Prospectus
July 28, 2023
July 28, 2023
GOLDMAN
SACHS MUNICIPAL FIXED INCOME FUNDS
THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED
UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
|
AN
INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT
INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND
INVOLVES
INVESTMENT
RISKS, AND YOU MAY LOSE MONEY IN A
FUND. |
◼
Goldman Sachs
Dynamic Municipal Income Fund
◼
Class P:
GAJPX
◼
Goldman Sachs
High Yield Municipal Fund
◼
Class P:
GGLPX
◼
Goldman Sachs
Short Duration Tax-Free Fund
◼
Class P:
GANPX
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|
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|
|
|
Class
P |
|
Management
Fees1 |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
Expense
Limitation2 |
( |
|
Total
Annual Fund Operating Expenses After Expense
Limitation |
|
1
2
|
|
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
P Shares |
$ |
$ |
$ |
$ |
|
|
|
|
1
|
|
2
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date | |
|
Class
P Shares |
|
|
|
|
Returns
Before Taxes |
- |
|
|
|
Returns
After Taxes on Distributions |
- |
|
|
|
Returns
After Taxes on Distributions and Sale of Fund Shares |
- |
|
|
|
Bloomberg
Municipal Bond 1-10 Year Blend Index (reflects no deduction for fees,
expenses or taxes) |
- |
|
|
|
Portfolio
Management |
Goldman
Sachs Asset Management, L.P. is the investment adviser for the Fund (the
“Investment Adviser” or “GSAM”).
Portfolio
Managers: Scott
Diamond, Managing Director, has managed the Fund since 2002; Joseph Wenzel, Vice
President, has managed the Fund since 2019; and Sylvia Yeh, Managing Director,
has managed the Fund since 2021.
|
Buying
and Selling Fund Shares |
The Fund
does not impose minimum purchase requirements for initial or subsequent
investments in Class P Shares.
You may
purchase and redeem (sell) Class P Shares of the Fund on any business day
through the Goldman Sachs Private Wealth Management business unit, The Goldman
Sachs Trust Company, N.A., The Goldman Sachs Trust Company of Delaware, The Ayco
Company, L.P. or with certain intermediaries that are authorized to offer Class
P Shares.
|
Tax
Information |
For
important tax information, please see “Tax Information” on page 13 of the
Prospectus.
|
Payments
to Broker-Dealers and
Other
Financial Intermediaries |
For
important information about financial intermediary compensation, please see
“Payments to Broker-Dealers and Other Financial Intermediaries” on page 13 of
the Prospectus.
4
|
|
|
|
|
|
Class
P |
|
Management
Fees |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
Expense
Limitation1 |
( |
|
Total
Annual Fund Operating Expenses After Expense
Limitation |
|
1
|
|
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
P Shares |
$ |
$ |
$ |
$ |
|
|
|
|
5
|
|
6
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date | |
|
Class
P Shares |
|
|
|
|
Returns
Before Taxes |
- |
|
|
|
Returns
After Taxes on Distributions |
- |
|
|
|
Returns
After Taxes on Distributions and Sale of Fund Shares |
- |
|
|
|
Goldman
Sachs High Yield Municipal Fund Composite Index |
- |
|
|
|
Bloomberg
Municipal Bond Index (reflects no deduction for fees, expenses or
taxes) |
- |
|
|
|
Bloomberg
Municipal High Yield Bond Index (reflects no deduction for fees, expenses
or taxes) |
- |
|
|
|
Portfolio
Management |
Goldman
Sachs Asset Management, L.P. is the investment adviser for the Fund (the
“Investment Adviser” or “GSAM”).
Portfolio
Managers: Scott
Diamond, Managing Director, has managed the Fund since 2002; Joseph Wenzel, Vice
President, has managed the Fund since 2019; and Sylvia Yeh, Managing Director,
has managed the Fund since 2021.
|
Buying
and Selling Fund Shares |
The Fund
does not impose minimum purchase requirements for initial or subsequent
investments in Class P Shares.
You may
purchase and redeem (sell) Class P Shares of the Fund on any business day
through the Goldman Sachs Private Wealth Management business unit, The Goldman
Sachs Trust Company, N.A., The Goldman Sachs Trust Company of Delaware, The Ayco
Company, L.P. or with certain intermediaries that are authorized to offer Class
P Shares.
|
Tax
Information |
For
important tax information, please see “Tax Information” on page 13 of the
Prospectus.
|
Payments
to Broker-Dealers and
Other
Financial Intermediaries |
For
important information about financial intermediary compensation, please see
“Payments to Broker-Dealers and Other Financial Intermediaries” on page 13 of
the Prospectus.
8
|
|
|
|
|
|
Class
P |
|
Management
Fees1 |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
Expense
Limitation2 |
( |
|
Total
Annual Fund Operating Expenses After Expense
Limitation |
|
1
2
|
|
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
P Shares |
$ |
$ |
$ |
$ |
|
|
|
|
9
|
|
10
|
|
|
|
|
|
|
|
|
|
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11
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|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date | |
|
Class
P Shares |
|
|
|
|
Returns
Before Taxes |
- |
|
|
|
Returns
After Taxes on Distributions |
- |
|
|
|
Returns
After Taxes on Distributions and Sale of Fund Shares |
- |
|
|
|
Bloomberg
Municipal Bond 1-3 Year Blend Index (reflects no deduction for fees,
expenses or taxes) |
- |
|
|
|
Portfolio
Management |
Goldman
Sachs Asset Management, L.P. is the investment adviser for the Fund (the
“Investment Adviser” or “GSAM”).
Portfolio
Managers: Scott
Diamond, Managing Director, has managed the Fund since 2002; Joseph Wenzel, Vice
President, has managed the Fund since 2019; and Sylvia Yeh, Managing Director,
has managed the Fund since 2021.
|
Buying
and Selling Fund Shares |
The Fund
does not impose minimum purchase requirements for initial or subsequent
investments in Class P Shares.
You may
purchase and redeem (sell) Class P Shares of the Fund on any business day
through the Goldman Sachs Private Wealth Management business unit, The Goldman
Sachs Trust Company, N.A., The Goldman Sachs Trust Company of Delaware, The Ayco
Company, L.P. or with certain intermediaries that are authorized to offer Class
P Shares.
|
Tax
Information |
For
important tax information, please see “Tax Information” on page 13 of the
Prospectus.
|
Payments
to Broker-Dealers and
Other
Financial Intermediaries |
For
important information about financial intermediary compensation, please see
“Payments to Broker-Dealers and Other Financial Intermediaries” on page 13 of
the Prospectus.
12
Municipal
Fixed Income Funds –
Additional Summary Information
Additional Summary Information
|
Tax
Information |
The Funds’
distributions of interest on municipal obligations generally are not subject to
federal income tax; however the Funds may distribute taxable dividends,
including distributions of short-term capital gains, and long-term capital
gains. In addition, interest on certain obligations may be subject to the
federal alternative minimum tax. To the extent that the Funds’ distributions are
derived from interest on obligations that are not exempt from applicable state
and local taxes, such distributions will be subject to such state and local
taxes.
|
Payments
to Broker-Dealers and
Other
Financial Intermediaries |
If you
purchase a Fund through an Intermediary, the Fund and/or its related companies
may pay the Intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the Intermediary and
your salesperson to recommend a Fund over another investment. Ask your
salesperson or visit your Intermediary’s website for more
information.
13
Investment
Management Approach
|
INVESTMENT
OBJECTIVE |
The Dynamic
Municipal Income Fund seeks a high level of current income that is exempt from
regular federal income tax. The High Yield Municipal Fund seeks a high level of
current income that is exempt from regular federal income tax and may also
consider the potential for capital appreciation. The Short Duration Tax-Free
Fund seeks a high level of current income, consistent with relatively low
volatility of principal, that is exempt from regular federal income
tax.
|
PRINCIPAL
INVESTMENT STRATEGIES |
Dynamic Municipal
Income Fund
The Fund
invests, under normal market conditions, at least 80% of its Net Assets in
Municipal Securities, the interest on which is exempt from regular federal
income tax (i.e., excluded from gross income for federal income tax purposes).
The Fund may invest up to 100% of its Net Assets in private activity bonds, the
interest on which (including the Fund’s distributions of such interest) may be a
preference item for purposes of the federal alternative minimum tax. 100% of the
Fund’s portfolio will be invested in U.S. dollar-denominated
securities.
The Fund
may invest up to 30% of its Net Assets in Municipal Securities that, at the time
of purchase, are non-investment grade (commonly referred to as “junk bonds”).
Non-investment grade securities are securities rated BB+, Ba1 or below by a
NRSRO, or, if unrated, determined by the Investment Adviser to be of comparable
credit quality. The Fund may purchase the securities of issuers that are in
default.
The Fund
may also seek to obtain exposure to fixed income investments through investments
in affiliated or unaffiliated investment companies, including ETFs.
The Fund
may focus its investments in issuers within the same state or economic sector.
The team uses a multi-faceted approach when evaluating whether to add or
maintain exposure to any individual position. A top-down approach is used to
assess broad macro trends while a bottom-up analysis is used to determine
relative value between individual securities. Individual securities will be
considered for purchase or sale based on credit profile, risk, structure,
pricing, and portfolio impact, as well as duration management, restructuring,
opportunistic trading and tax loss harvesting.
Under
normal interest rate conditions, the Fund’s duration is expected to range
between two and eight years. (Historically, over the last five years, the
duration of the Bloomberg Municipal Bond 1-10 Year Blend Index has been between
approximately 3.67 and 4.16 years). Although the Fund is not managed towards an
average maturity, it is expected that the average maturity of the Fund’s
portfolio will change in relation to the duration of the Bloomberg Municipal
Bond 1-10 Year Blend Index.
The Fund’s
benchmark index is the Bloomberg Municipal Bond 1-10 Year Blend Index. The
Bloomberg Municipal Bond 1-10 Year Blend Index is an investment grade, national
focused municipal bond index with maturities ranging from 1-12
years.
High Yield Municipal
Fund
The Fund
invests, under normal circumstances, at least 80% of its Net Assets in Municipal
Securities, the interest on which is exempt from regular federal income tax
(i.e., excluded from gross income for federal income tax purposes). The Fund
invests, under normal circumstances, a majority of its Total Assets in
high-yield Municipal Securities. High-yield securities are securities that, at
the time of purchase, are medium quality or non-investment grade. Medium quality
securities are rated BBB or Baa by a NRSRO, and non-investment grade securities
are securities rated BB+, Ba1 or below by an NRSRO. Non-investment grade
securities are commonly known as “junk bonds.” The Fund may also invest in
unrated securities determined by the Investment Adviser to be of comparable
credit quality. The Fund may purchase the securities of issuers that are in
default.
Under
normal circumstances, the Fund may also invest the remainder of its Total Assets
in higher grade fixed income securities. In pursuing its principal investment
strategy, the Investment Adviser will assess the relative value in the Municipal
Securities market from both a credit and yield curve perspective. Individual
securities will be considered for purchase or sale based on credit profile,
risk, structure, pricing, and portfolio impact, as well as duration management,
restructuring, opportunistic trading and tax loss harvesting. Tax-exempt
securities offering the high current income sought by the Fund may be
predominantly in the lower rating categories of NRSROs (BB+/Ba1 or
lower).
The Fund
may focus its investments in issuers in the same state or economic
sector.
14
Investment
Management Approach
The Fund
may invest up to 100% of its Net Assets in private activity bonds, the interest
on which (including the Fund’s distributions of such interest) may be a
preference item for purposes of the federal alternative minimum tax. 100% of the
Fund’s portfolio will be invested in U.S. dollar-denominated
securities.
The Fund
may also seek to obtain exposure to fixed income investments through investments
in affiliated or unaffiliated investment companies, including ETFs. In addition,
the Fund may invest in securities of other investment companies (specifically,
registered money market funds) to manage uninvested cash in the
portfolio.
Under normal interest rate
conditions, the Fund’s duration is expected to approximate that of the Goldman
Sachs High Yield Municipal Fund Composite Index (comprised of 40% Bloomberg
Municipal Bond Index and 60% Bloomberg Municipal High Yield Bond Index), plus or
minus two years. (Historically, over the last five years, the duration of the
Goldman Sachs High Yield Municipal Fund Composite Index has ranged between 5.24
and 9.36 years).
The Fund’s
benchmark indices are the Bloomberg Municipal High Yield Bond Index, the
Bloomberg Municipal Bond Index and the Goldman Sachs High Yield Municipal Fund
Composite Index. The Bloomberg Municipal High Yield Bond Index is an unmanaged
index made up of bonds that are non-investment grade, unrated, or rated below
Ba1 by Moody’s with a remaining maturity of at least one year. The Bloomberg
Municipal Bond Index is an unmanaged broad-based total return index composed of
approximately 40,000 investment grade, fixed rate and tax-exempt issues, with a
remaining maturity of at least one year. The Goldman Sachs High Yield Municipal
Fund Composite Index is a custom benchmark comprised of the Bloomberg Municipal
High Yield Bond Index (60%) and the Bloomberg Municipal Bond Index (40%) (with
distributions reinvested).
Short Duration
Tax-Free Fund
The Fund
invests, under normal market conditions, at least 80% of its Net Assets in
Municipal Securities, the interest on which is exempt from regular federal
income tax (i.e., excluded from gross income for federal income tax purposes),
and is not a tax preference item under the federal alternative minimum tax.
Under normal market conditions, the Fund’s investments in private activity bonds
and taxable investments will not exceed, in the aggregate, 20% of the Fund’s Net
Assets. The interest from private activity bonds (including the Fund’s
distributions of such interest) may be a preference item for purposes of the
federal alternative minimum tax. 100% of the Fund’s portfolio will be invested
in U.S. dollar-denominated securities.
The Fund
invests in securities rated at least BBB or Baa by a NRSRO at the time of
purchase, or if unrated, determined by its investment adviser to be of
comparable credit quality.
The Fund
may also seek to obtain exposure to fixed income investments through investments
in affiliated or unaffiliated investment companies, including ETFs.
The team
uses a multi-faceted approach when evaluating whether to add or maintain
exposure to any individual position. A top-down approach is used to assess broad
macro trends while a bottom-up analysis is used to determine relative value
between individual securities. Individual securities will be considered for
purchase or sale based on credit profile, risk, structure, pricing, and
portfolio impact, as well as duration management, restructuring, opportunistic
trading and tax loss harvesting.
Under
normal interest rate conditions, the Fund’s duration is expected to approximate
that of the Bloomberg Municipal Bond 1-3 Year Blend Index, plus or minus 0.5
years. (Historically, over the last five years, the duration of the Bloomberg
Municipal Bond 1-3 Year Blend Index has ranged between 2.04 and 2.25 years). The
reference to “Short-Duration” in the Fund’s name refers to this
duration.
The Fund’s
benchmark index is the Bloomberg Municipal Bond 1-3 Year Blend Index, an
unmanaged index that represents investment grade municipal bonds with maturities
greater than one year and less than four years.
All Funds
The Funds
may, from time to time, take temporary defensive positions that are inconsistent
with the Funds’ principal investment strategies in attempting to respond to
adverse market, political or other conditions. For temporary defensive purposes
(and to the extent that it is permitted to invest in the following), each Fund
may invest up to 100% of its total assets in securities issued or guaranteed by
the U.S. government, its agencies, instrumentalities or sponsored enterprises
(“U.S. Government Securities”), commercial paper rated at least A-2 by S&P
Global Ratings (“S&P”), P-2 by Moody’s Investors Service, Inc. (“Moody’s”)
or having a comparable credit rating by another NRSRO (or if unrated, determined
by the Investment Adviser to be of comparable credit quality), certificates of
deposit, bankers’ acceptances, repurchase agreements, non-convertible preferred
stocks and non-convertible corporate bonds with a remaining maturity of less
than one year, ETFs and other investment companies and cash items. When
a Fund’s assets are invested in such instruments, the Fund may not be achieving
its investment objective.
References
in the Prospectus to a Fund’s benchmark or benchmarks are for informational
purposes only, and unless otherwise noted, are not necessarily an indication of
how the Fund is managed.
15
U.S. Municipal
Investment Philosophy:
Our process
emphasizes:
◼
In-depth
security research
◼
Tax
efficiency and after-tax income
◼
Yield
Curve Strategies
◼
Disciplined
Risk Management
◼
Consideration
of a wide range of factors as part of the fundamental investment process, which
may include environmental, social and governance (“ESG”) factors
As part of
its fundamental investment process, the U.S. Municipal Portfolio Management Team
may integrate ESG factors alongside traditional fundamental factors to seek to:
(i) determine whether a particular fixed income security and/or sector is
suitable and attractively priced for investment and (ii) assess their potential
impact on the credit quality and spreads of a particular fixed income security.
Traditional fundamental factors that the U.S. Municipal Portfolio Management
Team may consider include, but are not limited to, leverage, financials,
industry trends and macroeconomic factors. ESG factors that the U.S. Municipal
Portfolio Management Team may consider include, but are not limited to, physical
risk (e.g., wildfires, floods, droughts and rising sea levels), workplace health
and safety, cyber risk, social unrest and equity, governance practices and
stakeholder relations, employee relations, board structure and management
incentives. The identification of a risk related to an ESG factor will not
necessarily exclude a particular fixed income security and/or sector that, in
the U.S. Municipal Portfolio Management Team’s view, is otherwise suitable and
attractively priced for investment, and the U.S. Municipal Portfolio Management
Team may invest in a security or sector without integrating ESG factors or
considerations into its fundamental investment process. The relevance of
specific traditional fundamental factors and ESG factors to the fundamental
investment process varies across asset classes, sectors and strategies. The U.S.
Municipal Portfolio Management Team may utilize data sources provided by
third-party vendors and/or engage directly with issuers when assessing the above
factors.
The U.S.
Municipal Portfolio Management Team employs a fundamental investment process
that considers a wide range of factors, and no one factor or consideration is
determinative.
With every fixed
income portfolio, the Investment Adviser applies a team approach that emphasizes
risk management and capitalizes on GSAM’s extensive research
capabilities.
Each of the
Funds described in the Prospectus has a target duration. A Fund’s duration
approximates its price sensitivity to changes in interest rates. For example,
suppose that interest rates in one day fall by 1% which, in turn, causes yields
on every bond in the market to fall by the same amount. In this example, the
price of a bond with a duration of 3 years may be expected to rise approximately
3% and the price of a bond with a 5 year duration may be expected to rise
approximately 5%. The converse is also true. Suppose interest rates in one day
rise by 1% which, in turn, causes yields on every bond in the market to rise by
the same amount. In this second example, the price of a bond with a duration of
3 years may be expected to fall approximately 3% and the price of a bond with a
5 year duration may be expected to fall approximately 5%. The longer the
duration of a bond, the more sensitive the bond’s price is to changes in
interest rates. In computing portfolio duration, a Fund will estimate the
duration of obligations that are subject to prepayment or redemption by the
issuer, taking into account the influence of interest rates on prepayments and
coupon flows. This method of computing duration is known as “option-adjusted”
duration. A Fund will not be limited as to its maximum weighted average
portfolio maturity or the maximum stated maturity or the maximum stated maturity
with respect to individual securities unless otherwise noted.
Maturity
measures the time until final payment is due; it takes no account of the pattern
of a security’s cash flows over time. In calculating maturity, a Fund may
determine the maturity of a variable or floating rate obligation according to
its interest rate reset date, or the date principal can be recovered on demand,
rather than the date of ultimate maturity. Similarly, to the extent that a fixed
income obligation has a call, refunding or redemption provision, the date on
which the instrument is expected to be called, refunded, or redeemed may be
considered to be its maturity date. There is no guarantee that the expected
call, refund or redemption will occur, and a Fund’s average maturity may
lengthen beyond the Investment Adviser’s expectations should the expected call,
refund or redemption not occur.
Each Fund
also has credit rating requirements for the securities it buys. A Fund will deem
a security to have met its minimum credit rating requirement if the security has
the required rating at the time of purchase from at least one NRSRO even though
it has been rated below the minimum rating by one or more other NRSROs. Unrated
securities may be purchased by the Funds if they are determined by the
Investment Adviser to be of comparable credit quality. A security satisfies a
Fund’s minimum rating requirement regardless of its relative ranking (for
example, plus or minus) within a designated major rating category (for example,
BBB or Baa). If a security satisfies a Fund’s minimum rating requirement at the
time of purchase and is subsequently downgraded below such rating, the Fund will
not be required to dispose of such security. If a downgrade occurs, the
Investment Adviser will consider what action, including the sale of such
security, is in the best interests of a Fund and its shareholders.
16
Investment
Management Approach
|
ADDITIONAL
PERFORMANCE INFORMATION |
The below
is additional information that relates to the “Performance” section of each
Fund’s summary section.
Note that
the “Best Quarter” and “Worst Quarter” figures shown in the “Performance”
section of each Fund’s Summary section are applicable only to the time period
covered by the bar chart.
The
definitions below apply to the after-tax returns shown in the “Performance”
section of each Fund’s Summary section.
Average
Annual Total Returns Before Taxes. These
returns do not reflect taxes on distributions on a Fund’s Shares nor do they
show how performance can be impacted by taxes when shares are redeemed (sold) by
you.
Average
Annual Total Returns After Taxes on Distributions. These
returns assume that taxes are paid on distributions on a Fund’s Class P Shares
(i.e., dividends and capital gains) but do not reflect taxes that may be
incurred upon redemption (sale) of the Class P Shares at the end of the
performance period.
Average
Annual Total Returns After Taxes on Distributions and Sale of Fund
Shares. These
returns reflect taxes paid on distributions on a Fund’s Class P Shares and taxes
applicable when the shares are redeemed (sold).
Note
on Tax Rates. The
after-tax performance figures are calculated using the historically highest
individual federal marginal income tax rates at the time of the distributions
and do not reflect state and local taxes. In calculating the federal income
taxes due on redemptions, capital gains taxes resulting from a redemption are
subtracted from the redemption proceeds and the tax benefits from capital losses
resulting from the redemption are added to the redemption proceeds. Under
certain circumstances, the addition of the tax benefits from capital losses
resulting from redemptions may cause the Returns After Taxes on Distributions
and Sale of Fund Shares to be greater than the Returns After Taxes on
Distributions or even the Returns Before Taxes.
|
OTHER
INVESTMENT PRACTICES AND
SECURITIES |
Although
each Fund’s principal investment strategies are described in the Funds’
Summary—Principal Strategy section of the Prospectus, the following tables
identify some of the investment techniques that may (but are not required to) be
used by the Funds in seeking to achieve their investment objectives. The tables
also highlight the differences and similarities among the Funds in their use of
these techniques and other investment practices and investment securities.
Numbers in these tables show allowable usage only; for actual usage, consult the
Funds’ annual/semi-annual report. For more information about these and other
investment practices and securities, see Appendix A.
Each Fund
publishes on its website (http://www.gsamfunds.com) complete portfolio holdings
for the Fund as of the end of each fiscal quarter subject to a thirty day lag
between the date of the information and the date on which the information is
disclosed. In addition, the Funds publish on their website selected portfolio
holdings information as of the end of each month subject to a fifteen day lag
between the date of the information and the date on which the information is
disclosed. In addition, a description of the Funds’ policies and procedures with
respect to the disclosure of the Funds’ portfolio holdings is available in the
Funds’ Statement of Additional Information (“SAI”).
17
|
10
Percent of total assets (italic type)
10 Percent
of net assets (excluding borrowings for investment purposes) (roman
type)
• No
specific percentage limitation on usage; limited only by the objectives
and strategies of the Fund |
Dynamic
Municipal
Income
Fund |
High
Yield
Municipal
Fund |
Short
Duration
Tax-Free
Fund |
|
Investment
Practices |
|
|
|
|
Borrowings |
331⁄3 |
331⁄3 |
331⁄3 |
|
Credit,
Interest Rate and Total Return Swaps |
• |
• |
• |
|
Financial
Futures Contracts and Options on Futures |
• |
• |
• |
|
Illiquid
Investments* |
15 |
15 |
15 |
|
Interest
Rate Floors, Caps and Collars |
• |
• |
• |
|
Investment
Company Securities (including ETFs)** |
10 |
10 |
10 |
|
Options*** |
• |
• |
• |
|
Repurchase
Agreements |
• |
• |
• |
|
Standby
Commitments and Tender Option Bonds |
• |
• |
• |
|
When-Issued
Securities and Forward Commitments |
• |
• |
• |
*
Illiquid
investments are any investments that a Fund reasonably expects cannot be sold or
disposed of in current market conditions in seven calendar days or less without
the sale or disposition significantly changing the market value of the
investment.
**
This
percentage limitation does not apply to a Fund’s investments in investment
companies (including ETFs) where a higher percentage limitation is permitted
under the Investment Company Act or rules, regulations or exemptive relief
thereunder.
***
The
Funds may sell call and put options and purchase call and put options on
securities and securities indices in which they invest.
18
Investment
Management Approach
|
10
Percent of total assets (italic type)
10 Percent
of Net Assets (including borrowings for investment purposes) (roman
type)
• No
specific percentage limitation on usage;
limited
only by the objectives and strategies of the Fund
— Not
permitted |
Dynamic
Municipal
Income
Fund |
High
Yield
Municipal
Fund |
Short
Duration
Tax-Free
Fund |
|
Investment
Securities |
|
|
|
|
Asset-Backed
Securities |
• |
• |
• |
|
Convertible
Securities |
• |
• |
• |
|
Corporate
Debt Obligations and Trust Preferred Securities |
• |
• |
• |
|
Floating
and Variable Rate Obligations |
• |
• |
• |
|
Lower
Grade Fixed Income Securities |
30 |
• |
— |
|
Structured
Securities1 |
• |
• |
• |
|
Tax-Free
Municipal Securities |
80+2 |
80+2 |
80+2,3 |
|
Taxable
Municipal Securities |
20 |
20 |
20 |
|
Temporary
Investments |
•4 |
•4,5 |
•4 |
|
U.S.
Government Securities |
• |
• |
• |
1
Structured
securities are not subject to the same minimum credit quality requirements as a
Fund’s investments in fixed income securities.
2
Each
Fund will invest at least 80% of its Net Assets in municipal securities, the
interest on which is exempt from regular federal income tax.
3
The
Short Duration Tax-Free Fund will invest at least 80% of its Net Assets in
obligations, the interest on which is exempt from regular federal income tax and
is not a tax preference item under the federal alternative minimum
tax.
4
Each
Fund may invest no more than 20% of its Net Assets in taxable investments under
normal market conditions. Under unusual conditions, taxable investments may
exceed this percentage.
5
The
High Yield Municipal Fund may for this purpose invest in investment and high
grade securities without limit.
19
Risks of
the Funds
Loss of
money is a risk of investing in the Fund (which, for the remainder of this
Prospectus, refers to one or more of the Funds offered in this Prospectus). An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the FDIC or any other governmental agency. The principal risks of the Fund are
discussed in the Summary section of the Prospectus. The following section
provides additional information on the risks that apply to the Fund, which may
result in a loss of your investment. The risks applicable to the Fund are
presented below in alphabetical order, and not in the order of importance or
potential exposure. The Fund should not be relied upon as a complete investment
program. There can be no assurance that the Fund will achieve its investment
objective.
|
✓ Principal
Risk
• Additional
Risk |
Dynamic
Municipal
Income
Fund |
High
Yield
Municipal
Fund |
Short
Duration
Tax-Free
Fund |
|
Call/Prepayment |
• |
• |
• |
|
Credit/Default |
✓ |
✓ |
✓ |
|
Cybersecurity |
• |
• |
• |
|
Derivatives |
• |
• |
• |
|
Distressed
Debt |
• |
• |
• |
|
ESG
Integration |
• |
• |
• |
|
Extension |
• |
• |
• |
|
Floating
and Variable Rate Obligations |
• |
• |
• |
|
Geographic
and Sector |
✓ |
✓ |
✓ |
|
Interest
Rate |
✓ |
✓ |
✓ |
|
Large
Shareholder Transactions |
✓ |
✓ |
✓ |
|
Liquidity |
✓ |
✓ |
✓ |
|
Management |
• |
• |
• |
|
Market |
✓ |
✓ |
✓ |
|
Municipal
Securities |
✓ |
✓ |
✓ |
|
NAV |
• |
• |
• |
|
Non-Investment
Grade Fixed Income Securities |
✓ |
✓ |
|
|
Other
Investment Companies |
✓ |
✓ |
✓ |
|
State/Territory
Specific |
✓ |
✓ |
✓ |
|
Tax |
✓ |
✓ |
✓ |
|
U.S.
Government Securities |
• |
• |
• |
◼
Call/Prepayment
Risk—An issuer
could exercise its right to pay principal on an obligation held by the
Fund (such as an asset-backed security) earlier than expected. This may
happen when there is a decline in interest rates, when credit spreads change, or
when an issuer’s credit quality improves. Under these circumstances, the Fund
may be unable to recoup all of its initial investment and will also suffer from
having to reinvest in lower-yielding securities.
◼
Credit/Default
Risk—An issuer
or guarantor of fixed income securities or instruments held by a Fund
(which may have low credit ratings) may default on its obligation to pay
interest and repay principal or default on any other obligation. This risk
includes the risk of default on foreign letters of credit or guarantees that may
back Municipal Securities. The credit quality of the Fund’s portfolio securities
or instruments may meet the Fund’s credit quality requirements at the time of
purchase but then deteriorate thereafter, and such a deterioration can occur
rapidly. In certain instances, the downgrading or default of a single holding or
guarantor of the Fund’s holdings may impair the Fund’s liquidity and have the
potential to cause significant NAV deterioration. These risks are heightened in
market environments where interest rates are rising as well as in
connection with a Fund’s investments in non-investment grade fixed-income
securities.
◼
Cybersecurity
Risk—The Fund
may be susceptible to operational and information security risks resulting from
cyber-attacks. Cyber-attacks include, among others, stealing or corrupting
confidential information and other data that is maintained online or digitally
for financial gain, denial-of-service attacks on websites causing operational
disruption, and the unauthorized release of confidential information and other
data. Cyber-attacks have the ability to cause significant disruptions and impact
business operations; to result in financial losses; to prevent shareholders from
transacting business; to interfere with the Fund’s calculation of NAV; and to
lead to violations of applicable privacy and other laws, regulatory fines,
penalties, reputational damage, reimbursement or other compensation costs and/or
additional compliance costs. Cyber-attacks affecting the Fund or its Investment
Adviser, custodian, Transfer Agent, or other third-party service providers may
adversely impact the Fund and its shareholders.
20
Risks
of the Funds
◼
Derivatives
Risk—The
Fund’s use of options, futures, forwards, swaps, options on swaps,
structured securities and other s and similar instruments (collectively referred
to in this paragraph as “derivatives”) may result in losses, including due to
adverse market movements. Derivatives, which may pose risks in addition to and
greater than those associated with investing directly in securities, currencies
or other instruments, may increase market exposure and be illiquid or less
liquid, volatile, difficult to price and leveraged so that small changes in the
value of the underlying assets or instruments may produce disproportionate
losses to the Fund. Certain derivatives are also subject to counterparty risk,
which is the risk that the other party in the transaction will not
fulfill,
or lacks the
capacity or authority to fulfill, its contractual obligations, liquidity
risk,
which includes
the risk that the Fund will not be able to close its derivatives position when
it is advantageous to do so, and risks arising from margin requirements, which
include the risk that the Fund will be required to pay additional margin or set
aside additional collateral to maintain open derivative positions. Derivatives
may be used for both hedging and non-hedging purposes.
The use of
derivatives is a highly specialized activity that involves investment techniques
and risks different from those associated with investments in more traditional
securities and instruments, and there is no guarantee that the use of
derivatives will achieve their intended result. If the Investment Adviser is
incorrect in its expectation of the timing or level of fluctuation in securities
prices, interest rates, currency prices or other variables, the use of
derivatives could result in losses, which in some cases may be significant. A
lack of correlation between changes in the value of derivatives and the value of
the portfolio assets (if any) being hedged could also result in losses. In
addition, there is a risk that the performance of the derivatives or other
instruments used by the Investment Adviser to replicate the performance of a
particular asset class may not accurately track the performance of that asset
class. In addition, a Fund’s use of derivatives could affect the amount, timing
and character of distributions to shareholders which may result in a
Fund realizing less tax-exempt income and more income subject to tax at
ordinary income tax rates than it would if it did not engage in derivative
transactions, which may adversely impact a Fund’s after-tax return.
The
use of
derivatives
is
also
subject to
operational and legal risks.
Operational
risks generally refer to
risks related
to potential operational issues, including documentation issues, settlement
issues, system failures,
inadequate
controls, and human error.
Legal risks
generally refer to risks of loss resulting from insufficient documentation or
legality or enforceability of
a
contract.
◼
Distressed
Debt Risk—When a
Fund invests in obligations of financially troubled companies (sometimes known
as “distressed” securities), there exists the risk that the transaction
involving such debt obligations will be unsuccessful, take considerable time or
will result in a distribution of cash or a new security or obligation in
exchange for the stressed and distressed debt obligations, the value of which
may be less than the Fund’s purchase price of such debt obligations.
Furthermore, if an anticipated transaction does not occur, a Fund may be
required to sell its investment at a loss or hold its investment pending
bankruptcy proceedings in the event the issuer files for
bankruptcy.
◼
ESG
Integration Risk—The Investment Adviser
employs a fundamental investment process that may integrate ESG factors with
traditional fundamental factors. The relevance and weightings of specific
ESG factors to or within the fundamental investment process varies across asset
classes, sectors and strategies and no one factor or consideration is
determinative. When integrating ESG factors into the investment process,
the Investment Adviser may rely on third-party data that it believes to be
reliable, but it does not guarantee the accuracy of such third-party
data. ESG information from third-party data providers may be incomplete,
inaccurate or unavailable, which may adversely impact the investment
process. Moreover, ESG information, whether from an external and/or
internal source, is, by nature and in many instances, based on a qualitative and
subjective assessment. An element of subjectivity and discretion is
therefore inherent to the interpretation and use of ESG data. The process for
conducting ESG assessments and implementation of ESG views in client/fund
portfolios, including the format and content of such analysis and the tools
and/or data used to perform such analysis, may also vary among the Investment
Adviser’s portfolio management teams. While the Investment Adviser believes that
the integration of material ESG factors into the Fund’s investment process has
the potential to identify financial risks and contribute to the Fund’s long-term
performance, ESG factors may not be considered for each and every investment
decision, and there is no guarantee that the integration of ESG factors will
result in better performance. Investors can differ in their views of what
constitutes positive or negative ESG characteristics. Moreover, the current
lack of common standards may result in different approaches to integrating ESG
factors. As a result, the Fund may invest in companies that do not reflect
the beliefs and values of any particular investor. The Investment Adviser’s
approach to ESG integration may evolve and develop over time, both due to a
refinement of investment decision-making processes to address ESG factors and
risks, and because of legal and regulatory developments.
◼
Extension
Risk—An issuer
could exercise its right to pay principal on an obligation held by a
Fund (such as an asset-backed security) later than expected. This may
happen when there is a rise in interest rates. Under these circumstances, the
value of the obligation will decrease, and a Fund will also suffer from the
inability to reinvest in higher yielding securities.
◼
Floating
and Variable Rate Obligations Risk—Floating
rate and variable rate obligations are debt instruments issued by companies or
other entities with interest rates that reset periodically (typically, daily,
monthly, quarterly, or semi-annually) in response to changes in the market rate
of interest on which the interest rate is based. For floating and variable rate
obligations, there may be a lag between an actual change in the underlying
interest rate benchmark and the reset time for an interest payment of such an
obligation, which could harm or benefit the Fund, depending on the interest rate
environment or other circumstances. In a rising
21
interest
rate environment, for example, a floating or variable rate obligation that does
not reset immediately would prevent the Fund from taking full advantage of
rising interest rates in a timely manner. However, in a declining interest rate
environment, the Fund may benefit from a lag due to an obligation’s interest
rate payment not being immediately impacted by a decline in interest
rates.
◼
Certain floating and
variable rate obligations have an interest rate floor feature, which prevents
the interest rate payable by the security from dropping below a specified level
as compared to a reference interest rate (the “reference rate”), such as Secured
Overnight Financing Rate (“SOFR”),
Term SOFR or
another rate determined using SOFR. Such a floor protects the Fund from losses
resulting from a decrease in the reference rate below the specified level.
However, if the reference rate is below the floor, there will be a lag between a
rise in the reference rate and a rise in the interest rate payable by the
obligation, and the Fund may not benefit from increasing interest rates for a
significant amount of time.
◼
Some
floating or
variable rate obligations or investments of the Fund may reference
(or may have
previously referenced) LIBOR.
As a result of
benchmark reforms, publication of most LIBOR
settings has
ceased.
Some LIBOR
settings continue to be published but only on a temporary,
synthetic and
non-representative basis
and are
expected to cease being published in September 2024. Regulated entities have
generally ceased entering into new LIBOR contracts in connection with regulatory
guidance or prohibitions. Public and private sector actors have worked to
establish alternative reference rates,
like SOFR or
Term SOFR, to be used in place of LIBOR.
There is no
assurance that any such alternative reference rate will be similar to or produce
the same value or economic equivalence as LIBOR or that it will have the same
volume or liquidity as did LIBOR which may affect the value, volatility,
liquidity or return on certain of the Fund’s floating and variable rate
obligations and investments and result in costs incurred in connection with
changing reference rates used for positions, closing out positions and entering
into new trades. For example, LIBOR was previously calculated using the average
rate at which a selection of large global banks reported they could borrow from
one another and SOFR is a measure of the cost of borrowing cash overnight,
collateralized by the U.S. Treasury securities, and is based on directly
observable U.S. Treasury-backed repurchase transactions. Certain of the Fund’s
obligations or investments may have transitioned from LIBOR or may transition
from LIBOR in the future. The transition from LIBOR to alternative reference
rates may result in operational issues for the Fund or its obligations or
investments. Any pricing adjustments to the Fund’s obligations or investments
resulting from use of an alternative reference rate may also adversely affect
the Fund’s performance and/or NAV. No
assurances can
be given as to the impact of the LIBOR transition
(and the
timing of any such impact) on the Fund and its obligations and
investments.
◼
Geographic
and Sector Risk—If a Fund
invests a significant portion of its total assets in securities of issuers
within the same state, geographic region or economic sector, an adverse
economic, business, political, environmental or other development affecting that
state, region or sector may affect the value of the Fund’s investments more than
if its investments were not so focused.
◼
Interest
Rate Risk—When
interest rates increase, fixed income securities or instruments held by
the Fund (which may include inflation protected securities) will generally
decline in value. Long-term fixed income securities or instruments will normally
have more price volatility because of this risk than short-term fixed income
securities or instruments. A wide variety of market factors can cause interest
rates to rise, including central bank monetary policy, rising inflation and
changes in general economic conditions. Changing interest rates may have
unpredictable effects on the markets,
may result in
heightened market volatility and may detract from Fund performance to the extent
the Fund is exposed to such interest rates and/or volatility. In addition,
changes in monetary policy may exacerbate the risks associated with changing
interest rates. Funds with longer average portfolio durations will generally be
more sensitive to changes in interest rates than funds with a shorter average
portfolio duration. Fluctuations in interest rates may also affect the liquidity
of fixed income securities and instruments held by the Fund.
It
is difficult
to predict the magnitude, timing or direction of interest rate changes and the
impact these changes will have on the markets in
which
the
Fund
invests.
◼
Large
Shareholder Transactions Risk—The Fund
may experience adverse effects when certain large shareholders, such as other
funds, institutional investors (including those trading by use of
non-discretionary mathematical formulas), financial intermediaries (who may make
investment decisions on behalf of underlying clients and/or include the Fund in
their investment model), individuals, accounts and Goldman Sachs affiliates,
purchase or redeem large amounts of shares of the Fund. Such large shareholder
redemptions, which may occur rapidly or unexpectedly, may cause the Fund to sell
portfolio securities at times when it would not otherwise do so, which may
negatively impact the Fund’s NAV and liquidity. Similarly, large Fund share
purchases may adversely affect the Fund’s performance to the extent that the
Fund is delayed in investing new cash or otherwise maintains a larger cash
position than it ordinarily would. These transactions may also accelerate the
realization of taxable income to shareholders if such sales of investments
resulted in gains, and may also increase transaction costs. In addition, a large
redemption could result in the Fund’s current expenses being allocated over a
smaller asset base, leading to an increase in the Fund’s expense
ratio.
◼
Liquidity
Risk—The Fund
may invest in securities or instruments that trade in lower volumes, that are
less liquid than other investments and/or that may become illiquid or less
liquid in response to market developments or adverse investor perceptions.
Investments that are illiquid or that trade in lower volumes may be more
difficult to value. When there is no willing buyer and
22
Risks
of the Funds
investments
cannot be readily sold at the desired time or price, that Fund may have to
accept a lower price or may not be able to sell the security or instrument at
all. An inability to sell one or more portfolio positions can adversely affect
a Fund's value or prevent the Fund from being able to take advantage of
other investment opportunities.
To the
extent that the traditional dealer counterparties that engage in fixed income
trading do not maintain inventories of bonds (which provide an important
indication of their ability to “make markets”) that keep pace with the growth of
the bond markets over time, relatively low levels of dealer inventories could
lead to decreased liquidity and increased volatility in the fixed income
markets. Additionally, market participants other than a Fund may attempt to sell
fixed income holdings at the same time as the Fund, which could cause downward
pricing pressure and contribute to decreased liquidity.
Illiquidity
can be caused by a drop in overall market trading volume, an inability to find a
willing buyer, or legal restrictions on the securities’ resale. To the extent a
Fund holds non-investment grade fixed income securities, the Fund may be
especially subject to the risk that during certain periods, the liquidity of
particular issuers or industries, or all securities within a particular
investment category, may shrink or disappear suddenly and without warning as a
result of adverse economic, market or political events (including periods of
rapid interest rate changes), or adverse investor perceptions, whether or not
accurate.
Liquidity
risk may also refer to the risk that that Fund will not be able to pay
redemption proceeds within the allowable time period or without significant
dilution to remaining investors’ interests because of unusual market conditions,
declining prices of the securities sold, an unusually high volume of redemption
requests or other reasons. While that Fund reserves the right to meet
redemption requests through in-kind distributions, a may instead choose to raise
cash to meet redemption requests through sales of portfolio securities or
permissible borrowings. If that Fund is forced to sell securities at an
unfavorable time and/or under unfavorable conditions, such sales may adversely
affect a Fund's NAV and dilute remaining investors’ interests.
Certain
shareholders, including clients or affiliates of the Investment Adviser and/or
other funds managed by the Investment Adviser, may from time to time own or
control a significant percentage of the shares. Redemptions by these
shareholders of their shares of that may further increase a Fund's
liquidity risk and may impact a Fund's NAV. These shareholders may include,
for example, institutional investors, funds of funds, discretionary advisory
clients and other shareholders whose buy-sell decisions are controlled by a
single decision-maker.
◼
Management
Risk—A strategy
used by the Investment Adviser may fail to produce the intended
results.
◼
Market
Risk—The
market value of the securities in which a Fund invests may go up
or down in response to the prospects of individual companies, particular sectors
or governments and/or general economic conditions throughout the world. Price
changes may be temporary or last for extended periods. A Fund's investments
may be overweighted from time to time in one or more sectors or countries, which
will increase the Fund's exposure to risk of loss from adverse developments
affecting those sectors or countries.
Global
economies and financial markets are becoming increasingly interconnected, and
conditions and events in one country, region or financial market may adversely
impact issuers in a different country, region or financial market. Furthermore,
local, regional and global events such as war, military conflict, acts of
terrorism, social unrest, natural disasters, recessions, inflation, rapid
interest rate changes, supply chain disruptions, sanctions, the spread of
infectious illness or other public health threats could also adversely impact
issuers, markets and economies, including in ways that cannot necessarily be
foreseen. A Fund could be negatively impacted if the value of a portfolio
holding were harmed by such political or economic conditions or events. In
addition, governmental and quasi-governmental organizations have taken a number
of unprecedented actions designed to support the markets. Such conditions,
events and actions may result in greater market risk.
◼
Municipal
Securities Risk—Municipal
securities are subject to call/prepayment risk, credit/default risk,
extension risk, interest rate risk and certain additional risks. The Fund may be
more sensitive to adverse economic, business or political developments if it
invests a substantial portion of its assets in the bonds of similar projects
(such as those relating to education, health care, housing, transportation, and
utilities), industrial development bonds, or in particular types of municipal
securities (such as general obligation bonds, private activity bonds and moral
obligation bonds). While interest earned on Municipal Securities is generally
not subject to federal tax, any interest earned on taxable Municipal Securities
is fully taxable at the federal level and may be subject to tax at the state
level. Specific risks are associated with different types of municipal
securities. With respect to general obligation bonds, the full faith, credit and
taxing power of the municipality that issues a general obligation bond secures
payment of interest and repayment of principal. Timely payments depend on the
issuer’s credit quality, ability to raise tax revenues and ability to maintain
an adequate tax base. Certain of the municipalities in which the Fund invests
may experience significant financial difficulties, which may lead to bankruptcy
or default.
With
respect to revenue bonds, payments of interest and principal are made only from
the revenues generated by a particular facility, class of facilities or the
proceeds of a special tax, or other revenue source, and depends on the money
earned by that source. Private activity bonds are issued by municipalities and
other public authorities to finance development of industrial facilities for use
by a private enterprise. The private enterprise pays the principal and interest
on the bond, and the issuer does not pledge its full faith, credit and taxing
power for repayment. If the private enterprise defaults on its payments, the
Fund may not receive any
23
income or
get its money back from the investment. Moral obligation bonds are generally
issued by special purpose public authorities of a state or municipality. If the
issuer is unable to meet its obligations, repayment of these bonds becomes a
moral commitment, but not a legal obligation, of the state or municipality.
Municipal notes are shorter term municipal debt obligations. They may provide
interim financing in anticipation of, and are secured by, tax collection, bond
sales or revenue receipts. If there is a shortfall in the anticipated proceeds,
the notes may not be fully repaid and the Fund may lose money. In a municipal
lease obligation, the issuer agrees to make payments when due on the lease
obligation. The issuer will generally appropriate municipal funds for that
purpose, but is not obligated to do so. Although the issuer does not pledge its
unlimited taxing power for payment of the lease obligation, the lease obligation
is secured by the leased property. However, if the issuer does not fulfill its
payment obligation it may be difficult to sell the property and the proceeds of
a sale may not cover the Fund’s loss.
◼
NAV
Risk—The net
asset value of the Fund and the value of your investment will
fluctuate.
◼
Non-Investment
Grade Fixed Income Securities Risk—Non-investment
grade fixed income securities and unrated securities of comparable credit
quality (commonly known as “junk bonds”) are considered speculative and are
subject to the increased risk of an issuer’s inability to meet principal and
interest payment obligations. These securities may be subject to greater price
volatility due to such factors as specific issuer developments, interest rate
sensitivity, negative perceptions of the junk bond markets generally and less
liquidity.
◼
Other
Investment Companies Risk—By
investing in other investment companies (including ETFs) indirectly through the
Fund, investors will incur a proportionate share of the expenses of the other
investment companies held by the Fund (including operating costs and investment
management fees) in addition to the fees and expenses regularly borne by the
Fund. In addition, the Fund will be affected by the investment policies,
practices and performance of such investment companies in direct proportion to
the amount of assets the Fund invests therein.
◼
State/Territory
Specific Risk—The Fund’s
investments in municipal obligations of issuers located in a particular state or
U.S. territory may be adversely affected by political, economic and regulatory
developments within that state or U.S. territory. Such developments may affect
the financial condition of a state’s or territory’s political subdivisions,
agencies, instrumentalities and public authorities and heighten the risks
associated with investing in bonds issued by such parties, which could, in turn,
adversely affect the Fund’s income, NAV, liquidity, and/or ability to preserve
or realize capital appreciation. From time to time, a Fund may focus its
investments in one or more state, territory, or geographic region, which will
subject the Fund, to a greater extent than if it were not so focused, to the
risks associated with that state, territory, or geographic
region.
◼
Tax
Risk—The Funds
may be adversely impacted by changes in tax rates and policies. Because interest
income from Municipal Securities is normally not subject to regular federal
income taxation, the attractiveness of Municipal Securities in relation to other
investment alternatives is affected by changes in federal and state income tax
rates or changes in the tax-exempt status of interest income from Municipal
Securities. Any proposed or actual changes in such rates or exempt status,
therefore, can significantly affect the demand for and supply, liquidity and
marketability of Municipal Securities. This could in turn affect a Fund’s net
asset value and ability to acquire and dispose of Municipal Securities at
desirable yield and price levels. Additionally, these Funds would not be a
suitable investment for IRAs, other tax-exempt or tax-deferred accounts or for
other investors who are not sensitive to the federal, state or local income tax
consequences of their investments.
◼
U.S.
Government Securities Risk—The U.S.
government may not provide financial support to U.S. government agencies,
instrumentalities or sponsored enterprises if it is not obligated to do so by
law. U.S. Government Securities issued by those agencies,
instrumentalities and sponsored enterprises, including those issued by the
Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage
Corporation (“Freddie Mac”) and the Federal Home Loan Banks, are neither issued
nor guaranteed by the U.S. Treasury and, therefore, are not backed by the full
faith and credit of the United States. The maximum potential liability of the
issuers of some U.S. Government Securities held by the Fund may greatly exceed
their current resources, including legal right to support from the U.S.
Treasury. It is possible that issuers of U.S. Government Securities will not
have the funds to meet their payment obligations in the future. Fannie Mae and
Freddie Mac have been operating under conservatorship, with the Federal Housing
Finance Agency (“FHFA”) acting as their conservator, since September 2008. The
entities are dependent upon the continued support of the U.S. Department of the
Treasury and FHFA in order to continue their business operations. These factors,
among others, could affect the future status and role of Fannie Mae and Freddie
Mac and the value of their securities and the securities which they guarantee.
Additionally, the U.S. government and its agencies and instrumentalities do not
guarantee the market values of their securities, which may
fluctuate.
More
information about the Fund’s portfolio securities and investment techniques, and
its associated risks, is provided in Appendix A. You should consider the
investment risks discussed in this section and in Appendix A. Both are important
to your investment choice.
24
Service
Providers
|
INVESTMENT
ADVISER |
|
Investment
Adviser |
Fund |
|
Goldman
Sachs Asset Management, L.P. (“GSAM”)
200
West Street
New
York, NY 10282 |
Dynamic
Municipal Income
High
Yield Municipal
Short
Duration Tax-Free |
GSAM has been registered as
an investment adviser with the SEC since 1990 and is an indirect, wholly-owned
subsidiary of The Goldman Sachs Group, Inc. and an affiliate of Goldman Sachs.
Founded in 1869, The Goldman Sachs Group, Inc. is a publicly-held financial
holding company and a leading global investment banking, securities and
investment management firm. As of March 31, 2023, GSAM, including its investment
advisory affiliates, had assets under supervision of approximately $2.41
trillion.
The
Investment Adviser provides day-to-day advice regarding the Fund’s portfolio
transactions. The Investment Adviser makes the investment decisions for the Fund
and places purchase and sale orders for the Fund’s portfolio transactions in
U.S. and foreign markets. As permitted by applicable law, these orders may be
directed to any executing brokers, dealers, futures commission merchants or
other counterparties, including Goldman Sachs and its affiliates. While the
Investment Adviser is ultimately responsible for the management of the Fund, it
is able to draw upon the research and expertise of its asset management
affiliates for portfolio decisions and management with respect to certain
portfolio securities. In addition, the Investment Adviser has access to the
research and certain proprietary technical models developed by Goldman Sachs
(subject to legal, internal, regulatory and Chinese Wall restrictions), and will
apply quantitative and qualitative analysis in determining the appropriate
allocations among categories of issuers and types of securities.
The
Investment Adviser also performs the following additional services for the Fund
(to the extent not performed by others pursuant to agreements with the
Fund):
◼
Supervises
all non-advisory operations of the Fund
◼
Provides
personnel to perform necessary executive, administrative and clerical services
to the Fund
◼
Arranges
for the preparation of all required tax returns, reports to shareholders,
prospectuses and statements of additional information and other reports filed
with the SEC and other regulatory authorities
◼
Maintains
the records of the Fund
◼
Provides
office space and all necessary office equipment and services
An
investment in the Fund may be negatively impacted because of the operational
risks arising from factors such as processing errors and human errors,
inadequate or failed internal or external processes, failures in systems and
technology, changes in personnel, and errors caused by third-party service
providers or trading counterparties. The use of certain investment strategies
that involve manual or additional processing, such as over-the-counter
derivatives, increases these risks. Although the Fund attempts to minimize such
failures through controls and oversight, it is not possible to identify all of
the operational risks that may affect the Fund or to develop processes and
controls that completely eliminate or mitigate the occurrence of such failures.
The Fund and its shareholders could be negatively impacted as a
result.
From time
to time, Goldman Sachs or its affiliates may invest “seed” capital in the Fund.
These investments are generally intended to enable the Fund to commence
investment operations and achieve sufficient scale. Goldman Sachs and its
affiliates may hedge the exposure of the seed capital invested in the Fund by,
among other things, taking an offsetting position in the benchmark of the
Fund.
|
MANAGEMENT
FEES AND OTHER EXPENSES |
As
compensation for its services and its assumption of certain expenses, the
Investment Adviser is entitled to the following fees, computed daily and payable
monthly, at the annual rates listed below (as a percentage of each respective
Fund’s average daily net assets):
|
Fund |
Contractual
Management
Fee
Annual Rate |
Average
Daily
Net
Assets |
Actual
Rate
For
the Fiscal
Year
Ended
March
31, 2023* |
|
Dynamic
Municipal Income |
0.40% |
First $1
Billion |
0.36% |
|
|
0.36% |
Next $1
Billion |
|
|
|
0.34% |
Next $6
Billion |
|
|
|
0.33% |
Over $8
Billion |
|
25
|
Fund |
Contractual
Management
Fee
Annual Rate |
Average
Daily
Net
Assets |
Actual
Rate
For
the Fiscal
Year
Ended
March
31, 2023* |
|
High
Yield Municipal |
0.55% |
First $2
Billion |
0.50% |
|
|
0.50% |
Next $3
Billion |
|
|
|
0.48% |
Next $3
Billion |
|
|
|
0.47% |
Over $8
Billion |
|
|
Short
Duration Tax-Free |
0.39% |
First $1
Billion |
0.35% |
|
|
0.35% |
Next $1
Billion |
|
|
|
0.33% |
Next $6
Billion |
|
|
|
0.32% |
Over $8
Billion |
|
*
The
Actual Rate may not correlate to the Contractual Management Fee Annual Rate as a
result of management fee waivers that may be in effect from time to
time
The
Investment Adviser may waive a portion of its management fee, including fees
earned as the Investment Adviser to any of the affiliated funds in which the
Funds invest, from time to time, and may discontinue or modify any such waivers
in the future, consistent with the terms of any fee waiver arrangements that may
be in place.
The Investment Adviser has
agreed to reduce or limit each Fund’s “Other Expenses” (excluding acquired fund
fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage
fees, expenses of shareholder meetings, litigation and indemnification, and
extraordinary expenses) to 0.004% of the Fund’s average daily net assets,
through at least July 28, 2024, and prior to such date, the Investment Adviser
may not terminate the arrangements without the approval of the Board of
Trustees. The expense limitations may be modified or terminated by the
Investment Adviser at its discretion and without shareholder approval after such
date, although the Investment Adviser does not presently intend to do so. A
Fund’s “Other Expenses” may be further reduced by any custody and transfer
agency fee credits received by the Fund.
A discussion regarding the
basis for the Board of Trustees’ approval of the Management Agreement for the
Funds in 2022 is available in the Funds’ semi-annual report dated September 30,
2022. A discussion regarding the basis for the Board of Trustees’ approval of
the Management Agreements for the Funds in 2023 will be available in the Funds’
semi-annual report dated September 30, 2023.
|
FUND
MANAGERS |
U.S. Municipal
Portfolio Management Team
The
individuals jointly and primarily responsible for the day-to-day management of
the Fund are listed below. The Fund’s portfolio managers' individual
responsibilities may differ and may include, among other things, security
selection, asset allocation, risk budgeting and general oversight of the
management of the Fund's portfolios.
|
Name
and Title |
Fund
Responsibility |
Years
Primarily
Responsible |
Five
Year Employment History |
|
Scott
Diamond
Managing
Director |
Portfolio
Manager—
Dynamic
Municipal Income
High
Yield Municipal
Short
Duration Tax-Free |
Since
2002
2002
2002 |
Mr.
Diamond is a portfolio manager on the U.S. Municipals Team. He
joined
the Investment Adviser in 2002 as a portfolio
manager. |
|
Joseph
Wenzel
Vice
President |
Portfolio
Manager—
Dynamic
Municipal Income
High
Yield Municipal
Short
Duration Tax-Free |
Since
2019
2019
2019 |
Mr.
Wenzel is a portfolio manager on the U.S. Municipals Team. He
joined
the Investment Adviser in 2002. |
|
Sylvia
Yeh
Managing
Director |
Portfolio
Manager—
Dynamic
Municipal Income
High
Yield Municipal
Short
Duration Tax-Free |
Since
2021
2021
2021 |
Ms.
Yeh is a portfolio manager on the U.S. Municipals Team. She
joined
the Investment Adviser in
1999. |
For
information about the portfolio managers’ compensation, other accounts managed
by the portfolio managers and the portfolio managers’ ownership of securities in
the Fund, see the SAI.
26
Service
Providers
|
DISTRIBUTOR
AND TRANSFER AGENT |
Goldman Sachs, 200 West
Street, New York, NY 10282, serves as the exclusive distributor (the
“Distributor”) of each Fund’s shares. Goldman Sachs, 71 South Wacker Drive,
Suite 1200, Chicago, IL 60606, also serves as each Fund’s transfer agent (the
“Transfer Agent”) and, as such, performs various shareholder servicing
functions.
For its
transfer agency services, Goldman Sachs is entitled to receive a transfer agency
fee equal, on an annualized basis, to 0.03% of the average daily net assets with
respect to the Class P Shares.
From time
to time, Goldman Sachs or any of its affiliates may purchase and hold shares of
the Fund. Goldman Sachs and its affiliates reserve the right to redeem at any
time some or all of the shares acquired for their own accounts.
|
ACTIVITIES
OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER
ACCOUNTS
MANAGED BY GOLDMAN SACHS |
The
involvement of the Investment Adviser, Goldman Sachs and their affiliates in the
management of, or their interest in, other accounts and other activities of
Goldman Sachs will present conflicts of interest with respect to the Fund and
will, under certain circumstances, limit the Fund’s investment activities.
Goldman Sachs is a worldwide, full service investment banking, broker dealer,
asset management and financial services organization and a major participant in
global financial markets that provides a wide range of financial services to a
substantial and diversified client base that includes corporations, financial
institutions, governments and individuals. As such, it acts as a broker-dealer,
investment adviser, investment banker, underwriter, research provider,
administrator, financier, adviser, market maker, trader, prime broker,
derivatives dealer, clearing agent, lender, counterparty, agent, principal,
distributor, investor or in other commercial capacities for accounts or
companies or affiliated or unaffiliated investment funds (including pooled
investment vehicles and private funds) in which one or more accounts, including
the Fund, invest. In those and other capacities, Goldman Sachs and its
affiliates advise and deal with clients and third parties in all markets and
transactions and purchase, sell, hold and recommend a broad array of
investments, including securities, derivatives, loans, commodities, currencies,
credit default swaps, indices, baskets and other financial instruments and
products for their own accounts or for the accounts of their customers and have
other direct and indirect interests in the global fixed income, currency,
commodity, equities, bank loans and other markets and the securities and issuers
in which the Fund directly and indirectly invest. Thus, it is expected that the
Fund will have multiple business relationships with and will invest in, engage
in transactions with, make voting decisions with respect to, or obtain services
from entities for which Goldman Sachs and its affiliates perform or seek to
perform investment banking or other services. The Investment Adviser and/or
certain of its affiliates are the managers of the Goldman Sachs Funds. The
Investment Adviser and its affiliates earn fees from this and other
relationships with the Fund. Although management fees paid by the Fund to the
Investment Adviser and certain other fees paid to the Investment Adviser’s
affiliates are based on asset levels, the fees are not directly contingent on
Fund performance, and the Investment Adviser and its affiliates will still
receive significant compensation from the Fund even if shareholders lose money.
Goldman Sachs and its affiliates engage in proprietary trading and advise
accounts and funds which have investment objectives similar to those of the Fund
and/or which engage in and compete for transactions in the same types of
securities, currencies and instruments as the Fund. Goldman Sachs and its
affiliates will not have any obligation to make available any information
regarding their proprietary activities or strategies, or the activities or
strategies used for other accounts managed by them, for the benefit of the
management of the Fund. The results of the Fund’s investment activities,
therefore, will likely differ from those of Goldman Sachs, its affiliates, and
other accounts managed by Goldman Sachs, and it is possible that the Fund could
sustain losses during periods in which Goldman Sachs and its affiliates and
other accounts achieve significant profits on their trading for proprietary or
other accounts. In addition, the Fund may enter into transactions in which
Goldman Sachs and its affiliates or their other clients have an adverse
interest. For example, the Fund may take a long position in a security at the
same time that Goldman Sachs and its affiliates or other accounts managed by the
Investment Adviser or its affiliates take a short position in the same security
(or vice versa). These and other transactions undertaken by Goldman Sachs, its
affiliates or Goldman Sachs-advised clients may, individually or in the
aggregate, adversely impact the Fund. Transactions by one or more Goldman
Sachs-advised clients or the Investment Adviser may have the effect of diluting
or otherwise disadvantaging the values, prices or investment strategies of the
Fund. The Fund’s activities will, under certain circumstances, be limited
because of regulatory restrictions applicable to Goldman Sachs and its
affiliates, and/or their internal policies designed to comply with such
restrictions. As a global financial services firm, Goldman Sachs and its
affiliates also provide a wide range of investment banking and financial
services to issuers of securities and investors in securities. Goldman Sachs,
its affiliates and others associated with it are expected to create markets or
specialize in, have positions in and/or effect transactions in, securities of
issuers held by the Fund, and will likely also perform or seek to perform
investment banking and financial services for one or more of those issuers.
Goldman Sachs and its affiliates are expected to have business relationships
with and purchase or distribute or sell services or products from or to
distributors, consultants or others who recommend the Fund or who engage in
transactions with or for the Fund. For more information about conflicts of
interest, see the section entitled “Potential Conflicts of Interest” in the
SAI.
A Fund
will, from time to time, make brokerage and other payments to Goldman Sachs and
its affiliates in connection with the Fund’s portfolio investment transactions,
in accordance with applicable law.
27
Distributions
The Fund
pays distributions from its investment income and from net realized capital
gains. You may choose to have distributions paid in:
◼
Cash
◼
Additional
shares of the same class of the same Fund
◼
Shares of
the same or an equivalent class of another fund managed by the Investment
Adviser and/or certain of its advisory affiliates (each, a "Goldman Sachs
Fund"). Special restrictions may apply. See the SAI.
You may
indicate your election on your account application. Any changes may be submitted
in writing or via telephone, in some instances, to the Transfer Agent (either
directly or through your Intermediary) at any time before the record date for a
particular distribution. If you do not indicate any choice, your distributions
will be reinvested automatically in the applicable Fund. If cash
distributions are elected with respect to the Fund’s distributions from net
investment income, then cash distributions must also be elected with respect to
the net short-term capital gains component, if any, of the Fund’s
distributions.
The
election to reinvest distributions in additional shares will not affect the tax
treatment of such distributions, which will be treated as received by you and
then used to purchase the shares.
Distributions
from net investment income and distributions from net capital gains, if any, are
normally declared and paid as follows:
|
Fund |
Investment
Income
Dividends |
Capital
Gains
Distributions | |
|
Declared |
Paid |
Declared
and Paid | |
|
Dynamic
Municipal Income |
Daily |
Monthly |
Annually |
|
High
Yield Municipal |
Daily |
Monthly |
Annually |
|
Short
Duration Tax-Free |
Daily |
Monthly |
Annually |
In
addition, a Fund may occasionally make a distribution at a time when it is not
normally made.
In addition
to the net investment income dividends declared daily and paid monthly, a Fund
may also earn additional net investment income throughout the year. Any
additional net investment income will be distributed annually as a declared
event and paid to shareholders of record for such events.
From time
to time a portion of the Fund’s distributions may constitute a return of capital
for tax purposes, and/or may include amounts in excess of the Fund’s net
investment income for the period calculated in accordance with generally
accepted accounting principles (“GAAP”).
When you
purchase shares of the Fund, part of the NAV per share may be represented by
undistributed income and/or realized gains that have previously been earned by
the Fund. Therefore, subsequent distributions on such shares from such income
and/or realized gains may be taxable to you even if the NAV of the shares is, as
a result of the distributions, reduced below the cost of such shares and the
distributions (or portions thereof) represent a return of a portion of the
purchase price.
28
Shareholder
Guide
The
following section will provide you with answers to some of the most frequently
asked questions regarding buying and selling the Fund's shares.
|
Important
Notice: |
|
Class
P Shares generally are available to the following
investors: |
|
◼Clients
of the Goldman Sachs Private Wealth Management business unit (“GS PWM”)
that custody their positions at
Goldman
Sachs; |
|
◼Clients
of The Goldman Sachs Trust Company, N.A. or The Goldman Sachs Trust
Company of Delaware (collectively, the
“Trust
Companies”) that custody their positions at Goldman
Sachs; |
|
◼Clients
of The Ayco Company, L.P. (“Ayco”) that either custody their positions at
Goldman Sachs or with certain
intermediaries
that are authorized to offer Class P Shares (“Authorized Institutions”)
(such clients of GS PWM, the Trust
Companies,
and Ayco are collectively referred to herein as “GS Clients”);
or |
|
◼Other
investors at the discretion of Goldman Sachs Trust’s (the “Trust”)
officers. |
|
You
may only purchase Class P Shares in accordance with the eligibility
criteria described above. If you are a GS Client and
propose
to transfer your shares to another institution for any reason, or if you
are no longer a GS Client, you may be required to
redeem
your shares of the Fund, or at the discretion of the Trust’s officers, you
may be able hold Class P Shares through another
institution,
which must be an Authorized Institution and the basis on which you hold
such Class P Shares may be limited to hold
and
redeem only. If available in such circumstances, in the alternative you
may be able to choose to exchange your shares of the
Fund
for a different share class offered by the Fund or another Goldman Sachs
Fund, which may be offered in another
Prospectus.
There is no guarantee that a different share class offered by the Fund
will be available to clients of the institution to
which
you intend to transfer your shares or that an option to exchange will be
made available. Moreover, the shares you receive
in
any exchange are subject to different (and possibly higher) fees and
expenses (which affect performance). Information
regarding
these other share classes may be obtained from the institution to which
you intend to transfer your shares or from the
Transfer
Agent by calling the number on the back cover of the
Prospectus. |
|
A
redemption is a taxable transaction for federal income tax purposes, and
may also be subject to state and local taxes. You
should
consult your tax adviser concerning the potential tax consequences of
investing in Class P Shares. None of the Trust, the
Investment
Adviser, Goldman Sachs, the Trust Companies, Ayco or an Authorized
Institution will be responsible for any loss in
an
investor’s account or tax liability resulting from a redemption or
exchange of Class P Shares. For more information about
exchanges,
please see “How to Sell Shares—Can I Exchange My Investment From One
Goldman Sachs Fund To Another
Goldman
Sachs Fund.” |
|
How
To Buy Shares |
Shares
Offering
Shares of
the Fund are continuously offered through Goldman Sachs, acting in its capacity
as the Fund’s distributor (the “Distributor”). The Fund and the Distributor will
have the sole right to accept orders to purchase shares and reserve the right to
reject any purchase order in whole or in part.
How Can I Purchase
Shares Of The Fund?
If you are
a GS Client, you may purchase shares of the Fund through Goldman Sachs, the
Trust Companies, Ayco, or an Authorized Institution. Goldman Sachs, the Trust
Companies, Ayco, and Authorized Institutions have been authorized by the Trust
to accept purchase, redemption or exchange orders on behalf of the Fund for GS
Clients. In order to make an initial investment in a Fund you must furnish to
Goldman Sachs, the Trust Companies, Ayco or your Authorized Institution the
information in the account application.
To open an
account, contact Goldman Sachs, the Trust Companies, Ayco or your Authorized
Institution. Goldman Sachs, the Trust Companies, Ayco, and Authorized
Institutions will normally give order instructions on behalf of GS Clients to
Goldman Sachs, acting in its capacity as the Fund’s transfer agent (the
“Transfer Agent”). Goldman Sachs, the Trust Companies, Ayco, or your Authorized
Institution, as applicable, is responsible for transmitting accepted orders and
payments to the Transfer Agent within the time period agreed upon by them and
will set times by which orders and payments must be received by them from GS
Clients. The Trust, Transfer Agent, Investment Adviser and their affiliates will
not be responsible for any loss in connection with orders that are not
transmitted to the Transfer Agent on a timely basis.
29
A Fund will
be deemed to have received an order for purchase, redemption or exchange of Fund
shares when the order is accepted in “proper form” by any of the Transfer Agent,
Goldman Sachs, the Trust Companies, Ayco or an Authorized Institution, as
applicable, on a business day, and the order will be priced at the Fund’s
current NAV per share next determined after acceptance by any of the Transfer
Agent, Goldman Sachs, the Trust Companies, Ayco or an Authorized Institution, as
applicable. Proper form generally means that specific trade details and customer
identifying information must be received by the Transfer Agent at the time an
order is submitted. Goldman Sachs, the Trust Companies, Ayco and Authorized
Institutions may have different requirements regarding what constitutes proper
form for trade instructions. Please contact Goldman Sachs, the Trust Companies,
Ayco or your Authorized Institution for more information.
What Is My Minimum
Investment In The Fund?
No minimum
amount is required for initial purchases or additional investments in Class P
Shares.
What Should I Know
When I Purchase Shares?
All
recordkeeping, transaction processing and payments of distributions relating to
your account will be performed by Goldman Sachs, the Trust Companies, Ayco, or
your Authorized Institution, as applicable, and not by a Fund and its Transfer
Agent. Since the Fund will have no record of your transactions, you should
contact Goldman Sachs, the Trust Companies, Ayco, or your Authorized
Institution, as applicable, to purchase, redeem or exchange shares, to make
changes in or give instructions concerning your account or to obtain information
about your account. If you transfer your shares, the Trust reserves the right to
redeem your shares. The Trust, the Investment Adviser, Goldman Sachs, the Trust
Companies, Ayco and an Authorized Institution will not be responsible for any
loss in an investor’s account or tax liability resulting from a
redemption.
Goldman
Sachs, the Trust Companies, Ayco, and Authorized Institutions that invest in
shares on behalf of GS Clients may charge fees directly to the GS Clients’
accounts in connection with their investments. You should contact Goldman Sachs,
the Trust Companies, Ayco, or your Authorized Institution for information
regarding such charges, as these fees, if any, may affect the return that GS
Clients realize with respect to their investments.
The
Investment Adviser, Distributor and/or their affiliates may make payments or
provide services to Authorized Institutions and other persons to promote the
sale, distribution and/or servicing of shares of the Fund and other Goldman
Sachs Funds. These payments are made out of the Investment Adviser’s,
Distributor’s and/or their affiliates’ own assets, and are not an additional
charge to the Fund. Such payments are intended to compensate Authorized
Institutions and other persons for, among other things: marketing shares of the
Fund and other Goldman Sachs Funds, which may consist of payments relating to
the Fund’s inclusion on preferred or recommended fund lists or in certain sales
programs sponsored by the recipients; access to Authorized Institutions’
registered representatives, advisors or salespersons, including at conferences
and other meetings; assistance in training and education of personnel; marketing
support; the provision of analytical or other data to the Investment Adviser or
its affiliates relating to sales of shares of the Fund and other Goldman Sachs
Funds; the support or purchase of technology platforms/software; and/or other
specified services intended to assist in the distribution and marketing of the
Fund and other Goldman Sachs Funds, including provision of consultative services
to the Investment Adviser or its affiliates relating to marketing and/or sale of
shares of the Fund and other Goldman Sachs Funds. The payments may also, to the
extent permitted by applicable regulations, sponsor various trainings and
educational programs. The payments by the Investment Adviser, Distributor and/or
their affiliates, which are in addition to the fees paid for these services by
the Fund, may also compensate Authorized Institutions and other persons for
subaccounting, sub-transfer agency, administrative, shareholder processing
and/or recordkeeping services. These additional payments may exceed amounts
earned on these assets by the Investment Adviser, Distributor and/or their
affiliates for the performance of these or similar services. The amount of these
additional payments is normally not expected to exceed 0.50% (annualized) of the
amount sold or invested through the recipients. In addition, certain Authorized
Institutions may have access to certain services from the Investment Adviser,
Distributor and/or their affiliates, including research reports, economic
analysis, and portfolio analysis, portfolio construction and similar tools and
software. In certain cases, Authorized Institutions may not pay for these
products or services or may only pay for a portion of the total cost of these
products or services. Please refer to the “Payments to Others (Including
Intermediaries)” section of the SAI for more information about these and similar
payments and services.
The
payments made by the Investment Adviser, Distributor and/or their affiliates and
the services provided by each of Goldman Sachs, the Trust Companies, Ayco, an
Authorized Institution, or other person may differ. The presence of these and
similar payments, receipt of these services and the basis on which Goldman
Sachs, the Trust Companies, Ayco, or an Authorized Institution compensates its
registered representatives, advisors, salespersons or other person may create an
incentive for a particular registered representative, advisor or salesperson to
highlight, feature or recommend a Fund based, at least in part, on the level of
compensation paid. You should contact Goldman Sachs, the Trust Companies, Ayco,
your Authorized Institution, or any other person that provides services to you,
for more information about the payments it receives and any potential conflicts
of interest.
30
Shareholder
Guide
What Else Should I
Know About Share Purchases?
The Trust
reserves the right to:
◼
Require
Goldman Sachs, the Trust Companies, Ayco, or an Authorized Institution to refuse
to open an account if you fail to (i) provide a taxpayer identification number,
a Social Security Number or other government-issued identification (e.g., for an
individual, a driver’s license or passport) or (ii) certify that such number or
other information is correct (if required to do so under applicable
law).
◼
Reject or
restrict any purchase or exchange order by a particular purchaser (or group of
related purchasers) for any reason in its discretion. Without limiting the
foregoing, the Trust may reject or restrict purchase and exchange orders by a
particular purchaser (or group of related purchasers) when a pattern of frequent
purchases, sales or exchanges of shares of a Fund is evident, or if purchases,
sales or exchanges are, or a subsequent redemption might be, of a size that
would disrupt the management of a Fund.
◼
Close a
Fund to new investors from time to time and reopen any such Fund whenever it is
deemed appropriate by the Invest- ment Adviser.
◼
Provide
for, modify or waive the minimum investment requirements.
◼
Modify the
manner in which shares are offered.
◼
Modify the
sales charge rate applicable to future purchases of shares.
Shares of
the Fund are only registered for sale in the United States and certain of its
territories. Generally, shares of the Fund will only be offered or sold to “U.S.
persons” and all offerings or other solicitation activities will be conducted
within the United States, in accordance with the rules and regulations of the
Securities Act of 1933, as amended (“Securities Act”).
A Fund may
allow you to purchase shares through Goldman Sachs, the Trust Companies, Ayco or
an Authorized Institution with securities instead of cash if consistent with the
Fund’s investment policies and operations and approved by the Investment
Adviser.
As of the
date of the Prospectus, the Goldman Sachs High Yield Municipal Fund (the “High
Yield Municipal Fund”) is open to new investors. The Fund may close to most new
investors from time to time. When the Fund is closed, the following investors
are the only investors who may make purchases and reinvestments of dividends and
capital gains into the High Yield Municipal Fund:
◼
Current
shareholders of the High Yield Municipal Fund. Once a shareholder closes all
accounts in the High Yield Municipal Fund, additional investments into the High
Yield Municipal Fund may not be accepted;
◼
Members of
the portfolio management teams of the High Yield Municipal Fund; and
◼
Trustees
and officers of the Trust.
Additionally,
discretionary mutual fund wrap programs that use the High Yield Municipal Fund
as an investment option may allow new customers to select the High Yield
Municipal Fund as an investment option within the program sponsor’s standard
predetermined asset allocation models and to make purchases of shares of the
High Yield Municipal Fund during a closure of the High Yield Municipal Fund,
subject to the following conditions: (i) the sponsor of such program must comply
with the limitations (which may include limitations on the volume of purchases
of High Yield Municipal Fund shares) that the High Yield Municipal Fund or the
Investment Adviser believe to be reasonable in the interests of the High Yield
Municipal Fund; (ii) the program sponsor must provide written assurances that it
has appropriate controls in place to implement the High Yield Municipal Fund’s
closure policy properly; and (iii) Goldman Sachs must approve such sponsor. In
addition, the High Yield Municipal Fund and its Investment Adviser reserve, at
all times, the right to reject any order for the purchase of High Yield
Municipal Fund shares from any program sponsor and to close the High Yield
Municipal Fund to any discretionary mutual fund wrap program at any time.
Discretionary mutual fund wrap programs that establish the High Yield Municipal
Fund as a new investment option during a time when the High Yield Municipal Fund
is closed will not be permitted to make purchases of shares of the High Yield
Municipal Fund until the High Yield Municipal Fund re-opens.
Exchanges
into the High Yield Municipal Fund from other Goldman Sachs Funds are not
permitted when the Fund is closed, except for current High Yield Municipal Fund
shareholders and for certain Qualified Defined Contribution and Benefit
Plans.
Additionally,
the High Yield Municipal Fund may enter into asset purchase or other
reorganization transactions with other investment companies that involve the
issuance of shares of the High Yield Municipal Fund to new accounts, and such
new accounts may continue to make additional purchases and reinvest dividends
and capital gains into their accounts when the High Yield Municipal Fund is
closed. The Investment Adviser may open or close the High Yield Municipal Fund
to new investors from time to time or for extended periods of time at its
discretion.
Notwithstanding
the foregoing, the Trust, Goldman Sachs, the Trust Companies, Ayco and any
Authorized Institution reserve the right to reject or restrict purchase or
exchange requests from any investor. The Trust, Goldman Sachs, the Trust
Companies and Ayco will not be liable for any loss resulting from rejected
purchase or exchange orders.
31
Please be
advised that abandoned or unclaimed property laws for certain states (to which
your account may be subject) require financial organizations to transfer
(escheat) unclaimed property (including shares of a Fund) to the appropriate
state if no activity occurs in an account for a period of time specified by
state law. For IRA accounts escheated to a state under these abandoned property
laws, the escheatment will generally be treated as a taxable distribution to
you; federal and any applicable state income tax will be withheld. This may
apply to your Roth IRA as well.
Customer
Identification Program. Federal
law requires the Fund to obtain, verify and record identifying information for
certain investors, which will be reviewed solely for customer identification
purposes, which may include the name, residential or business street address,
date of birth (for an individual), Social Security Number or taxpayer
identification number or other information, for each investor who opens an
account directly with the Fund. Applications without the required information
may not be accepted by the Fund. Throughout the life of your account, the Fund
may request updated identifying information in accordance with their Customer
Identification Program. After accepting an application, to the extent permitted
by applicable law or their Customer Identification Program, the Fund reserves
the right to: (i) place limits on transactions in any account until the identity
of the investor is verified; (ii) refuse an investment in the Fund; or (iii)
involuntarily redeem an investor’s shares and close an account in the event that
the Fund is unable to verify an investor’s identity or are unable to obtain all
required information. The Fund and its agents will not be responsible for any
loss or tax liability in an investor’s account resulting from the investor’s
delay in providing all required information or from closing an account and
redeeming an investor’s shares pursuant to their Customer Identification
Program.
How Are Shares
Priced?
The price
you pay when you buy shares is a Fund’s next-determined NAV per share
after
any of the
Transfer Agent, Goldman Sachs, the Trust Companies, Ayco or an Authorized
Institution, as applicable, has received and accepted your order in proper form.
The price you receive when you sell shares is a Fund’s next-determined NAV per
share after
any of the
Transfer Agent, Goldman Sachs, the Trust Companies, Ayco or an Authorized
Institution, as applicable, has received and accepted your order in proper form
with the redemption proceeds reduced by any applicable charges (e.g.,
redemption fees). Each class generally calculates its NAV as
follows:
|
NAV
= |
(Value
of Assets of the Class)
–
(Liabilities of the Class) |
|
|
Number
of Outstanding Shares of the
Class |
A Fund’s investments for
which market quotations are readily available are valued at market value on the
basis of quotations provided by pricing sources. If accurate quotations are not
readily available, if the Fund’s fund accounting agent is unable for other
reasons to facilitate pricing of individual securities or calculate a Fund’s
NAV, or if the Investment Adviser believes that such quotations do not
accurately reflect fair value, the fair value of the Fund’s investments may be
determined in good faith under valuation procedures approved by the Board of
Trustees. Thus, such pricing may be based on subjective judgments and it is
possible that the prices resulting from such valuation procedures may differ
materially from the value realized on a sale. Cases where there is no clear
indication of the value of a Fund’s investments include, among others,
situations where a security or other asset or liability does not have a price
source or a price is unavailable.
Equity
securities listed on an exchange are generally valued at the last available sale
price on the exchange on which they are principally traded. To the extent a Fund
invests in foreign equity securities, “fair value” prices will be provided by an
independent third-party pricing (fair value) service in accordance with the fair
value procedures approved by the Board of Trustees. Fair value prices are used
because many foreign markets operate at times that do not coincide with those of
the major U.S. markets. Events that could affect the values of foreign portfolio
holdings may occur between the close of the foreign market and the time of
determining the NAV, and would not otherwise be reflected in the
NAV.
Fixed
income securities are generally valued on the basis of prices (including
evaluated prices) and quotations provided by pricing services or securities
dealers. Pricing services may use matrix pricing or valuation models, which
utilize certain inputs and assumptions, including, but not limited to, yield or
price with respect to comparable fixed income securities, to determine current
value. Pricing services generally value fixed income securities assuming orderly
transactions of an institutional round lot size, but the Fund may hold or
transact in such securities in smaller odd lot sizes. Odd lots may trade at
lower prices than institutional round lots.
Investments
in other open-end registered investment companies (if any), excluding
investments in ETFs, are valued based on the NAV of those open-end registered
investment companies (which may use fair value pricing as discussed in their
prospectuses).
Investments
in ETFs will generally be valued at the last sale price or official closing
price on the exchange on which they are principally traded.
In
addition, the Investment Adviser, consistent with its procedures and applicable
regulatory guidance, may (but need not) determine to make an adjustment to the
previous closing prices of either domestic or foreign securities in light of
significant events, to reflect what it believes to be the fair value of the
securities at the time of determining a Fund’s NAV. Significant events that
could affect a large number of securities in a particular market may include,
but are not limited to: situations relating to one or more single issuers in a
32
Shareholder
Guide
market
sector; significant fluctuations in U.S. or foreign markets; market
dislocations; market disruptions or unscheduled market closings; equipment
failures; natural or man made disasters or acts of God; armed conflicts;
governmental actions or other developments; as well as the same or similar
events which may affect specific issuers or the securities markets even though
not tied directly to the securities markets. Other significant events that could
relate to a single issuer may include, but are not limited to: corporate actions
such as reorganizations, mergers and buy-outs; corporate announcements,
including those relating to earnings, products and regulatory news; significant
litigation; ratings downgrades; bankruptcies; and trading limits or
suspensions.
One effect of using an
independent third-party pricing (fair value) service and fair valuation may be
to reduce stale pricing arbitrage
opportunities
presented by the pricing of Fund shares. However, it involves the risk that the
values used by a Fund to price its investments may be different from those used
by other investment companies and investors to price the same
investments.
Please note
the following with respect to the price at which your transactions are
processed:
◼
NAV per
share of each share class is generally calculated by the Fund’s fund accounting
agent on each business day as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern time) or such other times as the New
York Stock Exchange or NASDAQ market may officially close. This occurs after the
determination, if any, of the income to be declared as a dividend. Fund shares
will generally not be priced on any day the New York Stock Exchange is closed,
although Fund shares may be priced on such days if the Securities Industry and
Financial Markets Association (“SIFMA”) recommends that the bond markets remain
open for all or part of the day.
◼
On any
business day when the SIFMA recommends that the bond markets close early, each
Fund reserves the right to close at or prior to the SIFMA recommended closing
time. If a Fund does so, it will cease granting same business day credit for
purchase and redemption orders received after the Fund’s closing time and credit
will be given on the next business day.
◼
The Trust reserves the
right to reprocess purchase (including dividend reinvestments), redemption and
exchange transactions that were processed at a NAV that is subsequently
adjusted, and to recover amounts from (or distribute amounts to)
shareholders
accordingly
based on the official closing NAV, as adjusted.
◼
The Trust
reserves the right to advance the time by which purchase and redemption orders
must be received for same business day credit as otherwise permitted by the
SEC.
Consistent
with industry practice, investment transactions not settling on the same day are
recorded and factored into a Fund’s NAV on the business day following trade date
(T+1). The use of T+1 accounting generally does not, but may, result in a NAV
that differs materially from the NAV that would result if all transactions were
reflected on their trade dates.
Note:
The time at which transactions and shares are priced and the time by which
orders must be received may be changed in case of an emergency or if regular
trading on the New York Stock Exchange and/or the bond markets is stopped at a
time other than their regularly scheduled closing time. In the event the New
York Stock Exchange and/or the bond markets do not open for business, the Trust
may, but is not required to, open one or more Funds for purchase, redemption and
exchange transactions if the Federal Reserve wire payment system is open. To
learn whether a Fund is open for business during this situation, please call the
appropriate phone number located on the back cover of the
Prospectus.
Foreign
securities may trade in their local markets on days a Fund is closed. As a
result, if a Fund holds foreign securities, its NAV may be impacted on days when
investors may not purchase or redeem Fund shares.
Each Fund
relies on various sources to calculate its NAV. The ability of the Fund’s fund
accounting agent to calculate the NAV per share of each share class of the Fund
is subject to operational risks associated with processing or human errors,
systems or technology failures, cyber attacks and errors caused by third party
service providers, data sources, or trading counterparties. Such failures may
result in delays in the calculation of a Fund’s NAV and/or the inability to
calculate NAV over extended time periods. The Fund may be unable to recover any
losses associated with such failures. In addition, if the third party service
providers and/or data sources upon which a Fund directly or indirectly relies to
calculate its NAV or price individual securities are unavailable or otherwise
unable to calculate the NAV correctly, it may be necessary for alternative
procedures to be utilized to price the securities at the time of determining the
Fund’s NAV.
When Will Shares Be
Issued And Dividends Begin To Be Accrued?
◼
Net
investment income dividends that are declared daily and paid monthly will begin
to be accrued as follows:
◼
Shares
Purchased by Federal Funds Wire:
◼
If a
purchase order is received in proper form before a Fund closes, shares will
generally be issued and dividends will generally begin to accrue on the
purchased shares on the later of (i) the business day after payment is received,
or (ii) the day that the federal funds wire is received by The Northern Trust
Company. Failure to provide payment on settlement date may result in a delay in
accrual.
33
◼
If a
purchase order is placed through an Authorized Institution that settles through
the National Securities Clearing Corpo- ration (the “NSCC”), the purchase order
will begin accruing dividends on the NSCC settlement date.
◼
Shares
Purchased by Check:
◼
If a
purchase order is received in proper form before a Fund closes, shares will
generally be issued and dividends will generally begin to accrue on the
purchased shares no later than two business days after payment is
received.
Other
dividends or distributions will be distributed annually as a declared event and
paid to shareholders of record on the record date for such events.
|
How
To Sell Shares |
How Can I Sell Shares
Of The Fund?
Generally,
shares may be sold (redeemed) only through Goldman Sachs, the Trust Companies,
Ayco, or an Authorized Institution. Goldman Sachs, the Trust Companies, Ayco and
Authorized Institutions will normally give redemption instructions on behalf of
GS Clients to the Transfer Agent. On any business day a Fund is open, the Fund
will generally redeem its shares upon request at their next-determined NAV per
share after any of the Transfer Agent, Goldman Sachs, the Trust Companies, Ayco
or an Authorized Institution, as applicable, has received and accepted a
redemption order in proper form, as described under “How To Buy Shares—How Can I
Purchase Shares Of The Fund?” above. Redemptions may be requested by electronic
trading platform, in writing or by telephone (unless Goldman Sachs, the Trust
Companies, Ayco, or an Authorized Institution opts out of the telephone
redemption privilege on the account application). You should contact Goldman
Sachs, the Trust Companies, Ayco or your Authorized Institution, to discuss
redemptions and redemption proceeds. A Fund may transfer redemption proceeds to
an account with Goldman Sachs, the Trust Companies, Ayco, or your Authorized
Institution. In the alternative, Goldman Sachs, the Trust Companies, Ayco, or
your Authorized Institution may request that redemption proceeds be sent to you
by check or wire (if the wire instructions are designated in the current records
of the Transfer Agent).
When Do I Need A
Medallion Signature Guarantee To Redeem Shares?
Generally,
a redemption request must be in writing and signed by an authorized person with
a Medallion signature guarantee if:
◼
You would
like the redemption proceeds sent to an address that is not your address of
record; or
◼
You would
like the redemption proceeds sent to a domestic bank account that is not
designated in the current records of the Transfer Agent.
A Medallion
signature guarantee must be obtained from a bank, brokerage firm or other
financial intermediary that is a member of an approved Medallion Guarantee
Program or that is otherwise approved by the Trust. A notary public cannot
provide a Medallion signature guarantee. The written request may be confirmed by
telephone with both the requesting party and the designated Intermediary to
verify instructions. Additional documentation may be required.
What Do I Need To
Know About Telephone Redemption Requests?
The Trust
and Goldman Sachs will not be liable for any loss or tax liability you may incur
in the event that the Trust accepts unauthorized telephone redemption requests
that the Trust reasonably believes to be genuine. The Trust may accept telephone
redemption instructions from any person identifying himself or herself as the
owner of an account or the owner’s registered representative where the owner has
not declined in writing to use this service. Goldman Sachs, the Trust Companies,
Ayco, or your Authorized Institution may submit redemption requests by telephone
on your behalf. Thus, you risk possible losses if a telephone redemption is not
authorized by you.
In an effort to prevent
unauthorized or fraudulent redemption and exchange requests by telephone, the
Transfer Agent and SS&C Global Investor
&
Distribution
Solutions, Inc. (“SS&C”) each employ reasonable procedures specified by the
Trust to confirm that such instructions are genuine. The following general
policies are currently in effect:
◼
Telephone
requests are recorded.
◼
Proceeds of
telephone redemption requests will be sent to your address of record or
authorized account designated in the current records of the Transfer Agent
(unless you provide written instructions and a Medallion signature guarantee
indicating another address or account).
◼
For the
30-day period following a change of address, telephone redemptions will only be
filled by a wire transfer to the authorized account designated in the current
records of the Transfer Agent (see immediately preceding bullet point). In order
to receive the redemption by check during this time period, the redemption
request must be in the form of a written, Medallion signature guaranteed
letter.
34
Shareholder
Guide
◼
The
telephone redemption option does not apply to Shares held in an account
maintained and serviced by your Authorized Institution. If your Shares are held
in an account with an Authorized Institution, you should contact your registered
representative of record, who may make telephone redemptions on your
behalf.
◼
The
telephone redemption option may be modified or terminated at any time without
prior notice.
Note:
It may be difficult to make telephone redemptions in times of unusual economic
or market conditions.
How Are Redemption
Proceeds Paid?
By
Wire: You may
arrange for your redemption proceeds to be paid as federal funds to an account
with Goldman Sachs, the Trust Companies, Ayco, or your Authorized Institution or
to a domestic bank account designated in the current records of the Transfer
Agent. In addition, redemption proceeds may be transmitted through an electronic
trading platform to an account with Goldman Sachs, the Trust Companies, Ayco, or
your Authorized Institution. The following general policies govern wiring
redemption proceeds:
◼
Redemption
proceeds will normally be paid in federal funds, between one and two business
days (or such other times in accordance with the requirements of Goldman Sachs,
the Trust Companies, Ayco, or your Authorized Institution) following receipt of
a properly executed wire transfer redemption request. In certain circumstances,
however (such as unusual market conditions or in cases of very large redemptions
or excessive trading), it may take up to seven days to pay redemption
proceeds.
◼
Redemption
requests may only be postponed or suspended for longer than seven days as
permitted under Section 22(e) of the Investment Company Act of 1940 (the
“Investment Company Act”) if (i) the New York Stock Exchange is closed for
trading or trading is restricted; (ii) an emergency exists which makes the
disposal of securities owned by a Fund or the fair determination of the value of
a Fund’s net assets not reasonably practicable; or (iii) the SEC, by order or
regulation, permits the suspension of the right of redemption.
◼
If you are
selling shares you recently paid for by check, the Fund will pay you when your
check has cleared, which may take up to 15 days.
◼
If the
Federal Reserve Bank is closed on the day that the redemption proceeds would
ordinarily be wired, wiring the redemption proceeds may be delayed until the
Federal Reserve Bank reopens.
◼
To change
the bank wiring instructions designated in the current records of the Transfer
Agent, you must send written instructions signed by an authorized person
designated in the current records of the Transfer Agent. A Medallion signature
guarantee may be required if you are requesting a redemption in conjunction with
the change.
◼
None of the
Trust, the Investment Adviser or the Transfer Agent assumes any responsibility
for the performance of your bank, Goldman Sachs, the Trust Companies, Ayco, or
Authorized Institution in the transfer process. If a problem with such
performance arises, you should deal directly with your bank, Goldman Sachs, the
Trust Companies, Ayco, or Authorized Institution.
By
Check: You may
elect to receive your redemption proceeds by check. Redemption proceeds paid by
check will normally be mailed to the address of record within two business days
(or such other times in accordance with the requirements of your Authorized
Institution) following receipt of a properly executed redemption request, except
in certain circumstances (such as those set forth above with respect to wire
transfer redemption requests). If you are selling shares you recently paid for
by check, the Fund will pay you when your check has cleared, which may take up
to 15 days.
What Else Do I Need
To Know About Redemptions?
The
following generally applies to redemption requests:
◼
Shares of
each Fund continue to earn dividends up to, but not including, the date of
settlement.
◼
Additional
documentation may be required when deemed appropriate by the Transfer Agent. A
redemption request will not be in proper form until such additional
documentation has been received.
◼
Goldman
Sachs, the Trust Companies, Ayco and Authorized Institutions are responsible for
the timely transmittal of redemption requests by GS Clients to the Transfer
Agent. In order to facilitate the timely transmittal of redemption requests,
Goldman Sachs, the Trust Companies, Ayco and Authorized Institutions may set
times by which they must receive redemption requests. Goldman Sachs, the Trust
Companies, Ayco or Authorized Institutions may also require additional
documentation from you.
◼
As
disclosed above, if you are a GS Client and propose to transfer your shares to
another institution for any reason, you may be required to either redeem your
shares of a Fund or if available, you may be able to choose to exchange your
shares of a Fund for a different share class offered by the Fund, which may be
offered in another Prospectus.
The Trust
reserves the right to:
◼
Redeem your
shares in the event any of Goldman Sachs, the Trust Companies, Ayco or your
Authorized Institution is no longer authorized to offer Class P
Shares.
◼
Redeem your
shares in the case of actual or suspected threatening conduct or actual or
suspected fraudulent, suspicious or illegal activity by you or any other
individual associated with your account.
◼
Subject to
applicable law, redeem your shares in other circumstances determined by the
Board of Trustees to be in the best interest of the Trust.
35
◼
Pay
redemptions by a distribution in-kind of securities (instead of cash). If you
receive redemption proceeds in-kind, you should expect to incur transaction
costs upon the disposition of those securities. In addition, if you receive
redemption proceeds in- kind, you will be subject to market gains or losses upon
the disposition of those securities.
◼
Reinvest
any amounts (e.g., dividends, distributions or redemption proceeds) which you
have elected to receive by check should your check remain uncashed for more than
180 days. No interest will accrue on amounts represented by uncashed checks.
Your check will be reinvested in your account at the NAV on the day of the
reinvestment. When reinvested, those amounts are subject to the risk of loss
like any Fund investment. If you elect to receive distributions in cash and a
check remains uncashed for more than 180 days, your cash election may be changed
automatically to reinvest and your future dividend and capital gains
distributions will be reinvested in the Fund at the NAV as of the date of
payment of the distribution. This provision may not apply to certain retirement
or qualified accounts, accounts with a non-U.S. address or closed accounts. Your
participation in a systematic withdrawal program may be terminated if a check
remains uncashed.
◼
Charge an
additional fee in the event a redemption is made via wire transfer.
◼
Terminate
your account if you are no longer a GS Client, or otherwise no longer eligible
to invest in Class P Shares of the Fund.
Each Fund
typically expects to meet redemption requests by using holdings of cash or cash
equivalents and/or proceeds from the sale of portfolio holdings. In addition,
under stressed market conditions, as well as for other temporary or emergency
purposes, the Fund may distribute redemption proceeds in-kind (instead of cash),
access a line of credit or overdraft facility, or borrow through other sources
to meet redemption requests.
None of the
Trust, the Investment Adviser, Goldman Sachs, the Trust Companies, Ayco or an
Authorized Institution will be responsible for any loss in an investor’s account
or tax liability resulting from an involuntary redemption.
Can I Exchange My
Investment From One Goldman Sachs Fund To Another Goldman Sachs
Fund?
You may
exchange your shares at NAV at the time of exchange for Class P Shares of
another Goldman Sachs Fund. The exchange privilege may be materially modified or
withdrawn at any time upon 60 days’ written notice. You should contact Goldman
Sachs, the Trust Companies, Ayco or your Authorized Institution to arrange for
the exchange of your shares for Class P Shares of another Goldman Sachs Fund. If
you propose to transfer your Class P Shares to another institution for any
reason, you may be required to either redeem your shares of a Fund or if
available, you may be able to choose to exchange your shares of a Fund for a
different share class offered by the Fund or another Goldman Sachs Fund, which
may be offered in another Prospectus. For more information, please see “How to
Sell Shares—What Else Do I Need to Know About Redemptions?” The shares you
receive in any exchange are subject to different (and possibly higher) fees and
expenses (which affect performance).
You should
keep in mind the following factors when making or considering an
exchange:
◼
You should
obtain and carefully read the prospectus of the Goldman Sachs Fund you are
acquiring before making an exchange. You should be aware that not all Goldman
Sachs Funds may offer all share classes.
◼
Currently,
the Fund does not impose any charge for exchanges, although the Fund may impose
a charge in the future.
◼
All
exchanges which represent an initial investment in a Goldman Sachs Fund must
satisfy the minimum initial investment requirement of that Fund. This
requirement may be waived at the discretion of the Trust. Exchanges into a
Goldman Sachs Fund need not meet the traditional minimum investment requirements
for that Fund if the entire balance of the original Fund account is
exchanged.
◼
Exchanges
are available only in states where exchanges may be legally made.
◼
It may be
difficult to make telephone exchanges in times of unusual economic or market
conditions.
◼
The Transfer Agent and
SS&C may use reasonable procedures described above in “How To Sell
Shares—What Do I Need To Know About Telephone Redemption Requests?” in an effort
to prevent unauthorized or fraudulent telephone exchange requests.
◼
Normally, a
telephone exchange will be made only to an identically registered
account.
◼
Exchanges
into Goldman Sachs Funds or certain share classes of Goldman Sachs Funds that
are closed to new investors may be restricted.
For federal
income tax purposes, an exchange from one Goldman Sachs Fund to another is
treated as a redemption of the shares surrendered in the exchange, on which you
may be subject to tax, followed by a purchase of shares received in the
exchange. You should consult your tax adviser concerning the tax consequences of
an exchange.
|
Shareholder
Services |
Can My Distributions
From A Fund Be Invested In Other Goldman Sachs Funds?
You may
elect to cross-reinvest distributions paid by a Goldman Sachs Fund in shares of
the same class of other Goldman Sachs Funds.
◼
Shares will
be purchased at NAV.
36
Shareholder
Guide
◼
You may
elect cross-reinvestment into an identically registered account or a similarly
registered account provided that at least one name on the account is registered
identically.
◼
You cannot
make cross-reinvestments into a Goldman Sachs Fund unless that Fund’s minimum
initial investment requirement is met.
◼
You should
obtain and read the prospectus of the Goldman Sachs Fund into which
distributions are invested.
What Types Of Reports
Will I Be Sent Regarding My Investment?
Each of
Goldman Sachs, the Trust Companies, Ayco or an Authorized Institution is
responsible for providing any communication from the Fund to shareholders,
including but not limited to, prospectuses, prospectus supplements, proxy
materials and notices regarding the source of dividend payments under Section 19
of the Investment Company Act. They may charge additional fees not described in
the Prospectus to GS Clients for such services.
Goldman
Sachs, the Trust Companies, Ayco or an Authorized Institution will provide you
with a printed confirmation of each transaction in your account and a monthly
account statement.
You will
also receive an annual shareholder report containing audited financial
statements and a semi-annual shareholder report. If you have consented to the
delivery of a single copy of shareholder reports, prospectuses and other
information to all shareholders who share the same mailing address with your
account, you may revoke your consent at any time by contacting Goldman Sachs,
the Trust Companies, Ayco or your Authorized Institution. The Fund will begin
sending individual copies to you within 30 days after receipt of your
revocation.
|
Restrictions
on Excessive Trading
Practices |
Policies
and Procedures on Excessive Trading Practices. In
accordance with the policy adopted by the Board of Trustees, the Trust
discourages frequent purchases and redemptions of Fund shares and does not
permit market timing or other excessive trading practices. Purchases and
exchanges should be made with a view to longer-term investment purposes only
that are consistent with the investment policies and practices of the respective
Fund. Excessive, short-term (market timing) trading practices may disrupt
portfolio management strategies, increase brokerage and administrative costs,
harm Fund performance and result in dilution in the value of Fund shares held by
longer-term shareholders. The Trust and Goldman Sachs reserve the right to
reject or restrict purchase or exchange requests from any investor. The Trust
and Goldman Sachs will not be liable for any loss resulting from rejected
purchase or exchange orders. To minimize harm to the Trust and its shareholders
(or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in
the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive
trading or if an investor’s trading, in the judgment of the Trust (or Goldman
Sachs), has been or may be disruptive to the Fund. In making this judgment,
trades executed in multiple accounts under common ownership or control may be
considered together to the extent they can be identified. No waivers of the
provisions of the policy established to detect and deter market timing and other
excessive trading activity are permitted that would harm the Trust or its
shareholders or would subordinate the interests of the Trust or its shareholders
to those of Goldman Sachs or any affiliated person or associated person of
Goldman Sachs.
As a
deterrent to excessive trading, many foreign equity securities held by the
Goldman Sachs Funds are priced by an independent pricing service using fair
valuation. For more information on fair valuation, please see “How To Buy
Shares—How Are Shares Priced?”
Pursuant to
the policy adopted by the Board of Trustees of the Trust, Goldman Sachs has
developed criteria that it uses to identify trading activity that may be
excessive. Excessive trading activity in the Fund is measured by the number of
“round trip” transactions in a shareholder’s account. A “round trip” includes a
purchase or exchange into the Fund followed or preceded by a redemption or
exchange out of the same Fund. If the Fund detects that a shareholder has
completed two or more round trip transactions in a single Fund within a rolling
90-day period, the Fund may reject or restrict subsequent purchase or exchange
orders by that shareholder permanently. In addition, the Fund may, in its sole
discretion, permanently reject or restrict purchase or exchange orders by a
shareholder if the Fund detects other trading activity that is deemed to be
disruptive to the management of the Fund or otherwise harmful to the Fund. For
purposes of these transaction surveillance procedures, the Fund may consider
trading activity in multiple accounts under common ownership, control, or
influence. A shareholder that has been restricted from participation in the Fund
pursuant to this policy will be allowed to apply for re-entry after one year. A
shareholder applying for re-entry must provide assurances acceptable to the Fund
that the shareholder will not engage in excessive trading activities in the
future.
Goldman
Sachs may modify its surveillance procedures and criteria from time to time
without prior notice regarding the detection of excessive trading or to address
specific circumstances. Goldman Sachs will apply the criteria in a manner that,
in Goldman Sachs’ judgment, will be uniform.
Fund shares
may be held through omnibus arrangements maintained by Goldman Sachs, the Trust
Companies, Ayco or Authorized Institutions.. In addition, Fund shares may be
held in omnibus Employee Benefit Plans, Eligible Fee-Based Programs and other
group accounts. Omnibus accounts include multiple investors and such accounts
typically provide the Fund with a net purchase or
37
redemption
request on any given day where the purchases and redemptions of Fund shares by
the investors are netted against one another. The identity of individual
investors whose purchase and redemption orders are aggregated are ordinarily not
tracked by the Fund on a regular basis. Goldman Sachs, the Trust Companies, Ayco
or an Authorized Institution may not have the capability or may not be willing
to apply the Fund’s market timing policies. While Goldman Sachs, the Trust
Companies and Ayco may monitor share turnover at the omnibus account level, the
Fund’s ability to monitor and detect market timing by shareholders in these
omnibus accounts may be limited in certain circumstances, and certain Authorized
Institutions may charge the Fund a fee for providing certain shareholder
financial information requested as part of the Fund’s surveillance process. The
netting effect makes it more difficult to identify, locate and eliminate market
timing activities. In addition, those investors who engage in market timing and
other excessive trading activities may employ a variety of techniques to avoid
detection. There can be no assurance that the Fund and Goldman Sachs, the Trust
Companies and Ayco will be able to identify all those who trade excessively or
employ a market timing strategy, and curtail their trading in every instance. If
necessary, the Trust may prohibit additional purchases of Fund shares by an
Authorized Instituion or by certain clients of the Authorized Institution.
Authorized Institutions may also monitor trading activities by their clients in
the Fund. The criteria used by Authorized Institutions to monitor for excessive
trading may differ from the criteria used by the Fund. If an Authorized
Institution fails to cooperate in the implementation or enforcement of the
Trust’s excessive trading policies, the Trust may take certain actions including
terminating the relationship.
38
Taxation
As with any
investment, you should consider how your investment in the Fund will be taxed.
The tax information below is provided as general information. More tax
information is available in the SAI. You should consult your tax adviser about
the federal, state, local or foreign tax consequences of your investment in the
Fund. Except as otherwise noted, the tax information provided assumes that you
are a U.S. citizen or resident.
Unless your
investment is through an Employee Benefit Plan or other tax-advantaged account,
you should carefully consider the possible tax consequences of Fund
distributions and the sale of your Fund shares.
|
DISTRIBUTIONS |
The Fund
contemplates declaring as dividends each year all or substantially all of its
income. The Fund expect to distribute “exempt-interest dividends” attributable
to tax-exempt interest earned by the Fund. Exempt-interest dividends are
generally not subject to federal income tax, but may be subject to state or
local taxes. However, investments in tax-exempt bonds can also result in the
recognition of income or gain by the Fund, and thereby cause a portion of the
Fund’s distributions to shareholders to be taxable. Thus, if the value of a bond
appreciates while the Fund owns it (aside from the appreciation attributable to
original issue discount on that bond), and the Fund then sells the bond at a
gain, that gain will generally not be exempt from tax—whether or not the
interest income on the bond is exempt. Gain recognized by the Fund on sales of
appreciated bonds will generally be short-term or long-term capital gain
depending on whether the Fund has held the bonds for more than one year, but
“market discount” bonds can cause the Fund to recognize ordinary income. “Market
discount” is a discount at which a bond is purchased that is attributable to a
decline in the value of the bond after its original issuance. The market
discount is then taken into account ratably over the bond’s remaining term to
maturity, and the portion that accrues during the Fund’s holding period for the
bond is generally treated as taxable ordinary income to the extent of any
realized gain on the bond upon disposition or maturity. Distributions
attributable to ordinary income and short-term capital gain recognized by the
Fund are generally taxable to you as ordinary income, while distributions
attributable to long-term capital gains are taxable to you as long-term capital
gains, no matter how long you have owned your Fund shares.
Under
current provisions of the Code, the maximum individual rate applicable to
long-term capital gains is generally either 15% or 20%, depending on whether the
individual's income exceeds certain threshold amounts. The preferential rate
described above also applies to certain qualifying dividend income, but Fund
distributions will generally not qualify for that favorable treatment and also
will generally not qualify for the corporate dividends received deduction
because the Funds will be earning interest income rather than dividend
income.
You should
note that exempt-interest dividends paid by the Funds may be a preference item
when determining your federal alternative minimum tax liability. In addition,
exempt-interest dividends of all of the Funds are taken into account in
determining the taxable portion of social security or railroad retirement
benefits. Any interest on indebtedness incurred by you to purchase or carry
shares in the Funds will not be deductible for federal income tax
purposes.
An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Although distributions are
generally treated as taxable to you in the year they are paid, distributions
declared in October, November or December but paid in January are taxable as if
they were paid in December. The character and tax status of all distributions
will be available to shareholders after the close of each calendar
year.
If you buy
shares of the Fund before it makes a distribution, the distribution will be
taxable to you even though it may actually be a return of a portion of your
investment. This is known as “buying into a dividend.”
|
SALES
AND EXCHANGES |
Your sale
of Fund shares is a taxable transaction for federal income tax purposes, and may
also be subject to state and local taxes. For tax purposes, the exchange of your
Fund shares for shares of a different Goldman Sachs Fund is the same as a sale.
When you sell your shares, you will generally recognize a capital gain or loss
in an amount equal to the difference between your adjusted tax basis in the
shares and the amount received. Generally, this capital gain or loss is
long-term or short-term depending on whether your holding period exceeds twelve
months, except that any loss realized on shares held for six months or less will
be treated as a long-term capital loss to the extent of any capital gain
dividends that were received on the shares. Additionally, any loss realized on a
sale, exchange or redemption of shares of the Fund may be disallowed under “wash
sale” rules to the extent the shares disposed of are replaced with
39
other
shares of that Fund within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of, such as pursuant to a dividend
reinvestment in shares of that Fund. If disallowed, the loss will be reflected
in an adjustment to the basis of the shares acquired.
|
OTHER
INFORMATION |
When you
open your account, you should provide your Social Security Number or tax
identification number on your account application. By law, the Fund must
withhold 24% of your taxable distributions and any redemption proceeds if you do
not provide your correct taxpayer identification number, or certify that it is
correct, or if the Internal Revenue Service (“IRS”) instructs the Fund to do
so.
The Fund is
required to report to you and the IRS annually on Form 1099-B not only the gross
proceeds of Fund shares you sell or redeem but also, for shares purchased on or
after January 1, 2012, their cost basis. Cost
basis will be calculated using the Fund’s default method of average cost, unless
you instruct the Fund to use a different methodology. If you
would like to use the average cost method of calculation, no action is required.
To elect an alternative method, you should contact Goldman Sachs Funds at the
address or phone number on the back cover of the Prospectus. If your account is
held with an Intermediary, contact your representative with respect to reporting
of cost basis and available elections for your account.
You should
carefully review the cost basis information provided by the Fund and make any
additional basis, holding period or other adjustments that are required when
reporting these amounts on your federal income tax returns.
Non-U.S.
investors are generally subject to U.S. withholding tax and may be subject to
estate tax with respect to their Fund Shares. Non-U.S. investors generally are
not subject to U.S. federal income tax withholding on certain distributions of
interest income and/or short-term capital gains that are designated by the
Funds. It is expected that a Fund will generally make designations of
short-term gains, to the extent permitted, but the Funds do not intend to make
designations of any distributions attributable to interest income. Therefore,
any distributions of interest income that are not exempt-interest dividends will
be subject to withholding when paid to non-U.S. investors.
The Fund
is required to withhold U.S. tax (at a 30% rate) on payments of dividends made
to certain non-U.S. entities that fail to comply (or be deemed compliant) with
extensive reporting and withholding requirements designed to inform the U.S.
Department of the Treasury of U.S.-owned foreign investment accounts.
Shareholders may be requested to provide additional information to enable the
Fund to determine whether withholding is required.
40
Appendix
A
Additional
Information on Fund Risks, Securities and Techniques
|
A. General
Fund Risks |
The Funds
will be subject to the risks associated with fixed income securities. These
risks include, among others, interest rate risk, credit/default risk and
call/extension risk. In general, interest rate risk involves the risk that when
interest rates decline, the market value of fixed income securities tends to
increase (although some asset-backed securities will have less potential than
other debt securities for capital appreciation during periods of declining
rates). Conversely, when interest rates increase, the market value of fixed
income securities tends to decline. Credit/default risk involves the risk that
an issuer or guarantor could default on its obligations, and a Fund will not
recover its investment. Call risk and extension risk are normally present in
asset-backed securities. For example, debtors have the option to prepay their
loans. Therefore, the duration of an asset-backed security can either shorten
(call risk) or lengthen (extension risk). In general, if interest rates on new
loans fall sufficiently below the interest rates on existing outstanding loans,
the rate of prepayment would be expected to increase. Conversely, if loan
interest rates rise above the interest rates on existing outstanding loans, the
rate of prepayment would be expected to decrease. In either case, a change in
the prepayment rate can result in losses to investors.
A rising
interest rate environment could cause the value of the Fund’s fixed income
securities to decrease, and fixed income markets to experience increased
volatility in addition to heightened levels of liquidity risk. Additionally,
decreases in the value of fixed income securities could lead to increased
shareholder redemptions, which could impair the Fund’s ability to achieve its
investment objective. The risks associated with increasing interest rates are
heightened given that interest rates are near historic lows, but may be expected
to increase in the future with unpredictable effects on the markets and the
Fund’s investments.
To the
extent a Fund invests in pooled investment vehicles (including investment
companies and ETFs) and partnerships, the Fund will be affected by the
investment policies, practices and performance of such entities in direct
proportion to the amount of assets the Fund invests therein.
To the
extent a Fund’s net assets decrease or increase in the future due to price
volatility or share redemption or purchase activity, the Fund’s expense ratio
may correspondingly increase or decrease from the expense ratio disclosed in the
Prospectus.
The
Investment Adviser will not consider the portfolio turnover rate a limiting
factor in making investment decisions for a Fund. A high rate of portfolio
turnover involves correspondingly greater expenses which must be borne by a Fund
and its shareholders; and is also likely to result in higher short-term capital
gains taxable to certain shareholders. The portfolio turnover rate is calculated
by dividing the lesser of the dollar amount of sales or purchases of portfolio
securities by the average monthly value of a Fund’s portfolio securities,
excluding securities having a maturity at the date of purchase of one year or
less. See “Financial Highlights” in Appendix B for a statement of each Fund’s
historical portfolio turnover rates.
The Funds
may, from time to time, enter into arrangements with certain brokers or other
counterparties that require the segregation of collateral. For operational, cost
or other reasons, when setting up arrangements relating to the
execution/clearing of trades, a Fund may choose to select a segregation model
which may not be the most protective option available in the case of a default
by a broker or counterparty.
The
following sections provide further information on certain types of securities
and investment techniques that may be used by the Funds, including their
associated risks. Additional information is provided in the SAI, which is
available upon request. Among other things, the SAI describes certain
fundamental investment restrictions that cannot be changed without shareholder
approval. You should note, however, that all investment objectives and all
investment policies not specifically designated as fundamental are
non-fundamental, and may be changed without shareholder approval. If there is a
change in a Fund’s investment objective, you should consider whether that Fund
remains an appropriate investment in light of your then current financial
position and needs.
|
B.
Other Fund Risks |
Fundamental
Policies. As a
matter of fundamental policy, under normal circumstances, at least 80% of the
Net Assets of the Dynamic Municipal Income, High Yield Municipal and Short
Duration Tax-Free Funds (measured at the time of purchase) will be invested in
Municipal Securities, the interest on which is exempt from regular federal
income tax (i.e., excluded from gross income for federal income tax purposes),
and, in the case of the Short Duration Tax-Free Fund is not a tax preference
item under the federal alternative minimum tax.
41
Credit/Default
Risks. Debt
securities purchased by the Funds may include U.S. Government Securities
(including zero coupon bonds) and securities issued by state and municipal
governmental entities, corporations, banks and other issuers. Some of these
fixed income securities are described in the next section below. Further
information is provided in the SAI.
Debt
securities rated BBB– or higher by S&P, or Baa3 or higher by Moody’s or
having a comparable credit rating by another NRSRO are considered “investment
grade.” Securities rated BBB– or Baa3 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. Certain Funds also have credit rating requirements for the securities
they buy, which are applied at the time of purchase. For the purpose of
determining compliance with any credit rating requirement, each Fund assigns a
security, at the time of purchase, the highest rating by an NRSRO if the
security is rated by more than one NRSRO. For this purpose, each Fund relies
only on the ratings of the following NRSROs: S&P, Moody’s and Fitch, Inc.
Unrated securities may be purchased by a Fund if they are determined by the
Investment Adviser to be of a credit quality consistent with the Fund’s credit
rating requirements.
A security
satisfies a Fund’s credit rating requirement regardless of its relative ranking
(for example, plus or minus) within a designated major rating category (for
example, BBB or Baa). If a security satisfies a Fund’s credit rating requirement
at the time of purchase and is subsequently downgraded below a minimum rating
requirement or upgraded above a maximum rating requirement, the Fund will not be
required to dispose of such security. If a downgrade or upgrade occurs, the
Investment Adviser will consider what action, including the sale of such
security, is in the best interests of a Fund and its shareholders.
The Dynamic
Municipal Income and High Yield Municipal Funds may invest in non-investment
grade fixed income securities (i.e.,
securities rated BB+ or Ba1 or below (or comparable unrated securities) commonly
referred to as “junk bonds”). Because non-investment grade fixed income
securities are issued by issuers with low credit ratings, they pose a greater
risk of default than investment grade securities. Junk bonds are considered
speculative and may be questionable as to principal and interest
payments.
In some
cases, junk bonds may be highly speculative, have poor prospects for reaching
investment grade standing and be in default. As a result, investment in such
bonds will present greater speculative risks than those associated with
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
“Non-Investment Grade Fixed Income Securities” in “Appendix A—Additional
Information on Fund Risks, Securities and Techniques.”
Risks
of Derivative Investments. The Funds
may invest in derivative instruments including, without limitation, options,
futures, options on futures, forwards, swaps, interest rate caps, floors and
collars. Derivatives may be used for both hedging and nonhedging purposes (that
is, to seek to increase total return), although suitable derivative instruments
may not always be available to the Investment Adviser for these purposes. Losses
from derivative instruments can result from a lack of correlation between
changes in the value of derivative instruments and the portfolio assets (if any)
being hedged, the potential illiquidity of the markets for derivative
instruments, the failure of the counterparty to perform its contractual
obligations, or the risks related to leverage factors associated with such
transactions. Derivatives are also subject to risks arising from margin
requirements, which include the risk that a Fund will be required to pay
additional margin or set aside additional collateral to maintain open derivative
positions and the risk of loss by a Fund of margin deposits in the event of the
bankruptcy or other similar insolvency with respect to a broker or counterparty
with whom a Fund has an open derivative position. Losses may also arise if the
Funds receive cash collateral under the transaction and some or all of that
collateral is invested in the market. To the extent that cash collateral is so
invested, such collateral will be subject to market depreciation or
appreciation, and a Fund may be responsible for any loss that might result from
its investment of the counterparty’s cash collateral. If cash collateral is not
invested, a Fund may be exposed to additional risk of loss in the event of the
insolvency of its custodian holding such collateral. The use of these management
techniques also involves the risk of loss if the Investment Adviser is incorrect
in its expectation of the timing or level of fluctuations in securities prices,
interest rates or other variables. Derivative instruments may be harder to
value, subject to greater volatility and more likely subject to changes in tax
treatment than other investments. For these reasons, the Investment Adviser’s
attempts to hedge portfolio risk through the use of derivative instruments may
not be successful, and the Investment Adviser may choose not to hedge portfolio
risks. Using derivatives for nonhedging purposes presents greater risk of loss
than derivatives used for hedging purposes. Some floating-rate derivative debt
securities can present more complex types of derivative and interest rate risks.
For example, range floaters are subject to the risk that the coupon will be
reduced below market rates if a designated interest rate floats outside of a
specified interest rate band or collar. Dual index or yield curve floaters are
subject to lower prices in the event of an unfavorable change in the spread
between two designated interest rates.
Risks
of Illiquid Investments. Each Fund
may not acquire any “illiquid investment” if, immediately after the acquisition,
the Fund would have invested more than 15% of its net assets in illiquid
investments that are assets. An “illiquid investment” is an investment that a
Fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment. In determining
whether an investment is an illiquid investment, the Investment Adviser will
take into account actual or estimated daily transaction volume of an investment,
group of related investments or asset class and other relevant market, trading,
and investment-specific considerations. In addition, in
42
Appendix
A
determining
the liquidity of an investment, the Investment Adviser must determine whether
trading varying portions of a position in a particular portfolio investment or
asset class, in sizes that a Fund would reasonably anticipate trading, is
reasonably expected to significantly affect its liquidity, and if so, the Fund
must take this determination into account when classifying the liquidity of that
investment or asset class.
Investments
purchased by a Fund that are liquid at the time of purchase may subsequently
become illiquid. If one or more investments in a Fund’s portfolio become
illiquid, the Fund may exceed the 15% limitation in illiquid investments. In the
event that changes in the portfolio or other external events cause a Fund to
exceed this limit, the Fund must take steps to bring its illiquid investments
that are assets to or below 15% of its net assets within a reasonable period of
time. This requirement would not force a Fund to liquidate any portfolio
instrument where the Fund would suffer a loss on the sale of that
instrument.
In cases
where no clear indication of the value of a Fund’s portfolio instruments is
available, the portfolio instruments will be valued at their fair value
according to the valuation procedures approved by the Board of Trustees. These
cases include, among others, situations where a security or other asset or
liability does not have a price source, or the secondary markets on which an
investment has previously been traded are no longer viable, due to its lack of
liquidity. For more information on fair valuation, please see “How To Buy
Shares—How Are Shares Priced?”
Temporary
Investment Risks. Each Fund
may, for temporary defensive purposes (and to the extent that it is permitted to
invest in the following), invest up to 100% of its total assets in:
◼
U.S.
Government Securities
◼
Commercial
paper rated at least A-2 by S&P, P-2 by Moody’s or having a comparable
rating by another NRSRO (or, if unrated, determined by the Investment Adviser to
be of comparable credit quality)
◼
Certificates
of deposit
◼
Bankers’
acceptances
◼
Repurchase
agreements
◼
Non-convertible
preferred stocks and non-convertible corporate bonds with a remaining maturity
of less than one year
◼
ETFs
◼
Other
investment companies
◼
Cash
items
The Funds
may invest more than 20% of their respective Net Assets in taxable investments
and cash items and, with respect to the High Yield Municipal Fund, more than 35%
of its Net Assets, in high grade securities and cash items under unusual
conditions. When a Fund’s assets are invested in such instruments, the Fund may
not be achieving its investment objective.
C. Fund
Securities and Techniques
This
section provides further information on certain types of securities and
investment techniques that may be used by the Funds, including their associated
risks.
The Funds
may purchase other types of securities or instruments similar to those described
in this section if otherwise consistent with the Fund’s investment objective and
policies. Further information is provided in the SAI, which is available upon
request.
Municipal
Securities. The Funds
may invest in securities and instruments issued by state and local government
issuers. Municipal Securities in which a Fund may invest consist of bonds,
notes, commercial paper and other instruments (including participation interests
in such securities) issued by or on behalf of the states, territories and
possessions of the United States (including the District of Columbia) and their
political subdivisions, agencies or instrumentalities. Such securities may pay
fixed, variable or floating rates of interest. The interest on tax-free
Municipal Securities will normally be exempt from regular federal income tax
(i.e., excluded from gross income for federal income tax purposes but not
necessarily exempt from federal alternative minimum tax or from state or local
taxes). Because of their tax-exempt status, the yields and market values of
Municipal Securities may be more adversely impacted by changes in tax rates and
policies than taxable fixed income securities.
Municipal
Securities include both “general” obligation and “revenue” bonds and may be
issued to obtain funds for various purposes. General obligations are secured by
the issuer’s pledge of its full faith, credit and taxing power. Revenue
obligations are payable only from the revenues derived from a particular
facility or class of facilities.
Municipal
Securities are often issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses, and obtaining funds to lend to other public institutions and
facilities. Municipal Securities in which the Funds may invest include private
activity bonds, pre-refunded municipal securities and auction rate securities.
Dividends paid by the Funds based on investments in private activity bonds will
be subject to the federal alternative minimum tax.
43
The
obligations of the issuer to pay the principal of and interest on a Municipal
Security are subject to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors, such as the Federal Bankruptcy
Act, and laws, if any, that may be enacted by Congress or state legislatures
extending the time for payment of principal or interest or imposing other
constraints upon the enforcement of such obligations. There is also the
possibility that, as a result of litigation or other conditions, the power or
ability of the issuer to pay when due the principal of or interest on a
Municipal Security may be materially affected.
In
addition, Municipal Securities include municipal leases, certificates of
participation and “moral obligation” bonds. A municipal lease is an obligation
issued by a state or local government to acquire equipment or facilities.
Certificates of participation represent interests in municipal leases or other
instruments, such as installment purchase agreements. Moral obligation bonds are
supported by a moral commitment but not a legal obligation of a state or local
government. Municipal leases, certificates of participation and moral obligation
bonds frequently involve special risks not normally associated with general
obligation or revenue bonds. In particular, these instruments permit
governmental issuers to acquire property and equipment without meeting
constitutional and statutory requirements for the issuance of debt. If, however,
the governmental issuer does not periodically appropriate money to enable it to
meet its payment obligations under these instruments, it cannot be legally
compelled to do so. If a default occurs, it is likely that a Fund would be
unable to obtain another acceptable source of payment. Some municipal leases,
certificates of participation and moral obligation bonds may be
illiquid.
Municipal
Securities may also be in the form of a tender option bond, which is a Municipal
Security (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term, tax-exempt rates. The bond is typically
issued with the agreement of a third party, such as a bank, broker-dealer or
other financial institution, which grants the security holders the option, at
periodic intervals, to tender their securities to the institution. After payment
of a fee to the financial institution that provides this option, the security
holder effectively holds a demand obligation that bears interest at the
prevailing short-term, tax-exempt rate. An institution may not be obligated to
accept tendered bonds in the event of certain defaults or a significant
downgrading in the credit rating assigned to the issuer of the bond. The tender
option will be taken into account in determining the maturity of the tender
option bonds and a Fund’s duration. There is risk that a Fund will not be
considered the owner of a tender option bond for federal income tax purposes,
and thus will not be entitled to treat such interest as exempt from federal
income tax. Certain tender option bonds may be illiquid.
Municipal
Securities may be backed by letters of credit or other forms of credit
enhancement issued by domestic or foreign banks or by other financial
institutions. The deterioration of the credit quality of these banks and
financial institutions could, therefore, cause a loss to a Fund that invests in
such Municipal Securities. Letters of credit and other obligations of foreign
banks and financial institutions may involve risks in addition to those of
domestic obligations because of less publicly available financial and other
information, less securities regulation, potential imposition of foreign
withholding and other taxes, war, expropriation or other adverse governmental
actions. Foreign banks and their foreign branches are not regulated by U.S.
banking authorities, and are generally not bound by the accounting, auditing and
financial reporting standards applicable to U.S. banks.
The Funds
may invest 25% or more of the value of their respective total assets in
Municipal Securities which are related in such a way that an economic, business
or political development or change affecting one Municipal Security would also
affect the other Municipal Security. For example, a Fund may invest all of its
assets in (a) Municipal Securities the interest on which is paid solely from
revenues from similar projects such as hospitals, electric utility systems,
multi-family housing, nursing homes, commercial facilities (including hotels),
steel companies or life care facilities; (b) Municipal Securities whose issuers
are in the same state; or (c) industrial development obligations (except where
the non-governmental entities supplying the revenues from which such bonds or
obligations are to be paid are in the same industry). A Fund’s investments in
these Municipal Securities will subject the Fund to a greater extent to the
risks of adverse economic, business or political developments affecting the
particular state, industry or other area of investment.
The Funds
may invest in Municipal Securities issued by municipalities, including U.S.
territories, commonwealths and possessions, that may be, or may become, subject
to significant financial difficulties. Factors contributing to such difficulties
may include: lower property tax collections as a result of lower home values,
lower sales tax revenue as a result of reduced consumer spending, lower income
tax revenue as a result of higher unemployment rates, and budgetary constraints
of local, state and federal governments upon which issuers of municipal
securities may be relying for funding. Such securities may be considered below
investment grade or may be subject to future credit downgrades due to concerns
over potential default, insolvency or bankruptcy on the part of their issuers or
any credit support provider. During the recent economic downturn, several
municipalities have, in fact, filed for bankruptcy protection or have indicated
that they may seek bankruptcy protection in the future. A credit downgrade or
other adverse news about an issuer or any credit support provider could impact
the market value and liquidity of the securities and consequently could
negatively affect the performance of a Fund that holds such
securities.
The High
Yield Municipal Fund may own a large percentage of any one general assessment
bond issuance. Therefore, the Fund may be adversely impacted if the issuing
municipality fails to pay principal and/or interest on those bonds.
44
Appendix
A
In
purchasing Municipal Securities, each Fund intends to rely on opinions of bond
counsel or counsel to the issuers for each issue as to the excludability of
interest on such obligations from gross income for federal income tax purposes.
A Fund will not undertake independent investigations concerning the tax-exempt
status of such obligations, nor does it guarantee or represent that bond
counsels’ opinions are correct. Bond counsels’ opinions will generally be based
in part upon covenants by the issuers and related parties regarding continuing
compliance with federal tax requirements. Tax laws contain numerous and complex
requirements that must be satisfied on a continuing basis in order for bonds to
be and remain tax-exempt. If the issuer of a bond or a user of a bond-financed
facility fails to comply with such requirements at any time, interest on the
bond could become taxable, retroactive to the date the obligation was issued. In
that event, a portion of a Fund’s distributions attributable to interest the
Fund received on such bond for the current year and for prior years could be
characterized or recharacterized as taxable income.
U.S.
Government Securities. Each Fund
may invest in U.S. Government Securities. U.S. Government Securities include
U.S. Treasury obligations and obligations issued or guaranteed by U.S.
government agencies, instrumentalities or sponsored enterprises. U.S. Government
Securities may be supported by (i) the full faith and credit of the U.S.
Treasury; (ii) the right of the issuer to borrow from the U.S. Treasury; (iii)
the discretionary authority of the U.S. government to purchase certain
obligations of the issuer; or (iv) only the credit of the issuer. U.S.
Government Securities also include Treasury receipts, zero coupon bonds and
other stripped U.S. Government Securities, where the interest and principal
components are traded independently. U.S. Government Securities may also include
Treasury inflation-protected securities whose principal value is periodically
adjusted according to the rate of inflation.
U.S.
Treasury obligations include, among other things, the separately traded
principal and interest components of securities guaranteed or issued by the U.S.
Treasury if such components are traded independently under the Separate Trading
of Registered Interest and Principal of Securities program
(“STRIPS”).
U.S.
Government Securities are deemed to include (i) securities for which the payment
of principal and interest is backed by an irrevocable letter of credit issued by
the U.S. government, its agencies, authorities or instrumentalities; and (ii)
participations in loans made to foreign governments or their agencies that are
so guaranteed. Certain of these participations may be regarded as
illiquid.
U.S.
Treasury Securities have historically involved little risk of loss of principal
if held to maturity. However, no assurance can be given that the U.S. government
will be able or willing to repay the principal or interest rate when due, or
provide financial support to U.S. government agencies, authorities,
instrumentalities or sponsored enterprises that issue U.S. Government Securities
if it is not obligated to do so by law.
Asset-Backed
Securities. Each Fund
may invest in asset-backed securities. Asset-backed securities are securities
whose principal and interest payments are collateralized by pools of assets such
as auto loans, credit card receivables, leases, installment contracts and
personal property. Asset-backed securities also include home equity line of
credit loans and other second lien mortgages. Asset-backed securities are often
subject to more rapid repayment than their stated maturity date would indicate
as a result of the pass-through of prepayments of principal on the underlying
loans. During periods of declining interest rates, prepayment of loans
underlying asset-backed securities can be expected to accelerate. Accordingly, a
Fund’s ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at comparable
yields is subject to generally prevailing interest rates at that time. If the
issuer of an asset-backed security defaults on its payment obligations, there is
the possibility that, in some cases, a Fund will be unable to possess and sell
the underlying collateral and that a Fund’s recoveries on repossessed collateral
may not be available to support payments on the securities. In the event of a
default, a Fund may suffer a loss if it cannot sell collateral quickly and
receive the amount it is owed. The value of some asset-backed securities may be
particularly sensitive to changes in prevailing interest rates. While
asset-backed securities may be supported by some form of government or private
guarantee and/or insurance, there is no assurance that private guarantors or
insurers, if any, will meet their obligations. Asset-backed securities may also
be subject to increased volatility and may become illiquid and more difficult to
value even when there is no default or threat of default due to the market’s
perception of the creditworthiness of the issuers and market conditions
impacting asset-backed securities more generally.
Corporate
Debt Obligations; Trust Preferred Securities and Convertible
Securities. The Funds
may invest in corporate debt obligations, trust preferred securities and
convertible securities. Corporate debt obligations include bonds, notes,
debentures, commercial paper and other obligations of corporations to pay
interest and repay principal. A trust preferred security is a long dated bond
(for example, 30 years) with preferred features. The preferred features are that
payment of interest can be deferred for a specified period without initiating a
default event. The securities are generally senior in claim to standard
preferred stock but junior to other bondholders. The Funds may also invest in
other short-term obligations issued or guaranteed by U.S. corporations, non-U.S.
corporations or other entities.
Convertible
securities are preferred stock or debt obligations that are convertible into
common stock. Convertible securities generally offer lower interest or dividend
yields than non-convertible securities of similar quality. Convertible
securities have both equity and fixed income risk characteristics. Like all
fixed income securities, the value of convertible securities is susceptible to
the risk of market losses attributable to changes in interest rates. Generally,
the market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. However, when
the market price of the common stock underlying a
45
convertible
security exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security, like a fixed income security, tends to trade increasingly
on a yield basis, and thus may not decline in price to the same extent as the
underlying common stock.
Structured
Securities and Inverse Floaters. The Funds
may invest in structured securities. Structured securities are securities whose
value is determined by reference to changes in the value of specific currencies,
securities, interest rates, commodities, indices or other financial indicators
(the “Reference”) or the relative change in two or more References. Investments
in structured securities may provide exposure to certain securities or markets
in situations where regulatory or other restrictions prevent direct investments
in such issuers or markets.
The
interest rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference.
Structured securities may be positively or negatively indexed, so that
appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, changes in the
interest rates or the value of the security at maturity may be a multiple of
changes in the value of the Reference, effectively leveraging a Fund’s
investments so that small changes in the value of the Reference may result in
disproportionate gains or losses to the Fund. Consequently, structured
securities may present a greater degree of market risk than many types of
securities, and may be more volatile, less liquid and more difficult to price
accurately than less complex securities. Structured securities are also subject
to the risk that the issuer of the structured securities may fail to perform its
contractual obligations.
Certain
issuers of structured products may be deemed to be investment companies as
defined in the Investment Company Act. As a result, a Fund’s investments in
structured securities may be subject to the limits applicable to investments in
other investment companies.
Structured
securities may also include inverse floating rate debt securities (“inverse
floaters”). The interest rate on inverse floaters resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher the degree of leverage of an inverse
floater, the greater the volatility of its market value.
Structured
securities may also include credit linked notes. Credit linked notes are
securities with embedded credit default swaps. An investor holding a credit
linked note generally receives a fixed or floating coupon and the note’s par
value upon maturity, unless the referred credit defaults or declares bankruptcy,
in which case the investor receives the amount recovered. In effect, investors
holding credit linked notes receive a higher yield in exchange for assuming the
risk of a specified credit event.
Floating
and Variable Rate Obligations. Each Fund
may purchase floating and variable rate obligations. The value of these
obligations is generally more stable than that of a fixed rate obligation in
response to changes in interest rate levels. The issuers or financial
intermediaries providing demand features may support their ability to purchase
the obligations by obtaining credit with liquidity supports. These may include
lines of credit, which are conditional commitments to lend, and letters of
credit, which will ordinarily be irrevocable both of which may be issued by
domestic banks or foreign banks. A Fund may purchase variable or floating rate
obligations from the issuers or may purchase certificates of participation, a
type of floating or variable rate obligation, which are interests in a pool of
debt obligations held by a bank or other financial institutions.
Floating
and variable rate obligations may be transferable among financial institutions,
but may not have the liquidity of conventional debt securities and are often
subject to legal or contractual restrictions on resale. Floating and variable
rate obligations are not currently listed on any securities exchange or
automatic quotation system. As a result, no active market may exist for some
floating and variable rate obligations. To the extent a secondary market exists
for other floating and variable rate obligations, such market may be subject to
irregular trading activity, wide bid/ask spreads, and extended trade settlement
periods. The lack of a highly liquid secondary market for floating and variable
rate obligations may have an adverse affect on the value of such obligations and
may make it more difficult to value the obligations for purposes of calculating
their respective net asset value.
For
floating and variable rate obligations, there may be a lag between an actual
change in the underlying interest rate benchmark and the reset time for an
interest payment of such an obligation, which could harm or benefit the Funds,
depending on the interest rate environment or other circumstances. In a rising
interest rate environment, for example, a floating or variable rate obligation
that does not reset immediately would prevent the Funds from taking full
advantage of rising interest rates in a timely manner. However, in a declining
interest rate environment, a Fund may benefit from a lag due to an obligation’s
interest rate payment not being immediately impacted by a decline in interest
rates.
Certain floating and
variable rate obligations have an interest rate floor feature, which prevents
the interest rate payable by the security from dropping below a specified level
as compared to a reference interest rate (the “reference rate”), such as SOFR,
Term SOFR or another rate determined using SOFR. Such a floor protects a Fund
from losses resulting from a decrease in the reference rate below the specified
level. However, if the reference rate is below the floor, there will be a lag
between a rise in the reference rate and a rise in the interest rate payable by
the obligation, and the Fund may not benefit from increasing interest rates for
a significant amount of time.
46
Appendix
A
Zero
Coupon; Deferred Interest; Pay-In-Kind; and Capital Appreciation
Bonds. Each Fund
may invest in zero coupon bonds, deferred interest, pay-in-kind and capital
appreciation bonds. These bonds are issued at a discount from their face value
because interest payments are typically postponed until maturity. Pay-in-kind
securities are securities that have interest payable by the delivery of
additional securities. The market prices of these securities generally are more
volatile than the market prices of interest-bearing securities and are likely to
respond to a greater degree to changes in interest rates than interest-bearing
securities having similar maturities and credit quality.
Options
on Securities and Securities Indices. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) of the option the obligation to buy, the underlying instrument during
the option period. A call option gives the purchaser of the option the right to
buy, and the writer (seller) of the option the obligation to sell, the
underlying instrument during the option period. Each Fund may write (sell) call
and put options and purchase put and call options on any securities and other
instruments in which the Fund may invest or any index consisting of securities
or other instruments in which it may invest.
The writing
and purchase of options is a highly specialized activity which involves special
investment risks. Options may be used for either hedging or cross-hedging
purposes, or to seek to increase total return (which presents additional risk).
The successful use of options depends in part on the ability of the Investment
Adviser to anticipate 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 market prices or determination of the
correlation between the instruments or indices on which options are written and
purchased and the instruments in a Fund’s investment portfolio, the Fund may
incur losses that it would not otherwise incur. The use of options can also
increase a Fund’s transaction costs. Options written or purchased by the Funds
may be traded on either U.S. exchanges or over-the-counter. Over-the-counter
options will present greater possibility of loss because of their greater
illiquidity and credit risks.
Yield
Curve Options. Each Fund
may enter into options on the yield “spread” or differential between two
securities. Such transactions are referred to as “yield curve” options. In
contrast to other types of options, a yield curve option is based on the
difference between the yields of designated securities, rather than the prices
of the individual securities, and is settled through cash payments. Accordingly,
a yield curve option is profitable to the holder if this differential widens (in
the case of a call) or narrows (in the case of a put), regardless of whether the
yields of the underlying securities increase or decrease.
The trading
of yield curve options is subject to all of the risks associated with the
trading of other types of options. In addition, such options present a risk of
loss even if the yield of one of the underlying securities remains constant, or
if the spread moves in a direction or to an extent which was not
anticipated.
Futures
Contracts and Options on Futures Contracts. Futures
contracts are standardized, exchange-traded contracts that provide for the sale
or purchase of a specified financial instrument at a future time at a specified
price. An option on a futures contract gives the purchaser the right (and the
writer of the option the obligation) to assume a position in a futures contract
at a specified exercise price within a specified period of time. A futures
contract may be based on particular securities, securities indices and other
financial instruments and indices. The Funds may engage in futures transactions
on U.S. exchanges.
Each Fund
may, to the extent consistent with its investment policies, purchase and sell
futures contracts, and purchase and write call and put options on futures
contracts, in order to seek to increase total return or to hedge against changes
in interest rates, securities prices or to otherwise manage its term structure,
sector selection and duration in accordance with its investment objective and
policies. Each Fund may also enter into closing purchase and sale transactions
with respect to such contracts and options.
Futures
contracts and related options present the following risks:
◼
While a
Fund may benefit from the use of futures and options on futures, unanticipated
changes in interest rates, securities prices or currency exchange rates may
result in poorer overall performance than if the Fund had not entered into any
futures contracts or options transactions.
◼
Because
perfect correlation between a futures position and a 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 additional risk of
loss.
◼
The loss
incurred by a Fund in entering into futures contracts and in writing call
options on futures is potentially unlimited and may exceed the amount of the
premium received.
◼
Futures
markets are highly volatile and the use of futures may increase the volatility
of a Fund’s NAV.
◼
As a result
of the low margin deposits normally required in futures trading, a relatively
small price movement in a futures contract may result in substantial losses to a
Fund.
◼
Futures
contracts and options on futures may be illiquid, and exchanges may limit
fluctuations in futures contract prices during a single day.
47
When-Issued
Securities and Forward Commitments. Each Fund
may purchase when-issued securities and make contracts to purchase or sell
securities for a fixed price at a future date beyond customary settlement time.
When-issued securities are securities that have been authorized, but not yet
issued. When-issued securities are purchased in order to secure what is
considered to be an advantageous price or yield to the Fund at the time of
entering into the transaction. A forward commitment involves entering into a
contract to purchase or sell securities for a fixed price at a future date
beyond the customary settlement period.
The purchase of securities
on a when-issued or forward commitment basis involves a risk of loss if the
value of the security to be purchased declines before the settlement date.
Conversely, the sale of securities on a forward commitment basis involves the
risk that the value of the securities sold may increase before the settlement
date. Although a Fund will generally purchase securities on a when-issued or
forward commitment basis with the intention of acquiring the securities for its
portfolio, a Fund may dispose of when-issued securities or forward commitments
prior to settlement if the Investment Adviser deems it appropriate.
Repurchase
Agreements. Repurchase
agreements involve the purchase of securities subject to the seller’s agreement
to repurchase them at a mutually agreed upon date and price. Each Fund may enter
into repurchase agreements with counterparties approved by the Investment
Adviser pursuant to procedures approved by the Board of Trustees that furnish
collateral at least equal in value or market price to the amount of their
repurchase obligations. The collateral may consist of any type of security in
which the Fund is eligible to invest directly. Repurchase agreements involving
obligations other than U.S. Government Securities may be subject to additional
risks.
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 are less than the repurchase price and the Fund’s costs
associated with delay and enforcement of the repurchase agreement. In addition,
in the event of bankruptcy of the seller, a Fund could suffer additional losses
if a court determines that the Fund’s interest in the collateral is not
enforceable.
Certain
Funds, together with other registered investment companies having advisory
agreements with the Investment Adviser or any of its affiliates, may transfer
uninvested cash balances into a single joint account, the daily aggregate
balance of which will be invested in one or more repurchase
agreements.
Borrowings
and Reverse Repurchase Agreements. Each Fund
can borrow money from banks and other financial institutions, and certain Funds
may enter into reverse repurchase agreements in amounts not exceeding one-third
of a Fund’s total assets (including the amount borrowed).
Reverse
repurchase agreements involve the sale of securities held by a Fund subject to
the Fund’s agreement to repurchase them at a mutually agreed upon date and price
(including interest). These transactions may be entered into as a temporary
measure for emergency purposes or to meet redemption requests. In addition,
while the High Yield Municipal Fund does not intend generally to leverage its
investments through borrowings, it may from time to time borrow money on a short
term basis (to the extent permitted by applicable law) for investment purposes.
Reverse repurchase agreements may also be entered into when the Investment
Adviser expects that the interest income to be earned from the investment of the
transaction proceeds will be greater than the related interest
expense.
Borrowings and reverse
repurchase agreements involve leveraging. If the securities held by a Fund
decline in value while these transactions are outstanding, the NAV of the Fund’s
outstanding shares will decline in value by proportionately more than the
decline in value of the securities. In addition, reverse repurchase agreements
involve the risk that the investment return earned by a Fund (from the
investment of the proceeds) will be less than the interest expense of the
transaction, that the market value of the securities sold by a Fund will decline
below the price the Fund is obligated to pay to repurchase the securities, and
that the securities may not be returned to the Fund.
Interest
Rate Swaps, Credit Swaps, Total Return Swaps, Options on Swaps and Interest Rate
Caps, Floors and Collars. Certain
Funds may enter into some or all of the following swap transactions and options
agreements, including interest rate caps, floors and collars. Interest rate
swaps involve the exchange by a Fund with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed-rate
payments for floating rate payments. Credit swaps involve the receipt of
floating or fixed rate payments in exchange for assuming potential credit losses
on an underlying security or pool of securities. Credit swaps give one party to
a transaction (the buyer of the credit swap) the right to dispose of or acquire
an asset (or group of assets or exposure to the performance of an index), or the
right to receive a payment from the other party, upon the occurrence of
specified credit events. Total return swaps give a party the right to receive
the appreciation in the value of a specified security, index or other instrument
in return for a fee paid to the counterparty, which will typically be based on
an agreed upon interest rate. If the underlying asset in a total return swap
declines in value over the term of the swap, the party may also be required to
pay the dollar value of that decline to the counterparty.
The Funds
may also purchase and write (sell) options contracts on swaps, commonly referred
to as swaptions. A swaption is an option to enter into a swap agreement. Like
other types of options, the buyer of a swaption pays a non-refundable premium
for the option and obtains the right, but not the obligation, to enter into an
underlying swap or to modify the terms of an existing swap on agreed-upon terms.
The seller of a swaption, in exchange for the premium, becomes obligated (if the
option is exercised) to enter into or modify an underlying swap on agreed-upon
terms which generally entails a greater risk of loss than the Fund incurs in
buying a swaption. The
48
Appendix
A
purchase of
an interest rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payment of interest on a
notional principal amount from the party selling such interest rate cap. The
purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
of interest on a notional principal amount from the party selling the interest
rate floor. An interest rate collar is the combination of a cap and a floor that
preserves a certain return within a predetermined range of interest
rates.
Each Fund
may enter into the transactions described above for hedging purposes or to seek
to increase total return. As an example, when a Fund is the buyer of a credit
default swap (commonly known as buying protection), it may make periodic
payments to the seller of the credit default swap to obtain protection against a
credit default on a specified underlying asset (or group of assets). If a
default occurs, the seller of the credit default swap may be required to pay the
Fund the notional amount of the credit default swap on a specified security (or
group of securities). On the other hand, when a Fund is a seller of a credit
default swap (commonly known as selling protection), in addition to the credit
exposure the Fund has on the other assets held in its portfolio, the Fund is
also subject to the credit exposure on the notional amount of the swap since, in
the event of a credit default, the Fund may be required to pay the notional
amount of the credit default swap on a specified security (or group of
securities) to the buyer of the credit swap. A Fund will be the seller of a
credit default swap only when the credit of the underlying asset is deemed by
the Investment Adviser to meet the Fund’s minimum credit criteria at the time
the swap is first entered into.
The use of
interest rate, mortgage, credit, currency and total return swaps, options on
swaps, and interest rate caps, floors and collars is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If the Investment
Adviser is incorrect in its forecasts of market values, interest rates and
currency exchange rates, or in its evaluation of the creditworthiness of swap
counterparties and the issuers of the underlying assets, the investment
performance of the Fund would be less favorable than it would have been if these
investment techniques were not used.
Currently,
certain standardized swap transactions are subject to mandatory central clearing
and exchange trading. Although central clearing and exchange trading is expected
to decrease counterparty risk and increase liquidity compared to bilaterally
negotiated swaps, central clearing and exchange trading does not eliminate
counterparty risk or illiquidity risk entirely. Depending on the size of a Fund
and other factors, the margin required under the rules of a clearinghouse and by
a clearing member may be in excess of the collateral required to be posted by
the Fund to support its obligations under a similar bilateral, uncleared swap.
However, certain applicable regulators have adopted rules imposing certain
margin requirements, including minimums, on uncleared swaps which may result in
the Fund and its counterparties posting higher amounts for uncleared
swaps.
Other
Investment Companies. Each Fund
may invest in securities of other investment companies, including ETFs and money
market funds such as iSharesSM, subject to statutory limitations prescribed by
the Investment Company Act or rules, regulations or exemptive relief thereunder.
These statutory limitations include in certain circumstances a prohibition on
any Fund acquiring more than 3% of the voting shares of any other investment
company, and a prohibition on investing more than 5% of a Fund’s total assets in
securities of any one investment company or more than 10% of total assets in
securities of all investment companies.
Subject to
applicable law and/or pursuant to an exemptive order obtained from the SEC or
under an exemptive rule adopted by the SEC, a Fund may invest in certain other
investment companies (including ETFs and money market funds) and business
development companies beyond the statutory limits described above or otherwise
provided that certain conditions are met. Some of those investment companies may
be funds for which the Investment Adviser or any of its affiliates serves as
investment adviser, administrator or distributor.
Additionally,
to the extent that any Fund serves as an “acquired fund” to another Goldman
Sachs Fund or unaffiliated investment company, the Fund’s ability to invest in
other investment companies and private funds may be limited and, under these
circumstances, the Fund’s investments in other investment companies and private
funds will be consistent with applicable law and/or exemptive rules adopted by
or exemptive orders obtained from the SEC. For example, to the extent the Fund
serves as an acquired fund in a fund of funds arrangement in reliance on Rule
12d1-4 under the Investment Company Act, the Fund would be prohibited from
purchasing or otherwise acquiring the securities of an investment company or
private fund if, after such purchase or acquisition, the aggregate value of the
Fund’s investments in such investment companies and private funds would exceed
10% of the value of the Fund’s total assets, subject to limited exceptions
(including for investments in money market funds).
The use of
ETFs is generally intended to help a Fund match the total return of the
particular market segments or indices represented by those ETFs, although that
may not be the result. Most ETFs are passively managed investment companies
whose shares are purchased and sold on a securities exchange. An ETF generally
represents a portfolio of securities designed to track a particular market
segment or index. An investment in an ETF generally presents the same primary
risks as an investment in a conventional fund (i.e., one that is not
exchange-traded) that has the same investment objectives, strategies and
policies. In addition, an ETF may fail to accurately track the market segment or
index that underlies its investment objective. The price of an ETF can
fluctuate, and a Fund could lose money
49
investing
in an ETF. Moreover, ETFs are subject to the following risks that do not apply
to conventional funds: (i) the market price of the ETF’s shares may trade at a
premium or a discount to their NAV; (ii) an active trading market for an ETF’s
shares may not develop or be maintained; and (iii) there is no assurance that
the requirements of the exchange necessary to maintain the listing of an ETF
will continue to be met or remain unchanged.
A Fund will
indirectly bear its proportionate share of any management fees and other
expenses paid by such other investment companies, in addition to the fees and
expenses regularly borne by the Fund. Although the Funds do not expect to do so
in the foreseeable future, each Fund is authorized to invest substantially all
of its assets in a single open-end investment company or series thereof that has
substantially the same investment objective, policies and fundamental
restrictions as the Fund.
Non-Investment
Grade Fixed Income Securities.
Non-investment grade fixed income securities and unrated securities of
comparable credit quality (commonly known as “junk bonds”) are considered
speculative. In some cases, these obligations may be highly speculative and have
poor prospects for reaching investment grade standing. Non-investment grade
fixed income securities are subject to the increased risk of an issuer’s
inability to meet principal and interest obligations. These securities, also
referred to as high yield securities, may be subject to greater price volatility
due to such factors as specific issuer developments, interest rate sensitivity,
negative perceptions of the junk bond markets generally and less
liquidity.
Non-investment
grade fixed income securities are often issued in connection with a corporate
reorganization or restructuring or as part of a merger, acquisition, takeover or
similar event. They are also issued by less established companies seeking to
expand. Such issuers are often highly leveraged and generally less able than
more established or less leveraged entities to make scheduled payments of
principal and interest in the event of adverse developments or business
conditions. Non-investment grade securities are also issued by governmental
bodies that may have difficulty in making all scheduled interest and principal
payments. The market value of non-investment grade fixed income securities tends
to reflect individual corporate or municipal developments to a greater extent
than that of higher rated securities which react primarily to fluctuations in
the general level of interest rates. As a result, a Fund’s ability to achieve
its investment objectives may depend to a greater extent on the Investment
Adviser’s judgment concerning the creditworthiness of issuers than funds which
invest in higher-rated securities. Issuers of non-investment grade fixed income
securities may not be able to make use of more traditional methods of financing
and their ability to service debt obligations may be affected more adversely
than issuers of higher-rated securities by economic downturns, specific
corporate or financial developments or the issuer’s inability to meet specific
projected business forecasts. Negative publicity about the junk bond market and
investor perceptions regarding lower rated securities, whether or not based on
fundamental analysis, may depress the prices for such securities.
A holder’s
risk of loss from default is significantly greater for non-investment grade
fixed income securities than is the case for holders of other debt securities
because such non-investment grade securities are generally unsecured and are
often subordinated to the rights of other creditors of the issuers of such
securities. Investment by a Fund in defaulted securities poses additional risk
of loss should nonpayment of principal and interest continue in respect of such
securities. Even if such securities are held to maturity, recovery by a Fund of
its initial investment and any anticipated income or appreciation is
uncertain.
The
secondary market for non-investment grade fixed income securities is
concentrated in relatively few market makers and is dominated by institutional
investors, including mutual funds, insurance companies and other financial
institutions. Accordingly, the secondary market for such securities is not as
liquid as, and is more volatile than, the secondary market for higher-rated
securities. In addition, market trading volume for high yield fixed income
securities is generally lower and the secondary market for such securities could
shrink or disappear suddenly and without warning as a result of adverse market
or economic conditions, independent of any specific adverse changes in the
condition of a particular issuer. The lack of sufficient market liquidity may
cause a Fund to incur losses because it will be required to effect sales at a
disadvantageous time and then only at a substantial drop in price. These factors
may have an adverse effect on the market price and a Fund’s ability to dispose
of particular portfolio investments. A less liquid secondary market also may
make it more difficult for a Fund to obtain precise valuations of the high yield
securities in its portfolio.
Credit
ratings issued by credit rating agencies are designed to evaluate the safety of
principal and interest payments of rated securities. They do not, however,
evaluate the market value risk of non-investment grade securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the conditions of the issuer that affect the market
value of the security. Consequently, credit ratings are used only as a
preliminary indicator of investment quality.
Downgraded
Securities. After its
purchase, a portfolio security may be assigned a lower rating or cease to be
rated, which may affect the market value and liquidity of the security. If this
occurs, a Fund may continue to hold the security if the Investment Adviser
believes it is in the best interest of the Fund and its
shareholders.
Distressed
Debt. A Fund
that invests in distressed debt may risk holding the securities through
bankruptcy proceedings. There are a number of significant risks inherent in the
bankruptcy process. Many events in a bankruptcy are the product of contested
matters and adversary proceedings and are beyond the control of the creditors. A
bankruptcy filing by an issuer may adversely and permanently affect the issuer,
and if the proceeding is converted to liquidation, the value of the issuer may
not equal the liquidation value that was believed to exist at the time of the
investment. The duration of a bankruptcy proceeding is difficult to predict, and
a creditor’s return on
50
Appendix
A
investment
can be adversely affected by delays until the plan of reorganization ultimately
becomes effective. The administrative costs in connection with a bankruptcy
proceeding are frequently high and would be paid out of the debtor’s estate
prior to any return to creditors. Because the standards for classification of
claims under bankruptcy law are vague, there exists the risk that a Fund’s
influence with respect to the class of securities or other obligations it owns
can be lost by increases in the number and amount of claims in the same class or
by different classification and treatment. In the early stages of the bankruptcy
process it is often difficult to estimate the extent of, or even to identify,
any contingent claims that might be made. In addition, certain claims that have
priority by law (for example, claims for taxes) may be substantial.
Equity
Investments. After its
purchase, a portfolio investment (such as a convertible debt obligation) may
convert to an equity security. Alternatively, a Fund may acquire equity
securities in connection with a restructuring or other similar event related to
one or more of its investments. If this occurs, a Fund may continue to hold the
investment (or make additional purchases of that equity investment) if the
Investment Adviser believes it is in the best interest of the Fund and its
shareholders.
51
Appendix
B
Financial
Highlights
The
financial highlights tables are intended to help you understand the Fund’s
financial performance for the past five years (or less if the Fund has
been in operation for less than five years). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
information for the Fund has been audited by PricewaterhouseCoopers LLP, whose
report, along with the Fund’s financial statements, is included in the Fund’s
annual report (available upon request).
|
|
Goldman
Sachs Dynamic Municipal Income Fund | ||||
|
|
Class
P Shares | ||||
|
|
Year
Ended March 31, |
Period
Ended
March
31, 2019(a)
| |||
|
|
2023 |
2022 |
2021 |
2020 | |
|
Per
Share Data | |||||
|
Net
asset value, beginning of period |
$15.72 |
$16.63 |
$15.59 |
$16.02 |
$15.65 |
|
Net
investment income(b) |
0.46 |
0.38 |
0.41 |
0.43 |
0.46 |
|
Net
realized and unrealized gain (loss) |
(0.63
) |
(0.92
) |
1.04 |
(0.43
) |
0.36 |
|
Total
from investment operations |
(0.17
) |
(0.54
) |
1.45 |
—
(c) |
0.82 |
|
Distributions
to shareholders from net investment income |
(0.45
) |
(0.37
) |
(0.41
) |
(0.43
) |
(0.45
) |
|
Net
asset value, end of period |
$15.10 |
$15.72 |
$16.63 |
$15.59 |
$16.02 |
|
Total
Return(d) |
(0.99
)% |
(3.33
)% |
9.37
% |
(0.08
)% |
5.35
% |
|
Net
assets, end of period (in 000’s) |
$1,704,487 |
$2,758,800 |
$2,195,715 |
$1,683,366 |
$1,193,566 |
|
Ratio
of net expenses to average net assets |
0.39
% |
0.38
% |
0.38
% |
0.38
% |
0.39
%(e) |
|
Ratio
of total expenses to average net assets |
0.41
% |
0.40
% |
0.41
% |
0.41
% |
0.43
%(e) |
|
Ratio
of net investment income to average net assets |
3.05
% |
2.31
% |
2.55
% |
2.61
% |
3.11
%(e) |
|
Portfolio
turnover rate(f) |
33
% |
15
% |
6
% |
23
% |
16
% |
(a)
Commenced
operations
on April 20, 2018.
(b)
Calculated
based on the average shares outstanding methodology.
(c)
Amount
is less than $0.005 per share.
(d)
Assumes
investment at the NAV at the beginning of the period, reinvestment of all
dividends and distributions, a complete redemption of the investment at the NAV
at the end of the period and no sales or redemption charges (if any). Total
returns would be reduced if a sales or redemption charge was taken into account.
Returns do not reflect the impact of taxes to shareholders relating to Fund
distributions or the redemption of Fund shares. Total returns for periods less
than one full year are not annualized.
(e)
Annualized.
(f)
The
Fund’s portfolio turnover rate is calculated in accordance with regulatory
requirements, without regard to transactions involving short term investments
and certain derivatives. If such transactions were included, the Fund’s
portfolio turnover rate may be higher.
52
Appendix
B
|
|
Goldman
Sachs High Yield Municipal Fund | ||||
|
|
Class
P Shares | ||||
|
|
Year
Ended March 31, |
Period
Ended
March
31, 2019(a)
| |||
|
|
2023 |
2022 |
2021 |
2020 | |
|
Per
Share Data | |||||
|
Net
asset value, beginning of period |
$9.85 |
$10.48 |
$9.58 |
$9.90 |
$9.60 |
|
Net
investment income(b) |
0.40 |
0.34 |
0.36 |
0.40 |
0.39 |
|
Net
realized and unrealized gain (loss) |
(0.84
) |
(0.64
) |
0.89 |
(0.34
) |
0.28 |
|
Total
from investment operations |
(0.44
) |
(0.30
) |
1.25 |
0.06 |
0.67 |
|
Distributions
to shareholders from net investment income |
(0.38
) |
(0.33
) |
(0.35
) |
(0.38
) |
(0.37
) |
|
Net
asset value, end of period |
$9.03 |
$9.85 |
$10.48 |
$9.58 |
$9.90 |
|
Total
Return(c) |
(4.44
)% |
(3.06
)% |
13.24
% |
0.44
% |
7.14
% |
|
Net
assets, end of period (in 000’s) |
$6,490,733 |
$7,661,350 |
$7,762,203 |
$6,139,055 |
$5,961,922 |
|
Ratio
of net expenses to average net assets |
0.54
% |
0.53
% |
0.53
% |
0.54
% |
0.55
%(d) |
|
Ratio
of total expenses to average net assets |
0.55
% |
0.54
% |
0.55
% |
0.56
% |
0.57
%(d) |
|
Ratio
of net investment income to average net assets |
4.35
% |
3.22
% |
3.56
% |
3.93
% |
4.27
%(d) |
|
Portfolio
turnover rate(e) |
32
% |
13
% |
7
% |
20
% |
16
% |
(a)
Commenced
operations
on April 20, 2018.
(b)
Calculated
based on the average shares outstanding methodology.
(c)
Assumes
investment at the NAV at the beginning of the period, reinvestment of all
dividends and distributions, a complete redemption of the investment at the NAV
at the end of the period and no sales or redemption charges (if any). Total
returns would be reduced if a sales or redemption charge was taken into account.
Returns do not reflect the impact of taxes to shareholders relating to Fund
distributions or the redemption of Fund shares. Total returns for periods less
than one full year are not annualized.
(d)
Annualized.
(e)
The
Fund’s portfolio turnover rate is calculated in accordance with regulatory
requirements, without regard to transactions involving short term investments
and certain derivatives. If such transactions were included, the Fund’s
portfolio turnover rate may be higher.
53
|
|
Goldman
Sachs Short Duration Tax-Free Fund | ||||
|
|
Class
P Shares | ||||
|
|
Year
Ended March 31, |
Period
Ended
March
31, 2019(a)
| |||
|
|
2023 |
2022 |
2021 |
2020 | |
|
Per
Share Data | |||||
|
Net
asset value, beginning of period |
$10.41 |
$10.81 |
$10.61 |
$10.64 |
$10.46 |
|
Net
investment income(b) |
0.20 |
0.10 |
0.15 |
0.19 |
0.18 |
|
Net
realized and unrealized gain (loss) |
(0.09
) |
(0.40
) |
0.19 |
(0.03
) |
0.17 |
|
Total
from investment operations |
0.11 |
(0.30
) |
0.34 |
0.16 |
0.35 |
|
Distributions
to shareholders from net investment income |
(0.20
) |
(0.10
) |
(0.14
) |
(0.19
) |
(0.17
) |
|
Net
asset value, end of period |
$10.32 |
$10.41 |
$10.81 |
$10.61 |
$10.64 |
|
Total
Return(c) |
1.09
% |
(2.79
)% |
3.24
% |
1.50
% |
3.42
% |
|
Net
assets, end of period (in 000’s) |
$4,684,309 |
$8,839,327 |
$9,108,224 |
$5,572,014 |
$4,965,675 |
|
Ratio
of net expenses to average net assets |
0.38
% |
0.37
% |
0.37
% |
0.37
% |
0.38
%(d) |
|
Ratio
of total expenses to average net assets |
0.41
% |
0.38
% |
0.39
% |
0.39
% |
0.40
%(d) |
|
Ratio
of net investment income to average net assets |
1.92
% |
0.97
% |
1.36
% |
1.75
% |
1.86
%(d) |
|
Portfolio
turnover rate(e) |
74
% |
41
% |
20
% |
29
% |
44
% |
(a)
Commenced
operations
on April 20, 2018.
(b)
Calculated
based on the average shares outstanding methodology.
(c)
Assumes
investment at the NAV at the beginning of the period, reinvestment of all
dividends and distributions, a complete redemption of the investment at the NAV
at the end of the period and no sales or redemption charges (if any). Total
returns would be reduced if a sales or redemption charge was taken into account.
Returns do not reflect the impact of taxes to shareholders relating to Fund
distributions or the redemption of Fund shares. Total returns for periods less
than one full year are not annualized.
(d)
Annualized.
(e)
The
Fund’s portfolio turnover rate is calculated in accordance with regulatory
requirements, without regard to transactions involving short term investments
and certain derivatives. If such transactions were included, the Fund’s
portfolio turnover rate may be higher.
54
Municipal
Fixed Income Funds Prospectus (Class P
Shares)
|
FOR
MORE INFORMATION |
Annual/Semi-Annual
Report
Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the Fund’s annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance during the last fiscal
year.
Statement of
Additional Information
Additional
information about the Fund and its policies is also available in the Fund’s SAI.
The SAI is incorporated by reference into the Prospectus (i.e., is
legally considered part of the Prospectus).
The Fund’s annual and
semi-annual reports and SAI are available free upon request by calling Goldman
Sachs at 1-800-526-7384. You can also access and download the annual and
semi-annual reports and the SAI at the Fund’s website:
www.gsam.com/content/gsam/us/en/advisors/fund-center/summary-prospectuses.html.
From time
to time, certain announcements and other information regarding the Fund may be
found at
http://www.gsamfunds.com/announcements-ind for individual investors or http://www.gsamfunds.com/announcements for advisers.
http://www.gsamfunds.com/announcements-ind for individual investors or http://www.gsamfunds.com/announcements for advisers.
To obtain
other information and for shareholder inquiries:
|
|
|
|
|
◼ By
telephone: |
1-800-621-2550 |
|
|
◼ By
mail: |
Goldman
Sachs Funds
71
South Wacker Drive, Suite 1200
Chicago,
IL 60606 |
|
|
◼ On
the Internet: |
SEC
EDGAR database – http://www.sec.gov |
|
Other
information about the Fund is available on the EDGAR Database on the SEC’s
internet site at http://www.sec.gov. You may
obtain copies of this information, after paying a duplicating fee, by electronic
request at the following e-mail address: [email protected].
The
Funds' investment company registration number is 811-05349.
GSAM® is a registered service mark of Goldman Sachs & Co. LLC
GSAM® is a registered service mark of Goldman Sachs & Co. LLC
TFFIPRO-23P