<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
May 1, 1996, as revised
December 1, 1996 THE GOLDMAN SACHS EQUITY PORTFOLIOS CLASS
A AND B SHARES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Highlights........................ 3
Fees and Expenses...................... 7
Financial Highlights................... 10
Investment Objectives and Policies..... 13
Description of Securities.............. 17
Investment Techniques.................. 22
Risk Factors........................... 25
Investment Restrictions................ 27
Portfolio Turnover..................... 27
Management............................. 28
Reports to Shareholders................ 32
How to Invest.......................... 32
Services Available to Shareholders..... 37
Distribution and Authorized Dealer
Service Plans......................... 40
How to Sell Shares of the Funds........ 41
Dividends.............................. 42
Net Asset Value........................ 43
Performance Information................ 43
Shares of the Company.................. 44
Taxation............................... 45
Additional Information................. 46
Appendix .............................. A-1
Account Application
</TABLE>
GOLDMAN SACHS BALANCED FUND
Seeks long-term capital growth and cur-
rent income through investments in eq-
uity and fixed income securities.
GOLDMAN SACHS SELECT EQUITY FUND
Seeks total return through investments
in equity securities consisting of capi-
tal appreciation plus dividend income
that, net of Fund expenses, exceeds the
total return realized on the Standard
and Poor's Index of 500 Common Stocks.
GOLDMAN SACHS GROWTH AND INCOME FUND
Seeks long-term growth of capital and
growth of income through investments in
equity securities that are considered to
have favorable prospects for capital ap-
preciation and/or dividend paying abili-
ty.
GOLDMAN SACHS CAPITAL GROWTH FUND
Seeks long-term growth of capital
through investments in equity securities
of companies that are considered to have
long-term capital appreciation poten-
tial.
GOLDMAN SACHS SMALL CAP EQUITY FUND
Seeks long-term capital growth through
investments in equity securities of com-
panies with public stock market capital-
izations of $1 billion or less at the
time of investment.
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Seeks long-term capital appreciation
through investments in equity securities
of companies that are organized outside
the U.S. or whose securities are princi-
pally traded outside the U.S.
GOLDMAN SACHS ASIA GROWTH FUND
Seeks long-term capital appreciation
through investments in equity securities
of companies related (in the manner de-
scribed herein) to Asian countries.
(continued on next page)
----------
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
(cover continued)
A FUND'S INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS AND FOREIGN CURRENCIES
ENTAIL CERTAIN RISKS NOT CUSTOMARILY ASSOCIATED WITH INVESTING IN U.S. DOLLAR-
DENOMINATED SECURITIES OF U.S. ISSUERS. IN PARTICULAR, THE SECURITIES MARKETS
OF ASIAN AND OTHER EMERGING MARKET COUNTRIES IN WHICH THE ASIA GROWTH AND
INTERNATIONAL EQUITY FUNDS INVEST ARE LESS LIQUID, SUBJECT TO GREATER PRICE
VOLATILITY, HAVE SMALLER MARKET CAPITALIZATIONS, HAVE LESS GOVERNMENT
REGULATION AND ARE NOT SUBJECT TO AS EXTENSIVE AND FREQUENT ACCOUNTING,
FINANCIAL AND OTHER REPORTING REQUIREMENTS AS THE SECURITIES MARKETS OF MORE
DEVELOPED COUNTRIES. THE FUNDS ARE INTENDED FOR INVESTORS WHO CAN ACCEPT THE
RISKS ASSOCIATED WITH SUCH INVESTMENTS AND MAY NOT BE SUITABLE FOR ALL
INVESTORS. SEE "DESCRIPTION OF SECURITIES."
Goldman Sachs Asset Management ("GSAM"), New York, New York, a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
investment adviser to the Balanced, Growth and Income, Small Cap Equity and
International Equity Funds. Goldman Sachs Funds Management, L.P. ("GSFM"), New
York, New York, an affiliate of Goldman Sachs, serves as investment adviser to
the Capital Growth and Select Equity Funds. Goldman Sachs Asset Management
International ("GSAMI"), London, England, an affiliate of Goldman Sachs,
serves as investment adviser to the Asia Growth Fund and subadviser to the
International Equity Fund. GSAM, GSFM and GSAMI are each referred to in this
Prospectus as the "Investment Adviser." GSAM serves as each Fund's
administrator and Goldman Sachs serves as each Fund's distributor and transfer
agent.
This Prospectus provides information about Goldman Sachs Equity Portfolios,
Inc. (the "Company") and the Funds that a prospective investor should
understand before investing. This Prospectus should be retained for future
reference. A Statement of Additional Information (the "Additional Statement"),
dated May 1, 1996, containing further information about the Company and the
Funds which may be of interest to investors, has been filed with the
Securities and Exchange Commission ("SEC") is incorporated herein by reference
in its entirety, and may be obtained without charge from Goldman Sachs by
calling the telephone number, or writing to one of the addresses, listed on
the back cover of this Prospectus.
<PAGE>
FUND HIGHLIGHTS
The following is intended to highlight certain information contained in
this Prospectus and is qualified in its entirety by the more detailed
information contained herein.
WHAT IS GOLDMAN SACHS EQUITY PORTFOLIOS, INC.?
Goldman Sachs Equity Portfolios, Inc. is an open-end management investment
company that offers its shares in several investment funds (mutual funds).
Each Fund pools the monies of investors by selling its shares to the public
and investing these monies in a portfolio of securities designed to achieve
that Fund's stated investment objectives.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS?
Each Fund has distinct investment objectives and policies. There can be no
assurance that a Fund's objectives will be achieved. For a complete
description of each Fund's investment objectives and policies, see
"Investment Objectives and Policies," "Description of Securities" and
"Investment Techniques."
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FUND NAME INVESTMENT OBJECTIVES INVESTMENT CRITERIA BENCHMARKS
------------- --------------------- ------------------- ----------
BALANCED FUND Long-term capital growth Between 45% and 65% of total The Lehman Aggregate
and current income. assets in equity securities Bond Index and the
and at least 25% in fixed Standard & Poor's Index
income senior securities. of 500 Common Stocks
(the "S&P 500 Index")
- ----------------------------------------------------------------------------------------------------
SELECT EQUITY Total return through At least 90% of total assets The S&P 500 Index
FUND investments in equity in equity securities. The
securities consisting of Fund's investments are
capital appreciation selected using
plus dividend income both fundamental research and
that, net of Fund a variety of quantitative
expenses, exceeds the techniques which seek to
total return realized on maximize the
the S&P 500 Index. Fund's reward to risk ratio.
- ----------------------------------------------------------------------------------------------------
GROWTH AND Long-term growth of At least 65% of total assets The S&P 500 Index
INCOME FUND capital and growth of in equity securities that the
income. Investment Adviser considers
to have favorable prospects
for capital appreciation
and/or dividend paying
ability.
- ----------------------------------------------------------------------------------------------------
CAPITAL GROWTH Long-term capital At least 65% of total assets The S&P 500 Index
FUND growth. in equity securities. The
Investment Adviser considers
long-term
capital appreciation potential
in selecting investments.
- ----------------------------------------------------------------------------------------------------
SMALL CAP Long-term capital At least 65% of total assets The Russell 2000
EQUITY FUND growth. in equity securities of
companies with public stock
market capitalizations of $1
billion or less at the time of
investment. The Fund currently
emphasizes investments
in companies with
public stock market
capitalizations
of $500 million or less at the
time of investment.
</TABLE>
(continued)
3
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FUND NAME INVESTMENT OBJECTIVES INVESTMENT CRITERIA BENCHMARK
------------- ---------------------- --------------------- -----------------------
INTERNATIONAL Long-term capital Substantially all, and The FT-Actuaries Europe
EQUITY FUND appreciation. at least 65%, of total and Pacific Index
assets in equity (unhedged)
securities of companies
organized outside
the United States or
whose securities are
principally traded
outside the United
States. The Fund may
invest in securities of
issuers located in
countries with emerging
economies or securities
markets and employ
certain currency
management techniques.
- --------------------------------------------------------------------------------------------
ASIA GROWTH Long-term capital Substantially all, and The (MSCI) Morgan
FUND appreciation. at least 65%, of total Stanley Capital
assets in equity International AC Asia
securities of companies Free ex Japan Index
in China, Hong (unhedged)
Kong, India, Indonesia,
Malaysia, Pakistan, the
Philippines,
Singapore, South Korea,
Sri Lanka, Taiwan and
Thailand. The Fund may
employ certain currency
management techniques.
</TABLE>
- --------------------------------------------------------------------------------
WHAT ARE THE RISK FACTORS AND SPECIAL CHARACTERISTICS THAT I SHOULD
CONSIDER BEFORE INVESTING?
Each Fund's share price will fluctuate with market, economic and, to the
extent applicable, foreign exchange conditions, so that an investment in any
of the Funds may be worth more or less when redeemed than when purchased.
None of the Funds should be relied upon as a complete investment program.
There can be no assurance that a Fund's investment objectives will be
achieved. See "Risk Factors."
Risk of Investments in Small to Medium Capitalization Companies. To the
extent that a Fund invests in the securities and related financial
instruments of small to medium sized market capitalization companies, a Fund
may be exposed to a higher degree of risk and price volatility because such
securities may lack sufficient market liquidity to enable the Fund to effect
sales at an advantageous time or without a substantial drop in price.
Foreign Risks. Investments in securities of foreign issuers and currencies
involve risks that are different from those associated with investment in
domestic securities. The risks of foreign investments and currencies include
changes in relative currency exchange rates, political and economic
developments, the imposition of exchange controls, confiscation and other
governmental restrictions. Generally, there is less availability of data on
foreign companies and securities markets as well as less regulation of
foreign stock exchanges, brokers and issuers. A Fund's investments in
emerging markets and countries involves greater risks than investments in
the developed countries of Western Europe, the U.S. and Japan. In addition,
because the International Equity and Asia Growth Funds invest primarily
outside the U.S., these Funds may involve greater risks, since the
securities markets of foreign countries are generally less liquid and
subject to greater price volatility. In particular, the securities markets
of the developing countries of Asia are marked by 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.
Other. A Fund's use of certain investment techniques, including
derivatives, forward contracts, options and futures will subject the Fund to
greater risk than funds that do not employ such techniques.
4
<PAGE>
WHO MANAGES THE FUNDS?
Goldman Sachs Asset Management acts as administrator to each Fund and
serves as the Investment Adviser to the Balanced, Growth and Income, Small
Cap Equity and International Equity Funds. Goldman Sachs Funds Management,
L.P. serves as Investment Adviser to the Capital Growth and Select Equity
Funds. Goldman Sachs Asset Management International serves as Investment
Adviser to the Asia Growth Fund and subadviser to the International Equity
Fund. As of March 27, 1996, the Investment Advisers, together with their
affiliates, acted as investment adviser, administrator or distributor for
assets in excess of $58 billion.
WHO DISTRIBUTES THE FUND'S SHARES?
Goldman Sachs acts as distributor of each Fund's shares.
WHAT IS THE MINIMUM INVESTMENT?
<TABLE>
<CAPTION>
MINIMUM
--------------------
INITIAL
PURCHASE ADDITIONAL
TYPE OF PURCHASE AMOUNT INVESTMENTS
---------------- -------- -----------
<S> <C> <C>
Regular Purchases........................................ $1,500 $50
Tax-Sheltered Retirement Plans........................... $ 250 $50
Automatic Investment Plan................................ $ 50 $50
</TABLE>
For further information, see "How to Invest--How to Buy Shares of the
Funds" on page 33.
HOW DO I PURCHASE SHARES?
You may purchase shares of the Funds through Goldman Sachs and certain
investment dealers, including members of the National Association of
Securities Dealers, Inc. (the "NASD") and certain other financial service
firms that have sales agreements with Goldman Sachs ("Authorized Dealers").
See "How to Invest" on page 32.
WHAT ARE MY PURCHASE ALTERNATIVES?
The Funds offer two classes of shares through this Prospectus which may be
purchased at the next determined net asset value ("NAV") plus a sales
charge, which, depending on the class of shares you choose for investment,
may be imposed either at the time of purchase (Class A shares) or on a
contingent deferred basis at the time of redemption (Class B shares). Direct
purchases of $1 million or more of Class A shares will be sold without an
initial sales charge and will be subject to a contingent deferred sales
charge at the time of certain redemptions.
<TABLE>
<CAPTION>
MAXIMUM FRONT MAXIMUM CONTINGENT
ALL FUNDS END SALES CHARGE DEFERRED SALES CHARGE
--------- ---------------- ---------------------
<S> <C> <C>
Class A.................. 5.5% (See above)
Class B.................. N/A 5% declining to 0% after six years
</TABLE>
Over time, the deferred sales charge and distribution fees attributable to
Class B shares will exceed the initial sales charge and the distribution
fees attributable to Class A shares. See "How to Invest--Alternative
Purchase Arrangements" on page 32.
5
<PAGE>
HOW DO I SELL MY SHARES?
You may redeem shares upon request on any Business Day, as defined under
"Additional Information," at the net asset value next determined after
receipt of such request in proper form, subject to any applicable contingent
deferred sales charge. See "How to Sell Shares of the Funds."
HOW DO I RECEIVE DIVIDENDS AND DISTRIBUTIONS?
<TABLE>
<CAPTION>
INVESTMENT INCOME DIVIDENDS
--------------------------- CAPITAL GAINS
FUND DECLARED AND PAID DISTRIBUTIONS
---- ----------------- -------------
<S> <C> <C>
Balanced............................ Quarterly Annually
Select Equity....................... Annually Annually
Growth and Income................... Quarterly Annually
Capital Growth...................... Annually Annually
Small Cap Equity.................... Annually Annually
International Equity................ Annually Annually
Asia Growth......................... Annually Annually
</TABLE>
You may receive dividends in additional shares of the same class of the
Fund in which you have invested or you may elect to receive cash, shares of
the same class of other mutual funds sponsored by Goldman Sachs (the
"Goldman Sachs Portfolios") or ILA Service Units of the Prime Obligations
Portfolio or the Tax-Exempt Diversified Portfolio of Goldman Sachs Money
Market Trust, if you hold Class A shares of a Fund, or ILA Class B Units of
the Prime Obligations Portfolio, if you hold Class B shares of a Fund (the
"ILA Portfolios"). For further information concerning dividends, see
"Dividends."
6
<PAGE>
FEES AND EXPENSES
<TABLE>
<CAPTION>
GROWTH SMALL
SELECT AND CAPITAL CAP
BALANCED EQUITY INCOME GROWTH EQUITY
FUND FUND FUND FUND FUND
------------------ ------------------ ------------------ ------------------ ------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales
Charge Imposed
on Purchases... 5.5%/1/ none 5.5%/1/ none 5.5%/1/ none 5.5%/1/ none 5.5%/1/ none
Maximum Sales
Charge Imposed
on Reinvested
Dividends...... none none none none none none none none none none
Maximum Deferred
Sales Charge... none/1/ 5.0% none/1/ 5.0% none/1/ 5.0% none/1/ 5.0% none/1/ 5.0%
Redemption
Fees/2/........ none none none none none none none none none none
Exchange
Fees/2/........ none none none none none none none none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees
(including,
after
applicable
limitations,
advisory and
administration
fees).......... 0.65% 0.65% 0.59%/6/ 0.59%/6/ 0.70% 0.70% 1.00% 1.00% 1.00% 1.00%
Distribution
(Rule 12b-1)
Fees (after
applicable
limitations)... 0.00%/3/ 0.75% 0.21%/3/ 0.75% 0.00%/3/ 0.75% 0.00%/3/ 0.75% 0.00%/3/ 0.75%
Other Expenses:
Authorized
Dealer Service
Fees........... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses
(after
applicable
limitations)... 0.10%/4/ 0.10%/4/ 0.14%/6/ 0.14%/6/ 0.27%/6/ 0.27%/6/ 0.14% 0.14% 0.30% 0.30%
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL FUND
OPERATING
EXPENSES (AFTER
FEE AND EXPENSE
LIMITATION)..... 1.00%/5/ 1.75%/5/ 1.19%/6/ 1.73%/6/ 1.22%/6/ 1.97%/6/ 1.39%/5/ 2.14%/5/ 1.55%/5/ 2.30%/5/
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
INT'L ASIA
EQUITY GROWTH
FUND FUND
--------------------- ---------------------
CLASS A CLASS B CLASS A CLASS B
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales
Charge Imposed
on Purchases... 5.5%/1/ none 5.5%/1/ none
Maximum Sales
Charge Imposed
on Reinvested
Dividends...... none none none none
Maximum Deferred
Sales Charge... none/1/ 5.0% none/1/ 5.0%
Redemption
Fees/2/........ none none none none
Exchange
Fees/2/........ none none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
Management Fees
(including,
after
applicable
limitations,
advisory and
administration
fees).......... 0.86%/6/ 0.86%/6/ 0.86%/6/ 0.86%/6/
Distribution
(Rule 12b-1)
Fees (after
applicable
limitations)... 0.21%/3/ 0.75% 0.21%/3/ 0.75%
Other Expenses:
Authorized
Dealer Service
Fees........... 0.25% 0.25% 0.25% 0.25%
Other Expenses
(after
applicable
limitations)... 0.36%/6/ 0.36%/6/ 0.34%/6/ 0.34%/6/
---------- ---------- ---------- ----------
TOTAL FUND
OPERATING
EXPENSES (AFTER
FEE AND EXPENSE
LIMITATION)..... 1.68%/6/ 2.22%/6/ 1.66%/6/ 2.20%/6/
========== ========== ========== ==========
</TABLE>
EXAMPLE
You would pay the following expenses on a hypothetical $1,000 investment
(including the maximum sales charge) assuming (i) a 5% annual return and (ii)
redemption at the end of each time period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Balanced Fund
Class A Shares................................ $65 $85 $107 $171
Class B Shares
--Assuming complete redemption at end of peri-
od........................................... 68 85 115 181
--Assuming no redemption...................... 18 55 95 181
Select Equity Fund
Class A Shares................................ 66 91 117 191
Class B Shares
--Assuming complete redemption at end of peri-
od........................................... 68 84 114 183
--Assuming no redemption...................... 18 54 94 183
Growth and Income Fund
Class A Shares................................ 67 92 118 195
Class B Shares
--Assuming complete redemption at end of peri-
od........................................... 70 92 126 203
--Assuming no redemption...................... 20 62 106 203
Capital Growth Fund
Class A Shares................................ 68 97 127 213
Class B Shares
--Assuming complete redemption at end of peri-
od........................................... 72 97 135 221
--Assuming no redemption...................... 22 67 115 221
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Small Cap Equity Fund
Class A Shares.................................. 70 101 135 229
Class B Shares
--Assuming complete redemption at end of period. 73 102 143 237
--Assuming no redemption........................ 23 72 123 237
International Equity Fund
Class A Shares.................................. 71 105 141 243
Class B Shares
--Assuming complete redemption at end of period. 73 99 139 234
--Assuming no redemption........................ 23 69 119 234
Asia Growth Fund
Class A Shares.................................. 71 104 140 241
Class B Shares
--Assuming complete redemption at end of period. 72 99 138 231
--Assuming no redemption........................ 22 69 118 231
</TABLE>
The hypothetical example assumes that a contingent deferred sales charge 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.
- --------
/1/ As a percentage of the offering price. No sales charge is imposed on
purchases of Class A shares by certain classes of investors. A contingent
deferred sales charge of 1.00% is imposed on certain redemptions of Class A
shares sold without an initial sales charge as part of an investment of $1
million or more. See "How to Invest--Offering Price."
/2/ 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 Portfolios or units of the ILA Portfolios and
free automatic exchanges pursuant to the Automatic Exchange Program, six
free exchanges are permitted in each twelve month period. A fee of $12.50
may be charged for each subsequent exchange during such period. See "How to
Invest--Exchange Privilege."
/3/ Goldman Sachs voluntarily has agreed to waive the entire distribution fee
attributable to Class A shares of the Balanced, Growth and Income, Capital
Growth and Small Cap Equity Funds. In addition, Goldman Sachs voluntarily
has agreed to waive a portion of the distribution fee attributable to Class
A shares of the Select Equity, International Equity and Asia Growth Funds.
Goldman Sachs has no current intention of modifying or discontinuing such
limitations but may do so in the future at its discretion. Without this
waiver, the distribution fees payable by these Funds would be 0.25% annually
of average daily net assets attributable to the Class A shares and the
Funds' Total Operating Expenses attributable to the Class A shares would be
correspondingly higher.
/4/ The Investment Adviser has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Balanced Fund (excluding advisory, administration,
distribution and authorized dealer service fees, taxes, interest and
brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.10% of the Fund's average
daily net assets. The Investment Adviser has no current intention of
modifying or discontinuing such limitation but may do so in the future at
its discretion.
/5/ Based on estimated amounts for the current fiscal year. If Goldman Sachs and
the Investment Advisers had not agreed to the limits described above, the
"Other Expenses" and "Total Operating Expenses," respectively, of the
Balanced, Capital Growth and Small Cap Equity Funds would be (as a
percentage of average daily net assets): Balanced--0.75% and 1.90% in the
case of Class A shares and 0.75% and 2.40% in the case of Class B shares,
Capital Growth--0.14% and 1.64% in the case of Class A shares and 0.14% and
2.14% in the case of Class B shares, and Small Cap Equity--0.30% and 1.80%
in the case of Class A shares and 0.30% and 2.30% in the case of Class B
shares. The annual "Management Fees," "Distribution Fees," "Other Expenses"
and "Total Operating Expenses," respectively, incurred by the Class A shares
of these Funds during the fiscal year ended January 31, 1996 (expressed as a
percentage of average daily net assets after fee adjustments) were as
follows: Balanced--0.65%, 0.03%, 0.32% and 1.00%, Capital Growth--1.00%,
0.08%, 0.28% and 1.36% and Small Cap Equity--1.00%, 0.09%, 0.32% and 1.41%.
See "Management--Investment Advisers, Subadviser and Administrator" and
"Distribution and Authorized Dealer Service Plans."
/6/ Based on estimated amounts for the current fiscal year. The Investment
Advisers and GSAM have voluntarily agreed to limit their advisory and
administration fees to the following, respectively, (as a percentage of
average daily net assets): Select Equity Fund--0.44% and 0.15%,
International Equity Fund--0.71% and 0.15% and Asia Growth Fund--0.71% and
0.15%. In addition, the Investment Advisers and GSAM have voluntarily agreed
to reduce or limit certain "Other Expenses" of the Select Equity, Growth and
Income, International Equity and Asia Growth Funds (excluding transfer
agency fees estimated to be 0.08%, 0.16%, 0.12% and 0.10%, respectively, of
average daily net assets, advisory, administration, distribution and
authorized dealer service fees, taxes, interest and brokerage fees and
litigation, indemnification and other extraordinary expenses) to 0.06%,
0.11%, 0.24% and 0.24%, respectively, of the Select Equity, Growth and
Income, International Equity and Asia Growth Fund's average daily net
assets. The Investment Advisers and
8
<PAGE>
GSAM have no current intention of modifying or discontinuing any of such
limitations but may do so in the future at their discretion. Without such
limitations, "Management Fees," "Other Expenses" and "Total Operating
Expenses" would be as follows: Select Equity--0.75%, 0.30% and 1.55% in the
case of Class A shares and 0.75%, 0.30% and 2.05% in the case of Class B
shares, Growth and Income--0.70%, 0.27% and 1.47% in the case of Class A
shares and 0.70%, 0.27% and 1.97% in the case of Class B shares,
International Equity--1.00%, 0.36% and 1.86% in the case of Class A shares
and 1.00%, 0.36% and 2.36% in the case of Class B shares and Asia Growth--
1.00%, 0.52% and 2.02% in the case of Class A shares and 1.00%, 0.52% and
2.52% in the case of Class B shares. The annual "Management Fees,"
"Distribution Fees," "Other Expenses" and "Total Operating Expenses,"
respectively, incurred by the Class A shares of these Funds during the fiscal
year ended January 31, 1996 (expressed as a percentage of average daily net
assets after fee adjustments) were as follows: Select Equity--0.60%, 0.19%,
0.46% and 1.25%, Growth and Income--0.70%, 0.06%, 0.44% and 1.20%,
International Equity--1.00%, 0.08%, 0.44% and 1.52% and Asia Growth--1.00%,
0.07%, 0.70% and 1.77%.
The information with respect to the Funds set forth in the foregoing table
and hypothetical example relates only to Class A and B shares. The Select
Equity, Growth and Income, International Equity and Asia Growth Funds, but not
the other Funds, also offer Institutional and Service Shares, which are
subject to different fees and expenses (which affect performance), have
different minimum investment requirements and are entitled to different
services than Class A shares and Class B shares. Information regarding
Institutional and Service Shares may be obtained from your sales
representative or from Goldman Sachs by calling the number on the back cover
page of this Prospectus. Because of the Distribution Plans, long-term
shareholders may pay more than the economic equivalent of the maximum front-
end sales charges permitted by the National Association of Securities Dealers,
Inc.'s rules regarding investment companies.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on the fees and expenses included in the table and
hypothetical example above are based on estimated fees and expenses for the
current fiscal year and should not be considered as representative of past or
future expenses. Actual fees and expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, a Fund's
actual performance will vary and may result in an actual return greater or
less than 5%. See "Management--Investment Advisers, Subadviser and
Administrator."
9
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following data with respect to a share (of the Class specified) of the
Funds outstanding during the period(s) indicated has been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
incorporated by reference into the Additional Statement from the Annual Report
to shareholders for the Funds for the year ended January 31, 1996 (the "Annual
Report"). This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Additional Statement. The Annual Report also contains performance information
and is available upon request and without charge by calling the telephone
number or writing to one of the addresses on the back cover of this
Prospectus.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------------------ -------------------------------------
NET REALIZED TOTAL FROM NET
AND UNREALIZED INCOME REALIZED
NET ASSET GAIN (LOSS) ON (LOSS) GAIN ON TOTAL
VALUE, NET INVESTMENTS, FROM FROM NET INVESTMENT DISTRIBUTIONS
BEGINNING INVESTMENT OPTIONS AND INVESTMENT INVESTMENT AND FUTURES TO
OF PERIOD INCOME FUTURES OPERATIONS INCOME TRANSACTIONS SHAREHOLDERS
--------- ---------- -------------- ---------- ---------- ------------ -------------
BALANCED FUND
- ----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $14.22 $0.51 $3.43 $3.94 $(0.50) $(0.35) ($0.85)
<CAPTION>
FOR THE PERIOD OCTOBER 12, 1994(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995--Class A
Shares.......... 14.18 0.10 0.02 0.12 (0.08) -- (0.08)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-------------------
RATIO OF
NET RATIO OF NET NET
INCREASE RATIO OF NET ASSETS INVESTMENT
(DECREASE) NET ASSET NET INVESTMENT AT END RATIO OF INCOME
IN NET VALUE, EXPENSES INCOME PORTFOLIO OF EXPENSES (LOSS)
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(a) NET ASSETS NET ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
---------- --------- --------- ---------- ---------- --------- ------------ ---------- ----------
BALANCED FUND
- ----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $3.09 $17.31 28.10% 1.00% 3.65% 197.10%(g) $50,928 1.90% 2.75%
<CAPTION>
FOR THE PERIOD OCTOBER 12, 1994(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Class A
Shares.......... 0.04 14.22 0.87(c) 1.00(d) 3.39(d) 14.71(c) 7,510 8.29(d) (3.90)(d)
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------------------ -------------------------------------
NET REALIZED TOTAL FROM NET
AND UNREALIZED INCOME REALIZED
NET ASSET GAIN (LOSS) ON (LOSS) GAIN ON TOTAL
VALUE, NET INVESTMENTS, FROM FROM NET INVESTMENT DISTRIBUTIONS
BEGINNING INVESTMENT OPTIONS AND INVESTMENT INVESTMENT AND FUTURES TO
OF PERIOD INCOME FUTURES OPERATIONS INCOME TRANSACTIONS SHAREHOLDERS
--------- ---------- -------------- ---------- ---------- ------------ -------------
SELECT EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $14.61 $0.19 $5.43 $5.62 $(0.16) $(0.41) $(0.57)
1996--Institu-
tional Shares
(f)............. 16.97 0.16 3.23 3.39 (0.24) (0.41) (0.65)
1995--Class A
Shares.......... 15.93 0.20 (0.38) (0.18) (0.20) (0.94) (1.14)
1994--Class A
Shares.......... 15.46 0.17 2.08 2.25 (0.17) (1.61) (1.78)
1993--Class A
Shares.......... 15.05 0.22 0.41 0.63 (0.22) -- (0.22)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-------------------
RATIO OF
NET RATIO OF NET NET
INCREASE RATIO OF NET ASSETS INVESTMENT
(DECREASE) NET ASSET NET INVESTMENT AT END RATIO OF INCOME
IN NET VALUE, EXPENSES INCOME PORTFOLIO OF EXPENSES (LOSS)
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(a) NET ASSETS NET ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
---------- --------- --------- ---------- ---------- --------- ------------ ---------- ----------
SELECT EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $5.05 $19.66 38.63% 1.25% 1.01% 39.35% $129,045 1.55% 0.71%
1996--Institu-
tional Shares
(f)............. 2.74 19.71 20.14(c) 0.65(d) 1.49(d) 39.35(c) 64,829 0.96(d) 1.18(d)
1995--Class A
Shares.......... (1.32) 14.61 (1.10) 1.38 1.33 56.18 94,968 1.63 1.08
1994--Class A
Shares.......... 0.47 15.93 15.12 1.42 0.92 87.73 92,769 1.67 0.67
1993--Class A
Shares.......... 0.41 15.46 4.30 1.28 1.30 144.93 117,757 1.53 1.05
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------------------ -------------------------------------
NET REALIZED TOTAL FROM NET
AND UNREALIZED INCOME REALIZED
NET ASSET GAIN (LOSS) ON (LOSS) GAIN ON TOTAL
VALUE, NET INVESTMENTS, FROM FROM NET INVESTMENT DISTRIBUTIONS
BEGINNING INVESTMENT OPTIONS AND INVESTMENT INVESTMENT AND FUTURES TO
OF PERIOD INCOME FUTURES OPERATIONS INCOME TRANSACTIONS SHAREHOLDERS
--------- ---------- -------------- ---------- ---------- ------------ -------------
SELECT EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD MAY 24, 1991(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1992--Class A
Shares.......... 14.17 0.11 0.88 0.99 (0.11) -- (0.11)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
-------------------
RATIO OF
NET RATIO OF NET NET
INCREASE RATIO OF NET ASSETS INVESTMENT
(DECREASE) NET ASSET NET INVESTMENT AT END RATIO OF INCOME
IN NET VALUE, EXPENSES INCOME PORTFOLIO OF EXPENSES (LOSS)
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(a) NET ASSETS NET ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
---------- --------- --------- ---------- ---------- --------- ------------ ---------- ----------
SELECT EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD MAY 24, 1991(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992--Class A
Shares.......... 0.88 15.05 7.01(c) 1.57(d) 1.24(d) 135.02(d) 11151,142 1.82(d) 0.99(d)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------------------------------- -----------------------------------------------------
NET REALIZED TOTAL FROM NET
NET ASSET NET AND UNREALIZED INCOME (LOSS) REALIZED GAIN IN EXCESS
VALUE, INVESTMENT GAIN (LOSS) ON FROM FROM NET ON INVESTMENTS OF NET TOTAL
BEGINNING INCOME INVESTMENTS, INVESTMENT INVESTMENT OPTIONS INVESTMENT DISTRIBUTIONS TO
OF PERIOD (LOSS) OPTIONS AND FUTURES OPERATIONS INCOME AND FUTURES INCOME SHAREHOLDERS
--------- ---------- ------------------- ------------- ---------- -------------- ---------- ----------------
GROWTH AND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares......... $15.80 $0.33 $4.75 $ 5.08 $(0.30) $(0.60) $ -- $(0.90)
1995--Class A
Shares......... 15.79 0.20(e) 0.30(e) 0.50 (0.20) (0.33) (0.07) (0.60)
<CAPTION>
FOR THE PERIOD FEBRUARY 5, 1993(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994--Class A
Shares......... 14.18 0.15 1.68 1.83 (0.15) (0.06) (0.01) (0.22)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES
OR EXPENSE LIMITATIONS
----------------------
RATIO OF
NET RATIO OF
NET RATIO OF INVESTMENT NET NET
INCREASE NET ASSET NET INCOME ASSETS AT RATIO OF INVESTMENT
ADDITIONAL (DECREASE) VALUE, EXPENSES TO (LOSS) TO PORTFOLIO END OF EXPENSES INCOME (LOSS)
PAID-IN IN NET END OF TOTAL AVERAGE NET AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
CAPITAL ASSET VALUE PERIOD RETURN(a) ASSETS NET ASSETS RATE (IN 000S) NET ASSETS NET ASSETS
----------- ----------- --------- ----------- ----------- ----------- ----------- --------- ------------ -------------
GROWTH AND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares......... $ -- $ 4.18 $19.98 32.45% 1.20% 1.67% 57.93% $436,757 1.45% 1.42%
1995--Class A
Shares......... 0.11(e) 0.01 15.80 3.97 1.25 1.28 71.80 193,772 1.58 0.95
<CAPTION>
FOR THE PERIOD FEBRUARY 5, 1993(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994--Class A
Shares......... -- 1.61 15.79 13.08(c) 1.25(d) 1.23(d) 102.23(c) 41,528 3.24(d) (0.76)(d)
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------------------------------- -----------------------------------------------------
NET REALIZED TOTAL FROM NET
NET ASSET NET AND UNREALIZED INCOME (LOSS) REALIZED GAIN IN EXCESS
VALUE, INVESTMENT GAIN (LOSS) ON FROM FROM NET ON INVESTMENTS OF NET TOTAL
BEGINNING INCOME INVESTMENTS, INVESTMENT INVESTMENT OPTIONS INVESTMENT DISTRIBUTIONS TO
OF PERIOD (LOSS) OPTIONS AND FUTURES OPERATIONS INCOME AND FUTURES INCOME SHAREHOLDERS
--------- ---------- ------------------- ------------- ---------- -------------- ---------- ----------------
CAPITAL GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares......... $13.67 $0.12 $ 3.93 $ 4.05 $(0.12) $(2.69) $ -- $(2.81)
1995--Class A
Shares......... 15.96 0.03 (0.69) (0.66) (0.01) (1.62) -- (1.63)
1994--Class A
Shares......... 14.64 0.02 2.40 2.42 (0.01) (1.07) (0.02) (1.10)
1993--Class A
Shares......... 13.65 0.06 2.28 2.34 (0.07) (1.28) -- (1.35)
1992--Class A
Shares......... 11.10 0.28 2.90 3.18 (0.31) (0.32) -- (0.63)
<CAPTION>
FOR THE PERIOD APRIL 20, 1990(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1991--Class A
Shares......... 11.34 0.34 (0.27) 0.07 (0.31) -- -- (0.31)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES
OR EXPENSE LIMITATIONS
----------------------
RATIO OF
NET RATIO OF
NET RATIO OF INVESTMENT NET NET
INCREASE NET ASSET NET INCOME ASSETS AT RATIO OF INVESTMENT
ADDITIONAL (DECREASE) VALUE, EXPENSES TO (LOSS) TO PORTFOLIO END OF EXPENSES INCOME (LOSS)
PAID-IN IN NET END OF TOTAL AVERAGE NET AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
CAPITAL ASSET VALUE PERIOD RETURN(a) ASSETS NET ASSETS RATE (IN 000S) NET ASSETS NET ASSETS
----------- ----------- --------- ----------- ----------- ----------- ----------- --------- ------------ -------------
CAPITAL GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares......... -- $ 1.24 $14.91 30.45% 1.36% 0.65% 63.90% $881,056 1.61% 0.40%
1995--Class A
Shares......... -- (2.29) 13.67 (4.38) 1.38 0.16 38.36 862,105 1.63 (0.09)
1994--Class A
Shares......... -- 1.32 15.96 16.89 1.38 0.13 36.12 833,682 1.63 (0.12)
1993--Class A
Shares......... -- 0.99 14.64 18.01 1.41 0.42 58.93 665,976 1.66 0.17
1992--Class A
Shares......... -- 2.55 13.65 29.31 1.53 2.09 48.93 500,307 1.78 1.84
<CAPTION>
FOR THE PERIOD APRIL 20, 1990(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991--Class A
Shares......... -- (0.24) 11.10 0.84(c) 1.27(c) 3.24(c) 33.63(c) 437,533 1.47(c) 3.04(c)
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------------------------------- -----------------------------------------------------
NET REALIZED TOTAL FROM NET
NET ASSET NET AND UNREALIZED INCOME (LOSS) REALIZED GAIN IN EXCESS
VALUE, INVESTMENT GAIN (LOSS) ON FROM FROM NET ON INVESTMENTS OF NET TOTAL
BEGINNING INCOME INVESTMENTS, INVESTMENT INVESTMENT OPTIONS INVESTMENT DISTRIBUTIONS TO
OF PERIOD (LOSS) OPTIONS AND FUTURES OPERATIONS INCOME AND FUTURES INCOME SHAREHOLDERS
--------- ---------- ------------------- ------------- ---------- -------------- ---------- ----------------
SMALL CAP EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares......... $16.14 $(0.23) $ 1.39 $ 1.16 $ -- $(0.01) $ -- $(0.01)
1995--Class A
Shares......... 20.67 (0.07) (3.53) (3.60) -- (0.69) (0.24) (0.93)
1994--Class A
Shares......... 16.68 (0.04) 5.03 4.99 -- (1.00) -- (1.00)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES
OR EXPENSE LIMITATIONS
----------------------
RATIO OF
NET RATIO OF
NET RATIO OF INVESTMENT NET NET
INCREASE NET ASSET NET INCOME ASSETS AT RATIO OF INVESTMENT
ADDITIONAL (DECREASE) VALUE, EXPENSES TO (LOSS) TO PORTFOLIO END OF EXPENSES INCOME (LOSS)
PAID-IN IN NET END OF TOTAL AVERAGE NET AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
CAPITAL ASSET VALUE PERIOD RETURN(a) ASSETS NET ASSETS RATE (IN 000S) NET ASSETS NET ASSETS
----------- ----------- --------- ----------- ----------- ----------- ----------- --------- ------------ -------------
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares......... -- $ 1.15 $17.29 7.20% 1.41% (0.59)% 57.58% $204,994 1.66% (0.84)%
1995--Class A
Shares......... -- (4.53) 16.14 (17.53) 1.53 (0.53) 43.67 319,487 1.78 (0.78)
1994--Class A
Shares......... -- 3.99 20.67 30.13 1.60 (0.45) 56.81 261,074 1.85 (0.70)
<CAPTION>
INCOME (LOSS) FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------------------------------- -----------------------------------------------------
NET REALIZED TOTAL FROM NET
NET ASSET NET AND UNREALIZED INCOME (LOSS) REALIZED GAIN IN EXCESS
VALUE, INVESTMENT GAIN (LOSS) ON FROM FROM NET ON INVESTMENTS OF NET TOTAL
BEGINNING INCOME INVESTMENTS, INVESTMENT INVESTMENT OPTIONS INVESTMENT DISTRIBUTIONS TO
OF PERIOD (LOSS) OPTIONS AND FUTURES OPERATIONS INCOME AND FUTURES INCOME SHAREHOLDERS
--------- ---------- ------------------- ------------- ---------- -------------- ---------- ----------------
FOR THE PERIOD OCTOBER 22, 1992(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993--Class A
Shares......... 14.18 0.03 2.50 2.53 (0.03) -- -- (0.03)
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES
OR EXPENSE LIMITATIONS
----------------------
RATIO OF
NET RATIO OF
NET RATIO OF INVESTMENT NET NET
INCREASE NET ASSET NET INCOME ASSETS AT RATIO OF INVESTMENT
ADDITIONAL (DECREASE) VALUE, EXPENSES TO (LOSS) TO PORTFOLIO END OF EXPENSES INCOME (LOSS)
PAID-IN IN NET END OF TOTAL AVERAGE NET AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
CAPITAL ASSET VALUE PERIOD RETURN(a) ASSETS NET ASSETS RATE (IN 000S) NET ASSETS NET ASSETS
----------- ----------- --------- ----------- ----------- ----------- ----------- --------- ------------ -------------
FOR THE PERIOD OCTOBER 22, 1992(b) THROUGH JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993--Class A
Shares......... -- 2.50 16.68 17.86(c) 1.65(d) 0.62(d) 7.12(d) 59,339 2.70(d) (0.43)(d)
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------- ----------------------------------------------------
NET REALIZED NET REALIZED
AND AND FROM NET
UNREALIZED UNREALIZED REALIZED
GAIN (LOSS) GAIN (LOSS) TOTAL GAIN GAIN ON
NET ASSET NET ON ON FOREIGN (LOSS) INVESTMENT, TOTAL
VALUE, INVESTMENT INVESTMENTS, CURRENCY FROM FROM NET OPTION AND IN EXCESS OF DISTRIBUTIONS
BEGINNING INCOME OPTIONS AND RELATED INVESTMENT INVESTMENT FUTURES NET INVESTMENT TO
OF PERIOD (LOSS) FUTURES TRANSACTIONS OPERATIONS INCOME TRANSACTIONS INCOME SHAREHOLDERS
--------- ---------- ------------ ------------ ---------- ---------- ------------ -------------- -------------
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $14.52 $0.13 $ 2.58 $ 1.42 $ 4.13 $(0.58) $(0.87) -- $(1.45)
1995--Class A
Shares.......... 18.10 0.06 (3.04) (0.01) (2.99) -- (0.59) -- (0.59)
1994--Class A
Shares.......... 14.35 0.05 4.08 (0.38) 3.75 -- -- -- --
<CAPTION>
FOR THE PERIOD DECEMBER 1, 1992(b) THROUGH JANUARY 31,
- ------------------------------------------------------
1993--Class A
Shares.......... 14.18 (0.01) 0.29 (0.11) 0.17 -- -- -- --
<CAPTION>
RATIOS
ASSUMING
NO
VOLUNTARY
WAIVER OF
FEES OR
EXPENSE
LIMITATIONS
-----------
RATIO OF RATIO OF RATIO OF
NET NET NET RATIO OF NET
INCREASE NET EXPENSES INVESTMENT EXPENSES INVESTMENT
(DECREASE) ASSET TO INCOME NET ASSET TO INCOME
IN NET VALUE, AVERAGE (LOSS) TO PORTFOLIO AT END OF AVERAGE (LOSS) TO
ASSET END OF TOTAL NET AVERAGE TURNOVER PERIOD (IN NET AVERAGE
VALUE PERIOD RETURN(a) ASSETS NET ASSETS RATE 000S) ASSETS NET ASSETS
---------- ------ --------- -------- ---------- --------- ---------- -------- -----------
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $ 2.68 $17.20 28.68% 1.52% 0.26% 68.48% $330,860 1.77% 0.01%
1995--Class A
Shares.......... (3.58) 14.52 (16.65) 1.73 0.40 84.54 275,086 1.98 0.15
1994--Class A
Shares.......... 3.75 18.10 26.13 1.76 0.51 60.04 269,091 2.01 0.26
<CAPTION>
FOR THE PERIOD DECEMBER 1, 1992(b) THROUGH JANUARY 31,
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993--Class A
Shares.......... 0.17 14.35 1.23 (c) 1.80 (d) (0.42)(d) 0.00 66,063 2.58(d) 1.20(d)
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------- ----------------------------------------------------
NET REALIZED NET REALIZED
AND AND FROM NET
UNREALIZED UNREALIZED REALIZED
GAIN (LOSS) GAIN (LOSS) TOTAL GAIN GAIN ON
NET ASSET NET ON ON FOREIGN (LOSS) INVESTMENT, TOTAL
VALUE, INVESTMENT INVESTMENTS, CURRENCY FROM FROM NET OPTION AND IN EXCESS OF DISTRIBUTIONS
BEGINNING INCOME OPTIONS AND RELATED INVESTMENT INVESTMENT FUTURES NET INVESTMENT TO
OF PERIOD (LOSS) FUTURES TRANSACTIONS OPERATIONS INCOME TRANSACTIONS INCOME SHAREHOLDERS
--------- ---------- ------------ ------------ ---------- ---------- ------------ -------------- -------------
ASIA GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $13.31 $0.17 $3.44 $(0.12) $ 3.49 $(0.17) -- $(0.14) $(0.31)
<CAPTION>
FOR THE PERIOD JULY 8, 1994(b) THROUGH JANUARY 31,
- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Class A
Shares.......... 14.18 0.11 (0.89) 0.01 (0.77) (0.10) -- -- (0.10)
<CAPTION>
RATIOS
ASSUMING
NO
VOLUNTARY
WAIVER OF
FEES OR
EXPENSE
LIMITATIONS
-----------
RATIO OF RATIO OF RATIO OF
NET NET NET RATIO OF NET
INCREASE NET EXPENSES INVESTMENT EXPENSES INVESTMENT
(DECREASE) ASSET TO INCOME NET ASSET TO INCOME
IN NET VALUE, AVERAGE (LOSS) TO PORTFOLIO AT END OF AVERAGE (LOSS) TO
ASSET END OF TOTAL NET AVERAGE TURNOVER PERIOD (IN NET AVERAGE
VALUE PERIOD RETURN(a) ASSETS NET ASSETS RATE 000S) ASSETS NET ASSETS
---------- ------ --------- -------- ---------- --------- ---------- -------- ----------
ASIA GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996--Class A
Shares.......... $3.18 $16.49 26.49% 1.77% 1.05% 88.80% $205,539 2.02% 0.80%
<CAPTION>
FOR THE PERIOD JULY 8, 1994(b) THROUGH JANUARY 31,
- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995--Class A
Shares.......... (0.87) 13.31 (5.46)(c) 1.90(d) 1.83(d) 36.08(c) 124,298 2.38(d) 1.35(d)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
(b)Commencement of operations.
(c)Not annualized.
(d)Annualized.
(e)Calculated based on the average shares outstanding methodology.
(f)Institutional shares commenced operations on June 15, 1995.
(g)Includes the effect of mortgage dollar roll transactions.
12
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and principal investment policies of each Fund are
described below. Other investment practices and management techniques, which
involve certain risks are described under "Description of Securities," "Risk
Factors" and "Investment Techniques." There can be no assurance that a Fund's
investment objectives will be achieved.
Potential equity investments for each Fund (other than the Select Equity
Fund which evaluates securities using both fundamental research and a variety
of quantitative techniques as described below under "Select Equity Fund")
generally are evaluated using fundamental analysis, including criteria such as
earnings, cash flow, asset values and/or dividend-paying ability. In choosing
a Fund's securities, the Investment Adviser utilizes first-hand fundamental
research, including visiting company facilities to assess operations and meet
decision-makers. The Investment Advisers may also use a macro analysis of
numerous economic and valuation variables to determine and anticipate changes
in company earnings and the overall investment climate. Each Investment
Adviser is able to draw on the research and market expertise of the Goldman
Sachs Investment Research Department and other affiliates of the Investment
Adviser as well as information provided by other securities dealers.
The Investment Advisers intend to purchase common stocks, preferred stocks,
interests in real estate investment trusts, convertible debt obligations,
convertible preferred stocks, equity interests in trusts, partnerships, joint
ventures and similar enterprises, warrants and stock purchase rights of
companies ("equities securities") that are, in their view, underpriced
relative to a combination of such companies' long-term earnings prospects,
growth rate, free cash flow and/or dividend-paying ability. The Funds may also
purchase securities of companies that have experienced difficulties and that,
in the opinion of the Investment Advisers, are available at attractive prices.
Consideration will be given to the business quality of the issuer. Factors
positively affecting the Investment Advisers' 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
market 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.
Equity securities in a Fund's portfolio will generally be sold when the
Investment Advisers believe that the market price fully reflects or exceeds
the securities' fundamental valuation or when other more attractive
investments are identified.
BALANCED FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital growth and current income. The Fund seeks capital
appreciation primarily through the equity component of its portfolio while
investing in fixed income securities primarily to provide income for regular
quarterly dividends.
Primary Investment Focus. The Fund invests, under normal circumstances,
between 45% and 65% of its total assets in equity securities. The Fund also
invests at least 25% of its total assets in fixed income senior securities and
the remainder of its assets in equity securities, other fixed income
securities and cash. The percentage of the portfolio invested in equity and
fixed income securities will vary from time to time as the Investment Adviser
evaluates their relative attractiveness based on market valuations, economic
growth and inflation prospects. This is subject to the Fund's intention to pay
regular quarterly 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.
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Other. 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 and economies, and equity securities quoted in a foreign
currency. A portion of the Fund's portfolio of equity securities may be
selected primarily to provide current income. Equity securities selected to
provide current income include interests in real estate investment trusts,
convertible securities, preferred stocks, utility stocks and interests in
limited partnerships.
The Fund's fixed income securities primarily include securities issued by
the U.S. Government, its agencies, instrumentalities or sponsored enterprises,
corporations or other entities, mortgage-backed and asset-backed securities,
municipal securities and custodial receipts. The Fund may also invest 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. Such
securities shall collectively be referred to herein as "fixed income
securities." The Fund's investments in fixed income securities that are issued
by foreign issuers, including issuers in countries with emerging markets may
not exceed 10% of the Fund's total assets.
SELECT EQUITY FUND
Objective. The Fund's investment objective is to provide investors with a
total return through investments in equity securities consisting of capital
appreciation plus dividend income that, net of Fund expenses, exceeds the
total return realized on the S&P 500 Index.
Primary Investment Focus. The Fund invests, under normal circumstances, at
least 90% of its total assets in equity securities. The Fund may invest in
equity securities of foreign issuers that are traded in the United States and
that comply with U.S. accounting standards. The Fund seeks to achieve its
investment objective by investing in a portfolio of equity securities selected
using both fundamental research and a variety of quantitative techniques which
seek to maximize the Fund's reward to risk ratio. The Fund's portfolio is
designed to have risk, capitalization and industry characteristics similar to
the S&P 500 Index. Select Equity Fund may only invest in fixed income
securities that are considered cash equivalents.
Investment Process. The Investment Adviser begins with a universe primarily
of large capitalization equity securities. The Investment Adviser uses a
proprietary multifactor model (the "Multifactor Model") to assign each equity
security a rating, and, if the security is followed by the Goldman Sachs
Investment Research Department (the "Research Department"), a second rating is
assigned based upon the Research Department's evaluation. In selecting
securities for the Fund, the Investment Adviser utilizes optimization models
to evaluate the ratings assigned by the Multifactor Model and the Research
Department to build a diversified portfolio. This portfolio is primarily
comprised of securities rated highest by the Investment Adviser's Multifactor
Model and research analysts and has risk characteristics and industry
weightings similar to the S&P 500 Index. Under normal conditions, the
securities of any one issuer may not exceed 5% of the Fund's total assets.
Multifactor Model. The Multifactor Model is a sophisticated computerized
rating system for valuing equity securities according to fundamental
investment characteristics. The factors used by the Multifactor Model
incorporate many variables studied by traditional fundamental analysis, and
cover measures of value, growth, momentum, risk (e.g., price/earnings ratio,
book/price ratio, growth forecasts, earnings estimate revisions, price
momentum, volatility and earnings stability). All of the factors used by the
Multifactor Model have been shown to significantly impact the performance of
equity securities. The weightings assigned to the factors are derived
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using a statistical formulation that considers each factor's historical
performance in different market environments. As such, the Multifactor Model
is designed to evaluate each security using only the factors that are
statistically related to returns in the anticipated market environment.
Because it includes many disparate factors, the Investment Adviser believes
that the Multifactor Model is broader in scope and provides a more thorough
evaluation than most conventional, value-oriented quantitative models. As a
result, the securities ranked highest by the Multifactor Model do not have one
dominant investment characteristic (such as a low price/earnings ratio);
rather, they possess an attractive combination of investment characteristics.
Research Department. In assigning ratings, the Research Department uses a
four category rating system ranging from "recommended for purchase" to "likely
to underperform." By employing both a quantitative (i.e., the Multifactor
Model) and a qualitative (i.e., the analyst's ratings) method of selecting
securities, the Fund seeks to capitalize on the strengths of each discipline.
GROWTH AND INCOME FUND
Objectives. The Growth and Income Fund's investment objectives are to
provide investors with long-term growth of capital and growth of income.
Primary Investment Focus. 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
dividend-paying ability.
Other. The Fund may invest up to 35% of its total assets in fixed income
securities that, in the opinion of the Investment Adviser, offer the potential
to further the Fund's investment objectives. In addition, although the Fund
will invest primarily in publicly traded U.S. securities, it may invest up to
25% of its total assets in foreign securities, including securities of issuers
in countries with emerging markets and economies.
CAPITAL GROWTH FUND
Objective. The Fund's investment objective is to provide investors with
long-term growth of capital.
Primary Investment Focus. The Fund invests, under normal circumstances, at
least 65% of its total assets in equity securities. The Fund seeks to achieve
its investment objective by investing primarily in equity and fixed income
securities that are considered by the Investment Adviser to have long-term
capital appreciation potential.
Other. Up to 25% of the Fund's total assets may be invested in fixed income
securities that, in the opinion of the Investment Adviser, offer long-term
capital appreciation possibilities. In addition, although the Fund invests
primarily in publicly traded U.S. securities, it may invest up to 25% of its
total assets in foreign securities, including securities of issuers in
countries with emerging markets and economies.
SMALL CAP EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital growth.
Primary Investment Focus. 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.
However, the Fund currently emphasizes investments in companies with public
stock market capitalizations of $500 million or less at the time of
investment. Under normal circumstances, the Fund's
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investment horizon for ownership of stocks will be two to three years.
Dividend income, if any, is an incidental consideration.
Small Capitalization Companies. The Fund will invest 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. However, investments in such small market
capitalization companies involve special risks. See "Description of
Securities" and "Risk Factors."
Other. The Fund may invest up to 35% of its total assets in the equity
securities of companies with public stock market capitalizations in excess of
$1 billion and in fixed income securities. In addition, although the Fund will
invest primarily in publicly traded U.S. securities, it may invest up to 25%
of its total assets in foreign securities, including issuers in countries with
emerging markets and economies.
INTERNATIONAL EQUITY FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal circumstances,
substantially all, and at least 65%, of its total assets in equity securities
of companies that are organized outside the United States or whose securities
are principally traded outside the United States. The Fund may allocate its
assets among countries as determined by the Investment Adviser from time to
time provided that the Fund's assets are invested in at least three foreign
countries. The Fund expects to invest a substantial portion of its assets in
the securities of companies located in the developed countries in Western
Europe and in Japan. However, the Fund may also invest in the securities of
issuers located in the following countries: Argentina, Australia, Bangladesh,
Brazil, Canada, Chile, China, Colombia, Czech Republic, Egypt, Hong Kong,
Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kenya, Kuwait, Malaysia,
Mexico, Morocco, New Zealand, Nigeria, Pakistan, the Philippines, Poland, The
Republic of Slovakia, Singapore, South Korea, Sri Lanka, South Africa, Taiwan,
Thailand, Turkey, Venezuela and Zimbabwe. Many of the countries in which the
Fund may invest have emerging markets or economies which involve certain risks
as described below under "Risk Factors--Special Risks of Investments in the
Asian and Other Emerging Markets," which are not present in investments in
more developed countries.
Other. The Fund may employ certain currency techniques to seek to hedge
against currency exchange rate fluctuations or to seek to increase total
return. When used to seek to enhance return, these management techniques are
considered speculative. Such currency management techniques involve risks
different from those associated with investing solely in U.S. dollar-
denominated securities of U.S. issuers. To the extent that the Fund is fully
invested in foreign securities while also maintaining currency positions, it
may be exposed to greater combined risk. The Fund's net currency positions may
expose it to risks independent of its securities positions. See "Description
of Securities", "Investment Techniques" and "Risk Factors." Up to 35% of the
Fund's total assets may be invested in fixed income securities.
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ASIA GROWTH FUND
Objective. The Fund's investment objective is to provide investors with
long-term capital appreciation.
Primary Investment Focus. The Fund invests, under normal market
circumstances, substantially all, and at least 65%, of its total assets in
equity securities of companies that satisfy at least one of the following
criteria: (i) their securities are traded principally on stock exchanges in
one or more of the Asian countries, (ii) they derive 50% or more of their
total revenue from goods produced, sales made or services performed in one or
more of the Asian countries, (iii) they maintain 50% or more of their assets
in one or more of the Asian countries, or (iv) they are organized under the
laws of one of the Asian countries. The Fund seeks to achieve its objective by
investing primarily in equity securities of Asian companies which are
considered by the Investment Adviser to have long-term capital appreciation
potential. Many of the countries in which the Fund may invest have emerging
markets or economies which involve certain risks as described under "Risk
Factors--Special Risks of Investments in the Asian and Other Emerging
Markets," which are not present in investments in more developed countries.
The Fund may purchase equity securities of issuers that have not paid
dividends on a timely basis, securities of companies that have experienced
difficulties, and securities of companies without performance records.
Other. The Fund may employ certain currency management techniques to seek to
hedge against currency exchange rate fluctuations or to seek to increase total
return. When used to seek to enhance return, these management techniques are
considered speculative. Such currency management techniques involve risks
different from those associated with investing solely in U.S. dollar-
denominated securities of U.S. issuers. To the extent that the Fund is fully
invested in foreign securities while also maintaining currency positions, it
may be exposed to greater combined risk. The Fund's net currency positions may
expose it to risks independent of its securities positions. See "Description
of Securities," "Investment Techniques" and "Risk Factors."
The Fund may allocate its assets among the Asian countries as determined
from time to time by the Investment Adviser. For purposes of the Fund's
investment policies, Asian countries are China, Hong Kong, India, Indonesia,
Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan
and Thailand as well as any other country in the Asian region (other than
Japan) to the extent that foreign investors are permitted by applicable law to
make such investments. Allocation of the Fund's investments will depend upon
the relative attractiveness of the Asian markets and particular 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 geographically concentrated. See "Description of Securities--
Foreign Transactions." The Fund may invest up to 35% of its total assets in
equity securities of issuers in other countries, including Japan, and fixed
income securities.
DESCRIPTION OF SECURITIES
CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities, including debt obligations
and preferred stock of the issuer convertible at a stated exchange rate into
common stock of the issuer. Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar
quality. As with all fixed income securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase
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as interest rates decline. However, when the market price of the common stock
underlying a convertible security exceeds the conversion price, the
convertible security tends to reflect the market price of the underlying
common stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus
may not decline in price to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an issuer's capital
structure and consequently entail less risk than the issuer's common stock. In
evaluating a convertible security, the Investment Adviser will give primary
emphasis to the attractiveness of the underlying common stock. The convertible
debt securities in which the Balanced Fund invests will be rated, at the time
of investment, B or better by Standard & Poor's Ratings Group ("Standard &
Poor's") or Moody's Investors Service, Inc. ("Moody's"), or if unrated by such
rating organizations, determined to be of comparable quality by the Investment
Adviser. The convertible securities, in which the Select Equity Fund invests,
are not subject to any minimum rating criteria. The convertible debt
securities in which the other Funds may invest are subject to the same rating
criteria as a Fund's investments in non-convertible debt securities.
Convertible debt securities are equity investments for purposes of each Fund's
investment policies.
FOREIGN INVESTMENTS
FOREIGN SECURITIES. Investments in foreign securities may offer potential
benefits that are not available from investments exclusively in U.S. dollar-
denominated domestic issues. Foreign countries may have economic policies or
business cycles different from those of the U.S. and markets for foreign
securities do not necessarily move in a manner parallel to U.S. markets.
Investing in the securities of foreign issuers involves risks that are not
typically associated with investing in U.S. dollar-denominated securities of
domestic issuers. Such investments may be affected by changes in currency
rates, changes in foreign or U.S. laws or restrictions applicable to such
investments and in exchange control regulations (e.g., currency blockage). A
decline in the exchange rate of the currency (i.e., weakening of the currency
against the U.S. dollar) in which a portfolio security is quoted or
denominated relative to the U.S. dollar would reduce the value of the
portfolio security. Commissions on transactions in foreign securities may be
higher than those for similar transactions on domestic stock markets. In
addition, clearance and settlement procedures may be different in foreign
countries and, in certain markets, such procedures have on occasion 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 U.S. Foreign securities markets may have substantially less volume
than U.S. securities markets and securities of many foreign issuers are less
liquid and more volatile than securities of comparable domestic issuers.
Furthermore, with respect to certain foreign countries, there is a possibility
of nationalization, expropriation or confiscatory taxation, imposition of
withholding taxes on dividend or interest payments, limitations on the removal
of funds or other assets of the Funds, political or social instability or
diplomatic developments which could affect investments in those countries.
INVESTMENTS IN ADRS, EDRS AND GDRS. 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 each
Fund, other than the Select Equity Fund, may also invest in European
Depository Receipts
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("EDRs") or other similar instruments representing securities of foreign
issuers (together,"Depository Receipts"). ADRs represent the right to receive
securities of foreign issuers deposited in a domestic bank or a correspondent
bank. Prices of ADRs are quoted in U.S. dollars and are traded in the United
States on exchanges or over-the-counter and are sponsored and issued by
domestic banks. EDRs and GDRs are receipts evidencing an arrangement with a
non-U.S. bank. EDRs and GDRs are not necessarily quoted in the same currency
as the underlying security. To the extent a Fund acquires Depository Receipts
through banks which do not have a contractual relationship with the foreign
issuer of the security underlying the Depository Receipts to issue and service
such Depository Receipts (unsponsored Depository Receipts), there may be an
increased possibility that the Fund would not become aware of and be able to
respond to corporate actions, such as stock splits or rights offerings
involving the foreign issuer, in a timely manner. In addition, the lack of
information may result in inefficiencies in the valuation of such instruments.
Investment in Depository Receipts does not eliminate all the risks inherent in
investing in securities of non-U.S. issuers. The market value of Depository
Receipts is dependent upon the market value of the underlying securities and
fluctuations in the relative value of the currencies in which the Depository
Receipt and the underlying securities are quoted. However, by investing in
Depository Receipts, such as ADRs, that are quoted in U.S. dollars, a Fund
will avoid currency risks during the settlement period for purchases and
sales.
FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers will
usually involve currencies of foreign countries, and because the International
Equity and Asia Growth Funds may have currency exposure independent of their
securities positions, the value of the assets of a Fund as measured in U.S.
dollars will be affected by changes in foreign currency exchange rates. A Fund
may, to the extent it invests in foreign securities, purchase or sell forward
foreign currency exchange contracts for hedging purposes and to seek to
protect against anticipated changes in future foreign currency exchange rates.
In addition, the International Equity and Asia Growth Funds may enter into
such contracts to seek to increase total return when the Investment Adviser
anticipates that the foreign currency will appreciate or depreciate in value,
but securities denominated or quoted in that currency do not present
attractive investment opportunities and are not held in the Fund's portfolio.
When entered into to seek to enhance return, forward foreign currency exchange
contracts are considered speculative. The International Equity and Asia Growth
Funds may also engage in cross-hedging by using forward contracts in a
currency different from that in which the hedged security is denominated or
quoted if the Investment Adviser determines that there is a pattern of
correlation between the two currencies. If a Fund enters into a forward
foreign currency exchange contract to buy foreign currency for any purpose or
the International Equity or Asia Growth Funds enter into forward foreign
currency exchange contracts to sell foreign currency to seek to increase total
return, the Fund will be required to place and maintain cash or liquid, high
grade debt securities in a segregated account with the Fund's custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. The Fund will incur costs in connection
with conversions between various currencies. A Fund may hold foreign currency
received in connection with investments in foreign securities when, in the
judgment of the Investment Adviser, it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in
the relevant exchange rate.
Currency exchange rates may fluctuate significantly over short periods of
time causing, along with other factors, a Fund's net asset value to fluctuate.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or anticipated changes in interest rates and
other complex factors, as seen from an international perspective. Currency
exchange rates also can be affected unpredictably by the intervention of U.S.
or foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in
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the United States or abroad. To the extent that a substantial portion of a
Fund's total assets, adjusted to reflect the Fund's net position after giving
effect to currency transactions, is denominated or quoted in the currencies of
foreign countries, the Fund will be more susceptible to the risk of adverse
economic and political developments within those countries.
The market in forward foreign currency exchange contracts, currency swaps
and other privately negotiated currency instruments authorized for use by the
International Equity and Asia Growth Funds, offers less protection against
defaults by the other party to such instruments than is available for currency
instruments traded on an exchange. Such contracts are subject to the risk that
the counterparty to the contract will default on its obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or
the benefits of a currency hedge or force the Fund to cover its purchase or
sale commitments, if any, at the current market price. A Fund will not enter
into forward foreign currency exchange contracts, currency swaps or other
privately negotiated currency instruments unless the credit quality of the
unsecured senior debt or the claims-paying ability of the counterparty is
considered to be investment grade by the Investment Adviser.
In addition to investing in securities denominated or quoted in a foreign
currency, the International Equity and Asia Growth Funds may engage in a
variety of foreign currency management techniques. However, due to the limited
market for these instruments with respect to the currencies of certain Asian
countries, the Investment Adviser does not currently anticipate that a
significant portion of Asia Growth Fund's currency exposure will be covered by
such instruments. The opportunity for hedging currency exposure to other
emerging markets is also generally limited. For a discussion of such
instruments and the risks associated with their use, see "Investment Objective
and Policies" in the Additional Statement.
FIXED INCOME SECURITIES
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 more volatile than the market prices of securities that pay interest
periodically. See "Taxation" in the Additional Statement.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Each Fund (other than the
Select Equity Fund) may invest in mortgage-backed securities ("Mortgage-Backed
Securities"), which represent direct or indirect participations in, or are
collateralized by and payable from, mortgage loans secured by real property.
Each Fund (other than the Select Equity Fund) may also invest in asset-backed
securities ("Asset-Backed Securities"). The principal and interest payments on
Asset-Backed Securities are collateralized by pools of assets such as auto
loans, credit card receivables, leases, installment contracts and personal
property. Such asset pools are securitized through the use of special purpose
trusts or corporations. Principal and interest payments may be credit enhanced
by a letter of credit, a pool insurance policy or a senior/subordinated
structure.
The Balanced Fund may also invest in stripped Mortgage-Backed Securities
("SMBS") (including interest only and principal only securities), which are
derivative multiple class Mortgage-Backed Securities. SMBS are
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usually structured with two different classes: one that receives 100% of the
interest payments and the other that receives 100% of the principal payments
from a pool of mortgage loans. If the underlying mortgage loans experience
different than anticipated prepayments of principal, a Fund may fail to fully
recoup its initial investment in these securities. The market value of the
class consisting entirely of principal payments generally is unusually
volatile in response to changes in interest rates. The yields on a class of
SMBS that receives all or most of the interest from mortgage loans are
generally higher than prevailing market yields on other Mortgage-Backed
Securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped.
CORPORATE DEBT OBLIGATIONS. Each Fund may invest in corporate debt
obligations. Corporate debt obligations are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations.
BANK OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated
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.
RATING CRITERIA. The debt securities in which the Balanced, Growth and
Income, International Equity and Asia Growth Funds may invest will, except as
noted below, be rated investment grade at the time of investment. Investment
grade debt securities are securities rated BBB or higher by Standard & Poor's
or Baa or higher by Moody's. A security will be deemed to have met a rating
requirement if it receives the minimum required rating from at least one such
rating organization even though it has been rated below the minimum rating by
one or more other rating organizations, or if unrated by such rating
organizations, determined by the Investment Adviser to be of comparable credit
quality. The Balanced Fund may invest up to 10% of its total assets in debt
securities that are rated BB or B by Standard & Poor's or Ba or B by Moody's
or, if unrated by such rating organizations, determined by the Investment
Adviser to be of comparable credit quality. The Capital Growth, Small Cap
Equity and Growth and Income Funds may invest up to 25%, 35% and 10%,
respectively, of their total assets in debt securities which are unrated or
rated in the lowest rating categories by Standard & Poor's or Moody's (i.e.,
BB or lower by Standard & Poor's or Ba or lower by Moody's), including
securities rated D by Moody's or Standard & Poor's. Fixed income securities
rated in the BBB or Baa category are considered medium-grade obligations with
speculative characteristics, and adverse economic conditions or changing
circumstances may weaken their issuers' capacity to pay interest and repay
principal. 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. Fixed income securities
rated BB or Ba or below (or comparable unrated securities) are commonly
referred to as "junk bonds" and are considered predominantly speculative and
may be questionable as to principal and interest payments. In some cases, such
bonds may be highly speculative, have poor prospects for reaching investment
grade standing and be in default. As a result, investment in such bonds will
entail greater speculative risks than those associated with investment in
investment grade bonds. Also, to the extent that the rating assigned to a
security in a Fund's portfolio is downgraded by a rating organization, the
market price and liquidity of such security may be adversely affected. See
Appendix A to the Additional Statement for a description of the corporate bond
ratings assigned by Standard & Poor's and Moody's.
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REAL ESTATE INVESTMENT TRUSTS ("REITS")
Each Fund may invest in REITs, which are pooled investment vehicles that
invest primarily in either real estate or real estate related loans. The value
of a REIT is affected by changes in the value of the properties owned by the
REIT or securing mortgage loans held by the REIT. REITs are dependent upon
cash flow from its investments to repay financing costs and the ability of the
REIT's manager. REITs are also subject to risks generally associated with
investments in real estate. A Fund will indirectly bear its proportionate
share of any expenses, including management fees, paid by a REIT in which it
invests.
INVESTMENT TECHNIQUES
OPTIONS ON SECURITIES AND SECURITIES INDICES
Each Fund (other than the Select Equity Fund) may write (sell) covered call
and put options and purchase call and put options on any securities in which
it may invest or on any securities index composed of securities in which it
may invest. The writing and purchase of options is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. The use of options
to seek to increase total return involves the risk of loss if the Investment
Adviser is incorrect in its expectation of fluctuations in securities prices
or interest rates. The successful use of options for hedging purposes also
depends in part on the ability of the Investment Adviser to manage future
price fluctuations and the degree of correlation between the options and
securities markets. If the Investment Adviser is incorrect in its expectation
of changes in securities prices or determination of the correlation between
the securities indices on which options are written and purchased and the
securities in a Fund's investment portfolio, the investment performance of the
Fund will be less favorable than it would have been in the absence of such
options transactions. The writing of options could significantly increase a
Fund's portfolio turnover rate and, therefore, associated brokerage
commissions or spreads.
OPTIONS ON FOREIGN CURRENCIES. A Fund may, to the extent it invests in
foreign securities, purchase and sell (write) call and put options on foreign
currencies for the purpose of protecting against declines in the U.S. dollar
value of foreign portfolio securities and anticipated dividends on such
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. In addition, the International 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, if there is a pattern of correlation between the two
currencies. 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 an option that a Fund has written is
exercised, the Fund could be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The purchase of
an option on foreign currency may constitute an effective hedge against
exchange rate fluctuations; however, in the event of exchange rate movements
adverse to a Fund's position, the Fund may forfeit the entire amount of the
premium plus related transaction costs. In addition to purchasing put and call
options for hedging purposes, the International 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 held in the
Fund's portfolio. When purchased or sold to seek to increase total return,
options on currencies are considered speculative. Options on foreign
currencies written or purchased by the Funds are traded on U.S. and foreign
exchanges or over-the-counter.
22
<PAGE>
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To seek to increase total return or to hedge against changes in interest
rates, securities prices or currency exchange rates, a Fund may purchase and
sell various kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts. Each Fund may also enter into
closing purchase and sale transactions with respect to any such contracts and
options. The futures contracts may be based on various securities (such as
U.S. Government securities), foreign currencies, securities indices and other
financial instruments and indices. The Select Equity Fund may enter into such
transactions only with respect to the S&P 500 Index. A Fund will engage in
futures and related options transactions only for bona fide hedging purposes
as defined in regulations of the Commodity Futures Trading Commission or to
seek to increase total return to the extent permitted by such regulations. A
Fund may not purchase or sell futures contracts or purchase or sell related
options to seek to increase total return, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial
margin deposits and premiums paid on the Fund's outstanding positions in
futures and related options entered into for the purpose of seeking to
increase total return would exceed 5% of the market value of the Fund's net
assets. These transactions involve brokerage costs, require margin deposits
and, in the case of contracts and options obligating a Fund to purchase
securities or currencies, require the Fund to segregate and maintain cash or
liquid, high grade debt securities with a value equal to the amount of the
Fund's obligations.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. See
"Investment Objectives and Policies--Futures Contracts and Options on Futures
Contracts" in the Additional Statement. Thus, while a Fund may benefit from
the use of futures and options on futures, unanticipated changes in interest
rates, securities prices or currency exchange rates may result in poorer
overall performance than if the Fund had not entered into any futures
contracts or options transactions. Because perfect correlation between a
futures position and portfolio position that is intended to be protected is
impossible to achieve, the desired protection may not be obtained and a Fund
may be exposed to risk of loss. The loss incurred by a Fund in entering into
futures contracts and in writing call options on futures is potentially
unlimited and may exceed the amount of the premium received. Futures markets
are highly volatile and the use of futures may increase the volatility of a
Fund's net asset value. The profitability of a Fund's trading in futures to
seek to increase total return depends upon the ability of the Investment
Adviser to correctly analyze the futures markets. In addition, because of the
low margin deposits normally required in futures trading, a relatively small
price movement in a futures contract may result in substantial losses to a
Fund. Further, futures contracts and options on futures may be illiquid, and
exchanges may limit fluctuations in futures contract prices during a single
day.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each Fund may purchase when-issued securities. When-issued transactions
arise when securities are purchased by a Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. Each Fund may also purchase securities on a forward commitment
basis; that is, make contracts to purchase securities for a fixed price at a
future date beyond the customary 3-day settlement period. A Fund is required
to hold and maintain in a segregated account with the Fund's custodian until 3
days prior to the settlement date, cash or liquid, high grade debt securities
in an amount sufficient to meet the purchase price. Alternatively, each Fund
may enter into offsetting contracts for the forward sale of other securities
that it owns. The purchase of securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Although a Fund would
generally purchase securities on a when-issued or forward commitment basis
with the intention of acquiring securities for its portfolio, a Fund may
dispose of when-issued securities or forward commitments prior to settlement
if its Investment Adviser deems it appropriate to do so.
23
<PAGE>
ILLIQUID AND RESTRICTED SECURITIES
A Fund may not invest more than 10% of its total assets in securities that
are subject to restrictions on resale ("restricted securities") under the
Securities Act of 1933, as amended ("1933 Act"), including securities eligible
for resale in reliance on Rule 144A under the 1933 Act. In addition, a Fund
will not invest more than 15% of its net assets in illiquid investments, which
includes securities (both foreign and domestic) that are not readily
marketable, swap transactions, certain SMBS, repurchase agreements maturing in
more than seven days, time deposits with a notice or demand period of more
than seven days, certain over-the-counter options, and certain restricted
securities, unless it is determined, based upon the continuing review of the
trading markets for a specific restricted security, that such restricted
security is eligible for sale under Rule 144A and, therefore, is liquid. The
Board of Directors has adopted guidelines and delegated to the Investment
Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Board of Directors, however, retains oversight
focusing on factors such as valuation, liquidity and availability of
information and is ultimately responsible for each determination. Investing in
restricted securities eligible for resale pursuant to Rule 144A may decrease
the liquidity of a Fund's portfolio to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted
securities. The purchase price and subsequent valuation of restricted and
illiquid securities normally reflect a discount, which may be significant,
from the market price of comparable securities for which a liquid market
exists.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with dealers in U.S.
Government securities and member banks of the Federal Reserve System which
furnish collateral at least equal in value or market price to the amount of
their repurchase obligation. The International Equity and Asia Growth Funds
may also enter into repurchase agreements involving certain foreign government
securities. If the other party or "seller" defaults, a Fund might suffer a
loss to the extent that the proceeds from the sale of the underlying
securities and other collateral held by the Fund in connection with the
related repurchase agreement are less than the repurchase price. In addition,
in the event of bankruptcy of the seller or failure of the seller to
repurchase the securities as agreed, a Fund could suffer losses, including
loss of interest on or principal of the security and costs associated with
delay and enforcement of the repurchase agreement. The Directors of the
Company have reviewed and approved certain counterparties whom they believe to
be creditworthy and have authorized the Funds to enter into repurchase
agreements with such counterparties. In addition, each Fund, together with
other registered investment companies having advisory agreements with an
Investment Adviser, may transfer uninvested cash balances into a single joint
account, the daily aggregate balance of which will be invested in one or more
repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
Each Fund may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to institutions,
such as certain broker-dealers, and are required to be secured continuously by
collateral in cash, cash equivalents, or U.S. Government securities maintained
on a current basis in an amount at least equal to the market value of the
securities loaned. Cash collateral may be invested in cash equivalents. If an
Investment Adviser determines to make securities loans, the value of the
securities loaned may not exceed 33 1/3% of the value of the total assets of a
Fund. See "Investment Restrictions" in the Additional Statement. A Fund may
experience a loss or delay in the recovery of its securities if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
MORTGAGE DOLLAR ROLLS
The Balanced Fund may enter into mortgage "dollar rolls" in which the Fund
sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase substantially similar
24
<PAGE>
(same type, coupon and maturity) 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 may benefit from the interest
earned on the cash proceeds of the securities sold until the settlement date
of the forward purchase. The Fund will hold and maintain in a segregated
account until the settlement date cash or liquid, high grade debt securities
in an amount equal to the forward purchase price. The benefits derived from
the use of mortgage dollar rolls depend upon the Investment Adviser's ability
to manage mortgage prepayments. There is no assurance that mortgage dollar
rolls can be successfully employed. For financial reporting and tax purposes,
the Fund treats mortgage dollar rolls as two separate transactions; one
involving the purchase of a security and a separate transaction involving a
sale. The Fund does not currently intend to enter into mortgage dollar rolls
that are accounted for as a financing.
SHORT SALES AGAINST-THE-BOX
Each Fund (other than the Select Equity Fund) may make short sales of
securities or maintain a short position, provided that at all times when a
short position is open the Fund owns an equal amount of such securities or
securities convertible into or exchangeable, without payment of any further
consideration, for an equal amount of the securities of the same issuer as the
securities sold short (a short sale against-the-box). Not more than 25% of a
Fund's net assets (determined at the time of the short sale) may be subject to
such short sales. Short sales will be made primarily to defer realization of
gain or loss for federal tax purposes; a gain or loss in a Fund's long
position will be offset by a gain or loss in its short position.
TEMPORARY INVESTMENTS
Each Fund may, for temporary defensive purposes, invest 100% of its total
assets (except that the Select Equity Fund may only hold up to 35% of its
total assets) in U.S. Government securities, repurchase agreements
collateralized by U.S. Government securities, commercial paper rated at least
A-2 by Standard & Poor's or P-2 by Moody's, certificates of deposit, bankers'
acceptances, repurchase agreements, non-convertible preferred stocks, non-
convertible corporate bonds with a remaining maturity of less than one year
or, subject to certain tax restrictions, foreign currencies. When a Fund's
assets are invested in such instruments, the Fund may not be achieving its
investment objective.
MISCELLANEOUS TECHNIQUES
In addition to the techniques and investments described above, each Fund
may, with respect to no more than 5% of its net assets, engage in the
following techniques and investments (i) warrants and stock purchase rights,
(ii) currency swaps (Balanced, International Equity and Asia Growth Funds
only), mortgage swaps, index swaps and interest rate swaps, caps, floors and
collars (Balanced Fund only), (iii) structured securities, (iv) yield curve
options (Balanced Fund only), (v) other investment companies and (vi)
unseasoned companies. For more information see the Additional Statement.
RISK FACTORS
Risk of Investing in Small Capitalization Companies. Investing in the
securities of such companies involves greater risk and the possibility of
greater portfolio price volatility. Historically, small market capitalization
stocks and stocks of recently organized companies have been more volatile in
price than the larger market capitalization stocks included in the S&P 500
Index. 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.
25
<PAGE>
Special Risks of Investments in the Asian and Other Emerging
Markets. Investing in the securities of issuers in emerging markets involves
risks in addition to those discussed above. The International Equity and Asia
Growth Funds may each invest without limit in the securities of issuers in
countries with emerging economies or securities markets. The Balanced, Growth
and Income, Capital Growth, and Small Cap Equity Funds may each invest up to
15% of their total assets in securities of issuers in countries with emerging
economies or securities markets. These emerging markets are generally located
in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. A Fund's purchase and sale of portfolio securities in certain emerging
markets may be constrained by limitations as to daily changes in the prices of
listed securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed
based on the aggregate trading volume by or holdings of a Fund, the Investment
Adviser and its affiliates and their respective clients and other service
providers. A Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached.
Foreign investment in the securities markets of certain emerging markets is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For
example, certain Asian countries require governmental approval prior to
investments by foreign persons or limit investment by foreign persons to only
a specified percentage of an issuer's outstanding securities or a specific
class of securities which may have less advantageous terms (including price)
than securities of the issuer available for purchase by nationals. In
addition, certain countries may restrict or prohibit investment opportunities
in issuers or industries deemed important to national interests. Such
restrictions may affect the market price, liquidity and rights of securities
that may be purchased by a Fund. Due to restrictions on direct investment in
equity securities in certain Asian countries, such as Taiwan, it is
anticipated that a Fund may invest in such countries only through other
investment funds in such countries. See "Other Investment Companies in the
Additional Statement." Furthermore, the repatriation of both investment income
and capital from several of the Asian countries is subject to restrictions
such as the need for certain governmental consents.
Many of the emerging markets may be subject to a greater degree of economic,
political and social instability than is the case in Western Europe, the
United States and Japan. Many of the emerging markets do not have fully
democratic governments. For example, some governments of emerging market
countries are authoritarian in nature or have been installed or removed as a
result of military coups, while governments in other emerging markets 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 of the Asian and other countries. The economies of
most of the emerging markets are heavily dependent upon international trade
and are accordingly affected by protective trade barriers and the economic
conditions of their trading partners, principally, the United States, Japan,
China and the European Union. In addition, the economies of some of the
emerging markets are vulnerable to weakness in world prices for their
commodity exports.
Settlement procedures in emerging markets are frequently less developed and
reliable than those in the United States and may involve a Fund's delivery of
securities before receipt of payment for their sale. In addition, significant
delays are common in certain markets in registering the transfer of
securities. Settlement or registration problems may make it more difficult for
a Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities, to have a portion of its assets
uninvested or to incur losses due to the failure of a counterparty to pay for
securities the Fund has delivered or the Fund's inability to complete its
contractual obligations.
26
<PAGE>
Currently, there is no market or only a limited market for many of the
management techniques and instruments with respect to the currencies and
securities markets of the emerging market countries. Consequently, there can
be no assurance that suitable instruments for hedging currency and market-
related risks will be available at the times when a Fund wishes to use them.
Risk of Investing in Fixed Income Securities. When interest rates decline,
the market value of fixed income securities tends to increase. Conversely,
when interest rates increase, the market value of fixed income securities
tends to decline. Volatility of a security's market value will differ
depending upon the security's duration, the issuer and the type of instrument.
Investments in fixed income securities are subject to the risk that the issuer
could default on its obligations and a Fund could sustain losses on such
investments. A default could impact both interest and principal payments.
Risks of Derivative Transactions. A Fund's transactions, if any, in options,
futures, options on futures, swap transactions, structured securities and
currency forward contracts involve certain risks, including a possible lack of
correlation between changes in the value of hedging instruments and the
portfolio assets being hedged, the potential illiquidity of the markets for
derivative instruments, the risks arising from the margin requirements and
related leverage factors associated with such transactions. The use of these
management techniques to seek to increase total return may be regarded as a
speculative practice and involves the risk of loss if the Investment Adviser
is incorrect in its expectation of fluctuations in securities prices, interest
rates or currency prices. A Fund's transactions in foreign currency, forward
foreign currency exchange contracts, options, futures contracts and certain
other derivative transactions may be limited by the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company.
INVESTMENT RESTRICTIONS
Each Fund is subject to certain investment restrictions that are described
in detail under "Investment Restrictions" in the Additional Statement.
Fundamental investment restrictions of a Fund can not be changed without
approval of a majority of the outstanding shares of that Fund. All investment
objectives and policies not specifically designated as fundamental are non-
fundamental and may be changed without shareholder approval. The Capital
Growth Fund's investment objective is a fundamental policy. If there is a
change in a Fund's investment objectives, shareholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial positions and needs.
PORTFOLIO TURNOVER
A high rate of portfolio turnover (100% or more) involves correspondingly
greater expenses which must be borne by a Fund and its shareholders and may
under certain circumstances make it more difficult for a Fund to qualify as a
regulated investment company under the Code. See "Financial Highlights" for a
statement of each Fund's historical portfolio turnover ratio. The portfolio
turnover rate is calculated by dividing the lesser of the dollar amount of
sales or purchases of portfolio securities by the average monthly value of a
Fund's portfolio securities, excluding securities having a maturity at the
date of purchase of one year or less. Notwithstanding the foregoing, the
Investment Adviser may, from time to time, make short-term investments when it
believes such investments are in the best interest of a Fund.
27
<PAGE>
MANAGEMENT
DIRECTORS AND OFFICERS
The Company's Board of Directors is responsible for deciding matters of
general policy and reviewing the actions of the Investment Advisers,
subadviser, administrator, distributor and transfer agent. The officers of the
Company conduct and supervise each Fund's daily business operations. The
Additional Statement contains information as to the identity of, and other
information about, the Directors and officers of the Company.
INVESTMENT ADVISERS, SUBADVISER AND ADMINISTRATOR
INVESTMENT ADVISERS AND SUBADVISER. Goldman Sachs Asset Management, One New
York Plaza, New York, New York 10004, a separate operating division of Goldman
Sachs, serves as the investment adviser to the Balanced, Growth and Income,
Small Cap Equity and International Equity Funds. Goldman Sachs registered as
an investment adviser in 1981. Goldman Sachs Funds Management, L.P., One New
York Plaza, New York, New York 10004, a Delaware limited partnership which is
an affiliate of Goldman Sachs, serves as the investment adviser to the Capital
Growth and Select Equity Funds. Goldman Sachs Funds Management, L.P.
registered as an investment adviser in 1990. Goldman Sachs Asset Management
International, 140 Fleet Street, London EC4A 2BJ, England, an affiliate of
Goldman Sachs, serves as the investment adviser to the Asia Growth Fund and
subadviser to the International Equity Fund. Goldman Sachs Asset Management
International became a member of the Investment Management Regulatory
Organisation Limited in 1990 and registered as an investment adviser in 1991.
Goldman Sachs Asset Management serves as administrator to each Fund. As of
March 27, 1996, GSAM, GSFM and GSAMI, together with their affiliates, acted as
investment adviser, administrator or distributor for assets in excess of $58
billion.
Under an Investment Advisory Agreement with each Fund, the applicable
Investment Adviser, and in the case of the International Equity Fund under a
Subadvisory Agreement, the subadviser, subject to the general supervision of
the Board of Directors, provides day-to-day advice as to the Fund's portfolio
transactions. Goldman Sachs has agreed to permit the Company to use the name
"Goldman Sachs" or a derivative thereof as part of each Fund's name for as
long as a Fund's Investment Advisory Agreement is in effect.
In performing its investment advisory services, each Investment Adviser,
while remaining ultimately responsible for the management of the Funds, may
rely upon the asset management division of its Singapore and Tokyo affiliates
for portfolio decisions and management with respect to certain portfolio
securities and is able to draw upon the research and expertise of its other
affiliate offices.
28
<PAGE>
FUND MANAGERS
<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
-------------- ------------------- ----------- ----------------------------
<C> <C> <C> <S>
G. Lee Anderson Portfolio Manager-- Since Mr. Anderson joined the
Vice President Capital Growth, 1996 Investment Adviser in
Growth and Income, 1996 1992. Prior to 1992, he
Balanced (Equity) 1996 was a research analyst
in the Investment
Research Department of
Goldman, Sachs & Co.
- --------------------------------------------------------------------------------------------
Eileen A. Aptman Portfolio Manager-- Since Ms. Aptman joined the
Vice President Capital Growth, 1996 Investment Adviser in
Growth and Income, 1996 1993. Prior to 1993, she
Balanced (Equity) 1996 was an equity analyst at
Delphi Management.
- --------------------------------------------------------------------------------------------
Jonathan A. Beinner Co-Portfolio Manager-- Since Mr. Beinner joined the
Vice President Balanced (Fixed Income) 1994 Investment Adviser in
1990.
- --------------------------------------------------------------------------------------------
Kent A. Clark Portfolio Manager-- Since Mr. Clark joined the
Vice President Select Equity 1996 Investment Adviser in
1992. Prior to 1992, he
was studying for a Ph.D.
in finance at the
University of Chicago.
- --------------------------------------------------------------------------------------------
Paul D. Farrell Senior Portfolio Since Mr. Farrell joined the
Vice President Manager--Capital Growth, 1996 Investment Adviser in
Small Cap Equity 1992 1991.
- --------------------------------------------------------------------------------------------
Ronald E. Gutfleish Senior Portfolio Manager-- Since Mr. Gutfleish joined the
Vice President Capital Growth, 1996 Investment Adviser in
Balanced (Equity), 1994 1993. Prior to 1993, he
Growth and Income 1993 was a principal of
Sanford C. Bernstein &
Co. in its Investment
Management Research
Department.
- --------------------------------------------------------------------------------------------
Roderick D. Jack Co-Portfolio Manager-- Since Mr. Jack joined the
Managing Director International Equity 1992 Investment Adviser in
1992. Prior to 1992, he
worked in the advisory
and financing group for
S.G. Warburg in London.
- --------------------------------------------------------------------------------------------
Robert C. Jones Senior Portfolio Since Mr. Jones joined the
Managing Director Manager--Select 1991 Investment Adviser in
Equity 1989.
- --------------------------------------------------------------------------------------------
Marcel Jongen Co-Portfolio Manager-- Since Mr. Jongen joined the
Executive Director International Equity 1992 Investment Adviser in
1992. Prior to 1992, he
was head of equities at
Philips Pension Fund in
Eindhaven.
- --------------------------------------------------------------------------------------------
Richard C. Lucy Co-Portfolio Manager-- Since Mr. Lucy joined the
Vice President Balanced (Fixed Income) 1994 Investment Adviser in
1992. Prior to 1992, he
managed fixed income
assets at Brown Brothers
Harriman & Co.
- --------------------------------------------------------------------------------------------
Shogo Maeda Co-Portfolio Manager-- Since Mr. Maeda joined the
Vice President International Equity 1994 Investment Adviser in
1994. Prior to 1994, he
worked at Nomura
Securities International
and for a period at
Manufacturers Hanover
Bank in New York.
- --------------------------------------------------------------------------------------------
Matthew B. McLennan Assistant Portfolio Manager-- Since Mr. McLennan joined the
Associate Small Cap Equity 1996 Investment Adviser in
1994. Prior to 1994, he
worked in the Investment
Banking Division of
Goldman, Sachs & Co. in
Australia.
- --------------------------------------------------------------------------------------------
Warwick M. Negus Senior Portfolio Since Mr. Negus joined the
Managing Director Manager--Asia 1994 Investment Adviser in
Growth 1994. Prior to 1994, he
Co-Portfolio Manager-- was a vice president of
International Equity 1994 Bankers Trust Australia
Ltd.
- --------------------------------------------------------------------------------------------
Victor H. Pinter Portfolio Manager-- Since Mr. Pinter joined the
Vice President Select Equity 1996 Investment Adviser in
1990.
- --------------------------------------------------------------------------------------------
Karma Wilson Portfolio Manager-- Since Ms. Wilson joined the
Vice President Asia Growth 1995 Investment Adviser in
1995. Prior to 1995, she
was an investment
analyst with Bankers
Trust Australia Ltd. and
prior to 1993 worked at
Arthur Andersen LLP.
</TABLE>
29
<PAGE>
It is the responsibility of the Investment Adviser to make investment
decisions for a Fund and to place the purchase and sale orders for the Fund's
portfolio transactions in U.S. and foreign securities and currency markets.
Such orders may be directed to any broker including, to the extent and in the
manner permitted by applicable law, Goldman Sachs or its affiliates.
As compensation for its services rendered and assumption of certain expenses
pursuant to separate Investment Advisory Agreements, GSAM is entitled to a fee
from the Balanced, Growth and Income, Small Cap Equity and International
Equity Funds, computed daily and payable monthly, at the annual rates of
0.50%, 0.55%, 0.75% and 0.25%, respectively, of average daily net assets;
however, GSAM is currently only imposing its advisory fee with respect to the
International Equity Fund at the annual rate of 0.23% of average daily net
assets. As compensation for its services rendered and assumption of certain
expenses pursuant to separate Investment Advisory Agreements, GSFM is entitled
to a fee from the Select Equity and Capital Growth Funds, computed daily and
payable monthly, at the annual rate of 0.50% and 0.75%, respectively of
average daily net assets; however, GSFM is currently only imposing its
advisory fee with respect to the Select Equity Fund at the annual rate of
0.44% of average daily net assets. As compensation for its services rendered
and assumption of certain expenses pursuant to Investment Advisory and
Subadvisory Agreements, GSAMI is entitled to a fee from the Asia Growth and
International Equity Funds, computed daily and payable monthly at the annual
rates of 0.75% and 0.50%, respectively, of average daily net assets; however,
GSAMI is currently only imposing its advisory fee with respect to the Asia
Growth Fund and its subadvisory fee with respect to International Equity Fund
at the annual rate of 0.71% and 0.48%, respectively, of average daily net
assets. The Investment Advisers may discontinue or modify such limitations in
the future at their discretion, although they have no current intention to do
so. For the fiscal year ended January 31, 1996, each Fund paid fees at the
foregoing contractual rates, except that the Select Equity Fund paid an
advisory fee equal to 0.43% of its average daily net assets. Without giving
effect to fee limitations, the aggregate management fees paid by the Capital
Growth, Small Cap Equity, International Equity and Asia Growth Funds are
higher than the fees paid by most funds but the Investment Advisers believe
such fees are comparable to management fees paid by funds with similar
investment strategies.
Each Investment Adviser has voluntarily agreed to reduce the fees payable to
it by a Fund (to the extent of its fees) by the amount (if any) that the
Fund's expenses would exceed the applicable expense limitations imposed by
state securities administrators. See "Management--Expenses" in the Additional
Statement. In addition, the Investment Adviser to the Balanced, Select Equity,
Growth and Income, International Equity and Asia Growth Funds has voluntarily
agreed to reduce or limit certain "Other Expenses" of such Funds (excluding
advisory, subadvisory, administration, distribution and authorized dealer
service fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses, and in the case of Select
Equity, Growth and Income, International Equity and Asia Growth Funds,
transfer agency fees) to the extent such expenses exceed 0.10%, 0.06%, 0.11%,
0.24% and 0.24% per annum of such Funds' average daily net assets,
respectively. 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.
ADMINISTRATOR. As administrator, pursuant to an Administration Agreement
with each Fund, GSAM provides personnel for supervisory, administrative, and
clerical functions; oversees the performance of administrative and
professional services to each Fund by others; provides office facilities; and
prepares, but does not pay for, reports to shareholders, the SEC and other
regulatory authorities. As compensation for the services rendered to the
Funds, GSAM is entitled to a fee from the Balanced and Growth and Income
Funds, computed daily and payable monthly, at an annual rate equal to 0.15% of
such Fund's average daily net assets and GSAM is entitled to a fee from each
other Fund, computed daily and payable monthly at an annual rate equal to
0.25% of
30
<PAGE>
each such Fund's average daily net assets; however, GSAM is currently only
imposing its administration fee with respect to the Select Equity,
International Equity and Asia Growth Funds at the annual rate of 0.15% of
average daily net assets. GSAM may discontinue or modify any such limitations
in the future at its discretion, although it has no current intention to do
so. For the period ended January 31, 1996, each Fund paid GSAM a fee for
administration services at the foregoing contractual rates, except that the
Select Equity Fund paid an administration fee equal to 0.18% of its average
daily net assets. GSAM has agreed to reduce its fees payable by a Fund (to the
extent of its fees) by the amount (if any) that a Fund's expenses exceed the
applicable expense limitations imposed by state securities administrators. See
"Management--Expenses" in the Additional Statement.
Goldman Sachs may from time to time, at its own expense, provide
compensation to certain Authorized Dealers for performing administrative
services to their customers. These services include maintaining account
records, processing orders to purchase, redeem and exchange Fund shares and
responding to certain customer inquiries. The amount of such compensation may
be up to 0.125% annually of the average daily net assets of the Balanced and
Select Equity Funds, 0.1375% annually of the average daily net assets of the
Growth and Income Fund and 0.1875% annually of the average daily net assets of
the Capital Growth, Small Cap Equity, International Equity and Asia Growth
Funds attributable to shares held by customers of such Authorized Dealers. In
addition, Goldman Sachs may from time to time, at its own expense, provide
compensation to certain Authorized Dealers who perform administrative services
with respect to depository institutions whose customers purchase shares of a
Fund. These services include responding to certain inquiries from and
providing written materials to depository institutions about a Fund;
furnishing advice about and assisting depository institutions in obtaining
from state regulatory agencies any rulings, exemptions or other authorizations
that may be required to conduct a mutual fund sales program; acting as liaison
between depository institutions and national regulatory organizations;
assisting with the preparation of sales material; and providing general
assistance and advice in establishing and maintaining mutual fund sales
programs on the premises of depository institutions. The amount of such
compensation may be up to 0.08% annually of the average net assets of a Fund's
shares attributable to purchases through, and held by the customers of, such
depository institutions. Such compensation does not represent an additional
expense to a Fund or its shareholders, since it will be paid from the assets
of Goldman Sachs or its affiliates.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED BY
GOLDMAN SACHS. The involvement of the Investment Advisers, Goldman Sachs and
their affiliates in the management of, or their interest in, other accounts
and other activities of Goldman Sachs may present conflicts of interest with
respect to 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
and in general it is not anticipated that the Investment Advisers will have
access to proprietary information for the purpose of managing a Fund. The
results of a Fund's investment activities, therefore, may differ from those of
Goldman Sachs and its affiliates and it is possible that a Fund could sustain
losses during periods in which Goldman Sachs and its affiliates and other
accounts and Funds achieve significant profits on their trading for
proprietary or other accounts. From time to time, a Fund's activities may be
limited because of regulatory restrictions applicable to Goldman Sachs and its
affiliates, and/or their internal policies designed to comply with such
restrictions. See "Management--Activities of Goldman Sachs and its Affiliates
and Other Accounts Managed by Goldman Sachs" in the Additional Statement for
further information.
31
<PAGE>
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York, serves as the exclusive
distributor of each Fund's shares. Shares may also be sold by Authorized
Dealers. Authorized Dealers include investment dealers that are members of the
NASD and certain other financial service firms. To become an Authorized
Dealer, a dealer or financial service firm must enter into a sales agreement
with Goldman Sachs. The minimum investment requirements, services, programs
and purchase and redemption options for shares purchased through a particular
Authorized Dealer may be different from those available to investors
purchasing through other Authorized Dealers.
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois, also serves as each
Fund's transfer agent (the "Transfer Agent") and as such performs various
shareholder servicing functions. As compensation for the services rendered to
each Fund by Goldman Sachs (as Transfer Agent) and the assumption by Goldman
Sachs of the expenses related thereto, Goldman Sachs is entitled to receive a
fee from each Fund, with respect to Class A shares and Class B shares of
$12,000 per year plus $7.50 per account, together with out-of-pocket and
transaction-related expenses (including those out-of-pocket expenses payable
to servicing agents). Shareholders with inquiries regarding any Fund should
contact Goldman Sachs (as Transfer Agent) at the address or the telephone
number set forth on the back cover page of this Prospectus.
REPORTS TO SHAREHOLDERS
Shareholders will receive an annual report containing audited financial
statements and a semi-annual report. Each shareholder will also be provided
with a printed confirmation for each transaction in the shareholder's account
and an individual quarterly account statement. A year-to-date statement for
any account will be provided upon request made to Goldman Sachs. The Funds do
not generally provide sub-accounting services.
HOW TO INVEST
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Fund continuously offers through this prospectus Class A and Class B
shares, as described more fully in "How to Buy Shares of the Funds." If you do
not specify in your instructions to the Funds which class of shares you wish
to purchase, the Funds will assume that your instructions apply to Class A
shares.
CLASS A SHARES. If you invest less than $1 million in Class A shares you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $1 million or more in Class A shares of a
Fund, no sales charge will be imposed at the time of purchase, but you will
incur a deferred sales charge equal to 1.00% if you redeem your shares within
18 months of purchase. Class A shares are subject to distribution fees of up
to 0.25% (which currently is being waived in the case of Balanced, Growth and
Income, Capital Growth and Small Cap Equity Funds and limited to 0.21% for the
Select Equity, International Equity and Asia Growth Funds) and authorized
dealer service fees of up to 0.25%, respectively, of each Fund's average daily
net assets attributable to Class A shares.
32
<PAGE>
CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") of up to 5% if
redeemed within six years of purchase. Class B shares are subject to
distribution and authorized dealer service fees of up to 0.75% and 0.25%,
respectively, of each Fund's average daily net assets attributable to Class B
shares. See "Distribution and Authorized Dealer Service Plans." Your entire
investment in Class B shares is available to work for you from the time you
make your initial investment, but the distribution fee paid by Class B shares
will cause your Class B shares (until conversion to Class A shares) to have a
higher expense ratio and to pay lower dividends, to the extent dividends are
paid, than Class A shares. Class B shares will automatically convert to Class
A shares, based on their relative net asset values, eight years after the
initial purchase.
FACTORS TO CONSIDER IN CHOOSING CLASS A OR CLASS B SHARES. The decision as
to which class to purchase depends on the amount you invest, the intended
length of the investment and your personal situation. For example, if you are
making an investment of $50,000 or more that qualifies for a reduced sales
charge, you should consider purchasing Class A shares. A brief description of
when the initial sales charge may be reduced or eliminated is set forth below
under "Right of Accumulation" and "Statement of Intention." If you prefer not
to pay an initial sales charge on an investment, you might consider purchasing
Class B shares. There is a maximum purchase limitation of $250,000 on each
purchase of Class B shares.
HOW TO BUY SHARES OF THE FUNDS--CLASS A AND CLASS B SHARES
You may purchase shares of the Funds through any Authorized Dealer
(including Goldman Sachs) or directly from a Fund, c/o National Financial Data
Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City, MO 64141-6711 on any
Business Day (as defined under "Additional Information") at the net asset
value next determined after receipt of an order, plus, in the case of Class A
shares, any applicable sales charge. If, by the close of regular trading on
the New York Stock Exchange (currently 4:00 p.m. New York time), a purchase
order is received by a Fund, Goldman Sachs or an Authorized Dealer, the price
per share will be based on the net asset value computed on the day the
purchase order is received.
The minimum initial investment in each Fund is $1,500. An initial investment
minimum of $250 applies to purchases in connection with Individual Retirement
Account Plans. For purchases through the Automatic Investment Plan, the
minimum initial investment is $50. The minimum subsequent investment is $50.
These requirements may be waived at the discretion of the Company's officers.
You may pay for purchases of shares by check (except that a check drawn on a
foreign bank or a third party check will not be accepted), Federal Reserve
draft, Federal Funds wire, ACH transfer or bank wire. Purchases of shares by
check or Federal Reserve draft should be made payable as follows: (i) to an
investor's Authorized Dealer, if purchased through such Authorized Dealer, or
(ii) to Goldman Sachs Equity Portfolios, Inc.--(Name of Fund and Class of
shares) and sent to NFDS, P.O. Box 419711, Kansas City, MO 64141-6711. Federal
Funds wires, ACH transfers and bank wires should be sent to State Street Bank
and Trust Company ("State Street"). Payment must be received within three
Business Days after receipt of the purchase order. An investor's Authorized
Dealer is responsible for forwarding payment promptly to the Fund.
In order to make an initial investment in a Fund, an investor must establish
an account with the Fund by furnishing to the Fund, Goldman Sachs or the
investor's Authorized Dealer the information in the Account Application
attached to this Prospectus. The Fund may refuse to open an account for any
investor who fails to (1) provide a social security number or other taxpayer
identification number, or (2) certify that such number is correct (if required
to do so under applicable law).
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<PAGE>
The Funds reserve the right to redeem shares of any shareholder whose
account balance is less than $50 as a result of earlier redemptions. Such
redemptions will not be implemented if the value of a shareholder's account
falls below the minimum account balance solely as a result of market
conditions. A Fund will give sixty (60) days' prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the Fund to avoid such redemption. In
addition, the Funds and Goldman Sachs reserve the right to modify the minimum
investment, the manner in which shares are offered and the sales charge rates
applicable to future purchases of shares.
OFFERING PRICE--CLASS A SHARES
The offering price of Class A shares of each Fund is the next determined net
asset value per share plus a sales charge, if any, paid to Goldman Sachs at
the time of purchase of shares as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE MAXIMUM DEALER
SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS
AMOUNT OF PURCHASE PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF
INCLUDING SALES CHARGE, IF ANY)( OFFERING PRICE INVESTED OFFERING PRICE
- -------------------------------- --------------- ------------- --------------
<S> <C> <C> <C>
Less than $50,000.............................. 5.50% 5.82% 5.00%
$50,000 up to (but less than) $100,000......... 4.75 4.99 4.00
$100,000 up to (but less than) $250,000........ 3.75 3.90 3.00
$250,000 up to (but less than) $500,000........ 2.75 2.83 2.25
$500,000 up to (but less than) $1 million...... 2.00 2.04 1.75
$1 million or more............................. 0.00* 0.00* **
</TABLE>
- --------
* No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions made within 18 months of purchase.
** Goldman Sachs pays a one-time commission to Authorized Dealers who initiate
or are responsible for purchases of $1 million or more of shares of the
Funds equal to 1.00% of the amount under $3 million, 0.50% of the next $2
million, and 0.25% thereafter. Goldman Sachs may also pay, with respect to
all or a portion of the assets, a commission in accordance with the
foregoing schedule to Authorized Dealers who initiate or are responsible
for purchases of $1 million or more by investors or "wrap" accounts
satisfying the criteria set forth in (h) or (j) below. Authorized Dealers
shall remit to Goldman Sachs such payments received in connection with
"wrap" accounts in the event that shares are redeemed within 18 months
after the end of the calendar month in which the purchase was made.
Purchases of $1 million or more of Class A shares will be made at net asset
value with no initial sales charge, but if the shares are redeemed within 18
months after the end of the calendar month in which the purchase was made (the
contingent deferred sales charge period), a CDSC of 1.00% will be imposed. Any
applicable CDSC will be assessed on an amount equal to the lesser of the
current market value or the original purchase cost of the redeemed Class A
shares. Accordingly, no CDSC will be imposed on increases in account value
above the initial purchase price, including any dividends which have been
reinvested in additional Class A shares. In determining whether a CDSC applies
to a redemption, the calculation will be determined in a manner that results
in the lowest possible rate being charged. Therefore, it will be assumed that
the redemption is first made from any Class A shares in your account that are
not subject to the CDSC. The CDSC is waived on redemptions in certain
circumstances. See "Waiver or Reduction of Contingent Deferred Sales Charges"
below.
Class A shares of the Funds may be sold at net asset value without payment
of any sales charge to (a) Goldman Sachs, its affiliates or their respective
officers, partners, directors or employees (including retired employees and
former partners), any partnership of which Goldman Sachs is a general partner,
any Director or
34
<PAGE>
officer of the Company and designated family members of any of the above
individuals; (b) qualified retirement plans of Goldman Sachs; (c) trustees or
directors of investment companies for which Goldman Sachs or an affiliate acts
as sponsor; (d) any employee or registered representative of any Authorized
Dealer or their respective spouses and children; (e) banks, trust companies or
other types of depository institutions investing for their own account or
investing for accounts for which they have investment discretion; (f) banks,
trust companies or other types of depository institutions investing for
accounts for which they do not have investment discretion, provided they have
entered into an agreement with GSAM specifying certain operating policies and
standards; (g) any state, county or city, or any instrumentality, department,
authority or agency thereof, which is prohibited by applicable investment laws
from paying a sales charge or commission in connection with the purchase of
shares of a Fund; (h) pension and profit sharing plans, pension funds and
other company-sponsored benefit plans having either 200 eligible employees or
at least $1,000,000 under management with GSAM and its affiliates;
(i) shareholders whose purchase is attributable to redemption proceeds
(subject to appropriate documentation) from a registered open-end management
investment company not distributed or managed by Goldman Sachs or its
affiliates, if such redemption has occurred no more than 60 days prior to the
purchase of shares of the Funds and the shareholder either (1) paid an initial
sales charge or (2) was at some time subject to a deferred sales charge with
respect to the redemption proceeds; (j) "wrap" accounts for the benefit of
clients of broker-dealers, financial institutions or financial planners,
provided that they have entered into an agreement with GSAM specifying
aggregate minimums and certain operating policies and standards; (k)
registered investment advisers investing for accounts for which they receive
asset-based fees; (l) accounts over which GSAM or its advisory affiliates have
investment discretion; and (m) shareholders receiving distributions from a
qualified retirement plan invested in the Goldman Sachs Portfolios and
reinvesting such proceeds in a Goldman Sachs IRA. Purchasers must certify
eligibility for an exemption on the Account Application and notify Goldman
Sachs if the shareholder is no longer eligible for an exemption. Exemptions
will be granted subject to confirmation of a purchaser's entitlement.
Investors purchasing shares of the Funds at net asset value without payment of
any initial sales charge may be charged a fee if they effect transactions in
shares through a broker or agent. In addition, under certain circumstances,
dividends and distributions from any of the Goldman Sachs Portfolios may be
reinvested in shares of each Fund at net asset value, as described under
"Cross-Reinvestment of Dividends and Distributions and Automatic Exchange
Program."
REINVESTMENT OF REDEMPTION PROCEEDS--CLASS A SHARES
A shareholder who redeems Class A shares of a Fund may reinvest at net asset
value any portion or all of his redemption proceeds (plus that amount
necessary to acquire a fractional share to round off his purchase to the
nearest full share) in Class A shares of a Fund or of any other Goldman Sachs
Portfolio. Shareholders should obtain and read the applicable prospectuses of
such other funds and consider their objectives, policies and applicable fees
before investing in any of such funds. This reinvestment privilege is subject
to the condition that the shares redeemed have been held for at least thirty
(30) days before the redemption and that the reinvestment is effected within
ninety (90) days after such redemption. If you paid a CDSC upon a redemption
and reinvest in Class A shares subject to the conditions set forth above, your
account will be credited with the amount of the CDSC previously charged, and
the reinvested shares will continue to be subject to a CDSC. The holding
period of the Class A shares acquired through reinvestment for purposes of
computing the CDSC payable upon a subsequent redemption will include the
holding period of the redeemed shares. Shares are sold to a reinvesting
shareholder at the net asset value next determined following timely receipt by
Goldman Sachs or an Authorized Dealer of a written purchase order indicating
that the shares are eligible for reinvestment at net asset value.
A reinvesting shareholder may realize a gain or loss for federal tax
purposes as a result of such redemption. If the redemption occurs within
ninety (90) days after the original purchase of the Class A shares, any sales
35
<PAGE>
charge paid on the original purchase cannot be taken into account by a
shareholder reinvesting at net asset value pursuant to the reinvestment
privilege for purposes of determining gain or loss realized on the redemption,
but instead will be added to the tax basis of the Class A shares received in
the reinvestment. To the extent that any loss is realized and shares of the
same Fund are purchased within thirty (30) days before or after the
redemption, some or all of the loss may not be allowed as a deduction
depending upon the number of shares purchased. Shareholders should consult
their own tax advisers concerning the tax consequences of a reinvestment. Upon
receipt of a written request, the reinvestment privilege may be exercised once
annually by a shareholder, except that there is no such time limit as to the
availability of this privilege in connection with transactions the sole
purpose of which is to reinvest the proceeds at net asset value in a tax-
sheltered retirement plan.
RIGHT OF ACCUMULATION--CLASS A SHARES
Class A purchasers may qualify for reduced sales charges when the current
market value of holdings (shares at current offering price), plus new
purchases, reaches $50,000 or more. Class A shares of the Goldman Sachs
Portfolios may be combined under the Right of Accumulation. See Additional
Statement for more information about the Right of Accumulation.
STATEMENT OF INTENTION--CLASS A SHARES
Purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Class A shares of the Goldman Sachs Portfolios may be
combined under the Statement of Intention. See the Additional Statement for
more information about the Statement of Intention.
OFFERING PRICE--CLASS B SHARES
Investors may purchase Class B shares of the Funds at the next determined
net asset value without the imposition of an initial sales charge. However,
Class B shares redeemed within six years of purchase will be subject to a CDSC
at the rates shown in the table that follows. At redemption, the charge will
be assessed on the amount equal to the lesser of the current market value or
the original purchase cost of the shares being redeemed. No CDSC will be
imposed on increases in account value above the initial purchase price,
including shares derived from the reinvestment of dividends or capital gains
distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a month will be aggregated and deemed to have been made on
the first day of that month. In processing redemptions of Class B shares, the
Funds will first redeem shares not subject to any CDSC, and then shares held
longest during the eight-year period. As a result, a redeeming shareholder
will pay the lowest possible CDSC.
<TABLE>
<CAPTION>
CDSC AS A
PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CDSC
---------- ---------------
<S> <C>
First........................................................ 5.0%
Second....................................................... 4.0%
Third........................................................ 3.0%
Fourth....................................................... 3.0%
Fifth........................................................ 2.0%
Sixth........................................................ 1.0%
Seventh and thereafter....................................... none
</TABLE>
36
<PAGE>
Proceeds from the CDSC are payable to the Distributor and may be used in
whole or part to defray the Distributor's expenses related to providing
distribution-related services to the Funds in connection with the sale of
Class B shares, including the payment of compensation to Authorized Dealers. A
commission equal to 4.00% of the amount invested is paid to Authorized
Dealers.
Class B shares of a Fund will automatically convert into Class A shares of
the same Fund at the end of the calendar quarter that is eight years after the
purchase date, except as noted below. Class B shares of a Fund acquired by
exchange from Class B shares of another Fund will convert into Class A shares
of such Fund based on the date of the initial purchase. Class B shares
acquired through reinvestment of distributions will convert into Class A
shares based on the date of the initial purchase of the shares on which the
distribution was paid. The conversion of Class B shares to Class A shares is
subject to the continuing availability of a ruling from the Internal Revenue
Service, for which the Funds will apply, or an opinion of counsel that such
conversions will not constitute taxable events for Federal tax purposes. There
can be no assurance that such ruling or opinion will be available. The
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available and, therefore, Class B shares would continue to
be subject to higher expenses than Class A shares for an indeterminate period.
WAIVER OR REDUCTION OF CONTINGENT DEFERRED SALES CHARGE. The CDSC on Class B
shares and Class A shares that are subject to a CDSC may be waived or reduced
if the redemption relates to (i) the death or disability (as defined in
Section 72 of the Code) of a shareholder if the redemption is made within one
year of such event, (ii) excess contributions being returned to pension and
profit sharing plans, pension funds and other company-sponsored benefit plans,
(iii) distributions from a qualified retirement plan invested in the Goldman
Sachs Portfolios which are being reinvested into a Goldman Sachs IRA, and (iv)
redemption proceeds which are to be reinvested in accounts or non-registered
products over which GSAM or its advisory affiliates have investment
discretion. In addition, Class A and Class B shares subject to a Systematic
Withdrawal Plan may be redeemed without a CDSC. However, Goldman Sachs
reserves the right to limit such redemptions, on an annual basis, to 12% of
the value of your Class B shares and 10% of the value of your Class A shares.
SERVICES AVAILABLE TO SHAREHOLDERS
AUTOMATIC INVESTMENT PLAN
Systematic cash investments may be made through a shareholder's bank via the
Automated Clearing House Network or a shareholder's checking account via bank
draft each month. Required forms are available from Goldman Sachs or any
Authorized Dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS AND AUTOMATIC EXCHANGE
PROGRAM
A shareholder may elect to cross-reinvest dividends and capital gain
distributions paid by a Fund in shares of the same class or an equivalent
class of any other Goldman Sachs Portfolio or ILA Portfolio. See "Fund
Highlights." Shareholders may also elect to exchange automatically a specified
dollar amount of shares of a Fund for shares of the same class or an
equivalent class of any other Goldman Sachs Portfolio or ILA Portfolio. Shares
acquired through cross-reinvestment of dividends or the automatic exchange
program will be purchased at net asset value and will not be subject to any
initial or contingent deferred sales charge as a result of the cross-
reinvestment or exchange, but shares subject to a CDSC acquired under the
automatic exchange program may be subject to a
37
<PAGE>
CDSC at the time of redemption from the Fund into which the exchange is made
determined on the basis of the date and value of the investor's initial
purchase of the fund from which the exchange (or any prior exchange) is made.
Automatic exchanges are made monthly on the fifteenth day of each month or the
first Business Day thereafter. The minimum dollar amount for automatic
exchanges must be at least $50 per month. Cross-reinvestments and automatic
exchanges are subject to the following conditions: (i) the value of the
shareholder's account(s) in the fund which is paying the dividend or from
which the automatic exchange is being made must equal or exceed $10,000 and
(ii) the value of the account in the acquired fund must equal or exceed the
acquired fund's minimum initial investment requirement or the shareholder must
elect to continue cross-reinvestment or automatic exchanges until the value of
acquired fund shares in the shareholder's account equals or exceeds the
acquired fund's minimum initial investment requirement. A Fund shareholder may
elect cross-reinvestment into an identical account or an account registered in
a different name or with a different address, social security or other
taxpayer identification number, provided that the account in the acquired fund
has been established, appropriate signatures have been obtained and the
minimum initial investment requirement has been satisfied. A Fund shareholder
should obtain and read the prospectus of the Fund into which dividends are
invested or automatic exchanges are made.
TAX-SHELTERED RETIREMENT PLANS
The Funds offer their shares for purchase by retirement plans, including IRA
Plans for individuals and their non-employed spouses and defined contribution
plans such as 401(k) Salary Reduction Plans. Detailed information concerning
these plans and copies of the plans may be obtained from the Transfer Agent.
This information should be read carefully, and consultation with an attorney
or tax adviser may be advisable. The information sets forth the service fee
charged for retirement plans and describes the federal income tax consequences
of establishing a plan. Under all plans, dividends and distributions will be
automatically reinvested in additional shares of the same class of the Fund
or, if so directed by the shareholder, in cash or in shares of the same class
or an equivalent class of any other Goldman Sachs Portfolio or ILA Portfolio.
EXCHANGE PRIVILEGE
Shares of a Fund may be exchanged at net asset value without the imposition
of an initial or contingent deferred sales charge at the time of exchange for
shares of the same class or an equivalent class of any other Fund, Goldman
Sachs Portfolio or ILA Portfolio. A shareholder needs to obtain and read the
prospectus of the fund into which the exchange is made. The shares or units of
these other funds acquired by an exchange may later be exchanged for shares of
the same (or an equivalent class) of the original Fund at the next determined
net asset value without the imposition of an initial or contingent deferred
sales charge if the dollar amount in the Fund resulting from such exchanges is
below the shareholder's all-time highest dollar amount on which it has
previously paid the applicable sales charge. Shares or units of these other
funds purchased through dividends and/or capital gains reinvestment may be
exchanged for shares of the Funds without a sales charge. In addition to free
automatic exchanges pursuant to the Automatic Exchange Program, six free
exchanges are permitted in each twelve-month period. A fee of $12.50 may be
charged for each subsequent exchange during such period. The exchange
privilege may be modified or withdrawn at any time upon sixty (60) days'
notice to shareholders and is subject to certain limitations.
An exchange of shares subject to a CDSC will not be subject to the
applicable CDSC at the time of exchange. Shares subject to a CDSC acquired in
an exchange will be subject to the CDSC of the shares originally held. For
purposes of determining the amount of any applicable CDSC, the length of time
a shareholder had owned shares will be measured from the date the shareholder
acquired the original shares subject to a CDSC and will not be affected by any
subsequent exchange.
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<PAGE>
An exchange may be made by identifying the applicable Fund and class of
shares and either writing to Goldman Sachs, Attention: Goldman Sachs Equity
Portfolios, Inc., Shareholder Services, c/o NFDS, P.O. Box 419711, Kansas
City, MO 64141-6711 or, if previously elected in the Fund's Account
Application, by telephone at 800-526-7384 (8:00 a.m. to 3:00 p.m. Chicago
time). Certain procedures are employed to prevent unauthorized or fraudulent
exchange requests as set forth under "How to Sell Shares of the Funds." Under
the telephone exchange privilege, shares may be exchanged among accounts with
different names, addresses and social security or other taxpayer
identification numbers only if the exchange request is in writing and is
received in accordance with the procedures set forth under "How to Sell Shares
of the Funds." In times of drastic economic or market changes the telephone
exchange privilege may be difficult to implement.
For federal income tax purposes, an exchange, including an automatic
exchange, is treated as a sale of the shares surrendered in the exchange, on
which an investor may realize a gain or loss, followed by a purchase of shares
or units received in the exchange. If such sale occurs within ninety (90) days
after the purchase of such shares, to the extent a sales charge that would
otherwise apply to the shares or units received in the exchange is not
imposed, the sales charge paid on such purchase of Class A shares cannot be
taken into account by the exchanging shareholder for purposes of determining
gain or loss realized on such sale for federal income tax purposes, but
instead will be added to the tax basis of the shares or units received in the
exchange. Shareholders should consult their own tax advisers concerning the
tax consequences of an exchange.
All exchanges which represent an initial investment in a Fund must satisfy
the minimum investment requirements of the Fund into which the shares are
being exchanged. Exchanges are available only in states where exchanges may
legally be made.
OTHER PURCHASE INFORMATION
If shares of a Fund are held in a "street name" account or were purchased
through an Authorized Dealer, shareholders should contact the Authorized
Dealer to purchase, redeem or exchange shares, to make changes in or give
instructions concerning the account or to obtain information about the
account. Authorized Dealers who receive a portion of the sales charge
applicable to the purchase of Class A or Class B shares will not be permitted
to impose any other fees on the shareholders in connection with the purchase
of such shares.
The Funds and Goldman Sachs each reserves the right to reject any specific
purchase order (including exchanges) or to restrict purchases or exchanges by
a particular purchaser (or group of related purchasers). The Funds or Goldman
Sachs may reject or restrict purchases or exchanges of shares by a particular
purchaser or group, for example, when a pattern of frequent purchases and
sales of shares of a Fund is evident, or if the purchase and sale or exchange
orders are, or a subsequent abrupt redemption might be, of a size that would
disrupt management of a Fund. Goldman Sachs reserves the right to limit the
participation in the Fund of its partners and employees.
In addition to concessions allowed to Authorized Dealers, Goldman Sachs may,
from time to time, assist Authorized Dealers by, among other things, providing
sales literature to and holding informational programs for the benefit of
Authorized Dealers' registered representatives. Authorized Dealers may limit
the participation of registered representatives in such informational programs
by means of sales incentive programs which may require the sale of minimum
dollar amounts of shares of the Goldman Sachs Portfolios. Goldman Sachs may
also provide additional promotional incentives to Authorized Dealers in
connection with sales of shares of the Goldman Sachs Portfolios. These
incentives may include payment for travel expenses, including lodging,
incurred in connection with trips taken by qualified registered
representatives and members of their families within or
39
<PAGE>
without the United States. Incentive payments will be provided for out of the
sales charge and distribution fees or out of Goldman Sachs' other resources.
Other than sales charges and distribution fees, a Fund and its shareholders do
not bear distribution expenses. An Authorized Dealer receiving such incentives
may be deemed to be an underwriter under the 1933 Act. In some instances, such
incentives may be made available only to certain Authorized Dealers whose
representatives have sold or are expected to sell significant amounts of
shares.
DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS
DISTRIBUTION PLAN--CLASS A SHARES
The Company, on behalf of each Fund's Class A shares, has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act") (the "Class A Distribution Plan"). Under the
Class A Distribution Plan, Goldman Sachs is entitled to a quarterly fee from
each Fund for distribution services equal, on an annual basis, to 0.25% of a
Fund's average daily net assets attributable to Class A shares of such Fund.
Currently, Goldman Sachs has voluntarily agreed to waive the entire amount of
such fee for the Balanced, Growth and Income, Capital Growth and Small Cap
Equity Funds and to limit the amount of such fee to 0.21% of average daily net
assets attributable to Class A shares of Select Equity, International Equity
and Asia Growth Funds. Goldman Sachs has no current intention of modifying or
discontinuing such waiver, but may do so in the future at its discretion. The
average rate for the fiscal year ended January 31, 1996 paid by the Balanced,
Select Equity, Growth and Income, Capital Growth, Small Cap Equity,
International Equity and Asia Growth Funds to Goldman Sachs was 0.03%, 0.19%,
0.06%, 0.08%, 0.09%, 0.08% and 0.07%, respectively, with respect to each
Fund's Class A shares.
Goldman Sachs may use the distribution fee for its expenses of distributing
of Class A shares of the Funds. The types of expenses for which Goldman Sachs
may be compensated for distribution services under the Class A Distribution
Plan include compensation paid to and expenses incurred by Authorized Dealers,
Goldman Sachs and their respective officers, employees and sales
representatives, allocable overhead, telephone and travel expenses, the
printing of prospectuses for prospective shareholders, preparation and
distribution of sales literature, advertising of any type and all other
expenses incurred in connection with activities primarily intended to result
in the sale of Class A shares. If the fee received by Goldman Sachs pursuant
to the Class A Distribution Plan exceeds its expenses, Goldman Sachs may
realize a profit from these arrangements. The Class A Distribution Plan will
be reviewed and is subject to approval annually by the Board of Directors of
the Company. The aggregate compensation that may be received under the Class A
Distribution Plan for distribution services may not exceed the limitations
imposed by the NASD's Rules of Fair Practice.
DISTRIBUTION PLAN--CLASS B SHARES
The Company, on behalf of each Fund's Class B shares, has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Act (the "Class B
Distribution Plan"). Under the Class B Distribution Plan, Goldman Sachs is
entitled to a quarterly fee from each Fund for distribution services equal, on
an annual basis, to 0.75% of a Fund's average daily net assets attributable to
Class B shares of such Fund.
Goldman Sachs may use the distribution fee for its expenses of distributing
Class B shares of the Funds. The types of expenses for which Goldman Sachs may
be compensated for distribution services under the Class B Distribution Plan
include compensation paid to and expenses incurred by Authorized Dealers,
Goldman Sachs and
40
<PAGE>
their respective officers, employees and sales representatives, commissions
paid to Authorized Dealers, allocable overhead, telephone and travel expenses,
the printing of prospectuses for prospective shareholders, preparation and
distribution of sales literature, advertising of any type and all other
expenses incurred in connection with activities primarily intended to result
in the sale of Class B shares. If the fee received by Goldman Sachs pursuant
to the Class B Distribution Plan exceeds its expenses, Goldman Sachs may
realize a profit from these arrangements. The Class B Distribution Plan will
be reviewed and is subject to approval annually by the Board of Directors of
the Company. The aggregate compensation that may be received under the Class B
Distribution Plan for distribution services may not exceed the limitations
imposed by the NASD's Rules of Fair Practice.
AUTHORIZED DEALER SERVICE PLANS
The Company on behalf of each Fund's Class A and Class B shares has adopted
non-Rule 12b-1 Authorized Dealer Service Plans (each a "Service Plan")
pursuant to which Goldman Sachs and Authorized Dealers are compensated for
providing personal and account maintenance services. Each Fund pays a fee
under its Class A or Class B Service Plan equal on an annual basis to 0.25% of
its average daily net assets attributable to Class A or Class B shares. The
fee for personal and account maintenance services paid pursuant to a Service
Plan 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. The Service Plans will be reviewed and are subject to
approval annually by the Board of Directors. For the period June 1, 1995
through January 31, 1996, each Fund paid Authorized Dealer service fees at the
foregoing rate for each Funds' Class A shares.
HOW TO SELL SHARES OF THE FUNDS
Each Fund will redeem its shares upon request of a shareholder on any
Business Day at the net asset value next determined after the receipt of such
request in proper form, subject to any applicable contingent deferred sales
charge. See "Net Asset Value." Redemption proceeds will be mailed by check to
a shareholder within three (3) Business Days of receipt of a properly executed
request. If shares to be redeemed were recently purchased by check, a Fund may
delay transmittal of redemption proceeds until such time as it has assured
itself that good funds have been collected for the purchase of such shares.
This may take up to fifteen (15) days. Redemption requests may be made by
writing to or calling the Transfer Agent at the address or telephone number
set forth on the back cover page of this Prospectus or an Authorized Dealer.
A shareholder may request redemptions by telephone if the optional telephone
redemption privilege is elected on the Account Application. It may be
difficult to implement redemptions by telephone in times of drastic economic
or market changes. In an effort to prevent unauthorized or fraudulent
redemption and exchange requests by telephone, Goldman Sachs and NFDS each
employ reasonable procedures specified by the Company to confirm that such
instructions are genuine. Consequently, proceeds of telephone redemption
requests will be sent only to the shareholder's address of record or
authorized bank account designated in the Account Application and exchanges of
shares will be made only to an identical account. Telephone requests will also
be recorded. The Company may implement other procedures from time to time. If
reasonable procedures are not implemented, the Company may be liable for any
loss due to unauthorized or fraudulent transactions. In all other cases,
neither a Fund, the Company nor Goldman Sachs will be responsible for the
authenticity of instructions
41
<PAGE>
received by telephone. Proceeds of telephone redemptions will be mailed to the
shareholder's address of record or wired to the authorized bank account
indicated on the Account Application, unless the shareholder provides written
instructions (accompanied by a signature guarantee) indicating another
address.
Written requests for redemptions must be signed by each shareholder with its
signature guaranteed by a bank, a securities broker or dealer, a credit union
having authority to issue signature guarantees, a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association, a national securities exchange, a registered
securities association or a clearing agency, provided that such institution
satisfies the standards established by the Transfer Agent.
The Funds will also arrange for the proceeds of redemptions effected by any
means to be wired as Federal Funds to the bank account designated in the
shareholder's Account Application. Redemption proceeds will normally be wired
on the next Business Day in Federal Funds (for a total one Business Day delay)
following receipt of a properly executed wire transfer redemption request.
Wiring of redemption proceeds may be delayed one additional Business Day if
the Federal Reserve Bank is closed on the day redemption proceeds would
ordinarily be wired. A transaction fee of $7.50 may be charged for payments of
redemption proceeds by wire. In order to change the bank designated on the
Account Application to receive redemption proceeds, a written request must be
received by the Transfer Agent. This request must be signature guaranteed as
set forth above. Further documentation may be required for executors, trustees
or corporations. Once wire transfer instructions have been given by Goldman
Sachs or an Authorized Dealer, neither a Fund, the Company, Goldman Sachs nor
any Authorized Dealer assumes any further responsibility for the performance
of intermediaries or the shareholder's bank in the transfer process. If a
problem with such performance arises, the shareholder should deal directly
with such intermediaries or bank.
Additional documentation regarding a redemption by any means may be required
to effect a redemption when deemed appropriate by the Transfer Agent. The
request for such redemption will not be considered to have been received in
proper form until such additional documentation has been received.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may draw on shareholdings systematically via check or ACH in
any amount specified by the shareholder over $50. Checks are only available on
or about the 25th of each month. Each systematic withdrawal is a sale for tax
purposes. A minimum balance of $5,000 in shares of a Fund is required. The
maintenance of a withdrawal plan concurrently with purchases of additional
Class A or Class B shares would be disadvantageous because of the sales charge
imposed on your purchases of Class A shares or the imposition of a CDSC on
your redemptions of Class A and Class B shares. The CDSC applicable to Class A
and Class B shares redeemed under a systematic withdrawal plan may be waived.
See "How to Invest--Waiver or Reduction of Contingent Deferred Sales Charge."
See Additional Statement for more information about the Systematic Withdrawal
Plan.
DIVIDENDS
Each dividend from net investment income and capital gains distribution, if
any, declared by a Fund on its outstanding shares will, at the election of
each shareholder, be paid in (i) cash, (ii) additional shares of the same
class of the Fund or (iii) shares of the same or an equivalent class of any of
the Goldman Sachs Portfolios or units of the ILA Portfolios (the Prime
Obligations Portfolio only for Class B), as described under "Cross-
Reinvestment of Dividends and Distributions and Automatic Exchange Program."
This election should initially
42
<PAGE>
be made on a shareholder's Account Application and may be changed upon written
notice to Goldman Sachs at any time prior to the record date for a particular
dividend or distribution. If no election is made, all dividends from net
investment income and capital gain distributions will be reinvested in the
Fund.
The election to reinvest dividends and distributions paid by a Fund in
additional shares or units of the Fund or any other Goldman Sachs Portfolio or
ILA Portfolio will not affect the tax treatment of such dividends and
distributions, which will be treated as received by the shareholder and then
used to purchase shares or units of the Fund, another Goldman Sachs Portfolio
or an ILA Portfolio.
Each Fund intends that all or substantially all of its net investment income
and net realized long-term and short-term capital gains, after reduction by
available capital losses, including any capital losses carried forward from
prior years, will be declared as dividends for each taxable year. The Balanced
and Growth and Income Funds will pay dividends from net investment income
quarterly. Each other Fund will pay dividends from net investment income at
least annually. All of the Funds will pay dividends from net realized long-
term and short-term capital gains, reduced by available capital losses, at
least annually. From time to time, a portion of any 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
net asset value per share may be represented by undistributed income of the
Fund or realized or unrealized appreciation of the Fund's portfolio
securities. Therefore, subsequent distributions (or portions thereof) of
taxable income or realized appreciation on such shares may be taxable to the
investor even if the net asset value of the investor's shares is, as a result
of the distributions, reduced below the cost of such shares and the
distributions (or portions thereof) represent a return of a portion of the
purchase price.
NET ASSET VALUE
The net asset value per share of each class of a Fund is calculated by the
Fund's custodian as of the close of regular trading on the New York Stock
Exchange (normally 3:00 p.m. Chicago time, 4:00 p.m. New York time), on each
Business Day (as such term is defined under "Additional Information"). Net
asset value per share of each class is calculated by determining the net
assets attributable to each class and dividing by the number of outstanding
shares of that class. Portfolio securities are valued based on market
quotations or, if accurate quotations are not readily available, at fair value
as determined in good faith under procedures established by the Company's
Board of Directors.
PERFORMANCE INFORMATION
From time to time each Fund may publish average annual total return and the
Balanced and Growth and Income Funds may publish their yield and distribution
rates in advertisements and communications to shareholders or prospective
investors. Average annual total return is determined by computing the average
annual percentage change in value of $1,000 invested at the maximum public
offering price for specified periods ending with the most recent calendar
quarter, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the
investment at the end of the relevant period. 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
43
<PAGE>
B shares reflect deduction of the applicable CDSC imposed upon redemption of
Class B 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 net asset value. Any
performance data which is based on a Fund's net asset value 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 performance rankings and indices.
The Balanced and Growth and Income Funds compute their yield by dividing net
investment income earned during a recent thirty-day period by the product of
the average daily number of shares outstanding and entitled to receive
dividends during the period and the maximum offering price per share on the
last day of the relevant period. The results are compounded on a bond
equivalent (semi-annual) basis and then annualized. Net investment income per
share is equal to the dividends and interest earned during the period, reduced
by accrued expenses for the period. The calculation of net investment income
for these purposes may differ from the net investment income determined for
accounting purposes. The Balanced and Growth and Income Funds' quotations of
distribution rate are calculated by annualizing the most recent distribution
of net investment income for a monthly, quarterly or other relevant period and
dividing this amount by the net asset value per share on the last day of the
period for which the distribution rates are being calculated.
Each Fund's yield, total return and distribution rate will be calculated
separately for each class of shares in existence. Because each class of shares
may be subject to different expenses, the yield, total return and distribution
rate calculations with respect to each class of shares for the same period
will differ. The investment performance of the Class A and Class B shares will
be affected by the payment of a sales charge and distribution fees. See
"Shares of the Company" below.
The investment results of a Fund will fluctuate over time and any
presentation of investment results for any prior period should not be
considered a representation of what an investment may earn or what the Fund's
performance may be in any future period. In addition to information provided
in shareholder reports, the Funds may, in their discretion, from time to time,
make a list of their holdings available to investors upon request.
SHARES OF THE COMPANY
Each Fund is a series of the Company, which was incorporated under the laws
of the State of Maryland on September 27, 1989. The authorized capital stock
of the Company consists of 2,000,000,000 shares of common stock, par value of
$.001 per share. The Directors of the Company have authority under the
Company's Charter to create and classify shares of capital stock in separate
series, without further action by shareholders. Additional series may be added
in the future. The Directors also have authority to classify and reclassify
any series or portfolio of shares into one or more classes. The Select Equity,
Growth and Income, International Equity and Asia Growth Funds offer four
classes of shares: Institutional Shares, Service Shares and the shares offered
by this Prospectus which are designated as Class A shares or Class B shares.
The Balanced, Capital Growth and Small Cap Equity Funds offer Class A shares
and Class B shares.
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 Fund available for distribution to such shareholders. All
shares
44
<PAGE>
entitle their holders to one vote per share, are freely transferable and have
no preemptive, subscription or conversion rights.
Unless otherwise required by the Act, ordinarily it will not be necessary
for the Company to hold annual meetings of shareholders. As a result,
shareholders may not consider each year the election of Directors or the
appointment of independent accountants. However, pursuant to the Company's By-
Laws, the recordholders of at least 10% of the shares outstanding and entitled
to vote at a special meeting may require the Company to hold such special
meeting of shareholders for any purpose and recordholders may, under certain
circumstances as permitted by the Act, communicate with other shareholders in
connection with requiring a special meeting of shareholders. Shareholders of
the Company may remove a Director by the affirmative vote of a majority of the
Company's outstanding voting shares. The Board of Directors, however, will
call a special meeting of shareholders for the purpose of electing Directors
if, at any time, less than a majority of Directors holding office at the time
were elected by shareholders.
In the interest of economy and convenience, the Company does not issue
certificates representing the Funds' shares. Instead, the Transfer Agent
maintains a record of each shareholder's ownership. Each shareholder receives
confirmation of purchase and redemption orders from the Transfer Agent. Fund
shares and any dividends and distributions paid by the Funds are reflected in
account statements from the Transfer Agent.
TAXATION
FEDERAL TAXES
Each Fund is treated as a separate entity for tax purposes, has elected to
be treated as a regulated investment company and intends to continue to
qualify for such treatment for each taxable year under Subchapter M of the
Code. To qualify as such, a Fund must satisfy certain requirements relating to
the sources of its income, diversification of its assets and distribution of
its income to shareholders. As a regulated investment company, a Fund will not
be subject to federal income or excise tax on any net investment income and
net realized capital gains that are distributed to its shareholders in
accordance with certain timing requirements of the Code.
Dividends paid by a Fund from net investment income, certain net realized
foreign exchange gains, the excess of net short-term capital gain over net
long-term capital loss and original issue discount or market discount income
will be taxable to shareholders as ordinary income. Dividends paid by a Fund
from the excess of net long-term capital gain over net short-term capital loss
will be taxable as long-term capital gains regardless of how long the
shareholders have held their shares. These tax consequences will apply
regardless of whether distributions are received in cash or reinvested in
shares. A Fund's dividends that are paid to its corporate shareholders from
qualifying dividends such Fund receives from U.S. domestic corporations may be
eligible, in the hands of such corporate shareholders, for the corporate
dividends-received deduction, subject to certain holding period requirements
and debt financing limitations under the Code. Dividends paid by International
Equity Fund and Asia Growth Fund are not generally expected to qualify, in the
hands of corporate shareholders, for the corporate dividends-received
deduction, but a portion of each other Fund's dividends may generally so
qualify. A Fund's investment in zero coupon securities may require the Fund to
sell certain of its portfolio securities to generate sufficient cash to
satisfy certain income distribution requirements. Certain distributions paid
by a Fund in January of a given year may be taxable to shareholders as if
received the prior December 31. Shareholders will be informed annually about
the amount and character of distributions received from the Funds for federal
income tax purposes.
45
<PAGE>
Investors should consider the tax implications of buying shares immediately
prior to a distribution. Investors who purchase shares shortly before the
record date for a distribution will pay a per share price that includes the
value of the anticipated distribution and will be taxed on the distribution
even though the distribution represents a return of a portion of the purchase
price.
Redemptions and exchanges of shares are taxable events on which a
shareholder may recognize a gain or loss.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on distributions, redemptions and
exchanges if they fail to furnish their correct taxpayer identification number
and certain certifications required by the Internal Revenue Service or if they
are otherwise subject to backup withholding. Individuals, corporations and
other shareholders that are not U.S. persons under the Code are subject to
different tax rules and may be subject to nonresident alien withholding at the
rate of 30% (or a lower rate provided by an applicable tax treaty) on amounts
treated as ordinary dividends from the Funds.
Each Fund may be subject to foreign withholding or other foreign taxes on
income or gain from certain foreign securities. The Funds do not anticipate
that they will elect to pass such foreign taxes through to their shareholders,
who therefore will generally not take such taxes into account on their own tax
returns. The Funds will generally deduct such taxes in determining the amounts
available for a distribution to shareholders.
OTHER TAXES
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from the Funds. A state income (and
possibly local income and/or intangible property) tax exemption is generally
available to the extent (if any) a Fund's distributions are derived from
interest on (or, in the case of intangibles taxes, the value of its assets is
attributable to) certain U.S. Government obligations, provided in some states
that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. For a further discussion of certain tax
consequences of investing in shares of the Funds, see "Taxation" in the
Additional Statement. Shareholders are urged to consult their own tax advisers
regarding specific questions as to federal, state and local taxes as well as
to any foreign taxes.
ADDITIONAL INFORMATION
The term "a vote of the majority of the outstanding shares" of a Fund means
the vote of the lesser of (i) 67% or more of the shares present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Fund.
As used in this Prospectus, the term "Business Day" means any day the New
York Stock Exchange is open for trading, which is Monday through Friday except
for holidays. The New York Stock Exchange is closed on the following holidays:
New Year's Day (observed), Presidents' Day (observed), Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
46
<PAGE>
APPENDIX
STATEMENT OF INTENTION
(APPLICABLE ONLY TO CLASS A SHARES PURCHASED SUBJECT TO A SALES CHARGE)
If a shareholder anticipates purchasing $50,000 or more of Class A shares of
a Fund alone or in combination with Class A shares of another Fund or another
Goldman Sachs Portfolio within a 13-month period, the shareholder may obtain
shares of the Fund at the same reduced sales charge as though the total
quantity were invested in one lump sum by filing this Statement of Intention
incorporated by reference in the Account Application. Income dividends and
capital gain distributions taken in additional shares will apply toward the
completion of this Statement of Intention.
To ensure that the reduced price will be received on future purchases, the
investor must inform Goldman, Sachs & Co. that this Statement of Intention is
in effect each time shares are purchased. Subject to the conditions mentioned
below, each purchase will be made at the public offering price applicable to a
single transaction of the dollar amount specified on the Account Application.
The investor makes no commitment to purchase additional shares, but if his
purchases within 13 months plus the value of shares credited toward completion
do not total the sum specified, he will pay the increased amount of the sales
charge prescribed in the Escrow Agreement.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the Account Application shall be held in escrow by
the Transfer Agent in the form of shares registered in the investor's name.
All income dividends and capital gains distributions on escrowed shares will
be paid to the investor or to his order. When the minimum investment so
specified is completed (either prior to or by the end of the thirteenth
month), the shareholder will be notified and the escrowed shares will be
released. In signing the Account Application, the investor irrevocably
constitutes and appoints the Transfer Agent his attorney to surrender for
redemption any or all escrowed shares with full power of substitution in the
premises.
If the intended investment is not completed, the investor will be asked to
remit to Goldman, Sachs & Co. any difference between the sales charge on the
amount specified and on the amount actually attained. If the investor does not
within 20 days after written request by Goldman, Sachs & Co. pay such
difference in the sales charge, the Transfer Agent will redeem an appropriate
number of the escrowed shares in order to realize such difference. Shares
remaining after any such redemption will be released by the Transfer Agent.
A-1
<PAGE>
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GOLDMAN SACHS ASSET
MANAGEMENT
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN SACHS FUNDS
MANAGEMENT, L.P.
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
140 FLEET STREET
LONDON, ENGLAND EC4A 2BJ
GOLDMAN, SACHS & CO.
DISTRIBUTOR
85 BROAD STREET
NEW YORK, NEW YORK 10004
GOLDMAN, SACHS & CO.
TRANSFER AGENT
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE (IN U.S.) . . . . . . . . 800-526-7384
EQI/250K/596
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE GOLDMAN SACHS
EQUITY PORTFOLIOS
CLASS A AND B SHARES
- --------------------------------------------------------------------------------
PROSPECTUS
GOLDMAN
SACHS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EQISSTK
THE GOLDMAN SACHS EQUITY PORTFOLIOS
INSTITUTIONAL SHARES
SERVICE SHARES
SUPPLEMENT DATED DECEMBER 1, 1996 TO THE PROSPECTUS DATED MAY 1, 1996
The following replaces the Fund Manager's table under the "Management"
section in the Prospectus:
FUND MANAGERS
<TABLE>
<CAPTION>
Years
Primarily
Name and Title Fund Responsibility Responsible Five Year Employment History
- -----------------------------------------------------------------------------------------
<C> <C> <C> <S>
G. Lee Anderson Portfolio Manager-- Since Mr. Anderson joined the
Vice President Growth and Income, 1996 Investment Adviser in
1992. Prior to 1992, he
was a research analyst
in the Investment
Research Department of
Goldman Sachs, & Co.
- -----------------------------------------------------------------------------------------
Eileen A. Aptman Portfolio Manager-- Since Ms. Aptman joined the
Vice President Mid-Cap Equity, 1996 Investment Adviser in
Growth and Income, 1996 1993. Prior to 1993, she
was an equity analyst at
Delphi Management.
- -----------------------------------------------------------------------------------------
Kent A. Clark Portfolio Manager-- Since Mr. Clark joined the
Vice President Select Equity 1996 Investment Adviser in
1992. Prior to 1992, he
was studying for a Ph.D.
in finance at the
University of Chicago.
- -----------------------------------------------------------------------------------------
Ronald E. Gutfleish Senior Portfolio Manager-- Since Mr. Gutfleish joined the
Vice President Growth and Income 1993 Investment Adviser in
1993. Prior to 1993, he
was a principal of
Sanford C. Bernstein &
Co. in its Investment
Management Research
Department.
- -----------------------------------------------------------------------------------------
Roderick D. Jack Co-Portfolio Manager-- Since Mr. Jack joined the
Managing Director International Equity 1992 Investment Adviser in
1992. Prior to 1992, he
worked in the advisory
and financing group for
S.G. Warburg in London.
- -----------------------------------------------------------------------------------------
Robert C. Jones Senior Portfolio Since Mr. Jones joined the
Managing Director Manager--Select 1991 Investment Adviser in
Equity 1989.
- -----------------------------------------------------------------------------------------
Marcel Jongen Co-Portfolio Manager-- Since Mr. Jongen joined the
Executive Director International Equity 1992 Investment Adviser in
1992. Prior to 1992, he
was head of equities at
Philips Pension Fund in
Eindhaven.
- -----------------------------------------------------------------------------------------
Shogo Maeda Co-Portfolio Manager-- Since Mr. Maeda joined the
Vice President International Equity 1994 Investment Adviser in
1994. Prior to 1994, he
worked at Nomura
Securities International
and for a period at
Manufacturers Hanover
Bank in New York.
- -----------------------------------------------------------------------------------------
Warwick M. Negus Senior Portfolio Since Mr. Negus joined the
Managing Director Manager--Asia 1994 Investment Adviser in
Growth 1994. Prior to 1994, he
Co-Portfolio Manager-- was a vice president of
International Equity 1994 Bankers Trust Australia
Ltd.
- -----------------------------------------------------------------------------------------
Victor H. Pinter Portfolio Manager-- Since Mr. Pinter joined the
Vice President Select Equity 1996 Investment Adviser in
1990.
- -----------------------------------------------------------------------------------------
Karma Wilson Portfolio Manager-- Since Ms. Wilson joined the
Vice President Asia Growth 1995 Investment Adviser in
1995. Prior to 1995, she
was an investment
analyst with Bankers
Trust Australia Ltd. and
prior to 1993 worked at
Arthur Andersen LLP.
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