10 10 10
Foreign Currency Transactions ./1/ . . .
Futures Contracts and Options on
Futures Contracts . . ./2/ ./3/
Interest rate caps, floors and
collars . -- -- --
Loan Participations . -- -- --
Mortgage Dollar Rolls . -- -- --
Options on Foreign Currencies/4/ . . . .
Options on Securities and
Securities Indices/5/ . . -- --
Repurchase Agreements . . . .
Reverse Repurchase Agreements (for
investment purposes) . -- -- --
Securities Lending 33 1/3 33 1/3 33 1/3 33 1/3
Short Sales Against the Box 25 25 -- --
Unseasoned Companies . . . .
- ------------------------------------------------------------------------------
</TABLE>
- --Not permitted
1 The Balanced Fund may also enter into forward foreign currency exchange
contracts to seek to increase total return.
2 The CORE Large Cap Value, CORE Large Cap Growth and CORE Small Cap Equity
Funds may enter into futures transactions only with respect to a represen-
tative index.
3 The CORE U.S. Equity Fund may enter into futures transactions only with
respect to the S&P 500 Index.
4 May purchase and sell call and put options.
5 May sell covered call and put options and purchase call and put options.
18-A
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
CORE CORE CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
LARGE CAP SMALL CAP GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
GROWTH FUND EQUITY FUND FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
33
1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
-- -- -- -- -- -- -- .
-- -- -- -- -- -- --
. . . . . . . .
10 10 10 10 10 10 10 10
. . . . . . . .
./2/ ./2/ . . . . . .
-- -- -- -- -- -- -- .
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- .
. . . . . . . .
-- . . . . . . .
. . . . . . . .
-- -- -- -- -- -- -- --
33
1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
-- -- 25 -- -- 25 25 25
. . . . . . . .
- -----------------------------------------------------------------------------------------
</TABLE>
19-A
<PAGE>
10Percent of total assets (BOLD 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>
GROWTH CORE CORE
BALANCED AND INCOME LARGE CAP U.S. EQUITY
FUND FUND VALUE FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES
American, European and Global
Depository Receipts . . ./6/ ./6/
Asset-Backed and Mortgage-Backed
Securities . . -- --
Bank Obligations . . . .
Convertible Securities/7/ . . . .
Corporate Debt Obligations . . ./8/ ./8/
Equity Securities 45-65 65+ 90+ 90+
Emerging Market Securities 20 25 -- --
Fixed Income Securities/9/ 25+ 35 ./8/ ./8/
Foreign Securities 20 25 ./10/ ./10/
Foreign Government Securities 10 -- -- --
Municipal Securities . -- -- --
Non-Investment Grade Fixed Income
Securities 10/11/ 10/12/ -- --
Real Estate Investment Trusts . . . .
Stripped Mortgage Backed
Securities . -- -- --
Structured Securities . . . .
Temporary Defensive Investments 100 100 35 35
U.S. Government Securities . . . .
Yield Curve Options and Inverse
Floating Rate Securities . -- -- --
- ------------------------------------------------------------------------------
</TABLE>
6 The CORE Funds may not invest in European Depository Receipts.
7 Convertible securities purchased by the Balanced Fund will be rated at the
time of investment B or better or, if unrated, determined to be of compa-
rable quality by the Investment Adviser. The CORE Funds have no minimum
rating criteria and all other Funds use the same rating criteria for con-
vertible and non-convertible debt securities.
8 Cash equivalents only.
9 Except as noted under "Non-Investment Grade Fixed Income Securities,"
fixed-income securities are rated at least investment grade (i.e., BBB or
higher by Standard & Poor's Rating Group ("Standard & Poor's") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's").
10 Equity securities of foreign issuers must be traded in the United
States.
11 Must be rated at least BB or B by Standard & Poor's or Ba or B by
Moody's.
12 May be rated BB or lower by Standard & Poor's or Ba or lower by
Moody's.
13 Must be rated B or higher by Standard & Poor's or B or higher by
Moody's.
20-A
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
CORE CORE CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
LARGE CAP SMALL CAP GROWTH GROWTH OPPORTUNITY VALUE VALUE SECURITIES
GROWTH FUND EQUITY FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
./6/ ./6/ . . . . . .
-- -- . . . . . .
. . . . . . . .
. . . . . . . .
./8/ ./8/ . . . . . .
90+ 90+ 90+ 90+ 90+ 65+ 65+ 80+
-- -- 10 10 10 25 25 15
./8/ ./8/ . 10 10 35 . 20
./10/ ./10/ 10 10 10 25 25 15
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- 10/12/ 10/12/ 10/12/ 10/13/ 35/12/ 20/12/
. . . . . . . .
-- -- -- -- -- -- -- .
. . . . . . . .
35 35 100 100 100 100 100 100
. . . . . . . .
-- -- -- -- -- -- -- .
- ------------------------------------------------------------------------------------------
</TABLE>
21-A
<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.
.. Applicable
- --Not applicable
<TABLE>
<CAPTION>
CORE CORE CORE
GROWTH LARGE CORE LARGE SMALL
AND CAP U.S. CAP CAP
PRINCIPAL BALANCED INCOME VALUE EQUITY GROWTH EQUITY
INVESTMENT RISKS FUND FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit/Default . . -- -- -- --
Foreign . . -- -- -- --
Emerging Markets . . -- -- -- --
Small Cap/REIT -- -- -- -- -- .
Stock . . . . . .
Derivatives . . . . . .
Interest Rate . . -- -- -- --
Management . . . . . .
Market . . . . . .
Liquidity Risk . . . . . .
Other . . . . . .
- ----------------------------------------------------------------------------------
</TABLE>
22-A
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
<TABLE>
<CAPTION>
MID SMALL REAL
CAPITAL STRATEGIC GROWTH CAP CAP ESTATE
GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- -- -- . . .
. . . . . .
. . . . . .
-- -- -- . . --
. . . . . .
. . . . . .
-- -- -- . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
- -------------------------------------------------------------------------------------------
</TABLE>
23-A
<PAGE>
All Funds:
..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.
..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
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in 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
with these investment categories, will shrink or disappear suddenly and with-
out 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."
Specific 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 special risks not typically associated with domestic
issuers. Losses may result because of less foreign government regulation, less
public information and less economic, political and social stability. Losses
may also result from the imposition of exchange controls, confiscations and
other government restrictions. A
24-A
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
Fund will also be subject to the risk of negative foreign currency rate fluc-
tuations. Foreign risks will normally be greatest when a Fund invests in
issuers located in emerging countries.
..EMERGING MARKETS RISK--The securities markets of Asian, Latin American, East-
ern European, African and other emerging countries are less liquid, are espe-
cially subject to greater price volatility, have smaller market capitaliza-
tions, have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the securi-
ties markets of more developed countries. Further, investment in equity secu-
rities 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.
..SMALL CAP STOCK AND REIT RISK--The securities of small capitalization stocks
and REITs involve greater risks than those associated with larger, more estab-
lished companies and may be subject to more abrupt or erratic price movements.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop in
price.
More information about the Fund's 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.
25-A
<PAGE>
Fund Performance
HOW THE FUNDS HAVE PERFORMED
The bar charts and tables below provide an indication of the risks of
investing in a Fund by showing: (a) changes in the performance of a Fund's
Institutional Shares from year to year; and (b) how the average annual
returns of a Fund's Institutional Shares compare to those of a broad-based
securities market index. The bar chart and table assume reinvestment of div-
idends and distributions. A Fund's past performance is not necessarily an
indication of how the Fund will perform in the future. Performance reflects
expense limitations in effect. If expense limitations were not in place, a
Fund's performance would have been reduced. The CORE Large Cap Value and
Real Estate Securities Funds did not commence operations until December 31,
1998 and July 27, 1998, respectively. The Strategic Growth and Growth Oppor-
tunities Funds had not commenced operations as of the date of this Prospec-
tus. Since these Funds have less than one calendar year's performance, no
performance information is provided in this section.
2
<PAGE>
FUND PERFORMANCE
Balanced Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 8/15/97) % %
S&P 500 Index* % %
Lehman Brothers Aggregate Bond Index** % %
-----------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index of bond
prices. The Index figures do not reflect any fees or expenses.
3
<PAGE>
Growth and Income Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 6/3/96) % %
S&P 500 Index* % %
----------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
4
<PAGE>
FUND PERFORMANCE
CORE U.S. Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
3
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR YEARS SINCE INCEPTION
-----------------------------------------------------------------------
<S> <C> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 6/15/95) % % %
S&P 500 Index* % % %
-----------------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
5
<PAGE>
CORE Large Cap Growth Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 5/1/97) % %
Russell 1000 Growth Index* % %
----------------------------------------------------------------
</TABLE>
* The Russell 1000 Growth Index is an unmanaged index of common stock prices.
The Index figures do not reflect any fees or expenses.
6
<PAGE>
FUND PERFORMANCE
CORE Small Cap Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 8/15/97) % %
Russell 2000 Index* % %
-----------------------------------------------------------------
</TABLE>
* The Russell 2000 Index is an unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
7
<PAGE>
Capital Growth Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 8/15/97) % %
S&P 500 Index* % %
-----------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
8
<PAGE>
FUND PERFORMANCE
Mid Cap Value Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
3
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR YEARS SINCE INCEPTION
----------------------------------------------------------------------
<S> <C> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 8/1/95) % % %
Russell Midcap Value Index* % % %
Russell Midcap Index* % % %
----------------------------------------------------------------------
</TABLE>
* The Russell Midcap Value and the Russell Midcap indices are unmanaged indi-
ces of common stock prices. The figures for the indices do not reflect any
fees or expenses.
9
<PAGE>
Small Cap Value Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Institutional
Shares for the
Fund's most
recent calendar
quarter ended
March 31, 1999
was %.
(INSERT GRAPH)
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------------
<S> <C> <C>
INSTITUTIONAL SHARES (INCEPTION 8/15/97) % %
Russell 2000 Value Index * % %
Russell 2000 Index * % %
-----------------------------------------------------------------
</TABLE>
* The Russell 2000 Value and the Russell 2000 indices are an unmanaged indi-
ces of common stock prices. The figures for these indices do not reflect
any fees or expenses.
10
<PAGE>
[This page intentionally left blank]
11
<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>
CORE
GROWTH AND LARGE CAP CORE
BALANCED INCOME VALUE U.S. EQUITY
FUND FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT):
Maximum Sales Charge (Load) Imposed
on Purchases None None None None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends None None None None
Redemption Fees None None None None
Exchange Fees None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS):/1/
Management Fees/2/ 0.65% 0.70% 0.60% 0.75%
Distribution and Service Fees None None None None
Other Expenses/3/ 0.28% 0.12% 0.56% 0.12%
- ------------------------------------------------------------------------------
Total Fund Operating Expenses* 0.93% 0.82% 1.16% 0.87%
- ------------------------------------------------------------------------------
</TABLE>
See page 14 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>
CORE
GROWTH AND LARGE CAP CORE
BALANCED INCOME VALUE U.S. EQUITY
FUND FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS):/1/
Management Fees/2/ 0.65% 0.70% 0.60% 0.70%
Distribution and Services Fees None None None None
Other Expenses/3/ 0.05% 0.09% 0.04% 0.04%
- -------------------------------------------------------------------------------
Total Fund Operating Expenses (after
current waivers and expense
limitations)* 0.70% 0.79% 0.64% 0.74%
- -------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Fund Fees and Expenses (Institutional Shares)
<TABLE>
<CAPTION>
CORE CORE
LARGE CAP SMALL CAP CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
GROWTH EQUITY GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
None None None None None None None None
None None None None None None None None
None None None None None None None None
None None None None None None None None
0.75% 0.85% 1.00% 0.80% 0.85% 0.75% 1.00% 1.00%
None None None None None None None None
0.22% 0.48% 0.10% -- % -- % 0.16% 0.13% 0.58%
- -------------------------------------------------------------------------------------
0.97% 1.33% 1.10% -- % -- % 0.91% 1.13% 1.58%
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CORE CORE
LARGE CAP SMALL CAP CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
GROWTH EQUITY GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.60% 0.85% 1.00% 0.80% 0.85% 0.75% 1.00% 1.00%
None None None None None None None None
0.04% 0.08% 0.04% % % 0.14% 0.10% 0.04%
- -------------------------------------------------------------------------------------
0.64% 0.93% 1.04% % % 0.89% 1.10% 1.04%
- -------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
/1/The Funds' annual operating expenses have been restated to reflect current
fees, except for the CORE Large Cap Value, Strategic Growth and Growth Opportu-
nities Funds whose expenses are estimated for the current fiscal year.
/2/The Investment Adviser has voluntarily agreed not to impose a portion of the
management fee on the CORE U.S. Equity Fund and the CORE Large Cap Growth Fund
equal to 0.05% and 0.15%, respectively. AS A RESULT OF FEE WAIVERS, THE CURRENT
MANAGEMENT FEES OF THE CORE U.S. EQUITY FUND AND CORE LARGE CAP GROWTH FUND ARE
0.70% AND 0.60%, RESPECTIVELY, OF SUCH FUNDS' AVERAGE DAILY NET ASSETS. THE
WAIVERS MAY BE TERMINATED AT ANY TIME AT THE OPTION OF THE INVESTMENT ADVISER.
/3/"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
average daily net assets:
<TABLE>
<CAPTION>
OTHER
FUND EXPENSES
---------------------------
<S> <C>
Balanced 0.01%
Growth and
Income 0.05%
CORE Large Cap
Value 0.00%
CORE U.S. Equity 0.00%
CORE Large Cap
Growth 0.00%
CORE Small Cap
Equity 0.04%
Capital Growth 0.00%
Strategic Growth 0.00%
Growth
Opportunities 0.00%
Mid Cap Value 0.10%
Small Cap Value 0.06%
Real Estate
Securities 0.00%
</TABLE>
14
<PAGE>
FUND FEES AND EXPENSES
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 5 YEARS 10 YEARS
- -------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED $ $ $ $
- -------------------------------------------------------
GROWTH AND INCOME $ $ $ $
- -------------------------------------------------------
CORE LARGE CAP VALUE $ $ N/A N/A
- -------------------------------------------------------
CORE U.S. EQUITY $ $ $ $
- -------------------------------------------------------
CORE LARGE CAP GROWTH $ $ $ $
- -------------------------------------------------------
CORE SMALL CAP EQUITY $ $ $ $
- -------------------------------------------------------
CAPITAL GROWTH $ $ $ $
- -------------------------------------------------------
STRATEGIC GROWTH $ $ N/A N/A
- -------------------------------------------------------
GROWTH OPPORTUNITIES $ $ N/A N/A
- -------------------------------------------------------
MID CAP VALUE $ $ $ $
- -------------------------------------------------------
SMALL CAP VALUE $ $ $ $
- -------------------------------------------------------
REAL ESTATE SECURITIES $ $ N/A N/A
- -------------------------------------------------------
</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 customers realize
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 in the Statement of Additional Information
("Additional Statement").
15
<PAGE>
Service Providers
INVESTMENT ADVISERS
<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
----------------------------------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM") Balanced
One New York Plaza Growth and Income
New York, New York 10004 CORE Large Cap Value
CORE Large Cap Growth
CORE Small Cap Equity
Strategic Growth
Growth Opportunities
Mid Cap Value
Small Cap Value
Real Estate Securities
----------------------------------------------------------------------
Goldman Sachs Funds Management, L.P. ("GSFM") CORE U.S. Equity
One New York Plaza Capital Growth
New York, New York 10004
----------------------------------------------------------------------
</TABLE>
GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. GSFM, a registered investment adviser since
1990, is a Delaware limited partnership which is an affiliate of Goldman
Sachs. As of December 31, 1998, GSAM and GSFM, together with their affili-
ates, acted as investment adviser or distributor for assets in excess of
$195 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
1-B
<PAGE>
..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
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>
FOR THE FISCAL YEAR OR PERIOD
FUND CONTRACTUAL RATE ENDED JANUARY 31, 1999
-----------------------------------------------------------------------
<S> <C> <C>
GSAM:
-----------------------------------------------------------------------
Balanced 0.65% %
-----------------------------------------------------------------------
Growth and Income 0.70% %
-----------------------------------------------------------------------
CORE Large Cap Value 0.60% N/A
-----------------------------------------------------------------------
CORE Large Cap Growth 0.75% %
-----------------------------------------------------------------------
CORE Small Cap Equity 0.85% %
-----------------------------------------------------------------------
Strategic Growth 0.80% N/A
-----------------------------------------------------------------------
Growth Opportunities 0.85% N/A
-----------------------------------------------------------------------
Mid Cap Value 0.75% %
-----------------------------------------------------------------------
Small Cap Value 1.00% %
-----------------------------------------------------------------------
Real Estate Securities 1.00% %
-----------------------------------------------------------------------
GSFM:
-----------------------------------------------------------------------
CORE U.S. Equity 0.70% %
-----------------------------------------------------------------------
Capital Growth 1.00% %
-----------------------------------------------------------------------
</TABLE>
The difference, if any, between the stated fees and the actual fees paid by
the Funds reflects that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled. The Investment
Adviser may discontinue or modify any such voluntary limitations in the
future at its discretion.
2-B
<PAGE>
SERVICE PROVIDERS
FUND MANAGERS
M. Roch Hillenbrand, a Managing Director of Goldman, Sachs & Co., is the
Head of Global Equities for Goldman Sachs Asset Management, overseeing U.S.,
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. Roch is also Presi-
dent of Commodities Corporation LLC, of which Goldman, Sachs & Co. is the
parent company. Over the course of his 18-year career at Commodities Corpo-
ration, Roch has had extensive experience in dealing with internal and
external investment managers who have managed a range of futures and equi-
ties strategies across multiple markets, using a variety of styles.
Value Team
..Thirteen portfolio managers/analysts compose the Investment Adviser's value
investment team
..Multi-sector focus provides a balanced perspective
..Across all value products, the Investment Adviser leverages the industry
research expertise of its small, mid and large cap investment teams
Value Team
<TABLE>
<CAPTION>
YEARS
FUND PRIMARILY
NAME AND TITLE RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Eileen A. PORTFOLIO SINCE MS. APTMAN JOINED THE
Aptman MANAGER-- 1996 INVESTMENT ADVISER IN 1993.
VICE PRESIDENT MID CAP VALUE 1997
SMALL CAP VALUE
- -------------------------------------------------------------------------------
Paul D. Farrell SENIOR PORTFOLIO SINCE MR. FARRELL JOINED THE
MANAGING MANAGER-- SMALL 1992 INVESTMENT ADVISER IN 1991. IN
DIRECTOR CAP VALUE 1998 1998, HE BECAME RESPONSIBLE FOR
MID CAP VALUE 1999 MANAGING THE INVESTMENT
GROWTH AND 1999 ADVISER'S VALUE TEAM.
INCOME
BALANCED
(EQUITY)
- -------------------------------------------------------------------------------
Matthew B. PORTFOLIO SINCE MR. MCLENNAN JOINED THE
McLennan MANAGER-- 1996 INVESTMENT ADVISER IN 1995.
VICE PRESIDENT SMALL CAP VALUE 1998 FROM 1994 TO 1995, HE
MID CAP VALUE WORKED IN THE INVESTMENT BANKING
DIVISION OF GOLDMAN SACHS
IN AUSTRALIA. FROM 1991 TO 1994,
MR. MCLENNAN WORKED AT
QUEENSLAND INVESTMENT
CORPORATION IN AUSTRALIA.
- -------------------------------------------------------------------------------
Karma Wilson PORTFOLIO SINCE MS. WILSON JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER IN 1994.
BALANCED 1998 PRIOR TO 1994, SHE WAS AN
(EQUITY) 1998 INVESTMENT ANALYST WITH
GROWTH AND BANKERS TRUST AUSTRALIA LTD.
INCOME
MID CAP VALUE
- -------------------------------------------------------------------------------
</TABLE>
3-B
<PAGE>
Quantitative Equity Team
..A stable and growing team supported by an extensive internal staff
..Access to the research ideas of Goldman Sachs' renowned Global Investment
Research Department
..More than $19 billion in equities currently under management
Quantitative Equity Team
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ---------------------------------------------------------------------------------
<C> <C> <C> <S>
Melissa Brown PORTFOLIO SINCE MS. BROWN JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER IN 1998.
CORE LARGE CAP 1998 FROM 1984 TO 1998, SHE WAS THE
VALUE 1998 DIRECTOR OF QUANTITATIVE EQUITY
CORE U.S. EQUITY 1998 RESEARCH AND SERVED ON THE
CORE LARGE CAP INVESTMENT POLICY COMMITTEE AT
GROWTH PRUDENTIAL SECURITIES.
CORE SMALL CAP
EQUITY
- ---------------------------------------------------------------------------------
Kent A. Clark SENIOR PORTFOLIO SINCE MR. CLARK JOINED THE
MANAGING MANAGER--CORE 1996 INVESTMENT ADVISER IN 1992.
DIRECTOR U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
Robert C. Jones SENIOR PORTFOLIO SINCE MR. JONES JOINED THE
MANAGING MANAGER--CORE 1991 INVESTMENT ADVISER IN 1989.
DIRECTOR U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
Victor H. SENIOR PORTFOLIO SINCE MR. PINTER JOINED THE
Pinter MANAGER--CORE 1996 INVESTMENT ADVISER IN 1990.
VICE PRESIDENT U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
</TABLE>
Growth Equity Investment Team
..17 year consistent investment style applied through diverse and complete
market cycles
..More than $8 billion in equities currently under management
..More than 150 client account relationships
..A portfolio management and analytical team with more than 130 years com-
bined investment experience
4-B
<PAGE>
SERVICE PROVIDERS
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 PORTFOLIO MANAGER-- SINCE MR. ADLER JOINED THE
VICE PRESIDENT BALANCED (EQUITY) 1997 INVESTMENT ADVISER IN
CAPITAL GROWTH 1997 1997.
STRATEGIC GROWTH 1999 FROM 1990 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS
A PORTFOLIO MANAGER AT
LIBERTY
INVESTMENT MANAGEMENT,
INC. ("LIBERTY").
- ------------------------------------------------------------------------------------------
Robert G. SENIOR PORTFOLIO MANAGER-- SINCE MR. COLLINS JOINED THE
Collins CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1991 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS
A PORTFOLIO MANAGER AT
LIBERTY.
HIS PAST EXPERIENCES
INCLUDE WORK AS A
SPECIAL SITUATIONS
ANALYST WITH
RAYMOND JAMES &
ASSOCIATES FOR
FIVE YEARS.
- ------------------------------------------------------------------------------------------
Herbert E. SENIOR PORTFOLIO MANAGER-- SINCE MR. EHLERS JOINED THE
Ehlers CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
MANAGING BALANCED (EQUITY) 1998 1997.
DIRECTOR STRATEGIC GROWTH 1999 FROM 1994 TO 1997, HE
GROWTH OPPORTUNITIES 1999 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 CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1990 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY AND ITS
PREDECESSOR FIRM, EAGLE.
- ------------------------------------------------------------------------------------------
David G. Shell PORTFOLIO MANAGER-- SINCE MR. SHELL JOINED THE
VICE PRESIDENT CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1987 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY
AND ITS PREDECESSOR
FIRM, EAGLE.
- ------------------------------------------------------------------------------------------
Ernest C. PORTFOLIO MANAGER-- SINCE MR. SEGUNDO JOINED THE
Segundo, Jr. CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1992 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY.
- ------------------------------------------------------------------------------------------
</TABLE>
5-B
<PAGE>
Fixed-Income Portfolio Management Team
..Fixed-income portfolio management is comprised of a deep team of sector
specialists.
..The team strives to maximize the risk-adjusted returns by de-emphasizing
interest and anticipation and focusing on security selection and sector
allocation
..The team manages approximately $40 billion in fixed-income assets for
retail, institutional and high net worth clients.
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Jonathan A. SENIOR PORTFOLIO SINCE MR. BEINNER JOINED THE
Beinner MANAGER -- 1994 INVESTMENT ADVISER IN 1990.
MANAGING BALANCED (FIXED-
DIRECTOR AND INCOME)
CO-HEAD U.S.
FIXED INCOME
- --------------------------------------------------------------------------------
Richard C. Lucy SENIOR PORTFOLIO SINCE MR. LUCY JOINED THE INVESTMENT
MANAGING MANAGER -- 1994 ADVISER IN 1992.
DIRECTOR AND BALANCED (FIXED-
CO-HEAD U.S. INCOME)
FIXED INCOME
- --------------------------------------------------------------------------------
</TABLE>
6-B
<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
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Herbert E. SENIOR PORTFOLIO MANAGER-- SINCE MR. EHLERS JOINED THE
Ehlers REAL ESTATE SECURITIES 1998 INVESTMENT ADVISER IN
MANAGING 1997.
DIRECTOR 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.
- ------------------------------------------------------------------------------------------
Elizabeth PORTFOLIO MANAGER-- SINCE MS. GROVES JOINED THE
Groves REAL ESTATE SECURITIES 1998 INVESTMENT ADVISER IN
VICE PRESIDENT 1998. HER PREVIOUS
EXPERIENCE INCLUDES 12
YEARS IN THE REAL ESTATE
AND REAL ESTATE FINANCE
BUSINESS. FROM 1991 TO
1997, SHE WORKED IN THE
REAL ESTATE DEPARTMENT
OF THE INVESTMENT
BANKING DIVISION OF
GOLDMAN SACHS, WHERE SHE
WAS RESPONSIBLE FOR BOTH
PUBLIC AND PRIVATE
CAPITAL MARKET
TRANSACTIONS.
- ------------------------------------------------------------------------------------------
Mark Howard- PORTFOLIO MANAGER-- SINCE MR. HOWARD-JOHNSON
Johnson REAL ESTATE SECURITIES 1998 JOINED THE INVESTMENT
VICE PRESIDENT ADVISER IN 1998. HIS
PREVIOUS EXPERIENCE
INCLUDES 15 YEARS IN THE
REAL ESTATE FINANCE
BUSINESS. FROM 1996 TO
1998, HE WAS THE SENIOR
EQUITY ANALYST FOR
BOSTON FINANCIAL,
RESPONSIBLE FOR THE
PIONEER REAL ESTATE
SHARES FUND. PRIOR TO
JOINING BOSTON
FINANCIAL, FROM 1994 TO
1996, MR. HOWARD-JOHNSON
WAS A REAL ESTATE
SECURITIES ANALYST FOR
THE PENOBSCOT GROUP,
INC., ONE OF ONLY TWO
INDEPENDENT RESEARCH
FIRMS IN THE PUBLIC REAL
ESTATE SECURITIES
BUSINESS. FOR FIVE YEARS
PRIOR TO THIS, HE HELD
SENIOR MANAGEMENT
POSITIONS WITHIN VARIOUS
REAL ESTATE DIVISIONS OF
THE FLEET FINANCIAL
GROUP.
- ------------------------------------------------------------------------------------------
</TABLE>
7-B
<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," which may lead to computer shutdowns or
errors (com-
8-B
<PAGE>
SERVICE PROVIDERS
monly known as the "Year 2000 Problem"). To the extent these systems conduct
forward-looking calculations, these computer problems may occur prior to
January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to
process securities trades, price securities, provide shareholder account
services and otherwise conduct normal business operations if the Investment
Adviser or other Fund service providers do not adequately address this 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 appropri-
ately take into account available information concerning the Year 2000 pre-
paredness of the issuers of securities held by the Funds. The Investment
Adviser may obtain such Year 2000 information from various sources which
the Investment Adviser believes to be reliable, including the issuers' pub-
lic regulatory filings. However, the Investment Adviser is not in a posi-
tion 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.
9-B
<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 exchanges in 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>
Balanced QUARTERLY ANNUALLY
- ------------------------------------------------------
Growth and Income QUARTERLY ANNUALLY
- ------------------------------------------------------
CORE Large Cap Value QUARTERLY ANNUALLY
- ------------------------------------------------------
CORE U.S. Equity ANNUALLY ANNUALLY
- ------------------------------------------------------
CORE Large Cap Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
CORE Small Cap Equity ANNUALLY ANNUALLY
- ------------------------------------------------------
Capital Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
Strategic Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
Growth Opportunities ANNUALLY ANNUALLY
- ------------------------------------------------------
Mid Cap Value ANNUALLY ANNUALLY
- ------------------------------------------------------
Small Cap Value ANNUALLY ANNUALLY
- ------------------------------------------------------
Real Estate Securities QUARTERLY ANNUALLY
- ------------------------------------------------------
</TABLE>
10-B
<PAGE>
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.
11-B
<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 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; 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.
..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.
1-G
<PAGE>
These institutions may receive payments from the Funds or Goldman Sachs for
the services provided by them with respect to the Fund's Institutional
Shares. These payments may be in addition to other 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.
2-G
<PAGE>
SHAREHOLDER GUIDE
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.
3-G
<PAGE>
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, at fair value as determined in good
faith under procedures established by the Trustees.
..NAV per share of each class is calculated by State Street 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.
..When you sell shares, you receive the NAV next calculated after the Funds
receive your order in proper form.
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.
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.
4-G
<PAGE>
SHAREHOLDER GUIDE
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>
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
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
.You may request that redemption proceeds be
sent to you by check or by wire
------------------------------------------------------------------------
BY TELEPHONE: If you have not declined the telephone
redemption privileges 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 Is A Signature Guarantee?
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.
5-G
<PAGE>
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 written request will 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 assumes 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.
6-G
<PAGE>
SHAREHOLDER GUIDE
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 redemption requests. These institutions may also
require additional documentation 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.
7-G
<PAGE>
<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 to be exchanged
.Mail the request to:
Goldman Sachs Funds
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-----------------------------------------------------------------------
BY TELEPHONE: If you have not declined the telephone redemption
privileges on your Account Application:
.1-800-621-2550 (8:00a.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.
..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.
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.
8-G
<PAGE>
SHAREHOLDER GUIDE
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. A year-to-date statement for your account will be pro-
vided upon request made to Goldman Sachs. The Funds do not generally provide
sub-accounting services.
9-G
<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.
At any time, a portion of a Fund's NAV per share may be represented by
undistributed income or realized or unrealized appreciation of the Fund's
portfolio securities. Therefore, subsequent distributions on a Fund's shares
may be taxable to you, even if the NAV of your shares is, as a result,
reduced below the cost of those shares and the distributions represent a
return of your purchase price.
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. Under certain circum-
stances, the Funds may make an election to treat a proportionate amount of
such taxes as constituting a distribution to you, which would allow you
either (1) to credit such proportionate amount of taxes against your U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
1-D
<PAGE>
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.
There are certain tax requirements that all 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.
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.
2-D
<PAGE>
Appendix A
Additional Information on Portfolio Risks, Securities and Techniques
The Funds will be subject to the risks associated with equity securities. "Eq-
uity 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 lia-
bility companies and similar enterprises, warrants and stock purchase rights.
In general, stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions. According-
ly, the value of the stocks that a Fund holds may decline over short or
extended periods. The stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The vol-
atility 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 investments.
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. Conversely, 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 investment. Call risk and exten-
sion 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 (extension risk). In general, if interest rates
on new mortgage loans fall sufficiently below the interest rates on existing
outstanding mortgage loans, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the interest
rates on existing outstanding mortgage loans, the rate of prepayment would be
expected to decrease. In either case, a change in the prepayment rate can
result in losses to investors.
The Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover (100% or more) involves correspondingly greater expenses which must be
borne by a Fund and its shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund's portfolio securities,
excluding secu-
3-D
<PAGE>
rities having a maturity at the date of purchase of one year or less. See
"Financial Highlights" in Appendix B for a statement of the Funds' historical
portfolio turnover rates.
The following sections provide further information on certain types of securi-
ties and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the Additional State-
ment, which is available upon request. Among other things, the Additional
Statement describes certain fundamental investment restrictions that cannot be
changed without shareholder approval. You should note, however, that all poli-
cies not specifically designated as fundamental are non-fundamental and may be
changed without shareholder approval. If there is a change in a Fund's invest-
ment objective, you should consider whether that Fund remains an appropriate
investment in light of your then current financial position and needs.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS. Investments in
small capitalization companies and REITs involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Among the
reasons for the greater price volatility of these investments are the less cer-
tain 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 periods 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 eco-
nomic or market conditions, or adverse investor perceptions, 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. Small capitalization companies
and REITs also often have limited 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 capitalization companies and REITs may be more difficult
to price precisely than other types of securities because of their characteris-
tics and lower trading volumes.
RISKS OF FOREIGN INVESTMENTS. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securities
of U.S. issuers. Foreign investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and changes in exchange control regulations (e.g., currency block-
age). A decline in
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APPENDIX A
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 partic-
ipating nations in the European Economic and Monetary Union ("EU") presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 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 in the European
Union, such as the United Kingdom and Denmark, into the euro and the admission
of other non-EU countries such as Poland, Latvia and Lithuania as members of
the EU may have an impact on the euro. These or other factors, including polit-
ical and economic risks, could cause market disruptions before or after the
introduction of the euro, and could adversely affect the value of securities
held by the Funds.
Brokerage commissions, custodial services and other costs relating to invest-
ment in international securities markets generally are more expensive than in
the United States. In addition, clearance and settlement procedures may be dif-
ferent in foreign countries and, in certain markets, such procedures have been
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S. securi-
ties markets and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationaliza-
tion, expropriation or confiscatory taxation, imposition of withholding or
other taxes on dividend or interest payments (or, in some cases, capital
gains), limitations on the removal of funds or other
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assets of the Funds, political or social instability or diplomatic developments
which could affect investments in those countries.
Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.
Investment in sovereign debt obligations by certain Funds involves special
risks not present in debt obligations of corporate issuers. The issuer of the
debt or the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or pay interest when due in accor-
dance with the terms of such debt, and a Fund may have limited recourse to com-
pel 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 obliga-
tions of U.S. issuers. A sovereign debtor's willingness or ability to repay
principal and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign currency reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.
Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). Certain Funds may also invest in European Depository
Receipts ("EDRs") or other similar instruments representing securities of for-
eign 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 security.
RISKS OF EMERGING COUNTRIES. Certain Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are heightened
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 port-
folio securities in certain emerging countries may be constrained by limita-
tions 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 vol-
ume by or holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other
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APPENDIX A
service providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For exam-
ple, 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 specific class of securi-
ties which may have less advantageous terms (including price) than securities
of the issuer available for purchase by nationals. In addition, certain coun-
tries may restrict or prohibit investment opportunities in issuers or indus-
tries deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for governmental
consents. Due to restrictions on direct investment in equity securities in cer-
tain Asian countries, such as Taiwan, it is anticipated that a Fund may invest
in such countries only through other investment funds in such countries.
Many emerging countries are subject to a substantial degree of economic, polit-
ical and social instability. Governments of some emerging countries are author-
itarian in nature or have been installed or removed as a result of military
coups, while governments in other emerging countries have periodically used
force to suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging countries. Unanticipated political or social developments may result
in sudden and significant investment losses. Investing in emerging countries
involves greater risk of loss due to expropriation, nationalization, confisca-
tion 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 invest-
ment 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 addition, significant delays are common in certain markets in
registering the transfer of securities. Settlement or registration problems may
make it more difficult for a Fund to value its portfolio securities and could
cause the Fund to miss attractive investment opportunities, to have a portion
of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's inabil-
ity to complete its contractual obligations. The creditworthiness of the local
securi-
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ties 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 crditworthiness of firms used
in more developed countires, thus subjecting the Fund to a greater risk of loss
if a securities firm defaults in the performance of its responsibilities.
The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries
may make a Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets (such as
the United States, Japan and most Western European countries). A Fund's invest-
ments 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, mar-
ket or political conditions, or adverse investor perceptions, 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 precisely because of their characteristics and
lower trading volumes.
Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a nega-
tive 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 barri-
ers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
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 signifi-
cant 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, structured securities and currency transac-
tions involve additional risk of loss. Loss can result from a lack of correla-
tion 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
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APPENDIX A
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) which is considered a speculative practice and
presents even greater risk of loss.
RISK 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 ordi-
nary 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 portfolio
to the extent that qualified institutional buyers become for a time uninter-
ested in purchasing these restricted securities. The purchase price and subse-
quent valuation of restricted and illiquid securities normally reflect a dis-
count, which may be significant, from the market price of comparable 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 agencies,
instrumentalities and sponsored enterprises), foreign governments, domestic and
foreign corporations, banks and other issuers. Some of these fixed-income secu-
rities are described in the next section below. Further information 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 con-
sidered medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers' capac-
ity 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.
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<PAGE>
Certain 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 questionable 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, investment
in such
bonds will present greater speculative risks than those associated with invest-
ment 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.
This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks. Further information is provided in the Additional Statement, which is
available upon request.
CONVERTIBLE SECURITIES. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities gen-
erally offer lower interest or dividend yields than non-convertible securities
of similar quality. Convertible securities in which a Fund invests are subject
to the same rating criteria as its other investments in fixed-income securi-
ties. Convertible securities have both equity and fixed-income risk character-
istics. 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 con-
vertible security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock
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APPENDIX A
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.
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 considered a speculative
practice. Some Funds may also engage in cross-hedging by using forward contracts
in a currency dif-ferent from that in which the hedged security is denominated
or quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgement of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date.
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 con-
trols 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 obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or could force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
STRUCTURED SECURITIES. Structured securities are securities whose value is
determined by reference to changes in the value of specific currencies, inter-
est 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 secu-
rities may be positively or negatively indexed, so that appreciation of the
Reference may produce an
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increase or decrease in the interest rate or value of the security at maturity.
In addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may 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.
Structured securities include, but are not limited to, 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.
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 or securing mortgage
loans held by the REIT. REITs are dependent upon the ability of the REITs' man-
agers, and are subject to heavy cash flow dependency, 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 asso-
ciated with investments in real estate including possible declines in the value
of real estate, general and local economic conditions, environmental problems
and changes in interest rates. To the extent that assets underlying a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
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 during 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. Certain Funds 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 for-
eign securities, purchase and sell (write) put and call options on foreign cur-
rencies.
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 consid-
ered a
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APPENDIX A
speculative activity). The successful use of options 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 (or currency) mar-kets.
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 other-wise
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 liquidity and credit risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts are stan-
dardized, exchange-traded contracts that provide for the sale or purchase 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 option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures con-
tract 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 foreign
exchanges.
A 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 currency
exchange rates, or to the extent applicable, otherwise manage its term struc-
ture and duration in accordance with its investment objective and policies.
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 regu-
lations of the Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations. A Fund may not pur-
chase or sell futures contracts or purchase or sell related options to seek to
increase total return, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of initial margin deposits and
premiums paid on the Fund's outstanding positions in futures and related
options entered into for the purpose of seeking to increase total return would
exceed 5% of the market value of the Fund's net assets.
Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures, unan-
ticipated changes in interest rates, securities prices or currency exchange
rates
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<PAGE>
may result in poorer overall performance than if the Fund had not entered into
any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired protec-
tion 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 writing
call options on futures is potentially unlimited and may exceed the amount of
the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in substan-
tial 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.
EQUITY SWAPS. Equity swaps allow the parties to a swap agreement to exchange
the dividend income or other components of return on an equity investment (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 invest-
ment 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 div-
idends 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. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securi-
ties 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 contract 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 sold securities may
increase before the
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APPENDIX A
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 secu-rities or forward
commitments before settlement whenever the Investment Adviser deems it
appropriate.
REPURCHASE AGREEMENTS. Certain Funds may enter into repurchase agreements with
primary dealers in U.S. Government securities and banks affiliated with primary
dealers. Repurchase agreements involve the purchase of securities subject to
the seller's agreement to repurchase them at a mutually agreed upon date and
price. The repurchase price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate on
the purchased security.
If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the repurchase agreement are
less than the repurchase price and Fund's costs associated with delay and
enforcement of the repurchase agreement. In addition, in the event of bank-
ruptcy of the seller, a Fund could suffer additional losses if a court deter-
mines 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. Distribu-
tions of the income from repurchase agreements will be taxable to a Fund's
shareholders. In addition, certain Funds, together with other registered
investment companies having advisory agreements with the Investment Adviser or
any of its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. 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 col-
lateral may be invested in cash equivalents. If the Investment Adviser deter-
mines 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 or possible loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
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<PAGE>
SHORT SALES AGAINST-THE-BOX. Certain Funds 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 securi-
ties convertible into or exchangeable for, without payment of any further con-
sideration, an equal amount of the securities of the same issuer as the securi-
ties sold short.
PREFERRED STOCK, WARRANTS AND RIGHTS. Each Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an owner-
ship interest providing the holder with claims on the issuer's earnings and
assets before common stock owners but after bond owners. Unlike debt securi-
ties, 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 of other non-com-
pliance by the issuer of the preferred stock.
Warrants and other rights are options to buy a stated number of shares of com-
mon stock at a specified price at any time during the life of the warrant. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
STANDARD & POOR'S DEPOSITORY RECEIPTS. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts ("SPDRs").
SPDRs are American Stock Exchange-traded securities 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 is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including, but
not limited to, facilitating the handling 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 American Stock Exchange (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 net asset values of their underlying indi-
ces and supply and demand of WEBS on the AMEX. To date, WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating 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 require-
ments of
16-D
<PAGE>
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 disrup-
tions affecting WEBS should occur in the future, the liquidity and value of
Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE Index could be impaired. If such disruptions were to
occur, a Fund could be required to reconsider the use of WEBS as part of its
investment strategy.
OTHER INVESTMENT COMPANIES. A Fund may invest in securities of other investment
companies subject to the limitations prescribed by the Investment Company 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 invest-
ing 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 manage-
ment fees and other expenses paid by such other investment companies. Such
other investment 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.
17-D
<PAGE>
MORTGAGE DOLLAR ROLLS. Certain Funds may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by a Fund of securities for delivery in
the current month. The Fund simultaneously contracts 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 benefits 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 pro-
ceeds of the securities sold. Unless the benefits of a mortgage dollar roll
exceed the income, capital appreciation and gain or loss due to mortgage pre-
payments 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.
Successful use of mortgage dollar rolls depends upon the Investment Adviser's
ability to predict correctly interest rates and mortgage prepayments. If the
Investment Adviser is incorrect in its predictions, the Fund may experience a
loss. For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The Funds do not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing and
do not treat them as borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
loans secured by real property. 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 invest-
ment conduit ("REMIC") pass-through or participation certificates. CMOs provide
an investor with a specified interest in the cash flow from a pool of under-
lying mortgages or of other Mortgage-Backed Securities. CMOs are issued in mul-
tiple classes. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no princi-
pal payments will be made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. A REMIC is a CMO that qualifies for
special tax treatment under
1-E
<PAGE>
the Code and invests in certain mortgages princi pally 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 principal pay-
ments from a pool of mortgage loans. The market value of SMBS consisting
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 mortgage loans are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
Mortgage-Backed Securities (including CMOs, REMICs and SMBS) are subject to
both call risk and extension risk as previously described. Because of these
risks, these securities can have significantly greater price and yield volatil-
ity than with traditional fixed-income securities.
The value of Mortgage-Backed Securities that are structured as pass-through
mortgage securities that are collateralized by ARMs are less likely to rise
during periods of declining interest rates to the same extent as fixed-rate
securities. This is because interest rate declines may result in accelerated
prepayments of mortgages with the result that proceeds from prepayments will be
reinvested at lower interest rates. On the other hand, during periods of rising
interest rates, the value of ARMs will lag behind changes in the market rate.
ARMs are also typically subject to maximum increases and decreases in the
interest rate adjustment which can be made on any one adjustment date, in any
one year, or during the life of the security. In the event of dramatic
increases or decreases in prevailing market interest rates, the value of a
Fund's investments in ARMs may fluctuate more substantially since these limits
may prevent the security from fully adjusting its interest rate to the prevail-
ing market rates.
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 prepay-
ments of principal on the underlying loans. During periods of declining inter-
est rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, 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,
2-E
<PAGE>
and its ability to reinvest the returns of principal at comparable yields is
subject to generally 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 security interest in collateral that is comparable to mortgage
assets. There is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities. 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.
ZERO COUPON, DEFERRED INTEREST, PAY-IN-KIND AND CAPITAL APPRECIATION BONDS.
Zero coupon, deferred interest, pay-in-kind and capital appreciation bonds are
issued at a discount from their face value because interest payments are typi-
cally postponed until maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. The market prices of
these securities generally are more volatile than the market prices of inter-
est-bearing securities and are likely to respond to a greater degree to changes
in interest rates than interest-bearing securities having similar maturities
and credit quality.
YIELD CURVE OPTIONS. Certain Funds 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 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 present a
risk of loss even if the yield of one of the underlying securities remains con-
stant, or if the spread moves in a direction or to an extent which was not
anticipated.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Certain Funds can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions in amounts not exceeding one-third of its total assets.
Reverse repurchase agreements involve the sale of securities held by a Fund
subject to the Fund's agreement to repurchase them at a mutually agreed upon
date and price (including interest). These transactions may be entered into as
a temporary measure for emergency purposes or to meet redemption requests.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of
the transaction proceeds will be greater than the related interest expense.
Borrowings and reverse repurchase agreements involve leveraging. If the securi-
ties held by a Fund
3-E
<PAGE>
decline in value while these transactions are outstanding, the NAV of the Fund's
outstanding shares will decline in value by proportion ately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the interest income earned by a Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by a Fund will decline below the price
the Fund is obligated to pay to repurchase the securi ties, and that the
securities may not be returned to the Fund.
INTEREST RATE SWAPS, MORTGAGE SWAPS, CREDIT SWAPS, CURRENCY SWAPS AND INTEREST
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 pay-
ments. Mortgage swaps are similar to interest rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, howev-
er, 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 occur-
rence 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 and a floor that preserves a certain return within a predetermined range
of interest rates.
Certain Funds may enter into swap transactions for hedging purposes or to seek
to increase total return. The use of interest rate, mortgage, credit and cur-
rency 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 forecasts 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.
4-E
<PAGE>
Appendix C
Prior Performance of Similarly Advised Accounts of the Investment Adviser
CORE LARGE CAP VALUE FUND
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies, and strategies substantially similar to the CORE Large Cap
Value Fund. The information is provided to illustrate the past performance
of the Investment Adviser in managing substantially similar accounts as mea-
sured against the Russell 1000 Value Index and does not represent the per-
formance of the CORE Large Cap Value Fund. Investors should not consider
this performance data as a substitute for the performance of the CORE Large
Cap Value Fund nor should investors consider this data as an indication of
future performance of the CORE Large Cap Value Fund or of the Investment
Adviser. The Russell 1000 Value Index is unmanaged and investors cannot
invest directly in the index.
<TABLE>
<CAPTION>
PRIVATE
ACCOUNT NET
COMPOSITE RUSSELL 1000
PERFORMANCE VALUE INDEX
- -------------------------------------------
<S> <C> <C>
1998 11.41 % 15.64 %
1997 32.87 % 35.18 %
1996 26.29 % 21.64 %
1995 37.92 % 38.35 %
1994 (2.17)% (2.01)%
1993 16.90 % 18.12 %
8/1/92-12/31/92 5.39 % 4.01 %
- -------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN FOR THE PERIODS
ENDED 12/31/98
SINCE
3 5 INCEPTION
ONE YEAR YEARS YEARS (8/1/92)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net Composite Performance 11.41% 23.18% 20.33% 19.33%
Russell 1000 Value Index 15.64% 23.88% 20.85% 19.68%
- -----------------------------------------------------------------------------
</TABLE>
In accordance with the standards of the Association for Investment Manage-
ment and Research ("AIMR"), the Investment Adviser's composite performance
data
16
<PAGE>
APPENDIX C
was calculated on a time-weighted and asset-weighted total return basis
which includes realized and unrealized gains and losses plus income. The
composite performance is net of applicable investment management fees, bro-
kerage commissions, execution costs and custodial fees, without provision
for federal and state taxes, if any. Total return performance of the CORE
Large Cap Value Fund will be calculated in accordance with the regulations
of the SEC. The SEC standardized average annual total return is neither
time-weighted nor asset-weighted and is determined for specified periods by
computing the annual percentage change in the value of an initial amount
that is invested in a share class of the Fund at the maximum public offering
price. Investors should be aware that the differences in methodology between
AIMR and SEC requirements could result in different performance data for
identical time periods.
All returns presented reflect the reinvestment of dividends and other earn-
ings. The weighted-average expenses of the private accounts used in calcu-
lating the Investment Adviser's net composite performance data were 0.59%
annualized, which are lower than the estimated expenses of Institutional
Shares of the CORE Large Cap Value Fund stated under "Fees and Expenses"
above. The performance of the private accounts would have been lower if they
had been subject to the expenses of the CORE Large Cap Value Fund. In addi-
tion, the private accounts are not subject to the same diversification
requirements, specific tax restrictions and investment limitations imposed
on the CORE Large Cap Value Fund by the Investment Company Act of 1940 and
Subchapter M of the Internal Revenue Code. Consequently, the performance
results of the Investment Adviser's composite could have been adversely
affected if the private accounts had been regulated as investment companies
under the federal securities laws.
17
<PAGE>
Appendix D
Prior Performance of Similarly Advised Accounts of the Investment Adviser
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies, and strategies substantially similar to the Strategic
Growth Fund. The information is provided to illustrate the past performance
of the Investment Adviser in managing substantially similar accounts as mea-
sured against the S&P 500 Index and does not represent the performance of
the Strategic Growth Fund. Investors should not consider this performance
data as a substitute for the performance of the Strategic Growth Fund nor
should investors consider this data as an indication of future performance
of the Strategic Growth Fund or of the Investment Adviser. The S&P 500 Index
is unmanaged and investors cannot invest directly in the index.
<TABLE>
<CAPTION>
PRIVATE
ACCOUNT NET
COMPOSITE S&P 500
PERFORMANCE INDEX
- --------------------------------------
<S> <C> <C>
1998 % %
1997 % %
1996 % %
1995 % %
1994 % %
1993 % %
8/1/92-12/31/92 % %
- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN FOR THE PERIODS ENDED
12/31/98
SINCE
INCEPTION
ONE YEAR 3 YEARS 5 YEARS (8/1/92)
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net
Composite Performance % % % %
S&P 500 Index % % % %
- ------------------------------------------------------------
</TABLE>
In accordance with the standards of the Association for Investment Manage-
ment and Research ("AIMR"), the Investment Adviser's composite performance
data was calculated on a time-weighted and asset-weighted total return basis
which
18
<PAGE>
APPENDIX D
includes realized and unrealized gains and losses plus income. The composite
performance is net of applicable investment management fees, brokerage com-
missions, execution costs and custodial fees, without provision for federal
and state taxes, if any. Total return performance of the Strategic Growth
Fund will be calculated in accordance with the regulations of the SEC. The
SEC standardized average annual total return is neither time-weighted nor
asset-weighted and is determined for specified periods by computing the
annual percentage change in the value of an initial amount that is invested
in a share class of the Fund at the maximum public offering price. Investors
should be aware that the differences in methodology between AIMR and SEC
requirements could result in different performance data for identical time
periods.
All returns presented reflect the reinvestment of dividends and other earn-
ings. The weighted-average expenses of the private accounts used in calcu-
lating the Investment Adviser's net composite performance data were 0.59%
annualized, which are lower than the estimated expenses of Institutional
Shares of the Strategic Growth Fund stated under "Fees and Expenses" above.
The performance of the private accounts would have been lower if they had
been subject to the expenses of the Strategic Growth Fund. In addition, the
private accounts are not subject to the same diversification requirements,
specific tax restrictions and investment limitations imposed on the Strate-
gic Growth Fund by the Investment Company Act of 1940 and Subchapter M of
the Internal Revenue Code. Consequently, the performance results of the
Investment Adviser's composite could have been adversely affected if the
private accounts had been regulated as investment companies under the fed-
eral securities laws.
19
<PAGE>
Index
<TABLE>
<C> <C> <S>
1 General Investment Management Approach
Fund Investment Objectives and Strategies
3 Goldman Sachs Balanced Fund
4 Goldman Sachs Growth and Income Fund
Goldman Sachs CORE Large Cap Value Fund
5 Goldman Sachs CORE U.S. Equity Fund
6 Goldman Sachs CORE Large Cap Growth Fund
7 Goldman Sachs CORE Small Cap Equity Fund
8 Goldman Sachs Capital Growth Fund
xx Goldman Sachs Strategic Growth Fund
xx Goldman Sachs Growth Opportunities Fund
9 Goldman Sachs Mid Cap Value Fund
10 Goldman Sachs Small Cap Value Fund
</TABLE>
<TABLE>
<C> <C> <S>
xx Goldman Sachs Real Estate Securities Fund
Other Investment Practices and Securities
Principal Risks of the Funds
Fund Performance
12 Fund Fees and Expenses
Service Providers
Dividends
Shareholder Guide
How To Buy Shares
How To Sell Shares
Taxation
A-1 Appendix A
Additional Information on Portfolio Risks,
Securities and Techniques
B-1 Appendix B
Financial Highlights
C-1 Appendix C
D-1 Appendix D
</TABLE>
20
<PAGE>
Domestic Equity Funds
Prospectus (Institutional 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.
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 1-800-621-2550.
To obtain other information and for shareholder inquiries:
By telephone - Call 1-800-621-2550
By mail - Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606
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. The Funds' investment company registration number is 811-5349.
[LOGO]
21
<PAGE>
Prospectus SERVICE SHARES
April 30, 1999
- ----------------------------------------------------------------------
GOLDMAN SACHS DOMESTIC EQUITY FUNDS
- ----------------------------------------------------------------------
.Goldman Sachs
Balanced Fund
.Goldman Sachs
Growth and
Income Fund
.Goldman Sachs
CORE Large Cap
Value Fund
.Goldman Sachs
CORE U.S.
Equity Fund
.Goldman Sachs
(INSERT ARTWORK) CORE Large Cap
Growth Fund
.Goldman Sachs
CORE Small Cap
Equity Fund
.Goldman Sachs
Capital Growth
Fund
.Goldman Sachs
Strategic
Growth Fund
.Goldman Sachs
Growth
Opportunities
Fund
.Goldman Sachs
Mid Cap Value
Fund (formerly
"Mid Cap
Equity")
.Goldman Sachs
Small Cap Value
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT Fund
APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. .Goldman Sachs
ANY REPRESENTATION TO THE CONTRARY IS A Real Estate
CRIMINAL OFFENSE. Securities Fund
----------------------------------------------
AN INVESTMENT IN A FUND IS NOT A BANK DEPOSIT
AND IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT [LOGO OF GOLDMAN SACHS
AGENCY. AN INVESTMENT IN A FUND INVOLVES APPEARS HERE]
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
----------------------------------------------
<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 Balanced,
Growth and Income, CORE Large Cap Value, CORE Large Cap Growth, CORE Small
Cap Equity, Strategic Growth, Growth Opportunities, Mid Cap Equity, Small
Cap Value and Real Estate Securities Funds. Goldman Sachs Funds Management,
L.P. serves as investment adviser to the CORE U.S. Equity and Capital Growth
Funds. Goldman Sachs Asset Management and Goldman Sachs Funds Management,
L.P. are each referred to in this Prospectus as the "Investment Adviser."
VALUE STYLE FUNDS
Goldman Sachs Value Investment Philosophy
The Investment Adviser seeks companies that are discounted due to:
..Company-specific problems that are over-discounted in the marketplace.
..Cyclically out-of-favor status.
..Unrecognized positive fundamentals.
The Investment Adviser seeks to identify value through:
..Firsthand fundamental research.
..Maintaining a long-term investment horizon.
..A team approach to decision making.
Value exists when a stock's price becomes inexpensive relative to the
company's estimated earnings and/or dividend-paying ability over the long-
term.
- --------------------------------------------------------------------------------
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.
1-A
<PAGE>
GENERAL INVESTMENT MANAGEMENT APPROACH
..Over the long-term, expect each company's stock price to ultimately 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 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.
- --------------------------------------------------------------------------------
QUANTITATIVE ("CORE") STYLE FUNDS
Goldman Sachs Quantitative Multifactor Model
The CORE Funds use the Goldman Sachs proprietary multifactor model
("Multifactor Model"), a rigorous computerized rating system, to forecast
the returns of securities held in each Fund's portfolio.
The Multifactor Model incorporates common variables covering measures of:
..VALUE (price-to-book, price-to-earnings, cash flow to enterprise value)
..MOMENTUM (earnings momentum, price momentum, sustainable growth)
..RISK (market risk, company-specific risk, earnings risk)
ALL OF THE ABOVE FACTORS ARE CAREFULLY EVALUATED WITHIN THE MULTIFACTOR
MODEL SINCE EACH HAS DEMONSTRATED A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE SECURITIES AND MARKETS THEY WERE DESIGNED TO FORECAST.
Goldman Sachs' CORE Funds provide broad foundation portfolios for investors
to build upon.
- --------------------------------------------------------------------------------
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.
2-A
<PAGE>
GENERAL INVESTMENT MANAGEMENT APPROACH
..Buys securities at a discount to the intrinsic value of the business (as-
sets and management).
..Seeks a term approach to decision making.
REIT stands for Real Estate Investment Trust
- --------------------------------------------------------------------------------
3-A
<PAGE>
Fund Investment Objectives and Strategies
Goldman Sachs Balanced Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and current income
Benchmarks: S&P 500 Index and Lehman Brothers Aggregate Bond Index
Investment Focus: Large capitalization U.S. stocks and investment grade U.S.
fixed income
Investment Style: Asset Allocation
INVESTMENT OBJECTIVE
The Fund seeks to provide long-term growth of capital and current income.
The Fund seeks growth of capital primarily through investments in equity
securities (stocks). The Fund seeks to provide current income through
investment in fixed-income securities (bonds).
PRINCIPAL INVESTMENT STRATEGIES
Historically, stock and bond markets have often had different cycles, with
one asset class rising when the other is falling. A balanced objective seeks
to reduce the volatility associated with investing in a single market. There
is no guarantee, however, that market cycles will move in opposition to one
another or that a balanced investment program will successfully reduce vola-
tility.
Equity Securities. The Fund invests, under normal circumstances, between 45%
and 65% of its total assets in equity securities. Although the Fund's equity
investments consist primarily of publicly traded U.S. securities, the Fund
may invest up to 10% of its total assets in the equity securities of foreign
issuers, including issuers in countries with emerging markets or economies
("emerging countries") and equity securities quoted in foreign currencies.
A portion of the Fund's portfolio of equity securities may be selected pri-
marily to provide current income (includ-
4-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
ing interests in real estate investment trusts, convertible securities, pre-
ferred stocks, utility stocks, and interests in limited partnerships).
Other. The Fund invests at least 25% of its total assets in fixed-income
senior securities. The remainder of the Fund's assets are invested in other
fixed-income securities and cash.
The Fund's fixed-income securities primarily include:
..Securities issued by the U.S. Government, its agencies, instrumentalities
or sponsored enterprises
..Securities issued by corporations, banks and other issuers
..Mortgage-backed and asset-backed securities
The Fund may also invest up to 10% of its total assets in debt obligations
(U.S. dollar and non-U.S.-dollar denominated) issued or guaranteed by one or
more foreign governments or any of their political subdivisions, agencies or
instrumentalities and foreign corporations or other entities. The issuers of
these securities may be located in emerging countries.
The percentage of the portfolio invested in equity and fixed-income securi-
ties will vary from time to time as the Investment Adviser evaluates such
securities' relative attractiveness based on market valuations, economic
growth and inflation prospects. The allocation between equity and fixed-
income securities is subject to the Fund's intention to pay regular quar-
terly dividends. The amount of quarterly dividends can also be expected to
fluctuate in accordance with factors such as prevailing interest rates and
the percentage of the Fund's assets invested in fixed-income securities.
5-A
<PAGE>
Goldman Sachs
Growth and Income Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and growth of income
Benchmark: S&P 500 Index
Investment Focus: Large capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace
Investment Style: Value
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and growth of income.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
65% of its total assets in equity securities that the Investment Adviser
considers to have favorable prospects for capital appreciation and/or divi-
dend-paying ability. Although the Fund will invest primarily in publicly
traded U.S. securities, it may invest up to 25% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities that offer the potential to further the Fund's investment
objective.
6-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
CORE Large Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and dividend income
Benchmark: Russell 1000 Value Index
Investment Focus: Diversified portfolio of equity securities of large cap
U.S. issuers selling at low to modest valuations
Investment Proc- Value, enhanced by a proprietary quantitative model
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified portfolio of equity secu-
rities of large cap U.S. issuers that are selling at low to modest valua-
tions relative to general market measures, such as earnings, book value and
other fundamental accounting measures, and that are expected to have favora-
ble prospects for capital appreciation and/or dividend-paying ability.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the Russell 1000 Value Index. The Fund seeks a
portfolio comprised of companies with above average capitalizations and low
to moderate valuations as measured by price/earnings ratios, book value and
other fundamental accounting measures.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
7-A
<PAGE>
Goldman Sachs
CORE U.S. Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital and dividend income
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities representing a variety of indus-
tries
Investment Style: Blend (Value and Growth), enhanced by a proprietary
quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income. The Fund
seeks this objective through a broadly diversified portfolio of large cap
and blue chip equity securities representing all major sectors of the U.S.
economy.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the S&P 500 Index. The Fund seeks a broad repre-
sentation in most major sectors of the U.S. economy and a portfolio com-
prised of companies with average long-term earnings growth expectations and
dividend yields.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
8-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
CORE Large Cap Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital; dividend income is a
secondary consideration
Benchmark: Russell 1000 Growth Index
Investment Focus: Large-cap, growth-oriented U.S. stocks
Investment Style: Growth, enhanced by a proprietary quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of large cap
U.S. issuers that are expected to have better prospects for earnings growth
than the growth rate of the general domestic economy. Dividend income is a
secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Investment Adviser emphasizes a company's growth prospects in analyzing
equity securities to be purchased by the Fund. The Fund's investments are
selected using both a variety of quantitative techniques and fundamental
research in seeking to maximize the Fund's expected return, while maintain-
ing risk, style, capitalization and industry characteristics similar to the
Russell 1000 Growth Index. The Fund seeks a portfolio comprised of companies
with above average capitalizations and earnings growth expectations and
below average dividend yields.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
9-A
<PAGE>
Goldman Sachs
CORE Small Cap Equity Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell 2000 Index
Investment Focus: Stocks of small capitalization U.S. companies
Investment Proc- Blend (Value and Growth), enhanced by a proprietary
ess: quantitative model
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital. The Fund seeks this objective
through a broadly diversified portfolio of equity securities of U.S. issuers
which are included in the Russell 2000 Index at the time of investment.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
90% of its total assets in equity securities of U.S. issuers, including for-
eign issuers that are traded in the United States.
The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the Russell 2000 Index. The Fund seeks a portfo-
lio comprised of companies with small market capitalizations, strong
expected earnings growth and momentum, and better valuation and risk charac-
teristics than the Russell 2000 Index. If the issuer of a portfolio security
held by the Fund is no longer included in the Russell 2000 Index, the Fund
may, but is not required to, sell the security.
Other. The Fund's investments in fixed-income securities are limited to
securities that are considered cash equivalents.
10-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Capital Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that offer long-term capital
appreciation potential
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to have long-term capi-
tal appreciation potential. Although the Fund invests primarily in publicly
traded U.S. securities, it may invest up to 10% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
11-A
<PAGE>
Goldman Sachs
Strategic Growth Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that are considered to be strate-
gically positioned for consistent long-term growth
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to be strategically
positioned for consistent long-term growth. Although the Fund invests pri-
marily in publicly traded U.S. securities, it may invest up to 10% of its
total assets in foreign securities, including securities of issuers in
emerging countries and securities quoted in foreign currencies.
12-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Growth Opportunities Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: S&P 500 Index
Investment Focus: U.S. equity securities that offer long-term capital
appreciation with a primary focus on mid capitalization
companies.
Investment Proc- Growth
ess:
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. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of equity secu-
rities that are considered by the Investment Adviser to have long-term capi-
tal appreciation potential. Although the Fund invests primarily in publicly
traded U.S. securities, it may invest up to 10% of its total assets in for-
eign securities, including securities of issuers in emerging countries and
securities quoted in foreign currencies.
13-A
<PAGE>
Goldman Sachs
Mid Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell Midcap Value Index
Investment Focus: Mid-capitalization U.S. stocks that are believed
to be undervalued or undiscovered by the marketplace.
Investment Proc- Value
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, substan-
tially all of its assets in equity securities and at least 65% of its total
assets in equity securities of mid-cap companies with public stock market
capitalizations (based upon shares available for trading on an unrestricted
basis) within the range of the market capitalization of companies constitut-
ing the Russell Midcap Value Index at the time of investment (currently
between $400 million and $16 billion). If the capitalization of an issuer
decreases below $400 million or increases above $16 billion after purchase,
the Fund may, but is not required to, sell the securities. Dividend income,
if any, is an incidental consideration. Although the Fund will invest pri-
marily in publicly traded U.S. securities, it may invest up to 25% of its
total assets in foreign securities, including securities of issuers in
emerging countries and securities quoted in foreign currencies.
Other. The Fund may also invest up to 35% of its total assets in fixed-
income securities.
14-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
Goldman Sachs
Small Cap Value Fund
FUND FACTS
- --------------------------------------------------------------------------------
Objective: Long-term growth of capital
Benchmark: Russell 2000 Index
Investment Focus: Small-capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace
Investment Proc- Value
ess:
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
Equity Securities. The Fund invests, under normal circumstances, at least
65% of its total assets in equity securities of companies with public stock
market capitalizations of $1 billion or less at the time of investment.
Under normal circumstances, the Fund's investment horizon for ownership of
stocks will be two to three years. Dividend income, if any, is an incidental
consideration. If the market capitalization of a company held by the Fund
increases above $1 billion, the Fund may, consistent with its investment
objective, continue to hold the security.
The Fund invests in companies which the Investment Adviser believes are
well- managed niche businesses that have the potential to achieve high or
improving returns on capital and/or above average sustainable growth. The
Fund may invest in securities of small market capitalization companies which
may have experienced financial difficulties. Investments may also be made in
companies that are in the early stages of their life and that the Investment
Adviser believes have significant growth potential. The Investment Adviser
believes that the companies in which the Fund may invest offer greater
opportunity for growth of capital than larger, more mature, better known
companies. Although the Fund will invest primarily in publicly traded U.S.
Securities, it may invest up to 25% of its total assets in foreign securi-
ties, including securities of issuers in emerging countries and securities
quoted in foreign currencies.
Other. The Fund may invest in the aggregate up to 35% of its total assets in
companies with public stock market capitalizations in excess of $1 billion
at the time of investment and in fixed-income securities.
15-A
<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: A substantial portion of assets will be invested in
REITS
Investment Proc- Growth at a discount
ess:
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.
Other. The Fund may invest up to 20% of its total assets in fixed-income
securities that offer the potential to further the Fund's investment objec-
tives.
16-A
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES
RISKS ASSOCIATED WITH INVESTING IN REITS
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property
owned by the REITs. Mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management 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 under the Code and
failing to maintain their exemptions from registration under the 1940 Act.
REITs whose underlying properties are concentrated in a particular industry
or geographic region are also subject to risks affecting such industries and
regions.
REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REITs investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REITs 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 REITs 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.
Investing in REITs involves risks similar to those associated with investing
in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be sub-
ject to more abrupt or erratic price movements than larger capitalization
companies. Historically, small capitalization stocks, such as REITs, have
been more volatile in price than the larger capitalization stocks included
in the Standard & Poor's Index of 500 Common Stocks. Among the reasons for
the greater price volatility of these small company and unseasoned stocks
are the less certain growth prospects of smaller firms and the lower degree
of liquidity in the markets for such stocks.
17-A
<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
objectivesand strategies
of the Fund
<TABLE>
<CAPTION>
GROWTH CORE CORE
BALANCED AND INCOME LARGE CAP U.S. EQUITY
FUND FUND VALUE FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT PRACTICES
Borrowings 33 1/3 33 1/3 33 1/3 33 1/3
Credit, currency, index, interest
rate and mortgage swaps . -- -- --
Cross Hedging of Currencies . -- -- --
Custodial receipts . . . .
Equity Swaps 10 10 10 10
Foreign Currency Transactions ./1/ . . .
Futures Contracts and Options on
Futures Contracts . . ./2/ ./3/
Interest rate caps, floors and
collars . -- -- --
Loan Participations . -- -- --
Mortgage Dollar Rolls . -- -- --
Options on Foreign Currencies/4/ . . . .
Options on Securities and
Securities Indices/5/ . . -- --
Repurchase Agreements . . . .
Reverse Repurchase Agreements (for
investment purposes) . -- -- --
Securities Lending 33 1/3 33 1/3 33 1/3 33 1/3
Short Sales Against the Box 25 25 -- --
Unseasoned Companies . . . .
- ------------------------------------------------------------------------------
</TABLE>
- --Not permitted
1 The Balanced Fund may also enter into forward foreign currency exchange
contracts to seek to increase total return.
2 The CORE Large Cap Value, CORE Large Cap Growth and CORE Small Cap Equity
Funds may enter into futures transactions only with respect to a represen-
tative index.
3 The CORE U.S. Equity Fund may enter into futures transactions only with
respect to the S&P 500 Index.
4 May purchase and sell call and put options.
5 May sell covered call and put options and purchase call and put options.
18-A
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
CORE CORE CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
LARGE CAP SMALL CAP GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
GROWTH FUND EQUITY FUND FUND FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
33
1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
-- -- -- -- -- -- -- .
-- -- -- -- -- -- --
. . . . . . . .
10 10 10 10 10 10 10 10
. . . . . . . .
./2/ ./2/ . . . . . .
-- -- -- -- -- -- -- .
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- .
. . . . . . . .
-- . . . . . . .
. . . . . . . .
-- -- -- -- -- -- -- --
33
1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
-- -- 25 -- -- 25 25 25
. . . . . . . .
- -----------------------------------------------------------------------------------------
</TABLE>
19-A
<PAGE>
10Percent of total assets (BOLD 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>
GROWTH CORE CORE
BALANCED AND INCOME LARGE CAP U.S. EQUITY
FUND FUND VALUE FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES
American, European and Global
Depository Receipts . . ./6/ ./6/
Asset-Backed and Mortgage-Backed
Securities . . -- --
Bank Obligations . . . .
Convertible Securities/7/ . . . .
Corporate Debt Obligations . . ./8/ ./8/
Equity Securities 45-65 65+ 90+ 90+
Emerging Market Securities 20 25 -- --
Fixed Income Securities/9/ 25+ 35 ./8/ ./8/
Foreign Securities 20 25 ./10/ ./10/
Foreign Government Securities 10 -- -- --
Municipal Securities . -- -- --
Non-Investment Grade Fixed Income
Securities 10/11/ 10/12/ -- --
Real Estate Investment Trusts . . . .
Stripped Mortgage Backed
Securities . -- -- --
Structured Securities . . . .
Temporary Defensive Investments 100 100 35 35
U.S. Government Securities . . . .
Yield Curve Options and Inverse
Floating Rate Securities . -- -- --
- ------------------------------------------------------------------------------
</TABLE>
6 The CORE Funds may not invest in European Depository Receipts.
7 Convertible securities purchased by the Balanced Fund will be rated at the
time of investment B or better or, if unrated, determined to be of compa-
rable quality by the Investment Adviser. The CORE Funds have no minimum
rating criteria and all other Funds use the same rating criteria for con-
vertible and non-convertible debt securities.
8 Cash equivalents only.
9 Except as noted under "Non-Investment Grade Fixed Income Securities,"
fixed-income securities are rated at least investment grade (i.e., BBB or
higher by Standard & Poor's Rating Group ("Standard & Poor's") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's").
10 Equity securities of foreign issuers must be traded in the United
States.
11 Must be rated at least BB or B by Standard & Poor's or Ba or B by
Moody's.
12 May be rated BB or lower by Standard & Poor's or Ba or lower by
Moody's.
13 Must be rated B or higher by Standard & Poor's or B or higher by
Moody's.
20-A
<PAGE>
OTHER INVESTMENT PRACTICES AND SECURITIES
<TABLE>
<CAPTION>
CORE CORE CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
LARGE CAP SMALL CAP GROWTH GROWTH OPPORTUNITY VALUE VALUE SECURITIES
GROWTH FUND EQUITY FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
./6/ ./6/ . . . . . .
-- -- . . . . . .
. . . . . . . .
. . . . . . . .
./8/ ./8/ . . . . . .
90+ 90+ 90+ 90+ 90+ 65+ 65+ 80+
-- -- 10 10 10 25 25 15
./8/ ./8/ . 10 10 35 . 20
./10/ ./10/ 10 10 10 25 25 15
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- 10/12/ 10/12/ 10/12/ 10/13/ 35/12/ 20/12/
. . . . . . . .
-- -- -- -- -- -- -- .
. . . . . . . .
35 35 100 100 100 100 100 100
. . . . . . . .
-- -- -- -- -- -- -- .
- ------------------------------------------------------------------------------------------
</TABLE>
21-A
<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.
.. Applicable
- --Not applicable
<TABLE>
<CAPTION>
CORE CORE CORE
GROWTH LARGE CORE LARGE SMALL
AND CAP U.S. CAP CAP
PRINCIPAL BALANCED INCOME VALUE EQUITY GROWTH EQUITY
INVESTMENT RISKS FUND FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit/Default . . -- -- -- --
Foreign . . -- -- -- --
Emerging Markets . . -- -- -- --
Small Cap/REIT -- -- -- -- -- .
Stock . . . . . .
Derivatives . . . . . .
Interest Rate . . -- -- -- --
Management . . . . . .
Market . . . . . .
Liquidity Risk . . . . . .
Other . . . . . .
- ----------------------------------------------------------------------------------
</TABLE>
22-A
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
<TABLE>
<CAPTION>
MID SMALL REAL
CAPITAL STRATEGIC GROWTH CAP CAP ESTATE
GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- -- -- . . .
. . . . . .
. . . . . .
-- -- -- . . --
. . . . . .
. . . . . .
-- -- -- . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
- -------------------------------------------------------------------------------------------
</TABLE>
23-A
<PAGE>
All Funds:
..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.
..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
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in 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
with these investment categories, will shrink or disappear suddenly and with-
out 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."
Specific 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 special risks not typically associated with domestic
issuers. Losses may result because of less foreign government regulation, less
public information and less economic, political and social stability. Losses
may also result from the imposition of exchange controls, confiscations and
other government restrictions. A
24-A
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
Fund will also be subject to the risk of negative foreign currency rate fluc-
tuations. Foreign risks will normally be greatest when a Fund invests in
issuers located in emerging countries.
..EMERGING MARKETS RISK--The securities markets of Asian, Latin American, East-
ern European, African and other emerging countries are less liquid, are espe-
cially subject to greater price volatility, have smaller market capitaliza-
tions, have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the securi-
ties markets of more developed countries. Further, investment in equity secu-
rities 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.
..SMALL CAP STOCK AND REIT RISK--The securities of small capitalization stocks
and REITs involve greater risks than those associated with larger, more estab-
lished companies and may be subject to more abrupt or erratic price movements.
Securities of such issuers may lack sufficient market liquidity to enable a
Fund to effect sales at an advantageous time or without a substantial drop in
price.
More information about the Fund's 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.
25-A
<PAGE>
Fund Performance
HOW THE FUNDS HAVE PERFORMED
The bar chart and table below provide an indication of the risks of invest-
ing in a Fund by showing: (a) changes in the performance of a Fund's Service
Shares from year to year; and (b) how the average annual returns of a Fund's
Service Shares compare to those of broad-based securities market indices.
The bar chart and table assume reinvestment of dividends and distributions.
A Fund's past performance is not necessarily an indication of how the Fund
will perform in the future. Performance reflects expense limitations in
effect. If expense limitations were not in place, a Fund's performance would
have been reduced. The CORE Large Cap Value and Real Estate Securities Funds
did not commence operations until December 31, 1998 and July 27, 1998,
respectively. The Strategic Growth and Growth Opportunities Funds had not
commenced operations as of the date of this Prospectus. Since these Funds
have less than one calendar year's performance, no performance information
is provided in this section.
2
<PAGE>
Balanced Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998 1 YEAR SINCE INCEPTION
----------------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 8/15/97) % %
S&P 500 Index* % %
Lehman Brothers Aggregate Bond Index** % %
----------------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index of bond
prices. The Index figures do not reflect any fees or expenses.
3
<PAGE>
FUND PERFORMANCE
Growth and Income Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 3/6/96) % %
S&P 500 Index* % %
-----------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
4
<PAGE>
CORE U.S. Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 6/7/96) % %
S&P 500 Index* % %
-----------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks,
an unmanaged index of common stock prices. The Index figures do not reflect
any fees or expenses.
5
<PAGE>
FUND PERFORMANCE
CORE Large Cap Growth Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 5/1/97) % %
Russell 1000 Growth Index* % %
-----------------------------------------------------------
</TABLE>
* The Russell 1000 Growth Index is an unmanaged index of common stock prices.
The Index figures do not reflect any fees or expenses.
6
<PAGE>
CORE Small Cap Equity Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 8/15/97) % %
Russell 2000 Index* % %
-----------------------------------------------------------
</TABLE>
* The Russell 2000 Index is an unmanaged index of common stock prices. The
Index figures do not reflect any fees or expenses.
7
<PAGE>
FUND PERFORMANCE
Capital Growth Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 8/15/97) % %
S&P 500 Index* % %
-----------------------------------------------------------
</TABLE>
* The S&P 500 Index is the Standard & Poor's Composite Index of 500 stocks, a
widely recognized, unmanaged index of common stock prices. The Index fig-
ures do not reflect any fees or expenses.
8
<PAGE>
Mid Cap Value Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 7/18/97) % %
Russell Midcap Value Index* % %
Russell Midcap Index* % %
-----------------------------------------------------------
</TABLE>
* The Russell Midcap Value and the Russell Midcap indices are unmanaged indi-
ces of common stock prices. The figures for the indices do not reflect any
fees or expenses.
9
<PAGE>
FUND PERFORMANCE
Small Cap Value Fund
TOTAL RETURN CALENDAR YEAR
- --------------------------------------------------------------------------------
The total
return for
Service Shares
for the Fund's
most recent
calendar
quarter ended
March 31, 1999
was
(INSERT GRAPH)
%.
Best Quarter
Q '9 %
Worst Quarter
Q '9 %
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31,
1998 1 YEAR SINCE INCEPTION
-----------------------------------------------------------
<S> <C> <C>
SERVICE SHARES (INCEPTION 8/15/97) % %
Russell 2000 Value Index* % %
Russell 2000 Index* % %
-----------------------------------------------------------
</TABLE>
* The Russell 2000 Value and the Russell 2000 indices are an unmanaged indi-
ces of common stock prices. The figures for the indices do not reflect any
fees or expenses.
10
<PAGE>
[This page intentionally left blank]
11
<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>
GROWTH CORE CORE
AND LARGE CAP U.S.
BALANCED INCOME VALUE EQUITY
FUND FUND FUND FUND
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT):
Maximum Sales Charge (Load) Imposed
on Purchases None None None None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None None
Redemption Fees None None None None
Exchange Fees None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS):/1/
Management Fees/2/ 0.65% 0.70% 0.60% 0.75%
Service Fees/3/ 0.50% 0.50% 0.50% 0.50%
Other Expenses/4/ 0.28% 0.12% 0.56% 0.12%
- ----------------------------------------------------------------------------
Total Fund Operating Expenses* 1.43% 1.32% 1.66% 1.37%
- ----------------------------------------------------------------------------
</TABLE>
See page 14 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>
GROWTH CORE CORE
AND LARGE CAP U.S.
BALANCED INCOME VALUE EQUITY
FUND FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets):/1/
Management Fees/2/ 0.65% 0.70% 0.60% 0.70%
Distribution and Service Fees/3/ 0.50% 0.50% 0.50% 0.50%
Other Expenses/4/ 0.05% 0.09% 0.04% 0.04%
- ------------------------------------------------------------------------------
Total Fund Operating Expenses (after current
waivers and expense limitations) 1.20% 1.29% 1.14% 1.24%
- ------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
CORE CORE
LARGE CAP SMALL CAP CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
GROWTH EQUITY GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
None None None None None None None None
None None None None None None None None
None None None None None None None None
None None None None None None None None
0.75% 0.85% 1.00% 0.80% 0.85% 0.75% 1.00% 1.00%
0.50% 0.50% 0.50% None None 0.50% 0.50% 0.50%
0.22% 0.48% 0.10% % % 0.16% 0.13% 0.58%
- -------------------------------------------------------------------------------------
1.47% 1.83% 1.60% % % 1.41% 1.63% 2.08%
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CORE CORE
LARGE CAP SMALL CAP CAPITAL STRATEGIC GROWTH MID CAP SMALL CAP REAL ESTATE
GROWTH EQUITY GROWTH GROWTH OPPORTUNITIES VALUE VALUE SECURITIES
FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.60% 0.85% 1.00% 0.80% 0.85% 0.75% 1.00% 1.00%
0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
0.04% 0.08% 0.04% % % 0.14% 0.10% 0.04%
- -------------------------------------------------------------------------------------
1.14% 1.43% 1.54% % % 1.39% 1.60% 1.54%
- -------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Fund Fees and Expenses (Service Shares)
/1/The Funds' annual operating expenses have been restated to reflect current
fees except for the CORE Large Cap Value, Strategic Growth and Growth Opportu-
nities Funds whose expenses are estimated for the current fiscal year.
/2/The Investment Adviser has voluntarily agreed not to impose a portion of the
management fee on the CORE U.S. Equity Fund and the CORE Large Cap Growth Fund
equal to 0.05% and 0.15%, respectively. AS A RESULT OF FEE WAIVERS, THE CURRENT
MANAGEMENT FEES OF THE CORE U.S. EQUITY FUND AND CORE LARGE CAP GROWTH FUND ARE
0.70% AND 0.60%, RESPECTIVELY, OF SUCH FUNDS' AVERAGE DAILY NET ASSETS. THE
WAIVERS MAY BE TERMINATED AT ANY TIME AT THE OPTION OF THE INVESTMENT ADVISER.
/3/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 such customers realize with respect to their
investments.
/4/"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>
Balanced 0.01%
Growth and
Income 0.05%
CORE Large Cap
Value 0.00%
CORE U.S. Equity 0.00%
CORE Large Cap
Growth 0.00%
CORE Small Cap
Equity 0.04%
Capital Growth 0.00%
Strategic Growth %
Growth
Opportunities %
Mid Cap Value 0.10%
Small Cap Value 0.06%
Real Estate
Securities 0.00%
</TABLE>
14
<PAGE>
FUND FEES AND EXPENSES
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 5 YEARS 10 YEARS
- -------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED $ $ $ $
- -------------------------------------------------------
GROWTH AND INCOME $ $ $ $
- -------------------------------------------------------
CORE LARGE CAP VALUE $ $ N/A N/A
- -------------------------------------------------------
CORE U.S. EQUITY $ $ $ $
- -------------------------------------------------------
CORE LARGE CAP GROWTH $ $ $ $
- -------------------------------------------------------
CORE SMALL CAP EQUITY $ $ $ $
- -------------------------------------------------------
CAPITAL GROWTH $ $ $ $
- -------------------------------------------------------
STRATEGIC GROWTH $ $ N/A N/A
- -------------------------------------------------------
GROWTH OPPORTUNITIES $ $ N/A N/A
- -------------------------------------------------------
MID CAP VALUE $ $ $ $
- -------------------------------------------------------
SMALL CAP VALUE $ $ $ $
- -------------------------------------------------------
REAL ESTATE SECURITIES $ $ N/A N/A
- -------------------------------------------------------
</TABLE>
Certain Service Organizations that invest in Service Shares may receive other
compensation in connection with the sale and distribution of such shares or for
services to their customers' accounts and/or the Funds. For additional informa-
tion regarding such compensation, see "Shareholder Guide" in the Prospectus and
in the Statement of Additional Information ("Additional Statement").
15
<PAGE>
Service Providers
INVESTMENT ADVISERS
<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
----------------------------------------------------------------------
<S> <C>
Goldman Sachs Asset Management ("GSAM") Balanced
One New York Plaza Growth and Income
New York, New York 10004 CORE Large Cap Value
CORE Large Cap Growth
CORE Small Cap Equity
Strategic Growth
Growth Opportunities
Mid Cap Value
Small Cap Value
Real Estate Securities
----------------------------------------------------------------------
Goldman Sachs Funds Management, L.P. ("GSFM") CORE U.S. Equity
One New York Plaza Capital Growth
New York, New York 10004
----------------------------------------------------------------------
</TABLE>
GSAM is a separate operating division of Goldman Sachs, which registered as
an investment adviser in 1981. GSFM, a registered investment adviser since
1990, is a Delaware limited partnership which is an affiliate of Goldman
Sachs. As of December 31, 1998, GSAM and GSFM, together with their affili-
ates, acted as investment adviser or distributor for assets in excess of
$195 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
1-B
<PAGE>
..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
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>
FOR THE FISCAL YEAR OR PERIOD
FUND CONTRACTUAL RATE ENDED JANUARY 31, 1999
-----------------------------------------------------------------------
<S> <C> <C>
GSAM:
-----------------------------------------------------------------------
Balanced 0.65% %
-----------------------------------------------------------------------
Growth and Income 0.70% %
-----------------------------------------------------------------------
CORE Large Cap Value 0.60% N/A
-----------------------------------------------------------------------
CORE Large Cap Growth 0.75% %
-----------------------------------------------------------------------
CORE Small Cap Equity 0.85% %
-----------------------------------------------------------------------
Strategic Growth 0.80% N/A
-----------------------------------------------------------------------
Growth Opportunities 0.85% N/A
-----------------------------------------------------------------------
Mid Cap Value 0.75% %
-----------------------------------------------------------------------
Small Cap Value 1.00% %
-----------------------------------------------------------------------
Real Estate Securities 1.00% %
-----------------------------------------------------------------------
GSFM:
-----------------------------------------------------------------------
CORE U.S. Equity 0.70% %
-----------------------------------------------------------------------
Capital Growth 1.00% %
-----------------------------------------------------------------------
</TABLE>
The difference, if any, between the stated fees and the actual fees paid by
the Funds reflects that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled. The Investment
Adviser may discontinue or modify any such voluntary limitations in the
future at its discretion.
2-B
<PAGE>
SERVICE PROVIDERS
FUND MANAGERS
M. Roch Hillenbrand, a Managing Director of Goldman, Sachs & Co., is the
Head of Global Equities for Goldman Sachs Asset Management, overseeing U.S.,
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. Roch is also Presi-
dent of Commodities Corporation LLC, of which Goldman, Sachs & Co. is the
parent company. Over the course of his 18-year career at Commodities Corpo-
ration, Roch has had extensive experience in dealing with internal and
external investment managers who have managed a range of futures and equi-
ties strategies across multiple markets, using a variety of styles.
Value Team
..Thirteen portfolio managers/analysts compose the Investment Adviser's value
investment team
..Multi-sector focus provides a balanced perspective
..Across all value products, the Investment Adviser leverages the industry
research expertise of its small, mid and large cap investment teams
Value Team
<TABLE>
<CAPTION>
YEARS
FUND PRIMARILY
NAME AND TITLE RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Eileen A. PORTFOLIO SINCE MS. APTMAN JOINED THE
Aptman MANAGER-- 1996 INVESTMENT ADVISER IN 1993.
VICE PRESIDENT MID CAP VALUE 1997
SMALL CAP VALUE
- -------------------------------------------------------------------------------
Paul D. Farrell SENIOR PORTFOLIO SINCE MR. FARRELL JOINED THE
MANAGING MANAGER-- SMALL 1992 INVESTMENT ADVISER IN 1991. IN
DIRECTOR CAP VALUE 1998 1998, HE BECAME RESPONSIBLE FOR
MID CAP VALUE 1999 MANAGING THE INVESTMENT
GROWTH AND 1999 ADVISER'S VALUE TEAM.
INCOME
BALANCED
(EQUITY)
- -------------------------------------------------------------------------------
Matthew B. PORTFOLIO SINCE MR. MCLENNAN JOINED THE
McLennan MANAGER-- 1996 INVESTMENT ADVISER IN 1995.
VICE PRESIDENT SMALL CAP VALUE 1998 FROM 1994 TO 1995, HE
MID CAP VALUE WORKED IN THE INVESTMENT BANKING
DIVISION OF GOLDMAN SACHS
IN AUSTRALIA. FROM 1991 TO 1994,
MR. MCLENNAN WORKED AT
QUEENSLAND INVESTMENT
CORPORATION IN AUSTRALIA.
- -------------------------------------------------------------------------------
Karma Wilson PORTFOLIO SINCE MS. WILSON JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER IN 1994.
BALANCED 1998 PRIOR TO 1994, SHE WAS AN
(EQUITY) 1998 INVESTMENT ANALYST WITH
GROWTH AND BANKERS TRUST AUSTRALIA LTD.
INCOME
MID CAP VALUE
- -------------------------------------------------------------------------------
</TABLE>
3-B
<PAGE>
Quantitative Equity Team
..A stable and growing team supported by an extensive internal staff
..Access to the research ideas of Goldman Sachs' renowned Global Investment
Research Department
..More than $19 billion in equities currently under management
Quantitative Equity Team
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ---------------------------------------------------------------------------------
<C> <C> <C> <S>
Melissa Brown PORTFOLIO SINCE MS. BROWN JOINED THE
VICE PRESIDENT MANAGER-- 1998 INVESTMENT ADVISER IN 1998.
CORE LARGE CAP 1998 FROM 1984 TO 1998, SHE WAS THE
VALUE 1998 DIRECTOR OF QUANTITATIVE EQUITY
CORE U.S. EQUITY 1998 RESEARCH AND SERVED ON THE
CORE LARGE CAP INVESTMENT POLICY COMMITTEE AT
GROWTH PRUDENTIAL SECURITIES.
CORE SMALL CAP
EQUITY
- ---------------------------------------------------------------------------------
Kent A. Clark SENIOR PORTFOLIO SINCE MR. CLARK JOINED THE
MANAGING MANAGER--CORE 1996 INVESTMENT ADVISER IN 1992.
DIRECTOR U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
Robert C. Jones SENIOR PORTFOLIO SINCE MR. JONES JOINED THE
MANAGING MANAGER--CORE 1991 INVESTMENT ADVISER IN 1989.
DIRECTOR U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
Victor H. SENIOR PORTFOLIO SINCE MR. PINTER JOINED THE
Pinter MANAGER--CORE 1996 INVESTMENT ADVISER IN 1990.
VICE PRESIDENT U.S. EQUITY 1997
CORE LARGE CAP 1997
GROWTH 1998
CORE SMALL CAP
EQUITY
CORE LARGE CAP
VALUE
- ---------------------------------------------------------------------------------
</TABLE>
Growth Equity Investment Team
..17 year consistent investment style applied through diverse and complete
market cycles
..More than $8 billion in equities currently under management
..More than 150 client account relationships
..A portfolio management and analytical team with more than 130 years com-
bined investment experience
4-B
<PAGE>
SERVICE PROVIDERS
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 PORTFOLIO MANAGER-- SINCE MR. ADLER JOINED THE
VICE PRESIDENT BALANCED (EQUITY) 1997 INVESTMENT ADVISER IN
CAPITAL GROWTH 1997 1997.
STRATEGIC GROWTH 1999 FROM 1990 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS
A PORTFOLIO MANAGER AT
LIBERTY
INVESTMENT MANAGEMENT,
INC. ("LIBERTY").
- ------------------------------------------------------------------------------------------
Robert G. SENIOR PORTFOLIO MANAGER-- SINCE MR. COLLINS JOINED THE
Collins CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1991 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS
A PORTFOLIO MANAGER AT
LIBERTY.
HIS PAST EXPERIENCES
INCLUDE WORK AS A
SPECIAL SITUATIONS
ANALYST WITH
RAYMOND JAMES &
ASSOCIATES FOR
FIVE YEARS.
- ------------------------------------------------------------------------------------------
Herbert E. SENIOR PORTFOLIO MANAGER-- SINCE MR. EHLERS JOINED THE
Ehlers CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
MANAGING BALANCED (EQUITY) 1998 1997.
DIRECTOR STRATEGIC GROWTH 1999 FROM 1994 TO 1997, HE
GROWTH OPPORTUNITIES 1999 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 CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1990 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY AND ITS
PREDECESSOR FIRM, EAGLE.
- ------------------------------------------------------------------------------------------
David G. Shell PORTFOLIO MANAGER-- SINCE MR. SHELL JOINED THE
VICE PRESIDENT CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1987 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY
AND ITS PREDECESSOR
FIRM, EAGLE.
- ------------------------------------------------------------------------------------------
Ernest C. PORTFOLIO MANAGER-- SINCE MR. SEGUNDO JOINED THE
Segundo, Jr. CAPITAL GROWTH 1997 INVESTMENT ADVISER IN
VICE PRESIDENT BALANCED (EQUITY) 1998 1997.
STRATEGIC GROWTH 1999 FROM 1992 TO 1997, HE
GROWTH OPPORTUNITIES 1999 WAS A
PORTFOLIO MANAGER AT
LIBERTY.
- ------------------------------------------------------------------------------------------
</TABLE>
5-B
<PAGE>
Fixed-Income Portfolio Management Team
..Fixed-income portfolio management is comprised of a deep team of sector
specialists.
..The team strives to maximize the risk-adjusted returns by de-emphasizing
interest and anticipation and focusing on security selection and sector
allocation
..The team manages approximately $40 billion in fixed-income assets for
retail, institutional and high net worth clients.
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- --------------------------------------------------------------------------------
<C> <C> <C> <S>
Jonathan A. SENIOR PORTFOLIO SINCE MR. BEINNER JOINED THE
Beinner MANAGER -- 1994 INVESTMENT ADVISER IN 1990.
MANAGING BALANCED (FIXED-
DIRECTOR AND INCOME)
CO-HEAD U.S.
FIXED INCOME
- --------------------------------------------------------------------------------
Richard C. Lucy SENIOR PORTFOLIO SINCE MR. LUCY JOINED THE INVESTMENT
MANAGING MANAGER -- 1994 ADVISER IN 1992.
DIRECTOR AND BALANCED (FIXED-
CO-HEAD U.S. INCOME)
FIXED INCOME
- --------------------------------------------------------------------------------
</TABLE>
6-B
<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
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Herbert E. SENIOR PORTFOLIO MANAGER-- SINCE MR. EHLERS JOINED THE
Ehlers REAL ESTATE SECURITIES 1998 INVESTMENT ADVISER IN
MANAGING 1997.
DIRECTOR 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.
- ------------------------------------------------------------------------------------------
Elizabeth PORTFOLIO MANAGER-- SINCE MS. GROVES JOINED THE
Groves REAL ESTATE SECURITIES 1998 INVESTMENT ADVISER IN
VICE PRESIDENT 1998. HER PREVIOUS
EXPERIENCE INCLUDES 12
YEARS IN THE REAL ESTATE
AND REAL ESTATE FINANCE
BUSINESS. FROM 1991 TO
1997, SHE WORKED IN THE
REAL ESTATE DEPARTMENT
OF THE INVESTMENT
BANKING DIVISION OF
GOLDMAN SACHS, WHERE SHE
WAS RESPONSIBLE FOR BOTH
PUBLIC AND PRIVATE
CAPITAL MARKET
TRANSACTIONS.
- ------------------------------------------------------------------------------------------
Mark Howard- PORTFOLIO MANAGER-- SINCE MR. HOWARD-JOHNSON
Johnson REAL ESTATE SECURITIES 1998 JOINED THE INVESTMENT
VICE PRESIDENT ADVISER IN 1998. HIS
PREVIOUS EXPERIENCE
INCLUDES 15 YEARS IN THE
REAL ESTATE FINANCE
BUSINESS. FROM 1996 TO
1998, HE WAS THE SENIOR
EQUITY ANALYST FOR
BOSTON FINANCIAL,
RESPONSIBLE FOR THE
PIONEER REAL ESTATE
SHARES FUND. PRIOR TO
JOINING BOSTON
FINANCIAL, FROM 1994 TO
1996, MR. HOWARD-JOHNSON
WAS A REAL ESTATE
SECURITIES ANALYST FOR
THE PENOBSCOT GROUP,
INC., ONE OF ONLY TWO
INDEPENDENT RESEARCH
FIRMS IN THE PUBLIC REAL
ESTATE SECURITIES
BUSINESS. FOR FIVE YEARS
PRIOR TO THIS, HE HELD
SENIOR MANAGEMENT
POSITIONS WITHIN VARIOUS
REAL ESTATE DIVISIONS OF
THE FLEET FINANCIAL
GROUP.
- ------------------------------------------------------------------------------------------
</TABLE>
7-B
<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," which may lead to computer shutdowns or
errors (com-
8-B
<PAGE>
SERVICE PROVIDERS
monly known as the "Year 2000 Problem"). To the extent these systems conduct
forward-looking calculations, these computer problems may occur prior to
January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to
process securities trades, price securities, provide shareholder account
services and otherwise conduct normal business operations if the Investment
Adviser or other Fund service providers do not adequately address this 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 appropri-
ately take into account available information concerning the Year 2000 pre-
paredness of the issuers of securities held by the Funds. The Investment
Adviser may obtain such Year 2000 information from various sources which
the Investment Adviser believes to be reliable, including the issuers' pub-
lic regulatory filings. However, the Investment Adviser is not in a posi-
tion 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.
9-B
<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 exchanges in 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>
Balanced QUARTERLY ANNUALLY
- ------------------------------------------------------
Growth and Income QUARTERLY ANNUALLY
- ------------------------------------------------------
CORE Large Cap Value QUARTERLY ANNUALLY
- ------------------------------------------------------
CORE U.S. Equity ANNUALLY ANNUALLY
- ------------------------------------------------------
CORE Large Cap Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
CORE Small Cap Equity ANNUALLY ANNUALLY
- ------------------------------------------------------
Capital Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
Strategic Growth ANNUALLY ANNUALLY
- ------------------------------------------------------
Growth Opportunities ANNUALLY ANNUALLY
- ------------------------------------------------------
Mid Cap Value ANNUALLY ANNUALLY
- ------------------------------------------------------
Small Cap Value ANNUALLY ANNUALLY
- ------------------------------------------------------
Real Estate Securities QUARTERLY ANNUALLY
- ------------------------------------------------------
</TABLE>
10-B
<PAGE>
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.
11-B
<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 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 on the next
business day; 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
..Processing orders to purchase, redeem or exchange shares for customers
1-H
<PAGE>
..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 and 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, that are attributable to or held
in the name of a 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 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.
2-H
<PAGE>
SHAREHOLDER GUIDE
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
The Funds' investments are valued based on market quotations or if accurate
quotations are not readily available, at fair value as determined in good
faith under procedures established by the Trustees.
..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.
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
3-H
<PAGE>
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.
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 materially of the
event, its effect on Fund operations and other relevant factors.
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 SERVICE SHARES UPON REQUEST ON ANY BUSINESS DAY AT
THEIR NAV NEXT DETERMINED AFTER RECEIPT OF SUCH REQUEST OF AN ORDER 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 not declined 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>
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
4-H
<PAGE>
SHAREHOLDER GUIDE
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 will 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 Transfer Agent.
..Neither the Trust nor Goldman Sachs assumes 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.
5-H
<PAGE>
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 earlier redemptions. 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 Organiza-
tion 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 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 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
to you.
<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 Fund
4900 Sears Tower--60th Floor
Chicago, IL 60606-6372
-----------------------------------------------------------------------
BY TELEPHONE: If you have not declined the telephone redemption
privileges on your Account Application:
.1-800-621-2550 (8:00 a.m. to
4:00 p.m. New York time)
-----------------------------------------------------------------------
</TABLE>
6-H
<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.
..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.
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.
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. A year-to-date statement for
accounts will be provided upon request made to Goldman Sachs. Service Orga-
nizations are responsible for providing these or other reports to their cus-
tomers who are the beneficial owners of Service Shares in accordance with
the rules that apply to their accounts with the Service Organizations.
7-H
<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.
At any time, a portion of a Fund's NAV per share may be represented by
undistributed income or realized or unrealized appreciation of the Fund's
portfolio securities. Therefore, subsequent distributions on a Fund's shares
may be taxable to you, even if the NAV of your shares is, as a result,
reduced below the cost of those shares and the distributions represent a
return of your purchase price.
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. Under certain circum-
stances, the Funds may make an election to treat a proportionate amount of
such taxes as constituting a distribution to you, which would allow you
either (1) to credit such proportionate amount of taxes against your U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
1-D
<PAGE>
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.
There are certain tax requirements that all 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.
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.
2-D
<PAGE>
Appendix A
Additional Information on Portfolio Risks, Securities and Techniques
The Funds will be subject to the risks associated with equity securities. "Eq-
uity 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 lia-
bility companies and similar enterprises, warrants and stock purchase rights.
In general, stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions. According-
ly, the value of the stocks that a Fund holds may decline over short or
extended periods. The stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. The vol-
atility 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 investments.
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. Conversely, 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 investment. Call risk and exten-
sion 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 (extension risk). In general, if interest rates
on new mortgage loans fall sufficiently below the interest rates on existing
outstanding mortgage loans, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the interest
rates on existing outstanding mortgage loans, the rate of prepayment would be
expected to decrease. In either case, a change in the prepayment rate can
result in losses to investors.
The Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover (100% or more) involves correspondingly greater expenses which must be
borne by a Fund and its shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund's portfolio securities,
excluding secu-
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<PAGE>
rities having a maturity at the date of purchase of one year or less. See
"Financial Highlights" in Appendix B for a statement of the Funds' historical
portfolio turnover rates.
The following sections provide further information on certain types of securi-
ties and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the Additional State-
ment, which is available upon request. Among other things, the Additional
Statement describes certain fundamental investment restrictions that cannot be
changed without shareholder approval. You should note, however, that all poli-
cies not specifically designated as fundamental are non-fundamental and may be
changed without shareholder approval. If there is a change in a Fund's invest-
ment objective, you should consider whether that Fund remains an appropriate
investment in light of your then current financial position and needs.
RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES AND REITS. Investments in
small capitalization companies and REITs involve greater risk and portfolio
price volatility than investments in larger capitalization stocks. Among the
reasons for the greater price volatility of these investments are the less cer-
tain 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 periods 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 eco-
nomic or market conditions, or adverse investor perceptions, 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. Small capitalization companies
and REITs also often have limited 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 capitalization companies and REITs may be more difficult
to price precisely than other types of securities because of their characteris-
tics and lower trading volumes.
RISKS OF FOREIGN INVESTMENTS. Foreign investments involve special risks that
are not typically associated with U.S. dollar denominated or quoted securities
of U.S. issuers. Foreign investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and changes in exchange control regulations (e.g., currency block-
age). A decline in
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APPENDIX A
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 partic-
ipating nations in the European Economic and Monetary Union ("EU") presents
unique uncertainties, including the legal treatment of certain outstanding
financial contracts after January 1, 1999 that refer to existing currencies
rather than the euro; the establishment and maintenance of exchange rates for
currencies being converted into the euro; the fluctuation of the euro relative
to non-euro currencies during the transition period from January 1, 1999 to
December 31, 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 in the European
Union, such as the United Kingdom and Denmark, into the euro and the admission
of other non-EU countries such as Poland, Latvia and Lithuania as members of
the EU may have an impact on the euro. These or other factors, including polit-
ical and economic risks, could cause market disruptions before or after the
introduction of the euro, and could adversely affect the value of securities
held by the Funds.
Brokerage commissions, custodial services and other costs relating to invest-
ment in international securities markets generally are more expensive than in
the United States. In addition, clearance and settlement procedures may be dif-
ferent in foreign countries and, in certain markets, such procedures have been
unable to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S. securi-
ties markets and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationaliza-
tion, expropriation or confiscatory taxation, imposition of withholding or
other taxes on dividend or interest payments (or, in some cases, capital
gains), limitations on the removal of funds or other
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<PAGE>
assets of the Funds, political or social instability or diplomatic developments
which could affect investments in those countries.
Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.
Investment in sovereign debt obligations by certain Funds involves special
risks not present in debt obligations of corporate issuers. The issuer of the
debt or the governmental authorities that control the repayment of the debt may
be unable or unwilling to repay principal or pay interest when due in accor-
dance with the terms of such debt, and a Fund may have limited recourse to com-
pel 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 obliga-
tions of U.S. issuers. A sovereign debtor's willingness or ability to repay
principal and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign currency reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward international lenders, and the political
constraints to which a sovereign debtor may be subject.
Investments in foreign securities may take the form of sponsored and
unsponsored American Depository Receipts ("ADRs") and Global Depository
Receipts ("GDRs"). Certain Funds may also invest in European Depository
Receipts ("EDRs") or other similar instruments representing securities of for-
eign 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 security.
RISKS OF EMERGING COUNTRIES. Certain Funds may invest in securities of issuers
located in emerging countries. The risks of foreign investment are heightened
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 port-
folio securities in certain emerging countries may be constrained by limita-
tions 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 vol-
ume by or holdings of a Fund, the Investment Adviser, its affiliates and their
respective clients and other
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<PAGE>
APPENDIX A
service providers. A Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For exam-
ple, 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 specific class of securi-
ties which may have less advantageous terms (including price) than securities
of the issuer available for purchase by nationals. In addition, certain coun-
tries may restrict or prohibit investment opportunities in issuers or indus-
tries deemed important to national interests. Such restrictions may affect the
market price, liquidity and rights of securities that may be purchased by a
Fund. The repatriation of both investment income and capital from certain
emerging countries is subject to restrictions such as the need for governmental
consents. Due to restrictions on direct investment in equity securities in cer-
tain Asian countries, such as Taiwan, it is anticipated that a Fund may invest
in such countries only through other investment funds in such countries.
Many emerging countries are subject to a substantial degree of economic, polit-
ical and social instability. Governments of some emerging countries are author-
itarian in nature or have been installed or removed as a result of military
coups, while governments in other emerging countries have periodically used
force to suppress civil dissent. Disparities of wealth, the pace and success of
democratization, and ethnic, religious and racial disaffection, among other
factors, have also led to social unrest, violence and/or labor unrest in some
emerging countries. Unanticipated political or social developments may result
in sudden and significant investment losses. Investing in emerging countries
involves greater risk of loss due to expropriation, nationalization, confisca-
tion 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 invest-
ment 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 addition, significant delays are common in certain markets in
registering the transfer of securities. Settlement or registration problems may
make it more difficult for a Fund to value its portfolio securities and could
cause the Fund to miss attractive investment opportunities, to have a portion
of its assets uninvested or to incur losses due to the failure of a
counterparty to pay for securities the Fund has delivered or the Fund's inabil-
ity to complete its contractual obligations. The creditworthiness of the local
securi-
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<PAGE>
ties 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 crditworthiness of firms used
in more developed countires, thus subjecting the Fund to a greater risk of loss
if a securities firm defaults in the performance of its responsibilities.
The small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries
may make a Fund's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets (such as
the United States, Japan and most Western European countries). A Fund's invest-
ments 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, mar-
ket or political conditions, or adverse investor perceptions, 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 precisely because of their characteristics and
lower trading volumes.
Many emerging countries have experienced currency devaluations and substantial
(and, in some cases, extremely high) rates of inflation, which have had a nega-
tive 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 barri-
ers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
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 signifi-
cant 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, structured securities and currency transac-
tions involve additional risk of loss. Loss can result from a lack of correla-
tion 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
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<PAGE>
APPENDIX A
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) which is considered a speculative practice and
presents even greater risk of loss.
RISK 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 ordi-
nary 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 portfolio
to the extent that qualified institutional buyers become for a time uninter-
ested in purchasing these restricted securities. The purchase price and subse-
quent valuation of restricted and illiquid securities normally reflect a dis-
count, which may be significant, from the market price of comparable 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 agencies,
instrumentalities and sponsored enterprises), foreign governments, domestic and
foreign corporations, banks and other issuers. Some of these fixed-income secu-
rities are described in the next section below. Further information 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 con-
sidered medium-grade obligations with speculative characteristics, and adverse
economic conditions or changing circumstances may weaken their issuers' capac-
ity 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.
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<PAGE>
Certain 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 questionable 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, investment
in such
bonds will present greater speculative risks than those associated with invest-
ment 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.
This section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks. Further information is provided in the Additional Statement, which is
available upon request.
CONVERTIBLE SECURITIES. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities gen-
erally offer lower interest or dividend yields than non-convertible securities
of similar quality. Convertible securities in which a Fund invests are subject
to the same rating criteria as its other investments in fixed-income securi-
ties. Convertible securities have both equity and fixed-income risk character-
istics. 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 con-
vertible security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock
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<PAGE>
APPENDIX A
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.
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 considered a speculative
practice. Some Funds may also engage in cross-hedging by using forward contracts
in a currency dif-ferent from that in which the hedged security is denominated
or quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgement of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date.
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 con-
trols 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 obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or could force the Fund to cover its purchase or
sale commitments, if any, at the current market price.
STRUCTURED SECURITIES. Structured securities are securities whose value is
determined by reference to changes in the value of specific currencies, inter-
est 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 secu-
rities may be positively or negatively indexed, so that appreciation of the
Reference may produce an
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<PAGE>
increase or decrease in the interest rate or value of the security at maturity.
In addition, changes in the interest rates or the value of the security at
maturity may be a multiple of changes in the value of the Reference.
Consequently, structured securities may 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.
Structured securities include, but are not limited to, 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.
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 or securing mortgage
loans held by the REIT. REITs are dependent upon the ability of the REITs' man-
agers, and are subject to heavy cash flow dependency, 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 asso-
ciated with investments in real estate including possible declines in the value
of real estate, general and local economic conditions, environmental problems
and changes in interest rates. To the extent that assets underlying a REIT are
concentrated geographically, by property type or in certain other respects,
these risks may be heightened. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
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 during 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. Certain Funds 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 for-
eign securities, purchase and sell (write) put and call options on foreign cur-
rencies.
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 consid-
ered a
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<PAGE>
APPENDIX A
speculative activity). The successful use of options 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 (or currency) mar-kets.
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 other-wise
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 liquidity and credit risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts are stan-
dardized, exchange-traded contracts that provide for the sale or purchase 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 option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures con-
tract 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 foreign
exchanges.
A 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 currency
exchange rates, or to the extent applicable, otherwise manage its term struc-
ture and duration in accordance with its investment objective and policies.
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 regu-
lations of the Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations. A Fund may not pur-
chase or sell futures contracts or purchase or sell related options to seek to
increase total return, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of initial margin deposits and
premiums paid on the Fund's outstanding positions in futures and related
options entered into for the purpose of seeking to increase total return would
exceed 5% of the market value of the Fund's net assets.
Futures contracts and related options present the following risks:
..While a Fund may benefit from the use of futures and options on futures, unan-
ticipated changes in interest rates, securities prices or currency exchange
rates
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<PAGE>
may result in poorer overall performance than if the Fund had not entered into
any futures contracts or options transactions.
..Because perfect correlation between a futures position and portfolio position
that is intended to be protected is impossible to achieve, the desired protec-
tion 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 writing
call options on futures is potentially unlimited and may exceed the amount of
the premium received.
..Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's NAV.
..As a result of the low margin deposits normally required in futures trading, a
relatively small price movement in a futures contract may result in substan-
tial 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.
EQUITY SWAPS. Equity swaps allow the parties to a swap agreement to exchange
the dividend income or other components of return on an equity investment (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 invest-
ment 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 div-
idends 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. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securi-
ties 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 contract 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 sold securities may
increase before the
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<PAGE>
APPENDIX A
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 secu-rities or forward
commitments before settlement whenever the Investment Adviser deems it
appropriate.
REPURCHASE AGREEMENTS. Certain Funds may enter into repurchase agreements with
primary dealers in U.S. Government securities and banks affiliated with primary
dealers. Repurchase agreements involve the purchase of securities subject to
the seller's agreement to repurchase them at a mutually agreed upon date and
price. The repurchase price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate on
the purchased security.
If the other party or "seller" defaults, a Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the Fund in connection with the repurchase agreement are
less than the repurchase price and Fund's costs associated with delay and
enforcement of the repurchase agreement. In addition, in the event of bank-
ruptcy of the seller, a Fund could suffer additional losses if a court deter-
mines 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. Distribu-
tions of the income from repurchase agreements will be taxable to a Fund's
shareholders. In addition, certain Funds, together with other registered
investment companies having advisory agreements with the Investment Adviser or
any of its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. 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 col-
lateral may be invested in cash equivalents. If the Investment Adviser deter-
mines 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 or possible loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
15-D
<PAGE>
SHORT SALES AGAINST-THE-BOX. Certain Funds 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 securi-
ties convertible into or exchangeable for, without payment of any further con-
sideration, an equal amount of the securities of the same issuer as the securi-
ties sold short.
PREFERRED STOCK, WARRANTS AND RIGHTS. Each Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an owner-
ship interest providing the holder with claims on the issuer's earnings and
assets before common stock owners but after bond owners. Unlike debt securi-
ties, 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 of other non-com-
pliance by the issuer of the preferred stock.
Warrants and other rights are options to buy a stated number of shares of com-
mon stock at a specified price at any time during the life of the warrant. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
STANDARD & POOR'S DEPOSITORY RECEIPTS. The Funds may, consistent with their
investment policies, purchase Standard & Poor's Depository Receipts ("SPDRs").
SPDRs are American Stock Exchange-traded securities 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 is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including, but
not limited to, facilitating the handling 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 American Stock Exchange (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 net asset values of their underlying indi-
ces and supply and demand of WEBS on the AMEX. To date, WEBS have traded at
relatively modest discounts and premiums to their net asset values. However,
WEBS have a limited operating 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 require-
ments of
16-D
<PAGE>
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 disrup-
tions affecting WEBS should occur in the future, the liquidity and value of
Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE Index could be impaired. If such disruptions were to
occur, a Fund could be required to reconsider the use of WEBS as part of its
investment strategy.
OTHER INVESTMENT COMPANIES. A Fund may invest in securities of other investment
companies subject to the limitations prescribed by the Investment Company 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 invest-
ing 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 manage-
ment fees and other expenses paid by such other investment companies. Such
other investment 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.
17-D
<PAGE>
MORTGAGE DOLLAR ROLLS. Certain Funds may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by a Fund of securities for delivery in
the current month. The Fund simultaneously contracts 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 benefits 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 pro-
ceeds of the securities sold. Unless the benefits of a mortgage dollar roll
exceed the income, capital appreciation and gain or loss due to mortgage pre-
payments 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.
Successful use of mortgage dollar rolls depends upon the Investment Adviser's
ability to predict correctly interest rates and mortgage prepayments. If the
Investment Adviser is incorrect in its predictions, the Fund may experience a
loss. For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security
and a separate transaction involving a sale. The Funds do not currently intend
to enter into mortgage dollar rolls that are accounted for as a financing and
do not treat them as borrowings.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
loans secured by real property. 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 invest-
ment conduit ("REMIC") pass-through or participation certificates. CMOs provide
an investor with a specified interest in the cash flow from a pool of under-
lying mortgages or of other Mortgage-Backed Securities. CMOs are issued in mul-
tiple classes. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no princi-
pal payments will be made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. A REMIC is a CMO that qualifies for
special tax treatment under
1-E
<PAGE>
the Code and invests in certain mortgages princi pally 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 principal pay-
ments from a pool of mortgage loans. The market value of SMBS consisting
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 mortgage loans are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped.
Mortgage-Backed Securities (including CMOs, REMICs and SMBS) are subject to
both call risk and extension risk as previously described. Because of these
risks, these securities can have significantly greater price and yield volatil-
ity than with traditional fixed-income securities.
The value of Mortgage-Backed Securities that are structured as pass-through
mortgage securities that are collateralized by ARMs are less likely to rise
during periods of declining interest rates to the same extent as fixed-rate
securities. This is because interest rate declines may result in accelerated
prepayments of mortgages with the result that proceeds from prepayments will be
reinvested at lower interest rates. On the other hand, during periods of rising
interest rates, the value of ARMs will lag behind changes in the market rate.
ARMs are also typically subject to maximum increases and decreases in the
interest rate adjustment which can be made on any one adjustment date, in any
one year, or during the life of the security. In the event of dramatic
increases or decreases in prevailing market interest rates, the value of a
Fund's investments in ARMs may fluctuate more substantially since these limits
may prevent the security from fully adjusting its interest rate to the prevail-
ing market rates.
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 prepay-
ments of principal on the underlying loans. During periods of declining inter-
est rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, 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,
2-E
<PAGE>
and its ability to reinvest the returns of principal at comparable yields is
subject to generally 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 security interest in collateral that is comparable to mortgage
assets. There is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities. 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.
ZERO COUPON, DEFERRED INTEREST, PAY-IN-KIND AND CAPITAL APPRECIATION BONDS.
Zero coupon, deferred interest, pay-in-kind and capital appreciation bonds are
issued at a discount from their face value because interest payments are typi-
cally postponed until maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. The market prices of
these securities generally are more volatile than the market prices of inter-
est-bearing securities and are likely to respond to a greater degree to changes
in interest rates than interest-bearing securities having similar maturities
and credit quality.
YIELD CURVE OPTIONS. Certain Funds 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 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 present a
risk of loss even if the yield of one of the underlying securities remains con-
stant, or if the spread moves in a direction or to an extent which was not
anticipated.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Certain Funds can borrow money
from banks and enter into reverse repurchase agreements with banks and other
financial institutions in amounts not exceeding one-third of its total assets.
Reverse repurchase agreements involve the sale of securities held by a Fund
subject to the Fund's agreement to repurchase them at a mutually agreed upon
date and price (including interest). These transactions may be entered into as
a temporary measure for emergency purposes or to meet redemption requests.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of
the transaction proceeds will be greater than the related interest expense.
Borrowings and reverse repurchase agreements involve leveraging. If the securi-
ties held by a Fund
3-E
<PAGE>
decline in value while these transactions are outstanding, the NAV of the Fund's
outstanding shares will decline in value by proportion ately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the interest income earned by a Fund (from the investment
of the proceeds) will be less than the interest expense of the transaction, that
the market value of the securities sold by a Fund will decline below the price
the Fund is obligated to pay to repurchase the securi ties, and that the
securities may not be returned to the Fund.
INTEREST RATE SWAPS, MORTGAGE SWAPS, CREDIT SWAPS, CURRENCY SWAPS AND INTEREST
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 pay-
ments. Mortgage swaps are similar to interest rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, howev-
er, 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 occur-
rence 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 and a floor that preserves a certain return within a predetermined range
of interest rates.
Certain Funds may enter into swap transactions for hedging purposes or to seek
to increase total return. The use of interest rate, mortgage, credit and cur-
rency 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 forecasts 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.
4-E
<PAGE>
Appendix C
Prior Performance of Similarly Advised Accounts of the Investment Adviser
CORE LARGE CAP VALUE FUND
<TABLE>
<CAPTION>
PRIVATE RUSSELL
ACCOUNT NET 1000
COMPOSITE VALUE
PERFORMANCE INDEX
- --------------------------------------
<S> <C> <C>
1998 11.41 % 15.64 %
1997 32.87 % 35.18 %
1996 26.29 % 21.64 %
1995 37.92 % 38.35 %
1994 (2.17)% (2.01)%
1993 16.90 % 18.12 %
8/1/92-12/31/92 5.39 % 4.01 %
- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/98
SINCE
3 5 INCEPTION
ONE YEAR YEARS YEARS (8/1/92)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Account Net Composite Performance 11.41% 23.18% 20.33% 19.33%
Russell 1000 Value Index 15.64% 23.88% 20.85% 19.68%
- -----------------------------------------------------------------------------
</TABLE>
The following table sets forth the Investment Adviser's composite perfor-
mance data relating to the historical performance of all discretionary pri-
vate accounts managed by the Investment Adviser that have investment objec-
tives, policies, and strategies substantially similar to the CORE Large Cap
Value Fund. The information is provided to illustrate the past performance
of the Investment Adviser in managing substantially similar accounts as mea-
sured against the Russell 1000 Value Index and does not represent the per-
formance of the CORE Large Cap Value Fund. Investors should not consider
this performance data as a substitute for the performance of the CORE Large
Cap Value Fund nor should investors consider this data as an indication of
future performance of the CORE Large Cap Value Fund or of the Investment
Adviser. The Russell 1000 Value Index is unmanaged and investors cannot
invest directly in the index.
In accordance with the standards of the Association for Investment Manage-
ment and Research ("AIMR"), the Investment Adviser's composite performance
data
16
<PAGE>
APPENDIX C
was calculated on a time-weighted and asset-weighted total return basis
which includes realized and unrealized gains and losses plus income. The
composite performance is net of applicable investment management fees, bro-
kerage commissions, execution costs and custodial fees, without provision
for federal and state taxes, if any. Total return performance of the CORE
Large Cap Value Fund will be calculated in accordance with the regulations
of the SEC. The SEC standardized average annual total return is neither
time-weighted nor asset-weighted and is determined for specified periods by
computing the annual percentage change in the value of an initial amount
that is invested in a share class of the Fund at the maximum public offering
price. Investors should be aware that the differences in methodology between
AIMR and SEC requirements could result in different performance data for
identical time periods.
All returns presented reflect the reinvestment of dividends and other earn-
ings. The weighted-average expenses of the private accounts used in calcu-
lating the Investment Adviser's net composite performance data were 0.59%
annualized, which are lower than the estimated expenses of Service Shares of
the CORE Large Cap Value Fund stated under "Fees and Expenses" above. The
performance of the private accounts would have been lower if they had been
subject to the expenses of the CORE Large Cap Value Fund. In addition, the
private accounts are not subject to the same diversification requirements,
specific tax restrictions and investment limitations imposed on the CORE
Large Cap Value Fund by the Investment Company Act of 1940 and Subchapter M
of the Internal Revenue Code. Consequently, the performance results of the
Investment Adviser's composite could have been adversely affected if the
private accounts had been regulated as investment companies under the fed-
eral securities laws.
17
<PAGE>
Appendix D
Prior Performance of Similarly Advised
Accounts of the Investment Adviser
STRATEGIC GROWTH FUND
Private Account
Net Composite S&P 500
Performance Index
- ---------------------------------------
1998 % %
1997 % %
1996 % %
1995 % %
1994 % %
1993 % %
8/1/92-12/31/92 % %
- ---------------------------------------
Average Annual Total Return
for the periods ended 12/31/98
Since
Inception
One Year 3 Years 5 Years (8/1/92)
- ----------------------------------------------------------------------------
Private Account Net Composite Performance % % % %
S&P 500 Index % % % %
- ----------------------------------------------------------------------------
The following table sets forth the Investment Adviser's composite performance
data relating to the historical performance of all discretionary private
accounts managed by the Investment Adviser that have investment objectives,
policies, and strategies substantially similar to the Strategic Growth Fund.
The information is provided to illustrate the past performance of the
Investment Adviser in managing substantially similar accounts as measured
against the S&P 500 Index and does not represent the performance of the
Strategic Growth Fund. Investors should not consider this performance data as a
substitute for the performance of the Strategic Growth Fund nor should
investors consider this data as an indication of future performance of the
Strategic Growth Fund or of the Investment Adviser. The S&P 500 Index is
unmanaged and investors cannot invest directly in the index.
In accordance with the standards of the Association for Investment Management
and Research ("AIMR"), the Investment Adviser's composite performance data was
calculated on a time-weighted and asset-weighted total return basis which
includes realized and unrealized gains and losses plus income. The composite
per-
18
<PAGE>
APPENDIX D
formance is net of applicable investment management fees, brokerage commis-
sions, execution costs and custodial fees, without provision for federal and
state taxes, if any. Total return performance of the Strategic Growth Fund
will be calculated in accordance with the regulations of the SEC. The SEC
standardized average annual total return is neither time-weighted nor asset-
weighted and is determined for specified periods by computing the annual
percentage change in the value of an initial amount that is invested in a
share class of the Fund at the maximum public offering price. Investors
should be aware that the differences in methodology between AIMR and SEC
requirements could result in different performance data for identical time
periods.
All returns presented reflect the reinvestment of dividends and other earn-
ings. The weighted-average expenses of the private accounts used in calcu-
lating the Investment Adviser's net composite performance data were 0.59%
annualized, which are lower than the estimated expenses of Service Shares of
the Strategic Growth Fund stated under "Fees and Expenses" above. The per-
formance of the private accounts would have been lower if they had been sub-
ject to the expenses of the Strategic Growth Fund. In addition, the private
accounts are not subject to the same diversification requirements, specific
tax restrictions and investment limitations imposed on the Strategic Growth
Fund by the Investment Company Act of 1940 and Subchapter M of the Internal
Revenue Code. Consequently, the performance results of the Investment Advis-
er's composite could have been adversely affected if the private accounts
had been regulated as investment companies under the federal securities
laws.
19
<PAGE>
Index
<TABLE>
<C> <C> <S>
1 General Investment Management Approach
Fund Investment Objectives and Strategies
3 Goldman Sachs Balanced Fund
4 Goldman Sachs Growth and Income Fund
Goldman Sachs CORE Large Cap Value Fund
5 Goldman Sachs CORE U.S. Equity Fund
6 Goldman Sachs CORE Large Cap Growth Fund
7 Goldman Sachs CORE Small Cap Equity Fund
8 Goldman Sachs Capital Growth Fund
Goldman Sachs Strategic Growth Fund
Goldman Sachs Growth Opportunities Fund
9 Goldman Sachs Mid Cap Value Fund
10 Goldman Sachs Small Cap Value Fund
</TABLE>
<TABLE>
<C> <C> <S>
xx Goldman Sachs Real Estate Securities Fund
Other Investment Practices and Securities
Principal Risks of the Funds
Fund Performance
12 Fund Fees and Expenses
Service Providers
Dividends
Shareholder Guide
How To Buy Shares
How To Sell Shares
Taxation
A-1 Appendix A--
Additional Information on Portfolio Risks,
Securities and Techniques
B-1 Appendix B--
Financial Highlights
C-1 Appendix C
D-1 Appendix D
</TABLE>
20
<PAGE>
Domestic Equity Funds
Prospectus (Service 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.
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 1-800-621-2550.
To obtain other information and for shareholder inquiries:
By telephone - Call 1-800-621-2550
By mail - Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606
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. The Funds' investment company registration number is 811-5349.
[LOGO]
21
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
SERVICE SHARES
INSTITUTIONAL SHARES
GOLDMAN SACHS BALANCED FUND
GOLDMAN SACHS GROWTH AND INCOME FUND
GOLDMAN SACHS CORE LARGE CAP VALUE 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 CAPITAL GROWTH FUND
GOLDMAN SACHS STRATEGIC GROWTH FUND
GOLDMAN SACHS GROWTH OPPORTUNITIES FUND
GOLDMAN SACHS MID CAP EQUITY FUND
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
GOLDMAN SACHS SMALL CAP VALUE FUND
GOLDMAN SACHS EUROPEAN EQUITY FUND
GOLDMAN SACHS JAPANESE EQUITY FUND
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
GOLDMAN SACHS ASIA GROWTH FUND
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
(Equity Portfolios of Goldman Sachs Trust)
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 Balanced Fund, Goldman Sachs
Growth and Income Fund, Goldman Sachs CORE Large Cap Value 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 Capital Growth Fund, Goldman Sachs Strategic Growth Fund, Goldman
Sachs Growth Opportunities Fund, Goldman Sachs Mid Cap Equity Fund, Goldman
Sachs International Equity Fund, Goldman Sachs Small Cap Value Fund, Goldman
Sachs European Equity Fund, Goldman Sachs Japanese Equity Fund, Goldman Sachs
International Small Cap Fund, Goldman Sachs Emerging Markets Equity Fund,
Goldman Sachs Asia Growth Fund and Goldman Sachs Real Estate Securities Fund
dated
<PAGE>
May 3, 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 Arthur Andersen LLP,
independent public accountants, for each Fund contained in each Fund's 1999
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.
B-2
<PAGE>
TABLE OF CONTENTS Page
----
INTRODUCTION..........................................................
INVESTMENT POLICIES...................................................
INVESTMENT RESTRICTIONS...............................................
MANAGEMENT............................................................
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................
NET ASSET VALUE.......................................................
PERFORMANCE INFORMATION...............................................
SHARES OF THE TRUST...................................................
TAXATION..............................................................
FINANCIAL STATEMENTS..................................................
OTHER INFORMATION.....................................................
DISTRIBUTION AND SERVICE PLANS........................................
OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE,
PURCHASES, REDEMPTIONS, EXCHANGES AND DIVIDENDS..................
SERVICE PLAN..........................................................
APPENDIX A..........................................................1-A
APPENDIX B..........................................................1-B
The date of this Additional Statement is May 3, 1999.
B-3
<PAGE>
GOLDMAN SACHS FUNDS MANAGEMENT, L.P.
Investment Adviser to:
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs Capital Growth Fund
One New York Plaza
New York, New York 10004
GOLDMAN SACHS ASSET MANAGEMENT
Investment Adviser to:
Goldman Sachs Balanced Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs CORE Large Cap Value Fund
Goldman Sachs CORE Large Cap Growth Fund
Goldman Sachs CORE Small Cap Equity Fund
Goldman Sachs Strategic Growth Fund
Goldman Sachs Growth Opportunities Fund
Goldman Sachs CORE International Equity Fund
Goldman Sachs Mid Cap Equity Fund
Goldman Sachs Small Cap Value Fund
Goldman Sachs Real Estate Securities Fund
One New York Plaza
New York, New York 10004
GOLDMAN, SACHS & CO.
Distributor
85 Broad Street
New York, New York 10004
GOLDMAN, SACHS & CO.
Transfer Agent
4900 Sears Tower
Chicago, Illinois 60606
GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
Investment Adviser to:
Goldman Sachs International Equity Fund
Goldman Sachs European Equity Fund
Goldman Sachs Japanese Equity Fund
Goldman Sachs International Small Cap Fund
Goldman Sachs Emerging Markets Equity Fund
Goldman Sachs Asia Growth Fund
133 Petersborough Court
London, England EC4A 2BB
Toll free (in U.S.) . . . 800-621-2550
B-4
<PAGE>
INTRODUCTION
Goldman Sachs Trust (the "Trust") is an open-end, management investment
company. The Trust is organized as a Delaware business trust, and 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 Balanced Fund ("Balanced Fund"), Goldman Sachs Growth
and Income Fund ("Growth and Income Fund"), Goldman Sachs CORE Large Cap Value
Fund ("CORE Large Cap Value Fund"), Goldman Sachs CORE U.S. Equity Fund ("CORE
U.S. Equity Fund")(formerly known as "Goldman Sachs Select Equity Fund"),
Goldman Sachs CORE Large Cap Growth Fund ("CORE Large Cap Growth Fund"), Goldman
Sachs CORE Small Cap Equity Fund ("CORE Small Cap Equity Fund"), Goldman Sachs
CORE International Equity Fund ("CORE International Equity Fund"), Goldman Sachs
Capital Growth Fund ("Capital Growth Fund"), Goldman Sachs Strategic Growth Fund
("Strategic Growth Fund"), Goldman Sachs Growth Opportunities Fund ("Growth
Opportunities Fund"), Goldman Sachs Mid Cap Equity Fund ("Mid Cap Equity Fund"),
Goldman Sachs International Equity Fund ("International Equity Fund"), Goldman
Sachs Small Cap Value Fund ("Small Cap Value Fund"), Goldman Sachs European
Equity Fund ("European Equity Fund"), Goldman Sachs Japanese Equity Fund
("Japanese Equity Fund"), Goldman Sachs International Small Cap Fund
("International Small Cap Fund"), Goldman Sachs Emerging Markets Equity Fund
("Emerging Markets Equity Fund"), Goldman Sachs Asia Growth Fund ("Asia Growth
Fund") and Goldman Sachs Real Estate Securities Fund ("Real Estate Securities
Fund") (collectively referred to herein as the "Funds"). As of May 3, 1999, no
shares of the Strategic Growth or Growth Opportunities Funds had been
offered.
The Funds, except the European Equity, Japanese Equity, International Small
Cap, CORE Large Cap Value, CORE Large Cap Growth, CORE International Equity,
Strategic Growth Fund, Growth Opportunities Fund, CORE Small Cap Equity and Real
Estate Securities Funds, were initially organized as a series of a corporation
formed under the laws of the State of Maryland on September 27, 1989 and were
reorganized as a Delaware business trust as of April 30, 1997. 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") a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Investment Adviser to the
Balanced, Growth and Income, CORE Large Cap Value, CORE Large Cap Growth, CORE
Small Cap Equity, Strategic Growth, Growth Opportunities, CORE International
Equity, Mid Cap Equity, Small Cap Equity and Real Estate Securities Funds.
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman Sachs,
serves as the Investment Adviser to the CORE U.S. Equity and Capital Growth
Funds. Goldman Sachs Asset Management International ("GSAMI"), an affiliate of
Goldman Sachs, serves as the Investment Adviser to the International Equity,
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and Asia Growth Funds. GSAM, GSFM and GSAMI are sometimes referred to
collectively herein as the "Investment Advisers." In addition,
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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.
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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 any of
the Funds may be worth more or less when redeemed than when purchased. None of
the Funds should be relied upon as a complete investment program.
General Information Regarding All 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.
Value Style Funds. Growth and Income, Mid Cap Equity, Small Cap Value
Funds and the equity portion of Balanced Fund are managed using a value oriented
approach. The Investment Adviser evaluates securities using fundamental analysis
and intends to purchase equity securities that are, in its view, underpriced
relative to a combination of such companies' long-term earnings prospects,
growth rate, free cash flow and/or dividend-paying ability. Consideration will
be given to the business quality of the issuer. Factors positively affecting the
Investment Adviser's view of that quality include the competitiveness and degree
of regulation in the markets in which the company operates, the existence of a
management team with a record of success, the position of the company in the
markets in which it operates, the level of the company's financial leverage and
the sustainable return on capital invested in the business. The Funds may also
purchase securities of companies that have experienced difficulties and that, in
the opinion of the Investment Adviser, are available at attractive prices.
[Growth Style Funds. The Capital Growth, Strategic Growth and Growth
Opportunities Funds are managed using a growth equity oriented approach. Equity
securities for these Funds are selected based on their prospects for above
average growth. The Investment Adviser will select securities of growth
companies trading, in the
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Investment Adviser's opinion, at a reasonable price relative to other
industries, competitors and historical price/earnings multiples. The Funds will
generally invest in companies whose earnings are believed to be in a relatively
strong growth trend, or, to a lesser extent, in companies in which significant
further growth is not anticipated but whose market value per share is thought to
be undervalued. 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.]
Quantitative Style Funds. CORE U.S. Equity, CORE Large Cap Growth, CORE
Large Cap Value, CORE Small Cap Equity and CORE International Equity Funds (the
"CORE Equity Funds") are managed using both quantitative and fundamental
techniques. CORE is an acronym for "Computer-Optimized, Research-Enhanced,"
which reflects the CORE Funds' investment process. This investment process and
the proprietary multifactor model used to implement it are discussed below.
Investment Process. The Investment Adviser begins with a broad universe of
U.S. equity securities for CORE U.S. Equity, CORE Large Cap Growth, CORE Large
Cap Value and CORE Small Cap Equity Funds (the "CORE U.S. Equity Funds"), and a
broad universe of foreign equity securities for CORE International Equity Fund.
As described more fully below, the Investment Adviser uses a proprietary
multifactor model (the "Multifactor Model") to forecast the returns of different
markets, currencies and individual securities. In the case of an equity security
followed by the Goldman Sachs Global Investment Research Department (the
"Research Department"), a rating is assigned based upon the Research
Department's evaluation. In the discretion of the Investment Adviser, ratings
may also be assigned to equity securities based on research ratings obtained
from other industry sources.
In building a diversified portfolio for each CORE Equity Fund, the
Investment Adviser utilizes optimization techniques to seek to maximize the
Fund's expected return, while maintaining a risk profile similar to the Fund's
benchmark. Each portfolio is primarily composed of securities rated highest by
the foregoing investment process and has risk characteristics and industry
weightings similar to the relevant Fund's benchmark.
Multifactor Models. The Multifactor Models are rigorous computerized
rating systems for forecasting the returns of different equity markets,
currencies and individual equity securities according to fundamental investment
characteristics. The CORE U.S. Funds use one Multifactor Model to forecast the
returns of securities held in each Fund's portfolio. CORE International Equity
Fund uses multiple Multifactor Models to forecast returns. Currently, CORE
International Equity Fund uses one model to forecast equity market returns, one
model to forecast currency returns and 22 separate models to forecast individual
equity security returns in 22 different countries. Despite this variety,
all
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Multifactor Models incorporate common variables covering measures of value,
growth, momentum and risk (e.g., book/price ratio, earnings/price ratio, price
momentum, price volatility, consensus growth forecasts, earnings estimate
revisions, earnings stability, and, in the case of models for CORE International
Equity Fund, currency momentum and country political risk ratings). All of the
factors used in the Multifactor Models have been shown to significantly impact
the performance of the securities, currencies and markets they were designed to
forecast.
The weightings assigned to the factors in the Multifactor Model used by the
CORE U.S. Funds are derived using a statistical formulation that considers each
factor's historical performance in different market environments. As such, the
U.S. Multifactor Model is designed to evaluate each security using only the
factors that are statistically related to returns in the anticipated market
environment. Because they include many disparate factors, the Investment
Adviser believes that all the Multifactor Models are broader in scope and
provide a more thorough evaluation than most conventional quantitative models.
Securities and markets ranked highest by the relevant Multifactor Model do not
have one dominant investment characteristic; rather, they possess an attractive
combination of investment characteristics. By using a variety of relevant
factors to select securities, currencies or markets, the Investment Adviser
believes that the Fund will be better balanced and have more consistent
performance than an investment portfolio that uses only one or two factors to
select such investments.
The Investment Adviser will monitor, and may occasionally suggest and make
changes to, the method by which securities, currencies or markets are selected
for or weighted in a Fund. Such changes (which may be the result of changes in
the Multifactor Models or the method of applying the Multifactor Models) may
include: (i) evolutionary changes to the structure of the Multifactor Models
(e.g., the addition of new factors or a new means of weighting the factors);
(ii) changes in trading procedures (e.g., trading frequency or the manner in
which a Fund uses futures); or (iii) changes in the method by which securities,
currencies or markets are weighted in a Fund. Any such changes will preserve a
Fund's basic investment philosophy of combining qualitative and quantitative
methods of selecting securities using a disciplined investment process.
Research Department. In assigning ratings to equity securities, the
Research Department uses a four category rating system ranging from "recommended
for purchase" to "likely to under perform." The ratings reflect the analyst's
judgment as to the investment results of a specific security and incorporate
economic outlook, valuation, risk and a variety of other factors.
By employing both a quantitative (i.e., the Multifactor Models) and a
qualitative (i.e., research enhanced) method of selecting securities, each CORE
Equity Fund seeks to capitalize on the strengths of each discipline.
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. CORE Large Cap Value, CORE
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U.S. Equity and CORE Large Cap Equity Funds may purchase futures contracts only
with respect to the S&P 500 Index (in the case of CORE U.S. Equity Fund) and a
representative index (in the case of CORE Large Cap Value, CORE Large Cap Growth
Funds) in order to keep a Fund's effective equity exposure close to 100%. CORE
Small Cap Equity and CORE International Equity Funds may purchase other types of
futures contracts. 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.
Actively Managed International Funds. The International Equity, Japanese
Equity, European Equity, International Small Cap, Emerging Markets Equity and
Asia Growth Funds are managed using an active international approach, which
utilizes a consistent process of stock selection undertaken by portfolio
management teams located within each of the major investment regions, including
Europe, Japan, Asia and the United States. In selecting securities, the
Investment Adviser uses a long-term, bottom-up strategy based on first-hand
fundamental research that is designed to give broad exposure to the available
opportunities while seeking to add return primarily through stock selection.
Equity securities for these Funds are evaluated based on three key factors--the
business, the management and the valuation. The Investment Adviser ordinarily
seeks securities that have, in the investment adviser's opinion, superior
earnings growth potential, sustainable franchise value with management attuned
to creating shareholder value and relatively discounted valuations. In addition,
the investment adviser uses a multi-factor risk model which seeks to assure that
deviations from the benchmark are justifiable.]
Real Estate Securities Fund. The investment strategy of the Real Estate
Securities Fund is based on the premise that property market fundamentals are
the primary determinant of growth underlying the success of companies in the
real estate industry. The Fund's research and investment process is designed to
identify those companies with strong property fundamentals and strong management
teams. This process is comprised of real estate market research and securities
analysis. The Fund's Investment Adviser will take into account fundamental
trends in underlying property markets as determined by proprietary models,
research of local real estate 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.
Additional Information About Balanced Fund
- ------------------------------------------
The investment objective of the Balanced Fund is to provide shareholders
with long-term capital growth and current income. The Balanced Fund seeks to
achieve its investment objective by investing in a balanced portfolio
diversified among both equity and fixed-income securities.
Balanced Fund is intended to provide a foundation on which an investor can
build an investment portfolio or to serve as the core of an investment program,
depending on the investor's goals. Balanced Fund is designed for relatively
conservative investors who seek a combination of long-term capital growth and
current income in a single investment. Balanced
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Fund offers a portfolio of equity and fixed-income securities intended to
provide less volatility than a portfolio completely invested in equity
securities and greater diversification than a portfolio invested in only one
asset class. Balanced Fund may be appropriate for people who seek capital
appreciation but are concerned about the volatility typically associated with a
fund that invests solely in stocks and other equity securities.
Fixed-Income Strategies Designed to Maximize Return and Manage Risk.
GSAM's approach to managing the fixed-income portion of Balanced Fund's
portfolio seeks to provide high returns relative to a market benchmark, the
Lehman Brothers Aggregate Bond Index (the "Index"), while also seeking to
provide high current income. This approach emphasizes (1) sector allocation
strategies which enable GSAM to tactically overweight or underweight one sector
of the fixed-income market (i.e., mortgages, corporate bonds, U.S. Treasuries,
non-dollar bonds, emerging market debt) versus another; (2) individual security
selection based on identifying relative value (fixed-income securities
inexpensive relative to others in their sector); and (3) to a lesser extent,
strategies based on GSAM's expectation of the direction of interest rates or the
spread between short-term and long-term interest rates such as yield curve
strategy.
The Index currently includes U.S. Government Securities and fixed-rate,
publicly issued, U.S. dollar-denominated fixed income securities rated at least
BBB or Baa by a nationally recognized statistical ratings organization
("NRSRO"). The securities currently included in the Index have at least one
year remaining to maturity; have an outstanding principal amount of at least
$100 million; and are issued by the following types of issuers, with each
category receiving a different weighting in the Index: U.S. Treasury; agencies,
authorities or instrumentalities of the U.S. government; issuers of mortgage-
backed securities; utilities; industrial issuers; financial institutions;
foreign issuers; and issuers of asset-backed securities. The Index is a
trademark of Lehman Brothers. Inclusion of a security in the Index does not
imply an opinion by Lehman Brothers as to its attractiveness or appropriateness
for investment. Although Lehman Brothers obtains factual information used in
connection with the Index from sources which it considers reliable, Lehman
Brothers claims no responsibility for the accuracy, completeness or timeliness
or such information and has no liability to any person for any loss arising from
results obtained from the use of the Index data.
GSAM seeks to manage fixed-income portfolio risk in a number of ways.
These include diversifying the fixed-income portion of the Balanced Fund's
portfolio among various types of fixed-income securities and utilizing
sophisticated quantitative models to understand how the fixed-income portion of
the portfolio will perform under a variety of market and economic scenarios. In
addition, GSAM uses extensive credit analysis to select and to monitor any
investment-grade or non-investment grade bonds that may be included in the
Balanced Fund's portfolio. In employing this and other investment strategies,
the GSAM team has access to extensive fundamental research and analysis
available through Goldman Sachs and a broad range of other sources.
A number of investment strategies will be used in selecting fixed-income
securities for the Fund's portfolio. GSAM's fixed-income investment philosophy
is to actively manage the portfolio within a risk-controlled framework. The
Investment Adviser de-emphasizes interest
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rate anticipation by monitoring the duration of the portfolio within a narrow
range of the Investment Adviser's target duration, and instead focuses on
seeking to add value through sector selection, security selection and yield
curve strategies.
Market Sector Selection. Market sector selection is the underweighting or
overweighting of one or more market sectors (i.e., U.S. Treasuries, U.S.
Government agency securities, corporate securities, mortgage-backed securities
and asset-backed securities). GSAM may decide to overweight or underweight a
given market sector or subsector (e.g., within the corporate sector,
industrials, financial issuers and utilities) based on, among other things,
expectations of future yield spreads between different sectors or subsectors.
Issuer Selection. Issuer selection is the purchase and sale of corporate
securities based on a corporation's current and expected credit standing (within
the constraints imposed by Balanced Fund's minimum credit quality requirements).
This strategy focuses on four types of investment-grade corporate issuers.
Selection of securities from the first type of issuers - those with low but
stable credit - is intended to enhance total returns by providing incremental
yield. Selecting securities from the second type of issuers - those with low
and intermediate but improving credit quality - is intended to enhance total
returns in two stages. Initially, these securities are expected to provide
incremental yield. Eventually, price appreciation should occur relative to
alternative securities as credit quality improves, the NRSROs upgrade credit
ratings, and credit spreads narrow. Securities from the third type of issuers -
issuers with deteriorating credit quality - will be avoided, since total returns
are typically enhanced by avoiding the widening of credit spreads and the
consequent relative price depreciation. Finally, total returns can be enhanced
by focusing on securities that are rated differently by different rating
organizations. If the securities are trading in line with the higher published
quality rating while GSAM concurs with the lower published quality rating, the
securities would generally be sold and any potential price deterioration
avoided. On the other hand, if the securities are trading in line with the
lower published quality rating while the higher published quality rating is
considered more realistic, the securities may be purchased in anticipation of
the expected market reevaluation and relative price appreciation.
Yield Curve Strategy. Yield curve strategy consists of overweighting or
underweighting different maturity sectors relative to a benchmark to take
advantage of the shape of the yield curve. Three alternative maturity sector
selections are available: a "barbell" strategy in which short and long maturity
sectors are overweighted while intermediate maturity sectors are underweighted;
a "bullet" strategy in which, conversely, short-and long-maturity sectors are
underweighted while intermediate-maturity sectors are overweighted; and a
"neutral yield curve" strategy in which the maturity distribution mirrors that
of a benchmark.
Additional Information About International Equity Fund
- ------------------------------------------------------
International Equity Fund will seek to achieve its investment objective by
investing primarily in equity and equity-related securities of issuers that are
organized outside the United States or whose securities are principally traded
outside the United States. Because research coverage outside the United States
is fragmented and relatively unsophisticated, many foreign companies that are
well-positioned to grow and prosper have not come to the attention of investors.
GSAMI believes that the high historical returns and less efficient pricing of
foreign
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markets create favorable conditions for the International Equity Fund's highly
focused investment approach. For a description of the risks of the International
Equity Fund's investments in Asia, see "Investing in Emerging Markets, including
Asia and Eastern Europe."
A Rigorous Process of Stock Selection. Using fundamental industry and
company research, GSAMI's equity team in London, Singapore and Tokyo seeks to
identify companies that may achieve superior long-term returns. Stocks are
carefully selected for International Equity Fund's portfolio through a three-
stage investment process. Because the International Equity Fund is a long-term
holder of stocks, the portfolio managers adjust the Fund's portfolio only when
expected returns fall below acceptable levels or when the portfolio managers
identify substantially more attractive investments.
Using the research of Goldman Sachs as well as information gathered from
other sources in Europe and the Asia-Pacific region, the Investment Adviser
seeks to identify attractive industries around the world. Such industries are
expected to have favorable underlying economics and allow companies to generate
sustainable and predictable high returns. As a rule, they are less economically
sensitive, relatively free of regulation and favor strong franchises.
Within these industries the Investment Adviser seeks to identify well-run
companies that enjoy a stable competitive advantage and are able to benefit from
the favorable dynamics of the industry. This stage includes analyzing the
current and expected financial performance of the company; contacting suppliers,
customers and competitors; and meeting with management. In particular, the
portfolio managers look for companies whose managers have a strong commitment to
both maintaining the high returns of the existing business and reinvesting the
capital generated at high rates of return. Management should act in the
interests of the owners and seek to maximize returns to all stockholders.
GSAMI's currency team manages the foreign exchange risk embedded in foreign
equities by means of a currency overlay program. The program may be utilized to
protect the value of foreign investments in sustained periods of dollar
appreciation and to add returns by seeking to take advantage of foreign exchange
fluctuations.
The members of GSAMI's international equity team bring together years of
experience in analyzing and investing in companies in Europe and the Asia-
Pacific region. Their expertise spans a wide range of skills including
investment analysis, investment management, investment banking and business
consulting. GSAM's worldwide staff of over 300 professionals includes portfolio
managers based in London, Singapore and Tokyo who bring firsthand knowledge of
their local markets and companies to every investment decision.
Corporate Debt Obligations
- --------------------------
Each Fund may, under normal market conditions, invest in corporate debt
obligations, including obligations of industrial, utility and financial issuers.
CORE Large Cap Value, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap
Equity and CORE International Equity Funds may only invest in debt securities
that are cash equivalents. 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
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interest rates, market perception of the creditworthiness of the issuer and
general market liquidity.
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 Balanced, Growth and Income, Capital Growth, Strategic Growth, Growth
Opportunities, Mid Cap Equity, Small Cap Value, International Equity, European
Equity, Japanese Equity, International Small Cap, Emerging Markets Equity, Asia
Growth and Real Estate Securities 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 Advisers 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 Balanced, Growth
and Income, Capital Growth, Strategic Growth, Growth Opportunities, Mid Cap
Equity, Small Cap Value, International Equity, European Equity, Japanese Equity,
International Small Cap, Emerging Markets Equity, Asia Growth and Real Estate
Securities 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
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issues. The Investment Advisers 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 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
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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 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 up to 5% of its net assets 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 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 securities law
purposes, custodial receipts are not considered U.S. Government securities.
Municipal Securities
- --------------------
Balanced Fund may invest up to 5% of its net assets in municipal
securities. Municipal securities consist of bonds, notes and other instruments
issued by or on behalf of states, territories and possessions of the United
States (including the District of Columbia) and their political subdivisions,
agencies or instrumentalities, the interest on which is exempt from regular
federal income tax. Municipal securities are often issued to obtain funds for
various public purposes. Municipal securities also include "private activity
bonds" or industrial development bonds, which are issued by or on behalf of
public authorities to obtain funds for privately operated facilities, such as
airports and waste disposal facilities, and, in some cases, commercial and
industrial facilities.
The yields and market values of municipal securities are determined
primarily by the general level of interest rates, the creditworthiness of the
issuers of municipal securities and economic and political conditions affecting
such issuers. Due to their tax exempt status, the yields and market prices of
municipal securities may be adversely affected by changes in tax
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rates and policies, which may have less effect on the market for taxable fixed-
income securities. Moreover, certain types of municipal securities, such as
housing revenue bonds, involve prepayment risks which could affect the yield on
such securities. The credit rating assigned to municipal securities may reflect
the existence of guarantees, letters of credit or other credit enhancement
features available to the issuers or holders of such municipal securities.
Investments in municipal securities are subject to the risk that the issuer
could default on its obligations. Such a default could result from the
inadequacy of the sources or revenues from which interest and principal payments
are to be made or the assets collateralizing such obligations. Revenue bonds,
including private activity bonds, are backed only by specific assets or revenue
sources and not by the full faith and credit of the governmental issuer.
Mortgage-Backed Securities
- --------------------------
General Characteristics. Each Fund (other than CORE Large Cap Value, CORE
U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity and CORE International
Equity Funds) 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 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
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<PAGE>
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.
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
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<PAGE>
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 (other than CORE Large Cap
Value, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity and CORE
International Equity Funds) 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 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
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
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.
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
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<PAGE>
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 mortgage assets. These tranches tend to have market prices and
yields that are much more volatile than other PAC classes.
Stripped Mortgage-Backed Securities. Balanced and Real Estate Securities
Funds 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
- --------------------------------
Balanced and Real Estate Securities Funds may invest up to 5% of their net
assets 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
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<PAGE>
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
- -----------------------
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.
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.
Loan Participations
- -------------------
Balanced Fund may invest in loan participations. Such loans must be to
issuers in whose obligations Balanced Fund may invest. A loan participation is
an interest in a loan to a U.S. or foreign company or other borrower which is
administered and sold by a financial intermediary. In a typical corporate loan
syndication, a number of lenders, usually banks (co-lenders), lend a corporate
borrower a specified sum pursuant to the terms and conditions of a
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<PAGE>
loan agreement. One of the co-lenders usually agrees to act as the agent bank
with respect to the loan.
Participation interests acquired by Balanced Fund may take the form of a
direct or co-lending relationship with the corporate borrower, an assignment of
an interest in the loan by a co-lender or another participant, or a
participation in the seller's share of the loan. When Balanced Fund acts as co-
lender in connection with a participation interest or when Balanced Fund
acquires certain participation interests, Balanced Fund will have direct
recourse against the borrower if the borrower fails to pay scheduled principal
and interest. In cases where Balanced Fund lacks direct recourse, it will look
to the agent bank to enforce appropriate credit remedies against the borrower.
In these cases, Balanced Fund may be subject to delays, expenses and risks that
are greater than those that would have been involved if the Fund had purchased a
direct obligation (such as commercial paper) of such borrower. For example, in
the event of the bankruptcy or insolvency of the corporate borrower, a loan
participation may be subject to certain defenses by the borrower as a result of
improper conduct by the agent bank. Moreover, under the terms of the loan
participation, Balanced Fund may be regarded as a creditor of the agent bank
(rather than of the underlying corporate borrower), so that Balanced Fund may
also be subject to the risk that the agent bank may become insolvent. The
secondary market, if any, for these loan participations is limited and any loan
participations purchased by the Balanced Fund will be regarded as illiquid.
For purposes of certain investment limitations pertaining to
diversification of the Balanced Fund's portfolio investments, the issuer of a
loan participation will be the underlying borrower. However, in cases where the
Balanced Fund does not have recourse directly against the borrower, both the
borrower and each agent bank and co-lender interposed between the Balanced Fund
and the borrower will be deemed issuers of a loan participation.
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. CORE Large Cap Value and CORE Large Cap
Growth Funds may only enter into such transactions with respect to a
representative index. CORE U.S. Equity Fund may enter into futures transactions
only with respect to the S&P 500 Index. The other 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
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<PAGE>
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.
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 (other than CORE Large Cap Value,
CORE U.S. Equity, CORE Large Cap Growth and CORE Small Cap Equity Funds) can
sell futures contracts on a specified currency to protect against a decline in
the value of such currency and its portfolio securities which are quoted or
denominated in such currency. Each Fund (other than CORE Large Cap Value, CORE
U.S. Equity, CORE Large Cap Growth and CORE Small Cap Equity Funds) 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. Balanced Fund may also use futures contracts to manage the
term structure and duration of its fixed-income securities holdings in
accordance with that Fund's investment objectives and policies.
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 (other than CORE Large Cap Value, CORE U.S. Equity, CORE Large
Cap Growth and CORE Small Cap Equity Funds) foreign currency rates that would
adversely affect the dollar value of such Fund's portfolio securities.
Similarly, each Fund (other than CORE Large Cap Value, CORE U.S. Equity, CORE
Large Cap Growth and CORE Small Cap Equity Funds) 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
B-26
<PAGE>
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 Advisers
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.
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.
B-27
<PAGE>
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.
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 to seek to increase total
return 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 (other than CORE Large Cap
Value, CORE U.S. Equity and CORE Large Cap Growth Funds). 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
B-28
<PAGE>
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 would have deposited with
its custodian cash or liquid assets with a value at least equal to the exercise
price of the put option. 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 and put options purchased by the
Fund.
In addition, a written call option or put option may be covered by
maintaining segregated cash or liquid assets (either of which may be quoted or
denominated in any currency), by entering into an offsetting forward contract
and/or by purchasing an offsetting option 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 composed 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 (other than the CORE Large Cap Value, CORE
U.S. Equity and CORE Large Cap Growth Funds) 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.
B-29
<PAGE>
A Fund would normally 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 would normally 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 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. Balanced and Real Estate Securities Funds, with
respect to up to 5% of their net assets, 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.
Balanced and Real Estate Securities Funds may purchase or write yield curve
options for the same purposes as other options on securities. For example, each
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. Balanced and Real Estate Securities Funds may also purchase or
write yield curve options in an effort to increase current income if, in the
judgment of the Investment Adviser, a 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.
B-30
<PAGE>
Yield curve options written by Balanced and Real Estate Securities Funds
will be "covered." A call (or put) option is covered if a Fund holds another
call (or put) option on the spread between the same two securities and
segregates cash or liquid assets sufficient to cover a Fund's net liability
under the two options. Therefore, a 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 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 Advisers. 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.
B-31
<PAGE>
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
- -----------------------------
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 up to 5% of its net assets, calculated at the time of
purchase, 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. CORE Large Cap Value, CORE U.S.
Equity, CORE Large Cap Growth, CORE Small Cap Equity and CORE International
Equity Funds have
B-32
<PAGE>
no present intention of acquiring warrants or rights. Warrants and rights have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
Foreign Securities
- ------------------
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.
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. Balanced, CORE
International Equity, International Equity, European Equity, International Small
Cap, Emerging Markets Equity and Asia Growth 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
B-33
<PAGE>
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.
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 (except for CORE Large Cap Value, CORE U.S. Equity, CORE
Large Cap Growth and CORE Small Cap Equity Funds) 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.
Each Fund (except CORE Large Cap Value, CORE U.S. Equity, CORE Large Cap
Growth and CORE Small Cap Equity Funds) 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
B-34
<PAGE>
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. CORE
International Equity, International Equity, European Equity, Japanese Equity,
International Small Cap, Asia Growth and Emerging Markets Equity Funds are
intended for long-term investors who can accept the risks associated with
investing primarily in equity and equity-related securities of foreign issuers,
including (for certain Funds) emerging country issuers, as well as the risks
associated with investments quoted or denominated in foreign currencies.
Balanced, Growth and Income, Capital Growth, Strategic Growth, Growth
Opportunity, Mid Cap Equity, Small Cap Value, and Real Estate Securities Funds
may invest, to a lesser extent, in equity and equity-related securities of
foreign issuers, including emerging country issuers.
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.
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. 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.
B-35
<PAGE>
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 (such as Malaysia) is subject to restrictions which require
governmental comments 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; and (v) ethnic, religious and
racial disaffection or conflict. Such 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.
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."
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 a portion of the assets of a Fund is uninvested and no return is
earned on such assets. The inability of a Fund to make intended security
purchases or sales due to settlement problems could result either in losses to
the Fund due to
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<PAGE>
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.
Investing in Japan. The Japanese Equity Fund invests in the equity
securities of Japanese companies. Japan's economy, the second-largest in the
world, has grown substantially over the last three decades. The boom in Japan's
equity and property markets during the expansion of the late 1980's supported
high rates of investment and consumer spending on durable goods, but both of
these components of demand have now retreated sharply following the decline in
asset prices. Profits have fallen sharply, unemployment has reached a
historical high and consumer confidence is low. The banking sector continues to
suffer from non-performing loans and this economy is subject to deflationary
pressures. Numerous discount-rate cuts since its peak in 1991, a succession of
fiscal stimulus packages, support plans for the debt-burdened financial system
and spending for reconstruction following the Kobe earthquake may help to
contain the recessionary forces, but substantial uncertainties remain.
In addition to the cyclical downturn, Japan is suffering through structural
adjustments. Like the Europeans, the Japanese have seen a deterioration of
their competitiveness due to high wages, a strong currency and structural
rigidities. Finally, Japan is reforming its political process and deregulating
its economy. This has brought about turmoil, uncertainty and a crisis of
confidence.
While the Japanese governmental system itself seems stable, the dynamics of
the country's politics have been unpredictable in recent years. The economic
crisis of 1990-92 brought the downfall of the conservative Liberal Democratic
Party, which had ruled since 1955. Since then, the country has seen a series of
unstable multi-party coalitions and several prime ministers come and go, because
of politics as well as personal scandals. While there appears to be no reason
for anticipating civic unrest, it is impossible to know when the political
instability will end and what trade and fiscal policies might be pursued by the
government that emerges.
Japan's heavy dependence on international trade has been adversely affected
by trade tariffs and other protectionist measures as well as the economic
condition of its trading partners. While Japan subsidizes its agricultural
industry, only 19% of its land is suitable for cultivation and it is only 50%
self-sufficient in food production. Accordingly, it is highly dependent on
large imports of wheat, sorghum and soybeans. In addition, industry, its most
important economic sector, depends on imported raw materials and fuels,
including iron ore, copper, oil and many forest products. Japan's high volume
of exports, such as automobiles, machine tools and semiconductors, have caused
trade tensions, particularly with the United States. Some trade agreements,
however, have been implemented to reduce these tensions. The relaxing of
official and de facto barriers to imports, or hardships created by any pressures
brought by trading partners, could adversely affect Japan's economy. A
substantial rise in world oil or commodity prices could also have a negative
affect. The strength of the yen itself may prove an impediment to strong
continued exports and economic recovery, because it makes Japanese goods sold in
other countries more expensive and reduces the value of foreign earnings
repatriated to Japan. Because the Japanese economy is so dependent on exports,
any fall-off in exports may be seen as a sign of economic weakness, which may
adversely affect the market.
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<PAGE>
Geologically, Japan is located in a volatile area of the world, and has
historically been vulnerable to earthquakes, volcanoes and other natural
disasters. As demonstrated by the Kobe earthquake in January of 1995, in which
5,000 people were killed and billions of dollars of damage was sustained, these
natural disasters can be significant enough to affect the country's economy.
Forward Foreign Currency Exchange Contracts. Growth and Income, CORE Large
Cap Value, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity,
Capital Growth, Strategic Growth, Growth Opportunities, Mid Cap Equity, Small
Cap Value and Real Estate Securities Funds may enter into forward foreign
currency exchange contracts for hedging purposes. Balanced, CORE International
Equity, International Equity, European Equity, Japanese Equity, International
Small Cap, Emerging Markets Equity and Asia Growth Funds may enter into forward
foreign currency exchange contracts for hedging purposes and to seek to increase
total return. 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
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<PAGE>
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. 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.
Balanced, CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds may engage in cross-hedging by using forward contracts in one
currency to hedge against fluctuations in the value of securities quoted or
denominated in a different currency if GSAM or GSAMI determines that there is a
pattern of correlation between the two currencies.
Balanced, CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds may also enter into forward contracts to seek to increase total
return. 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.
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<PAGE>
Writing and Purchasing Currency Call and Put Options. Each Fund (except
CORE Large Cap Value, CORE U.S. Equity, CORE Large Cap Growth and CORE Small Cap
Equity Funds) may write covered put and call options 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 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.
Balanced, CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds may use options on currency to cross-hedge, which involves writing
or purchasing options on one currency to hedge against changes in exchange rates
for a different currency with a pattern of correlation. In addition, Balanced,
CORE International Equity, International Equity, European Equity, Japanese
Equity, International Small Cap, Emerging Markets Equity and Asia Growth Funds
may purchase call or put options on currency to seek to increase total return
when the Investment Adviser anticipates that the currency will appreciate or
depreciate in value, but the securities quoted or denominated in that currency
do not present attractive investment opportunities and are not included in the
Fund's portfolio.
A call option written by a Fund obligates a Fund to sell 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 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
B-40
<PAGE>
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. 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,
Balanced, CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds may use options on currency to seek to increase total return.
Balanced, CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth 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, Balanced, CORE International Equity, International Equity, European
Equity, Japanese Equity, International Small Cap, Emerging Markets Equity and
Asia Growth Funds may forego the opportunity to profit from an increase in the
market value of the underlying currency. Also, when writing put options,
Balanced, CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth 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
B-41
<PAGE>
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
- -----------------------------------
Balanced, Real Estate Securities, CORE International Equity, International
Equity, European Equity, Japanese Equity, International Small Cap, Emerging
Markets Equity and Asia Growth Funds may, with respect to up to 5% of their net
assets, enter into currency swaps for both hedging purposes and to seek to
increase total return. In addition, Balanced and Real Estate Securities Funds
may, with respect to 5% of their net assets, enter into 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 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
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<PAGE>
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 net
amount payable under an interest rate, index or mortgage swap and the entire
amount of the payment stream payable by a Fund under a currency swap or an
interest rate floor, cap or collar is segregated in cash or liquid assets, the
Funds and the Investment Advisers 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 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.
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 it would have been if this investment technique were not used. The
Investment Advisers, under the supervision of the Board of Trustees, are
responsible for determining and monitoring the liquidity of the Funds'
transactions in swaps, caps, floors and collars.
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
- --------------------
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
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<PAGE>
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. The counterparty to an equity swap contract will typically be a
bank, investment banking firm or broker/dealer. The counterparty will generally
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, plus the dividends that would have been received on those
stocks. The Fund will agree to pay to the counterparty a floating 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 any 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.
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. The net amount of the excess, if any, of a Fund's obligations over its
entitlements with respect to each equity swap will be accrued on a daily basis
and an amount of cash or liquid assets, having an aggregate net asset value at
least equal to such accrued excess will be maintained in a segregated account by
a Fund's custodian. Inasmuch as these transactions are entered into for hedging
purposes or are offset by segregated cash or liquid assets, as permitted by
applicable law, the Funds and their Investment Advisers 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.
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, U.S. Government securities or letters of intent maintained on a
current basis at an amount at least equal to the market value of the
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<PAGE>
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 Advisers to be of
good standing, and when, in the judgment of the Investment Advisers, the
consideration which can be earned currently from securities loans of this type
justifies the attendant risk. If the Investment Advisers determine to make
securities loans, it is intended that the value of the securities loaned 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.
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<PAGE>
Investment in Unseasoned Companies
- ----------------------------------
Each Fund may invest up to 5% of its net assets, calculated at the time of
purchase, 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 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 5% of its net assets in the
securities of other 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 an 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 an
Investment Adviser or any of its affiliates acts as Investment Adviser, the
advisory and administration fees payable by the Fund to an 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). 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.
B-46
<PAGE>
Each Fund (other than CORE Large Cap Value, CORE U.S. Equity, CORE Large
Cap Growth and CORE Small Cap Equity Funds) 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
(other than the Real Estate Securities 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. CORE International Equity, International Equity,
Japanese Equity, European Equity, International Small Cap, Emerging Markets
Equity, Asia Growth and Balanced Funds may also enter into repurchase agreements
involving certain foreign government securities. 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. 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 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 Advisers seek 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.
B-47
<PAGE>
In addition, a Fund, together with other registered investment companies
having advisory agreements with the Investment Advisers or their 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.
Reverse Repurchase Agreements
- -----------------------------
Balanced Fund may borrow money for temporary purposes by entering into
transactions called reverse repurchase agreements. Under these arrangements, the
Fund will sell portfolio securities to dealers in U.S. Government Securities or
members of the Federal Reserve System, with an agreement to repurchase the
security on an agreed date, price and interest payment. Reverse repurchase
agreements involve the possible risk that the value of portfolio securities the
Fund relinquishes may decline below the price the Fund must pay when the
transaction closes. Borrowings may magnify the potential for gain or loss on
amounts invested resulting in an increase in the speculative character of the
Fund's outstanding shares.
When a Fund enters into a reverse repurchase agreement, it places in a
separate custodial account either liquid assets or other high grade debt
securities that have a value equal to or greater than the repurchase price. The
account is then continuously monitored to make sure that an appropriate value is
maintained. Reverse repurchase agreements are considered to be borrowings under
the Act.
Mortgage Dollar Rolls
- ---------------------
When Balanced 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.
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
B-48
<PAGE>
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"). This restriction does not, however, apply to any Fund
classified as a non-diversified company under 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) (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.
(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.
B-49
<PAGE>
(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 maturing in 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-50
<PAGE>
MANAGEMENT
The Trustees are responsible for deciding matters of general policy
and reviewing the actions of the Investment Advisers, distributor and transfer
agent. The officers of the Trust conduct and supervise 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.
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
Ashok N. Bakhru, 56 Chairman Chairman of the Board and Trustee -
1325 Ave. of the Americas & Trustee Goldman Sachs Variable Insurance Trust
New York, NY 10019 (registered investment company) (since
1997); Executive Vice President -
Finance and Administration and Chief
Financial Officer, Coty Inc. (since
April 1996); President, ABN Associates
(July 1994 -March 1996); 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).
*David B. Ford, 52 Trustee Trustee- Goldman Sachs Variable
One New York Plaza Insurance Trust (registered investment
New York, NY 10004 company) (since 1997); Director,
Commodities Corp. LLC (since April
1997); Managing Director, J. Aron &
Company (since November 1996); Managing
Director, Goldman, Sachs & Co.
Investment Banking Division (since
November 1996); 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,
</TABLE>
B-51
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
respectively); Co-Head, Goldman, Sachs &
Co. 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, 36 Trustee Trustee and President - Goldman Sachs
One New York Plaza & President Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Managing Director, Goldman, Sachs & Co.
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).
*John P. McNulty, 46 Trustee Trustee - Goldman Sachs Variable
One New York Plaza Insurance Trust (registered investment
New York, NY 10004 company) (since 1997); Managing
Director, Goldman Sachs (since 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);
Director, Global Capital Reinsurance
(since 1989); Director, Commodities
Corp. LLC (since April 1997); Limited
Partner of Goldman, Sachs & Co.(1994 -
November 1995).
</TABLE>
B-52
<PAGE>
<TABLE>
<CAPTION>
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 1997); Vice President
New York, NY 10021 and Senior Program Officer, The Andrew
W. Mellon Foundation (since October
1997); President of Bryn Mawr College
(1978-1997); Director of Josiah Macy,
Jr. Foundation (since 1977); Director of
the Philadelphia Contributionship (since
1985); Director of Amherst College
(since 1986); Director of Dayton Hudson
Corporation (1988-1997); Director of the
Spenser Foundation (since 1993); and
member of PNC Advisory Board (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 1997); Limited Partner,
Goldman, Sachs & Co. (since 1994);
Consultant to Goldman Sachs Asset
Management (since 1994); Director, Chief
Operating Officer and Vice President of
Goldman Sachs Funds Management Inc.
(from November 1993 - November 1994);
President and Chief Operating Officer,
GSAM - Japan Limited (November 1993 -
November 1994); Director, Goldman Sachs
Asset Management International (November
1993 - November 1994); General Partner,
Goldman, Sachs & Co. Investment Banking
(December 1986 - November 1994).
</TABLE>
B-53
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
Jackson W. Smart, Jr., 68 Trustee Trustee - Goldman Sachs Variable
One Northfield Plaza Suite 218 Insurance Trust (registered investment
Northfield, IL 60093 company) (since 1997); Chairman,
Executive Committee, First Commonwealth,
Inc. (a managed dental care company)
(since January 1996); Chairman and Chief
Executive Officer, MSP Communications
Inc. (a company engaged in radio
broadcasting) (November 1988 - December
1997); Director, Federal Express
Corporation (NYSE) (since 1976);
Director, Evanston Hospital Corporation
(since 1980).
William H. Springer, 69 Trustee Trustee - Goldman Sachs Variable
701 Morningside Drive Insurance Trust (registered investment
Lake Forest, IL 60045 company) (since 1997); Director,
Walgreen Co. (a retail drug store
business) (since April 1998); Director
of Baker, Fentress & Co. (a closed-end,
non-diversified management investment
company) (April 1992 - present);
Trustee, Northern Institutional Funds
(since April 1984).
</TABLE>
B-54
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
Richard P. Strubel, 59 Trustee Trustee - Goldman Sachs Variable
737 N. Michigan Ave., Suite 1405 Insurance Trust (registered investment
Chicago, IL 60611 company) (since 1997); Director of
Kaynar Technologies Inc. (since March
1997); Managing Director, Tandem
Partners, Inc. (since 1990); President
and Chief Executive Officer, Microdot,
Inc. (a diversified manufacturer of
fastening systems and connectors)
(January 1984 - October 1994); Trustee,
Northern Institutional Funds (since
December 1982).
*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 & Co. (since April 1985);
Co-Manager of Shareholder Servicing of
GSAM (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 & Co. Incorporated (since
July 1995); Director, Investors Bank and
Trust (November 1993 - July 1995).
*James A. Fitzpatrick, 38 Vice President Vice President - Goldman Sachs Variable
4900 Sears Tower Insurance Trust (registered investment
Chicago, IL 60606 company) (since 1997); Vice President of
Goldman Sachs Asset Management (since
April 1997); Vice President and General
Manager, First Data Corporation -
Investor Services Group (prior thereto).
</TABLE>
B-55
<PAGE>
<TABLE>
<CAPTION>
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,
Goldman Sachs Asset Management (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., 36 Assistant Treasurer Assistant Treasurer - Goldman Sachs
10 Hanover Square Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997); Vice
President, Goldman, Sachs & Co. (May
1992-Present); Tax Accountant, Goldman,
Sachs & Co. (December 1990-May 1992).
*Anne Marcel, 40 Vice President Vice President, Goldman Sachs Assets
4900 Sears Tower Management (June 1998-Present); Vice
Chicago, IL 60606 President - Goldman Sachs Variable
Insurance Trust (registered investment
company) (since 1998); Vice President,
Stein Roe & Farnham, Inc. (October
1992-June 1998).
*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 Goldman Sachs
Asset Management (since December 1997);
Associate General Counsel of Goldman
Sachs Asset Management (February 1994 -
December 1997); Vice President and
Assistant General Counsel of Goldman,
Sachs & Co. (since June 1992); Counsel
to the Funds Group, GSAM (June 1992 -
December 1997); Partner, Hale and Dorr
(September 1991 - June 1992).
</TABLE>
B-56
<PAGE>
<TABLE>
<CAPTION>
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, Goldman Sachs
Asset Management and Associate General
Counsel to the Funds Group (since
December 1997); Assistant General
Counsel and Vice President, Goldman,
Sachs & Co.(since November 1993 and May
1994, respectively); Counsel to the
Funds Group, Goldman Sachs Asset
Management (November 1993 - December
1997); Associate of Shereff, Friedman,
Hoffman & Goodman (prior thereto).
*Valerie A. Zondorak, 32 Assistant Secretary Assistant Secretary - Goldman Sachs
85 Broad Street Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Assistant General Counsel, Goldman Sachs
Asset Management and Assistant General
Counsel to the Funds Group (since
December 1997); Vice President and
Assistant General Counsel, Goldman,
Sachs & Co. (since March 1997 and
December 1997, respectively); Counsel to
the Funds Group, Goldman Sachs Asset
Management (March 1997 - December 1997);
Associate of Shereff, Friedman, Hoffman
& Goodman (prior thereto).
*Steven E. Hartstein, 35 Assistant Secretary Assistant Secretary - Goldman Sachs
85 Broad Street Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Associate, Goldman, Sachs & Co.
(December 1998 - present); Legal
Products Analyst, Goldman, Sachs & Co.
(June 1993 - December 1998).
</TABLE>
B-57
<PAGE>
<TABLE>
<CAPTION>
Name, Age Positions Principal Occupation(s)
and Address with Trust During Past 5 Years
- ----------------------------------- ------------------- -----------------------------------------
<S> <C> <C>
*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 & Co.
(January 1996 - December 1998); Legal
Assistant, Goldman, Sachs & Co.
(January 1996 - December 1998); Executive
Secretary, Goldman, Sachs & Co.
(January 1994 - January 1996); Legal
Secretary, Cleary, Gottlieb, Steen and
Hamilton (September 1990 - January 1994).
*Kaysie P. Uniacke, 37 Assistant Secretary Assistant Secretary - Goldman Sachs
One New York Plaza Variable Insurance Trust (registered
New York, NY 10004 investment company) (since 1997);
Managing Director, Goldman Sachs Asset
Management (since 1997); Vice President
and Senior Portfolio Manager, Goldman
Sachs Asset Management (since 1988).
*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, Goldman Sachs Asset
Management (since April 1996); Junior
Portfolio Manager, Goldman Sachs Asset
Management (1995 - April 1996); Funds
Trading Assistant, Goldman Sachs Asset
Management (1993 - 1995); Compliance
Analyst, Prudential Insurance (1991 -
1993).
</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 each Fund.
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-58
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended January
31, 1999:
<TABLE>
<CAPTION>
Aggregate Total Compensation from Goldman
Compensation Pension or Retirement Benefits Sachs Trust and the Goldman Sachs
Name of Trustee from the Funds/1/ Accrued as Part of Funds' Expenses fund complex (including the Funds)/2/
- ------------------------------- --------------- ---------------------------------- ------------------------------------
<S> <C> <C> <C>
Ashok N. Bakhru $ $0 $
David B. Ford 0
Douglas C. Grip 0
John P. McNulty 0
Mary P. McPherson 0
Alan A. Shuch 0
Jackson W. Smart 0
William H. Springer 0
Richard P. Strubel 0
</TABLE>
- ------------------------------------
/1/ Reflects amount paid by Goldman Sachs Trust during fiscal year ended January
31, 1999.
/2/ The Goldman Sachs Fund complex consists of the Goldman Sachs Trust and
Goldman Sachs Variable Insurance Trust. Goldman Sachs Trust consisted of
____ mutual funds, including ____ equity funds, on January 31, 1999. Goldman
Sachs Variable Insurance Trust consisted of 8 mutual funds.
B-59
<PAGE>
Class A Shares of the Fund 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' Prospectus, GSFM, One New York Plaza, New
York, New York, a Delaware limited partnership and an affiliate of Goldman
Sachs, 85 Broad Street, New York, New York, serves as Investment Adviser to CORE
U.S. Equity and Capital Growth Funds. GSAM, One New York Plaza, New York, New
York, a separate operating division of Goldman Sachs, serves as Investment
Adviser to Balanced, Growth and Income, CORE Large Cap Value, CORE Large Cap
Growth, CORE Small Cap Equity, Strategic Growth, Growth Opportunities, CORE
International Equity, Real Estate Securities, Mid Cap Equity and Small Cap Value
Funds. GSAMI, 133 Petersborough Court, London, England EC4A 2BB serves as
Investment Adviser to International Equity, European Equity, Japanese Equity,
International Small Cap, Emerging Markets Equity and Asia Growth Funds. GSAMI
is also an affiliate of Goldman Sachs. See "Service Providers" in the Funds'
Prospectus for a description of the applicable Investment Adviser's duties to
the Funds.
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 Advisers are 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. With an annual equity research budget
approaching $200 million, the Goldman Sachs Global Investment Research
Department covers approximately 2,000 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
Advisers.
B-60
<PAGE>
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.
In managing the Funds, the Investment Advisers have 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
the Institutional Investor's annual "All British Research Team Survey" in the
following categories: Economics (U.K.) 1986-1993; Economics/International 1989-
1993; and Currency Forecasting 1986-1993. In addition, the team has also earned
top rankings in the annual "Extel Financial Survey" of U.K. investment managers
in the following categories: U.K. Economy 1989-1995; International Economies
1986, 1988-1995; and Currency Movements 1986-1993.
In allocating assets among foreign countries and currencies for the
Funds which can invest in foreign securities (in particular, the CORE
International Equity, International Equity, International Small Cap, Emerging
Markets Equity and Asia Growth Funds), the Investment Advisers 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 Advisers 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 Agreements provide that GSAM, GSFM and GSAMI, in their
capacity as Investment Advisers, may render similar services to others as long
as the services under the Management Agreements are not impaired thereby. The
Strategic Growth, Growth Opportunities, CORE Large Cap Value, European Equity,
Japanese Equity and International Small Cap Funds' management agreements were
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
__________, __________, November 3, 1998, July 22, 1998, April 23, 1998 and
April 23, 1998, respectively. The CORE Small Cap Equity, CORE International
Equity and Real Estate Securities Funds' Management Agreements were initially
approved by the Trustees, including a majority of the non-interested Trustees
(as defined
B-61
<PAGE>
below) who are not parties to the Management Agreements, on July 22, 1997. The
CORE Large Cap Growth and Emerging Markets Equity Funds' Management Agreements
were initially approved by the Trustees, including a majority of the non-
interested Trustees (as defined below) who are not parties to the management
agreements, on April 23, 1997. The other Funds' Management Agreements were most
recently approved by the Trustees, including a majority of the Trustees who are
not parties to the management agreements or "interested persons" (as such term
is defined in the Act) of any party thereto (the "non-interested Trustees"), on
__________, 1999. These arrangements were most recently approved by the
shareholders of each Fund (other than Strategic Growth, Growth Opportunities,
CORE Large Cap Value, CORE Large Cap Growth, CORE Small Cap Equity, CORE
International Equity, Emerging Markets Equity, Real Estate Securities, Japanese
Equity, International Small Cap and European Equity Funds) on April 21, 1997.
The sole shareholder of the Strategic Growth, Growth Opportunities, CORE Large
Cap Value, CORE Large Cap Growth, CORE Small Cap Equity, CORE International
Equity, Emerging Markets Equity, Real Estate Securities, Japanese Equity,
International Small Cap and European Equity Funds approved these arrangements on
__________, _________, November 3, 1998, April 30, 1997, July 21, 1997, July 21,
1997, January 28, 1997, July 21, 1997, April 23, 1998, April 23, 1998 and July
22, 1998, respectively. Each Management Agreement will remain in effect until
[June 30, 2000] and 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, and
(b) the vote of a majority of the non-interested Trustees, cast in person at a
meeting called for the purpose of voting on such approval. Each management
agreement will terminate automatically if assigned (as defined in the Act) and
is terminable at any time without penalty by the Trustees or by vote of a
majority of the outstanding voting securities of the affected Fund on 60 days'
written notice to the Investment Adviser and by the Investment Adviser on 60
days' written notice to the Trust.
Pursuant to the Management Agreements the Investment Advisers are
entitled to receive the fees listed below, payable monthly based on such Fund's
average daily net assets. In addition, as of the date of this Additional
Statement the Investment Advisers were voluntarily limiting their management
fees for certain funds to the annual rates also listed below:
<TABLE>
<CAPTION>
Management Management
With Fee Without Fee
Fund Limitations Limitations
- ------------------------------------------------------------------- ------------------------- --------------------
<S> <C> <C>
GSAM
Balanced Fund 0.65%
Growth and Income Fund 0.70%
CORE Large Cap Value Fund 0.60%
CORE Large Cap Growth Fund 0.75%
CORE Small Cap Equity Fund 0.85%
Strategic Growth Fund 0.80%
- ---------------------
Growth Opportunities Fund 0.85%
- -------------------------
CORE International Equity Fund 0.85%
Mid Cap Equity Fund 0.75%
Small Cap Value Fund 1.00%
Real Estate Securities Fund 1.00%
GSFM
CORE U.S. Equity Fund 0.75%
Capital Growth Fund 1.00%
</TABLE>
B-62
<PAGE>
<TABLE>
<S> <C>
GSAMI
International Equity Fund 1.00%
European Equity 1.00%
Japenese Equity Fund 1.00%
International Small Cap Fund 1.20%
Emerging Markets Equity Fund 1.20%
Asia Growth Fund 1.00%
</TABLE>
GSAM, GSFM and GSAMI may discontinue or modify the above limitations in the
future at their discretion.
Prior to May 1, 1997, the Funds then in operation had separate investment
advisory (and subadvisory, in the case of the International Equity Fund) and
administration agreements. Effective May 1, 1997, the services under such
agreements were combined in the management agreement. The services required to
be performed for the Funds and the combined advisory (and subadvisory, in the
case of the International Equity Fund) and administration fees payable by the
Funds under the former advisory (and subadvisory, in the case of the
International Equity Fund) and administration agreements are identical to the
services and fees under the management agreement.
For the last three fiscal years the amounts of the combined investment
advisory (and subadvisory, in the case of the International Equity Fund) and
administration fees incurred by each Fund then in existence were as follows
(with and without the fee limitations that were then in effect):
<TABLE>
<CAPTION>
1999 1998 1997
======================== ======================= =======================
With Fee Without Fee With Fee Without Fee With Fee Without Fee
Limitations Limitations Limitations Limitations Limitations Limitations
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund $ $ $ 870,444 $ 870,844 $ 402,183 $ 402,183
Growth and Income Fund 7,740,380 7,740,380 3,541,318 3,541,318
CORE Large Cap Value Fund/1/ N/A N/A N/A N/A
CORE U.S. Equity Fund 3,087,383 3,924,639 1,667,381 2,119,552
CORE Large Cap Growth Fund/1/ 182,628 228,283 N/A N/A
CORE Small Cap Equity Fund/1/ 65,418 74,140 N/A N/A
CORE International Equity Fund/1/ 51,031 57,835 N/A N/A
Capital Growth Fund 10,913,224 10,913,224 8,697,265 8,697,265
Strategic Growth Fund/2/ N/A N/A N/A N/A N/A N/A
Growth Opportunities Fund/2/ N/A N/A N/A N/A N/A N/A
Mid Cap Equity Fund 1,653,946 1,653,946 964,945 964,945
International Equity Fund 6,772,826 7,525,362 4,124,076 4,638,203
Small Cap Value Fund 3,206,411 3,206,411 2,130,703 2,130,703
European Equity Fund/1/ N/A N/A N/A N/A
Japanese Equity Fund/1/ N/A N/A N/A N/A
International Small Cap Fund/1/ N/A N/A N/A N/A
Emerging Market Equity Fund/1/ 31,937 34,840 N/A N/A
Asia Growth Fund 1,874,193 2,179,299 2,221,857 2,583,555
</TABLE>
B-63
<PAGE>
Real Estate Securities Fund /1/ N/A N/A N/A N/A
/1/ The CORE Large Cap Value, CORE Large Cap Growth, CORE Small Cap Equity, CORE
International Equity, European Equity, Japanese Equity, International Small Cap,
Emerging Markets Equity and Real Estate Securities Funds commenced operations on
December 31, 1998, May 1, 1997, August 15, 1997, August 15, 1997, October 1,
1998, May 1, 1998, May 1, 1998, December 15, 1997 and July 27, 1998,
respectively.
/2/ During the fiscal years ended January 31, 1999, 1998 and 1997, no Shares of
the Strategic Growth or Growth Opportunities Funds had been offered.
Under the Management Agreement, each 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 Advisers 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 Advisers and their 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
Advisers' and their 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 Advisers and their
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 equitable. In some cases, this system may adversely affect the size or
the price of the assets purchased or sold for the Funds.
B-64
<PAGE>
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 Advisers and/or their
affiliates will not initiate or recommend certain types of transactions in
certain securities or instruments with respect to which the Investment Advisers
and/or their affiliates are performing services or when position limits have
been reached.
In connection with their management of the Funds, the Investment Advisers
may have access to certain fundamental analysis and proprietary technical models
developed by Goldman Sachs and other affiliates. The Investment Advisers 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 Advisers 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 Advisers in managing the
Funds.
The results of each Fund's investment activities may differ significantly
from the results achieved by the Investment Advisers and their 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.
In addition, certain principals and certain of the employees of the
Investment Advisers 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.
B-65
<PAGE>
Each 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 Advisers may be
prohibited from purchasing or recommending the purchase of certain securities of
that entity for the Funds.
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
B-66
<PAGE>
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. No
Class C Shares were outstanding during the fiscal year ended January 31, 1997.
B-67
<PAGE>
Goldman Sachs retained approximately the following combined commissions on
sales of Class A, Class B and Class C Shares during the following periods:
<TABLE>
<CAPTION>
1999 1998 1997
====================== ====================== ======================
<S> <C> <C> <C>
Balanced Fund/1/ $ $ 387,000 $ 94,000
Growth and Income Fund/1/ 2,405,000 555,000
CORE Large Cap Value Fund/2/ N/A N/A
CORE U.S. Equity Fund/1/ 566,000 380,000
CORE Large Cap Growth Fund/3/ 129,000 N/A
CORE Small Cap Equity Fund/4/ 49,000 N/A
CORE International Equity Fund/4/ 24,000 N/A
Capital Growth Fund/1/ 743,000 323,000
Strategic Growth Fund/5/
Growth Opportunities Fund/5/
Mid Cap Equity Fund/4/ 704,000 N/A
International Equity Fund/1/ 1,091,000 1,563,000
Small Cap Value Fund/1/ 662,000 219,000
European Equity/6/ N/A N/A
Japanese Equity Fund/6/ N/A N/A
International Small Cap Fund/6/ N/A N/A
Emerging Market Equity Fund/7/ 107,000 N/A
Asia Growth Fund/1/ 414,000 1,397,000
Real Estate Securities Fund/6/ N/A N/A
</TABLE>
______________________________
/1/ Prior to May 1, 1996 and August 15, 1997, Balanced, Growth and Income, CORE
U.S. Equity, Capital Growth, Small Cap Value, International Equity and Asia
Growth Funds had not sold Class B and Class C Shares, respectively.
/2/ CORE Large Cap Value Fund commenced operations on December 31, 1998.
/3/ Prior to May 1, 1997, May 1, 1997 and August 15, 1997, CORE Large Cap Growth
Fund had not sold Class A, Class B and Class C Shares, respectively.
4 Prior to August 15, 1997, CORE Small Cap Equity, CORE International Equity and
Mid Cap Equity Funds had not sold Class A, Class B or Class C Shares.
5 During the fiscal years ended January 31, 1999, 1998 and 1997, no shares of
the Strategic Growth or Growth Opportunities Funds were offered.
6 Prior to October 1, 1998, May 1, 1998, May 1, 1998 and July 27, 1998, the
European Equity, Japanese Equity, International Small Cap and Real Estate
Securities Funds had not sold Class A, Class B or Class C Shares.
7 Prior to December 15, 1997, the Emerging Markets Equity Fund had not sold
Class A, Class B or Class C Shares.
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
B-68
<PAGE>
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.
As compensation for the services rendered to the Trust by Goldman Sachs as
transfer agent and the assumption by Goldman Sachs of the expenses related
thereto, Goldman Sachs received fees for the last three fiscal years from each
Fund then in existence as follows under the fee schedules then in effect:
<TABLE>
<CAPTION>
1999 1998 1997
================== ================= ================
<S> <C> <C> <C>
Balanced Fund/1/ $ $ 240,869 $148,576
Growth and Income Fund/1/ 1,545,495 870,527
CORE Large Cap Value Fund/2/ N/A N/A
CORE U.S. Equity Fund/1/ 483,534 319,246
CORE Large Cap Growth Fund/3/ 107,944 N/A
CORE Small Cap Equity Fund/4/ 62,625 N/A
CORE International Equity Fund/4/ 36,474 N/A
Capital Growth Fund/1/ 992,678 908,310
Strategic Growth Fund/5/ N/A N/A
Growth Opportunities Fund/5/ N/A N/A
MidCap Equity Fund/4/ 142,558 N/A
International Equity Fund/1/ 860,719 586,243
Small Cap Value Fund/1/ 595,479 511,883
European Equity/6/ N/A N/A
Japanese Equity Fund/6/ N/A N/A
International Small Cap Fund/6/ N/A N/A
Emerging Markets Equity Fund/7/ 1,907 N/A
Asia Growth Fund/1/ 370,233 385,114
Real Estate Securities Fund/6/ N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Institutional Shares Service Shares
----------------------- --------------------
1999 1998 1997 1999 1998 1997
===== ======= ======= ===== ====== =====
<S> <C> <C> <C> <C> <C> <C>
Balanced Fund/1/ $ $ N/A $ N/A $ $ N/A $ N/A
Growth and Income Fund/1/ 2,593 15 5,033 488
CORE Large Cap Value Fund/2/ N/A N/A N/A N/A
CORE U.S. Equity Fund/1/ 0 N/A 0 N/A
CORE Large Cap Growth Fund/3/ 49 N/A 21 N/A
CORE Small Cap Equity Fund/4/ 0 N/A 0 N/A
CORE International Equity Fund/4/ 0 N/A 0 N/A
Capital Growth Fund/1/ 683 N/A 0 N/A
Strategic Growth Fund/5/ N/A N/A N/A N/A
Growth Opportunities Fund/5/ N/A N/A N/A N/A
Mid Cap Equity Fund/4/ 74,315 51,464 1 N/A
International Equity Fund/1/ 0 N/A 0 N/A
Small Cap Value Fund/1/ 2,674 N/A 0 N/A
European Equity/6/ N/A N/A N/A N/A
Japanese Equity Fund/6/ N/A N/A N/A N/A
International Small Cap Fund/6/ N/A N/A N/A N/A
Emerging Markets Equity Fund/7/ 617 N/A 0 N/A
Asia Growth Fund/1/ 0 N/A 0 N/A
Real Estate Securities Fund/6/ N/A N/A N/A N/A
</TABLE>
___________________________
B-69
<PAGE>
/1/ Prior to May 1, 1996 and August 15, 1997, Balanced, Growth and Income, CORE
U.S. Equity, Capital Growth, Small Cap Value, International Equity and Asia
Growth Funds had not sold Class B and Class C Shares, respectively. Prior to
August 15, 1997, Balanced Fund had not sold Institutional Shares or Service
Shares; prior to June 3, 1996 and March 6, 1996, Growth and Income Fund had not
sold Institutional and Service Shares, respectively; prior to June 7, 1996 CORE
U.S. Equity Fund had not sold Service Shares; prior to August 15, 1997 neither
Capital Growth Fund nor Small Cap Value Fund had sold Institutional or Service
Shares; prior to February 7, 1996 and March 3, 1996, International Equity Fund
had not sold Institutional or Service Shares, respectively; and prior to
February 2, 1996 Asia Growth Fund had not sold Institutional Shares, [Asia
Growth Fund had not sold Service Shares as of January 31, 1999.]
/2/ The CORE Large Cap Value Fund commenced operations on December 31 1998.
/3/ Prior to May 1, 1997, May 1, 1997, August 15, 1997, May 1, 1997 and May 1,
1997 CORE Large Cap Growth Fund had not sold Class A, Class B, Class C,
Institutional or Service Shares, respectively.
/4/ Prior to August 15, 1997, CORE Small Cap Equity and CORE International
Equity Funds had not sold Class A, Class B, Class C, Institutional or Service
Shares. Mid Cap Equity Fund had not sold Class A, Class B or Class C Shares
prior to August 18, 1997 or Service Shares prior to July 18, 1997.
/5/ During the fiscal years ended January 31, 1999, 1998 and 1997, no shares of
the Strategic Growth or Growth Opportunities Funds were offered.
/6/ Prior to October 1, 1998, May 1, 1998, May 1, 1998 and July 27, 1998,
European Equity, Japanese Equity, International Small Cap and Real Estate
Securities Funds had not sold Class A, Class B, Class C, Institutional or
Service Shares.
/7/ Prior to December 15, 1997, Emerging Markets Equity Fund had not sold Class
A, Class B, Class C, Institutional or Service Shares.
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 Advisers, service fees paid to Service
Organizations, the fees and expenses payable to 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
B-70
<PAGE>
services rendered by employees of GSAM, 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 Investment Advisers voluntarily have agreed to reduce or limit
certain "Other Expenses" (excluding management, distribution and service fees,
transfer agency fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) for the following Funds to the
extent such expenses exceed the following percentage of average daily net
assets:
<TABLE>
<CAPTION>
Other
Expenses
--------------------
<S> <C>
Balanced Fund 0.01%
Growth and Income Fund 0.05%
CORE Large Cap Value Fund 0.00%
CORE U.S. Equity Fund 0.00%
CORE Large Cap Growth Fund 0.00%
CORE Small Cap Equity Fund 0.04%
CORE International Equity Fund 0.12%
Capital Growth Fund 0.00%
Strategic Growth Fund %
Growth Opportunities Fund %
Mid Cap Equity Fund 0.10%
Small Cap Value Fund 0.06%
International Equity Fund 0.10%
European Equity Fund 0.10%
Japanese Equity Fund 0.01%
International Small Cap Fund 0.16%
Emerging Markets Equity Fund 0.15%
Asia Growth Fund 0.16%
Real Estate Securities Fund 0.00%
</TABLE>
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 internal legal and compliance department.
Each Fund may also bear an allocable portion of the applicable Investment
Adviser's costs of performing certain accounting services not being provided by
a Fund's Custodian.
B-71
<PAGE>
For the last three fiscal years the amounts of certain "Other
Expenses" of each Fund then in existence that were reduced or otherwise limited
were as follows under the expense limitations that were then in effect:
<TABLE>
<CAPTION>
1999 1998 1997
================== ================= =================
<S> <C> <C> <C>
Balanced Fund1 $ $420,659 $319,552
Growth and Income Fund/1/ 0 0
CORE Large Cap Value Fund/2/ N/A N/A
CORE U.S. Equity Fund/1/ 63,253 104,833
CORE Large Cap Growth Fund/3/ 332,713 N/A
CORE Small Cap Equity Fund/4/ 202,498 N/A
CORE International Equity Fund/4/ 206,055 N/A
Capital Growth Fund/1/ 0 N/A
Strategic Growth Fund/5/ N/A N/A
Growth Opportunities Fund/5/ N/A N/A
Mid Cap Equity Fund/4/ 264,378 72,441
International Equity Fund/1/ 0 144,265
Small Cap Value Fund/1/ 0 N/A
European Equity Fund/6/ N/A N/A
Japanese Equity Fund/6/ N/A N/A
International Small Cap Fund/6/ N/A N/A
Emerging Markets Equity Fund/7/ 112,725 N/A
Asia Growth Fund/1/ 125,828 50,407
Real Estate Securities Fund/6/ N/A N/A
</TABLE>
________________________________
/1/ Prior to May 1, 1996 and August 15, 1997, Balanced, Growth and Income, CORE
U.S. Equity, Capital Growth, Small Cap Value, International Equity and Asia
Growth Funds had not sold Class B and Class C Shares, respectively. Prior to
August 15, 1997, Balanced Fund had not sold Institutional Shares or Service
Shares; prior to June 3, 1996 and March 6, 1996, Growth and Income Fund had not
sold Institutional and Service Shares, respectively; prior to June 7, 1996
CORE U.S. Equity Fund had not sold Service Shares; prior to August 15, 1997
neither Capital Growth Fund nor Small Cap Value Fund had sold Institutional or
Service Chares; prior to February 7, 1996 and March 3, 1996, International
Equity Fund had not sold Institutional or Service Shares, respectively; and
prior to February 2, 1996 Asia Growth Fund had not sold Institutional Shares,
Asia Growth Fund has not sold Service Shares as of January 31, 1999.
/2/ CORE Large Cap Value Fund commenced operations on December 31, 1998.
/3/ Prior to May 1, 1997, May 1, 1997, August 15, 1997, May 1 1997 and May 1,
1997 CORE Large Cap Growth Fund had not sold Class A, Class B, Class C Shares,
respectively.
/4/ Prior to August 15, 1997, CORE Small Cap Equity and CORE International
Equity Funds had not sold Class A, Class B, Class C, Institutional or Service
Shares. Mid Cap Equity Fund had not sold Class A, Class B or Class C Shares
prior to August 18, 1997 or Service Shares prior to July 18, 1997.
/5/ During the fiscal years ended January 31, 1999, 1998 and 1997, no shares of
Strategic Growth or Growth Opportunities Funds were offered.
/6/ Prior to October 1, 1998, May 1, 1998, May 1, 1998 and July 27, 1998,
European Equity, Japanese Equity, International Small Cap and Real Estate
Securities Funds had not sold Class A, Class B or Class C, Institutional or
Service Shares.
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<PAGE>
/7/ Prior to December 15, 1997, Emerging Markets Equity Fund had not sold Class
A, Class B, Class C, Institutional or Service Shares.
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
==============================
Arthur Andersen LLP, independent public accountants, 225 Franklin Street,
Boston, Massachusetts 02110, have been selected as auditors of the Trust. In
addition to audit services, Arthur Andersen LLP 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 Advisers are 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
Advisers are generally required to give primary consideration to obtaining the
most favorable price and efficient execution under the circumstances. This
means that an Investment Adviser will seek to execute each transaction at a
price and commission, if any, which provides the most favorable total cost or
proceeds 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 Advisers generally seek reasonably competitive spreads or
commissions, a Fund will not necessarily be paying the lowest spread or
commission available. Within the framework
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<PAGE>
of this policy, the Investment Advisers will consider research and investment
services provided by brokers or dealers who effect or are parties to portfolio
transactions of a Fund, the Investment Advisers and their 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 Advisers in the performance of their decision-
making responsibilities. Such services are used by the Investment Advisers 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 Advisers 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 Advisers. 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 an 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 such 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 applicable 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.
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 Advisers 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
B-74
<PAGE>
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.
B-75
<PAGE>
For the past three fiscal years, each Fund in existence paid brokerage
commissions as follows:
<TABLE>
<CAPTION>
Total Total Brokerage
Brokerage Amount of Commissions
Total Commissions Transaction Paid
Brokerage Paid to on which to Brokers
Commissions Affiliated Commissions Providing
Paid Persons Paid Research
=========== =========== =========== ===========
Fiscal Year Ended
January 31, 1999:
<S> <C> <C> <C> <C>
Balanced Fund $ $ $ $ N/A
Growth and Income Fund /1/ /2/ N/A
CORE Large Cap Value Fund N/A N/A
CORE U.S. Equity Fund /1/ /2/ N/A
CORE Large Cap Growth Fund /1/ /2/ N/A
CORE Small Cap Equity Fund /1/ /2/ N/A
CORE International Equity Fund /1/ /2/ N/A
Capital Growth Fund /1/ /2/ N/A
Strategic Growth Fund/3/ N/A N/A N/A
Growth Opportunities Fund/3/ N/A N/A N/A
Mid Cap Equity Fund /1/ /2/ N/A
International Equity Fund /1/ /2/ N/A
Small Cap Value Fund /1/ /2/ N/A
European Equity Fund N/A
Japanese Equity Fund N/A
International Small Cap Fund N/A
Emerging Markets Equity Fund /1/ /2/ N/A
Asia Growth Fund /1/ /2/ N/A
Real Estate Securities Fund N/A
</TABLE>
- ----------------------------
/1/ Percentage of total commissions paid.
/2/ Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
/3/ Not operational.
B-76
<PAGE>
<TABLE>
<CAPTION>
Total Total Brokerage
Brokerage Amount of Commissions
Total Commissions Transaction Paid
Brokerage Paid to on which to Brokers
Commissions Affiliated Commissions Providing
Paid Persons Paid Research
=========== ============== =================== ===========
Fiscal Year Ended
January 31, 1998:
<S> <C> <C> <C> <C>
Balanced Fund $ 111,054 $ 13,185(12%)/1/ $2,731,475,157(1%)/2/ N/A
Growth and Income Fund 1,550,312 190,001(12%)/1/ 9,046,102,538(3%)/2/ N/A
CORE Large Cap Value Fund/3/ N/A N/A N/A N/A
CORE U.S. Equity Fund 944,895 0 (0%)/1/ 1,996,000,522(0%)/2/ N/A
CORE Large Cap Growth Fund 54,360 288 (1%)/1/ 200,813,608(0%)/2/ N/A
CORE Small Cap Equity Fund 59,517 0 (0%)/1/ 159,674,227(0%)/2/ N/A
CORE International Equity Fund 43,120 0 (0%)/1/ 142,395,942(0%)/2/ N/A
Capital Growth Fund 514,890 37,947 (7%)/1/ 2,748,868,081(5%)/2/ N/A
Strategic Growth Fund/3/ N/A N/A N/A N/A
Growth Opportunities Fund/3/ N/A N/A N/A N/A
Mid Cap Equity Fund 480,808 76,398(15%)/1/ 2,584,258,044(2%)/2/ N/A
International Equity Fund 506,607 0 (0%)/1/ 3,898,716,988(0%)/2/ N/A
Small Cap Value Fund 646,533 82,143(13%)/1/ 5,686,763,232(1%)/2/ N/A
European Equity Fund/3/ N/A N/A N/A N/A
Japanese Equity Fund/3/ N/A N/A N/A N/A
International Small Cap Fund/3/ N/A N/A N/A N/A
Emerging Markets Equity Fund 59,999 6,230(10%)/1/ 236,915,108(1%)/2/ N/A
Asia Growth Fund 814,656 2,885 (0%)/1/ 2,160,632,195(1%)/2/ N/A
Real Estate Securities Fund/3/ N/A N/A N/A N/A
</TABLE>
- ----------------------------
/1/ Percentage of total commissions paid.
/2/ Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
/3/ Not operational.
B-77
<PAGE>
<TABLE>
<CAPTION>
Total Total Brokerage
Brokerage Amount of Commissions
Total Commissions Transaction Paid
Brokerage Paid to on which to Brokers
Commissions Affiliated Commissions Providing
Paid Persons Paid Research
=========== ================ ================= ===========
Fiscal Year Ended
January 31, 1997:
<S> <C> <C> <C> <C>
Balanced Fund $ 62,072 $ 5,112 (8%)/1/ $ 1,057,742(15%)/2/ $ 0
Growth and Income Fund 779,396 77,587(10%)/1/ 13,310,208(9%)/2/ 0
CORE Large Cap Value Fund/3/ N/A N/A N/A N/A
CORE U.S. Equity Fund 279,620 0(0%)/1/ 6,706,824(0%)/2/ 0
CORE Large Cap Growth Fund/3/ N/A N/A N/A N/A
CORE Small Cap Equity Fund/3/ N/A N/A N/A N/A
CORE International Equity Fund/3/ N/A N/A N/A N/A
Capital Growth Fund 1,460,140 304,052(21%)/1/ 29,920,578(1%)/2/ 42,039
Strategic Growth Fund/3/ N/A N/A N/A N/A
Growth Opportunity Fund/3/ N/A N/A N/A N/A
Mid Cap Equity Fund 364,294 22,134(6%)/1/ 6,655,100(7%)/2/ 0
International Equity Fund 1,529,436 0(0%) 48,059,958(0%)/2/ 0
European Equity Fund/3/ N/A N/A N/A N/A
Small Cap Value Fund 758,205 36,087(5%)/1/ 16,439,842(1%)/2/ 0
Japanese Equity Fund/3/ N/A N/A N/A N/A
International Small Cap Fund/3/ N/A N/A N/A N/A
Emerging Markets Equity Fund/3/ N/A N/A N/A N/A
Asia Growth Fund 1,554,313 50,624(3%)/1/ 102,609,295(4%)/2/ 0
Real Estate Securities Fund/3/ N/A N/A N/A N/A
</TABLE>
__________________
/1/ Percentage of total commissions paid.
/2/ Percentage of total amount of transactions involving the payment of
commissions effected through affiliated persons.
/3/ Not operational.
B-78
<PAGE>
During the fiscal year ended January 31, 1999, the Trust acquired and sold
securities of its regular broker-dealers. As of January 31, 1999, the Trust
held the following amounts of securities of its regular broker/dealers, as
defined in Rule 10b-1 under the Act, or their parents ($ in thousands):
<TABLE>
<CAPTION>
Fund Broker/Dealer Amount
- ---- ------------- ------
<S> <C> <C>
Balanced Fund $
Growth and Income
Fund
CORE Large Cap Value
Fund
CORE U.S. Equity
Fund
CORE Large Cap
Growth Fund
CORE Small Cap
Equity Fund
CORE International
Fund
Capital Growth Fund
Strategic Growth
Fund
Growth Opportunities
Fund
Mid Cap Equity Fund
International
Equity Fund
</TABLE>
B-79
<PAGE>
<TABLE>
<CAPTION>
Small Cap Value
Fund
Fund Broker/Dealer Amount
- ---- ------------- ------
<S> <C> <C>
European Equity $
Fund
Japanese Equity
Fund
International Small
Cap Fund
Emerging Markets
Equity Fund
Asia Growth Fund
Real Estate
Securities Fund
</TABLE>
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
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<PAGE>
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 mean between the closing bid and asked prices, or if closing bid
and asked prices are not available, at the exchange 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 mean
between the bid and asked prices 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 mean between the
last bid and asked price; (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 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 Advisers 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 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
B-81
<PAGE>
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
A Fund may from time to time quote or otherwise use total return,
yield and/or distribution rate information in advertisements, shareholder
reports or sales literature. Average annual total return and yield are computed
pursuant to formulas specified by the SEC.
Yield is computed by dividing net investment income earned during a
recent thirty-day period by the product of the average daily number of shares
outstanding and entitled to receive dividends during the period and the maximum
public offering price per share on the last day of the relevant period. The
results are compounded on a bond equivalent (semi-annual) basis and then
annualized. Net investment income per share is equal to the dividends and
interest earned during the period, reduced by accrued expenses for the period.
The calculation of net investment income for these purposes may differ from the
net investment income determined for accounting purposes.
The distribution rate for a specified period is calculated by
annualizing distributions of net investment income for such period and dividing
this amount by the NAV 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
B-82
<PAGE>
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., 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,
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<PAGE>
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
Toykyo 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;
.. total stock market capitalizations of specific countries and regions on
a global basis;
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<PAGE>
.. 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.
The CORE Large Cap Growth Fund commercial operations on May 1, 1997.
The performance information shown below for periods before that date is for a
predecessor separate account managed by the Investment Adviser which converted
into Class A Shares as of the commencement date. The performance record of the
separate account quoted by the Fund have been adjusted downward based on the
expenses applicable to Class A Shares (the class into which the separate account
transferred) to reflect the expenses expected to be incurred by the Fund during
its initial year of operation. These expenses include any sales charges and
asset-based charges (i.e., fees under Distribution and Service Plans) imposed
and other operating expenses. Total return quotations are calculated pursuant
to the methodology prescribed by the SEC for standardized performance
calculations. Prior to May 1, 1997, the separate account was a separate
investment advisory account under discretionary management by the Investment
Adviser and had substantially similar investment objectives, policies and
strategies as the Fund. Unlike the Fund, the separate account was not registered
as an investment company under the Act and therefore was not subject to certain
investment restrictions and operational requirements that are imposed on
investment companies by the Act. If the separate account had been registered as
an investment company under the Act, the separate account's performance may have
been adversely affected by such restrictions and requirements. On May 1, 1997,
the separate account transferred a portion of its assets to the Fund in exchange
for Fund shares. The performance record of each other class has been linked to
the performance of the separate account (based on Class A expenses) and the
Class A performance for any periods prior to commencement of operations of a
class of shares.
The Service Shares of Balanced, Capital Growth, Small Cap Value,
Growth and Income, CORE U.S. Equity, CORE Large Cap Growth and International
Equity Funds commenced operations on August 15, 1997, August 15, 1997, August
15, 1997, March 6, 1996, June 7, 1996, May 1, 1997 and March 6, 1996,
respectively. The Service Shares of these Funds had no operating or performance
history prior thereto. However, in accordance with interpretive positions
expressed by the staff of the SEC, each of these Funds has adopted the
performance records of its respective Class A Shares from that class's inception
date (October 12, 1994, April 20, 1990, October 22, 1992, February 5, 1993, May
24, 1991, May 1, 1997 and December 1, 1992 respectively) to the inception dates
of Service Shares stated above. Quotations of performance data of these Funds
relating to this period include the performance record of the applicable Class A
Shares (excluding the impact of any applicable front-end sales charge). The
performance records of the applicable Class A Shares reflect the expenses
incurred by the
B-86
<PAGE>
Funds. These expenses include asset-based charges (i.e., fees under Distribution
- -----
and Service Plans) and other operating expenses. Total return quotations are
calculated pursuant to SEC-approved methodology.
B-87
<PAGE>
INTRODUCTION
VALUE OF $1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)
<TABLE>
<CAPTION>
Assumes
Maximum
Applicable
Sales
Fund Class Time Period Charge**
- ------------------------------------------- ------------- ---------------------------------- -------------------
<S> <C> <C> <C>
Balanced Fund A 10/12/94-1/31/99 - Since inception
Balanced Fund A 2/1/96-1/31/99 - Three years
Balanced Fund A 2/1/98-1/31/99 - One year
Balanced Fund B 5/1/96-1/31/99 - Since inception
Balanced Fund B 2/1/98-1/31/99 - One year
Balanced Fund C 8/15/97-1/31/99 - Since inception
Balanced Fund C 2/1/98-1/31/99 - One year
Balanced Fund Institutional 8/15/97-1/31/99 - Since inception
Balanced Fund Institutional 2/1/98-1/31/99 - One year
Balanced Fund Service 10/12/94-1/31/99 - Since inception
Balanced Fund Service 2/1/96-1/31/99 - Three years
Balanced Fund Service 2/1/98-1/31/99 - One Year
Growth and Income A 2/5/93-1/31/99 - Since inception
Growth and Income A 2/1/96-1/31/99 - Three years
Growth and Income A 2/1/94-1/31/99 - Five years
Growth and Income A 2/1/98-1/31/99 - One year
Growth and Income B 5/1/96-1/31/99 - Since inception
Growth and Income B 2/1/98-1/31/99 - One year
Growth and Income C 8/15/97-1/31/99 - Since inception
Growth and Income C 2/1/98-1/31/99 - One year
Growth and Income Institutional 6/3/96-1/31/99 - Since inception
Growth and Income Institutional 2/1/98-1/31/99 - One year
Growth and Income Service 2/5/93-1/31/99 - Since inception
Growth and Income Service 2/1/94-1/31/99 - Five years
Growth and Income Service 2/1/96-1/31/99 - Three years
Growth and Income Service 8/1/97-1/31/99 - One year
CORE Large Cap Value A -- 1/31/99 - Since inception*
CORE Large Cap Value B -- 1/31/99 - Since inception*
CORE Large Cap Value C -- 1/31/99 - Since inception*
CORE Large Cap Value Institutional -- 1/31/99 - Since inception*
CORE Large Cap Value Service -- 1/31/99 - Since inception*
CORE U.S. Equity A 5/24/91-1/31/99 - Since inception
CORE U.S. Equity A 2/1/94-1/31/99 - Five years
<CAPTION>
Assuming no
voluntary
waiver of fees and
no
expense
reimbursements
------------------
Assumes Assumes maximum Assumes
no sales Applicable sales no sales
Fund Charge Charge** Charge
- ------------------------------------------- ------------------- ---------------- --------
<S> <C> <C> <C>
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Balanced Fund
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
Growth and Income
CORE Large Cap Value
CORE Large Cap Value
CORE Large Cap Value
CORE Large Cap Value
CORE Large Cap Value
CORE U.S. Equity
CORE U.S. Equity
</TABLE>
B-88
<PAGE>
INTRODUCTION
VALUE OF $1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)
<TABLE>
<CAPTION>
Assumes
Maximum
Applicable
Sales
Fund Class Time Period Charge**
- ------------------------------------------- ------------- ---------------------------------- -------------------
<S> <C> <C> <C>
CORE U.S. Equity A 2/1/96-1/31/99 - Three years
CORE U.S. Equity A 2/1/98-1/31/99 - One year
CORE U.S. Equity B 5/1/96-1/31/99 - Since inception
CORE U.S. Equity B 2/1/98-1/31/99 - One year
CORE U.S. Equity C 8/15/97-1/31/99 - Since inception
CORE U.S. Equity C 2/1/98-1/31/99 - One year
CORE U.S. Equity Institutional 6/15/95-1/31/99 - Since inception
CORE U.S. Equity Institutional 2/1/96-1/31/99 - Three years
CORE U.S. Equity Institutional 2/1/98-1/31/99 - One year
CORE U.S. Equity Service 5/24/91-1/31/99 - Since inception
CORE U.S. Equity Service 2/1/94-1/31/99 - Five years
CORE U.S. Equity Service 2/1/96-1/31/99 - Three years
CORE U.S. Equity Service 2/1/98-1/31/99 - One year
CORE Large Cap Growth A 11/11/91-1/31/99 - Since inception
CORE Large Cap Growth A 2/1/94-1/31/99 - Five years
CORE Large Cap Growth A 2/1/96-1/31/99- Three years
CORE Large Cap Growth A 2/1/98-1/31/99 - One year
CORE Large Cap Growth B 5/1/97-1/31/99 - Since inception
CORE Large Cap Growth B 2/1/98-1/31/99 - One year
CORE Large Cap Growth C 8/15/97-1/31/99- Since inception
CORE Large Cap Growth C 2/1/98-1/31/99 - One year
CORE Large Cap Growth Institutional 11/11/91-1/31/99 - Since inception
CORE Large Cap Growth Institutional 2/1/94-1/31/99 - Five years
CORE Large Cap Growth Institutional 2/1/96-1/31/99 - Three years
CORE Large Cap Growth Institutional 2/1/98-1/31/99 - One year
CORE Large Cap Growth Service 11/11/91-1/31/99 - Since inception
CORE Large Cap Growth Service 2/1/94-1/31/99 - Five years
CORE Large Cap Growth Service 2/1/96-1/31/99 - Three years
CORE Large Cap Growth Service 2/1/98-1/31/99 - One year
CORE Small Cap Equity A 8/15/97-1/31/99 - Since inception
CORE Small Cap Equity A 2/1/98-1/31/99 - One year
CORE Small Cap Equity B 8/15/97-1/31/99 - Since inception
CORE Small Cap Equity B 2/1/98-1/31/99 - One year
CORE Small Cap Equity C 8/15/97-1/31/99 - Since inception
<CAPTION>
Assuming no
voluntary
waiver of fees and
no
expense
reimbursements
------------------
Assumes Assumes maximum Assumes
no sales Applicable sales no sales
Fund Charge Charge** Charge
- ------------------------------------------- ------------------- ---------------- --------
<S> <C> <C> <C>
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE U.S. Equity
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Large Cap Growth
CORE Small Cap Equity
CORE Small Cap Equity
CORE Small Cap Equity
CORE Small Cap Equity
CORE Small Cap Equity
</TABLE>
B-89
<PAGE>
INTRODUCTION
VALUE OF $1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)
<TABLE>
<CAPTION>
Assumes
Maximum
Applicable
Sales
Fund Class Time Period Charge**
- ------------------------------------------- ------------- ---------------------------------- -------------------
<S> <C> <C> <C>
CORE Small Cap Equity C 2/1/98-1/31/99 - One year
CORE Small Cap Equity Institutional 8/15/97-1/31/99 - Since inception
CORE Small Cap Equity Institutional 2/1/98-1/31/99 - One Year
CORE Small Cap Equity Service 8/15/97-1/31/99 - Since inception
CORE Small Cap Equity Service 2/1/98-1/31/99 - One year
CORE International Equity A 8/15/97-1/31/99 - Since inception
CORE International Equity A 2/1/98-1/31/99 - One year
CORE International Equity B 8/15/97-1/31/99 - Since inception
CORE International Equity B 2/1/98-1/31/99 - One year
CORE International Equity C 8/15/97-1/31/99 - Since inception
CORE International Equity C 2/1/98-1/31/99 - One year
CORE International Equity Institutional 8/15/97-1/31/99 - Since inception
CORE International Equity Institutional 2/1/98-1/31/99 - One year
CORE International Equity Service 8/15/97-1/31/99 - Since inception
CORE International Equity Service 2/1/98-1/31/99 - One year
Capital Growth A 4/20/90-1/3/199 - Since inception
Capital Growth A 2/1/94-1/31/99 - Five years
Capital Growth A 2/1/96-1/31/99 - Three years
Capital Growth A 2/1/98-1/31/99 - One year
Capital Growth B 5/1/96-1/31/99 - Since inception
Capital Growth B 2/1/98-1/31/99 - One year
Capital Growth C 8/15/97-1/31/99 - Since inception
Capital Growth C 2/1/98-1/31/99 - One year
Capital Growth Institutional 8/15/97-1/31/99 - Since inception
Capital Growth Institutional 2/1/98-1/31/99 - One year
Capital Growth Service 4/20/90-1/31/99 - Since inception
Capital Growth Service 2/1/94-1/31/99 - Five years
Capital Growth Service 2/1/96-1/31/99 - Three years
Capital Growth Service 2/1/98-1/31/99 - One year
Mid Cap Equity A 8/15/97-1/31/99 - Since inception
Mid Cap Equity A 2/1/98-1/31/99 - One year
Mid Cap Equity B 8/15/97-1/31/99 - Since inception
Mid Cap Equity B 2/1/98-1/31/99 - One year
<CAPTION>
Assuming no
voluntary
waiver of fees and
no
expense
reimbursements
------------------
Assumes Assumes maximum Assumes
no sales Applicable sales no sales
Fund Charge Charge** Charge
- ------------------------------------------- ------------------- ---------------- --------
<S> <C> <C> <C>
CORE Small Cap Equity
CORE Small Cap Equity
CORE Small Cap Equity
CORE Small Cap Equity
CORE Small Cap Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
CORE International Equity
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Capital Growth
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
</TABLE>
B-90
<PAGE>
INTRODUCTION
VALUE OF $1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)
<TABLE>
<CAPTION>
Assumes
Maximum
Applicable
Sales
Fund Class Time Period Charge**
- ------------------------------------------- ------------- ---------------------------------- -------------------
<S> <C> <C> <C>
Mid Cap Equity C 8/15/97-1/31/99 - Since inception
Mid Cap Equity C 2/1/98-1/31/99 - One year
Mid Cap Equity Institutional 8/1/95-1/31/99 - Since inception
Mid Cap Equity Institutional 2/1/96-1/31/99 - Three years
Mid Cap Equity Institutional 2/1/98-1/31/99 - One year
Mid Cap Equity Service 7/18/97-1/31/99 - Since inception
Mid Cap Equity Service 2/1/98-1/31/99 - One year
International Equity A 12/1/92-1/31/99 - Since inception
International Equity A 2/1/94-1/31/99 - Five years
International Equity A 2/1/96-1/31/99 - Three years
International Equity A 2/1/98-1/31/99 - One year
International Equity B 5/1/96-1/31/99 - Since inception
International Equity B 2/1/98-1/31/99 - One year
International Equity C 8/15/97-1/31/99 - Since inception
International Equity C 2/1/98-1/31/99 - One year
International Equity Institutional 2/7/96-1/31/99 - Since inception
International Equity Institutional 2/1/98-1/31/99 - One year
International Equity Service 12/1/92-1/31/99 - Since inception
International Equity Service 2/1/94-1/31/99 - Five years
International Equity Service 2/1/96-1/31/99 - Three years
International Equity Service 2/1/98-1/31/99 - One year
Small Cap Value A 10/22/92-1/31/99 - Since inception
Small Cap Value A 2/1/94-1/31/99 - Five years
Small Cap Value A 2/1/96-1/31/99 - Three years
Small Cap Value A 2/1/98-1/31/99 - One year
Small Cap Value B 5/1/96-1/31/99 - Since inception
Small Cap Value B 2/1/98-1/31/99 - One year
Small Cap Value C 8/15/97-1/31/99 - Since inception
Small Cap Value C 2/1/98-1/31/99 - One year
Small Cap Value Institutional 8/15/97-1/31/99 - Since inception
Small Cap Value Institutional 2/1/98-1/31/99 - One year
Small Cap Value Service 10/22/92-1/31/99 - Since inception
Small Cap Value Service 2/1/94-1/31/99 - Five years
Small Cap Value Service 2/1/96-1/31/99 - Three years
<CAPTION>
Assuming no
voluntary
waiver of fees and
no
expense
reimbursements
------------------
Assumes Assumes maximum Assumes
no sales Applicable sales no sales
Fund Charge Charge** Charge
- ------------------------------------------- ------------------- ---------------- --------
<S> <C> <C> <C>
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
Mid Cap Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
International Equity
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
Small Cap Value
</TABLE>
B-91
<PAGE>
INTRODUCTION
VALUE OF $1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)
<TABLE>
<CAPTION>
Assumes
Maximum
Applicable
Sales
Fund Class Time Period Charge**
- ------------------------------------------- ------------- ---------------------------------- -------------------
<S> <C> <C> <C>
Small Cap Value Service 2/1/98-1/31/99 - One year
European Equity A 10/1/98-1/31/99 - Since inception*
European Equity B 10/1/98-1/31/99 - Since inception*
European Equity C 10/1/98-1/31/99 - Since inception*
European Equity Institutional 10/1/98-1/31/99 - Since inception*
European Equity Service 10/1/98-1/31/99 - Since inception*
Japanese Equity Fund A 5/1/98-1/31/99 - Since inception*
Japanese Equity Fund B 5/1/98-1/31/99 - Since inception*
Japanese Equity Fund C 5/1/98-1/31/99 - Since inception*
Japanese Equity Fund Institutional 5/1/98-1/31/99 - Since inception*
Japanese Equity Fund Service 5/1/98-1/31/99 - Since inception*
International Small Cap Fund A 5/1/98-1/31/99 - Since inception*
International Small Cap Fund B 5/1/98-1/31/99 - Since inception*
International Small Cap Fund C 5/1/98-1/31/99 - Since inception*
International Small Cap Fund Institutional 5/1/98-1/31/99 - Since inception*
International Small Cap Fund Service 5/1/98-1/31/99 - Since inception*
Emerging Markets Equity A 12/15/97-1/31/99 - Since inception
Emerging Markets Equity A 2/1/98-1/31/99 - One Year
Emerging Markets Equity B 12/15/97-1/31/99 - Since inception
Emerging Markets Equity B 2/1/98-1/31/99 - One Year
Emerging Markets Equity C 12/15/97-1/31/99 - Since inception
Emerging Markets Equity C 2/1/98-1/31/99 - One Year
Emerging Markets Equity Institutional 12/15/97-1/31/99 - Since inception
Emerging Markets Equity Institutional 2/1/98-1/31/99 - One Year
Emerging Markets Equity Service 12/15/97-1/31/99 - Since inception
Emerging Markets Equity Service 2/1/98-1/31/99 - One Year
Asia Growth A 7/8/94-1/31/99 - Since inception
Asia Growth A 2/1/96-1/31/99 - Three years
Asia Growth A 2/1/98-1/31/99 - One year
Asia Growth B 5/1/96-1/31/99 - Since inception
Asia Growth B 2/1/98-1/31/99 - One year
<CAPTION>
Assuming no
voluntary
waiver of fees and
no
expense
reimbursements
------------------
Assumes Assumes maximum Assumes
no sales Applicable sales no sales
Fund Charge Charge** Charge
- ------------------------------------------- ------------------- ---------------- --------
<S> <C> <C> <C>
Small Cap Value
European Equity
European Equity
European Equity
European Equity
European Equity
Japanese Equity Fund
Japanese Equity Fund
Japanese Equity Fund
Japanese Equity Fund
Japanese Equity Fund
International Small Cap Fund
International Small Cap Fund
International Small Cap Fund
International Small Cap Fund
International Small Cap Fund
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Emerging Markets Equity
Asia Growth
Asia Growth
Asia Growth
Asia Growth
Asia Growth
</TABLE>
B-92
<PAGE>
INTRODUCTION
VALUE OF $1,000 INVESTMENT
(AVERAGE ANNUAL TOTAL RETURN)
<TABLE>
<CAPTION>
Assumes
Maximum
Applicable
Sales
Fund Class Time Period Charge**
- ------------------------------------------- ------------- ---------------------------------- -------------------
<S> <C> <C> <C>
Asia Growth C 8/15/97-1/31/99 - Since inception
Asia Growth C 2/1/98-1/31/99 - One Year
Asia Growth Institutional 2/2/96-1/31/99 - Since inception
Asia Growth Institutional 2/1/98-1/31/99 - One year
Real Estate Securities A 7/27/98 - Since inception*
Real Estate Securities B 7/27/98 - Since inception*
Real Estate Securities C 7/27/98 - Since inception*
Real Estate Securities Institutional 7/27/98 - Since inception*
Real Estate Securities Service 7/27/98 - Since inception*
<CAPTION>
Assuming no
voluntary
waiver of fees and
no
expense
reimbursements
------------------
Assumes Assumes maximum Assumes
no sales Applicable sales no sales
Fund Charge Charge** Charge
- ------------------------------------------- ------------------- ---------------- --------
<S> <C> <C> <C>
Asia Growth
Asia Growth
Asia Growth
Asia Growth
Real Estate Securities
Real Estate Securities
Real Estate Securities
Real Estate Securities
Real Estate Securities
</TABLE>
__________________________
All returns are average annual total returns.
* 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 Strategic
Growth or Growth Opportunities Funds had been offered.
B-93
<PAGE>
From time to time, advertisements or information may include a discussion
of certain attributes or benefits to be derived by an investment in the 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 Funds, except the CORE International Equity, CORE Small Cap Equity,
CORE Large Cap Value, CORE Large Cap Growth, Strategic Growth, Growth
Opportunities, European Equity, Japanese Equity, International Small Cap,
Emerging Markets Equity and Real Estate Securities Funds, were reorganized on
April 30, 1997 from series of a Maryland corporation to part of Goldman Sachs
Trust, a Delaware business trust, established by a Declaration of Trust dated
January 28, 1997.
The Trustees have authority under the Trust's Declaration of Trust to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. 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.
B-94
<PAGE>
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 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 such Class A Shares (0.50% with respect to the CORE
International Equity, International Equity, European Equity, Japanese Equity,
International Small Cap, Emerging Markets, Asia Growth and Real Estate
Securities Funds). 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
B-95
<PAGE>
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.
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, 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, State Street Bank & Trust Company as Trustee (GS
Profit Sharing Master Trust), P.O. Box 1992, Boston, MA 02105, was recordholder
of 13% of CORE U.S. Equity Fund's Institutional shares outstanding; Goldman
Sachs CORE Large Cap Fund, Omnibus A/C - Growth Strategy, 4900 Sears Tower,
Chicago, IL 60606, was recordholder of 11%, Goldman Sachs CORE Large Cap Growth
Fund, Omnibus A/C - Growth Fund, 4900 Sears Tower, Chicago, IL 60606, was
recordholder of 12%, and Fleet National Bank as custodian for The Hotchkiss
School, Goldman Sachs, Attn: 0006295110, P.O. Box 92800, Rochester, NY 14692,
was recordholder of 7% of CORE Large Cap Growth Fund's Institutional shares
outstanding; State Street Bank & Trust Company as Trustee (GS Profit Sharing
Master Trust), P.O. Box 1992, Boston, MA 02105, was recordholder of 52% of Mid
Cap Equity Fund's Institutional shares outstanding; Resources Trust Co., FBO
Various Accounts, 8051 E. Maplewood Ave., Englewood, CO 80111, was recordholder
of 17% of CORE International Equity Fund's Class A shares outstanding; Goldman
Sachs International Equity Fund, Omnibus A/C Income Strategy, 4900 Sears Tower,
Chicago, IL 60606, was recordholder of 6%, Goldman Sachs International Equity
Fund, Omnibus A/C Growth & Income Strategy, 4900 Sears Tower, Chicago, IL 60606,
was recordholder of 28%, Goldman Sachs International Equity Fund, Omnibus A/C
Growth Strategy, 4900 Sears Tower, Chicago, IL 60606, was recordholder of 23%
and Goldman Sachs International Equity Fund, Omnibus A/C Aggressive Growth
Strategy, 4900 Sears Tower, Chicago, IL 60606, was recordholder of 9% of CORE
International Equity Fund's Institutional shares outstanding; Merrill Lynch
Pierce Fenner & Smith, for the sole benefit of its customers, Attn: Service Team
Seq, Goldman Sachs Funds, 4800 Deer Lake Rd East 3rd floor, Jacksonville, FL
32246, was recordholder of 5% of International Equity Fund's Class A shares
outstanding; Goldman Sachs & Co., c/o Mutual Fund Operations, FBO Acct
#010100683, 85 Broad St., New York, NY 10004 was recordholder of 8% of European
Equity Fund's Class A shares outstanding; Goldman Sachs Seed Account, Attn:
Darin Pritchett, 4900 Sears
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Tower, Chicago, IL 60606 was recordholder of 20% of European Equity Fund's
Institutional shares outstanding; Southbridge Securities, 150 Water St South,
Cambridge, ON N1R 3E2, was recordholder of 5% of Japanese Equity Fund's Class A
shares outstanding; Goldman Sachs Seed Account, Attn: Darin Pritchett, 4900
Sears Tower, Chicago, IL 60606 was recordholder of 56% of Japanese Equity Fund's
Institutional shares outstanding; Goldman Sachs International Small Cap Fund,
Omnibus A/C Growth & Income Strategy, 4900 Sears Tower, Chicago, IL 60606, was
recordholder of 22%, Goldman Sachs International Small Cap Fund, Omnibus A/C -
Growth Strategy, 4900 Sears Tower, Chicago, IL 60606, was recordholder of 19%,
Goldman Sachs International Small Cap Fund, Omnibus A/C Aggressive Growth
Strategy, 4900 Sears Tower, Chicago, IL 60606, was recordholder of 11%, Goldman
Sachs Seed Account, Attn: Darin Pritchett, 4900 Sears Tower, Chicago, IL 60606,
was recordholder of 29%, and Goldman Sachs & Co., c/o Mutual Fund Operations,
FBO Acct #029049525, 85 Broad St., New York, NY 10004 was recordholder of 9% of
International Small Cap Fund's Institutional shares outstanding; Resources Trust
Co., FBO Various Accounts, 8051 E. Maplewood Ave., Englewood, CO 80111, was
recordholder of 9% of Emerging Market Equity Fund's Class A shares; Goldman
Sachs Emerging Markets, Omnibus A/C Growth and Income Strategy, 4900 Sears
Tower, Chicago, IL 60606, was recordholder of 13%, Goldman Sachs Emerging
Markets, Omnibus A/C Growth Strategy, 4900 Sears Tower, Chicago, IL 60606, was
recordholder of 13%, Goldman Sachs Emerging Markets, Omnibus A/C Aggressive
Growth Strategy, 4900 Sears Tower, Chicago, IL 60606, was recordholder of 6%,
Board of Regents of the University of Texas System, Attn: Security Operations,
PO Box 2033, Austin, TX 78768, was recordholder of 9%, and Pennsylvania Public
School Employees Retirement System, Attn: Brian Carl, PO Box 125, Harrisburg, PA
17108, was recordholder of 10% of Emerging Market Fund's Institutional shares
outstanding; and State Street Bank and Trust Company, FBO Goldman Sachs Employee
Pension Plan, 200 Newport Ave, North Quincy, MA 02170, was recordholder of 7% of
Asia Growth Fund's Class A shares outstanding.
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
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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 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
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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 exclusion of any other
Trustees of the Delaware Trust, all the powers and authorities of Trustees under
the Trust Instrument 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 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.
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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 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 Strategic Growth and Growth
Opportunities Funds each intent to elect and each other 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
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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 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 such as the CORE International Equity,
International Equity, European Equity, Japanese Equity, International Small Cap,
Emerging Markets Equity or Asia Growth Funds 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. Asia Growth Fund had approximately $_______, $_________, $__________ and
$__________ at January 31, 1999 of
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capital loss carry forwards expiring in 2002, 2003, 2004 and 2005, respectively,
for federal tax purposes. 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 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
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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.
Each Fund (other than CORE Large Cap Value, CORE U.S. Equity, CORE Large
Cap Growth and CORE Small Cap Equity Funds) 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, as may occur for
CORE International Equity, International Equity, European Equity, Japanese
Equity, International Small Cap, Emerging Markets Equity and Asia Growth Funds,
more than 50% of a Fund's total assets at the close of any taxable year consists
of stock or securities of foreign corporations, the Fund may file an election
with the Internal Revenue Service pursuant to which shareholders of the Fund
would be required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of foreign income
taxes paid by the Fund that are treated as income taxes under U.S. tax
regulations (which excludes, for example, stamp taxes, securities transaction
taxes, and similar taxes) even though not actually received by such
shareholders, and (ii) treat such respective pro rata portions as foreign income
taxes paid by them.
If the CORE International Equity, International Equity, European Equity,
Japanese Equity, International Small Cap, Emerging Markets Equity and Asia
Growth Funds make this election, its respective shareholders may then deduct
such pro rata portions of qualified foreign taxes in computing their taxable
incomes, or, alternatively, use them as foreign tax credits, subject to
applicable limitations, against their U.S. federal income taxes. Shareholders
who do not itemize deductions for federal income tax purposes will not, however,
be able to deduct their pro rata portion of foreign taxes paid by a Fund,
although such shareholders will be required to include their shares of such
taxes in gross income if the election is made.
If a shareholder chooses to take credit for the foreign taxes deemed paid
by such shareholder as a result of any such election by CORE International
Equity, International Equity, European Equity, Japanese Equity, International
Small Cap, Emerging Markets Equity or Asia Growth Funds, the amount of the
credit that may be claimed in any year may not exceed the same proportion of the
U.S. tax against which such credit is taken which the shareholder's taxable
income from foreign sources (but not in excess of the shareholder's entire
taxable income) bears to his entire taxable income. For this purpose,
distributions from long-term and short-term capital gains or foreign currency
gains by a Fund will generally not be treated as income from foreign sources.
This foreign tax credit limitation may also be applied separately to certain
specific categories of foreign-source income and the related foreign taxes. As
a result of these rules, which have different effects depending upon each
shareholder's particular tax situation, certain shareholders of CORE
International Equity, International Equity, European Equity, Japanese Equity,
International Small Cap, Emerging Markets Equity and Asia Growth Funds may not
be able to claim a credit for the full amount of their proportionate share of
the foreign taxes paid by such Fund even if the election is made by such a Fund.
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Shareholders who are not liable for U.S. federal income taxes, including
tax-exempt shareholders, will ordinarily not benefit from this election. Each
year, if any, that the CORE International Equity, International Equity, European
Equity, Japanese Equity, International Small Cap, Emerging Markets Equity or
Asia Growth Fund files the election described above, its shareholders will be
notified of the amount of (i) each shareholder's pro rata share of qualified
foreign taxes paid by a Fund and (ii) the portion of Fund dividends which
represents income from each foreign country. The other Funds will not be
entitled to elect to pass foreign taxes and associated credits or deductions
through to their shareholders because they will not satisfy the 50% requirement
described above. If a Fund cannot or does not make this election, it may deduct
such taxes in computing the amount it is required to distribute.
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
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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 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. Because eligible dividends are limited to
those a Fund receives from U.S. domestic corporations, it is unlikely that a
substantial portion of the distributions made by CORE International Equity,
International Equity, European Equity, Japanese Equity, International Small Cap,
Asia Growth and Emerging Markets Equity Funds will qualify for the dividends-
received deduction. 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,
B-105
<PAGE>
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 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. Non-U.S. shareholders may also be subject to U.S. federal withholding tax
on deemed income resulting from any election by CORE International Equity,
International Equity, European Equity, Japanese Equity, International Small Cap,
Emerging Markets
B-106
<PAGE>
Equity or Asia Growth Funds to treat qualified foreign taxes it pays as passed
through to shareholders (as described above), but they may not be able to claim
a U.S. tax credit or deduction with respect to such taxes.
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.
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 reports of Arthur Andersen
LLP, independent public accountants, contained in each Fund's 1999 Annual Report
are hereby incorporated by reference. A copy of the annual reports 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 each Fund's prospectus. No other part of the Annual
Reports are incorporated herein by reference.
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.
B-107
<PAGE>
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 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.
B-108
<PAGE>
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.
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 each Fund were most recently approved on [April __, 1999] 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%, 0.75% 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 (CORE International Equity, International Equity,
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity, Asia Growth and Real Estate Securities Funds only), 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, 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'
B-109
<PAGE>
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 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 terminated by the Trustees of the Trust 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.
B-110
<PAGE>
For the fiscal years ended January 31, 1999, January 31, 1998 and January
31, 1997 the distribution fees paid to Goldman Sachs pursuant to its Class A
Plan by each Fund then in existence were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balanced Fund $ $ 0 $ 0
Growth and Income Fund 723,634 139,025
CORE Large Cap Value Fund/1/ N/A N/A
CORE U.S. Equity Fund 720,025 363,264
CORE Large Cap Growth Fund/1/ 0 N/A
CORE Small Cap Equity Fund/1/ 1,380 N/A
CORE International Equity Fund/1/ 2,751 N/A
Capital Growth Fund 0 0
Strategic Growth Fund/2/ N/A N/A
Growth Opportunities Fund/2/ N/A N/A
Mid Cap Equity Fund/1/ 67,478 N/A
International Equity Fund 1,416,253 900,274
Small Cap Value Fund 0 0
European Equity Fund/1/ N/A N/A
Japanese Equity Fund/1/ N/A N/A
International Small Cap Fund/1/ N/A N/A
Emerging Markets Equity Fund/1/ 3,381 N/A
Asia Growth Fund 431,390 526,448
Real Estate Securities Fund/1/ N/A N/A
</TABLE>
- --------------------
1. The Class A Share class of CORE Large Cap Value, CORE Large Cap
Growth, CORE Small Cap Equity, CORE International Equity, Mid Cap Equity,
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and Real Estate Securities Funds commenced operations on December 31,
1998, May 1, 1997, August 15, 1997, August 15, 1997, August 15, 1997, October 1,
1998, May 1, 1998, May 1, 1998, December 15, 1997 and July 27, 1998,
respectively.
2. During the periods shown, no shares of Strategic Growth or Growth
Opportunities Funds were offered.
B-111
<PAGE>
Without the voluntary limitations then in effect, the Funds would have
paid Goldman Sachs the following distribution fees during the fiscal years ended
January 31, 1999, January 31, 1998, and January 31, 1997 pursuant to their
respective Class A Plans:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balanced Fund $ $ 301,397 $ 153,392
Growth and Income Fund 2,324,970 1,252,257
CORE Large Cap Value Fund/1/ N/A N/A
CORE U.S. Equity Fund 771,451 432,457
CORE Large Cap Growth Fund/1/ 61,924 N/A
CORE Small Cap Equity Fund/1/ 6,898 N/A
CORE International Equity Fund/1/ 2,751 N/A
Capital Growth Fund 2,678,370 2,171,462
Strategic Growth Fund/2/ N/A N/A
Growth Opportunities Fund/2/ N/A N/A
Mid Cap Equity Fund/1/ 67,478 N/A
International Equity Fund 1,632,745 1,071,755
Small Cap Value Fund 727,298 529,684
European Equity Fund/1/ N/A N/A
Japanese Equity Fund/1/ N/A N/A
International Small Cap Fund/1/ N/A N/A
Emerging Markets Equity Fund/1/ 3,381 N/A
Asia Growth Fund 513,560 626,724
Real Estate Securities Fund/1/ N/A N/A
</TABLE>
- --------------------
1. The Class A Share class of CORE Large Cap Value, CORE Large Cap
Growth, CORE Small Cap Equity, CORE International Equity, Mid Cap Equity,
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and Real Estate Securities Funds commenced operations on December 31,
1998, May 1, 1997, August 15, 1997, August 15, 1997, August 15, 1997, October 1,
1998, May 1, 1998, May 1, 1998, December 15, 1997 and July 27, 1998,
respectively.
2. During the periods show, no shares of Strategic Growth or Growth
Opportunities Funds were offered.
B-112
<PAGE>
During the fiscal years ended January 31, 1999, January 31, 1998, and
January 31, 1997 Goldman Sachs was paid the following distribution fees under
the Class B Plan of each applicable Fund with Class B shares then in existence:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balanced Fund $ $ 74,569 $ 3,861
Growth and Income Fund 1,117,813 28,075
CORE Large Cap Value Fund/1/ N/A N/A
CORE U.S. Equity Fund 265,025 36,508
CORE Large Cap Growth Fund/1/ 34,332 N/A
CORE Small Cap Equity Fund/1/ 20,064 N/A
CORE International Equity Fund/1/ 5,700 N/A
Capital Growth Fund 127,395 7,632
Strategic Growth Fund/2/ N/A N/A
Growth Opportunities Fund/2/ N/A N/A
Mid Cap Equity Fund/1/ 47,585 N/A
International Equity Fund 314,578 44,148
Small Cap Value Fund 160,608 8,973
European Equity Fund/1/ N/A N/A
Japanese Equity Fund/1/ N/A N/A
International Small Cap Fund/1/ N/A N/A
Emerging Markets Equity Fund/1/ 38 N/A
Asia Growth Fund 28,550 10,229
Real Estate Securities Fund/1/ N/A N/A
</TABLE>
- --------------------
1. The Class B Share class of CORE Large Cap Value, CORE Large Cap
Growth, CORE Small Cap Equity, CORE International Equity, Mid Cap Equity,
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and Real Estate Securities Funds commenced operations on December 31,
1998, May 1, 1997, August 15, 1997, August 15, 1997, August 15, 1997, October 1,
1998, May 1, 1998, May 1, 1998, December 15, 1997 and July 27, 1998,
respectively.
2. During the periods shown, no shares of Strategic Growth or Growth
Opportunities Funds were offered.
B-113
<PAGE>
During the fiscal years ended January 31, 1999 and January 31, 1998,
Goldman Sachs was paid the following distribution fees under the Class C Plan of
each applicable Fund with Class C Shares then in existence:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balanced $ $ 13,290
Growth and Income 57,542
CORE Large Cap Value Fund/1/ N/A
CORE U.S. Equity Fund 14,614
CORE Large Cap Growth Fund/1/ 6,880
CORE Small Cap Equity Fund/1/ 4,038
CORE International Equity Fund/1/ 3,118
Capital Growth Fund 9,607
Strategic Growth Fund/2/ N/A
Growth Opportunities Fund/2/ N/A
Mid Cap Equity Fund/1/ 10,495
International Equity Fund 7,485
Small Cap Value Fund 12,158
European Equity Fund/1/ N/A
Japanese Equity Fund/1/ N/A
International Small Cap Fund/1/ N/A
Emerging Markets Fund/1/ 28
Asia Growth Fund 2,854
Real Estate Securities Fund/1/ N/A
</TABLE>
- --------------------
1. The Class C Share class of CORE Large Cap Value, CORE Large Cap
Growth, CORE Small Cap Equity, CORE International Equity, Mid Cap Equity,
European Equity, Japanese Equity, International Small Cap, Emerging Markets
Equity and Real Estate Securities Funds commenced operations on [December 31,
1998;] August 15, 1997, August 15, 1997, August 15, 1997, August 15, 1997,
October 1, 1998, May 1, 1998, May 1, 1998, December 15, 1997 and July 27, 1998.
2. During the periods shown, no shares of Strategic Growth or Growth
Opportunities Funds were offered.
No distribution fees were paid to Goldman Sachs under the Class C Plans during
the fiscal year ended January 31, 1997.
B-114
<PAGE>
During the fiscal year ended January 31, 1999, Goldman Sachs incurred
the following expenses in connection with distribution under the Class A Plan of
each applicable Fund with Class A Shares then in existence:
<TABLE>
<CAPTION>
Compensation Printing and Preparation
and Expenses Allocable Mailing of and
of the Overhead, Prospectuses Distribution
Distributor Telephone to Other of Sales
Compensation & Its Sales and Travel Than Current Literature and
to Dealers Personnel Expenses Shareholders Advertising
------------ ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended January 31, 1999:
Balanced Fund $ $ $ $ $
Growth and Income Fund
CORE Large Cap Value Fund
CORE U.S. Equity Fund
CORE Large Cap Growth Fund
CORE Small Cap Equity Fund
CORE International Equity Fund
Capital Growth Fund
Strategic Growth Fund/1/
Growth Opportunities Fund/1/
Mid Cap Equity
International Equity Fund
Small Cap Value Fund
European Equity Fund
Japanese Equity Fund
International Small Cap
Emerging Market Equity Fund
Asia Growth Fund
Real Estate Securities Fund
</TABLE>
The table above reflects amounts expended by Goldman Sachs, which amounts are in
excess of the compensation received by Goldman Sachs under the Class A Plans.
The payments under the Class A Plan were used by Goldman Sachs to compensate it
for the expenses shown above on a pro-rata basis.
- --------------------
1 During the periods shown, no shares of Strategic Growth or Growth
Opportunities Funds were offered.
B-115
<PAGE>
For the fiscal years and periods indicated below, Goldman Sachs
received service fees from the Funds pursuant to the Plans then in existence at
the rate of 0.25% of each Fund's average daily net assets attributable to Class
A, Class B, or Class C Shares, which totaled:
<TABLE>
<CAPTION>
Class A Class B Class C
------------------------------------- ---------------------------------- -----------------
1999 1998 1997 1999 1998 1997/1/ 1999 1998
==== ==== ==== ==== ==== ==== ==== ====
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced Fund/2/ $ 301,397 $ 153,392 $ 24,856 $ 1,294 $ 4,430
Growth and Income Fund/2/ 2,324,970 1,252,257 372,604 9,358 19,181
CORE Large Cap Value Fund/3/ N/A N/A N/A N/A N/A
CORE U.S. Equity Fund/2/ 771,451 432,457 88,342 12,169 4,871
CORE Large Cap Growth Fund/4/ 61,924 N/A 11,444 N/A 2,293
CORE Small Cap Equity Fund/5/ 6,898 N/A 6,688 N/A 1,346
CORE International Equity Fund/5/ 2,748 N/A 1,900 N/A 1,040
Capital Growth Fund/2/ 2,678,370 2,171,462 42,465 2,854 3,202
Strategic Growth Fund/6/ N/A N/A N/A N/A N/A
Growth Opportunities Fund/6/ N/A N/A N/A N/A N/A
Mid Cap Equity Fund/5/ 67,485 N/A 15,862 N/A 3,499
International Equity Fund/3/ 1,632,745 1,071,755 104,859 14,733 2,496
Small Cap Value Fund/2/ 727,298 569,684 53,536 2,992 4,052
European Equity Fund/7/ N/A N/A N/A N/A N/A
Japanese Equity Fund/7/ N/A N/A N/A N/A N/A
International Small Cap Fund/7/ N/A N/A N/A N/A N/A
Emerging Market Equity Fund/8/ 3,424 N/A 13 N/A 10
Asia Growth Fund/2/ 513,560 626,724 9,517 3,410 951
Real Estate Securities Fund/7/ N/A N/A N/A N/A N/A
</TABLE>
___________________
/1/ For the period commencing May 1, 1996.
/2/ Prior to May 1, 1996 and August 15, 1997, Balanced, Growth and Income, CORE
U.S. Equity, Capital Growth, Small Cap Value, International Equity and Asia
Growth Funds had not sold Class B and Class C Shares, respectively.
/3/ CORE Large Cap Value Fund commenced operations on December 31, 1998.
/4/ Prior to May 1, 1997, May 1, 1997 and August 15, 1997, CORE Large Cap Growth
Fund had not sold Class A, Class B and Class C Shares, respectively.
/5/ Prior to August 15, 1997, CORE Small Cap Equity, CORE International Equity
and Mid Cap Equity Funds had not sold Class A, Class B or Class C Shares.
/6/ During the periods shown, no shares of Strategic Growth or Growth
Opportunities Funds were offered.
/7/ Prior to October 1, 1998, May 1, 1998, May 1, 1998 and July 27, 1998,
European Equity, Japanese Equity, International Small Cap and Real Estate
Securities Funds had not sold Class A, Class B or Class C Shares.
/8/ Prior to December 15, 1997, Emerging Markets Equity Fund had not sold Class
A, Class B or Class C Shares.
B-116
<PAGE>
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 January 31, 1999, 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>
Balanced Fund $ 5.5% $
Growth and Income Fund 5.5%
CORE U.S. Equity Fund 5.5%
CORE Large Cap Value Fund 5.5%
CORE Large Cap Growth Fund 5.5%
CORE Small Cap Equity Fund 5.5%
CORE International Equity Fund 5.5%
Capital Growth Fund 5.5%
Strategic Growth Fund/1/ ----
Growth Opportunities Fund/1/
Mid Cap Equity Fund 5.5%
International Equity Fund 5.5%
Small Cap Value Fund 5.5%
European Equity Fund 5.5%
Japanese Equity Fund 5.5%
International Small Cap Fund 5.5%
Emerging Market Equity Fund 5.5%
Asia Growth Fund 5.5%
Real Estate Securities Fund 5.5%
</TABLE> ----
/1/ During the fiscal year ended January 31, 1999, no shares of Strategic Growth
or Growth Opportunities Funds were offered.
The following information supplements the information in the Prospectus under
the captions "Shareholder Guide" and "Dividends." Please see the Prospectus for
more complete information.
B-117
<PAGE>
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.
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.
B-118
<PAGE>
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 "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.
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
B-119
<PAGE>
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.
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-120
<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.
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
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
B-121
<PAGE>
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, most recently voted
to approve the Plan and related Service Agreements at a meeting called for the
purpose of voting on such Plan and Service Agreements on _______, 1999. 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 Service Shareholders of the
affected Fund and all material amendments of the Plan must also be approved by
the Trustees in the manner described above. 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,
B-122
<PAGE>
there is a reasonable likelihood that the Plans will benefit the Funds and the
holders of Service Shares of the Funds.
B-123
<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.
2-A
<PAGE>
"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.
"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:
3-A
<PAGE>
"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 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
4-A
<PAGE>
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.
"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:
5-A
<PAGE>
"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.
"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.
6-A
<PAGE>
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.
"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
7-A
<PAGE>
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 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. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery of amounts outstanding on any securities involved and "D"
represents the lowest potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA ratings
from and including "AA" to "B" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major rating categories.
Thomson 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
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 concerns 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 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:
9-A
<PAGE>
"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 assets
diminish, reputation 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 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.
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
1-B
<PAGE>
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 distinction.
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.
GOLDMAN, SACHS & CO.'S INVESTMENT BANKING AND SECURITIES ACTIVITIES
Goldman, Sachs & Co. is a leading global investment banking and securities
firm with a number of distinguishing characteristics.
Privately owned and ranked among Wall Street's best capitalized firms, with
partners' capital of approximately $6.1 billion as of November 28, 1997.
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 issuers from (1993-
1996).
A research budget of $200 million for 1997.
Premier lead manager of negotiated municipal bond offerings over the past six
years (1990-1996).
The number one lead manager of U.S. common stock offerings for the past eight
years (1989-1996).*
The number one lead manager for initial public offerings (IPOs) worldwide
(1989-1996).
- --------------------
* Source: Securities Data Corporation. Common stock ranking excludes REITs,
====================================
Investment Trusts and Rights.
2-B
<PAGE>
GOLDMAN, SACHS & CO.'S HISTORY OF EXCELLENCE
1865 End of Civil War
1869 Marcus Goldman opens Goldman Sachs
1890 Dow Jones Industrial Average first published
1896 Goldman Sachs joins New York Stock Exchange
1906 Goldman Sachs takes Sears Roebuck & Co. public (longest-standing client
relationship)
Dow Jones Industrial Average tops 100
1925 Goldman Sachs finances Warner Brothers, producer of the first talking
film
1956 Goldman Sachs co-manages Ford's public offering, the largest to date
1970 London office opens
1972 Dow Jones Industrial Average breaks 1000
1986 Goldman Sachs takes Microsoft public
1991 Provides advisory services for the largest privatization in the
region of the sale of Telefonos de Mexico
1995 Dow Jones Industrial Average breaks 5000
1996 Goldman Sachs takes Deutsche Telecom public
Dow Jones Industrial Average breaks 6000
1997 Dow Jones Industrial Average breaks 7000
Goldman Sachs increases assets under management by 100% over 1996
3-B
<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) and to Post-Effective Amendment
No. 53 to such Registration Statement (Accession No. 0000950130-99-001069).
(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,
3
<PAGE>
dated January 28, 1997. (Accession No. 0000950130-98-000676).
(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
4
<PAGE>
Income Fund, and Goldman Sachs Asset Management. (Accession No.
0000950130-98-000676).
(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)(1) Distribution Agreement dated April 30, 1997 as amended January
22, 1999 between Registrant and Goldman Sachs & Co. (Accession
No. 0000950130-99-000742)
(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
5
<PAGE>
Agreement referred to above as Exhibit (g)(2) (Accession No.
0000950130-98-000965).
(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
6
<PAGE>
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)(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).
7
<PAGE>
(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 (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
8
<PAGE>
April 22, 1998. (Accession No. 0000950130-98-006081).
(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
9
<PAGE>
Liquid Assets Portfolios. (Accession No. 0000950130-98-006081).
(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).
(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).
(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:
(j). Consent of Independent Auditors.
(n). Financial Data Schedules.
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
11
<PAGE>
reason of its willful misfeasance, bad faith or gross negligence or the
Adviser's reckless disregard of its obligation under the 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, The Northern Institutional Funds
(formerly The Benchmark Funds), 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 Northern Institutional
Funds (formerly The Benchmark Funds) and 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
12
<PAGE>
Executive Committee. None of the members of the executive committee holds a
position or office with the Registrant.
GOLDMAN SACHS EXECUTIVE COMMITTEE
Name and Principal
Business Address Position
---------------- --------
Jon S. Corzine (1) Co-Chairman
Robert J. Hurst (1) Managing Director
Henry M. Paulson, Jr. (1) Chief Executive Officer, Co-Chairman
John A. Thain (1)(3) Co-ChiefOperating Officer
John L. Thornton (3) Co-ChiefOperating Officer
Roy J. Zuckerberg (2) 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
(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 meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 54 to its
Registration Statement under Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 54 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 15th day of April, 1999.
GOLDMAN SACHS TRUST
(A Delaware business trust)
By: /s/ Michael 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.
<TABLE>
<CAPTION>
Name Title Date
- ----------------------------------------- ----------------------------------- -----------------------------
<S> <C> <C>
*Douglas C. Grip President and
--------------- Trustee April 15, 1999
Douglas C. Grip
*John M. Perlowski Principal Accounting
----------------- Officer And Principal
John M. Perlowski Financial Officer April 15, 1999
*David B. Ford Trustee April 15, 1999
-------------
David B. Ford
*Mary Patterson McPherson Trustee April 15, 1999
------------------------
Mary Patterson McPherson
*Ashok N. Bakhru Chairman and Trustee April 15, 1999
---------------
Ashok N. Bakhru
*Alan A. Shuch Trustee April 15, 1999
-------------
Alan A. Shuch
*Jackson W. Smart Trustee April 15, 1999
---------------------
Jackson W. Smart, Jr.
*John P. McNulty Trustee April 15, 1999
---------------
John P. McNulty
*William H. Springer Trustee April 15, 1999
-------------------
William H. Springer
*Richard P. Strubel Trustee April 15, 1999
------------------
Richard P. Strubel
</TABLE>
14
<PAGE>
*By: /s/ Michael Richman
--------------------
Michael J. Richman,
Attorney-In-Fact
* Pursuant to a power of attorney previously filed.
15
<PAGE>
GOLDMAN SACHS TRUST
Certificate of Secretary
The undersigned Secretary of Goldman Sachs Trust hereby certifies that the
following resolution was duly adopted by the Board of Trustees of said Trust on
January 22, 1999 and remains in effect on the date hereof:
FURTHER RESOLVED, that the Trustees and Officers of the Trust who may
be required to execute any amendments to the Trust's Registration Statement
be, and each hereby is, authorized to execute a power of attorney
appointing James A. Fitzpatrick, Douglas C. Grip, Anne Marcel, Jesse Cole,
Nancy L. Mucker, John W. Perlowski, Michael J. Richman, Howard B. Surloff
and Valerie A. Zondorak, jointly and severally, their true and lawful
attorney or attorneys, to execute in their name, place and stead, in their
capacity as officer of the Trust any and all amendments to the Registration
Statement and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange
Commission; and each of said attorneys shall have the power to act
thereunder with or without the other said attorneys and shall have full
power of substitution and resubstitution; and to do in the name and on
behalf of said Trustees and Officers, or any or all of them, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as each of said Trustees
or Officers, or any or all of them, might or could do in person, said acts
of said attorneys, being hereby ratified and approved.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of April,
1999.
GOLDMAN SACHS TRUST
/s/ Michael J. Richman
----------------------
Michael J. Richman
Secretary
16
<PAGE>
EXHIBIT INDEX
(j). Consent of Independent Auditors.
(n). Financial Data Schedules.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 531
<NAME> GS Capital Growth Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1570000649
<INVESTMENTS-AT-VALUE> 2325978519
<RECEIVABLES> 23084804
<ASSETS-OTHER> 30841
<OTHER-ITEMS-ASSETS> 62995
<TOTAL-ASSETS> 2349157159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14936136
<TOTAL-LIABILITIES> 14936136
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1509333232
<SHARES-COMMON-STOCK> 82915669
<SHARES-COMMON-PRIOR> 67981133
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68909921
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755977870
<NET-ASSETS> 2334221023
<DIVIDEND-INCOME> 18532086
<INTEREST-INCOME> 3071644
<OTHER-INCOME> 0
<EXPENSES-NET> (25877680)
<NET-INVESTMENT-INCOME> (4273950)
<REALIZED-GAINS-CURRENT> 133916314
<APPREC-INCREASE-CURRENT> 392953579
<NET-CHANGE-FROM-OPS> 522595943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32045496
<NUMBER-OF-SHARES-REDEEMED> (19634822)
<SHARES-REINVESTED> 2523862
<NET-CHANGE-IN-ASSETS> 1024140330
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3264140
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17460353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28445365
<AVERAGE-NET-ASSETS> 1746043592
<PER-SHARE-NAV-BEGIN> 18.48
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 6.35
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.03
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 532
<NAME> GS Capital Growth Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1570000649
<INVESTMENTS-AT-VALUE> 2325978519
<RECEIVABLES> 23084804
<ASSETS-OTHER> 30841
<OTHER-ITEMS-ASSETS> 62995
<TOTAL-ASSETS> 2349157159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14936136
<TOTAL-LIABILITIES> 14936136
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1509333232
<SHARES-COMMON-STOCK> 10029570
<SHARES-COMMON-PRIOR> 2234279
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68909921
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755977870
<NET-ASSETS> 2334221023
<DIVIDEND-INCOME> 18532086
<INTEREST-INCOME> 3071644
<OTHER-INCOME> 0
<EXPENSES-NET> (25877680)
<NET-INVESTMENT-INCOME> (4273950)
<REALIZED-GAINS-CURRENT> 133916314
<APPREC-INCREASE-CURRENT> 392953579
<NET-CHANGE-FROM-OPS> 522595943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (6254745)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8217516
<NUMBER-OF-SHARES-REDEEMED> (692115)
<SHARES-REINVESTED> 269890
<NET-CHANGE-IN-ASSETS> 1024140330
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3264140
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17460353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28445365
<AVERAGE-NET-ASSETS> 1746043592
<PER-SHARE-NAV-BEGIN> 18.27
<PER-SHARE-NII> (0.12)
<PER-SHARE-GAIN-APPREC> 6.19
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.57
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 537
<NAME> GS Capital Growth Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1570000649
<INVESTMENTS-AT-VALUE> 2325978519
<RECEIVABLES> 23084804
<ASSETS-OTHER> 30841
<OTHER-ITEMS-ASSETS> 62995
<TOTAL-ASSETS> 2349157159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14936136
<TOTAL-LIABILITIES> 14936136
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1509333232
<SHARES-COMMON-STOCK> 2561215
<SHARES-COMMON-PRIOR> 295829
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68909921
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755977870
<NET-ASSETS> 2334221023
<DIVIDEND-INCOME> 18532086
<INTEREST-INCOME> 3071644
<OTHER-INCOME> 0
<EXPENSES-NET> (25877680)
<NET-INVESTMENT-INCOME> (4273950)
<REALIZED-GAINS-CURRENT> 133916314
<APPREC-INCREASE-CURRENT> 392953579
<NET-CHANGE-FROM-OPS> 522595943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1535180)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2456617
<NUMBER-OF-SHARES-REDEEMED> (254033)
<SHARES-REINVESTED> 62802
<NET-CHANGE-IN-ASSETS> 1024140330
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3264140
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17460353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28445365
<AVERAGE-NET-ASSETS> 1746043592
<PER-SHARE-NAV-BEGIN> 18.24
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 6.15
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.52
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 533
<NAME> GS Capital Growth Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1570000649
<INVESTMENTS-AT-VALUE> 2325978519
<RECEIVABLES> 23084804
<ASSETS-OTHER> 30841
<OTHER-ITEMS-ASSETS> 62995
<TOTAL-ASSETS> 2349157159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14936136
<TOTAL-LIABILITIES> 14936136
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1509333232
<SHARES-COMMON-STOCK> 1737954
<SHARES-COMMON-PRIOR> 393638
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68909921
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755977870
<NET-ASSETS> 2334221023
<DIVIDEND-INCOME> 18532086
<INTEREST-INCOME> 3071644
<OTHER-INCOME> 0
<EXPENSES-NET> (25877680)
<NET-INVESTMENT-INCOME> (4273950)
<REALIZED-GAINS-CURRENT> 133916314
<APPREC-INCREASE-CURRENT> 392953579
<NET-CHANGE-FROM-OPS> 522595943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (949782)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2253646
<NUMBER-OF-SHARES-REDEEMED> (946047)
<SHARES-REINVESTED> 36717
<NET-CHANGE-IN-ASSETS> 1024140330
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3264140
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17460353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28445365
<AVERAGE-NET-ASSETS> 1746043592
<PER-SHARE-NAV-BEGIN> 18.45
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 6.38
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.07
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 536
<NAME> GS Capital Growth Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1570000649
<INVESTMENTS-AT-VALUE> 2325978519
<RECEIVABLES> 23084804
<ASSETS-OTHER> 30841
<OTHER-ITEMS-ASSETS> 62995
<TOTAL-ASSETS> 2349157159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14936136
<TOTAL-LIABILITIES> 14936136
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1509333232
<SHARES-COMMON-STOCK> 128746
<SHARES-COMMON-PRIOR> 94
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68909921
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755977870
<NET-ASSETS> 2334221023
<DIVIDEND-INCOME> 18532086
<INTEREST-INCOME> 3071644
<OTHER-INCOME> 0
<EXPENSES-NET> (25877680)
<NET-INVESTMENT-INCOME> (4273950)
<REALIZED-GAINS-CURRENT> 133916314
<APPREC-INCREASE-CURRENT> 392953579
<NET-CHANGE-FROM-OPS> 522595943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (97173)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 140100
<NUMBER-OF-SHARES-REDEEMED> (15887)
<SHARES-REINVESTED> 4439
<NET-CHANGE-IN-ASSETS> 1024140330
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3264140
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17460353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28445365
<AVERAGE-NET-ASSETS> 1746043592
<PER-SHARE-NAV-BEGIN> 18.46
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 6.31
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.96
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 541
<NAME> GS Small Cap Value Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 392442246
<INVESTMENTS-AT-VALUE> 331551650
<RECEIVABLES> 4728447
<ASSETS-OTHER> 13549
<OTHER-ITEMS-ASSETS> 39065
<TOTAL-ASSETS> 336332711
<PAYABLE-FOR-SECURITIES> 3416796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4552080
<TOTAL-LIABILITIES> 7968876
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 410398210
<SHARES-COMMON-STOCK> 14139071
<SHARES-COMMON-PRIOR> 15394383
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (21143779)
<ACCUM-APPREC-OR-DEPREC> (60890596)
<NET-ASSETS> 328363835
<DIVIDEND-INCOME> 3423058
<INTEREST-INCOME> 2128511
<OTHER-INCOME> 0
<EXPENSES-NET> (6981720)
<NET-INVESTMENT-INCOME> (1430151)
<REALIZED-GAINS-CURRENT> (21053205)
<APPREC-INCREASE-CURRENT> (75425946)
<NET-CHANGE-FROM-OPS> (97909302)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11250168
<NUMBER-OF-SHARES-REDEEMED> (13625605)
<SHARES-REINVESTED> 1120125
<NET-CHANGE-IN-ASSETS> (104791468)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 24416487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4417249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7900828
<AVERAGE-NET-ASSETS> 441779732
<PER-SHARE-NAV-BEGIN> 24.05
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> (4.48)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.51
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 542
<NAME> GS Small Cap Value Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 392442246
<INVESTMENTS-AT-VALUE> 331551650
<RECEIVABLES> 4728447
<ASSETS-OTHER> 13549
<OTHER-ITEMS-ASSETS> 39065
<TOTAL-ASSETS> 336332711
<PAYABLE-FOR-SECURITIES> 3416796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4552080
<TOTAL-LIABILITIES> 7968876
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 410398210
<SHARES-COMMON-STOCK> 2369281
<SHARES-COMMON-PRIOR> 1798680
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (21143779)
<ACCUM-APPREC-OR-DEPREC> (60890596)
<NET-ASSETS> 328363835
<DIVIDEND-INCOME> 3423058
<INTEREST-INCOME> 2128511
<OTHER-INCOME> 0
<EXPENSES-NET> (6981720)
<NET-INVESTMENT-INCOME> (1430151)
<REALIZED-GAINS-CURRENT> (21053205)
<APPREC-INCREASE-CURRENT> (75425946)
<NET-CHANGE-FROM-OPS> (97909302)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2897126)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1020790
<NUMBER-OF-SHARES-REDEEMED> (609437)
<SHARES-REINVESTED> 159248
<NET-CHANGE-IN-ASSETS> (104791468)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 24416487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4417249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7900828
<AVERAGE-NET-ASSETS> 441779732
<PER-SHARE-NAV-BEGIN> 23.73
<PER-SHARE-NII> (0.21)
<PER-SHARE-GAIN-APPREC> (4.42)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.10
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 547
<NAME> GS Small Cap Value Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 392442246
<INVESTMENTS-AT-VALUE> 331551650
<RECEIVABLES> 4728447
<ASSETS-OTHER> 13549
<OTHER-ITEMS-ASSETS> 39065
<TOTAL-ASSETS> 336332711
<PAYABLE-FOR-SECURITIES> 3416796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4552080
<TOTAL-LIABILITIES> 7968876
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 410398210
<SHARES-COMMON-STOCK> 453409
<SHARES-COMMON-PRIOR> 236148
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (21143779)
<ACCUM-APPREC-OR-DEPREC> (60890596)
<NET-ASSETS> 328363835
<DIVIDEND-INCOME> 3423058
<INTEREST-INCOME> 2128511
<OTHER-INCOME> 0
<EXPENSES-NET> (6981720)
<NET-INVESTMENT-INCOME> (1430151)
<REALIZED-GAINS-CURRENT> (21053205)
<APPREC-INCREASE-CURRENT> (75425946)
<NET-CHANGE-FROM-OPS> (97909302)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (512006)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 348913
<NUMBER-OF-SHARES-REDEEMED> (156144)
<SHARES-REINVESTED> 24492
<NET-CHANGE-IN-ASSETS> (104791468)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 24416487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4417249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7900828
<AVERAGE-NET-ASSETS> 441779732
<PER-SHARE-NAV-BEGIN> 23.73
<PER-SHARE-NII> (0.18)
<PER-SHARE-GAIN-APPREC> (4.43)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.12
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 543
<NAME> GS Small Cap Value Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 392442246
<INVESTMENTS-AT-VALUE> 331551650
<RECEIVABLES> 4728447
<ASSETS-OTHER> 13549
<OTHER-ITEMS-ASSETS> 39065
<TOTAL-ASSETS> 336332711
<PAYABLE-FOR-SECURITIES> 3416796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4552080
<TOTAL-LIABILITIES> 7968876
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 410398210
<SHARES-COMMON-STOCK> 824509
<SHARES-COMMON-PRIOR> 607122
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (21143779)
<ACCUM-APPREC-OR-DEPREC> (60890596)
<NET-ASSETS> 328363835
<DIVIDEND-INCOME> 3423058
<INTEREST-INCOME> 2128511
<OTHER-INCOME> 0
<EXPENSES-NET> (6981720)
<NET-INVESTMENT-INCOME> (1430151)
<REALIZED-GAINS-CURRENT> (21053205)
<APPREC-INCREASE-CURRENT> (75425946)
<NET-CHANGE-FROM-OPS> (97909302)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (946473)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 191950
<NUMBER-OF-SHARES-REDEEMED> (30030)
<SHARES-REINVESTED> 55467
<NET-CHANGE-IN-ASSETS> (104791468)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 24416487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4417249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7900828
<AVERAGE-NET-ASSETS> 441779732
<PER-SHARE-NAV-BEGIN> 24.09
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (4.50)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.62
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 546
<NAME> GS Small Cap Value Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 392442246
<INVESTMENTS-AT-VALUE> 331551650
<RECEIVABLES> 4728447
<ASSETS-OTHER> 13549
<OTHER-ITEMS-ASSETS> 39065
<TOTAL-ASSETS> 336332711
<PAYABLE-FOR-SECURITIES> 3416796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4552080
<TOTAL-LIABILITIES> 7968876
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 410398210
<SHARES-COMMON-STOCK> 14136
<SHARES-COMMON-PRIOR> 70
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (21143779)
<ACCUM-APPREC-OR-DEPREC> (60890596)
<NET-ASSETS> 328363835
<DIVIDEND-INCOME> 3423058
<INTEREST-INCOME> 2128511
<OTHER-INCOME> 0
<EXPENSES-NET> (6981720)
<NET-INVESTMENT-INCOME> (1430151)
<REALIZED-GAINS-CURRENT> (21053205)
<APPREC-INCREASE-CURRENT> (75425946)
<NET-CHANGE-FROM-OPS> (97909302)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (16422)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13163
<NUMBER-OF-SHARES-REDEEMED> (71)
<SHARES-REINVESTED> 974
<NET-CHANGE-IN-ASSETS> (104791468)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 24416487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4417249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7900828
<AVERAGE-NET-ASSETS> 441779732
<PER-SHARE-NAV-BEGIN> 24.05
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> (4.51)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.50
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 571
<NAME> GS Mid Cap Equity Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 329204497
<INVESTMENTS-AT-VALUE> 303734865
<RECEIVABLES> 17541905
<ASSETS-OTHER> 105659
<OTHER-ITEMS-ASSETS> 39800
<TOTAL-ASSETS> 321422229
<PAYABLE-FOR-SECURITIES> 3613470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1809228
<TOTAL-LIABILITIES> 5422698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335338925
<SHARES-COMMON-STOCK> 3839266
<SHARES-COMMON-PRIOR> 4191937
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (31716)
<ACCUMULATED-NET-GAINS> 6161954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25469632)
<NET-ASSETS> 315999531
<DIVIDEND-INCOME> 5328500
<INTEREST-INCOME> 1374682
<OTHER-INCOME> 0
<EXPENSES-NET> (4482048)
<NET-INVESTMENT-INCOME> 2221134
<REALIZED-GAINS-CURRENT> 6435290
<APPREC-INCREASE-CURRENT> (58648058)
<NET-CHANGE-FROM-OPS> (49991634)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (280574)
<DISTRIBUTIONS-OF-GAINS> (59)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6897312
<NUMBER-OF-SHARES-REDEEMED> (7448798)
<SHARES-REINVESTED> 198815
<NET-CHANGE-IN-ASSETS> (46224084)
<ACCUMULATED-NII-PRIOR> 130093
<ACCUMULATED-GAINS-PRIOR> 14688293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2953154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4810183
<AVERAGE-NET-ASSETS> 393759397
<PER-SHARE-NAV-BEGIN> 21.61
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> (2.38)
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.38
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 572
<NAME> GS Mid Cap Equity Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 329204497
<INVESTMENTS-AT-VALUE> 303734865
<RECEIVABLES> 17541905
<ASSETS-OTHER> 105659
<OTHER-ITEMS-ASSETS> 39800
<TOTAL-ASSETS> 321422229
<PAYABLE-FOR-SECURITIES> 3613470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1809228
<TOTAL-LIABILITIES> 5422698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335338925
<SHARES-COMMON-STOCK> 2067304
<SHARES-COMMON-PRIOR> 1332295
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (31716)
<ACCUMULATED-NET-GAINS> 6161954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25469632)
<NET-ASSETS> 315999531
<DIVIDEND-INCOME> 5328500
<INTEREST-INCOME> 1374682
<OTHER-INCOME> 0
<EXPENSES-NET> (4482048)
<NET-INVESTMENT-INCOME> 2221134
<REALIZED-GAINS-CURRENT> 6435290
<APPREC-INCREASE-CURRENT> (58648058)
<NET-CHANGE-FROM-OPS> (49991634)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3147)
<DISTRIBUTIONS-OF-GAINS> (1854834)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1238560
<NUMBER-OF-SHARES-REDEEMED> (586417)
<SHARES-REINVESTED> 82866
<NET-CHANGE-IN-ASSETS> (46224084)
<ACCUMULATED-NII-PRIOR> 130093
<ACCUMULATED-GAINS-PRIOR> 14688293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2953154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4810183
<AVERAGE-NET-ASSETS> 393759397
<PER-SHARE-NAV-BEGIN> 21.57
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> (2.35)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.29
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 577
<NAME> GS Mid Cap Equity Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 329204497
<INVESTMENTS-AT-VALUE> 303734865
<RECEIVABLES> 17541905
<ASSETS-OTHER> 105659
<OTHER-ITEMS-ASSETS> 39800
<TOTAL-ASSETS> 321422229
<PAYABLE-FOR-SECURITIES> 3613470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1809228
<TOTAL-LIABILITIES> 5422698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335338925
<SHARES-COMMON-STOCK> 590146
<SHARES-COMMON-PRIOR> 298521
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (31716)
<ACCUMULATED-NET-GAINS> 6161954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25469632)
<NET-ASSETS> 315999531
<DIVIDEND-INCOME> 5328500
<INTEREST-INCOME> 1374682
<OTHER-INCOME> 0
<EXPENSES-NET> (4482048)
<NET-INVESTMENT-INCOME> 2221134
<REALIZED-GAINS-CURRENT> 6435290
<APPREC-INCREASE-CURRENT> (58648058)
<NET-CHANGE-FROM-OPS> (49991634)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9826)
<DISTRIBUTIONS-OF-GAINS> (536322)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 499586
<NUMBER-OF-SHARES-REDEEMED> (230071)
<SHARES-REINVESTED> 22110
<NET-CHANGE-IN-ASSETS> (46224084)
<ACCUMULATED-NII-PRIOR> 130093
<ACCUMULATED-GAINS-PRIOR> 14688293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2953154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4810183
<AVERAGE-NET-ASSETS> 393759397
<PER-SHARE-NAV-BEGIN> 21.59
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> (2.34)
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.30
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 573
<NAME> GS Mid Cap Equity Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 329204497
<INVESTMENTS-AT-VALUE> 303734865
<RECEIVABLES> 17541905
<ASSETS-OTHER> 105659
<OTHER-ITEMS-ASSETS> 39800
<TOTAL-ASSETS> 321422229
<PAYABLE-FOR-SECURITIES> 3613470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1809228
<TOTAL-LIABILITIES> 5422698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335338925
<SHARES-COMMON-STOCK> 10694424
<SHARES-COMMON-PRIOR> 10921229
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (31716)
<ACCUMULATED-NET-GAINS> 6161954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25469632)
<NET-ASSETS> 315999531
<DIVIDEND-INCOME> 5328500
<INTEREST-INCOME> 1374682
<OTHER-INCOME> 0
<EXPENSES-NET> (4482048)
<NET-INVESTMENT-INCOME> 2221134
<REALIZED-GAINS-CURRENT> 6435290
<APPREC-INCREASE-CURRENT> (58648058)
<NET-CHANGE-FROM-OPS> (49991634)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2101193)
<DISTRIBUTIONS-OF-GAINS> (9058413)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 967052
<NUMBER-OF-SHARES-REDEEMED> (1801025)
<SHARES-REINVESTED> 607168
<NET-CHANGE-IN-ASSETS> (46224084)
<ACCUMULATED-NII-PRIOR> 130093
<ACCUMULATED-GAINS-PRIOR> 14688293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2953154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4810183
<AVERAGE-NET-ASSETS> 393759397
<PER-SHARE-NAV-BEGIN> 21.65
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> (2.38)
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.37
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 576
<NAME> GS Mid Cap Equity Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 329204497
<INVESTMENTS-AT-VALUE> 303734865
<RECEIVABLES> 17541905
<ASSETS-OTHER> 105659
<OTHER-ITEMS-ASSETS> 39800
<TOTAL-ASSETS> 321422229
<PAYABLE-FOR-SECURITIES> 3613470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1809228
<TOTAL-LIABILITIES> 5422698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335338925
<SHARES-COMMON-STOCK> 15810
<SHARES-COMMON-PRIOR> 360
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (31716)
<ACCUMULATED-NET-GAINS> 6161954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25469632)
<NET-ASSETS> 315999531
<DIVIDEND-INCOME> 5328500
<INTEREST-INCOME> 1374682
<OTHER-INCOME> 0
<EXPENSES-NET> (4482048)
<NET-INVESTMENT-INCOME> 2221134
<REALIZED-GAINS-CURRENT> 6435290
<APPREC-INCREASE-CURRENT> (58648058)
<NET-CHANGE-FROM-OPS> (49991634)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2697)
<DISTRIBUTIONS-OF-GAINS> (14028)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15505
<NUMBER-OF-SHARES-REDEEMED> (978)
<SHARES-REINVESTED> 923
<NET-CHANGE-IN-ASSETS> (46224084)
<ACCUMULATED-NII-PRIOR> 130093
<ACCUMULATED-GAINS-PRIOR> 14688293
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2953154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4810183
<AVERAGE-NET-ASSETS> 393759397
<PER-SHARE-NAV-BEGIN> 21.62
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (2.31)
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.29
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 591
<NAME> GS CORE U.S. Equity Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 773218849
<INVESTMENTS-AT-VALUE> 1098830017
<RECEIVABLES> 6856698
<ASSETS-OTHER> 82876
<OTHER-ITEMS-ASSETS> 60263
<TOTAL-ASSETS> 1105829854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2303328
<TOTAL-LIABILITIES> 2303328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 766173617
<SHARES-COMMON-STOCK> 18359982
<SHARES-COMMON-PRIOR> 14985404
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11108394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 326342778
<NET-ASSETS> 1103624789
<DIVIDEND-INCOME> 11451637
<INTEREST-INCOME> 827363
<OTHER-INCOME> 0
<EXPENSES-NET> (10242244)
<NET-INVESTMENT-INCOME> 2036756
<REALIZED-GAINS-CURRENT> 27478562
<APPREC-INCREASE-CURRENT> 176422425
<NET-CHANGE-FROM-OPS> 205937743
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (627909)
<DISTRIBUTIONS-OF-GAINS> (6198)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8753952
<NUMBER-OF-SHARES-REDEEMED> (5761134)
<SHARES-REINVESTED> 381760
<NET-CHANGE-IN-ASSETS> 429022659
<ACCUMULATED-NII-PRIOR> 75033
<ACCUMULATED-GAINS-PRIOR> 4515480
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6647941
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11419374
<AVERAGE-NET-ASSETS> 891125208
<PER-SHARE-NAV-BEGIN> 26.59
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 7.02
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.98
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 592
<NAME> GS CORE U.S. Equity Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 773218849
<INVESTMENTS-AT-VALUE> 1098830017
<RECEIVABLES> 6856698
<ASSETS-OTHER> 82876
<OTHER-ITEMS-ASSETS> 60263
<TOTAL-ASSETS> 1105829854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2303328
<TOTAL-LIABILITIES> 2303328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 766173617
<SHARES-COMMON-STOCK> 4687864
<SHARES-COMMON-PRIOR> 2249148
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11108394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 326342778
<NET-ASSETS> 1103624789
<DIVIDEND-INCOME> 11451637
<INTEREST-INCOME> 827363
<OTHER-INCOME> 0
<EXPENSES-NET> (10242244)
<NET-INVESTMENT-INCOME> 2036756
<REALIZED-GAINS-CURRENT> 27478562
<APPREC-INCREASE-CURRENT> 176422425
<NET-CHANGE-FROM-OPS> 205937743
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2631225)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2857310
<NUMBER-OF-SHARES-REDEEMED> (501968)
<SHARES-REINVESTED> 83374
<NET-CHANGE-IN-ASSETS> 429022659
<ACCUMULATED-NII-PRIOR> 75033
<ACCUMULATED-GAINS-PRIOR> 4515480
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6647941
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11419374
<AVERAGE-NET-ASSETS> 891125208
<PER-SHARE-NAV-BEGIN> 26.32
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 6.91
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.50
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 597
<NAME> GS CORE U.S. Equity Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 773218849
<INVESTMENTS-AT-VALUE> 1098830017
<RECEIVABLES> 6856698
<ASSETS-OTHER> 82876
<OTHER-ITEMS-ASSETS> 60263
<TOTAL-ASSETS> 1105829854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2303328
<TOTAL-LIABILITIES> 2303328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 766173617
<SHARES-COMMON-STOCK> 830687
<SHARES-COMMON-PRIOR> 238838
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11108394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 326342778
<NET-ASSETS> 1103624789
<DIVIDEND-INCOME> 11451637
<INTEREST-INCOME> 827363
<OTHER-INCOME> 0
<EXPENSES-NET> (10242244)
<NET-INVESTMENT-INCOME> 2036756
<REALIZED-GAINS-CURRENT> 27478562
<APPREC-INCREASE-CURRENT> 176422425
<NET-CHANGE-FROM-OPS> 205937743
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (453366)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 670600
<NUMBER-OF-SHARES-REDEEMED> (91806)
<SHARES-REINVESTED> 13055
<NET-CHANGE-IN-ASSETS> 429022659
<ACCUMULATED-NII-PRIOR> 75033
<ACCUMULATED-GAINS-PRIOR> 4515480
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6647941
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11419374
<AVERAGE-NET-ASSETS> 891125208
<PER-SHARE-NAV-BEGIN> 26.24
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 6.89
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.40
<EXPENSE-RATIO> 1.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 593
<NAME> GS CORE U.S. Equity Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 773218849
<INVESTMENTS-AT-VALUE> 1098830017
<RECEIVABLES> 6856698
<ASSETS-OTHER> 82876
<OTHER-ITEMS-ASSETS> 60263
<TOTAL-ASSETS> 1105829854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2303328
<TOTAL-LIABILITIES> 2303328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 766173617
<SHARES-COMMON-STOCK> 9228681
<SHARES-COMMON-PRIOR> 7573189
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11108394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 326342778
<NET-ASSETS> 1103624789
<DIVIDEND-INCOME> 11451637
<INTEREST-INCOME> 827363
<OTHER-INCOME> 0
<EXPENSES-NET> (10242244)
<NET-INVESTMENT-INCOME> 2036756
<REALIZED-GAINS-CURRENT> 27478562
<APPREC-INCREASE-CURRENT> 176422425
<NET-CHANGE-FROM-OPS> 205937743
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1706072)
<DISTRIBUTIONS-OF-GAINS> (6196732)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3495701
<NUMBER-OF-SHARES-REDEEMED> (2092487)
<SHARES-REINVESTED> 252278
<NET-CHANGE-IN-ASSETS> 429022659
<ACCUMULATED-NII-PRIOR> 75033
<ACCUMULATED-GAINS-PRIOR> 4515480
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6647941
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11419374
<AVERAGE-NET-ASSETS> 891125208
<PER-SHARE-NAV-BEGIN> 26.79
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 7.11
<PER-SHARE-DIVIDEND> (0.18)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.29
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 596
<NAME> GS CORE U.S. Equity Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 773218849
<INVESTMENTS-AT-VALUE> 1098830017
<RECEIVABLES> 6856698
<ASSETS-OTHER> 82876
<OTHER-ITEMS-ASSETS> 60263
<TOTAL-ASSETS> 1105829854
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2303328
<TOTAL-LIABILITIES> 2303328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 766173617
<SHARES-COMMON-STOCK> 353120
<SHARES-COMMON-PRIOR> 295570
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11108394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 326342778
<NET-ASSETS> 1103624789
<DIVIDEND-INCOME> 11451637
<INTEREST-INCOME> 827363
<OTHER-INCOME> 0
<EXPENSES-NET> (10242244)
<NET-INVESTMENT-INCOME> 2036756
<REALIZED-GAINS-CURRENT> 27478562
<APPREC-INCREASE-CURRENT> 176422425
<NET-CHANGE-FROM-OPS> 205937743
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (41127)
<DISTRIBUTIONS-OF-GAINS> (222218)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 138492
<NUMBER-OF-SHARES-REDEEMED> (89923)
<SHARES-REINVESTED> 8981
<NET-CHANGE-IN-ASSETS> 429022659
<ACCUMULATED-NII-PRIOR> 75033
<ACCUMULATED-GAINS-PRIOR> 4515480
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6647941
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11419374
<AVERAGE-NET-ASSETS> 891125208
<PER-SHARE-NAV-BEGIN> 26.53
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 7.01
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (1)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.85
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 601
<NAME> GS CORE Lge Cap Gr. Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 492723474
<INVESTMENTS-AT-VALUE> 600049090
<RECEIVABLES> 4545730
<ASSETS-OTHER> 3015
<OTHER-ITEMS-ASSETS> 39222
<TOTAL-ASSETS> 604637057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 938255
<TOTAL-LIABILITIES> 938255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 513507470
<SHARES-COMMON-STOCK> 10855306
<SHARES-COMMON-PRIOR> 4491866
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158558)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (17445815)
<ACCUM-APPREC-OR-DEPREC> 107795705
<NET-ASSETS> 603698802
<DIVIDEND-INCOME> 2053010
<INTEREST-INCOME> 733718
<OTHER-INCOME> 0
<EXPENSES-NET> (2802372)
<NET-INVESTMENT-INCOME> (15644)
<REALIZED-GAINS-CURRENT> (16923839)
<APPREC-INCREASE-CURRENT> 102776431
<NET-CHANGE-FROM-OPS> 85836948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (218)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8392008
<NUMBER-OF-SHARES-REDEEMED> (2029343)
<SHARES-REINVESTED> 775
<NET-CHANGE-IN-ASSETS> 527152649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (16664)
<OVERDIST-NET-GAINS-PRIOR> (493840)
<GROSS-ADVISORY-FEES> 2072619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3964062
<AVERAGE-NET-ASSETS> 276349096
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 4.19
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.17
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 602
<NAME> GS CORE Lge Cap Gr. Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 492723474
<INVESTMENTS-AT-VALUE> 600049090
<RECEIVABLES> 4545730
<ASSETS-OTHER> 3015
<OTHER-ITEMS-ASSETS> 39222
<TOTAL-ASSETS> 604637057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 938255
<TOTAL-LIABILITIES> 938255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 513507470
<SHARES-COMMON-STOCK> 5862727
<SHARES-COMMON-PRIOR> 1162113
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158558)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (17445815)
<ACCUM-APPREC-OR-DEPREC> 107795705
<NET-ASSETS> 603698802
<DIVIDEND-INCOME> 2053010
<INTEREST-INCOME> 733718
<OTHER-INCOME> 0
<EXPENSES-NET> (2802372)
<NET-INVESTMENT-INCOME> (15644)
<REALIZED-GAINS-CURRENT> (16923839)
<APPREC-INCREASE-CURRENT> 102776431
<NET-CHANGE-FROM-OPS> 85836948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4694)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5276877
<NUMBER-OF-SHARES-REDEEMED> (577338)
<SHARES-REINVESTED> 1075
<NET-CHANGE-IN-ASSETS> 527152649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (16664)
<OVERDIST-NET-GAINS-PRIOR> (493840)
<GROSS-ADVISORY-FEES> 2072619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3964062
<AVERAGE-NET-ASSETS> 276349096
<PER-SHARE-NAV-BEGIN> 11.92
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 4.12
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.98
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 607
<NAME> GS CORE Lge Cap Gr. Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 492723474
<INVESTMENTS-AT-VALUE> 600049090
<RECEIVABLES> 4545730
<ASSETS-OTHER> 3015
<OTHER-ITEMS-ASSETS> 39222
<TOTAL-ASSETS> 604637057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 938255
<TOTAL-LIABILITIES> 938255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 513507470
<SHARES-COMMON-STOCK> 2319627
<SHARES-COMMON-PRIOR> 346492
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158558)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (17445815)
<ACCUM-APPREC-OR-DEPREC> 107795705
<NET-ASSETS> 603698802
<DIVIDEND-INCOME> 2053010
<INTEREST-INCOME> 733718
<OTHER-INCOME> 0
<EXPENSES-NET> (2802372)
<NET-INVESTMENT-INCOME> (15644)
<REALIZED-GAINS-CURRENT> (16923839)
<APPREC-INCREASE-CURRENT> 102776431
<NET-CHANGE-FROM-OPS> 85836948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1573)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2156694
<NUMBER-OF-SHARES-REDEEMED> (183652)
<SHARES-REINVESTED> 93
<NET-CHANGE-IN-ASSETS> 527152649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (16664)
<OVERDIST-NET-GAINS-PRIOR> (493840)
<GROSS-ADVISORY-FEES> 2072619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3964062
<AVERAGE-NET-ASSETS> 276349096
<PER-SHARE-NAV-BEGIN> 11.93
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 4.11
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.99
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 603
<NAME> GS CORE Lge Cap Gr. Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 492723474
<INVESTMENTS-AT-VALUE> 600049090
<RECEIVABLES> 4545730
<ASSETS-OTHER> 3015
<OTHER-ITEMS-ASSETS> 39222
<TOTAL-ASSETS> 604637057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 938255
<TOTAL-LIABILITIES> 938255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 513507470
<SHARES-COMMON-STOCK> 18242633
<SHARES-COMMON-PRIOR> 388928
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158558)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (17445815)
<ACCUM-APPREC-OR-DEPREC> 107795705
<NET-ASSETS> 603698802
<DIVIDEND-INCOME> 2053010
<INTEREST-INCOME> 733718
<OTHER-INCOME> 0
<EXPENSES-NET> (2802372)
<NET-INVESTMENT-INCOME> (15644)
<REALIZED-GAINS-CURRENT> (16923839)
<APPREC-INCREASE-CURRENT> 102776431
<NET-CHANGE-FROM-OPS> 85836948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (125793)
<DISTRIBUTIONS-OF-GAINS> (12174)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19639867
<NUMBER-OF-SHARES-REDEEMED> (1788450)
<SHARES-REINVESTED> 2288
<NET-CHANGE-IN-ASSETS> 527152649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (16664)
<OVERDIST-NET-GAINS-PRIOR> (493840)
<GROSS-ADVISORY-FEES> 2072619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3964062
<AVERAGE-NET-ASSETS> 276349096
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 4.23
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.21
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 606
<NAME> GS CORE Lge Cap Gr. Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 492723474
<INVESTMENTS-AT-VALUE> 600049090
<RECEIVABLES> 4545730
<ASSETS-OTHER> 3015
<OTHER-ITEMS-ASSETS> 39222
<TOTAL-ASSETS> 604637057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 938255
<TOTAL-LIABILITIES> 938255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 513507470
<SHARES-COMMON-STOCK> 103240
<SHARES-COMMON-PRIOR> 9619
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (158558)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (17445815)
<ACCUM-APPREC-OR-DEPREC> 107795705
<NET-ASSETS> 603698802
<DIVIDEND-INCOME> 2053010
<INTEREST-INCOME> 733718
<OTHER-INCOME> 0
<EXPENSES-NET> (2802372)
<NET-INVESTMENT-INCOME> (15644)
<REALIZED-GAINS-CURRENT> (16923839)
<APPREC-INCREASE-CURRENT> 102776431
<NET-CHANGE-FROM-OPS> 85836948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (218)
<DISTRIBUTIONS-OF-GAINS> (85)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 105509
<NUMBER-OF-SHARES-REDEEMED> (11909)
<SHARES-REINVESTED> 21
<NET-CHANGE-IN-ASSETS> 527152649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (16664)
<OVERDIST-NET-GAINS-PRIOR> (493840)
<GROSS-ADVISORY-FEES> 2072619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3964062
<AVERAGE-NET-ASSETS> 276349096
<PER-SHARE-NAV-BEGIN> 11.95
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 4.17
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.11
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 621
<NAME> GS CORE Sm. Cap Eq. Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 129431286
<INVESTMENTS-AT-VALUE> 148267167
<RECEIVABLES> 1709293
<ASSETS-OTHER> 34099
<OTHER-ITEMS-ASSETS> 37103
<TOTAL-ASSETS> 150047662
<PAYABLE-FOR-SECURITIES> 744241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434768
<TOTAL-LIABILITIES> 1179009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 149429512
<SHARES-COMMON-STOCK> 6305945
<SHARES-COMMON-PRIOR> 1049487
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61646)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19314794)
<ACCUM-APPREC-OR-DEPREC> 18815581
<NET-ASSETS> 148868653
<DIVIDEND-INCOME> 1040297
<INTEREST-INCOME> 292376
<OTHER-INCOME> 0
<EXPENSES-NET> (1159403)
<NET-INVESTMENT-INCOME> 173270
<REALIZED-GAINS-CURRENT> (18927424)
<APPREC-INCREASE-CURRENT> 18052638
<NET-CHANGE-FROM-OPS> (701516)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47356)
<DISTRIBUTIONS-OF-GAINS> (3)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6683657
<NUMBER-OF-SHARES-REDEEMED> (1432586)
<SHARES-REINVESTED> 5387
<NET-CHANGE-IN-ASSETS> 116208278
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (35674)
<OVERDIST-NET-GAINS-PRIOR> (386027)
<GROSS-ADVISORY-FEES> 769013
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1740092
<AVERAGE-NET-ASSETS> 90472123
<PER-SHARE-NAV-BEGIN> 10.59
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.43)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 622
<NAME> GS CORE Sm. Cap Eq. Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 129431286
<INVESTMENTS-AT-VALUE> 148267167
<RECEIVABLES> 1709293
<ASSETS-OTHER> 34099
<OTHER-ITEMS-ASSETS> 37103
<TOTAL-ASSETS> 150047662
<PAYABLE-FOR-SECURITIES> 744241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434768
<TOTAL-LIABILITIES> 1179009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 149429512
<SHARES-COMMON-STOCK> 1529888
<SHARES-COMMON-PRIOR> 942850
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61646)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19314794)
<ACCUM-APPREC-OR-DEPREC> 18815581
<NET-ASSETS> 148868653
<DIVIDEND-INCOME> 1040297
<INTEREST-INCOME> 292376
<OTHER-INCOME> 0
<EXPENSES-NET> (1159403)
<NET-INVESTMENT-INCOME> 173270
<REALIZED-GAINS-CURRENT> (18927424)
<APPREC-INCREASE-CURRENT> 18052638
<NET-CHANGE-FROM-OPS> (701516)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 828354
<NUMBER-OF-SHARES-REDEEMED> (241316)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 116208278
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (35674)
<OVERDIST-NET-GAINS-PRIOR> (386027)
<GROSS-ADVISORY-FEES> 769013
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1740092
<AVERAGE-NET-ASSETS> 90472123
<PER-SHARE-NAV-BEGIN> 10.56
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> (0.44)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 627
<NAME> GS CORE Sm. Cap Eq. Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 129431286
<INVESTMENTS-AT-VALUE> 148267167
<RECEIVABLES> 1709293
<ASSETS-OTHER> 34099
<OTHER-ITEMS-ASSETS> 37103
<TOTAL-ASSETS> 150047662
<PAYABLE-FOR-SECURITIES> 744241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434768
<TOTAL-LIABILITIES> 1179009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 149429512
<SHARES-COMMON-STOCK> 650443
<SHARES-COMMON-PRIOR> 242025
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61646)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19314794)
<ACCUM-APPREC-OR-DEPREC> 18815581
<NET-ASSETS> 148868653
<DIVIDEND-INCOME> 1040297
<INTEREST-INCOME> 292376
<OTHER-INCOME> 0
<EXPENSES-NET> (1159403)
<NET-INVESTMENT-INCOME> 173270
<REALIZED-GAINS-CURRENT> (18927424)
<APPREC-INCREASE-CURRENT> 18052638
<NET-CHANGE-FROM-OPS> (701516)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 565318
<NUMBER-OF-SHARES-REDEEMED> (156900)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 116208278
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (35674)
<OVERDIST-NET-GAINS-PRIOR> (386027)
<GROSS-ADVISORY-FEES> 769013
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1740092
<AVERAGE-NET-ASSETS> 90472123
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> (0.45)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 2.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 623
<NAME> GS CORE Sm. Cap Eq. Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 129431286
<INVESTMENTS-AT-VALUE> 148267167
<RECEIVABLES> 1709293
<ASSETS-OTHER> 34099
<OTHER-ITEMS-ASSETS> 37103
<TOTAL-ASSETS> 150047662
<PAYABLE-FOR-SECURITIES> 744241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434768
<TOTAL-LIABILITIES> 1179009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 149429512
<SHARES-COMMON-STOCK> 6150352
<SHARES-COMMON-PRIOR> 850858
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61646)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19314794)
<ACCUM-APPREC-OR-DEPREC> 18815581
<NET-ASSETS> 148868653
<DIVIDEND-INCOME> 1040297
<INTEREST-INCOME> 292376
<OTHER-INCOME> 0
<EXPENSES-NET> (1159403)
<NET-INVESTMENT-INCOME> 173270
<REALIZED-GAINS-CURRENT> (18927424)
<APPREC-INCREASE-CURRENT> 18052638
<NET-CHANGE-FROM-OPS> (701516)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (144454)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7133876
<NUMBER-OF-SHARES-REDEEMED> (1837364)
<SHARES-REINVESTED> 2982
<NET-CHANGE-IN-ASSETS> 116208278
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (35674)
<OVERDIST-NET-GAINS-PRIOR> (386027)
<GROSS-ADVISORY-FEES> 769013
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1740092
<AVERAGE-NET-ASSETS> 90472123
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (0.43)
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.20
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 626
<NAME> GS CORE Small Cap Eq. Fund-Serv.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 129431286
<INVESTMENTS-AT-VALUE> 148267167
<RECEIVABLES> 1709293
<ASSETS-OTHER> 34099
<OTHER-ITEMS-ASSETS> 37103
<TOTAL-ASSETS> 150047662
<PAYABLE-FOR-SECURITIES> 744241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434768
<TOTAL-LIABILITIES> 1179009
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 149429512
<SHARES-COMMON-STOCK> 5350
<SHARES-COMMON-PRIOR> 160
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (61646)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19314794)
<ACCUM-APPREC-OR-DEPREC> 18815581
<NET-ASSETS> 148868653
<DIVIDEND-INCOME> 1040297
<INTEREST-INCOME> 292376
<OTHER-INCOME> 0
<EXPENSES-NET> (1159403)
<NET-INVESTMENT-INCOME> 173270
<REALIZED-GAINS-CURRENT> (18927424)
<APPREC-INCREASE-CURRENT> 18052638
<NET-CHANGE-FROM-OPS> (701516)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5527
<NUMBER-OF-SHARES-REDEEMED> (339)
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 116208278
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (35674)
<OVERDIST-NET-GAINS-PRIOR> (386027)
<GROSS-ADVISORY-FEES> 769013
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1740092
<AVERAGE-NET-ASSETS> 90472123
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.44)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 711
<NAME> GS CORE Lge Cap Val Fund-Class A
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 60551157
<INVESTMENTS-AT-VALUE> 60440586
<RECEIVABLES> 465839
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 454
<TOTAL-ASSETS> 60906879
<PAYABLE-FOR-SECURITIES> 28071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208291
<TOTAL-LIABILITIES> 236362
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60775637
<SHARES-COMMON-STOCK> 656325
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37422
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (32964)
<ACCUM-APPREC-OR-DEPREC> (109578)
<NET-ASSETS> 60670517
<DIVIDEND-INCOME> 30857
<INTEREST-INCOME> 20869
<OTHER-INCOME> 0
<EXPENSES-NET> (14304)
<NET-INVESTMENT-INCOME> 66030
<REALIZED-GAINS-CURRENT> (32964)
<APPREC-INCREASE-CURRENT> (109578)
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 659370
<NUMBER-OF-SHARES-REDEEMED> (3045)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60670517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 151395
<AVERAGE-NET-ASSETS> 22497449
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 712
<NAME> GS CORE Lge Cap Val Fund-Class B
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 60551157
<INVESTMENTS-AT-VALUE> 60440586
<RECEIVABLES> 465839
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 454
<TOTAL-ASSETS> 60906879
<PAYABLE-FOR-SECURITIES> 28071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208291
<TOTAL-LIABILITIES> 236362
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60775637
<SHARES-COMMON-STOCK> 33500
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37422
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (32964)
<ACCUM-APPREC-OR-DEPREC> (109578)
<NET-ASSETS> 60670517
<DIVIDEND-INCOME> 30857
<INTEREST-INCOME> 20869
<OTHER-INCOME> 0
<EXPENSES-NET> (14304)
<NET-INVESTMENT-INCOME> 66030
<REALIZED-GAINS-CURRENT> (32964)
<APPREC-INCREASE-CURRENT> (109578)
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33501
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60670517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 151395
<AVERAGE-NET-ASSETS> 22497449
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 717
<NAME> GS CORE Lge Cap Val Fund-Class C
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 60551157
<INVESTMENTS-AT-VALUE> 60440586
<RECEIVABLES> 465839
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 454
<TOTAL-ASSETS> 60906879
<PAYABLE-FOR-SECURITIES> 28071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208291
<TOTAL-LIABILITIES> 236362
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60775637
<SHARES-COMMON-STOCK> 26441
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37422
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (32964)
<ACCUM-APPREC-OR-DEPREC> (109578)
<NET-ASSETS> 60670517
<DIVIDEND-INCOME> 30857
<INTEREST-INCOME> 20869
<OTHER-INCOME> 0
<EXPENSES-NET> (14304)
<NET-INVESTMENT-INCOME> 66030
<REALIZED-GAINS-CURRENT> (32964)
<APPREC-INCREASE-CURRENT> (109578)
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26441
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60670517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 151395
<AVERAGE-NET-ASSETS> 22497449
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 1.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 713
<NAME> GS CORE Lge Cap Val Fund-Inst.
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 60551157
<INVESTMENTS-AT-VALUE> 60440586
<RECEIVABLES> 465839
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 454
<TOTAL-ASSETS> 60906879
<PAYABLE-FOR-SECURITIES> 28071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208291
<TOTAL-LIABILITIES> 236362
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60775637
<SHARES-COMMON-STOCK> 5256829
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37422
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (32964)
<ACCUM-APPREC-OR-DEPREC> (109578)
<NET-ASSETS> 60670517
<DIVIDEND-INCOME> 30857
<INTEREST-INCOME> 20869
<OTHER-INCOME> 0
<EXPENSES-NET> (14304)
<NET-INVESTMENT-INCOME> 66030
<REALIZED-GAINS-CURRENT> (32964)
<APPREC-INCREASE-CURRENT> (109578)
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5393552
<NUMBER-OF-SHARES-REDEEMED> (136723)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60670517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 151395
<AVERAGE-NET-ASSETS> 22497449
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 0.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 716
<NAME> GS CORE Lge Cap Val Fund-Service
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> DEC-31-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 60551157
<INVESTMENTS-AT-VALUE> 60440586
<RECEIVABLES> 465839
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 454
<TOTAL-ASSETS> 60906879
<PAYABLE-FOR-SECURITIES> 28071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208291
<TOTAL-LIABILITIES> 236362
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60775637
<SHARES-COMMON-STOCK> 160
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37422
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (32964)
<ACCUM-APPREC-OR-DEPREC> (109578)
<NET-ASSETS> 60670517
<DIVIDEND-INCOME> 30857
<INTEREST-INCOME> 20869
<OTHER-INCOME> 0
<EXPENSES-NET> (14304)
<NET-INVESTMENT-INCOME> 66030
<REALIZED-GAINS-CURRENT> (32964)
<APPREC-INCREASE-CURRENT> (109578)
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 160
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60670517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 151395
<AVERAGE-NET-ASSETS> 22497449
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 511
<NAME> GS Balanced Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 252647388
<INVESTMENTS-AT-VALUE> 267354072
<RECEIVABLES> 13367644
<ASSETS-OTHER> 75001
<OTHER-ITEMS-ASSETS> 50503
<TOTAL-ASSETS> 280847220
<PAYABLE-FOR-SECURITIES> 16435233
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5246976
<TOTAL-LIABILITIES> 21682209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 242895161
<SHARES-COMMON-STOCK> 9398064
<SHARES-COMMON-PRIOR> 8064620
<ACCUMULATED-NII-CURRENT> 375856
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 929382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14964612
<NET-ASSETS> 259165011
<DIVIDEND-INCOME> 2087290
<INTEREST-INCOME> 7691689
<OTHER-INCOME> 0
<EXPENSES-NET> (2943604)
<NET-INVESTMENT-INCOME> 6835375
<REALIZED-GAINS-CURRENT> (3394596)
<APPREC-INCREASE-CURRENT> 4114362
<NET-CHANGE-FROM-OPS> 7555141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5454393)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3748039
<NUMBER-OF-SHARES-REDEEMED> (2655783)
<SHARES-REINVESTED> 241188
<NET-CHANGE-IN-ASSETS> 54656766
<ACCUMULATED-NII-PRIOR> 410404
<ACCUMULATED-GAINS-PRIOR> 4386005
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1609311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3856967
<AVERAGE-NET-ASSETS> 247578125
<PER-SHARE-NAV-BEGIN> 20.29
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.48
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 512
<NAME> GS Balanced Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 252647388
<INVESTMENTS-AT-VALUE> 267354072
<RECEIVABLES> 13367644
<ASSETS-OTHER> 75001
<OTHER-ITEMS-ASSETS> 50503
<TOTAL-ASSETS> 280847220
<PAYABLE-FOR-SECURITIES> 16435233
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5246976
<TOTAL-LIABILITIES> 21682209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 242895161
<SHARES-COMMON-STOCK> 2156327
<SHARES-COMMON-PRIOR> 1170246
<ACCUMULATED-NII-CURRENT> 375856
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 929382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14964612
<NET-ASSETS> 259165011
<DIVIDEND-INCOME> 2087290
<INTEREST-INCOME> 7691689
<OTHER-INCOME> 0
<EXPENSES-NET> (2943604)
<NET-INVESTMENT-INCOME> 6835375
<REALIZED-GAINS-CURRENT> (3394596)
<APPREC-INCREASE-CURRENT> 4114362
<NET-CHANGE-FROM-OPS> 7555141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (858147)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1305421
<NUMBER-OF-SHARES-REDEEMED> (357101)
<SHARES-REINVESTED> 37761
<NET-CHANGE-IN-ASSETS> 54656766
<ACCUMULATED-NII-PRIOR> 410404
<ACCUMULATED-GAINS-PRIOR> 4386005
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1609311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3856967
<AVERAGE-NET-ASSETS> 247578125
<PER-SHARE-NAV-BEGIN> 20.20
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.37
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 517
<NAME> GS Balanced Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-01-1999
<INVESTMENTS-AT-COST> 252647388
<INVESTMENTS-AT-VALUE> 267354072
<RECEIVABLES> 13367644
<ASSETS-OTHER> 75001
<OTHER-ITEMS-ASSETS> 50503
<TOTAL-ASSETS> 280847220
<PAYABLE-FOR-SECURITIES> 16435233
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5246976
<TOTAL-LIABILITIES> 21682209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 242895161
<SHARES-COMMON-STOCK> 702452
<SHARES-COMMON-PRIOR> 438867
<ACCUMULATED-NII-CURRENT> 375856
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 929382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14964612
<NET-ASSETS> 259165011
<DIVIDEND-INCOME> 2087290
<INTEREST-INCOME> 7691689
<OTHER-INCOME> 0
<EXPENSES-NET> (2943604)
<NET-INVESTMENT-INCOME> 6835375
<REALIZED-GAINS-CURRENT> (3394596)
<APPREC-INCREASE-CURRENT> 4114362
<NET-CHANGE-FROM-OPS> 7555141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (325754)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 532005
<NUMBER-OF-SHARES-REDEEMED> (281904)
<SHARES-REINVESTED> 13484
<NET-CHANGE-IN-ASSETS> 54656766
<ACCUMULATED-NII-PRIOR> 410404
<ACCUMULATED-GAINS-PRIOR> 4386005
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1609311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3856967
<AVERAGE-NET-ASSETS> 247578125
<PER-SHARE-NAV-BEGIN> 20.17
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.34
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 513
<NAME> GS Balanced Fund-Institutional
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 252647388
<INVESTMENTS-AT-VALUE> 267354072
<RECEIVABLES> 13367644
<ASSETS-OTHER> 75001
<OTHER-ITEMS-ASSETS> 50503
<TOTAL-ASSETS> 280847220
<PAYABLE-FOR-SECURITIES> 16435233
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5246976
<TOTAL-LIABILITIES> 21682209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 242895161
<SHARES-COMMON-STOCK> 391095
<SHARES-COMMON-PRIOR> 412422
<ACCUMULATED-NII-CURRENT> 375856
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 929382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14964612
<NET-ASSETS> 259165011
<DIVIDEND-INCOME> 2087290
<INTEREST-INCOME> 7691689
<OTHER-INCOME> 0
<EXPENSES-NET> (2943604)
<NET-INVESTMENT-INCOME> 6835375
<REALIZED-GAINS-CURRENT> (3394596)
<APPREC-INCREASE-CURRENT> 4114362
<NET-CHANGE-FROM-OPS> 7555141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (294710)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108930
<NUMBER-OF-SHARES-REDEEMED> (143532)
<SHARES-REINVESTED> 13275
<NET-CHANGE-IN-ASSETS> 54656766
<ACCUMULATED-NII-PRIOR> 410404
<ACCUMULATED-GAINS-PRIOR> 4386005
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1609311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3856967
<AVERAGE-NET-ASSETS> 247578125
<PER-SHARE-NAV-BEGIN> 20.29
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> (0.65)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.48
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 516
<NAME> GS Balanced Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 252647388
<INVESTMENTS-AT-VALUE> 267354072
<RECEIVABLES> 13367644
<ASSETS-OTHER> 75001
<OTHER-ITEMS-ASSETS> 50503
<TOTAL-ASSETS> 280847220
<PAYABLE-FOR-SECURITIES> 16435233
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5246976
<TOTAL-LIABILITIES> 21682209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 242895161
<SHARES-COMMON-STOCK> 23958
<SHARES-COMMON-PRIOR> 780
<ACCUMULATED-NII-CURRENT> 375856
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 929382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14964612
<NET-ASSETS> 259165011
<DIVIDEND-INCOME> 2087290
<INTEREST-INCOME> 7691689
<OTHER-INCOME> 0
<EXPENSES-NET> (2943604)
<NET-INVESTMENT-INCOME> 6835375
<REALIZED-GAINS-CURRENT> (3394596)
<APPREC-INCREASE-CURRENT> 4114362
<NET-CHANGE-FROM-OPS> 7555141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7267)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22926
<NUMBER-OF-SHARES-REDEEMED> (123)
<SHARES-REINVESTED> 375
<NET-CHANGE-IN-ASSETS> 54656766
<ACCUMULATED-NII-PRIOR> 410404
<ACCUMULATED-GAINS-PRIOR> 4386005
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1609311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3856967
<AVERAGE-NET-ASSETS> 247578125
<PER-SHARE-NAV-BEGIN> 20.28
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.47
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 521
<NAME> GS Growth and Inc. Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1585456699
<INVESTMENTS-AT-VALUE> 1639194381
<RECEIVABLES> 93946655
<ASSETS-OTHER> 2947790
<OTHER-ITEMS-ASSETS> 59791
<TOTAL-ASSETS> 1736148617
<PAYABLE-FOR-SECURITIES> 14875327
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15669514
<TOTAL-LIABILITIES> 30544841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1672507725
<SHARES-COMMON-STOCK> 46123894
<SHARES-COMMON-PRIOR> 46918649
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1221249)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19420382)
<ACCUM-APPREC-OR-DEPREC> 53737682
<NET-ASSETS> 1705603776
<DIVIDEND-INCOME> 29328058
<INTEREST-INCOME> 9404194
<OTHER-INCOME> 0
<EXPENSES-NET> (26018727)
<NET-INVESTMENT-INCOME> 12713525
<REALIZED-GAINS-CURRENT> (79720615)
<APPREC-INCREASE-CURRENT> (91067228)
<NET-CHANGE-FROM-OPS> (158074318)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9893876)
<DISTRIBUTIONS-OF-GAINS> (3869)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19137910
<NUMBER-OF-SHARES-REDEEMED> (20323258)
<SHARES-REINVESTED> 390593
<NET-CHANGE-IN-ASSETS> 104402645
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 60296635
<OVERDISTRIB-NII-PRIOR> (614031)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13527887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27321453
<AVERAGE-NET-ASSETS> 1932555290
<PER-SHARE-NAV-BEGIN> 25.93
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> (1.60)
<PER-SHARE-DIVIDEND> (0.20)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.33
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 522
<NAME> GS Growth and Inc. Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1585456699
<INVESTMENTS-AT-VALUE> 1639194381
<RECEIVABLES> 93946655
<ASSETS-OTHER> 2947790
<OTHER-ITEMS-ASSETS> 59791
<TOTAL-ASSETS> 1736148617
<PAYABLE-FOR-SECURITIES> 14875327
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15669514
<TOTAL-LIABILITIES> 30544841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1672507725
<SHARES-COMMON-STOCK> 14489417
<SHARES-COMMON-PRIOR> 11963607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1221249)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19420382)
<ACCUM-APPREC-OR-DEPREC> 53737682
<NET-ASSETS> 1705603776
<DIVIDEND-INCOME> 29328058
<INTEREST-INCOME> 9404194
<OTHER-INCOME> 0
<EXPENSES-NET> (26018727)
<NET-INVESTMENT-INCOME> 12713525
<REALIZED-GAINS-CURRENT> (79720615)
<APPREC-INCREASE-CURRENT> (91067228)
<NET-CHANGE-FROM-OPS> (158074318)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (581653)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7059564
<NUMBER-OF-SHARES-REDEEMED> (4555733)
<SHARES-REINVESTED> 21979
<NET-CHANGE-IN-ASSETS> 104402645
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 60296635
<OVERDISTRIB-NII-PRIOR> (614031)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13527887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27321453
<AVERAGE-NET-ASSETS> 1932555290
<PER-SHARE-NAV-BEGIN> 25.73
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> (1.58)
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.13
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 517
<NAME> GS Growth and Inc. Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1585456699
<INVESTMENTS-AT-VALUE> 1639194381
<RECEIVABLES> 93946655
<ASSETS-OTHER> 2947790
<OTHER-ITEMS-ASSETS> 59791
<TOTAL-ASSETS> 1736148617
<PAYABLE-FOR-SECURITIES> 14875327
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15669514
<TOTAL-LIABILITIES> 30544841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1672507725
<SHARES-COMMON-STOCK> 1999722
<SHARES-COMMON-PRIOR> 1233014
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1221249)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19420382)
<ACCUM-APPREC-OR-DEPREC> 53737682
<NET-ASSETS> 1705603776
<DIVIDEND-INCOME> 29328058
<INTEREST-INCOME> 9404194
<OTHER-INCOME> 0
<EXPENSES-NET> (26018727)
<NET-INVESTMENT-INCOME> 12713525
<REALIZED-GAINS-CURRENT> (79720615)
<APPREC-INCREASE-CURRENT> (91067228)
<NET-CHANGE-FROM-OPS> (158074318)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (103476)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1937045
<NUMBER-OF-SHARES-REDEEMED> (1174701)
<SHARES-REINVESTED> 4364
<NET-CHANGE-IN-ASSETS> 104402645
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 60296635
<OVERDISTRIB-NII-PRIOR> (614031)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13527887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27321453
<AVERAGE-NET-ASSETS> 1932555290
<PER-SHARE-NAV-BEGIN> 25.70
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> (1.59)
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.08
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 513
<NAME> GS Growth and Income Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1585456699
<INVESTMENTS-AT-VALUE> 1639194381
<RECEIVABLES> 93946655
<ASSETS-OTHER> 2947790
<OTHER-ITEMS-ASSETS> 59791
<TOTAL-ASSETS> 1736148617
<PAYABLE-FOR-SECURITIES> 14875327
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15669514
<TOTAL-LIABILITIES> 30544841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1672507725
<SHARES-COMMON-STOCK> 7133432
<SHARES-COMMON-PRIOR> 1396153
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1221249)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19420382)
<ACCUM-APPREC-OR-DEPREC> 53737682
<NET-ASSETS> 1705603776
<DIVIDEND-INCOME> 29328058
<INTEREST-INCOME> 9404194
<OTHER-INCOME> 0
<EXPENSES-NET> (26018727)
<NET-INVESTMENT-INCOME> 12713525
<REALIZED-GAINS-CURRENT> (79720615)
<APPREC-INCREASE-CURRENT> (91067228)
<NET-CHANGE-FROM-OPS> (158074318)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2184769)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10119858
<NUMBER-OF-SHARES-REDEEMED> (4396583)
<SHARES-REINVESTED> 14004
<NET-CHANGE-IN-ASSETS> 104402645
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 60296635
<OVERDISTRIB-NII-PRIOR> (614031)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13527887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27321453
<AVERAGE-NET-ASSETS> 1932555290
<PER-SHARE-NAV-BEGIN> 25.95
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> (1.58)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.35
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 526
<NAME> GS Growth and Income Fund-Serv.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1585456699
<INVESTMENTS-AT-VALUE> 1639194381
<RECEIVABLES> 93946655
<ASSETS-OTHER> 2947790
<OTHER-ITEMS-ASSETS> 59791
<TOTAL-ASSETS> 1736148617
<PAYABLE-FOR-SECURITIES> 14875327
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15669514
<TOTAL-LIABILITIES> 30544841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1672507725
<SHARES-COMMON-STOCK> 490755
<SHARES-COMMON-PRIOR> 343095
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1221249)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19420382)
<ACCUM-APPREC-OR-DEPREC> 53737682
<NET-ASSETS> 1705603776
<DIVIDEND-INCOME> 29328058
<INTEREST-INCOME> 9404194
<OTHER-INCOME> 0
<EXPENSES-NET> (26018727)
<NET-INVESTMENT-INCOME> 12713525
<REALIZED-GAINS-CURRENT> (79720615)
<APPREC-INCREASE-CURRENT> (91067228)
<NET-CHANGE-FROM-OPS> (158074318)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (84710)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 218320
<NUMBER-OF-SHARES-REDEEMED> (73792)
<SHARES-REINVESTED> 3132
<NET-CHANGE-IN-ASSETS> 104402645
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 60296635
<OVERDISTRIB-NII-PRIOR> (614031)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13527887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27321453
<AVERAGE-NET-ASSETS> 1932555290
<PER-SHARE-NAV-BEGIN> 25.92
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> (1.58)
<PER-SHARE-DIVIDEND> (0.18)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.33
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 551
<NAME> GS Intl Equity Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 960,197,202
<INVESTMENTS-AT-VALUE> 1,132,794,478
<RECEIVABLES> 17,348,290
<ASSETS-OTHER> 6,954
<OTHER-ITEMS-ASSETS> 157,923
<TOTAL-ASSETS> 1,150,307,645
<PAYABLE-FOR-SECURITIES> 749,525
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,852,561
<TOTAL-LIABILITIES> 6,602,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 949,639,943
<SHARES-COMMON-STOCK> 43,237,037
<SHARES-COMMON-PRIOR> 35,149,596
<ACCUMULATED-NII-CURRENT> 1,040,126
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,936,494
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172,088,996
<NET-ASSETS> 1,143,705,559
<DIVIDEND-INCOME> 12,034,000
<INTEREST-INCOME> 2,132,238
<OTHER-INCOME> 0
<EXPENSES-NET> (16,880,644)
<NET-INVESTMENT-INCOME> (2,714,406)
<REALIZED-GAINS-CURRENT> 96,004,014
<APPREC-INCREASE-CURRENT> 55,278,283
<NET-CHANGE-FROM-OPS> 148,567,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (41,132,351)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 90,785,418
<NUMBER-OF-SHARES-REDEEMED> (84,367,795)
<SHARES-REINVESTED> 1,669,818
<NET-CHANGE-IN-ASSETS> 328,125,370
<ACCUMULATED-NII-PRIOR> 772,084
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (27,613,162)
<GROSS-ADVISORY-FEES> 9,814,989
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,746,701
<AVERAGE-NET-ASSETS> 981,498,914
<PER-SHARE-NAV-BEGIN> 19.85
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 3.24
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.92
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 552
<NAME> GS Intl Equity Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 960,197,202
<INVESTMENTS-AT-VALUE> 1,132,794,478
<RECEIVABLES> 17,348,290
<ASSETS-OTHER> 6,954
<OTHER-ITEMS-ASSETS> 157,923
<TOTAL-ASSETS> 1,150,307,645
<PAYABLE-FOR-SECURITIES> 749,525
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,852,561
<TOTAL-LIABILITIES> 6,602,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 949,639,943
<SHARES-COMMON-STOCK> 3,201,016
<SHARES-COMMON-PRIOR> 2,808,047
<ACCUMULATED-NII-CURRENT> 1,040,126
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,936,494
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172,088,996
<NET-ASSETS> 1,143,705,559
<DIVIDEND-INCOME> 12,034,000
<INTEREST-INCOME> 2,132,238
<OTHER-INCOME> 0
<EXPENSES-NET> (16,880,644)
<NET-INVESTMENT-INCOME> (2,714,406)
<REALIZED-GAINS-CURRENT> 96,004,014
<APPREC-INCREASE-CURRENT> 55,278,283
<NET-CHANGE-FROM-OPS> 148,567,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3,418,683)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 794,593
<NUMBER-OF-SHARES-REDEEMED> (557,697)
<SHARES-REINVESTED> 156,073
<NET-CHANGE-IN-ASSETS> 328,125,370
<ACCUMULATED-NII-PRIOR> 772,084
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (27,613,162)
<GROSS-ADVISORY-FEES> 9,814,989
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,746,701
<AVERAGE-NET-ASSETS> 981,498,914
<PER-SHARE-NAV-BEGIN> 19.7
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 3.21
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.63
<EXPENSE-RATIO> 2.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 557
<NAME> GS Intl Equity Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 960,197,202
<INVESTMENTS-AT-VALUE> 1,132,794,478
<RECEIVABLES> 17,348,290
<ASSETS-OTHER> 6,954
<OTHER-ITEMS-ASSETS> 157,923
<TOTAL-ASSETS> 1,150,307,645
<PAYABLE-FOR-SECURITIES> 749,525
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,852,561
<TOTAL-LIABILITIES> 6,602,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 949,639,943
<SHARES-COMMON-STOCK> 541,619
<SHARES-COMMON-PRIOR> 172,210
<ACCUMULATED-NII-CURRENT> 1,040,126
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,936,494
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172,088,996
<NET-ASSETS> 1,143,705,559
<DIVIDEND-INCOME> 12,034,000
<INTEREST-INCOME> 2,132,238
<OTHER-INCOME> 0
<EXPENSES-NET> (16,880,644)
<NET-INVESTMENT-INCOME> (2,714,406)
<REALIZED-GAINS-CURRENT> 96,004,014
<APPREC-INCREASE-CURRENT> 55,278,283
<NET-CHANGE-FROM-OPS> 148,567,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (556,864)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,644,608
<NUMBER-OF-SHARES-REDEEMED> (6,294,716)
<SHARES-REINVESTED> 19,517
<NET-CHANGE-IN-ASSETS> 328,125,370
<ACCUMULATED-NII-PRIOR> 772,084
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (27,613,162)
<GROSS-ADVISORY-FEES> 9,814,989
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,746,701
<AVERAGE-NET-ASSETS> 981,498,914
<PER-SHARE-NAV-BEGIN> 19.56
<PER-SHARE-NII> (0.15)
<PER-SHARE-GAIN-APPREC> 3.15
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.45
<EXPENSE-RATIO> 2.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 553
<NAME> GS Intl Equity Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 960,197,202
<INVESTMENTS-AT-VALUE> 1,132,794,478
<RECEIVABLES> 17,348,290
<ASSETS-OTHER> 6,954
<OTHER-ITEMS-ASSETS> 157,923
<TOTAL-ASSETS> 1,150,307,645
<PAYABLE-FOR-SECURITIES> 749,525
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,852,561
<TOTAL-LIABILITIES> 6,602,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 949,639,943
<SHARES-COMMON-STOCK> 5,014,842
<SHARES-COMMON-PRIOR> 2,817,977
<ACCUMULATED-NII-CURRENT> 1,040,126
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,936,494
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172,088,996
<NET-ASSETS> 1,143,705,559
<DIVIDEND-INCOME> 12,034,000
<INTEREST-INCOME> 2,132,238
<OTHER-INCOME> 0
<EXPENSES-NET> (16,880,644)
<NET-INVESTMENT-INCOME> (2,714,406)
<REALIZED-GAINS-CURRENT> 96,004,014
<APPREC-INCREASE-CURRENT> 55,278,283
<NET-CHANGE-FROM-OPS> 148,567,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,927,209)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,805,737
<NUMBER-OF-SHARES-REDEEMED> (740,110)
<SHARES-REINVESTED> 131,238
<NET-CHANGE-IN-ASSETS> 328,125,370
<ACCUMULATED-NII-PRIOR> 772,084
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (27,613,162)
<GROSS-ADVISORY-FEES> 9,814,989
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,746,701
<AVERAGE-NET-ASSETS> 981,498,914
<PER-SHARE-NAV-BEGIN> 19.97
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 3.31
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.20
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 556
<NAME> GS Intl Equity Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 960,197,202
<INVESTMENTS-AT-VALUE> 1,132,794,478
<RECEIVABLES> 17,348,290
<ASSETS-OTHER> 6,954
<OTHER-ITEMS-ASSETS> 157,923
<TOTAL-ASSETS> 1,150,307,645
<PAYABLE-FOR-SECURITIES> 749,525
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,852,561
<TOTAL-LIABILITIES> 6,602,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 949,639,943
<SHARES-COMMON-STOCK> 162,658
<SHARES-COMMON-PRIOR> 152,953
<ACCUMULATED-NII-CURRENT> 1,040,126
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,936,494
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172,088,996
<NET-ASSETS> 1,143,705,559
<DIVIDEND-INCOME> 12,034,000
<INTEREST-INCOME> 2,132,238
<OTHER-INCOME> 0
<EXPENSES-NET> (16,880,644)
<NET-INVESTMENT-INCOME> (2,714,406)
<REALIZED-GAINS-CURRENT> 96,004,014
<APPREC-INCREASE-CURRENT> 55,278,283
<NET-CHANGE-FROM-OPS> 148,567,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (179,258)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 78,227
<NUMBER-OF-SHARES-REDEEMED> (77,199)
<SHARES-REINVESTED> 8,677
<NET-CHANGE-IN-ASSETS> 328,125,370
<ACCUMULATED-NII-PRIOR> 772,084
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (27,613,162)
<GROSS-ADVISORY-FEES> 9,814,989
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,746,701
<AVERAGE-NET-ASSETS> 981,498,914
<PER-SHARE-NAV-BEGIN> 19.84
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 3.24
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.93
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 561
<NAME> GS Asia Growth Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 72,037,427
<INVESTMENTS-AT-VALUE> 67,770,286
<RECEIVABLES> 4,332,625
<ASSETS-OTHER> 2,675
<OTHER-ITEMS-ASSETS> 1,439,338
<TOTAL-ASSETS> 73,544,924
<PAYABLE-FOR-SECURITIES> 2,625,137
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,590,865
<TOTAL-LIABILITIES> 4,216,002
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,913,009
<SHARES-COMMON-STOCK> 7,692,291
<SHARES-COMMON-PRIOR> 10,430,282
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (105,797)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (100,729,336)
<ACCUM-APPREC-OR-DEPREC> (4,748,954)
<NET-ASSETS> 69,328,922
<DIVIDEND-INCOME> 1,686,262
<INTEREST-INCOME> 376,865
<OTHER-INCOME> 0
<EXPENSES-NET> (1,570,865)
<NET-INVESTMENT-INCOME> 492,262
<REALIZED-GAINS-CURRENT> (27,883,885)
<APPREC-INCREASE-CURRENT> 21,285,501
<NET-CHANGE-FROM-OPS> (6,106,122)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,227,587
<NUMBER-OF-SHARES-REDEEMED> (17,965,578)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (22,776,605)
<ACCUMULATED-NII-PRIOR> 137,887
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (73,629,726)
<GROSS-ADVISORY-FEES> 808,815
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,656
<AVERAGE-NET-ASSETS> 80,901,887
<PER-SHARE-NAV-BEGIN> 8.38
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (0.66)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.79
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Goldman Sachs Trust Annual Report dated January 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 562
<NAME> GS Asia Growth Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 72,037,427
<INVESTMENTS-AT-VALUE> 67,770,286
<RECEIVABLES> 4,332,625
<ASSETS-OTHER> 2,675
<OTHER-ITEMS-ASSETS> 1,439,338
<TOTAL-ASSETS> 73,544,924
<PAYABLE-FOR-SECURITIES> 2,625,137
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,590,865
<TOTAL-LIABILITIES> 4,216,002
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,913,009
<SHARES-COMMON-STOCK> 545,677
<SHARES-COMMON-PRIOR> 404,337
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (105,797)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (100,729,336)
<ACCUM-APPREC-OR-DEPREC> (4,748,954)
<NET-ASSETS> 69,328,922
<DIVIDEND-INCOME> 1,686,262
<INTEREST-INCOME> 376,865
<OTHER-INCOME> 0
<EXPENSES-NET> (1,570,865)
<NET-INVESTMENT-INCOME> 492,262
<REALIZED-GAINS-CURRENT> (27,883,885)
<APPREC-INCREASE-CURRENT> 21,285,501
<NET-CHANGE-FROM-OPS> (6,106,122)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 345,699
<NUMBER-OF-SHARES-REDEEMED> (204,359)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (22,776,605)
<ACCUMULATED-NII-PRIOR> 137,887
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (73,629,726)
<GROSS-ADVISORY-FEES> 808,815
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,656
<AVERAGE-NET-ASSETS> 80,901,887
<PER-SHARE-NAV-BEGIN> 8.31
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.64)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.68
<EXPENSE-RATIO> 2.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 567
<NAME> GS Asia Growth Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 72,037,427
<INVESTMENTS-AT-VALUE> 67,770,286
<RECEIVABLES> 4,332,625
<ASSETS-OTHER> 2,675
<OTHER-ITEMS-ASSETS> 1,439,338
<TOTAL-ASSETS> 73,544,924
<PAYABLE-FOR-SECURITIES> 2,625,137
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,590,865
<TOTAL-LIABILITIES> 4,216,002
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,913,009
<SHARES-COMMON-STOCK> 130,146
<SHARES-COMMON-PRIOR> 52,511
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (105,797)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (100,729,336)
<ACCUM-APPREC-OR-DEPREC> (4,748,954)
<NET-ASSETS> 69,328,922
<DIVIDEND-INCOME> 1,686,262
<INTEREST-INCOME> 376,865
<OTHER-INCOME> 0
<EXPENSES-NET> (1,570,865)
<NET-INVESTMENT-INCOME> 492,262
<REALIZED-GAINS-CURRENT> (27,883,885)
<APPREC-INCREASE-CURRENT> 21,285,501
<NET-CHANGE-FROM-OPS> (6,106,122)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,148,809
<NUMBER-OF-SHARES-REDEEMED> (2,071,174)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (22,776,605)
<ACCUMULATED-NII-PRIOR> 137,887
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (73,629,726)
<GROSS-ADVISORY-FEES> 808,815
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,656
<AVERAGE-NET-ASSETS> 80,901,887
<PER-SHARE-NAV-BEGIN> 8.29
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (0.61)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.68
<EXPENSE-RATIO> 2.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 563
<NAME> GS Asia Growth Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 72,037,427
<INVESTMENTS-AT-VALUE> 67,770,286
<RECEIVABLES> 4,332,625
<ASSETS-OTHER> 2,675
<OTHER-ITEMS-ASSETS> 1,439,338
<TOTAL-ASSETS> 73,544,924
<PAYABLE-FOR-SECURITIES> 2,625,137
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,590,865
<TOTAL-LIABILITIES> 4,216,002
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,913,009
<SHARES-COMMON-STOCK> 531,067
<SHARES-COMMON-PRIOR> 103,588
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (105,797)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (100,729,336)
<ACCUM-APPREC-OR-DEPREC> (4,748,954)
<NET-ASSETS> 69,328,922
<DIVIDEND-INCOME> 1,686,262
<INTEREST-INCOME> 376,865
<OTHER-INCOME> 0
<EXPENSES-NET> (1,570,865)
<NET-INVESTMENT-INCOME> 492,262
<REALIZED-GAINS-CURRENT> (27,883,885)
<APPREC-INCREASE-CURRENT> 21,285,501
<NET-CHANGE-FROM-OPS> (6,106,122)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 636,785
<NUMBER-OF-SHARES-REDEEMED> (209,306)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (22,776,605)
<ACCUMULATED-NII-PRIOR> 137,887
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (73,629,726)
<GROSS-ADVISORY-FEES> 808,815
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,656
<AVERAGE-NET-ASSETS> 80,901,887
<PER-SHARE-NAV-BEGIN> 8.44
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (0.56)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.91
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 581
<NAME> GS Emerging Mkts Eq Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 153,031,981
<INVESTMENTS-AT-VALUE> 143,607,077
<RECEIVABLES> 1,367,377
<ASSETS-OTHER> 15,634
<OTHER-ITEMS-ASSETS> 3,680,320
<TOTAL-ASSETS> 148,670,408
<PAYABLE-FOR-SECURITIES> 4,090,946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 953,881
<TOTAL-LIABILITIES> 5,044,827
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,658,406
<SHARES-COMMON-STOCK> 7,483,990
<SHARES-COMMON-PRIOR> 1,824,207
<ACCUMULATED-NII-CURRENT> 26,133
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (46,285,294)
<ACCUM-APPREC-OR-DEPREC> (9,773,664)
<NET-ASSETS> 143,625,581
<DIVIDEND-INCOME> 2,694,167
<INTEREST-INCOME> 1,004,258
<OTHER-INCOME> 0
<EXPENSES-NET> (2,048,995)
<NET-INVESTMENT-INCOME> 1,649,430
<REALIZED-GAINS-CURRENT> (41,326,432)
<APPREC-INCREASE-CURRENT> (8,910,101)
<NET-CHANGE-FROM-OPS> (48,587,103)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,250,635)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,357,445
<NUMBER-OF-SHARES-REDEEMED> (5,015,931)
<SHARES-REINVESTED> 318,269
<NET-CHANGE-IN-ASSETS> 106,686,543
<ACCUMULATED-NII-PRIOR> 19,872
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (22,454)
<GROSS-ADVISORY-FEES> 1,519,721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,611,296
<AVERAGE-NET-ASSETS> 126,643,117
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (2.40)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.04
<EXPENSE-RATIO> 2.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 582
<NAME> GS Emerging Mkts Eq Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 153,031,981
<INVESTMENTS-AT-VALUE> 143,607,077
<RECEIVABLES> 1,367,377
<ASSETS-OTHER> 15,634
<OTHER-ITEMS-ASSETS> 3,680,320
<TOTAL-ASSETS> 148,670,408
<PAYABLE-FOR-SECURITIES> 4,090,946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 953,881
<TOTAL-LIABILITIES> 5,044,827
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,658,406
<SHARES-COMMON-STOCK> 65,322
<SHARES-COMMON-PRIOR> 6,579
<ACCUMULATED-NII-CURRENT> 26,133
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (46,285,294)
<ACCUM-APPREC-OR-DEPREC> (9,773,664)
<NET-ASSETS> 143,625,581
<DIVIDEND-INCOME> 2,694,167
<INTEREST-INCOME> 1,004,258
<OTHER-INCOME> 0
<EXPENSES-NET> (2,048,995)
<NET-INVESTMENT-INCOME> 1,649,430
<REALIZED-GAINS-CURRENT> (41,326,432)
<APPREC-INCREASE-CURRENT> (8,910,101)
<NET-CHANGE-FROM-OPS> (48,587,103)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,186)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 73,263
<NUMBER-OF-SHARES-REDEEMED> (16,489)
<SHARES-REINVESTED> 1,969
<NET-CHANGE-IN-ASSETS> 106,686,543
<ACCUMULATED-NII-PRIOR> 19,872
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (22,454)
<GROSS-ADVISORY-FEES> 1,519,721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,611,296
<AVERAGE-NET-ASSETS> 126,643,117
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (2.41)
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.03
<EXPENSE-RATIO> 2.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 587
<NAME> GS Emerging Mkts Eq Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 153,031,981
<INVESTMENTS-AT-VALUE> 143,607,077
<RECEIVABLES> 1,367,377
<ASSETS-OTHER> 15,634
<OTHER-ITEMS-ASSETS> 3,680,320
<TOTAL-ASSETS> 148,670,408
<PAYABLE-FOR-SECURITIES> 4,090,946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 953,881
<TOTAL-LIABILITIES> 5,044,827
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,658,406
<SHARES-COMMON-STOCK> 38,754
<SHARES-COMMON-PRIOR> 7,520
<ACCUMULATED-NII-CURRENT> 26,133
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (46,285,294)
<ACCUM-APPREC-OR-DEPREC> (9,773,664)
<NET-ASSETS> 143,625,581
<DIVIDEND-INCOME> 2,694,167
<INTEREST-INCOME> 1,004,258
<OTHER-INCOME> 0
<EXPENSES-NET> (2,048,995)
<NET-INVESTMENT-INCOME> 1,649,430
<REALIZED-GAINS-CURRENT> (41,326,432)
<APPREC-INCREASE-CURRENT> (8,910,101)
<NET-CHANGE-FROM-OPS> (48,587,103)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,811)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44,699
<NUMBER-OF-SHARES-REDEEMED> (15,015)
<SHARES-REINVESTED> 1,550
<NET-CHANGE-IN-ASSETS> 106,686,543
<ACCUMULATED-NII-PRIOR> 19,872
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (22,454)
<GROSS-ADVISORY-FEES> 1,519,721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,611,296
<AVERAGE-NET-ASSETS> 126,643,117
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (2.39)
<PER-SHARE-DIVIDEND> (0.27)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.05
<EXPENSE-RATIO> 2.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 583
<NAME> GS Emerging Mkts Eq Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 153,031,981
<INVESTMENTS-AT-VALUE> 143,607,077
<RECEIVABLES> 1,367,377
<ASSETS-OTHER> 15,634
<OTHER-ITEMS-ASSETS> 3,680,320
<TOTAL-ASSETS> 148,670,408
<PAYABLE-FOR-SECURITIES> 4,090,946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 953,881
<TOTAL-LIABILITIES> 5,044,827
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,658,406
<SHARES-COMMON-STOCK> 12,715,053
<SHARES-COMMON-PRIOR> 1,971,850
<ACCUMULATED-NII-CURRENT> 26,133
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (46,285,294)
<ACCUM-APPREC-OR-DEPREC> (9,773,664)
<NET-ASSETS> 143,625,581
<DIVIDEND-INCOME> 2,694,167
<INTEREST-INCOME> 1,004,258
<OTHER-INCOME> 0
<EXPENSES-NET> (2,048,995)
<NET-INVESTMENT-INCOME> 1,649,430
<REALIZED-GAINS-CURRENT> (41,326,432)
<APPREC-INCREASE-CURRENT> (8,910,101)
<NET-CHANGE-FROM-OPS> (48,587,103)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,314,046)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,487,704
<NUMBER-OF-SHARES-REDEEMED> (3,049,355)
<SHARES-REINVESTED> 304,854
<NET-CHANGE-IN-ASSETS> 106,686,543
<ACCUMULATED-NII-PRIOR> 19,872
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (22,454)
<GROSS-ADVISORY-FEES> 1,519,721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,611,296
<AVERAGE-NET-ASSETS> 126,643,117
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> (2.36)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.09
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 586
<NAME> GS Emerging Mkts Eq Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 153,031,981
<INVESTMENTS-AT-VALUE> 143,607,077
<RECEIVABLES> 1,367,377
<ASSETS-OTHER> 15,634
<OTHER-ITEMS-ASSETS> 3,680,320
<TOTAL-ASSETS> 148,670,408
<PAYABLE-FOR-SECURITIES> 4,090,946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 953,881
<TOTAL-LIABILITIES> 5,044,827
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,658,406
<SHARES-COMMON-STOCK> 166
<SHARES-COMMON-PRIOR> 160
<ACCUMULATED-NII-CURRENT> 26,133
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (46,285,294)
<ACCUM-APPREC-OR-DEPREC> (9,773,664)
<NET-ASSETS> 143,625,581
<DIVIDEND-INCOME> 2,694,167
<INTEREST-INCOME> 1,004,258
<OTHER-INCOME> 0
<EXPENSES-NET> (2,048,995)
<NET-INVESTMENT-INCOME> 1,649,430
<REALIZED-GAINS-CURRENT> (41,326,432)
<APPREC-INCREASE-CURRENT> (8,910,101)
<NET-CHANGE-FROM-OPS> (48,587,103)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (44)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 106,686,543
<ACCUMULATED-NII-PRIOR> 19,872
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (22,454)
<GROSS-ADVISORY-FEES> 1,519,721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,611,296
<AVERAGE-NET-ASSETS> 126,643,117
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> (0.13)
<PER-SHARE-GAIN-APPREC> (2.41)
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.87
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 611
<NAME> GS CORE Intl Equity Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 378,542,840
<INVESTMENTS-AT-VALUE> 400,455,538
<RECEIVABLES> 2,397,378
<ASSETS-OTHER> 174,294
<OTHER-ITEMS-ASSETS> 195,757
<TOTAL-ASSETS> 403,222,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 989,403
<TOTAL-LIABILITIES> 989,403
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 389,210,761
<SHARES-COMMON-STOCK> 11,053,406
<SHARES-COMMON-PRIOR> 768,392
<ACCUMULATED-NII-CURRENT> 336,569
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (9,262,172)
<ACCUM-APPREC-OR-DEPREC> 21,948,406
<NET-ASSETS> 402,233,564
<DIVIDEND-INCOME> 3,302,032
<INTEREST-INCOME> 696,313
<OTHER-INCOME> 0
<EXPENSES-NET> (2,590,993)
<NET-INVESTMENT-INCOME> 1,407,352
<REALIZED-GAINS-CURRENT> (8,586,417)
<APPREC-INCREASE-CURRENT> 21,848,298
<NET-CHANGE-FROM-OPS> 14,669,233
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (250,453)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,982,750
<NUMBER-OF-SHARES-REDEEMED> (6,723,268)
<SHARES-REINVESTED> 25,532
<NET-CHANGE-IN-ASSETS> 14,669,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (11,740)
<OVERDIST-NET-GAINS-PRIOR> (675,755)
<GROSS-ADVISORY-FEES> 1,890,475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,276,074
<AVERAGE-NET-ASSETS> 222,408,839
<PER-SHARE-NAV-BEGIN> 9.22
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.79
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.98
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 612
<NAME> GS CORE Intl Equity Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 378,542,840
<INVESTMENTS-AT-VALUE> 400,455,538
<RECEIVABLES> 2,397,378
<ASSETS-OTHER> 174,294
<OTHER-ITEMS-ASSETS> 195,757
<TOTAL-ASSETS> 403,222,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 989,403
<TOTAL-LIABILITIES> 989,403
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 389,210,761
<SHARES-COMMON-STOCK> 743,573
<SHARES-COMMON-PRIOR> 295,542
<ACCUMULATED-NII-CURRENT> 336,569
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (9,262,172)
<ACCUM-APPREC-OR-DEPREC> 21,948,406
<NET-ASSETS> 402,233,564
<DIVIDEND-INCOME> 3,302,032
<INTEREST-INCOME> 696,313
<OTHER-INCOME> 0
<EXPENSES-NET> (2,590,993)
<NET-INVESTMENT-INCOME> 1,407,352
<REALIZED-GAINS-CURRENT> (8,586,417)
<APPREC-INCREASE-CURRENT> 21,848,298
<NET-CHANGE-FROM-OPS> 14,669,233
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 515,393
<NUMBER-OF-SHARES-REDEEMED> (67,362)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,669,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (11,740)
<OVERDIST-NET-GAINS-PRIOR> (675,755)
<GROSS-ADVISORY-FEES> 1,890,475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,276,074
<AVERAGE-NET-ASSETS> 222,408,839
<PER-SHARE-NAV-BEGIN> 9.21
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0.74
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 617
<NAME> GS CORE Intl Equity Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 378,542,840
<INVESTMENTS-AT-VALUE> 400,455,538
<RECEIVABLES> 2,397,378
<ASSETS-OTHER> 174,294
<OTHER-ITEMS-ASSETS> 195,757
<TOTAL-ASSETS> 403,222,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 989,403
<TOTAL-LIABILITIES> 989,403
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 389,210,761
<SHARES-COMMON-STOCK> 375,620
<SHARES-COMMON-PRIOR> 174,438
<ACCUMULATED-NII-CURRENT> 336,569
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (9,262,172)
<ACCUM-APPREC-OR-DEPREC> 21,948,406
<NET-ASSETS> 402,233,564
<DIVIDEND-INCOME> 3,302,032
<INTEREST-INCOME> 696,313
<OTHER-INCOME> 0
<EXPENSES-NET> (2,590,993)
<NET-INVESTMENT-INCOME> 1,407,352
<REALIZED-GAINS-CURRENT> (8,586,417)
<APPREC-INCREASE-CURRENT> 21,848,298
<NET-CHANGE-FROM-OPS> 14,669,233
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 308,917
<NUMBER-OF-SHARES-REDEEMED> (107,735)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,669,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (11,740)
<OVERDIST-NET-GAINS-PRIOR> (675,755)
<GROSS-ADVISORY-FEES> 1,890,475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,276,074
<AVERAGE-NET-ASSETS> 222,408,839
<PER-SHARE-NAV-BEGIN> 9.22
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.74
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.96
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 613
<NAME> GS CORE Intl. Equity Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 378,542,840
<INVESTMENTS-AT-VALUE> 400,455,538
<RECEIVABLES> 2,397,378
<ASSETS-OTHER> 174,294
<OTHER-ITEMS-ASSETS> 195,757
<TOTAL-ASSETS> 403,222,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 989,403
<TOTAL-LIABILITIES> 989,403
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 389,210,761
<SHARES-COMMON-STOCK> 27,897,671
<SHARES-COMMON-PRIOR> 1,920,464
<ACCUMULATED-NII-CURRENT> 336,569
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (9,262,172)
<ACCUM-APPREC-OR-DEPREC> 21,948,406
<NET-ASSETS> 402,233,564
<DIVIDEND-INCOME> 3,302,032
<INTEREST-INCOME> 696,313
<OTHER-INCOME> 0
<EXPENSES-NET> (2,590,993)
<NET-INVESTMENT-INCOME> 1,407,352
<REALIZED-GAINS-CURRENT> (8,586,417)
<APPREC-INCREASE-CURRENT> 21,848,298
<NET-CHANGE-FROM-OPS> 14,669,233
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (808,555)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,484,309
<NUMBER-OF-SHARES-REDEEMED> (4,511,270)
<SHARES-REINVESTED> 4,168
<NET-CHANGE-IN-ASSETS> 14,669,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (11,740)
<OVERDIST-NET-GAINS-PRIOR> (675,755)
<GROSS-ADVISORY-FEES> 1,890,475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,276,074
<AVERAGE-NET-ASSETS> 222,408,839
<PER-SHARE-NAV-BEGIN> 9.24
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.80
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.06
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 616
<NAME> GS CORE Intl. Equity Fund-Serv.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 378,542,840
<INVESTMENTS-AT-VALUE> 400,455,538
<RECEIVABLES> 2,397,378
<ASSETS-OTHER> 174,294
<OTHER-ITEMS-ASSETS> 195,757
<TOTAL-ASSETS> 403,222,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 989,403
<TOTAL-LIABILITIES> 989,403
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 389,210,761
<SHARES-COMMON-STOCK> 2,165
<SHARES-COMMON-PRIOR> 161
<ACCUMULATED-NII-CURRENT> 336,569
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (9,262,172)
<ACCUM-APPREC-OR-DEPREC> 21,948,406
<NET-ASSETS> 402,233,564
<DIVIDEND-INCOME> 3,302,032
<INTEREST-INCOME> 696,313
<OTHER-INCOME> 0
<EXPENSES-NET> (2,590,993)
<NET-INVESTMENT-INCOME> 1,407,352
<REALIZED-GAINS-CURRENT> (8,586,417)
<APPREC-INCREASE-CURRENT> 21,848,298
<NET-CHANGE-FROM-OPS> 14,669,233
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,000
<NUMBER-OF-SHARES-REDEEMED> 4
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,669,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (11,740)
<OVERDIST-NET-GAINS-PRIOR> (675,755)
<GROSS-ADVISORY-FEES> 1,890,475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,276,074
<AVERAGE-NET-ASSETS> 222,408,839
<PER-SHARE-NAV-BEGIN> 9.23
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0.81
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 631
<NAME> GS Int.l Small Cap Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 77,991,659
<INVESTMENTS-AT-VALUE> 80,510,839
<RECEIVABLES> 369,417
<ASSETS-OTHER> 44,529
<OTHER-ITEMS-ASSETS> 25,813
<TOTAL-ASSETS> 80,950,598
<PAYABLE-FOR-SECURITIES> 7,566,969
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,999,176
<TOTAL-LIABILITIES> 10,566,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,759,384
<SHARES-COMMON-STOCK> 3,108,876
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (106,697)
<ACCUMULATED-NET-GAINS> 174,252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,557,514
<NET-ASSETS> 70,384,453
<DIVIDEND-INCOME> 153,016
<INTEREST-INCOME> 113,944
<OTHER-INCOME> 0
<EXPENSES-NET> (414,854)
<NET-INVESTMENT-INCOME> (147,894)
<REALIZED-GAINS-CURRENT> 232,160
<APPREC-INCREASE-CURRENT> 2,557,514
<NET-CHANGE-FROM-OPS> 2,641,780
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,789,828
<NUMBER-OF-SHARES-REDEEMED> (680,952)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 70,384,453
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 287,765
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 793,818
<AVERAGE-NET-ASSETS> 31,713,331
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.62
<EXPENSE-RATIO> 2.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 632
<NAME> GS Intl. Small Cap Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 77,991,659
<INVESTMENTS-AT-VALUE> 80,510,839
<RECEIVABLES> 369,417
<ASSETS-OTHER> 44,529
<OTHER-ITEMS-ASSETS> 25,813
<TOTAL-ASSETS> 80,950,598
<PAYABLE-FOR-SECURITIES> 7,566,969
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,999,176
<TOTAL-LIABILITIES> 10,566,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,759,384
<SHARES-COMMON-STOCK> 20,099
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (106,697)
<ACCUMULATED-NET-GAINS> 174,252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,557,514
<NET-ASSETS> 70,384,453
<DIVIDEND-INCOME> 153,016
<INTEREST-INCOME> 113,944
<OTHER-INCOME> 0
<EXPENSES-NET> (414,854)
<NET-INVESTMENT-INCOME> (147,894)
<REALIZED-GAINS-CURRENT> 232,160
<APPREC-INCREASE-CURRENT> 2,557,514
<NET-CHANGE-FROM-OPS> 2,641,780
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,738
<NUMBER-OF-SHARES-REDEEMED> (4,639)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 70,384,453
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 287,765
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 793,818
<AVERAGE-NET-ASSETS> 31,713,331
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> (0.1)
<PER-SHARE-GAIN-APPREC> 0.71
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> 2.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 637
<NAME> GS Intl. Small Cap Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 77,991,659
<INVESTMENTS-AT-VALUE> 80,510,839
<RECEIVABLES> 369,417
<ASSETS-OTHER> 44,529
<OTHER-ITEMS-ASSETS> 25,813
<TOTAL-ASSETS> 80,950,598
<PAYABLE-FOR-SECURITIES> 7,566,969
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,999,176
<TOTAL-LIABILITIES> 10,566,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,759,384
<SHARES-COMMON-STOCK> 16,459
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (106,697)
<ACCUMULATED-NET-GAINS> 174,252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,557,514
<NET-ASSETS> 70,384,453
<DIVIDEND-INCOME> 153,016
<INTEREST-INCOME> 113,944
<OTHER-INCOME> 0
<EXPENSES-NET> (414,854)
<NET-INVESTMENT-INCOME> (147,894)
<REALIZED-GAINS-CURRENT> 232,160
<APPREC-INCREASE-CURRENT> 2,557,514
<NET-CHANGE-FROM-OPS> 2,641,780
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,740
<NUMBER-OF-SHARES-REDEEMED> (3,281)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 70,384,453
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 287,765
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 793,818
<AVERAGE-NET-ASSETS> 31,713,331
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 0.67
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> 2.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 633
<NAME> GS Intl. Small Cap Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 77,991,659
<INVESTMENTS-AT-VALUE> 80,510,839
<RECEIVABLES> 369,417
<ASSETS-OTHER> 44,529
<OTHER-ITEMS-ASSETS> 25,813
<TOTAL-ASSETS> 80,950,598
<PAYABLE-FOR-SECURITIES> 7,566,969
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,999,176
<TOTAL-LIABILITIES> 10,566,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,759,384
<SHARES-COMMON-STOCK> 3,469,496
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (106,697)
<ACCUMULATED-NET-GAINS> 174,252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,557,514
<NET-ASSETS> 70,384,453
<DIVIDEND-INCOME> 153,016
<INTEREST-INCOME> 113,944
<OTHER-INCOME> 0
<EXPENSES-NET> (414,854)
<NET-INVESTMENT-INCOME> (147,894)
<REALIZED-GAINS-CURRENT> 232,160
<APPREC-INCREASE-CURRENT> 2,557,514
<NET-CHANGE-FROM-OPS> 2,641,780
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,659)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,172,165
<NUMBER-OF-SHARES-REDEEMED> (703,520)
<SHARES-REINVESTED> 851
<NET-CHANGE-IN-ASSETS> 70,384,453
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 287,765
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 793,818
<AVERAGE-NET-ASSETS> 31,713,331
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.67
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 636
<NAME> GS Intl. Small Cap Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 77,991,659
<INVESTMENTS-AT-VALUE> 80,510,839
<RECEIVABLES> 369,417
<ASSETS-OTHER> 44,529
<OTHER-ITEMS-ASSETS> 25,813
<TOTAL-ASSETS> 80,950,598
<PAYABLE-FOR-SECURITIES> 7,566,969
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,999,176
<TOTAL-LIABILITIES> 10,566,145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,759,384
<SHARES-COMMON-STOCK> 161
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (106,697)
<ACCUMULATED-NET-GAINS> 174,252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,557,514
<NET-ASSETS> 70,384,453
<DIVIDEND-INCOME> 153,016
<INTEREST-INCOME> 113,944
<OTHER-INCOME> 0
<EXPENSES-NET> (414,854)
<NET-INVESTMENT-INCOME> (147,894)
<REALIZED-GAINS-CURRENT> 232,160
<APPREC-INCREASE-CURRENT> 2,557,514
<NET-CHANGE-FROM-OPS> 2,641,780
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 161
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 70,384,453
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 287,765
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 793,818
<AVERAGE-NET-ASSETS> 31,713,331
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 0.63
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 641
<NAME> GS Japanese Equity Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 18,450,764
<INVESTMENTS-AT-VALUE> 20,399,223
<RECEIVABLES> 435,745
<ASSETS-OTHER> 706
<OTHER-ITEMS-ASSETS> 877,667
<TOTAL-ASSETS> 21,713,341
<PAYABLE-FOR-SECURITIES> 14,636
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176,442
<TOTAL-LIABILITIES> 191,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,528,426
<SHARES-COMMON-STOCK> 758,945
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (34,385)
<ACCUMULATED-NET-GAINS> 86,542
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,941,680
<NET-ASSETS> 21,522,263
<DIVIDEND-INCOME> 41,835
<INTEREST-INCOME> 29,405
<OTHER-INCOME> 0
<EXPENSES-NET> (158,213)
<NET-INVESTMENT-INCOME> (86,973)
<REALIZED-GAINS-CURRENT> 140,585
<APPREC-INCREASE-CURRENT> 1,941,680
<NET-CHANGE-FROM-OPS> 1,995,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 974,018
<NUMBER-OF-SHARES-REDEEMED> (215,073)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,522,263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 122,901
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,566
<AVERAGE-NET-ASSETS> 16,253,194
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 1.12
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 1.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 642
<NAME> GS Japanese Equity Fund-Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 18,450,764
<INVESTMENTS-AT-VALUE> 20,399,223
<RECEIVABLES> 435,745
<ASSETS-OTHER> 706
<OTHER-ITEMS-ASSETS> 877,667
<TOTAL-ASSETS> 21,713,341
<PAYABLE-FOR-SECURITIES> 14,636
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176,442
<TOTAL-LIABILITIES> 191,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,528,426
<SHARES-COMMON-STOCK> 129,373
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (34,385)
<ACCUMULATED-NET-GAINS> 86,542
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,941,680
<NET-ASSETS> 21,522,263
<DIVIDEND-INCOME> 41,835
<INTEREST-INCOME> 29,405
<OTHER-INCOME> 0
<EXPENSES-NET> (158,213)
<NET-INVESTMENT-INCOME> (86,973)
<REALIZED-GAINS-CURRENT> 140,585
<APPREC-INCREASE-CURRENT> 1,941,680
<NET-CHANGE-FROM-OPS> 1,995,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 143,378
<NUMBER-OF-SHARES-REDEEMED> (14,005)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,522,263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 122,901
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,566
<AVERAGE-NET-ASSETS> 16,253,194
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.03
<EXPENSE-RATIO> 2.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 647
<NAME> GS Japanese Equity Fund-Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 18,450,764
<INVESTMENTS-AT-VALUE> 20,399,223
<RECEIVABLES> 435,745
<ASSETS-OTHER> 706
<OTHER-ITEMS-ASSETS> 877,667
<TOTAL-ASSETS> 21,713,341
<PAYABLE-FOR-SECURITIES> 14,636
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176,442
<TOTAL-LIABILITIES> 191,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,528,426
<SHARES-COMMON-STOCK> 25,718
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (34,385)
<ACCUMULATED-NET-GAINS> 86,542
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,941,680
<NET-ASSETS> 21,522,263
<DIVIDEND-INCOME> 41,835
<INTEREST-INCOME> 29,405
<OTHER-INCOME> 0
<EXPENSES-NET> (158,213)
<NET-INVESTMENT-INCOME> (86,973)
<REALIZED-GAINS-CURRENT> 140,585
<APPREC-INCREASE-CURRENT> 1,941,680
<NET-CHANGE-FROM-OPS> 1,995,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 197,598
<NUMBER-OF-SHARES-REDEEMED> (171,880)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,522,263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 122,901
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,566
<AVERAGE-NET-ASSETS> 16,253,194
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 1.13
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 2.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 643
<NAME> GS Japanese Equity Fund-Inst.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 18,450,764
<INVESTMENTS-AT-VALUE> 20,399,223
<RECEIVABLES> 435,745
<ASSETS-OTHER> 706
<OTHER-ITEMS-ASSETS> 877,667
<TOTAL-ASSETS> 21,713,341
<PAYABLE-FOR-SECURITIES> 14,636
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176,442
<TOTAL-LIABILITIES> 191,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,528,426
<SHARES-COMMON-STOCK> 1,028,740
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (34,385)
<ACCUMULATED-NET-GAINS> 86,542
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,941,680
<NET-ASSETS> 21,522,263
<DIVIDEND-INCOME> 41,835
<INTEREST-INCOME> 29,405
<OTHER-INCOME> 0
<EXPENSES-NET> (158,213)
<NET-INVESTMENT-INCOME> (86,973)
<REALIZED-GAINS-CURRENT> 140,585
<APPREC-INCREASE-CURRENT> 1,941,680
<NET-CHANGE-FROM-OPS> 1,995,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,204)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,028,740
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,522,263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 122,901
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,566
<AVERAGE-NET-ASSETS> 16,253,194
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.13
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.10
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Goldman
Sachs Trust Annual Report dated January 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 646
<NAME> GS Japanese Equity Fund-Service
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 18,450,764
<INVESTMENTS-AT-VALUE> 20,399,223
<RECEIVABLES> 435,745
<ASSETS-OTHER> 706
<OTHER-ITEMS-ASSETS> 877,667
<TOTAL-ASSETS> 21,713,341
<PAYABLE-FOR-SECURITIES> 14,636
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176,442
<TOTAL-LIABILITIES> 191,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,528,426
<SHARES-COMMON-STOCK> 161
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (34,385)
<ACCUMULATED-NET-GAINS> 86,542
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,941,680
<NET-ASSETS> 21,522,263
<DIVIDEND-INCOME> 41,835
<INTEREST-INCOME> 29,405
<OTHER-INCOME> 0
<EXPENSES-NET> (158,213)
<NET-INVESTMENT-INCOME> (86,973)
<REALIZED-GAINS-CURRENT> 140,585
<APPREC-INCREASE-CURRENT> 1,941,680
<NET-CHANGE-FROM-OPS> 1,995,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 161
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,522,263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 122,901
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,566
<AVERAGE-NET-ASSETS> 16,253,194
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 1.09
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT J
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
for Goldman Sachs Trust-Equity Funds dated March 19, 1999 (and to all references
to our firm), included in or made a part of Post-Effective Amendment No. 54 and
Amendment No. 56 to Registration Statement File Nos. 33-17619 and 811-5349,
respectively.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 13, 1999
